Risk vs. Reward
Despite generating widespread enthusiasm, cloud computing faces the same hard questions that remote computing services have always faced. As with cloud computing precursors ASPs (application service providers), SAAS vendors and the like, customers want to know if their data is secure, whether they'll be compensated for outages, what happens to their data should their cloud provider go under and whether their data may be going offshore. Periodic outages are a signal to enterprises to be wary. AWS suffered 8 hours of S3 downtime in July, echoing an earlier outage of several hours in February. In August, Google Gmail and Google Apps messaging and collaboration cloud services suffered an outage of nearly 15 hours.Forrester analyst James Staten notes that companies may not be able to certify the integrity of their data for regulatory purposes if they do not know where it is while it's being processed in a cloud-computing service. For TC3 Health, a health care claims processing and cost containment company, the cloud payoff was well worth the risk. TC3 needed extra capacity when a customer asked to have a large number of claims checked for accuracy. "We had 30 million claims dumped in our lap. We were overloaded," said Paul Horvath, CTO at TC3 Health. Using TC3's standard processing approach would have cost $750,000. Instead, TC3 tapped AWS for additional capacity, at a total cost of $220,000, including a fee paid to RightScale, a company that customizes Amazon.com's cloud services for clients. "I pay by credit card," said Horvath. "The cost ranges from a few hundred to several thousand per month." TC3 has six different server configurations on AWS, ranging in cost from 10 cents per hour per server to 80 cents per hour per server. With regard to security and confidentiality, Horvath said, confidential information is stripped out of the forms before they're processed on AWS, and data is encrypted while being fed into and retrieved from AWS servers. Although Horvath does not know the exact location of the servers, he said he understands that they are in the United States. Although some mainstream businesses such as TC3 are reaping the benefits of commercial cloud services, the principal cloud beneficiaries so far have been small companies that can't afford extensive IT operations and IT staff-the same companies that were targeted by the ASPs of a decade ago. In many cases, cloud-computing startups are serving other startups. Rick Wee, founder and CEO of Blissbook.com, a social network for the bridal community that is about to launch a beta site, selected GoGrid, a cloud service that is itself currently in beta, to provide a development platform for the site. Wee had launched several previous startups and, in doing so, felt the heavy burden of investing scarce funds in IT infrastructure. "Cloud computing reduces startup costs substantially," Wee said. "You pay for what you use. We recognize the need to grow business in a methodical manner, not overinvesting or underinvesting, but able to scale quickly without a large infrastructure investment." Some cloud providers, such as GoGrid, are enabling application development with Ruby on Rails, a streamlined version of the Ruby programming language that is popular among social network sites, according to Wee. Similarly, MLB.com, the Web site of Major League Baseball, sought to accommodate sudden surges in use that typically occur, for example, at the time of the World Series and the All-Star Game and when traditional rivals meet. A year ago, MLB.com launched a chat application consisting of 100 chat rooms per major league game. That's plenty for most games, but not when, for example, the Boston Red Sox play their archrivals, the New York Yankees, said Christian Gough, system administrator for MLB.com. "We're using Joyent, which allows us to meet spikes in demand," said Ross Paul, architect of enterprise service network MLB.com, a wholly owned subsidiary of MLB. Founded in 2004, Joyent provides several cloud services, including a Sun OpenSolaris infrastructure for running Web sites. "I don't have to build new servers, rack them up and wire them up in our data center," Gough said. "I can call Joyent at any time and, in a few hours or less, can provision the servers and get running." "Joyent can provision any type of server with a whole software stack," added Paul. "It completely removes the overhead and administrative cost." Having successfully used Joyent to backstop the chat application, MLB.com is aiming to use Joyent services to handle other applications, such as one that's under development on Facebook.
"There are some problems still there-where the data resides, for example," said Gartner analyst David Smith. "We are early in the cycle-those who are evaluating [cloud computing] are asking those questions."