While it will take years, if not decades, to remove all the hardware from a corporate data center and manage a business on an Infrastructure-as-a-Service basis, some businesses are already making the move.
Companies at the leading edge of this evolution are often startups that have an intrinsic advantage: They are new companies that have yet to build their own IT infrastructure.
Such a move, often at the urging of venture capital investors, helps those companies reduce or eliminate capital spending on IT and use the money instead to invest in developing the core business.
Getting startups to move their IT infrastructures completely to the cloud is becoming more common, said Barry Eggers, managing director at Lightspeed Venture Partners, a Menlo Park, Calif.-based venture capital investment firm.
"With cloud-based compute and storage technology in the cloud getting better and faster, it is becoming easier to move all operations to the cloud," Eggers said.
However, because of performance considerations, the cloud is not for everybody, he said. "If you are running an application with high-performance or low-latency requirements, you won't put it in the cloud to start," Eggers said. "But a startup doesn't always have these needs. And they can purchase modules from Amazon to increase performance if needed, or buy a bigger link for bandwidth."
The next five to 10 years will see more interest in moving IT infrastructures to the cloud, especially where the cost of operations outweighs the need for performance, Eggers said.
"The cloud turns fixed costs into variable costs, and startups don't know how fast they will grow," he said. "And over time, we'll see more and more established companies move to the cloud. But not companies like big banks, which count their infrastructure as a strategic asset."
Jim Linfield, a partner at Cooley LLP, a law firm that works with several venture capital-backed companies, said many companies at the angel investment stage are completely virtual until they get to the point at which they start receiving venture capital funding.
At that point, they will usually get their own office, if not their own IT infrastructure, Linfield said.
"In general, the venture capitalists are very focused on capital-efficient business models," he said. "The ability to procure things as a service is very attractive, if something can indeed be acquired as a service. This goes beyond IT into all areas of an investment."
Venture capitalists first realized the importance of pushing their portfolio companies toward building their IT infrastructure in the cloud and away from purchasing their own equipment and licenses back when the dot-com business hit its first snag, said Todd Krautkremer, vice president of marketing for Pertino, a startup developer of cloud-based virtual networks.
"When the dot-com bubble burst, there were warehouses full of computers, telephone systems and other equipment, as well as fallow software licenses, stacked right next to the piles of desk and chairs," he said. "I suspect more than one VC looked around and said there has to be a better way to utilize capital."
