Sramana Mitra: And security? What is your strategy vis-à-vis security?
Diane Bryant: Again, that is step one on the security factor. What are the applications that are of high risk? We don’t put those into the cloud. Then we go through, and we have to look at compliance as well. We are in the early days of cloud and anything more mature. These aren’t black and white statements, but today compliance, more precisely compliances and auditing, is around physical service. You are looking at the application and the server that it’s running on and who has control over that server. What are the controls of that server?
We need to advance that to where you can associate an application and data to a virtual machine. Until that happens, we are just going to leave it on the dedicated hardware. It is easier to go through the soft compliance audit process. From security at the pool, the cloud pool, that is really a lot of what we have done in our proprietary implementation of the private cloud, which is integrating our data security solutions into that cloud automation solution. We know that all of our VMs, all of our apps are being updated with the latest security patches. It is part of why we won’t go to an external cloud. I know when I have a malware attack, I know I get the patch, and I know within X minutes we are updated against that patch. I am in control of that. I know that happens.
If I move my data out to the cloud, now I am trusting that someone has the same level of diligence to block that latest malware. I am trusting someone else to rapidly deploy that patch across my infrastructure, my applications. You are handing that off to someone. You need to trust that person. You need to know that it is going to happen and he has a service level agreement that you can fit into, you can trust. And I just think it is maturing; the external cloud world is maturing.
Sramana: What is the impact on the cost structure? If you look at free cloud in the cloud era, what is that doing to your core structure?
Diane: It’s a good question. Unfortunately, like every other question, there is no black and white [answer]. For one thing, let me give you an example. We our storage is growing 35% CAGR every year, 35% increase on our total storage capacity. It is ridiculous! So, what we thought was maybe the cloud, from the storage capability, maybe that is a good example of an external cloud. We went out and did pricing against it, and it was prohibitively expensive. you get charged based on X amount per gigabyte. You get one incremental cost and then you get charged based on every access, so you need to know how much more cost prohibitive it is. The data that I never got to access, maybe it is worth it to push it to an external cloud provider, get it off my tier one storage. That could be a cost savings, but if it’s data I am going to access, I could end up paying a lot for that source because I am getting charged based on each access.
So, the ROI is a tough one. You really have to go through the specific example to your collaboration suite. What am I going to offload? How is that going to drive up my internet network cost? How is it going to drive down my license cost, or is it going to drive down my license cost? And you just have to go through every line item that is associated with a given service that is provided by IT, and say is it going to be net up or net down if I go to a cloud? [With] my example of using external benefits and using SAP external cloud SaaS for Intel’s benefits and expense report, I would have to start a team to develop these applications and then run them. I am not getting any incremental value for Intel when I am doing that. From a net total cost of ownership ROI, is it worth it to put it outside? It becomes application-by-application or service-by-service specific, and the problem is that if you are a large enterprise and you are carrying that infrastructure, you have capacity, and you assume that you are running it well, your total cost of ownership of running around data centers is good. It is hard to find an external service that is going to save you money.
Sramana: But what about your move from the old architecture, from legacy architecture to a private cloud architecture? You have more control over that. What is the cost differential for that move?
Diane: I am sorry; I misunderstood. The benefit, yes, is huge, absolutely huge. Because building out a cloud means first lowering the amount of apps and then virtualizing the server and virtualizing the storage, virtualizing the network – we went through a network virtualization process as well – and then automating it. Internally, we will save $650 million over seven years.
It is that compelling value proposition of virtualization, to be honest, that is the big starting point, refreshing the services, having a beat rate of server refresh so that you are always running with the compute capacity per watt and then having that server be shared across the entire IT application suite. That process of refreshing servers, virtualizing and automating them to a cloud, that is a compelling value virtualization because you reduce data centers over time. We can send you the breakdown of how we got to $650 million, but we are on track. We are halfway there in 2011. We started in 2007. That is why I said to you at the beginning we are all compelled to do this.
Sramana: There is no argument. $650 million is a huge number.
Diane: It is a tremendous value proposition for any IT organization. It is just then how do you go about doing it? To your point, where are we in a maturity curve that the solutions exist to develop them internally? I don’t have the skill set. There is a lot that goes into it.