by Tony Greenberg and Alex Veytsel of RampRate

It’s not often that we get to be a part of something big and are able to talk about it. Sure, we negotiated groundbreaking deals for some of the biggest streaming events at the dawn of online video, saved buyers  hundreds of millions in IT spend, and enabled the coolest online games to be available worldwide. But between confidentiality agreements and letting our clients take the credit, there’s not much fame for RampRate. We have always boiled down IT  to nuts and bolts and simplified measurements, always asking the question for our clients- How much are you saying that strategic thing costs? Now the language will be properly socialized amongst key stakeholders in every executives place at the table. Consensus drives decisions and today  IT decisions become more actionable and measurable.

But today we get some reflected glory at least — because we put in our two cents to help our client eBay’s Dean Nelson launch a metric in his keynote in todays Green Grid Annual Meeting that’s going to elevate measurement of efficiency and cost from the IT level to the business level. There will be challenges in mass adoption of the metric, and it will continue to evolve. But, in an industry that’s usually a follower, eBay is pushing to have the data center business take the lead in measuring and optimizing to what’s really important.

Deconstructing DSE

eBay’s Digital Service Efficiency (DSE) metric, announced at Green Grid today, finally cuts to the bottom line of IT energy efficiency – what’s the amount of energy consumed for a transaction. By using the denominator of actual business volume, it enables all forms of energy saving measures to be weighted and traded off against each other; from more efficient CPUs, to better PUE, to right-sizing the data center, even to coding that minimizing energy consumption. eBay aspires to have it become the new “Mile Per Gallon” of the IT industry, making ”an end-to-end connection between what customers do and the fundamental business metrics they influence— including cost, performance, environmental impact, and revenue.”

Source: eBay

The pursuit of maximum energy efficiency is not new for eBay – it is consistently ranked as one of the most socially-conscious firms in the online industry by CSR Hub. Nor is it new for the data center team at eBay, which has published a number of case studies on groundbreaking PUEs, among other accomplishments. But what is new is the data center team taking a leadership role across all IT disciplines and saying “energy efficiency is everyone’s concern.”

Source: CSRHub

Next Steps – Cross-Industry Adoption

Of course, one adopter does not make an industry standard. eBay’s transaction may differ from the Gap’s transaction, which in turn definitely differs from a Ford, Boeing, Fidelity, or GE transaction. But the framework and foundation allows us to start setting standards for various industries and building towards best practices in a way that was much harder without it.

At RampRate, we’re going to be adding these metrics to our SPY Index for full IT outsource operations, PaaS, and online retail platforms, and ask the folks higher up in the stack to start tracking their work and output on a per-transaction basis where appropriate. This will help us engage those business level and financial decision makers in the buying process. It will help them identify misallocations in the budget by showing which levers affect the cost of the transaction the most / least and get them to invest in IT that really drives down the cost of each transaction as opposed to flashiest marketing or strongest internal voice.

We’ve dealt with per transaction price models on occasion for the last 5 years – just as we have pushed for energy efficiency with our clients since 2007, but there’s still a lot of work to be done before measurement of costs and efficiencies on a business metric level becomes the rule rather than the exception.

But even today we can start thinking of how to use DSE in other industries. For instance, we can document that when one of our gaming clients uses 50% of their allocated power on average instead of the industry-standard 75%, they’re not being wasteful – but instead using servers that are put on standby during off-peak hours. Without DSE, there’s no metric that properly rewards that design – PUEs are higher since data centers are designed for peak loads, processor utilization may be lower, and it looks inefficient by standard metrics.

But if we track, say, energy per gaming hour, that value now shines through. Similarly, maybe a digital media firm’s “transaction” will be a view, while a manufacturer uses a unit shipped. Other industry-specific transaction units may apply for financial services, pharma, etc. The important part is building a platform for a common comparison among things that are alike and then we can tackle the question of who’s more efficient across industries and start putting together dashboards consumable by the business and metrics that financial analysts will probe to predict performance.

Source: eBay

Going Even Bigger

In some ways eBay is taking off and flying when the rest of the industry is still stuck between crawling and walking. PUE measurement is far from universal or pursued. Plenty of outsourced data centers still settle for 1.5-2.0 when 1.3 has been achieved in a mixed environment time and time again. In-house facilities are often even worse. Most wholesale facilities providers refuse to commit to a PUE target while retail ones frequently don’t measure it lest they face the horror of having to provide metered power and lose a source of fat margins.

But even as eBay reaches high, there’s a loftier metric goal that the industry would do well to pursue; dropping the D in “Digital Service Efficiency” and looking at service efficiency overall and how digital contributes to a quantum leap.

When Jim Glanz shook up the data center industry with an assault on its energy usage a few months back, the best response to it came from the inimitable George Rockett at Datacenter Dynamics, whose riposte was a simple “well, what’s the other option? Computers in closets with PUEs that are unmeasurably bad? Or no computers? A few misrouted cargo planes would burn more fuel in a day than FedEx’s entire data center in a year. Functionality uses energy, and digital functionality uses less energy than anything that came before.”

And George is, in the end, correct. Computing is not a cost center for energy – it is a profit center. By measuring the cost of a transaction in the old world of retail – warehousing, spoilage, transportation, etc., it’s clear that the digital way is better. But thanks in part to the New York Times and similar popularization of the data center as a latter-day factory with hidden smokestacks, that’s not the perception among the masses or the politicians. And that invites all sorts of meddling that may not be warranted. If Digital Services Efficiency be correlated with Non-Digital Service Efficiency.

The Bottom Line – We All Have Homework

eBay has cracked the door. Now let’s swing it wide open. Let’s start building DSE for every industry, share experiences, and build cross-functional efficiency teams where for once the data center is the hub of the movement as opposed to the low man on the totem pole. Let’s start thinking about overall Service Efficiency and defend the industry from unwarranted challenges while highlighting the laggards that are genuinely wasteful.

And most importantly, let’s make this happen. How will and how soon will bring DSE to your organization?

THE CLOUD LIVES IN DATA CENTER

By Alex Veytsel- One of the panels I most regret missing at Data Center Dynamics annual London show last week, where our CEO spoke was a discussion of the future of data centers in 10-20 years. Fortunately I got to participate in the prep session for it in the speaker’s lounge, where brilliant folks like Ian Bitterlin, David Gauthier, and Ed Ansett kicked around ideas ranging from the pragmatic to the futuristic under the steady guiding hand of Ambrose McNevin (and I hope I got a shout-out if there was mention of pendulums or whale oil). Which got me to thinking – whether the amount of change is great or small, how will the way services are bought change over that time? What will be the sourcing process in 10 years?

The short answer: buyers will demand more transparency; vendors will give them just enough to continue finding more margin and feed the sales machine; and sourcing advisors will build a toolset to fit the right service for your business more automatically, with more just-in-time adjustment.

First, I would say that the commercial aspects of outsourcing are still the most stubbornly un-changeable ones. Just this year, I have reviewed a still-active contract written on Exodus Communications paper and multiple invoices based on racks and square feet in an age where everyone thinks of watts consumed as the primary / sole metric.

And 12 years in, RampRate’s mission has not changed much – there’s still billions in wasted IT spend through bad decisions; still too many people listening to salespeople instead of seeking out data, and a great terror of being exposed for one’s incompetence that leads buyers to run from their best sources of improvement.

That said, some things are starting to move. Cloud services, especially IaaS, brought unprecedented transparency to pricing. Not that there isn’t an opportunity to get off the price list if you’re big enough (or smart enough), or lack of clarity in the many customizations, or a pretty sorry state of tying pay to performance… well, perhaps, it’s not that big of a sea change – somewhat mirroring how much of the good old managed hosting paradigm still lives beneath the moniker of cloud. But it’s a start.

However, it’s clear that a buyer in 10-20 years will clearly want and expect more visibility into what they’re buying. This will manifest in several ways:

• Detailed price lists of commodities that are linked to the right pricing metric (no more mysterious “20 racks [10 useable]” line items that we see today)
• Public or well-known scale discounts
• Activation of scale discounts / surcharges based on demand (you use more, you get into the higher bracket)
• At minimum a gold / silver / platinum service level menu (or better yet, a continuum of options) that discounts services based on how much latency, downtime, and performance consistency a buyer expects
• Closer approach to pricing parity / true commoditization due to easier switchover / migration

So does that mean that I think RampRate will be out of business? Well, hardly. Even as much of the pressure of the competitive process (and the embedding of sourcing advisors into buying departments everywhere) will drive some improvements, others will stubbornly resist change:

• Direct sales forces will still retain immense influence, controlling introductory offers / strategic discounts and monopolizing certain large accounts, requiring continued fight for channel integration and reduction in commissionable layers
• Units of purchase will still be influenced by marketing, which will actively seek to differentiate their firm’s services by selling their own version of compute units that’s harder to match up to competitors in an “apples-to-apples” comparison
• Buying inefficiencies will still be encouraged by “all you can eat” pre-payment plans that offer the prospect of a small discount if things go exactly according to plan, but trap the buyer in an unworkable deal if business requirements change.

Compared to holographic storage, fusion power, and spending 80% of the world’s energy on computing, this seems like an awful lack of imagination. But considering that we see a predatory business logic still working even after the singularity happens and we’re all cyborgs built by nanomachines, perhaps it should not be surprising that the 10 year horizon is closer than you’d think. But that said, there will be better weapons on the buyer side in the arms race of data vs. salesmanship. We know because we’re building them already:

• Tools to optimize allocation of services (by application, business unit, or even process) to the right amount of fault tolerance (and therefore the right price) within each vendor, and across multiple vendors concurrently. Just as a single full-IT outsource contract is rapidly becoming a dinosaur, it will become more rare to be attached to a single data center, a single network, a single cloud, etc.
• An electronic due diligence process that tracks real-world performance across hundreds of buyers to give solid data on actual uptime, latency, PUE, and other metrics, rather than taking vendor’s word
• A translation engine that not only cuts through the differentiation efforts of vendors to the underlying commodity metrics, but also allows you to choose from data center, managed, or cloud depending on where on the maturity curve your IT department is and how strategic IT really is for you.
• An automatic contract writer that inserts the right terms and service levels for your business’ needs and finds the appropriate service within the vendor portfolio to support them.

This improvement in transparency will help drive redirection of some of the vendor differentiation budget from sales and marketing to transparency and service, lifting the tide for all boats – even non-users of sourcing advisory toolsets. It will also speed up the re-contracting cycle to where deals of a few months will be the norm even outside of the cloud environment – with a smoother, more well-oiled vendor selection process, a renewal / mid-term adjustment will be a less arduous process. And maybe, just maybe, the rest of the world’s outsourcing failure rates will start to resemble those of RampRate’s customers today (<1% for those keeping track).

It Aint Easy Being Green

Everything is about to change. Wow. A fluid market is starting to take place right before our eyes. Syzygy of software hardware and services, bundled into a piece of joy loosely labeled cloud. RampRate was founded to help companies cut IT costs, both supplier and user. For a decade, we’ve worked with hundreds of IT suppliers and advised many of the world’s biggest media, entertainment, finance and tech companies on these issues. I  always loved that Geico ad, but I  never realized the vendors AND  the clients would be happy post-RampRate cost chopping.

So you can imagine how delighted I was to read a smart little piece like this one from Chris Crosby, about cutting costs by moving to a highly standardized approach to data center construction. Yes, thats where the actual cloud lives and breathes.

Crosby cites the teachings of management guru Edwards Deming to explain why his company focuses on fewer component providers and consistent designs to reduce the headaches and misadventures that can result when every data center becomes a bespoke project created from scratch. As a CQUIP trainer of yesteryear, does anyone remember that>? That which can not be measured can not be improved.

His approach means systems that cost less, do the most important things that matter to most customers, are more reliable and more likely to be delivered on time. And by focusing on the most important functions, his company can really optimize what they’re creating for their customers.

It’s the same smart approach of another of RampRate’s regular collaborators, ServiceMesh, which provides an enterprise-grade platform for managing cloud-based applications. In working with a major Australian bank, for instance, ServiceMesh developed a standardized set of specs and connections for software creators that eliminates the need for custom-written programs of many kinds for the entire banking industry.

The standardized specs cut development costs, increase reliability and allow businesses to swap out programs without the attendant headaches caused by tech lock-in, long development cycles and more. In short, it helps businesses get on with doing their business, with fewer distractions trying to optimize their IT.

RampRate board advisor Peter Gross spent part of his last year at Hewlett-Packard helping that giant company create a highly standardized prefabricated approach to data-center design called, for short, FlexDC.

According to Peter, who now is with BloomEnergy using fuel-cell technology to get data centers off the main utility grid to lower costs and increase reliability, this approach creates savings in two ways: 1) leveraging the supply chain to get economies of scale in parts and 2) shifting labor costs from the data center site to a centralized and highly optimized assembly factory.

“It’s the way data centers will be built in the future,” Peter says. I think he’s right. The savings are too substantial for bespoke alternatives to adequately compete in most situations and for most needs.

More and more, businesses are understanding the value of these standardized platforms. As an advisor to many of these companies, RampRate is continually looking for smart  suppliers and approaches that can squeeze out unnecessary costs and focus on what companies need! In the telecom expense management space, which is about as archaic as frame relay, its time for a fresh look at how networks are really being built not how trunks and voice are being cut a speck of a penny. Ugh.

Admittedly, care needs to be taken in settling on a standardized approach. What can be a cost-saver can, if done wrong, be an overly limiting straitjacket. But for so many areas, the upsides are much bigger than the downsides when it’s done right.

So here’s my question for you: What is your company doing to reduce the cost of your IT spend? Are you looking at standardized approaches for development and implementation? Are you considering platforms that can simplify application development while meeting your cost structures and delivery windows? If not, why not?

SANTA MONICA, CALIF. May 16, 2012 – RampRate Sourcing Advisors, the premier sourcing advisor for IT infrastructure and cloud computing, has integrated CSRHub’s corporate-social-responsibility scores into its proprietary SPY Index decision hub, enriching it so that IT decision makers can evaluate how well vendors align with their corporate environmental, social, and community values.  VIEW PRODUCT HERE

 “CSRHub’s scores are an important addition to the SPY Index, taking the IT industry’s most comprehensive data set on services, prices and quality levels into a new dimension,” said RampRate CEO Tony Greenberg. “Now, we’ll also evaluate providers’ environmental and energy-conservation efforts and other factors, truly measuring total cost of ownership (TCO) and evaluating vendor impacts on your company’s triple bottom line.”

CSRHub rates about 5,000 publicly traded companies on their corporate social responsibility achievements, using more than 150 information sources that measure environmental sensitivity, corporate governance, community engagement and employee treatment.

“This deal puts CSRHub’s transparent, carefully derived scores to work in a tangible, effective way that fully values vendors’ social and environmental performance,” said CSRHub’s co-founder and COO Cynthia Figge. “It will help smart, forward-thinking companies better decide which vendors should be their business partners.”

“First costs may not matter as much as they have in the past,” said John A. “Skip” Laitner, Director of Economic and Social Analysis for the American Council for an Energy-Efficient Economy. “Instead, providing total value-added services for the customer will likely drive future loyalty and business. Those businesses that shift to a new dynamic that engages and empowers their customers, and that delivers high-quality and value-added services have the best chance to secure a robust economic future.”

Customers of RampRate (www.ramprate.com) can now access CSRHub scores in RampRate’s vendor evaluation scorecard. The top-level element, called “Alignment with Industry and Community Goals,” will allow buyers of data centers, support, and other IT services to assign a weight to social responsibility in their overall vendor evaluations.

The SPY Index database will include the weighted CSRHub scores in creating a prioritized list of vendors based on their alignment with client goals. Conversely, vendors will receive feedback on their performance on this and other dimensions along with guidelines for improvement.

For companies that wish to more deeply explore their scores and those of their partners, CSRHub offers subscription services, peer analysis, and custom reports to monitor organizational performance.

“Choosing the right vendor can dictate how the public and your customers perceive your company, as recent headlines have shown,” said RampRate board member Peter Gross, P.E., a long-time champion of energy-efficient data centers. “Now, more than ever, it is important to know who you’re doing business with and how they do it, far beyond just pricing and service levels. In the long run, this approach is better for the IT decision maker who wants to create a positive public perception and build customer relationships.”

Former Microsoft executive Will Poole of CreativeCap.org helped midwife the deal, calling it a natural fit that extends the SPY Index’s power to measure a deal’s true return on investment (ROI).

“The definitions of TCO and ROI are changing rapidly, with a growing recognition that many more factors are involved than once thought,” said Poole. “This deal, bringing together organizations with the best information for different parts of those new definitions, will help companies serve the triple bottom line far better.”

The announcement builds on a long-term RampRate strategy of incorporating social responsibility components as a key dimension in IT services. RampRate’s Greenberg has long been involved with the Clinton Global Initiative in encouraging more efficient data-center design to reduce negative environmental impacts. RampRate also has worked with Green Grid and other industry organizations dedicated to propagating environmentally sensitive tech practices.

About RampRate

RampRate is the premier sourcing advisor and decision hub for IT infrastructure and cloud computing. RampRate has delivered proven results for more than a decade, finding the right outsourced IT partners for more than 125 of the world’s most important companies in finance, tech, entertainment, and beyond.

About CSRHub

CSRHub provides access to corporate social responsibility (CSR) and sustainability ratings and information on nearly 5,000 companies from 135 industries in 65 countries. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

Media Contacts

Tony Greenberg, CEO

RampRate Sourcing Advisers

310-319-1599

t@ramprate.com

Cynthia Figge, COO

CSRHub

425-392-9993

Cynthia@csrhub.com

About RampRate
RampRate is the premier sourcing advisor and decision hub for IT infrastructure and
cloud computing. RampRate has delivered proven results for more than a decade,
finding the right outsourced IT partners for more than 125 of the worldʼs most important
companies in finance, tech, entertainment, and beyond.

About CSRHub
CSRHub provides access to corporate social responsibility (CSR) and sustainability
ratings and information on nearly 5,000 companies from 135 industries in 65
countries. Managers, researchers and activists use CSRHub to benchmark company
performance, learn how stakeholders evaluate company CSR practices and seek ways
to change the world.

Media Contacts
Tony Greenberg, CEO
RampRate Sourcing Advisers
310-319-1599
t@ramprate.com

Cynthia Figge, COO
CSRHub
425-392-9993
Cynthia@csrhub.com

SANTA MONICA, Calif. – April 24, 2012.  RampRate (www.ramprate.com), the premier sourcing advisor for selecting locations and vendors in IT infrastructure and cloud computing, today announced that data center innovator Peter Gross has agreed to become an advisor to the company.  By joining RampRate’s advisory board, he will play a key role in guiding RampRate’s 125+ top enterprise clients as they manage the challenges of energy consumption and social / environmental impact in their data centers.

Having been a voice of innovation in the data center industry for decades, including his role as founder and leader of EYP Mission Critical before and after its acquisition by HP, Mr. Gross continues his transformational role in Bloom Energy’s Mission Critical Practice. With Bloom Energy, he will apply the world most efficient natural gas-powered fuel cells to sustainably and consistently power data center facilities, while substantially reducing their carbon footprint. Today, companies must be mindful of their environmental and social impact. They are looking for new ways to efficiently cut energy costs, specifically in their data centers, without sacrificing performance, and Bloom Energy is an integral part of the most revolutionary development in the field in decades.

“RampRate has been the secret sauce ensuring successful IT sourcing in finance, entertainment, tech and other sectors for more than a decade,” said Peter Gross, vice president, mission critical practice, Bloom Energy “I’m excited to join their  advisory board and further contribute to their global trajectory and success. How companies deal with the challenges of energy sustainability in IT is a crucial question. Together, we can help RampRate clients get the right partners and deal structure to be efficient and socially responsible in their entire data center footprint.”

“Peter has materially impacted every business he has touched, driving innovation in data center practices and infrastructure design to improve energy efficiency and performance for dozens of years,” said Tony Greenberg, CEO, RampRate. “With Bloom Energy, he will once again transform the way the world houses and powers enterprise IT services. His commitment to innovation, sustainability and smarter IT practices will inform everything RampRate does in advising its enterprise customers on the best fit for their IT and networking needs.”

This appointment adds to the company’s momentum as the most innovative and fastest growing global sourcing advisor for IT infrastructure. The addition of Mr. Gross highlights the company’s path in making energy efficiency and social responsibility an integral element in vendor and site selection projects of its enterprise IT clients, which include names like Microsoft, News Corp., Hearst and dozens of startups. Across hundreds of projects, 77 countries, and billions of dollars in spend, RampRate is helping companies redefine how power and energy is viewed and used in internal data centers as well as outsourced co-location, managed hosting, and cloud services.  It is currently on-boarding several partners and expanding its Service Provider Intelligence index to include hundreds of social responsibility and energy efficiency criteria.

About RampRate

RampRate is the premier sourcing advisor and decision hub for IT infrastructure, telecom and cloud computing. RampRate has delivered proven results in time, cost, and risk reduction for more than a decade, becoming the go-to-resource for 125 of the world’s most important companies in finance, tech, entertainment, and other industries. With consultative expertise and transactional focus, RampRate works with CIOs, CTOs, CFOs and procurement organizations at every step of their IT service evaluation and purchasing process, from needs analysis and baseline, to benchmarking, to identifying the right solution from across the gamut of established and emerging technology options.

Speed thrills, especially near the speed of light. For Wall Street traders, speed creates new fortunes on the world’s fastest networks, for makers and users both.

But those technologies require lots of money and brainpower, creating questions about unfair advantages for privileged insiders with the fastest networks and best relationships, even as regulators ponder what to do.

Welcome to the future, where winners are determined by who arrives first with the most intelligence. Whether it’s making a killing with a million-dollar trade, snagging choice concert tickets,  or sniping an eBay auction, technology’s next big leap is nearly here. Low-latency networks will reshape most industries, even if they never approach the speed of light.

Finding Alpha Between Each Tick of the Clock 

Through my firm RampRate, I have watched companies pay big money to get even a mile closer to the trading floor. Trading speeds have accelerated to millionths of a second, with nanosecond reactions coming. Sophisticated financial traders are zipping in and out of positions in less than a heartbeat, generating billions of dollars in arbitrage profits.

“The people who are upset with the leaders of the pack (for being) like genetically altered Olympic hopefuls hopped up on performance-enhancing drugs are people who want to be big players,” says Chuck Ocheret, formerly head of Deutsche Bank’s platform solutions. “But they don’t have good alpha-generation principles, and aren’t smart enough to achieve ultra low latencies anyway.”

But are the millions spent optimizing latency (some of which trickle down to my company, which advises companies on the right co-location centers and networks) truly creating market efficiency? Who really needs this speed?

How Low Is Low? Depends on Your Business

Low latency is heady stuff. But not all industries need to flirt with the speed of light t to create competitive opportunities now. What counts as low latency in your industry will be a crucial differentiator in your success.

“Latency matters a lot and means different things, depending on where you are in the value chain,” says former BBC and CBS digital chief Mark Kortekaas. “On the one extreme are the high-frequency traders where physical distance is crucial. On the other is the time it takes for an end user to see your service.  Google has said even half-a-second delays to search results significantly drop traffic.”

So, speed is vital, but so is perception. Companies such as Gomez and Keynote prevent latency gaffes a user might notice that can affect brand image, customer satisfaction and employee productivity. Slow can be a blow, no matter the industry.

The most likely immediate low-latency candidates are industries with lots of bidding or trading and massive data analysis. Financial news outlets are obvious, the velocity of information creating arbitrage potential. Companies such as Activ Financial not only get the news to traders faster, but interpret it too.

Auction sites are ripe for adjustment, as seen with eBay “sniping attacks.” So too is the legalized gambling of the penny auction. Second place in a penny auction is worse than not playing, because you’ve spent money on all those penny bids, yet bought nothing.

STATS LLC provides sports fans (bettors) rich, fast data on 234 sports, including pitch-by-pitch and play-by-play updates, using the same analytic concepts used in financial markets. Betfair.com, the UK gambling giant, uses high-frequency data to respond to news that causes rapid adjustments of prices and odds.

 Who Profits? The Infrastructure Play

In my work, I’ve seen buyer approaches range from bashful to brazen. Some clients strongly prefer specific geographic and network topology locations that we know are close to trading floors. Others say money is (almost) no object if it speeds their London-Singapore link by 10 milliseconds.

Hibernia Atlantic is building a $300 million trans-Atlantic cable to cut data transmission 6 milliseconds compared to Global Crossing. Spread Networks just linked Chicago to New Jersey with a high-speed connection. And if anyone figures out how to bore straight through the Earth, you can be sure they’ll have customers.

Eyebrows are raised particularly when exchanges themselves sell low-latency links. Nasdaq’s co-location business has been under regulatory scrutiny since 2009, and the NYSE is seeking special permission from the SEC to sell more co-lo.

Others can’t help wondering if this game is rigged. Are some competitors being kept away from fast links? And do some others get a cross-connect a few feet shorter, and few slices of a second faster in even the best locations

Many of these complaints are spurious, but can’t be totally dismissed. Markets thrive on confidence and transparency, and when people suspect cheating, they stop playing.

The blame game is not reserved to unsuccessful players. Complaints erupted after 2010’s “Flash Crash,” when the Dow Jones Industrial Average plunged more than 600 points in 5 minutes, and then magically bounced back 20 minutes later.

High-frequency traders did have a role in the crash, but analysts have said they were not at fault, there or in similar events.

Some believe high-frequency trading unfairly advantages a privileged few. Others complain that it disrupts conventional trading. And though it creates undeniable efficiencies, it also creates undeniable perceptions of impropriety, which may outweigh benefits.

What Now?

Despite calls for more regulation, these networks are moving forward, evolving quickly. Already, more than 60 percent of U.S. financial trading (and a third of European trading) filters through an HFT platform. With physical laws doing what man’s laws cannot in limiting speeds, some believe current concerns will soon go away.

“Unless we change the laws of physics, the high-frequency/low-latency game has played out,” writes Larry Tabb of the Tabb Group research firm. Tabb says we ask the wrong question in wondering whether high-frequency trading is bad for the market. It’s already been transformed, with more to come.

“We have seen a 2,000-fold drop in average core-trading latency in the last three years, and I think the move to measure trading latency in picoseconds is nearing,” says Christian Sommer, Intel’s director of capital markets.

It may be that the need for speed will simply hit a wall. Even measuring latency in picoseconds requires such sophisticated tools that it practically requires a CERN physicist. After all, a picosecond is to one second as one second is to 31,700 years.

“Light travels 30 centimeters in one nanosecond,” says Neil McGovern, Sybase’s senior director of strategy and financial services. “So if light can go only a fraction of a centimeter in a picosecond, how much faster are you going to get?”

In which case, markets will have to look elsewhere for competitive advantages, like being smarter. High-frequency, low-latency architectures will just be tools for executing a strong alpha-seeking strategy.

“The truth is that if you really have the talent on board smart enough to achieve true ultra low latency,” says Ocheret, “then you are probably smart enough to make money without it.”

A friend of mine in the research industry used to give out little post-it-notes to trainee analysts that said “be wrong boldly.” Her reasoning – if you are bold and right, you will be hailed as a prophet. If you’re wrong, most likely the crowd will have moved on by the time your prediction fizzles. But accountability for our past advice is a core value here at RampRate, so we have to see how we did on our 2011 predictions – and see just how well our crystal ball was working. By our count, we have 4 hits, 2 partial hits, 1 miss, and 3 TBDs that won’t be known until later. What do you think?

1. Everything that’s old will be new again – we predicted that the main technology splashes 2011 will be retreads. The year was a bit short on new fads compared to 2010, with most of the top tech gifts like new tablet PCs and phones being evolutionary rather than revolutionary developments. The one true innovation that we got to participate in — the purely electric car — is, however, a classic reprise. The first electric carsheld speed records and went head to head with internal combustion (and steam) in early days of the industry only to be trounced by cheap gas. With several major manufacturers mass-producing all electric cars, the old electric car new again, making this prediction a hit. 
2. Markets will stay irrational longer than companies stay solvent – although the year was a busy one for data center and telecom M&A activity, most of the acquisitions were hardly fire sales. And while there were 9 telecom bankruptcies for the year, the only ones that made it into the top 20 were in satellite communications. That said, bets on rapidly rising data center prices have continued to not pay off as RampRate customers typically saw material per-kilowatt cost decreases in their renewals and greenfield projects, leaving the prospect of further shakeout down the road and a partial hit for the prediction.
3. A large firm will overpay to jump on a bandwagon - while most of this prediction covers 2012-2013, there are several examples of cloud / data center acquisitions that start off on the hype path, such as Verizon’s purchase of Terremark at 5.4x annual revenue and a 35% premium vs. market and CenturyLink’s Savvis purchase at 3.2x revenue and an 11% premium vs. market prices (which would have been a 53% premium had it been bought at the same time as Terremark). Time Warner’s purchase of NaviSite (albeit at a smaller 1.9x revenue multiplier) completes the trio. We wish these folks all the best, but the prediction still stands as TBD.
4. More CDNs will be built and fail – Dan Rayburn’s list of current and former CDNs keeps growing. However, 2 of the main exits of 2011 and the first week of 2012 – Cotendo and Voxel – could be considered successes, and Tata’s pickup of BitGravity at least a salvaging of a mediocre situation. So this one will be a miss… for now. Some catastrophes like Amazon web Services failed it customers, but not financially for Amazon.
5. More peering disputes will be recast as net neutrality - As predicted, Netflix CEO Reed Hastings elevated this issue to headline levels by publicly lobbying Congress for a better deal for its provider. Others such as Global Crossing and Voxel followed suit, leaving a harried AT&T and a cable providers’ industry group pleading with the FCC to decide on the issue. Regardless of the outcome, the prediction is a hit.
6. The media industry will step into another content rights PR nightmare – Ah, where to start? Should it be the inability to sell Hulu – the one digital property that the media industry nurtured to prominence due to content rights issues? My favorite suitor was Amazon. Or with getting half the internet to mobilize against the SOPA and PIPA legislation? Or yet another single-player game rendered inoperable by remote server failure – but only for legitimate users? A clear hit.
7. A top exec or politician will demonstrate technology cluelessness matched only by his / her influence on the industry. This year’s Ted Stevens memorial award goes to the many sponsors of SOPA and PIPA, with special mention for Mel Watt (D – NC) and Maxine Waters (D – CA).
8. Security restrictions will cripple productivity without actually improving security. Without another scandal to stir the pot, the pace of silly security measure adoption has been slow. With the UK government actually moving to more, rather than less sanity on allowing open source software, we were about to label the prediction a big miss. But between proposals to build a whole separate secure internet and contributing to LA’s inability to migrate to Google apps, the FBI salvaged a partial hit for us on crippling government productivity for the sake of security aspirations destined to fail due to simple social engineering.
9. Analysts will invent a new acronym destined to melt away by 2013. It’s altogether too easy to say that an acronym or buzzword will fade away. A bit harder to say which one will. Will “gamification” join “protail” (forecast to be a $1.5B industry by 2012 as of 2008 and nonexistent by 2011) in the dustbin? Or will it be underperformance of a hyped segment like PaaS joining data loss prevention’s failure to deliver ($2B in 2012 as forecast in 2008; $832M in 2015 as forecast more recently)? We’ll rate this one as incomplete for now. I  certainly hope this stuid world cloud gets contained or it will be the greenwash term of the decade.
10. Something big will be lost in waves of hype. This one won’t be final until 2018, but Gartner has some guesses. Then again, most of their guesses from 2009 either stayed in the same place on the curve or disappeared, as predicted by number 9. Incomplete.

So, all told, we didn’t do badly, certainly not compared with other prognosticators of more wobbly consistency and clarity. Only one outright miss, and three others that will take a while more to fully determine. That leaves us batting, more or less, .600 with prospects for further improvement. That’s enough to get into the Pundit Hall of Fame, presuming of course than any other pundit actually bothered to look back at what they used to predict would happen before things actually did happen.

Up next, predictions for 2012.

2011 was a very busy year for us at RampRate. I’ve spent nearly 20 years, on many sides, of the technology business and I enjoy reflecting across large swaths of time to see if there are patterns, lessons, and advice, so let’s see what we get from 2011.

Cloud Computing Won’t Whisk Us Away to Oz

In all my years of global technology, I’ve never seen anything with such marketing hype, vapor, and semantic nonsense as “the cloud.” I find it very simple to define and work with public or private shared hosting, but the industry at large seems to have an insatiable need to stamp “cloud” on everything from hardware to web based email services. The marketing noise does not translate into dollars however. The amount of total industry revenue for what I define as “cloud”, which consists solely of public access shared hosting with self managed provisioning and automated scaling, was somewhere around $750M in 2011 (http://cloud-computing-today.com/2011/06/30/quantifying-cloud-computing-market-share-2/). This is a good number, but as global technology markets go, not that impressive. It is lower than the total sales of a single company like Akamai or Equinix. The “analysts” predict a future market size as high as hundreds of billions of dollars. Are these the same ones that predicted this for the dot.coms in 1999? I remember you analysts! And although I use a public cloud platform every day, and I do find it compelling, I don’t see public cloud infrastructure, as is, becoming the type of global market devouring force that the analysts love to write about. Why? Because public access services will have a hard time keeping up in terms of performance, service levels, and customer service with dedicated private hardware, especially in a complex network environment. Shared computing has been around for decades- if it was going to be the mainstream leader, it would have been so back when SSH was still considered novel. I do feel that public cloud computing will grow as a market- just not eat the entire market. Colocation and managed hosting will be around for a long time to come.

Lesson learned? Don’t believe the hype. Again.

New Jersey Is The Future

I love the sound of it. And I don’t mean that Chris Christie is guaranteed to win a national election. New Jersey is the future because, strangely enough, it has become one of the hottest datacenter markets in the world. I used to live in Santa Clara, California, the epicenter of the datacenter industry where the likes of Exodus (now CenturyLink) got their start. I moved to northern New Jersey a few years ago and the datacenter trend followed me. IO Datacenters (http://www.iodatacenters.com/) bought the New York Times printing factory with 100MW of power and is turning it into a location for their container based datacenters. Wipro (http://www.wipro.com/) and HCL (http://www.hcl.com), two of the largest managed hosting and IT outsourcing providers, have established their major US bases here in central NJ. Telx (http://www.telx.com) is building a huge datacenter and office building in Clifton, NJ. Digital Realty Trust (http://www.digitalrealtytrust.com) is in Weehawken near the Lincoln Tunnel and just opened 10,000 square feet. And the list goes on. This means that IT jobs, leadership, international trade, R&D, and many other great economic indicators may well follow.  NJ’s native son, Thomas Edison, would be proud. I just hope one of the datacenter companies hires Jersey Shore’s Snooki as a spokesperson like Godaddy (http://www.godaddy.com) uses racing pro Danica Patrick.

Lesson learned? Where there are ports, international airports, lots of people, economic centers, and seismic stability, there will be datacenters. Follow the population density and international proximity. Not everyone will build datacenters in rural areas.

Content Delivery Networking, Again

I would be remiss if I didn’t reflect on my alma mater, the CDN industry. I was very proud to hear that Ronni Zehavi’s Cotendo (http://www.cotendo.com), and its Speedera and Akamai expats, got swept up by Akamai just like my old company Speedera did in 2005. A few years back, Ronni Zehavi and I sat down in the Empire State Building’s Heartland Brewery for lunch. He asked me

“How do I succeed in the CDN market?”

“Focus on performance,” I replied.

“But I have a great business model involving selling really cheap bandwidth,” he said, in that hardened determined Israeli way I have grown to know and love since my days at early Israeli startup VDOnet.

“There is an infinite supply of bandwidth,” I said, repeating the same thing I have repeated since 1997, “and infinite supply means a continuous collapse in marginal cost and price. The secret is to sell services that enhance performance and reliability. These are products that will garner a premium, and by definition are I short supply, since if you can deliver performance, you are setting yourself apart from the market. This is what worked at Speedera and Netli, and will work for you.”

Ronni listened (I’m sure to many who said the same thing as I did) and lo and behold, succeeded both in customer count and now exit strategy. Congrats Ronni, Michel, Walter, and all of your team…

The CDN market continues to grow. All CDNs vendors that deliver performance and customer service continue to grow. Without CDNs, the internet will shut down. The telcos and other “logical” players continue to attempt their single network strategies that haven’t yet competed on a successful scale with the pure play CDNs. History keeps repeating.

Lesson learned? As my old boss Carlos de Andrade, legendary music producer and studio owner in Brazil once said,

“I like to sell expensiveness.”

We Have Been Instructed Not To Negotiate With You

2012 will mark six years that I’ve been at RampRate Sourcing Advisors. If you search for “sourcing advisor” on Google, RampRate is the 5^th link that comes up. This tells me we represent an abstract enough concept that, with no fancy search optimization, we wind up listed on the first page.

For the curious, a Sourcing Advisor is an expert buyer that one hires to help negotiate, renegotiate, or secure a new contract. They exist for cars, real estate (buyers agents), and in our case, for IT infrastructure contracts. RampRate has been around for 11 years. We’ve seen the size, complexity, and scope of our projects grow every year, and we feel we’ve barely tapped the potential in the market because there is just so much of it. Markets are inefficient. Contracts are hard to deal with. Most companies won’t employ dedicated staff to occupy seats to negotiate contracts that only come up every few years- hence they call us. We analyze and advise on best practices for these contracts every day. However once in a while, we get a vendor who tries to make it hard for us (and therefore the vendor’s client who employs us). One would think that a vendor would be excited to work with a focused professional who knows exactly where pricing, terms, and service levels should be, and work with a team whose sole job is to help them get a contract closed rather than having to schedule time with a busy client. But every so often we see stalling tactics, crazy pricing, attempts to circumvent our process, and other odd behavior. Why do they do this? They know we know the contract’s outcome. They know we are hired by the client. Is it ego? Frustration with confronting market reality? Whatever the reason, it takes extra energy for us- our execs have to do more face to face meetings, our analyst and client teams have to put in more time, all to get the vendor back on track and get the contract closed. After all these years in the industry, one would think that all sides would know the game, get it done, and move on to the next opportunity. But even after all this time it doesn’t work that way.

Vendors should be happy to work with sourcing advisors because we:

• Have incentives to close deals quickly
• Reduce closing time because we already have data on what is possible in terms of prices, SLAs, and terms
• Aren’t distracted by any internal projects like clients may be- we don’t have any fires to put out- we solely are focused on working with vendors
• Have experience working on thousands of deals around the world so long sales cycles are not needed
• Are hired to represent the clients- which is a sure sign that the client is ready to make a decision
• Can help retain clients that may be leaving- we make sure that the contract that is signed won’t be a future risk of going bad and that the client will be happy
• Can bring new deals

We are far more efficient to work with than clients are. We don’t need to be wined, dined, or sold. We want to get the contract done so the vendor can move on to more sales. Work with us! Don’t try to go around us- we will help you get the deal closed!

Lesson learned? People are still the essence of business. No amount of numbers, technology, or process can replace the effort required by a dedicated team to produce a result.

Wrap Up and Forecast

2011 wasn’t a radical year in RampRate’s part of the technology industry. The evolution of mobile devices is fast moving, but datacenters and giant server farms are monolithic slow moving organisms that have long lifespans. “The Cloud” has to live in a datacenter too- the more energy that goes into it, the more the datacenter contracts will have to happen, and this will continue to keep us busy helping vendors and clients establish the best possible relationships.

For 2012 I predict strong growth outside of the USA for the datacenter industry. There are billions of people coming online, not with 300baud modems like we had in 1982, but with high resolution smartphones that have broadband. These people will want data, media, and transactions- and lots of them, and serving them is harder outside of North America due to cost of capital, regulations, and business climates. I look forward to helping clients around the world build and serve a population that will hopefully have access to information, and to the rest of the world.

by Alex Veytsel, Steve Lerner and Tony Greenberg
As published by Microsoft TechNet 

In the 10+ years that RampRate has advised buyers of IT infrastructure services, few technology options have been as polarizing as “the cloud.”  In some organizations, a public cloud deployment is viewed as an immature technology if not a passing fad, with any cloud outage eliciting a chorus of “I told you so.” In others, it is a panacea that appears at the end of every strategic roadmap for every application.

The true position is at neither extreme. Public cloud computing is a tool for a job, which fits some buyers and projects today, and will fit more of them as both cloud technologies and application development practices continue to mature. It is the heir to many technologies that were initially viewed with an equal measure of skepticism and enthusiasm in the past – from co-location to content delivery networks to virtualization technologies rebranded by some vendors as “private clouds”.

The key question is not whether it is a great technology or a flawed one – it’s both, particularly flawed when misapplied – but what cloud service is the right fit for your specific jobs, whether today or in a few years, and what you should do to prepare.

Public Cloud in the Big Picture

Public cloud infrastructure is a trendy label that has been applied (and misapplied) to many services along the spectrum of managed hosting. For the purposes of this article, the cloud services we are addressing are:

• Infrastructure as a Service (IaaS) – open architecture public cloud platforms such as Amazon EC2
• Platform as a Service (PaaS) – development platforms such as Microsoft Azure
• Software as a Service (SaaS) – application delivery such as salesforce.com

At a minimum, the Public Cloud solution must exhibit the following features:

• Most key design decisions belong to the vendor
• Automatic provisioning
• On-demand scaling or elasticity, often with charge-back reflecting per-hour rather than per-month charges

Figure 1 Hosting Spectrum for Cloud and Non-Cloud Deployments. Source: RampRate

Public Cloud Buyer Profile

As part of getting buyers towards an optimal decision, we use a scorecard mechanism to weight priorities vs. solution strengths. Historically, public cloud buyers — whether starting new projects or attempting to migrate legacy applications — have shown the following attributes compared to their colleagues that opt for other forms of managed hosting:

• Higher risk tolerance. Moving into the cloud does entail some early adopter operational risk. It is a market where several of the top providers have a history of outages, and customer service standards are not always enterprise class. public cloud buyers are all too aware of the risk and seek to hedge it in other ways – whether through application resiliency or provider diversity.
• More emphasis on price. The TCO on a public cloud platform may not always be lower, but the sticker price usually is, and it does attract the cost-conscious buyer.
• More emphasis on scale up than out. Buyers of public cloud services want one thing — on-demand compute capacity/storage — done at scale, rather than a broad portfolio of infrastructure and telecommunications offerings.

Figure 2 Priorities of cloud buyers

Heir to Multiple Legacies

The profile of the cloud infrastructure buyer bears many similarities to early adopters of other infrastructure approaches as well. However, crucial differences remain, based largely on alternatives to each technology available at the time of its initial uptake:

Co-location

• Similar to public cloud, early fears with regards to outsourced shared data centers often focused on security concerns that were largely, though not always, overblown
• However, unlike public cloud, the adoption of early data centers was less about scale and price than about operational health (i.e. uptime) – to be precise, a specific mix of resiliency and cost that found a sweet spot in the market. Yet it was still not a solution for all buyers. A closet with an air conditioner served for the buyer with minimal uptime concerns, while true Tier IV data centers for the maximalist were (and remain) rare and expensive, and are still built as often as rented.

Content Delivery Network (CDN)

• CDN adoption was similar to today’s public cloud infrastructure in the role of scale. Steep and unexpected demand on the infrastructure is a key driver for both services. CDN was also similar in offering usage-based billing in place of capacity-based charges of alternatives – supplanting the traditional per-Mbps charge model with a cost per gigabyte transferred.
• However, unlike public cloud, CDN adoption during its early days was less often a price driven decision, and more often a question of technical fit and performance. Questions like “Does the CDN support a specific streaming media format?” “Does the increased price for bandwidth increase my revenue from my website?” “Can it generate unique URLs to keep my content secure?” “Is it faster than my own servers?”, and even more mundane concerns like “Will the caching mechanism blow up if my file size is too big?” were more top of mind than, say, support for a specific OS version is on a public cloud infrastructure.

Implications for the Public Cloud Buyer

For both co-location and CDN – now mainstream and mature services – the same growing pains of unexpected outages, indifferent customer service from market leaders, and the prospect of smaller providers winking out of existence kept the initial risk profile high. Yet, when the dust cleared, the key attributes of choosing each one — operational health for data centers and technology fit / performance for CDNs — remained as key guides to the core value.

Similarly, buyers who put scale and price first will eventually drift to the public cloud. Risk tolerance only determines where in the technology maturity cycle they will make the leap.  If on-demand growth at a low cost is your primary goal, then the public cloud should be somewhere on your roadmap now. If your top of mind concern is ability to control and fine-tune the performance profile or retain backwards compatibility with retained legacy components, it may be best to proceed more cautiously, building private cloud competencies that can be extended to public cloud services in the future.

Most legacy applications have implicit assumptions about operating systems, hardware, geography, latency, throughput, scalability, governance, access rights, monitoring and other aspects that must be carefully addressed before deploying to the public cloud.

by Alex Veytsel, Steve Lerner and Tony Greenberg
as published by Microsoft TechNet 

When faced with the many opportunities afforded by a cloud infrastructure—on-demand scale, potential cost reductions, elimination of complex maintenance processes, etc.—the decision to build a new application in a public cloud is often a no-brainer, especially for the buyer with the mindset of prioritizing agility and speed-to-market over customization and the perceived security/reliability advantages of internal infrastructure.

Migrating an existing application, however, is a different beast. Most legacy applications have implicit assumptions about operating systems, hardware, geography, latency, throughput, scalability, governance, access rights, monitoring and other aspects that must be carefully addressed before deploying to the public cloud. Some of these have been addressed through the experiences of adapting these applications to function correctly in a private cloud, but the provisioning of shared resources in a public cloud remains a more difficult leap.

Migration Decisions

When deciding whether or not to migrate existing functionality to the cloud, the decision criteria are more complex than for new builds. Key questions in “cloud planning” include:

• Should I migrate to a public cloud (and if so, which one), or a private cloud within my existing data center?
• How can I tell if my application can be moved to the public cloud at all? Should I engage in an application remediation strategy to accommodate such a move or rebuild from scratch?
• Should I hybridize my application to move some part of functionality to the public cloud while keeping other components on an internal private cloud?
• When should I consider public cloud SaaS solutions for my end-users, and how should I approach the build? If so, is portability across multiple heterogeneous clouds important for my application and how can it be achieved?

For those enterprises that are just beginning their journey and not yet ready to tackle the full depth of analysis needed for migration, we offer a few rules of thumb for the first few questions above. However, it should be noted that this is only the first step. For organizations with large application portfolios, it is important to go beyond these rough guidelines and establish a consistent scoring and evaluation across disciplines and departments, so that they can effectively prioritize those best suited for cloud migration. More thorny issues of formalizing these rules as well as dealing with governance issues of regulatory constraints, security restrictions, access rights, and SLA commitments often wind up being solved with another technology layer of planning and governance software.

Public Cloud vs. Private Cloud

Many of the advantages of the public cloud can be achieved with a private cloud capability as well — by deploying similar mechanisms used in a public cloud, but within the existing data center and implementing an on-demand, API-driven orchestration layer. Key criteria that would lead buyers to choose this approach instead of public cloud include:

• Predictable Demand — if you know what amount of compute capacity and storage you will need a year from now, you can provision virtual or even dedicated servers to meet the demand. If every month brings new surprises, private cloud deployments can prevent overprovisioning waste or under-provisioning congestion, not to mention the stress of hitting tight deployment windows.
• Consistent Demand — for services that have the same amount of volume each hour, day of the week, and each month, a private cloud deployment may make sense. The same goes for those whose divisions have that peaks are asynchronous enough to benefit from optimizing utilization among disparate user groups.  When considering projects in industries like retail (with a Black Friday spike and a broader December plateau) or online games, where winter weekends spike demand, the public cloud becomes more attractive.
• Tight Coupling Between Apps and Devices — if an application is tightly integrated with other applications or hardware (such as network attached storage devices) that you are not yet ready to move to the cloud, it may encounter latency issues or other problems when moved by itself. A private cloud deployment will help mitigate this issue.
• Specific Network Access — if applications are required to access specific networks for connection to clients, offices, or other network dependent entities, private cloud may be the only choice due to the ability to deploy hardware on a specific network or mix of networks.

How to Diagnose Moving Difficulty

In our experience, the customers that could benefit the most from moving to the public cloud were often the ones least able to do it due to core assumptions in the design of their applications. Some of the ones we have seen in the past include:

• Hard-coded Geography and Network Topology — applications may have implicit assumptions as to where they are on the network and in the world. Hard-coded IP addresses are the easiest example, but other decisions may assume geographic or network hop proximity to resources that the cloud instance will no longer have nearby.
• Tight / Undocumented Latency Needs — in designing data center deployments, we have worked with buyers whose SAN needed to be no further than 20 feet away from their servers because their applications would time out otherwise. In a cloud environment, even if your storage is in the same location (not always guaranteed), it may be a mile away in the same data center campus.
• Extreme Throughput — many cloud storage providers shy away from high performance database storage altogether because of an inability to hit IOPS targets. Even services ostensibly designed to support databases don’t always offer the consistent high throughput of dedicated hardware.[1] Applications built on high-performance throughput assumptions may not be able to adapt to the more variable – if not outright lower – performance of their cloud instance.

If your application faces multiple constraints such as the one above, it may be worth it to look to the next generation and build for the cloud in the next major release rather than try and adapt existing functionality built on the assumptions of certain latency, throughput, and location.

Hybridizing Apps

Another interim step is “hybridizing” an application to run some instances or functionality in the public cloud while retaining the core on an internal private cloud. Key decision criteria that would make this approach desirable include:

• Limitations in Existing Infrastructure — a hybrid approach is often useful to overcome specific gaps in the original design. For example, if a company has a single data center on the West Coast of the U.S., a public cloud extension or instance can better serve customers on the East Coast or in Europe while retaining centralization / synchronization to the master database.
• Low Cost Added Availability — a Tier IV data center can cost up to 50% more than a Tier III data center while offering only 1.2 more hours of uptime annually. So when your app must be available 24x7x365, a light version of an app hosted in a public cloud that can hold down the fort during datacenter outages or maintenance can be a life saver at a fraction of the cost of extra redundancy.
• Event-Based Demand Spikes — if your spike demand (say due to a promotion or media coverage) is different from your regular demand profile, it may be possible to build functionality just for that extraordinary bulge in the public cloud, trading in some performance for extra flexibility. The interface or functionality or response time might be a bit off, but your one-time spike users will never notice.

The Final Step: Migrating Apps to SaaS

The last key migration question is when to make a more wholesale change from a client application to software as a service (SaaS), and if so, how much to rely on pre-built functionality of a PaaS or SaaS vendor rather than developing in house. Rather than a classic migration dilemma, this is more of an architectural decision, and is made at a more strategic level based on the following questions:

• What’s Less Predictable: Configuration or Access? — the bane of the desktop application is the plurality of desktop hardware and software configurations and the possible conflicts this engenders. If the desktop is not locked down, client-side apps are harder to build and support than browser-based apps. Conversely, if access to the internet is more inconsistent, then SaaS often runs into problems absent client-side workarounds, while local apps work better.
• Can I Support Constant Releases? — a major advantage of SaaS approaches is the constant addition of incremental functionality. If developing significant functionality in-house but without tight QA controls, this advantage can turn into a liability quickly, as bugs are introduced along with new features on a weekly or monthly basis. The discipline of the development process becomes key.
• How Much Lock-In Is Acceptable? — IaaS approaches, while not perfectly interchangeable, can be switched with relatively little pain. PaaS and SaaS platforms are much easier to get started on but may be much harder to leave. If Microsoft or salesforce.com is a strategic vendor that you trust implicitly, the tradeoff is worth it. If you envision changing platforms down the road, a more generic approach may be better.

Conclusion

The decision to choose public or private cloud-based solution is not trivial even for new builds — a stigma of risk still hovers over the industry given outages at some public cloud vendors. When migrating existing applications, the risk threshold is even higher and buyers still often choose to only dip their toes by virtualizing within existing data centers or building extensions in the cloud while keeping the core as it was.

As public cloud technology matures, the aspect of risk will start to fade away. What will remain is the tradeoff between easy / rapid scale on one hand and customization / control to accommodate application-specific environments on the other. And as connectivity becomes more ubiquitous, and development discipline reduces the need for fine-tuning hardware, all three flavors of public cloud: IaaS, PaaS, and SaaS, will become increasingly viable targets, not just for new apps, but for migration of legacy functionality.