Heavy Clouds Need Optimising for ISV Growth

The shift away from on premise towards cloud computing continues unabated. Yet while the business reasons for handing over this non-core activity to a third party add up, is the financial model really as compelling as promised? We explore the answers with Neil Cornish, Managing Director, M7 Managed Services

In reality, with upwards of 80% of UK hosted providers still using outdated technology to deliver their so-called cloud deployments, the business case is being supported by plummeting communications costs – not the smart use of innovative, cloud optimised technologies.

From the ISV trying to create a viable cloud-based revenue stream to the corporate looking to put Big Data and Analytics into the cloud, it is time for hosted providers to come clean, move away from inappropriate technologies and embrace the dedicated cloud appliances that will truly realise the cloud vision.

Companies are moving into the cloud for sound business reasons. Whether it is the Financial Director looking to replace the Capex model with Opex, the IT Director wanting to improve the responsiveness of the IT department to new line of business requests, or sales and marketing looking for quicker time to market; taking the provision of IT infrastructure services out of the business makes sense.

Despite on-going debates about cloud architecture; about the difficulty of creating the right balance of public and private cloud and on premise solutions; there is one incontrovertible fact: virtualisation is the foundation of the cloud. Yet the reality is that very, very few outsourced deployments are actually exploiting virtual technology to deliver shared services. The result? Organisations are simply not getting access to the low cost of computing promised by the cloud.

ISVs recognise that if the infrastructure deployment costs reduce the customer will have more money to deploy their applications. Their customers are beginning to realise that the less spent on the infrastructure, the more can be allocated to the applications that drive the business and innovation.

But the ISVs are still struggling to make any money from cloud based software solutions with an estimated 80% of the outsourced market operating on outdated servers and storage architecture. If the hosted providers are not using current virtualisation technology, they can’t offer shared services – and the ISV can’t gain access to the low cost to market required to make their cloud based software offering competitive and compelling.

Time Bomb

The vast majority of cloud-based offerings are operating on old technologies that are being coerced to fit, albeit uncomfortably, a new model. It works. For now. But it is not sustainable. It is not scalable; it is not future-proof; and it is certainly not delivering the financial benefits that a true, designed from the ground up, cloud model will provide. How long can ISVs keep promising that cloud revenues will pick up?  What will happen as more organisations look to put Big Data and Analytics into the cloud? Or exploit 4G Mobile networks?

Outsourcers and Managed Service Providers don’t just need to switch over to virtualised server technologies; they need to embrace dedicated, cloud optimised technologies that fundamentally transform the quality, scalability, serviceability and, critically, the cost of the cloud deployments.

The first generation of cloud technology was designed to exploit virtualisation to improve the load sharing across servers. Now dedicated cloud appliances have been developed to include virtualised server, storage and network capacity, as well as systems management, all within one system. Designed and optimised for the cloud, the performance of these systems is not only far beyond the virtualised server model but a world away from what is actually being used in the vast majority of UK data centres today.

True Cloud

With a virtual and optimised cloud provisioning platform in place, the dynamics of the cloud business model change. Completely.

For example, the recently announced IBM X222 Node for the Flex Server can support up to 200 Virtual machines. 14 of them fit into a 10U Chassis, 3 chassis fit into a rack. 8,400 virtual machines in one rack! If you combine this with Flash Storage Technology and 40Gb internal switch technology you could run a small country in single rack managed via a single, remote screen!

Install one in each of two data centres for resilience and DR and you have a shared services, cloud deployment model for a fraction of the legacy costs. One tenth the space and power, significantly less human resources to manage the environment and more money to allocate to the applications that make a difference.

A typical MSP contract in this environment will be around one third of the price offered by hosted providers today. For the ISV, not only is the financial model compelling but the application is working on a true shared services platform which means it will perform better, upgrades will be easier to achieve and accounting models can be put in place. The whole Software as a Service (SaaS) concept suddenly becomes truly attractive to the customer. The revenue stream opens up.

The message is – those organisations who select the right partnerships have every chance of success; those that remain in the old paradigm will still see costs and limited flexibility as barriers to business growth and innovation.

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David Dungay

Editor - Comms Business Magazine
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