Amazon, a relative baby in the field of technology services, triumphed over stalwart IBM to gain a $600 million C.I.A. contract, but the most remarkable part of the deal was that the agency was a cloud convert in the first place. The fact that a tech company could warehouse data involving the government’s spies is the clearest signal yet that cloud computing is having its moment.
Somewhat like outsourcing a decade ago, cloud computing is the coming technology destined to sweep away all before it. Amazon Web Services is the fastest-growing part of fast-growing Amazon, and analysts expect it someday to be the dominant part of the company. Google, IBM, Verizon, Microsoft and a host of smaller players are competing for a part of the action. Global spending on public cloud services alone is forecast to hit $210 billion in 2016, up 172 percent from 2010.
And yet outsourcing provides a cautionary tale of how enthusiasm can be derailed by reality. Outsourcing advocates said every customer service call, every information technology fix, even the creation of routine legal documents was destined to be done in India or the Philippines. They said this would be cheaper and more efficient. American companies would be hollowed out, with only executives and their aides left on the payroll.
It didn’t happen quite that way. While many companies outsourced routine tasks, some moved them back after complaints of poor service. Others never outsourced. Outsourcing was ultimately a segment of the market rather than becoming the market.
Cloud computing is already confronting similar issues.
Members of the Open Data Center Alliance, a consortium of global information technology companies like Infosys, Disney, Deutsche Telekom and SAP, are cloud enthusiasts. But in a recent alliance survey, two-thirds of the members said concerns about data security were delaying their move to the cloud. That was down from the 80 percent of respondents who expressed a concern about security the previous year.
Other results, however, are headed away from cloud computing. Fifty-six percent of members now say regulatory issues will limit their adoption, up from 47 percent. And 47 percent worry about being tied to one vendor, up from 39 percent.
Cloud computing “is kind of in the first wave,” said Michael Masterson, director of cloud solutions for Compuware, which helps clients improve the performance of their applications. “I don’t know if I’d call it immature, but it’s definitely Version 1.”
“Immature” is exactly what Roman Stanek would call it. Mr. Stanek founded GoodData in 2007 with the mission of disrupting business intelligence. Amazon had just started Amazon Web Services, and GoodData became a client. It was not an entirely happy experience, Mr. Stanek said.
“Imagine if your electric company didn’t know whether it would be up or down — if they told you, ‘No guarantees, but we believe it will be mostly up,’ ” he said. “Maybe that works for some clients.”
Amazon Web Services had well-publicized failures in October 2012 and two months later. But reliability is not a problem specific to Amazon. Mr. Masterson pointed out that Hewlett-Packard, which publishes its service agreements on the web, says it has 99.95 percent availability, which works out to about four hours of trouble a year. The service agreement also says a failure only counts if it lasts for more than six minutes.
“Imagine a company selling a premium new car whose warranty includes 2M piston revolutions, 10k door latch cycles, and 20k window open and closes,” Mr. Masterson wrote in a recent blog post. “And even then, with 99.5 percent availability, you might still be unable to start the car two days a year, or during winter there might be two weeks where the doors won’t unlock until the sun melts the ice in the door locks. Ready to buy?”
GoodData grew with Amazon. It has raised more than $75 million and has nearly 300 employees. But in the first quarter, the company left Amazon. It moved to a private cloud hosted by Rackspace, which is based near San Antonio. With Rackspace, it had more control. The only thing worse than a company offering unreliable service appears to be a company whose very existence is in doubt. Nirvanix was a cloud company based in San Diego with impressive backers, including Intel Capital and Khosla Ventures, and impressive hype. It was going to take on the big boys, Amazon Web Services and Google.
Last Sept. 16, Nirvanix warned customers they had two weeks to retrieve their data. On Oct. 1, it filed for bankruptcy. Apparently all customers got their data out, but it was a near miss. Then last month Rackspace, whose stock dropped by half since the beginning of 2013, said it was hiring Morgan Stanley to advise it on a possible sale or merger. While profitable, Rackspace faces increasing competition.
Companies that fail or are sold would matter less if data was more portable.
“It’s still difficult to tap into Rackspace and change your mind, or tap into AWS and change to something else,” said James Staten, an analyst with Forrester Research. “We’re a long way from sufficient standards where that’s a possibility.”
Mr. Staten said the last companies to go to the cloud would be those that had no experience with it — hospitals, medical device makers, and architecture and construction companies. “The reason they should go last is they don’t yet know what they don’t know,” he said. “They’ll start with applications that do not involve compliant data or customer data.”
In general, he said, “it’s hard to make a case for organizations that should not go to cloud at all.” It is not like outsourcing, which faltered over communications issues and rising prices in the host countries, he said.
GoodData expects to ultimately go full circle as competition increases. “This used to be very much Amazon’s monopoly, and a one-horse race was not good,” Mr. Stanek said. “That’s why I’m happy to see Google get in. In a couple of years, you will be able to go to Google or Amazon and say, ‘Give me the features I need, the service agreements and a good price, and I will have no reason to build my own cloud.’ ”