Strategic Importance of Cloud Computing in Business Organizations
Krishna Kalyanam
Campbellsville University
Abstract
In the 21st century cloud computing is like what electricity was in the 20th[1]: It’s transforming the way we do business. In the present business world with the amount of economic fall and loss happening every day, there is much demand for a technology which is reliable, yet affordable; cloud computing is one such technology. We can say cloud computing as the successor of grid computing. Cloud computing helps business organizations of all sizes to transform their current technological operations by establishing an adaptable and flexible IT environment to meet the changing requirements. In the present business organizations, the need to achieve more with less investment is at the financial core, and cloud computing’s increase in demand makes it as the perfect source for the organizations to operate effectively even with a tight budget. Unnecessary expenses including hardware, software, administrative are avoided in the businesses by opting cloud computing. These features are compelling the business organizations to adopt cloud technology in the first place. By researching the cloud computing services available, this paper describes the impact of cloud computing on the business organizations. By using Netflix as an example this paper focuses on how cloud computing can be utilized in a business and, we can determine which type of businesses would benefit most from this technology [17].
Keywords: cloud computing, technology, grid computing, cloud services, advantages, Netflix
Introduction
We can consider cloud computing as the successor of grid computing. Unlike grid computing cloud computing doesn’t get to access the resources required for the business application directly, rather it gets to them through something like a service. These computing clouds are developed on large servers that are hosted by an organization, which provides services to others. These services are provided on demand and on a pay-per-use basis. Examples of businesses that run their applications on cloud are CRM, HR, accounting and custom build applications. Especially in the small businesses cloud computing is an excellent technological tool, since the customer doesn’t need to pay for the software, hardware and maintenance instead they can use the services form the cloud and pay as per they use. And opting the cloud services allows the customers to focus on their applications instead of worrying about the software maintenance, performance or upgrades as the cloud service providers periodically upgrade the services automatically to facilitate new features, security and performance. The best example of cloud computing which is a trending nowadays is AWS (Amazon Web Services). AWS provides services like database, storage, mobile services, application services from which the customers can buy any service as per their business requirement.
At the beginning this paper gives an explanation about cloud computing. Next section describes the characteristics of cloud computing. Besides, the cloud computing service models will be provided by explaining what are the functionalities of individual model. Next section of the paper will discuss the importance of cloud computing in the business organizations. There is case study in the paper on Netflix, through which it is explained how can cloud computing used in a business application. In the next section, the paper will conclude by seeing the impact of cloud computing on the business organizations including the challenges of the adoption of cloud computing. Finally, will summarize the whole paper briefly including future research areas.
An explanation of cloud computing
Cloud computing technology is a hot cake in the market today. However, even with many talks about cloud computing there still seems to be a debate on the exact definition of cloud computing. There are many definitions for cloud computing in the internet, in simple terms, it is basically a technology that is used to access different services over the internet which is referred to as “the cloud”, these services are maintained on remote servers by a service provider. Cloud computing technology has enabled the customers to work on variety of mobile devices, these include PCs, laptops, smartphones, PDAs. Using these devices, the users can access services like storage and business development applications over the internet, via services provided by the cloud service providers.
When it comes to business, of course, it is all about competition each business wants to be better than the others. Their goal will be to maximize their profits with minimal investment. To do this, many are opting for cloud computing, but it is not just about opting the cloud technology; it is also about taking into consideration the providers who are providing the cloud services. Cloud computing has many such providers for the business organizations to choose from. Some of these providers are Amazon, Google, Microsoft, IBM, Yahoo and eBay. However, every company offers different set of functionalities within their cloud. These companies have also come up with different internet services like social networking, mailing services that use cloud computing.
Nowadays cloud computing is commonly used to describe the availability of software, infrastructure, and storage as services over the internet. Cloud computing solutions can make the way your business operates simpler, mainly regarding the hardware needs. Because, through a cloud service you need not maintain the hardware for your required service instead you will be able to connect and access the same information from anywhere and enjoy a more streamlined technology installation, as shown in the picture below [17][15].
Figure 1: Technology installation before and after cloud computing implementation. [11]
Characteristics of cloud computing
On-demand self service
All the services provided by the service provider such as email, applications, network or server service can be provided to the customer without the human intervention with each service provider. Once configured these cloud services can automated requiring no further human involvement from the customer or the provider side, mostly done through web based self-service portal often referred as management console. Thus, this is called as on demand usage environment [17] .
Ubiquitous Access
This represents that cloud computing services are widely accessible to the customers through standard procedures that support multiple client platforms such as mobile devices, laptops and workstations. That means these computing services can be accessed anywhere, anytime with a standard communicating device that can access internet.
Resource pooling
Resource pooling is something that can be achieved by using a multitenancy model. The provider’s cloud services are pooled on a shared cloud storage device to serve multiple customers by using multitenancy models. Multitenancy allows multiple cloud service customers to access the same service or its instance, being completely unware that the same service may be used by other customers.
Rapid elasticity
Elasticity is the ability of the cloud service to continuously (sometimes automatic) provide the services to the customer either on demand from the customers or sometimes automatically as per the runtime environments. Elasticity is the main reason to adopt cloud computing as it is closely related with cost benefits.
Measured usage
This represents the ability of the cloud service provider to keep track of the usage of its services by the customers. Based on the amount of services used and by the timeframe the customers are charged for the services. In short, all the services are based on pay for usage [13].
Cloud computing service models
According to NIST (National Institute of Standards and Technology) cloud computing has service models: infrastructure as-a-service (IaaS), platform as-a-service (PaaS) and software as-a-service (SaaS). The below diagram shows in simple terms what types of services are provided in each model [7] [15].
Figure 2: Cloud service models [12]
Infrastructure as-a-service (IaaS) [7]
As the name suggests IaaS provides the infrastructure for the applications to run, virtualization is the main concept behind the IaaS service model. IaaS provides the physical devises such as virtual computers, servers, storage devices, which are physically located in a data center (remote places), but they can be accessed by the customers over the internet by using login id and password from any device anywhere.
Platform as-a-service (PaaS) [7]
This model represents a ready-to-use working environment typically consisting of already deployed IT resources like operating systems, databases and middleware’s. These resources are made available to the customers over the internet. Instead of buying licenses for all these resources, maintain them the customers use them from the cloud.
Software as-a-service (SaaS) [7]
SaaS represents a software program maintained in a shared cloud service and it is made available as a product to the customers over the internet. There will be many SaaS products available over the internet which can be leased and used for many purposes and via different means. So, by adopting a SaaS service the customers can avoid the work of installing a software on the client system, regularly updating it with the patches and version upgrades etc., which are unnecessary for them to perform, instead they can lease the products from a cloud service provider.
Importance of cloud computing in business organizations
Today, cloud computing is trending in all kinds of businesses, let’s go back to the reason why business organizations started looking for a technology like this in the first place [2]. There are innumerable reasons for the emergence of cloud computing, the major reasons for the cloud emergence are:
Rapid growth of computers and communication technologies.Changes in management philosophies.Availability of excess computing resources: with giant corporations like google and amazon which are providing services like software products, infrastructure etc.,The figure below shows the gist of the reasons for the organizations to adopt cloud computing
Figure 3: The reasons behind using cloud computing services [19]
Benefits of cloud computing in business
Cloud computing is quite different from other computing concepts like grid computing, utility computing. Basically, it provides an interactive and user-friendly platform where the customers can access their required services over the web, it is like using web applications.
In today’s competitive world cloud computing has played a vital role for the business, they have found cloud computing as an innovative technology which lets them to stay competitive among other organizations in the market. Cloud computing has proved that it can provide the resources which the traditional IT solution model couldn’t provide[3] [6][7].
Cost reductionThe main reason business organizations started reaching out to cloud computing is because it helps them to reduce their cost in the business. Organizations are fascinated by the idea of cost reduction as the cloud service providers provide “in-house” availability of these services. Besides, the organizations got to pay only for the services they use.
FlexibilityMost of the organizations adopt the cloud services because of its flexibility, it allows each employee to work literally from any place if they have access to internet through any kind of device, they need not be physically present at the workplace. Cloud computing enables the employees to share the documents over the internet simultaneously. Besides, as all the business documents are shared over internet virtually, it allows the employees to access them simultaneously.
Automatic upgrades and maintenanceIn a business organization when an IT solution has been implemented, it becomes a problem to maintain that IT solutions due to the high cost of purchasing and maintaining the hardware and software. This has become a drawback. These problems are solved by switching to cloud computing. By opting for cloud computing you need not worry about the hardware and software upgrades a these will be handled by the cloud service providers. They will do the maintenance and upgrade activities on time to time basis.
AgilityIn today’s business, it is necessary for the organizations to be competitive. One of the ways to make your organization different from others is the ability to be able respond to fast changing needs of the customers. Due to the flexibility of the cloud services the organizations have access to cloud services round the clock. This helps the organizations to fulfill the customer needs in a short span of time. Cloud computing helps to increase the agility in your business. You will be able to adapt quickly to the changing needs and respond to them.
ScalabilityAnother benefit of cloud computing is its nature of being scalable, it allows the users to adjust to the services based on the changes in business needs. Due to scalability of services in the cloud, it helps to solve the problems of business organizations and results in increase customer satisfaction. Besides, cloud computing allows the users to analyze large amount of data in just no time due to its high processing power. This has helped lot of organizations to analyze the market and predict the customers buying habits and their behavior [4].
Let’s understand the impact of cloud computing on the business by taking an example. Below is a case study on Netflix and how it uses cloud computing.
Netflix case study: cloud computing and its impact on business
Introduction
Netflix is an entertainment company that was founded in 1997. Initial business model was based on an ecommerce model where the company rented DVD’s to its customers. Then as the internet technology evolved Netflix changed its business model from renting DVD’s to complete online video streaming model [21].
Now Netflix has around 103.95 million members or subscribers worldwide and its overall revenue is little bit over 8 billion dollars and its growing very fast. In this case study, we will study about its previous infrastructure with data centers and its current AWS cloud infrastructure. This case study, would give us clear understanding about cloud computing and its impact on overall business of the company.
Netflix infrastructure
Netflix initially streamed all its content from its own data centers, while the company was small with less number of subscribers the data centers model was working out well for the company. But once the company grew big and the subscribers kept increasing the current data centers were unable to handle the excess load on its servers. Main issues with the data center model was [22],
Servers were unable to handle the extra load as more subscribers wanted to access the Netflix database. Due to this the whole data center was going out of service and there was interruption in the service which lead to dissatisfaction in the customers.Unable to scale up its processing and storage capacity while there is high demand for it.Exponential increase cost of maintaining, upgrading and construction of new data centersInfrastructure issues during global expansion of Netflix.So, to address these issues with data center model Netflix decided to go with AWS cloud computing model.
AWS cloud model
As shown in the figure 4 AWS cloud model has many different components that help Netflix to function properly. [22]
AWS uses EC2 services, which does all the processing and computation. EC2 is just like CPU, its functions are all same as CPU. So, when we go to www.netflix.com its EC2 that receives your request and takes you to main pageOnce we enter the main page via EC2 we need to enter all our details like user ID and password to login so once we enter all credentials, EC2 will send the request to match credentials in AWS RDS which is a relational database services which stores all user information and list of all video available in Netflix. So, if the credential user entered matches with the data in RDS, user will be given access into Netflix user account page.Figure 4: Basic AWS Model for Netflix [22]
Once we login into user account we can access the list of available videos on the screen this list is fetched from RDS and when we select on item from the list EC2 will process the request and send to Amazon S3, it acts like the hard disk where all the actual video files will be stored once the request find the required file it send the connection back to EC2 and we can watch the video.So, whenever there is sudden increase in demand from users AWS uses Elastic load balancers (ELB) and it creates more EC2 instances (figure 4) which would provide more computational power and can accommodate more users at a single time and when the demand is less ELB will take down required instances so that AWS will provide scalability up and down. Hence it will provide uninterrupted services.Figure 5: Scalability for Netflix in AWS Model [22]
Business impact
Once Netflix moved to AWS cloud based architecture it got all the benefits of cloud computing with extra AWS services benefits. So as technical workflow was explained above we can understand that AWS cloud computing could run Netflix in cloud environment very efficiently and it easily addressed all the issues Netflix faced with data center model. Once Netflix moved to AWS environment there was huge impact on their business.
After AWS migration Netflix closed all the data centersThis saved huge infrastructure cost.Netflix saved a lot on equipment cost.Data Center maintenance cost was fully eliminatedNetflix could provide uninterrupted services to its customers which helped them to attract more customers and grow the business.Due to cloud computation benefits and availability of AWS zones all over the globe Netflix was easily able to expand globally which gave them huge boost in their business as its market size increased.As AWS gives us good scalability, Netflix was only paying for AWS resources they were using at a given point of time, for example if there is no traffic on Netflix website than AWS will scale down all it services to minimum requirement and Netflix will not be charged at that point of time but in Data center model even if there is no traffic in Netflix website they must pay full price for its maintenance and processing.So, we can conclude that cloud computing had really changed the entire business model of Netflix and this case study clearly explains the technical aspects of cloud computing which explains us how it impacts the business.
Conclusion
As we have discussed throughout the paper, cloud computing is emerging as an extremely important technology in the current business world. There are many advantages for adopting the cloud technology such as cost reduction, flexibility, scalability etc., Also there are different models of cloud services to choose from based on the type of business solution you are looking for [5] [4].
So, till now we have discussed how good and advantageous is cloud computing for the businesses, but there are some shortcomings that needs to be taken into consideration. As there is famous quote “With great power comes great responsibility”, in this case also for this great technological invention there are some challenges that the business organizations need to face. The major challenge they need to face here is cloud security. Cloud computing is a place for the business organizations to host their web applications, this has attracted the hackers to steal the data from the cloud and misuse them against the organizations.
As more and more companies adopt cloud computing the future of cloud technology becomes uncertain. The competition for cloud computing service providers increases, the question is how will they react to that competition? How will they try and beat their competition? What is certain here is that the popularity and user ability will only increase in the future. Cloud computing gives its users the services they to be successful, innovative and one step ahead of their competitors [8][9][10].
Summary
In this paper, cloud computing concept, characteristics of cloud, different services of cloud computing and the benefits of cloud computing are briefly discussed. Cloud computing has many benefits and has become one of the transformational technologies in the recent times. Although, like every other technology, cloud computing services also have some downsides, but it is clearly seen that the benefits of cloud computing outweigh its downsides. By using cloud computing efficiently and correctly any business can earn huge profits by allowing fewer employees to work remotely, but it can also rise the productivity of the organization. Employees no longer need to wait for other team members to gather to work on a single project, rather they can log into the cloud services via internet from anywhere anytime still being up to date with their team members.
As discussed in this paper, cloud computing brings ease and benefits to the organizations such as flexibility, scalability, cost reduction, automatic software and hardware upgrades and agility. The main benefit that every organization adopts cloud computing is cost, the business organizations need not buy and maintain the hardware and software resources required for their application. Some of the impacts of adopting cloud technology in the businesses are ease of use, cost reduction, reliability, sharing and collaboration, security and privacy.
To conclude, cloud technology has humungous advantages over traditional IT solutions but also comes with some challenges and disadvantages. The cloud service providers should place the safety of cloud computing services in the first place and take good safety measures. So, cloud computing has great impact on the business organizations when security risks are taken care of.
References
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