The differences between IT outsourcing and Cloud Computing
I was recently asked by a journalist for my thoughts on the differences between IT infrastructure outsourcing and “Cloud Computing”. Flattering, of course, but I suppose that I should have a view, especially since Google rates my definition of Cloud Computing above just about everyone else’s:
http://google.co.uk/search?q=the+definition+of+cloud+computing
Lets face it, Google is near omniscient (and probably already has a band of worshipers preparing for the birth of its sentience) so I must know my stuff! </gloat> 
Ahem, anyway, when you get down to it, there are only really three differences between Cloud Computing and traditional IT infrastructure outsourcing:
- Shorter contracts: Hours, days or weeks (at most one month) rather than months or years (usually at least 6 months for traditional outsourcing).
- On demand: Near-instant scaling / adding of resources.
- No up-front costs: The CapEx and installation is absorbed into the rental charges.
Modern “managed hosting” providers like my company are largely synonymous with “Cloud Computing” or “Utility Computing” providers; companies like mine will give customers anything from a virtual machine to a large dedicated cluster with a contract of one month and no setup fees. We are blurring the line between traditional IT infrastructure outsourcing (eg. EDS / HP at the big end, Rackspace at the small end) and “pure” Cloud providers like Amazon EC2.
Cloud Computing has been enabled by the ubiquity of Internet connectivity, since companies are no longer tied to owning their own data centre with hard-lines back to offices. Instead, the infrastructure can be pretty much anywhere, although usually you want it in the same country as your main operations.
So what becomes of the old-school big-corp IT outsourcers?
As for the impact on IT outsourcing businesses, that is simple: Cloud Computing is exposing the true cost of computer / server resources, which thanks to Moore’s Law is tiny. Cloud / Utility Computing providers are driving the comoditisation of compute & storage resource, thus eviscerating the outrageous profit margins enjoyed by the old-guard of IT outsourcing providers.
The Cloud movement has the potential to finally deliver on IT’s long-oversold promise of shared services and cheap, highly scalable process automation. In doing so, Cloud also threatens the livelihoods of the big IT consultancies / Systems Intergrators who have become better at selling their highly-paid peoples’ time than actual IT services.
The proof are the likes of Google, Xero online accounting and Zimbra Desktop (Outlook- & Google docs-like functionality, but open source and Web-based): They are delivering most of the IT services that businesses need at an extremely low price, thus demonstrating that:
- Most of us want the same, simple things in terms of IT services.
- IT resources are actually really, really cheap.
Sorry chaps, but it looks like the jig is up.
I’m definitely a small scale user, but I’ve noticed a significantly reduction in computing costs over the last few years; using remote computing resources has never been so cost effective, and the internet connectivity enables people like me to exist at all.
Personally, I’ve reached a point where the majority of my business costs are based on how I value my own time and the cost of maintaining my skills. Consequently, I can focus on applying those skills to solving the problems in which my clients are interested and hardly need to consider the cost of hardware in the contract.
As you point out, the contract length has a big impact in terms of financial commitment. Shorter contracts make it easier to justify trying things out, and easier to find a optimal solution.
I’d be interested to know whether the use of Cloud resourcing increase the amount of work being done by the average data centre server, are there fewer powerful dedicated servers on long term hire sitting around with virtually no load? If so, this alone is a significant cost and environmental benefit.
Conversely, is the low cost availability of resources both freeing people to experiment and boosting the overall level of resource usage? Good for resource providers and users, like me, but environmentally speaking…
Yes, Cloud is actually very energy-efficient since it helps to even-out the peaks and troughs in load. In theory, one could event have applications roaming the globe (see “Follow the moon / globe trotting applications” in my definition of cloud computing post.
However, the big win in terms of load maximisation (which is the most efficient way to use computers since they use some power when doing no work, and only about 50% more when working flat out) is simply virtualisation. This is especially true because Moore’s Law has made machines much more powerful than most application require, so the old tin-hugging school of “one app per physical server” crowd should be lined up and shot!