September 26th, 2011
The evolving federal tax laws concerning the taxation of goods and services on the web are causing some problems at the state tax level. As the cloud begins to have a stronger influence on business, there is some concern about how the various states will approach taxation. A recent report on Bloomberg looks at the current concerns many states have regarding the ability to tax transactions that are being challenged by the very notion of how business is conducted on the web. Where does a traditional point-of-sale tax fit in here?
Defining a Transaction
Part of the problem is that the transactions that were once considered the sale of “goods”, such as buying a piece of software off the shelf at your local office supply store, are now more like service transactions when it is part of a service package for your web business being run in the cloud. It can get even more complicated. A good example is when a company in New York purchases server space and cloud-based software from a company in California. This California company could easily have servers in several states. Add a factor such as the New York company having employees in several states that access that software, while traveling via their smart phones or laptops, and you have a taxing nightmare.
Some states have tried to make online retailers such as Amazon change the definition of their business, the end result of which is a split between the company and the state governments. More importantly it has caused Amazon to break agreements with some of its key partners due to the new laws creating an extra layer of taxes for Amazon.
Washington and the States
Verneda Smith is part of a Washington group that represents state revenue departments. He sees the cloud as a new business model that will affect every tax type. With companies like IBM, Amazon, and Google fighting it out over a global market expected to increase from $40.7 billion today to $241 billion by 2020, there is a lot at stake. And Forrester Research, whose trend analysis predicts this growth, sees more of the same in the coming years.
But these companies are not waiting around to see what kind of taxes they will be dealing with; they have gotten involved with the House Judiciary Committee by backing federal legislation that would regulate and limit a state’s authority to tax when it comes to any kind of digital goods and services. Reid Okimoto, a senior member of KPMG LLP, summed it up by saying “It’s akin to the difference between renting a bus and paying to ride on one.”
According to Smith, what is decided in the next little while could be a game changer. He sees a lot at stake and the potential to change the way just about any company on the web does business. How that business is to be taxed and why still remains to be worked out. But anyone considering doing business in the clouds would be well advised to keep an eye on what is decided in Washington.
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September 22nd, 2011
Spending over $80 billion a year on information technology, the U.S. Government is easily one of the largest consumers of technology and technology products in the world. Therefore it is no wonder that when President Obama created the office of Federal Chief Information Officer, one of the prime reasons was to look into ways to cut those costs.
Vivek Kundra was appointed the first official for the office and, during his two and a half year tenure, has created and implemented a view of the government that is leaner and much more internet-centric. One of the biggest changes he has made is to initiate cloud usage to various government departments by his implementation of “Cloud First”, a policy that introduces the idea of having all government departments move some aspects of their business to the cloud.
Kundra saw more than costs savings, he saw an opportunity for greater flexibility, something that government agencies are not well known for today. Agencies could adjust the scope of a project without having it affect the infrastructure already in place, making it easier to make adjustments along the way. “Cloud First” encourages government departments to incorporate the cloud as a part of new projects and requires each department to move at least three already existing projects to the cloud by the summer of 2012.
As to be expected, some of these departments, especially ones like the Pentagon, are concerned with security aspects of this new policy. But for departments that have less confidential material, such as the Department of Agriculture, they see it as a positive that will speed along technology projects. This department has already moved 46,000 employee accounts to the cloud and is expecting to move an additional 120,000.
The State Department has chosen some of the more low-risk projects such as the website for the Office of the Historian to implement their cloud technology. Concerns about disruption, security and the recent hacking of the Pentagon by what is perceived to be foreign government intelligence operations continues to slow the move.
Teri Takai, the Chief Information Officer for the Defense Department concedes that the global reach of hundreds of thousands of users spread across the globe could make the cloud a useful tool for them. The ability to use the cloud anytime and anywhere has led to the concept of a “Mission–Oriented Resilient Clouds” approach for military applications. “When done with the proper considerations and planning, cloud computing will be a very effective and efficient tool,” Ms. Takai said.
Another department that has moved swiftly to embrace the “Cloud First” policy is the General Services Administration. This department works with other departments to help them with transportation, office space and communications issues, and put the entire department’s e-mail services onto a Google Cloud Service last December.
With overall spending on cloud infrastructure growing at five times the rate of traditional corporate technology, up until now the corporate sector has been the driving force for growth. That may change with this new direction from the current U.S. administration. As part of the search for cutting waste in government spending, there has been a call for each department to re-examine its use of technology and for agencies to define new ways to share resources and cut costs. The cloud does seem like a natural fit for this new direction.
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September 20th, 2011
At a recent cloud conference, Joe Weinman gave a talk about the business, financial and user experience benefits of the cloud. He presented some complex simulation tools to show how these counter-intuitive characterizations challenge many of today’s fundamental assumptions about business and the cloud, including those regarding on-demand, pay-per-use and other business aspects. Although not radical in concept, like many of Weinman’s talks, they do challenge conventional thinking and are well worth taking a second look at.
Counter Point: Although the technology may feel new to many, and the business model a radical departure from conventional technology strategies, in fact the business model and attributes behind the technology have been used for years by such industries as car rental services, hotels and many more.
Counter Point: As important as the Web/IP/Browser is to the technology, the cloud is in reality a general architectural model and although the web plays a big part it is far from being the whole story. To unlock the true value of the Cloud other types of networking technologies such as Optical Transport MPLS and VPLS need to be leveraged. Other uses such as audio conferences, webinars and M2M are services in the cloud that are used today without the benefit of browsers.
Counter Point: Because large cloud providers today are using the same architecture that is available to any enterprise this is not completely true these days. This same availability means that no major benefit is derived from their scale when we are looking at it in terms of economy. There are some other benefits that do come from size, the most notable being such characteristics as statistic of scale, scalability and geographic dispersion.
Counter Point: One of the major differences between electricity and IT is that electricity has the benefits of scale that IT does not have, from an economic perspective. Any decision on how much of IT to keep in the enterprise versus running that function in the cloud is going to be governed by a large number of factors including the nature of each particular application, its cost and the amount of flexibility needed overall from IT. Whenever some type of decisions about IT are made, they are by their very nature quite complex, as opposed to how decisions about electricity are generally made, which are purely economic in nature.
Counter Point: While this may be true for many businesses, it is not so for all of them. Whether it is important to replace OPEX with CAPEX depends fully on the financial decisions that each individual company makes in regards to its financial and funding activities. For some it will be an advantage based on their business structure, while for others the gains may not be significant.
Counter Point: Actually, it has been proposed that any technological process that increases efficiency for a resource will increase that resources rate of consumption as a result of the increase in efficiency. This has been called the Jevons Paradox Effect and is already being seen to some degree in the evolution of the cloud today.
For a closer look at Weinman’s work theories on cloud and its impact on business, read his latest work on the economic rationale for the hybrid in The Mathematical Proof of the Inevitability of Cloud Computing at his website cloudonomics.
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September 19th, 2011
Whenever you hear anyone talk about cloud computing, one of the biggest reasons most people bring up for moving to the cloud is that it is so much more efficient. Generally when people say this, they are thinking in terms of it costing less for staff and hardware to run a program in the cloud instead of at your own mainframe. But what about energy efficiencies?
There was an analysis done recently by WSP Environment & Energy that took a look at just this question for in-house data centers. Jonathan Koomey at GigaOm discussed this recently on his blog, and the findings should be of interest to more than just WSP’s client Salesforce.com. Looking at the per-transactions cost, they found on average a 95% reduction in transmissions. That is a huge amount of savings, so let’s take a look at where those savings originated.
One of the biggest impacts was the economy of scale, not that surprising when you truly consider it. Just as you can spread the work over a larger server base, so too can you spread the cost. When it comes to fixed costs such as equipment inventory, the improvement of the centers airflow and other costs associated with assessing Power Usage Effectiveness, spreading this cost across a wider customer base and larger number of transactions allows for a greater efficiency. You also get the advantage in size by being able to hire specialists in energy conservation who will know all the latest technology and how to implement it.
Whenever flexibility comes up as a cost saver for moving to the cloud, generally the speaker is referring to the ability to use such techniques as virtualization to separate software from the structure of physical servers. This capability may indeed cut software costs, but it also cuts energy costs due to its ability to allow you to drop features that are not energy efficient or even route the software around dead servers, eliminating the need for multiple power supplies in these circumstances. You are delivering IT services, and so the death of one server does not have to impact your reliability or the energy needed to perform.
Another area of impact is the fact that your users are spread around the globe, giving a larger operation the ability to diversify its load at any given time or day. With users who have peak needs at various days and times the end result is that those facilities are running at a much higher capacity. If you were to run efficiency tests in a typical data center you would find that most servers run at between 5 and 15% capacity making them highly underutilized. When looking at the vast majority of major players in the cloud, you will see a server utilization range of 30 to 40%.
One of the biggest discussions within many enterprises is the tug of war between IT and facilities over the cost of energy. For an IT department, the question is always how they can expand the number of servers in order to assist in more and more complex operations. Facilities departments tend to see the skyrocketing cost of electricity as a threat to their budgets. Somewhere along the line, Operations gets caught in the middle, looking for a solution to a need. In the end what happens is that they find it easier to take out the corporate credit card and simply go to the cloud to get what they need, bypassing both departments. Since IT and Facilities are under the same budget in a cloud scenario, the economy of scale once again plays into a savings of energy as it allows operations to get what it needs in a timely manner and within their budget. Problem solved, without the inter-department headaches.
As time goes on these savings in energy, when placed alongside the cost efficiencies of staffing down and the reduction in hardware needs and software upgrades will make it hard to ignore the cloud. When the capital cost of a standard in-house facility, which is now standing at $25,000 per kilowatt, becomes unthinkable the move to the cloud will be inevitable for all but the largest or most security-sensitive enterprises, such as the financial market.
There are still a few kinks in the system, one being the question of liability for cloud outages and the other being the development of truly secure public clouds. For some that solution will be an expansion into a members only private cloud structure. But even with these, there will be energy cost savings worth making the pursuit worth the time and effort. The movement to the clouds with its cost efficiencies and energy savings is just starting to really take off. Where it will eventually lead us in the next few years will be an interesting journey.
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September 16th, 2011
One of the basics of the cloud is that it has created a level playing field when it comes to competition between small and large businesses. Many of the first wave of cloud users were, in fact, innovative small businesses who saw the value of putting some aspects, if not all of their operations, in the cloud. Here are five good business operation areas for any small business to consider moving to the cloud.
1. Communication – This is a key tool for any business but can be a vital one for a small business. VoIP was one of the early applications of the cloud for communications, and then came online video conferencing. Today you can add cloud email, instant messaging, video chat and more to that arsenal. And the beauty of most of them is that they are not only often inexpensive to implement, they will make your business more efficient.
2. File Sharing – As business becomes more mobile and remote offices more common, being able to keep your files in the cloud just makes good sense. Your clients can access the information they need, your email will not get filled up with all those bulky and memory consuming attachments and you will soon find that being able to pull up that file of information you need at the snap of a button on your smartphone is habit forming, and good for business.
3. Software – Why should a small business have to spend all of its time and money keeping software up to date when it doesn’t need to? Put your operations in the cloud with web-based software or services and everyone in the company is always on same application and same version of that application. Collaborate online, share files back and forth, send notes through the net, it is all possible and not as out of reach as you may think.
4. Backup – The dreaded backup is something all small businesses should do and often don’t. The days of having the last person out the door turn on the tape-drive backup machine are gone – and good riddance. Now you can back up everything in the cloud so no matter what happens, fire, hurricane or break-in, you are covered. There is no worse feeling then realizing your entire business just went up in smoke because your backup was on the machine next to that smoking hulk that used to be your computer.
5. Customer service – Today there are so many great cloud-based CRM programs it is hard to even know where to start. The cloud is the perfect tool for customer service, and for many small businesses, customer service is key to success.
This is truly just scratching the surface of the many great ways that the cloud makes sense for any small business. While it is true that not every business needs the cloud, and not every aspect of a business should be in the cloud, many small businesses find that moving the daily operations into it has made them more efficient, cost effective and that the ROI is better than they expected.
What are some of your favorite small business cloud applications?
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September 15th, 2011
The Insurance Industry, a risk-averse culture that has been slow to adapt to the cloud, is finding that there are some avenues where moving to the cloud is making a lot of sense. When it comes to SaaS (Software as a Service) and PaaS (Platform as a Service) the insurance industry can see some real opportunities for new efficiencies that have many of the traditional carriers looking at moving some elements of their business to the cloud.
Security, however, remains a major concern for many in the industry, and with good reason. “Recent headlines about major data breaches have by no means allayed insurers’ anxieties around client data confidentiality,” comments Aite Group Director of Research, Clark Troy. He does, however, point out that there are some applications, including new business, underwriting and claims solutions, along with some industry-specific needs such as monthly analytical scoring that are particularly well suited for the cloud. With the monthly analytical scoring, most systems are running only 12 days out of the year, making this the perfect application for the cloud as there is then no need to pay for the other 353 days of the year when the infrastructure will sit idle.
“The beauty of it is that it is vapor – you push a button and it’s there and the second you have completed your activity, you tear it down,” says Steve Byrne, VP of Agency and Field Automation Technology and acting CTO of Harleysville Insurance. Byrne stresses that the cloud has been particularly useful for software development and testing.
“To buy the hardware for test environments is extremely expensive and they will sit idle most of the time anyway, ” comments Byrne. The cloud allows a company to “quickly provision the needed resources, including platform, database and operating systems, and applications, required to support and develop testing activities.”
Another advantage of the cloud is when an insurance company is looking at the possibilities of new business ventures. This kind of exploration often requires having IT acquire and build out infrastructure to support the new venture, and if it does not succeed you are left with unwanted infrastructure. A good example of this is Harleysville Insurance’s current opportunity to explore the development of disaster recovery. The model for this type of use allows them to create and put on hold the required structure, until it is needed in a disaster. The end result: they only pay for it when they need it.
Although Byrne readily admits that he would be uncomfortable moving core data into the cloud at this point in time, the possibilities that it opens up for other types of ventures makes it a good fit for his industry in that regard.
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September 14th, 2011
June’s Structure Conference in San Francisco was much more business and market dynamics centric in its look at the cloud than in previous years where the focus had always been on pure technology and services. This new focus gave coherence to the talks that had not been there before.
Unlike the previous year’s conferences where the preponderance of “vaporware” overshadowed all else, this year saw vendors with real products and services and customers who had experiences with private and public cloud deployments. What a difference a year makes.
One of the biggest changes was from a focus in 2009 on “virtual machines” and 2010 on “workloads” to the current emphasis on “applications”. Everywhere you heard talk about the importance of supporting application development, integrating applications and the operation of applications in the cloud. Truly in 2011 applications was King.
If you accept the concept that cloud computing is an operations model and not a technology, then this development makes perfect sense. In the stack there is nothing that is truly “cloud”. For cloud, management and monitoring protocols are not changed because it is how you operate and provision these elements that make it cloud. And the secret to this is to make them on demand and with the ability to scale appropriately.
Cloud is not just an operations model – it is an application centric operations model. As we have witnessed in the past year, IT is moving slowly towards an application-centric operations model and away from the old server centric model. The end result will be management and monitoring tasks that are defined by and targeted at the application itself instead of the infrastructure that is underlying.
This leads to an interesting corollary. If clouds are application-centric, then the perspective of the application must be considered when reviewing the problems resolved by cloud solutions. Or to look at it another way, it is a short-term solution to develop a tool specifically for virtual machine management in the cloud. Sooner or later managing a guest operating system in a virtual machine will become unworkable as the application begins to hide the containers in which it runs.
However a disruptive concept that has tremendous promise is the development of tools in the cloud model that have the development, deployment and operations of code and data, in essence displacing the old server-centric model of the past. In terms of operations, very few enterprises have the tools and processes for this concept. At least today.
There are a few application-centric tools for cloud around, such as EnStratus or RightScale. Although each of these is looking to provide tools for managing applications across disparate cloud systems, they tend to still be a trifle VM-centric. At least from this point of view. But then again most applications are built and deployed these days as an end product of this VM viewpoint.
There are several approaches one can take that would make an application-centric approach achievable:
Keep in mind that even with application-centric operations you will still require an ability to deliver the service that the application is deployed to and the infrastructure that supports this service. This includes the delivery of the application itself when deploying SaaS. Remember that managed services and data center operations become the responsibility of the cloud provider, whether it is public or private, and not the end user.
At the end of the day the center of this difficult cultural change for many IT departments is the concept of separating concerns in operations. The good thing is that this resulting change will give business units the true ability to focus on business functionality. This is the gain from making applications the center of the cloud computing universe.
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September 13th, 2011
With news of sites being hacked and other disturbing events on the web, is it any wonder that many businesses are apprehensive about moving their business into the cloud? Yet despite these events experts are predicting a large increase in the number of businesses that are planning to move to the cloud in the next few years. The reason is obvious, with the cloud making possible custom IT services simply and quickly at a lower cost every business, whether a start-up or established company, wants to move to the cloud.
There are still some businesses that are holding back, primarily because of fear or lack of information. There are three primary areas where knowledge of the risks and how to combat them can help any business decide if moving to the cloud is right for them.
Security – Cloud computing can be seen as more vulnerable to online attacks than the alternative of storing data on the company’s private servers because of being based on the Internet. While this sounds logical, the actual situation is that having dedicated staff ensuring cloud security and setting security standards will give you a higher level of security and is more reliable. To be sure that a cloud service provider’s security is at the level you need, examine their security policy. You can also stay in touch with the latest in cloud security through The Cloud Security Alliance which is a collaboration of cloud experts who are actively promoting best standards and practices for security assurance in the cloud computing community.
Compatibility – This is another issue which often holds back larger organizations and enterprises from moving forward with cloud technology. Sometimes the existing IT configuration is too complicated to restructure for compatibility with cloud technology. When this happens, often the best solution is the hybrid cloud to give the business the best of both worlds. Often a third party provider is brought into the picture to provide assistance in handling the transition that will dramatically reduce time and costs for both personnel and technology for the business.
Availability – Many businesses express concern about the degree that cloud data will be available to them. This is of particular concern when it comes to data and service interruptions because businesses may be used to their servers being in close physical proximity and control. The best way to approach this is to discuss with the provider and assess the risks involved along with risk management responsibilities for each of the parties.
In the final analysis, cloud computing for each business can only be undertaken once all of the IT advantages and disadvantages along with the business impact it will have are taken into account. The determination of what the business is looking to achieve from cloud computing along with a discussion with your cloud provider regarding security risks can help any business to configure the cloud environment that works best for their particular business context.
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September 12th, 2011
Imagine driving down the street while your car sends data about weather and traffic to the cloud so you have the latest information to get you home quickly and safely. If this sounds like something out of a science-fiction novel, guess again. This is just one example of the kind of technology Intel is hoping may evolve from their latest collaborative investment with Carnegie Mellon, The Intel Science and Technology Center for Cloud Computing.
This research center, one of two that are part of a five-year $100 million program to accelerate innovation in key areas and reach out to increase university research, is a partnership between Intel data center experts and Carnegie Mellon researchers. Along with the centers, the program has seen the development of the Open Data Center Alliance, an association of Global IT leaders to define customer requirements for cloud computing.
The focus of the center is to resolve outstanding issues in device and task specialization, further research into automation for agility and scalability, increase results in the analysis of large bodies of data and explore the interaction between intelligence at the edge and in the data center.
This new expanded program will be openly inviting researchers from across the US academic community to take part in the process of identifying additional ISTCs by submitting information they consider vital as part of the consideration. In addition, Intel is looking forward to “tighter collaboration between university thought leaders and Intel” by publicly releasing results through technical publications and open-source software releases of the open IP models they intend to use.
The ISTCs which include the Intel Embedded Computing Center, “are expected to open amazing opportunities,” said Justin Rattner, Chief Technology Officer at Intel. These centers, the first expected to be awarded in 2011 and launch in 2012, will create a new cloud computing research community that includes ideas from the top academic researchers and broadens Intel’s “Cloud 2015” vision. For a look at that vision, and how this research center is at the heart of it, watch Intel Data Center Group VP and GM, Kirk Skaugen, discuss the future of the cloud. It’s a vision well worth considering.
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September 9th, 2011
“In three years… more than 80% of the devices connecting to the Internet will not be Windows-based personal computers.” This statement was part of a keynote speech by VMWare CEO Paul Maritz recently at the VMWorld sessions in Las Vegas. A long time executive at Microsoft in the 80s and 90s, outranked only by Bill Gates and Steve Ballmer, Maritz was in Las Vegas to talk about his vision of the future, the cloud and the Internet as a whole. He spoke of the need for new applications and new approaches as the cloud creates new realities for IT.
Maritz touched on many aspects of this change, including the growth of virtual machines, stating that a new virtual machine is deployed every six seconds, making the rate of growth faster than the U.S. birthrate. He also talked about how the evolution of data fabric will be a key to many upcoming changes. “The relational database cannot handle the way at which and the rate at which these applications are going to be developed. And out of this, we can already see the beginnings of the next canonical set of applications that will be about scale being in real time,” Maritz said.
The old world way of collecting data and storing it until the information is needed will become obsolete as the younger generation of users and IT workers, weaned on Facebook and Twitter, will demand real-time information. Although this change in how business intelligence is handled is not new, the focus of how it is evolving is. The ability to customize information whenever needed within the context it was requested is going to be crucial for future business applications.
This will be a challenge for many CIOs and IT decision makers and Maritz was quick to point out that with the vast majority of applications currently being produced by programmers under the age of 35, legacy systems and cumbersome methodology will need to move aside for new ways of looking at solutions and different ideologies.
“The problem is the people under the age of 35 don’t sit behind desks, and they don’t spend all of their time lovingly tending to documents” Maritz said. “They will be dealing with streams of information that will be coming at them in much smaller chunks and much larger numbers. We’re moving into a new post-document era, and we will need different solutions.”
The era of BYOD (bring your own device) is upon us and he cautioned that CIOs would be well advised to stop wasting time and energy fighting this inevitable change. We can no longer control what device the user has in their hands; IT cannot assume that they can make that happen anymore, he cautioned. The changes in the consumer world are going to drive that factor, and we might as well learn how to work with it.
“We’re going have to learn how to deliver capability to users independent of the particular device that they happen to have in their hands at that time of day, and do that in a way that’s not only secure on the one hand, but acceptable to the user in the other,” he said.
No matter how you look at it, change is coming. Are you ready for it?
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Image Credit: Jay Greene/CNET
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