What cloud computing means for a business depends in large part on economics, C-Net blogger and Cloud Computing Evangelist James Urquhart told SiliconAngle.tv at the Strata Putting Data to Work Conference February 1-3 in Santa Clara.  See the full interview below, or at SiliconANGLE.tv.

For small businesses and start-ups in particular, Software-as-a-Service is a no-brainer. “Say I’m opening a new business in town, and I want some IT to back that up. I go to one of these sites, I set up an account, I check off that I need the retail system, I need the finance system, and all of the integration is already worked out for me, and it’s all readily available as a service.”

But for large enterprises with major investments already in their data centers, the economics re very different. There, it is hard to justify the expense of moving applications that are already paid for, running in stable environments that the company already owns, to a cloud infrastructure.

What does make sense, he says, is to use both public and private cloud structures to support development and provisioning for new business services. “You’ve got enterprises out there with development groups that take up two floors in an office building, and all those servers are sitting around most of the time, waiting for the next iteration or trial.” If instead a cloud infrastructure can be used to provide a shared infrastructure with self-provisioning, that can cut the cost of development infrastructure to a fraction of what it has been in the past. And if the enterprise can use infrastructure-as-a-service from large public cloud providers such as Amazon.com rather than buying its own systems, it can be even less expensive, although security, cultural, and other concerns may dictate a private cloud system as well.

The other area where cloud infrastructure makes strong immediate economic sense for large enterprises, he argues, is in provisioning for new applications. “Right now if you want some servers to be put in the data center you have to go through a committee, you have to go all the way up to the CFO’s and get his approval.” A cloud infrastructure would eliminate that time and expense and just let the executive put in a request at a Web site that is automatically provisioned within a few minutes or hours rather than days or weeks. “There’s been some recent work that shows that the faster you can get the resources in the hands of those who want it the more money you save overall. If you can get bureaucracy out of the IT organization in terms of provisioning and then in terms of operational decisions moving forward but still provide the services around backup and all those things, you’re going to come out way ahead.”

However, he warns, reducing the cost per unit of processing or storage does not automatically equate to an overall savings. The paradox is that reducing the per-unit cost often encourages greater use of the resources for more projects and applications. However, if this means that the enterprise realizes more business value from the same investment in IT resources, it can strengthen the organization overall. And the cloud model combined with virtualization can maximize the value the enterprise realizes from its investments.

“The cloud is an operations model,” he says. “It is not a technology; it is a way to apply technology to problems. If you have a silo data center where your utilization rates are bad or the only way you are fixing it is by statically provisioning vertical machines to do fractional ownership of the physical server, but you don’t have much flexibility, then you would still have huge costs in operations that don’t really need to be there. So from that perspective, if you can change your operational model to take advantage of the economics of shared resource pools and shared capacity, you may not be as cheap as Amazon in what you’re doing, but you will run a lot cheaper than you have been in the past, and you will be able to maintain, certainly, security, compliance parameters, certain cultural parameters.”


Watch live video from SiliconANGLE.com on Justin.tv