Cloudcast

VMware vSphere: Are External Clouds Just for On-Demand Capacity?

April 21st, 2009 Posted in Cloud Computing

VMware launched a new release of its virtual infrastructure platform today under the ‘vSphere’ brand. VMware encouraged customers to virtualize their IT infrastructure within ‘private clouds’ and automate provisioning and management to lower costs and increase business agility.

This is a continuation of VMware’s  vCloud initiative which is designed to enable service providers (such as Skytap) to deliver portability between external clouds and internal clouds so external clouds can provide on-demand capacity. Given VMware’s announcement should customers now rush to build internal clouds? What about external clouds, should they just be used for on-demand capacity? The answer, of course, is ‘it depends’.

Internal vs. External Clouds

It’s useful to go back to basics and remind ourselves of some of the characteristics associated with a ‘cloud’. I’ve listed these below with a subjective ‘grade’ for internal clouds and external clouds:

The characteristic common to both internal and external clouds is that they are virtualized, which enables provisioning of flexible computing resources. Aside from that, we see some key differences, which can be categorized into 3 areas: (1) Time-to-Value, (2) Economic and (3) Service Levels.

(1)    Time-to-Value

External clouds are on-demand, which means new resources can typically be deployed very quickly (typically hours, if not minutes) through a self-service portal or an API. They are also scalable, which enables incremental resources can be added as required by the business. In contrast, internal clouds take time to implement and have a fixed capacity. Unless an internal cloud is very large (for instance, the type of internal cloud found at a Wall St investment bank), an external cloud will almost always be faster to provision and scale than an internal cloud. One caveat here is for compliance issues, which can usually be overcome more easily with an internal cloud.

In addition, internal clouds are typically not fully self-service and typically don’t offer an API, although this will change over time. Finally, external clouds typically enable teams to collaborate more effectively by offering global access to shared virtual infrastructure and built-in security, networking and access control functionality.

(2)    Economic

Internal clouds require an up-front capital investment and internal resources to build and manage the infrastructure, in addition to expensive upgrades to software, hardware and ongoing maintenance. In contrast, external clouds are offered as a utility, enabling capital expenses to be exchanged for ‘pay-per-use’ operational expenses. In some cases, internal clouds offer a similar ‘utility billing’ option, but this is usually only for very large IT deployments that provide IT services to internal customers.

Aside from Cap-Ex, the killer economic benefit for external clouds is that they are multi-tenant and scalable, which allows ‘time sharing’ and ‘bursting’ of resources. There are several usage scenarios that are highly dynamic (see below) and have low utilization of resources that make an external cloud a much more compelling option than an internal clouds. However there are also some steady-state usage scenarios for which internal clouds can be very cost competitive (as a recent McKinsey report pointed out).

(3)    Service Levels

An external cloud typically publishes an SLA agreement, with a goal of uptime (e.g. 99.9%+) and rebates to a customer if this service level is not met. If a customer is not happy with an external cloud supplier, they can take their business elsewhere. In contrast, an IT organization sets SLAs for internal customers. Although it’s possible for an IT organization to meet or exceed the service levels of an external cloud, if they don’t there’s very little flexibility or competitive pressure to improve the situation. In essence, enterprises can be ‘locked in’ to an internal cloud with no option to move.

‘Hybrid Clouds’: The Best of Both Worlds

William Fellows at the 451 Group, recently published some research that included a survey on what public clouds are currently being used for. The top five usage scenarios are:
(1)    Internet Application Hosting
(2)    Databases
(3)    Disaster Recovery
(4)    Remote Storage
(5)    Application Testing & Development

Not unsurprisingly, these scenarios take full advantage of the on-demand and scalable nature of the cloud, especially when the scenario is highly dynamic. Our customers, for instance, utilize our cloud for all IT lab use cases: (1) application testing and development, (2) virtual learning and (3) sales demos and POCs, and (4) software evaluation and prototyping. Typically, these usage scenarios are very dynamic in that machine usage and the user base (# of users from inside and outside the organization) vary from one application development project to the next, or from training class to training class. In addition, resources often have to be scaled up and down to cope with variable demand and users need to collaborate in real-time using these resources through a self-service portal. This is a perfect match for an external cloud and Gartner commented recently that Skytap has the ‘potential to dramatically reduce total cost of ownership for test labs by 25% to 50% annually’ and we are already seeing customers achieve a 75% TCO reduction.

So, there are some use cases for an external cloud which are very compelling from a business and financial perspective and trump almost any internal cloud. However, it’s important to recognize the strong usage scenarios for internal clouds, including steady-state workloads such as file/print servers, predictable production applications etc.

In our discussions with customers, we’ve found those taking a ‘hybrid approach’, i.e. using internal and external clouds together are gleaning the most financial benefit. As an example, we showcased ‘hybrid’ cloud computing back at VMworld in September, whereby application development and testing can be done in the cloud with access back to onsite resources as required. So, the bottom line is to do the business and financial analysis and pick either an internal or external cloud based on your criteria and circumstances.

To read more on what we’ve heard customers are doing in 2009, check out our whitepaper ‘The 7 Strategies to Reduce  IT Costs with Cloud Computing’. We’ve also go a TCO calculator which will help you crunch the numbers for an application testing and development use case.

Good luck!

Ian