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Companies slowly ascend into the cloud

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Shifting to the cloud has various economic advantages, but some companies are still wary about jumping in head-first.

“You can come in and put in technology that is being monitored from a distance very cost effectively,” said Dale Stein, owner and CEO of Voice Smart Networks. “It’s an industry that is exploding and will continue to grow because it makes economic and business sense to do so.”

A group of users and providers of cloud computing gathered at a recent roundtable at the The Daily Transcript sponsored by Booz Allen Hamilton and American Internet Services.

Customers who are in need of a new server because warranties are expiring are the ones considering the move to the cloud.

“They say, ‘Do I put in a $6,000 server, or do I try that cloud thing?' Slowly but surely they are transitioning to the cloud,” said Stein.

The cloud is also causing companies to reduce or eliminate IT staff altogether.

“The cloud will change the manning of organizations going forward,” said Jason Escaravage, principal at Booz Allen Hamilton.

While more IT capabilities can be handled off premises, buying technology services from the cloud takes someone who knows what they are doing.

As a result, chief operating officers and chief technology officers are stepping up to the plate in a more strategic role to navigate through the cloud.

“You need a person who can orchestrate the resources of what’s out there in the cloud more effectively,” said Stein.

San Diego International Airport recently moved its in-house email to Microsoft-hosted Office 365, a cloud-based service.

The biggest advantage of cloud computing is disaster recovery, said Howard Kourik, director of information services at SD County Regional Airport Authority.

Disaster recovery isn’t foolproof in the cloud if the data center isn’t organized the right way, warns Phil Mar, director at ViaSat (Nasdaq: VSAT).

“Not all cloud providers are created equal. When people are choosing a cloud provider they have to be really careful when thinking about disaster recovery,” said Mar.

They have to keep in mind what kinds of natural disasters they want to avoid before picking the right provider. Hurricanes can affect a large area and wipe out data centers, he points out.

While it’s important to plan and have options, some organizations can't guard against everything, said Andy Singer, deputy director for Information Dominance Advocacy/Inman Chair for Naval Intelligence at the U.S. Navy.

Navy ships, for example, must deal with combat damage, jamming attacks in networks and lost connectivity.

Privacy and security are two challenges in moving to the cloud, said Mar.

“It used to be everything was in-house. You own the data. For better or worse, if you lose it you know who to blame,” said Mar. “If you put all data in the cloud, you start losing control.”

Cubic Corp. (NYSE: CUB), which needs to adhere to strict requirements because of its U.S. and foreign government clients, is wary of using the cloud because of cost.

“To me, the cloud is intriguing and we want to use it, but it’s difficult for us to do that and then be compliant with what rules and regulations we are currently under,” said John Minteer, vice president of information technologies at Cubic.

Using providers with International Traffic in Arms Regulations (ITAR)-compliant cloud services can cause the cost to double or triple, he said.

Microsoft’s high price point kept Cubic from using its email.

When he added up how much storage they were providing per user, and compared that to what his requirements were, the cost was "very substantial," said Minteer.

Stein argues that the cloud is a better investment over time.

”Cloud is a less expensive transaction in the long term from a cost standpoint,” he said.

Many companies are opting to take a hybrid approach to maintain control of some of their information.

“Some information is critical for our patients, and some information is ancillary for our business,” said Ed Babakanian, chief information officer at UC San Diego Health System.

From his perspective, tools that help run the business, like materials management and supply chain management, can run in the cloud.

“To provide quality care and patient safety, some data would be difficult to outsource to the cloud somewhere," he said.

Sempra Energy (NYSE: SRE) also has a hybrid model when it comes to cloud services.

“For us, doing things in house makes a lot of sense,” said Jeff Nichols, director of information security and information management. "We looked at trying to host some of our data with heavy compliance requirements in the cloud. It can be done but it’s really cost prohibitive."

Tim Caulfield, CEO of American Internet Services, sees extremely secure solutions that don't drive a lot of cost.

He admits that providers have room for improvement when it comes to compliance, but customers also have a role in the process.

“You don’t just go to the cloud and say I don’t have to worry," said Caulfield, whose company operates enterprise-class data centers.

That’s why when Amazon Web Services — Amazon's (Nasdaq: AMZN) cloud services division — goes down, mature businesses like Netflix (Nasdaq: NFLX) that are running in Amazon's cloud stay up and running because it’s crafted the correct solution.

“When Amazon has a problem Netflix doesn’t have a problem,” he said.

Caulfield thinks the industry is still at the starting line; a cloud lexicon first surfaced in 2006 with Amazon Web Services.

“It’s only gotten traction in the past few years," he said.

In Las Vegas last month, Amazon Web Services sponsored a first-ever technology conference highlighting the cloud.

The shift of companies owning and operating technology to using technology as a service is not going to happen overnight.

“In the next 10 to 20 years is when we will see the real material shift of people using full-scale cloud services,” he predicts.

The DoD is moving slower into the cloud than private industry because it's not as agile, said Singer.

“We have a lot of stuff and we have a lot of money invested in stuff. We can’t just pick up and jump ... certain systems only operate on certain software," said Singer.

He said the DoD is ready to make the leap into a a cloud-based infrastructure, or joint information environment, for reasons of security, privacy, ease of use and better distribution of data.

“We can’t see ourselves getting good where we are at today and continuing in legacy infrastructure," he said.

Moving to the cloud will help the Navy compete with the infrastructure of a potential adversary that has data centers and lots of sensors and compute power.

While the government is struggling to catch up into the cloud, tech startups are diving in head-first.

Caulfield works with San Diego startups that have a completely fully-managed cloud based solution before even receiving their first round of funding.

“If you are a startup in Silicon Valley, you don’t consider anything else. That is the acceptable solution," explains Caulfield. “The CIO doesn't want to deal with that stuff, they want to worry about their product."

In a data-driven world, soaring straight into the cloud might be the way to go.

Jeff Kerns, director of business analytics and integration at DPR Construction, says more people need to embrace the fact that their data is out there.

“Safeway knows what groceries I buy," he said. "If security is a concern we need to work towards making it better rather than trying to fight it and saying I am not going to put data out there.”


Roundtable participants

* Ed Babakanian, Chief Information Officer, UC San Diego Health System

* Rob Benson, Chief Information Officer, ID Analytics

* Tim Caulfield, Chief Executive Officer, American Internet Services (sponsor)

* Jason Escaravage, Principal, Booz Allen Hamilton (sponsor)

* Jeff Kerns, Director of Business Analytics & Integration, DPR Construction

* Howard Kourik, Director of Information Systems, San Diego County Regional Airport Authority

* Phil Mar, Director, ViaSat

* John Minteer, Vice President of Information Technologies, Cubic Corp.

* Jeff Nichols, Director of Information Security & Management, Sempra Energy

* Dale Stein, Owner/CEO, Voice Smart Networks

* Andy Singer, Deputy Director for Information Dominance Advocacy, U.S. Navy

* Bob Stinton, Vice President of Engineering, Diving Unlimited International Inc.

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