Tag: cloud computing

Live from Bangalore – the NASSCOM IMS Summit, September 21 | Gaining Altitude in the Cloud

CIOs, service providers, analysts, and the business media rubbed shoulders on the power-packed first day of the NASSCOM Infrastructure Management Summit (IMS) in Bangalore. This year’s conference has the twin themes of Enterprise Mobility and Cloud Computing, with one day dedicated to each, which seems to lead to a more focused set of discussions than a super broad-based event that leaves you struggling to absorb all of what you just heard.

After the welcome address and keynote speech from Som Mittal, President of NASSCOM, and Pradeep Kar, Chairman of the NASSCOM RIM Forum, we settled in for a series of insightful presentations and panel discussions with global technology leaders.

BMC CEO Robert E. Beauchamp spoke about how the parallel paradigms of cloud, consumerization, and communication (yes, I am in alliteration mode today) require CIOs to think of a unified approach to service management. Of particular interest were Beauchamp’s insights on how different service providers are trying to interpret the cloud differently in an attempt to a) disintermediate the competition; b)  avoid being disintermediated; or c) both a and b.

IBM’s interpretation of the cloud: The cloud is all the bundled hardware, software, and middleware we have always sold to you, but now you can buy the whole stack yourself instead of us having to sell it to you.

Google’s counter: Who cares about the hardware anyway? We will buy the boxes from Taiwan – cheaper and better. It’s about what you do with it, and that’s where we come in…again.

VMWare chips in: You already own the hardware – and we will tell you how best to make use of it.

Beauchamp sees more than one way of “belling the cloud cat,” and CIOs need to figure out which direction to take based on their legacy environments, security requirements, and cost imperatives. (“Belling the cloud cat” is my take-off on a fable titled Belling the Cat. It means attempting, or agreeing to perform, an impossibly difficult task.)

As for service providers, he also foresees successful survivors and spectacular failures as the cloud conundrum disrupts traditional business models.

Mark Egan, VMWare CIO spoke about how consumerization and cloud computing are nullifying the efficacy of traditional IT management tools. According to Egan, IT needs to move from a “we’ll place an agent on the device” mode to a “heuristics” mode of analyzing data in order to prevent every CIO’s security nightmare from coming true in a consumerized enterprise.

Next up, Brian Pereira, Editor, InformationWeek, and Chandra Gnanasambandam, Partner, McKinsey, inspired us with real stories about how mobility is transforming the lives of unbanked villagers, saving billions of dollars worth of healthcare expenditure, and improving and optimizing the enterprise supply chain.

Here’s a gem of an insight: Do you know what most urban workers in the Philippines, Vietnam, or India do if they need to transfer money to parents living in rural areas? They buy a train ticket. Then they call Mum and Dad, share the ticket number, and ask them to go to the local railway station, cancel the ticket and collect the refund (minus a small cancellation fee). Wow – that’s what I call consumer-led innovation!

To summarize today’s sessions:

  • While many discussions highlighted the correctness of what Everest Group analysts are already predicting, it was invaluable to get validation on what we suspected, complete with more live examples.
  • Cloud and enterprise mobility are here to stay. With the momentum behind them – unlike other hyped up technologies – these are being demanded by the consumer, not dumped on them. And that is always going to mean something.
  • Service providers and CIOs need to evolve. In themselves, cloud and mobility do not represent a threat. But it’s a lot of change. And the threat lies in how CIOs, and their service providers, gauge the pace of the change, and react to it.

That’s it for now. Tomorrow, I share a panel with CSC and Microland to discuss “Trigger points – Driving traditional datacenter to private cloud.” Right now I’m heading off the gym in an attempt to burn all the calories I’ve put on during the day, thanks to the excellent food. Stay tuned!

Cloud: The Network Itch | Gaining Altitude in the Cloud

During the past several weeks, Everest Group’s ITO team has had multiple debates about the various levers that govern the cloud services industry. The growing consensus has been that service orientations, *aaS (BPaaS, SaaS, PaaS and IaaS), are the strength levers with which the cloud service providers will play. So, for example, a Rackspace (IaaS) will host a Salesforce.com (SaaS) on a Microsoft Azure (PaaS) platform, completing the cloud landscape. Just one glance across the *aaS firmament and the stories appear similar. The cloud portrait seemed complete and nailed to the wall for posterity.

However, a statement by Steve Caniano, VP of AT&T Hosting and Cloud Services – “What is key for us is the ability to leverage the cloud as part of a network service experience – without a network you don’t have a cloud” – took our debates in another direction.

“Without a network you don’t have a cloud”

While the services side of the cloud has dazzled the industry, the infrastructure side – consisting of data centers and network – has seemed dreary. After all, network and storage are considered hygiene requirements for the cloud infrastructure. They also appear to have been relegated to commodities, as both the network and storage markets have experienced intense competitive and pricing pressures. Our feeling is that saying there cannot be a cloud without a network is akin to taunting a Ferrari owner that his or her sports wonder car is no good without Michelin tires. True, the owner may have a momentary nightmare of the beaming red Ferrari’s chassis lying flat on the ground. But it isn’t a real worry, as Bridgestone, Goodyear, and other tire brands are also options. So, can I pat myself on my back and say I nailed this “cloud without a network” debate with this repartee and sign off on this blog?

A growing tribe of telecom firms thinks otherwise. Verizon, CenturyLink and AT&T have all recently made big investments in cloud – acquisitions of Terremark and Savvis are still fresh, and AT&T has put up a US$1 billion corpus fund for its cloud initiative. Additionally, the cloud-focused consolidation happening in the telecom industry has coincided with the growing activity in the cloud services industry. The next generation of networks (4G and 5G) have enticed many new cloud initiatives. Apple’s iCloud is an example.

In the debate that ensued within my team on this topic, a colleague reminded that the whole concept of cloud comes from telecommunications, and that public telephony was the first cloud ever. With this legacy in mind, can we assume that control over network and bandwidths will help telecom companies define the rules of the cloud?

Taking this debate external, is network:

  • Just a part of the cloud (and the real money lies with systems integration and advisory)?
  • An enabler of the cloud?
  • The cloud itself?

We’d love to hear your thoughts on this.

Time to Call the Real Experts – What We Can Learn from Ants about Cloud Governance | Gaining Altitude in the Cloud

IT rarely loves end users, and for good reason…they constantly invent new problems. They customize their laptops, creating unmanageable software Frankensteins; they bother IT with all kinds of new whims; they want to use all types of new mobile devices, each scarier than the previous one, etc. But the biggest reason of all is that end users always think they know better than IT what tools they need to conduct their business.

But IT can fight these battles with a mighty tool – centralized governance. The less control IT gives end users the better and more stable the system architecture will be, and centralized IT control always produces more efficient results. . Right? Actually, it’s no longer true. While centralized IT governance works well in a traditional IT ecosystem, it quickly fails in the new generation IT environment. The powerful promise of cloud computing is that any user can get easy access to a diverse set of IT resources – not just those available from the internal IT group –for the precise period of time they are needed, and shut them down once the project is completed. But all this requires a new type of governance – decentralized – which allows every user a choice of technology tools and operational flexibility, while still enforcing integrity and consistency of the IT architecture.

Is this even possible? Is there any precedent that shows this can work? There sure is, but not exactly where we would expect to look for it.

Introducing Governance, the Ants Way

Ants solve very complex problems everyday. A few of them include:

  • Conducting comprehensive project management of building large anthills capable of accommodating the whole colony
  • Running sophisticated logistical optimization exercises of finding food for the whole colony day after day
  • Administering a complicated supply chain of anthill maintenance and repair, food storage, and perimeter security per major environment changes (e.g., rain), and constant competition (e.g., other ants)
  • Managing HR – or rather AR, (Ant Resources) – of ~40,000 ants

What’s most striking is that they do all this under conditions of completely decentralized governance!

Ants

In fact, every ant has total operational flexibility to select its own tools, make optimization decisions, and manage its own work. The only guidelines they follow are their direct job responsibilities (e.g., worker, soldier, queen) and the overall goal of the colony.

This type of decentralized governance is what IT today must adopt and embrace to successfully manage cloud-based IT delivery. Business users will need to make IT decisions every day, and there is no way they can run every one of these decisions through IT for architectural approval, procurement for buying authorization, finance for budgeting, etc.

New flexible guidelines must be designed to support end users’ IT decision making. IT will still need to maintain the overall architecture, but it should not, for example, dictate to the end user exactly which server build and OS stack needs to run the user’s email. Procurement will still negotiate deals with cloud providers, but it should not micromanage every end user’s buying decision as long as the decisions comply with the overall goals. And finance will still set the budgets for business units and business users, but it should step away and let users select their own tools within the budget guidelines. Indeed, the enterprise will operate just like a colony of humans, with every worker optimizing his or her IT decisions within the overall company guidelines. Yes, to attain the full benefits of flexibility and agility of the cloud, enterprises need to learn to govern it the ants’ way.

This approach is certainly not without its challenges. While ant colonies have no issues with guidelines enforcement as ants are “compliance hard wired,” we certainly can’t say the same about human IT end users. Hence, IT’s issue will be how to enforce policies while still enabling users to enjoy the benefits of the cloud model. This is a non-trivial challenge for which there are no easy answers…yet.

HP’s Strategic Decisions – What’s the Next Shoe to Drop? | Gaining Altitude in the Cloud

In 1729, Anglo-Irish satirist, essayist, and political pamphleteer Jonathan Swift penned a satirical paper suggesting that to prevent the children of poor people in Ireland from being a burden to their parents or country, and to make them beneficial to the public, the Irish should eat their own children. Driving toward services leadership may require HP to make a similarly tough (yet certainly less ghoulish) choice – is it time to for HP to accelerate the next generation progress of its service business by actively cannibalizing the traditional IT infrastructure outsourcing business?

The IT infrastructure outsourcing market has already moved through a state of slow to zero growth into a phase of contraction.

ITO Market

The primary force disrupting this market has been the growth of the remote infrastructure management outsourcing (RIMO) model, which has effectively replaced traditional IT infrastructure outsourcing (ITO) contracts with a more flexible and cost effective alternative, resulting in services that generate as little as 25 percent of providers’ ITO revenue. (To clarify why providers only capture 25 percent of the revenue… with RIMO offerings, hardware, software, and data center costs are retained by the customer.) This disruptive trend may accelerate rapidly as it combines with the emerging forces of next generation data centers and cloud computing.

Based on HP’s recent bold strategic decisions around its non-performing businesses including PCs, TouchPad platform, and WebOS software, one wonders if it will also take a page from Swift’s proposal in setting direction for its services business. Doing so could enable it to accelerate its positioning as a next generation IT leader by actively eating its legacy customer base by rapidly driving cloud and other next generation IT services into it. This would likely generate significantly higher profit margins but result in lower overall revenue levels. So why should HP contemplate such a painful move? In short, if it doesn’t, someone else will! In fact, reports are that IBM is already snacking within its customer base, significantly expanding its next generation penetration while keeping a close eye on sustaining/growing its profit pool. Additionally, some Indian service providers have specific offerings targeted precisely at replacing legacy infrastructure contracts with more agile RIMO relationships.

As the Irish would have found had they followed Swift’s satirical advice, HP will find this move extremely painful and extremely unpopular in some quarters (e.g., Wall Street). True it will find solace in higher margins of these next generation offerings, which in many instances may be two to three times higher than its current low margins, and enjoy higher growth (albeit from a much smaller base). But this will offer scant relief from the real and emotional pain of absorbing significant stranded costs while replacing each dollar of “traditional” revenue with as little as 25¢ to 50¢ on the dollar of next generation services revenue.

I read the recent announcements about HP’s strategy as increasing the probability that the company will take such bold actions. It seems willing to take strong and decisive actions such as shuttering its WebOS business, TouchPads, and phones, as well as spinning off its underperforming PC business…so why leave its services business out of the mix?

What If the Hackers Had Attacked Sony Through Microsoft Azure Instead of Amazon’s EC2? | Gaining Altitude in the Cloud

There is widespread speculation that the recent attack on Sony was accomplished by utilizing credit card information stolen via compute resources purchased from Amazon’s EC2 cloud offering. This high profile incident has attracted attention in the mainstream press and in the blogosphere, underscoring the interconnected and anonymous nature of cloud computing, as well as the need for vigilance and improved security. Interestingly, there has been little attention paid or blame allocated to Amazon’s EC2 offering in the public discussion. Amazon, rightly or wrongly, has largely escaped unscathed, and the cloud infrastructure services sector – of which EC2 is the most visible champion – continues to enjoy increased adoption, favorable press, and commentary largely unaffected by this incident.

There are many good reasons why Amazon’s EC2 has not been vilified and cloud adoption continues at its frenetic pace. But what if the circumstances had been different? What if the credit card information had been stolen utilizing Microsoft’s Azure platform? Would the world have responded with the same collective yawn? Would there have been an attempt to hold Microsoft accountable for the nefarious use of its compute power? Would open source enthusiasts have suggested it to be another reason to move to open source from Microsoft products? To explore this, let’s first examine why it might have made a difference:

  • Microsoft plays a different role in championing cloud than Amazon. Azure is the Microsoft answer to the Windows operating system (OS) and bundled IP provided through the cloud. As such, it represents Windows and the dominant OS at this time.
  • As the dominant OS provider, Microsoft appears to be held to a different standard than most other providers; if there is a hole in Windows, we are all vulnerable (except, of course, Apple fanatics).
  • Microsoft acts as a lightning rod like no other, drawing negative attention from all quarters.
  • There seems to be a preference to excoriate past monopolists in favor of newer entrants that may yet gain similar market power, akin to market behavior that favored the Microsoft upstart over the established IBM in the 1980s.

So, what would have happened? Would the steady march to the cloud be delayed as we criticized Microsoft and questioned more deeply not only its culpability for how its service is utilized, but also the requirements for security in the cloud more broadly? Would regulators be initiating inquiries threatening further changes in compliance security laws, or attempting to add responsibility to providers of compute power? Or would there have been a similar yawn? It’s interesting to speculate… and as we do, what does this tell us about where we are headed and where we have been?

How Cloud Computing Is Reshaping The Role Of The CIO | Gaining Altitude in the Cloud

This blog was originally posted in Forbes’ CIO Central on August 3 as a contributed piece. Read the original post.


 

Four disruptive forces are causing executive teams to reconsider how the CIO function will add strategic value in a world where cloud computing, distributed architectures and mobile ubiquity are givens for future competitiveness.

Rising Server-to-Admin Ratios

When 25 physical servers for each IT admin was the norm, CIOs built organizational structures suited to that reality. Hiring, training, reporting lines, compensation, key success factors, annual reviews, career advancement and social norms were all built around that 25:1 ratio. Now, enterprise IT is facing the near-term reality of ratios that are 100:1, 500:1 or even 1,000:1. Google is rumored to be aiming for a 10,000:1 goal.

This massive increase in administrative density signals wholesale changes in the enterprise IT org chart. It changes who is hired, what skills they must have, how they will be trained and managed, evaluated and compensated, how they interact with and support business units, and what their long-term career paths will look like.

IT Becomes a Variable Cost

In the early 90s, when the CIO title was gaining popularity, the chief driver for bringing IT into the executive suite was the massive capital allocations required to give organizations a competitive advantage through rapidly changing technologies. These technologies demanded larger and larger percentages of the corporate budget, so a direct line to the president or CEO was paramount in justifying these spends.

Cloud and next-generation IT strategies dramatically change this. What was once CAPEX increasingly becomes OPEX, and long-term risk falls accordingly. So, where’s the strategic value in having IT in the executive suite? Arguably, it’s more important than ever.

The increase in business agility and responsiveness that cloud computing makes possible shifts the strategic value of the CIO from a technical role to a business role. CIOs must understand the functions they support, so they can help these functions quickly put the infrastructure and applications in place to support quickly moving new ideas to market, testing them, and iterating them to general release. Competitors will be doing this (and already are, in several industries).

End-User Auto Provisioning

End users are gaining a level of power that makes past demands for integration of Blackberries and iPhones seem whimsical by comparison. CIOs accustomed to pushing back against new ideas based on security threats and support burdens will increasingly find themselves cut out of the deal by end users who can go online and provision SaaS (software as a service) and IaaS (infrastructure as a service) with a credit card.

As Vivek Kundra, until recently the White House CIO, has said, “the more a CIO says ‘no,’ the less secure his organization becomes.”

Infrastructure Becomes Commodity

New — and largely uninvented — processes are required to deal with all of this change. Governance, compliance and security are all matters that 20 years of client/server policy is ill equipped to deal with. On top of this, CIOs must develop policies for the rapid growth of collaboration technologies (and, yes, social media) that employees will increasingly require in order to do the job the CEO is asking of them.

These shifts signal the need for the new CIO to bring an entirely new set of skills to the game. Yes, the new CIO’s job will continue to require an understanding of infrastructure and architecture, but a knowledge of how to turn the dials and knobs will be far less important tomorrow than it was yesterday. Tomorrow’s winning CIO will bring an MBA’s understanding of finance, marketing, operations, HR and the other functions. CIOs will understand how to say “yes” to new services that make their companies competitive, while mitigating risks and allowing for small-scale failures in the pursuit of long-term success.

Evolving Cloud, Evolving Advisory Role | Gaining Altitude in the Cloud

Avid readers of this blog can tell by now that Everest Group is excited to participate and contribute to the market discussion on the impact of the rapidly evolving cloud industry. We get tremendous satisfaction from both the online and in-person conversations our blog topics have generated in the last year and promise to continue to contribute our informed viewpoints with continued enthusiasm.

Enterprise IT leaders we talk with every day find themselves at a crossroads. The cloud revolution is nearing an inflection point, promising to radically transform the way IT services are delivered. At the same time, there is an equally strong “echo chamber” effect in which promises and benefits are refracted through various service provider prisms, creating a significant challenge in separating what’s possible from unhelpful hyperbole. Additionally, the focus in the current market tends to be on the ever-evolving technology upgrades and releases of various cloud components, which leaves most CIOs in the dark when it comes time to try and sell the economic benefits of cloud technology to their key internal stakeholders.

IT organizations have had enough theory and are ready to start working in more practical terms:

  • How do we transform the provision of IT services to our business to meet its needs more effectively?
  • How do we build a strategy to get us there?
  • What does the financial case look like to achieve our desired outcomes?

We’re excited to share the vision of our Next Generation IT Practice with you, because we believe it to be the natural evolution from our current practice of assisting Global 1000 firms drive greater operational efficiency. Our expertise allows us to help transform IT organizations to strengthen both their long-term strategic and economic positions by leveraging the next generation of technologies.

Our vision for this new practice is simple: provide a bridge between strategic direction and technical execution for IT transformation without bias towards the desired end state. We believe this is where the current advisory market falls short and Everest Group can add the most value.

Our Next Generation IT team is successfully able to:

  • Build on existing experience helping large IT clients develop strategies
  • Leverage our breadth of research on the service providers’ strengths and weaknesses
  • Adopt a time-tested methodology to include next-generation technologies
  • Utilize our business case modeling skills to construct a versatile tool for helping assess transformation economics in a way that is unique in the marketplace

We cannot wait to share more details about how our team at Everest Group has helped clients develop a roadmap towards transformation in the coming weeks, so that we can continue to contribute thought leadership in this space.


Learn details about how our Cloud Transformation and Next Generation IT offerings can help your organization achieve the strategic value it’s seeking.

End User Computing in the Cloud | Gaining Altitude in the Cloud

Since the inception of the end user computing (EUC) space in 1982, there have been many exciting moments including the first IBM PCs, the first Macintosh PCs, personal networking, desktop publishing, laser printers, Microsoft Office, and the Internet.  More recently, the advance of portable devices and media-centric applications have been of interest, but it’s been some time since I’ve been really excited about using my PC. That’s about to change. The convergence of network capacity/availability, technology, and applications are about to create a whole new EUC experience both personal and professional – the cloud!

How the cloud is integrated into corporate infrastructure planning varies by client, but the implications for optimization, virtualization, flexibility, and management are dramatic. New business models are emerging, and firms are working though security, compliance, and other considerations at a feverish pace. While the cloud is going to be very disruptive to corporate infrastructure, and many articles have been written on that topic, little has been written about how the cloud is going to impact us personally, as end users. So, let’s go there.

A few weeks ago, Apple announced its forth-coming iCloud offering. Think about having anywhere, anytime, any device (Any3) access to all the media you’ve ever purchased (on any device) or ripped (legally) to a PC. Imagine no longer being tethered, memory constrained, or having to sync with your PC in order to have access to your personal media when and where you want, regardless of hardware. That’s exciting. That’s the cloud!

Any Access

Additionally, little attention has been paid to how the cloud will ultimately change our professional computing experience. The reality is, the line between personal and corporate computing assets (from an end user perspective) is starting to blur. Imagine having the same Any3 access to every file, e-mail, contact, link, note, or application that you need, regardless of where that content originated, where you are physically, which application or version is licensed on your device, or even what device you happen to have available at the moment. Whether it’s your phone, tablet, notebook, office PC, home PC, a public PC, or even your grandma’s…you’ve got access to what you need! Next, think of the collaborative opportunities that will be enabled for document generation, review, and editing, and you get an idea of the future of EUC…it’s the cloud!

The cloud’s impact on EUC will go beyond just functionality and productivity, however. From a commercial perspective, the cloud will fundamentally change the way EUC services are procured, provisioned, licensed, updated, upgraded, and managed. It will also have positive implications on long standing issues like piracy and intellectual property.

From a usage standpoint, let’s think about just one of the commercial impacts in EUC that the cloud will dramatically impact…licensing. The cloud is going to make it truly use/user-centric. In an average 2,000-hour work year, how much do you actually use each of your applications? Maybe Office for 600 hours, PowerPoint for 500, a variety of other apps like Excel, SAP, Oracle, or Salesforce.com for another 400 or so combined, and one or two specialized applications for just a few hours or days? The cloud will usher in an era in which you’ll be able to use applications on demand, on any device, wherever you are, whatever time it is, for as much or as little time as you need them. And you won’t have to worry about licenses, versions, installation, updates, compatibility, etc.

Now that’s cool. That’s the cloud. And it’s coming soon to a device near you!


Learn more about Everest Group’s cloud transformation expertise.

Community Clouds Indicate Evolution in the Public Cloud Market | Gaining Altitude in the Cloud

Commercial technology tends to evolve in a repeatable pattern. An innovative firm releases a technology thinking it has the potential to have an impact on the way a task is performed. Because new technology is unproven, it is interpreted as being risky; it thus appeals first to early adopters who play a vital role in its evolution. Their enthusiasm for “the new” is related to a desire to test a technology, identify its shortcomings, and occasionally reengineer it to solve a problem the original inventors may not have thought of previously.

When a new entrant into a market tries to gain a foothold by incorporating the feedback and experimentation of early adopters into its own evolution of the underlying technology, this signals that the product has entered a new phase of maturity in the market.

Cloud technology is not immune to this cycle. With the announcement of NYSE Technologies Capital Markets Cloud Platform last week, we are now entering what I believe is the next phase of maturity for the public cloud: vertically focused cloud service providers selling access to community clouds.

Community clouds are public, architected with some level of specialized design or configuration optimized to a particular business user community. While not new in concept, there were very few examples of public community clouds before NYSE’s announcement. To date, most discussions and preliminary use cases for community clouds have been in sectors in which competition is extremely low or non-existent, such as governments and higher education. Industry competitiveness is an important characteristic because community clouds involve some degree of sharing more proprietary infrastructure with a group of peers. In most industries, this level of openness goes well beyond normal practice.

Here is the most interesting part of the NYSE community cloud. Its purpose is to bring a level of fairness to one of the most competitive industries: financial services. With the advent of electronic trading, financial services firms have tried to get their machines as physically close as possible to the servers that run the market to gain a competitive advantage through the execution of faster trades. According to James Staten, principal researcher at Forrester Research, this community cloud enables any firm to place its virtual machine on the same infrastructure as the exchange and allows the NYSE to monitor access in an effort to promote fairness. Said Staten, Now financial firms can compete on their trading algorithms, market insights and knowledge without geolocation, colo relationships and big money prioritization creating an uneven playing field. This doesn’t mean that a large financial institution can’t still colocate a massive server farm, just that winning isn’t defined by your ability to do so.”

Community clouds are designed to appeal to a specific group of users and thus are not truly “public” in that not everyone needing computing resources will see value in them. Community clouds will always attract fewer customers than traditional public clouds because of their more narrow appeal than a “vanilla” IaaS offering like Amazon Web Services. However, community cloud providers are still able to deliver some of the same economic benefits (e.g., lower operating costs per server) of larger scale public cloud to their clients.

Microsoft Confuses Economies of Scale with Next Generation Data Centers | Gaining Altitude in the Cloud

In a recent article in Information Week, a Microsoft executive made the claim that the economies of scale of cloud data centers were so compelling that few companies, if any, would want to continue to operate their own. He went on to offer Microsoft’s cloud data centers as the proof point. He stated the Microsoft cloud data centers operate on next generation architecture. Instead  of housing servers in hardened data centers, which are expensive to build, cool and maintain, Microsoft utilizes new hyper-scalable architecture that jam packs servers and storage into vapor-cooled containers similar to those you see on the interstate being pulled by semi trucks. Microsoft achieves resilience exceeding that in the hardened data centers by duplication of assets in multiple locations. And when combined with the flexibility of virtualized cloud offerings, the net result is dramatically lower cost – to the tune of as little as 25 percent of the cost to build and run their level 4 hardened cousins.

Our counterpoint: we have been conducting extensive research, and our analysis confirms that many next generation data centers are significantly less expensive than many cloud offerings. Further, they are mature enough to support enterprise-class computing today, and are far more flexible than traditional legacy data center infrastructures. When enterprises combine these benefits, they can indeed achieve dramatically lower computing costs. It’s important to recognize that these are not driven by economies of scale; rather, they arise from the advantages of radical new architecture and technology. Everest Group’s work strongly suggests that whereas economies of scale do exist in next generation data centers and their related cloud offerings, most of the benefits are reached quite quickly.

A vital distinction – next generation data centers and private cloud are available to most mid to large enterprises at a cost comparable to that of mega Microsoft. Enterprises seeking to capture these benefits should not be seduced by claims of massive gains provided by ever increasing size,  but should instead focus their attention on how to leverage the architecture and next generation technologies while adapting their applications and organizations to take advantage of these dramatic new opportunities.

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