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Michael Fehse is an IT Advisor and Strategic IT Consultant. His company, I-C-T-S, is a member of a number of multi-national technology working groups.
Chuck Goolsbee is Vice President of Technical Operations at the colocation provider digital.forest in Seattle/Washington.


“Cloud computing will permanently change the future of IT/business partnerships.“
Michael Fehse


“Cloud computing lacks the absolute certainty that auditors and legal systems require, and will therefore never be a high flyer.“
Chuck Goolsbee

Is cloud computing the way forward?

The virtualization of entire IT processes is a hot topic.
Best Practice asked two experts for their opinion on this current IT trend.

Michael Fehse

The cloud is on the horizon – Cloud computing is set to permanently change the way we do business.
Cloud computing is an attractive alternative to conventional sourcing models. This is especially true for companies seeking to survive and thrive in today’s challenging economy. Cloud computing is not just cost-efficient, it also allows users a high level of flexibility, and enables businesses to turn high upfront investment (capital expenditure) into ongoing, variable spending (operating expenditure). Companies that manage to make this leap are sure to have competitive edge in the future.
20 percent savings with cloud computing
The flexible nature of cloud computing makes it particularly suitable for businesses experiencing fluctuating or intermittent demand, particularly with significant peaks. And it offers considerable savings over traditional hosting, with 20 percent generally considered to be the lower rather than the upper limit.
So far, the new approach has generally been limited to relatively simple services. But the cloud model has already gained a firm foothold in the Anglo-Saxon world. Some of its larger users include the New York Times, Nasdaq, Major League Baseball, ESPN and British Telecom. And cloud-computing providers are well-prepared for increased demand – Google, Amazon and Microsoft are estimated to each have around 500,000 servers.
So cloud computing is not just the latest fad making the rounds through the global village. It is set to permanently change the future of IT/business partnerships.
The ideal solution for fluctuating demand
Deployment of cloud computing is particularly well suited for applications with highly variable load, accessed via the Internet or, if greater security and performance are required over dedicated network connections. However, businesses need to consider whether cloud computing is in line with their governance model. And since services are charged according to actual usage, there can be unpleasant surprises, for example if reporting is only quarterly.
Today, the IT industry is in the same situation as department stores and mailorder companies in the pre-Amazon era. In the early days, Amazon had quite a limited offering – like cloud computing today. Now, Amazon carries a comprehensive variety of goods, generating 19.2 billion dollars in revenue in 2008. Cloud computing would seem set for similar growth.

Chuck Goolsbee

Cloud computing as a business model?
No chance
A cloud is amorphous and indistinct. It is layer seven, abstracted from all the lower layers. You can’t audit a cloud. It is virtual. Sure, we all know that it translates to a physical manifestation at some point, but can you touch it? Can you audit, with absolute certainty, its file systems, logs and physical access? Can you be absolutely certain that it is physically secure? Can you be absolutely certain that its virtualized file systems are not mingled on a physical disk with somebody else’s data? Absolute certainty is required for compliance. You can’t find absolute certainty out there in a cloud, by definition. What goes for PCI also goes for all those other “fully acronym-compliant” compliance regulations – HIPAA, SOX, SAS70, GLBA, etc. No matter what industry you operate in, there are regulations somewhere that you either have to comply with now, or will have to in the near future.
Not a high flyer
Here again, cloud computing isn’t going to fly because it lacks the absolute certainty that auditors and legal systems require. Those of us who have built and maintained data centers know that it doesn’t come cheap. Wildly popular Web apps with no revenue won’t pay the cost of the servers, much less the electricity bill. I can’t see how cloud providers can spend the cash to build out the infrastructure and then have enough margin in the usage charges to enjoy healthy profits. Data centers are expensive to build and expensive to run. It is very hard to deliver something so large and unwieldy in an instant to meet sudden demand, even using modular techniques. Demand fluctuates, and unless you are going to charge usurious rates when demand comes in, you will burn cash at terrifying rates when demand is down.
SaaS has a future – but it is not a cloud
Finally, one thing I think happens often in the business is “buzz-word overlap.” People throw the buzz word du jour at whatever concept they are trying to sell. The overlap I see a lot in the cloud space right now is “software as a service,” aka SaaS. SaaS can use a cloud as its underlying infrastructure, but SaaS is not a cloud. I feel that SaaS and other online applications have a strong future. The whole mobile market and most Web applications are SaaS of some sort or another. The SaaS market is in its toddlerhood, having evolved from the previous buzz word, “application service provider” – same idea, different name. Google, for example, is not a cloud provider per se, it is an application provider that happens to use cloud technologies to support its applications. So, what you buy is application time online. SaaS has a future. I think that as an underlying technology it makes a lot of sense. But as a business model? If I were a venture capitalist I’d be chasing people out of my office as soon as they used the phrase.