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Your Cloud or Mine?

Before companies can migrate their IT to "private" or "public" clouds, they need a better grasp of current costs.

Unless you’ve been on a very long sabbatical, you have no doubt heard about “cloud computing” as the future of information technology.

But the conversation is quickly morphing from a discussion of “the cloud” to a potentially confusing choice between “public clouds” and “private clouds.”

Definitions of cloud computing vary, but, until recently, most centered around the concept of moving computing functionality from behind corporate firewalls onto the Internet. A computing task moved to the cloud becomes a service provided by a third party in its own data center, allowing companies to scale down their huge investments in IT hardware, software, and staff.

So the advent of the term “private cloud” may strike you as an oxymoron, because it keeps much of the IT action behind a company’s firewall — and much of the expense on its books.

But many companies, particularly large ones, are moving more avidly toward private clouds than toward public ones. (Gartner forecasts that, through 2012, the top 1,000 global corporations will spend more on building private clouds than on buying public-cloud services.) Some, in fact, may be moving that way without even realizing it.

That’s because computing clouds depend largely on the virtualization of computer servers, which are configured to serve multiple applications, and on sophisticated automation that shifts work among the servers as efficiently as possible. Companies have been adopting greater virtualization for several years. How many of them would regard this effort as building a “private cloud” is an open question.

Regardless, by tapping the full power of virtualization, companies can create an IT environment that offers many of the advantages of public clouds — fast and easy application implementation, scalability of computing capacity according to demand, pay-as-you-go pricing, and, often, lower operating costs than with traditional IT. Private clouds may also offer better data security, which is often cited as a major concern when companies contemplate a move to the public cloud (see “Safe and Sound?” at the end of this article).

But before a company can opt for any of the many forms of public-cloud computing (applications via software-as-a-service, computing capacity via infrastructure-as-a-service, or an application-development environment via platform-as-a-service) or build its own private cloud, it will have to determine which route offers the most savings. Unfortunately, in this regard many companies are flying blind.

“Most companies don’t have a good handle on their IT costs, so they can’t legitimately say whether they will save money by moving to the cloud,” said David Smith, a Gartner analyst. That applies especially to very large companies: in a report published last December, Gartner estimated that only about 10% of the CIOs at the 2,000 largest global companies truly understand their costs.

Ric Telford, vice president of cloud services for IBM, points out that CFOs have a key role in weighing the cost considerations of a move to public or private clouds. That’s because the CFO is best positioned to assess the total cost of IT, including things like real estate, power consumption, and other factors that might escape a data-center manager’s attention.


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