Earth to Cloud Providers: Data Costs Can Make Your Cloud Services Cost Prohibitive

“My people are destroyed from lack of knowledge.”   Hosea Chapter 4, Verse 6 from the Bible came to mind as I reviewed a recent survey conducted by an old friend, Tom Nolle, who is the President of CIMI Corporation, a strategic consulting firm specializing in telecommunications and data communications. Symantec and other analysts continually point out that security has been the major hurdle impacting the adoption of cloud computing, yet my old friend Tom has pointed out that the cost of storage may have even more of an impact with respect to the penetration and rate of cloud adoption in the Enterprise environment.

As I read Tom’s survey, it became clear to me that Enterprises are beginning to recognize that some of their early expectations for the cloud will not be achieved. If the survey is correct, cloud providers will have to recalculate the risk/benefit analysis as these facts will soon become evident to Enterprise customers. In the near future, it now appears that cloud providers will focus on supporting real world deployments and benefiting from the experience differential as compared to their competitors — and that focus will create, in my opinion, a similar opportunity for consulting organizations that can deftly support cloud migration and private cloud infrastructure design and deployment.

Tom’s survey clearly indicates that everyone has ignored the cost of cloud data storage and its impact on the adoption of cloud services. So far, the applications that are being migrated to cloud services are typically applications that do not have significant storage requirements. This is not the case for the majority of Enterprise applications. Tom’s survey indicates that the penetration of cloud computing into the Enterprise won\’t surpass 30% primarily because of pricing.

Enterprises are tending to reject Infrastructure as a Service (IaaS) because the business model doesn\’t address application support costs, and the model cannot be expected to gain much savings from economies of scale. This, more than any other factor, is moving buyer consideration up the food chain toward Platform as a Service (PaaS) and Software as a Service (SaaS), where Enterprises can follow the 5R’s of Cloud Migration:

  • Rehost – To redeploy applications to a different hardware environment and change the application’s infrastructure configuration. IaaS is the primary business model used to rehost.
  • Refactor – To run applications on a cloud provider’s infrastructure. The primary advantage is blending familiarity with innovation as “backward compatible” solutions  The PaaS platform means developers can reuse languages, frameworks, and containers they have invested in, thus leveraging code the organization considers strategic.
  • Revise – To modify or extend the existing code base to support legacy modernization requirements, then use rehost or refactor options to deploy to cloud. This option allows organizations to optimize the application to leverage the cloud characteristics of the providers\’ infrastructure.
  • Rebuild – To rebuild the solution on PaaS, discard code for an existing application and re-architect the application. Although rebuilding requires losing the familiarity of existing code and frameworks, the advantage of rebuilding an application is access to innovative features in the provider\’s PaaS platform.
  • Replace – To discard an existing application (or set of applications) and use commercial software delivered as a service (SaaS). This option avoids investment in mobilizing a development team when requirements for a business function change quickly.

However, the uncertainty around data costs is chilling the marketplace.  Cloud Providers tend to exact a double penalty for cloud data: You pay for storage, and then you pay for access. Large databases that are accessed regularly end up costing a fortune in the cloud. Transactional applications can\’t use summary data — they create the data users are hoping to summarize — so migrating these applications to the cloud is very complex or in some cases impossible.

IBM and other vendors have been positioning the deployment of summarized repository abstractions as the basis for cloud business intelligence (BI) applications, and this approach is, in my opinion, the optimum means of dealing with the problem because most BI applications don\’t need to handle detail-level data. The result is that BI applications are supplanting mission-critical applications in the cloud as they help the Enterprise dodge the double penalty for cloud data.

In the small and medium-sized business (SMB) space, the current state of the market is somewhat better.  SMBs are finding that the cloud\’s biggest benefit is avoiding technical support costs, which are higher for the SMB because of the market\’s limited career paths for IT resources and the inability to depend on competent  technical resources being readily available in local labor pools.  SMBs typically do not have the storage requirements that Enterprises do, which means that SMB migration costs to cloud services are more easily matched by corresponding savings.

It’s very difficult to estimate the addressable market and penetration rates for SMB cloud services because SMBs are less likely to account for their current IT costs or their potential savings, but according to Tom’s survey, about 50% of SMB IT spending could be focused on cloud services. That finding indicates that the primary target for cloud services should be the SMB — or even the residential consumer.  I can hear the wailing and gnashing of teeth as I write this, as most of the major service providers have focused on Enterprise cloud services.

While these findings contradict the conventional wisdom, IBM, Oracle and Microsoft are beginning to support some promising strategies to try to make cloud storage work better at the Enterprise level. The most interesting approach is to focus the Storage as a Service (StaaS)  offering  on data replication, backup or deeper storage, which means creating a transparent storage hierarchy that starts on the Enterprise premise with Tier 1 storage data and migrates  into the cloud Tier 2 and 3 storage data (the platforms supporting this storage tend to be less expensive than Tier 1 storage platforms), with applications deployed to control the transport of  information among the tiers based on specific business policies. It is believed that IBM, Oracle and Microsoft are all proposing this sort of service, and several startups are now focusing on the development of storage appliances that virtualize a tiered hierarchy.

The tools are far from deployment-ready, but good progress is being made, and this may be one of the most important technology evolutions in terms of maximizing the cloud opportunity for providers in the future.

Tom…an old dog can learn new tricks.  A very interesting survey that I am sure will create the debate that you love.

Earth to Cloud Providers…Are you listening?

What do you think?  How important is cost when considering Cloud services to you?  What do you see as the future for PaaS (Platform as a Service)?
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