Author Archives: David Shepard

About David Shepard

David Shepard is CEO of Exacent, a global provider of on-demand enterprise-grade infrastructure. For more information visit www.exacent.com.

Money Crunch

The Credit Crunch Is Leading Many Organizations To Outsource Asset-Intensive Legacy Processes

Market conditions are always a driving force in organizational spending, and the current environment is no exception. But in 2009, in addition to cost reduction, companies are now evaluating whether they can maximize their scarce credit availability by outsourcing capital-intensive IT functions that were traditionally “off limits” to these sorts of exercises or simply not technologically feasible.

Now, leading organizations are addressing not just the effective use of a third party expense platform, but also are evaluating the use of OPA — Other People’s Assets.

As with everything in business, outsourcing moves in cycles. In the early days of enterprise computing, when mainframes and huge computer systems were the only option and the cost to purchase was high, the only model that made sense was to outsource. However, as technology changed and developed — and as credit became more readily available — many organizations spent large amounts of capital to build and manage their IT infrastructure.

IT infrastructure comprises the data center, servers, routers, switches, firewalls and more — all of the components that make up the back end of your e-mail, CRM, ERP, Web sites, Blackberry servers, file servers, print servers, etc. IT infrastructure is core to every organization and it is not cheap, especially when you want to ensure you are doing it right.

Technology is a powerful enabler of these considerations, and nowhere can this more clearly be seen than in industry of outsourced IT infrastructure and hosted IT infrastructure. Technology has developed to a point where now the highest performance infrastructure can be allocated to multiple users. Companies such as VMware and Cisco have pioneered virtualization. This technology now allows hosting to go to the next level. No longer are hosting companies providing low-end servers and storage to their customers. With virtualization hosting, companies are now providing Fortune 100 quality infrastructure. Access to this type of technology can be a game changer, but at a minimum provides end users with the best opportunity to leverage their IT infrastructure.

Hosted infrastructure is very simply utilizing the above mentioned resources that are owned by someone else. There are multiple benefits to hosted infrastructure, including: specialization by your hosting provider (hosting is their core business), access to typically better infrastructure, newer infrastructure, higher performance, etc. And in times like these, perhaps the most relevant benefit is no capital outlay. In a time when capital is scarce, spending on only what you need and not making a major asset investment in infrastructure could be the difference between being buried in debt and fighting to the top of your market.

Emotion is perhaps the most difficult obstacle to overcome when evaluating an outsourcing decision. Wehave already touched on the fact that the job can be done internally. But another emotional aspect is tied to a person’s job, and if something isoutsourced then someone, maybe even the person doing the analysis, might put themselves out of work.Outsourcing has always been associated with people losing their jobs. But in reality, just the opposite istrue. If an organization is using capital to grow instead of building its IT infrastructure, more people will have opportunities and more jobs will be available.

Outsourcing of IT infrastructure and the use of hosted infrastructure are being utilized by nearly every large organization, and it is growing in the small and medium business sector. In the next five years, nearly every organization will benefit from outsourcing, whether it is their Web sites, e-mail, file servers, offsite storage or their entire data center. Organizations are realizing very quickly that it is more efficient to allocate their capital to grow their business than to buy servers and routers.

Cloud Computing

Cloud Computing: Better, Faster, Cheaper?

Cloud computing is the latest buzzword in information technology (IT), and depending on who you talk to, you will get a different answer as to what exactly cloud computing really means.

Some refer to cloud computing as SaaS (Software as a Service), utility computing, managed services, Web services, outsourcing, etc. The term is so hot as a marketing tool that every business wants to somehow be associated with it, making it that much harder to define. While a popular buzzword, cloud computing also has very real and beneficial practical applications.

Cloud computing is not the first and it will not be the last buzzword used in IT. The one constant in IT is change and it occurs at a rate much faster than in most other industries. Ultimately, the drive behind the spread of cloud computing as both a marketing term and practical business application is the bottom line. Better, faster, cheaper is always something that technology providers and consumers want.

Efficiency and performance are touted with cloud computing because they are two of the key metrics in every business decision. They are critical measurements of success in any process/technology improvement or investment. No organization should invest in a project if it does not measurably improve the status quo, and efficiency and performance are two quantifiable ways to track this. In IT, servers, disk (storage), memory, space and power consumption are all easily quantified, and gains or declines in efficiency and performance can be measured down to the second.

Historically, many organizations have failed to look at these IT components individually or even at an aggregate level to measure the true cost of their IT infrastructure. Now, organizations large and small are determining that building, owning and operating their IT infrastructure is one of the most significant operating expenses they have. A principal reason for this is that most organizations operate their IT infrastructure very inefficiently, as IT is not their core competency. This inefficiency can be tracked from their internal data center (typically a small space in their office) through their individual servers. The data center is the heart of an IT infrastructure providing power, conditioned air, and telco connectivity, all to support the server and associated infrastructure. Independent studies have shown that the average server utilization is less than 20 percent. Even if the server is only using 20 percent of the resources, it is using 100 percent of the power. This type of inefficiency is very common.

Directly associated with cloud computing and its expanding recognition is virtualization. Virtualization, like cloud computing, has many definitions depending on who you are talking to, but the simplest explanation is that virtualization allows the resources of various types of hardware to be shared.

Virtualization has exploded in no small part due to VMware’s ESX software. ESX is software that allows organizations to run multiple different operating systems on the same computer. These operating systems run separately and securely from the others, but allow for utilization of the same memory, processor, storage and power, based on the individual operating system needs. This is an example of how increased efficiencies and performance can be gained with virtualization and, by proxy, cloud computing. No longer is there a one-to-one relationship between an operating system and a server. Individual servers running on a server with virtualization software can run optimally, utilizing resources from the pool as needed and giving them back when they are not.

So what is cloud computing, and is it truly better, cheaper and faster than a traditional architecture? Cloud computing is so nebulous at this time there is no clear answer.

The answer to the second part of the question is a little more straightforward, and that answer is yes — but a qualified yes. Consumers need to be aware of the “pretenders” that are offering cloud computing services and also be aware of the level of service they can expect. Whether they are working with a large provider that is trying to sell subscriptions to their unused space or a small cloud computing provider that is pushing very poorinfrastructure, they need to understand exactly what they are getting. Consumers need to know that they are receiving better efficiency and performance per dollar spent. It is beneficial to work with providers that are exclusively operating in this segment who do one thing extremely well.