Green Telecom Live: Why does the world need Liquid Radio?
Mike Murphy: Traffic growth and the need for cost efficiency are the drivers for the shift in technologies. As broadband grows, you see the need for cost efficiency because revenue is not really tracking anywhere near the capacity requirements. According to a recent study by the ITU, prices of fixed broadband has gone down by 50% over the last two years, while price of mobile has gone down 22%. If you extrapolate that to ten years, say 2020, you end up with a 95% reduction in price, so a requirement for a 95% reduction in costs as well.

From the old days of TDMA, CDMA, GSM – basically what we would do is make new versions of the same boxes every two to three years – that worked OK. But when you get into numbers like these, you need to look at more fundamental changes, not just better boxes, better chipsets – that all now relates to Liquid Radio – how do we do things perhaps differently to satisfy the capacity and cost demands?

The network is starting to split. You have the connectivity part, which is driven by cost efficiency, flexibility, and increasingly, we have services on top of that, which is more driven by innovation, so called, OTTs, and operator-build services. It means the ability to be flexible and to serve capacity in a cost effective way and to match your capacity to the need of your subscribers.

Practically, what does that really mean?

When customers ask me whether they should deploy TDD, or go from HSPA to LTE now, the answer is always ‘yes’ to everything, because I believe that to satisfy the demand, you’ll need everything you have. So if you have spectrum for TD that you can apply for LTE, then you should do that. If you don’t, then you need to figure a way to go to FDD.

Basically, you will need to bring everything to bear to satisfy the demand. The bad thing about that is that it creates what we call, heterogeneous networks – it doesn’t take a rocket scientist to figure out that it’s going to be more complex with you have multiple technologies. I think we will have networks that will have 2G, 3G, TDD, FDD, Wi-Fi, and so it is complex, so you need ways of simplifying it.

What exactly is Liquid Radio?
There’re a few components of Liquid Radio. One component is Active Antenna. The way I describe it is in a base station site, you have three components, you have an antenna, you have a radio unit, and you have a digital unit. Typically, they are all put together at the site. An Active Antenna is it takes the radio part of it and combines it with the antenna with some extra intelligence, so it is not just a dumb mechanic bolt on, there is actually intelligence in there where you can do things like beam forming, vertical sectors, auto recovery in case of failure – so it is an intelligent thing, and not just a mechanical unit. We make that a point because there is at least one vendor that is making it a mechanical unit.

Another part of Liquid Radio is the digital part. Since the connection between the radio part of the digital part is an optical link, why not put the digital in a centralised location – or baseband hotels. The idea is you consolidate hundreds, maybe even a thousand digital units in a baseband hotel.

One customer told us they can save 70% of ongoing opex just by doing this – not the whole company’s opex, but the opex associated with managing their sites. And it is quite easy to imagine. Let’s say you have 10,000 base stations, and you create 10 hotels. The old story is you have to do maintenance, or some kind of an upgrade to 10,000 locations – most upgrades are to the digital part, normally the radio is not involved – so today, you only have to go to 10 locations. For each of the 10,000 locations, you have to get into the truck, drive to the site, go to the landlord to get the key, get to the roof, and get into the base stations, basically it is a very costly exercise, so you it is easy to imagine these numbers are actually not that ludicrous.

We have always had this concept of software-defined radio, so one platform supporting multiple technologies – that’s not really new. Today, we can do the separation of radio and digital, and we have several customers doing that now.

The other part of Liquid Radio that we announced is called, baseband pooling, so up until now, there’s really been a one-to-one relationship between baseband and the site. So if you have two sites and a user is connected to it, and he moves from one site to the other during and day and at night, if you have a one-to-one relationship, you need the maximum capacity on both sites’ baseband. But if you do pooling, it means that you can share capacity when that users crosses over to multiple sites. The end-results is you get statistical multiplexing advantages, which means less capex, maybe 20%-25% less – those are the numbers that are now floating around regarding baseband pooling – that was the other part of the Liquid Radio model.

It basically means that you have, literally, a pool of capacity that can serve multiple sites, instead of one-to-one.

Another thing that is not announced – and maybe a couple of vendors are looking at this, certainly we are – is research into off the shelf computing for baseband. This is a number of years away, because the capability isn’t quite there yet. The chipsets are not powerful enough, and the transition is not trivial, even for us, moving software from a proprietary base to a general software base is a non-trivial exercise – remember that so of these developments was done over the last 10-15 years, so this will take time. I think you’ll see an evolution like that over the coming years.

I believe this is a fundamental paradigm shift, it changes the game – that’s what I means when I say, you can’t just create a better box – you have to do that as well, but you also have to look at how can you improve the architecture.

I think what is happening in the industry is that there really wasn’t any clarity and direction even a year ago, now there is more of a clarity in that direction.

Are there any challenges for Liquid Radio?
Where the story breaks down is the cost of fibre, however as operators roll out LTE, they kind of have to have fibre, so these things come at the same time. If you look at existing networks, you are absolutely right, if fact, most operators don’t have a lot of fibre and there’s still a lot of microwave – and this doesn’t work with microwave – the requirements are very, very high on the optical interface. But places like Korea, Japan, Singapore, Hong Kong, fibre is generally available, some operators like Telstra have 90% fibre to their sites. So I think the problem is slowly going away, particularly with LTE, there is almost a necessity to have fibre – the timing is actually appropriate.

At the moment, there is two optical standards and they are very well known. One is called, OBSAI, and another is called, CPRI. You could implement then in different ways, so you can’t really say there is plug-and-play between different vendors, so there is some debate – I’d call it research because it is not crystal clear the best way to do this. For example, some people say we should move more of the digital functionality over to the antenna to make the optical easier. Others say no. There is still some simulation and research going on. Some customers also have different views on this. Some are very opinionated.

Where is the market on that roadmap today?
The separation of digital and radio has been there a while, you can do this over multiple tens of kilometres, so that is nothing new. In 3G, we have pooling of two baseband units. The Liquid Radio announcement is for a pool of up to 9 baseband units with up to 10Gbps of capacity. On average, we say you have pooling across 100 sites. Active antennas are available now, and they are on trial.

Going to off the shelf computing, that is still in the research stage. It is years away, but it also means that some guys in labs have some variant of it working.

What’s after Liquid Radio?
In the Mobile World Congress, we announced OpenCore, so this is so you can put the HLR, SGSN, GGSN, Policy Control, so on, on off-the-shelf systems. The second step is virtualising that hardware – so it is same idea as baseband pooling, so you can actually pool capacity for any service. We have virtualised VAS right now, so in particularly SMSCs. The benefits of that is the same as baseband pooling, a lot of capex savings, but perhaps more dramatically. We have one customer in Indonesia who had three floors of SMSCs reduced to half a floor once we introduced virtualisation and pooling.

The last step is, instead of using ATCA (Advanced Telecommunications Computing Architecture), you go to low cost computing in a cloud. We have some services who are actually sitting in public clouds today, so CRM, field services, OSS/BSS and managed services, and we have some on virtualised private clouds.

Everybody talks about clouds, but usually, they are talking about IT clouds. But some telecoms services cannot be run on those kinds of clouds. So mainstream voice, emergency services, billing, because their demands are higher, whether that is reliability, availability, or latency, or security, or a combination of all those. So I believe over time, customers will need telco clouds that have stronger capabilities then traditional IT clouds – a kind of carrier-grade clouds.

Because of that, we are building some of the fundamentals to enable that. One is the ability to manage clouds, one is the infrastructure and platform elements to help you create this so-called, carrier-grade cloud. Our global services team have create a term called, managed IT, to look at things like managed IT clouds.

Green Telecom Live: What’s M2M all about and what is Telenor Connexion’s position in the market?
Gwenn Larsson: Putting a SIM card inside a smartphone or tablet is very different from designing a house monitoring system. Some of our competitors have focused on getting as many M2M units deployed as possible, but they are applications like Kindle and focus on the consumer segment to mass release devices.

We deliver something call a premium service and this is for companies that run business and life-critical applications – they recognise that there’s product integration complexities when you are putting in a monitoring service to a healthcare unit, or an automobile – the whole thing has to be tested together. Mostly what we look at is multiple market developments – as in geography – so they are looking to launch services in the Europe, the US, and Japan, something like that.

And then there’s the understanding that machines behave differently than human beings. For incidence, when you walk into a conference and can’t get a signal, you are not going to try a hundred million times to make the call – you are going to give up and try again in a few minutes. But machines don’t think like that, so you have to avoid these kinds of synchronised behaviour – that’s one example that we work with our customers on. We make provisions so the machines don’t all come on at the same time. You can design the application not to behave that way, you can design non-synchronise communications, it could just a few seconds apart. This is something we work with our customers to solve problems with the mobile network – you don’t want 50,000 alarm panels to come online at the same time.

Also, there is the quality of service aspect. There is a big focus in Scandinavia on high quality in all the products. Essentially what makes us different from most of the players in the industry is this quality and reliability focus. In order to achieve that, we offer something call pro-active service awareness, and this is being more proactive with our customers and ensuring the longevity of the service and the quality of the service.

The third thing is we are one of the few companies that have a proven track record across verticals, so we can point to Volvo and Nissan for automotive, Daimler for fleet management, Omron for healthcare, Hitachi for asset management and so on.

Lastly, we are a company that is very focus on ensuring that our customers are aware of the latest trends in embedded connectivity. There are certain governing bodies, GSMA as an example, who have written some guidelines for embedded connectivity, and we ensure that our customers are aware of them.

How does M2M work?
Essentially, we have developed an M2M platform – this is where the data is processed. But in order to deliver this service, we have to leverage mobile networks all over the world. For incidence, we might have a roaming partner in Italy because we don’t own a network there, so we would make an agreement with an operator there to allow our SIM cards to roam there. In Malaysia, we have our own network provided by Digi [Telenor Group company]. It doesn’t really matter because anywhere in the world, we can use the radio network where we have roaming agreements on to connect back to our M2M platform, which then sends the data onward to our customers.

What are some of features offered by Telenor Connexion?
Because we have roaming agreements with operators all over the world, we can put a probe into their network. What a probe does is it allows us to check on a regular basis, the performance of that network. Let’s say this roaming partner in Italy is having a problem with their network, we would send a message to our end customer saying ‘we don’t know if you will experience an issue here, but right now, we are seeing X, Y, Z, problem in Italy.’ This is something that our customers really appreciate, instead of just wondering what the issue is when it happens.

Other things that we can also offer are value-added services that lie outside of the platform itself. There are three different areas – one is connectivity: What we can do is enabled different types of connectivity as part of our offering, to add Wi-Fi, to add CDMA, to add satellite. We can also add data processing functions, so that we can use location-based service information, device management information and bring that all together in one central focal point for the customer.

And then finally, we are working with some companies with special payment set ups, prepaid solutions, smart bill solutions and so on. There’re a lot of value-added services that we can add to our platform that allow us to continue to differentiate from our customers.

What is the typical M2M business model?
There are different business models for different applications. Some of our competitors, they advertise one global standard, one global price, but then it is really expensive. Instead, maybe what you need is a SIM that work in Malaysia, Thailand and India – we can be really flexible in creating a business model based on where a customer actually needs to use the application.

For example, with Hitachi, their machines now have our SIM card in them. The business model that we set up with them is they can potentially pay a package and use it anywhere in the world, or we can charge them on a country-by-country basis, depending on what the roaming rates are. They like to keep track when it is being used and so on. They have created the monitoring tool that they are now selling into other industries.

We can work with some of our customers to ensure the efficiency of the applications, to ensure the amount of data you are sending is optimise – to send costs money, you always want to reduce the size of the packets, and we work with our customers for that.

And we work with them to design the quality of the terminals and how the terminals perform in the network, because that is important too, especially when there’s a problem in the network.

How do you charge for your services?
I can’t even begin to answer that question. If you compare a security monitoring applications, you are only sending data if someone breaks in, or the house is on fire, so you might send one-packet of data a year, maybe less. For Nissan, the application is providing monitoring information to the driver on a constant basis, but maybe some people drive their car everyday, some people drive their car once-a-month, so the business model varies.

Is it all usage-based then?
It’s not always usage-based pricing. For Tomtom for example, it is not usage-based pricing, they predict how much data their customers will use per year and they just sell the Tomtom and the customer doesn’t even know that there’s a SIM card in there.

The objective is not to be cheaper. So if you are implementing, say a home monitoring system, you’re buying it because it is going to save your life. In some cases, you will walk into a car dealership and they will say, ‘we have this feature and it will cost your US$250 extra over the life of your car, but if you crash it is going to send vital data to the authorities.’

M2M packages are charged in a completely different way. We are not billing consumers, we are billing companies and some companies we bill just based on the value of the offering – like Volvo, they could come to us and say ‘I want you to provide this applications to 100,000 vehicles for 10 years, how much will you charge me?’ They don’t really care how many transactions, or how much data, will take place over the network.

Today, the amount of M2M networks relative to people is very, very small. It is such a small part of the industry today, so minute compared to people.

So what are your plans in Asia?
Telenor is in Asia primarily for four reasons. We are trying to find companies who have headquarters in Asia, who want to take an existing, or new, M2M solution and take in internationally. It could be a company who is deployed in Malaysia today and they want to now deploy in multiple markets. If they started out in Malaysia, they are probably just using one of the national providers, but that national provider doesn’t have a M2M focus, and they say ‘we don’t want to take that risk, we want to work with a company that understands.’ The same thing with many of our existing customers, maybe they haven’t launched in Asian markets yet, and it feels more comfortable for them that we have a presence here to support them in that endeavour.

To support that, we have appointed Thomas Strandin as Head of Sales for the Asia Pacific region, and are expanding our Japanese office.

Verne Global, backed by General Catalysts from Boston, Novator in London and the Wellcome Trust, is now constructing a wholesale data centre in Iceland. The idea, according to the company, is to leverage the inherent benefits of Iceland, namely abundant, clean power, cool climate, as well as the availability to international bandwidth and tech skills, to build a facility that will be able to compete against data centre offerings on either side of the Atlantic.

The business model seems simple enough and is covered pretty well by Iceland’s marketers. In this interview we speak to Jeff Monroe, CEO of Verne Global, about his business model, the benefits of Iceland as a data haven, and why the recent volcanic activity is actually good for his company.

Green Telecom Live: What’s the vision behind Verne Global?

Jeff Monroe: Our core offering is a wholesale data centre provider. what that means is we provide space, power, cooling and physical security for companies who operate computer servers for online operations. So in essence, we are the base infrastructure for companies that need computing power, and so Verne Global, our motto is to find the world’s optimal server aggregation point in the world, and develop wholesale data centres so that customers can take advantage of those optimised locations.

Now, what is making this possible is – in the early days of the Internet, there is Mae East and Mae West and in the Docklands in London and these were the primary Internet connection points – there was very little metro fibre and there was very little long haul fibre, so data centres by and large had to be located in these areas where the main connections are. Over the years, metro fibre rings have expanded, long haul fibre capacity has expanded, and has allowed companies – one of the leaders being Google, to take applications and put them in more optimal areas verses in congested, expensive, inefficient metropolitan locations.

For the record, what are the advantages of having your facility in Iceland?

One of the things is when we talk about an optimised server aggregation point is you start to go through what aspect of a data centre, from an operational stand point, are most important. One of the key elements is the power source. You probably have seen news about companies who own and operate their own data centres have selected locations that, for example might be fed by a coal fired energy source, so something that is not environmentally friendly – and companies are starting to take a lot of heat for that – being asked to look carefully at the best location. So the energy source is a key element in selecting a location and Iceland is one of those places that checks that box more completely than anywhere else. It has all geothermal and hydroelectric energy, so all the energy on the island is renewable and it is also plentiful. The infrastructure is young with a high industry base, which allows it to be extremely efficient. It also allows us to provide to customers a 20 year visibility into power prices. We are able to, today, fixed energy prices, with an escalator, for up to 20 years, which is unheard of anywhere else in the world. So the energy piece is a big chuck.

Another piece is cooling. As you know, these data centres uses a lot of energy and produces a lot of heat as that energy is converted to operating servers, it creates heat which needs to be ejected from the data centre. Iceland happens to be a climate that allows us to do 100% free cooling. What’s important about this is that there are locations in the world where you can do some portion of free cooling because through the seasons, the temperature might be right for it. But even if you can do free cooling for 300 plus days a year, if you can’t do it for the full year, you need to put in all of the infrastructure for a chilling plant to be able to cool the environment and that has refrigerant, it has operational expense, etc. So Iceland is optimal because it allows us to do year round free cooling because it is in the North Atlantic. However it is dominated by the Gulf Stream flow so it keeps the temperature in Iceland in a range of not being high, and not being too low – it is kind of in a sweet spot for data centre environmentals.

The other thing you look for is abundant connectivity. One of the things that makes Iceland an opportunity now is that, just last year, a full cable system was completed that the government of Iceland was thoughtful enough and proactive enough to put in. This is a multi-redundant, multi-Terabit modern cable system that connects Iceland with Europe and with North America.

So now, you have all these great attributes and you are able to offer them to customers via this cable system that was installed.
One of the other fantastic attributes of Iceland is you have a very modernised, very educated society, English speaking, tech savvy society. So you have this amalgamation of qualities that check the box in every way for having an optimal location for data centre.

The last point, which is on everyone’s mind because it is a current event, which is the volcano eruption that happened recently. The other thing you look at for data centre is how can I find a highly protected location because no matter where you put a data centre – if you put it on the East Coast of the US, you have hurricane risks, tornado risks, thunder storm risks, in the Northeast [of the US], you get snow risks, in the Central [US] you have flooding risks, and on the West Coast [US], you have earthquake risks, so really, every region has to deal and content with mother nature.

One of the fantastic things about our site in Iceland is it was a former NATO air base, base of command. The military is very good at picking strategic locations and our site happens to be situated in 1.5 million year-old bedrock. It happens to be upstream from the volcanic activity, so what we just witness here is – literally a live test of sorts with regard to the location of the site and how it will react to a natural event like this. As you saw, what happened was the volcano erupted and where did that ash cloud get carried because of the prevailing winds? Directly over Europe. Our site remained clear. The power was never interrupted. The communications was never interrupted. So you had this event, which created a huge impact in a region that I think many people couldn’t have conceived would have been impacted from a volcano in Iceland.

All these pieces kind of fit together and form a puzzle and Iceland is a place when you put all the pieces together, it’s a very complete picture.

Was it a difficult task convincing the investment community to back your business model?

I have to tell you, when you are dealing with an investor base that had a couple of qualities – one is a long range vision, and two, an investor that looks for definitive trends – industry trends, market trends in things that are driving the market in a certain direction, it actually wasn’t very challenging.

Our three investors right now are, General Catalysts, which is a venture capital firm in Boston, Novator, which is an investment firm in London, and the Wellcome Trust, which is a fund that will back our entire first phase, and really, if you look at the Wellcome Trust specifically, you are talking about an organisation that has very, very defined investment objectives, they really look for strategic opportunities in things that they feel are going to be important over the long term, not just the short term. So I think if you are looking for somebody that doesn’t have that strategic vision, or that long term vision, then yeah, you could be in an situation where an investor, or a management team for that matter, who are just reactive to current things that are happening. What we are doing is we are looking more strategically, and we have a more long range view – because whether it’s carbon legislation, climate change issues, the upward pressure that is going to resume in energy prices, all of those things we believe are going to just continue to drive the importance of what we have to offer.

Is the facility up and running?

The facility is not up and running presently. What we have is our office there, which is up and running. The data centre component itself has been developed in a modular fashion. What that means is there’s multiple phases to it. You’ve got the underlying power infrastructure, you have the cooling infrastructure, you have the tenant fitted out infrastructure. What we have done is we have completed the underlying power infrastructure, and we have the shell buildings there, and we have our first phase carved out. As we work with our potential customers towards going live, that will define the tenant fit out area, so that will trigger the completion of that data centre environment.

We are doing it in a very modular fashion, whereby our design is very flexible with regards to customer requirement and we build based upon customer demand. That modular fashion allows us to that.

Does that mean you are adopting container-based modules?

There’s a lot of different environments where you can put servers to operate in, so whether that is a raised floor environment, whether that is a container. For our first phase, it will be a raised floor environment, not a container environment, but that raised floor environmental will be segmented into very distinct customer suites. So rather than having a very large open data centre with the cages in the middle, we are actually developing individual customer suites.

The beauty of the wholesale model is it allows a 2MW or 4MW data centre user, who is completely inefficient from a monetary standpoint and an operations standpoint. This allows companies who need that demand to come into an environmental where they are a part of a larger data centre and it allows them to reap all the rewards of the efficiency driven by that larger data centre. For example, in a single building, we are going to have six distinct customer suites, so each suite is going to be developed based on that customer demand, in a very modular fashion.

Containers are one potential solution, but that will be driven by the customer because that is such a customised solutions. Because the container kind of wraps about the servers that is really a customer specific discussion.

When do you expect the first customer to sign up and go live?

We are in the yellow line process and I can only say, and I hope you can appreciate this – the customers that we are dealing with, we are under pretty strong NDA, so all we are saying is we are working with potential customers and the ultimate delivery of the space will be based upon what their requirements are. So we are not going out to the market and quoting a specific date, or specific time that we are going to turn up the first phase, because it really depends upon what that customer need is.

So what has been the response from potential customers?

I can tell you in an absolute fashion, and this is pre-volcano and post-volcano, that the response that we’ve had has been incredibly positive. In some cases, this is more so after the volcano because again, this is something that happens – the last time that volcano went off was over 100 years ago – so it’s only so often that you actually see a live test of that magnitude and be able to see the resilience of the infrastructure and the location of the data centre.
As companies continue to drive towards more efficient operations, it’s going to drive applications to places like Iceland.

Have customers expressed any kind of concerns whatsoever? For one thing, connectivity – even though there is a new cable, Iceland only has a total of three-four cable systems, so in terms of redundancy, you can only get two routes per direction, has this been an issue for customers in terms of diversity and obviously price?

First and foremost, if you have just one cable, this wouldn’t work because people will not be single-tethered. If you have two cables, it would work for some, and I would argued for many. If you have three cables, that’s crosses the threshold for most. Iceland has the ability, you’ve got a cable into Blauberg, you’ve got a cable into Ireland which connects via terrestrial into London, you’ve got a cable through Greenland into North America, then you have the TAT cables, which run trans-Atlantic connecting the North America to Europe. So you do have multiple paths and I can tell you from a redundancy and resiliency standpoint, with the customers we are talking to, we have had no concern from that perspective.

From a pricing standpoint, if you have a data centre that is sitting on top of an exchange and a data centre that is some distance away, inevitably, there is going to be some level of transit costs, but the cost savings that we can drive through the efficiency of the data centre, through the savings in the energy, and you’ve got a government in a country who is extremely aggressive to drive data centre business into Iceland and into our site, you’ve got all the makings of an extremely attractively price model.

Once that volume starts to build, that builds upon itself to be able to offer lower and lower prices.

At this point, do you have any competitors? Are you the only company building data centre in Iceland?

We are the only company building wholesale data centres in Iceland right now. Iceland has very, very small co-location style data centres, but as far as a large scale wholesale data centre, we are the only one in Iceland right now. I would anticipate that you will see others follow our lead.

Will you be targeted enterprises, or more service providers?

It will be both. They can be enterprise level customers, or service provider level customers. It will be fantastic backup site for governments. We are really across the spectrum of customers that we are talking to.

Besides Iceland itself, will you have physical infrastructure, like POPs, on either side of the Atlantic?

Because we are a wholesale provider, and because the customers that we are going to have is going to be large, more sophisticated customers, those customers will essentially handle their own connectivity needs. What we are will be facilitators for those needs. What we are talking about is very big, savvy, sophisticated companies who will be our customers, and therefore they will handle the connectivity themselves.

What is the role of Icelandic government in this? I know they actually been quite aggressive in this area, did they play a part in your decision making process in terms of subsidies and anything like that?

I’ll answer that in two ways. Number one, the government has been extremely supportive and as you say, very positive and wanting to drive this industry in Iceland, for a multitude of reasons – for diversity of their economy, for job creation, etc. Relatively to specific incentive, we do have an excellent relationship with the government. We do have quite a few initiatives and those incentives and initiatives are dealt with on a case by case basis between us and our customers. We don’t go out actively in the press and state what those are but they are definitely in place. That is part of the government, or a municipality, participating and helping an industry get off the ground.

Are you staff mostly local? Are all the skills there?

That is correct. All the skills are there. Keep in mind, and I’ll give you a couple of example. Iceland is a huge, huge market for the aluminium smelting industry, so the country is not unfamiliar with extremely large industrial projects. Data centres are very much a factory of sorts. Number two is CTP Games, which is one of the top multiplayer online gaming companies – and I don’t mean gambling, has their operation in Iceland. So there’s a very tech-savvy staff there.

You’ve got a country, where Reykjavík is as modern as any modern city in the world and it has a very sophisticated population.

In this Part 2 of our next generation data centre architecture series, Andre Smit, Cisco’s managing director of data centre sales in the Asia Pacific, and Pete Nicholls, business development manager for data centres in the region, explains the thinking behind the strategic move and the technology powering the new architecture.

Read Next generation data centre architecture: Juniper’s single switching fabric here.

Andre Smit – on the strategy behind Unified Computing

Most innovation today happens in a single domain. You have new innovation in the network space, in the storage space, in the server space or in the virtualization space, but there is no single solution that pulls all these components together in an integrated way. We are announcing Unified Computing system today to address these challenges.

Unified Computing provides a cohesive system that unites computing, networking, storage, and virtualization into one system and simplifies the management layer on top of it.

Unified Computing offers considerable business benefits to our customers, the biggest of which, considering the current economic climate, is reduced total cost of ownership for our customers. Today, most of our customers spend a very high percentage of their IT budgets just keeping the lights on inside the data centre environment. 35% of the IT budget today is spent in the data centre just to maintain the status quo for that they have. Very limited budget is left for innovation and changes in the data centre of our customers.

We provide better agility for our customers to better support the changing needs of their business today. This also improves energy efficiency for our customers.

…on the addressable market for Unified Computing…

Worldwide the market for data centre is roughly US$85 billion. This consists of data centre hardware, software, services and networking. The market that we are going after, that is addressed by the Unified Computing system, is roughly US$20 billion of that, so roughly less than a quarter of the market that also, once again, applies to all these elements of networking, software, services, and hardware. So we are not going after the entire market, but different segments within this market. The segment that we are looking at is any customers that is looking at, and have started to implement virtualisation on their server platform, as well as customers that have extended, is extending, or wants to extend the virtualisation all the way down to the desktop platform that they are running today.
So it is not just about the data centre, it’s an extension of virtualisation all the way through their network infrastructure that this addresses.

So why Cisco – the newest player in this space today? First of all, we are uniquely position. The network of which we have 30+ understanding of, a real fundamental understanding of down to the smallest detail, touches every single component in the data centre. It touches the servers – the compute side, the virtualisation side, as well as the storage element. We believe the network is the platform for customers to grow and deliver all these business benefits in the data centre environment.

Three years ago, Cisco recognised the challenges that customers were facing, the limitations in capability, the management complexity, etc. We started three years ago by assembling a team, drawing expertise from the industry into Cisco to understand all the different silos. The team has taken a brand new approach in developing a system that breaks down the different silos between the compute, networking, virtualisation, management and applications that are on top of the system.

We started delivering components of this vision last year. So the launch of Unified Computing system today is a combination of all the solutions we have launched over the past year. Some of you might ask, is Cisco for the long run. Are we just dabbling here and then get out. Cisco has a long history of entering new markets, markets in transition, changing the market and staying in that market. Every market we entered, we have a concerted vision to be the number one or number two player in that market. This is no exception to us.

Pete Nicholls – on the technology and capabilities of Unified Computing

This is really an evolution that maps into our data centre 3.0 strategy. We have multiple waves of innovation that leads to the Unified Computing strategy.

The Unified Computing system really employs all these technologies that forms the central nervous system of what we are then adding with Unified Computing to create a new class of standards based x86 computing using the network as a platform.

If we take a look at what is available today and what has become best in class so far in servers. The past twenty years have really seen an evolution in size rather than thinking. Servers are as they were years ago, they still have configuration around CPU, memory, file settings, firmware, network settings, everything is hardware dependent, and everything adds complexity. Blade servers are the latest iteration, through rack mount, rack optimised and in the last few years, the blade. Blade servers have taken off in several areas for good reasons. They do introduce a more efficient form factor. Basically, they are taking traditional servers, turning them on their sides and inserting them into a chassis where the blade server makes use of shared components on a common back pane. However, every chassis still needs embedded switches, Ethernet switches, fiberchannel switches, management modules, plus virtualisation and we end up with hundreds of thin devices to manage.

In Cisco, we don’t have a legacy in the compute space, so we were able, three years ago, take a fresh approach and design a new system. So assembling that multi-discipline team around computer, storage, networking, virtualisation and application specialist, and we asked, ‘wouldn’t it be better if we pre-integrated all these elements for our customers?’ We can pre-test them, tuned them and the place to really begin is management because our customers tell us that management complexity is the top inhibitor to realising the scaling, the flexibility and total cost of ownership benefits of virtualisation.

As a first step, rather than have a suite with many management applications, we embed management in each component and into the fabric of the system itself. This allows the entire system to operate as one via the GUI interface and the command line interface that Cisco makes available, but most important through our rich API that is available so third party tools and third party systems management can also be use.

Then we use the unified fabric of all traffic types, so this negates the need for multiple legacy networks. So we strip away the extra cabling and this results in a significant reduction in the complex, expensive, power hungry cabling systems and their associated layers of Ethernet and fibrechannel switches and this further simplifies management. It allows for wire once and walk away performance. As an example, Cisco is consolidation our U.S. data centres into a facility in Richardson in Texas, and we expect to save a million dollars in cabling cost with that feature.

Then we optimised the platform for virtualisation and this is a major target for us, to solve the problems that arrive with the introduction of virtualisation. So we introduced further innovation here by overcoming the existing memory constraints available in server platforms today. We optimised the throughput per virtual machine in terms of networking and we added virtual machine-aware networking. We are introducing a new term here, we created an environment of stateless computing. Stateless means that each compute node has full resources, enabling unprecedented scale and flexibility as a platform for virtualisation.

The benefit for customers is that they can place more virtual machines on a given server estate. This enables customers to save costs by optimising their resources. Because each compute node is stateless, it can be auto-discover within the system and it can be provisioned by use of what we are calling, service profile – this is an obstruction where we separate the configuration from the hardware, so the server, the network and storage can create a service platform that can then apply as a personality to any server within the system. It gives the server a definition of all those configuration settings the service needs, so it can then deduce up either it can support a virtual machine environment, or Oracle, or Microsoft SQL, or the software platforms that are support on the system today.

Finally, we strip away the remaining redundant components, where all the additional Ethernet, fibrechannel switches, the multiple redundant management modules that are no longer needed, and that are replaced by an integrated fabric. The end result is that, compared to legacy systems, we have less than half of the support infrastructure needed to support the same level of application.

…on the system’s specifications…

So this is quite unique. Cisco Unified Computing system is a single system, unified x86 compute, unified network fabric, manageable scalable virtualisation, and consistent access to storage. It scales up to 40 server chassis and that enables support for 320 servers. The important point is that those 320 servers are all managed as a single unit.

Stateless compute provides the location, hardware and provisioning freedom. The platform is optimised around thousands of virtual machines and certainly we manage a virtual machine in this environment exactly as you managed a physical machine.

First and foremost, the Unified Computing platform is an architecture, so that is what we are announcing, an architecture that lends itself to evolving form factors. So today, a lot of the discussions are around blades, but we need to be careful not to miss the message that this architecture lends itself to compute in other form factors.

The key point of this, to simplify it for our customers, is that it is configured and shipped as a single system. So there may be integration work with the customers’ existing management tools that is required, but a lot of the pre-work has been done to remove that load of IT.

We are learning in two-way engagements with customers and finding that on average, we expect to be able to deliver 20% savings in capital expenses, and up to 30% savings in operating expenses.

Our blade enclosure for our servers is much simpler than the complex integrated designs from other vendors today. So the chassis itself is 53% open, there’s a lot of fresh air flow directly from front to back, we don’t need ducking to bend air and avoid hot spots. The power supplies are over 90% efficient.

So really the architecture that we are launching – was this a reactive move? This was three years in development and involved bringing expertise into the company. This was about reacting not to the market, but reacting to the challenges that our customers had, challenges of virtualisation and the complexity that brings to an organisation. It also delivers on further proof points on the Data Centre 3.0 vision that we laid out some 18 months ago.

Data centre 1.0 was really about the closed computing environment that was then changed to what we called data centre 2.0, the change to client/server and distributed computing, very open but also not necessary very efficient and quite difficult for IT to maintain quality and control. What we are moving to now is a much more efficient, highly integrated and virtualised environment, and virtualisation is driving that change. So we are building up here our platform of data centre networking, and this is all about data centre cost containment through standardisation, standardisation in the LAN, in the WAN, and also in the Layer 4-7 services.

On top of that, we have a unified fabric, which appeared from Cisco in the middle of last year, which is optimising data centre technologies through consolidation at the server access layer. Now with Unified Computing, we have integration and this really delivers on the three components of consolidation, virtualisation and optimisation. It delivers location freedom, hardware freedom, and in the service delivery platform for cloud computing, provisioning freedom and the flexibility that brings.

So this is a new paradigm for computing, we see it as something dramatically different from what is available today.

Andrew Smit – on potential market competition

I have to say one thing about this solution. This solution is not a blade for blade solution. This is a new market we are entering here. We are creating a brand new market. This is a market in transition that we are entering here. This is not comparable to any solution that is out there in the market today. Until there is competition, there isn’t – this is a new segment.

Pete Nicholls – on the difference of Unified Computing and mainframes

That’s interesting. I’ve presented this topic a few times now and that is the not the first time that I’ve heard that comment – that this does look like an x86 mainframe and I guess in many respects, it is. But bear in mind it is an open system, it is not a closed system, it is allowing scalable compute, it’s providing a less complex environment, so rather than using a management overlay to try and hide the complexity of what is there, we actually simplified what is there. So we can get levels of availability, scalability that is expected in some instances in the mainframe environment. But with the comparison, there is one area where we digress, is that this is many vendors working with us to provide x86 standards-based computing as a platform for virtualisation in a very open, collaborative fashion.

Specifically, both Juniper and Cisco made significant announcements in their vision of a next generation data centre environment that can support the performance requirements of cloud computing services.

In this first article of a two part series on the two companies’ strategy and visions for cloud-based computing infrastructure , Green Telecom talks to Lam Chee Keong, regional enterprise solutions manager at Juniper Networks, about the thinking behind its Stratos Project and why there’s a need for a single fabric.

Green Telecom: So what is Juniper’s next generation data centre vision?

Lam Chee Keong: I think you have heard a lot about cloud computing and it is also common knowledge that cloud computing means different things to different people. One of the things that I think we can all more or less agreed on is basically that cloud computing is the ability to deliver services through the cloud. It is actually leveraging off on the public Internet infrastructure.

The whole idea of cloud computing is to be able to move to a point where computing can be treated like a utility, or what we called utility computing. With utility computing, you come to a point in time, like electricity. With Electricity, it is like utility for all of us. We go to anywhere, the office, home, or in any public place, there is a power point and I can plug my appliance or device into the power point and I turn it on and straight away I get power.

So cloud computing is moving in such a direction, to achieve a point where computing becomes a utility. Now cloud computing isn’t really new right, in a sense, you are delivering applications across the public infrastructure is not really new – it has been around for a while. With the new technologies, like Software as a Service, and novel concepts like this, I think is taking cloud computing to a whole new level. For enterprises, or end consumer or customer of cloud computing services, there certainly is a compelling reason with tangible benefits which are drivers for this.

So I think the two key reasons for this is first the issue of costs, especially in terms of applications – not only in acquiring the license and contracts, but I think with enterprises typically, when you acquire software applications, they typically overprovision or under-provision, this effectively hamper business agility, business objectives. If you overprovision, you basically waste costs. If you underprovision, you might not be quick enough to get additional licenses to meet business objectives.

The second driver is in the area of opex and management. With this utility as a computing concept, I don’t have to worry about, or invest in, headcount to manage the applications, to worry about upgrading, installing it, maintaining it, and basically all these, I can move, transfer, this kind of task, as well as risk, to the cloud provider, the service provider of the cloud. These are the key drivers for cloud computing.

And it is not just SaaS, but it basically comprises the applications, it can be storage services, security services, all kinds of services can be hosted in a cloud and made available to the public. So I think the other reason cloud computing has gained another level – one reason as I mentioned earlier was the way we are use applications and software, like SaaS, the second reason is the Internet infrastructure becoming more available with high performance networking capability. Today, broadband to the home, Internet access all the way to the home, is talking 8 Mbps, 10 Mbps of bandwidth, compared to years ago when you are talking about dial up. I think this is also fueling cloud computing considerations as well.

With cloud computing, on one end, you have users, on the other end, you have data centres, where applications are stored and located. So there is three main parts; the user and the devices, the infrastructure in between, which is usually the Internet, and on the other, there public or private data centres that hosts the applications or the services.

The user end, as I mentioned, you have high speed access to offices and homes, so it is kind of like a given now, high speed access. In the middle, the public infrastructure is also offers high performance networks, so that part has caught up as well.

Now the problem is the data centre at the other end. The problem with data centre today is that they are still based on legacy architecture, and there has not been much innovation as far as the network in the data centre is concerned. Of course, you may say, that is not true because there are new products and stuff for the data centers. Well sure, everybody is announcing new switches and routers in the data centre, but the problem is that data centre architecture is still based on a traditional, campus like – what we called a three tier concept of switches. So you might have very fast switches in the data centre, but the architecture needs to change to meet cloud computing environments.

For computing as a utility and cloud computing to really be transparent and ubiquitous to the user, I think the user experience is really important. If it’s going to take a long time to download an application, then the user experience is not good and the pick up rate will not be good.

So the data centre architecture is due for an overhaul. We have spoken to consultants, large public cloud providers, private cloud providers, and even our partners, systems integrators like IBM, who have built a lot of data centres, who understand the kind of requirements that goes into a data centre – that was how this Stratos Project on data centre fabric was actually born.

So how is it different from what is available today?

So the idea is that the data centre fabric that we are talking about with the Stratos Project and working on, brings a whole new meaning to the idea of the single, flat architecture for data centre. As I was talking about before, a lot of data centre today are still built based on the idea of a three tier, an edge layer for aggregation and a core switch layer kind of concept. In the past, without cloud computing, this was alright. But today, with the kind of data that is going across, especially if you are talking about converged data, you are talking about fibrechannel, infiniband, Ethernet, and lossless ability and all kinds of requirements, certainly having multiple tiers is a going to be a bottleneck and introducing lots of latency for this kind of application and data type.

So for Juniper, we think we have an opportunity to look at it and start from scratch, let’s take a fresh, blank piece of paper and let’s think about what is the most efficient and simplest way to implement the data centre network. So the idea is well: the ideal network infrastructure would be one single switch, where I interconnect everything. Today, a lot of infrastructures is not use to connect users to the servers, but interconnecting switches and other devices. So the simplest data centre infrastructure would be a single switch where you can plug in servers, users, storage and security devices, appliances. This would be simple, efficient and you don’t have to worry about multiple tiers.

The problem with a single switch, of course, is physically there are a lot of limitations, especially with the number of ports, you can’t scale. In cloud computing, we are staging, not just thousands, but tens of thousands of ports, you can have a switch with tens of thousands of ports. So scalability is a major issue with a single switch. You also have a single point of failure, so you have to make sure the switch is reliable.

So the idea is to have the concept of a single switch, so a logical single switch, but we actually expand it to a fabric. So all the intelligence is actually out in the edge, so you get the top of rack, or end-of-row box, and in between is actually interconnected like a fabric, in a way many-to-many type of interconnection. So with that, the whole fabric behaves like a single switch, and is managed like a single switch and it is a single tier. It is highly efficient and will be able to accept most converged data, like Ethernet, or fibrechannel, or even infiniband will work across it transparently. So that is essentially what our architecture would look like.

Is this applicable to existing installations? Obviously, if you are building a new data centre, then you and adopt some of this technology and implement it, but does this apply to existing facilities?

So there are a couple of things to think about. One of the reasons why we are announcing this Stratos Project so early because we expect this to be a multi-year project before we are able to release anything. The reason why we are announcing it is data centres have a long cycle. It takes a long time to plan, especially when we are talking about very fundamental things like the network architecture. So this allows our customers to plan ahead incorporate this when they need it. Secondly, we are not expecting this data centre fabric to appeal to everybody. So it won’t make sense in a campus environment. It won’t make sense in a small data centre environment.

However, when it comes to large data centres, we will appeal to them. The idea is that it will co-exist and it will work with the existing infrastructure without ripping everything out. In fact, it will augment and complement, for example, our existing EX line of switches perfectly.

So it is kind of like JUNOS network operating systems, so you can link up all the switches into a virtual fabric kind of thing?

That’s right.

So when do you expect some of the technologies from the Stratos Project to be released?

So the Stratos Project is something that is designed from the ground up using our expertise, experience, silicon design and testing, so we are expecting this to be a multi-year, at least a couple of years, effort. We are not expecting any revenue from the project this year.

In terms of the technologies that are being developed, like the 30 patents already submitted in the US, and how these will be commercialized, is there a roadmap?

Right now, I can’t comment on that right now unfortunately. I think as time goes on, we will continue to keep the public inform of what is happening.

In Part 2, Green Telecom looks at Cisco’s new Unified Computing concept.

As a follow up to our initial coverage of his report, Sam Lucero, senior analyst, M2M Connectivity at ABI Research, talks to Green Telecom about the opportunities, deployment scenarios, and market challenges presented to the telecoms industry as smart meters go mass market.

Green Telecom: One of the key trends identified by your report seems to be the need for connectivity solutions between the metres themselves and the utility, what are some of the deployments scenarios (i.e. cellular operator, home network-to-Internet, etc)?

Sam Lucero: Deployment scenarios:

Utility deploys powerline carrier or fixed RF infrastructure at the local level for “Neighbourhood Area Network” connectivity, whereby a cluster of smart meters are aggregated through a concentrator/gateway for backhaul of communications to the utility’s back-end infrastructure. The utility can deploy its own backhaul network (eg fiber ring or private wireless WAN), or use cellular backhaul. This is the most common scenario for mass market/residential smart meter deployments.

Utility can use cellular connections to each individual meter. This is not common, except in Scandinavia and for utilities trying to reach more rural/geographically dispersed smart meters.

“Non-meter” meter data connectivity. The homeowner’s broadband connection, or a non-smart meter gateway device, can be used to transmit smart meter data back to the utility and utility communications to the smart meter. This is not common.

Obviously, smart meters will be deployed by the power utilities, but does the telecoms sector have any play in this area – such as partnerships, specialized solutions, etc?

The telecom sector has various plays in this area:

Mobile operators can provide backhaul and direct to meter connectivity, either as a standalone service or in conjunction with a bundle of data and voice services to the utility. Sometimes this is done through direct sales to the utility or in partnerships in conjunction with members of the utility value chain (eg AT&T’s partnership with meter maker Itron).

Cellular module providers and modem makers provide the radio interfaces at the meter and concentrator that enable communications to take place.

In the chapters listing, there’s mentioned of some interesting new business developments, such as M2M operators, is this happening already? Are some operators being set up just to serve the M2M market?

Yes, there are specialized types of cellular service providers that are oriented toward the needs of M2M customers, including utilities in the smart metering space. Some key names in this segment include Jasper Wireless, KORE Telematics, Aeris, and Numerex.

Will the introduction of M2M require new business models (pricing structures, network configuration, etc?)

Yes, M2M applications typically feature devices that use lower bandwidth and communicate more infrequently than human-centric mobile voice/data devices, in addition to other specific needs (eg the devices must be able to be remotely managed as there is no user to take drop it by a retail outlet if something goes wrong!) Typically, M2M cellular services range in monthly ARPU (average revenue per user) from $2 – $15 US per month, while the typical voice/data handset subscriber would be looking at $50 – $100 US per month. So, there are vast differences in pricing, network configuration, and on-going management, and this is a key reason for the development of specialized players such as those mentioned above.

What kind of bandwidth will smart meters require on the telecommunications network?

Per individual smart meter, basic meter reading and limited demand response functionality should only require a very limited amount of bandwidth, perhaps a few KB per month. But this is really variable, depending on the exact functionality desired. In general, though, M2M applications require much less bandwidth than handset voice/data communications; bandwidth constraints are not a problem in the M2M market.

Are applications (Google’s PowerMeter for one) being developed to support smart meter deployments?

Yes, there are a variety of applications being developed to support demand response and Home Area Networking (HAN) functionality. Google’s PowerMeter is just the latest.

Do you anticipate utilities coming in and offering their own connectivity solutions (i.e. powerline tech, MVNO)?

This is already being done to a large extent in North America (where utilities have more of a track record in deploying their own communications infrastructure than in other parts of the world). However, we believe that utilities are increasingly relying on cellular infrastructure for backhaul communications; in most instances, we believe it is more economical for the utility to rely on public infrastructure, than it is to deploy its own communications infrastructure.

Green Telecom: So what is AT&T doing the cloud space?

Joe Weinman: The first thing is everyone has a different definition of cloud, and I have this definition that seems to be catching on, and I think it’s helpful. Some people say cloud is IT services delivered across the Internet into a browser. I think that is an overly limited definition of cloud, in fact, it doesn’t represent the use case for most of the enterprises going forward in terms of ways in which they will use the cloud.

So this is what people way, cloud services or IT services accessible over the Internet. There is this thing called private clouds, and that might work with public service provider clouds, everything will ultimately move into the cloud, the economy of scale will drive benefits, etc. I don’t think these are exactly right.

First of all, we think one of the big use cases for enterprise for cloud services is not accessing over the Internet, but accessing through their VPN networks, so their data centre IT resources can burst into the cloud. That is not going to be done over the Internet. So there’s this myth that has been congregated by consumer service providers and our focus, of course, is on the enterprise.

My definition of cloud is: Common, Location-independent, Online, Utility that is available on-Demand – that makes Cloud into a nice acronym.

By common, I mean a shared resource that is statistically multiplexed across multiple customers and applications. Secondly, location independence is key – it shouldn’t matter where the user is, or where the cloud service is. If you use Gmail as an example, you don’t need to know where the data centre is and you should be able to use it anywhere in the world you want to. It’s online means two things – it is accessible over a network and that doesn’t have to mean the Internet or a VPN; and by online it also means it is available, so high availability is key – you need a fall back plan for network access as well as the behind the scene architecture. It’s a utility in terms of the sense that it provides value, but also in terms of usage sensitive pricing based on resources used or other metric of usage. And lastly, it has to be on-demand, so resources should be dynamically allocated.

With this definition, I would claim to you that there are lots of cloud services – electric utilities, rental car chains and hotel chains, because they are ubiquitous, location-independent, I can pay per use per kilowatt, per room day, per car day, or per car mile. Hotels are online because they are accessible by wide area highways and local area hallways. So with that, a lot of people say that there’s a thing called cloud computing and that’s what defines the cloud.

I would say that classic network services have that characteristic, whether it is analogue voice, or VoIP, or data access and transport services – certainly, the typical types of computing infrastructure – computing, storage, data base, etc, coupled with the move into the application stack – horizontal applications like voice, data, video conferencing, and the whole UC type of services. For example, we brought a company called Interwise – about a year and a half ago, and they provided a unified platform over IP. We will sell that software to you, or managed it for you on the premises, but it is also available as a cloud service – you don’t need to know anything, you don’t need to deploy any software, you just go ahead and start using and we will bill you for it.

In addition to that, we have a variety of tools, like managed messaging, hosted contact centres, desktop productivity tools through display over IP or thin client. We have variety of industry standard applications numbering in the dozens that we would provide in a managed, utility, in-the-cloud basis. So we offer managed Exchange, OCS, SharePoint, Oracle Financials, SAP, PeopleSoft, JD Edwards, Siebel, so virtually any enterprise application we will offer in the cloud as a managed app. Lastly, we have some interesting capabilities as the world’s largest network provider, not to mention the world’s largest, not only, telecommunications company, but we’re the world’s largest telecommunications company and/or IT provider. Not many people realize this, but we are larger than Siemens, larger than HP EDS, we are larger than IBM on a revenue basis. If you look at the Fortune 500, the companies that are ahead of us are Walmart, and oil companies and car companies. We are number 10 in the US list, and 29 in the global list.

So we are very much so in cloud services.

We have great global footprint. We are rated at the top in Gartner’s leaders’ quadrant for hosting providers. We are sort of tied for first place – they have mechanisms for ‘ability to execute’ and ‘vision’ – there is no one above us in either dimension. There are a few who are below us in the leaders’ quadrant in either dimension and there are a number that are not in the leaders’ quadrant.

The reason is, we have a decade and a half history starting with managed hosting when the World Wide Web started. Then in early 2000/2001, we started creating utility offers – utility computing and utility storage offers. We combined that with AT&T hosting, with SBC hosting, with Bell South hosting, to create a unified single, integrated organisation which has a foot print of 38 Internet data centres globally.

As you can see, we have four sites in Japan. We just opened our second site in Shanghai last year and we now have a third there. We just opened Bangalore in 2008. Singapore is being expanded – it is a super hub, so we will have additional growth there. The super hub concept has to do with – for those customers who are location agnostic – as opposed to needing to be in a particular country – we may as well aggregate their demand because it just makes sense in terms of the capital expenditure. For all this infrastructure, we have a platform that will provide full, virtual server dynamic bursting in real time. It will allow you to add and remove virtual servers from the cluster. We have grown our utility storage offers. We also have some innovative capabilities on usage-sensitive priced middleware because one of the issues of cloud computing is, just getting the infrastructure on a pay per usage basis doesn’t matter if the software has to be an outright license purchase. That has driven people to open source, which we certainly offer.

I would claim that, with both the industry definition of cloud as well as with my broader definition of cloud, that not only are we in the cloud business, I would claim that we are the number one cloud provider globally for the enterprise. Now, as far as consumer services, there are already vendors there and they are trying to move into the enterprise. But AT&T is what I called an integrated company, and there aren’t many of those. There are companies that are good at networking. There are companies who are good at hosting. We are excellent in networking – we are in the leaders’ quadrant for US networking, for pan-European networking, for Asia Pacific networking and for global networking, we are basically in first place, or tied for first place in each of those. In addition to that, we have this leadership position in hosting. When you combined those, who else is there? There are some companies that have a hosting presence, but they don’t run networks.

What is this important?

I believe that being an integrated provider is absolutely key for reasons that have to do with cost and performance, especially if we look at the current, emerging generation of Web applications. For example, if you considered video over the Web, latency is absolutely key. Ajax application – same thing – you’ve got 150 to 185 millisecond maximum time budget, round trip, including server time, to be able to deliver that. So you can’t afford extra hops to go offnet to a third party provider and extra hops back. So we have created this incredible infrastructure that ties together the world’s largest global network – we carry more IP traffic than anybody – 16.5 Petabytes per day, and growing, 88 subsea cable systems, 880,000 route miles of fibre – an as you know every route mile can be multiple fibre pairs, and anyone of those fibres can carry up to 80 service channels, which use to be 2.5Gbps, then they were 10Gbps and now they are 40Gbps – we have been buying the majority of the 40Gbps (OC-768) line cards manufactured in the world – so we know we are ahead of anyone in terms of those deployments. Not to mention we have a very aggressive 3G roll out plan. We have already deployed in hundreds of markets. We have almost 100,000 Wi-Fi hotspots globally.

We combine cloud computing, whether it is infrastructure, platform, or applications services that we have on the footprint, and couple it with the network, coupled with enterprise sales capability, the ability to operate at scale, high availability, and the enterprise SLAs.

Without being overly arrogant, the consumer-grade services have a different approach to service roll out and availability – everything is in beta, possibility still now even after five years. Beta use to mean something – this is a step on the road to testing before we provide a quality product that we will stand behind. Beta now is just a disclaimer – if it doesn’t work then too bad, you are on your own. And you know as well as I do the recent outages in a storage services that lasted for days, and a mail service that went down. Our customers don’t live with that, they don’t accept that. In the global enterprises that we serve, it’s three 9s, four 9s, or five 9s availability.

And any outages, on the odd chance that they happened, are dealt with on an advanced notification and escalation process, a multiple hundred million dollar global network operations centre, multiple customer support centres and teams. Selling to the enterprise, and more importantly, delivering the quality services to the enterprise for mission-critical services for large global enterprises is a very different value proposition then offering something for free that is kind of on a best effort basis.

So I would claim that we are not just in the cloud field, but we are – what the lawyers would let me say – a leading provider.

How is AT&T’s cloud offering different from others?

We will do things like sell capacity, again they can be dynamically allocated in a variety of different formats – virtual servers, physical servers, and we can do virtual servers essentially instantaneously. In addition to that, we have what we called managed hosted applications that are available on a pay per use basis. There, the cloud concept is a little bit different in a way – it is not the same type of infrastructure bursting that you’d expect because you are dealing with a lot of large numbers around statistical aggregation of users. We can allocate dynamically, in fact, we run hosted SAP on our Synaptic Hosting platform, so what that means is we can scale out the SAP instance by leveraging the inherent, dynamic capabilities of our underlying Synaptic Hosting platform.

That is interesting because it has almost got two dimensions of flexibility – there’s the pay per use around the users, and there’s the flexibility of scaling based on use. So there’s a variety of scenario for that – both for business as usual variation but also for business continuity and disaster recovery, where a lot of customers may still want to have SAP running in their own data centre, but are saying ‘why do we want to run a separate data centre with an idle instance, why not leverage AT&T, who is a preferred partner of SAP, together with the Synaptic Hosting platform, so that in the event of an outage, we can fail over to an AT&T facility.

A lot of this stuff is applicable to variable and unpredictable demand. A really good example that we did was providing support for the US Olympic Committee. Think about that as a cloud spiking problem. You only have two hours of demand – its two weeks, but during the opening ceremony, you went from nothing to all of the sudden, people went crazy, and there was unprecedented demand. We were able to provision their site for them in our Synaptic Hosting facilities within a very short amount of time and then burst to meet their unpredictable demand, not just for hosting services, but also content delivery because they were doing things like streaming video. We do the Grammy awards, American Idol, where we broke all of our text messaging – which is also a cloud service – records actually for this most recent season of American Idol. There was something like 77 million messages sent because people texted each other and they vote.

There’s two ways you can take what I’m saying – you can say ‘alright, this guy has a good story on Synaptic Hosting, every once in a while he starts to talk about text messaging, maybe he is too dumb, he doesn’t quite get that, that is different than what I have in mind when I think about cloud services.’

But if you think about what’s really going on, you’ve got this convergence of different communications, social networking, Web-oriented, mobile Web, coming together with mobile access networks, coming together with Wi-Fi as an alternative distribution path into mobile devices, or for that matter, using Femto cell technology, Wi-Fi networks become important, coupled with wired line, coupled with remote VPN – you can’t really break out any longer, ‘oh, this is a Web application, you are talking about a voice application’, it’s all coming together. You’ve got click to chat, you’ve got VoIP handling communications to people who are both online using a softphone on their PC or an integrated UC portal.

So, we believe that having all the capabilities that we have through our AT&T Labs heritage, coupled with the network and hosting, just really brings together this nice package. You add in digital media solutions, add in content delivery and content management platforms, and it says that we are in the best position, both to provide point solutions but I think it gets more interesting when you think about integrated solution that start to say – you don’t care what device you are using, you don’t care what network you are coming in on, but what you do care about is user experience, the richness of that experience, the latency, the availability and the ability to do multi-mode – you want immersive video – great, you want Webcam video-great, you want mobile video-great, you want voice, you want VoIP, you want data, you want whiteboarding, you want to accessing it all over a Web platform, leveraging mobile device capabilities like accelerometers, touch interfaces that are not yet built into the browser paradigm. We can weave all that together.

How important is the network in the cloud computing service model?

If I only sold coffee cups, I would say that coffee cups were the most important model. If I was a department store that sold lots of things, coffee cups, nails, and cards and everything else, then I would say, ‘why are coffee cups the only way to go?’ So in terms of our breath of services, we not only offer just compute services – we do all that – but we do much more than that. So why should we limit things and say ‘well, we only sell coffee cups.’

Secondly, where some of these companies that started out with only one data centre, they are playing catch up, and they are now trying to expand into other parts of the world. We are already there. You can count the countries – we are in a dozen and a half countries.

So what we have is large data centres in all of these areas and now we can do one of two models. One is if you only want to be in a single data centre as a customer, we can do that for you. And there may be solid reasons for that based on your current size, based on compliance requirements. If you want to be in multiple locations, we have a variety of patented technology that leverages location based sensing together with optimum routing to the nearest node. So we will do global load balancing across, say, web servers where ever you tell us to deploy them. We can deploy them, scale them dynamically. We have something called adaptive any stream technology that is being rolled out first half of this year. What that does is provide optimised routing to the nearest service node based on location identification.

So again, because we run the network and we know where you are coming in in the network, therefore, we can optimally route you, which reduces cost, reduces latency, which in turn, enhances user experience. So between, flexibility through Synaptic Hosting, optimised routing through IDNS, or intelligent DNS services, together with http direct and global load balancing, we can optimised the whole experience across this disperse architecture, which we believe, represents the ultimate in a compute architecture.

Tightly coupled network and compute fabric, geographically dispersed, serving a global user based, which can be employees, customers, customers’ business partners, with optimised routing to a service node, as well as failover through MPLS fast reroute on our global meshed network, which is lowest latency, highly reliable – again, 88 subsea cable systems gives you a very robust mesh.

And we not only do optimised routing in that mesh, for example, we are deploying cable systems that avoid the Taiwan off shore earthquake epicentre. In addition to that, we have enough cable systems going in and alternate routes – North Pacific, South Pacific, we just announced the Europe India Gateway, so we’ve got alternate paths. So no matter where in the world you are and no matter where you want to get to, we will provide you with multiple alternate paths that are also high capacity.

We have also just completed a major, global router upgrade, so we are deploying the state-of-the-art Cisco CRS-1s, which are native 40Gbps routers with a high availability, stateful failover routing architecture and a 96Tbps backpane. We’ve put dozens in, both in the US and globally.

Green Telecom: So what is Rackspace Hosting’s approach to ‘green’ practices?

Graham Weston: Two three years ago, we actually switched to AMD processors because they drew less energy. We intentionally, by one decision, we went with AMD. It saved on our power bill, our carbon footprint, it helps us be more efficient and be more productive in the data centre. That was an important inflection point.

The first thing we decided was: we are going to make sure that customers always have a choice of using servers that are more efficient. Like in America, a lot of people drive big cars – they don’t need them, but they drive them. A lot of people like bigger power hungry servers over less power hungry ones. I think the first thing is to give customers the choice and to say ‘use this server, because here is how you can contribute to fight global warming. I think the basic unit of green is to engage the individual. So what we look to always do is to give the customers – there are some decisions that we make that is just the way of operating – others are about giving our customers the choice to do things for themselves. We are going to let them buy a smaller car instead of an SUV, so to speak. Giving them that choice lets the customer to say, ‘yes, I think I’m going to participate here.’

Sometimes, it is not appropriate for them, but we want to give customers the choice.

The second thing is we went and designed a data centre with very efficient air conditioning system. In a data centre, you have a lot of power being burnt in the servers, but every watt of that power goes to heat – electricity goes to either light or heat and there’s no light, so it all goes to heat. So if the server burns 300 watts, it’s all heat, so we have to take it out with air conditioning. It is a huge volume to remove. The way we remove it is one of the opportunities to be green. The way we do it is install air conditioning units that are heat exchangers. What that means is that you can either remove the heat through mechanical means through a compressor. Like the air conditioning in your house, you have a compressor that uses all the power. Ordinarily, you have a system that dissipates the heat and you have a compressor that compresses the refrigerant that discharges the heat. What we did was we brought a system that does this passively. So what a passive system allows you to do – say the temperature of the air inside is 22 degrees, if the air outdoor is 22 degrees, then all you have to do is take the air from outside and exchange it with the air from the inside.

This is not rocket science. This is not genius. It means that once we started paying attention, we can reap the benefits.

So is power a big cost component for Rackspace?

It’s a big expense, but it’s a small percentage. Power is less than 2% of our revenue. It’s still a large number. We are a company that last year, did US$360 million. Last quarter, we did US$130 million, so 2% of that is US$2.6 million, so roughly US$900,000 a month. It’s a big bill, but it is still a small percentage of our revenue because most of our revenue is for service. That is up substantially from last year – it’s a noticeable rise.

We want to be sure that we have an alternative for them and we can explain to them the clear advantage that brings them. It’s not really a cost thing for us, but a green thing. If we are managing a server for our customers for US$500, 2% of that is power, so US$10 – it’s not enough to matter. The green servers are usually more expensive.

There’s a lot of talk on power efficiency of data centres, what is your view on the topic?

Efficiency is work divided by energy. If you have a certain amount of processing power divided by the energy it uses, you could end up with an efficiency rating for the server.

On the data centre level, a lot of the power equals cooling, and redundancy. So we have a lot of systems that sit around and do nothing. If you want to make a data centre more efficiency, just make it less redundant. None of our customers are willing to take that trade off. The other problems is that if we put our data centres in Iceland it would be more efficient, it would be more efficient than if we put them in a hot place because cooling would be cheaper the colder you are. So if you are in Iceland, your ability to do passive cooling is much greater.

The problem is that it is hard to operate there. We are going to look at it, but I think it’s going to be a long shot. We have to be able to get servers there, generator experts there, but you never know, we’ll see.

Another issue is the power source. Is it coal? Is it hydro? Is it nuclear? That’s what makes it hard to have a standard. I would say, let’s have an Energy Star on routers, switches, UPSs, the air conditioning system itself – the things that draw energy. It’s like the air conditioner in your house. You can buy the really expensive one that is more efficient, or you can buy the cheap one that is not. When you make these decisions in the data centre, you end up with a more efficient data centre. The biggest factor is the efficiency of the server, which is hard to measure – in theory you can do it.

I think there’s a perception that data centres are a new problem. Say Rackspace manages 40,000 servers and that grows hundreds per month. So you can say, Rackspace, a million dollar of power, you are a polluter, etc. The dilemma of it is that we are taking the servers that the customers use to manage and managing it for them.

The largest users in the world still end up being companies who have a server room in the back in the office. What we do is transplant them from there to us. What we are doing is taking the servers that previously were in the server closet in the business and now we have them. So nothing has really happened. They had air conditioning in their offices that pulled the heat out – we have it.

What about cloud computing?

The server sits there most of the time, and spikes when there is an activity such as an email blast that you send out. Most of the time, it just sits there – this is the really wasteful thing.

The power demand rises obviously when the server is working harder, but only marginally. The ideal thing is to figure out a way to smooth out the demand, so we have the server running at full throttle all the time, because you can get more work done for the same amount of energy.

So the way you do that, is through cloud computing. It means it is pooled, it means it is shared – I don’t like the word share because it raises some questions and issues because of security, but pooled. It means that if you have 1000 servers and you have a Terabyte drive in each one, so you have 1000 Terabytes of data storage – that’s an unbelievable amount of storage and the whole city of Hong Kong probably didn’t have 1000 Terabytes of storage five years ago. Then you have dual processor with four cores, so you have eight cores per server – that’s 8000 cores.

These two resources can be used full throttle all of the time, or they can be used in a slight way. If they are used in the traditional way, the servers sit around and runs at 50%, 60%, 70% utilization with the air conditioning running, with the batteries being charged, with the routers running, everything has to run. It’s like leaving your car on idle all day long.

The real opportunity I think is, ‘look, instead of having a thousand servers doing this, doing a certain amount of work. How can we make the 1000 servers do more work?’ The answer is by using virtualization and cloud computing to level out the load. We think the load is around 4x. So the amount of work that can be done can be four times of what it is today using cloud computing vs the way it is done today.

We have two cloud computing services. One is email hosting. If you have a company that sends email for you, that server can be running full throttle all day. What we have, and I don’t have the exact number, is 400-500 servers that run 800,000 mail boxes. That means we are running 2,000 mail boxes per server. Think about the server in the average business, it is running 10 mail boxes.

So if we use mail boxes as a measure of work, say a hotel has 100 employees divided by one server, is productivity of 100. We have 2,000 mail boxes on a server, so that is 20x. Also, they are not running it all on one server, it’s a factory. Because if you want to run mail correctly, you need an inbound server, an outbound server, a virus server, a spam server and in some cases, there’s a Blackberry server, so it’s really five servers. So 100 divided by 5 is 20. So its between 20 per server, compared to 2,000, so its 100x.

What matters is utilization. You can theoretically come up with how many cycles a server produces and come up with a benchmark test, but what matters is utilization. So you want to be able to balance the load.

When we first started we had bandwidth that we had to pay for all day long, but that was only peaking at say, 7 pm, and the rest of the day, it was underutilised. So we opened up our UK office so we can sell the excess bandwidth during off-peak hours (because the peak hours for the UK is different from the peak hours in the US), because it’s free anyways. What we did was change the utilization curve to get more utilization out of it.

And this is the same basic idea with servers. Cloud computing, or pooled computing, will allow us to have the peak to trough utilization much better. Today, Rackspace has 40,000 servers, most of them dedicated to customers running in a curve. But if we can take the 40,000 servers and have them run like our bandwidth, we can do way more work. That’s the function of green, how we can use cloud computing.

Is this like virtualization?

Think about virtualization as the engine of a car. By itself it’s kind of useless, but if you put a car around it and put the power to the wheels then it works. The server itself has to run software on it. So in a normal software call the OS, then you run an application on top of that. In order to run Word on your PC, you need a processor, you need an OS to run on top of that, and you need Word to run on top of that. But if you have five people logged into a computer all running Word, it’s not going to work very well, because all five people are trying to shared the applications, and competing for resource – it’s like we are all trying to drink from the same cup of tea. You can do it, but I like to have my own cup.

Virtualization actually virtualises the server, so there is a layer that takes that server and splits it up into little server. These servers mean that we each get our own tea cup. We are going to have less, but we are all going to have our own.

So when you load Windows running Word, Windows is fooled into thinking that it has its own cup of tea, but what happens is when the other little servers are not running, the power gets transfer to the one that is running the applications. To Windows, it does not even know that it is running on a computer with other people. So it doesn’t even know that there’s a teapot and it is sharing the tea with other tea cups. All Windows knows is that it has its own tea cup.

What virtualization allows you to do is to take – it’s like cloud computer but on the server level – so instead of being one user on a server, you can have, say, 20 users. But they can’t all run at full throttle. The idea is to load-balance and get all of them to work and get utilization up.

So the first element of cloud computing is virtualization. The second part of it is, ‘here’s two servers in the data centre, and here’s all the little machines (the virtualized servers), and when one is filled up, they can moved it to the other server. At the end, the result is you get servers that run at 90%, instead of 20%. The thing is that all the software that developers have given us today is software that let you virtualize one server very well, but it won’t allow you to share between servers very well, and it won’t allow you to expand or contract this container.

My point really is that if you run in a cloud basis, it’s automatically more green. What we are doing is trying to take the capacity of the world today, how we can make the world’s servers more efficient.

The first important technology in cloud computing is the ability to create these virtual machines. But that is not really enough, because it only allows you to use multiple users on a single machine. The software that allows you to expand and contract the VM and the ability to move it across servers will be the next critical step. The key point is to have companies like Rackspace provide computing, so that more computing is provided by hosting companies – these will make computing more green.

One of the challenges is to convince companies to run applications on servers that are also running applications from other companies. But it’s not that hard a concept to get across. When you go to a bank, they don’t store your money in a corner by itself, they pool it, it’s the same concept.

So what’s next?

We have another offering called cloud FS, which is for file sharing. That’s in beta right now, and it is being launch. That is going to be a massive pool of storage. So if you think about your music, you upload your music to us and we’ll put it on some servers here, but the next time you back it up or upload, it will be on another group of servers, and so on.

The key is the software that will make it all look like one storage. That is the sort of thing that hosting companies are thinking about when delivering cloud computing services to customers.

We are the ones that have been delivering computing as a service for 10 years, and we are the ones developing the software to allow this to work.

Green Telecom: Can you please give an overview of AT&T’s participation in the EPA’s Energy Star for data centres initiative?

Rick Felts: AT&T is providing monthly reports to a subcontractor of the EPA and participating in forum discussions on the value of the collected information and the recommendations for interpreting the data as facility energy performance indicators.

How many AT&T facilities will be providing data to the EPA program? How big are these facilities? And what are their primary purposes?

AT&T is providing data on four of our facilities. These facilities range from 50,000 to 150,000 sq. ft. of conditioned floor space. The primary purpose of two centres is for internal data processing necessary to support the products and services provided by AT&T. The infrastructure consists of industry servers to mid-range servers to mainframe operations and the data network to connect all AT&T locations. The other two centres are Internet data centres that serve the hosting needs of our customer base.

In the EPA program, what kind of data is being collected by AT&T for submission? How is the data being collected?

AT&T is providing the total building power and the sub-metered MEP (mechanical/electrical plant) power. The IT power consumption is being monitored and recorded through the building management systems and reported monthly to the EPA subcontractor.

What kinds of energy efficiency initiatives has AT&T implemented in its data centres?

Our initiatives are best summarized by the bullets below:

• We have implemented air flow improvements by sealing raised floor environments and cabinets
• Improved HVAC energy consumption by raising the temperature in the data centres
• Reduced unnecessary air velocity
• Shortened the distance of cooling source and heat loads
• Mechanically separated hot and cold air flows
• In some locations we have deployed variable speed controls for AC systems
• Embarked on technology refresh of IT systems that use less energy (<=25% reduction)per device
• Enabled power management in some systems
• Deployed virtual systems and shared storage
• Increased partitioning of systems
• Enabled motion sensing light switches on the data centre floors
• Reduced unmanned CRTs
• Renegotiated power contracts
• Established sell-back agreements with utilities
• Storage optimization programs to reduce unnecessarily stored data
• Application rationalization of 30% in 2007-2008
• In 2008 joined The Green Grid and agreed to participate in the EPA ENERGY STAR rating development effort for data centres.

Are there similar initiatives to reduce energy consumption inside the AT&T networks?

Absolutely. The network organization, which supports our customer base, has developed and managed its own initiatives and activities from a sustainability perspective for some time. Because of this, the various operating organizations at AT&T collaborate on multiple management levels to unify AT&T’s sustainability strategy and plans, including working councils and an executive-level steering committee. Sustainable business practices are extremely important to AT&T and are embedded in our corporate direction as a company.

How do you go about measuring power usage of the data centre infrastructure? What were the results and were there any surprises?

AT&T has monitored power consumption for some time in its data centres using the environmental probes and management systems of the buildings. What is new in the industry is to identify the differing classes of power and how it is used. AT&T has been defining the differences in power consumption since before the dot-com days, when we first began operating Internet data centres. Sub-metering in enterprise data centres has been segregated between IT load, admin facility load and HVAC. We have discovered the need to see beyond the supply segregation and have a strategy to sub-meter all environmental resources at the distribution level.

The industry typically assumes one watt of cooling for each watt of IT power. We found that we were a little better than that number. The greatest surprise was that at any given time, we had retired servers that remained powered on, and that in many cases HVAC systems were running at 100 percent without carrying the associated loads. We immediately set out to reduce or eliminate unused, yet powered systems.

When “sorting through the vendor hype on Green IT,” what was some of the “hype” you discovered? What were some of the technologies that offered real benefits?

In managing data centres, our focus and priority is on maximizing energy efficiency by using less kilowatt hours of electricity to do more work. The greatest hype comes from vendors offering services that “guarantee” reduction of energy consumption. This is usually coupled with a full technology refresh in mind. These services usually include using the professional services team to analyze your data centre, generate a report saying that you’re not efficiently using it, giving you colour maps of your computational fluid dynamics (airflow), and then pitching the tech refresh of all of your equipment. So, the moral to the story is to pick your trusted partners effectively. Much of this data can be useful but the appropriate business cases are needed to ensure the cost/benefit analysis justifies the effort. Also, there are no inexpensive guarantees.

From a hardware vendor perspective, it is true that most OEM partners’ systems are more energy efficient than in the past and some have made sustainability a priority in their equipment design and life cycle. The technologies that have offered real benefits are those that incorporate the physical facility infrastructure into their solution. An example is a server that communicates its environmental conditions back to your surveillance centre where the data can be used by support systems to adjust the environmental factors. Other examples are power management solutions, soft wall containment curtains, and on-demand computing environments. However, each of these technologies is only part of managing energy consumption in the data centre. The real benefits over time are achieved with a comprehensive strategy that encompasses all of these techniques.

How much energy/power have you managed to save with the deployment of Green IT technologies?

By deploying floor seals, cabinet blanks and sealing cable chases we have saved as much as 6 percent of the facility energy consumption.

How much more are you paying to “green” your data centre?

The price of efficient energy consumption is coming down, mostly due to greater demand. We have targeted opportunities for energy savings that have a five year ROI or less and incorporated them into our Data Centre Optimization Program. These opportunities address increased capacity and improved reliability, but with an energy-efficient focus. In addition, our normal, annual spend on equipment now includes power management and other environmentally and energy-efficient technologies as a requirement.

What exactly does “green servers” mean?

“Green” has become an over-used and frequently misused term. For the IT function at AT&T, our emphasis is doing more work with less energy and using products that are minimally impacting on all aspects of the environment, including end-of-life disposal. Thus, we think a “green server” is one that uses less energy to produce the same or more work than its peers. It doesn’t waste energy when it isn’t working; it has a low impact on water and water waste; and when its end-of-service life is realized, the parts can be recycled or can be disassembled in a low impact, responsible way.

Is greening your data centres a competitive advantage? How? (by using less power so you can charge customers less? Because it meets customer’s CSR requirements?)

The IT operation of AT&T is only one supporting aspect of a much larger effort to improve the sustainability of our products and our process. This results in a better return to our shareholders and better value to our customers. We also believe that AT&T’s services and solutions offer sustainable opportunities to our clients, by connecting people with technologies to offset travel requirements, by reducing the amount of end user computing devices and by combining media appliances in the home. We also believe in responsible stewardship. By making our data centres operate in a more efficient and sustainable manner, we contribute to the larger corporate goal. To the extent that we outperform our competitors in ways that improve sustainability and reduce our costs, we enhance our competitive positioning.

Are customers looking specifically for “green” services?

Customers are at different points in their own sustainability journey. Some are looking for partners who share their broad values in their sustainable behaviour. Others are looking for ways to cut their energy consumption in these times of rapidly increasing energy costs. Regardless of where our customers are with respect to their thinking on sustainability, we think that we have a wide array of solutions that will help customers meet their needs.

Have you looked into sourcing renewable energy sources for your data centres?

Energy sourcing is not generally a decision made by the IT department. Nevertheless, AT&T is evaluating renewable energy sources to see how well we can support different aspects of the corporate operations. While most renewable energy is not now cost-competitive, we believe the economics will change over time. We want to understand how we may need to adjust our operations to accommodate the nuances of different sources of energy.

How does US $100/barrel oil impact the costs of running a data centre? Has energy gone up on a per Kw basis? Is this a concern?

Energy is a substantial input to the data centre operation. Energy costs continue to rise, and there is little reason to think the pattern will change. Indeed, energy cost inflation will likely accelerate. Increasing costs for competitive operations is always a concern and is a driver to improving data centre efficiency. However, increasing energy cost also is an opportunity for the Information Communication Technology (ICT) industry. We have powerful tools and products that can help customers do more while using less energy. ICT has the potential to improve the quality of life in this country while at the same time reduce its consumption of energy and, more specifically, fossil fuels.

So what was the motivation behind the environmental reporting survey?

The thing that I find interesting is that, now that we have now done the report for a couple of years, the statistical results that we get are the same year-on-year. But I think this year, some 38% of the people said they had things underway and another 15%-19% said they were doing it in the next year. The curiously thing is that the results last year were almost the same, which would go to suggest that those people who had good intentions the previous year, never did anything.

In terms of that report, the data that I found most interesting is the fact that many corporations are not ready for reporting environmental data, which I believe is probably one of the most challenging aspects of going green?

From what we’ve been able to see, I think that people have been putting off and putting off because there weren’t any imperative for them to do so. I think when we are working with people, the first three piece of advice we give them are; you need to measure, then you need to measure again, then you need to measure again.

The challenge is obviously two fold. One is to look at the Garnaut report in Australia and what it has talked about, then looking at being able to measure (carbon footprint). I think they’ve got targets of the largest companies to start off, then moving on to the rest of the populace. I think there is an imperative first of all from a governmental regulation point-of-view going forward that they be able to report on what their carbon footprint looks like.

But equally a lot of people have embarked on things like consolidation, and made a lot of use of virtualization, for that they need to measure their starting position. I’m detecting already there are a lot of people out in the market place that have spent a fair bit of money on consolidation and virtualization, and now they are not able to really quantify financially, or from a carbon footprint point of view, what the savings they have made because they really didn’t know what their costs were to start with.

So I think it’s been one of those things because there was no imperative to do it and people were unsure of how they should do it, they just avoided it. I think going forward, there’s going to be a lot of pressure on them to actually start measuring. Also, internally, a lot of organizations, and a lot of CIOs that I speak to, now have KPIs within their overall goals of reducing their power consumption.

Usually, corporates look at it from the perspective of – they want to reduce power consumption and air-conditioning – but when they describe it externally, they say they want to reduce their carbon footprint, but at the end of the day, what is motivating them at the moment is the sheer costs of them in dollar terms. I think one of the interesting statistics to come out it, is the number of organisations that know that the power source for their IT, i.e. data centres, were over a million dollars a year – that is something they can actually do something significant about reducing.

So what has Sun done in Australia in this respect?

We’ve done quite a lot. We deal with it from a global perspective to start with and I’ll come back to that. From a local perspective, all of Sun’s subsidiaries, geographical areas as we call them, have a responsibility themselves to look at what the implications are – from a perspective of addressing the whole carbon footprint challenge.

Part of question why we have done it that way, in Australia and New Zealand for example, we actually have a team of staff members who are looking at all of the sorts of things that impinge on that area. So we are looking at things like improving the usage of videoconferencing, looking at making sure that all of the default settings for laser printers are double-sided print, those sorts of things. It’s actually been largely driven by the staff under the executive level.

The reason we have done it that way is culturally, obviously, if you look around the Asia Pacific, indeed if you look around the world, most countries have different culturally approaches to it, so rather than corporately trying to drive out a single message, we’ve allowed each country to look at see what works best for them.

The other thing is the issues are different (between different countries). If you look at New Zealand, whilst they have challenges around providing base load power going forward, most of their power is a lot of greener in its generation than, for example, Victoria, which is largely coal-based; New South Wales, which is largely coal-based. So the challenges are slightly different. On a local basis, Australia and New Zealand actually have a team of people who are looking at what we can do collectively to actually reduce the green costs within Sun.

Corporately, they are actually looking at how they can support the initiatives that go on worldwide. So they are looking at, for example – one of the corporate initiatives have been a program called, openwork, which is basically to turn a lot of our offices into flexible offices. More important is, the majority of staff now has the ability to actually work from anywhere. So the sort of benefits we get from that, we would have a lot of people, for example, who if they don’t have an early morning meeting, will get up and do their email from home, check their calendars and start writing their reports, etc. They can get into Sun’s internally network securely from anywhere in the world. And it means if you don’t have to travel during peak hour, you no longer have to. That in itself is a significant saving. Obviously, driving in heavy traffic is a greater emitter of carbon than driving after peak hour, or before peak hour. So we’ve done a lot to enable people to actually be active and productive, whether they are at home, or they happened to be at a customer site. The classic case is, you might have two meetings in the city that is separated by an hour. You can now find somewhere quiet to sit and practically work, get access to everything inside Sun, from a public place. That really has enabled different thinking and different work practices.

It’s hard to put a figure on it, but we believe that we’ve probably reduced about 30,000 tonnes of CO2 emissions, just in the differences it has made in the heavily populated areas, with people not having any longer to tie themselves to particular hours because they couldn’t get to Sun from anywhere outside the office.

From a data centre point of view, we have actually centralised our data centres. We have a handful of them worldwide and what we have done in those data centres is probably a very good example of what can be achieved for the majority of customers. Now, other than the black box of modular data centres – we don’t specifically sell data centres, we are finding that the practices and experiences that we have implemented, for example, in our Santa Clara data centre, are resonating with a lot of our customers and giving them ideas on how they can perhaps approach their data centres differently. So we have consolidated a number of the US data centres into the Santa Clara data centre. We reduced the amount of floor space by, I think, it’s over two-thirds. We have reduced the number of servers by over half. We got rid of substantial number of devices, etc.

In actual fact, one of the energy utilities in the US have given us a substantial rebate because they believed the new data centre actually relieved some of demand that they had, in increasing their own base loads.

We recently won an award for innovation for these initiatives. The data centre that we’ve built in Santa Clara – and there are two others modelled in the same way – it doesn’t have a raised floor for example, we no longer air-condition the entire data centre.

We work with partners like APC, with Emission, Leibert, to cool the equipment specifically. We have hot aisles and cold aisles and the air-conditioning in those aisles sit next to the equipment, so that the heat is much more closely controlled, to the point that so if the equipment is under heavy load, the air conditioning ramps up a little bit, and if the load drops, then the air-conditioning ramps down. We’ve done a tremendous amount both from a data centre point of view but also through practices, and what we have enabled staff to do worldwide.

It seems that you’re moving beyond just selling Sun’s equipment, are you going to market with partners and offering kind of consultancy services as well?

Over the last six to nine months, we have actually taken a lot of the learning that we’ve made from the data centre consolidation that we did for ourselves in the new data centres, and we have packaged those into some services that we are now starting to offer Australia, but that we have been offering in the US and Europe, which actually enables us to go in, sit with customers and explore the sorts of things that they can actually do, and how they can improve it.

Some customers actually will gain benefit from basically re-implementing their data centre, but the changes don’t have to be expensive, and they don’t have to be major. They could be something as simple as walking into a data centre – a lot of data centres in Australia, for example, are run at between 18-20 degrees (Celsius), if you bumped that temperature up, you’ll actually save money on the air conditioning. We are a relatively hot environment, and we pay a lot in data centres to cool them to 18-20 degrees (Celsius), whereas sometimes that is necessary for the nature of the equipment in those data centres. So changes can be as trivial as turning up the thermostat.

We are doing a lot of consulting now, starting in Australia and New Zealand, to consult with our partners to customers. Some of those partners may be people like APC, some of them will be our traditional partners that we are giving some of the IP around.

So are people getting the message?

I think the answer to that is somewhat mixed. There are some that think this is the next Y2K. Y2K was an interesting challenge and they are people out there that feel the IT industry as a whole beat up the whole Y2K question substantially and that the problem never existed, etc. I think that there are some people who think the whole green IT thing is a beef up, but I think there are more who understand – whether they believe in global warming or not. Global warming to a lot of corporates is not part of the issue – the issue for them is that they are spending millions of dollars in powering the equipment, millions of dollars on cooling it – they are real financial benefits in actually greening their data centres.

There’s a lot of confusion about the sorts of things that can be done. I think a lot of the CIOs that I speak to believe that it is just a matter of cost to do it. Some of them don’t understand that there are actually financial benefits in doing the consolidations or doing the greening of the data centre.

So it is a very mixed environment. Generally, there’s a belief that most organisations need to do something, and these fall into three categories: Those who are leading edge and who are already starting to do it, and appreciate that it is not something that happens overnight, that it is a journey that can quite often take two to three years; There are those that know something’s got to be done, but are still trying to figure out what precisely and I think it comes down to some confusion in the market place, of what sorts of things lead to reducing carbon footprint; The third group acknowledged that there’s an expectation that they do something, but they’ll get around to it someday – those are the ones who will be in for the biggest shock because I suspect that socially, there’s going to be a lot of pressure over the next couple of years and certainly, when I talk to banks for example, they are painfully aware that they will lose customers if customers see them as non-green. I think there’s an increasing social pressure, which smart companies are understanding, and starting to react to. I think some of the companies that are slower are going to get a shock when they discover that there’s perhaps going to be a backlash with not being socially responsible in that area.

So how important is this issue as a selling point for Sun, and is this a big market opportunity?

Yes, I think it absolutely is. If you look at the sort of equipment that Macquarie Telecom are using, Sun entered the x86 market about 3 years ago and I think a lot of people looked and said ‘why would they do that?’ Part of the reason was, having no presence in that market previously, we basically went and took a clean sheet of paper and designed our systems from the ground up.

So even comparing like-for-like systems between ourselves and the HPs and the Dells, etcs of the world, our systems typically offer the same or better performance, but have a lower carbon footprint, because they are more efficiently designed. If you look at the old SPARC equipment that we used to have, we have actually now replaced a lot of that with the new ultra SPARC chip – the ultra SPARC 1 and ultra SPARC 2.

It’s taken a little while for people to really adopt it because it is a radically different approach to processing. Rather than doing one thing at a time really, really quickly, the concept behind the ultra SPARC T-series is to do 32 or 64 things at the same time, but at a slower speed, so the overall result is that, if you actually only want to do one thing at a time, then the ultra SPARC T-series is not really going to do the job very well. If on the other hand, you’ve got an application that needs to do 40 or 50 things at a time, the ultra SPARC T-series is much more efficient as a processor than any other processor on the market.

The benefit from a green perspective is, that processor basically looks like a 64 CPU machine to the operating system even though it is a single chip. It draws a lot less power than Atheons, our old ultra SPARC 3 and 4, than Xeons, etc, etc, and can offer anything up to a ten-fold improvement in the power consumption per performance offered by those systems. We are trying to engineer in a lot of green credentials in those systems.

The other side of the equation we are looking at is in designing these systems. We are moving away from using a lot of plastic and those sorts of things because there is obviously an eco impact of using plastics because of their petroleum base. And also, a lot of the plastics that the IT vendors use are not recyclable easily.

So we are starting to put metal back into our systems because we can recycle that. We started to design the systems so they can be easily taken apart to be recycled. We are aiming for and achieving, on the systems we get back, a 95% recycling and reuse, so only 5% of what we return to the factories ever goes into the waste stream.

We want to develop and foster a program that enables us to take back all the equipment that we replace. So if a customer upgrades, we want to be able to take back the equipment that they are replacing. But one of the challenges for Australia and New Zealand has been, when actually calculated the costs of transporting equipment back overseas to have them re-engineer or disassemble, sometimes the transport negates the benefits you gain.

It’s not a simple question to answer, but certainly we are doing a tremendous amount to try and ensure that everything we offer draws less power, generates less heat, generates the same performance that people are looking for, but solves the problems of, the costs of manufacturing, using and then dismantling equipment at the end of its life time. This is proving to be very compelling to customers.

I think unfortunately, the economy is presenting people with a challenge for the moment, so perhaps the uptake is slower than would otherwise have happened. I suppose how I would characterise it is – we are seeing a tremendous amount of interest and a lot of people are looking seriously at utilising it, it is just taking a little longer to consummate some of the sales then it use to be.

If we can go back to the reporting aspect, how does Sun measure and report on its own environmental performance?

We actually publish a report. It’s part of the corporate social responsibility report that we publish each year. What we try to do – we are in the same situation as a lot of organisations in that obviously we have been around for a couple of decades, so we are starting off on existing base.

If we are starting something from scratch, it would have been a lot easier as you can appreciate. What we try to do is, in the case of data centres and those sorts of areas, as we refresh them we are actually putting in measuring equipment. So for example, we can tell minute-to-minute, how much power particular areas of our centres are using, how much air-conditioning demand that they are generating, etc, etc. Through performance and management of the system themselves, we know how many users they are servicing, etc.

It’s a matter of instrumentation at that point, and measurement, so we are now getting to the stage now where we can measure from the point of view of our processing, what we are delivering per user and what the overall cost per user is.

From the point the view of the less tangible things, we are trying to use industry figures and our experience to, for example, measure how far our staff travel. We get reports from airlines that we contract that do our flying for us on what they think the carbon emissions for staff travelling are, so that gives us the ability to then start looking at and calculating the savings that can be made if we can hold meetings using video conference rather than sitting across the table.

So it’s a journey, it is not something you suddenly on Monday morning turn on and you’ve got a measurement of everything. So of it is very accurate, such as what is going on in the data centres and the consumptions that we get from our desktops and those sorts of things. Some of it is based on best estimates, industry averages, such as what is the cost of people travelling to and from work.

Certainly, we are putting a tremendous effort into actually trying to measure that and give people the ability to start making intelligent decisions from a staff point of view. What we want to do, and we’re not quite there yet, is give people like myself, the ability to look at say, ‘well, flying to Melbourne for things like the CommsDay congress is a no brainer.’ You can’t really do that as effectively via video conference, but what I need to do and here are the savings I can do by surrounding that with three or four customers meetings. If I get a request to go and do a presentation to two people, then what we are trying to do is give ourselves the ability to understand what the implications of that are, and what the savings might be if I was to do that over a video conference, or something to that nature.

In our CSR report, you’ll start to get a flavour for the sort of things we are measuring, and can determine closely, and the sorts of strategies and directions we are heading. I think more and more companies are going to have to generate those types of reports. And we have some tenders from companies here in Australia, where they actually request that as part of the tender response because they want to determine the CSR criteria.

Is that becoming a very important part of customer tenders, in addition to specific statistics on power consumption and so on?

Nearly all of our customers are asking for information on power consumptions and that sort of things and that has changed over the last couple of years. As far as the CSR, what I’m finding is large enterprises, probably three out of the four major banks here, would ask us to demonstrate our green credentials. I think it is becoming increasingly important for federal and state governments here. It seems to me that large corporations that are starting to ask us for our green credentials, as opposed to just ‘how much is it going to cost me to run this equipment?’ And certainly, a number of them are progressing to the stage where it is now part of their decision making criteria rather than a question that they just ask in passing.

You mentioned the instrumentation that Sun is using to measure its power consumption in its data centres and equipment, are these now part of Sun’s product portfolio?

Those are the sort of things that we’ve done with Liebert, with Emerson, with APC. We are going out to customers and saying, ‘here’s how we have done it.’ I supposed one of the differences I see in Sun’s approach to this whole thing is, our view is we want to innovate around the whole ICT, whether it has to do with carbon footprint, or whether it be just to do with future processing needs for the network, we then want to act on it ourselves so we are very much into eating our own dog food, so to speak. But then we want to share it.

A very large portion of our motivation, and that is part of the reason why we went open source, we believe the power of the innovation comes about when other people start to use it and start to pick it up. So what we’ve done in the data centre, we can certainly consult to customers and explain to them how we did it and how that might parallel what they want to do, but the measuring equipment, etc, comes from people like Emerson, who do a lot of the power distribution systems in data centres, and people like APC, who are doing a lot of the UPS and so on. We are certainly using the knowledge that we’ve gained, using the things that we’ve jointly developed. Certainly these vendors have incorporated some of the things we suggested, into future products. Those are things our customers would require from our partners, but we are very proactively making that known. That is part of the main thing, to be able to share the experiences.

We’ve actually set up a website, openeco.org. The idea behind that – it is not tied to Sun, we just funded it and got it going – but we want people to share their experience. We don’t have all of the intellect in the universe – it would be great if we did – but the fact of the matter is our competitors do come up with clever ideas, so do our customers.

What we are trying to do is encourage people that come up with those sorts of ideas to be able to share them. We are starting to see some uptake of that, so people can publish: here is where we started, here’s how we measured, here is what we ended up, here are the potholes we fell into, here are the positive experiences we’ve had, and get them to share that on the website.

Last question is, what is Sun doing to prepare for the proposed carbon cap and trade scheme that the Australian government has put forth, which outlines a pretty aggressive schedule?

It’s a fairly aggressive schedule. We are doing three things.

One is that we are working with government and trying to give them advice from the perspective we’ve seen in trying to implement these things ourselves elsewhere. I think that there’s probably going to be a fair bit of consultancy by the government and it won’t surprise me if some of their timelines and some of their expectations change a little. We are trying to bring the industry and our customers’ experiences to bear and to make sure that, that knowledge is available to them.

Internally, we are working very hard to ensure we have the infrastructure and capability in place to be able to do the measurement ourselves and to assist in helping customers do the same thing.

The third thing is, in working with people who have done it worldwide, but also people that have opinions and views, to try to get a sense of what people are expecting, particularly in identifying the challenges and problems are concerned about, and be able to reflect those. We would like to be able to act as a bit of a guide in some of those things because a lot of the underpinnings we have already done.

It is really those two sides. One is trying to provide and participate in helping the government, make a sensible input. The other is to prepare ourselves, so that we can satisfy whatever they decide on.

]]> http://www.greentelecomlive.com/2008/08/27/full-transcript-interview-with-sun-microsystems-asia-pacific-cto-angus-macdonald/feed/ 0