A couple years ago I attended several "fast pitch" competitions and events for entrepreneurs in Southern California, all designed to give startups a chance to "pitch" their ideas in about 60 seconds to a panel of representatives from the local investment community. Similar to television's "Shark Tank," most of the ideas pitches were harshly critiqued, with the real intent of assisting participating entrepreneurs in developing a better story for approaching investors and markets.
While very few of the pitches received a strong, positive response, I recall one young guy who really set the panel back a step in awe. The product was related to biotech, and the panel provided a very strong, positive response to the pitch.
Wishing to dig a bit deeper, one of the panel members asked the guy how much money he was looking for in an investment, and how he'd use the money.
"$5 million he responded," with a resounding wave of nods from the panel. "I'd use around $3 million for staffing, getting the office started, and product development." Another round of positive expressions. "And then we'd spend around $2 million setting up in a data center with servers, telecoms, and storage systems."
This time the panel looked as if they'd just taken a crisp slap to the face. After a moment of collection, the panel spokesman launched into a dress down of the entrepreneur stating "I really like the product, and think you vision is solid. However, with a greater than 95% chance of your company going bust within the first year, I have no desire to be stuck with $2 million worth of obsolete computer hardware, and potentially contract liabilities once you shut down your data center. You've got to use your head and look at going to Amazon for your data center capacity and forget this data center idea."
Now it was the entire audience's turn to take a pause.
In the past IT managers really placed buying and controlling their own hardware, in their own facility, as a high priority - with no room for compromise. For perceptions of security, a desire for personal control, or simply a concern that outsourcing would limit their own career potential, sever closets and small data centers were a common characteristic of most small offices.
At some point a need to have proximity to Internet or communication exchange points, or simple limitations on local facility capacity started forcing a migration of enterprise data centers into commercial colocation. For the most part, IT managers still owned and controlled any hardware outsourced into the colocation facility, and most agreed that in general colocation facilities offered higher uptime, fewer service disruptions, and good performance, in particular for eCommerce sites.
Now we are at a new IT architecture crossroads. Is there really any good reason for a startup, medium, or even large enterprise to continue operating their own data center, or even their own hardware within a colocation facility? Certainly if the average CFO or business unit manager had their choice, the local data center would be decommissioned and shut down as quickly as possible. The CAPEX investment, carrying hardware on the books for years of depreciation, lack of business agility, and dangers of business continuity and disaster recovery costs force the question of "why don't we just rent IT capacity from a cloud service provider?"
Many still question the security of public clouds, many still question the compliance issues related to outsourcing, and many still simply do not want to give up their "soon-to-be-redundant" data center jobs.
Of course it is clear most large cloud computing companies have much better resources available to manage security than a small company, and have made great advances in compliance certifications (mostly due to the US government acknowledging the role of cloud computing and changing regulations to accommodate those changes). If we look at the US Government's FedRAMP certification program as an example, security, compliance, and management controls are now a standard - open for all organizations to study and adopt as appropriate.
So we get back to the original question, what would justify a company in continuing to develop data centers, when a virtual data center (as the first small step in adopting a cloud computing architecture) will provide better flexibility, agility, security, performance, and lower cost than operating a local of colocated IT physical infrastructure? Sure, exceptions exist, including some specialized interfaces on hardware to support mining, health care, or other very specialized activities. However if you re not in the computer or switch manufacturing business - can you really continue justifying CAPEX expenditures on IT?
IT is quickly becoming a utility. As a business we do not plan to build roads, build water distribution, or build our own power generation plants. Compute, telecom, and storage resources are becoming a utility, and IT managers (and data center / colocation companies) need to do a comprehensive review of their business and strategy, and find a way to exploit this technology reality, rather than allow it to pass us by.
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