Demystifying Cloud Computing

HEN PEOPLE TALK ABOUT“plugging into the IT cloud,”they generally have some-thing very simple in mind—browser access to an appli-

cation hosted on the Web. Cloud computing iscertainly that, but it’s also much more.What fol-lows is the longer, more detailed explanation.

With so much happening in the technology in-dustry around cloud computing, Information-Week set out to define the megatrend in a waythat helps IT professionals not only understandthe nuances, but also make informed decisionsabout when and where to use cloud services inlieu of on-premises software and systems. Cloudcomputing represents a new way, in some casesa better and cheaper way, of delivering enter-prise IT, but it’s not as easy as it sounds, as welearned in a discussion with a few yet-to-be-swayed CXOs. The venue was the recent Enter-prise 2.0 conference in Boston, where Informa-tionWeek and TechWeb, our parent company,

brought together senior technologists from theCalifornia Public Utilities Commission, North-eastern University in Boston, and Sudler & Hen-nessy to engage leading cloud vendors in anopen forum on The Cloud.

Everyone agreed that cloud services such asAmazon Web Services, Google Apps, and Sales-force.com CRM have become bona fide enter-prise options, but there were also questionsabout privacy, data security, industry standards,vendor lock-in, and high-performing apps thathave yet to be vaporized as cloud services. (For arecap of that give and take, see “Customers Fire AFew Shots At Cloud Computing,” June 16, p. 52;informationweek.com/1191/preston.htm.)

If we learned anything from our Enterprise2.0 cloud forum, it’s that IT departments needto know more. Our approach here is to look atcloud computing from the points of view ofeight leading vendors. In doing so, we’re leav-ing out dozens of companies that have a role toplay, but what we lack in breadth, we hope to

Web-based software, storage, and other services

are enticing alternatives to do-it-yourself IT.

But different cloud vendors have different strengths.

By J. Nicholas Hoover and Richard Martin

W

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compensate for in depth.And this analysis is just

the beginning of expandededitorial coverage by In-formationWeek on cloudcomputing. Visit our just-launched Cloud Comput-ing blog on InformationWeek.com, and sign up for ournew weekly newsletter, Cloud Computing Report, atinformationweek.com/newsletters. We’re also develop-ing video content, an in-depth InformationWeek Ana-lytics report, and a live events series in the fall.

Where does cloud computing fit into your company’sstrategy? We’d love to hear from you.

—JOHN FOLEY ([email protected])

AMAZONAmazon made its repu-

tation as an online book-store and e-retailer, butits newest business iscloud computing. One ofthe first vendors in thisemerging market morethan two years ago, Ama-zon is a good startingpoint for any businesstechnology organizationtrying to decide whereand when to plug intothe cloud.

Amazon’s cloud goes bythe name Amazon WebServices (AWS), and it

consists, so far, of four core services: Simple StorageService (S3); Elastic Compute Cloud (EC2); SimpleQueuing Service; and, in beta testing, SimpleDB. Inother words, Amazon now offers storage, computerprocessing, message queuing, and a database manage-ment system as plug-and-play services that are ac-cessed over the Internet.

A tremendous amount of IT infrastructure is re-quired to provide those services—all of it in Amazondata centers. Customers pay only for the services theyconsume: 15 cents per gigabyte of S3 storage eachmonth, and 10 to 80 cents per hour for EC2 server ca-pacity, depending on configuration.

Already,AWS represents three of the defining char-acteristics of the cloud: IT resources provisioned out-side of the corporate data center, those resources ac-cessed over the Internet, and variable cost.

Amazon’s first cloud service was S3, which providesunlimited storage of documents, photos, video, and

other data. That was fol-lowed by EC2, pay-as-you-use computer pro-cessing that lets custom-ers choose among serverconfigurations.

Why is Amazon movingso aggressively into Web services? In its rise to leader-ship in e-commerce, the company developed deeptechnical expertise and invested heavily in its datacenters. Now it’s leveraging those assets by openingthem to other companies, at a time when many CIOsare looking for alternatives to pumping more moneyinto their own IT infrastructures. “What a lot of peopledon’t understand is that Amazon is at heart a technol-ogy company—not a bookseller or even a retailer,” saysAdam Selipsky,VP of product management and devel-oper relations for AWS.

Developers—defined as anyone, from individuals tothe largest companies, who signs up for AWS—areglomming onto Amazon’s infrastructure to develop anddeliver applications and capacity without having to de-ploy on-premises software and servers. More than370,000 developers are on board.

Amazon Web Services weren’t aimed initially at bigbusinesses, but enterprises are tapping in for the samereasons that attract small and midsize businesses—lowup-front costs, scalability up and down, and IT resourceflexibility.To better support large accounts,Amazon be-gan offering round-the-clock phone support and enter-prise-class service-level agreements a few months ago.For instance, if S3 availability falls below 99.9% in amonth, customers are entitled to at least a 10% credit.Amazon isn’t foolproof—its consumer-facing Web siterecently suffered a series of outages and slowdowns.

Amazon hasn’t morphed into a software-as-a-ser-vice vendor, but startups and other software devel-opers are using AWS to offer their own flavors ofSaaS.They include Vertica, which sells S3-based datawarehouses, and Sonian, which built its archive ser-vice on Amazon infrastructure.

GOOGLEGoogle built a supercharged business model around

searching the Internet. Now it’s opening its cloud tobusinesses in the form of application hosting, enter-prise search, and more.

In April, Google introduced Google App Engine, aservice that lets developers write Python-based appli-cations and host them on Google infrastructure at nocost with up to 500 MB of storage. Beyond that, Googlecharges 10 to 12 cents per “CPU core hour” and 15 to 18cents per gigabyte of storage. This month, Google dis-

32 June 23, 2008 informationweek.com

IN DEPTH / CLOUD COMPUTING

Selipsky is wooingdevelopers to AWS

DIG DEEPER

SAAS STRATEGY Web-based apps can be a compellingalternative to on-premises software, but you need a plan.

Download this InformationWeek Report at:informationweek.com/1182/report_saas.htm

See all our Reports at informationweekreports.com


closed plans to offer hosted enterprise search that canbe customized for businesses.

Yet Google, like Amazon, has demonstrated the risksof cloud computing. Google App Engine last week wascrippled for several hours. Google blamed the outageon a database server bug.

For end users, there’s Google Apps—Web-baseddocuments, spreadsheets, and other productivity ap-plications. Google Apps are free or $50 per user annu-ally for a premium edition. Microsoft’s PC-based Office2007 suite, by comparison, costs up to $500 per user.

More than half amillion organizationshave signed up forGoogle Apps—includ-ing General Electricand Procter & Gam-ble—and there are nowsome 10 million GoogleApps users. But keepthat in perspective:The majority of thoseusers are consumers,college students, andemployees of smallbusinesses, not the cor-porate crowd. Googlesenior product man-ager Rajen Sheth ac-knowledges that Goo-gle’s apps aren’t in-tended to replace busi-ness tools like Office.

Google has takensteps to make its ap-plications, originallyaimed at consumers,more attractive to ITdepartments. Last year,the company acquiredPostini, whose hostede-mail security andcompliance software is now part of Google Apps, andin April it partnered with Salesforce.com to integrateSalesforce CRM and Google Apps, including a pre-mium package that comes with phone support andthird-party software for $10 per user each month.

Google is also adjusting to the reality that userssometimes need to work offline. Google Gears is abrowser plug-in for doing that.

Google has teamed with IBM to provide cloud com-puting to university students and researchers. TheGoogle-IBM cloud is a combination of Google ma-

chines and IBM BladeCenter and System x serversrunning Linux, Xen virtualization, and Apache’s opensource Hadoop framework for distributed applications.

“One great advantage we have, and one of the rea-sons we started to explore this, is that we run one ofthe largest online apps in the world, if not the largest,”says Sheth, referring to Google’s Web search engine.The project, Sheth says, will help “foster new innova-tion and new ideas” about cloud computing.

Google and IBM have been cagey about any plansto extend their cloud collaboration to enterprises, but

it would be an obviousnext step. “There’s notthat much differencebetween the enter-prise cloud and theconsumer cloud” be-yond security require-ments, Google CEOEric Schmidt said afew weeks ago. “Thecloud has highervalue in business.That’s the secret toour collaboration.”

With its plug-and-compute simplicity, thecloud seems ethereal,but don’t be fooled.Google’s cloud repre-sents a massive invest-ment in IT infra-structure. Google hasrecently completed oris in the processing ofbuilding new data cen-ters in Iowa, Oregon,North Carolina, andSouth Carolina, at anaverage cost of about$600 million each.

SALESFORCESalesforce became the proving ground for software

as a service with its Web alternative to premises-basedsales force automation applications, and dozens ofSaaS companies followed. Salesforce’s next act: plat-form as a service.

Marc Benioff’s company is making its Web applicationplatform, Force.com, available to other companies as afoundation for their own software services. Force.comincludes a relational database, user interface options,business logic, and an integrated development environ-

ment called Apex. Programmers can test their Apex-de-veloped apps in the platform’s Sandbox, then offer thefinished code on Salesforce’s AppExchange directory.

In the early going, developers used Force.com to cre-ate add-ons to Salesforce CRM, but they’re increas-ingly developing software unrelated to Salesforce’s of-ferings, says Adam Gross, the vendor’s platform VP.Game developer Electronic Arts built an employee-re-cruiting application on Force.com, and software ven-dor Coda crafted a general ledger app.

At the same time, Salesforce continues to advance itsown applications, which are now being used by 1.1 mil-lion people.An upgrade due this summer will include theability to access Google Apps from within a Salesforceapplication, more than a dozen new mobile features, an“analytics snapshot,” enhanced customer portals, andimproved idea exchange and content management.

Salesforce is getting into other cloud services, too.In April 2007, it jumped into enterprise content man-agement with Salesforce Content, which lets usersstore, classify, and share information similar to Mi-crosoft SharePoint and EMC Documentum.

Salesforce has adopted a multitenant architecture, inwhich servers and other IT resources are shared bycustomers rather than dedicated to one account.

“There’s no question there’s an evangelism involvedwith doing multitenancy, but, with education, customersquickly come on board with the model,” says Gross.

The proof is in the sales figures. Salesforce’s rev-enue grew to $248 million in the quarter endedApril 30, a 53% increase over the same period a yearago, keeping it on pace to become the first billion-dollar company to generate almost all of its salesfrom cloud computing.

MICROSOFTIf any technology company has had its cloud strat-

egy questioned, it’s Microsoft. Now, after a couple ofyears of putting the pieces into place, Microsoft isshowing progress.

Some vendors envision a future where most, if not all,IT resources come from the cloud, but Microsoft isn’tone of them. Its grand plan is to provide “symmetry be-tween enterprise-based software, partner-hosted ser-vices, and services in the cloud,” chief software archi-tect Ray Ozzie said a few months ago. More simply,Microsoft calls it “software plus services.”

Microsoft’s first SaaS offerings for business, rollingout this year, are Dynamics CRM Online, ExchangeOnline, Office Communications Online, and Share-


F CLOUD COMPUTING OFFERSbenefits to enterprise IT depart-ments, it’s an absolute godsend tosmall and midsize companies. In-

stead of making do with a small, underre-sourced IT staff trying to emulate the pro-ductivity of IT outfits with multimillion-dollarbudgets, smaller companies can now ac-cess enterprise-class technology withlow up-front costs and easy scalability.

Important as those things are, they’reonly the first steps in a larger shift. Cloudcomputing doesn’t just level the playingfield—it promises to tilt it in the other di-rection. Simply put, today’s most power-ful and most innovative technology is nolonger found in the enterprise. The cloudmakes leading-edge technology availableto everyone, including consumers, oftenat a far lower cost than businesses payfor similar or inferior services.

Years ago, most people had access tothe best technology at work, Google VP

Dave Girouard said re-cently. “You had a T1 lineto access the Internet atthe office, for example,then went home to watchthree channels of TV.”

Those days are gone.Compare a typical Ex-change Server, offering per-haps 500 MB of e-mail stor-age per user, to Web-basede-mail services that give usersup to 7 GB of storage at no cost.(Google’s corporate version offers 25GB per user for $50 a year.) Likewise,compare on-premises enterprise contentmanagement systems to easier-to-useand more-flexible cloud-based publishingand sharing systems like Blogger, Flickr,and Facebook. They’re free, too.

Those comparisons may not be rele-vant to big companies, but they are toSMBs. While large enterprises typically

use the cloud for infra-structure services suchas storage, SMBs aremore likely to plug intothe cloud for day-to-dayproductivity applica-tions, says MichelleWarren, a senior ana-

lyst at Info-Tech Research. In fact, as cloud computing ma-

tures, we’ll see small compa-nies rely on the cloud for moreand more of their technologyneeds, gradually eschewing

the costs and complexity of in-house IT infrastructure.

“We’re moving toward a world where ITis outsourced,” Warren says. “Maybe not100%, but 95%. It will happen more inthe SMB than in the enterprise, for sure.”—FREDRIC PAUL, publisher and editor in

chief of TechWeb’s bMighty.com, which pro-

vides technology information to SMBs

I

June 23, 2008 34

SMBs Will Rise To Cloud Computing


Point Online. Each will be available in a multitenantversion, generally for small and midsize businesses,and a single-tenant version for companies requiring5,000 or more licenses. For consumers, Microsoft’s on-line services include Windows Live, Office Live, andXbox Live.

A handful of large companies—Autodesk, Blockbuster,Energizer, and Ingersoll-Rand among them—are earlyadopters.Anyone who doubts that Microsoft has enteredthe cloud services game should consider this: Coca-Colaplans to subscribe to 30,000 seats of Microsoft-hostedExchange and Share-Point by next year.

Microsoft senior VPChris Capossela sayscustomers can mix andmatch hosted and on-premises versions of itssoftware, an attractiveoption for companieswith branch offices thatlack IT staff. Microsofthasn’t disclosed pricingfor its online services,but Capossela says it’snaive to think thatcloud services will becheaper than on-prem-ises software over thelong haul.“You’re goingto pay forever,” he says.“It’s a subscription, forgoodness’ sake.”

What’s next? A proj-ect called MatrixDBwould extend on-prem-ises SQL Server data-bases to Microsoft-hosted databases inthe cloud. That’s still acouple of years away,but it hints at futurepossibilities. And Microsoft points to BizTalk Services,its hosted business process management software, asone element in a forthcoming “Internet service bus” thatfunctions like an enterprise service bus, albeit online.

As for the Windows operating system, Microsoft’supcoming synchronization platform, Live Mesh, andsome of the Windows Live services will be moretightly integrated with it.

The shift to cloud services has forced Microsoft to re-think not just the way its products are architected, butits data center strategy, too. For years, Microsoft leased

its major data centers, but it has now begun to design,construct, and own them, with U.S. facilities recentlycompleted or under construction in Illinois,Texas, andWashington, and another under way in Dublin, Ireland.

SUN MICROSYSTEMS John Gage, Sun Microsystems’ co-founder, coined

the phrase “the network is the computer” nearly 20years ago. Arguably, that was the beginning of thecloud—but the wind changed direction.

Sun “got it backwards,” CTO Greg Papadopoulosnow says. How so?With its Sun Gridtechnology, Sun fo-cused on mission-critical, highly re-dundant data centerenvironments. “Wefound that nobodycared about that,”says Papadopoulos.“They just want it tobe easy to use.”

Making cloud com-puting easy to use isnow the focus of twoinitiatives at Sun: Net-work.com, a collectionof grid-enabled onlineapplications availableon a pay-per-use ba-sis, and Project Caro-line, a research effortto make cloud-basedresources available todevelopers workingon Web applicationsand services. They co-incide with what Pa-padopoulos calls “RedShift,” his theory thatcomputing demand

will exceed capacity at many companies. The obvioussolution: cloud computing.

Network.com is evolving into a “virtual on-demanddata center” that customers can use in real time asbusiness demands change, says senior director of soft-ware Mark Herrin.

Project Caroline is intended to become a hosting plat-form for SaaS providers.The goal is to make it “far moreefficient to develop multiuser Internet services rapidly,update them frequently, and reallocate resources flexi-bly and cost-efficiently,” according to Sun. An open

source project led by Sun VP of technology Rich Zip-pel, Caroline supports applications built in severalprogramming languages, including Java, Perl, Python,Ruby, and PHP. “We don’t really think that ‘all applica-tions will tie back to Sun servers on the Internet,’ ”Zippel writes on his blog. “We’re really bullish aboutthe ability to develop, deploy, and deliver softwareservices on the Internet.”

Like Microsoft, Sun expects businesses to continueto need some of their own IT infrastructure. Sun’sdata-center-in-a-box, Blackbox, is designed for com-panies that face massive computing requirements butaren’t ready to shift all their infrastructure to thecloud. Similarly, Sun’s Constellation groups togetherSun Blade 6000 servers.

“The public clouds will be spillover points for enter-prises,” says Papadopoulos. “They’ll be able to make ajudgment. I may not like my crown-jewel data livingin the cloud, but it’d be good to pull in another 1,000nodes and do some work.”

IBMIBM last year unveiled Blue Cloud, a set of offerings

that, in IBM’s words, will let corporate data centers“operate more like the Internet by enabling computingacross a distributed, globally accessible fabric of re-sources.” The pieces of Blue Cloud include virtualLinux servers, parallel workload scheduling, and IBM’sTivoli management software. In the first phase, IBM istargeting x86 servers and machines equipped withIBM’s Power processors; in phase two, IBM will loopin virtual machines running on its System z main-frames. Blue Cloud is “not just about running parallelworkloads but about more-effective data center uti-lization,” says Denis Quan, CTO of IBM’s High Perfor-mance On Demand Solutions unit.

IBM’s first commercial cloud computing data centeris going up in Wuxi, in southern China. It will providevirtualized computing resources to the region’s chip-making companies.

IBM’s advantage in cloud computing is its expertisein building, supporting, and operating large-scalecomputing systems. IBM got into cloud computing afew years ago with its Technology Adoption Program,an “innovation portal” run out of the Almaden Re-search Center to give engineers on-demand resources,such as DB2 databases and Linux servers.

Last October, IBM announced a partnership withGoogle to provide cloud computing gateways to uni-versities. Intended as a way of teaching university stu-dents how to use parallel programming models, theinitiative is “critical to the next generation of cloud-based applications,” Quan says.Three cloud computing

centers for academia have gone live, one at Almaden,one at the University of Washington in Seattle, and onein a Google data center.

For IT departments, IBM’s cloud software, systems,and services can be brought together into what thevendor calls the “New Enterprise Data Center,” withquality-of-service guarantees to reassure CIOs thatthere’s nothing hazy about the cloud.

ORACLE Despite its sometimes-contradictory signals, Oracle

was an early proponent of the on-demand model,launching Oracle Business OnLine in 1998.At that time,CEO Larry Ellison described the new Web-based de-livery model as an extension of the company’s existingsoftware business. Today, it’s clear that Oracle’s des-tiny lies in the cloud, even if the company has beenreluctant to switch its lucrative on-premises softwarelicense business over to a subscription model.

Speaking to financial analysts last September, Elli-son downplayed the SaaS movement, saying there’s noprofit to be made in delivering applications over theInternet. (He’s obviously wrong on that point.) Presi-dent Charles Phillips has said Oracle plans a “stair-step” approach to the cloud, gradually moving on-premises customers over to Web-based software.

Oracle got into cloud computing in one fell swoopwith its 2005 acquisition of Siebel Systems for $5.8 bil-lion. At the time, Oracle executives called the deal abeachhead against SAP, but it’s clear in hindsight thatSiebel’s on-demand CRM applications were every bitas important to Oracle’s long-term strategy. Oracle OnDemand comprises much of the vendor’s softwarestack, including the company’s flagship database.

Oracle has developed a “pod” architecture for its on-demand data centers. Pods can be configured for indi-

June 23, 2008 36


Cloud computingmust be easy, saysSun’s Papadopoulos


vidual customers, in clusters for large companies withmultiple departments, or in multitenant versions forshared use.

Oracle’s on-demand business generated $174 millionin revenue in the fiscal quarter ended March 26, up23% from the same quarter last year, and it’s on trackfor $700 million for the year.While On Demand repre-sents only about 3% of Oracle’s revenue, it’s the fastest-growing part of the business, with 3.6 million users.

To support growth, Oracle, like other cloud serviceproviders, is building a new data center.This summer, itwill break ground on a200,000-square-foot fa-cility in Utah and putsthe initial investmentat $285 million.

EMCCEO Joe Tucci barely

touched on EMC’splans for cloud com-puting at EMC Worldlast month, but you canbe sure he’s thinkingabout it. The cloud byits very nature is a vir-tual computing envi-ronment, and wherethere’s virtualization,there’s EMC, owner ofVMware.

Earlier this year,EMC acquired per-sonal informationmanagement startupPi and, with it, formerMicrosoft VP PaulMaritz, who’s beentapped as president ofEMC’s new cloud in-frastructure and ser-vices division. In fact,the acquisitive EMC has been pulling in for a few yearscompanies that bolster its abilities to deliver on cloudcomputing. In 2004, it bought Smarts, whose softwareconfigures distributed networks and monitors storage.And last year, EMC acquired Berkeley Data Systemsand its Mozy backup services.

EMC has expertise in information life-cycle manage-ment, which is one area where it expects to have a rolein cloud computing. “If we look at EMC’s core assetportfolio, all of the key areas of the information infra-structure lend themselves not only to current models of

up-front acquisition but also the new model of SaaSand pay-as-you-go subscription delivered over the In-ternet,” says CTO Jeff Nick.

Nick sees companies moving to cloud storage and in-formation management services as a way to “outtask”jobs to cloud computing vendors. “The key to storage ina cloud environment is not just to focus on bulk capac-ity but as much as possible make it self-managing, self-directive, and self-tuning,” Nick says.

What kinds of cloud services might EMC offer?Storage is a no-brainer, though it doesn’t have such an

offering yet. Beyondthat, EMC might beable to bridge com-pliance monitoringacross online and on-premises storage.EMC sees opportuni-ties for SaaS businessprocess managementand collaboration, aswell as personal in-formation manage-ment for consumers.Data indexing, archiv-ing, disaster recovery,and security are allpossibilities, too, Nicksays. Several of EMC’sacquired businesses,including Documen-tum (indexing andarchiving), RSA (se-curity), and Infra (ITservice management)are likely paths to get-ting there.

EMC’s VMware di-vision will find its wayinto the mix. “We wantto be the plumbingand the enabler of

cloud computing,” says VMware CTO Stephen Herrod.Like his colleague Nick, Herrod is looking ahead. He

hints at enabling on-premises server infrastructure toscale up via on-demand virtual servers, disaster-re-covery scenarios, and using management software likethat acquired in VMware’s purchase of B-hive Net-works to maintain service-level agreements.

In other words, today’s cloud represents just the be-ginning of many new possibilities.

Write to J. Nicholas Hoover at [email protected].

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Demystifying Cloud Computing