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Something You Won’t Hear From Amazon: Insourcing is Safer, Cheaper and Better

It’s not something Amazon broadcasts. “It” is the dirty little secret of cloud computing: For the real-world enterprise, a public cloud isn’t as secure, cost-effective or flexible as a private cloud. Period. Some enterprises have learned it the hard way, but now the secret’s out. Insourcing is the way to go for organizations that have outgrown AWS.

The public cloud: awesome in some ways, limiting in others

The public cloud opened a new world of possibility for the traditional in-house, on-prem-iron, centralized IT organization. Public cloud service providers like Amazon promised convenience, scalability and efficiency. And many orgs—Zynga and Sony come to mind—rushed in, eager to push data operations to the public cloud, willing to hand over keys to their IT kingdom. Some even eliminated seemingly redundant IT overhead. But from there, the public cloud picture got less rosy.

The mistake some organizations make is to assume the public cloud’s pay-for-what-you-use scalability is the only thing to consider when planning ahead. The public cloud scales to accommodate growth in the size of data, which is awesome. However, it’s not enough for companies that need better future proofing.

As businesses grow, so do their cloud computing needs, including security, redundancy and regulatory compliance. Data is safe in the public cloud, but IT control is relinquished. That loss of control can be unsettling for IT management. In one well-publicized defection earlier this year, Sony’s gaming division moved some of its cloud hosting from Amazon to Rackspace, in part to mitigate risk of potential security breaches.

The public cloud tax: Peace of mind is an extra 40 Percent

Reliability—specifically, the surrendering of control over reliability—can also be an issue. Public cloud outages are rare, but do happen, and they can be devastating to enterprises that rely on uptime (which, let’s be honest, is pretty much everyone). Public cloud customer Netflix, using services in three Amazon “Availability Zone” datacenters, allocated 40 percent of its paid hosting storage capacity just for AWS failover. Not everyone can afford to pay for capacity they don’t use (or, in this case, redefine the word “use” to include such insurance). Outage risk is part of the problem, but so is getting back to uptime, which requires enterprises place recovery responsibility in the hands of a third party. Who to call for mission-critical enterprise disaster recovery? Customer service?

Public cloud computing is IT outsourcing, plain and simple. Unfortunately for IT management, the associated absolution of control doesn’t carry a similar absolution of responsibility. If an enterprise doesn’t know where its data lives, does it still technically own that data?

“Insourcing:” The thinking enterprise’s approach to cloud

Cloud computing is the present and future of enterprise data and application management. But locking in to a public cloud model can potentially limit an organization’s ability to progress into the future. Public cloud delivers compelling value to many enterprises, but by its very nature, the one-size-fits-all public cloud can’t be flexible enough to accommodate everyone forever. For instance, former AWS customer case study Zynga ultimately had to bring its cloud in-house in order to optimize its servers to meet its needs. What’s sobering is that Zynga was able to deliver the same level of service, with more specialization (e.g., one machine optimized for logic execution, another for db access, etc.) using one-third the number of servers.

Insourcing is the cloud-computing converse of outsourcing to public cloud, but it’s about more than bringing IT on premise. In the cloud-computing world, insourcing signifies keeping data within span of control, and there’s no better way to maintain oversight than with a private cloud.

Zynga insourced because it needed more control and greater flexibility than it could find with a public cloud service provider. In Zynga’s case, moving to private cloud was necessary to facilitate business growth.

Rethinking the cloud cost/profit model

Scalability is still key to the private cloud virtualization ideal: Enterprises who go private must manage their own servers and their own scale. But therein lies an opportunity. Enterprise IT strives for innovative cloud strategy while working to achieve efficiencies. The trick is harnessing that expertise and experience for good. And the way to do that is to adopt a cloud service provider model for IT services, and effectively turn an IT cost center into a profit center.

In practice, that involves turning excess capacity into a revenue-generation tool, reselling it to internal or external customers. Strategically, it means IT moves from cost-cutting mode to profitability assessments. Perhaps it’s somewhat cynical to say, but public-cloud services are commodities, and ROI assessment must emphasize cost cutting. Shifting to private cloud can enable an enterprise IT operations team to become a service provider itself, and focus its attention on generating more revenue, maybe by selling capacity to the small business up the street (or on the other side of the world).

It’s a creative strategy, and innovative enterprises in the cloud are already doing it. It worked for a certain online bookseller I know. And with the right insourcing approach, it can work for the real-world enterprise.

About Bart Copeland

As President & CEO of ActiveState Software, Bart Copeland brings more than 20 years of management, finance and technology business experience to his role. With a passion for technologies that help people lead more productive and enjoyable lives, Bart is currently focused on ActiveState’s private platform-as-a-service (PaaS) offering, Stackato. With his vision for PaaS as an enabler to accelerate cloud adoption and value in enterprises, Bart is actively involved in the strategy, roadmap, business development and evangelism of Stackato. Bart is also an active angel investor and serves as a director on a number of other tech companies. He holds an MBA in Technology Management from the University of Phoenix and a Mechanical Engineering degree from the University of British Columbia.

View all posts by Bart Copeland →

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JorgeBlat 5 pts

I believe the CLOUD hype is still going on and companies will continue to believe that the using the likes of AWS is the way to go because it will be "cheaper". As more companies experience the pain of cloud "breakdowns", there will be some form of understanding and things will shift a little. Also, I am still amazed at the concept of Virtual desktops when the so called "thin clients" such as mobile phones and tablets are becoming more powerful than the desktops we have been using all this while... looks like history is repeating itself once again...

Mainframe-->Thin client --> Desktop

Cloud --> VDI --> Ultra powerful Mobile/Tablet that can run APPS?

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ShaunMackiel 5 pts

Extremely interesting article... I would be willing to bet the private cloud model catches on w/ some of the bigger enterprises sooner than later...