The Sun Will Shine Brighter From Behind the Clouds

Vahan Vardanian, Managing Director, Chief Information Officer / Renaissance Group

Information Technology services market worldwide and in Russia has seen an interesting trend in the current economic downturn as technology investments are shifting from infrastructure and “status” investments to building performance, efficiency and controls. In the past, the Russian IT Sector was dominated by hardware and license sales often clouded and surrounded by controversy. A different type of cloud is promising to set the new standard.

Russia is still lagging behind some of the major recent technology trends, specifically Cloud Computing and Software as a Service (SaaS) — new incarnation of Application Service Provider (ASP) paradigm. Cloud computing and SaaS in particular are opening up new horizons for the massive extension of applications and services across large distributed and medium enterprises. With the chronic deficit of qualified IT personnel SaaS model should open up best in class applications and services that companies could otherwise not afford for either financial, geographical or resourcing reasons.

In fact, industry analyst Gartner estimates that by 2012, one in every three dollars spent on enterprise software will be a service subscription rather than a product license, and that early adopters will purchase as much as 40 percent of their hardware infrastructure as a service rather than as equipment.

What is cloud computing and why it can change forever the landscape of corporate technology infrastructure?

Among other things, cloud computing promises sourcing flexibility for hardware and software, variable (as opposed to fixed) costs for IT, centralized management software, and arguably better security against malicious attacks and data theft. Cloud computing refers to the sourcing of some capability — hardware, software, execution of a business process — from somewhere “out there.”

Within this rather broad definition, there are three major categories of cloud computing.

Hardware cloud

This is a very large and very sophisticated data center that lets you use its hardware—servers, storage, network—for a use-based charge. You can, among other things, run your enterprise applications, store your data or execute e-commerce transactions. Exactly how the provider does this or precisely where the computing takes place, you don’t know and, theoretically, you don’t care. Amazon’s Elastic Computer Cloud, or EC2, is an example of a hardware cloud.

Software cloud or Software as a Service (SaaS)

This is specialized software (say, for customer relationship management) that runs on a hardware cloud somewhere, typically someplace other than your own data center. Your employees use a web browser to access it; typically, you pay by the number of users, or seats. Exactly where the hardware resides or how the software is configured, the users don’t know and again, theoretically, don’t care. Salesforce.com is an example of a software cloud.

Desktop cloud

This runs the desktop applications you’d normally install on your home or office computer (such as word processing or spreadsheets) from a hardware cloud via the Internet, yet provides you the same experience as if the application ran locally. A complex mechanism distributes the computation across your computer, the Internet itself and remote data centers so that you literally cannot know exactly what computation takes place where. Google Docs or Microsoft Live are examples of desktop clouds.

Security

When it comes to using third-party hardware and software, security is perhaps the single biggest issue for most companies. While this is likely to be a significant near term concern, one could argue that a large SaaS provider whose entire business is predicated on securing its clients’ data and applications would be in a better position to do so than many in house IT organizations. But for some companies, particularly in sectors such as defense, aerospace and brokerage, security and compliance requirements (including the physical location of data) may make public clouds—hardware or software unacceptable.

In Russia the future of SaaS as a primary B2B services delivery mode is hampered largely by the lack of proven regulatory framework governing information security, protection of personal data and corresponding judicial treatment. “Personal Data Protection Act” adopted in 2006 is the first indication that the issue is getting due attention.

For companies regardless of size, cloud computing provides several potential benefits, including lower and transparent IT costs, faster deployment of new IT capabilities, an elastic IT infrastructure that can expand or contract as needed. Although individual aspects of cloud computing are relatively mature and usable today, how they will all come together and which of the scenarios discussed will play out is yet far from clear so I would recommend starting piloting those concepts to define the most applicable long term technology landscape by the time when mature offerings emerge.