A recent survey predicts that growing proportions of IT budget will migrate from on-premise capabilities to off-premise services like hosted IT and public cloud. While this seems like an inevitable progression, it will be gradual, and hybrid cloud is the enabling bridge between the two service deployment models.
Many enterprises have massive capital investments in their on-premise technology, and often will have budgeted for two or three years of depreciation costs that will beef up their profits. So despite the allure of public cloud, enterpises will sweat their IT assets until depreciation is no longer a P&L benefit.
Step forward hybrid cloud. With the opportunity to get higher utilisation from on-premise tech assets, and the flexibility to exploit cost and agility benefits from public cloud, hybrid will become a well-trodden path toward the next level of enterprise tech services.
Commissioned by Microsoft and carried out by 451 Research, the Hosting and Cloud Study 2014 polled over 2,000 companies about their cloud strategy and spending. Today, 41 percent of the IT budgets of those who responded were dedicated to data centres or sites they operate themselves, with 59 percent going to outsourced services, co-location, software as a service or platform as a service. In two years, they expect the split to be 38 versus 62 percent.
The takeaway was that hybrid cloud is shaping up as the go-to model for enterprise users.
The reason for hybrid's popularity seems to be twofold. Many organisations still have an investment in legacy, on-premise hardware that's needed for specific tasks. On the other hand, public cloud hosting offers the scalability and flexibility that buying and maintaining hardware doesn't. Hybrid is the crossroads between the two.
There are as many hybrid cloud use cases as there are users -- it can include any number of infrastructure builds spread across public cloud, private cloud, colocation, and on-premise servers.
According to a report by technology research and advisory firm TechNavio, the hybrid cloud market was worth US$21.18 billion in 2013 and will reach heights of US$79.12bn in 2018. Key market drivers, the firm says, will remain those we've seen so far -- reduce IT spending, improve organisational productivity, and enforce strict security and regulatory policies.
The experience of the cloud industry seems to bear the above findings out. Australian telecommunications provider Telstra is following a new strategic direction, expanding into systems integration services in the US, and Erez Yarkoni, executive director of cloud, talks about the profile most of their customers fit.
"We see these mega-infrastructures in the public cloud, and emerging business clouds like SoftLayer, and also on-premise automated infrastructure installations," Yarkoni says. "All our customers live somewhere in between and are going to do so for a long time."
Surprisingly, that also applies to both enterprise or government-scale customers and the SME market.
"They absolutely talk about their need for their own private applications or localised access database they can't really move to a public cloud," Yarkoni adds.
So what do users get out of a hybrid cloud approach, when it seems that parking and running all processes in one place would be much easier?
"There are always trade-offs," says David McKnight, COO of Leisure Interactive, a provider of online reservations, property management, and point of sale (POS) systems. "The key is to define the trade-offs that add value."
In his case, hybrid is about security. Microsoft Azure was a good fit for most systems apart from one -- storage of encrypted customer credit card data, which couldn't be hosted in a public cloud environment. With US$50 million in transactions in 2013, Leisure Interactive had no choice but to host the payment system separately from the reservation system to meet payment card industry (PCI) compliance.
When a reservation is made through the company's publicly hosted website, the payment is processed by connecting to a payment gateway, with the details stored in Leisure Interactive's private cloud. Although Microsoft announced PCI compliance in Azure at the beginning of 2014, and McKnight is looking into it, financial data is a common roadblock to a completely public cloud service for many.
In another case, a private cloud is the best solution for a specialised workflow, while other applications can run in public environments. IT strategy consultant Kris Kelso has a marketing/production company client that initially housed most of their systems either in-house or at a co-location host facility. After an ROI analysis, he helped the company move most of their customer-facing systems to Amazon Web Services, apart from one critical function.
"The largest system kept in house was a video editing/production platform which required a lot of storage and bandwidth with fiber-connected editing workstations," he says. "Since they needed a server and storage footprint anyway, we housed a few other servers for file storage and network services with replication to the 'external' cloud for backup purposes."
Hybrid is also the perfect way to 'get your feet wet' says Chris Poelker, enterprise solutions VP for FalconStor Software and author of Storage Area Networks for Dummies.
"Instead of radical change, a hybrid approach lets us get acclimated with concepts and contracts while still giving us control over all primary applications and data," he says.
There might also be something of an ownership mindset among decision makers, as large organisations catch up to what cloud computing can do. As ZDNet reported recently when we investigated private versus public clouds, there's an 'own it or rent it' duality, and some IT managers might not consider a computing platform rightly theirs unless it's under their roof -- however figuratively.
Or you may run critical legacy systems that just don't translate. Telstra's Erez Yarkoni says the biggest driver to hybrid environments he sees among clients is applications and processes that just can't live in most cloud systems.
"They weren't born there and they weren't written to live there so they can't go there," he says. "When those customers want to benefit from a more utility-type offering they use a private cloud offering so they can run it themselves."
With the opportunity to get higher utilisation from on-premise tech assets, and the flexibility to exploit cost and agility benefits from public cloud, hybrid will become a well-trodden path toward the next level of enterprise tech services.
Chris Poelker agrees, adding that so far, the easiest applications to migrate to the public cloud are the ones generally available 'off the shelf' from multiple vendors such as email, sales support, CRM, and back-office financials.
In some cases, the choice to adopt a hybrid cloud strategy is a business decision on the part of the vendor or third-party cloud systems integrator. Greg Archbald, CEO of oil and gas data management provider GreaseBook, has seen plenty of users adopt far more than they can handle.
"If a project isn't managed correctly or the company doesn't have the necessary expertise to manage their hybrid or private cloud, the volume of customer support some bigger customers need can be debilitating to the provider," Archbald says.
Finally, a hybrid environment can be a simple matter of redundancy. Imagine running two copies of the same data, one private and one public, and each performing the same workload. For minimal cost, you have a ready-made clone of the business in one as a backup of the live copy in the other.
When you're in the midst of a steady workflow, you can run your private cloud copy and save on pay-as-you use public costs. If there's a jump in traffic that calls for a quick scale-up, you can flick a switch and make the public cloud copy live to absorb the flexibility the workload needs. Or as Esmerelda Swartz, CMO of billing provider MetraTech, puts it: "The hybrid approach is also a nice hedge against vendor lock-in."
Seattle Bank uses hybrid cloud for just such protection. Using a third party plug-in for VMware vCenter, the data stored in the company's AWS public cloud environment is fully integrated and constantly communicating with the on-premise private cloud.
Snapshots taken every 15 minutes mean if there's an issue with the on-premise virtual machines, the ones on AWS are integrated with them to restore service. As VP and director of IT Scott McGillivray says: "We wanted to expand our infrastructure for disaster recovery and business continuity. Public cloud providers offered it without needing a new data center."
Public cloud is indeed where many companies have wet their feet by moving simple processes like email or data storage to external providers, such moves are often enough to encourage further cloud adoption and at a certain point, many sit up and realise they're running their own cloud environment.
From there it can be just a short step to migrate fully to a public cloud service, or a private cloud if your public cloud experience has given you confidence to run one. From that perspective, hybrid cloud might be a long process of industry evolution -- in every possible direction and at every possible pace.
Thanks to the efficiencies offered by the mobile workforce, many SME operators are also incorporating consumer electronics and buying (or building) apps to work smarter -- virtually all of which Greg Archbald says are driven by the public cloud.
"Thanks to the hybrid cloud approach we can tailor a solution to fit even the largest of clients while still staying flexible enough to offer smaller companies one heck of a solution," he says.
It's also going to further enable the service industry that helps users make it happen, as Telstra is finding in their pursuit of business in the US.
"We invest in the layer that integrates those clouds with service management offerings," Yarkoni says. "So if you do need an application that resides on multiple clouds, you can service-manage it from a layer above, which Telstra offers."
But despite interoperability of data being the sort of thing cloud computing was built for, sometimes managing a hybrid environment can be like having an office full of Macs and PCs or a mobile workforce full of Androids and iPhones. You might put a lot of effort into a proprietary private cloud solution, and then find out how hard it is to migrate it.
At Leisure Interactive, David McKnight found the biggest challenge was moving his core product -- the reservation system -- from private to public. When it comes to platform-as-a-service, he advises coding from scratch, and wishes he'd had that luxury himself.
"It took about 18 months from the time we made the decision to the time we flipped the switch," he says. "That took a tremendous amount of planning, architecture modification, and coding. It was a massive project, much larger than we anticipated."
Even then, features you wish you had can blow out to cost time and productivity. Metafuse Inc. is behind cloud-based project management software Project Insight, and director of technology Wes Kliewer has found missing functionality to be the main challenge when it comes to the cloud.
In Microsoft's cloud-based Outlook Web App, for example, external partners can't attach emails to the Microsoft CRM product. Kliewer's internal sales team can, but partners have to copy and paste emails as an independent record. It doesn't sound like a big deal, but scale that up to a company the size of a Fortune 500 blue chip with tens of thousands of employees and hundreds of thousands of suppliers and partners, and it adds up to a lot of man-hours lost incrementally.
"It's vital you know what functionality might be different when you look at locally installed versus cloud software," Kliewer says.
Still, Chris Poelker says most potential pitfalls are avoidable if you're careful. His advice is to think about every possible contingency -- and don't sign off until your provider's addressed them. The contract, he thinks, is everything.
"Make sure all the concerns you would have in running your own datacenter are taken care of by the cloud provider -- service levels, performance, security, out clauses, even compensation for loss of data all needs to be specified in the contract," he says.
No matter what your organisation's size, all the figures point to the same thing -- you're going to be in the hybrid cloud majority soon, if you're not already.