By Ed Lucente  @edlucente

 Thanks to the cloud, startups have more affordable access to IT resources. This allows new businesses to “hyper-bootstrap.” An entrepreneur, for instance, can connect quickly and more economically to customers and suppliers around the globe through the cloud and thereby realize enormous operational efficiencies. This, in turn, allows startups to deliver innovative solutions faster to the market and to compete and win against much larger rivals.

Here are six ways that startups can hyper-bootstrap using cloud services:

1. Lower Startup Costs – By renting IT services, startups avoid the CapEx (capital expenditures) associated with compute/storage/networking hardware, and reduce OpEx (operating expenses) related to IT staff and maintenance.
2. Communication and Collaboration – Cloud services, like email and conferencing, allow startups to keep in closer touch with their employees, suppliers, and customers via any device cost-effectively.
3. Rapid Product Development – ISVs, for example, harness cloud services on-demand for scale-up/scale-down agility, performance, and lower cost.
4. Speed to Market – Cloud services allow startups to target customers more quickly and meet customer requirements more effectively.
5. Global Market Penetration – Cloud services allow startups to access global markets and take advantage of the explosive growth occurring in developing economies.
6. Increased Productivity – Cloud services deliver economical, pay-as-you-grow application software. Startups pay as their business grows, perhaps on a monthly basis, for SaaS-based productivity applications, including ERP, HRM, CRM, expense management, and secure data backup.http://ow.ly/7mBhX

For more anecdotes, please check out Joe McKendrick’s recent article in Forbes:  How Cloud Computing is Fueling the Next Startup Boom — http://www.forbes.com/sites/joemckendrick/2011/11/01/cloud-computing-is-fuel-for-the-next-entrepreneurial-boom/

October 21st, 2011 by Ed Lucente Twitter  ”@edlucente”

 SaaS Adoption

Many Independent Software Vendors (ISVs) are considering whether or not to SaaS-enable, or “SaaS-ify”, their application services and business models, especially since some high profile SaaS ISVs have succeeded wildly . For example, Salesforce.com, the best known SaaS company, has over 100,000 customers, nearly $2 billion in revenue, and offers compelling value propositions and ROIs to IT departments that make purchasing decisions no-brainers.

Some common application characteristics have surfaced among ISVs that have pivoted successfully to SaaS. It turns out that “self-service, employee-facing” applications are relatively easy to migrate to the cloud. These include applications like Salesforce.com’s CRM, Concur’s travel and expense management, or Taleo’s skills management solutions, where the SaaS purchaser is comfortable implementing specific, subscription-based application services for their employees. Other kinds of SaaS applications usually don’t require a lot of customization, legacy integration, and are not considered mission-critical.

SaaS-ification, however, is not appropriate for many ISVs. A recent report by Forrester Research found that only 25% of the global software market would be disrupted by SaaS. This makes sense since many of today’s on-premise applications would require a good amount of customization or legacy integration. Other applications are considered too mission-critical or must comply with industry regulations and laws. So it seems that customers want to avoid lengthy or risky migrations yet don’t mind straight-forward, SaaS-based add-ons.

The SaaS Business Model Is About Services

Even when applications are well-suited to SaaS delivery, an ISV’s transition to a profitable subscription-based business is risky and can take several years. SaaS marketing and business models differ from those of the traditional, license/on-premises ISVs. Entirely new challenges must be met for an ISV to achieve SaaS market success. Since SaaS applications are viewed as on-demand services, ISVs need to deliver value on a weekly or even daily basis. Examples include a delightful end user “experience” and customer care services like metering, billing, contract management, and SLA assurances. An ISV is also expected to provide more frequent application updates.

Perhaps the biggest challenge is that an ISV can no longer “install and run” and then expect a 20%+ annual maintenance fee in perpetuity. In the SaaS model, upfront revenue at the initial sale is much smaller since it is billed monthly, so carefully managing operating costs is crucial. New forms of creative financing, like a line of credit contingent upon future SaaS revenue streams, may be required from leasing companies to provide necessary working capital — and many ISVs may not qualify.

Don’t Count ISVs Out Of SaaS Just Yet

In spite of data compliance and security concerns, I suspect that many customers are asking ISVs about SaaS since there has been so much industry hype. As these concerns get resolved through new contractual agreements and industry standards, why wouldn’t customers want to take advantage of SaaS benefits like frequent updates, easier deployments, “pay-as-you-grow” flexibility, and lower CapEx?

My bet is that many license/on-premise ISVs will take a second look at SaaS over the next few years. Also, don’t be surprised to see ISVs SaaS-ify their applications as cloud service providers (CSPs) continue to improve their capabilities in areas like security and regulatory compliance. In other words, as more ISVs “trust the cloud” and strive to meet customers’ self-service demands, they will choose the SaaS model to remain competitive.

About the Author
Edward J. Lucente is Sr. Product Marketing Manager in As-a-Service for AT&T. Formerly, V.P. of Business Development at Data Center Rebates, Inc., an IT efficiency company based in Carlsbad, CA, whose professional services focus on data center energy efficiency (DCEE), leasing integrated with technology refreshes, and negotiation of IT energy rebates. Please feel free to email comments to el283u@att.com or twitter: @edlucente

There’s plenty of talk about benefits of business analytics — the analysis of “big data” to spot insightful trends, patterns, or correlations — but far less discussion around business analytics applications delivered using analytics cloud appliances. This should change soon as more and more businesses deploy analytics cloud appliances to achieve three primary goals: 1) increase the perceived value of their product or service; 2) reduce their internal operating costs (e.g., supply chain optimization); and 3) spur growth opportunities in existing or new markets.

Defining Big DataWhat’s big data exactly? According to Wikipedia (http://en.wikipedia.org/wiki/Big_data), big data:
are data sets that grow so large that they become awkward to work with using on-hand database management tools. Difficulties include capture, storage, search, sharing, analytics, and visualizing. This trend continues because of the benefits of working with larger and larger data sets allowing analysts to spot business trends, prevent diseases, and combat crime. Though a moving target, current limits are on the order of terabytes, exabytes, and zettabytes of data. Scientists regularly encounter this problem in meteorology, genomics, biological research, Internet search, finance, and business informatics. Data sets also grow in size because they are increasingly being gathered by ubiquitous information-sensing mobile devices, software logs, cameras, microphones, RFID readers, wireless sensor networks, and so on.

Applications in business analytics have the power to formulate pattern recognitions such that trends can be identified and acted upon from petabytes (or more) of public or private data. Analytics cloud appliances integrate business analytics software with hardware to uncover correlations or patterns of behavior never before imagined, such as consumer buying trends in clothing stores or the probability of success for particular hospital procedures. Analytics cloud appliances can be tailored to specific industry applications as well. Perhaps most important, business analytics applications provide approximate solutions to business problems that cannot be solved “exactly.” This, in turn, helps business leaders to re-think best practices and transform their business models in order to meet changing market demands and to sustain competitive advantage.

Analytics AnecdotesIDC forecasts that the global market for analytics applications will grow from $25.5 billion this year to $34 billion in 2014, and many IT companies are pursuing business analytics opportunities. IBM, for example, has opened analytics solution centers in Zurich, Budapest, Vienna, Berlin, Beijing, London, New York, Dallas, Tokyo, and Washington, D.C. — their focus on solving tough business problems across industries ranging from defense to healthcare. IBM also has rolled out about a dozen analytics cloud appliances for specific industry verticals. These appliances provide convenient access to powerful analytics capabilities via private (on-premise) cloud deployments.

At Microsoft, Tony Hey, V.P. of Research, uses business analytics to help hospitals predict whether and when a patient might return following initial congestive heart failure treatment. Sifting through terabytes of data from 300,000 patients, Hey’s business analytic tools provide hospitals with break-through information regarding the likelihood of a patient’s full recovery. The objective is to help hospitals design better programs to keep patients stable and, at the same time, reduce administrative costs of medical procedures.

SAS Software, another business analytics player, sponsored a white paper outlining common applications where problems can be resolved through big data analysis (below).

Business Analytics = Innovative Business Models
Business analytics applications are valuable tools that can help management make faster, smarter decisions to ensure innovative business models. They help spotlight clever ways to improve business processes and serve customers better — ahead of the competition.

About the Author
Edward J. Lucente is Sr. Product Marketing Manager in As-a-Service for AT&T. Formerly, V.P. of Business Development at Data Center Rebates, Inc., an IT efficiency company based in Carlsbad, CA, whose professional services focus on data center energy efficiency (DCEE), leasing integrated with technology refreshes, and negotiation of IT energy rebates. Please feel free to email comments to el283u@att.com or twitter: @edlucente

The only concern will be the ability to test the applications and make sure security issues are addressed. In addition, with the popularity of Tablets and the growing demand for on-line purchases, companies need to test PCI-DSS compliance. Companies like Kubisys can provide this capability.

Read article below by Niel Nickolaisen, vice president of strategy and innovation at EnergySolutions Inc. in Salt Lake City.

“Making virtual desktop infrastructure efforts pay dividends at last”

For years, I was enchanted by the promise of the virtual desktop infrastructure (VDI). It seemed a natural extension of server and storage virtualization that could help me slow down my PC and laptop refresh cycle.

I saw VDI technology as a way to achieve unprecedented service levels for remote and travelling users. I imagined wiping out and recreating a salesperson’s device on the fly after he’d downloaded the latest malware. And with the trend to smaller, smarter mobile devices, a VDI seemed to promise a way to support a range of traditional and nontraditional devices.

Each time I pursued my VDI infatuation, however, I was spurned. Each time I launched a VDI pilot, the technology failed me. One time, a vendor promoting its VDI product told me that in order to get the end-device performance I desired, I would have to install racks of blade servers, then allocate a blade for each end-user device. Then I would have to upgrade (by quite a bit) my storage infrastructure. The thought of having to replace my servers and storage somehow defeated one of the main reasons for a VDI — to lower operating costs, eventually.

Vowing to never give up, I recently started another VDI pilot. This time, the driver was to allow employees to select their own devices –tablets, most likely.

Having failed at previous VDI attempts, I first did some networking and talked with someone — who knew someone — who had heard rumors of a VDI appliance that solved the processor density and storage problems. I tracked down the maker of this appliance and convinced the company to let us test it as part of the pilot. The appliance consists of management software and a series of solid-state drives. The solid-state drives provide incredibly high throughput and reduce the demand on data center processors and storage. In fact, when we used this appliance, we didn’t have to make any changes to our data center infrastructure. In our initial test, we planned for an appliance-to-end-device ratio of 30-to-1. The appliance easily surpassed that density, and we now operate in the range of 50-to-1.

Once we figured out how to use a VDI to deliver our enterprise computing resources, we had to find a good group of volunteer pilot users. We wanted the group to include 30 power users of our business applications, and we wanted a good mix of local and remote users. As with many companies, most of our users are resistant to change, so we planned on having to do some selling to enlist a test group. Once we made the announcement that volunteers would be the “cool kids” who got to use an IT-supported tablet in exchange for being guinea pigs, the line of willing candidates snaked out my door and filled my email inbox.

We are about two months into our pilot, and it is going well — well enough that our plan now is to move to our employee-selected device over the next year. If all goes well, laptops will be a thing of our past. And even better, now we are experimenting with sales and customer relationship management, or CRM, applications that run on our growing population of tablets. Next in our mobile application roadmap are field service and maintenance applications to improve our engineering and repair service levels and response times.
Virtual desktop lessons learned

In planning for and deploying a VDI, we have had to overcome some objections and have learned a few things.

We were concerned about how we could support the types of devices our employees would select, and puzzled about this for a while. Then someone made the blindingly simple observation that most of our employees had tablets and computers at home that they somehow were able to support themselves. Couldn’t they also self-support the work devices they selected? This has become our policy: If you select your own device, you support your own device.
Another VDI consideration: If you want to move from providing email to a tablet to providing the full range of enterprise computing resources, you need to do some experiments with your infrastructure. Even with our really slick VDI appliance, performance can be throttled by network bandwidth limits and traffic spikes. Such bottlenecks might not be an issue for a tablet email user, but they will frustrate people attempting ERP transactions.

VDI comes of age
Based on the results of our pilot, it seems to us that VDI is maturing. From our perspective, now is the perfect time to experiment with VDI. That way, you can take a leadership role in delivering improved service levels at lower cost. So, have some fun, take a chance, and be prepared to fail and have to correct your course. The biggest risk is ignoring what just could be the next technology revolution.

Niel Nickolaisen is vice president of strategy and innovation at EnergySolutions Inc. in Salt Lake City. He is a frequent speaker, presenter and writer on IT’s dual role enabling strategy and delivering operational excellence. Write to him at nnick@accelinnova.com or editor@searchcio.com.

High Moon Studios Triple Play

Increasing performance, reducing I/O bottlenecks, and lowering IT energy costs in VMware environment

What most IT professionals don’t realize is that changes to applications that result in increased performance and increased throughput also impact energy utilization, which goes down dramatically. Local utilities can then offer handsome energy rebates to customers who demonstrate these IT efficiencies.

I met with High Moon Studios, part of Activision Blizzard, a developer of action-packed games for Xbox 360®, PlayStation®3 and the PC. High Moon has won several awards in categories such as creative excellence, technology innovation, digital art, and best video games.

Developers wanted to add features but not impact build time or delay market introduction. High Moon IT Director, Dan Mulkiewicz was looking to improve performance. The environ¬ment was characterized by highly random and bursty storage accesses. He made the decision to virtualize the build server environment under VMware with shared SATA-based bulk storage. After completion, Dan was able to reduce the physical servers from over 70 to less than 10.

As the number of virtual servers grew, so did the IOPS, stressing the capability of the shared stor¬age arrays creating an I/O bottleneck. So High Moon Studios installed a GridIron Turbocharger SAN application appliance transparently in their Fibre Channel fabric between the servers and storage. The performance boost from the GridIron TurboCharger reduced the software build times, in extreme cases, down by a factor of nine! This reduced the build from 70 minutes to 8 minutes enabling the studio’s IT department to exceed their service level agreements.

The GridIron TurboCharger easily handled the bursty build traffic given its ability to serve over 100,000 IOPS, effec¬tively eliminating I/O contention at the storage array.
Finally, as an added bonus, the IT energy efficiency increased significantly, which resulted in lower utility bills and qualifies for energy rebates from the utility company.

And thus the triple play was created providing the best of all worlds:

1) Increased performance;
2) Elimination of I/O bottlenecks; and
3) Reduction of IT energy costs.

Six Santa Clara businesses were honored today by their electric utility, Silicon Valley Power (SVP), for innovative adoption of energy efficiency measures and renewable energy in 2010. One of the companies saved almost 6 million kilowatt-hours of electricity last year.

SVP annually honors winners in the categories of Environmental Innovator, Energy Efficiency Partner and Green Power Champion. As it turns out, a little recognition can go a long way toward encouraging customers to work with their utilities on efficiency and renewables programs. The following lists the companies recognized for their achievements and a brief description of what they did:

Environmental Innovator: CoreSite, a data center that cut its energy use by 6 million kilowatt-hours a year by incorporating energy-efficient air temperature design won the award in the large company category. It also built a Leadership in Energy & Environmental Design Gold-certified facility in Santa Clara. In the small business category, Roos Instruments was recognized for cutting its power consumption by 6% last year, and is shooting for a 10% reduction this year.

Energy Efficiency Partner: Agilent Technologies won the large business award, earning $108,000 in SVP rebates for its smart building technologies used in heating and cooling systems. The company cut its energy use in 2010 by 10%. In the small business category, the Bella Vista Inn was honored for its installation of motion sensor-controlled efficient lighting, upgraded air conditioning unites and updated hot water and laundry equipment to cut power use.

Green Power Champion: Intel won in the large company category for cutting its carbon footprint by buying 1.43 billion kilowatt-hours of renewable energy credits, which covered about 50% of the company’s nationwide electricity use. Intel also installed a 100-kilowatt solar array on its Santa Clara headquarters. The small business winner is the community’s Neighborhood Christian Center, which saves energy with energy-efficient lighting and operates with 100% renewable energy.

Virtualization technology is a key building block for next generation enterprise datacenters and infrastructure. Though several vendors (Citrix, Microsoft, Novell, Oracle and VMware) have stepped up their virtualization offerings to the market, a void remains in the undeveloped area of managing and optimizing those virtualized environments and devices once they are in place. As the number of virtual servers increases, system administrators quickly find themselves in fire-fighting mode. Existing server monitoring tools are not virtualization aware and are unable to take into account the shared resource dependency between host and virtual machine.

Ed Lucente

I believe that the impact of cloud computing to the IT industry and to society at-large will be as significant as the Industrial Revolution was to market economies, otherwise known as capitalism. I’d like to explore the benefits of cloud computing, along with some potential threats. Incidentally, I refer to cloud computing in market economies as free market clouds. By this, I mean the coexistence of cloud computing and capitalism. Free market clouds, I predict, will unleash a wave of economic growth and opportunity, creating new benefits for individuals and firms by facilitating access to massive amounts of IT resources and services.

After a brief history on capitalism, I’ll consider how free market clouds can impact business, government, and society, including:
• Who will be the early adopters?
• How will free market clouds deliver benefits to business, government, and society?
• What will be some threats to a thriving cloud computing ecosystem?

Finally, I’ve provided footnotes to reference sources at the end of this essay in case readers wish to dig deeper.

On Capitalism

I think it’s important to provide some history on the origins of free markets (a.k.a., capitalism). Here are two definitions by two respected business historians, Thomas K. McCraw and David S. Landes:

“What exactly does “capitalism” mean? At a minimum, a capitalistic system is organized around a market economy that emphasizes private property, entrepreneurial opportunity, technological innovation, the sanctity of contracts, payment of wages in money, and the ready availability of credit. Under capitalism, property must be “alienable,” that is, freely bought and sold. The “value” of a good or service means whatever price someone will pay for it…“Capitalists,” then, are people who make bets on the future. The essence of capitalism is a psychological orientation toward the pursuit of future wealth and property. It’s all about aspiration and striving, measured by gains and losses in wealth and income. It rests on the belief that economic growth, even substantial growth, is possible and desirable — for an individual, a family, a business firm, an industry, even an entire country.”¹

“The decisive and most distinctive American innovation, though, was not any particular device, however important, but a mode of production — what came to be called the American system of manufactures. This was a creative response to (1) a market free of the local and regional preferences and the class and status distinctions that prevailed in Europe, hence ready to accept standardized articles; and (2) the scarcity of labor relative to materials. The two were related. In a labor-scarce economy, standardization was a way of dividing, hence of simplifying, tasks and making them repetitive, thus substantially enhancing productivity.”²

So then, capitalism is a combination of economic and cultural principles based on free markets, private property, freedom to take risks, access to wages and credit, the right to accumulate wealth, specialization of labor, and deep-seated values among individuals and firms to strive for their full potential and growth.

Early Adopters

According to David Linthicum, a recognized IT industry expert, areas where cloud computing might be a fit are:
• “When the processes, applications, and data are largely independent (loosely coupled).
• When the points of integration are well-defined.
• When a lower level of security will work just fine.
• When the core internal enterprise architecture is healthy.
• When the browser is the desired interface.
• When money is tight.
• When the applications and/or services are new.”³

I can’t argue with these technical postulates since they make good sense, but I’d also add other profiles:
• Early adopters will include businesses that need to improve communication with their customers and business partners. (This does not rule out many.)
• Early adopters will include innovative, small businesses that need ready access to IT and global markets in order to grow and compete against incumbent corporations. (The surrealistic ideal of David beating Goliath can become a reality for start-ups.)
• Early adopters will include industry verticals that have been served poorly by traditional client/server computing models.
• Early adopters will include businesses within a common industry that have much to gain by centralizing data in order to share information better with their customers, like healthcare.
• Early adopters will include research entities — such as engineering and research labs at universities or pharmaceuticals — that require analysis of massive amounts of data and access to high performance computing resources.

Free Market Clouds Will Deliver Benefits to Business, Government, and Society

Benefits to Business

It’s easy to create a quick (though incomplete) laundry list of potential business benefits if we assume the following positive impacts of free market clouds:
• Self-service (no third-party intervention needed to access IT services).
• Metered access to IT resources and services (pay-as-you-go).
• Scale up, scale down capability.
• IT standardization, including widely accepted APIs to prevent cloud service provider lock-in.
• Dramatically lower upfront cash outlays (CapEx) for on-premises IT equipment.
• Easier broadband access to compute, data, and networking resources.
• Less expensive broadband access to compute, data, and networking resources.
• Ubiquitous, mobile access to reams of compute, data, and networking resources.
• Customer and product focus vs. “on-premise technology distraction.”
• Easier market analytics (i.e., consumer behavior metrics).
• Intense competition among cloud service providers.
• Free and easier information sharing.
• Lower IT labor costs for firms.

I anticipate that these free market cloud impacts will then benefit business in many areas, including:
• Increased product innovation.
• Increased research and engineering effectiveness.
• Net job creation as innovative ideas turn into new businesses.
• Improved employee productivity.
• More customer choice.
• Lower supply chain costs.
• Lower customer prices.

Benefits to Government

Over the past ten years, the number of federal data centers has grown from 498 to more than 1,200. Earlier this year the Federal Government launched their Data Center Consolidation Initiative, the cornerstone of which is cloud computing.

The Federal Government understands the efficiencies and transformative benefits of cloud computing, like:
• Reducing data center carbon footprints.
• Reducing wasted real estate.
• Improving data center energy efficiency.
• Improving inter- and intra-agency communication.
• Improving outward-facing public services by consolidating data and enabling browser access.

The Federal Government not only “gets it” but is an early adopter. In his February 2010 memo, Vivek Kundra, Federal Chief Information Officer, explained:
“The Data Center Consolidation Initiative is broken down into 6 key phases and is designed to first assess and inventory the current agency environment and then establish a plan for achieving significant reductions in data center build through the use of server virtualization and Cloud Computing technologies. Additionally, this initiative aims to reduce overall energy consumption by data centers across the Federal Government, while reducing the physical real estate and other key costs drivers associated with data centers.”⁴

Benefits to Society

According to Bill Drayton, CEO, and Valeria Budinich, founder, of Ashoka, a global association of leading social entrepreneurs:
“The time is ripe for collaboration between for-profit businesses and mission-driven individuals and organizations, or citizen-sector organizations (CSOs). Collaborations between corporations and CSOs (many of whom are entrepreneurs) can create and expand markets on a scale not seen since the Industrial Revolution. These markets will reach everyone, but especially the 4 billion people who are not yet part of the world’s formal economy. Since the 1980s, for example, the citizen sector has been creating jobs about three times as fast as have other employers in the Organisation for Economic Co-operation and Development countries. In Brazil, the number of CSOs rose from about 36,000 to nearly a million over the past 20 years. In the United States, their number has grown by more than 300% since 1982.”⁵

By making it easier and less costly for CSOs to access computer resources and to collaborate with for-profit businesses or corporations, it stands to reason that free market clouds should help to fuel positive, collaborative results (e.g., job creation) between people in need and private business.

Threats to a Thriving Cloud Computing Ecosystem

It seems to me that the two most obvious threats to a thriving cloud ecosystem are:
• Natural monopolies occurring within cloud service providers.
• Too much government regulation.

Among cloud computing service providers today, there is intense competition; the players can be described as being fragmented. Inevitably, there will be a shake-out as the business matures, which can lead to the “winners” being only the largest cloud service providers. The reason for this is that there are profound financial and operational economies of scale for cloud service providers as they build out their infrastructure for clients — efficiency improvements of 5-10X have been estimated for large, well-run cloud data centers vs. traditional on-premise data centers. For example, Amazon Web Services, which just celebrated its fourth anniversary, is about to break through the $500 million revenue threshold in 2010. UBS estimates that Amazon Web Services’ net income will expand roughly 50-70% each year through 2014, a truly incredible business model. The point is that Amazon Web Services has become a powerful engine for profit and cash generation due to its large scale.

Other competitors, such as ATT, Level 3 Communications, IBM, CA, HP, Rackspace, Savvis, and Terremark are trying to catch-up to Amazon Web Services’ scale (perhaps some have already), and they should be able to compete toe-to-toe successfully into the future. Smaller cloud service providers, however, are likely to disappear over the next decade. Less competition in any business leads to less choice and higher prices for clients, so this could become a threat when the cloud service provider industry undergoes consolidation in the future.

Also, history has proven that too much government regulation in any business sector is damaging to its growth and continued success. On government regulations in a free market economy, Friedrich Hayek, the renowned economist argued that:
“Government regulations will always limit the scope of experimentation and thereby obstruct what may be useful developments. They will normally raise the cost of production or, what amounts to the same thing, reduce over-all productivity.”⁶

Hayek, therefore, prescribed the avoidance of “factory legislation” whenever possible.

Similarly, Alfred Chandler and Richard Tedlow, business historians at Harvard, reaffirmed Hayek’s thinking:
“Most regulation occurs at the borderlands of politics, law, and economics, and those who have shaped its evolution have come from these three fields. Of the three, the first two have tended to overshadow the third, and considerations of politics and legal process have customarily triumphed over those of economic efficiency.”⁷

The bottom line: Government shouldn’t regulate free market clouds much.

Wrap-Up

Time will tell whether free market clouds will reinvigorate the beneficial, pro-growth economic forces of capitalism, which began in England around 1760 with the invention of the steam engine for coal mining. For skeptical readers who doubt the merits of capitalism, please remember these historical facts:
• Per capita income in the West was flat for 1,000 years prior to industrialization and market economies.
• Then per capita income in the West rose by 20% in the 1700s.
• Then per capita income in the West rose by 200% in the 1800s.
• Then per capita income in the West rose by 740% in the 1900s.⁸

My hope is that business, government, and society will continue to create fertile ecosystems for cloud computing to thrive, just as many Western market economies have done for capitalism for 250 years.

Footnotes

1. Thomas K. McCraw, Creating Modern Capitalism: how entrepreneurs, companies, and countries triumphed in three industrial revolutions (Cambridge, Massachusetts, and London, England: Harvard University Press, 1997), 3-4.
2. David S. Landes, The Wealth and Poverty of Nations: Why some are so rich and some so poor, (New York: W. W. Norton & Company, Inc., 1998), 301.
3. David S. Linthicum, Cloud Computing and SOA Convergence in Your Enterprise: (Upper Saddle River: Addison-Wesley/Pearson Education, 2010), 186.
4. Vivek Kundra, State of Public Sector Cloud Computing: (Washington, D.C.: CIO Council Paper from the Federal Chief Information Officer, May 20, 2010).
5. Bill Drayton & Valeria Budinich, Can Entrepreneurs Save the World? (Boston: Harvard Business School Publishing Corporation, 2010), 58-59.
6. Friedrich A. Hayek, The Constitution of Liberty, (Chicago, The University of Chicago Press, 1960), 61.
7. Alfred D. Chandler, Jr. & Richard S. Tedlow, The Coming of Managerial Capitalism: A Casebook on the History of American Economic Institutions, (Homewood, Illinois: Richard D. Irwin, 1985), 9.
8. Bill Drayton & Valeria Budinich, Can Entrepreneurs Save the World? (Boston: Harvard Business School Publishing Corporation, 2010), 58.

About the Author
Edward J. Lucente is V.P. of Business Development at Data Center Rebates, Inc., an IT efficiency consultancy based in Carlsbad, CA, whose professional services focus on data center energy efficiency (DCEE), leasing integrated with technology refreshes, and negotiation of IT energy rebates. Please feel free to email comments to ed.lucente@datacenterrebates.com.

These days everyone seems to be dropping the word “cloud” both inside and outside of the IT industry. Cloud hype is so far off the charts that recently I thought I heard a Boston Red Sox announcer ask David Ortiz (aka. “Big Papi”) for his opinion of IT as a service from the burgeoning cloud computing paradigm. (I don’t think this really happened, but somehow I equated cloud computing with some other topic being discussed on TV at Fenway Park.) My point is that there is ample cloud confusion out there.

Various organizations, like Open Cloud Manifesto (www.opencloudmanifesto.org), have established a cloud computing “taxonomy” that by now you’ve heard. Cloud deployments, they say, come in three flavors:  IaaS; PaaS; and SaaS. Cloud implementations can then be described generally as private (on-premises), public (off-premises), or hybrid (a mix). Unfortunately, cloud service provider solutions don’t always fit neatly into these categories. For example, some private cloud services offered by cloud service providers, like Savvis, are not actually located in the client’s data center. Instead, Savvis provides each client with tight security measures — like firewalls and intrusion protection — and private networking options to connect to Savvis’ U.S, U.K., or Asian cloud data centers. Each Savvis client also accesses dedicated physical IT resources, so physical resources are never shared with other clients (zero multi-tenancy). Cloud taxonomies do help to frame cloud IT conversations nevertheless.

Of course, the topic of cloud data center benefits seems to continuously heat up with every new cloud announcement, especially from large IT vendors. Witness Microsoft’s Worldwide Partner Conference on July 12^th, which hosted over 13,000 global software development partners and boasted Microsoft’s Azure platform and appliance to facilitate private, public, and hybrid cloud deployments. For Microsoft, this show represented the official dawn of “IT as a Service.” Already, 70% of Microsoft’s 40,000 developers are working on cloud products and services in 2010, and over 10,000 customers are on the Azure platform, which encompasses the IaaS, PaaS, and SaaS implementations. Said differently, the Azure roll-out represents 38,000 people or organizations, or the capacity of Fenway Park including standing room!

Okay, but whether it’s Azure or some other cloud platform (e.g., Google, Amazon, IBM, CA) what real benefits are going to be delivered via cloud data centers?

Below is a sample laundry list of cloud benefit buzzwords just to give you an idea of how widely scattered opinions are, but also to demonstrate the hype, hope, and promise of cloud computing, which I borrowed from The Open Group’s “Cloud Computing Business Scenario Workshop”, August, 2009. (www.opengroup.org). Potential cloud computing benefits (or “pain-point killers”) were grouped into nine categories and then ranked in priority order, as follows:

• Timeliness/agility.
• Resource optimization.
• Cost.
• Need to remove obstacles to innovation.
• Security.
• Risk management.
• Compliance.
• Need to improve quality of IT support.
• Business continuity.

These are the potential cloud data center implementation advantages expected over time, but these seems too complicated, let alone difficult to memorize for a customer meeting. So, I have pinpointed the three or four cloud computing characteristics that continuously pop out for me and customers.

For starters, the key cloud enablement technology is virtualization, typically at the server level (e.g., VMware, Hyper-V, Zen); however, many other IT resources can be virtualized (and should be), including storage, network fabrics, I/O, memory, applications, and even databases. Once most IT resources are virtualized by the abstraction layer, theoretically the sky’s the limit as far as how big you can scale out a cloud data center. Rapid deployment, or agility, is another frequently cited benefit in the IT cloud, ranking number one in priority in The Open Group Workshop aforementioned.

Many other beneficial “efficiency factors” come into play with cloud data centers as well, so it’s not just about virtualization. For example, significantly fewer IT administrators are required to operate virtualized environments thanks to:

• IT standardization practices that create more predictable, highly controllable environments.
• Improved systems management software that automates many processes, eliminates the majority of human errors, and allows IT folks to focus on their most challenging applications or customer problems.
• Persistent reusability or repeatability of applications and processes. (Let’s face it, if you keep doing the same thing over and over, sooner or later you get really efficient at doing it!)

So it turns out that with scaled-out size along with these efficiency factors and others enable tremendous economies of scale when cloud data centers are well-designed and operated.

The newest data centers being run by the likes of Google or Microsoft are enormous and boast cost efficiencies 5-10X greater than traditional, “un-virtualized” enterprise data centers, which are also typically smaller in size. The efficiency benefits inherent in cloud data centers come in different forms when best practice design and technologies are implemented at both the facility and IT operation levels. Benefits include things like superior energy efficiency, higher availability, and better performance.

Perhaps most crucial (and I’m guessing usually never brainstormed in professional IT workshops) is that a business can run a massive cloud data center with 100% clean energy sourced from a nearby hydro-dam or wind mill farm. Google, Yahoo, and Microsoft are doing exactly that today in the US Northwest. Ultimately, a business can achieve a zero-carbon IT operation and then brag about it in their annual sustainability or corporate social responsibility report.

Actually, when you think of it, introducing the efficiency benefits of cloud data centers as being simply “greener and cleaner” is a much better place to begin cloud discussions — for IT professionals, sports announcers, and Major League baseball players like Big Papi.

About the Author

Edward J. Lucente is V.P. of Business Development at Data Center Rebates, Inc., an IT efficiency consultancy based in Carlsbad, CA, whose professional services focus on data center energy efficiency (DCEE), leasing integrated with technology refreshes, and negotiation of IT energy rebates. (Ed is a rabid Red Sox fan also.) Please feel free to email comments to ed.lucente@datacenterrebates.com.

Recently, I was at the Uptime Institute in New York and had several conversations about carbon dioxide (CO₂) management for data centers. Energy consumed by U.S. data centers in 2010 will reach 3% of overall U.S. energy production. This will double in about five years given that the annual growth in data center energy consumption is 10%. Increases in data center CO₂ emissions should mirror energy consumption increases since most data centers will be unable to convert to greener, cleaner, renewable energy sources.

The good folks at the Uptime Institute estimate that data center CO₂ emissions will quadruple between 2010 and 2020; also that annual global data center CO₂ emissions are already on par with the CO₂ emissions of the airline industry, or even entire countries. Maybe we should put data centers in airplanes and keep all the CO₂ flying around.

Annual CO₂ emission comparisons (Mt = thousands of metric tons)
U. S. data centers 170 Mt
Argentina 142 Mt
Netherlands 146 Mt
Malaysia 178 Mt

The IT professionals that I spoke with are becoming familiar with their data centers’ “carbon footprint.” They understand that by managing CO₂ emissions they will be better prepared for existing or future greenhouse gas (GHG) regulations. (GHG also includes water vapor, methane, nitrous oxide, and ozone.)

Also, I noticed that a number of application software companies have sprouted up to promote carbon management information systems that deal with issues around CO₂ compliance standards, CO₂ inventory baselining, and financial management of carbon allowances and credits. Certainly, innovative application solutions will be needed to help data center professionals and executives navigate through CO₂ management challenges associated with:

• Compliance.
• Conservation.
• Complexity.
• Cost.
• Competitiveness.

The federal government will be among the early adopters of carbon management software. The U.S. federal government’s demand for carbon management software is expected to grow from its current level of $36 million to $294 million by 2017, according to a new report by Pike Research.

US Legislation
In the United States, government regulations concerning CO₂ include the EPA’s GHG Reporting Rule and the pending Kerry-Lieberman bill, known as “cap and trade.” Under the EPA’s GHG Reporting Rule, suppliers of fossil fuels or industrial greenhouse gases, manufacturers of vehicles and engines, and facilities that emit 25,000 metric tons or more per year of GHG emissions are required to submit annual reports to the EPA. This would include the largest data centers, and there is a concern that over time this floor of 25,000 metric tons would be reduced by government. Currently, over a dozen U.S. states are contesting this new EPA law in court, so stay tuned.

The passage of the Kerry-Lieberman bill in 2010 is less certain, especially now with the oil spill crisis in the Gulf of Mexico, but it is potentially far reaching. If passed, it would require many businesses to measure, monitor, or manage GHG offsets, abatement projects, GHG sources, GHG reporting, carbon prices, and various protocols. This could be a nightmare for data center professionals. Just the bill’s preamble scares me, especially the “for other purposes” language:

To secure the energy future of the United States, to provide incentives for the domestic production of clean energy technology, to achieve meaningful pollution reductions, to create jobs, and for other purposes.

Call for Action
I tend to believe that government mandates are less efficient delivery mechanisms than programs developed through private industry and self-regulation; what concerns me is that I have not seen the IT industry take a more proactive, self-regulatory role with regard to managing and minimizing CO₂ emissions. Consider these questions:

• Why should the IT industry wait around for government standards on CO₂ emissions?
• Shouldn’t data center professionals control and develop their own CO₂ management information systems since they understand best their unique IT and business environments?
• Why wouldn’t a CEO, Corporate Sustainability Officer (CSO), Corporate Social Responsibility (CSR) executive, or CIO want to take more control of their destiny?

As mentioned, IT shops can choose from various application solutions and turn to energy efficiency consultants for additional guidance. Data centers that reduce their CO₂ emissions will also reduce their energy bills (OpEx) and total cost of ownership.

I suggest, therefore, that the IT industry create its own “carbon efficiency consortium” to establish carbon management information standards and solutions aimed at reducing CO₂ emissions in data centers. This would be an industry-led, self-regulatory body that provides thought leadership on CO₂ management and shares best practices and recommendations for carbon management.

My bet is that data center professionals who develop internal management information systems for carbon management now will achieve significant cost savings ahead of their competitors. It’s not just about a greener planet; it’s about building a sustainable and competitive IT and industry advantage.

About the Author
Edward J. Lucente is V.P. of Business Development at Data Center Rebates, Inc., an IT efficiency consultancy based in Carlsbad, CA, whose professional services focus on data center energy efficiency (DCEE), leasing integrated with technology refreshes, and negotiation of IT energy rebates. Please feel free to email comments to ed.lucente@datacenterrebates.com.

Green IT initiatives are popular among IT professionals. In fact, “Green IT 2.0” is a new buzzword that prescribes a holistic approach to not only greener data center designs and practices, but also for more eco-friendly practices across all functional departments of an organization (e.g., proper e-waste management of toner cartridges or paper).

So why are these trends so hot?

Enterprise-level data centers consume more energy than ever before due to their increasing size, growing design densities, and the popularity of multi-core processor technology in servers. So about 50% of an enterprise data center’s operating cost can be due to the electricity costs to power and cool the IT equipment and facility. Also, for many years, IT departments have been asked to do more with less, and now there exists a positive, politically correct spin on what to call this kind of initiative:  “next generation, green data centers.” The bottom line is that being green means being more cost efficient over the long term.

Best practices in next generation, green data centers include the entire organization, not just the IT department; it also includes the Facilities Department designing data centers and the Executive Committee overseeing corporate eco-responsibility. It’s a very good thing that green IT initiatives are beginning to cross all lines of businesses for better, sustainable approaches to cut energy costs and e-waste. Consider this for example:  desktop/laptop computers are scattered everywhere; PDAs are assigned to employees by the thousands; and departmental printers populate every office floor.

I’m enthusiastic about a newer kind of data center called the containerized data center, or simply, the container. For about two years, companies like Sun Microsystems, HP, and SGI (formerly Rackable Systems) have been delivering high density, energy efficient containers.

The container is designed to be a fully optimized, tightly controlled system complete with sophisticated management and monitoring tools. The container delivers the most energy efficient “data center in a box” with a PUE rating of less than 1.20. The containerized data center confronts challenges faced by IT and Facilities professionals today more effectively than a traditional brick-and-mortar data.

Why?

Well, when all of the container’s attributes are taken together, realized benefits are clear. The container:

• Lowers operating costs
• Lowers energy (power and cooling) consumption, at least a 25% reduction
• Increases IT staff productivity

Is more capital efficient

• 50% of the capital cost for an equivalent brick-and-mortar data center.

Is more energy efficient and greener

• At least 25% less electricity for power and cooling
• Attachable to renewable energy sources, such as hydro dams and windmills, at their location
• Significantly smaller carbon footprint

Accelerates project ROI with IT energy rebates provided by utilities

• IT energy rebates are maximized
• Upfront cash rebates can be $300,000 – $500,000 per container

Lowers IT project risk

• Mitigates investment risks associated with brick-and-mortar data centers, such as construction delays, supply chain issues, cost overruns, site permits, etc.

Is faster to deploy (commission)

• In weeks versus years
• Six-week deployments are typical
• Meets capacity increases more easily

Minimizes over-provisioning with its modular design

• Matches supply of compute/storage/networking capacity with IT and business demands

Improves operational support and manageability

• Facility management system that interfaces with any SNMP standard system
• Increases IT staff productivity

Increases flexibility via a heterogeneous design

• Accommodates compute, storage, and networking equipment from multiple IT vendors
• More easily optimized for specific applications

Achieves high availability and reliability (system-wide redundancies)

• Tier 3 rating, or higher, from the UpTime Institute (now The 451 Group)

Portability

• Can be located indoors or outdoors, on any terrain and in almost any climate

All of these container qualities make for a superior TCO versus brick-and-mortar data centers. Below are container photos: