It's August 2007. VMware goes public and virtualization, in all its forms, reigns as the leading IT infrastructure megatrend. Fast forward to the summer of 2008 and virtualization is already giving way to the new king of IT media - cloud computing. All of a sudden, the conversations about how virtualization will transform existing enterprise infrastructure shift to talk about how virtualization will enable the adoption of cloud computing in the enterprise. Every virtualization industry event either becomes a virtualization + cloud computing show or acts as the venue for major vendor announcements related to the cloud.

It's clear that the interest in cloud computing has reached a frenzy. Until recently, most of the focus on the cloud has been on applications and services for consumers or small businesses. Increasingly, more and more analysts, vendors and IT managers are thinking about how cloud computing will play a role in the enterprise. In general, most IT folks currently think of cloud computing in the enterprise as a combination of server virtualization and hosting. That is, virtualizing server workloads and shifting them from being housed in an internal data center to being hosted in a service provider "cloud."

There are a number of benefits to this approach. First, since the services provided by these back-office systems are delivered over a network, accessing them from a service provider data center shouldn't be significantly different from accessing them in an internal data center. From a cost perspective, cloud-hosted servers allow enterprises to avoid capital expenditures (CAPEX) related to buying their own physical servers. Instead, the cost of server infrastructure becomes an operating expense (OPEX) that enterprises normally pay as a monthly subscription. Economies of scale, optimized infrastructure and operating efficiency allow most service providers to run hosting infrastructure at a cost lower than the average enterprise. In addition to being able to avoid CAPEX, enterprises also benefit from a hoster's lower operating costs. Finally, the service provider is responsible for managing the integration complexity necessary to build an environment capable of hosting large numbers of virtualized servers. In the end, cloud-hosted servers allow enterprise IT to focus on managing key business applications instead of commodity servers.

However, digging deeper into this model exposes some significant obstacles, the most critical being the location and security of enterprise data. Most server workloads are inextricably bound to their data tier. The majority of existing server applications were designed with the assumption that the application server and its data are collocated in the same data center. This provides high-speed network connectivity between the two tiers. However, if an application server is virtualized and shifted to a service provider cloud, it will no longer sit in the same data center with its data. For most applications and services, this is a non-starter from a performance perspective.