Is Google Your Next Data Center?

Cloud computing is changing the way we think of the IT department.

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With hosted IT services, West says, "you don't have to buy the hardware and software; you just subscribe. There's not a lot of capital outlay. The attraction to that is huge."

Moreover, hosted services providers such as Google Inc. and Amazon are making pricing transparent. Google Apps (which includes e-mail, word processing, spreadsheets, presentations and calendaring) is priced at $50 per user per year, says Matthew Glotzbach, Google's director of product management. Amazon says its Simple Storage Service (S3) is priced at 15 cents per gigabyte each month.

"We've removed so much of the friction by being transparent about prices and not having to have lengthy contracts and negotiations," says Adam Selipsky, vice president of product management and developer relations at Amazon Web Services in Seattle.

Although the bulk of Amazon Web Services' customers are small firms, it has also signed up big players such as The Nasdaq Stock Market LLC and The New York Times, says Selipsky. In fact, he says that adoption among enterprise customers has happened "a little quicker than we would have imagined."

"The choices we have about what we do in-house and what we can have outsourced continue to improve," says Beach Clark, CIO at Georgia Aquarium Inc., whose Web farm is hosted off-site by a third party. But Clark says he believes that IT activities that are core to the mission of a business will continue to be handled internally.

For instance, Clark's five-person staff handles most of the aquarium's online ticketing support and much of its business intelligence work -- functions he deems critical -- even though some of the programming itself is outsourced.

Chance of Problems

The shift among enterprise IT organizations toward hosted infrastructure services is real, says Paul Major, managing director of IT at Aspen Skiing Co.

But even though he finds the prospect of outsourcing IT infrastructure support to third parties "appealing," Major raises one of the red flags that have played a role in curbing widespread adoption among big companies.

"My concern is what happens if [the service provider's] business model flops and someone comes in and buys them," says Major. "How do I go back in and get my data and format it? I'd rather keep it local and keep it under control."

For that reason and others, Storage Networking Industry Association Chairman Vincent Franceschini believes there will be "many shades of gray" when it comes to adoption of hosted IT infrastructure services among Fortune 2,000 organizations.

For instance, the chemical and avionics industries have vastly different business processes and data workflows. But at the core of both is intellectual property that companies "very much want to be controlling," says Franceschini. So while companies may outsource some level of rote IT infrastructure activities to third parties, he says that "it will take some time" for core business applications -- particularly those containing IP -- to move off-premises.

If anything is going to cause a slowdown in managed services adoption by enterprise customers, it's concern about data protection, says Nick Sharma, senior vice president of infrastructure managed services at Satyam Computer Services Ltd.

There are other reasons that many CIOs are still resisting the hosted IT services model. "I think there's going to be a swing back to a more traditional [on-premises IT support] model because IT departments are understanding that users want to interface with a real human being in English," says Carmen Malangone, director of IT at Coty Inc., a maker of fragrance and beauty products. "That's one area where these [managed] services fall short," he says, alluding to the use of offshore service reps whose English language skills may be spotty.

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