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HIGH-TECH FORECAST: CLOUDY WITH CHANCE OF COST SAVINGS

Elum Designs of Kearny Mesa has been able to build a business out of historic technology. The small print shop makes wedding invitations, baby announcements and other items using an outdated but fashionable process called letterpress.

Behind the scenes, however, Elum is not ledger books, india ink and quill pens. The business has cutting-edge computer software from Germany-based SAP AG keeping the books and monitoring inventory. Even more cutting edge is the way Elum gets the software: through the cloud.

Elum has used its cloud-based SAP system for two months. “We’re very happy with the decision,” said co-owner Brad Foster.

The term “cloud computing” may be something people have heard about but don’t quite know how to picture. One definition of cloud computing is software and computer storage that is located off a company’s premises.

The term comes from the way people draw diagrams of the Internet. The complex electronics at the center of the system were often depicted by a cartoon cloud, noted Tim Caulfield, CEO of American Internet Services, or AIS, a Kearny Mesa company that operates data centers in San Diego, Los Angeles and Phoenix.

Another way to think of the cloud is as a utility, said James Heller, marketing director for San Diego data center operator ScaleMatrix. The cloud offers software and storage in the same way a utility provides running water or electrical power.

Even with 17 employees and a few million dollars in annual revenue, Elum takes advantage of cloud computing, tapping into SAP’s Business ByDesign software with the help of Radiant Technologies, a San Diego reseller. So-called enterprise resource planning software is particularly appropriate for growing companies that have achieved revenues of $3 million to $5 million and have outgrown popular bookkeeping software, said Michael Anderson, Radiant’s CEO.

Greater Utility
People may associate the cloud computing phenomenon with larger businesses, perhaps something on the scale of The Active Network. With thousands of employees, the San Diego event registration firm reported $337 million in revenue for 2011, up 21 percent from 2010.
Last year, The Active Network used the cloud to complete 80 million registrations for clients such as marathon promoters and city park departments. All of that data resides in faraway places such as Las Vegas and Virginia. The Active Network also runs its internal business applications (including products from Oracle) from those data centers, according to President Matt Landa.
“At the core, we are a cloud computing company,” Landa said.
Cloud computing makes sense for a number of clients, said Daniel Dahan, vice president for sales and marketing at RedIT, which operates data centers in San Diego, Phoenix and three cities in Mexico.
Consider the case of an unnamed business consulting firm with a dozen offices and 400 employees. It had two concerns: aging technology and the need to move its headquarters. Instead of plowing more than $1 million into new hardware, the business opted to buy computing as a utility, which carried a predictable operating expense rather than a capital expense. Money saved went toward more strategic initiatives. And after three months of transition, Dahan said, the company shuttered its in-house data center on the East Coast.
Organizations that have turned to cloud computing frequently pay for the amount of resources they use, and are able to rapidly increase (or decrease) those resources as needed. Amazon.com has built its web services business on that model.
Technology called virtualization software can spread applications among multiple computer servers. As a result, a single server can conk out with no effect to the program being run, Dahan said.
The main venue for cloud computing is the data center, and Kearny Mesa is home to several.

Scaling New Heights

There is plenty of empty floor space at ScaleMatrix, near state Route 163. About one-third of the floor space has computer cabinets. ScaleMatrix’s Heller predicts the large room will be full of server cabinets in two to three years. ScaleMatrix has invested $20 million in the business. Since early last year, it has grown from eight employees to 60.

One of ScaleMatrix’s specialties is “private cloud,” where a specific piece of hardware is dedicated to a specific user. ScaleMatrix hosts private clouds for several familiar business names, Heller said, including Bumble Bee Foods LLC.

ScaleMatrix CEO Mark Ortenzi calls the technology in the building “data center version two.” Version two technology does away with traditional raised floors and forced air systems, and cools server racks using an alternate method. It also physically isolates racks so a calamity in one won’t affect its neighbors. Ortenzi says he has three to four patents pending on the technology he uses. “I think I have a good 10-year jump on this market,” he said.

Heller shows off fire suppression systems, redundant chilling systems, links to multiple telecom carriers, redundant backup power generators and seven days’ worth of fuel. Any data center worth its salt has hefty generators to keep systems running if the power grid goes down — which it did in San Diego in September.

The night without power “was a nonevent for us,” said RedIT’s Dahan. “Our data center looked like an airport after a flight had been canceled,” he said, adding that clients packed the well-lit building and people were “plugging into outlets, charging phones and computers.”

Caulfield said AIS plans to do more in the cloud space, including introducing services optimized for the life sciences community during the second quarter of 2012.

And he argues that 2012 may be an optimum time for a company to get into cloud computing.

With the economy coming back, companies may need to expand their computing power. However, chief financial officers might be hesitant to spend money on resources. The beauty of cloud computing, Caulfield said, is it allows firms to get more computing capacity without investing in more hardware.

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