Jockeying for Position
Transforming Banks for a Digital Future: The Winners, The Losers, and the Strategies to Beat the Odds
Jockeying for Position
This kind of service has been offered by companies with excess data center capacity over the past decade, but the maturation of the Internet, the standardization of infrastructure technologies, and the ascension of Linux and open-source software has made it much more doable and much more in demand.
In fact, the field for providing cloud computing infrastructure is likely to become a bit crowded, as companies like Amazon and IBM jockey for position.
In addition to Amazon's S3 service, which essentially lets small businesses rent out unused space on the company's vast storage network, the online retail giant is beta testing a product it calls the Elastic Compute Cloud. EC2 operates like S3, except that instead of storage space, companies rent out server capacity, adjusting it up or down depending on their needs.
Instead of sweating over the costs of infrastructure investments and server deployments, companies using EC2 get an invoice that looks strikingly similar to an electric bill, with charges based on minutes of server access and quantities of data moved and stored. Adding to the potential for the service, Linux software distributor Red Hat is beta testing a version of its enterprise Linux operating system that can be purchased as a subscription service in conjunction with EC2.
The idea, according to Brian Stevens, Red Hat's chief technology officer, is to provide systems as a service, which he describes as a layer down from SaaS offerings like Salesforce.com. That could position just about any company not just to benefit from cloud computing, but also to contribute to it. "It could be used to offer SaaS to your clients or to have a remote data center," he says.
Red Hat also is exploring ways in which its own IT department can put the Amazon cloud to work, namely by tapping it for software development projects that need server capacity beyond what's available on the company's internal network. That's an ideal reflection of the potential cloud computing holds for corporate IT departments. "We believe in the cloud model," Stevens says. "We don't think it's where everything goes, but we're going to learn from it."
Whereas Amazon evolved into a cloud computing provider as a way to maximize the value of its own IT resources, IBM committed to rolling out a series of cloud computing components under the handle Blue Cloud. The first of these products, expected to be available this spring, includes a package of blade servers and IBM's Tivoli management software, and is designed to allow companies to essentially build their own clouds, running in their own data centers.
Eventually, IBM intends to offer an integrated stack of software, hardware and management capabilities packaged in a self-service Web 2.0 portal, says Blue Cloud CTO Quan. That would allow companies to book computing resources the way consumers book hotel rooms on the Internet. A CIO could reserve server time, automatically provision needed software, and provide "keys" that would allow employees to log in and do their work with only a Web browser.
Driving the need for such flexible computing resources are challenges such as escalating energy costs and scarce data center space. These challenges are getting in the way of innovation, as companies have to wait on--or completely forego--adding IT resources.
"It's about business agility," Quan says. "In order to get new projects off the ground quickly, with virtualization and automated provisioning, we can get that up and running in a matter of minutes. That's a huge enabler of innovation."
If the proponents of cloud computing are to be believed, that's where the greatest promise of the technology lies: in spurring innovation. "Cloud computing will completely change the role of IT departments," Salesforce.com's Benioff says. "The IT department is evolving from being information technology to being innovation technology."
The irony is that evolution has been occurring as the ability of IT departments to innovate has been shrinking. As IT budgets have been challenged by the economic tightening of the past couple of years, development projects have been hardest hit, with CIOs having to commit the lion's share of their resources to software updates, server provisioning, data center expansions and general maintenance of IT resources.
Cloud computing could change all that by making those IT budget mainstays an afterthought, allowing CIOs to subscribe to on-demand IT offerings and letting service providers take on those headaches. That would allow CIOs to commit funds to new development projects and even tap those on-demand resources as temporary development environments.
Given such potential, it's no wonder that growing numbers of CIOs have their heads in the cloud.
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