Cloud computing: Cloud on the horizon

The lower costs of ‘cloud computing’ are most easily illustrated by the alternative way in which an IT manager might address the question of ‘peak demand’ for computing power. An organisation would have to acquire enough capacity to deal with this level.
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AS TENDS to happen with fashionable buzz words, ‘cloud computing’ has recently undergone a sharp period of phrase inflation, which has diluted its meaning and may, perhaps, undermine its marketing potential. It has certainly caused confusion, which a statement from Gartner, released in late September, confirms.

As Mike Ferris, director of product strategy at Red Hat, which provides an enterprise Linux platform via Amazon’s EC2 cloud, says: “If we’re talking about it as a marketing term, I won’t say it’s misused but certainly it can be unclear as to what you’re really referring to.” Gartner’s contention is that more should be made of the difference between ‘internal’ and ‘external’ clouds. The concept of the ‘internal cloud’, also known as ‘utility computing’, aims to derive the same benefits as the external one, but without the supposed hazard of moving data off site. This does not necessarily require a change in hardware or software, and works with existing technology, such as virtualisation, to increase server usage levels. The internal cloud, Gartner believes, “is an extension of traditional data centre approaches, while the off-premises nature of cloud services should be the point of reference.”
Gartner’s definition of ‘cloud computing’, “A style of computing in which massively scalable IT-related capabilities are provided as a service using internet technologies to multiple external customers,” is used here. Ferris adds that cloud computing is specifically “talking about infrastructure as a service”.

Joel Berman, director of marketing strategy at Red Hat, suggests that two facets must be in place for something genuinely to fit the definition of ‘cloud computing’. “It must be a utility in the sense that when you turn the kettle on you don’t know which terminal, generator or nuclear plant spun up a little to supply that electricity. Likewise when you start doing computing on a cloud you don’t know specifically which machine is used, or where that resource is actually located.” It is the opaqueness of this process, he believes, which explains the use of the word ‘cloud’.

‘Clouds are a model that holds a lot of promise for people at a dramatically changing time. This is certainly a period where finding a flexible resource to use is worthwhile’ - Mike Ferris, Red Hat
The second key aspect of ‘cloud computing’ is the pricing model, in that up-front costs should be low, and there is a ‘pay as you use it’ structure. Dennis Quan, director of autonomic computing at IBM, explains the aesthetic attraction of the cloud thus: “Users can get access to their applications and services over the network from anywhere, as long as they have a device connected to the network. They don’t have to worry about how it’s being managed – it’s all being taken care of for them, up there in the cloud.” And definitions aside, cloud computing offers the promise of lower overheads, in terms of floor space, energy costs and staff. It is also, comparatively speaking, ‘green’.

The lower costs of ‘cloud computing’ are most easily illustrated by the alternative way in which an IT manager might address the question of ‘peak demand’ for computing power. An organisation would have to acquire enough capacity to deal with this level of demand, even though normally demand on the IT infrastructure would be considerably lower. This means that for much of the time, server space would be idle, and a drain on resources. Indeed, a responsible firm would over-provision for predicted peak demand, just in case. A public cloud, however, such as the one run by Amazon, provides an alternative that can be tapped into at a moment’s notice, purchased for the duration, and then left for others to leverage.

If capacity is in short supply, demand for capacity for mission critical processes may supplant, and so delay, other ongoing processes. The credit card company at Christmas is the obvious example. “Processing comes in like crazy,” Berman says, “And in the olden days you would just have to shut down all development work and business analysis. You would process credit cards for two months, then returns for a month, and finally get back to business as normal. Today, you can move many of those development jobs, business intelligence and analysis off to the cloud.”

Quan adds that demand on computing power is likely to rise for two reasons, both of which are relevant to some degree for banks. Part of the Web 2.0 phenomenon entails users of websites feeding large amounts of data back into them, such as by comments on blogs. More directly for banks, the rise of mobile banking (as well as internet banking) is likely to place a greater pressure on the existing data centres. “People could be checking their account balances and transactions several times a day, because they always have their mobile with them. Online, it might be once a day. We think that’s going to put an enormous strain on data centres, which were strained enough to begin with,” he says.
‘People could be checking their account balances and transactions several times a day, because they always have their mobile with them... We think that’s going to put an enormous strain on data centres’ - Dennis Quan, IBM

In terms of user cases for financial institutions, there are a handful of generic ones which are worth mentioning. In general, however, an “excellent user case” will be “an institution which needs to run a specific job or activity for a limited amount of time,” says Ferris. “We have spoken to several institutions which need to run a book analysis, where it’s not providing additional revenue for them and not building up their business models. It’s simply to meet regulatory requirements.”

Another user case is placing the disaster recovery site on the cloud, or a ‘mirror’ on the cloud, as Geva Perry, chief marketing officer at Gigaspaces Technologies, terms it. “For business continuity,” says Berman, “most financial institutions have obviously already set up dark or multiple sites to take precautions, but the cloud becomes another alternative.”

Perceived security issues may well be deterring financial institutions from embracing cloud computing. Global Secure Systems (GSS), a security consultancy, released a statement in October saying that ‘there are a significant number of security and IT considerations to plan ahead for’ in cloud computing. This was a reaction to Oracle’s statement at its OpenWorld Conference in San Francisco that it would run some of its services on Amazon’s cloud.

The main sticking point seems to be the actual location of where on a cloud data may be stored, and not knowing its whereabouts at any point in time. Secondly, a couple of well-publicised outages recently have called the reliability of cloud computing into question. Amazon’s cloud went down for a few hours in July, affecting online services such as Twitter. Some users of Google’s Gmail service were unable to access it for a short period in October. Google has issued an apology, but it is not known how many users were affected, or what caused the outage.

This may be a concern for financial institutions, and may explain their reluctance to discuss their use of cloud computing (IBS found banks unwilling to contribute to this piece). “Banks don’t like to talk too much about the inner workings of their technology generally,” concedes Perry, “But yes, there is a lot of trepidation about cloud computing and the potential vulnerability of it.”

However, most who are involved in ‘cloud computing’ play down the security hazards, which Perry believes are typically “psychological rather than technical”. The example of Amazon is instructive: “Amazon has been around for more than a decade now, and they keep millions of people’s credit card details,” Perry says. “There’s no reason to think they’ll start losing them now.”

Berman believes that “technology isn’t an issue, it’s more about regulatory and licensing areas. For example, if we start to have multinational clouds, there will have to be some form of standards or agreements put together.” And if there are any misgivings about this then, as stated above, financial institutions can avoid undertaking mission critical activities on the cloud. “Firms do seem very happy to put non-critical workloads onto the cloud,” he adds.

So in the peak demand scenario, firms can spin up more of their own machines to cater for sensitive material and, rather than halting risk analysis, business intelligence and so on, can move all else to a cloud. Red Hat’s product, Enterprise MRG, helps firms shift workloads between internal and external capacity more seamlessly. In terms of analysis, perhaps the best example is Market Replay, a tool offered via the cloud by Nasdaq. This allows people to monitor Nasdaq, NYSE and Amex-listed securities retrospectively. All of the data is of course public knowledge, so there is no conceivable risk.

Despite reservations, financial institutions are moving towards the cloud. “I know of two or three banks who are doing real work in the cloud,” says Berman. “And I know a number of banks and other transaction-oriented financial institutions which are seriously thinking of experimenting.” And it appears that this trend is likely to continue, according to Quan: “As with any new technology, people are incrementally shifting into it. They start with less complex workloads, and make way for things which are more and more mission critical. This is a growing area for banks but it has really taken off in the last couple of years.” Ferris believes that there are perhaps as many as 5000 firms, in all disciplines, using the cloud ‘very effectively’ today, and that these are very early adopters, often with unique needs which are specially suited.

‘There is a lot of trepidation about cloud computing and the potential vulnerability of it’ - Geva Perry, Gigaspace Technologies

Though at an early stage, it is possible to speculate on the future of cloud computing. As it becomes more widespread, which seems likely, a more clear-cut market for computer capacity may develop. That one may, for instance, expect capacity to be more in demand at Christmas time than in June may lead to futures markets, price differentials and arbitrage. That a public holiday is scheduled in one country may see cloud providers entering the neighbouring market for the day. As the market matures, cloud computing may end up behaving more like a commodity, with bidding, reverse auctioning and so on. A number of financial firms could decide to sidestep this by pooling their own resources for a ‘federated cloud’. Regulation may, of course, have a huge say in how it develops.

What all agree on is that the recession which the world is entering will force financial institutions to consider the cloud anew. ‘In the current climate, particularly with so much M&A going on, integration is going to be a key challenge, and we at IBM think cloud will be instrumental for them to make transitions in a smoother way,’ says Quan.
“Banks are all looking at how to cut costs, budgets and teams also,” says Perry. “They don’t necessarily want to be managing a large data centre operation, which requires a lot of expertise, people, systems, knowledge, investment, time and so on,” he adds.

Cloud providers can focus their attention on building energy efficient data centres in a way that banks can’t. IBM is currently building a new data centre in North Carolina, which is designed to be as green as possible. It will, for example, make extensive use of energy-efficient light bulbs, will use alternative energy sources and will be water-cooled (and cooled by the weather in winter). IBM and other cloud providers can probably specialise in this area in a way that banks can’t. Cost-cutting through efficient use of resources is a positive goal in happier times but it is an imperative now. “Clouds are a model that holds a lot of promise for people at a dramatically changing time. This is certainly a period where finding a flexible resource to use is worthwhile,” Ferris believes.

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BY Victoria Summerfield
Source：merinews