News / October, 2015

SPECIAL REPORT: CIOs Say Hybrid Cloud Takes Off

By STEVE ROSENBUSH at The Wall Street Journal, CIO report. 10.20.15

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CIOs say they are knitting together a new IT architecture that comprises the latest in public cloud services with the best of their own private data centers and partially shared tech resources. Demand for the so-called hybrid cloud is growing at a compound rate of 27%, far outstripping growth of the overall IT market, according to researcher MarketsandMarkets.

For now, adoption of the hybrid cloud is motivated by the need for improved collaboration and greater flexibility and efficiency, CIOs say. Over time, Gartner Inc.’s Ed Anderson says, “I start to think of a multi cloud environment as a foundation for a next wave of applications.” He envisions mashups of cloud-based analytics with customer data or data collected by sensors embedded in machines and other objects.

Hybrid Cloud Market Takes Off
The hybrid cloud market will achieve a compound annual growth rate of 27% between now and 2019, according to researcher MarketsandMarkets. That’s far faster than the overall IT market.
Market Size (CAGR 27.3 %) Year
$ 25.28 billion 2014
$ 32.18 billion 2015
$ 40.97 billion 2016
$ 52.15 billion 2017
$ 66.39 billion 2018
$ 84.67 billion 2019

CIOs are demanding a way to combine the best of the cloud with their own localized data centers. Few companies or organizations are willing or able to move all of their IT to the public cloud, yet most of them are eager to move past the anachronism of the isolated, on-premise data center. “We are actively working on our hybrid cloud architecture. It is a high priority for us,” says Ted Ross, CIO of the City of Los Angeles. Benefits include the ability to “virtualize” more hardware by substituting it with less expensive and more versatile software, according to Mr. Ross, who leads a group of about 500 people. He also sees value in being able to shift workloads among public and private clouds and city data centers, based on the nature of the task.

“We are leveraging hybrid cloud and we are actively increasing our adoption,” says Paul Stokes, CIO of the University of Victoria, in British Columbia, Canada. “The path forward is the cloud. That said, not everything belongs in the cloud, and we are actively sourcing services that allow for a hybrid architecture to acquire best-of-breed solutions that can extend our existing on-premise application base, and ensure privacy and security.”

MarketsandMarkets said it expects the hybrid cloud market to reach $85 billion in 2019, up from $25 billion in 2014, a compound annual growth rate of about 27%. Gartner surveyed attendees at one of its tech conferences and found that nearly 75% of large enterprises represented there planned to have hybrid IT deployments, as it refers to the hybrid cloud, by the end of 2015. The shift has gained momentum during the last two years, as use of the cloud has moved from testing to deployment, according to Mr. Anderson, research vice president for cloud services at consultant Gartner. “Real solutions require a more sophisticated architecture that supports business needs and which allows for an application to be run in many different places,” he says.

It’s hard to find a tech vendor, from International Business MachinesCorp. to Google Inc., and EMC Corp. that doesn’t embrace the hybrid cloud.

“Hybrid cloud is our foundation and focus,” says Steve Daheb, OracleCorp. senior vice president. “I don’t know of any Oracle product that isn’t in the cloud already or won’t be there soon. Smaller and medium sized businesses are more public cloud focused. But enterprises and large enterprises say, look, we have tens of years and millions of dollars of investment in on our on-premise environment. Ultimately, what is the best solution? It will be hybrid.”

Coach Inc., the luxury fashion company, reflects the ways in which companies are creating hybrid cloud IT platforms.

Coach is a heavy user of large data files, including videos and computer-assisted designs, and it was difficult for an employee in Hong Kong to access a file that was created in New York, and vice versa. “Opening a file could take half an hour,” Brian Demay, divisional vice president of global systems and engineering, recalled.

The company couldn’t afford to install high-speed gigabit network connections at all of its facilities. Mr. Demay said he tried a number of public cloud vendors. He found that users could access files stored in the public cloud at fast speeds, but only if they were located on premises with high-speed connections.

Coach deployed a file services platform from startup Egnyte “specifically because of their hybrid cloud mentality,” Mr. Demay said.

Coach can keep some files in Egnyte’s public cloud, and some in its own data center, with a common interface and set of file sharing tools from Egnyte available to both. Pieces of Egnyte software, known as a virtual appliance, are located on Coach premises. They bridge the data center and the cloud, facilitate a common interface and tools, and help maintain consistent network performance in functions such as downloading, according to Mr. Demay.

Egnyte offers a range of cloud services, but hybrid is most in demand, according to Vineet Jain, co-founder and CEO. “As we see the cloud become mainstream among large companies, we find hybrid is the key driver,” he says.

Cloud pioneer Amazon Web Services says there’s a need for public clouds to integrate into a broader, hybrid environment. “That has been the reality of the work we have done with enterprise customers over the last nine years,” said Ariel Kelman, vice president of worldwide marketing at AWS, a unit of Inc.

Inova Translational Medicine Institute, part of the Inova healthcare system in northern Virginia, reflects the ways in which public clouds like AWS function in a hybrid environment.

Aaron Black, director of informatics at ITMI, said raw data resides in AWS, but passes through an appliance from enterprise storage company Avere Systems Inc., which keeps the most in-demand data closest to the user, improving performance and adding encryption. It’s faster than a public cloud, but cheaper than storing so much data locally, according to Mr. Black. And it simplifies the user experience. “Before, we had two sets of logins. Now, there is one set of users, on premise, although they see the Amazon data,” Mr. Black said.

Hybrid cloud adoption often reflects security preferences. “We have student information, research information, financial information that we feel better about putting under our own peoples’ tutelage,” says Danny Miller, CISO at Texas A&M University System, which uses a hybrid cloud file-sharing platform from Syncplicity.

“Think of the hybrid container as a mixing pot for information coming from the public world with information that you might pull out of your CRM [customer relationship management] system or your ERP [enterprise resource planning system]. There is just stuff that is proprietary that you really don’t want to put out on the Internet,” said Michael D. Rhodin, senior vice president, International Business Machine Corp.’s IBM Watson unit, a hybrid-cloud based decision support system for professionals in a range of industries such as health and wealth management.

Some pioneers will fully embrace the public cloud. Netflix Inc. told CIO Journal this summer that it was on the verge of shutting down the last of its private data centers, making it one of the first big companies to run all applications, even sensitive ones like data analytics and customer accounts, on AWS’s public cloud of shared resources.

For most big companies, however, the public cloud will remain but one element of an increasingly integrated IT infrastructure, one in which borders between public and private resources are dissolving, and information flows every which way.

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