Virtualization or cloud computing: Which way to go?

Computerworld - For the past three years, HotSchedules.com Inc., an Austin-based provider of online labor-scheduling services, has experienced annual revenue growth of over 100% -- a boom that could have cost it $60,000 in server hardware purchases.

Yet HotSchedules.com has managed to support an ever-expanding network, enhance its in-house server security and deliver maximum uptime to nearly 375,000 users -- all while cutting hardware expenditures and stabilizing electricity costs.

The answer was virtualization, an increasingly popular technology as cash-strapped companies aim to cut capital spending on server hardware. Essentially, virtualization is a layer of software that lets companies consolidate several of their in-house servers onto a single piece of hardware. The upshot: the power of dozens of servers for a fraction of the price and space.

But virtualization wasn't HotSchedules.com's first stab at boosting its computing power. Back in 1999, it rented server power and storage for a monthly fee from a third-party provider -- essentially what marketers today call cloud computing. However, poor customer service, mounting costs and limited capacity prompted the company to finally make the switch to virtualization.

"The vendor provisioned a couple of servers and some memory for us, but that's all we got," says Matt Woodings, HotSchedules.com's chief technology officer. "We received poor customer service, and it just wasn't the best experience."

Companies such as HotSchedules.com are fast discovering that there's no such thing as a one-size-fits-all approach to bolstering your server and storage capabilities. Some argue that virtualization requires high-priced in-house expertise in exchange for greater security. Others applaud cloud computing's same-day scalability while at the same time questioning its overall reliability.

Even the cost savings loudly touted by well-respected vendors are being hotly debated. A controversial March 2009 study by consulting firm McKinsey & Co. concluded that for large businesses, shifting IT work to the cloud can be more costly (and less reliable) than owning the hardware in-house.

So how can a company decide whether virtualization or cloud computing is a better bet for its needs?

Mark Tonsetic, a program manager at The Corporate Executive Board's Infrastructure Executive Council in Washington, says the key is to make a selection "on a project-by-project basis, based on the nature of the application or data that's being supported." Each project, he adds, should be evaluated using criteria ranging from server workload demands and disaster recovery requirements to security risks and vendor.

In the case of HotSchedules.com, the deciding factor was the need to accommodate growth while keeping expenses down. On the brink of signing a large new client, the company realized that it would have to purchase $60,000 worth of server hardware, doubling the size of its data center, in order to accommodate the staggering computing demands of a sizable restaurant chain.