Are Banks Using Cloud Computing? A Definitive Yes.

Ever since 2009 when NIST published its first definition of cloud computing there has been a promise of community clouds, and now we finally have a second one in the financial services market, thanks to NYSE Technologies. The IT arm of NYSE Euronext announced beta of Capital Markets Community Platform, its cloud computing offering this week, and the effort, on the surface, is a good example for other vertical markets to follow.

For years, financial services firms such as investment banks and hedge funds have been competing on trade execution speed and volume -- where milliseconds per trade can translate into billions of dollars in competitive advantage. And in doing so, they have found that you can't beat the speed of light. Thus if you want very, very fast connections to the stock market, you need to be as close to the servers used by the market as possible. The way to do this prior was to find out where the data center for an exchange was located and put your servers as close as possible and hopefully on the same network backbone. If the exchange was in a colocation facility, then you wanted the cage right next door. This method gave larger investment banks a distinct advantage as you had to be able to afford a full cage and have priority access.

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Getting Private Cloud Right Takes Unconventional Thinking

Recent Forrester inquiries from enterprise infrastructure and operations (I&O) professionals show that there's still significant confusion between infrastructure-as-a-service (IaaS) private clouds and server virtualization environments. As a result, there are a lot of misperceptions about what it takes to get your private cloud investments right and drive adoption by your developers. The answers may surprise you; they may even be the opposite of what you're thinking.

From speaking with Forrester clients who have deployed successful private clouds, we've found that your cloud should be smaller than you think, priced cheaper than the ROI math would justify and actively marketed internally - no, private clouds are not a Field of Dreams. Our latest report, "Q&A: How to Get Private Cloud Right," details this unconventional thinking, and you may find that internal clouds are much easier than you think.

First and foremost, if you think the way you operate your server virtualization environment today is good enough to call a cloud, you are probably lying to yourself. Per the Forrester definition of cloud computing, your internal cloud must be:

  1. Highly standardized - meaning that the key operational procedures of your internal IaaS environment (provisioning, placement, patching, migration, parking and destroying) should all be documented and conducted the same way every time.
  2. Highly automated - and to make sure the above standardized procedures are done the same time every time, you need to take these tasks out of human error and hand them over to automation software.
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A Key Decision Is Often Clouded By Emotion

What is one of the most important decisions infrastructure & operations (I&O) professionals face today? It's not whether to leverage the cloud or build a private cloud or even which cloud to use. The more important decision is which applications to place in the cloud, and sadly this decision isn't often made objectively. Application development & delivery professionals often decide on their own by bypassing IT. When the decision is made in the open with all parts of IT and the business invited to collaborate, emotion and bravado often rule the day. "SAP's a total pain and a bloated beast, let's move that to the cloud," one CIO said to his staff recently. His belief was if we can do that in the cloud it will prove to the organization that we can move anything to the cloud. Sadly, while a big bang certainly would garner a lot of attention, the likelihood that this transition would be successful is extremely low, and a big bang effort that becomes a big disaster could sour your organization on the cloud and destroy IT's credibility. Instead, organizations should start with low risk applications that let you learn safely how to best leverage the cloud — whether public or private.

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Jumpstart Your Private Cloud: Good Vendor Solutions Abound

 

Forrester surveys show that enterprise infrastructure and operations (I&O) teams that are well down the virtualization path are shifting their priorities to deploying a private cloud. While you can certainly build your own, you don’t have to anymore. There’s an abundance of vendor solutions that can make this easier. In response to Forrester client requests for help in selecting the right vendor for their needs, we've published our first market overview of private cloud solutions. Through this research we found that there are a variety of offerings suited to different client needs, giving you a good landscape to choose from. There are essentially five solution types emerging: 1) enterprise systems management vendors; 2) OS/hypervisor vendors; 3) converged infrastructure solutions; 4) pure-play cloud solutions; and 5) grid-derived solutions. Each brings the core IaaS features as well as unique differentiating value.

How should you choose which one is right for you? That very much depends on which vendors you already have relationships with, what type of cloud you want to deploy, where you want to start from, and what you hope to get out of the cloud once it's deployed.

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CIOs: At What Stage Is Your Thinking On Cloud Economics?

Is your cloud strategy centered on saving money or fueling revenue growth? Where you land on this question could determine a lot about your experience level with cloud services and what guidance you should be giving to your application developers and infrastructure & operations teams. According to our research the majority of CIOs would vote for the savings, seeing cloud computing as an evolution of outsourcing and hosting that can drive down capital and operations expenses. In some cases this is correct but in many the opposite will result. Using the cloud wrong may raise your costs.

But this isn’t a debate worth having because it’s the exploration of the use cases where it does save you money that bears the real fruit. And it’s through this experience that you can start shifting your thinking from cost savings to revenue opportunities. Forrester surveys show that the top reasons developers tap into cloud services (and the empowered non-developers in your business units) is to rapidly deploy new services and capabilities. And the drivers behind these efforts – new services, better customer experience and improved productivity. Translation: Revenues and profits.

If the cloud is bringing new money in the door, does it really matter if it’s the cheaper solution? Not at first. But over time using cloud as a revenue engine doesn’t necessarily mean high margins on that revenue. That’s where your experience with the cost advantaged uses of cloud come in.

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AWS And OpenStack: An Interesting Contrast Worth Considering During Cloud Selection

 Having attended the OpenStack Design Summit this week and at the same time fielding calls from Forrester clients affected by the Amazon Web Services (AWS) outage, an interesting contrast in approaches bore out. You could boil it down to closed versus open but there’s more to this contrast that should be part of your consideration when selecting your Infrastructure as a Service (IaaS) providers.

The obvious comparison is that AWS’ architecture and operational procedures are very much their own and few outside the company know how it works. Not even close partners like RightScale or those behind the open source derivative Eucalyptus know it well enough to do more than deduce what happened based on their experience and what they could observe. OpenStack, on the other hand, is fully open source so if you want to know how it works you can download the code. At the Design Summit here in Santa Clara, Calif. this week, developers and infrastructure & operations professionals had ample opportunity to dig into the design and suggest and submit changes right there. And there were plenty of conversations this week about how CloudFiles and other storage services worked and how to ensure an AWS Elastic Block Store (EBS) mirror storm could be avoided.

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CenturyLink-Savvis: Is The Rush To Cloud 1 + 1 = More Than 2 For Enterprise I&O?

Hot on the heels of Verizon’s acquisition of Terremark comes today’s $3.2 billion purchase of Savvis by CenturyLink, signaling that the rush to be an enterprise cloud leader is on.

It seems that during every major shift in the telecommunications, service provider or hosting market there is a string of moves like these as players attempt to capitalize on the change to gain greater market position. And there are plenty of investors caught up in the opportunity who are willing to lend a few bucks. In the dot.com period, through 2000s, we saw major shifts in the service provider landscape as colo/hosting giants were created such as Cable & Wireless and Equinix.

But what does this mean for infrastructure & operations professionals looking to select a hosting or Infrastructure as a Service (IaaS) cloud provider? The key is in determining if 1 + 1 actually equals anything greater than 2.

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The Two Words You Need To Know To Turn On Cloud Economics

Everyone understands that cloud computing provides pay per use access to resources and the ability to elastically scale up an application as its traffic increases. Those are values that turn on cloud economics, but how do you turn cloud economics to your advantage?

That was the topic of my keynote session at the Cloud Connect 2011 event in Santa Clara, Calif. earlier this month. The video of this keynote can now be viewed on the event website at http://tv.cloudconnectevent.com/. You will need to register (free) on the site. In this short -- six minute -- keynote you will get the answers to this question. I also encourage you to view many of the other keynotes from this same event, as this was the first cloud computing conference I have attended that finally moved beyond Cloud 101 content and provided a ton of great material on how to really take advantage of cloud computing. We still have a long way to go, but this is a great step forward for anyone still learning about the Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) solutions and how they can empower your organization.

If you still aren't experimenting with these platforms, get going. While they won't transform the world, they do give you new deployment options that can accelerate time-to-market, increase deployment flexibility, and prepare you for the new economic model they are bringing to many early adopters today. 

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You Must Go Further To Get Private Cloud Right . . . But How Much Further?

 Lately it's starting to seem like private clouds are a lot like beauty – in the eye of the beholder. Or more accurately, in the eye of the builder. Sadly, unlike art and beauty, the value that comes from your private cloud isn’t as fluid, and the closer you get in your design to a public cloud, the greater the value. While it may be tempting to paint your VMware environment as a cloud or to automate a few tasks such as provisioning and then declare “cloud,”organizations that fall short of achieving true cloud value may find their investments miss the mark. But how do you get your private cloud right?

For the most part, enterprises understand that virtualization and automation are key components of a private cloud, but at what point does a virtualized environment become a private cloud? What can a private cloud offer that a virtualized environment can’t? How do you sell this idea internally? And how do you deliver a true private cloud in 2011?

In London, this March, I am facilitating a meeting of the Forrester Leadership Board Infrastructure & Operations Council, where we will tackle these very questions. If you are considering building a private cloud, there are changes you will need to make in your organization to get it right and our I&O council meeting will give you the opportunity to discuss this with other I&O leaders facing the same challenge.

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Which Applications Should I Move To The Cloud?

Forrester took more than a thousand inquiries from clients on cloud computing in 2010, and one of the themes that kept coming up was about which applications they should plan to migrate to infrastructure-as-a-service (IaaS) cloud platforms. The answer: Wrong question.

What enterprises should really be thinking about is how they can take advantage of the economic model presented by cloud platforms with new applications. In fact, the majority of applications we find running on the leading cloud platforms aren't ones that migrated from the data center but ones that were built for the cloud.

A lot of the interest in migrating applications to cloud platforms stems from the belief that clouds are cheaper and therefore moving services to them is a good cost-saving tactic. And sure, public clouds bring economies of scale shared across multiple customers that are thus unachievable by nearly any enterprise. But those cost savings aren't simply passed down. Each public cloud is in the profit-making business and thus shares in the cost savings through margin capture.

For enterprises to make the most of a public cloud platform, they need to ensure that their applications match the economic model presented by public clouds. Otherwise, the cloud may actually cost you more. In our series of reports, "Justify Your Cloud Investment" we detail the sweet spot uses of public cloud platforms that fit these new economics and can help guide you towards these cost advantages.

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