Friday, May 14, 2010

Who is Picking Up the Check?

This isn’t a story about the tooth fairy and clouds in the sky, but it’s close. It’s a story about the cloud fairy. You know, the fairy that makes cloud computing possible – for free.

What? Free? Is that possible?

Consider the perspective of Douglas Merrill, ex-CIO of Google, as reported by Andy Greenberg in this article on Merrill is a strong proponent of cloud computing, and recommends that organizations should rely on search capabilities (e.g. Google) rather than e-filing systems (like the kind Microsoft makes). Merrill suggests a very flexible model for managing data in an age where data is everywhere – literally. Fair enough.

And then Merrill says that organizations should, ”Ride on the wave of virtually infinite storage at virtually zero cost.” He is talking about cloud computing. Later in the story he does acknowledge that there are “one rate costs” associated with cloud computing, but nonetheless he advocates storing your data on “a big hard drive that someone else is paying for.”

Okay, so he didn’t say “free”, he said, “virtually zero cost.” Store your data in the cloud. Let someone else pay for it.

Yes, I suppose a good CIO’s job includes reducing costs. But, someone has to manufacture the storage capacity. Someone has to provide the infrastructure. Someone has to pay for managing it. Cloud computing, while arguably more efficient, is not free. Moreover, I believe it can’t be free. What manufacturer will continue to innovate storage solutions in a model where only the service providers and the end users realize value?

Ironically, this blog exists in the cloud. I created a free site (using Google’s blogger) and I pour new bits and bytes of data into the cloud each week. But I do worry that some day the cloud fairy will turn into the wicked cloud fairy of the west and start charging me for every post, or that the cloud will burst and my data will become inaccessible, which is why I keep a copy of everything I post on my own server (and then I back that up). Paranoid? Maybe.

Can we allow the storage systems that host our data to continue to commoditize until they have no essential value? Will the cloud burst? Or perhaps the question should be: When will the cloud burst? What do you think?


Dave E said...

There are really two aspects to cloud computing. The processing cloud and the data cloud. To me it makes sense to use the cloud for the actual processing since it enables processing power to be fully utilized. Wait, didn't we already have this? Oh yes. They are called mainframes. Oh well, moving on...
Back in the good old days the DP department would charge back to it's customers (the other depts within a company) the cost of using the mainframe since the thing was expensive to buy, house, run and maintain. With the advent of cheap PCs people seem to have forgotten that computing power costs money. That fancy laptop cost x amount of $ to buy. That cost (and the cost of any additional hardware/software)is spread out over it's lifetime but in effect, everything you do on it consumes a part of that cost. Admittidly the cost per 'transaction' is very small but even so it is not free although I doubt anyone thinks about it when sat at their PC.

The data cloud is a slightly different matter. If cost is an issue, albeit a hidden one, then where will the data go? To the places with the lowest storage cost. Since it takes power, buildings, hardware and even people to maintain that lot it will go to the places where the cost of those is lowest and these days that probably means China.
So you have your account at the local bank and you 'assume' your personal data is safe. They contract with whoever to store the data in a cloud who then offshores the actual storage to the lowest cost place and you data ends up god knows where and accessible by who knows who. Just because we have safeguards does not mean you data is safe once it leaves our shores! So you could encrypt the data but the weakest link in any software system is the people around it. One mistake or omission and you data is there for all to see.

There's also some stuff that I just do not want on the cloud. There's only one person I trust with the information and that is me. As soon as you put your data outside of your personal space it becomes accessible. Sure it may take a court order for someone to get at it but how many time do you hear of someone being tracked down because an ISP was forced to release data to the government. Right now Amazon is in a legal battle with the state of North Carolina (where I live) over access to Amazon's sales data so that the state can go after people that live in the state (me) and have bought anything through Amazon (me), for sales taxes even though I 'declared' it (more or less) on my tax return. If that's the face of the 'brave new world' then can you stop it please because I want to get off.

I'm sure the cloud is here to stay and you might call me a Luddite, but I'm in the software industry. I don't trust computers and newer isn't always better.

Colette said...

Dave E, I love your comment about the high utilization rates on mainframes!

And thanks for pointing out the security concerns -- I was reluctant to bring that up, but it is such a huge issue.

Your story about Amazon and North Carolina is scary. Yikes!

Rob said...

"There's only one person I trust with the information and that is me."
- Dave E

Quoted For Truth!

End of line.


Colette said...

Dave E, thinking more about your comment -- I feel compelled to add that on the mainframe we not only have high utilization but there is a reason why so much data has been stored on mainframes -- it's rock solid and secure.

And... for those who don't want to manage things themselves, there have been managed services and outsources solutions for years -- and you knew exactly where your data was.

Rob -- well said.

Anonymous said...

Excellent article Colette, and fantastic comment Dave. I agree with both of you.
There is also a technical and business aspect to cloud computing.

From a technical standpoint (I come from a technical background) there really is nothing new about cloud computing. It's just a repacking of existing offerings... a new way of telling an old story.

This means that from a business perspective, the margins have dropped out of the market as old offerings have turned into a commodity overnight. So unless the players in this market can sell higher margin services alongside their cloud offerings they are in a race to the bottom and I expect that many won't survive.

I guess this is why companies like IBM are buying up outfits like Cast Iron Systems.

Colette said...

Anonymous, it really is going to be interesting to see how this business model plays out. What I find fascinating is that it's not just the technology itself we are allowing to commdotize -- I fear that information/data is becoming a commodity along with it.

Traub Motorcycle Detective said...

Sure and automated teller machines were all free to use when initially introduced. Now you are stuck with your banks or else pay an out of network fee and other bank or service fee. And this was to reduce costs of human bank teller salaries. Anyone see that there are no human bank tellers anymore???

Same for cloud computing- who owns, controls, and gets to data mine the demographic information for profit?

Colette said...

Traub Motorcycle Detective, good point about ATMs -- I had forgotten about that.

And who owns the data is a very interesting question indeed -- I think we have just hit the tip of the iceberg on that one.

Anonymous said...

I agree with the comments made in this discussion. Someone has to cover the costs. In the Google search engine model, the cost is covered by advertisers posting ads as you do your search. I don't think companies would want ads popping up as they are doing payroll or other business processing.

In regards to data security, even if you encrypt data techniques are being developed/have been developed to allow analysis of the encrypted data. So where the data is stored and who has access to mine it is a concern.

The point about ATMs was an excellent one. I remember the original argument by banks that human tellers were so expensive, so here is the ATM that will let you do most of your banking and will reduce the cost. Then once we got used to them, you got hit with the usage fees if you're outside your banks network. The reason for the charges is that it takes money to load the ATMs, service them, connect them to the banks network, and computers to track the ATM transactions.

I can see something similar happen in cloud computing. Once everyone has switched to it and small ISVs are gone, then you have to pay to keep your company running if you're on the cloud.

Collete, I enjoy your posts as they are thought provoking and look at real world questions in so many areas. Please keep up the good work.

Colette said...

Anonymous, I do think we are going to have to talk more about data security. Thanks for your comment!

kanishk said...
This comment has been removed by a blog administrator.
Lynne Spreen said...

Collette, I know you were talking about cost and security, but I think we're about the same age, and I went from an all-DOS laptop to an Apple IIe to ... you know the drill. And possibly because I "remember the days", I have a fantasy about a future where we never have to buy any more software for our computers (MS Office, Photoshop, drivers for all our toys, Norton et al, etc.) All we would need is a keyboard, a screen, and a credit card. If the stupid software needs an update, fine, let it happen in the cloud as part of my subscription. I simply log on and get all the best; my computer travels wherever I go. I log on using whatever device I have and there's all my stuff, all my data, all my programs. It's a nice dream, isn't it?

Colette said...

Lynne, definitely a nice dream! I think we're getting closer with smart devices, and I do think we'll get there.