Rise of cloud computing liberates companies

New technology is changing the way many organisations' data centres operate.

Information technology is moving off site to the cloud, freeing up resources so companies can focus on their core business.

Chief information officers who have spent years filling up their data centres are now clearing out space so they can do new things.

That's the picture Jim Thompson, chief engineer and vice-president for engineering and supply chain at technology vendor Unisys, brought to last week's ninth annual CIO Summit.

He talked on the rise of the digital business and how that is transforming the data centre.

Data centres, which are like fridges full of computers, have been changing physically anyway under the effect of Moore's Law, which describes the steady rate at which silicon chips become smaller, more powerful and cheaper.

"The fridges are getting smaller. They're more like wine cellars now," he says from his home base in Philadelphia.

But while servers have got smaller, the average enterprise has added more of them to host applications that talk to the web and mobile technology.

That sets up the conversation for cloud computing, how to move some application and tasks off site.

The analogy Thompson uses is the early part of the industrial revolution, when factories would have their own power plants.

"As the infrastructure matured, big factories got out of the power generation business. IT in the cloud is computing becoming a utility model, something you can get in different ways.

"Business and IT have wrestled with how to deliver technology to the enterprise. Banks want to be banks, airlines want to be airlines. They don't want to be in the IT business, and they see the cloud as the answer to all their problems.

"You put it in the cloud and you only pay for what you want to use, you get the elasticity you want."

Thompson says it's putting even more pressure on IT departments to reduce costs.

"Our friends at [analysis firm] Gartner say something like 25 per cent of IT costs have to come out by 2017, so a CIO looks at how to deliver value to the enterprise, but also help innovate and grow and differentiate while taking costs out.

"Most of these guys are also saying they are overwhelmed in one way or another, they have way more work than they can deal with."

Budgets are fixed or declining, expectations are rising, and new consumer technologies like phones and watches are demanding more of their time.

"My car just told my phone I need an iWatch," jokes Thompson, but the new technology will be no joke for IT departments.

Thompson says as a rule of thumb two-thirds of spending on the data centre goes to run the operation at a steady state, 20 per cent goes towards growth and what's left must pay for any innovation in the business.

The bulk of costs are in labour and software licensing.

Jim Thompson.

"CIOs should look to minimise the number of vendors, maximise the licence coverage, optimise cost and as much as possible optimise staff, and use co-lo services or any kind of cloud you can.

"They need to recognise where the business differentials are, what exactly is the secret sauce for the business? Everything else can go in the cloud."

It's a bit like payroll, which most organisations outsourced decades ago. It's not just applications but storage and computing power that can be bought when needed from disruptors like Amazon or Rackspace. It can be a solution or just raw assets to do testing and development.

"You can't push everything into the cloud so you have to be disciplined about what you do and where," Thompson says.

"You need to recognise your differentiators, the places you want to innovate and grow.

"How does IT shift its position in the enterprise from a passive supplier to a business enabler? I think there is a mindset shift that CIOs have to take in the way they operate their IT component. It shouldn't be viewed as just a boiler in the basement that keeps the lights on. It should be used as it can be used to create differentiated business value. It's about recognising the rise of digitalisation in business."

Every bit of new consumer technology influences the way businesses have to respond.

"Every business has an app now, things you never expected to produce an application for a phone now do and some are pretty worthwhile. That's what the customer expects whenever they make a transaction.

"That is a stress on IT and they need to shift the pedestrian stuff that is now consuming two-thirds of their assets. They need to take that the way of payroll. Get rid of that stuff and focus on what differentiates me and my business in the marketplace. How do I get in front of what customers want and need?"

Thompson, who has almost three decades with Unisys and holds technology patents in operating systems, storage and banking, looks back to the days when IBM and Unisys mainframes got eaten from the bottom because Intel produced an inexpensive chip that ended up on the desktop.

The days of needing big expensive computers on site doing a lot of processing are never coming back.

As one of the longest surviving mainframe providers, Unisys stopped producing its own chips and now uses Intel's X86 chip architecture.

Thompson says having an enterprise standardise on an architecture like X86 makes sense.

"You get agility by standardisation because as things ebb and flow, you have interchangeable parts. That is the new IT and that is what enables use of the cloud."

" Provisioning with cloud resource means it can be throttled down when needed.

Unisys' main hunting ground in New Zealand is banks, the health sector and government agencies.

Who is Jim?

• Jim is chief engineer & vice-president - engineering and supply chain at Unisys.

• He is responsible for the design, development and manufacture of technology products. Jim's career with Unisys spans 27 years in various customer facing and engineering roles and he is responsible for creating the vision and architecture for Unisys' modern mission-critical products. Before joining Unisys, Jim held various technical positions in financial institutions and commercial firms, as well as being an independent consultant.