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Flashback to four years ago......From STLTODAY.COM July 1, 2011

Heavy Cloud Cover Seen for Area Firms

BY JIM GALLAGHER - jgallagher@post-dispatch.com

It may be bad news for the people in your corporate IT department, but much of their work may be moving to "the cloud." If the digital soothsayers are right, that personal computer in your office cubicle someday may function as nothing but a dumb screeen. The real electronic brain - the computing power, the files and the software - will be far away in a bank of computer servers owned by another company. That computer bank is "the cloud."

It's a rapidly growing business - mainly because it promises to cut company computing costs. And St. Louis companies such as Savvis, Datotel and Hexagrid have a piece of it.

Until now, consumers have been ahead of the industry in using the cloud. Email through services such as Gmail and Yahoo are cloud uses. Consumers who store photos on Shutterfly or track their finances on Mint.com are using the cloud.

"Consumers are far ahead of the enterprises in this," says David Brown, Datotel's President.

Now business is getting into the act - creating opportunities for local firms. Savvis, based in Town and Country, has been selling tickets to its digital cloud to companies worldwide. Its $40 million cloud business has been doubling every year.

"We'll probably be disappointed if we keep (growth) only to 100 per cent," says Savvis President Bill Fathers. "If we can't make this a bilion-dollar business in three or four years, then we've not been successful."

Though West Coast tech giants like Google, Amazon, Microsoft and Apple currently dominate cloud computing, Fathers believes St. Louis has established itself as a hub that can grow as the business grows.

"St. Louis has been a good incubation point," the Savvis President said. "Among cities in America, St. Louis is probably a cloud capital."

Entry into the cloud business was one motivation behind CenturyLink's planned $2.5 billion purchase of Savvis announced two months ago. The Louisiana phone company plans to keep the Savvis operation in St. Louis and add 300 to 400 jobs here next year.

MarketsandMarkets, a market research company, sees the global cloud growing from $37.8 billion in revenue last year to $121.5 billion in 2015. Other forecasts are similar.

Datotel, located in the old Globe-Democrat building, downtown, provides a cloud for small to mid-size businesses, mainly around St. Louis. It had $6.5 million in revenue last year, and Brown says business this year will be up 20 percent.

"We're on the front end of the curve," Brown said. "This industry is growing incredibly fast."

THE CONSUMER CLOUD

The definition of the cloud remains a subject of debate. The most popular definition sounds like old-fashioned corporate outsourcing: Computer functions once done in the IT departments are farmed out to a data center elsewhere. Customers use the Internet or cell connections to access their clouds.

A broader definition would include any storage of data on the Web, including now ubiquitous Web-based email accounts such as those from Google and Yahoo.

As the concept takes hold, consumers and businesses will access the cloud from smartphones, tablets or laptops from wherever they happen to be. Movies, photos, music, bank accounts, work documents, and computer applications can be a finger tap away.

"You'll pretty much have everything up in the cloud" says Joe Seibel, Chief Financial Officer at Hexagrid, a Chesterfield software company specializing in cloud computing. "If you have a phone, you'll go over to your friend's house and watch one of your movies."

Last month, Apple CEO Steve Jobs announced iCloud for consumers. They'll be able to store their iTunes music, along with documents, pictures and video on Apple's servers, and they'll be automatically downloaded to iPhones, iPad tablets and home computers.

"We're going to demote the PC and the Mac to just a device - just like an iPad, an iPhone or an iPod touch," said Jobs. "We're going to move the hub of your digital life to the cloud."

COMPANIES SEEK SAVINGS

If consumers were first adopters in cloud computing, businesses are hot on their heels. The reason: The move can cut computing costs betwen 30 and 70 percent, said Fathers of Savvis.

"As a concept, it's been around for more than 20 years. It's only in the last 12 to 18 months that the technology advanced so as to realize the promise," said Fathers. "The underlying technology has gotten cheaper - things like processors, servers, bandwidth."

At most times of the day, companies use only 5 to 15 percent of their server capacity, says Brown of Datotel. They keep this extra power for moments of peak demand.

The cloud makes use of all that wasted server capacity by allowing many companies to share the same servers, which can be allocated as needed. When Hallmark, for instance, gets a rush of orders during the holidays that's 4,000 times its normal traffic, Savvis can simply assign more data processing capacity to the card company.

The cloud also cuts companies' hardware investments, notes Sanjay Madria, professor of computer sciences at the Missouri University of Science and Technology. They use the cloud companies' equipment, and they usually pay only for the capacity they use.

Of course, many companies already have big investments in hardware and that's slowing the transition. Companies don't want to report a loss on the value of the hardware they'd abandon by moving to the cloud. That's why Asian companies are moving faster - they're newer and have less installed hardware, says Fathers.

"America has a write-off problem for at least five years," he says.

NEW OPPORTUNITIES

Cloud computing can also enable local firms to expand beyond traditional customers.

Appistry, based in Creve Coeur, invented a program for gene sequence analysis. They'll install it in the labs of the big research customers. But smaller labs can run it through Appistry's own cloud - and only pay for their usage.

Spreading costs over many customers should help bring prices down, as should the gene analysis that costs $10,000 now may cost $200 or $300 in five years, says Sultan Meghji, a vice president at Appistry.

"Patients will be able to include their genetics in any conversation with their doctors," he says. "Are there new markers for prostate cancer?"

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