Making the 'Big Switch' to cloud computing

Part one of a two-part series (Access part two):

It is an odd way to start a magazine story, by recommending that readers rush out and read books. And yet, that is precisely what Newsweek suggested a couple of weeks ago in its article, “Fifty books for our time.”

It is a recommendation repeated here for book No. 4 on that list, The Big Switch: Rewiring the World, From Edison to Google, by Nicholas Carr, first published last year. Newsweek said all of the books on its list “open a window on the times we live in.” In the case of The Big Switch, at least for healthcare information technology, it is more of a window on the times we are only now just beginning to live in, but that's likely to change significantly as time goes by, according to healthcare and IT industry experts contacted for this story.

The switch in question is what Carr, a former executive editor of the Harvard Business Review, sees as the inevitable conversion of most computing from the mainframe, client/server and local network technologies, overwhelmingly the dominant models in clinical healthcare computing today, to the next generation of off-site, remotely hosted and managed services via the “World Wide Computer.” That's a Carr coinage interchangeable with a more commonly used term: cloud computing.

Carr argues that we are on the cusp of a change in business and society as profound as at the end of the 19th century. Back then, industrialists made the big switch of that era, converting their factories from the motive forces of the water wheels and steam plants they owned to a vastly larger-scale, electrical power grid they did not own but used as customers of a utility. Computing, he argues, is being commoditized just as electricity was a century or so ago.

The question put to selected healthcare cognoscenti is whether there is now, or will soon be, a role for cloud computing in the healthcare industry. Their answers were yes, and yes.

Just what is cloud computing?

For one thing, it's big business with a worldwide reach. Global revenue for cloud-based service providers is expected to exceed $56 billion this year, up 21% from $46.5 billion in 2008, according to Gartner, a Stamford, Conn.-based IT research firm. As much as 60% of that 2008 revenue was from advertising-based services, reflecting the successes of Google, Microsoft Corp., Yahoo and others, he said. Systems infrastructure delivered as a service (a more likely candidate as a healthcare IT substitute) remains a newer and still growing segment of cloud computing, accounting for $2.5 billion in 2008 revenue and is forecast to reach $3.2 billion in 2009, Gartner reported.

Yet, defining cloud computing remains a work in progress. Scientists Peter Mell and Tim Grance of the National Institute of Standards and Technology took a stab at it in June through an online posting on the NIST's Computer Security Resource Center.

Cloud computing, they wrote, deploys “massive clusters of computers” linked by software that not only manages traffic between them, but also is capable of dividing computers into multiple “virtual” machines. It provides clients of the cloud a service that can quickly expand and contract to a client's needs. A cloud utility can “elastically provide many servers for a single software-as-a-service style application” or “host many such applications on a few servers,” they wrote.

Mell and Grance also offered a caveat. Cloud computing is “still an evolving paradigm.” As cloud computing develops, it likely will create “a large ecosystem of many models, vendors and market niches,” they wrote.

Outsourcing of computerized tasks has been a staple of the hospital IT industry for decades. Application service provider, or ASP, practice management and electronic health systems have been touted to physicians in office practices since at least the 1990s, but cloud computing, which includes aspects of both outsourcing and ASP-based systems, is “fundamentally different,” Mell said in an interview.

“Cloud computing is really the convergence of many technologies that IT professionals know,” Mell said. “People say, ‘Oh, cloud computing, there is nothing new,' and they are right, but in the convergence, there is something new.”

The way to understand that difference, Mell said, is to look at what he and Grance call the five “essential cloud characteristics” (See chart). “If a service is running on an infrastructure that provides all of those characteristics, then it is cloud computing.”

In writing about what he sees as the inevitable conversion to cloud computing, Carr said that smaller companies will be pushed quickly into the cloud while “most larger companies will need to carefully balance their past investments in in-house computing with the benefits from utilities.”

These bigger concerns—and large healthcare organizations are likely to be among them—“can be expected to pursue a hybrid approach for many years, supplying some hardware and software requirements themselves and purchasing others over the grid,” Carr wrote. One of the key challenges for IT departments, in fact, is in making the right decisions about what to hold onto and what to let go, he wrote.

In healthcare, most purchasers of IT aren't looking for a competitive advantage, Carr said in an interview. “You're going to be thinking about privacy and security and utility. What we see as a big challenge with medical information is being able to share it quickly and effectively among providers.” Cloud-based systems “are built from the ground up for quickly sharing information,” Carr said. “It's really tapping into that ability to collaborate and share while making sure you have the privacy and security safeguards that healthcare providers really need."

One precursor to the cloud—outsourced IT service—is one of the oldest information technologies in healthcare. Daniel Emig is vice president of hosting services for Siemens Healthcare, based in Malvern, Pa., where he started working 25 years ago with Shared Medical Systems Corp., or SMS, an outsourced IT service provider for hospitals and medical groups. SMS, founded in 1969, was acquired by Siemens 10 years ago. By then, SMS was well-established, reporting 1,000 healthcare customers and revenue of $1.2 billion. According to Siemens, its Malvern data center now hosts more than 2,800 different applications and processes—194 million transactions during an average day.

From a customer's perspective, Emig said, cloud computing looks very much like what they've been seeing for decades in IT outsourcing.

“Cloud is the latest terminology, but the concept has always been the same as a buyer,” Emig said. “You plug into a network and have them do work you want done.”

The ability to move work around and divide up mainframe computers also is quite old, Emig said. “In the server world, the systems world, there are now virtualization technologies in the market that allow you to do the same thing,” he said. “You can take one physical server and create 10 virtual servers on it.”

In a follow-up e-mail, Emig said Siemens' service offers its customers most of the five NIST essential characteristics of cloud computing, noting its pricing is based on “a more fixed and predictable cost structure over the term of their contracts” rather than completely variable pricing based on usage. “We only charge for scale up when customers significantly exceed the statistics provided to Siemens. Scale down is completely transparent to healthcare providers. However, we do carefully meter usage for our own internal cost accounting.”

Gregory Veltri is the chief information officer for Denver Health, which operates a 26-building campus, 10 family practice clinics, 14 school-based clinics and a host of other healthcare services. The public hospital complex has been a partial SMS/Siemens IT outsourcing customer since 1996. Carr said price will drive customers to the cloud and, not surprisingly, it was a key driver for Denver Health to outsource.

“We find the model to be very cost-effective,” Veltri said. “That's why we do it. My motto used to be: I had to know and fix everything. I'm a control freak.”

What do you think? Submit a letter to Your Views. Please include your name, title, company and hometown. Health IT Strategist reserves the right to edit all submissions.

Also, please share your thoughts by taking our latest HITS reader poll.