Cloud Computing and the Financial Crisis

By Geva Perry

September 29, 2008

A somewhat neglected aspect of the current financial crisis is the huge spike in trading volumes in recent days. In some cases, they have raised to more than double the average of the months (and years) that preceded the crisis. Systems, of course, don’t care if stocks are going up or down; they just need to handle the transactions. And for the most part, the IT systems of Wall Street, both at the banks and the exchanges, handled these unexpected “black swan” peaks.

How did they do it? In the same way that almost every organization out there is preparing for expected and unexpected loads: by over-provisioning systems. In a CNET piece about the 2006 tax-day snafu by TurboTax, an Intuit spokesperson was quoted as saying: “Every year, we take the busiest minute of the busiest hour of the busiest day and build capacity on that. We built our systems to (handle that load) and we went above and beyond that.”

Intuit’s solution to the problem of peaks in demand is typical, but far from ideal. First off, it’s extremely expensive. According to analysts, average datacenter utilization rates are at the 15-20 percent range. That means that on average, 80-85 percent of the organization’s IT resources — servers, storage, networks and software — are idle. This creates a huge financial drain on the company. Second, as the Intuit story exemplifies, it is no solution at all.

Predicting demand is an extremely tricky business. The busiest minute last year is not necessarily a solid indicator of the volume during the busiest minute this year. It is no surprise, then, that major application failures are frequent, from the famous eBay outage in 1998 to the Twitter outages of 2008. And these issues don’t affect just Web companies. The Dow Jones Index failure last year, the AT&T iPhone provisioning fiascoes and many other stories come to mind — all as a result of the inability to scale on demand to handle unexpected peaks.

With the increasing possibility of weakening global economies — and shrinking IT budgets to follow — companies can no longer engage in the expensive practice of over-provisioning. On the other hand, with increased competition and the increased mission-criticality of IT systems to businesses and consumers, failure is not an option. But failure is not relegated to complete down-time. A system’s inability to scale might just result in a slow-down, but this, too, can be extremely damaging to the business.

Consider a recent Tabb Group report estimating that a mere 1 millisecond delay in response to a trading request can cost a brokerage firm up to $4 million. Or a Google study that an additional 500 millisecond delay in returning a “search results” page decreases user traffic by 20 percent.

So what’s a company to do?

A key value proposition of cloud computing is the ability to handle demand volatility. Users can avoid downtime and slow-downs by scaling on demand to handle spikes in application loads, such as the ones we saw in the stock market recently. Because cloud providers, such as Amazon and Google, have massive computing capacity, a company can essentially “borrow” these resources.

The notion of on-demand computing completely changes the economics of IT, as well. Because public cloud services, such as Amazon EC2, GoGrid or Joyent, typically offer utility pricing — the notion of only paying for resources only when they are used — companies can tap into these resources solely to handle spikes in demand. As an example, at my own company, GigaSpaces, we did a back-of-the-envelope calculation showing that with the current pricing of Amazon EC2, we are better off using machines in Amazon’s cloud if we expect these machines to have an average utilization rate of 70 percent or less. Given the industry utilization rates noted above, it is quite clear why the idea of cloud computing — if for only this reason — is compelling.

Joe Weinman of AT&T captures this concept nicely in a GigaOm post entitled The 10 Laws of Cloudonomics:

Cloudonomics Law #2: On-demand trumps forecasting.
The ability to rapidly provision capacity means that any unexpected demand can be serviced, and the revenue associated with it captured. The ability to rapidly de-provision capacity means that companies don’t need to pay good money for non-productive assets. Forecasting is often wrong, especially for black swans, so the ability to react instantaneously means higher revenues, and lower costs.

Doing More with Less

Although recent surveys don’t show a significant expected drop in the growth of IT budgets for 2009-2010, many of these surveys were conducted before the recent financial fallout, and its full impact might not be reflected in them. In any case, it is clear that one of the top priorities of CIOs is to cut costs. This is especially true in industries such as financial services, automotive and airlines that were hard-hit by the current crisis and high oil prices.

Cloud computing offers the possibility of cutting costs, while still increasing computing capacity and introducing new products and services with a rapid time-to-market cycle. Virtualization technology a la VMware and Xen already has started this trend of server consolidation. Cloud computing is the next step in this evolution.

Just Doing More

Although I’m not suggesting that it was the crux of the current crisis, one of the questions that has come up recently is why Wall Street’s massive investments in value-at-risk analysis system did not curb the downfall. We have not heard (at least not yet) that these risk analyses were blinking with red lights and were ignored. In an HPCwire piece entitled The Quantitative Models Tanked Too,” editor Michael Feldman tackles this issue. Although not the only explanation, one of the issues raised in the article is the fact that the models used were over-simplified. Feldman explains that “in some cases, limits in computational power made these simplifications necessary so that the valuation models could be run.”

Done right, cloud computing offers nearly limitless computing power. Had they used a cloud service such as EC2, and software that is built to scale on the cloud, the quants on Wall Street could have easy, cheap and on-demand access to massive computation power.

Almost every industry can benefit from such low-cost and elastic compute capacity. With more rigorous analysis and automation, cloud computing can enable whole industries to move from faith-based to fact-based decision-making.

But What About the Technology?

In the frequent talks and writing I do about cloud computing, a recurring question is “How do we deploy our existing and new applications in a cloud environment?” Are there any unique technologies that need to be applied to take advantage of the on-demand power of cloud computing? The answer is “it depends”. Mostly stateless applications, such as simple Web applications, can be quite easily ported to cloud environment. After all, these are simply standard servers that are accessed via the Internet.

But more sophisticated applications, such as the data-intensive VAR analysis ones used on Wall Street, as well as various transactional Web applications, require some adjustments. Traditional applications servers, such as JEE app servers from IBM, Oracle and JBoss, won’t cut in a cloud environment. They tend to have central bottlenecks and are rigidly “wired” to the physical servers. Such applications require elastic application servers that can go grow and shrink on demand, handle fault-tolerance transparently and be easily moved around without any downtime. Fortunately, there is a new generation of application servers that fits exactly those requirements, including the product made by my own company.

On-Demand Is Not Just About the Technology

There is another aspect of on-demand computing that is key to its success: both the hardware and the software need to be provided in a “pay-by-the-drink” usage-based model. Typically, this would be some sort of CPU hourly pricing for computation power, data size pricing for storage and memory and so on. Unless software providers offer true hourly pricing like that offered by GigaSpaces or Red Hat (whether you’re using it externally or as part of an in-house cloud), theirs is not truly a cloud offering, as I have written on my blog.

—–

Geva Perry is general manager of cloud computing at GigaSpaces Technologies and a popular blogger and speaker on cloud computing. His blog, “Thinking Out Cloud,”  can be found at http://gevaperry.typepad.com.

Subscribe to HPCwire's Weekly Update!

Be the most informed person in the room! Stay ahead of the tech trends with industy updates delivered to you every week!

Supercomputer Research Reveals Star Cluster Born Outside Our Galaxy

July 11, 2020

The Milky Way is our galactic home, containing our solar system and continuing into a giant band of densely packed stars that stretches across clear night skies around the world – but, it turns out, not all of those st Read more…

By Oliver Peckham

Max Planck Society Begins Installation of Liquid-Cooled Supercomputer from Lenovo

July 9, 2020

Lenovo announced today that it is supplying a new high performance computer to the Max Planck Society, one of Germany's premier research organizations. Comprised of Intel Xeon processors and Nvidia A100 GPUs, and featuri Read more…

By Tiffany Trader

Xilinx Announces First Adaptive Computing Challenge

July 9, 2020

A new contest is challenging the computing world. Xilinx has announced the first Xilinx Adaptive Computing Challenge, a competition that will task developers and startups with finding creative workload acceleration solutions. Xilinx is running the Adaptive Computing Challenge in partnership with Hackster.io, a developing community... Read more…

By Staff report

Reviving Moore’s Law? LBNL Researchers See Promise in Heterostructure Oxides

July 9, 2020

The reality of Moore’s law’s decline is no longer doubted for good empirical reasons. That said, never say never. Recent work by Lawrence Berkeley National Laboratory researchers suggests heterostructure oxides may b Read more…

By John Russell

President’s Council Targets AI, Quantum, STEM; Recommends Spending Growth

July 9, 2020

Last week the President Council of Advisors on Science and Technology (PCAST) met (webinar) to review policy recommendations around three sub-committee reports: 1) Industries of the Future (IotF), chaired be Dario Gil (d Read more…

By John Russell

AWS Solution Channel

Best Practices for Running Computational Fluid Dynamics (CFD) Workloads on AWS

The scalable nature and variable demand of CFD workloads makes them well-suited for a cloud computing environment. Many of the AWS instance types, such as the compute family instance types, are designed to include support for this type of workload.  Read more…

Intel® HPC + AI Pavilion

Supercomputing the Pandemic: Scientific Community Tackles COVID-19 from Multiple Perspectives

Since their inception, supercomputers have taken on the biggest, most complex, and most data-intensive computing challenges—from confirming Einstein’s theories about gravitational waves to predicting the impacts of climate change. Read more…

Penguin Computing Brings Cascade Lake-AP to OCP Form Factor

July 7, 2020

Penguin Computing, a subsidiary of SMART Global Holdings, Inc., announced yesterday (July 6) a new Tundra server, Tundra AP, that is the first to implement the Intel Xeon Scalable 9200 series processors (codenamed Cascad Read more…

By Tiffany Trader

Max Planck Society Begins Installation of Liquid-Cooled Supercomputer from Lenovo

July 9, 2020

Lenovo announced today that it is supplying a new high performance computer to the Max Planck Society, one of Germany's premier research organizations. Comprise Read more…

By Tiffany Trader

President’s Council Targets AI, Quantum, STEM; Recommends Spending Growth

July 9, 2020

Last week the President Council of Advisors on Science and Technology (PCAST) met (webinar) to review policy recommendations around three sub-committee reports: Read more…

By John Russell

Google Cloud Debuts 16-GPU Ampere A100 Instances

July 7, 2020

On the heels of the Nvidia’s Ampere A100 GPU launch in May, Google Cloud is announcing alpha availability of the A100 “Accelerator Optimized” VM A2 instance family on Google Compute Engine. The instances are powered by the HGX A100 16-GPU platform, which combines two HGX A100 8-GPU baseboards using... Read more…

By Tiffany Trader

Q&A: HLRS’s Bastian Koller Tackles HPC and Industry in Germany and Europe

July 6, 2020

In this exclusive interview for HPCwire – sadly not face to face – Steve Conway, senior advisor for Hyperion Research, talks with Dr.-Ing Bastian Koller about the state of HPC and its collaboration with Industry in Europe. Koller is a familiar figure in HPC. He is the managing director at High Performance Computing Center Stuttgart (HLRS) and also serves... Read more…

By Steve Conway, Hyperion

OpenPOWER Reboot – New Director, New Silicon Partners, Leveraging Linux Foundation Connections

July 2, 2020

Earlier this week the OpenPOWER Foundation announced the contribution of IBM’s A21 Power processor core design to the open source community. Roughly this time Read more…

By John Russell

Hyperion Forecast – Headwinds in 2020 Won’t Stifle Cloud HPC Adoption or Arm’s Rise

June 30, 2020

The semiannual taking of HPC’s pulse by Hyperion Research – late fall at SC and early summer at ISC – is a much-watched indicator of things come. This yea Read more…

By John Russell

Racism and HPC: a Special Podcast

June 29, 2020

Promoting greater diversity in HPC is a much-discussed goal and ostensibly a long-sought goal in HPC. Yet it seems clear HPC is far from achieving this goal. Re Read more…

Top500 Trends: Movement on Top, but Record Low Turnover

June 25, 2020

The 55th installment of the Top500 list saw strong activity in the leadership segment with four new systems in the top ten and a crowning achievement from the f Read more…

By Tiffany Trader

Supercomputer Modeling Tests How COVID-19 Spreads in Grocery Stores

April 8, 2020

In the COVID-19 era, many people are treating simple activities like getting gas or groceries with caution as they try to heed social distancing mandates and protect their own health. Still, significant uncertainty surrounds the relative risk of different activities, and conflicting information is prevalent. A team of Finnish researchers set out to address some of these uncertainties by... Read more…

By Oliver Peckham

[email protected] Turns Its Massive Crowdsourced Computer Network Against COVID-19

March 16, 2020

For gamers, fighting against a global crisis is usually pure fantasy – but now, it’s looking more like a reality. As supercomputers around the world spin up Read more…

By Oliver Peckham

[email protected] Rallies a Legion of Computers Against the Coronavirus

March 24, 2020

Last week, we highlighted [email protected], a massive, crowdsourced computer network that has turned its resources against the coronavirus pandemic sweeping the globe – but [email protected] isn’t the only game in town. The internet is buzzing with crowdsourced computing... Read more…

By Oliver Peckham

Supercomputer Simulations Reveal the Fate of the Neanderthals

May 25, 2020

For hundreds of thousands of years, neanderthals roamed the planet, eventually (almost 50,000 years ago) giving way to homo sapiens, which quickly became the do Read more…

By Oliver Peckham

DoE Expands on Role of COVID-19 Supercomputing Consortium

March 25, 2020

After announcing the launch of the COVID-19 High Performance Computing Consortium on Sunday, the Department of Energy yesterday provided more details on its sco Read more…

By John Russell

Honeywell’s Big Bet on Trapped Ion Quantum Computing

April 7, 2020

Honeywell doesn’t spring to mind when thinking of quantum computing pioneers, but a decade ago the high-tech conglomerate better known for its control systems waded deliberately into the then calmer quantum computing (QC) waters. Fast forward to March when Honeywell announced plans to introduce an ion trap-based quantum computer whose ‘performance’ would... Read more…

By John Russell

Neocortex Will Be First-of-Its-Kind 800,000-Core AI Supercomputer

June 9, 2020

Pittsburgh Supercomputing Center (PSC - a joint research organization of Carnegie Mellon University and the University of Pittsburgh) has won a $5 million award Read more…

By Tiffany Trader

Global Supercomputing Is Mobilizing Against COVID-19

March 12, 2020

Tech has been taking some heavy losses from the coronavirus pandemic. Global supply chains have been disrupted, virtually every major tech conference taking place over the next few months has been canceled... Read more…

By Oliver Peckham

Leading Solution Providers

Contributors

Nvidia’s Ampere A100 GPU: Up to 2.5X the HPC, 20X the AI

May 14, 2020

Nvidia's first Ampere-based graphics card, the A100 GPU, packs a whopping 54 billion transistors on 826mm2 of silicon, making it the world's largest seven-nanom Read more…

By Tiffany Trader

10nm, 7nm, 5nm…. Should the Chip Nanometer Metric Be Replaced?

June 1, 2020

The biggest cool factor in server chips is the nanometer. AMD beating Intel to a CPU built on a 7nm process node* – with 5nm and 3nm on the way – has been i Read more…

By Doug Black

‘Billion Molecules Against COVID-19’ Challenge to Launch with Massive Supercomputing Support

April 22, 2020

Around the world, supercomputing centers have spun up and opened their doors for COVID-19 research in what may be the most unified supercomputing effort in hist Read more…

By Oliver Peckham

Australian Researchers Break All-Time Internet Speed Record

May 26, 2020

If you’ve been stuck at home for the last few months, you’ve probably become more attuned to the quality (or lack thereof) of your internet connection. Even Read more…

By Oliver Peckham

15 Slides on Programming Aurora and Exascale Systems

May 7, 2020

Sometime in 2021, Aurora, the first planned U.S. exascale system, is scheduled to be fired up at Argonne National Laboratory. Cray (now HPE) and Intel are the k Read more…

By John Russell

Summit Supercomputer is Already Making its Mark on Science

September 20, 2018

Summit, now the fastest supercomputer in the world, is quickly making its mark in science – five of the six finalists just announced for the prestigious 2018 Read more…

By John Russell

TACC Supercomputers Run Simulations Illuminating COVID-19, DNA Replication

March 19, 2020

As supercomputers around the world spin up to combat the coronavirus, the Texas Advanced Computing Center (TACC) is announcing results that may help to illumina Read more…

By Staff report

$100B Plan Submitted for Massive Remake and Expansion of NSF

May 27, 2020

Legislation to reshape, expand - and rename - the National Science Foundation has been submitted in both the U.S. House and Senate. The proposal, which seems to Read more…

By John Russell

  • arrow
  • Click Here for More Headlines
  • arrow
Do NOT follow this link or you will be banned from the site!
Share This