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A Place in the Cloud

Cloud computing offers an enticing value proposition, but do the benefits justify the risks?

But even companies in the business of selling IT services are buying what they need via the cloud computing model. Consider Hoodiny, a Miami-based company that provides record labels with on-demand streaming capabilities for music downloads and other high-bandwidth services.

Hoodiny buys a bundle of processing and storage resources monthly, says Jose Gonzalez, executive vice president of business affairs, and can then configure virtual machines according to its needs. If the company needs to add five servers to handle a surge in additional Web traffic, it can bring new capacity online without a capital outlay or cannibalizing an existing server. And it can switch off the extra computing power when the promotion ends. “It takes 10 minutes to have a virtual machine available versus hours or days, depending on your financial position, to have the equivalent hardware ready,” Gonzalez says.

While Gonzalez is still collecting data from his five-person IT department to calculate the firm’s ROI, “instinctively you can begin to see there is some cost savings in cloud computing,” he says. The more immediate value, though, lies in eliminating the time it takes to decide to buy a new server, configure it, and go through purchasing, only to have the asset sit idle or underutilized after it fulfills a temporary need. “From an asset-management perspective, cloud computing is very attractive,” Gonzalez says. In the future, Hoodiny may rely on cloud services to replicate its production environment as a way to test upgrades and new software functionality. “I’ll have a duplicate platform without shelling out for additional sets of hardware” or having to beg for money, Gonzalez says.

Rebalancing Act

How useful will cloud computing be? For the most part, “companies are still struggling with it,” says Major Horton, CFO of Nirvanix Inc., provider of a cloud storage platform. “They say, ‘We get the advantage of not having to layout capital, but what do we use cloud computing for?’ That’s where there is still a learning curve.”

Heavy-duty enterprise jobs are not an option at this point. “The best [service-level agreement] that I know of provides for only 99.5 percent uptime, whereas most enterprises are looking for 99.999 percent uptime or better for mission-critical applications,” says Brett Waldman, a research analyst in system software at IDC.

Migration to the cloud will likely follow the same evolution other forms of outsourcing have taken: low-priority business tasks will be the early candidates. Instead of moving to cloud computing “en masse,” companies will “look at their technology landscape and rebalance it by pushing some to the cloud,” says Daz Wilkin, a program manager in Microsoft’s platform strategy group. The technical infrastructure that is not part of a company’s “secret sauce” will be best suited to cloud computing, Wilkin says, citing messaging and Web collaboration as examples.

Microsoft, for example, expects 50 percent of Exchange mailboxes to migrate to Microsoft Exchange Online in five years. “Customers are giving us jobs they cannot do themselves or that are peripheral and noncritical,” agrees Eric Novikoff, former CFO and now chief operating officer at ENKI, a virtual data-center provider.

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