Cloud computing in the enterprise

Paul Cheesbrough is a cloud watcher. The former IBM consultant and BBC controller of digital media, became the UK poster child for the emerging world of enterprise cloud computing when he took over as CIO of the Telegraph Media Group last year and promptly converted the company’s office software user-base from Microsoft’s classic desktop package to the Internet-delivered Google Apps.

He has no sense of being out there on a limb; rather, he is mixing in a growing community of users who are formulating cloud strategies and adoption plans around what they believe is a compelling, and long-overdue, model.

The IT industry is “in need of change, a field that truly needs a shake up. The software business has become [too] comfortable among the incumbents, and a source of frustration for so many businesses,” Cheesbrough wrote in his blog last month, after witnessing the fervour of 9,000-strong crowd at’s annual software-as-a-service (SaaS) rally, Dreamforce.

“You can’t help but recognise that 2008 is the coming of age for cloud computing within the business community – especially at a time where economic pressures mean cost reductions and revenue retention,” he observes.

The principle behind cloud computing is simple, according to Cheesbrough. “Plug in to powerful platforms, functionality and systems that exist already on the Internet and you can do things more creatively, more quickly and cost effectively.”

Salesforce, Google and Amazon may be the pioneers of online applications and utility services, but they are just the vanguard of a widespread phenomenon. Indeed, there is hardly a company in IT’s top 100 – from HP, IBM, Oracle and Microsoft downward – which is not frantically constructing a cloud strategy, whether in defence or to grasp a new market opportunity.

Accelerated take-up

Certainly, for as long as IT has appeared as an expense line on corporate accounts, businesses have wished there was a better way of sourcing IT services. They have looked at ways to avoid large, upfront capital expenditure, and complex and time-consuming deployment projects that typically yielded uncertain results. They have lobbied suppliers, largely unsuccessfully, to offer licensing terms that would allow IT costs to more exactly match IT consumption.

Above all, corporate executives have searched in vain for an IT delivery model that is dynamic and flexible enough to be easily aligned with their constantly changing business needs. In fact, ideally, business would like IT to be available as a pay-as-you-go, on-demand service akin to that provided by the electricity generators and other utility suppliers. This, its proponents claim, is exactly what cloud computing can provide.

The promise, though, has taken on a new dimension, as the intense economic pressures on business have raised a huge wave of interest in – and more recently adoption of – cloud services.

Of course, business executives and IT professionals have heard this kind of thing before. Similarly grandiose claims have been made for, among other things, the application service provider (ASP) service model, service-oriented architecture (SOA) technology, Grid computing, and even for a data-formatting standard – XML. Each of these was expected to tame IT, but each has failed to meet expectations – not least because, with hindsight, it is easy to see that each only addressed one facet of the IT utility challenge.

The same cannot be said for the cloud. Indeed, as the cloud trend has emerged over the past 18 months, industry analysts have been wary of defining the market too narrowly, to the point where both IDC and Gartner distinguish between ‘cloud services’ and ‘cloud technologies’.

The former, typified by services such as Google Apps and Amazon Web Services (AWS) remote compute and storage offerings (EC2 and S2), are the most visible and fastest-growing elements of the cloud phenomenon. Gartner (which takes a narrower view than IDC, and excludes computer services like AWS from its calculations) believes the market for cloud-hosted subscription application services is already worth $6.4 billion, and expects it to more than double to $14.8 billion in 2012.

Gartner published these figures before the banking crisis became critical in September, but says it remains happy with its forecast. More recently, IDC estimated that cloud services (including, in this case, infrastructure services such as remote server capacity and storage on-demand) are already worth $16.2 billion, and are set to reach $42 billion in 2012; nor does IDC expect these forecasts to be driven down by economic uncertainty. On the contrary, other commentators feel there is every chance that increased economic uncertainty will accelerate IT user’s migration to cloud services and – possibly – cloud computing technologies in general.

Studies like Gartner’s and IDC’s demonstrate how robust is the demand for these public cloud services, but they are not telling the whole cloud story. As both analyst groups acknowledge, public clouds like Google Apps are themselves the products of a convergence of technological developments spanning network, storage and server virtualisation.

The deployment of these technologies behind corporate firewalls may not be so visible or easy to track, but it is a clear trend, say experts such as Julian Friedman, a consultant with IBM’s Emerging Technologies for High Performance On-demand Computing at Hursley Park in the UK.

“We are working with a lot of people who are doing things around public clouds, and who are interested in deploying the same technologies internally. It seems almost certain that there will be both” said Friedman. “No one is going to do everything on the public clouds, and equally nobody will do everything on their own private cloud.”

Nevertheless, there seems little doubt that for a great many organisations, their journey into the cloud will begin with a subscription to a public service and, even though it is far from being the only option, there is currently a good chance that this service will be Google Apps.

Since its launch as a paid subscription service (the original Standard and Education editions were, and remain free) the Google Apps Premier Edition has been rapidly built up into a comprehensive suite of personal productivity and collaborative working applications, including optional video conferencing and VoIP services.

The basic business package now delivers mail, calendar, document processing and presentation applications plus 10GB of storage per user with telephone support thrown in for just £25 per user, per year. It is covered by a standard Google service level agreement guaranteeing 99.9% availability of all applications in any calendar month.

For a small-scale business the attractions of this approach are obvious. Using a credit card and a web browser, and with no professional IT intervention, a business manager can set up an office network and sync data and mail with their team’s BlackBerry wireless phones in a few minutes and with minimal capital outlay.

At the end of October this year, Google revealed that it now has more than one million businesses subscribing to Google Apps, and according to Dave Armstrong, head of product management and marketing for Google EMEA, the company is presently adding to this figure at a rate of 3,000 businesses every day.

Google doesn’t offer any detailed breakdown of this surging user base, and it seems likely that a very large percentage of these “businesses” may be sole traders or even private consumers happy to pay for a little extra support and some extra disk space in the cloud. But it isn’t only little fish being swept up in the cloud services tide.

Proctor & Gamble and GE are two Fortune 500 companies subscribing to Google Apps, while in the UK Taylor Woodrow and the Telegraph Media Group both have 2,000 or more Google Apps ‘seats’ available to them.

“You can see the obvious benefits there for small and medium-sized businesses but large enterprises are also looking at this from many different angles: from the ability to outsource those applications that don’t give them a direct competitive advantage; in terms of the impact it can have on their cost base, especially operating costs; and from what it can give them in terms of increased scalability,” says Armstrong.

“As you build up the size of company applying this model, the benefits grow in other areas around collaboration, communic-ation across geographic and linguistic borders, and, of course, scale. Because now you can scale your operations without having to scale your own infrastructure,” he says.

Clearly, Google’s message to enterprise customers is that the greater their commitment to the cloud, the larger the benefits they will realise from it. And there are companies that are starting to be receptive to this message.

At the Telegraph Media Group, Paul Cheesbrough has spent the past year using cloud services to hasten his company’s transition from traditional print publisher to modern digital media group. The first phase of this transition has involved the mass migration of the Group’s staff away from Microsoft Office to a more distributed yet integrated front-office and content creation platform based on Google Apps.

Cheesbrough believes that the migration has been an outstanding success. Although there have been gripes, particularly from power Office users, about some lingering functional shortcomings in the Google Apps suite, it has proved to be “good enough”, says Cheesbrough, and in some unlooked-for cases even better than good enough. “The Internet software is inherently networked and collaborative, so when you put these tools in the hands of the users they quickly find different ways of doing things.”

For example, he says: “We now use Google Video [an optional addition to the Google Apps Premier Edition] as a corporate YouTube, using it to broadcast communications around strategy and planning, and to produce podcasts for internal consumption.”

Cheesbrough doubts whether this could have happened with conventional client software with its slow and resource-heavy upgrade cycles and prohibitive licence costs. Internal studies have shown that the Telegraph’s Google Apps deployment will work out 80% cheaper than an Office-based approach over three years, and just as importantly: “The SaaS platform, with its comparatively short deployment cycle and high refresh cycle is simply more disposed to a higher level of innovation, and it is more open.”

This last point, the openness of cloud services, will be critical in the next phase of the Telegraph’s cloud journey, and to the long-term success of the cloud model generally. For Cheesbrough, the willingness that Google and Salesforce have shown to provide the API that will allow the Telegraph to seamlessly join its office systems to its customer management process has given him confidence that, ultimately, all of the Telegraph’s core systems will be deployed using a cloud model. However, it remains to be seen whether this will involve their deployment through public cloud services.

Although it seems likely that many other organisations will follow the Telegraph’s lead and migrate non-core applications to remotely hosted public cloud services, there is still little evidence that businesses are preparing to do the same with their strategic applications. Indeed, even proponents of a cloud-services future, such as Rackspace Hosting chief technology officer John Engates, recognise that that future is still not quite here.

“The state of the cloud today is still very immature. A lot of the offerings are really geared towards early adopters, like a start-up with little to risk and a lot to gain by utilising low-cost, on-demand, pay-as-you-go cloud resources,” he says.

Certainly, for organisations that have spent thousands of man years and millions of dollars building their own bomb-proof infrastructure to support complex, and often highly regulated systems, there is simply too much at stake for them to abandon this investment in favour of a set of shared resources that are out of their control.

Yet, at the same time, says Engates: “I think the cloud is going to be such a compelling proposition financially, and it is going to be so attractive not to have to keep buying your own infrastructure and then wait weeks or months before it is deployed that, even in risk-averse organisations, the CFO is going to say ‘look it’s dramatically cheaper, we can put extra things in to offset the risk’.”

In practice, ‘offsetting the risk’ of cloud computing probably means investing in systems that are effectively private clouds – highly virtualised collections of network, storage and server resources that offer much of the flexibility and response to change of the public cloud, but which can be kept safely behind the corporate firewall.

This, of course, is what many companies are doing today as they roll out the next phase of their investment in systems build around the virtual machine architectures of VMware, Xen, Citrix and Microsoft. However, to be a truly effective strategy, both Engates and IBM’s Friedman argue, building a private cloud shouldn’t be done as a complete alternative to exploiting the public cloud.

Ultimately, “whether companies consume it [cloud computing technology] internally or externally doesn’t really matter. The technologies will look a lot alike and they will be very similar in the way they are deployed and managed,” says Engates. However, he adds, “I think the big benefits will come when it is possible to utilise internal and external computing resources seamlessly, as if they were one giant cloud.”

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

Related Topics

Cloud Computing