Cloud Computing

Cloud Computing

With cloud computing, companies can cut both start-up and operating costs from technology budgets.

Flyspy is traveling light.

The airfare search engine launched in the spring, and its capital purchases so far could practically fit into founder Robert Metcalf’s carry-on luggage. A few personal computers, a printer for its Dinkytown office, and that’s about it.

What’s missing? The closet full of servers, routers, firewalls, and other networking gear that was once a requirement for any Internet-based business. All that hardware might have cost Flyspy up to $200,000—an expense large enough to ground or delay many Web start-ups.

But Metcalf looked to the clouds instead.

Cloud computing is an emerging business model in which users rent virtual servers, software, and hard drives from online vendors. The data and software is stored in massive, remote data centers, or “clouds,” owned by the likes of Amazon, Google, and Microsoft. You may never know the physical location of the files, but with Internet access, a password, and a few clicks, they’re as accessible from any computer in the world as if they were saved on your desktop.

Sound intimidating? Well, odds are you’re already using cloud computing and don’t realize it. The Washington, D.C.–based Pew Research Center’s Internet & American Life Project survey last year found that 69 percent of online Americans store data or use applications in the cloud. The most common function is Web-based e-mail—programs like Gmail or Hotmail that don’t require users to install any software. Other activities include online storage of personal photos, documents, videos, and backup files.

It provides a convenience for people who regularly work from more than one computer and want to access the same information from each one. But cloud computing is also proving to be a potentially disruptive concept in the world of business. It’s lowering entrance barriers for start-ups like Flyspy. Meanwhile, it’s making big corporations like Best Buy more nimble, allowing them to test and develop ideas faster than ever before. Even the White House is exploring cloud computing as part of a mission to make the federal government more innovative, efficient, and effective with its technology use.

Starting Up

While security and reliability concerns need to be considered, cloud computing’s early adopters say in many instances the benefits far outweigh the risks. It’s only a matter of time, they believe, before nearly all companies are moving some or all their data and programs into the cloud. “There isn’t a company out there that won’t be looking at it just for the pure cost reasons,” says Graeme Thickins, a local technology writer and start-up consultant.
Cloud computing is, in a sense, “the perfect solution for the economic times,” Thickins says. Access to credit and capital is tight, and many companies’ technology budgets are frozen or in reverse. Cloud computing gives companies a path to expand and experiment without breaking the budget. Amazon, for example, charges 10 cents an hour for use of a virtual server on its Elastic Compute Cloud, or EC2. Buying and installing the same equipment in house would cost thousands of dollars and could take several hours, days, or even weeks to set up.

For a start-up like Flyspy that hadn’t already invested in its own data center equipment, putting an application in Amazon’s cloud instead was a “no-brainer,” Metcalf says. The company was prepared to spend $200,000 on hardware before Metcalf researched Amazon as an alternative. “We went back to the spreadsheets and plugged in all the numbers, and it was a dramatic cost savings,” he says. The company’s monthly bill from Amazon is about what it originally budgeted for maintaining an in-house data center. So the move left the site’s operating costs unchanged and all but eliminated its capital expenditures.

What really opened Metcalf’s eyes to the possibilities of the cloud, though, was the way in which the services allow users to infinitely scale up their resources and immediately scale them down when they are no longer needed. True cloud computing services sell computing power like a metered utility. Customers use what they need and only pay for what they use. Say, for example, a cold snap caused a spike in Flyspy searches for Minneapolis to Florida airfares. Amazon would detect the traffic increase and assign more servers to keep the site from slowing or crashing.

“All of a sudden, we’re not constrained,” Metcalf says. The paradigm shift was so great that the company actually went back to the drawing board with its business plan, which worked on the assumption that the company would be restricted by the hardware in its in-house data center. “We re-engineered [the plan] to be in this very liquid environment that scales up and down on demand,” Metcalf says.

That scalability is part of what keeps Internet Broadcasting’s network of Web sites running smoothly. The St. Paul company operates sites for about 70 television stations around the country. Much of the content is stored in its own data center, but the company uses a cloud provider called Akamai to help offset some of the demand on its equipment, particularly during big, breaking news events, says Andy Morgan, vice president for platform technologies.

When Anna Nicole Smith was found dead in a hotel room in 2007, for example, traffic to the company’s Web sites quadrupled within minutes. Same goes for when Sasha Cohen skated in the 2006 Winter Olympics. A local news Web site that typically got 1 million page views a month received 1 million in a single day when flooding hit the region. For Internet Broadcasting, the cloud means not having to build infrastructure to meet those demand peaks.
At Best Buy, cloud computing has taken so much of the cost and risk out of launching new applications that it’s turned the entire process upside down, says Gary Koelling, the company’s senior manager for social technology. Ideas that used to require months of pitching and planning now don’t even need manager approval and can be up and running in a matter of weeks.

The change is freeing employees to pursue ideas such as the Best Buy Idea Exchange, a Web site where customers can share, vote on, and discuss ideas for improving Best Buy. The site launched just six weeks after Koelling’s team decided to pursue it. It’s hosted in Amazon’s cloud. It’s possible that in-house hosting for the site would have cost 10 times as much, Koelling says, but more likely, it never would have seen the light of day.

At least a half-dozen higher-profile Best Buy applications are running in either Google or Amazon clouds, from its employee social-network site Blue Shirt Nation to the iPhone app it launched earlier this summer.

Read more from this issue

Security Concerns

Companies have hesitated to place more sensitive data such as health or financial records in the cloud, and their concerns aren’t without merit. Highly regulated companies using cloud services will face extra hurdles, and right now, some of those hurdles might be insurmountable or not worth the hassle.

“For the most part, the cloud is going to be more secure than what you can provide in your own IT infrastructure,” says George Reese, author of Cloud Application Architecture, a book for developers and systems administrators, and owner of Minneapolis-based EnStratus, which provides tools that help businesses manage resources in the cloud. “[Amazon is] going to have the policies and procedures in place that 90 percent of companies may talk about doing but don’t really do.”

The most immediate barrier for most companies may be emotional. “The lack of control creates a perceived reduction in security,” Reese says. It’s like feeling less safe riding in the passenger seat with a friend at the wheel, even if she’s a better driver than you are.

No uniform standards exist for security in the cloud. “Just because Amazon is particularly good with protecting your data doesn’t mean that Joe’s Cloud Company is going to be good with protecting your data,” Reese says.

And there is a risk when your data is stored on a server that is shared by multiple customers. The data will be inaccessible to other customers. But if, for example, someone whose data is on the same server is subpoenaed, your data could conceivably wind up in the hands of lawyers, Reese explains.
That’s very worrisome for some industries, but in most situations, there are encryption tools that can disguise the data to anyone outside your firm. “The key security issue for the clouds is transparency and understanding what your cloud vendor is doing with that data,” Reese says. A cloud provider should be able to explain what information is encrypted, and how it is encrypted, he says. If a provider can’t answer those questions, you have to assume it is not encrypted; and if it’s not encrypted, you have to assume the whole world could end up seeing that data.

As important as security is continuity planning. The number of cloud providers is billowing, and many of them will fail. As it stands today, moving data and applications from one cloud service provider to another isn’t a simple task. It’s cheap and easy to try a new cloud, but once you’ve invested the time to build an infrastructure in a particular cloud, it’s often going to take an equal or greater investment to switch to another provider.

To protect themselves from the possibility of a cloud vendor failing, companies should regularly pull data out of the cloud and have a plan to move it in the event of a failure—even if the cloud provider is a giant like Amazon or Microsoft. If the past year has taught us anything, it’s that giants fail, too, Reese notes: “If [the provider’s clients] don’t have any kind of business continuity plan around their cloud infrastructure, they will follow that company out of business.”

Head In(to) the Clouds

Cloud computing doesn’t eliminate the need for technical expertise. Companies will still need experienced systems administrators. It takes a level of technical ability to launch an application in the cloud, just as it does in a data center, say Jason Baker, chief technology officer at Visi, a Minneapolis managed hosting company.

That expertise is less than what it takes to manage in-house hardware. However, more companies are deciding that running a data center is not really part of their business, Thickins says.

Some are waiting for more cloud-computing standards to emerge, which could take a while to be accepted by a majority of vendors. “My belief is that we’re about a year or two away from seeing more generalized adoption by small- and medium-business and larger enterprises,” Baker says.

Most companies aren’t going to abandon existing data centers anytime soon, but look for them to use a mix of their own computers and the cloud. Meanwhile, thousands of small companies will be using the cloud exclusively, especially the newer and younger firms, Thickins predicts.
So what’s the first step? Go to Amazon and start reading up, Thickins recommends. The site provides demos and online training that makes it possible for IT-literate people to figure out many of the basics on their own. And it costs very little to experiment.

The experts advise turning to a trusted vendor or consultant and getting their advice before making a bigger commitment to a cloud service. “There are a number of cloud platforms out there today, and I guarantee the number is going to explode in the next 12 months,” Baker says. “All of these clouds, they all have their pros and cons, they all have their unique capabilities. It’s not the case that one cloud is going to meet the needs of all businesses.”

If Flyspy were launching today, Metcalf says, he would have spent more time finding a good management tool, such as the one offered by EnStratus. “There’s a lot of moving pieces. It’s almost like spinning plates on a stage, and they help with that,” Metcalf says. “That would have helped us. At the time, they weren’t far enough long in product development. But these days, they’re getting to be pretty robust and easy to use tools.”

As Flyspy gains altitude, Metcalf expects a lot less turbulence now that his company is in the clouds.