The Commonwealth Bank has stood up a hypervisor-agnostic cloud computing platform during proof of concept trials, a platform the bank expects will enable it to shift workloads between outsourced IT service providers in the future.
In an extensive interview with iTnews, Commonwealth Bank executive general manager of service support Nick Holdsworth explained that the sheer scale of the CBA's cloud computing investment - which covers multiple data centres and regions - will help the bank extract more value from outsourced suppliers and promote the growth of a domestic cloud computing industry.
"We're taking a really hard look at cloud computing," Holdsworth said.
[Part II and Part III of this video interview appear on the following page].
The bank has settled on a standard, virtualised infrastructure stack, to be deployed both in-house and mandated for private cloud providers wanting to do business with the bank.
The bank will outsource the lion's share of its IT infrastructure needs to a service provider that is prepared to offer favourable pricing to win the bulkiest block of the bank's data-crunching business.
But unlike past outsourcing agreements, the CBA will ask that these services be delivered on the bank's mandated 'cloud' architecture and under a contract that allows the CBA to rapidly shift to another provider if competitors offer better value.
If multiple service providers build out a cloud on the same infrastructure stack, the CBA will achieve its dream of service "contestability."
Holdsworth noted that organisations the size of the Commonwealth Bank have the scale to acquire IT infrastructure in bulk for a lower cost than if purchased from today's cloud providers on a pay-as-you-go basis.
But if cloud computing can make services more 'portable', the CBA can negotiate with a dedicated provider (kept honest by the ease with which the bank can shift the bulk of its business elsewhere) and also manage peaks in demand for computing resources by "bursting" onto additional capacity on a pay-as-you-go basis.
"Ultimately what you'd want to do is have a dedicated scale that you can optimise use of, and then burst out of that for peaks," Holdsworth explained.
The bank is "trying to graph the point at which you have a pretty steady utilisation - as high as possible - [whilst able to] burst out of that into other environments - where you may be paying a high unit cost, but your overall cost is reduced because you're not paying for those services 24x7.
Holdsworth said the bank is "ready to start looking at how to scale out" the infrastructure it has already deployed and what partners will provide these resources as a service.
A services 'app' store
The CBA has developed standard software environments - applications housed in what Holdsworth describes as an enterprise 'app store' - that can be loaded into the bank's cloud infrastructure stack at the click of a mouse.
The bank will also use its cloud platform to manage the peaks and troughs of application development.
"A developer may want to start cutting some code - today they'd log onto a development system which may be sitting around 24 hours a day waiting for developers to log onto it," Holdsworth said.
"We may be consuming all or some of that capacity at any time and in fact at times we may need more of that capacity. So today, that's quite a static environment and one that has both waste but also issues around how we scale that up if we require.
"What we're talking about doing is being able to take that .NET development stack - the software or platform component - and actually pick that up and load it into a scalable hosting environment, which would enable it to be paid for only as long as it was consumed, and would enable it to scale up and down on the basis that demand dictates."
Read on for how the CBA will use the cloud as a bargaining chip when re-negotiating outsourcing deals...
Keeping [suppliers] honest
The bank expects to use cloud computing to negotiate better deals with its outsourced suppliers.
The CBA has several "major contracts coming up for review in the next year or two," Holdsworth said.
Among them - an enterprise processing services tender (mainframe and mid-range computing) last handed to EDS in a US$573 million deal, which comes up for renewal in June 2012.
"We're looking really hard at how we take the opportunity as we re-source those [contracts] to create more flexible commercial arrangements which line up with the cloud business model," he said.
"We are looking at shorter term contracts and looking at how we create more flexibility to source from a number of providers, so that there is more contestability in the model.
"Contestability is enabled in some degree by portability of underlying workloads," he said.
But technology aside, the CBA must use its formidable buying power to convince suppliers to build out the necessary scale for the bank's needs and consider more flexible contractual arrangements.
Holdsworth said the CBA is working with IT suppliers to create "more flexible models on the back of some of the technology that we're now experimenting with."
Traditionally, suppliers have "wanted to put contracts together over longer terms, so they have some committed payback around the investments they make," he said.
"We're looking to change that paradigm."
He expects telcos to be faster off the mark with cloud computing models than traditional IT outsourcers as "telcos are used to investing a lot of capital upfront and then selling it back into the market a dollar at a time.
"I think a lot of the other IT service providers are starting to catch up to some of that thinking," he said.
"I think it does create some considerable challenges for some of these companies from a business model perspective. They've been used to locking in medium to long term annuity revenues, which are pretty much guaranteed.
"They're [now] looking at moving toward a model where there is a lot more contestability or uncertainty in their revenue streams and that certainly creates some challenges for them."
He has a simple message for suppliers.
"I'd like to think we can continue to buy services from them because they're providing a very attractive service on any day - both in terms of service levels and price - and if they continue to do that then why would we want to move our service?"
The cloud business model is far more preferable, he said, than "being locked into a five or ten year contract where we have no option or can't afford to buy our way of it."
Five and ten year long outsourcing deals are likely to become a thing of the past, he said.
Security and compliance
Holdsworth said that industry regulators in Australia are only now starting to realise the need to adjust to cloud computing models.
The industry "clearly has a lot of work to do in terms of security," he said.
He doesn't expect the public cloud model will appeal for that very reason.
"When we think about the cloud model, it's a continuum that runs from running private clouds running within our own data centres all the way through to public cloud," he said.
"The work we're doing today is focused a lot more on private cloud within our own data centres or certainly within data centres of key providers on-shore within Australia. Today, it's really about "right placing" those workloads."
There may be development environments or applications that don't hold customer data, he said, which might be more applicable to the public cloud for price and service reasons. But most of the bank's production systems require "high availability, high levels of security and much tighter controlled management around what's happening in those environments."
Better customer service
Holdsworth said that "at the end of the day", the cloud computing project is "primarily about customer service.
"We live in a world that is expecting things to change and happen a lot faster," he said. "Today, if the business comes to me and says, 'hey look, we're looking at standing up a new application' or 'we'd like to do some experimentation around a new service or new application we'd like to provide to our customers', we often have to go through quite a long exercise to get that up and running.
"We'd have to do some design work, we'd have to procure some equipment, we might have to put that equipment into a data centre and get it cabled up. We'd have to do the testing around that and there might be some network components that are required."
The cloud, by contrast, would ideally allow the IT department to give a much more positive response:
"We can have that for you in an hour and you can test as much as you like at whatever scale you want and then we can just shut that down and you don't need pay for it anymore," Holdsworth said.