Contents

What is Cloud Computing?....................................................................................................................1

History...................................................................................................................................................2
Key Characteristics................................................................................................................................3
SWOT Analysis.......................................................................................................................................4
Porter’s five forces in cloud computing.................................................................................................4
Service provider Landscape...................................................................................................................5
SaaS (Software as a Service)..............................................................................................................5
Paas (Platform as a Service)...............................................................................................................6
IaaS (Infrastructure as a Service).......................................................................................................7
Recent Findings.....................................................................................................................................7
Key Features:.........................................................................................................................................8
Cloud Computing...............................................................................................................................8
Virtualization.....................................................................................................................................9
Private Clouds....................................................................................................................................9
Public Clouds.....................................................................................................................................9
Hybrid Clouds....................................................................................................................................9
The IaaS Model (Infrastructure as a Service).....................................................................................9
The PaaS Model (Platform as a Service)............................................................................................9
The SaaS Cloud Model (Software as a Service)..................................................................................9
MSPs (Managed Service Providers).................................................................................................10
Market dynamics.................................................................................................................................10
Shifting mindsets.............................................................................................................................10
Investing in today – and tomorrow.................................................................................................11
Partnering for growth......................................................................................................................17

What is Cloud Computing?

Cloud Computing is essentially the Fifth Generation of Computing (after Mainframe, Personal
Computer, Client-Server Computing, and the web)
Cloud computing is computation, software, data access, and storage services that do not require
end-user knowledge of the physical location and configuration of the system that delivers the
services. Parallels to this concept can be drawn with the electricity grid where end-users consume
power resources without any necessary understanding of the component devices in the grid
required to provide the service.

Cloud computing is a natural evolution of the widespread adoption of virtualization, service-oriented

architecture, autonomic and utility computing. Cloud computing describes a new supplement,
consumption, and delivery model for IT services based on Internet protocols, and it typically involves
provisioning of dynamically scalable and often virtualized resources.

Cloud computing sample architecture

The underlying concept of cloud computing dates back to the 1960s, when John McCarthy
opined that "computation may someday be organized as a public utility."

Cloud computing is broken down into three segments: "applications(SaaS),"

"platforms(PaaS)," and "infrastructure(Iaas)." Each segment serves a different purpose
and offers different products for businesses and individuals around the world. In June 2009, a
study conducted by VersionOne found that 41% of senior IT professionals actually don't
know what cloud computing is and two-thirds of senior finance professionals are confused by
the concept, highlighting the young nature of the technology. In Sept 2009, an Aberdeen
Group study found that disciplined companies achieved on average an 18% reduction in their
IT budget from cloud computing and a 16% reduction in data center power costs.

History
Amazon played a key role in the development of cloud computing by modernizing their data centers
after the dot-com bubble, which, like most computer networks, were using as little as 10% of their
capacity at any one time, just to leave room for occasional spikes. Having found that the new cloud
architecture resulted in significant internal efficiency improvements whereby small, fast-moving
"two-pizza teams" could add new features faster and more easily, Amazon initiated a new product
development effort to provide cloud computing to external customers, and launched Amazon Web
Service (AWS) on a utility computing basis in 2006.
In 2007, Google, IBM and a number of universities embarked on a large scale cloud computing
research project. In early 2008, Eucalyptus became the first open source AWS API compatible
platform for deploying private clouds. In early 2008, OpenNebula, enhanced in the RESERVOIR
European Commission funded project, became the first open source software for deploying private
and hybrid clouds and for the federation of clouds. In the same year, efforts were focused on
providing QoS guarantees (as required by real-time interactive applications) to Cloud-based
infrastructures, in the framework of the IRMOS European Commission funded project. By mid-2008,
Gartner saw an opportunity for cloud computing "to shape the relationship among consumers of IT
services, those who use IT services and those who sell them" and observed that "[o]rganisations are
switching from company-owned hardware and software assets to per-use service-based models" so
that the "projected shift to cloud computing ... will result in dramatic growth in IT products in some
areas and significant reductions in other areas."

Key Characteristics
• Agility improves with users' ability to rapidly and inexpensively re-provision technological
infrastructure resources.

• Application Programming Interface (API) accessibility to software that enables machines to

interact with cloud software in the same way the user interface facilitates interaction between
humans and computers.

• Cost is claimed to be greatly reduced and in a public cloud delivery model capital
expenditure is converted to operational expenditure. This ostensibly lowers barriers to entry, as
infrastructure is typically provided by a third-party and does not need to be purchased for one-time
or infrequent intensive computing tasks.

• Device and location independence enable users to access systems using a web browser
regardless of their location or what device they are using (e.g., PC, mobile phone).

• Multi-tenancy enables sharing of resources and costs across a large pool of users thus
allowing for:

1. Centralization of infrastructure in locations with lower costs (such as real estate,

electricity, etc.)
2. Peak-load capacity increases (users need not engineer for highest possible load-levels)
3. Utilization and efficiency improvements for systems that are often only 10–20% utilized.

• Reliability is improved if multiple redundant sites are used, which makes well designed
cloud computing suitable for business continuity and disaster recovery.

• Scalability via dynamic ("on-demand") provisioning of resources on a fine-grained, self-

service basis near real-time, without users having to engineer for peak loads.

• Security could improve due to centralization of data, increased security-focused resources,

etc., but concerns can persist about loss of control over certain sensitive data, and the lack of
security for stored kernels.
• Maintenance of cloud computing applications is easier, since they don't have to be installed
on each user's computer.

• Metering means that cloud computing resources usage should be measurable and should be
metered per client and application on a daily, weekly, monthly, and yearly basis.

SWOT Analysis

Strengths Weaknesses

 Scalable  Data privacy and security

 Efficient

 Cost effective

 OpEx based against Capex

Opportunities Threats

 For SMEs: Access to high-  Lack of standards

end applications (economic)  Lack of regulatory body

 For Giants: Emerging market

Porter’s five forces in cloud computing

Threat of new entrants There is likely to be a large number of new entrants from SMEs, that
will raise the level of competition. The reasons that there is likely to be a large number of
new entrants are low fixed costs, low cost of switching to this new technology, and relative
lack of government restrictions.

Bargaining power of suppliers Unfortunately, the bargaining power of suppliers is high, and
this is reflected in the way the terms and conditions (“T&C”) are drafted, many much more in
the suppliers’ favour in the buyer-supplier relationship. The reasons for the bargaining power
of suppliers being so high is that there are many potential customers amongst SMEs and few
dominant suppliers (such as Google and Amazon), and the suppliers integrate in positioning
themselves in the marketplace.

Bargaining powers of buyers The bargaining power for SME clients can potentially
improve, if the cloud computing products become standardized (and a large driver for this
could be regulatory compliance with the law), and there are more emerging suppliers of cloud
computing (although it has to be conceded that Google, Microsoft and Amazon have
achieved a healthy dominance in the market due to their innovation rather than abuse of
competition).

Threat of substitutes The main competition of cloud computing is open source computing,
and SME clients might consider adopting cloud computing in preference to open source
computing, as the switching costs are not prohibitive, SME directors might find the business
case for switching attractive, and, not least, because cloud computing is cheaper. However,
factors in favour of sticking to open source computing might be brand loyalty and current
trends.

Competitive rivalry The question of whether the market is truly competitive is an area of
controversy. Analysis of this depends on whether any particular provider is dominant in the
market (all the main providers, such as Google, Amazon and Microsoft, have all been called
‘main providers’ at some point), and whether there is true differentiation between the
products being offered by the cloud computing providers. For example, Google Apps’
strategy is a mix of differentiation and cost leadership. It seeks to distinguish itself from the
market as bringing a purely online collaboration model, where companies would need to give
up traditional desktop based document software like MS Office.

Service provider Landscape

SaaS (Software as a Service)

Software as a service, sometimes referred to as "software on demand," is software that is deployed
over the internet and/or is deployed to run behind a firewall on a local area network or personal
computer. With SaaS, a provider licenses an application to customers either as a service on demand,
through a subscription, in a "pay-as-you-go" model, or (increasingly) at no charge when there is
opportunity to generate revenue from streams other than the user, such as from advertisement or
user list sales. This approach to application delivery is part of the utility computing model where all
of the technology is in the "cloud" accessed over the Internet as a service.

Advantages
 * Accessible from anywhere with an internet connection
* No local server installation
* Pay per use or subscription based payment methods
* Rapid scalability
* System maintenance (backup, updates, security, etc) often included in service
* Possible security improvements, although users with high security requirements (e.g.,
large corporations) may find SaaS a security concern
* Reliability
* Reduced time to market

SaaS has become a common model for many business applications including accounting,
collaboration, customer relationship management (CRM), enterprise resource planning (ERP),
invoicing, human resource management (HRM), content management (CM), and service desk
management.

Customized Saas Providers: The companies below are already established in the On-Demand
software or SaaS business. These companies charge their customers a subscription fee and in return
host software on central servers that are accessed by the end user via the internet.

o International Business Machines (IBM)

o Salesforce.com (CRM)
o Google (GOOG)
o NetSuite (N)
o Cordys
o Taleo (TLEO)
o Concur Technologies (CNQR)

Traditional Saas Providers: The following companies have established themselves as traditional
software providers. These companies sell licenses to their users, who then run the software from on
premise servers.
o SAP AG (SAP)
o Oracle (ORCL)
o Blackbaud (BLKB)
o Lawson Software (LWSN)
o Blackboard (BBBB)

Paas (Platform as a Service)

Platform as a Service (PaaS) is the delivery of a computing platform and solution stack as a service.
PaaS offerings facilitate deployment of applications without the cost and complexity of buying and
managing the underlying hardware and software and provisioning hosting capabilities, providing all
of the facilities required to support the complete life cycle of building and delivering web
applications and services entirely available from the Internet.
PaaS offerings may include facilities for application design, application development, testing,
deployment and hosting as well as application services such as team collaboration, web service
integration and marshalling, database integration, security, scalability, storage, persistence, state
management, application versioning, application instrumentation and developer community
facilitation. These services may be provisioned as an integrated solution over the web.

Active platforms - The following companies are some that have developed platforms that allow end
users to access applications from centralized servers using the internet. Next to each company is the
name of their platform.

o International Business Machines (IBM) - IBM Cloud - Lotus Live

o Google (GOOG) - Apps Engine
o Amazon.com (AMZN) - EC2
o Microsoft (MSFT) - Windows Azure
o SAVVIS (SVVS) - Symphony VPDC
o Terremark Worldwide (TMRK) - The Enterprise Cloud
o Salesforce.com (CRM) - Force.com
o NetSuite (N) - Suiteflex
o Rackspace Cloud - cloudservers, cloudsites, cloudfiles
o Metrisoft

IaaS (Infrastructure as a Service)

Cloud infrastructure services, also known as "Infrastructure as a Service (IaaS)", delivers computer
infrastructure - typically a platform virtualization environment - as a service. Rather than purchasing
servers, software, data-center space or network equipment, clients instead buy those resources as a
fully outsourced service. Suppliers typically bill such services on a utility computing basis and amount
of resources consumed (and therefore the cost) will typically reflect the level of activity. IaaS evolved
from virtual private server offerings.

Cloud infrastructure often takes the form of a tier 3 data center with many tier 4 attributes,
assembled from hundreds of virtual machines.

Major Infrastructure Vendors - Below are companies that provide infrastructure services:
o Google (GOOG) - Managed hosting, development environment
o International Business Machines (IBM) - Managed hosting
o SAVVIS (SVVS) - Managed hosting & cloud computing
o Terremark Worldwide (TMRK) - Managed hosting
o Amazon.com (AMZN) - Cloud storage
o Rackspace Hosting (RAX) - Managed hosting & cloud computing
Recent Findings

As per recent findings of the technology research firm Gartner Inc., the global cloud service
market is expected to grow substantially with revenue expected to reach $148.8 billion by
2014. The market research firm is of the opinion that the cloud computing market will grow
exponentially by 16.6%, generating revenues of $68.3 billion in 2010 and reaching $148.8
billion by 2014 from $58.6 billion in 2009.

The detailed study by the market researcher reveals that the U.S. had a 60.0% share of the
worldwide cloud services market in 2009, which is expected to dip by ten percentage points
to around 50.0% by 2014, whereas other countries that have started adopting cloud
computing more aggressively would account for the growth.

Apart from the U.S, Western Europe is expected to capture 23.8% of the cloud services
market in 2010, while Japan will take a 10.0% share. By 2014, the UK is expected to
comprise a 29.0% share of the total market, with Japan’s share reaching around 12.0% of
total cloud services revenue.

While the U.K.’s budget restructuring program outlines plans to implement budget cuts to the
different government departments, the government itself is expected to adopt cloud
computing services aggressively, which they believe will lead to lower IT costs across
sectors. So this will be a clear driver of cloud computing growth in the U.K.

The technology research major also believes that the financial services, manufacturing,
communications and technology industries are the largest adopters of cloud computing
services and will continue to generate volumes in this segment.

Sensing the huge opportunity, CA, Inc. has come out with a new technology, CA Agile
Vision, which runs on the Force.com platform provided by the cloud computing major
Salesforce.com. CA Agile Vision was designed to provide a competitive edge to the user
through application development management technology on a cloud computing platform.
The teaming up of cloud computing-based companies is becoming common, making the
competition in this field much stiffer.

Recently, another global leader in virtualization and cloud infrastructure, VMware, teamed
up with search-engine giant Google. The purpose of the collaboration was to make cloud
applications more productive, portable and flexible.

Meanwhile, competition continues to intensify in the software & cloud computing space, as
big players like IBM, Hewlett Packard and Dell scramble to grab the leading market share
in this space.

Gartner is of the opinion that security, availability of service, vendor viability and maturity of
technology remain some of the concerns to be resolved, which will take cloud computing to
new heights.
Key Features:
Cloud Computing
A method of delivering computing resources – including storage, servers, processing, memory,
network bandwidth, applications and services – typically over the public Internet, using a shared
infrastructure. In one of its greatest contributions to cost-efficiency, a “utility pricing” model lets
customers pay only for what they use.

Virtualization
The creation of a software layer between existing computer hardware and Windows or other host
operating systems. By fooling the operating system into thinking it’s talking to the hardware, this
buffer layer of software allows multiple “virtual machines,” each hosting their own operating system
and application, to run side-by-side on the same physical hardware. Efficiency also results from the
software acting as a traffic cop, intercepting requests from each virtual machine and redirecting
them to the appropriate resources, such as storage, network bandwidth or compute cycles.

Private Clouds
Describes a model in which the cloud infrastructure is operated solely for one organization. It may
be managed by the organization, or by a third party, and may exist on or off the premises. The
infrastructure supporting those services is completely dedicated to one customer.

Public Clouds
The model in which the cloud infrastructure delivers a set of shared “multitenant” services, often to
a variety of businesses, individuals, or industry groups. Community Clouds Here, the infrastructure is
shared by several organizations, and supports a specific community that has common concerns, such
as mission, security requirements, or policy or compliance considerations. The organization may
manage it, or it may be managed by a third party.

Hybrid Clouds
Their infrastructure is composed of two or more clouds – whether private, public or community –
that remain unique entities, but are bound together by standardized or proprietary technology that
lets the data be portable, allowing such things as “cloud bursting,” for example, to help balance
loads between clouds.

The IaaS Model (Infrastructure as a Service)

Provides processing, storage, networks, and other fundamental computing resources, with the
customer deploying and running the software. The customer does not manage or control the cloud
infrastructure, but controls the operating systems, storage and applications, and may control such
networking components as firewalls. Amazon Web Services EC2 is an example.

The PaaS Model (Platform as a Service)

Allows the customer to deploy customer-created or acquired applications within the cloud
infrastructure, using programming languages and tools supported by the provider. Customers do not
manage or control the underlying infrastructure, however. Microsoft’s Windows Azure is an
example.
The SaaS Cloud Model (Software as a Service)
The capability provided to the customer lets it use the provider’s applications, but running on a
cloud infrastructure, and accessible from various customer devices, usually through a web browser
or web-based email. The customer does not manage or control the underlying cloud infrastructure –
including network, servers, operating systems and storage – except possibly for some limited
applications. For customers it means no upfront investment in servers or software licensing, while
provider costs are lower, compared to conventional hosting, because there is just one application to
maintain. Salesforce.com, NetSuite and Google Apps are examples.

MSPs (Managed Service Providers)

One of the oldest forms of cloud computing, service through MSPs basically involves applications –
such as virus scanning services for e-mail – that are exposed to IT rather than to end-users. Desktop
management services are often MSPs, as are security services from SecureWorks, IBM and Verizon,
and anti-spam services such as Google’s Postini.

Market dynamics
As economies around the world continue their steady recovery, midsize firms face a new set of
challenges and opportunities to position themselves for success. Midsize companies have been the
engines driving economic growth and fuelling a smarter planet for some time now. They realize they
must constantly adjust to a rapidly changing global marketplace and "new normal" financial
environment. And they are. The strategic mind-set of midsize firms has dramatically shifted during
these challenging times to place more emphasis on growth, innovation, and customer value. Midsize
businesses are taking the steps needed to make better use of the information and resources
available to them in order to increase productivity, attract and retain customers, and improve
competitive positioning – all within a cost-effective business model. For a growing number of these
firms, recent economic disruptions have spawned new ways of thinking about information
technology and smart systems. In many ways, technology has moved from being a back office
function and enabler of cost reduction, to a driver of growth and value. For some, this transition is a
steady journey. For others, the right alignment of IT and business strategy can deliver immediate
breakthrough change and transformation.

Shifting mindsets
Today’s midsize firms must reconcile seemingly opposing strategic mindsets – keeping costs down
and increasing efficiency while reshaping business models and infusing them with intelligence. Our
findings reveal that midsize firms are, in fact, able to juggle these dual priorities to focus on what will
offer the most value to their organizations. When asked about their strategic mindset, 79% cited
customers, innovation, and growth as their major priorities, with 21% primarily focused on reducing
costs and increasing efficiency. Comparisons between findings from this study and those from 2009
reveal a broadening midsize businesses focus on strategic areas that will continue to help seize
opportunity and lead the recovery.
In 2009, midsize businesses (53%) were mainly consumed with reducing costs and increasing
efficiencies. The progress and momentum gained from these efforts continue to yield critical
benefits and advantages for midsize businesses. Because of this momentum they are now in a
position to turn their attention to more forward-looking aspects of their business. This is
demonstrated by the significant increase in focus on customers (+20 pts), innovation (+7 pts) and
revenue growth (+5 pts).

To strengthen relationships, improve service, and provide differentiated value, 31% of midsize
businesses are shifting their attention toward current and prospective customers. . Midsize
businesses today have a variety of affordable applications and technologies at their fingertips to
accomplish these goals. Technologies, such as social media, Web 2.0, and mobility applications,
expand opportunities in terms of reach, collaboration, and accessibility. Other technologies, like
information management and business analytics, help companies derive insights from vast amounts
of customer data.

Another 30% of midsize businesses are looking to revenue and market share growth as ways to enter
new markets, expand globally, and improve competitive positioning. And, 18% are tapping into new
and innovative business processes and models to help them transform into more agile and
formidable competitors. With the economy continuing to strengthen, companies are looking for
breakthrough innovations and new markets that will drive new revenue streams to carry them into
the next decade.

At any given time, corporate culture, available resources, and business environment play major roles
in influencing which approach is most appropriate for a company. Regardless of the prevailing mind-
set, all present different challenges that require careful planning and strong execution to ensure a
successful outcome.

Investing in today – and tomorrow

Midsize firms are increasing their investment in IT, striking a balance between solutions that drive
short term cost savings and those that enable revenue growth and stronger customer relationships.
Globally, managing costs, improving efficiencies, driving up productivity, and focusing on superior
customer service are all cited as critical business priorities.

Cost reduction and operational efficiencies – The demands of today’s “new normal” financial
environment require that midsize firms remain focused on efficiency and cost control. Given that, it
is no surprise that in our study 76% of midsize businesses cites improving efficiency as a key priority,
while 70% cite increasing employee productivity. From a geographic perspective, these priorities are
particularly high in China, Brazil, and Mexico where roughly 9 in ten believe improving efficiencies
and reducing costs are the top priorities. Many midsize businesses are optimizing key business
processes to deliver greater efficiency and competitiveness. This is a particularly high priority in Italy,
BeNeLux, and New Zealand.

Customer focus – Enhancing customer service (73%) and prospecting for new customers (67%) are
top priorities among midsize businesses around the world. In Canada, the United Kingdom,
Germany, Mexico, Singapore, and Poland, improving service and better managing customer
relationships are the top priorities. In China, 92% indicate that finding new ways to reach customers
(e.g., via social media) and customer acquisition are top priorities.

Increased insights and intelligence - Improving insights for better decision making (62%) is a top
priority for midsize businesses. This capability allows them to use information more effectively in
order to make informed and competitive business decisions regarding customers, competitors, and
their own companies.
Consistent with an optimistic IT budget outlook and critical business priorities that need to be
achieved, midsize businesses are proceeding with their IT plans in 2011. These plans include:

• IT infrastructure improvements (75% started/intend to implement) to ensure flexible, resilient,

scalable

• Collaboration (70% started/intend to implement) to drive innovation, improve employee

productivity, and better focus on the customer

• Business analytics (70% started/intend to implement) and information management (69%) to

better collect, aggregate, and transform data into insightful and actionable intelligence

• Business performance management (70% started/intend to implement) to monitor financial and

operational performance versus key objectives and benchmark

• Virtualization (67% started/intend to implement), cloud computing (66%), and software as a

service (65%) to take advantage of a shared infrastructure to improve efficiencies, lower costs, and
improve scalability.
Looking at specific IT priorities, midsize businesses are focused on security management, customer
relationship management, and business analytics. With IT priorities around security management
and associated solutions, like business continuity, midsize businesses can protect their IT systems
and sensitive customer data while minimizing potential threats.

The research also reveals that while there are many common areas of IT focus for midsize businesses
around the world, some areas are higher priorities in certain countries than others.

• Maintaining the viability of core IT systems is critical in many countries through infrastructure
improvements to server, storage, and network environments. This is most evident in Canada, Brazil,
Mexico, Italy, Spain, France, South Africa, Poland, and Germany.

• In Russia, New Zealand, Singapore, and Mexico, disaster recover and business continuity are top IT
priorities for 2011.

• Financial management to improve finance operations such as claims automation, risk simulation,
and compliance are key areas of investment and focus in Brazil, South Africa, and New Zealand.
The study shows that midsize businesses are turning a corner in 2011, with more than half showing
confidence that the recovering economy will support their plans to increase IT budgets to help them
focus on growth and customer value, while continuing to improve operational efficiencies. At a
worldwide level, 53% expect to increase their IT budget in 2011 – versus only 20% in 2009. Another
31% expect no change, and only 16% are planning for a decrease. In fact, of those that expect to
increase their budgets, almost half expect an increase of 10% or more versus their 2009 IT spend.
The study also reveals that companies in growth market countries (69%) are even more likely than
more mature market countries (51%) to increase their budgets in 2011. In countries such as China,
Brazil, India, Korea, and Singapore, more than 7 in 10 midsize businesses are planning for a budget
increase next year.

Partnering for growth

To advance these priorities, more than 70% of midsize firms are seeking a consultative, versus purely
transactional, relationship with their primary IT provider. And whether they are part of the two-
thirds who view themselves as advanced when it comes to IT adoption or among those who lag, all
midsize firms cite product reliability, product performance, and competitive pricing as the top
reasons for choosing their primary IT vendor.

Although midsize businesses clearly want to adopt new, innovative business strategies, make
changes required to improve their performance, and partner with an IT provider who can help
advance their business strategy, they still face substantial challenges to executing against those
goals. Not surprisingly, a key barrier, despite increasing budgets, is cost. This is cited by 58% of
respondents as being one of the top barriers to achieving their key IT priorities. Difficulty
implementing new technology also represents a top challenge worldwide.

The study shows differences in IT barriers across different countries. In mature market countries,
cost is cited more frequently as a key inhibitor (59%). For com example, in Japan nearly 7 in 10 cite
cost as a top barrier in achieving their IT priorities in 2011. Countries in growth markets are more
likely to point to skills and resource challenges, as well as inability to demonstrate a return on their
IT invesments as key inhibitors. In China, Korea, Singapore, and the Czech Republic, over half
mention lack of IT skills and resources as a significant inhibitor in realizing their objectives. Difficulty
demonstrating return on investment is a major challenge in China (60%) and Korea (50%).

Challenges, such as cost and demonstrating short-term return on investment, coupled with the on-
going need to improve operational efficiencies, are driving more companies to virtualized systems
and cloud computing as key components of their IT environment.