Most of today's CIOs like to keep the company's most critical data and applications close, inside the biggest data center, where IT can see or touch the servers involved.
Domino Sugar CIO Don Whittington wants to get rid of as much hardware as he can, keep the software and data in a nice home where they're safe, and visit as often as he wants.
In a decade as CIO (and now also VP of Domino parent company Florida Crystal Corp.,) Whittington has shifted the company from traditional on-premise data-center ownership through several stages of outsourcing and abstraction: These included co-location deals, data center hosting services and finally an application service provider contract.
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The latest stage is what Whittington and service provider Virtustream call the largest SAP implementation ever built on a public (multitenant) cloud-computing system. During the course of an 18-month development and migration cycle, Domino shifted its SAP system and almost all of its other enterprise systems, including e-mail, fax servers, business intelligence, EDI and other application servers, from hosted or ASP arrangements into Virtustream's cloud.
One Mantra: Pay Only For What You Use
Security and performance requirements are part of the contract, and Domino pays only for the computing power that it uses. If that usage stays within historical parameters, the cost to Domino should be 20 to 25 percent lower than the previous ASP model, Whittington says.
The biggest part of that savings is liberation from the need to commit to specific hardware requirements for a specific time.
"Even under an ASP model, I was constrained by technology," Whittington says. "When I needed to add capacity or storage, it would take a three-year commitment from us, and then it had to be provisioned and racked and stacked and managed. I didn't own that hardware, but I had to be aware of the capacity planning and restrained by it."
Freedom from physical capacity planning is a huge difference in cost for end-user companies, but is only really possible in public, multitenant cloud systems on which the service provider can run as many customers as necessary to raise utilization and make operation efficient, according to Sean Hackett, research director for The 451 Group.
That's the big reason for maintaining a clear definition between public and private clouds—the key differentiator of which is the question of whether virtual machines or workloads from more than one customer run on the same physical server, Hackett says.
With that kind of change—as with the server consolidation that happens in a shift from physical to virtual servers—it's "doable, not even extraordinary" to land the kind of savings Whittington expects, Hackett says.
"Even compared to an ASP model, the efficiencies a cloud provider can get with multitenant make it much more possible to charge lower fees," Hackett says. "With multitenant you get much greater utilization of the data center—some estimates run higher than 75 percent compared to 20 to 25 percent for a normal data center—the cost differences are incredible."
One Computing Pool, Separate "Swim Lanes"
The cost difference may be, but many customers are still leery of running their workloads on the same physical servers as other customers. Some in government or healthcare or financial services are flatly forbidden from doing it because of security concerns, according to Kevin Reed, co-founder and CEO of Virtustream.
"One of the things we do, using technology we developed, so it works with any hypervisor and any workload within our platform, is designate different attributes that create separate swim lanes for clients, so that from the moment their network traffic enters the building to the point it hits a physical disk, we maintain logical and physical separation between them and anything else," Reed says.
Virtustream does have a good implementation, "but it's not Star Trek," Hackett says. "They basically created VLANs and they're very deliberate about how they segment the data. Technically it's fine, it's a good decision from a cost/benefit point of view and in terms of flexibility and adaptability. Whether it's a good idea for other companies is a complicated decision point."
In a study released Oct. 7 by market-research firm Hubspan, more than 60 percent of respondents said moving cloudward for applications, infrastructure, integration and other projects is a strategic direction for their company; 36 percent had built at least one cloud solution—70 percent of which were SaaS deals.
On the other hand, of the more than 200 companies responding, 70 percent said security was their top concern in evaluating new providers, followed closely by a lack of understanding of the real benefits of cloud computing.
For the sugar business, where regulation and data sensitivity don't compare to defense or healthcare or finance, the risk is low enough that economics outweighed them easily, Whittington says, once he was confident the capacity, reliability and stability of the system all met Domino's performance criteria.
During the past 10 years, the sugar business has been consistently strong, with peaks that had pundits calling it "white gold," according to agricultural commodities analyst Darrin Newsom of commodity market information provider Telvent News, Weather and Market Analysis at publisher DTN.
Sugar prices have been solid for years, but the falling value of the dollar, which makes sugar from foreign suppliers more expensive, a drop in supply, and continued strong demand have caused a spike in the price of sugar and the fortunes of leading U.S. sugar suppliers, Newsom says.
Domino and parent company Florida Crystal have grown quickly during the past decade, with revenues estimated as high as $3 billion. Florida Crystal, which owns a host of companies in addition to Domino Sugar, but is often referred to by the name of its best-known brand, is a private company owned by a family of Cuban exiles whose generations-old sugar empire was confiscated by Fidel Castro in 1959 and rebuilt it from a base in West Palm Beach, FL.
They've expanded their company into one of the largest sugar producers in the U.S.—shipping 4 million tons of sugar per year, with 180,000 acres of growing land, mills, distribution centers and an energy facility. Much of that growth, which pushed it from being a regional distributor into a global player, has come during Whittington's decade as CIO and has driven many of his IT decisions.
Cloud Suits Long-Term IT Strategy
Among the most fundamental choices: Avoid large capital expenses even when they were considered normal and avoid long-term commitments to technology that would lose value over time.
Whittington says his team brags that despite the speed at which the company is growing, their overall IT budget is less than 1 percent of overall revenue. (According to CIO Magazine's annual State of the CIO survey data, that compares to an average of 5.7 percent across industries in 2010. Keep in mind that figure includes top-spending financial services firms.)
Whittington has built a successful track record of getting rid of his servers and relying on pure IT-by-wire rather than IT-on-the-floor. The Virtustream arrangement is the latest step.
"We pay by CPU and memory in specific unit amounts, so we have a basic minimum range we know we're going to pay and that Virtustream can count on. Then there's the on-demand range, when we have to go beyond that dynamic threshold and need to use more infrastructure than we'd budgeted," Whittington says. "And we came up with that we called beyond-demand capacity, if there's a real crisis and we need more than the on-demand range and would actually force them to buy or provision more hardware."
"The cost is a lot higher than normal, but the risk is, if you don't guarantee some emergency level, they won't have or won't have the incentive to build the capacity to handle you when you need " Whittington says.
Though most of the server apps have gone to cloud, Whittington still has some LANs, routers, phone systems and workstations and the usual front-office infrastructure in-house. He says he's thinking of virtualizing that as well, if he can find a hosted virtual desktop service that offers the same TCO as the cloud, with acceptable levels of service.
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