Cloud Computing Industry Analysis

Cloud Computing

Cloud computing refers to the provision of computing resources like computing power, applications, computing infrastructure, and business processes in a manner that is scalable as per requirement and can be shared in order to gain economies of scale. These provisions are delivered as a service over the internet (or any other electronic network) and the service can be accessed by end users via a computing device. The data and application-related information relevant to the end users' business/personal needs is stored on remote servers.

The term 'cloud' is used for the abstraction of the complex network infrastructure that is used for providing the service. A more effective way to explain the concept of cloud computing is to compare it with an office building. An office building can accommodate multiple companies belonging to different types of industries. Although some companies can go for privately managed maintenance/servicing of their own office, it will be extremely economical and cost-effective for all companies to go for shared services that are used by all.

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These will mostly include some essential and fundamental utility services. Likewise, Cloud computing enables sharing of the computing resources, management of which by a single company could be taxing and uneconomical. The flexibility, immediate availability, and cost-effectiveness of the maintenance, hardware, and platform development offered by cloud computing can be compared with the electricity coming out of every wall of an office building, the underlying technical aspects being abstracted from the user.

Players in the Cloud computing world:

1. Vendors: Provide applications and enable technology, infrastructure, hardware, and integration.
2. Partners: Collaborate with vendors and provide support services to customers.
3. Business Leaders: Either use or evaluate various types of cloud computing offerings.

Types of Cloud computing services:

1. Private Cloud: The cloud is owned by a particular customer with the required infrastructure and technology residing either on-site or off-site. This type of service is expensive but provides better security.
2. Public Cloud: The cloud is owned by a large organization or company specializing in cloud computing services. The cloud can be rented for use to anyone willing to pay for it. It is the cheapest type of cloud computing service but because of its public nature, it is deemed to be less secure.
3. Hybrid Cloud: It consists of multiple private and public clouds.

What are the necessities of cloud computing?

1. Information Technology penetrated in day to day life very fast With the starting of Internet era, most of the people and majority companies in the world became dependent on the services you could get with a click of the mouse. The best example may be free email (Gmail/Yahoo mail), chat technology (Yahoo Messenger), and Social Networking websites (YouTube, Facebook, Twitter). One can’t imagine life without them. That’s where the cloud was born. You need cloud data centers to run that stuff.
2. Cheaper source of Technology One may look for quality or ease of access but in the end, the main thing that’s at the top of everybody’s mind is the economy. Cloud data centers are fundamentally different because they are built for very large user numbers and for a particular focus. Traditional data centers cannot compete on cost. In fact it’s no competition on the cost front.
3. Go Green In the scenario where environment is one of the biggest concerns, cloud computing seems like a perfect option as there is no paper etc required. The data is saved over internet as digital signals. Nowadays digitization of everything is becoming a trend among all top multinational companies.
4. The never-ending and always expanding data The data is ever increasing and it probably always will be. It seems to grow at about 60% a year and it doesn’t pause for breath. It won’t stop, even if you cry at it. But like old email, you never access most of the data and at the same time, you also don’t want to delete it. So saving it all in the cloud makes sense clearly.
5. Unlimited Access This is almost impossible to stop users from accessing anything they want on the Internet. One may be able to blacklist some web sites (adult sites etc) but one can’t want to prevent users from finding useful capabilities on the Internet. And those are cloud apps by any definition. There’s a wealth of it and it’s a boon to us.
6. No need for continuous software development Cloud computing is the best way of software development. There was always two types of software development; the mission critical stuff that gives us business traction, and the rest. We need not worry for it. It’s the competition that drives software development and thus making it cost-effective.
7. The emergence of cloud computing as an ecosystem cloud computing has created an environment and hence various companies and developers create applications that support this environment, just like Google which is no more a website but an ecosystem.

What are the needs of PaaS, IaaS, SaaS (Cloud Families)?

PaaS: What is it?

The way of renting hardware, operating systems, storage, and network capacity over the Internet is called PaaS (Platform as a Service). It allows the customer to rent virtualized servers and associated services for running existing applications or developing and testing new ones.

Features:

1.  All the services needed in the process of making an application like developing, testing, deploying, hosting, and maintaining applications are integrated into the same platform.
2. It is very user-friendly as different user interfaces can be easily created using various web tools available in PaaS.
3. Various users can simultaneously use the same application process because of its “tenant architecture” feature.
4. It is used for billing and subscription management.
5. Integration can be done via common standards with web services and databases.
6. It has a built-in feature to handle load balancing and failover.

SaaS: What it is?

The model in which applications are hosted by a vendor or service provider and made available to customers over a network, typically the Internet is known as SaaS (Software as a Service)

Features:

1. It is used in commercial applications for accessing the web
2. It has a central hub for software management
3. It uses the star network model for software delivery
4. It has a feature called “application programming interface” which is used to link different software
5. Time-to-time upgradation of software and recovery of system patches is not required to be monitored by the SaaS users.

SaaS solutions. Iaas: What it is?

A model in which an organization outsources the equipment used to support operations, including storage, hardware, servers, and networking components is called IaaS (Infrastructure as a Service). The service provider owns the equipment and is responsible for housing, running, and maintaining it. The client has no obligations and he only pays on a per-use basis.

Features:

1. Dynamic scaling can be done
2. It allows access to multiple users on a single hardware
3. It is based on the model of utility pricing and hence has a variable cost
4. Resources are distributed as a service.
5. Pricing Models

Elastic pricing or Pay-as-you-Use model

The elastic pricing model is a model that incurs less wastage and lower costs as under this system customers are charged based as per their usage and consumption of a service. As the users are keenly aware of the cost of doing business and consuming a resource (since it’s coming from their pockets) therefore the awareness of cost and selective usage is quite prominent.

When to use it?

1. When there is an Unpredictability of resources.
2. When there is a limitation of budget.

Fixed or Subscription-based pricing

The simplest pricing option where the customer organization is billed on a fixed monthly basis is known as fixed pricing. The consumer is billed the same amount every month without consideration for actual usage.

When to use it?

1. When requirements are well-defined.
2. When more control over the budget is required.
3. When it is required to use the cloud for a longer period.

Spot pricing for cloud

It is a new concept in cloud computing, where market forces will decide the pot pricing model i. e. , when the demand for computing and storage resources is higher then the price of services will be higher and vice-versa. Cloud chargeback Customers are charged on the basis of usage.

The benefits of this model are:

1. Resource utilization can become more visible.
2. Forecasting, budgeting, and capacity planning can be facilitated.
3. It encourages the use of new emerging technologies.
4. It facilitates the justification and allocation of costs to their stakeholders and business units.

Annual contract-based modeling is mostly opted for by large enterprises. The resource-based usage model is adopted by the SMB segment in the majority. Potential customers are not satisfied with the single pricing model. Pricing structures offered by vendors should be easy to understand, transparent, and cost-efficient.

PESTLE Analysis

Even with the Internet’s rise to the Horizon, it took many years for policymakers to set up common norms and procedures regarding the internet’s usage. With the current popularity of cloud computing policymakers are more proactive in addressing technological changes.

Regulations are still at a very nascent stage for Cloud computing: There are various government policies involved that need to be incorporated by vendors to successfully implement cloud. There are various issues like security, privacy, location, and ownership of data, that hinder the growth of cloud computing. Some vendors like Amazon Web Services have addressed certain issues by deploying local infrastructure in main markets (US and EU).

Government projects

Cloud computing has the potential to provide good-level government service deliveries to the people despite government agencies suffering from resource constraints.

Economic Various multinational companies have reduced their IT spending in lieu of the economic slowdown that has hit the economy hard. JP Morgan recently cut their IT spending. By lowering the opportunity cost of running technology. When it comes to technology only 20% of the time and effort goes into running technology which is where all the value lies. By using Cloud computing the 80-20 can be reversed as the time required to manage the OS and hardware gets considerably reduced. With the movement from traditional operation to the cloud, A company gets a lot of time focused on its core activities. Recently, Netflix moved on to the Amazon Cloud service (AWS EC2).

The Internet has been the most disruptive social phenomenon of the past couple of decades and has found its use in both professional and personal activities. The number of internet users is close to 2. 23 billion and growing. Since the cloud is an internet-based technology its adoption has a greater probability. The future generation will no doubt be connected through the internet for both personal and professional lives. Social media has grown from strength to strength and now even companies are focused on the use of social networking to find opportunities for their growth.

Technical Technology has taken great strides over the last 2 decades and IT infrastructure and service sharing have become a great source of growth for some companies. With the high speed of the internet, low connectivity issues, higher security standards and modularization of environments, it has become easier to implement the cloud.

There is currently no legal framework designed for the adoption on cloud computing. There are local regulations on the free flow of information between countries. There are a few questions that are raised by the law structure when the cloud is being implemented.

1. Who is the controller?
2. Which law is applicable
3. Transfer outside the country?

The future of legal policies appears uncertain and they can easily keep a lid on the growth of cloud computing Environmental IT contributes 2% of the world’s CO2 emissions in the world which is the same as the Airline industry. Other than CO2 emission IT produces 2 million tonnes of electric waste as well.

Cloud Computing is one of the ways to reduce the environmental impact of IT industry. Most of the electric waste would become obsolete with the evolution of cloud computing.

Technological Infrastructure required for Cloud Computing

The following Infrastructure is needed for Cloud computing:

1. Computing Infrastructure
2. Network Infrastructure
3. Storage Infrastructure
4. Linking Infrastructure: Linking to Network, Linking to Storage Depending upon the service required (IaaS or PaaS, or SaaS), these infrastructure elements can be owned by the client or the Cloud service provider.

As per the CIO. com article is as follows: there are seven important aspects of any cloud infrastructure:

1. Heterogeneous System Support Other than leveraging the latest software and hardware systems, the cloud infrastructure should also be compatible with the legacy and traditional systems of the organization and should also support the existing infrastructure.
2. Service Management In order to make the cloud offering successful, the cloud service should be able to provide proper resources (e. g. CPU cycle or storage, etc, guarantees, transparent metering rules of the service, and proper billing cycles. Also, the service should be able to be managed and deployed easily and quickly.
3. Dynamic Workload and Resource Management For providing truly on-demand and virtualized services, it is important for any cloud infrastructure to manage the resources and workload as per the required service level agreement to the consumer. And hence in case of peak load, prioritize resources in order to be highly efficient and performance-driven.
4. Reliability, Availability, and Security Reliability, Availability, and Security are important aspects of any service, whether it is provided through the cloud or through the traditional model.  Hence any cloud infrastructure should provide a smooth transition to the cloud service without compromising on any of these aspects of the system.
5. Integration with Data Management tools It is possible that cloud computing management solutions do not fully take the place of traditional systems and data centers. Hence the cloud infrastructure should be able to integrate with these out-of-the-box systems and data centers to provide a hassle-free service to the clients.
6. Visibility and Reporting An important feature of the cloud service is the ‘pay-as-per-use facility. Hence to fully achieve this objective, the cloud infrastructure should support detailed levels of visibility and report regarding the usage, service level agreements, compliances, system and network performances, billing schedules, etc.
7. Administrator, Developer and End User Interface Most Cloud infrastructures provide user interfaces and portals to hide the cloud service complexities from the end user and in a way also provide the ability to manage these cloud services in a simple yet comprehensive way.

Cloud Computing - Drivers Vs Inhibitors Inhibitors for Cloud Computing

A report published by IBM based on the survey conducted on 110 Cloud implementation Projects, revealed that the major concerns for implementing Cloud were issues involving security, lack of perceived value proposition by the customers, lack of standardization, and lack of funding for implementation. Some of the other factors include- complexity concerns, lack of skills, concerns about the reliability and availability of the cloud, technical immaturity, etc.

Security

Security is one of the major concerns, especially in public cloud implementations. Most customers are worried about the privacy and integrity of their data. The concerns may increase even more if the cloud is shared among other customers, who may be your competitors. Hence according to the IBM survey, most companies are interested in implementing the private cloud (instead of going for the Public Cloud).

Standardization

As Cloud Computing is an emerging technology, the processes, and implementations are not yet standardized. Each of the Cloud implementers provides their own solutions. There are no industrywide standards yet developed for Cloud computing. Hence this lack of hardware requirements, software, operating system, and processes act as an inhibitor to implementing the cloud.

Value Proposition

Implementation of the Cloud is much easier if the value it provides in terms of meeting the business requirements and cost benefits can be explained to the customer. Hence lack of tools and models that assist the customers to calculate the return on investment and value proposition poses a deterrent in cloud implementation.

Complexity and Integration

Most customers today run a host of applications including numerous legacy tools. Customers are looking for an integrated solution for all their applications from the cloud providers. Hence the doubts over integrating all solutions and also reducing complexity are one of the concerns of the customers in implementing the cloud.

According to Keane White's paper on “Cloud Computing – Clear thinking about its risks, benefits and success factors” impediments to cloud Adoption are as follows:

1. Security Privacy
2. Compliance Immaturity of vendors
3. Offerings Risk
4. Mitigation Legacy Applications
5. Drivers for Cloud Computing

Benefits

The study conducted by IBM based on 110 Cloud implementations revealed the following results:

Around 80% of clients acknowledge the benefits sharing of IT resources through highly virtualized infrastructure by implementing the cloud. Around 60% achieved ease of use through self-service with rapid delivery. Taking about public clouds specifically

Ease-of-use is 85% (as compared to 60% overall by both public and private cloud users) 68% benefit from the pay-as-you-go Charging model 63% benefit from Internet / Web-based Cloud

According to Keane White's paper on “Cloud Computing – Clear thinking about its risks, benefits and success factors” benefits of Cloud solutions are as follows:

• Cost Capability
• Scalability
• More Green Organization
• Agility Collaboration

Global cloud computing market size& Future growth

According to the report called “Sizing the Cloud” by independent research firm Forrester Research the global cloud computing market would fetch $241 billion by 2020 as compared to $40. 7 billion in 2010. It could be a possible cause of the rapidly growing of cloud computing services.

According to this report, Software-as-a-service(SaaS) would have a significant share in the total revenue. This segment would offer more opportunities for growth than any other segment. The SaaS would have the leading position in the Cloud Computing market by holding $92. 8 billion by 2016. According to IDC by 2015 nearly 24% of the software purchases would be service-enabled software. SaaS delivery will have a share of around 13. 1% of worldwide software revenue and 14. 4% for applications. Global Corporate Mobile SaaS Market will be at $1. billion in 2011 and will grow to $3. 7 billion by 2016 with a Compound annual growth rate of 25. 8% according to the latest Strategy Analytics Wireless Enterprise Strategies. It will be possible through the integration of business applications on smartphones, tablets, and other wireless devices. Deloitte has estimated that cloud-based usage will replace 2. 34% of IT spending in 2014 and further it will rise to 14. 49% in 2020.

This year would be the crucial year when workloads through cloud data centers (51%) would be higher than the traditional data centers (49%) for the first time. If this trend would be continued then cloud workloads would be dominating the traditional workload by 2015. The Compound annual growth rate is expected to be at 22% during 2010-15.

Vishnu Bhatt, head of cloud services at Infosys says that “About 60 percent of enterprise workloads will be on the cloud in five years, from the current nonexistent levels”. Four different types of market opportunities are there in India. Roughly 25 percent of the Indian market is in the “private cloud” business cause of security reasons. The other three opportunities lie in the “public cloud” as Saas, PaaS, & in Iaas. Independent software vendors (ISVs) like” Infosys, Wipro, etc. ” are the middle players who serve small clients from the big players like Microsoft and Salesforce.

The entire cost is borne by the end users, on average the ISVs make around 20-30 percent of the total revenue. Around 3000 ISVs are there in India and nearly 1000 of them have tied up with Microsoft and Salesforce. So we can say the Indian cloud market mostly depends on ISVs.

Web 2. 0 and Cloud Computing

Web 2. 0 and Cloud computing have changed the way we develop, deploy and use computer applications. The World Wide Web had seen a transition from the traditional publishing model to the new collaborative information creation model. Web 2. 0 uses the network as a platform for sharing information, creating content, & making a virtual community, in contrast to websites where users can simply read the text (passive viewing of content). Web 2. includes some of the most widely known and used applications blogs, social networking sites, YouTube, wikis, Twitter, web applications, etc. Cloud computing defines the way the applications are deployed. It offers infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS).

As per the requirement of resources, the processing power and memory get allocated in an elastic manner. The cloud is often misinterpreted as a combination of clusters and grids. However, in reality, clouds are next-generation data centers that are dynamically provisioned as per the user demand used for personalized resource collection for fulfilling specific user needs, and are accessible through “Web 2. 0” technologies. Web 2. 0 and Implications of cloud computing Web 2. 0 contributes to the front end of the business, cloud computing contributes to the back end of the business.

Combining both, web 2. 0 & cloud computing, both the front end as well as some of the back end of the business can be outsourced. The work can be performed from anywhere, teams may not be at the same location thus collaborating on the information using, web 2. 0 tools, cloud, and mobile technologies. This is the concept of virtualized organizations. Statistical Support David Osimo shows how web 2. 0 applications have grown massively. He uses the data from Technorati, Wikipedia, Myspace, Youtube, and Nielsen-Netratings for analysis.

Web 2. 0 provides collaborative functionality that helps in sharing documents and making changes on a real-time basis regardless of their locations. This along with cloud computing allows for online storage of data avoiding the use of hardware, data centers as well as software replaced by online web applications like Google documents. There can be two kinds of customers for the cloud. Those that need to scale up (achieve higher scale) at low costs. Those that want to eliminate the data center model and choose the pay-as-you-go model.

Many technologies like grid computing, peer to peer computing contribute directly to the cloud. Thus, web 2. 0 provides users the capabilities of easy sharing and accessibility of data with anyone, from anywhere. Applications like Google Docs, Facebook are managed by the cloud storing huge amounts of user data in one place and making it readily available to everyone anytime. These applications are one type of service, software as a service. Users have their own hardware in place and use their own platforms to run these cloud applications. The software resources like application servers, database servers, IDE, etc. re not required.

Other kinds of services include an application as a service where users have their own hardware in place and rent platforms from the cloud to develop customized software. Finally, infrastructure as a service means the complete virtualization of business with storage in the cloud. Hardware and computing also need not be performed at the site but takes place in the cloud. Resources like storage and computing power are not required. With the advent of web 2. 0, cloud computing got a boost as people could create and access any amount of information without having to worry about its storage.

Google is the best example. It provides many services and applications like Google Docs, spreadsheet, and YouTube all of which are cloud-based and help to share information on a real-time basis. The real-time sharing of knowledge is what is made possible through the combination of the two. Cloud is incorporated in the next version of web 2. 0 retaining the features of web 2. 0 and adding new ‘elasticity’ to the whole application or business deployment.

Porter’s 5 Forces

1. Existing competitive landscape: The Cloud computing market comprises both small and big players causing intense rivalry.
   But there is a large variety in the type of products and services required by customers and so there is room for big, small, and niche players. There are the big players providing end-to-end services like IBM, Amazon, Microsoft, etc, pure players like Salesforce and niche players like Dell-BOOMI (specializes in Cloud Integration), Rackspace (leader in managed hosting services), and small players like Zenith.
2. Suppliers’ bargaining power: Since there is a huge potential for demand from SMEs and a few big players like Google, Amazon, and IBM, the bargaining power of suppliers is quite high. Bargaining power could vary according to the type of service provided. E. g. In the case of an IaaS service, switching costs for customers might not be very high since the offering is largely undifferentiated, but the same cannot be said for a SaaS offering. Also, there is no clear rule of law for the regulation of the data stored on the cloud. Data stored on the cloud could be subject to less stringent action by the regulatory authority than that stored on a personal computer. This could make the switching costs for the customers quite high.
3. Buyer’s bargaining power: The bargaining power of buyers can be said to be dependent on the size of the buyer’s business. In the case of SMEs, the bargaining power can be said to be low since many of the suppliers in the cloud computing market are large corporations. Whereas the buyer’s bargaining power can substantially dominate the supplier if the buyer itself is a large organization. The bargaining power of SMEs can increase if with the standardization of the services which will be facilitated by establishing proper regulatory compliances.
4. The threat of new entrants: With the huge potential market among the SMEs, it is expected that many new entrants from the SME segment itself will enter the Cloud computing market with low-cost offerings. This expectation lies in the fact of low fixed costs, relatively lower costs of developing a product, and low barriers to entry.
5. The threat of substitutes: Open source computing can be considered a substitute for Cloud computing services. But it can be expected that SMEs will prefer Cloud computing over open source due to higher switching costs in the case of open source and lower costs of cloud computing services.

References Online:

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