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To Build or to Buy ? That is the Question

CDW’s 2011 Cloud Computing Tracking Poll found that 37 percent of SMBs have developed a strategic plan to adopt cloud computing and that in five years, they will spend 33 percent of their IT budget on cloud computing.  Further, they expect they will save over a quarter (28 percent) of their total IT budget with cloud computing in that time.  With that in mind, the build or buy debate tends to focus more on the ‘buy’ side as SMBs consider the benefits of data center colocation versus newer alternatives such as Software as a Service (SaaS) and other variants of cloud computing.

With cloud computing growing in popularity, the question at hand is:  Is it more practical for SMBs to collocate their data centers in hosted facilities or completely bypass that option and head into the cloud?  First, let’s briefly clarify the two:

Data center colocation: Typically provided as a commercial service, this option allows SMBs to rent data center space in a third party facility that provides necessary pipe (network connectivity to the Internet) and ping (network response).  Space is usually leased as individual rack units, cabinets, cages, suites, rooms or facilities.  Whatever the unit, the SMB customer has a claim to specific space and equipment within the colocation facility, regardless of how fully they use it.  If their requirement exceeds their rented space and equipment, they need to negotiate additional capacity or make alternate arrangements to meet it.  Costs to the customer are relatively fixed and based primarily on the capacity reserved for them, not on the volume of usage

Cloud computing: By moving to the cloud, SMBs have the ability to store and process data over the Internet.  For clarity, CDW defines cloud computing as a model for enabling convenient, on-demand access to a shared pool of configurable computing resources that can be rapidly provisioned.  The SMB customer typically pays monthly for the volume, or throughput, of their cloud-based applications and can scale usage up or down according to their needs, paying only for what they use

Colocation vs. Cloud

Colocation provides data center facilities, and the customer provides their own applications.  Cloud computing includes software applications and services as well as data center facilities, all integrated delivered as an instantly scalable service.  Both options provide networking and cost-saving benefits, and SMBs can benefit greatly from either solution.

Data center colocation provides SMBs with the opportunity to house dedicated computing infrastructure (servers, network devices) in a shared facility instead of building a dedicated server room or data center within their primary location, capturing economies of scale and saving money on facilities infrastructure and maintenance.  While on-site data centers can require significant investments and overhead, there is no one-size-fits-all answer for every organization.  Some organizations prefer to make the capital expenditure upfront in their own data center and look for payback from long term savings.  Others prefer to avoid the capital investment and count on savings over the contract term of a colocation center.

Colocation does offer SMBs customizable services to ensure they are getting exactly what they need.  In turn, networks, bandwidth, redundancy and connectivity become less expensive and often more reliable than on-site, owner-operated facilities.  Data center colocation also allows businesses to free up internal networks and increase Web access speed, while electric bill savings from the reduced power consumption will help offset the colocation costs.  Additionally, many colocation facilities are moving toward green power sources such as solar or wind to reduce the carbon impact of their energy use.

Many colocation providers also offer additional technical support, which is beneficial to smaller businesses that may not have the budget to employ experts to address challenging IT issues.  However, it is important to understand the limitations noted in any service-level agreement, such as the availability of the provider’s support team.  While some colocation providers offer around the clock support, others do not.  If that is the case, work with the provider to obtain off-hour access to the facility for your own staff, and have a fall-back plan in place.

The data center colocation marketplace operates under boom or bust economics.  In 2001-2003, data center space became a commodity, leading to rapid expansion.  Looking ahead today, it is difficult to determine whether there are enough data centers to meet the growing demand for colocation services.  Much like any other type of real estate, there are cycles, so if you expect your business to grow, plan ahead.  Choose a provider that has high speed connectivity to another facility and has an expansion plan in place.  Contracts vary, so be sure to find the one that is best suited for the unique needs of your SMB.

On the other side of the debate, cloud services not only include the facility savings of colocation – they also deliver integrated computing applications, storage, backup and additional infrastructure as a service.  The ability to compute in the cloud is not location specific – cloud customers are not tied to specific devices or pieces of hardware.  Instead, the Internet acts as a new ‘facility,’ which provides access to the various applications, and the cloud is much more flexible than on-site or collocated facilities.  With a click of a mouse, scalable resources and support are available to meet business needs around the clock.

Discussing cloud computing, it is important to recognize that there are several fundamentally different approaches, including:
Public cloud: The cloud infrastructure is made available to the general public or a large industry group and is owned by an organization selling cloud services.  Most commonly used services here are application-specific – for example, Salesforce or Microsoft Office 365 – and pricing is often on a simple, cost-per-seat-per-month basis

Private cloud: The cloud infrastructure is operated solely for one organization.  It may be managed by the organization itself or by a third party and may exist on premise or off premise.  CDW’s Cloud Computing Tracking Poll found that most IT decision makers, in SMB as well as other markets, would prefer the private option.  However, the private option requires more knowledge and capabilities to manage, so getting there is a journey for most organizations

The common attribute of cloud under either approach is a “pay as you go” pricing structure, and public cloud services make it simple for SMBs to grow or change their computing and storage needs.  While it is nearly impossible to make direct comparisons between the costs of traditional servers managed onsite and cloud computing, according to the CDW’s 2011 Cloud Computing Tracking Poll, many SMBs realize cost savings when moving applications over to the public cloud.

While security is a forefront concern, properly implemented cloud computing does not entail any more security risks than traditional computing.  Private cloud computing can also provide additional security, as the cloud infrastructure is operated solely for one organization.  Still, cloud users need to be just as vigilant with cloud security as they are with traditional computing:  they must talk to their cloud vendor to ensure all necessary security measures are in place.  With effective data security in place, cloud computing is a safe, reliable way to outsource data.  However, because it is a newer technology and an innovative way of delivering IT services, SMBs are reliant on their cloud vendor’s design and capabilities to maintain security.  The cloud is all about network and systems security, as opposed to colocation centers, which are focused primarily on physical security.

One noteworthy concern surrounding public cloud computing is shared data.  Cloud computing provides SMBs with added freedom, but it is also important to understand that data is moving onto a shared resource.  Therefore, when moving or changing providers, SMBs should consider what this means for their data.  Will a little “data footprint” be left behind?  By connecting to resources over the internet, SMBs do not have complete control of the end-user’s access to cloud resources.  The public cloud is not a part of the private connection, therefore availability of Internet – and in turn the data – depends on the provider.  It is important for SMBs to consider their capabilities before moving data to the cloud.

While cloud computing is still in its very early stages, its benefits continue to evolve and the challenges continue to diminish.  SMBs should consider the multitude of cost savings cloud computing will provide in the future as well as today.

Best Practices:At the end of the cloud vs. colocation discussion, no matter what choice you make, there are some best practices that every SMB should consider before outsourcing their data center functions:

Practice due diligence: Whether with cloud computing or colocation, do the homework.  If the services sound too good to be true, they probably are.  World class facilities and providers are available – use them

Define your needs: What is most important to your business?  Security, service, room for growth, contract flexibility?  Find out what benefits are a part of these services and understand the limitations.  Where the cloud may have more flexibility, colocation may offer more customized security features.  Generate a concise list of objectives prior to moving any data, and compare in detail how well your available options line up with them

Investigate financial health: Do you need to worry about losing access if your provider locks the doors?  We can’t say it enough – do your homework.  While someone else might offer a better deal, remember the reliability that comes along with seasoned providers

Server huggers beware: Experiencing empty nest syndrome?  It is understandable to experience some apprehension both before and after moving mission-critical data and applications, but SMBs should not worry.  By taking the necessary precautions, the cloud and colocation are both secure and reliable alternatives.  Plus, both come with cost-saving benefits that directly affect the bottom line

What Now?

SMBs should evaluate their needs and consider that while colocation is a viable solution, the move to service infrastructure is on the rise.  Seize the opportunities available and consider that colocation can provide eased management and upfront cost savings, but that sometimes running your own data center is worth the control and peace of mind.

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