Multicloud vs. hybrid cloud: Decision guide for utilities

9-minute read

Quick summary: How to choose the right cloud strategy—multicloud or hybrid cloud—to meet your utility’s specific needs

The energy and utilities industry is undergoing a digital transformation, driven by renewable energy integration, smart grids, customer demand for personalized experiences, and other factors. Cloud computing plays a critical role in this transformation, offering scalability, flexibility, and access to advanced technologies. However, choosing the right cloud strategy—multicloud or hybrid cloud—can be a challenge.

Multicloud strategy explained

A multicloud strategy involves using a variety of public cloud services, such as AWS, Azure, Google Cloud Platform, and Oracle, each handling different workloads and applications. This approach offers several advantages:

• Agility and scalability: It meets fluctuating demands, such as peak energy periods, by harnessing on-demand resources from multiple providers.
• Best-of-breed services: Each cloud service can be selected for its strengths, such as AI or analytics, enabling tailored solutions to specific operational needs.
• Cost optimization: Companies can choose the most economical services for different tasks, optimizing overall expenditures.
• Enhanced disaster recovery: Using multiple clouds can enhance resilience, providing redundancy to maintain service continuity during outages.

However, the multicloud approach has its share of challenges, including:

• Increased complexity: Managing several cloud services increases the complexity of operations, security, and billing.
• Vendor lock-in risk: Spreading data across multiple providers can complicate moving away from a particular service if needed.
• Regulatory compliance: Adhering to strict industry regulations becomes more challenging when data and services are scattered across multiple cloud environments.

Hybrid cloud strategy explained

In contrast, a hybrid cloud strategy combines on-premises infrastructure with public cloud services to create a unified IT environment. This strategy brings its own set of benefits:

• Enhanced security and control: Sensitive data, such as customer information, can be kept on-premises, where security can be tightly controlled.
• Legacy system integration: Existing infrastructure can be integrated with cloud services, allowing for a smoother transition to cloud computing.
• Simplified compliance: Keeping certain data and applications on-premises provides the direct control that facilitates compliance with some regulations. For example, NERC CIP requires on-premise hosting for applications in which changes made to data within them impact the grid directly within 15 minutes.

That said, the hybrid model also faces several challenges:

• Limited flexibility: Dependence on specific hardware and software for on-premises infrastructure may restrict flexibility.
• Limited scalability: While cloud resources can scale quickly, on-premises infrastructure may not be as adaptable.
• Management complexity Operating both on-premise and cloud environments demands significant expertise and can introduce operational complexities.

Selecting the optimal cloud strategy

The choice between multicloud and hybrid cloud should be driven by an organization’s unique needs.

Multicloud is suitable for organizations that:

• Can handle complexity
• Require high levels of agility
• Seek best-in-breed services from each cloud provider
• Have less-stringent security requirements for certain data types

Hybrid cloud is preferable for organizations with:

• Substantial legacy systems
• Stringent data security and compliance demands
• A more gradual approach to adopting cloud technologies

Key considerations for implementation

Whether a provider opts for a multicloud or hybrid cloud strategy, several considerations remain critical:

• Data governance: Effective management of data across all platforms is crucial, particularly for handling sensitive information.
• Robust security: Strong, consistent security measures are imperative across all cloud and on-premise systems to protect critical infrastructure and customer data.
• Seamless integration: Integrating systems and ensuring coherent data flow between cloud and, if applicable, on-premise platforms is essential for operational efficiency.

Use case: Cloud resilience and utilities public safety power shutoffs (PSPS)

The increasing frequency and intensity of severe weather events due to climate change are putting a strain on utilities and highlighting the need for cloud-based solutions with high resilience.

The problem

Extreme weather like wildfires, hurricanes, and other storms can damage power grids, leading to outages that leave people without electricity for days or even weeks. Utilities are resorting to public safety power shutoffs (PSPS) to limit the damage of wildfires caused by downed power lines. While this action protects communities, it also disrupts lives and critical infrastructure by disrupting electricity services.

Cloud resilience as a solution

Cloud resilience refers to the ability of a cloud-based infrastructure to withstand and recover from disruptions, planned or unplanned. It helps utilities ensure that applications and data remain available and accessible even when things go wrong. Cloud resilience entails:

• Accommodating disruptions: This includes infrastructure failures (hardware, network), software glitches, cyberattacks, and even natural disasters. A resilient cloud setup can handle these issues with minimal downtime or data loss.
• High availability: This refers to the percentage of time applications are operational and accessible to users. Resilient cloud architecture incorporates redundancy and fault tolerance mechanisms to achieve high availability.
• Disaster recovery: A disaster recovery plan within a cloud strategy ensures that procedures and backups are in place to restore operations quickly in case of a major outage.
• Reliable data backup and access: Cloud storage ensures critical data like grid management systems and customer information are safe from physical damage during outages.
• Data continuity: Cloud storage ensures critical data like grid status, customer information, and outage maps are safe during local outages. This data is readily available for informed decision-making during PSPS events.
• Remote operations: Utility personnel can access and manage the grid remotely using cloud-based tools, even if their local offices are without power.
• Uninterrupted customer communication: Cloud platforms can facilitate communication with customers during outages. Utilities can provide updates and restoration timelines through email, websites, mobile apps, or social media, all managed from remote locations.
• Faster restoration: Cloud-based analytics can help utilities pinpoint damage and prioritize restoration efforts, leading to quicker recovery times.

Why cloud resilience matters for PSPS

• Reduced downtime: Cloud-based systems are inherently more resilient than on-premise solutions in case of outages because data is geographically distributed, minimizing the impact of localized disruptions. This minimizes downtime and ensures a quicker response to changing grid conditions during PSPS events.
• Enhanced decision making: Real-time data access from the cloud empowers utility companies to make informed decisions regarding power restoration priorities and resource allocation during PSPS events.
• Scalability: Cloud resources can be easily scaled up or down to meet changing demands during emergencies.
• Cost-effectiveness: The cloud eliminates the need for expensive upfront investments in hardware and disaster recovery infrastructure.
• Improved customer service: Cloud-based communication tools allow utilities to keep customers informed throughout outages, reducing frustration and improving overall customer satisfaction.
• Improved regulatory compliance: Cloud architectures help utilities meet industry regulations regarding data security and service uptime.

Assessing cloud providers for PSPS

When it comes to cloud resilience for handling power outages and severe weather disruptions, all three major providers—Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP)—offer robust solutions. Here’s a breakdown of their strengths:

Similarities

• Global infrastructure: AWS, Azure, and GCP all have geographically distributed networks of data centers across multiple regions and availability zones. This redundancy ensures that, if one zone experiences an outage, services can be automatically rerouted to another.
• Disaster recovery services: All solutions from major providers encompass tools and services for replicating data across regions, allowing for quick failover in case of disaster.
• Scalability: All platforms can scale resources up or down to meet fluctuating demands during emergencies.

Differences

Availability zones

• AWS: Most extensive network with 99 availability zones (and more planned) across 31 regions
• Azure: Offers availability zones within each region, but with a smaller total footprint compared to AWS
• GCP: Provides regions and zones (37 regions, 112 zones), with a focus on geographically dispersed locations

Network resilience

• AWS: Doesn’t rely solely on a single internet service provider (ISP)
• Azure: Might leverage a single ISP in some regions, potentially impacting service during widespread outages
• GCP: Uses a mix of its own fiber network, undersea cables, and partnerships with various ISPs

Focus

• AWS: Known for its broad range of services and mature disaster recovery solutions
• Azure: Strong integration with Microsoft products and focus on hybrid cloud deployments
• GCP: Known for strong security features and leveraging Google’s experience in large-scale infrastructure management

Choosing the right cloud provider

There’s no single “best” cloud provider for every utility. To determine which is right for your organization, consider these factors:

• Existing infrastructure: If you heavily rely on Microsoft products such as Azure Entra ID, Microsoft 365, and SharePoint, then Azure might be a good fit.
• Security needs: If security is paramount, AWS and GCP might be strong contenders.
• Compliance and audit needs: Understand how each of the cloud providers can tackle NERC CIP compliance and audit requirements and reporting.
• Scalability requirements: If you anticipate significant fluctuations in resource needs during emergencies, AWS’ vast network could be advantageous.
• Technical expertise: Consider your team’s familiarity with each platform’s tools and architecture. Decide whether you want to build cloud skills in-house or have partners implement the solution.

A few additional points to keep in mind:

• If the application under consideration is not a core application for utilities, see if it can be implemented using a SaaS offering that meets SOC type 2 compliance. This allows utilities to focus on building and managing core utility-based apps on cloud service providers.
• Check NERC compliance requirements before deciding whether the application or solution can be migrated to a cloud service provider from on-premise resources. NERC standards necessitate that some functions remain on-premise, including real-time control systems and protection systems associated with critical utility infrastructures.
• Consult with each cloud provider to understand their compliance with NERC standards and specific resilience offerings in each target region.
• You can leverage a multicloud strategy using different providers for various services based on their strengths. But managing multicloud skills in-house can become a challenge. Annual budgetary constraints lead most utilities to choosing an ISV partner for their multicloud strategy journey.

Exploring specialized tools: AWS Resilience Hub

Utilities are now considering implementing advanced cloud resiliency solutions to mitigate the availability of a cloud solution in the event of a PSPS event. One of the utility providers we work with has implemented AWS Resilience Hub to ensure the resiliency of their application workload during PSPS events. AWS Resilience Hub provides a central location in the AWS Console for the utility to manage and improve the resilience posture of their applications on AWS.

AWS Resilience Hub enables the customer to:

• Define their resilience goals and the recovery time and recovery point objectives for application workloads.
• Assess their resilience posture against those goals.
• Implement recommendations for improvement based on the AWS Well-Architected Framework.
• Create and run AWS Fault Injection Service (AWS FIS) experiments, which mimic real-life disruptions to the application to help the utility better understand dependencies and uncover potential weaknesses.

Constraints to cloud implementation: NERC compliance and on-premise hosting

NERC compliance requires utilities to maintain reliable and secure operation of the bulk electric system. Specific standards outline requirements for data security, system integrity, and disaster recovery. While cloud adoption is growing in utilities, NERC standards require that some functions remain on-premise, including:

• Real-time control systems: NERC standards emphasize the importance of real-time control systems for grid stability and security. These systems monitor and manage grid conditions in real time, and some utilities might prefer the deterministically low latency of a physical on-premise connection for these critical tasks.
• Protection systems: Similar to control systems, protection systems like relays and fault detectors play a crucial role in safeguarding grid equipment during emergencies. NERC standards might necessitate keeping these systems on-premise for latency and security reasons.

Shaping the future with the right cloud strategy

As the energy and utilities sector continues its journey through digital transformation, the choice between multicloud and hybrid cloud strategies becomes increasingly pivotal. Multicloud offers unmatched agility and a diverse range of best-of-breed services, ideal for utilities that can manage complexity and require rapid scalability. Conversely, a hybrid cloud strategy provides enhanced security and more direct control, essential for utilities with extensive legacy systems and stringent security needs.

Ultimately, each utility must consider its specific requirements—balancing agility, security, compliance, and cost—to determine the most suitable cloud strategy. Embracing the right cloud solution not only supports the resilience needed to handle severe weather events and PSPS, but also positions the organization to better serve its customers and adapt to the evolving landscape of the energy sector.