* The price advantage of a large site is claimed (claimed!) to be 3-5x that of a small site. But it would be insane for most businesses to rely solely on one cloud provider, and most likely there would be a requirement for local (not cloud) backup of all data as well. Add the cost of a much bigger internet connection, and it is not clear that there is a cost advantage at all for data intensive business.

* Cloud providers offer a “best effort” pricing, which is somewhat different from what onsite computing resources do in typical enterprises. I would be interested to see what kind of pricing they would offer for a specific SLA with consequential damages for example.

* The insanity of relying on a single cloud provider arises from having a single copy of the data in the hands of a third party is way too large a risk; and never mind that if you stop paying or have any dispute with the cloud provider you lose access to your data, which the cloud provider might even delete, even if nonpayment is temporary. Even just making a backup of the data might be too expensive (unless done continuously incrementally).

* Moving business data processing to the cloud, even assuming a strong SLA from the cloud provider, trades local data center availability risk for internet connection availability risk. The cloud may be 99.999% available guaranteed (again, I’d like to see the pricing for that), but is the full internet connection to it equally guaranteed?

But for one thing just imagine the complications in liquidation or bankruptcy of having all enterprise data with a service that won’t make that available unless they get paid first and ahead of all other creditors, and they want to get paid for all time the data has been on their servers.

What are the businesses that will take advantage of clouds? Well, those where lots of processing of small amounts of data is common, those where the business is intrinsically network oriented and data volumes are small, those that cannot get enough reliability locally, those where initial capital is scarce.

So for example offshoring businesses in 3rd world countries offering web based services are a perfect fit: they get access to 1st world class infrastructure, without any initial capital outlay, and most of their data needs are small.

However, one thing is very clear. For many purposes data has to be close to processing power for bandwidth and, even more importantly, latency issues. I think pure cloud storage has only limited appeal for many enterprises. Performance, scalability and availability matter hugely. Try running a large call centre with predictive dialing integrated into CRM systems to see what I mean.

It’s going to take time to work out how this shakes down. I have an idea that it might appeal more to small and mid-range customers first. For large enterprises with highly integrated infrastructure and systems with all that entails, then it’s going to initially be a bureaux service for a few discrete applications – probably invoked by a department with a bit of budget that can’t get the central IT system to deliver on time. With large enterprise struggling with configuration management, software licensing, asset management, support and so on for what are often thousands of disparate applications, this could add a further complication It will be rather like that when CIOs found that small, but critical parts of their Enterprise’s IT systems, now relied on an ancient server sitting under a desk in an office somewhere depending on the support of a contractor that was lost in a cost cutting exercise two years earlier.

On demand computing has its hidden costs. Control in IT enterprises matters – it’s not just the costs of trhe hardware or even systems support that matters. Enterprise IT is often a fight between the need for flexibility and speed on one side with and control and management on the other site. Complex, hybrid arrangements across different infrastructure provision with inconistant monitoring and management at different layers palgues many Enterprises.

On the flipside, those cheaper IDC BW rates don’t make much of a difference if they are shipping all the data to/from the IDC from the home office in Butte, MT. They either need a fat pipe on that end still, at $$$ rates, or else they’re not transferring enough data for that cost to be the deciding factor, I would think.

On the other hand, the network costs seem way too low. In many places, even in dense metro environments, customers are paying orders of magnitude higher rates for their Internet bandwidth.

I’m looking forward to your next blog post about cloud storage.