Cloud Computing

What is Cloud Computing?

At its most basic level, the "cloud" is simply the Internet, or the vast array of servers around the world that comprise it. When people say a digital document is stored, or a digital task is being performed in the cloud, they mean that the file or application lives on a server you access over an Internet connection, via a Web browser or app, rather than on "local" devices, like your computer or smartphone. (Walter S. Mossberg, 2010)

Cloud computing means “Internet Computing” which is a computing term or metaphor that evolved in the late 2000s, based on utility and consumption of computer resources. The Internet is commonly visualized as clouds; hence the term “cloud computing” for computation done through the Internet. With Cloud computing, users can access database resources via the Internet from anywhere, for as long as they need, without worrying about any maintenance or management of actual resources.
There are 3 types of Cloud Computing in the market:

1) SaaS (Software as a service)

Cloud-based applications or software as a service to run on distant computers “in the cloud” that are owned and operated by others and that connect to users’ computers via the Internet and, usually a web browser.

2)PaaS (Platform as a service)

It provides a cloud-based environment with everything required to support the complete lifecycle of building and delivering web based applications without the cost and complexity of buying and managing the underlying hardware, software, provisioning and hosting.

3) IaaS (Infrastructure as a service)

It provides companies with computing resources including servers, networking, storage, and data center space on a pay-per-use basis.

Cloud Computing Boost the IT infrastructure?

In the past, Company needs to equip traditional IT infrastructure e.g. servers, hardware, licenses and also to install software so to run its business. This is talking about huge investment of a company especially small and medium company.

Recent years, company starts to shift from traditional server-centric approach to a service centric approach because of Cloud Computing developed.

There are several deployment models of Cloud Computing for the company to select so as to fit their business needs. By the flexibility advantage, it’s sooner to be adopted by the market and influence the overall IT industry:

Cloud Computing concept delivers a well-defined set of services, which are perceived by the companies to have infinite capacity, continuous availability, increased agility and improved cost efficiency.

Comparison of Cloud Deployment Models:

How Cloud Computing Influencing the IT Industry

1) Traditional IT jobs are being changed. New skills and specialties are increasingly demanded.

Most of the jobs are outsourced or provided by the cloud providers, most likely the company is not required its IT staff to necessary know how to build the serve, maintain the system, etc.

2) Change on the IT infrastructure.

More applications are being moved to private or public clouds. Software developments and companies have to find ways to create and delivery applications to its target customers.

3) Need for IT support staff is reduced.

4) The effort to maintain the data is diminished.
    
Moving the data to cloud means the company doesn’t require managing the data in house as it already outsourced to the cloud provider. However, it will have another issue that most of the companies are concerning – Security.

5) Security

Security is one of a big concern of Cloud Computing. The Cloud Computing providers their experts on managing the data to their customers.

Cloud Computing Companies in the market

Amazon – Per Jon Brodkin (2009), Amazon is providing web-based computing, offering pay-as-you-go access to virtual servers and data storage space. In addition to these offerings, it offers SimpleDB, CloudFront and the Simple Queue Service to the market. By launching the Elastic Compute Cloud in 2006, Amazon has become almost synonymous with “cloud computing”.

Google – Google started to release App as part of the company business than consumer search market. It mains focus is crawling, the Web and delivering advertising-supported search result, it provides software-as-a-service applications for business is hastening the industry’s move from packaged ssoftware to Web-hosted service, and App Engine provides a credible alternative in the PaaS market.

Microsoft – Microsoft’s is the first big foray into the cloud as it develops the operating system for home and work computers. But with all forms of application moving to the web-hosted model, it make Windows available over the cloud e.g. Exchange, Sharepoint, Office Communications, etc.

Industry Profile Report

Cloud computing offers tangible benefits to the real world businesses that need to meet the demands and take advantage of the opportunities. As the world grows smarter, cloud computing offers ways the organizations can work more efficiently and productively, simultaneously saving money and enhancing the business and IT operations. It helps the companies in cutting down the operating costs compared to tradition IT approach.

As you can see on above figure, there has been a drastic increase on cloud services. Global spending on cloud services is expected to grow 18.6% in 2012 to $110.3B, achieving a compound annual growth rate of 17.7% from 2011 through 2016. The total market is expected to grow from $76.9B in 2010 to $210B in 2016.

IBM is one of the key service providers of the cloud computing technology and it has put a lot of effort in improving the platform. The fiscal year 2014 cloud revenue was $7 Billion and it was a 60% increase from fiscal year 2013. IBM predicts that by 2016, there will be an 11% shift of IT budget away from traditional in-house IT delivery, toward various versions of cloud computing as a new delivery model. By 2018, more than 60% of enterprises will have at least half of their infrastructure on cloud-based platforms.
Opportunities of Cloud Computing

1. Globalizing the workforce that worldwide employees can access the cloud provided they have an internet connection. Improved flexibility in case of sudden change in processes.

2. Reduced spending on technology infrastructure by minimizing the licensing of new software and the need of IT staff.

3. Easy partnering with other organizations in exchanging data and information.

Pitfalls of Cloud Computing

1. Possible downtime without internet connection

Cloud computing is totally dependent on the internet connection. When the internet connection or network is down, cloud services are down as well. If the connection runs slow, then the services will also run slow and be delayed. The operations may become idle if one does not have a backup or alternative internet connection. Even if cloud computing providers take precautions to ensure that the network has a great uptime, the risk always remains.

2. Security and privacy issues

Although security in the cloud is generally good and reliable, there are still serious security concerns that hackers can attack and breach the system. As the servers are interconnected in the cloud, hackers can breach one system and then make their way into other linked systems. Privacy is another area of concern. If a user can log in from any location to access data and applications, it’s possible the user’s privacy could be compromised. There are still chances they private data are revealed.

3. Cost

Analyzing cost and savings before implementing Cloud computing is always an important task. For a small business enterprise a cloud computing application may appear to be a lot cheaper than installing a particular software solution. On the other hand, it may appear expensive to set up cloud computing on a small-scale basis. The company needs to check if the cloud application has all the features that they intended to have and if not, they need to evaluate how important the missing features are to them. Also if a company has a specific IT needs, they may be better off with custom-designed software than general cloud based application software. It is also important to analyze the plan and fee structure of the cloud computing services being used.

Factors that drive technology leaders to manage Cloud Computing

1. Add on service

Knowing that Cloud system needs to maintain regularly and improve at certain of time. In addition, companies might want the Cloud or the services within it to be re-designed to fit their needs. Cloud suppliers can keep offering all these services to their customers once they purchased the package. Unlike traditional IT infrastructure and software, the suppliers can keep generating business in this way.

2. Operational and development advantages

Cloud applications are true cloud applications are based on multi-tenancy. All customers make use of the same configuration. Instead of installing and maintaining a server or separate configuration for each customer, all customers use the same one. Patches and bug fixes only need to be applied once, and upgrading to a new release immediately moves all customers to the latest version eliminating the substantial cost of needing to maintain old releases. On the development side the advantage is the number of platforms. One no longer needs to build and maintain a Windows, Unix and Mainframe version, rather, offers only a cloud version. There is no need to maintain many versions, releases, and platforms and that makes an
enormous cost difference to the supplier.

3. Flexibility

All of the Cloud customers do not want to use an identical system. They will want to be able to customize the service to their specific needs. Early cloud application suppliers have invested substantially in building a specific new development platform to do this. Such a platform typically includes a menu system, a user rights administration system, a reporting system and many more items that traditional software suppliers had to build before they could start developing their core functionality. Several of these early cloud providers took their development platform and offered it to other cloud providers as a platform or as a service to generate business.

Characteristics of Cloud Computing

The market for Cloud computing is booming for the past a few years. It is become a business solution for a wide range of fields, from government to financial sector. There are some key structure characteristics of the technology in application.

1.      As a business solution

One of the interest characteristic of Cloud computing lies in its product nature as business solution, which means as a product in market it won’t be affected by economic downturn. As the Vice President, High Performance On Demand Solutions, IBM, Willy Chiu, admitted,“No matter how compelling the economics are, cloud strategies can’t run counter to business strategies” (Miller, 2008)

IBM has been expanding the scope of cloud computing service from verification procedures for service providers to cloud consulting services. More recent plan of IBM cloud computing service is targeting at the growth of cloud computing on several levels, and provide some services for customers’ own infrastructure, while providing the hardware, construction and consulting companies to establish their own "private cloud."

2.      Enter Strategy

There are two ways to adopt the cloud computing system for companies. For the first, partnership with technology players is the key step in adopting cloud computing. To build up its cloud computing system, company should partnered with several technique provider, such as hardware providers e.g. IBM or HP, and then software specialists such as Citrix Systems. The partnerships with technical giant would help target companies reduce the time cost and also risks that is related to technical problems. An alternative way to establish a cloud system for the company is that purchase built-models from service providers, or even buyout. One prominent case would be, AT&T who bought application services provider USInternetworking (USi) in 2006 for US$300 million in order to develop capabilities in delivering on-demand services and managed enterprise software solutions (Capgemini, 2010).

3.      Production cycle

Compared to classic way of doing computing, the benefits of the cloud that it actually helps company reduce their concern on managing computing systems. However there is another side of the story. One of the unique features of information technology application, especially the software, is that the production cycle is very short, though the money cost for update is relative low. And once the

4.      Information Security

When applying a cloud computing, it means company is giving up a certain degree of control over a number of services, for example operating system configuration in a Web-based contract (EDUCAUSE, 2012). Another unusual characteristic of cloud computing is the multitenancy, which means that different, unrelated customers will be sharing hardware resources, especially the  memory and storage. Not only suffered from risk of data leakage, but also there are risks of sharing resources. Multitenancy exploits are very worrisome because one flaw could allow another tenant or attacker to see all other data or to assume the identity of other clients. Several new classes of vulnerabilities derive from the shared nature of the cloud. Researchers have been able to recover other tenants' data from what was supposed to be new storage space.

Thus, Clouding computing brings business opportunity but new challenges to IBM customers as well. In order to tackle the problems, customers need a proper planning, to manage the disruptive nature of cloud computing with the help from IBM. Customer has to change their traditional management way in order to get adapt to the cloud computing.

New analytical framework and Suggestions

Because of the nature of the product, the risk management should be on the top of concerns when company decides to introduce in a cloud computing system. One usual misunderstanding on cloud is that, by applying the cloud computing, company is avoiding all security problem in their side.  

1.      Contract

Different from traditional information security control, company using cloud computing should apply access control and compliance solutions on both sides of these interfaces, companies and cloud service providers. In the case, a solid and specific security contract should be signed between the customer and Cloud computing service vendor. The contract could at least ensures that the company obtain security commitments from service provider in writing.

2.      Audit

Another way to reduce information leakage risk is to doing regular based audit. First, the customer should determine what information will be involved and the security classification of the information. That helps customer to determine what part of the information should be mitigated locally and what information be obligated to service provider. Cloud service Employees could get access to sensitive information like financial, personal information of the client organizations. Auditors from customers will be glad if they could see procedures and policies that reduce access to information as much as possible and provide oversight and training for anyone who does retain access.

3.      Information Security Software

Other suggestion includes security software, which is able to leverages a cloud-based threat protection network, by preventing malware email threats before they reach company’s workstation. 

IBM’s Strategic Change

It might surprise the world that the American giant International Business and Machines, short for IBM, has already shrink the percentage of manufacturing hardware to 20% of its total business.(Online Source: "Smart" Change in Strategy The Journal Of JVBL Values Based Leadership 2011.)The remaining 80% is the IT consulting service based on cloud computing. The shift of its core business indicates that IBM has changed its corporation strategy direction from hardware manufacturer to consulting program-shared one word Smart, which offered in 2008. The aim of Smart Planet is to take advantage of IBM’s technology advantage to help its clients capture the potential of these smarter system to achieve economic growth.

IBM’s Strategic Approach

1 First Mover Approach

IBM is not only a leader in cloud computing but also the first one to present an image as a B2B IT consulting company.

Obviously, “company that introduces a new technology many earn a long-lasting reputation as a leader in that technology domain.” (Melissa A. Schilling, (2012). Strategic Management of Technological Innovation. 4th ed. London: McGraw-Hill/Irwin.) According to Melissa, such a reputation can help the company to acquire brand loyalty and market share, this advantage is sustainable, even after competitors have introduced comparable products. So being a first mover can transform this advantage into sustainable profits. (Melissa A. Schilling, (2012). Strategic Management of Technological Innovation. 4th ed. London: McGraw-Hill/Irwin.)First Mover approach combines with IBM’s technology advantage enhance its leadership and brand loyalty in IT industry at the same time, it also rise buyer switching costs potentially which help raise competitors’ entry barrier.

2 Smarter Marketing Strategy

IBM finds a theme around its vision to promote its concept. This theme integrates its different programs into a brand family and also expand its meaning beyond IT area. IBM's consulting programs all share one common characteristic: the word SMART - or a derivative thereof - typically precedes the name of the specific consulting program involved. This method helps IBM’s smart area become borderless. IBM received several awards for its branding and marketing efforts around Smarter Planet, including a “Gold Global Effie” for the most effective global campaign.(Online Source: IBM 100 2011.)

3 Collaboration Innovation

Through establishing Collaborative Innovation Centers and University Awards, IBM builds connections with universities to boost its Innovative capability.
By cultivating T-shape Professionals (depth and breadth) through education and training, IBM Collaborative Innovation Centers (CIC) tries to build competency for new technology and design a regional workforce with T-shape Professionals who are adaptive innovators, highly-socially networked, lifelong learners, and make excellent entrepreneurs to putting knowledge to use and creating direct impact on economic growth.
In this collaboration innovation system, government can act as a public entrepreneur and venture capitalist. This collaborative method enable IBM connect with regional government, academic institutions and business to accelerate research innovation into markets and driving regional economic development.

Strategic Fit Assessment

1. External Environment

As many economics around the world were slowing, both business and governments were looking for ways to rebuild their infrastructure to be more cost-effectiveness. IBM captured this change and believe this is a golden opportunities to address this problem and challenge. That is the original idea of IBM’s smarter planet. Soon it became the overarching framework for IBM’s growth strategy.

IBM’s Smarter Planet vision was driven by three I’s—instrumentation, interconnectedness and intelligence. From smarter power grids, to smarter food systems, smarter water, smarter healthcare and smarter traffic
systems.

2 Internal Environment

In the early 1990s, IBM faced a fierce competition. Its stock price was the lowest it had been since 1983. (J. Bruce Harreld &Charles A. O’Reilly III &Michael L. Tushman. (2006). Dynamic Capabilities at IBM: Driving Strategy into Action. Stanford Business. 49 (1), pp.3) By 1992, the company was almost failing. After rethink its business model, in order to cut down cost and increase revenue, top managements decided to change its corporate strategy, make IBM to be a broad-based solutions provider from a technology company.

3 Strategic fit analysis

IBM is the leading player in the application infrastructure, software and big data market. (Market line, (2012). Company Profile: COMPANY PROFILE International Business Machines Corporation. 38 (3), pp.4) Its competitive advantage is technology advantage and strong R&D ability. Since the corporate strategy has shift to solutions provider role, IBM’s company vision changed to become the best solution provider. IBM focus on continues investment in R&D and innovation. Its leading advantage in big data field combines with cloud computing technology to achieve information insight to provide its customers professional IT consulting service. Now IBM has 12 labs across 6 continents around the world. (Online Source: IBM corporate (2011). IBM research. [ONLINE] Available at:
http://www.research.ibm.com/labs/. [Last Accessed 10/04/2015].) Taking advantage of its resource and core competitiveness, IBM’s strategy change helps IBM capture times’ opportunity and survive from nearly death in 1993.

4 Lessons Learn from IBM

1. Changing times can imperil even the most successful companies. Hubris is a business killer, transformation is a continuous process that can never end. Managements should face the change they face and success comes from leadership.

2. Long-term thinking sometimes may lead to a safe, steady but conservative outcomes. This thinking pattern sometimes impede companies to transformation or change easily when external environment has been different.

3. At last, the most important one lesson is that “Soft” Capabilities like the ability to reallocate and reconfigure sources must be developed over time. Such Dynamic ability is important to companies especially to some big computers, it is not easily for big companies to be dynamic, such dynamic ability is such important under this situation.

Reference:
The Journal Of JVBL Values Based Leadership (2011). "Smart" Change in Strategy:
IBM'sResponsetoChallengingTimes.[ONLINE Availableat:http://www.valuesbasedleadershipjournal.com/issues/vol4issue1/strategy.php. [Last Accessed 09/04/2015].

Melissa A. Schilling, (2012). Strategic Management of Technological Innovation. 4th ed. London: McGraw-Hill/Irwin

IBM100 (2011). Smart Planet. [ONLINE] Available at: http://www-03.ibm.com/ibm/history/ibm100/us/en/icons/smarterplanet/
[Last Accessed 10/04/2015]

J. Bruce Harreld &Charles A. O’Reilly III &Michael L. Tushman. (2006). Dynamic Capabilities at IBM: Driving Strategy into Action. Stanford Business. 49 (1), pp.3

Market line, (2012). Company Profile: COMPANY PROFILE International Business Machines Corporation. 38 (3), pp.4

IBM corporate (2011). IBM research. [ONLINE] Available at: http://www.research.ibm.com/labs/. [Last Accessed 10/04/2015]

Walter S, Mossbery. (2010, May 6). Learning About Everything Under The 'Cloud'. Retrieved from http://www.wsj.com/articles/SB10001424052748703961104575226194192477512

Job Brodkin. (2009, may 18). 10 cloud computing companies to watch. Retrieved from http://www.networkworld.com/article/2268033/virtualization/10-cloud-computing-companies-to-watch.html

Miller, Rich. 2008. IBM Targets Cloud Services Market. Available from http://www.datacenterknowledge.com/archives/2008/11/24/ibm-targets-cloud-services-market/

Capgemini, 2010. Cloud Computing The Telco Opportunity Telecom & Media. Available from Insightshttps://www.capgemini.com/resource-file-access/resource/pdf/Cloud_Computing_____The_Telco_Opportunity.pdf

Brukbacher, S. 2012. Practical strategies for managing the risk in cloud computing. Available from https://net.educause.edu/ir/library/pdf/ERB1103.pdf