How to Castrate a Bull - the Blog - by Dave Hitz

Cloud/Grid/Utility: Definitions Drift Because IT Is In Denial About Outsourcing

Why did the term cloud computing so quickly lose its original meaning? At first, cloud computing was about how to not build a data center, but it quickly morphed into an architectural description of how you should build a data center. The first definition is about accessing IT services over the Internet from computing resources that somebody else owns and operates. The second definition is about building your own hyper-efficient data center based on virtualization, shared resources, and dynamic provisioning. These definitions are so different – contradictory even – that it takes modifiers like external, public, internal, and private to tell them apart. To many, it seems that we have sunk into a morass of confusion.

My point here, though, is not to debate definitions or technology. (I believe that both internal and external clouds will be wildly successful for many years to come.)

My question today is why the definition got muddled so quickly, especially since this isn’t the first time it has happened. The original idea of utility computing was that computing should be like electricity. In the early days, companies had their own generators, but over time, centralized power companies replaced them. The theory was that IT should evolve in the same way. This same metaphor also inspired grid computing, but as with cloud computing, the definitions quickly shifted to data center architectures. I remember many data center tours where the proud owner of rack after rack of Linux nodes would say, “Check out my compute grid.”

What is going on here? I believe that IT is in denial. CEOs and CIOs are like ships passing in the night.

CEOs ask, “Why can’t we just convert to cloud computing?” What they mean is this: “I’m tired of expensive data centers, high capital costs, and hard to manage infrastructure. Why can’t someone else do all of that for us and we just buy it as a service over the Internet? You know, like Yahoo! email or Salesforce.com?” In other words, CEOs would like to outsource big chunks of IT, just like they have already outsourced big chunks of manufacturing.

And then the CIO comes back and says, “I figured it out. We can convert to cloud computing, but the good news is that we still get to build the data center and buy the IT equipment ourselves.” Ships in the night.

IT departments are so averse to the idea of having their jobs outsourced – who wouldn’t be! – that whenever someone tries to define a term to mean exactly that, they redefine it to mean a new thing that they get to build and run themselves. Perhaps soon there will be a creative new definition of external cloud that somehow means you build it yourself.

As I said above, I believe that both internal and external clouds will be wildly successful. For at least the next five years, more likely ten, most CIOs will run a hybrid model consisting of three main parts: (1) Traditional silos, where an application, a server, and storage are purchased and installed together; (2) Internal clouds, which will initially run less critical apps and grow over time; and (3) External clouds, which will also start low and move up.

Why Is NetApp's New Data Center So Efficient? Big Fans and Hot Air

NetApp just finished building a new data center in RTP, and it is one of the most efficient in the world. I mostly focus on innovation around storage and data management, so I was surprised by how much room there is for interesting innovation in data center design.

The big problem of data centers is getting the heat out. In a typical data center, for every kilowatt you put in to run your equipment, you have to spend another kilowatt on air-conditioning to pull the heat out. In other words, it actually takes 2 kW of energy to run 1 kW of equipment. This is a Power Utilization Effectiveness (PUE) of 2.0.

NetApp's new data center has a PUE of 1.2, which cuts the total power requirement almost in half. At current electricity prices, we'll save over $7 million a year. We use many techniques to achieve this, but I have two favorites: big fans and hot air.

First for the big fans: our data center moves enough air to fill the Goodyear Blimp in three seconds. To get a mental picture of this, imagine an endless series of blimps flying out of the building – every three seconds another blimp. The harder you blow, the faster you cool.

The hot air technique is more subtle. Most data centers cool air to 55 or 60 degrees, but our team figured out how to get effective cooling with 74-degree air. Less cooling equals less energy. The trick is to manage airflow carefully. Rack mounted equipment sucks air in the front and blows it out the back maybe twenty degrees hotter. Most data centers have rows and rows of racks in a big open room, so the air gets all mixed up. It works better to deliver cooler air directly to the front of the rack and collect the hot air from the back. In our previous data center, we experimented with plastic shower curtains to separate the “cool aisles” at the front of the racks from the “hot aisles” at the back, and it worked wonderfully. In the new data center, we went a step further and used drywall to build airtight cool aisles, which we pressurize to speed airflow through the equipment and ensure that the hot air can’t get back around to the front. The hot aisle can get up to 95 degrees, which is uncomfortable, but that’s okay – it’s optimized for equipment and energy, not for people.

In RTP, the outdoor temperature is 74 degrees or less 67% of the time, which means we can usually use outside air with no cooling at all. Our data center has more cooling capacity than the Empire State Building, but our goal is to leave it off.

It didn’t take exotic technology to achieve this result. The design and airflow are unusual, but we used ordinary air conditioning units, heat exchangers, and so on. In fact, we reduced the cooling capacity by about 20% so this technique is not only cheaper to run but also cheaper to build. If you want to learn more, we welcome visitors.

What Moves Markets: The Seven Hundred Million Dollar Man

Last week we had our Analyst Day in New York City, which means that we met with a theater full of Wall Street financial analysts and explained our company to them. You can learn a lot about how Wall Street thinks by watching how our stock price changed during the different presentations. (You can watch it yourself here.)

The first four speakers described our strategy, why we have been winning recently, and why we believe we are very well positioned to take advantage of trends in the market like cloud computing and industry consolidation – Tom (our new CEO) on the big picture, me on our vision of data centers and clouds, Manish on our product strategy, and Rob on our sales strategy.

Finally, Steve Gomo, our Chief Financial Officer, gave projected financial results for the next two quarters. In particular, he showed a slide saying that by Q3, we expect to be back to our normal operating profit of 16%.

We tracked the stock ticker throughout the presentations, and here’s how Wall Street responded. After the four of us did our absolute best – two hours of details – to explain what we are doing and why we will win, the stock had moved a total of three cents. In the first ten minutes of Steve’s talk, the stock went up a dollar. It’s clear what matters to Wall Street. Never mind technology, long term strategy, or market position, what moves markets is short term earnings. (Not new news, of course, but this is a graphic illustration.)

By the next day, the stock was up about two dollars. Perhaps the extra dollar came from the other four presentations, and it just took a while for the analysts to digest the details, but – realistically – that was probably Steve’s doing as well. Since we have 350 million shares, Steve’s short talk – maybe just that one slide – drove NetApp’s value up by seven hundred million dollars. If you look just at the first ten minutes of his talk, when Steve got the first dollar, he was increasing our market cap at the rate two billion dollars an hour. What power: mover of markets and creator of value. Steve Gomo, the seven hundred million dollar man!

And yet, when he got home from the meeting, late that night after a cross country flight, the first words Steve heard were: “Honey, I need you to take a look at this sink. The spray hose is leaking like crazy.” From star to plumber in six seconds.