our hardware in very different ways than we could ever do before. The lesson we learned is that a very big part of building these public and private clouds is to be sure that you can get utilization factors significantly better than traditional company operations.

VoGeLs: If you run your services inside the company, privately, utilization becomes an issue. It amortizes your costs over a number of cycles. If you run services outside, on a public service, it is no longer an issue for you.

RAmLe Th: We are operating hundreds of servers that are processing data for projects that no longer exist and are no longer generating revenue. We do this because there may be a time and place where we would need this information, such as in a warranty situation.

Amazon taught us that we can move these programs from our data center to EC2, get them operational, capture that image, and then shut it down. At this point we have incurred very minimal costs. When conditions arise that require the execution of one of those programs, we can do it. By using Amazon EC2, we can transform what used to be a fixed cost of allocating a dedicated in-house server—regardless of whether we need the information—to a variable cost that is incurred only when the business case requires it.

The cost savings of using Amazon is quite compelling. A basic server, operating internally, that sits and does nothing costs us about $800 to a $1,000 per month to run. We can go to Amazon and get charged only for what we use, at a rate of 10 cents to 15 cents an hour.

TucKeR: This is the promise of utility computing. Users will be able to move their applications and their platforms off-site, and they will have more choices. There will be many different kinds of cloud service providers and, ultimately, opportunities for arbitrage. We are moving to a scenario where it will not matter where things execute, and where choosing an execution platform will be based on a number of different characteristics such as cost, security, performance, reliability, and brand awareness.

The great thing is that self-service has now moved into the provisioning of virtualized compute, storage, and networking resources. Without even talking to anybody at Amazon, you can use

its service with just a credit card. Enterprise customers are looking at their internal customers the same way. If the marketing department wants to run a new kind of application, traditionally you had to get the IT department to agree to help you build and deploy that application. Now IT departments are able to say, “You’ve got your own developers over in your area. If they want to develop and run this, fine, go ahead. Here are the policies for infrastructure services.”

BADRos: One of the key benefits is that not only is it easier to get going at start up, but also there is no discontinuity as things grow. It’s never the case that you are debating internally whether you should buy that extra server, invest in a more sophisticated infrastructure, or be able to scale to that second machine.

TucKeR: We need to be a little careful. Not all applications scale easily. While there is a whole class of applications that have very easy scaling characteristics, others do not. Databases are part of this class unless you are using something that has been set up to scale, such as Amazon’s SimpleDB ( http://aws.am- azon.com/simpledb/). If you’re running your own database, unless it has been designed to be scalable, don’t count on it happening.

cReeGeR: How does that poor person sitting at a small- to mid-cap company make a decision to invest in clouds? What is he going to do next quarter or next year when the CEO comes in and says, “I read this thing in the Wall Street Journal stating that all the smart companies are going to cloud computing.” How is this guy going to respond?

oLsen: First, adopt a philosophy of buy first, build second—even at the basic level of “I’m going to start a company, I need IT services.” Do I look to hire engineers and buy equipment or do I assume that there’s some outside service that might meet my needs? To me that’s half of it. I’m going to assume that services meeting my needs are already available or are going to evolve over time. I take a philosophy that says, “I’m all about my core business. I buy only infrastructure that directly supports my unique contributions to the marketplace.”

RAmLe Th: I agree with you, if you are rational. However, you’re dealing with humans, and they are often not ratio-

nal. When a CEO goes down to his IT manager’s office and asks, “How are we utilizing cloud computing?”, the first thing that manager asks is, “What will this mean to me?” The biggest obstacle to change at our company was our own IT guys trying to protect their jobs. The change we have done at Bechtel has been 20% technology and 80% managing the change.

I believe an important part of your value proposition should be to explain to both the decision maker as well as the user how this tool enhances their professional futures. If it does not, those folks are going to be your obstacles.

TucKeR: There are certainly different approaches for different businesses at different points in their life cycles. A start-up has a certain set of needs. I completely agree with Greg [Olsen] to look for all the services that you can purchase before you think of building it yourself.

Animoto is a new company that makes movies out of photographs synced with music. It started with 50 instances running on Amazon. They launched it on Facebook and had very high success. In a matter of three days they went to 3,500 instances.

Can you imagine going to your IT department and saying, “We’re running on 50 servers today, and in two to three days we want to go to 3,500 servers”? It just would not have been possible.

cReeGeR: So, for the zero- to a mil-lion-miles-an-hour overnight business plan that is stalled because of up-front CapEx costs, cloud computing is going to be your answer.

What other types of criteria can we give to people to evaluate how effective their internal IT infrastructure is in supporting business goals?

VoGeLs: There are many first steps that corporations take into this world. Engineers can start by experimenting with these services, using them for small projects and comparing cost savings. I find that many of the first steps that enterprises take are just something small, easy, simple, and cost effective.

The New York Times scanned images covering a 60-year period in history and wanted to place them online. These guys moved four terabytes into S3, ran all the stuff on a Sunday, spent $25, and got the product done.

BADRos: Replacing existing organi-