Virtualization vs. cloud computing - what exactly is the difference?

This is a great question - virtualization and cloud computing are easily confused becuase they are inter-twined. Virtualization is software technology that allows you to run multiple 'virtual servers' on a single physical server. Imagine that you had 4 servers in your business each running a different "workload" - (1) an email server, (2) a database server, (3) a file server and (4) an application server. Now imagine that these 4 servers are not terribly busy - that they are in effect "idle" about 80% of their time. The economic utility of each of these servers would thus be quite low; say you paid $1,000 for each server but are only gettting 20% utility out of each - you're paying $1,000 for $200 of utility.

Virtualization allows you take all four workloads and move them to one physical server. Your hardware utility instantly goes up because now you are using one server to do the job you originally required 4 servers to accomplish (of course you would need to consider factors such as depreciation before deciding to make this switch in the first place).

You can virtualize your servers on-premise or in the cloud - and this is where it gets a little confusing.

Cloud computing allows you to 'outsource' the servers altogether - you have no physical servers but rather rely on a provider to host your workloads on their servers. The reason this gets confusing is that hosting providers rely on virtualization to maximize the utility of their physical plant. When you contract with a hosting provider, you are typically contracting for the use of virtual servers. By relying on this bit of technical legerdemain, hosting providers can typically offer very atttractive rates for hosting your workloads.

A proper treatment of deciding whether to use in-house virtual servers vs. hosting should factor in not only costs vs. benefits but also secuirty, performance and uptime issues.

Donald
Great answer. Some of the other implications of virtualization of your hardware include:
1. lower IT running costs, including personnel
2. less of a cost advantage for cloud computing.

Additionally, when you are evaluating software that is not available in the cloud, it is also useful to question the vendor on whether their software can run in a virtual environment or not. That may influence your evaluation process.

Carrie -
Len is absolutely right about verifying that your software will run in a virtual environment. In addition to questioning the vendor, I'd suggest checking a couple of references to verify that they actually have it running in a virtual environment, not just assuming that it 'should' run okay. Also, check to see if any additional licensing is required for a virtual environment. Some software vendors charge significant fees because the 'virtual' aspect means you could be running the software on many machines in a much larger environment.

Our firm recently completed the virtual vs. cloud decision and is now living thru some of the issues I mentioned above, so if you'd like to discuss it further feel free to contact me directly.