With Cloud Computing, Look Beyond the Cost Savings

From Innovations, a website published by Ziff-Davis Enterprise from mid-2006 to mid-2009. Reprinted by permission.

Back in the early days of data center outsourcing, some pioneer adopters got a rude surprise.  These companies had outsourced all or large parts of their data centers to specialty providers who bought their equipment, hired their staff and offered attractive contract terms that shaved millions of dollars in expenses in the first year.

The surprise was that the contract terms weren’t so that attractive once the outsourcer became embedded in the client’s expense line.  Customers found that nearly everything carried hefty escalator fees, ranging from unbudgeted capacity increases to software patches to staff overtime. But there was little customers could do.  They were locked into the contractor and the cost of unlocking themselves was prohibitive.

This story came to mind recently during a chat with Bob McFarlane, a principal at facilities design firm Shen Milsom & Wilke. McFarlane is an expert in data center design, and his no-nonsense approach to customer advocacy has made him a hit with audiences around the country.

McFarlane thinks the current hype around hosted or “cloud” computing is getting out of touch with reality.  Cloud computing, which I’ve written about before, involves outsourcing data processing needs to a remote service, which theoretically can provide world-class security, availability and scalability.  Cloud computing is very popular with startups these days, and it’s beginning to creep onto the agenda of even very large firms as they reconsider their data processing architectures.

The economics of this approach are compelling.  For some small companies in particular, it may never make financial sense to build a captive data center because the costs of outsourcing the whole thing are so low.  McFarlane, however, cautions that value has many dimensions.

What is the value, for example, of being able to triple your processing capacity because of a holiday promotion?  Not all hosting services offer that kind of flexibility in their contract, or if they do, may charge handsomely for it.

What is the value of knowing that your data center has adequate power provisioning, environmentals and backups in case of a disaster? Last year, a power failure in San Francisco knocked several prominent websites offline for several hours when backup generators failed to kick in. Hosting services in earthquake or flood-prone regions, for example, need extra layers of protection.

McFarlane’s point is to not buy a hosting service based on undocumented claims or marketing materials. You can walk into your own data center and kick a power cord out of the wall to see what happens.  Chances are you can’t do that in a remote facility.  There are no government regulations for data center quality, so you pretty much have to rely on hosting providers to tell the truth.

Most of them do, of course, but even the truth can be subject to interpretation. The Uptime Institute has created a tiered system for classifying infrastructure performance. However, McFarlane recalls one hosting provider that advertised top-level Uptime Institute compliance but didn’t employ redundant power sources, which is a basic requirement for that designation.

This doesn’t mean you should ignore the appealing benefits of cloud computing, but you should look beyond the simple per-transaction cost savings. Scrutinize contracts for escalator clauses and availability guarantees.  Penalties should give you appropriate compensation.  While you won’t convince a hosting service to refund you the value of lost business, you should look for something more than a simple credit toward your monthly fee.

If you can, plan a visit to a prospective hosting provider and tour its facilities.  Reputable organizations should have no problem letting you inside the data centers and allowing you to bring along an expert to verify their claims. They should also be more than willing to provide you with contact information for reference customers. Familiarity, in this case, can breed peace of mind.

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