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By V. PremKrishnan PGP24230
Indian Institute of Management, Lucknow 04 December 2009
Table of Contents
OVERVIEW OF CLOUD COMPUTING ............................................................................................................ 3 BUSINESS IMPLICATIONS OF SOFTWARE-AS-A-SERVICE .......................................................................... 14 BUSINESS IMPLICATIONS OF PLATFORM-AS-A-SERVICE........................................................................... 31 BUSINESS IMPLICATIONS OF INFRASTRUCTURE-AS-A-SERVICE ............................................................... 39 PUTTING IT ALL TOGETHER ........................................................................................................................ 44 FUTURE TRENDS ......................................................................................................................................... 50 REFERENCES ................................................................................................................................................ 55
Business implications of cloud computing
SECTION 1 Overview of cloud computing
WHAT IS CLOUD COMPUTING?
Forrester has defined cloud computing as “A form of standardized IT-based capability — such as Internet based services, software, or IT infrastructure — offered by a service provider that is accessible via Internet protocols from any computer, is always available and scales automatically to adjust to demand, is either pay-per-use or advertising-based, has Web- or programmatic-based control interfaces, and enables full customer self-service.” As one of the hottest concepts in IT today, cloud computing proposes to transform the way IT is consumed and managed, with promises of improved cost efficiencies, accelerated innovation, faster time-to-market, and the ability to scale applications on demand. The NIST (National Institute of Standards and Technology) describes cloud computing in terms of: The characteristics: • On-demand self-service: individuals can set themselves up without needing anyone’s help; • Ubiquitous network access: available through standard Internet-enabled devices; • Location independent resource pooling: processing and storage demands are balanced across a common infrastructure with no particular resource assigned to any individual user; • Rapid elasticity: consumers can increase or decrease capacity at will; • Pay per use: consumers are charged fees based on their usage of a combination of computing power, bandwidth use and/or storage The possible delivery models:
Software as a service (SaaS)
•Customers rent software hosted by the vendor
Platform as a service (PaaS)
•Customers rent infrastructure and programming tools hosted by the vendor's APIs to create their own applications
Infrastructure as a service (IaaS)
•Customers rent processing, storage, networking and other fundamental computing resources for all purposes
Business implications of cloud computing
The possible deployment models:
•The cloud infrastructure is owned by an organization selling cloud services to the general public or to a large industry group.
•The cloud infrastructure is shared by several organizations and supports a specific community that has shared concerns (e.g., mission, security requirements, policy, and compliance considerations).
•The cloud infrastructure is owned or leased by a single organization and is operated solely for that organization.
•The cloud infrastructure is a composition of two or more clouds (internal, community, or public) that remain unique entities but are bound together by standardized or proprietary technology).
The foundation of cloud computing is virtualization technology. By abstracting software from its underlying hardware, virtualization lays the foundation for enabling pooled, shareable, just-in-time infrastructure. Cloud computing extends this concept of virtualization by going beyond the more efficient use of a single physical machine or cluster — to the aggregation of computing resources across multiple data centers, applications, and tenants, and allowing each to scale up or down on demand. This enables cloud providers to efficiently manage and offer on-demand storage, server, and software resources for many customers simultaneously. To summarize, Cloud Computing is a service model where business workloads such as software applications (SaaS), and/or platforms (PaaS) such as programming tools, and/or infrastructures (IaaS) such as processing, storage, networking, etc., are used in accordance with the following characteristics: Services are provisioned quickly without requiring excessive administrative intervention on the part of the end user’s organization Usage of a shared resource model (pool of virtualized resources) to support a cost-effective pricing structure (only pay what you consume), either housed locally within the four walls of the end user’s
Business implications of cloud computing
data center (Private Cloud) or outside the data center at a secondary site or third party hosting facility (Public Cloud) Providing self-service interfaces that let customers acquire resources at any time and get rid of them the instant they are no longer needed.
WHY ADOPT CLOUD COMPUTING?
A poll conducted by IDC Enterprise Panel among organizations on the perceived benefits of cloud computing revealed the following:
During economic downturns, the ability to speed up time-to-value and time-to-market becomes more critical than ever, and represents probably the most important benefit of the Cloud. Many companies are delaying projects unless they deliver a return on investment within weeks. With Cloud Computing, companies can speed up those times, because of the following benefits: • No upfront capital investments and less financial risk (allows companies to shift from capital to operational expenses, which also means better cash flow and a more competitive business); no more upfront huge capital investments on on-premise infrastructure (applications, servers, network, maintenance, licenses, hardware, facilities, etc.) with uncertain payoff and that may never be needed. With cloud computing, organizations only pay for what they use when they need it and they can terminate the contract. Page 6
Business implications of cloud computing
Clouds can provide an almost immediate access to hardware resources (for large enterprises, the ease of deploying a full service set without having to set up base infrastructure to support it can be even more attractive than cost savings; for start-ups because it allows them to test their business plan very quickly for little money) Large-scale multi-tenancy achieves significant economic advantage. Sharing the resources and purchasing power of very large-scale multitenant data centers provides an important economy of scale. Easier change management of infrastructure, including maintenance and upgrades. (Cloud vendors extensively virtualize and commoditize the underlying components to make it non-disruptive to replace and improve them frequently) Offers improved agility to deploy solutions and choice between vendors (particularly when cloud interoperability becomes more of a reality than it is today) Reduces the time for integrating and maintaining servers, storage & software, and eliminates mundane IT management tasks from skilled staff, leaving those tasks as the responsibility of the Cloud dedicated specialists. This allows staff to concentrate on what they are skilled at, and to focus on things that drive the business: service innovation. Cloud computing also offers an on-ramp for IT staff to recent computing advances such as nonrelational databases, new languages, and new computing frameworks. Cloud Computing can lower IT barriers to innovation and increase interoperability between disjoint technologies.
Eli Lily, a pharmaceutical company, was conducting research that needed a lot of fast data analysis. 25 servers were needed to crunch the huge volume of data. • Scenario without Cloud Computing: wait until the purchase request is approved, wait until the servers arrive, wait until the servers are configured, etc. all of which can take several weeks or even several months. Let's say it takes three months. In an industry where the cost of delaying a product is estimated at $150 per second, that three months' wait would cost more than $1 billion. • Scenario with Cloud Computing: the researcher clicks over to Amazon Web Services, configures the 25 servers in the Cloud in one hour, and within two hours has crunched the data. Total fee for the time using Amazon’s resources - Just $89. Thus cloud computing allows organizations to pay for innovation, and not for infrastructure.
Business implications of cloud computing
CHALLENGES AND RISKS IN CLOUD COMPUTING
The poll by IDC Enterprise panel revealed the following perceived risks in cloud computing:
Cloud security challenges include the following: • • • • • • • • • • • • • • • Trusting vendor’s security model Customer inability to respond to audit findings Obtaining support for investigations Indirect administrator accountability Proprietary implementations can’t be examined Loss of physical control; Data dispersal and international privacy laws Need for isolation management Multi-tenancy Logging challenges Data ownership issues Quality of service guarantees Dependence on secure hypervisors Attraction to hackers (high value target) Possibility for massive outages Encryption needs for cloud computing Page 8
Business implications of cloud computing
Before choosing a cloud vendor, due diligence is necessary by thorough examination of the Service Level Agreements (SLA's) to understand what they guarantee and what they don’t. In addition, customers should scour through any publicly accessible availability data. Amazon, for example, maintains a "Service Health Dashboard" that shows current and historical up-time status of its various services.
Regarding the level of performance, there will always be some network latency with a cloud service, possibly making it slower than an application that runs in the local data center. But third party vendors, such as RightScale, are building services on top of the cloud to make sure applications can scale and perform well. APPLICATION CHARACTERISTICS FOR THE CLOUD IN AN ENTERPRISE The cloud adoption in enterprises initially is led by tactical opportunities that offer implementation speed and cost advantages to these enterprises, although there are a few misconceptions about when to use the Cloud and the associated technological challenges in moving toward it. Security, performance, availability, and reliability are the top concerns that IT managers cite for adopting the Cloud. Cloud providers are addressing these concerns through appropriate architectural measures and service-level agreements (SLAs) to gain user confidence in the Cloud. The following are the characteristics of applications that are potential candidates for the Cloud: Non-core business services—For an enterprise, there are certain business functions that are core to the value that the enterprise delivers and drive more business and customers to the organization. For example, the core functions for a retailer are merchandizing and customer service. However, functions such as Web conferencing, enterprise-content management, and portal are non-core or non-differentiators; they are only enablers to support the business. Non-core applications are good candidates for cloud and allow organizations to focus their business and IT staff on building the core. High computing workloads over short time span— Applications that do not have uniform workload requirements. There will be spikes in usage for a small period; otherwise, however, resource utilization will be low most of time. Instead of acquiring infrastructure to support the peak workload, an enterprise can acquire space in the Cloud and pay for usage. Page 9
Business implications of cloud computing
these can be offered as cloud applications. if it goes offline.) Business implications of cloud computing Page 10 . The Cloud offers a good platform for experimentation.0 collaborative applications—Applications (such as video sharing. helping them manage their risks better. and blogs) that generate data that is exposed to the public. if needed—thus. start by taking a broad look at the applications and other IT resources and systems under your control (both existing ones and planned ones).enterprise and cross-departmental reach. Web 2. without having to invest in full IT infrastructure upfront. discussion forums. Besides allowing enterprises to offload the infrastructure management to the cloud provider. Instead of duplicating the effort in creating multiple applications or copies of the same software. Both mission-critical and non-critical can be further sub-categorized into core business practices (those that provide competitive differentiation) and non-core practices (typically internal activities such as HR services. Determine the good and bad candidates for the cloud First.e. CLOUD COMPUTING IMPLEMENTATION ROADMAP 1. Centralized applications—Applications that have cross. as businesses can terminate the contract. categorize them into mission-critical (i. etc. your company will not survive) and non-mission-critical. New business services and pilots—Applicable in scenarios in which enterprises need the flexibility to launch new business applications. they also offer economics of scale through their reuse across different departments.
Prepare your IT portfolio for the cloud This could be anything from new assets. particularly where there is a regulatory or legal risk involved in any disclosure.g. audit and compliance systems requirements. review their data leak prevention (DLP) deployment to prevent insider attacks. Next you need to find a vendor that meets those security. to the redeployment of certain existing assets or a complete rewrite of some existing applications (remember not all your current applications are Cloud-enabled: Service Oriented Architecture and Virtualized applications are better candidates) taking always in account the security. loading the database onto the cloud may be costly) as well as any performance-sensitive application (i. and companies should find out if third parties have access to the information How is data being protected? Ask to review the service provider’s architecture to make sure proper data segregation is available. will require special treatment if they are to be run on a public cloud (get legal advice before committing any applications of this type to public cloud computing) • Applications that require access to very intensive data workloads (for example. review the vendor’s data protection techniques to ensure appropriate cryptography is used for both data in rest and in motion. and make sure the appropriate documentation is available for auditors. in the event of the provider’s bankruptcy or change in business direction? What's the exit strategy? • • • • • Business implications of cloud computing Page 11 . Key Questions to Ask Cloud Computing Providers • Where is my data and who has access to it? The provider’s access control and authentication procedures should be reviewed. customized SaaS) 2. Will you maintain the features we contracted? And what are the penalties? What's customer support like? How can I ensure that my data and the cloud services will continue to be available. and compliance requirements. one that is very likely to create performance problems if it is to run on a public cloud) • Applications that require high customization (e.e. legal. 3..Mission critical Non mission critical Core Keep behind firewall Keep behind firewall Non-core Deploy in public cloud Deploy in public cloud Good candidates for the Public Clouds: As discussed in the previous section Bad candidates for the Public Clouds • Applications that involve extremely sensitive data.
capabilities to manage such virtualization need to be put in place. as also continuing to measure the ROI.4. it’s not much of a stretch to use the same techniques to bring the cloud all the way to the applications comprised of such services. Clouds of services are normally more valuable than clouds of things like hardware. It uses IaaS extensively. but it's worthwhile because when you move a system into the cloud. And remember this effort takes extra time. and human capital resources. once a cloud of services has been established. Mogulus streams 120. Finally you should have monitoring systems so that you can measure the performance. you introduce a range of new variables that are beyond your experience and direct control. Monitor and Measure ROI One of the major benefits of Cloud Computing is the ability to test a concept relatively quickly and easily. Deploy. and track usage of these virtualized services. a small start-up which decided to use Amazon's Cloud Services. Before making the final decision either to deploy or not to deploy (production phase) to the Cloud. This may seem like a lot of work. such as security. Once both service virtualization and management of that virtualization are in place. Virtualization alone does not a cloud make. you should perform full cloud integration tests. Animoto. performance. This results in an elastic cloud and one in which usage across the cloud can be tracked to facilitate the utility pricing model so often associated with clouds. etc. Test. It handled all of the election coverage for most of the large media sites.000 live TV channels over the Internet and owns no hardware except for the laptops it uses. Nasdaq uses Amazon’s S3 Cloud Service to deliver historical stock and mutual fund information. the result is a cloud of services. so after users successfully virtualize the services in their SOA. These capabilities include the ability to create. was able to keep up with soaring demand for its service and scale up from 50 instances to 3. rather than add the load to its own database and computing infrastructure. • Business implications of cloud computing Page 12 . storage. REAL WORLD CLOUD COMPUTING APPLICATIONS Some real world cloud computing applications are: • • • Coca-Cola Enterprises uses a Cloud-based system to streamline operations with merchandisers in the field.500 instances over a three day period. dynamically allocate. and databases because the cloud is brought to the resources that are much closer to the end-user. Further. deploy. capital. This may be the most valuable cloud of all since it is the asset that a company’s end-users come in direct contact with.
MARKET ANALYSIS The following diagram describes the major players in the cloud computing market: .
SECTION 2 Business implications of Software-as-a-service (SaaS) .
public folders. 4. IBM. Two things define cloud-based email: Someone else runs it. This category thus includes some traditional outsourcers. For example. moving to cloud-based mail providers. some run in the cloud. E-MAIL ARCHITECTURE 3. internal routing servers. you can keep your mobile executives and information workers in an on-premise email system and host your occasional users at a cloud-based provider. you keep mailboxes on-premise while moving email filtering. mailbox storage. 4 Enterprises can run their e-mail service in any one of four service architectures: 1. and Google Postini and Symantec MessageLabs offer cloud-based email filtering services.e. though Novell has a long history and strong presence in smaller and midsized companies. and archiving where necessary. Hosted email: All email services are in a hosted or cloud-based email service provider. In this situation. Rackspace. including mail servers. Oracle. client access servers. In this hybrid situation. Many firms run older versions and email systems from multiple suppliers. and Sun. email filtering. Any cloud-based provider can support this architecture. Azaleos handles Microsoft Exchange monitoring remotely. gateways. Split-domain email (hybrid): Some users run on-premise. and it runs in someone else’s data center. and various others are present. and Google. 2.net. Yahoo Zimbra and Iron Mountain offer cloud-based message archiving. Most large and midsized organizations run their own email systems. every employee has the same email domain and an email router splits the domain. In this case.Business implications for enterprises This document describes the benefits to enterprises by switching to a Software-as-a-Service model for their e-mail requirements i. Microsoft and IBM are the dominant suppliers today with their Exchange/Outlook and LotusNotes offerings respectively. Business implications of cloud computing Page 15 . On-premise email: All email services are in the corporate data center. archiving. and next-generation multitenant providers like Microsoft itself. 3. hosted Microsoft Exchange providers like Intermedia. and AT&T Hosting & Application Services. Hosted support services (hybrid): Some email services run in the cloud. or perhaps continuity and management to a cloud-based provider.
it’s the easiest place to start. While circumstances such as a broader corporate strategy involving an archiving service might limit options. This includes in. anti-spam. Business implications of cloud computing Page 16 . Traditional onpremise software vendors like Trend Micro are taking their solutions and offering them as a service. and possibly data-loss prevention. moving your email filtering to a provider means email is consuming less bandwidth and your mail servers are processing fewer messages. and resources than they need to. External providers will also be able to back their services with more redundancy than you can.and out-bound antivirus. there is a clear opportunity for many to offload the cost and responsibility associated with supporting services Message filtering: Because filtering is mostly well partitioned from your infrastructure.HOSTED SUPPORTING SERVICES Supporting services can take up more space. power. at a better price. In addition to merely offloading responsibility for maintaining and managing the service. encryption.
These hosted services range from providing basic send/receive functionality if the primary server fails. When selecting a service. Some email continuity services include failover for mobile devices as well. or disaster recovery. you want to think about how all of your users access their email. Business implications of cloud computing Page 17 . Broader archiving. Email continuity: Email continuity. corporate eDiscovery needs. The costs associated with planning and building out your own data center or leveraging a colocation provider and purchasing the necessary hardware and software can be stifling. Message archiving: Archiving and eDiscovery for email can be trickier for some organizations. or plans for data may limit options for you to make changes to those associated with email. Services range from basic journaling — where all incoming messages are sent and stored at an external provider with little granularity — to more detailed archiving. covers scenarios associated with the loss of your primary site and allows email to keep flowing. to more sophisticated and expensive offering that include access to an archive of the past week’s or month’s messages.
This is best suited for organizations that need a higher level of integration than is possible with multi-tenant solutions but that still want to move email off-premise for all of their employees or for large subsets of the organization (e. Hosted email vendors use single-tenant.g. a large contractor population or newly acquired business). multitenant offerings will become more accessible to a broader audience as application vendors work with the providers to integrate with them. Outsourcer hosted solutions also require a longer commitment than the other two options. it’s the lowest cost option — but it lags behind the other options in your ability to integrate with your other applications and services. Hosted multi-tenant email vendors use a shared infrastructure to host customers’ email. Single-tenant solutions allow you more access to the systems.. In this option. more like a traditional outsourcing arrangement. This is an appealing option for companies with simpler environments who need basic integration for a fully hosted architecture or those looking to provide cheaper email for large subsets of users in a split-domain hybrid architecture. Business implications of cloud computing Page 18 . In time. easier integration with applications and mobility services. or dedicated servers for individual companies. This is best suited for large organizations with complex environments and deep integration into their email infrastructure that want to reduce their facilities and labor costs with an outsourcer. As time progresses. Because of the high cost associated with this option. which include: Multi-tenant hosted solutions.HOSTED MAILBOX SERVICES Hosted mailbox services fall into three categories. a traditional IT outsourcing provider uses its data centers to host your infrastructure. you would most likely only use this for hosting all of your users. Outsourcer hosted solutions. this will be the de facto standard. Single-tenant hosted solutions. Because of the economies of scale in providing this. and more control over service windows and updates.
rather than revenue-generating projects. and Clemson University are using cloud-based email providers like Microsoft and Google to provision their alumni or incoming freshmen. Allocate valuable IT professionals to more business-centric projects. Bryant University. it’s clear that a cloud-based email provider can help you provision a new subsidiary or perhaps your summer interns in hours or days. so new viruses don’t sneak through. The financing benefit of paying as you go rather than in a big upfront investment will appeal to any budget holder and certainly to the CFO. keeping client and server software upgraded and safe is a critical yet challenging task. As any IT professional knows. instead of weeks or months.NON COST BENEFITS OF HOSTED EMAIL SOLUTIONS 5 The benefits of hosted delivery go beyond cost. Shift the financial burden from upfront capital expense to ongoing operating expense. the biggest benefit of cloud-based email is that you no longer carry the debt liability and the hardware and software assets on the balance sheet. How much more valuable might that email administrator be if she were available to help roll out a cross-sell application in the call center or to improve data quality on a business metric like churn risk or seasonal demand forecast? Always run the latest software and configurations without upgrade hassles. particularly in these capital-constrained times Business implications of cloud computing Page 19 . With providers like Google on-boarding 100.000 users a week. A cloud-based provider like Symantec MessageLabs or a hybrid provider like Proofpoint takes on the burden of keeping your message filtering software and configurations always up to date. The opportunity cost of running email on-premise is that your staff must spend time on email support. For a business executive. universities like Arizona State University. For example. Shifting email to a cloud-based provider allows you to: Rapidly provision new users.
Many employees with PCs spend an hour or more in their email client every day. software. is either over-provisioned with features they don’t need or left without a business email address at all. Email attachments are the biggest storage cost for email. Hardware costs include operating systems. so a 1 gigabyte mailbox could suffice. which includes people who don’t sit in front of a PC all day or who work part-time or as interns. For example. Mobile executives need big mailboxes and mobile messaging Mobile executives — employees who spend most of their time away from their desks — typically need extra messaging services. Occasional users don’t need big mailboxes or dedicated email clients. power. so they expect a LotusNotes or an Outlook email and calendaring client.COST-BENEFIT ANALYSIS OF HOSTED EMAIL SOLUTIONS 6 Forrester suggests a three-step model to evaluate email costs and the resulting benefits of moving to cloud based solutions. Staffing costs include the administration of every piece of the solution. you have to estimate what each piece of functionality is worth to the firm. so they would require around 2 gigabyte mailboxes. This group. And to calculate the cost of the email license in a bundled product. and data center costs. But this group is very likely to have email at home and 70% of those online are using Web mail clients already. This group is also the most likely to keep big document attachments lying around in their inboxes. it also includes the cost of power backup. This group might be trained to keep their inboxes purged of large attachments. Step Two: Calculate Your Fully Loaded On-Premise Email Costs Software costs include maintenance and support. storage. you must add in these other factors. you have to include annual support costs and the cost of installing and maintaining the systems. The purchase and installation costs depreciated over three years are just the start of a fully loaded server cost. And archiving. continuity. Storage and archiving costs accumulate over time. and regulatory reporting add significant cost to email. and so on — has staffing costs associated with it. Power alone is much more expensive than the kilowatt hours. To calculate the client and server email software costs. cooling costs. Page 20 Business implications of cloud computing . and power redundancy. To calculate the actual cost. you must assign a cost of the Outlook client software if you are a Microsoft client. Step one: Segment your workforce to determine each group’s email needs. as attachments pile up. They require just a Web mail client and a small mailbox. Each cost component — hardware. Information workers typically need a dedicated email client but smaller mailboxes. and that cost is growing rapidly as attachments soar in size and accumulate forever. eDiscovery. particularly BlackBerry devices or other smartphones.
Business implications of cloud computing Page 21 . which includes: Email accounts with 25 GB of storage per user and instant search tools IM. the cost benefits are substantial. plus voice and video chat Group calendaring system Mobile access Spam and virus filtering Web-powered collaboration apps: Google Docs.Step Three: Compare On-Premise Email against Cloud-Based Alternatives The following figures estimate how much a basic Microsoft Exchange 2007 deployment would cost and what enterprises could save with Google Apps*. For a small-sized company (100 employees). Google Sites and Google Video for businesses The savings calculator provided by the Google Apps website has been used for these estimates.
the cost estimates are as follows: Business implications of cloud computing Page 22 . the cost advantages reduce: For larger companies.For mid-sized companies (around 1000 employees).
000 users. Forrester research indicates that cloud-based email is always cheaper for companies with fewer than 15. this 15. These estimates show that for small and mid-sized companies.000 users. The crossover point for when generic cloud-based email is cheaper than on-premise email is about 15. mailboxes per server. and operating systems costs. can move this crossover point. Business implications of cloud computing Page 23 . While the above calculations take some simplifying assumptions into account.These savings have not considered using Google Docs as a replacement for Microsoft Office since it is assumed that most organizations will be reluctant to switch from Microsoft Office (especially Microsoft Excel and Microsoft PowerPoint) till equivalent features are provided in Google Docs. cloud based e-mail is always cheaper. including staffing efficiency.000-user crossover is a rule of thumb that is validated by the number of firms of this size moving to a hosted Exchange provider. While many factors.
ISVs must move cautiously to overcome these obstacles. While some ISVs still refuse to believe that the SaaS phenomena is anything more than the latest technology industry fad. With its ability to provide reduced total cost of ownership and ease of use. posing a serious threat to established ISVs. low barriers to entry have also permitted an assortment of startups and peripheral players to enter the market. Customer satisfaction with the initial round of SaaS solutions has led to greater receptivity among IT and business decision-makers. However. To meet these challenges. today’s economic crisis is also accelerating customer adoption of SaaS as organizations of all sizes seek more cost-effective methods to operate their businesses. customer and competitive requirements in the SaaS marketplace. This is especially true given the intensifying competitive landscape. opening the door to a wider array of market opportunities. those ISVs that recognize the need to respond to these trends are quickly discovering that fulfilling their customers’ escalating expectations is becoming increasingly difficult given today’s challenging economic environment. ISVs are now leveraging third-party software development and Business implications of cloud computing Page 24 . The transformation process involves a series of challenges which often fall into four primary categories: Re-architecting software products into SaaS solutions that are truly Web-centric and servicesoriented. A combination of market forces is driving a growing number of organizations of all sizes to adopt Software-as-a-Service (SaaS) solutions to achieve their business objectives. but even more daunting in today’s tough business climate. Re-structuring revenue recognition models and operating processes to accommodate the “payas-you-go” subscription model associated with SaaS. Therefore. ISVs cannot afford to delay their efforts to develop and deliver competitive SaaS solutions. SaaS offers ISVs a compelling way to extend customer goodwill and loyalty amid these tough economic times. For established ISVs to succeed in the SaaS market they must move from a product-centric to a servicesdriven business model. Re-designing go-to-market strategies to ensure the right service delivery infrastructure and management capabilities are in place to properly support SaaS solutions. Some suggest that moving to SaaS entails a change in corporate DNA. independent software vendors (ISVs) are facing unprecedented challenges due to a fundamental shift in customer preferences relative to how they acquire and use business applications. Re-orienting development.Business implications for IT service providers OVERVIEW Given the current economic downturn and the resulting emphasis on cutting costs. Yet. These are significant challenges under the best of circumstances. sales and support staff to fully understand the product. With sales of existing software products slowing and the ability to access credit more difficult than ever.
pricing schedules. user and ISV/provider perspectives. User Perspective First and foremost. The critical dimensions of a SaaS solution must encompass the specific requirements from the buyer. Therefore. as well as its accessibility and compatibility with multiple service options such as various browsers. However. ROLE-BASED DIMENSIONS OF SAAS 8 To develop and offer a successful SaaS solution. etc. Since buyers have to ensure a seamless experience to business users. Unlike traditional software which was historically evaluated and acquired by a technical buyer. ISVs/providers must also be able to provision. access control mechanisms. Users will also expect seamless integration of SaaS products with their on-premise applications. security provisions and contractual aspects of the solution. such as the on-boarding process. end-users expect the services to be easy to use and reliable. ISVs. objectives and business requirements. IT managers are increasingly becoming involved in the purchase decision to ensure the SaaS solution is reliable. This means automating as many of these processes as possible. sensitive data outside the organizational perimeter. that can also stand up to the more rigorous requirements of a technical buyer. Therefore. scalable and secure. deliver and support their SaaS solutions in a cost-effective manner.services delivery providers who possess the right skills and experience to satisfy their (and their customers’) SaaS requirements. service usage metering capabilities and billing systems. the dimensions of the user perspective will also be used as evaluation criteria by buyers. legacy applications and data sources. as well as the growing competition in the SaaS market. Buyer Perspective Buyers of SaaS solutions are concerned about the management capabilities. mobile devices. buyers and users view and utilize SaaS differently. Buyers are keen on the scalability of a SaaS solution to meet Business implications of cloud computing Page 25 . Users also prefer “try-and-buy” options which permit them to test SaaS solutions before buying them. reporting methods. Understanding and satisfying their differing requirements is imperative to enable each party to achieve its objectives. ISVs/SaaS providers must design solutions which are easy for a business user to try and possibly purchase. These considerations must also drive SaaS design. Each of these players has differing goals. it is essential to understand the various roles and relationships in the value chain. Herein lies the opportunity for the major Indian IT software firms. given the price sensitivity of today’s buyers. SaaS solutions are sold directly to the business user directly who can make a unilateral decision to purchase the solution without IT department input or even authorization. service delivery and support requirements. Since the SaaS model leads to hosting of business-critical. security considerations become extremely important from a user perspective. end users initially focus on the responsiveness and usability of the SaaS solutions. who have built expertise in offering the full lifecycle of services as well as valuable business relationships. and can be integrated with other SaaS solutions. Additionally.
usage volumes and seasonal spikes. ISVs can solve critical product issues. Ease of onboarding and usability help reduce support costs for the ISV as well. For example. Instrumentation built into the SaaS solution is critical for identifying usage patterns. This substantially reduces SaaS deployment as well as implementation costs. Depending on usage patterns. create new compelling solutions and cross sell/ up-sell services based on the insights from usage analytics. These considerations will shape the various dimensions of the ISV’s SaaS business model and product offerings. an accounting solution can experience sudden spurts during quarter and annual closing periods. ISV/Provider Perspective From the provider’s perspective. buyers will prefer to switch among multiple service options/bundles.dramatic increases in users. SaaS solutions must provide flexible service packages to address this need. SaaS solutions should be architected for multi-tenancy and ease of onboarding. The key dimensions that ISVs should take into account are illustrated as follows: Business implications of cloud computing Page 26 .
functionality is provided to end-users for consuming services.SAAS ARCHITECTURE ESSENTIALS The key elements required by ISVs to build a scalable. Service Functional Layer: This layer provides the functionality offered by the SaaS product. Business implications of cloud computing Page 27 . This varies from product to product. Delivering development services for this layer requires expertise in SOA modeling and architecture. Typically. to administrators for managing the offering and to help desk or support staff for supporting the offering. advances in rich UI experiences as well as multiple device access points. This layer is usually implemented using AJAX/Flex/Silverlight technologies. reliable and secure SaaS architecture are as follows: Interface Layer: This layer can leverage usability principles.
Operational Support Infrastructure: This layer provides operational support to monitor availability and performance of services. CASE STUDY: COGNIZANT’S SOLUTION TO ENABLE ISVS TO MIGRATE TO SAAS This case examines the unique holistic approach that Cognizant employs to help ISVs overcome these challenges and capitalize on the rapidly evolving SaaS market. Tenant service configurations and branding is managed by this layer. mobile and other formats offered through Web services). capturing/categorizing the requests/tickets and channeling to/from appropriate help desk staff is managed by this layer.Service Access Infrastructure: This layer manages the access context in terms of authenticating users. etc. Standard Infrastructure: This layer provides a framework to manage messaging. It shows how Cognizant leverages its globally integrated delivery model across numerous specialized capabilities to accelerate and optimize SaaS transformation. The service usage is metered and billed to buyers/users. The data store needs to clearly address tenant-perimeter/security and data integrity. Open source ticketing systems such as OTRS are used for this purpose. The figure below illustrates the major components of Cognizant's SaaS development and delivery process. Personal information of customers is managed through appropriate data security/encryption mechanisms. operations and measurement. audit trail logging. Data Store: This layer provides the framework for storing and organizing critical data from the SaaS solution. identifying tenant and setting related configurations and packaging the offering for tenant/user preferred channels (such as Web. Help Desk Infrastructure: This layer provides help desk services to the end-users and administrators. In a multi-tenant environment. Cognizant provides a spectrum of services to ISVs to help navigate this lifecycle. Business implications of cloud computing Page 28 . help on-board new tenants and to manage service-level agreements. SaaS solutions are put through continuous phases of conception. The services are provisioned and authorized through a user registration process. development. Business Support Infrastructure: This layer provides infrastructure needed to manage the business aspects of the SaaS product.
product engineering and consulting skills to deliver its Product Portfolio Analysis. Cognizant has architecture best practices and frameworks in Java. Usability and ERP/CRM Centers of Excellence provide multi-dimensional insights that drive the end state SaaS architecture. This helps to prioritize SaaS migration in an objective way leading to an optimal plan.NET platforms to enable a unified product/platform architecture. Business implications of cloud computing Page 29 . seamless entry points for buyers/users into the product family -. Cognizant leverages a combination of domain analysis. During the conception phase. Open Source and . Data Architecture. Performance Engineering.thereby enabling the ISV to tap into a wider market space. Digital Security. the SaaS product suite needs to be architected on top of a common product platform. This enables a unified user experience across a family of SaaS products. criticality and suitability. This also provides multiple.Product Portfolio Analysis is a methodology developed to assess product families across the dimensions of SaaS complexity.
S. It also helped Intuit achieve cost-savings of $1. Cognizant toolkits -.. This reduces program management complexity for the ISV coordinating across different practices in the partner organization. functional QA engineers and performance/security test engineers. These environments integrate Cognizant best practice templates and tools for enabling an agile development lifecycle. Cognizant brings to the table its product engineering frameworks and best practices in terms of: Integrated development environments built on Eclipse and Visual Studio Team System platforms. Cognizant’s CoEs worked together to accelerate Intuit’s time-to-market by helping it release the product four months ahead of schedule. Intuit engaged Cognizant in the launch of their first SaaS product sold to more than 1700 financial institutions. Cognizant help ISVs validate the SaaS offering in terms of vulnerability. Monitoring services using OnTarget or an assortment of third-party platforms are provided from Cognizant’s global operations centers in the U. performance engineers. Cognizant Automation frameworks (CRAFT) are brought in to increase agility through appropriate test automation. Latin America. The Cognizant team developed a SaaS architecture by first eliciting and analyzing requirements from business. product architects. providing product development services across different divisions. The new product design also reduced service implementation time from three months to two weeks and was scalable enough to accommodate a large number of financial institutions. The resulting architecture addressed all the critical SaaS dimensions. endurance and performance/scalability. which created an inter-disciplinary team made up of product development managers.6 million.Call Log Analyzer and Sentiment Analyzer -. Europe or Asia. security engineers. usability engineers. Intuit tapped Cognizant. Performance dashboards developed by the Performance CoE are deployed to monitor various system parameters to ensure responsiveness.provide user feedback analysis. usability. accessibility. Business implications of cloud computing Page 30 . availability and scalability. Cognizant began its partnership with Intuit in October 2004. Cognizant’s unique Two-in-a-BoxTM client engagement model (where an onsite Cognizant Client Partner works with a dedicated offshore Delivery Manager to mitigate the complexity of global services delivery) ensures that the spectrum of services for a successful SaaS migration are performed as an integrated solution. Cognizant’s OnTarget platform provides a proprietary monitoring environment for application and hardware infrastructure.During the development phase. Intuit had an aggressive time-to market requirement and wanted to overcome SaaS software development challenges by leveraging the expertise of a partner. end-user and operations perspectives and then developing code to meet these specifications. These toolkits are used in conjunction with Web analytics to drive continuous improvement of the SaaS offering as well as proactive reduction of support costs and abandonment rates.
SECTION 3 Business implications of Platform-as-a-Service (PaaS) .
com (Force. many ISVs will choose to offer a SaaS version of their current or future products. To satisfy this demand and to keep pace with the competition. application development. It can also provide a low-risk way to gain experience with this new kind of technology. Customers are increasingly interested in having a SaaS option for the software they buy. storage. Major cloud platform vendors include Microsoft (Windows Azure). a cloud platform provides simpler administration. application instrumentation and developer community facilitation. persistence. This incremental approach to using a cloud platform can save money and improve the current application functionality. A cloud platform is different from traditional hosting. Just as operating systems provide a foundation for on-premises applications. Cloud computing needn’t be an-all-or-nothing proposition. testing. These differences mean that cloud platforms can potentially provide better technology and lower costs for ISV applications. web service integration and marshalling. WHY PAAS IS IMPORTANT TO INDEPENDENT SOFTWARE VENDORS The primary goal of PaaS is to provide a platform on which ISVs can create SaaS applications. From a technical perspective. scalability. As more computing moves into the cloud. and so SaaS applications aren’t the only choice. An existing on-premises application can be enhanced with cloud-based functionality. IT managers or end-users. database integration.OVERVIEW OF PLATFORM-AS-A-SERVICE (PAAS) 'Platform as a service' (PaaS) is the delivery of a computing platform and solution stack as a service. highly reliable cloud-based service that can be used simultaneously by many customer organizations. Business implications of cloud computing Page 32 . These services are provisioned as an integrated solution over the web. Building the foundation from scratch for this makes no more sense than would writing an operating system for an on-premises application. It facilitates deployment of applications without the cost and complexity of buying and managing the underlying hardware and software layers and provides all of the facilities required to support the complete life cycle of building and delivering web applications and services entirely available from the Internet—with no software downloads or installation for developers. finding these new offerings is likely to be an important way to maintain its revenue stream. The business differences include minimal up-front commitment and easier ways to increase and decrease the computing resources an ISV’s application uses. such as running some code or storing a subset of data on a cloud platform. PaaS offerings include workflow facilities for application design. state management. Google (Google Apps Engine) and Salesforce. cloud platforms provide a foundation for SaaS applications. Cloud platforms aren’t useful only for firms that create end-user applications. For an ISV that provides infrastructure add-ons or developer aids for the on-premises environment. application versioning. Creating a SaaS application requires building a highly scalable.com). as well as services designed to create scalable and reliable applications. security. deployment and hosting as well as application services such as team collaboration. it’s likely that it can also find value-added products to create for cloud platforms.
15/GB stored per month. data storage and access. In both cases. there is a fixed charge per gigabyte per month. read and delete data. along with a charge for operations against stored data. say.A CASE STUDY 9. an application’s owner pays a fixed amount per gigabyte of data transferred in or out of a Windows Azure datacenter. The charges are: Web Edition: $9. with two variables: how much data is stored and how much data is transferred in or out of a Windows Azure datacenter. For compute time.10/GB transferred in. For applications with variable load.15/GB transferred out Business implications of cloud computing Page 33 . the owner of an application typically pays for a specific set of machines for a fixed amount of time.99/month for a relational database with up to 1 GB of storage Business Edition: $99. With Windows Azure. it guarantees that at least 99. Once again. such as GETs and PUTs.000 operations against stored data Bandwidth = $0. $0.15/GB transferred out The Windows Azure Service Level Agreement guarantees that for compute. is consumption-based pricing. for example. he might up his request to six Web role instances and four Worker role instances. its internet facing roles will have external connectivity at least 99. and bandwidth transferred in and out. Windows Azure applications can also use SQL Azure Database for storage. this fixed set must be large enough to handle the highest peak.9% of the time it will successfully process correctly formatted requests that it receives to add. the charging is usage-based. When the application’s load is light.95% of the time. and one of its biggest differences from traditional hosting. three Web role instances and two Worker role instances.01 / 10. For storage. the application’s owner pays only for the resources his application is using. 10 A primary attraction of a cloud platform.12/hour for each running VM Storage = $0. When the load is heavy. Cloud platforms aren’t like this. with three main variables: compute time. (There are no bandwidth fees for accessing data within a datacenter. however.10/GB transferred in. an application’s owner is charged a fixed amount for each hour a VM is running. when an ISV deploy two or more role instances in different fault and upgrade domains.Business implications for PaaS providers WINDOWS AZURE . $0. For data. For bandwidth.99/month for a relational database with up to 10 GB of storage Bandwidth = $0. The Windows Azure pricing scheme is relatively simple.) The charges are: Compute = $0. $0. he might request. With traditional hosting or an in-house data center. update. which means that capacity goes unused at non-peak times. the owner of an application pays for the compute and storage resources he uses.
Forums. Commitments help Microsoft plan more efficiently. phone support. on-premises. and other traditional services are available as well. One part of this is an Azure QuickStart. The company also has a Development Accelerator offer. Customers willing to commit to specific minimum usage levels will see their charges reduced. As with its other offerings. reflecting Microsoft’s understanding of the fundamental role that ISVs play in making Windows Azure successful.15/100K message operations.15 out / GB Although it’s not available at the platform’s initial launch. and so the discounts reflect these lower costs. The charges for AppFabric are: Messages = $0. Some of the primary ways in which ISVs can use Windows Azure include: Use cloud storage from on-premise applications Combine cloud computing with on-premise application Creating a SaaS version of on-premise application Provide support services (extra developer tools) for cloud platforms Business implications of cloud computing Page 34 . Access Control transactions and service management operations Data transfers = $0.9% during a calendar month. The Windows Azure platform AppFabric provides secure connectivity as a service to help developers bridge cloud. Microsoft also has a partner program for Windows Azure. and hosted deployments. which gives ISVs willing to make a six month commitment pricing discounts for developer use of the Windows Azure platform.10 in / $0. SQL Azure will maintain a “Monthly Availability” of 99.The SQL Azure Service Level Agreement states that SQL Azure customers will have connectivity between the database and Microsoft’s internet gateway. which provides a central place for ISVs and other partners to begin exploring the Windows Azure platform and to connect with Microsoft and other customers using this platform. Microsoft says that it will eventually offer commitment-based pricing discounts. including Service Bus messages.
The NDF is a global operation.Business implications for PaaS users and IT service providers Indian IT service providers need to take note of the growing interest in cloud based platforms. provides a means for the US government to respond rapidly to non-proliferation and disarmament opportunities.066 THE COMPANY The US State Department’s Non-proliferation and Disarmament Fund (NDF). established in 1994.com’s Force.com. circumstances or conditions that are unanticipated or unusually difficult. THE CHALLENGE NDF program managers work all around the world and don’t always have consistent access to government facilities and information systems.com platform to create a custom application to provide program managers around the world with ready access to up-to-date budget information. This increased productivity while enabling NDF to better manage contractor costs. but of high priority. and directly supports the President’s national strategy to combat weapons of mass destruction and other key US initiatives. NDF program managers were still challenged Business implications of cloud computing Page 35 . Accordingly. all of which are significant business opportunities for Indian IT service providers. Although the NDF used the State Department’s financial system of record and had also developed a custom application to provide program managers with project budget information while they were in the office.A CASE STUDY 11 OVERVIEW The State Department’s Nonproliferation and Disarmament Fund (NDF) used Salesforce. ROI: 216% Payback: 8 months Average annual benefit: $1. they should provide consulting services on how to move applications to cloud platforms such as Windows Azure or Force.625. The transition to cloud platforms will also require a huge amount of redevelopment. coding and maintenance. The flexibility and immediate response available from the Fund ensures that the United States will be able to respond to unforeseen proliferation issues anywhere in the world and is an important tool to take advantage of opportunities to counter proliferation. The following case study explains how NDF used a cloud solution developed by Acumen solutions (an IT service provider) to build a customized application. NDF .
the NDF was comfortable that a secure and reliable application that would meet its needs could be built and integrated with other existing systems in less than a year.com implementation partner. A team at NDF worked closely with Acumen to define requirements and iteratively develop the application and it went live in October 2008. the NDF was able to deliver the application at less than a quarter of the time and cost that would have been required with traditional on-premise development environments. The system was then formally audited.com enabled the NDF to provide program managers with accurate.com functionality and the capabilities of Acumen Solutions. Ready access to information enables program managers to make decisions more quickly and plan program initiatives. Acumen continues to further enhance the application to bring new functionality to end users as needed. Business implications of cloud computing Page 36 . KEY BENEFIT AREAS Developing a custom application on Force. Better contractor management.com. Using Force. THE STRATEGY The NDF considered a number of different technology strategies including database development and customizing an Oracle or SAP application. NDF started working with Acumen (an ISV) to develop the application in March 2008. Increased productivity. they either had to run programs with larger budgets or risk cost overruns. After exploring the Force. The NDF needed a means to track costs across multiple programs and geographies on a real-time basis so it could spend its capital most effectively — and they needed to be able to access the information from anywhere on almost any device.to manage their program budgets: without up-to-date consistent access to information. up-to-date program budget information from anywhere so they can manage programs more cost-effectively. Ultimately the organization decided on Force. not in procuring and managing databases and servers. Key benefits from the solution include: Improved technology management. Better visibility into contract and invoice details on an ongoing basis enables program managers to run projects in a more hands-on fashion to reduce the time and cost of changes and increase overall efficiency. a Salesforce.com for two main reasons: The cloud computing model appealed to NDF from an operational perspective because its core competence was in diplomacy.
integrate.KEY COST AREAS Key cost areas for the deployment included consulting.com platform. and personnel. Consulting made up the most significant cost area as NDF used Acumen Solutions to develop. CALCULATING THE ROI Nucleus calculated the costs of software. test. and further enhance the application iteratively based on user input. The financial analysis detailing the ROI calculation is as follows. The NDF also took advantage of the opportunity to develop the application iteratively with ongoing user input to ensure that functional requirements that weren’t identified in the beginning could still be supported in the application. consulting. Direct benefits quantified included the number of additional hires avoided by making existing staff more productive and the value of reduced contractor overbilling. software. NDF program managers were ideal candidates for use of a cloud computing application. and personnel over a 3-year period to quantify NDF’s total investment in the Force. Business implications of cloud computing Page 37 . which was calculated based on the overall annual budget of the organization and the estimated potential loss from overbilling. and the need to manage them from any location (not just a standard secured State Department network). BEST PRACTICES Given the significant growth of projects and programs to manage.
DETAILED FINANCIAL ANALYSIS Business implications of cloud computing Page 38 .
SECTION 4 Business implications of Infrastructure-as-a-Service (IaaS) .
paying by the hour for active servers. including a one-time reserved instances fee and usage cost. CPU. hence the term "elastic". (An instance is Amazon’s unit of computational capacity). launch.e. customers only pay for the compute capacity that they consume.OVERVIEW OF IAAS Infrastructure as a Service (IaaS) is the delivery of computer infrastructure (typically a platform virtualization environment) as a service. i. the reserved instances costs: 13 Business implications of cloud computing Page 40 . The key characteristics of Infrastructure as a service include Resources delivered as a service including servers. the instance is reserved and there is no further obligation. For example. For a one year commitment for the EC2 reserved instance. server instances. Customers make a one-time payment for each instance they want to reserve and in turn receive a significant discount on the hourly usage charge for that instance. data center facilities. Amazon compares the one-time fee to “acquiring hardware.” Here’s the breakdown of the on-demand instances costs vs. EC2 allows scalable deployment of applications by providing a web services interface through which a customer can create virtual machines. After the one-time payment. an ondemand EC2 Small instance costs $0. on which the customer can load any software of their choice. network equipment.10 per hour. disk space. A customer can create. the cost is $0. Amazon EC2 allows customers to rent computers on which to run their own computer applications. memory. Dynamic scaling of infrastructure which scales up and down based on application resource needs Variable cost service using fixed prices per resource component Multiple tenants typically coexist on the same infrastructure resources Enterprise grade infrastructure allows mid-size companies to benefit from the aggregate compute resource pools 12 AMAZON EC2 – A CASE STUDY The most widely used IaaS service is Amazon’s Elastic Compute Cloud (EC2). A customer can set up server instances in zones insulated from each other for most failure causes so that one may be a backup for the other and minimize down time.067 per hour. and terminate server instances as needed.” and hourly usage fee to “operating costs.
14 The results are as follows: Business implications of cloud computing Page 41 .A comparison of IaaS providers on pricing and features offered was carried out by InformationWeek.
Business implications of cloud computing Page 42 .
Cycle Computing supported Varian’s implementation of CycleCloud for scientific computing needs in the cloud. Cycle. while enabling access to tremendous compute power. Varian used CycleCloud to dramatically decrease the time required to compute product design simulations. then shut down when calculations completed. Business implications of cloud computing Page 43 . Lower costs to operate: CycleCloud’s pay-per-use model for fully secure. has developed CycleCloud to address the growing need to rapidly deploy clusters for pay-as-you-go intensive computing needs. This empowers researchers to get results and develop products faster. To summarize. the primary benefit of IaaS is that companies no longer need to have hardware and infrastructure on their balance sheets – rather they can convert this huge fixed cost into variable costs which depend on their usage of this infrastructure. they needed to get results done faster. a systems integrator specializing in cloud computing and high performance computing. By easily provisioning a secure cluster with the encryption required to execute sensitive calculations on the cloud. with a reputation for high quality products for scientific industries. Speed to market: In Amazon’s Elastic Compute Cloud. CycleCloud dynamically scaled up to execute the simulation. while only using the servers they need. Varian was able to access a supercomputer with several hundred cores for a day. With CycleCloud. Business Challenge: Varian needed to simulate a design for a mass spectrometer. provisioned clusters removes upfront capital expenditures and the costs of an operations team. obtaining their modeling results just in time for the conference presentation and avoiding the overhead of buying and managing their own computers.VARIAN – MINI CASE STUDY 15 Cycle Computing. With a conference deadline for completed results looming.Cloud makes high performance cloud computing easy. Varian. running a calculation on 1 machine for 100 hours costs the same as using 100 machines for 1 hour. while decreasing costs. Varian was able to run this several week calculation in under a day using CycleCloud. Inc. and nearly 6 calendar weeks on an internal pool of processors. is a leading Scientific Instruments Company. a very compute intensive operation. Solution: Rather than purchasing hardware. In summary. By provisioning a fully secured cluster that grew to several hundred CPUs on Amazon’s Elastic Compute Cloud (Amazon EC2). Researchers run calculation intensive monte carlo simulations of future products using partial differential equation mathematical models. The simulations required several thousand compute hours.
SECTION 5 Putting it all together .
it has increased its global footprint with rollouts in a few European countries through acquisitions. Over several decades of running the business. Branding and superior customer service—Customer feedback and collaboration are key to the success of Globtron. Again. Rapid global expansion—Although Globtron is growing both organically and via acquisitions. while taking care of local requirements and constraints.S. establish its brand worldwide via superior customer service. so as to connect better with customers and improve customer service. Globtron also wants to increase its existing service and channels mix to improve customer experience. Globtron wants to leverage its existing investments in IT and reduce licensing. who wants to offer collaborative applications and business tools to customers and store staff.CASE STUDY – GLOBAL RETAIL ENTERPRISE 16 Model Business Drivers How do cloud opportunities for enterprise IT derive from the business pressures and enterprise requirements? Let us take the example of Globtron. a fictitious retailer of electronics goods. The key business challenges for Globtron are to expand rapidly and extend its footprint to emerging markets in Eastern Europe and Asia. and drive growth further through new business services and channels. Recently. without having to commit to extensive investments in IT infrastructure. Globtron wants to try out the new services and channels quickly and review initial progress through pilot launches. instead of managing servers and infrastructure. hosting. and maintenance costs to benefit from what Globtron believes will offer benefits of economics of scale. Business implications of cloud computing Page 45 . The challenge is to deploy existing staff in the United States and local IT to focus on the core business and build innovative applications for merchandising and customer service. its objective is to adopt its existing business best practices and IT systems. customer service. Globtron management knows that its core business value that drives customers to their stores is in merchandising. Globtron is a U. Driving growth via new business services and channels—Apart from opening new stores across several countries. and branding.-based retailer that has a strong brand presence.
Business implications of cloud computing Page 46 . This is only an illustration for discussing the concept and approach. we list the application requirements to address the key business issues that are linked to the key business drivers. We are limiting it to the sales and marketing sub-domain of the retail enterprise.Application Scenarios for Each Business Driver Next. and is not a comprehensive listing of all possible scenarios and solutions.
Rapid Global Expansion Global usage of service-based loyalty application—Globtron has built a loyalty application in the United States that exposes Web Services for consumption from multiple channels. New store portal for store staff—Globtron also wants a store portal for the store staff. Extension of homegrown e-commerce system internationally—Globtron has established a successful online e-commerce and is able to drive huge traffic and sales in the United States. such as operation manuals and best practices. so that the retailer can improve communication and collaboration with the store staff and share information. The business team decided to experiment with online selling for this segment. Driving growth via new business services and channels New venture into online home-appliance retailing—As part of its strategy to venture into new services. the success of this business will require some initial pilots and feedback before it can go full steam into it. obtain feedback on its product and services. compute loyalty points. because its store format is small and medium. The services allow store and e-commerce systems to validate the loyalty card number of a customer. and drive more sales. Globtron does not have much real estate for this business. including store and e-commerce systems. build loyalty. Centralization of store systems—One of the pain points for retail IT is the overhead and cost that are involved in distributing software upgrades and patches across stores. Business implications of cloud computing Page 47 . Globtron wants to rearchitect and deploy a central store system that is accessible from the store devices via the Internet and the smart-client model. However. and discussion forums. New CRM system for repairs service—Globtron wants to improve the customer service for its electronics-repairs business that is available in several stores through automation. and drive sales and customer loyalty through collaborative applications such as reviews and ratings. but without the hassles and costs to set up multiple instances for similar functionality across different countries. However. Branding and superior customer service New social-media applications for customer feedback and collaboration—Globtron wants to engage better with its customers. Globtron decided to retail large home appliances in Germany. and set up the customer in the loyalty system. Launch of online marketing campaign—Although Globtron does not have a significance presence in online selling outside the United States. The Globtron business team believes that it should leverage this system globally for all other countries. videos sharing. it wants to launch an online marketing campaign to provide offers for its customers. Readiness to address peak workload for e-commerce—Globtron has asked its IT department to assess the readiness of its infrastructure to address peak workload demand for the upcoming holiday season. Globtron wants to utilize the existing e-commerce application for rollouts across the world.
Mapping application scenarios to cloud application characteristics Mapping application scenarios to cloud types Business implications of cloud computing Page 48 .
The following are some of the cloud-solution options for Globtron: New portal for store staff and CRM system for repairs service—Leverages SaaS offerings such as Microsoft Office SharePoint Online and Dynamics CRM Online.NET Services Centralization of store systems—Re-architects and deploys the existing application on the Windows Azure Platform The remaining three could be developed by using a PaaS offering. such as the Windows Azure Platform and the Google App Engine: Launch of online marketing campaign New venture into online home-appliance retailing New social-media applications for customer feedback and collaboration Business implications of cloud computing Page 49 . Readiness to address peak workload for e-commerce—Cloud burst to an IaaS service such as Amazon EC2 Extension of home-grown e-commerce system internationally—Can again deploy it on the Cloud by using an IaaS offering Global usage of service-based loyalty application—Exposes on-premise loyalty Web Services to all other countries by using integration in cloud offerings such as Windows Azure Platform .
SECTION 6 Future trends .
Until recently. SOA applications will flourish. There are solutions in the marketplace today. or services. thus enabling the next very important step in bringing the cloud to a SOA. Cloud processing (dynamic allocation of CPU resources) and cloud storage (Web services API access to storage resources) infrastructure is the most natural target platform for SOA apps because cloud infrastructure is designed to scale in the way implied by the SOA approach to application architecture. solutions usually constitute a set of virtualized resources and capabilities that allow those resources to be managed. Manage the virtualization When we look at cloud computing in very plain terms. would be a two step process: 1. There weren't many options until the earliest cloud computing service providers deployed large-scale cloud infrastructure. Services can be invoked. frameworks that enable application functionality to be provided and consumed as sets of services published at a granularity relevant to the service consumer. And the cloud is the technology by which these services are delivered from party to party. SOA is defined as “The policies.MIGRATING FROM SOA TO CLOUD COMPUTING 17 Service Oriented Architecture (SOA) is a business-centric IT architectural approach that supports integrating business as linked. To put it differently. the services. SOA is about proper system architecture while cloud is about the infrastructure. Virtualize the services 2. The SOA world owes Amazon and Rackspace a big thanks for making the infrastructure investment required to launch S3. standardsbased form of interface. The concept of Service Oriented Architecture (SOA) has been around for a long time. and some people believe it has not fulfilled its promise. and are abstracted away from the implementation using a single. an SOA application was severely limited because of lack of infrastructure. CloudFiles. As the rest of the Hosting market--and broader IT service provider industry--follows suit. To bring the cloud to SOA the goal should be to create a cloud of services. This. Virtualizing the services in a SOA is a logical first step then toward moving to a cloud-enabled SOA. EC2. SOA is well on its way to fulfilling its promise and the rise of cloud computing infrastructure is an important step in this process. Business implications of cloud computing Page 51 . service infrastructure. as a general outline. Technically. While SOA has been around for quite some time now. repeatable business tasks. the way you build. SOA is the underlying architecture. practices. so to run properly SOA applications need infrastructure architecture that lends itself SOA. and service. and CloudServers.” SOA has witnessed high levels of adoption by IT service providers. maintain. cloud computing is yet to reach a level of maturity among organizations. the service becomes a virtualized resource. govern. the WebSphere CloudBurst Appliance being one. To the contrary. CloudSites. In effect. Organizations are now beginning to use cloud computing as an extension to SOA. SOA applications inherently call upon Web services to request resources. which provide users a virtual packaging that includes an operating system. and orchestrate the services you deliver. published and discovered. The best way to cloud-enable a SOA is to deal with the heart of SOA.
one would need to be connected to the internet. But. and everything else is on the server. This is the need that Google aims to tap into with the launch of Chrome OS. with free Wifi coverage. is mainly used by software professionals who utilize the advantages including reduced hardware costs and on demand scalability. uses console level command line tools as the primary interface to AWS. Cloud based operating systems like Chrome OS will be license-free and supported by revenues from advertisements instead. Google Chrome OS is aimed at users who spend most of their computer time on the Internet. Chrome OS is setting the stage for the rise in netbooks as evidenced by Dell’s recent announcement regarding Chrome OS support. Amazon AWS. resource procurement is not straight forward or user-friendly. The Chrome OS is considered a significant milestone in the history of cloud computing. like AWS would need to provide functionality where individual applications would be able to dynamically locate and utilize the remote resources.S. Once complete wireless connectivity becomes a reality. with minimal user interaction. The move by Google has already seen response from competitors. The option should be as simple as Run Application on the Cloud. Pricing strategies are also likely to change. This problem presents a huge opportunity. That's the future of cloud computing—where the processing power. Microsoft has announced online support for its popular Office suite of applications. which in turn should call the back end API's which will take care of all the connectivity. Google recently announced pilot tests to grant 47 airports in the U. spreadsheets and presentations. Enterprise level public clouds. The cloud. cloud computing will move out of the domain of business users and will become hugely attractive to end users. 2009. allocation and security issues. and your hand-held device is really just a dumb-terminal into the cloud that displays what you would see if you were right there.LAUNCH OF GOOGLE CHROME OPERATING SYSTEM On July 7. for example. Another cloud based operating system. The alternative. also needs a lot of user interaction and knowledge. The ordinary user cannot be expected to go through the whole process just to run an ordinary application. Business implications of cloud computing Page 52 . But because Chrome OS requires internet access to initiate the core operating system and all its applications. as of now. direct and secure way in which applications can use the computing power and storage from a remote cloud. since it is the first operating system depending entirely on the cloud. Because the browser will be the only application residing on the device. meaning one will no longer have to install Microsoft Office to view or edit documents. What is required here is a user friendly. till now. Jolicloud has also been launched – it will primarily be widget based and run web based applications. Google announced the launch of Chrome OS. ElasticFox plugin or RightScale interface. The next 10 years are predicted to witness the biggest wave of Wifi implementation. data. operating system. an operating system based on Linux and targeting specific hardware such as netbooks.
While there is a certain level of awareness about what services and benefits the cloud has to offer. Similarly. the textile industry in India comprises a four stage value chain. Cluster-specific solutions like specialized solutions for the leather industry. HDFC Standard Life Insurance is also considering the use of cloud computing. Currently there aren’t many specific customized solution catering to each process of the value chain. SMBs would not have to necessarily invest in software licenses or make high capital investments. Product companies might provide software free of cost and generate revenues from advertisements. and offers some cloud services such as Information Protection Services (cloud storage). i. textile industry. CRM and security solutions on ‘pay per use’ basis. YES Bank. it is likely that the Software-as-a-Service model can be effectively used to tap the needs of this sector. Microsoft India has started offering its Dynamics Suite of ERP applications through SaaS model. The SMB sector provides significant business opportunities for Indian IT service providers for selling SaaS based solutions. For e. is currently evaluating cloud services.e. Also. However most of IT solutions are not customized to vertical / cluster specific problem of SMBs. may be the first to use cloud resources. with the large SME/SMB population and the emergence of many start-ups. In most of the cases. and others. processing and stitching. Netmagic recently announced its cloud offerings in India and already has a few customers. to turning towards cloud providers that can present some attractive potential savings. which has a solution deployed on a Software-as-a-Service model. With this model. IBM recently announced a Dynamic Infrastructure Lab in Pune. the scope for growth is huge. data storage. Product companies are also likely to focus on revenues from advertisement for SMB sector. SMBs would be able to access applications like ERP. Considering these requirements of SMBs.CLOUD COMPUTING IN INDIA 18 Most analysts and vendors believe that India is still a nascent market for cloud-based services. The uncertain economy and tight budgets have companies looking for ways to lower operating costs. e-mail and LotusLive (collaboration tools delivered over the Web). spinning. SMB owners need to be convinced of returns before making any capital investments in IT. automobile industry from organizations like SAP are very expensive and run as on-premise Business implications of cloud computing Page 53 . by outsourcing e-mail. Wipro Infotech has announced that it is setting up a few data centers around the country.g. SMB owner expects the quantified benefits such as growth in revenues/profit margin or significant cost savings. which would also allow the company to offer cloud computing services in the form of IT infrastructure and specific Business Applications as a service. However. such as those under the umbrella of Business Intelligence. provided the concerns over the adoption of these services are addressed. Indian organizations are also jumping onto the cloud bandwagon. but that are not critical from a transaction processing perspective or are not customer facing. organizations are taking a cautious approach and are still experimenting and testing both public and private cloud services. application delivery.5 billion in 2007-08 which happens to be around 30% of the total IT spend in India. weaving. CIOs too share a similar point of view. IT spend by SMBs was USD 6. Applications that require computing firepower.
This perception exists largely because of the fact that a SaaS application resides in a server outside the user’s premises in a shared environment. A large number of companies do not know of the existence of SaaS as an alternative to the traditional model of software delivery. they would witness higher adoption and would also enable more SMBs to adopt IT without affecting their expenditures significantly. If these applications can be moved to the cloud. Lack of trust and perceived reliability: Trust and reliability are key challenges because many of the SaaS vendors are small companies or startups that are not widely known which holds back adoption. in a region where piracy is rampant and many SMEs use pirated versions of software. Business implications of cloud computing Page 54 . Power issues: It will take a few more years for the country to become efficient enough. Resistance to paying for services and piracy: In many countries including India. As applications are accessed online. Bandwidth issues: Many of the SaaS applications consume substantial bandwidth. or nearly so. It is likely that it will be only after three to five years that India will see large-scale cloud service adoptions. Companies like Microsoft. service is often taken for granted and viewed as something that must be offered with an application for free. to support large data centers which can host large-scale cloud services from within the country. For this purpose. in terms of power supply. It will also take time for the broadband infrastructure to improve enough for cloud services to be adopted extensively. Hence. Security concerns: Security is another key issue.applications. they can hire industry experts as evangelists who can explain how SaaS solutions can be customized for specific SMEs. Moreover. Broadband penetration in India is also insufficient for organizations to move to a cloud based model. Some of the key challenges in the proliferation of the SaaS model in India have been the following: Lack of Awareness and Understanding: The biggest barrier inhibiting the adoption of SaaS beyond a small section of the market is a lack of awareness and understanding of SaaS. they do not take it into account at all while considering a software deployment. Many prospective users consider SaaS applications less secure than on-premise applications. the quality of bandwidth from the enterprise end to the data centre where the application is hosted could be an issue in many cases. there is also a lack of willingness to pay for services. SAP and Infosys should first spread awareness about cloud computing and how it can benefit SMEs.
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