A long time ago, before I started working in the PC world, I was a government economist. I don't do that any more, but being an economist gives you a framework to analyze business models, like one we're all thinking about these days…

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WSV316

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… The Cloud.(yes, I did pick the scariest picture I could find.)

What Does "In The Cloud" Mean?

Cloud = (It's on the Web) + (It's not on your servers)Earliest example: Web hostingMost popular now: Exchange hostingThink of it as "outsourcing, 2011 style"There are three basic levels of outsourcing cloud-based services – let's look at them and how they affect your needs

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Type One: Infrastructure as a Service (IaaS)

New: you essentially rent time, space and bandwidth on a virtual machine created by the cloud vendorUnchanged: you still have to maintain the operating systemUnchanged: you still have to maintain the applications (Exchange, IIS, SharePoint, etc)Microsoft version: persistent VM roles (sort of), VMM2012 private cloud hosting

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IaaS Example: Private Cloud

Good idea for many organizationsThe idea is that you set up an IaaS-type cloud internally with VMM 2012, Vsphere, etcSo when internal users need a server, they can basically (with the right permissions) do self-serviceMakes doing internal charge-back much easier to keep track of

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Type Two: Platform as a Service (PaaS)

New: you essentially rent time, space and bandwidth on a virtual machine created by the cloud vendorNew: vendor installs, secures, patches OSUnchanged: you maintain and tune OS/appUnchanged: you still have to maintain the applications (Exchange, IIS, SharePoint, etc)Microsoft version: Azure

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Type Three: Application/"Software" as a Service (SaaS)

New: you essentially rent time, space and bandwidth on a virtual machine created by the cloud vendorNew: vendor maintains the operating systemNew: you don't run the application, you just consume its services (i.e. rent Exchange mailboxes)Focuses on just one application/serviceMicrosoft version: Exchange hosting

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Why Consider Clouds?

Basically, one reason: saving money(And size flexibility, more on that later)Also it may be an excuse to shake up IT (more later)But there's no guarantee it's cheaperAvoid being "plowed by the cloud:" If you can show that (1) you're cheaper and/or (2) cloud "savings" is merely a guess based on shaky assumptions then you're safe… and if not, can you address that?

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The Problem with Clouds(I finally figured it out)

Cloud vendors have marketing and sales people.Here's an intelligent, thought-provoking example…

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Note the intelligent and respectful approach to selling this cloud solution in this TechNet advert

Cloud Questionsso let's consider…

Reliability and quality of service providedGetting your apps in the CloudPlanning for and controlling costs in the cloudAgility Security and privacy

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Cloud reliability and quality of service

Quality/Reliability of Service

Look, cloud computing's a service, services have outages, so the cloud will vanish now and thenWe are never very happy when our our mission-critical apps are downSo what tools do you have when the vendor goes down?What sort of response do you expect?So you want an service level agreement (SLA), right?What sort do you think you'll get, unless you're one of the cloud vendor's five largest customers?13

Economics Truth: TINSTAAFL

Cloud vendors are businesses, businesses that thrive on volumeTherefore bigger ones are more profitable, and so there will tend to be a small number of big onesAnd as a matter of simple Darwinian business reality, they'll look after their large clients, so again the smaller ones should read their contracts carefully

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Thinking Beyond Absolutesdetermine a reasonable expectation

No application is up truly 100 percent of the timeSo when you’re considering a cloud solution, ask:

how much downtime can you tolerate?How does the answer vary, app by app?What sort of uptime are you accomplishing right now?What does it cost you to accomplish that now?

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Will the SLA Have Teeth?here's where things get nonlinear

When the system is down, what leverage do you have with the vendor (in comparison to what you have with in-house staff)How would you enforce it… what penalties would the cloud vendor pay?How much more are you willing to pay to find a cloud vendor who will meet your SLA needs?

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Or, Simplified:

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If disrupting your service is the single most expensive, painful, and undesirable option for a cloud vendor, then that's the vendor to consider using. In fact, that's the only kind of cloud vendor to consider.But, it may not be cheap!

Corollarythe other reason to go to the cloud

A "sneaky" reason to move to the cloud is to get rid of an unwanted IT departmentSo it's a good idea for all of us to ask, "how well are we serving our clients, whether internal or external?"

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Quality Update

As of April 2011, we've had some serious cloud problems

Amazon offline for three days in AprilGoogle docs has been down for up to a half day in the past year with no comment from GoogleThree-hour delays in receiving email in BPOS 12 May 2011

Are these acceptable? It's up to you

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Application Compatibility:Will Your Apps Run in the Cloud?

Application Compatibility, Part 1IaaS and SaaS… easiest answers

Will your apps run in the cloud?Well, if it's IaaS, then sure… it's like RDP-ing to some server in another building – really it's almost no changeSaaS? If, for example, you go to hosted Exchange from in-house Exchange, really the only issue is "how do I merge the old mail with the new?" and "can I synchronize to the same stuff I sync to now?"

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Application Compatibilitywith PaaS

Azure offers Win32 APIs and .NET, but by its very nature, Azure is "Windows from another angle," and so many apps cannot directly fit without changes to code if you're going to Azure and to others as wellRecent Azure upgrades – full security mode, RDS interface and VM roles – have really simplified the job (and lowered cost), thoughEither way, be sure to factor in app rewrite costs!

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Planning for and Controlling Costs in the Cloud

Controlling Costs

Ultimately, every reason for going to the cloud boils down to the same thing… it’ll save your company money or, more specifically, it’ll improve its bottom lineSo how is the cloud at letting us control costs?

The structure of costs changesNew uncertainties ariseEntirely new costs appear

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Fixed and Variable Costs Now

Today, you have a cost model that you can control, with fixed and variable costs

Hardware, Software: bought or leased: (fixed)People: paid by the hour or year (fixed, predictable)Power: predictable, short of a price shockBandwidth: fixedMaintenance of the above: see "people," and it's not as unpredictable as some would have it

Largely predictable… but perhaps predictably too expensive in many folks' minds!

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Sidebar:know your current costs!

The existence of the cloud as an alternative forces us to examine our costs, to create metrics, to track expenses (although many of you already do that)It is not, however, an exact science thanks to "overhead"If you aren’t currently tracking costs, start tracking costs…… because someone’s going to do it, if you don’t!

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In the Cloud, the Meter's Runningless fixed, more variable

As I said two slides ago, we currently have a lot of fixed and/or predictable costsWith the cloud, however, a few things change; you now pay by the minute for bandwidth, CPU, etcIf those per-minute rates are low enough, then you might save moneySo how much might it cost?

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There are Cost Estimation Tools

Here are a two example pages from AmazonNotice the kinds of stuff you need to know to answer the questions

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Again, can you get some kind of handle on the current values of these parameters? It's essential both for your organization and – maybe – for your continued employment

Cloud Cost Conundrum

Pre-cloud:Your costs are largely fixed and predictable

In the cloud:Your costs are largely variable

Thus, you may be faced with the question, "we now pay $10 million a year for IT when we do it, but when we go to the cloud, we'll pay somewhere between $4 million and $7 million"

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New Costs: Bandwidth

When you move the servers to the cloud…… the people still stay in the buildingYou'll still need gobs of Internet bandwidth so that your personnel can access what used to be in-house applications that are now on somebody else's network the cloud, no savings thereSo now you're paying for the cloud vendor's Internet in addition to yours

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Sidebarwhat gets cheaper with time, what gets more expensive, and what does that mean for clouds?

Well, people get more expensive, clearlyBut what about (a) Internet bandwidth, (b) hardware, and (c) software licenses?They tend to get cheaper, from what I seeSo… be sure to ask your cloud vendor how quickly its rates will drop over the next few years!

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Software Maintenancewill the cloud save you software maintenance costs?

IaaS: no, PaaS: yes OS, no applicationSaaS: yes on OS, yes on applicationsAnd speaking of "control," what happens when your cloud vendor says, "we're shutting down our Cloud 2.4 servers in three months, time to get up to Cloud 3.0!"

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Let's Repeat That…

Suppose Amazon decides to stop offering Intel servers in six months and you are running AMD-dependent stuffWhat does that do to your maintenance planning?

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Agility in the Cloud Considered

Agilitythe kind cloud vendors mean

Again, why clouds? Answer #2: flexibilitySuppose your number of customers doubles overnight, and now you need twice as many Web serversIf you're on the cloud, you just click a few times, and new servers come online in minutesNote that this does not happen automatically, thankfully!

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Agilitynot the kind cloud vendors talk about

How do you leave if you're dissatisfied?Things happen, and so you might decide to leave your IaaS, PaaS, or SaaS cloudWhat will that cost – migration tools, time, recoding time, data transfer bandwidth?This is something you want to knowThat knowledge should be part of your disaster recovery plan

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Security and Privacy in the Cloud: A Few Thoughts on a Big Topic

Security

So how would you feel if your competitor were on the same cloud vendor and his stuff was

On the same cloud as yours?On the same physical server as yours?On the same virtual machine as yours?

A good cloud vendor can give you those assurancesAnd be sure to talk about data breaches…

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Summing Up Our Conclusions

Review

Clouds change your cost structure from "mostly fixed" to "mostly variable"Can save you money in the right circumstanceClouds let you scale up and scale down easilyImpossible to plan without good performance metrics, so it's best to know your current uptime, throughput, productivity, etc

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Review

Private clouds are a great idea for many, and VMM 2012 offers some powerful opportunitiesWhen considering a cloud vendor, insist on a good SLA… but be reasonable and consider what you've already gotten in-houseHave an exit strategy and perhaps off-cloud replication in case of outages

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Review

Ask what control will you have when the vendor wants to upgrade its infrastructure… clouds may save you money, but may also force you to cede some control of your upgrade pathwaysIn terms of "cloud intensity," low-to-high isIaaS -> PaaS -> SaaSAnd at this point Microsoft has offerings in all areas covered

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So What's the Answer?

Of course, the answer to that varies for everyone; I just wanted to offer some thoughts and to give you some questions to mull overThanks for joining me, I hope this was a good use of your timeThank you and enjoy the rest of the show!

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© 2012 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to

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