Don’t let the media fool you. Which of these actually make cloud computing financially compelling?

1. Super cheap power, such as hydro-electric
2. Shipping container datacenters
3. Massive datacenters
4. Blade servers
5. Datacenters with super-efficient cooling
6. VMware virtualization licenses
7. Pay-as-you-go pricing
8. Automation
9. Shared platforms
10. Commodity hardware

The answer is NOT “all of the above”! If you said “pay-as-you-go pricing, automation, shared platforms, and commodity hardware” then you win. In fact, these four concepts are so powerful that I believe that they will shrink the entire IT economy. IT shrinking? How could that be possible? Yes, I think that the $3.3 trillion dollar global IT economy could be cut in half. When I’ve made this declaration before I’ve been likened to the commissioner of the US Patent Office who was rumored to have said:

“Everything that can be invented has been invented.”

Charles H. Duell, Commissioner, U.S. patent office, 1899 (attributed)

In truth he didn’t say this. http://en.wikipedia.org/wiki/Charles_H._Duell

But I’m still saying that I think we’re currently seeing the peak of complexity and cost in IT. IT is going to get easier and less expensive from this point forward. There. You have it in writing.

#1. Pay-as-you-go pricing

Pay-as-you-go pricing can reduce total IT costs by 90% or more in many cases. The tech industry always has huge claims like this so why is this one such an incredibly big deal? For example, Intel is always coming out with processors that are a zillion times faster. This is a big deal because we’re not talking about a single component getting much better, we’re talking about the whole IT budget. The whole IT economy. This most powerful force driving the economics of cloud computing really has two components, you “pay for only what you need” and you can “switch what you do pay for”.

Pay for what you need

Paying for only what you need means that you don’t need to over-provision. This part of cloud computing is analogous to the electrical power grid that “GoGrid” is named after. Businesses don’t need to generate their own power anymore.

The average IT department would never confess to how guilty they are of over-provisioning. I’ve been the CEO of colocation, dedicated hosting and cloud hosting companies. Each of these models provides an improvement in your ability to provision only the IT resources that you need. And because I have been exposed to thousands of installations in each of these business models, I have a unique perspective on the efficiencies of each model. Basically, the average colo customer “wastes” about 90% of their infrastructure, dedicated server customers do better but still “waste” about 70% of what they are paying for, and with our cloud platform we’re seeing “waste” as low as 10%.

Colocation:

With colocation you don’t need to have your own datacenter so you can generally control how much space and power you want to pay for. You still need to commit to 1 to 5 years’ worth of space and power so you almost certainly will have periods when you have too much space and power or not enough space and power. IT loads are never static.

You tend to alternate periods of too much which is wasteful, or too little which is potentially even more damaging to your business. The bigger problem with collocating your IT equipment is that you still need to buy the equipment. You don’t want to risk running out of capacity so you buy big. You estimate what you need at peak load, say the demand you hope to see during the holidays, and that is what you buy for and live with for several years.

We’ve studied the aggregate waste of our 1,000s of colo customers and estimate that 90% of their CPU power, 70% of their RAM and 50% of storage space is wasted. This means that somewhere around 70% of the electricity needed to power and cool this equipment is also wasted.

Dedicated Servers:

Dedicated servers give you much improved granularity in your purchasing and significantly shorter contracts but we still estimate that over 70% of the CPU power, 60% of the RAM and even more of the storage space is wasted, along with the corresponding use of electricity. Among other challenges, you still can’t scale your individual servers to re-size them as loads change without somebody getting out a screw-driver, so you tend to over-provision.

Cloud computing:

Cloud can be paid for by the hour. Because your infrastructure can scale up and down automatically, it is just like turning on and off the lights. Waste can be minimized. You can scale in two ways that aren’t as easy in the real, physical world, both horizontally by adding and deleting servers automatically, and also vertically, by enlarging and shrinking the servers themselves. Paying for servers by the hour even gives you the ability to de-provision servers at night and GoGrid has many customers that are doing this quite effectively. GoGrid servers are being turned on and off at a super high rate of speed. In fact, the number of “adds” per month at GoGrid is much higher than the number of servers that customers just leave running for the month.

Switch what you do pay for

Now here’s a concept that works… don’t agonize over your IT decisions. You aren’t as stuck with them as you have been in the past. It took many years for the client-server revolution to occur because embracing this architecture was an incredibly costly endeavor with a 10 year plus commitment. It took many years for that generation of computing to happen, but cloud is happening much more quickly. With the cloud, you don’t own anything so if you don’t like what you have you can dump it and switch. It is hard to put a percentage savings on this but isn’t freedom an incredibly powerful economic advantage that will give incredible flexibility to business?

In summary, Pay-as-you-go is number one this list for good reason. Pay-as-you-go is an “order of magnitude” force…a “90% cheaper” force…a “10,000% better” force on the economics of IT.

#2. Automation

Labor is the single biggest piece of the IT economy according to Gartner. Equipment isn’t even close. People make mistakes, they are super-expensive, and they just can’t do as good of a job running infrastructure as software that can run infrastructure for itself. That is the big change here… programmable infrastructure. “Dev Ops”.

While automation isn’t itself the single biggest economic factor in the cloud revolution, it is the key technological factor. The big change of the cloud generation is that now software controls infrastructure. In the old world software was developed by one group of people and then a completely different group operated the software. Now developers run the whole show. The datacenter has been automated and a whole bunch of labor, complexity and cause for error has been eliminated.

#3. Shared Platforms

SalesForce.com delivers a complex CRM solution to 97,700 customers using 3,000 servers, a ratio of 0.031 servers per customer. 1,500 of the 3,000 servers are turned off according to Mark Benioff at 0:52 into this speech:

0.03 servers per customer for a complex CRM service is incredible. In the “old world,” this would take at least 2 servers, a hot one plus one for disaster recovery / business continuity. Many businesses deploy a whole bunch more than 2 servers for a complex CRM installation. Zero-point-zero-three servers per customer is a 65 X improvement over the old days. Not 50% or 100% but 6,500%. But wait, there’s more, this isn’t just a savings in server hardware, think of how much more efficiently SalesForce.com manages these 3,000 servers than 100,000 random companies could manage more than 200,000 servers themselves. Crazy. Keep in mind that labor is the single biggest piece of the $3.3 Trillion global IT economy.

There are lots of obvious and powerful reasons when shared platforms make clouds incredibly cost-effective to operate, including scale and an easy-to-operate homogeneous environment that fits all customers. Service providers have capabilities and tools and best practices that they can share amongst thousands of customers and do a much better job than any customer could possibly do individually. Shared platforms also let the service provider capitalize on the mis-matched peak load periods amongst the customers. For example, consumer services (yes, including porn) are popular in the evening while business services are popular during the day and number crunching can be done in the middle of the night.

#4. Commodity Hardware

The programmability of cloud infrastructure enables designing for failure. Things heal automatically so now you can use “throw away” components. No more paying ten times as much for an “enterprise” server that has 3 power supplies but does the same job. Did the hardware powering your Web server fail? No biggie. You should have at least three small ones running anyway instead of one big one, all load-balanced to automatically handle this failure while a replacement is spun up. The leading public cloud vendors and the largest Internet properties are achieving fantastic uptime using super-cheap hardware. No cloud based on “enterprise-grade” hardware from IBM or HP could possibly be price competitive.

The “Doesn’t Matter” list:

1. Super cheap power, such as hydro-electric
2. Shipping container datacenters
3. Massive datacenters
4. Blade servers
5. Datacenters with super-efficient cooling
6. VMware virtualization licenses

1. Super cheap power, such as hydro-electric

At GoGrid, power represents less than 5% of our cost of goods sold. We’re a nicely profitable company despite buying some of the most expensive power and cooling on the planet. Theoretically, we could knock a few points out of our COGS if we used a datacenter next to the Columbia River in Eastern Oregon. Great fishing there, too. But then we’d have new costs that we don’t have now such as the costs of managing people who are native to Eastern Oregon and paying people from Silicon Valley to travel to Eastern Oregon to manage those people and lots of networking costs to take traffic to and from there which increases latency and also the costs of fishing lures.

2. Shipping container datacenters

Maybe somebody else can tell me why these things have anything to do with cloud computing? They are not cheap, not even on a per server basis if you use them completely. And you can’t just park them anywhere. Any claims that these are relevant to cloud computing are likely good examples of “cloud washing”.

3. Massive datacenters

These are critical to Google, which has been rumored to own 2% of the World’s servers:

http://royal.pingdom.com/2009/08/24/google-may-own-more-than-2-of-all-servers-in-the-world/

(image source: intac)

However, the efficiencies that this scale provides just aren’t relevant in today’s SaaS and IaaS markets yet. Margins are super high and businesses pay well for complex infrastructure. Super low-cost PaaS offerings aren’t yet seeing traction from power users. Nobody is giving away free complex infrastructure (yet) on an ad supported model.

4. Blade servers

These are incredibly expensive and always out of date. If you want to use the latest processors, don’t expect to find them on blades. And if you are using blades, you are likely tied into other hardware and software too, which also is quite expensive and inflexible. The leading public clouds don’t use blades and never will.

5. Datacenters with super-efficient cooling

Green is great. Cloud computing is incredibly green for the same reasons that the economics are powerful… a whole lot less infrastructure needs to be provisioned, in many cases 90% less or even 65 times less as is the case with SalesForce.com. But green datacenters really aren’t relevant to the economics of cloud computing at this time.

6. VMware virtualization licenses

VMware is expensive. Virtualization is free. Amazon is the runaway market leader for cloud infrastructure and they do not use VMware and I’d be surprised if they ever did. GoGrid uses open source XEN, and so do other leading public clouds. There is even a third open-source (free) virtualization alternative called “KVM” that has wild technical acclaim.

Summary:

There is good reason why all businesses need a cloud computing strategy even though it is so new. Cloud computing doesn’t deliver a small improvement; cloud will reduce existing IT costs by a factor of 10 or more in many cases. Pay-as-you pricing is the number one economic force driving the cloud. Most importantly, cloud computing is making IT simpler, greener and more reliable in addition to far less expensive.

With so many different types of cloud infrastructure available – public, private, internal – and with so many conflicting opinions in the industry, finding the right cloud for your business can be a confusing and frustrating process.

In order to bring clarity and understanding, we recorded a new educational webinar, hosted by GoGrid, where guest speaker James Staten, Principal Analyst, Forrester Research Inc., and Mario Olivarez, VP of Product Management of GoGrid share new research and discuss the status and direction of the Cloud infrastructure landscape.

These cloud experts discuss:

• The 4 characteristics of cloud computing
• Why are companies using the Cloud?
• What is the difference between Public and Private Cloud?
• Why is 2011 the Year of the Hosted Private Cloud?
• What is the ROI of the Cloud?

The recorded webinar also includes all the answers to the questions submitted by the live audience.

So if you are interested in learning more about the cloud industry or want to have a greater understanding of how cloud computing technology can help your business The Future of the Cloud will be well worth viewing. Starting today, this webinar is now available as a free download (.wmv and .mov versions available).

Please download the webinar by clicking the download link and leave your thoughts in comment section on this blog post.

Download “The Future of the Cloud – Why 2011 is the Year of Hosted Private Cloud”

One of the best open-source tools ever created and maintained is Cacti. Cacti can be used to monitor and log critical information for your servers, applications and other network devices. The monitored data can be graphed in a variety of ways and becomes a valuable resource when troubleshooting problems and projecting future resource utilization.

However, the initial configuration can take hours to complete, not including the server OS install process and pre-configuration.

Deploying Cacti Easily in GoGrid

To make this process a bit easier for GoGrid users, I have performed the routine installation of Cacti 0.8.6 along with the package requirements within a Community GSI (GoGrid Server Image). Also, I have added DenyHosts for added system level protection. The ssh_banner will provide the details of what was configured on the system. All that needs to be done is going into your account within the GoGrid portal, clicking on the Add button and filter for “Cacti”.

The select “Add Cloud Server”:

Filter for “Cacti“. You will then see the Cacti image. Highlight that image and click the Next button to deploy into your GoGrid infrastructure environment.

Now simply name your Cacti Monitoring Server and give it an available public IP, along with the amount of RAM you need. 2GB is usually a good baseline.

Click Save and then the server will enter the deployment process. You will see it on your Grid in the amber state.

In a few minutes the server will show green and you will be able to find the login information under the Passwords tab.

Use the login provided in the Passwords tab (within the “Support” section of the portal) to SSH into the server as root. Now, read the ssh_banner (also posted here in this blog) for more detailed information on the system.

More about Cacti

The online community that contributes to Cacti is huge. There are so many host templates out there ranging from Windows pagefault to Zeus ZXTM load balancer. The Import and Export tools that Cacti has built in become very useful in regards to using and sharing templates within the community.

If you are totally new to Cacti – then I highly recommend you review the manual.

http://www.cacti.net/downloads/docs/html/

Also – comb through the forums for more insight and possible answers to your questions.

http://forums.cacti.net

SSH_BANNER Information

Below is the SSH_BANNER that will display within SSH on the server you deployed using the Cacti Community GSI.

SSH_BANNER:

—–Community GSI Setup Report—–

    Steps accomplished to make this Community GSI: 

1. Enabled RPMForge repository  
2. Installed PHP5
3. Installed Cacti 0.8.6     
4. Installed MySQL Server 5.0.7
5. Installed DenyHosts (please update ADMIN_EMAIL in /etc/denyhosts/denyhosts.cfg
   with your email
6. Set httpd, mysqld, snmpd, denyhosts to start on boot
7. Created MySQL user cacti and new database named cacti
8. Set password for database to < omitted > - recommend you change this to your own pw.
9. Imported cacti settings from cacti.sql into cacti database
10. After this VM is deployed - log into Cacti from servers IP - http://cacti/
   (don't forget the trailing '/')
11. Follow GUI Login steps to complete installation. The initial user/pw is admin/admin
    Login with this and then you will be prompted to update pw.
12. Modify /etc/httpd/conf.d/cacti.conf --- change "Allow" line to IP(s) you want to give
    access to this graphing utility. Now it is set to all.
13. The forums.cacti.net is a good place to find device templates.
    http://www.debianhelp.co.uk/cactitemplates.htm is a good source for templates and
    documentation
14. Copy the above information and then feel free to delete this ssh_banner file. It is
    located in /etc/ssh/ssh_banner
15. Also don’t forget to assign your new Cacti Monitoring Server a private IP from your
    private network.
    This is the preferred way to communicate with your other servers on GoGrid.
16. Update IPTables to meet your firewalling needs. 

----Community GSI Setup Report----

Deploy the new Community GSI and start monitoring your applications and servers today! Once you have what you want in your Cacti setup (in regards to devices being monitored) then save your server image using MyGSI functionality. The image that you save will be private and securely accessed only from your account. You can later redeploy it to commit new devices to the configuration and then resave.

More tutorials on the way!

The financial rag-writers are cloud-washing their stories. Writers are “spin” experts so cut them some slack given that every IT related company is now miraculously selling “cloud” computing. It is no surprise that they have slapped the “cloud” label on the recent acquisitions of Terremark, Navisite and Savvis.

Some great hosting companies have been bought recently but not any true “cloud computing” companies. Even the Wall Street people can understand that the so-called “cloud” revenues of these hosting companies are too small to be meaningful. How much clearer could the Savvis CEO be than to state that only $5 million of their nearly $1 billion in revenue is “cloud”?

Here’s a question for the wizards of Wall Street: Do you think a massive telecommunications company with a name like “CenturyLink” is going to be on the forefront of ushering in a new paradigm in computing? Which century? This doesn’t seem to be the track record for the 21st century. Acquirers like this admit that they are buying these kewl hosting companies because telecom is stale. Let’s hope that these self-confessed dinosaurs don’t take these formerly kewl hosting companies and prevent them from developing any cutting edge cloud offerings. This isn’t cloud consolidation, this is smoke from the mega-boardroom with a mandate to sell networks not develop technology.

Maybe these acquisitions sound “cloudy” because the marketing literature has the word “virtualization”? Ooooh. I bet stock-pickers really love the words “hypervisor” and “virtualization” ’cause those words sound high tech.  They sound like they could be the type of technology that must be the underpinning of cloud computing. They even are reminiscent of Star Trek as in “beam me up some servers Scottie”. “Now that must be cloud computing” they must think to themselves, “I need some exposure to this cloud computing revolution so I’m gonna look for stocks that ‘have’ this virtualization technology”. What they don’t realize is that hypervisors and virtualization are free, old news, and only one of many elements that make for state-of-the-art clouds.

True clouds enable a type of computing that was never before possible. True clouds are the choice of the new Internet companies because they let them compute in new ways that make their new business models possible.  The new best practices in computing require programmable infrastructure that is truly on-demand and massively scalable in a fully automated fashion and super cost effective. The state-of-the-art clouds enable this new genre of computing using purpose-built software that makes it all happen on commodity hardware powering über-efficient and massively-multi-tenant platforms that also enable great margins to the provider.

Clouds are still developing and merely keeping pace isn’t possible for companies dependent on vendors for technology to resell. Things are moving super-fast in cloud computing and that mandates a strong competence in R&D because you cannot buy the technology needed to compete with Amazon. And if you could buy the technology needed to compete with Amazon then you wouldn’t be relevant in terms of price. Even if you believe that these were cloud computing companies that were acquired, and we could debate the point, the safe bet is that they will become less relevant quickly.

Hearty congratulations to our hosting industry friends at Terremark, Navisite and Savvis! We’re happy for you and we praise your excellent work keeping valuations high for the hosting industry.

Several weeks ago, we released the GoGrid Cloud Survey Report, which contained data from a survey we conducted at the beginning of the year. We polled over 500 CTOs, developers and IT professionals, and asked them to share their industry insights and specifics on how they used cloud technology.

Our first post in this series, “What is Cloud Computing and How Do You Use It?“, focused on what IT professionals believe cloud computing encompasses and what aspects they use in their work process. As the largest Infrastructure-as-a-Service (IaaS) pure play in the world, we were curious to see what percentage of the IT industry used cloud infrastructure currently and if there were plans to increase infrastructure usage throughout 2011.

We have taken the key findings of the survey and created several interesting charts and graphics. Because of the extensive nature of the survey, we will be releasing the findings in topical blog posts over the coming months, but you can download the full survey results data at any time by clicking here.

The results of our survey highlight two key findings:

1) Higher than expected use of Infrastructure-as-a-Service

We asked the industry if they were using cloud infrastructure and found that over 45% of our respondents use IaaS in some way, shape or form. This number was much higher than I anticipated. While many businesses use cloud technology, the primary use has been Software-as-a-Service (like e-mail or other hosted services). This data shows that there is a healthy understanding and adoption of cloud infrastructure services.

It’s important to remember that when we talk about Infrastructure services that we are talking about various appliances that make up ones infrastructure, namely, cloud servers, load balancers, cloud storage, firewalls, private networking, etc. While the primary adoption by corporations and enterprises does seem to be focused on cloud applications, many companies choose to create and launch these applications built on top of cloud infrastructure, the fundamental building blocks that are making the cloud so successful.

These results gave interesting insights into where infrastructure-as-a service stood as of early 2011, but what trends might be coming throughout the rest of the year? This led to our second finding.

2) Significant Upward Trend in IaaS Adoption Throughout 2011

We asked the IT professionals if they plan to increase, maintain or decrease their usage of infrastructure-as-a-service through 2011 and the results were very positive. The majority of CTOs, developers and IT professionals planned to significantly increase the usage of Infrastructure-as-a-Service as the year progressed.

These survey results show that IaaS is very healthy, growing and that 2011 may be a huge year for cloud infrastructure adoption. The next post in this series will focus on cloud computing use cases – so stay tuned for that.

For more information on our survey methodology or to see all of our results, please download the GoGrid Cloud Survey Report.