Competitive advantage

As I mentioned at the beginning of this chapter, cloud computing first rose to prominence in the IT industry in 2008, at
least with suppliers and the media, just as a financial crisis stunned the world, and I wrote about this coincidence at the time in my blog (Williams, 2008). Then in a later post I speculated on how cloud computing could give smaller companies a competitive advantage in an uncertain financial landscape:

New startups will not find investment easy to find so they will, by necessity, keep costs down and avoid capital expenditure
where possible. These new companies will naturally use pay-per-use, cloud computing technologies, and their staff will more often than not be contractors, working mostly from home. With their established competitors losing money and people, clever startups have a great opportunity to gain market share quickly

As for established companies that were around in the boom years before the credit crunch, they will have to adapt or die,and that means mimicking the business models of startups, writing off old investments and keeping their best people, even as contractors. (Williams, 2009)

Moreover, as was mentioned earlier in this chapter, enterpriseclass businesses are constrained by corporate governance
and internal policies so public clouds are often not a viable option; but smaller businesses usually have no such   strictions. Of course small to medium-sized businesses and enterprises are generally not direct competitors, but if there
are enough new entrants of the former variety into an industry where IT-enabled systems and innovation count, they can eat significantly into an enterprise’s market share. And with the capability afforded by many cloud computing  latforms to quickly develop scalable and feature-rich, customerfocused web applications (and integrated online workflow processes) without having to worry about IT infrastructure, there is great potential for market disruption.

Even in more prosperous times it pays for businesses to be agile, to be able to respond quickly to changes in market conditions and technological developments. The flexibility and scalability that cloud computing affords levels the playing field for businesses of different sizes. Small businesses can now afford enterprise-class IT systems so big businesses had better watch out!

Environmental benefits

Public cloud computing is often touted as an environmentally friendly or ‘green’ alternative to businesses owning their own IT infrastructures, but there are arguments for and against this claim. Sharing resources and commuting less must be a good thing, but if the enhanced technology that is available in public clouds causes businesses to use more resources together than the combined total they would have used apart then how can they be green?

Sharing resources

Some arguments for cloud computing being an energyefficient IT solution are:

  • customers share a pool of IT resources;
  • suppliers are using bigger, more modern and energyefficient data centres in purpose-built ‘smart’ buildings;
  • increased utilization of servers due to server virtualization – vendors claim that typical server utilization rates can rise from between 5 and 15 per cent to between 60 and 80 per cent (VMWare, 2010);
  • the financial incentives for cloud providers to use less energy;
  • the increasing availability of follow-the-sun and follow-the-moon clouds so virtual servers and applications move between linked data centres across time zones, making more use of the combined computing resources and even taking account of the availability of energy in different geographical locations at certain times of day.

Some arguments against cloud computing technologies being green are:

  • more internet traffic;
  •  increased data replication within public clouds;
  •  high demand created by new services.

According to a March 2010 Greenpeace report, Make IT Green: Cloud Computing and its Contribution to Climate Change, the electricity consumed by cloud computing globally will increase from 623 billion kilowatt hours in 2007 to 1,964 billion kWh by 2020 (Greenpeace, 2010).

Now, the clock cannot be turned back, the cloud computing ‘genie’ cannot go back into the bottle. We have to accept that internet usage will increase along with the wider adoption of cloud computing services, but the rise of social networking websites has made this an inevitable trend anyway. All we can do is to make the technology we use to provide web-based services as green as possible, and cloud computing providers can certainly help. Along with many leading IT firms, Google and Microsoft are members of the Climate Savers Computing Initiative (, which is a nonprofit group ‘dedicated to reducing the energy consumption
of computers and reducing the environmental impact of new and emerging technologies’, so let us hope they can rise to
the significant challenge that cloud computing represents.

Reduced travel

Naturally, cloud computing means that we no longer have to travel to an office to do office work, nor do our system
administrators have to go to data centres to install new servers. It is now much easier to work from home and many of us do already – in the UK, for example, at least 8 per cent of the workforce in 2005 used computers and  elecommunications to work mainly from home (Ruiz and Walling, 2005). If global warming is a reality, as most of the scientists of our time agree, then I would like to think that cloud computing or ‘cloud commuting’ will help to make most business travel unnecessary and reduce significantly the impact of business activities on the environment, but only time will tell. According to Viviane Reading, EU Commissioner for Information Society and Media: ‘If businesses in Europe were to replace only 20 per cent of all business trips by video conferencing, we could save more than 22 million tons of CO2 per year’ (Donaghue, 2009).

tons of CO2 per year’ (Donaghue, 2009). I first wrote about ‘cloud computing commuters’ in my blog post of 19 February 2009, concluding it with speculation about their possible effect on cities:

I can predict with more confidence that, although there will always be value in face-to-face meetings, there will be far lesstime, money and energy wasted on commuting in the decade to come. London’s workforce will consist increasingly ofvirtual commuters, doing ever more complex business in the cloud. Whether London itself, or cities in general, will still be as important in the business world is another matter, and it may all depend on those cloud computing commuters.(Williams, 2009)


Operational features and benefits

What differences can cloud computing make to the day-today running of your business? Firstly it can make much of IT someone else’s problem so you can focus on core business, and secondly it affords ‘business beyond buildings’.

Someone else’s problem

The argument for using third-party services in general is to offload non-core business activities to experts in the relevant fields. If you are busy doing what your business does best then why waste time on everyday tasks like bookkeeping or cleaning your windows when you can pay someone else to do it better and faster than you? The same goes for IT system administration, which is often a headache for businesses, especially small businesses with limited resources, but you can save precious time and avoid worries by moving some or all of your activities into a public cloud.

For example, do you really need to manage your own Microsoft Exchange e-mail server and deal with spam, viruses,
databases and back-up systems internally? Do you have a disaster recovery plan should your systems fail? Do your
internal IT systems depend on one or more internal staff or external IT consultants to keep them up and running?

Here is a list of common IT administration tasks you can avoid having to do yourself by using the appropriate cloud
computing services:

  • buying, installing, supporting and updating desktop business software on specific PCs;
  • tracking hardware and software assets;
  • backing up data off-site automatically and redundantly;
  • setting up virtual private networks;
  • securing web applications and patching web servers;
  • buying and configuring server hardware that would almost certainly be underutilized;
  • buying and configuring high-specification PCs when a web browser is usually all you need.

And with very little technical knowledge cloud computing enables you to perform the following tasks yourself:

  • set up new user accounts for e-mail and other applications in the cloud;
  • assign users to one or more role-based user groups and limit their access to IT systems according to their role;
  • restore deleted or archived files and folders from back-ups;
  • create or destroy a new virtual server in minutes;
  • temporarily increase the performance of a web server or expand a cluster of web servers.

Business beyond buildings

Cloud computing frees you from common IT administrative tasks, but what can your business do with cloud computing
technologies? Depending on any restrictions imposed by corporate governance and your organization’s internal (operational) controls, here are some examples to consider:

  • access your data and applications from any internet connection, regardless of the device you are using, so you can work from home or on the move in exactly the same way as you would in your office;
  • avoid storing confidential business data on laptops, PCs and other devices that could be stolen;
  • share documents and collaborate more easily on documents and projects with colleagues, partners and customers;
  • add pre-integrated third-party applications from within your cloud or connect to applications or data sources in other clouds (LinkedIn or Facebook for example) using standard web service protocols;
  • use visual web-based development tools to quickly create new web applications and document workflows that make more of your business data and speed up processes;
  • run highly intensive data processing tasks on any number of duplicate virtual servers and then delete the server instances when you have your results.


Technological benefits

Making the economic case for cloud computing is not simple because you need to compare accurately the total cost of
owning your current systems (if any) with replacements in the cloud, and be able to predict confidently the expected return
on investment (if any); but the technological benefits are clearer. Public clouds afford on-demand access to a pool of rapidly scalable computing resources from anywhere.

Rapid scalability on demand

Two of the five essential characteristics of cloud computing are on-demand self-service and rapid  elasticity, which speed up everything to do with IT provisioning. You can quickly provide new employees (temporary or permanent) with user accounts for your Software as a Service applications, and they can use any old personal computer to access it. You can develop new web-based business software applications using Platform as a Service without worrying about servers, firewalls, security or operating systems. And you can use Infrastructure as a Service to gain temporary access to seemingly unlimited computing power and data storage when you need it for as long as you need it.

Access anywhere

Because they are web-based, your access to cloud computing services does not depend on the computer you are using – all you need is a web browser; and most SaaS solutions now support popular hand-held computing devices, too, through native browsers or downloadable applications. See Figure 2.1 for an example of the iPhone application in action.

CRM iPhone application

Future proof

Assuming your cloud computing provider continues as a going concern then the services they provide will be effectively future proof. With Software as a Service (SaaS) and Platform as a Service (PaaS) you always get the latest software –   updates are automatic. There are no costs for upgrading to the next version of your favourite application or  development platform and it is in your supplier’s interest to ensure that their systems improve and remain competitive. Moreover, because the technologies are web-based they use standard information transfer protocols, facilitating  connections to other web-based software. These benefits do not apply to Infrastructure as a Service (IaaS) where any business  software applications are managed by you; but your system control panels and the underlying infrastructure will be kept up-to-date for you.


Financial benefits

The financial benefits of cloud computing are most clear cut for public clouds, where computing resources are acquired
as a utility service on demand from external providers, as described in Chapter 1. This business model means that IT can be purchased on a pay-per-use basis and treated as operational expenditure, with the reduced administration burden that comes with not having any server hardware to look after.

Pay-per-use IT

The elastic and scalable nature of cloud computing supports the unpredictable cycles of expansion and contraction that
businesses go through. Public cloud customers share the cost of a multi-tenanted computing infrastructure with other customers, making their own consumption-based costs and subscription-based costs affordable and variable. Cost models vary between the three main service models: Software as a Service (SaaS), Infrastructure as a Service (IaaS) and Platform as a Service (PaaS), but the principle is the same. Your SaaS costs depend on your user numbers; your PaaS costs increase in proportion to the usage and size of the applications you develop; and your IaaS costs cover your use of servers and storage Long-term cost savings are less likely for large enterprises as they have their own economies of scale, but many small to medium-sized businesses can benefit financially from cloud computing even in the long term.

Operational expenditure

When your business buys computing hardware it is capital expenditure, which increases your tax burden in the short
term. Cloud computing purchases, however, are considered operational expenditure, because you are renting resources
and accumulate no assets, so the costs can be subtracted directly from profits – an important consideration for many businesses. Moreover, building your own IT infrastructure involves significant up-front costs on hardware and software,
driven by long-term planning based on forecasts of business growth and market trends, whereas a cloud computing system grows with you and, if necessary, shrinks with you. With cloud computing, hardware assets and software licences
are not left unused when you downsize your business.

Reduced IT management costs

If you manage your own IT infrastructure or deploy business software applications to your employees’ desktops there is an administration overhead, and this is a significant factor in the total cost of ownership. Assets have to be bought and managed, users supported and technical people employed to administrate systems and hardware. Cloud computing can reduce this overhead by offloading the problems of procuring, installing, managing and maintaining hardware (through Infrastructure as a Service); server operating systems (through Platform as a Service); and application deployment (through Software as a Service).

These overhead costs are less of an issue for organizations with large IT departments, but small to medium-sized businesses with fewer resources can certainly benefit.

Benefits of cloud computing

I see, therefore, great potential for cloud computing applications to help Europe’s businesses into the true ICT age, at lower costs compared to traditional IT company solutions.

Viviane Reding, EU Commissioner for Information Society and Media, November 2009

Towards the end of the first decade of the 21st century there was a worldwide financial crisis that saw businesses everywhere searching for ways to cut costs. At the same time feature-rich ‘Web 2.0’ technologies such as social networking
websites, accessible from anywhere on different kinds of devices – including the ubiquitous iPhone from Apple – were gaining in popularity at an incredible rate, thanks in no small part to the high availability and affordability of broadband internet and mobile internet connections. So Information Technology was becoming more complex and businesses, along with the general public, were becoming ever more dependent on it; but added complexity and functionality are usually accompanied by added costs, which was not a great message for financial directors in a recession. The time was right for cloud computing, which offers some businesses considerable financial benefits, technological benefits and operational benefits, and can provide an opportunity for competitive advantage over others. As for the potential environmental benefits of cloud computing, they are debatable, as we shall see.

Quick technology tips

The particular cloud computing technologies you choose (if any) depend on your working practices, your business size, your current IT systems and the skills of your internal staff. All these points will be covered in later chapters, but

Non-cloud and public cloud

Non-cloud and public cloud

Non-cloud and public cloud

here are some quick technology tips to bear in mind as you proceed through the book:

  • If you want off-the-shelf software that you can access from anywhere then choose Software as a Service; but look for solutions with comprehensive web services interfaces to facilitate integration with other systems.
  • If you want to customize your software choose Platform as a Service over SaaS; but choose the solution that best matches your in-house skills, beware vendor lock-in, and consider choosing a platform that has a wide range of ready-made applications that you can plug in to yours.
  • If you want complete control over your application servers use Infrastructure as a Service; but consider the portability of your virtual machines as you may wish to move them between clouds at some point.
  • If you do not want your data to be hosted in a public cloud then use private cloud technologies; but choose an internal cloud management system that supports a hybrid cloud configuration in case you ever need to manually or dynamically increase your available computing capacity.

Twelve adoption scenarios

Businesses vary greatly in size, sector and maturity, and they can have very different IT requirements. Chapter 4 provides
a selection of real-life case studies for Software, Platform and Infrastructure as a Service (SaaS, PaaS and IaaS); but Table 1.1 below lists common adoption scenarios where a choice could be made between cloud computing solutions and non-cloud solutions. The scenarios are wideranging,  but they all serve to demonstrate the relative convenience of IT solutions in public clouds where capital investment in hardware and software by the customer is not necessary.

When is a cloud not a cloud?

If there is some debate about the four deployment models then there is general agreement among IT professionals, if not marketing executives, that the following situations do not constitute cloud computing:

  • renting dedicated server hardware in a data centre for a single task, such as hosting a website, even if it is on a subscription basis;
  • server virtualization (running multiple virtual computers on a single server) in itself, unless servers can be deployed and destroyed in minutes by the consumer themselves rather than the provider;
  • connecting to your home PC or office PC from anywhere using remote desktop or VPN (Virtual Private Network) technology.

Four deployment models

Many industry experts dispute the validity of the four deployment models in the NIST definition framework, which are discussed below; that is, public clouds, community clouds, private clouds and hybrid clouds. For them only public clouds are true clouds, but when the user experience and functional capabilities are the same, and there is the possibility of  moving seamlessly across cloud boundaries, the distinctions become, well, cloudy.

Public clouds

Public cloud computing services are provided off-premise by third-party providers to the general public and the
computing resources are shared with the provider’s other customers. This is pure cloud computing and there is no debate on this one.

Community clouds

Community clouds are used by distinct groups (or ‘communities’) of organizations that have shared concerns such as compliance or security considerations, and the computing infrastructures may be provided by internal or third-party
suppliers. The communities benefit from public cloud capabilities but they also know who their neighbours are so they
have fewer fears about security and data protection.

Private clouds

Many large organizations prefer, or are legally obligated, to keep their servers, software and data within their own data centres; and private clouds enable them to achieve some of the efficiencies of cloud computing while taking responsibility for the security of their own data. By implementing cloud computing technologies behind their firewall,
enterprises can enable pooling and sharing of computing resources across different applications, departments or business units. Unlike the pay-as-you-go model of public clouds, however, private clouds require significant up-front
development costs, data centre costs, ongoing maintenance, hardware, software and internal expertise.

Hybrid clouds

Many enterprises take the ‘hybrid cloud’ approach by using public clouds for general computing while customer data is
kept within a private cloud, community cloud or a more traditional IT infrastructure. The use of ‘virtual private cloud’
technology enables enterprises to connect their existing infrastructure to a set of isolated computing resources in
a public cloud infrastructure and to extend their existing internal IT management capabilities – such as security services, firewalls, and intrusion detection systems – to include their external virtual resources. This option is attractive to businesses that have invested in their own IT infrastructure or have data protection responsibilities, but would like to
take advantage of the scalability and flexibility that cloud computing affords.