Top Reasons and Paybacks for Adopting Cloud Computing Sooner Rather than Later

Updated: June 12, 2010

Please join me now in welcoming Archie Reed, HP's Chief Technologist for Cloud Security and the author of several publications including The Definitive Guide to Identity Management and a new book, The Concise Guide to Cloud Computing; Jim Reavis, executive director of the Cloud Security Alliance (CSA) and president of Reavis Consulting Group, and Dave Linthicum, Chief Technology Officer of Bick Group and also a prolific cloud blogger and author. The discussion is moderated by Dana Gardner, principal analyst at Interarbor Solutions.

Here are some excerpts:

Reed: When we go into all of this discussion around what is the benefit [to cloud], we need to do our standard risk analysis. There's nothing too much that's new here, but what we do see is that when you get to the cloud and you're doing that assessment, the [payoffs] come down to agility.

Agility, in this sense, has the dimensions of speed at scale. For businesses, that can be quite compelling in terms of economic return and business agility, which is another variation on the theme. But, we gain this through the attributes we ascribe to cloud -- things like instant on/off, huge scale, per-use billing, all the things we tried to achieve previously but finally seem to be able to get with a cloud-computing architectural model.

The risks may go down, if it's a private environment.



If we're going to do the cost-benefit analysis, it does come down to the fact that, through that per-use billing, we're able to do this in a much more fine-grain manner and then compare to the risks that we are going to encounter as a result of using this type of environment. Again, that's regardless of whether it's public or private. The risks may go down, if it's a private environment.

Factoring all those things in together, there's not too much of a new model in how we try to achieve this justification and gain those benefits.

Linthicum: This notion of business agility is really where the money is. It's the ability to scale up and scale down, the ability to allocate compute resources around business opportunities, and the ability to align the business to new markets quickly and efficiently, without doing waves and waves of software acquisitions, setups, installs, and all the risks around doing that. That's really where the core benefit is.

If you look at that and you look at the strategic value of agility within your enterprise, it's always different. In other words, your value of agility is going to vary greatly between a high tech company, a finance company, and a manufacturing company. You can come up with the business benefit and the reason for moving into cloud computing, and people have a tendency not to think that way.

Innate risks

But you have to weigh that benefit in line with the innate risks in moving to these platforms. Whether or not you are moving from on-premises to off-premises, on-premies to cloud, or traditional on-premises to private cloud computing, there's always risk involved in terms of how you do security, governance, latency, and those things.

Once you factor those things in and you understand what the value drivers are in both OPEX and CAPEX cost and the trade-offs there, as well as business agility, and weigh in the risk, then you have your cost-benefit analysis equation, and it comes down to a business decision. Nine times out of ten, the cloud computing provider is going to provide a more strategic IT value than traditional computing platforms.

Reavis: When you think about the economics, what's the core of economics? It's supply and demand. Cloud gives you that ability to more efficiently serve your customers. It becomes a customer-service issue, where you can provide a supply of whatever your service is that really fits with their demand.

Their business would not have been able to exist in the earlier era of the Internet. It's just not possible.



Ten years ago I started a little minor success in the Internet dot-com days. It was called Securityportal.com. You all remember something called the "Slashdot effect," where a story would get posted on Slashdot and it would basically take your business out. You would have an outage, because so much traffic would go your way.

We would, on the one hand, love those sorts of things, and we would live in fear of when that would happen, when we would get recognition, because we didn't have cloud-based models for servicing our customers. So, when good things would happen, it would sometimes be a bad thing for us.

I had a chance to spend a lot of time with an online gaming company, and the way they've been able to scale up would only be possible in the cloud. Their business would not have been able to exist in the earlier era of the Internet. It's just not possible.

So, yeah, it provides us this whole new platform. I've maintained all along that we're not just going to migrate IT into the cloud, but we're going to reinvent new businesses, new business processes, and new ways of having an intermediary relationship with other suppliers and our customers as well. So it's going to be very, very transformational.

Reed: At HP, when we talk to customers and even try to evaluate internally, we talk about this thing called business outcomes being core to how IT and business align. Whether they're small companies or large companies, it's providing services that support the business outcomes and understanding that ultimately you want to deliver.

In business terms, it's more processing of loan requests and financial transactions. Then, if that's the measure that people are looking at what the business outcomes need to be, then IT can align with that and they become the service provider for that capability.

We've talked to a lot of customers, particularly in the financial industry, for example, where IT wasn't measured in how they cut costs or how much staff they had. They were measured in incremental improvements on how many advances could be made in delivering more business capability.

In that example, one particular business metric was, "We can process more loans in a day, when necessary." The way they achieved that was by re-architecting things in a more cloud or service-centric way, wherein they could essentially ramp up, on what they called a private cloud, the ability to process things much more quickly.

Now, many in IT realize -- perhaps not enough, but we're seeing the change -- that they need to make this toward the service oriented architecture (SOA) approach and delivery, such that they are becoming experts in brokering the right solution to deliver the most significant business outcomes.

That becomes the latency that drives the lateness of the business process changes that need to occur within the enterprise.



The source of those services is less about how much hardware and software you need to buy and integrate and all that sort of thing, and more about the most economical and secure way that they can deliver the majority of desired outcomes. You don't just want to build one service to provide a capability. You want to build an environment and an architecture that achieves the bulk of the desired outcomes.

Linthicum: Cloud computing will provide us with some additional capabilities. It's not necessarily nirvana, but you can get at compute and you can get at even some of these pretty big services. For example, the Predictive API that Google just announced at Google I/O recently is an amazing piece of data-mining stuff that you can get for free, for now.

The ability to tie that into your existing processes and perhaps make some predictions in terms of inventory control things, means you could save potentially a million dollars a month, supporting just-in-time inventory processes within your enterprise. Those sorts of things really need to come into the mix in order to provide the additional value.

Sometimes we can drive processes out of the cloud, but I think processes are really going to be driven on-premises and they are going to include cloud resources. The ability to on-board those cloud resources is needed to support the changes in the processes and is really going to be the value of cloud computing.

That the area that's probably the most exciting thing. I just came back from Gluecon in Denver. That is, in a sense, a cloud developers' conference, and they're all talking about application programming interfaces (APIs) and building the next infrastructure.

When those things come online, become available, and we don't have to build those things in-house, we can actually leverage them into a "pay per drink" basis through some kind of provider, buying those into our processes. We'll perhaps have thousands of APIs that exist all over the place, and perhaps even not even local data within these APIs.

That's where the value of cloud computing is going to appear, and we haven't seen anything yet. There are huge amounts of value being built right now.



They just produce behavior, and we bring them together to form these core business processes. More importantly, we bring them together to recreate these core business processes around new needs of the business.

Reed: I think the incentives, the risks, and all those things with cloud computing change, dependent on the type of business we're looking at.

Certainly, when we talk to smaller organizations and mid-sized organizations as well, they're looking for the edge that they can gain in terms of cost and support and, in most cases, more security. In this case, they look for broader back-office solutions than perhaps some of the larger organizations, things such as email, account management, HR, and so forth, as well as front-end stuff, basic web hosting and more advanced versions of that.

We've implemented things like Microsoft Business Productivity Online Suite (BPOS) for many customers, especially in the mid range. They do find better support, better up time, better cost controls, and to Jim's point, more security than they are able to provide for themselves.

When we get to talk to larger organizations, some are looking for this. We know, even in the financial industry, which you might consider to be one of the most security paranoid type environments there are outside of the three-letter agencies, they find that kind of thing appealing as well. Some of those have actually gone to use Salesforce.com for some of their services.

But, they're generally more concerned with the security stuff and they often find specific capabilities more appealing in a service model, such as data processing, data analysis, data retrieval, functional analysis, and things like that. The mashups are definitely more popular as a type of model or the service-oriented nature is more popular model with larger organizations that we talk to.

Linthicum: Moving into cloud is going to make people think in a very healthy, paranoid state. In other words, they are going to think twice about what information goes out there, how that information is secured and modeled, what APIs they are leveraging, and service level agreements (SLAs). They're going to consider encryption and identity management systems that they haven't done in the past.

In most of the instances that I am seeing deploying cloud computing systems, they are as secure, if not more secure, than the existing on-premise systems. I would trust those cloud computing systems more than I would the existing on-premise systems.

That comes with some work, some discipline, some governance, some security, and a lot of things that we just haven't thought about a lot, or haven't thought about enough with the traditional on-premise systems. So, that's going to be a side benefit. In two years, we're going to have better security and better understanding of security because of cloud.
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