BBIM510 - Business Innovation in Digital Economies

Cloud computing

Lecturer: Arjun Shivraj

Cloud computing

Created by Sam Johnston using OminGroup's OmniGraffle and Inkscape (includes Computer.svg by Sasa Stefanovic)

Defining the cloud

• “Cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g. networks, servers, storage, applications and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.” (The US National Institute of Standards and Technologies)

• Cloud computing is mainly a new mean of delivering IT resources, enabling organisations to leverage their innovation and competitive advantage, at the same time that they cut costs and gain agility for the business.

Characteristics

National Institute of Standards and Technology: Defining Cloud Computing (2011)

Characteristics• On-demand self-service. A consumer can unilaterally provision computing capabilities,

such as server time and network storage, as needed automatically without requiring human interaction with each service provider.

• Broad network access. Capabilities are available over the network and accessed through standard mechanisms that promote use by heterogeneous thin or thick client platforms (e.g., mobile phones, tablets, laptops, and workstations).

• Resource pooling. The provider's computing resources are pooled to serve multiple consumers using a multi-tenant model, with different physical and virtual resources dynamically assigned and reassigned according to consumer demand. 

• Rapid elasticity. Capabilities can be elastically provisioned and released, in some cases automatically, to scale rapidly outward and inward commensurate with demand. To the consumer, the capabilities available for provisioning often appear unlimited and can be appropriated in any quantity at any time.

• Measured service. Cloud systems automatically control and optimize resource use by leveraging a metering capability at some level of abstraction appropriate to the type of service (e.g., storage, processing, bandwidth, and active user accounts). Resource usage can be monitored, controlled, and reported, providing transparency for both the provider and consumer of the utilized service.

National Institute of Standards and Technology: Defining Cloud Computing (2011)

Thin client (1990s)

Thin client (2014)

Cloud services• Information aggregation• Supply Chain Services• Financial, accounting and insurance services• eRetail• Document management• Government services• Services integration• CRM and social CRM• Service management and brokerage• ID management• Business intelligence and analytics• Personalisation• Social media platforms

Examples on cloud services• Search tools: Google, Yahoo! Technorati (http://technorati.com/)• Create and Shared documents, collaborate (Google Documents, Microsoft Office

365, Dropbox, Wiki tools, IBM LotusLive)• Share calendars (major suppliers)• Email management: today around 4%, but to be 50% by 2020 (Gartner, report

September 2011): Google, Microsoft• Project management (Microsoft Office 365 Share Point; Manymoon, Basecamp)

(learn: Project in a Box); http://www.attask.com/ • VOIP (Skype) (peer-to-peer architecture)• CRM Salesforce: http://www.salesforce.com/uk/?ir=1; and Sage

http://www.sage.com/ourbusiness/newsroom/newsfromourregionalbusinesses/view/1667

• Business Process Management (IBM Blueworks Live)• Cloud service security (major vendors)• iCloud: storage of documents, photos and songs in the cloud; access to apps in

different devices (other companies are doing this in the cloud, start-ups, but working with open platforms thus any sort of programme or file could be saved in ‘personal’ clouds; better because it does not lock the user in particular vendors).

• Content management: http://box.net/• Business intelligence: http://www.cloudera.com/ • Platforms: Data base and business intelligence: Azure

http://www.microsoft.com/windowsazure/; EC2 (Amazon: http://aws.amazon.com/ec2/) and Force.com (http://www.force.com/).

Cloud categories • Infrastructure as a service (IaaS): Network, computing and

storage resources. The consumer does not control the infrastructure, but operating systems, storage, applications and network components (such as firewalls). Example: virtual machines at Google and Amazon.

• Platform as a service (PaaS): Development environment, offering programme languages (e.g. Java; Force.com platform which supports the development of applications related to Sales-force.com) and tools for the development of applications.

• Software as a Service (SaaS): applications used by individuals and organizations (social media, ERP, SCM, CRM, Analytics, Business Intelligence etc.).

Cloud categories

Making sense of Cloud Computing Infrastructure as a Service

• http://www.youtube.com/watch?v=MAkrsxpREF8 (it is a good video, but observe it is produced by a vendor)

SalesForce CRMSoftware/service as a Service

• http://www.youtube.com/watch?v=r6hxqg3PgRQ (vendor’s video)

Cloud types

Cloud types • Public cloud: Public clouds are intended to be used by multiple parties at

once and are designed to provide maximum value for money through a standardised and hi-scale approach. Many public clouds operate internationally for scale or geographic resilience, but this gives rise to some concerns for some businesses over where their data is being stored at any given time.

• Private cloud: Private clouds are intended to be restricted to a single customer or trusted community. These are popular among organisations looking to access the benefits of cloud computing but retain higher control and flexibility of configuration compared with a public cloud. Private clouds can be run inside a company data centre or hosted by a third party. This is an ideal solution where data sovereignty is a key issue.

• Hybrid cloud: A hybrid cloud, as the name infers, is a cloud capability that joins either on-premise infrastructure to private or public clouds, or clouds to each other, to provide a customer with a bespoke environment to meet their specific operational needs.

http://www.guardian.co.uk/cloud-technology/cloud-computing-terms-jargon-buster

Public cloud vs. Conventional Data Center

Armbrust et al. (2010: 53)

Data Centres

• A datacentre is a facility used to store computer systems and servers which store data and help in telecommunications

• Type of Data Centres– Tier 1 –

Non- redundant distribution – Uptime 99.671– Tier 2

Redundant Site infrastructure – Uptime 99.741%

• Tier 3

Multiple independent distribution paths serving the IT equipment

Dual powered and fully compatible with topology of site’s architecture

Uptime – 99.982%• Tier 4

– All the cooling equipment dual powered, including chillers and heating equipment

– Uptime – 99.995%

Fostering competitiveness and business innovation

• Increase operational efficiency, create new business models, and establish whole new businesses.

• Having a service infrastructure in the cloud means organisations need less resources to innovate and start up new projects.

• Instead of investing upfront on hardware, and human resources, companies may build their business platform using mainly cloud resources, relying on the capacity of the cloud to offer scalability and flexibility (pay-as-you-use).

• Companies may combine different tools as they need, as far as the communication between platforms is possible.

• Companies may broaden their portfolio of products and services as they may answer more quickly to the market reaction (less time in market research).

Support for innovation agenda

Key advantages 1– Costs is main driver– Capital (fix cost versus variable costs) (pay-as you-go

model, e.g. utility computing): reduce the barrier to entry in new markets, and reduce the risk of innovating

– Agility (save time!)• Ex.: NYT converted 11 million articles to PDF in 24

hours for less than $ 300 using Amazon cloud, meanwhile it would need 7 weeks using own resources (Sun Microsystems 2009).

– Access (local, mobile and remote access): network effects (all benefits of being connected to standardised networks, communicating and collaborating with more companies and professionals)

Key advantages 2– Usability– Scalability (elasticity)– Flexibility– Security (state-of-art encryption of file systems;

resources to pay for redundant systems)– Collaboration and networking– Training and learning– Focus on business side not on IT– Convergence of technologies, platforms and services

Key shortcomings 1

• Technical problems– Bandwidth (latency x real time): service depends on good and

reliable network connection– Efficiency and reliability of service provider: outage and

discontinuity of services – Risk management (mitigation) and business continuity

(contingency plans): disaster/recovery of data– Communication standards, interoperability and integration – Security: Hacker attacks to cloud providers– Cloud sprawl (unmanage spread of public cloud services, which

may lead to increasing costs, security issues and loss of control)– Auditability– New skills and capabilities

Key shortcomings 2• Contractual problems

– Metering (hidden and unexpected costs) (testbed providers may help providing platforms for experimentation of large projects)

– Data ownership, transferability/portability (lock-in positions)

– Service Level Agreement (SLA): verify level of security offered by provider; verify where data is stored and where the backup is stored; verify the level of liability (competition is improving the quality of the SLA and the levels of liability but this is still a risky area)

Key shortcomings 3• Legal problems

– Privacy– Compliance and liabilities (legal constraints for offshoring of

data): the Data Protection Act in the UK covers data sovereignty; the European Union’s Data Privacy Directive is valid in Europe, including UK; in the US, the Patriotic Act is the relevant legal framework.

 • Managerial problems

– Trust and reputation: credibility of suppliers; it is difficult to evaluate the quality of suppliers, especially when they are new providers (look for those with ISO 27000 series)

– Company executives may wish keep control of budget (cloud shift power in organisations)

Contract ambiguity is a big concern• Just over half (52 per cent) of end user organisations currently using the

Cloud claim to have negotiated the legal terms of their contract with their Cloud Service Provider.

• A third (32 per cent) stated that their CSP can impose changes to their contract by posting a new version online. This figure rose to 50 per cent amongst resellers.

• Just under half – 46 per cent – of end user contracts are renewed automatically. This becomes a greater percentage the smaller the organisation. The larger the organisation or indeed if it is in the public sector, the greater the chance these are reviewed.

• End users are looking for far greater assurances in their contracts with CSPs than traditional service level agreements. This is more often about data and its location, security and ultimate ownership. When contracting for a Cloud Service almost eight in ten cloud users are looking beyond an SLA for comfort in the service to be provided.

(Source: DMH Stallard, 2011)

The perception of risks

Coping with disaster

• Disaster recovery planning: Devises plans for restoration of disrupted services

• Business continuity planning: Focuses on restoring business operations after disaster

– Both types of plans needed to identify firm’s most critical systems and business processes

• Business impact analysis to determine impact of an outage

• Management must determine – Maximum time systems can be down

– Which systems must be restored first

Relevant aspects for innovation• It is a combination of an IT infrastructure, which provides

new forms of operations, with business process innovation (the way we do things in the organisation) and with market innovation (the sort of products and services the company is able to offer to the market).

• In this environment, collaboration becomes much more important and throughout the value chain, as well the speed of change.

• Important antecedents: the capacity the sector has of accepting innovation; adopters attributes and role in the industry; organisation readiness for innovation; how easy is the innovation to assimilate; quality of the organisation implementation process; legacy of previous IT investments; institutional and cultural aspects.

Amazon Webstore

• http://www.youtube.com/watch?v=1Esdw2cQFKI

Case: accounting

• http://www.youtube.com/watch?v=G6E1WkMgo50 (observe it is also a vendor video)

Video on cloud computing• Nicholas Carr Big Switch

– http://www.youtube.com/watch?v=Tt91barP0GE&feature=results_main

• Nicholas Carr: Building a bridge to the cloud - Uptime Institute Symposium Speaker Series (2012)

– http://www.youtube.com/watch?v=uoEP4qT4wDM

Full video:

– http://www.youtube.com/watch?v=lZf39fMl8OY

Vendors videos on cloud computing– Microsoft: http://www.youtube.com/watch?v=I-jmkkYiQac– Intel: http://www.youtube.com/watch?v=c7pVTNqtdqg&feature=related– IBM: http://www.youtube.com/watch?v=2Bbr4LBv1QI

References• http://www.cloudtweaks.com/2011/07/top-110-cloud-computing-enablers-gaining-mind-share-in-

2q-2011/• Armbrust, M. et. al (2010). A view of cloud computing. Communications of ACM, 53(4): pp.50-58.• Campbell-Kelly, M. (2009). Historical Reflections: The rise, fall and resurrection of Software as a

Service. Communications of ACM, 52(5): 28-30.• Laudon, K.C. and Laudon, J.P. (2010, 2012). Management Information Systems, New Jersey,

Prentice-Hall.• LSE Report (2011). Cloud and the Future of Business: From Costs to Innovation. Document

elaborated by the London School of Economics and Accenture. http://www2.lse.ac.uk/management/news-and-events/news/outsourcingunit-cloud.aspx

• Mulholland, A., Pyke, J., Fingar, P. (2010). Enterprise Cloud Computing: A Strategy Guide for Business and Technology Leaders. Tampa, Florida: Meghan-Kiffer Press.

• Fingar, P. (2009). Dot.Cloud. The 21st Century Business Platform. Meghan-Kiffer Press.• Cloud Circle (2011). 1st Industry Trends Report. http://www.thecloudcircle.com/video/1st-cloud-

circle-industry-trends-report• Carr, N. (2009). The Big Switch. London, New York: W.W. Norton & Company.• Guardian, 17th October 2011. Special report on Cloud Computing. First link:

http://www.guardian.co.uk/cloud-technology/clud-computing-business-facebook-uk-economy• DMH Stallard (2011). Contracting Cloud Services: A Guide to Best Practice. Cloud UK Paper 3.

Whitepaper Cloud Industry Forum. http://www.dmhstallard.com/cms/document/CIF_Paper_Three.pdf

• Source: Gawer, A., 2009. Platform dynamics and strategies: from products to services. In A. Gawer, ed. Platform, Markets and Innovation. Cheltenham: Edward Elgar, pp. 45-76.

Next seminar

Next seminar

• Please refer to last week’s “Lecture and Seminar 6: E-Commerce and Mobile Platforms” Presentation Slides

• You should by now have formed groups and working on the paper and the Business Models Canvas for your presentation of the analysis of eCommerce Business Models as instructed