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Moving to the cloud – the cap-ex calculus


william franklin.jpgGuest post by William L. Franklin
VP, OpenStack and Technology Enablement, HP Cloud


This is my third invitation to you to join an imaginary dinner party for Fortune 500 CIOs. The A-list guests are the movers and shakers of global enterprise IT. They are drawn together by the theme of the dinner: “Determining the right type of cloud for your IT and business environment.”


Every CIO at the table knows that their enterprise – and possibly their career – is at risk if they ignore the cloud. They are each challenged to lead their enterprise into this New Style of IT. How should applications be evaluated? What makes sense technologically? What makes sense financially?


I hear these questions all the time as I introduce HP Helion, based on OpenStack® technology.


Cap-ex vs. op-ex

As intriguing as cloud technology is, deciding which software to promote, or migrate, to the cloud usually ends up being a business decision. It is often better decided by an MBA with a spreadsheet than by a data center engineer with a spec sheet. Like so many things in business, it comes down to finding a balance between capital expenditures (cap-ex) and operating expenditures (op-ex). The great promise of the elastic cloud is that it can free the enterprise from having to overbuild the IT infrastructure to handle peak loads. The new adage is “own the base and rent the peaks.”


Here is a back-of-the-napkin explanation of that new wisdom. Let’s say you estimate your IT needs for the next year. Your budget is approved, you buy all the servers, drives, and switches, and you install it all in your data center. If your forecast turns out to be wrong – say you use only 40 percent of your maximum capacity – then you overspent by 60 percent. You have tied up a massive amount of capital that can’t be freed up until it depreciates.


Cloud can help you avoid locking up precious capital. With the flexibility of the cloud, you don’t have to build for peak events. You can provision your data center to handle average demand, then tap the public cloud to meet spikes. Then reacting to an unusual surge in demand becomes just another operating expense. Capital is not tied up for years.


Avoid cloud-in-a-box

There is a wrinkle in this reasoning that every CIOs at our dinner party needs to understand. It has to do with the way they implement their clouds.


Fortune 500 enterprises have been slow to embrace the public cloud due, in part to, data security concerns. Most Fortune 500 companies already have huge data centers, so it will be easy to set up a private cloud on their own infrastructure – with no connection to the public cloud.


A hermetically sealed private cloud will be safe and secure within the data center. It will likely benefit from efficiencies in the cloud workflow, but the enterprise will still own – and pay for – 100 percent of its compute capacity, even on days when only 40 percent is used. An on-premise private cloud, trapped in a data center, cannot scale beyond the metal on which it resides. It cannot burst to accommodate demand. It still must be over-provisioned to handle peak loads.

The CIO who is running a private cloud can correctly state that the company has “moved to the cloud” – running applications with cloud architecture. However, that cloud remains boxed up in the data center. The IT architecture may have changed, but the capacity and the economics remain the same.


data explosion.PNGYou’re going to need a bigger box

Industry research forecasts that data growth will outpace traditional private data centers. By 2020 the world will be generating 44 zettabytes of data – that’s 44 billion terabytes according to the IDC report, The Digital Universe of Opportunities: Rich Data and the Increasing Value of the Internet of Things" April 2014.


To handle such unprecedented demand – much of it spiking day-to-day or even hour-to-hour. Enterprises will be compelled to take advantage of the vast capacity of the public cloud. This points to a hybrid cloud model: operating privately most of the time, then bursting into the public cloud as needed.


HP Helion, built on OpenStack® technology, lays the foundation for a hybrid cloud environment. HP Helion is the culmination of everything HP has been doing with cloud, OpenStack technology, and hybrid cloud delivery. It provides the agility, interoperability and security that enterprise CIOs need today.


For CIOs who are sitting back and taking a wait-and-see attitude, OpenStack software is a reality today. OpenStack is running on both private and public clouds. HP’s public cloud is based on OpenStack technology, and our flagship private cloud, Helion CloudSystem, offers OpenStack-based capabilities. Every day workflows are passing from private to public clouds and between public clouds.


Looking back

After dinner, as the plates are cleared, our assembled CIO’s will start to reminisce. Dessert will be served with a generous helping of nostalgia as they swap stories about technologies they have loved or hated, and business opportunities that were a hit or miss.


It’s much easier to look back than to look ahead. No one can foresee all the changes that a hybrid cloud world will bring, but every enterprise CIO is determined to not miss the updraft that is pulling their business up into the cloud.


Read William Franklin’s previous posts in this 4-part series.


Wherever you are on your cloud journey, HP is prepared to help take you to the next level. For more information about HP’s Cloud strategy and solutions, visit the HP Helion website and follow us on twitter at hphelioncloud

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