SCHOOL OF MANAGEMENT IN TRENČÍN

The Business Impact of Cloud Computing

Bachelor Thesis

2013 ERIK BIELY

SCHOOL OF MANAGEMENT IN TRENČÍN

The Business Impact of Cloud Computing

Bachelor Thesis

Study program: Business Administration Number of the field of study: 6284 Title of the field of study: 3.3.16 Economics and Business Administration Workplace: School of Management Bratislava Thesis advisor: Rudolf Rössel, MBA.

Bratislava, 2013 Erik Biely

Abstrakt

Téma: Cloud computing a jeho dopad na biznis

Kľúčové slová: cloud computingové platformy, konkurenčná výhoda, implementácia

Táto bakalárska práca je zameraná na jednu z najpraktickejších foriem modernej

informačnej technológie, ktorou je cloud computing. Výber tejto témy ovplyvnila

skutočnosť, že cloud computing nie je všeobecne aplikovaný v štruktúrach slovenských

firiem, najmä pokiaľ ide o malé a stredne veľké firmy. Cloud computing je schopný získať

pre danú firmu konkurenčnú výhodu pred ostatnými subjektmi používajúcimi zastarané

formy riadenia biznisu. Analyzovaná teória poukázala na množstvo nevyužitého potenciálu

v rukách moderných manažérov a majiteľov firiem. Pokračujúca ekonomická recesia

vyžaduje od vedenia firiem nové prístupy k biznisu v prípade, ak chcú prežiť alebo zvýšiť

svoj podiel na trhu. Táto práca sa zaoberá implementáciou cloud computingu v

špecifických podmienkach vydavateľstva zameraného na vydávanie knižných publikácií.

Z porovnania starého biznis modelu bez cloud computingu s novou alternatívou vyplynuli

nové poznatky smerujiúce k vyššej výkonnosti, praktickej využitelnosti, flexibilite a

zníženia nákladov podniku. Zo spracovaného materálu možno vyvodiť viaceré výhody

tohto moderného prístupu k riadeniu firmy, ktorý možno uplatniť vo väčšine podnikov so

zastaranými stereotypmi.

Abstract

Topic: The Business Impact of Cloud Computing

Key words: cloud computing platforms, competitive advantage, implementation

This thesis is focused on one of the most practical forms of modern information

technology – the cloud computing. Such topic was selected due to the fact, that cloud

computing is generally not frequently applied in the structures of local Slovak companies -

namely the small and medium sized businesses. Cloud computing is capable of delivering

strong competitive advantage over other competitors who use old-fashioned ways of

management and doing business. Analyzed theory showed how much unused potential lies

in the hands of modern managers and business owners. The ongoing economical recession

requires new approaches for companies that want to survive or boost their market share.

This thesis illustrates an actual implementation of cloud computing to a specific publishing

company. Comparison of old versus newly gained utility, cost saving and flexibility will be

described. Related theory, which was analyzed, shows numerous business advantages that

might totally transform most of the companies with their old fashioned stereotypes.

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Table of contents

Explanation of terms..............................................................................................................8

Special Thanks.......................................................................................................................9

1 Introduction and problem definition..................................................................................10

2 Overview of used sources..................................................................................................11

3 Methodology and research procedures .............................................................................12

4 Thesis goals.......................................................................................................................12

5 Theoretical description of cloud computing......................................................................13

5.1 Definition of cloud computing.......................................................................................13

5.2 Differentiation of cloud, cloud computing and cloud services......................................14

5.3 Cloud computing characteristics....................................................................................15

5.4 Cloud computing deployment models............................................................................16

6 Cloud computing platforms...............................................................................................17

6.1 Infrastructure as a service (IaaS)....................................................................................17

6.2 Platform as a service (PaaS)...........................................................................................17

6.3 Software as a service (SaaS)..........................................................................................18

6.4 Software and service (S+S)............................................................................................19

6.5 Storage as a service (STaaS)..........................................................................................20

6.6 Data as a service (DaaS).................................................................................................20

6.7 Security as a service (SECaS)........................................................................................21

7 Business impact of cloud computing.................................................................................22

7.1 Steve Jobs as a visionary of ‘’cloudy’’ future................................................................22

7.2 Trends (2013+) in cloud computing...............................................................................23

7.3 World of business going mobile.....................................................................................25

7.4 Global cloud computing situation..................................................................................26

7.5 Business point of view: developer, investor, consumer.................................................26

7.6 Threats of cloud computing in business.........................................................................27

7.7 Benefits of cloud computing in business........................................................................28

7.8 Cloud computing challenges..........................................................................................30

7.9 Important insights of cloud computing..........................................................................31

8 Implementation..................................................................................................................32

8.1 Company description......................................................................................................32

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8.2 Google drive vs physical storage server ........................................................................33

8.3 Microsoft office 365 vs on-premise office 2013 business ............................................33

8.4 Webex meetings.............................................................................................................34

8.5 SWOT.............................................................................................................................34

8.6 TCO................................................................................................................................35

9 Conclusion.........................................................................................................................37

10 Resumé............................................................................................................................39

11 References.......................................................................................................................40

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Explanation of terms

TCO – Total cost of ownership

IT – Information technology

Edge - Factor that gives superiority over competitors

CRM – Customer relationship management

SWOT – Analysis elaborating strengths, weaknesses, opportunities and threats

Horizontal scalability – Connecting numerous software or hardware entities in order to

make them work as a single unit

Vertical scalability – Increasing capacity of software or hardware by allocating additional

resources

CAGR – Compound annual growth rate

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Special Thanks To Rudolf Rössel, MBA., who helped me with this thesis and provided me with useful

feedback and support through the process of research and implementation.

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1 Introduction and problem definition

Cloud computing is one of the most modern approaches in information technology

applied to the world of business and entrepreneurship. It has a broad practical use for a lot

of companies operating in different areas, for example – sales, marketing or information

technology. The fact that it is still undiscovered by many businesses creates automatically

a powerful advantage over competitors, also described as an edge. This edge has even

more value in current years representing a decline of economical activity. Companies

struggle to cope with aggressive competition and challenging conditions given by the

market. This situation is only getting worse by the Slovak latest income tax regulations,

strict labor code and very low law enforcement. Therefore understanding various concepts

of cloud computing and its‘ possibilities is crucial for every manager that is interested in

maximizing the team’s flexibility and performance. The range of available cloud services

is very complex for every competitive business owner: cloud storage management, CRM

systems, IT security, data analysis, cloud infrastructure and many others.

One of the main benefits of cloud computing is getting the freedom and flexibility

of software and hardware. Users of cloud services are able to run their programs on the go

– without the need of physical software, expensive licenses and difficult hardware

maintenance. Companies are able to cut unnecessary fixed costs at the start of their

existence. Cloud service and their costs are manageable through convenient subscription

payments. Such a model is also described as ‘’pay as you consume’’. This fact reduces the

risk of doing business and persuades more people to start their own companies.

This thesis is divided into 9 chapters – each contains viable information about the

topic. Starting with theoretical background – showing foundations of cloud computing, it’s

trends, benefits & challenges but also a concrete example of implementation. In fact, a

local publishing company was selected to be the main subject for this purpose. They are

producing books, magazines, e-books and organizing seminars. It’s internal structure

represents a common model in this industry – dealing with office environment,

approximately 10 people, external and internal communication with staff, suppliers and

executive partners. Other companies with similar operating models could be inspired -

change their internal habits and move on to the cloud computing model

Hopefully, this thesis will provide a clear and understandable image of cloud

computing and it’s hidden potential for business and managers. Cloud computing is able to

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reshape the whole IT, administrative and data exchange as we know it today. Even thought

the implementation of cloud computing into the structure of companies requires additional

resources, it is capable of delivering a strong competitive advantage in the upcoming years

of business influenced with an ongoing economic slowdown.

2 Overview of used sources

Information and data that were helpful during the research of this thesis are taken

mainly from these companies and organizations:

• Gartner – world’s leading information technology research and advisory company.

Founded in 1979. High-profile clients in more than 85 countries.

• Accenture – global company focusing on management consulting, technology

services and outsourcing. • IDC (International Data Corporation) – global provider of market intelligence and

information technology advisor. Guidance for top executives and investors. Wholly

owned subsidiary of a giant - International Data Group (IDC, 2013). • Forbes – American business magazine related to science, technology, finance and

industry. • Cisco – world’s finest networking company. • PwC (PricewaterhouseCoopers) – multinational advisory company in finance,

technology, infrastructure and others. • Ernst & Young – top assurance, tax and advisory service provider. • NIST (National Institute of Standards and Technology) – American official

institute responsible for measurements of standards.

Sources, which were used in the process of making this thesis are in electronic or

printed form. They are credible sources and documents taken from respected portals,

internationally recognized magazines and publications related to the main topic of this

thesis. The main goal is to use all materials in order to present an objective summary of

researched facts. Majority of cited material comes from an online form due to the fact that

cloud computing is a quickly evolving topic which requires broad - up to date knowledge

and insights from IT and business.

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3 Methodology and research procedures

This topic is closely related to information technology and management. Therefore

a reasonable combination of analyzing tools was chosen in order to highlight the most

important points for both specializations. SWOT analysis combined with TCO analysis

will illustrate the results of implementation.

SWOT is a specific analysis of strategies, products or even people and their ideas. It

evaluates their strengths, weaknesses, opportunities and threats. Such a complex spectrum

clearly identifies internal and external factors that could play a major role in the final

decision-making process. Internal factors are strengths and weaknesses – affecting

managers, salesmen, executive, employees. External factors are formed by opportunities

and threats – competition, suppliers and customers.

On the other hand - TCO analysis brings information about direct and indirect

costs: estimating bills for equipment, licenses, maintenance, employee trainings and many

others. TCO computation for non-cloud approach is easier because it involves mostly fixed

costs for hardware & software that is paid at the start - in full price. However, cloud

computing is unique in it’s ability to scale (horizontally and vertically). It greatly adapts to

various workloads (seasonality) and to fluctuating. Therefore, costs associated with cloud

services have very high dependency on the output.

According to Golden (2010), computing TCO of cloud applications is more of an

accurate evaluation of costs rather than chasing the last penny. Businesses should focus

more on overall flexibility advantage, while maintaining more than 20 % cost advantage if

possible.

4 Thesis goals

The focus of this thesis is on a theoretical description of cloud computing, it’s

platforms, trends, benefits and threats. It is important to find out whether the cloud model

is efficient for certain businesses. Objective is to broaden the knowledge about cloud

services from a managerial point of view. Moreover, practical implementation will analyze

cloud computing and it’s cost saving aspect. Information technology is constantly evolving

and we have master it’s strengths in order to leverage added functionality.

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5 Theoretical description of cloud computing

Following subchapters will illustrate cloud computing and it’s definition,

foundations, characteristic features and deployment models. Comprehensive knowledge of

the topic is critical for each manager who would like to implement cloud solutions within

their companies. Cloud computing is constantly evolving over the time. Developers are

pushing daily new cloud concepts and services. In fact they are shaping the cloud - it's

possibilities and getting to new, previously undiscovered areas.

5.1 Definition of cloud computing

Getting a precise definition of cloud computing is quite a challenging task. It is

because of constant innovations in this field: rapid evolution of IT, it’s complex character –

involving a broad network with progressive tools, different users and providers. Confusion

is also brought by using terms like cloud, cloud computing and cloud services without

knowing the difference between them. The best way of getting the most accurate

explanation would be combining more than one cloud computing definition. In this case,

combining definitions of internationally recognized IT entities – the National Institute of

Standards and Technology together with a respected IT company - The Gartner.

Beginning with the definition of NIST - ‘‘Cloud computing is a model for enabling

ubiquitous, convenient, on-demand network access to a shared pool of configurable

computing resources (e.g., networks, servers, storage, applications, and services) that can

be rapidly provisioned and released with minimal management effort or service provider

interaction‘‘(Mell, Glance, 2011). It is clearly visible that it mentions cloud computing as

a network, over which are cloud resources transported to individual users.

Continuing with the second definition of The Gartner company - “Cloud computing

is a style of computing where massively scalable IT-enabled capabilities are delivered ‘as a

service’ to external customers using Internet technologies” (Kinetix, 2009). According to

Kinetix (2009), this definition puts stress on terms: scalability, service and the Internet.

Companies are not necessarily looking for the background of computing – instead of that,

their focus is on applications, performance and the cost saving element.

‘’Cloud computing is about how an application is deployed and delivered over the

Internet and which is scalable on demand’’ (Kinetix, 2009). This deployment model

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enables companies to stay focused on their core business operations without splitting

resources to demanding IT hardware and software management. Many organizations do

not want to own assets neither to manage their IT network with complicated data centers -

these clients are buying results not assets (Kinetix,2009).

5.2 Differentiation of cloud, cloud computing and cloud services

Gartner (2008), stated that the common misusage of terms cloud, cloud computing

and cloud services are creating a lot of confusion and misleading conclusions in these

terms of IT. Starting with the most simple – cloud, which is by official IT standards a

metaphor for the word global network - the Internet. Decades ago, cloud was a symbol for

telecommunication network.

Telling the difference between cloud computing and cloud services is actually the

point where everything gets messed up. According to Gens (2008) from IDC, cloud

computing is an IT developing tool, enabling deployment and dynamic distribution of

products over the company’s network or internet (concrete cloud applications). It serves as

an IT ecosystem behind each cloud application. There will not be any cloud service

without it’s cloud computing framework. In real life – companies and individual users are

no even confronted with these computations, because it is mainly used by developers and

IT engineers. Cloud computing requires heavy IT skills and knowledge of networking.

On the other hand – cloud services are heavily focused on products for companies

and private consumers. People are mostly referring to cloud computing only as a software

as a service (or storage) platform & applications that are reachable over the internet.

According to Gens (2008), applications for general public are having purposes like

shopping, banking, communication or entertainment. From the user’s point of view it has

nothing to do with the actual computing as they are referring to. In this context, consumers

do not buy any cloud computing. Instead, they are purchasing and interacting with

individual cloud services. Most typically, cloud services require just an access to the

Internet, low IT skills for usage & implementation. They are frequently simplified with an

user friendly interface.

An abstract image of the whole cloud terminology would be: a canvas (cloud),

painter and his drawing tools (cloud computing) and the painted picture visible for the

public (cloud services). Even though there is a difference between cloud computing and

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services there is still a strong correlation between these two terms. In the real world of

business they cannot exist without each other.

5.3 Cloud computing characteristics

According to the Mell, Glance (2011), cloud computing consists of five essential

characteristics, three main service models and four deployment models. Starting with it’s

five main characteristics: on demand self service, broad network access, resource pooling,

rapid elasticity and measured service (Mell,Glance,2011). -On demand self service: consumer is able to regulate his/her demanded computing

capacities without physical interaction between consumer and service provider (amount of

network usage, service reports, storage ...).

-Broad network access: Cloud services that are offered by providers are available

over the commonly used network and most importantly through standardized

communication devices like: smart-phones, tablets, laptop and other personal computers.

Having physical assets and shrink-wrapped software started to be very cumbersome.

-Resource pooling: Computing capacities of the service provider are pooled to

numerous clients via a multi-tenant model assigning various physical and virtual resources

of the provider (supply) to fluctuating demand of consumers. This adaptation is performed

on a dynamic basis. Resources of this information technology (traffic, storage...) are not

dependant on a certain location therefore cloud services could be provided on a global

scale.

- Rapid elasticity: Capabilities of cloud services could be usually automatically

scaled in both directions - upwardly and downwardly depending on processing

requirements. It is capable of dealing with fluctuations in demand and strong seasonality.

Cost saving has to be considered as a viable feature in this point.

-Measured service: Individual cloud computing services are often offering a

monitoring interface with an overview of generated traffic and useful resource

management tools for optimizing the performance. There is usually no need for any added

analytical software. All results are presented in an user-friendly way, with appropriate

measurements and control over the service.

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5.4 Cloud computing deployment models

Another point to mention is the differentiation between cloud computing

deployment models. According to NIST there are four of them:

-Public cloud: The most common form of a cloud that is shared between the general

population. This deployment model is mostly used by non-profit organizations, students-

schools, governmental subjects or entrepreneurs. This type of model exists only under the

control of it’s provider.

-Private cloud: Designed for one single organization that may be consisting of

multiple business units. ‘’A private cloud is a proprietary computing architecture, owned or

leased by a single organization, which provides hosted services behind a firewall to

“customers” within the organization’’ (Kynetix, 2009). There are many discussion whether

the private cloud is not contradictory to the original cloud model. Content should be

available throughout the whole network rather than being locked inside a company. Private

means for companies - more secure and providing space & possibilities for individual

tweaks in their own cloud infrastructure. Important fact to add is the upward trend of

private clouds. Not only in business environment but also in the private sector - due to the

general exposure of cloud services to public. Private clouds are providing us with a secure

way of sharing our personal information only with a limited amount of users.

-Community cloud: Concept of a cloud that is used within companies or

organizations for specific departments of people who share a mutual concern for some

specific subject. That could be team’s objective, mission or just a group of tasks, in which

common cloud workplace is beneficial. It could be controlled by the client itself (company)

or by a third party subject.

-Hybrid cloud: Hybrid model consists of two or more cloud categories that have

been already mentioned. They are acting as individual clouds with features that are

corresponding to their original category. However, the difference is in their mutual

cooperation (sharing of data) provided by standardized form of data exchange between the

clouds. The most important point is to ensure portability and security of data.

Hybrid clouds are using a technique called – the cloud bursting. According to

Rouse (2011), cloud bursting is a technique used for example in combination of private

and public cloud. Data, which needs to be shared outside the private cloud is transported to

public cloud with much higher number of users. Such a dramatic spike in bandwidth could

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threaten the overall stability. Cloud bursting solves this problem by allocating extra

computing resources during the critical period. Many companies are using this deployment

model for their simple, non-critical information that are not very sensitive. It is because of

lower security standards of this method – for example providers do not always guarantee

PCI DSS (Payment Card Industry Data Security Standard). This fact would put for

example - cash transactions and their details into danger.

6 Cloud computing platforms

Cloud computing offers three main platforms: IaaS, PaaS and SaaS. The most

attention was given to SaaS platform and it’s various forms. It offers tremendous value for

business, lowers costs and it has the most straight-forward method of implementation.

SaaS has also the biggest chance to reach individuals and help out beginning entrepreneurs.

6.1 Infrastructure as a service (IaaS)

Through IaaS (outsourcing platform), consumers are able to rent hardware, servers,

storage and other equipment through the cloud. According to Sosinsky (2011), it is

providing users with additional computing capacities required for developing & running

applications and business operations. Consumers of this service are able to run their own

virtual servers on provided capacities. The provider of IaaS is responsible for maintenance

of the system. Under IaaS, hardware and servers are substituted by their virtual

counterparts. This saves a lot of office space and resources. Last but not least, users of IaaS

are able to choose characteristics of their virtual servers like operational systems or

application software.

6.2 Platform as a service (PaaS)

PaaS is a platform mainly designed for developers who design their own SaaS. It’s

main purpose is to make developing of applications and software much easier – using less

people, money and time. According to Salesforce (2013), developing software was

previously very sluggish, costly and complicated. Each new application required

operational system, hardware, databases, middleware, servers and a lot of complex

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software. Many IT engineers and experts with framework skills (J2EE or .NET) were

needed to run and test it for long time (Salesforce, 2013). Servers, cooling systems and IT

experts dramatically scale the final price of such development.

Nowadays, providers of PaaS offer developers their playground – infrastructure and

application tools in the clouds. Developers are able to focus on application content,

innovations, user experience. They can forget about difficulties with managing everything

in the background. They are limited only by the design and capabilities of provider’s

infrastructure. Finished applications could be hosted by the same service provider and be

instantly available on-demand for external or internal customers. To sum up: PaaS makes

developing and deployment of application much faster, using much less time and money

while lowering required IT skills for designing new software that is cloud-ready.

6.3 Software as a service (SaaS)

Software as a service is the most recognizable cloud computing platform for public

and private consumers. Providers of SaaS are hosting applications and our personal data on

their servers. Clients are able to reach them over the Internet without bothering what is

happening in the background. Typical example of SaaS would be Gmail, where Google

keeps our correspondence and files in their data centers. Users only interact with interface,

which is powered by Google’s software.

There are two basic forms of SaaS – for business and private consumers. Business

SaaS is offering cloud services aimed at companies’ processes (operations, management,

CRM...) and are billed usually by monthly subscriptions. Private SaaS is focused on

emailing, e-banking or cloud storage (Dropbox). SaaS is the easiest platform to maintain,

because everything related to effective usage (servers, operational software, layout,

functions...) is in provider’s responsibility. SaaS has lower flexibility – applications are

usually tuned for broader audience.

There are numerous advantages of adopting SaaS – no need for resource consuming

and tedious testing of in-house software, reduced costs compared to licensed software,

small maintenance costs and automatic updates are performed on provider’s servers.

Everyone within the company has the same version of used application – automatically.

Also for accounting purposes, a lot of providers are offering products under global

accounting standards (GAAP, FASB, SEC, AICPA...) making journalizing transparent for

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audit (Velte & Elsenpeter, 2011).

SaaS is considered to be a solution ideal for small or mid sized businesses due to

it’s ‘’turnkey’’ character and less space for personalization. However, there are also cases,

when companies made a big deal with SaaS – bank Meryl Lynch bought 25 000 CRM

subscriptions from Salesforce.

6.4 Software and service (S+S)

Software plus service is considered by many people to be the golden mean –

combining cloud possibilities with local software and hardware. This architecture installs

programs locally while connecting them with data saved in the cloud. It brings numerous

advantages over pure SaaS solutions:

- offline availability: users frequently travel, often without having a reliable

connection or internet that is fast enough. Users of such S+S could work on their

own - independently from the Internet. Later, they just sync local data with cloud

(to upload work or download data from databases, backup...).

- security: users of S+S could keep the most sensitive information at local computers

or servers. The rest is easily shared through clouds between co-workers – all

without putting the company’s data to risk. Prevention is the best security

measurement in this case.

- performance: certain heavy-processing tasks are depending on massive hardware

capacities (graphics, processing, memory...). Combination of local software &

hardware with cloud services will outperform pure SaaS. Running software in the

browser might also set limitation on application’s functionality and reduce

employee’s output.

According to Velte, Elsenpeter (2011), S+S solution could get very costly by using

a lot of provider’s data capacities. Company has to calculate whether it is not more

efficient to host additional servers locally compared to cloud outsourcing. Someone might

find confusing and complicated to operate both parts of S+S, even though companies are

often offering fully compatible solutions.

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6.5 Storage as a service (STaaS)

Storage as a service is a subgroup of SaaS. It provides consumers with cloud

service in the form of digital storage that could be leased or rented from the service

provider. Users are obtained with software that enables data transfers and manages

backups. It handles storage very effectively by adjusting the capacity and number of peers.

In most of the cases, consumers are paying only for the capacity of rented storage (no

additional fees for traffic or transported data). There are two main negatives: security and

bandwidth requirements. Security issues are obvious due to the fact that a company will

share it’s internal and external data with a 3rd party provider. Bandwidth constraint is in

other words – how fast can an employee download or upload files to the company’s cloud

storage. TCO analysis in vast majority favors STaaS as far more cost effective solution

than building individual storage networks with servers and operators.

6.6 Data as a service (DaaS)

Data as a service is distributing information on demand – text (reports, studies,

financial records...) with audio-visual content (pictures, videos, interviews, podcasts...) that

could be used for building competitive advantage or in decision-making process. Provided

information is rich in customer habits, demographic & geographic mapping, financial

reports, statistical analysis and other different categories that contain useful data for

marketing, business operations and market overview. Companies can also offer their

internal information and content of databases to providers of DaaS for monetary purposes.

DaaS’s advantages are: great speed, quality and diversity of provided information,

which are available through user interface. It greatly reduces number of required

employees and effectively uses their working hours.

There are mostly two different payment options: by volume based and data type

based. Volume is considered as an amount of demanded data (for example: fixed price per

transferred megabyte). Data type is specified as fixed cost per demanded file type (each

picture or pdf document...).

There is also a subgroup of DaaS called BDaaS (Big Data as a Service). According

to EMC (2012), the importance of big data in business will exponentially scale in the near

future because: ‘’As data is increasingly becoming more varied, more complex, and less

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structured, it has become imperative to process it quickly’’ (EMC, 2012).

This service has numerous uses in management – for example in improving yield

management processes. According to Proffitt (2012), BDaaS was used to monitor and

adjust prices of rooms in a specific hotel. It was in a high-profile area, where room pricing

of competitors changed more than 70 times per day. In order to stay competitive, hotel

demanded BDaaS even though they were professional in hospitality but amateurs in IT

(Proffitt, 2012).

Negatives of DaaS are common as in other platforms of cloud computing: privacy,

security and doubtful proprietary ownership. It is not frequently clear, whether the rented

content belongs to provider, author or a service user.

6.7 Security as a service (SECaaS)

Security as a service delivers protection for consumer’s email, web and network

over the cloud. According to Furht, Escalante (2010), these services are capable of doing

the same functions as on-premise software products that are available on the store’s

shelves. It protects from malware, spam, unauthorized access from 3rd party devices and

performs encryption of sensitive information. Benefits of having such service are mainly:

- Avoiding capital outlay: shrink-wrapped software is adding moderate costs and

maintenance bills, licenses are usually limited for uninterrupted long-term usage (1-2

years). On the other hand, SECaaS can be subscribed for individual time periods with

better allocation of costs.

- Automatic updates: users of SECaaS are always using the newest versions with

constantly renewed databases of virtual threats. It is done without any intervention of

employees.

- All-around security: ensuring that the whole company is protected by an unified

security service defending various portable and stationary devices over the whole network.

There is not any need for additional IT security staff – reducing costs and time resources.

Company is able to focus more deeply on their core business, by outsourcing security to

cloud service providers.

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7 Business impact of cloud computing

7.1 Steve Jobs as a visionary of ‘’cloudy’’ future

Apple under the leadership of Steve Jobs contributed to the cloud computing

integration. Nowadays, considerable part of their business model is counting on the

distribution of multimedia content over the Internet between Apple’s iDevices. Cloud

serves as an extension of their minimalistic philosophy – in this case, delivering easy

access to personal & commercial content at any place or any time.

Steve Job’s legendary speech on Worldwide Developers Conference back in 1997

showed incredible vision of cloud computing future that we actually see today around us.

Apple used a similar ‘’cloud’’ network system on their internal servers in early 90’s.

During the speech Jobs said that he never did a backup of his personal data in last seven

years and he never lost any data since that exact moment. He understood that hard drives

would became redundant if personal data could be accessed faster from the server or even

independently on the location. Jobs added that he was able to reach his personal

information from his home, at the offices of Pixar or Apple at any time without being

restricted by physical hardware. Introduction of faster gigabit-ethernet together with user-

friendly interface of such services could change the world of information technology for

masses – Jobs added. He pointed out also the potential of leveraging personal computers as

means for communication intensive tasks - instead of the regular computation intensive

task.

Today, Apple serves as a brilliant example of a cloud computing platform provider

– by offering their SaaS called iCloud. They managed to get 250 million users on their

iCloud service till January 2013 (TechCrunch, 2013). This service is synchronizing various

personal data of users – backups, e-mails, calendar, documents, photos, music and many

others through the iCloud account. The success of this platform is based on the integration

of all user’s iDevices into one ecosystem at the same time. Apple’s intentions are to

connect their phones, computers and home entertainment into one dominant hub –

reachable anytime and anywhere. Itunes plays here an important role as an on-demand

store and personal library. Apple did exactly what a commercial cloud service developer

should – create a cloud environment, give users a meaningful purpose for using it and

leverage provided content in order to appear as a nearly unavoidable value provider. Also

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compatibility plays a major role in this case. Services, which are offered for multiple

devices and various operation systems are much harder to abandon (lock-in factor), due to

easy access and convenience.

7.2 Trends (2013+) in cloud computing

This subchapter will illustrate upcoming trends in the swift world of cloud

computing. Beginning with five dominant trends of cloud computing strategies by The

Gartner company for the upcoming years till 2015:

- Formal Decision Frameworks Facilitate Cloud Investment Optimization: ‘’The

cloud promises to deliver a range of benefits, including a shift from capital-intensive to

operational cost models, lower overall cost, greater agility and reduced complexity. It can

also be used to shift the focus of IT resources to higher-value-added activities for the

business, or to support business innovation and, potentially, lower risks” (Gartner, 2012).

However, it is still necessary to monitor cloud computing in terms of performance and deal

with security issues, limitations of licensing, lack of transparency and reduce downtimes.

(Gartner, 2012).

-Hybrid Cloud Computing Is an Imperative: In this case, external cloud

environment (public or private) combined with company’s infrastructure and application

services. Predictions are showing that the hybrid cloud might transform into an integrated

model of one major cloud consisting of numerous differentiated cloud platforms (internal

& external). They will be used on-demand by companies during shifting workloads for

greater efficiency. ‘’Gartner recommends that enterprises focus near-term efforts on

application and data integration, linking fixed internal and external applications with a

hybrid solution’’ (Gartner, 2012). On the other hand - providers of public cloud services

and applications should start offering solutions for integration of their public services with

internal infrastructures of their clients’ companies.

-Cloud Brokerage Will Facilitate Cloud Consumption: Demand for cloud

computing service is rising but so does the demand for customer support. In fact, there is a

whole category of related support called ‘’CSB’’ – cloud services brokerage. This

brokerage is having an important position as a mediator between the provider and a

consumer. Good news for this branch of business is that CBS is usually required by both

types of companies – working with or without information technologies.

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-Cloud-Centric Design Becomes a Necessity: Most of the companies are enabling

the cloud computing transformation just by shifting their workload to cloud services or

applications. That works very well, especially if they are coping with uneven requirements

on resources or using applications that are horizontally scalable. Still, for making the most

out of a cloud model - ‘’applications need to be designed with the unique characteristics,

limitations and opportunities of a cloud model in mind. Gartner advises enterprises to look

beyond the migration of enterprise workloads - to the creation of cloud-optimized

applications that fully exploit the potential of the cloud’’ (Gartner, 2012).

-Cloud Computing Influences Future Data Center and Operational Models:

Companies and organizations, which are still retaining their internal data centers should

adapt to the situation. They need to manage their data centers and related hardware for

possible (present or future) cooperation with cloud computing models for greater

efficiency and flexibility. Other companies already moved-on and made their networks

cloud-ready.

-Big data: It has become one of the most progressing IT trends together with the

rise of cloud computing. Big data is related to the amount of data – created and processed

in the whole Internet. IT engineers are able to track and analyze our consumer behavior –

each click by click is translated into a valuable business opportunity. Nowadays it is very

popular - due to exponentially growing supply of data that comes from social media, blogs,

emails, positioning data and overall web content. ‘’Information is exploding all around us:

1,500 blogs, 98,000 tweets, and 168 million emails every minute’’ (Kisker, 2012). It is a

fabulous opportunity for business to gather value from all of these information that are

broadcasted around us. Such valuable infinite source of consumer habits, opinions and

behavior is extremely profitable if it is used in company’s decision making. The overall

complexity and volume of information is so high, that companies require help from other

IT companies or services. Their original software is not able to cope up with such a high

volume and in-house database management lacks capacity. Acquiring, analyzing and

organizing of these information could be provided by services through cloud platforms.

Combination of cloud enabled big data services has a huge advantage of theoretically

infinite resources on demand (by using the potential of cloud computing scalability).

Related requirements on performance are even higher than usually, because companies are

dealing in majority with unstructured information that comes from the outside. According

to Kisker (2012), from Forrester global research & advisory company, there are 3 main

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reasons for implementing big data through cloud services:

1. Big data requires a spectrum of advanced technologies, skills, and

investments – there is no need to have all these processing capabilities

hosted in-house due to being very costly and demanding a lot of

maintenance (Kisker, 2012).

2. Big data includes huge amounts of external data – it would not be

convenient to shift and manage such big portion of external data behind the

company’s firewalls (Kisker, 2012).

3. Big data needs a lot of data services – it is far more rational to concentrate

on the results of company’s specific analyses rather than big data

management (Kisker, 2012).

7.3 World of business going mobile

Another point to mention is the decline of desktop usage and a significant shift

towards portable devices like tablets or smart-phones. According to Jackson (2011),

VMware (top American cloud & virtualization provider) CEO Paul Mauritz predicted that

‘’Within five years, less than 20 percent of computing clients will be running Microsoft

Windows’’ (Jackson, 2011). Also the idea of desktop as a single workstation together with

a model of one fixed operational system has to be abandoned. VMware has became

successful after developing software for server virtualization. However, the next direction

will be private and hybrid clouds. The reason being is simple: world’s businesses need

more dynamic and flexible workforce. Paul Mauritz added that modern managers (less

than 35 year old) are spending less time behind their desks and dealing with larger quantity

of small information – a new ‘’post-document’’ era. (Jackson, 2011).

The fact playing a major role in today’s business is - extreme growth of web traffic

from mobile devices. According to Musil (2012), results of global web traffic analysis for

the year 2012 showed a dramatic figure – 13 % goes to mobile devices. Just for a

comparison – in 2010 it was only 4 %. There are even countries where mobiles surpassed

desktops in web traffic – in India it is 60 % mobile devices versus 40 % desktop (Musil,

2012). According to Delloite’s recent research, the number of global smart-phone sales

will reach for the first time 1 billion pieces per year in 2013 (Garside, 2013). It is clear now

- how much potential lies in portable devices and cloud service integration.

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7.4 Global cloud computing situation

According to Cantu (2011) from Forbes, the cloud service revenue in 2009 was

more than 58,6 billion USD – and rapidly growing. Gartner consulting company addressed

that it is expected from cloud services revenue to go over 152 billion USD in 2014 (Cantu,

2011). Focusing just on business applications: ‘’IDC reports that enterprise cloud

application revenues reached $22.9B in 2011 and is projected reach $67.3B by 2016’’

(Columbus, 2012).

‘’According to the Cisco Global Cloud Index, global cloud traffic will account for

nearly two-thirds of total data center traffic by 2016 (Columbus, 2012)’’. By 2016 – the

most generated cloud traffic will be from Asia Pacific region (1.5 zettabytes annually),

second place goes to North America (1.1 zettabytes annually) and 3rd is Wester Europe

with approximately 1 zettabyte annually (Cisco, 2012). 1 zettabyte is approximately worth

250 billion DVDs.

From 2011 to 2016 the highest cloud traffic growth rate will be in the Middle East

and Africa (79 % CAGR), Latin America (66% CAGR) followed by Central & Eastern

Europe (55% CAGR) (Cisco, 2012). This indicates a strong technological shift in the

world and place for possible business opportunities.

Growth of cloud computing usage has also boosted sales of servers: ‘’IDC reports

that $5.2B in worldwide server revenue was generated in 2011 or 885,000 units sold. IDC

is forecasting a $9.4B global market by 2015, resulting in 1.8 million servers sold’’

(Columbus, 2012).

7.5 Business point of view: developer, investor, consumer

Developer’s point of view: developers have gained permanent income in forms of

pay-by-use models and subscriptions. That is generally more accepted compared to the

traditional model of income from software licenses. Cloud services have helped developers

to fight against software piracy by using cloud application deployment model. Naturally,

developers are dealing with the most complicated part of the cloud computing –

developing of applications, building IT infrastructure, complex software and hardware

management while demanding technical engineers and staff. Another point to mention is

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the pressure applied to software developers in order to adapt and offer cloud services. This

transformation from developer to provider includes a whole new perspective on doing

business.

Investor’s point of view: cloud computing business includes many opportunities for

investors. It is possible to choose and track companies on different levels: startup

companies (also within business incubators), transformational companies or enterprises

that are before initial public offering (or already public on the market). Cloud computing

has an unique feature that even a simple idea with minimum hardware could have a

remarkable operating leverage – and gain profit for visionary shareholders.

Consumer’s point of view: consumers will progressively increase the demand for

cloud services and applications over the next years. Buying a license or physical copies of

software is getting outdated and replaced by more convenient methods. Companies require

smaller portion of fixed cost for the initial startup, which is achievable by ‘’leasing’’ cloud

services over the time. Otherwise, companies would be financially challenged by buying

licenses for hundreds of their computers. Licenses would become assets that are much

harder to maintain, organize and dispose. Also the value of software depreciates as newer

versions arrive – their compatibility and support lowers. Cloud services are always up-to-

date and could be unsubscribed during holidays or periods with less workload.

7.6 Threats of Cloud computing in business

- Data security & privacy: Sharing internal business data with 3rd party service

provider will always involve risk. According to Kynetix (2009), hosting data through cloud

is equally dangerous as hosting data through internal servers that are connected to the

Internet. More importantly, company is facing far more danger from it’s own employees.

Every business should focus more on internal security levels. According to the study, 70 %

of intellectual property violations are made from the inside of the company (Kynetix,

2009).

- Competition: According to Ernst & Young (2011), start-ups have much more

tools and methods that were previously available only for companies spending a big

portion of their capital on IT and research & development. Therefore by avoiding these

business risks, even small players in the market are capable of delivering massive results.

Also many new developers and cloud expertise companies want to - ‘’jump on the

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bandwagon and want to profit from the price paid by early adopters’’ (PwC, 2013).

- Internet dependency, latency and performance: ‘’Network bandwidth is the most

important component of the model without which the model is an illiquid asset’’ (PwC,

2013). Bandwidth is surely increasing over the years - the same as with web-accelerating

technology, which greatly improves the user’s experience (Kynetix, 2009). It enables

smooth performance of advanced cloud applications.

- Data location: It is an inevitable fact that our data, which is accessible through

cloud services has to be physically present on provider’s servers. Many countries have very

strict legislation and laws about certain data location, duration of that possession or ways

of legal manipulation with citizens’ information. Subjects in international business have to

be especially careful. ‘’Many banking regulators also require customers' financial data to

stay in their home country. Many compliance regulations require that data not be

intermixed with other data, such as on shared servers or databases’’ (Kynetix, 2009).

- Availability of services: Downtimes and technical issues resulting into

unavailability of provider’s services are very unpleasant for both sides. In practice, it holds

business operations and lowers revenues. It has always a harmful effect on the image of

our company. For preventive reasons, it is good to have a service level agreement that

serves also as platform for conflict negotiation - when things go wrong and consumer

wants to switch services (Kynetix, 2009).

7.7 Benefits of Cloud computing in business

According to Jassy (2013) – Senior vice president of Amazon Web Services, cloud

computing holds these six powerful benefits:

- Trade capital expense for variable expense: transition from fixed capital expenses

(on-premise software and services) to variable expenses of cloud computing is very smart.

Paying full price for servers, software and development before not knowing whether the

business model will gain any profit adds high entrepreneurship risk that is avoidable by

cloud-enabled model. There is theoretically zero beginning IT capital required because of

it’s ‘’pay as you consume’’ character.

- Lower overall costs: For example Amazon Web Service saved Samsung 34

million USD through smarthub application. Commonwealth bank – 10’s of million USD

saved just after migration of two applications to AWS. Foursquare reported 50% lower

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analytical costs after establishing cloud services. There are other well-known services

hosted through Amazon’s (EC2) cloud service like Instagram, Netflix or Pinterest all

benefiting from elimination of unnecessary costs.

Continuing with Jassy (2013), successful business cycle of a cloud service provider:

Picture #1 Cloud provider’s business cycle

In practice it means that cloud providers are forced to invest into their infrastructure

in order to have services with sustainable performance and reliability. Therefore, user base

is directly proportional to computing potential. Economical model - economies of scale

confirms the fact that company gains cost advantage when costs are spread out over higher

number units of output. Cloud providers are then able to lower their infrastructure cost –

making their services more affordable – in other words attracting more customers.

- No more guessing of capacity: It is extremely hard to estimate capacities before a

company wants to start their new project. In most of the cases companies end up using too

much or too less capacity resulting into bad customer experience or excessive capacity that

has no use apart from it’s costs Even if the situation changes, additional IT capacity needs

to be allocated as soon as possible, thus overpricing the operation. Cloud model enables

dynamic scalability – on demand & elastic change of provided capacities. They could be

added or removed in seconds without hazardous consequences.

- Agility, speed, innovation: Cloud computing brought faster innovations and new

possibilities for developers (companies, startups). They did not have enough resources to

finance the infrastructure and development. This brings potential for new medical,

technical or scientific discoveries.

- Shift focus to differentiation: Companies requiring capacities from cloud

computing do not have to care about factors like: data centers, cooling systems, power,

More  cloud  consumers  

More  infrastructure  

Economies  of  scale  

Lower  infrast.  costs  

Reduced  prices  

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cables, servers or labor. Company can focus on their core business and develop products

without unnecessary noise from IT departments.

- Going global in minutes: Cloud is a medium that carries applications over the

whole globe through the network. Language barriers or worries about contracts that

previously took place are no longer present.

7.8 Cloud computing challenges

Even though cloud computing has numerous benefits – it certainly has its flaws as

well. According to Accenture and Willcocks, Venters, Whitley (2011), there are three main

challenges:

- Safeguarding data security: Surely this is the biggest challenge in the entire cloud

computing. There are new systems coming up daily – boosting levels of security through

file encryption and software that prevents from data loss during attacks. Cloud service

providers are investing a big portion of capital into introduction of new methods like

analytics of uncommon behavior of logged users or entities across the range of virtual

servers. Providers could also develop devices generating unique access passwords to user’s

applications. Problem is that the Internet attackers are endangering everything web-hosted

no matter what infrastructure is behind the service. Issues with security could also come

from different legislations of countries where are our services hosted – offshore data

housing. Prevention is the best, therefore hybrid cloud might solve many of these issues by

differentiation what information - based on sensitivity goes to public or private cloud

(Willcocks, Venters, Whitley, 2011).

- Managing the contractual relationship: In practice, there is a minority of cloud

service providers who are able to match all requirements of their clients within ecosystem

of a single service provider. There is a need for filling multiple contracts for delivering

complex solutions to customers. ‘’Cloud contracts generally focus on service-level

agreement (SLA) guarantees, but the network of interactions within the overall ecosystem

increases the complexity of SLAs. SaaS providers often share a single platform for all

users. Therefore, clients cannot be provided with a differentiated SLA’’ (Willcocks,

Venters, Whitley, 2011).

There is still a big portion of providers that have not get used to their position of a

service provider – having a service liability. It takes some time for companies that have

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been previously developing only software to gain experience as custodians of data with

appropriate customer service.

- Dealing with lock-in: As with any other service, there are costs and trouble related

to switching from one service to another. Technological lock-in threat makes the client

even more rooted to the provider’s infrastructure. Companies that are concerning to move

their operations from one cloud platform to another are obviously looking at the most cost

effective method. However, the cost-winner is often the current platform with additional

subscriptions to new services enhancing user’s experience – which dramatically increases

the lock-in element (Willcocks, Venters, Whitley, 2011). Institutional lock-in: Takes place

when users of cloud services are entrenched with it’s effect on business habits and

practices. That is especially delicate while using SaaS.

7.9 Important insights of cloud computing

- Importance of the customer experience: Quality of the customer service will

separate and enlarge the difference between suppliers of external IT and business service

industry. Today, the characteristic stereotype of every product is to have best: quality,

quantity, value, performance. ‘’However, “softer” metrics—characteristics such as

responsiveness, assurance and empathy—will become increasingly important in the new

business and IT environment’’ (Willcocks, Venters, Whitley, 2011). In other words:

numbers and functions are being slowly replaced with user’s experience, intuitiveness and

availability. Accenture’s interview with an unnamed CEO stated that: “I am moving to

only two sets of metrics: customer satisfaction and key business performance indicators’’

(Wilcocks, Venters, Whitley, 2011).

- The shift from product to service: ‘’Involves the shift from IT-based products to

business-oriented services’’ (Willcocks, Venters, Whitley, 2011). Products like Microsoft’s

Office 365 are quickly gaining market share and pushing shrink-wrapped Office back in

sales. Accessing software that is always updated and easily available through cloud

without maintenance is far more attractive than an on-premise model.

Companies are quickly taking advantage of these features. For example Quantas

has replaced their 22 year old system used for frequent flyer program: ’’The cloud has

given the airline a scalable architecture that can cope more effectively with rapid changes

in demand, providing more consistent service to its 7 million members while also dealing

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with rapidly growing activity’’ (Willcocks, Venters, Whitley, 2011).

- Job creation: According to McKendrick (2012), cloud computing will generate 14

million jobs by 2015. 10 million will be generated in China, India and the Asia-Pacific

region due to the fact they are emerging markets with massive workforce. Approximately 1

million of jobs will rise in North America. These are just direct jobs including only cloud

computing as a main role. Other millions of job opportunities emerge with progressing

integration of cloud computing services with our daily routines and business operations.

Previous perception of cloud computing was a job eliminator but in fact it is a great job

creator. Business opportunities will surely include areas like: ‘’marketing, sales, finance

and administration, production, and service. We may not have even imagined yet what job

titles may emerge’’ (McKendrick, 2012).

8 Implementation This thesis consists also from a practical case of cloud service implementation to a

company. Implementation will be evaluated by TCO and SWOT analysis providing us

with tangible results about cost effectiveness and benefits of cloud services. Mutual

comparison of both on-premise and cloud approach will illustrate whether are

implementation challenges worth overcoming.

8.1 Company description

It’s core business is publishing of content intended for lawyers and economists.

Their range of consumers is quite broad: students, professors, law & economic advisors,

state administrators, accountants, private entrepreneurs and managers. Their portfolio of

products and services consists of books, magazines, seminars and e-books. With 10

employees it is considered to be a medium sized company referring to other regional

enterprises in the same industry.

There are currently:

-1 general manager & CEO in one person

-1 chief editor with 4 additional editors

-1 graphic designer

-1 text & layout editor

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-1 accountant

-1 marketing & IT specialist

8.2 Google drive vs physical storage server

This company was desperately looking for a solution that will provide them with

file sharing service within the group of employees. Previously, all information were

transferred through portable flash drives or emails. This solution was very trivial but it

lacked speed and flexibility regarding slightly bigger files. There were two options:

physical server - connecting all computers to one server or a cloud service equivalent.

Publishing business does not require heavy-data traffic with terabytes of shareable storage.

Editors and designer are exchanging mostly files that have 5mb – 15mb on average,

multiple times per day. Such capacities are also demanded when employees communicate

with external subjects like printing companies or journalists and authors.

Storage servers usually come with highly configurable space – from 250gb to more

than 3 terabytes of storage per one hard-drive. Frequently, only people with IT skills are

capable of creating the network. Connecting new computers is not very straightforward.

Data, which would be stored on this server will remain within the company without 3rd

party provider. Servers have to be constantly powered on in order to be accessible. Data

exchange is mostly done through specific software that has to be installed on computers.

On the other hand, Google drive offers space from 5gb to 16 terabytes. Entry-level

5gb storage is for free, which companies or private users could use as a test sample.

Connection of computers but also mobile devices (phones, tablets...) is extremely user

friendly through a web-browser or an application. Customer also gets a set of Google docs

applications, containing the most necessary office tools on-the-go, cloud enabled.

8.3 Microsoft office 365 vs on-premise office 2013 business

Microsoft office 365 is in other words a subscription-based form of a traditional

office package. It’s applications are accessed over the cloud through desktop computers,

laptops, tablets or even smartphones. One office 365 small business premium subscription

can be shared across 5 different devices. Users can take advantage of 365’s exclusive

content like Office OnDemand, which creates full-version of Office for a single use on any

34

computer. Application deletes itself after our temporary usage, which gives a new

dimension for work flexibility outside – in the field. Moreover, Office 365 is always

running the newest version available. Zero administration and no other interventions are

necessary for the maintenance of this office package.

Shrink-wrapped package of Office 2013 for business can be used only on a single

computer. User is paying for the software full price - in advance and without knowing it’s

real usefulness. Lengthy installation is required for every computer in the office. Many

employees require help from technical support during installation of patches and upgrades.

This fact is even more crucial when we think about big enterprises with hundreds of

computers. Many employees usually do not have a permission to modify or install

software. Service hours are very pricy in terms of money and time while interfering with

usual business routines.

8.4 Webex meetings

Webex meetings is a public cloud service offering virtual meetings, discussions and

real life co-operation through the Internet. It is an unique service, which is able to put

multiple users into one virtual room – streaming their audio and video output in real time.

One host license can take a maximum of 8 people per session. They could share and

illustrate their agenda through interactive whiteboard, remote control, share documents or

even their view on the desktop. That is especially important for the publishing company,

because a lot of interactive collaboration is required. The prices are from 19 € to 69 € per

host and per month, depending on capacity (Webex, 2013). 19 € per month is very little

compared to fuel bills and time consumed by commuting and being present in the office.

8.5 SWOT

Previously mentioned cloud services have many beneficial effect that could be used

in the publishing company. As with any other innovative changes in the business, even

cloud solutions have it’s weaknesses and threats.

Strengths:

- flexible cost regulation

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- transparency of personal agenda while sharing mutual folders and work

- accessing files on-the-go (mobility)

- low IT skills needed – company does not need additional IT workforce

Weaknesses:

- overcoming resistance to change: employees are used to work with on-premise

software

- dependency on stable Internet bandwidth

- automatically accepting new updates (not being able to downgrade the service)

Opportunities:

- creation of portable workspace: boosting productivity of tablets and smartphones

- possible future implementation of other cloud platforms for CRM, accounting or

market & competition analysis

- more effective communication & collaboration with colleagues and suppliers

- hiring distant co-workers from abroad: Webex + file sharing serves as a viable

substitution of real-life office environment

Threats:

- security breach – copying or erasing confidential documents regarding new

publications and other products (possible industrial espionage)

- cloud service downtime – inability to access files in the cloud or office applications

- loss of privacy – uploading work on Google drive will make it visible for other co-

workers

8.6 TCO

TCO analysis has proved that cloud approach managed to be cheaper that it’s

opposite standard approach. Provided cost computation is related to acquiring two services

– storage & file sharing and MS Office package. Time period is from 1-3 years, which

illustrates ‘’pay as you consume’’ model compared to paying full price at the start. The

costs of subscription payment is gradually scaling up whereas equipment is averaging over

the years of usage. Cloud approach is with 25,49 % more efficient and cheaper by 625 €

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over 3 years. It was achieved by assuming that company has 10 computers and no

fluctuations of demanded capacities.

The most accurate results of TCO analysis should be in the case of a comparison

between MS office 2013 business and MS office 365 for small business (4,9 € per month

of usage). The reason being is that both products are nearly the same apart from 365’s

cloud hosting. Comparison is therefore more objective, because both versions are from the

same developer and used for identical purposes. Time period is set to 3 years, which is a

common turnover of Office software.

Table #1 – TCO: standard vs cloud approach

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9 Conclusion

Cloud computing is likely to have a positive outlook. The reason being is mainly

the fact that business and public consumers will continue to have a strong demand for such

technology. Today’s situation in the world is influenced by an ongoing economic

slowdown. Companies are looking for innovative cloud computing applications and cost

saving solutions. In fact, cost saving and high flexibility of on-demand services are two

most valuable benefits of this phenomenon.

It’s useful effect for organizations and companies scales accordingly to the size and

structure of each business. Moreover, various cloud computing platforms could be used in

different business life cycles – from the birth of the company till it’s decline. Many

beginning entrepreneurs were afraid to start their own business due to high capital costs.

Cloud computing provides platforms and tools, which greatly minimize capital and fixed

costs. In addition, cloud computing enables companies to focus on their core business

rather than dealing with hardware problems or infrastructure complications.

On-demand services and capacities are becoming more significant especially for

companies with fluctuations of their output. In other words, various business operations

and projects require different capacities and resources that could be easily delivered by

cloud computing platforms. With the help of this technology, there is no need to

compensate unutilized capacities after peaks of strong demand. Thus, seasonality but also

development of new projects or products is much easier while involving less risk.

Upcoming years will show the importance of mentioned challenges – mainly

security and privacy issues. These negatives are globally recognized and developers are

doing their best to offer protected services. There will be always many conservative

business owners who are not keen on sharing sensitive data over the network. It is

important to state that risk could be mitigated by using hybrid clouds or data encryptions.

Finally, cloud computing has become an inevitable part of outsourcing - which

should be the greatest tool of today’s managers. Firstly, they have to know the theory –

platforms, uses and challenges that are related to implementation. It is impossible to

analyze tradeoffs and possible benefits for company’s departments without such

knowledge.

Cloud has without a doubt changed modern business practices together with our

personal lives. On-premise software and hardware – combination, which was for decades

38

seen as the most demanded is getting old and obsolete. This is a consequence of the

continuous Internet revolution that made us think differently about our computers. This

was predicted back in 1985 when Steve Jobs gave an interview for the Playboy magazine –

describing possible contours of cloud computing: “The most compelling reason for most

people to buy a computer for the home will be to link it into a nationwide communications

network. We’re just in the beginning stages of what will be a truly remarkable

breakthrough for most people - as remarkable as the telephone. – Steve Jobs, 1985’’

(CCO7, 2011).

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10 Resumé

Táto práca je zameraná na cloud computing a analýzu cloudových platforiem

vrátane jeho praktickej implementácie v prostredí firmy. Vo svete sa cloud computing

považuje za veľmi praktický nástroj používaný pri vedení firmy, ktorý dokáže dramaticky

zvyšovať flexibilitu (zamestancov, procesov, výroby, komunikácie a pod.) a zároveň

znižovať firemné náklady. Optimalizácia nákladov a zvýšenie konkurencieschopnosti na

trhu sú v súčasnosti nesmierne dôležité. Žiaľ, v slovenských firmách sa cloud computing

využíva len v malej miere, alebo dokonca vôbec. Úpadok európskych ekonomík a pokles

kúpyschopnosti našich kľúčových obchodných partnerov spôsobuje, že podnikatelia musia

pôsobiť v čoraz zložitejších podmienkach. Tento fakt ešte väčšmi umocňuje dopyt po

opatreniach, ktoré dokážu efektívne znížiť náklady. Dôležité je nielen prežiť, ale najmä

zlepšiť svoje postavenie v porovnaní s ostatnými konkurentmi

Jednotlivé kapitoly sa primárne venujú:

• cloud computingu, jeho komplexnej definícii, teda vymedzeniu pojmov ako cloud,

cloud computing a cloudové služby,

• jednotlivým cloudovým modelom: privátny, verejný, komunitný a hybridný,

• cloudovým platformám: SaaS, IaaS, PaaS a ich podskupinám, pričom z detailného

rozboru platforiem vyplýva ich charakteristika a využiteľnosť pre firmy,

• globálnej situácii v tejto IT branži, teda cloudovým trendom, analýze cloudu a jeho

dopadu na biznis, rozšíreniu mobilných zariadení,

• benefitom a nástrahám, ktoré sa ukrývajú v používaní cloud computingu,

• implemetácií základných služieb v podmienkach firmy a vyhodnoteniu výsledného

účinku.

Hlavným cieľom tejto práce bolo získať o cloud computingu bohaté vedomosti

z pohľadu manažéra, ktorý by získané poznatky mohol aplikovať v štruktúrach reálnych

firiem. Dôležitou súčasťou práce je aj implementácia základných cloudových služieb

(dátové úložisko a MS Office) v prostredí knižného vydavateľstva. Výsledky práce

umožňujú dospieť k záveru, že aplikáciou teoretických poznatkov by podnik skutočne

mohol ušetriť prostriedky v prípade použitia uvedených služieb. Takisto by sa mohla

nesmierne zjednodušiť práca zamestnancom, ktorí by získanú flexibilitu mohli využiť na

dosiahnutie lepších výsledkov.

40

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