How the Cloud Changes Technology Economics The second speaker, Chris Drumgoole, SPV Global Operations for Verizon’s Terremark, a provider of enterprise infrastructure and security services, discussed the advantages of the cloud in terms of allowing companies to test out their ideas without making an investment in thousands of servers. “With cloud you are swiping a credit card if you have make an arrangement with a cloud provider, within minutes to seconds you have the ability to test an idea,” says Drumgoole, noting that for $12 you have the price to test an idea. Whereas in the traditional model companies develop an application, buy one server, and then put thousands of servers in multiple data centers around the world, before they know if the application is going to be successful, said Drumgoole. If it fails, then the entire investment is a waste.
Cloud also allows firms to fail at a lower cost and allows firms to throw more ideas at the wall, though the danger is “cloud sprawl.” Cloud also takes away the risk of success — the worry of having to build for your peak day, i.e., the SuperBowl or Christmas, since firms can firms can provision more resources, if they need to, said Verizon Terramark’s executive. Also, cloud enables companies to innovate quicker. “I don’t think there’s an IT organization that can provision in less than three weeks in normal course of business,” related Drumgoole, noting that some CIOs have told him it takes up to six months. “Now we’re saying minutes, hours to provision entire infrastructures, to do full test[ing] and full proof of concepts. Verizon Terramark operates one of the world’s largest public clouds.
According to Verizon’s data, cloud adoption is growing. Once existing companies move to the cloud, they are moving applications to the cloud faster. Enterprise deployments in the cloud are 60% larger, one year later, based on Verizon's data. While a year ago the majority of applications on its cloud were test, development and QA, “now if you look…over 50% are production workloads. People trust the cloud at this point because the economics work for them,” said Drumpoole. Cloud economics is also influencing who contacts the cloud provider about provisioning an application. Usually it was the CIO that contacted Verizon Terremark about deploying an application in the cloud, but more recently it’s become the CFO, observed Drumpoole. “The CIO started the cloud; the CIO finished it,” he said “We’re able to drive costs lower and we’re able to pass that onto you. We’re able to run data centers more efficiently, better use processors, drive the cost of cooling down.”
Rubin advised companies to think about “elasticity” in their technology environments and to take advantage of break through technologies such as the cloud, among others. Citing the case of investment banks in US equities that bulked up on capacity in 2007 when volumes were high, he said they were caught when volumes fell by 50 percent. “They were left with an IT network that had no elasticity,” said Rubin. “You need to engineer the economics underneath it for the ultimate elasticity.”