Yankee Group analyst Steve Hilton lays out the key aspects of cloud computing, and explains why he feels the technology isn't yet ready to star in prime time for SMBs.
Each month, SMB expert Steve Hilton of Yankee Group answers real reader questions about small and midsize business technology in Ask Steve.
It's the end of summer. After months of sun, warm breezes, mojitos, and beach adventures, what better time to talk about clouds. Of course, I don't mean rain-filled nimbus or silken stratus. I mean cloud computing. Is it the newest marketing incarnation of ASPs and SaaS, or something completely different? Or maybe a bit of both.
Brendan from Durham, NC: Is it time to start talking to my customers about cloud computing? And what is there to talk about?
Answer: Brendan, cloud computing is a new and improved variation on an older theme. Remember back in the days of mainframe computing? We had a big computing resource used by numerous people for various applications. You could draw on those computing resources when needed, assuming someone else wasn't monopolizing those same resources at the time.
Computing costs were high in those days and businesses had to maximize the utilization rate of the computing assets if it wanted to make an acceptable ROI on its investment.
Today, new challenges drive us to a new computing paradigm. Computing resources are relatively cheap and the utilization rate of computing assets is fairly low. Take a look at all those dormant PCs and servers sitting on desks or in IT closets. There's a lot of underutilized computing power: assets just hanging-out on a beach somewhere catching a few rays when they could be doing something more productive.
Imagine shared computing assets, managed in way to increase utilization rates and balance peak demand. Here's where cloud computing makes its entry. Yankee Group defines an offering as cloud computing if it meets the following 7 characteristics:
1. Scalable - The cloud service has the ability to add or remove computing resources including bandwidth, storage, and compute power, as the applications or users need. Note that we do not say cloud services have unlimited scalability. Cloud computing service providers, particularly as cloud business model becomes more popular, are likely to price their cloud-based offerings with a resource threshold, in order to establish and meet service-level agreements (SLAs).
2. Virtualized - Information services, including servers, storage and applications, are virtualized. The users are shielded from the details of the underlying architecture and work with virtual resources allocated to their enterprise or application.
3. On-Demand - The compute resources and applications can be allocated or removed within seconds at the request of the user.
4. Internet Powered - The Layer 3 Wide Area Network (WAN) communications protocol is Internet Protocol or IP and the service is accessible via the World Wide Web or Internet.
5. Multi-Tenant Capable - The resources (e.g., network, storage and compute power) can be shared among multiple enterprise clients, thereby lowering overall expense. Resource virtualization is used to enforce isolation and aid in security.
6. Service-Level Assured - The cloud service provider ensures a specific guaranteed server uptime, server reboot, network performance, security control, and time-to-response to the customer, with agreed upon service-provider penalties if those SLA guarantees are not met.
7. Usage Priced - There is no up-front cost to the user. For cloud-based infrastructure services, the pricing model is on a per-use basis for bandwidth, storage, and CPU. The cloud service provider assumes all capital costs. Some services are billed on a subscription basis per user, per month.
If you're thinking this type of offering isn't ready for SMB prime-time, you're right. Vendors and service providers are still working out the details for large, enterprise customers. Wide-scale cloud-based computing offerings for SMBs are still in the early design phase.
Not to mention we have a lot of SMB education to do. According to Yankee Group's Anywhere Enterprise--SMB: 2009 US Transforming Infrastructure Survey, SMBs stilll see little value in cloud computing compared to a host of other technology offerings. Enabling mobile and collaborative applications are top technology priorities for one-third and one-quarter of SMBs respectively; whereas only 1 in 20 SMBs (5%) believes cloud computing is a top priority over the next year.
Cloud Computing Least Important Technology Priority Over Next Year for Medium Businesses
So Brendan, we recommend you drop a casual reference to cloud computing with your clients and see if it sparks some questions. If it does, talk about the needs of your clients over the next few years. Are they adding resources or office locations; expanding internationally; becoming more reliant on particular business applications; facing changes in compliance or regulatory issues; changing particular business processes? Then link some of these business needs with the cloud definition we provided to show how cloud solutions might solve some of their problems.
But keep in mind, cloud computing is a work-in-progress. If you're looking for some vendor-specific information, check out offerings from Amazon, GoGrid, Mosso, and FlexiScale. Also, AT&T recently unveiled its storage-as-a-service offering targeting a wide spectrum of enterprise users including SMBs.
Thanks again for the question. I'm pretty sure you'll have a few more summer days in North Carolina before those clouds roll in.
Don't Miss: Cloud computing coverage on bMighty.com
Do you have a question to ask Yankee Group analyst Steve Hilton?
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Steve Hilton is VP of Enterprise and SMB research at Yankee Group. Hilton is recognized as a leading, global SMB expert.
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