Jason Moulton, CEO, Home Team Financial Inc.

Jason Moulton, CEO, Home Team Financial Inc.

Get Onto My Cloud

Moving to virtual space for software, storage and more

Back Longreads Jul 1, 2010 By Andrea Lorenz

The savings totaled about $10,000 a month, not counting the $30,000 a month saved from employees working from home.

“It’s probably the smartest business decision I’ve made in five years,” Moulton says.

When Moulton approached Vital Networks Inc., a Sacramento information technology consultant, with the new financial constraints, the company suggested he sell the $100,000 worth of servers that Moulton’s company, Home Team Financial Inc., owned and get on the cloud.

“I didn’t understand what they were talking about,” Moulton says. “Then when they walked me through some of the cost savings, there was absolutely no reason for me not to explore it.”

About a year ago, Moulton started the process with the company’s proprietary software. By November, everything, including the phone system, was virtual.

Moulton says he’s now looking for a physical office for customers to visit, but the servers are gone for good.

“That’s done; that’s a done deal,” he says. “I’m never going back.”

Businesses in the Sacramento area — and around the world — have taken to cloud computing, using the “cloud,” rather than company servers for storage and in place of software uploaded on company computers for administrative tasks and essential operations.

Cloud computing is a major force in the growing trend to outsource IT services, which local consultants say will only increase in years to come.

“What you’ll find is that everybody is looking at the cloud right now — absolutely everybody,” says George Usi, the president of Sacramento Technology Group, a consulting company that was recently authorized to resell cloud-based Google Applications.

“Even the little, small businesses are saying, ‘Hmm, do I really want to go buy those licenses?” Usi says. “Or, do I want to buy another server to make all this stuff work? Or can I just move it to the cloud?’”

A kind of cloud computing that resonates most with the average computer user has been around for several years: Web-based email services such as Hotmail or Gmail, or Web-based programs that store photos online, such as Flickr. Rather than storing files or working in a program kept on one’s computer, users access files and programs through the Internet.

Cloud computing can be used to describe a more traditional form of outsourcing IT:  hiring another company to take care of technology infrastructure in a data center space. Another level of cloud computing includes using it as an actual computer desktop where users access all of the applications needed to run the business. On a smaller scale, the cloud is the location of basic software applications, such as email or word processing.

Usi compared companies moving to the cloud today to when factories started buying power from power companies rather than making it themselves. Factories once had to set up shop along a river and build water wheels to make their own power. When power companies came along, the factories started buying from the companies that specialized in making power.

“That’s the same kind of thing that’s happening now with different kinds of software,” Usi says. “The real value is in the software; it’s not in the middleware that the software runs on. That’s the most painful part. So what you really want is access to that software interface that runs your business.”

Last year, Computer Weekly dubbed cloud computing one of the fastest-growing segments of the IT industry.

Not only do businesses get the benefit of accessing applications from anywhere, but they also save money. No longer does a business have to buy costly software or hardware based on how much IT resources are needed at its peak time, leaving them dormant during normal business operations. Instead, businesses can contract with an IT company that offers cloud-computing services to tap into the storage and software programs necessary for the business to run smoothly.

IT companies are quickly filling the demand. Along with giants like Microsoft and Google, local startups and outsourcing providers are moving their clients to the cloud.

“Cloud is going to be the way that technology pushes,” says Todd Bollenbach, principal owner of GNT Solutions, a Sacramento-based company that provides technology support to small and medium-sized businesses. “The Internet’s going to be so fast, it won’t matter whether the applications are in your office or if they’re in a data center across the world.”

Fueling the trend, Microsoft plans to release the Office suite in a free Web-based version, which other companies, such as Google with Google Apps, already offer. Major companies, such as Amazon, IBM, Oracle and Dell, also provide cloud-computing services.

The idea for cloud computing surfaced in the 1960s, but it didn’t gain traction until recently. Google chief executive Eric Schmidt first used the term cloud computing publicly in 2006, according to a Wall Street Journal report, attracting international attention. Before this, according to Computer Weekly, Salesforce.com broke new ground by offering applications via the company’s website in 1999, making it one of the early developers in the industry.

Last year, Computer Weekly dubbed cloud computing one of the fastest-growing segments of the IT industry because of its low cost, which entices companies hit by the recession. According to the Wall Street Journal, estimates of the revenue accrued by cloud computing as an industry range from $42 billion to $160 billion, depending on the research firm reporting data.

There’s no set profile of a company on the cloud, according to IT executives. Companies that don’t need to have an office, such as travel agencies or language translation services, benefit from cloud computing, as do other kinds of companies with employees in several geographic areas. Even public entities, such as the city of Los Angeles, are moving email services and more to the cloud in hopes of saving money: forgoing mail servers, updating software and other necessities of running and storing one’s own data and applications.

Because of cloud computing’s ability to quickly add or drop services and capacity in an instant, companies such as those in the gaming industry have also moved more operations to it.

“Forever you had to size the IT environment for the peak load — the worst-case scenario,” says Denoid Tucker, vice president of technology of RagingWire Enterprise Solutions and its newest venture, StrataScale, a startup launched in the past year that focuses on cloud hosting.

“That’s one of the reasons virtualization has taken off so much, because most people realize that they have to overbuy and underutilize their gear to be able to accommodate peak loads,” Tucker says.

Cloud computing allows companies to add server space, for example, within minutes rather than the time it takes to buy, order and install new hardware. This scaling means big savings, he says.

As fast as the cloud is picking up — Bollenbach’s GNT Solutions has seen a 35 percent increase in the past two years — some hesitation still exists among business owners to move part or all of operations to the cloud.

“A lot of people will hear about cloud computing, and they’ll think it’s cool, but they don’t know how it will directly drive and pertain to their environment,” Bollenbach says.

A major concern with cloud computing is security, which IT executives say is being addressed via private clouds, vigilant monitoring and hybrid solutions where some information and applications are virtual on the cloud and others are in the physical world under lock and key in a data center.

Cloud computing poses a security risk by its very nature: A company’s data and programs are stored within a “cloud” along with data belonging to others, who are also accessing the same programs.

“If it’s on the cloud, it’s out there on the Internet, so you want to make sure when you’re sending stuff out there, that those lines of communication are secure,” Bollenbach says.

Keeping data and running operations in a shared, public cloud won’t work for companies that follow government privacy regulations, such as those in the health care and finance industries, so in these cases, as well as with larger, enterprise companies, the cloud still works, but these users pay a premium for their own private cloud. Companies are sprouting to fill the demand created by the federal government, which gives financial incentives for doctors to move their medical records to the cloud.

Estimates of the revenue accrued by cloud computing as an industry range from $42 billion to $160 billion.

But even the public clouds are protected, Usi says, and as the cloud becomes more common, people will be more comfortable that data is secure.

“This is something that happened in the ’90s,” Usi says. People had questions: “‘Do I really want to connect my computers to this thing called the public Internet. What is it?’”

With cloud computing, Usi says “we’re running into that same situation where people are saying, ‘do I really want to start working in the cloud and putting things out there where there could be security issues?’ What they find is that the cloud can actually be more secure than hosting it in your own environment.”

Especially for small and medium-sized companies with limited resources and technology specialists on staff, information-technology companies can ensure more privacy — and even reliability — because it’s their specialty.

Reliability was Moulton’s chief concern before switching to the cloud. Twice over the course of the company’s growth in two different locations, the air-conditioning went out where the servers were kept.

“You walk into the server room on Monday morning, and it’s 100 degrees in there, and you’ve got these red lights flashing, and you’ve got to call” the company’s outsourced IT provider, Moulton says.

He hasn’t had any such problems on the cloud, he says.

The valley, away from the Bay Area earthquake worries, has long made the city an ideal location for physical data centers, which bodes well for RagingWire and other IT companies with physical centers.

The combination of the two works well for companies that need to keep some applications and storage off of the cloud, Tucker says.

Another concern about cloud computing is bandwidth. Companies need to have fast Internet services so the applications run as smoothly and quickly as if the software was on the machine.

“As faster Internet connections become available, the more opportunity there is to migrate servers or entire environments to the cloud,” Eric Johnson, a managing partner of Vital Networks Inc. in Sacramento, said in an email.

Usi, whose company serves as a sort of guide to businesses to adjust and then operate in the cloud, says companies often don’t move there all at once. Some infrastructure, such as the phone system, might remain in the physical world, and that infrastructure has to work with the infrastructure in the cloud.

“The problem with cloud computing is it’s not an all or nothing proposition,” Usi says. “You can’t just flip a switch and be in the cloud.”

To ensure a smooth transition, Computer Weekly suggests companies ask providers where the data is kept, what security measures are in place and which, if any, third-parties can access data. Companies concerned about security could also get an independent security audit on potential hosts before moving anything to a cloud.

After all, as with Moulton’s experience, businesses moving to the cloud do so to make life easier, not harder.

“It’s a more seamless way to do business, and businesses want to spend less time focusing on technology and more time focusing on their business,” Usi says. “And working in the cloud is a way to do that.”

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