Cloud computing can be regarded as essentially the provision of computing resources and/or software as a utility, in the same way that your business uses familiar utilities, such as electricity, water, gas etc. Cloud computing enables you to pay for computing resources as you need them. These services are provided over the internet, on a consumption-based pay-as-you-use model, with short-term contracts and without up-front expenditure.

Whether you realise it or not, you’re probably already using cloud-based services. Facebook and Google are two prominent companies offering cloud-based software as a free online service to billions of users across the world. Google, for example, hosts a set of online productivity tools and applications in the cloud such as email, word processing, calendars, photo sharing, and website creation tools.

Broadly speaking, to be considered “cloud computing” an application’s data and core processing functions would be hosted/stored and managed online or ‘in the cloud’, and accessible from any PC, laptop or mobile device with a network connection in real-time.

In this context, “in the cloud” actually means that the application, along with the data it uses, is installed one or many powerful computers called servers, which are similar to home computers but in a different form factor and without screens, that reside within specially adapted buildings called data centres. Data centres are like warehouses filled with banks of servers in cabinets called racks. Data centres have powerful air conditioning systems to keep the servers cool and highly resilient power and internet connections. A picture of one of ours before being filled up is here.

Three Flavours of Cloud – the “service models”

One of the biggest confusions over cloud comes from the fact that it actually applies to a number of different layers in the “stack”. Don’t worry about what I mean by the stack, but if you’re curious see this post. There are three flavours of cloud, which broadly go down in cost but up in the required level of technical know-how in the order I have listed below:

Software-as-a-Service (SaaS)

These are usually applications or services that you access via a Web browser. Google Mail and Google Docs are examples of this kind of cloud computing. Some companies host an application on the internet that many users sign-up for and use without any concern about where, how, by whom the compute cycles and storage bits are provided.

Some SaaS is delivered via customised client applications, for example if you use Twitter or Facebook from an app on your phone. Our own SquirrelSave personal cloud backup product is also an example of SaaS in that sense – you, the user, doesn’t have to worry about where the data is getting stored nor the internal workings of the platform we have developed.

A better term than “software” might be “application”, since the platform part is also really just software, but SaaS has already gained wide acceptance. SaaS is usually the most expensive form of cloud since you are paying for the software as well as the underlying infrastructure and it requires no technical know-how. Examples of paid SaaS include Salesforce.com, though presently the most widely known examples are “free”. Of course, nothing is truly free, and by giving away their services companies like Facebook and Google are getting something – your information and time.

Platform-as-a-Service (PaaS)

This is a set of lower-level services such as an operating system or computer language interpreter or web server offered by a cloud provider to software developers. Developers write their application to a more or less open specification and then upload their code into the cloud where the app is hosted and automagically scalled without the developer having to worry about it overly. Microsoft Windows Azure and Google App Engine are examples of PaaS.

In old-school hosting parlance, a managed hosting service might also be considered PaaS – the developer gives the hosting provider some code, and the provider worry about how many servers, how much bandwidth (internet connectivity), etc. and just give the developer one bill. Because of the auto-scaling and ease-of-use afforded by PaaS, and the abstraction/obfuscation it gives the vendor, it usually costs a premium over renting the underlying infrastructure directly (IaaS).

For the more astute readers: You might hear people say that that Facebook is also a “platform”. This can easily get confusing; yes they provide a platform for developers to make add-ons, like the popular game FarmVille, but in reality they are just being a gateway (FarmVille runs on servers outside Facebook’s data centres) and are not providing any computer resources, so they are not providing PaaS. A similar example is Apple’s iOS platform – they provide tools to developers and a gateway to sell their apps (the app store) but if those applications that have a cloud component will likely be using IaaS or PaaS from elsewhere.

Infrastructure-as-a-Service (IaaS)

IaaS is the provision of virtual servers and storage that organisations use on a pay-as-you-go basis. This is the most powerful type of cloud in that virtually any application and any configuration that is fit for the internet can be mapped to this type of service, but is also the most technically challenging to exploit. Amazon’s Elastic Compute Cloud (EC2) and Simple Storage Service (S3) are examples of IaaS, as are our own Miniserver VM® cloud compute and Memstore™ cloud storage services.

In practice, cloud suppliers often provide additional services alongside IaaS offerings, so the boundary between IaaS and PaaS can become blurred. However in its purest form compute IaaS can be considered as a bunch of unmanaged virtual machines (VMs) for which you provide the operating system image, that can be scaled up and down (by spinning up and tearing down VMs) according to your application’s needs in near-real time (ie. within minutes). IaaS data storage is more simple, working like a giant disk drive where you only get billed for what you are using, usually on an hour-by-hour basis.

A virtual server or virtual machine (VM), is just like a normal server but is smaller in terms of CPU, RAM and disk than a whole physical server, and several sit on each physical host server. We typically put about 15 VMs on each host server, for example. VMs have the advantage that they can be created and destroyed effectively in real-time in dynamic response to demand.

Private vs. Public – “deployment models”

As well as IaaS, PaaS and SaaS (the “service models”), cloud has a number of “deployment models”. The ones I’m going to focus on here are “private” and “public” cloud. There are also “community” and “hybrid” clouds, but I’m going to save that for a later article. Also, here I am just going to briefly cover what public and private cloud means in the IaaS context.

Public cloud means that your virtual machines are sat on the same physical host servers as other clients. A private cloud is where the host servers, and in some cases the physical network or even an entire data centre facility, is dedicated to one client. When most people say “private cloud” what they usually mean is “a company’s own data centre with some virtualisation software”. This is arguably not cloud since you lose the scalability aspect. When we, as a cloud provider, say “private cloud“, we mean infrastructure dedicated to one client that we scale (by adding dedicated host servers into their set from our standby pool) as necessary. Some people would call that a “virtual private cloud”.

Moving To The Cloud?

One of the great things about cloud is that it can be experimented with very cheaply. If you are looking to make use of cloud services then I suggest just dive in! Start small, with one service, and then move more services once you are ready.

Analysts have indicated that future technology leaders will gravitate to cloud-based models as a way to deploy software and to store content, and we are certainly seeing that trend. A lot of customer start using our cloud as their development “sandbox”, costing a few £10s of pounds per month, and as they gain confidence gradually migrate more critical applications across.

Instead, purchase your software from one provider, but have a direct relationship with the host. Some of our customers are starting to do this with us and Zimbra. Zimbra is sort-of like Google docs, but open source, and they host it with us, and backup to a third-party host (which is cheap to do).

Good for resellers too

Managing the backup and hosting process might be a new way that resellers can differentiate their offering or add value to the supply chain as more and more businesses look to protect their data as they move to a Cloud Computing model. Ensuring ease of data migration between cloud providers is paramount for businesses moving forward.

By not being tied to one provider, a business could easily migrate to another host, or if Zimbra becomes unsupported, for example, they would not lose their data, and we would carry on hosting while they work with us to find a new software solution. If we fail, they still have their data and Zimbra can help them get set up again. We (the managed hosting provider in this example) would not own their data even if we did fail, but no harm in belt-and-braces.

Hosting commoditisation is here

Software providers cannot realistically compete in today’s commoditised hosting market place, and instead should stick to their strengths. This also applies to migrations – when moving customers between hosts there are now companies that specialise in the migration itself but have no interest in selling software nor hosting. One such company is SEM Solutions, with whom we have recently started working.

Another big win from supply chain disintegration is that you gain total price transparency; no more getting stitched up by one provider who is just whacking a huge mark-up on a commodity service like hosting (yes, I’m talking to you, local government CIOs .

Not only does it show you which bits cost what, thus allowing you to compare with the market rates, but disintegrating the supply chain also makes migration to a new Cloud / managed hosting provider easy since you just need to work with the software supplier to migrate to the new host, and are not tied in to one provider. Equally, since you own the data on the service (because you are buying the hosting direct), moving to a new software provider is greatly simplified.

Eating my own dog food

So, do I take my own advice? Yes; Memset is one of the fastest growing technology SMEs in the country, and all our business critical information and systems are hosted in the Cloud (or at least our little bit of it) and accessed over the Web. None of my staff have Microsoft Office, we do not pay for any software, and we do not need servers in our office for administration applications. Everyone has a laptop, and since all our systems and documents (we use a Wiki for the latter) are hosted online everyone can work from home without the complications of a VPN. We do not use any paper for internal communications either, thus minimising “the printer has broken” type problems.

We also use Trac project management and documentation management system for all our internal documentation, task and project management. It is free and simple to host yourself with any managed hosting provider. Simple, scalable systems like Trac have also made it easy for us to obtain and maintain our quality, security and environmental management systems (ISO9001, ISO27001 & ISO14001 accreditations).

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:

1. Shorter contracts: Hours, days or weeks (at most one month) rather than months or years (usually at least 6 months for traditional outsourcing).
2. On demand: Near-instant scaling / adding of resources.
3. 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:

1. Most of us want the same, simple things in terms of IT services.
2. IT resources are actually really, really cheap.

Sorry chaps, but it looks like the jig is up.

“The current design of the scheme will encourage transfers of carbon liability, rather than a net overall reduction in emissions across the UK.”

“The current design of the scheme will only encourage energy efficiency in a context of stunted growth. At the heart of this problem lies the proposed design of the league table, and the suggested metric to be used for ranking and recycling purposes.”

In this article I will look at how the CRC works in the context of data centres, why it will will not significantly reduce our carbon emissions, and how the it threatens to stifle growth and innovation in a sector vital for our economic and environmental health.

Data centres use in the region of 2.2-3.3% of Britain’s total grid power. While that is a considerable amount, ICT has been repeatedly identified as a key mechanism through which our society will reduce our carbon emissions. The World Wildlife Fund have identified ICT as the way to “save the first billing tons” of carbon, and the Global eSustainability Initiative SMART 2020 report has identified now the intelligent application of ICT can reduce our annual global emissions by 15% by 2020.

Data centres lie at the heart of ICT’s potential to reduce our collective carbon emissions. We, the ICT sector, are not the enemy; we are part of the solution to climate change.

Further, data centres are absolutely key to our national prosperity. Britain’s knowledge economy now employes 41% of the population, and will account for 50% of GDP by 2010. Data centres are the backbone of UK Plc, vital to the resilience of public services and the competitiveness of British business. The ICT sector, powered by data centres, promises to be one of the engines of economic growth which can lift us out of recession, and must be allowed to do so.

We are not idle about our The European IT industry, through Digital Europe (formerly EICTA) has already committed to reducing its carbon emissions by 20% by 2020. The UK has taken a leadership role in on data centre energy efficiency. The British Computer Society in particular has been a key player in the development of the EU Code of Conduct for Data Centres, and the globally-leading cost and energy data centre simulator (in partnership with the Carbon Trust). We, the UK data centre industry, have our house well in order.

The CRC scheme is part of the UK government activity seeking to cut carbon emissions by 80% of 1990 levels by 2050. The most effective way to achieve this goal is to encourage energy users responsible for emissions to reduce their energy consumption on the one hand, and adopt efficiency measures on the other.

However, the government’s scheme plans to allocate the entire carbon liability to the utility bill payer, irrespective of whether the bill payer is in fact using the energy, or a key player in the decision to use this energy.

The basic mechanism for the purpose of this discussion is that any organisation that consumes greater than 6,000 Mega-Watt Hours (mWh) electrical energy per year is automatically captured and all of the electrical (and some other) consumption of that organisation and all subsidiaries is totalled to represent the carbon of the organisation.

6,000 mWh per year is equivalent to a continuous load of 685 Kilo-Watts (kW), roughly 500 kW of IT equipment load in a moderately well-run data centre, which is around 5,000 efficient modern 1U servers (assuming 100W per server). For a poorly run monolithic ‘old school’ data centre with an excess of power and cooling infrastructure, using 3-4 year old servers it might be as few as 2,000 machines.

Operators will have their energy use base lined and then be required to report their energy consumption. The organisation then has to purchase allowances to cover the total carbon in a similar way to the power generators under the EU ETS6. This is intended to add direct financial incentives for the carbon associated with the electrical energy consumed by the data centre operator.

Data centre operators do have the ability to reduce the carbon footprint in newer more modern data centres, and by taking advantage of the relentless improvements in the energy-efficiency of IT equipment. They could contract out the carbon liability of the utility bill back to the customer. At Memset, we have that facility already; it is a trivial matter to put a customer’s approximate share of our total energy consumption onto invoices.

The customer would then would be incentivised to alter its behaviour and chose more energy-efficient criteria in the data centre. An example might be choosing to migrate older servers into a virtualised environment. Furthermore, the high price of energy is already an incentive for operators to encourage their customers to embrace more environmentally friendly solutions; electricity already accounts for roughly one third of our direct costs.

However, as the government’s CRC scheme places the onus to reduce emissions on the organisation which pays the electricity bill, not the end-user, responsibly organisations like us cannot pass the carbon down the supply chain and thus encourage our customers to reduce their usage.

As a result of this, it makes no sense to own your own data centre, and I expect to see a massive increase in data centre outsourcing. That will actually be a good thing for my business, but I so firmly believe that the CRC as it stands will be detrimental to our emissions overall that I am speaking out against it.

Outsourcing a corporate data centre or entire ICT department would, under the current
allocation approach result in the carbon also being outsourced. While clear ‘carbon dumping’ could otherwise lead to reputational damage, data centre outsourcing is a common practice; there would be no way of determining whether the outsourcing that might take place post CRC implementation was driven by genuine business reasons, or a desire to shift the carbon liability.

Furthermore, as energy costs in the UK are currently less competitive than in continental Europe, the additional carbon costs could encourage businesses to offshore. Data centres are by nature geographically flexible. Off-shoring to the continent is a realistic possibility, and the cost of running a data centre in the UK may tip the scales in its favour. This in turn will have wider implications for jobs in the UK, and data and application security.

That said, if organisations do outsource the bulk of their energy-consuming activities to more efficient third parties, the overall net emissions for the UK will reduce, and the CRC will have proved fit for purpose. However, the current design of the performance league table inhibits this from being the case.

The league table is an apparently simple mechanism for the processing and comparison of the carbon reported by each CRC organisation, but will actually create utterly perverse incentives.

The current proposals suggest that rankings in the table will be determined by two metrics: absolute growth in emissions, and relative growth in emissions. After the initial phase of the scheme, the former metric is expected to be weighted at 75%, and the latter at 25% (though it is unclear how DECC reached these figures). As a result, any business growth, even if accompanied by increased overall energy efficiency, could result in an organisation dropping down the league table!

For a data centre, our energy consumption is directly related to our revenues, and as previously mentioned the sector’s continued growth is key to supporting UK PLC and delivering ICT’s promise of reduced carbon emissions across society. The CRC as it stands will reputationally damage data centres who dare grow.

Further still, for companies like Memset that are already leading the market in terms of energy efficiency, and for whom the opportunities for improvement are very few, the CRC is quite simply unfair. It will have been much better to start out as being really bad and then to artificially manage a slow improvement in energy efficiency in order to maximise the league table position. We will look significantly worse than our horribly energy-inefficient competitors, which will result in the customers being mis-directed to use more carbon-intensive providers.

In summary, the CRC as it stands will encourage “carbon laundering” with the outsourcing (or even off-shoring) of data centre operations to avoid brand value damage, will inhibit the growth of one of the UK’s most important business sectors, and will encourage end-users to use the least efficient providers.

The CRC is already changing business behaviours in negative ways. We (as a managed hosting provider) were planning to invest in a leading, semi-experimental, “super-green” data centre in Surrey, which would incorporate a number of the latest innovations in efficient data centre design, and push the boundaries of the technologies further.

However, because the CRC penalises companies that pay the electricity bill it no longer makes sense for us to own and operate a data centre, since instead we can just rent space and power from an existing data centre and let their brand get hit by the league tables, not ours. In this case, the CRC has been directly responsible for stopping an award-winning leader in the field of green IT from investing in the next stage of innovation.

Further, as it stands the CRC may make it more economical to offshore part of our data centre operations; as long as the servers are within a hundred miles of their users it does not matter for 99% of applications.

This is especially frustrating since we already have the capability to account to our customers for their carbon usage (we have been able to do that since becoming Carbon Neutral!), so we could easily pass the carbon levy / “credits” along to our customers. That in turn would further incentivise them to minimise their indirect energy usage through us.

As the CRC stands it will make managed hosting providers with UK-based data centre operations (like Memset) less competitive to those not under the jurisdiction of the CRC (like Amazon EC2), regardless of how well-managed and how efficient we are.

The CRC at present creates the incentive to launder, rather than reduce, carbon emissions and rewards organisations good at playing the ‘carbon game’, not those who are most energy-efficient.

The legislation is a threat to UK skills and employment. From the British Computer Society’s review of the proposed CRC legislation:

“The combined impact of the incentives created by the CRC driving outsourcing of ICT and data centre services both within and outside the UK is likely to reduce the number of skilled jobs in this sector as well as removing the most significant opportunity afforded by this political will, the development in the UK of world leading, exportable skills and technology in energy constrained ICT. “

Finally, contrary to its purpose, the CRC threatens to impede growth and innovation in the data centre industry, and thus inhibit ICT’s ability to deliver the massive carbon savings so clearly identified by numerous reputable sources.