BOSTON -- Two IT organizations showed different sides of the growing trend toward private clouds at the State of the Cloud Conference this week.
Startup VistaPrint looked hard at Amazon Simple Storage Service (S3) but found the network costs too high, so it built its own storage and content delivery network (CDN) infrastructure. Massachusetts hospital chain Caritas Christi needed a complete IT overhaul after being acquired by a private equity firm, but couldn't make sense of the IT market for healthcare.
Enterprises say they've done the math, and most public cloud services like Amazon simply aren't viable. They are happy to use Software as a Service (SaaS) for well-recognized and tested areas like CRM or email, but they're uninterested in pushing critical business applications or data out to public clouds right now.
Analysts and industry watchers say that a lack of standards and irresolvable security and legal concerns mean that enterprises are looking to reshape their own IT into private clouds before they think seriously about public resources.
"We really inherited a pure bare metal, an aging bare metal environment," said Todd Rothenhaus, emergency room physician and CIO at Caritas Christi.
He said the first time he went to survey the organization's data centers, he found neglect, animal droppings and 1990's era Data General servers, along with a hidebound informatics system.
He was given $70 million to fix the problem over three years, not a very robust IT budget for a $1.5 billion organization. Rothenhaus said that he quickly realized that he could consolidate his ancient services onto modern servers at a colocation facility and serve his users much more cheaply than if he outsourced each of his IT needs.
"We realized that with Moore's Law, we had the ability to provide the hosting ourselves," he said.
That freed him from worrying about HIPAA regulation and let him proceed at his own pace. Rothenhaus said that the dismal state of healthcare informatics means that outsourcing services to the cloud, or using public cloud computing resources instead of traditional hosting, gains them none of the purported benefits of cloud.
"Optimized business processes have not been established in healthcare," he said, and that means there isn't a free flowing and competitive market for IT services. It's all bespoke, and expensive, and that's unlikely to change despite a recent federal push for electronic health records (EHRs), because standards are comparatively weak.
He also said that cloud computing vendors were mutable -- healthcare was not. He simply can't consider a position where if he picked a cloud provider that suddenly went away, or changed its terms or services, his hospitals might not be able to function.
"I'm struggling with the concept of cloud and healthcare," he said.
VistaPrint picks EMC Atmos over S3
Jim Sokoloff, VP of technology at VistaPrint, concurred: "Strategically, we work very hard to avoid lock-in."
Sokoloff said success drove his company's IT strategy; a self-publishing service, users upload documents and images to VistaPrint, which prints and delivers paper goods, pens, calendars and the like. VistaPrint now serves eight million customers a year and has more than a petabyte of customer data at any given time.
Sokoloff said the firm started with traditional storage area network (SAN) devices in its data centers but as users grew exponentially, so did costs, until it was clear that they would be paying more to handle user files than they could charge to deliver them.
"We started looking very hard at [Amazon] S3 in 2008," he said, but found that while the base price was great, the bandwidth costs associated with getting their massive pile of data back and forth from S3 to their print facilities was prohibitive. "That was, in fact, the deal breaker for us," he said.
Sokoloff said that by switching out his SAN technology with object-based storage based on EMC Atmos software and strategically locating data centers around the world, he was able to achieve cheap, scalable storage and a CDN and eventually reduced storage costs by a factor of 12.
An image file that would have cost him $2 to process now costs pennies, according to Sokoloff, and even as his hosting bills go up, so does his revenue. He said the company does maintain a small presence in Amazon Web Services in case of unexpected traffic needs, but unless network fees come down, he's confident that there's more money in rolling his own solution instead of looking to a public cloud.
Enterprises want Amazon, but inside their IT shop
Rick Swanborg, CEO of ICEX, runs executive forums for large enterprises and said Caritas Christi and VistaPrint were typical of what enterprises had found when looking at cloud computing. Swanborg, whose clients are largely Fortune 100, said multinational corporations were looking at private cloud -- optimizing their own IT infrastructures by approaching the Amazon model -- in the short term, rather than trying to find ways to move whole hog into cloud services.
"Many have already done pilot tests and not found any reason to date to go into cloud," he said. Instead, they will look for niche areas to outsource.
Swanborg said that enterprises already understand very well the proven use cases for cloud -- elastic, spiky computing needs, like batch processing, testing and development environments and non-critical services such as CRM or email. They just cannot compromise on things like data portability or lock-in for business critical data and don't see cloud providers making efforts to satisfy enterprise security concerns – "trust us" is not an option, he said.
He added that large organizations would love to see open standards for compatibility and independent, vendor-neutral security in public clouds, but those kind of changes aren't coming any time soon. He said legislative work was probably required before enterprises would ever really trust the cloud with certain data. It's not that they don't like the concept; they do, said Swanborg, and they will be very happy to implement cloud computing internally while cloud vendors finish squabbling about standards and the market solidifies.
"They're still very bullish" on the idea, he said -- they're just not in a hurry.
Carl Brooks is the Technology Writer for SearchCloudComputing.com. Contact him at email@example.com.