On the other hand, those defending traditional IT are pointing out the many and glaring flaws in today’s cloud computing services, and lining up behind the private cloud computing bulwark. IT vendors interested in maintaining the enterprise business they enjoy today are also co-opting the private cloud computing concept as only a slight modification of what enterprises have been doing all along.

This cloud computing argument is a lot like belly buttons. You’re either an innie or an outie. The unfortunate thing is this has led to some serious investment in navel-gazing.

Perhaps a dose of pragmatism would help. Or lint removal?

The cloud computing services needed to deliver the majority of IT services needed by customers do not yet exist. There are limited SaaS offerings today, service-level requirements can’t always be met, glaring security holes exist, regulatory compliance requirements haven’t caught up with technological capability, cloud providers tend to be proprietary and monolithic – just another opportunity for lock-in.

On the other hand, private cloud computing services cannot have the economies of scale that many large providers will enjoy. The complexity and speed of technology change will be hard for any internal IT organization to handle, especially smaller ones. The investment needed to build a private cloud service may be immense, and the resulting architecture could be a dead-end.

Gartner believes that there are quite a few services available today from cloud computing providers that are ready, and cloud computing will gradually fill more and more computing service needs. Where opportunities exist for a business model, cloud providers will fill those gaps – even when the number of potential customers for a service range in the hundreds, rather than the millions. Brokers and interoperability standards will emerge. SLA and security guarantees (for a price) will evolve. And don’t forget the completely new services that will emerge because of cloud computing and scale. It’s coming.

But it may take many years for some services. So while it is evolving, private cloud computing may make sense. It’s a question of ROI, not religion (or belly button architecture). So how you build your private cloud services matters – it’s important to build it with relatively rapid return on investment, in a way that eases a migration to external cloud computing at some point in the future. That point could be very far away. Or a hybrid model (both private and public) for some services might make the most sense in the future.

And there will be some services where cloud computing won’t ever make sense – perhaps there just won’t be a business model for a service provider, or perhaps it is simply too customized for a specific business – a real differentiator. Or perhaps it changes often, and doesn’t easily fit a concept of standard and relatively static interfaces. I think this kind of service will be a minority, but it will exist.

So hopefully we can raise our eyes from our navels, and make intelligent business decisions that will embrace the cloud computing concept as a part of our toolbox, and build a rational evolution to take advantage of cloud where and when it makes sense. And cents.

I’ve gotten a lot of client questions recently about how to get started building their private clouds. Their vendors are at their doorstep hawking private cloud computing. Clients are asking about what technologies to use, which vendors to choose, how to build one, etc. I say, “Whoa!”

This is no field of dreams. “If you build it, he will come” is not a reasonable strategy for private clouds.

We’ve got to get our IT people to stop thinking about products and technologies and even architectures first, and instead to focus on understanding their service requirements first.

Start by understanding your service catalog (most organizations don’t have one), understand the SLAs and costs for each service (most don’t know that, either), build strategic plans for each of those services (does anyone have this?), determine which ones might go to the cloud in the future and when that cloud service will be “ready” (OK, this takes some work), make your ROI decision about building a private cloud service, and then you can start looking at architectures and products and technologies.

There has been an awful lot of definitional talk about cloud computing and private clouds for the past year. Time to move on. My cloud research at Gartner is focusing on case studies, roadmaps, and best practices for private cloud computing – and debunking the incredible amount of vendor hype that is hiding some real value in this trend.

Myth: There will be a “big switch”
Fact: There will be a slow migration (including development of private cloud services), the migration will take decades, and even then quite a bit of IT will stay in-house; in fact, most of the interesting stuff will be hybrid models, long-term.

The electricity analogy really doesn’t fit well. Unlike electricity distribution (using AC instead of on-premises DC), IT is evolving at an extremely rapid rate. The number of enterprises generating their own electricity in 1887 was miniscule compared to the number of enterprises generating their own IT today. Even so, the electricity grid did not take place over virtually overnight – it took more than two decades before centralized utilities produced more than half of the electrical production in the U.S.

In many ways, the invention of AC was like the invention of the Internet. So why hasn’t computing across the Internet replaced enterprise computing yet? In IT, the “distribution” mechanism has been in existence for more than a decade. What’s really changed are technologies that enable economies of scale and sharing. We should not ignore the fact that enterprises can gain some economies of scale themselves, internally, for example, through virtualization – and enterprises aren’t ignoring it. The evolution toward cloud computing is a multi-variable equation, and does not have an inevitable conversion of everything to cloud services.

Myth: Cloud computing is just an evolution of “fill in the blank”
Fact: Cloud computing did not appear out of nowhere. Some say it is just the next version of outsourcing. Some say the next version of the web. Some say the natural evolution of virtualization. I say it’s all the above. The web created the standards and connectivity needed to make cloud computing possible. But, economies of scale do not occur unless you have technologies at the back-end that enable efficient technology sharing – multitenant applications, virtual machines, parallel programming mechanisms, automation, etc. Sprinkle in a growing demand for speed in the marketplace, and the industrialization of IT (including increased commoditization of hardware and open source), and cloud computing – has been evolving for years. And still has a ways to go.

Myth: Only megaproviders will win
Fact: There are diminishing returns to economies of scale, there are many fragmented markets that have good enough scale for smaller providers, and innovation makes provider agility a critical offsetter to size. We’re not going to have a handful of megaproviders, we’re going to have thousands of providers, and it will be very Darwinian.

Myth: Cloud computing is about IT commoditization
Fact: While services offered in the cloud may be commoditizing, the usage of those services may not – new, innovative businesses, proprietary analysis of data in the cloud, etc. – new applications matter. In fact, innovative use of cloud computing services will be be a huge reason why IT does matter, and innovative use of IT will remain a critical business differentiator.

And be careful – cloud computing services are not always cheaper. Providers gotta make a living. Amazon’s recent introduction of Reserved Instances was both to help Amazon plan and manage capacity, and to lower the price to compare better when workloads are not dramatically elastic. There’s a reason that some startups born on Amazon created their own data centers as they got bigger and their businesses became more predictable.

Instead, it’s a stepping stone. It’s about embracing cloud concepts earlier, and about enabling the flexibility to use public cloud computing services as soon as they meet requirements. Getting some of the benefits of cloud computing, but contained within the enterprise.

I had a busy week along the west coast, meeting individually with fifteen different clients, presenting about cloud computing to groups in three cities, and doing some deep strategy dives with a few vendors.

Private cloud computing – and the point made in the first paragraph – came up in every conversation. I talked to people who already had private cloud computing services, or had some being developed, or were building technologies to make private cloud computing effective. I also talked to a few companies where private cloud computing will not make sense – a wasted investment, because their needs for the right services will be available in the public cloud soon enough.

The real issue is determining a strategy for each service. Some services are not destined for the cloud, and should evolve in a very different direction. Some services should be converted to a public cloud offering soon. Some services are candidates for the public cloud, but for one reason or another, the public cloud offerings aren’t ready yet.

For the latter services, it’s a question of return on investment. When will the public cloud service be “ready”? What is the cost of doing nothing before I migrate? What kind of investment have I already made internally? Is there a business case for investing in cloud concepts for this service internally? Are there even technologies available that can help me internally?

It will all come down to understanding the enterprise service portfolio, and building a vision and a roadmap for each service. For some of them, private cloud computing might be the way to go.

I’ve been putting a lot of time into this lately. My inquiries have shifted heavily to cloud computing in the past few months (away from server virtualization, another hot topic). I have six research notes in progress on the subject – describing the phenomenon, describing examples of private cloud computing services that others have set up or are in the process of setting up, discussing when it does and does not make sense, etc.

More later!

One interesting question that cloud computing raises is the importance of customer intimacy between IT and its business customers. Improving the relationship between IT and the business has always been considered a major goal – aligning IT and business strategies, integrating IT and business processes, ensuring IT people understand the business and vice versa. Strategy alignment leads to more proactive IT investments and innovations that help the business grow, and more business actions that leverage new and differentiating technologies.

On the face of it, cloud computing calls a halt to that – the big switch replaces intimacy with interface. Tightly define how the business communicates with IT, and requests IT services – through a self-service and programmatic interface. If you believe that IT is not differentiating, intimacy is a thing of the past.

I think there’s another way to look at it.

Cloud computing doesn’t eliminate the need for intimacy between IT and the business. I think it is forcing us to look at customer relationship differently.

• Right-sizing intimacy: The level of intimacy needs are different for every service. Commodity, non-differentiating services need little to no intimacy between IT and the customer. Highly experimental, differentiating technology needs a tremendous amount of synergy between IT and the customer. Every service is different.
• Managing customer relationship: Intimacy and customer relationship does not require a person to sit between the provider and the customer. In cloud computing, intimacy means understanding your market, and adjusting your service choices, service offerings, and their interfaces to meet changing market needs.

A modern infrastructure and operations organization will have services that are highly static and self-service, services that are highly dynamic and differentiating, and everything in between. Where intimacy is not needed, it should be removed and replaced entirely with a self-service interface. These services are great candidates for cloud computing (or private cloud computing, if public cloud offerings aren’t yet mature).

Where intimacy provides unique and differentiating value, services-orientation is still important. A codified interface is still important. IT needs to work closer with the business to understand service requirements, changing the service offering and the interfaces to meet those needs. Could these services go to the cloud? Less likely, but sure – as long as there is a way for the provider to collect feedback and information on changing requirements from customers.

Cloud computing won’t kill intimacy for all IT services, but intimacy will become more focused on responding to customer needs by managing the interface between providers and customers. Intimacy will be a reason that some services stay on-premises, and possibly evolve to become private cloud services. Intimacy will be a differentiator for some cloud computing providers, who focus on understanding their markets, listening to customers, and evolving their service offerings rapidly.

So how do you know you’ve arrived? What is different from a private cloud versus a well-run IT organization?

I can think of four fundamental attributes:

1. Services-oriented. The IT organization sells services, and the IT customer only deals with IT through service offerings (self-service).
2. Variable Pricing. Based on usage. The IT organization maximizes technology sharing and automation for efficiency.
3. Elasticity. Customers deploy/grow/shrink/retire services quickly. IT is architected to ensure fluid scaling on demand.
4. Independence. The IT organization could move a service to the public cloud by flipping a switch. Likewise, the IT organization could choose to open their services to external customers easily. I even talked to a company today interested in take their services “public” sometime in the future.

There are probably many more, but I think this captures the essence. What am I missing?

There’s an argument over whether the term “cloud” can be used to describe the changes taking place in internal IT architectures. How silly! Regardless of the term, there is a major trend playing out over the next few years where internal IT providers want to make fundamental changes so that they behave and provide similar benefits (on smaller scale) as cloud computing providers.

I believe that enterprises will spend more money building private cloud computing services over the next three years than buying services from cloud computing providers. But those investments will also make them better cloud computing customers in the future.

Building a private cloud computing environment is not just a technology thing – it also changes management processes, organization/culture, and relationship with business customers (our Infrastructure and Operations Maturity Model has a roadmap for all four). And these changes will make it easier for an IT organization and its customers to make good cloudsourcing decisions and transitions in the future.

We will even see several organizations evolve from being private cloud computing providers to becoming public cloud computing providers.

Can you find a better term? Go ahead. But you’ll be fighting an uphill battle. At Gartner, more and more of our clients are trying to understand what cloud computing can provide today, how it will evolve, what they should do now to prepare, and what they can learn from cloud computing. We are talking about private cloud computing on a daily basis. Get over it.

Cisco’s public blog recently announced an architectural approach they call “Unified Computing”. There’s been a lot of speculation about Cisco moving into the blade server business and so forth. I think Cisco just made clear that in their view the network may be at the center of IT, but “unifying” it with computing and storage is critical. Cisco is going to enter new markets. Maybe, better said, the lines between the technologies and the markets are getting fuzzier.

Gartner first talked about this in 2001 as Real-Time Infrastructure. IBM focused on “On Demand” which has been morphing over time but is still essentially a core part of their strategy. HP had Adaptive Enterprise (and Infrastructure) which shifted toward Adaptive Infrastructure and is still core to them today. Microsoft had Dynamic Systems Initiative, which became Dynamic IT – their vision behind the architecture for internal IT and for their cloud offering, the Azure Services Platform. VMware has Virtual Data Center Operating System and vCloud. And on and on.

I hear Harry Nilsson singing: “Everybody’s talking at me, I don’t hear a word they’re saying…”

Here are the words: unification, virtualization, cloud, adaptive, real-time, simplification.

We’ll see what Cisco delivers, but what is apparent is that the comfortable sandboxes in which different IT vendors sat are shattering. Those words demand that computing become a much more flexible, unified fabric. Unified to deliver on service levels. Services-oriented. Selling components is not the name of the game – making it all work together is.

What is also apparent is there are many vendor attempts to achieve this, and they all bring their current strengths and products to bear to unify a portion of the fabric. I believe Cisco’s announcement may be “one large step for a vendor, one small step for vendor-kind”. It is safe to say this will be big for Cisco – and big for unifying networking and computing – but it may not be a huge state of the art shift for the industry. It is good to see Cisco aggressively joining the club of vendors pushing the state of the art in infrastructure forward, however.

Finally, what is apparent is that we have to get over the religious argument about whether cloud computing can only be used to describe “what Amazon delivers” or mega-monstrous-external-service-providers, or unknown and unknowable computing capability in the ether. There is huge industry energy pushing in the direction that will make internal computing more real-time, on demand, adaptive, dynamic, unified. Cisco is undoubtedly a part of that push. What was custom will become packaged, and we will see a growth both in the numbers of cloud computing providers and in the number of organizations that feel they are building “private clouds” to be used only by their internal customers.

Where “the sun keeps shining through the pouring rain.”

During Gartner’s Data Center Conference in Las Vegas last week, we used electronic polling to survey the attendees on various topics. I asked several questions during my keynote. More than 1,600 attended the session, and 492 answered the question: “When do you expect to use some external cloud services in place of what could be internal IT services?”

Before analyzing the results, it’s important to understand the demographics of the attendees. In terms of company size, 44% belong to companies with more than 20,000 employees, and only 10% belong to companies with less than 750 employees. 22% belong to the public sector/government, and about 12% are in financial services. 35% are data center managers or supervisors, 28% directors, 9% VPs and 6% are C-level or presidents. In general, these are decision-makers who don’t swallow market hype too quickly, and are more cautious about using new techniques and technologies for enterprise IT.

The poll is revealing on data center intentions and attitudes. Note that this is not asking about new types of applications that may emerge because of cloud computing. This was specifically about workloads/services that could leverage the cloud instead of using internal IT assets.

• 11% said “Never”. I’m sure these are organizations where IT is seen as a differentiator, or where security and compliance are absolutely critical. However, 11% sounds high to me – a smaller percentage are likely to have no choice in whether workloads could be sourced internally or in the cloud in the future.
• Only a fourth of the respondents thought cloud services were a post-2012 phenomena.
• Interestingly, 20% said they already were using services in the cloud. We know there is experimentation taking place in the cloud today, but 20% sounds high to me.
• More than half believe that they will be using external cloud services in place of what could be internal services within two years – and about two-thirds by 2012. While that does not mean that the majority of all IT services will be handled in the cloud, it does show that the number of large organizations using some cloud services could be growing rapidly.

I delivered the keynote at Gartner’s 27th annual Data Center Conference this week. Here are four major points I made. Later I’ll post some key take-aways from hours and hours of conversations – lots of great insights from conversations between our analysts and more than 1,800 attendees in a very busy week.

The future of infrastructure looks like cloud. Cloud is definitely being over-hyped in the marketplace, and isn’t popping into existence out of nothing. Gartner has been describing a vision for the future of infrastructure for more than seven years called “Real-Time Infrastructure”. Amazon’s EC2 and Microsoft’s Azure are examples of real-time infrastructures being delivered as external services. They are showing what can be done when standardization, virtualization and automation technologies are leveraged heavily, and internal IT organizations should learn from these examples. Cloud computing has a long way to go – but it is and will be evolving quickly. Evolve to behave more like a cloud provider – which will also prepare you to leverage cloud services when it makes sense.

Virtualization is a modernization catalyst. Virtualization is the hottest topic at the conference – but our key advice is to look beyond simple consolidation and cost savings. Virtualization can be the catalyst to drive many fundamental important changes in architectures, processes and cultures. Even if short-term attention needs to be given to cost-savings, make sure you build a foundation that can be leveraged in a few years. Virtualization “unlocks” cloud computing potential internally and externally.

Sourcing will become dynamic and granular. Traditional outsourcing and hosting is not dead, but it is dying. Economies of scale are replacing skills, and speed is replacing static contracts. IT needs to take the initiative in building dynamic sourcing teams – people who understand both IT and business, and can make sourcing decisions a project at a time, and dynamically based on changing workloads, priorities and costs. On the other hand, cloud computing portends a huge shift in small business IT. Cloud providers will offer a low barrier to entry and economies of scale that are too compelling to ignore. To service them, a new industry of service brokers will evolve.

The time to build a strategic plan is now. Infrastructure demands, an economy in turmoil, technologies for virtualization and automation, and the emergence of cloud computing are all happening too rapidly to simply stay in react-mode. Infrastructure strategic planning is not an option, it’s a requirement to navigate change and survive. Success stories are pointing the way. The gap between the strong and the weak is expanding – don’t be left behind.

More later.