The Impact of Cloud Computing in the Business - Coursework Example

Running Header: The impact of Cloud Computing in the business Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Table of Contents Running Header: The impact of Cloud Computing in the business 1 Table of Contents 2 Abstract 4 1.0 Introduction 5 1.1 Introduction to cloud computing 5 1.2 History 5 1.3 Characteristic of cloud computing 5 1.4 Service models 6 1.5 structural changes 6 2.0 Architectures and deployment models 7 2.1 Architecture 7 2.2 Private cloud 7 2.3 Public cloud 8 2.4 Hybrid cloud 8 2.5 Community cloud 8 3.0 Benefits of Cloud computing. 9 3.1 Easy expansion of the existing hardware and software. 9 3.1 Cost reduction 9 3.2 Easy integration of new hardware and software. 10 3.3 Virtual distribution of offices all over the continent 10 3.4 Cloud services allows portability of the capital and labor 11 3.5 Reduction of power usage hence reducing expenses 11 4.0 Disadvantages of cloud computing 13 4.1 Prone to hackers and unauthorized users leading to crime 13 4.2 Data location and privacy 13 4.3 Internet dependency and performance 14 4.4 Service levels and availability 15 4.5 legal challenges due to introduction of new rules 15 5.0 The risks of cloud computing 16 5.1 Privacy is not observed and businesses can loss information as a result of this. 16 5.2 Unauthorized persons abuse the cloud services leading to leakage of information 16 5.3 The businesses are at risk of insecurity from technology criminals 17 5.4 Natural disasters which cannot be prevented 17 5.5 The cost of sustaining is substantial due to carbon emissions 17 7.0 Conclusion 18 Abstract Cloud computing is a current technology which is internet based and which the storage of information is done on servers and this information is provided on-demand and as a service to clients. The research discusses the benefits and effects of the introduction of cloud computing. There is emphasis of how the cloud computing has enhanced the creation and growth of businesses. The reduction of costs in the initial capital has enabled many firms to offer cloud computing and also the organizations can easily afford it. There are several models of cloud computing and each organization adopts the best model depending on its requirement and type of business. The research show there is a lot of benefits of cloud computing to businesses like cost reduction, virtualization of offices, the integration of hardware and software, reduction of power usage. There are also some challenges that arise in the usage of cloud computing like the hacking to the systems which a security issue, contribution to global warming etc. The research shows that many companies and organizations will continue to adopt and implement cloud computing to increase their productivity and profitability (187 words) 1.0 Introduction 1.1 Introduction to cloud computing Technology has advanced a lot in the recent times and it plays a major role in promotion of competition and growth which helps in the recovery of the economy from a severe recession. The discussion will be on economic effect of innovation in the software-hardware field which will have a great effect on the structures of the market of many sectors and also macro-performance globally performance in the next few years. The cloud computing has a major impact on the cost production of the firms and firms production possibilities, and in particular to the small and medium size enterprises (SMEs). When cloud computing is introduced to an organization it reduces the fixed costs drastically and this will have an impact which is positive on competition and entry in the sectors where the usage of ICT is very critical (Jothy & Arthur, 2011). 1.2 History Cloud computing started in the 1960s. The major contributor of the cloud computing was the Amazon when it modernized its data centers and used only 10% of the capacity and it started providing their service to external customers by the name Amazon Web Service (AWS) in 2006 (Mell, 2009, para. 13). It was in 2008 when Eucalyptus started the open source platform. 1.3 Characteristic of cloud computing The cloud computing offer what is referred as on-demand self-service which means that they are easy to request and the customers can access the resources without going through a complex process. Clod computing has also the characteristic of shared resources, multitenancy and resource pooling. For the providers of cloud services to be cost effective they have to offer a common access to the infrastructure. The other characteristic of cloud computing is that it has a broad network access. A report from the University of California Berkeley [5] summarized the key characteristics of cloud computing as: “(1) the illusion of infinite computing resources; (2) the elimination of an up-front commitment by cloud users; (Rajkumar, & James, 2011) and (3) the ability to pay for use . . . as needed . . .” (p. 34, paragraph 4). 1.4 Service models The first type of model is the service provider and this model represents the organizations that do provide cloud services and it offers some of the capabilities that are required by the customer. The other model is the service consumer and this represents the organization that uses the cloud services and gives specific requirement depending on the usage to the provider (Jothy & Arthur, 2011). The other service model is the service broker which is the organization that gets the service on behalf of the client and then provides the service to the client as a different entity. 1.5 structural changes Cloud computing has offered help to the experts of technology because the do not have to move all over the world selling their software (Federico, 2010). This has also helped businesses to install software only at one location and it can be used everywhere. 2.0 Architectures and deployment models 2.1 Architecture Infrastructure as a Service (IaaS) is the basis for cloud computing. Normally it can provide the staff and customers with access to bandwidth, storage, server hardware and other critical computing resources which are useful. For example the Amazon does allow the businesses and individuals to rent preconfigured machines with operating systems which are already selected and running their own applications (Mell, 2009, para. 24). The other is the Platform as a Service (Paas) is normally built upon the IaaS and it does provide the clients and staff the software applications, basic operating system and development services without the necessity to manage or buy the computing infrastructure. 2.2 Private cloud The cloud services which are privately hosted are normally considered safer but they are much costly than the other services which are using setting of shared tenancy (Bartholomew, 2009, para. 8). In managed or a community setting, the tenancy can either be shared or dedicated (single) and the infrastructure of the IT is managed either by a third party or the organization. The only difference which can be spotted between the other cloud computing services and the hybrid cloud computing services is that the latter do compose of two or more clouds i.e. public, community or private which do continue to have unique identities but they are normally bound together by the proprietary or standardized technology and enables application and data portability. 2.3 Public cloud When one chooses to use public cloud the company should standardize the applications workload which is used by many people. The application code should be developed and tested for the usage and the organization should have a SaaS application from a supplier whom employs high security (Jothy & Arthur, 2011). There should be a capacity of increment for the addition of services due the services change. 2.4 Hybrid cloud This is the combination of both the private cloud and public cloud applications. The SaaS suppliers do create a private cloud for the organization inside firewall and provide it with virtual private network to increase security (Bartholomew, 2009, para.12). Hybrid cloud is also fit for the organizations that do offer wide range of services such as insurance, shipping and offering credit facilities. 2.5 Community cloud Community cloud are normally used by a number of organizations and they do support a definite community that have shared concerns e.g. compliance, policy, security requirements and mission considerations (Keizer, 2009, para.15). They could be managed by a third party or organizations and they might exist as off premise or on premise. 3.0 Benefits of Cloud computing. 3.1 Easy expansion of the existing hardware and software. The platform has the ability to contract and expand automatically depending on the organization needs and the model of charging which is associated with this, and this are key elements that differentiate cloud computing from types of hosting This feature of scalability help companies to update their systems by adding new functionalities e.g. the banking sector can introduce a new application to help their customers to get better services and they will just add that application to the existing platform. At the level of the software development, the cloud computing do allow the IT operations and developers do deploy , develop and run application that help easily to grow the capacity, never fail and work faster without minding the location and the nature of the underlying infrastructure (Murthy, 2010). 3.1 Cost reduction Ronald states that, “For companies that are just starting out, organizations in emerging markets, or even advanced technology groups in larger organizations, cloud computing greatly reduces startup costs (Ronald & Russell, 2010). The new organization starts with an infrastructure already in place, so the time and other resources that would be spent on building a data center are borne by the cloud provider, whether the cloud is private or public.”(Page 32, paragraph 5) If the decision whether to adopt cloud computing or not will depend on the saving of the potential costs then the internal operation costs need to be understood and many organizations fail to do this. Many data centers of organization are normally oversized when they were built and their utilization is up to 60% (Zittrain, 2009). The major advantage in cloud computing is that you can pay depending on the consumption e.g. per gigabyte, per hour etc which has a large impact when comes to the economics. 3.2 Easy integration of new hardware and software. The speed which the new computing capabilities can be requisitioned is critical element of cloud computing. The adding of the computing power, memory, network bandwidth, additional storage etc can be done instantaneously and rapidly. The benefit to the business is that they can change the infrastructure of the company or change the servers or upgrade them without interfering with the remote computers. Cloud computing do allow the organizations in reacting very fast to market conditions and scaling down and up as needed and this helps them to be up-to-date in the market competition(Keizer, 2009, para. 18). 3.3 Virtual distribution of offices all over the continent The cloud computing also provides flexibility which creates room for innovation of new ideas which are tested and tried rapidly without any necessity to shift the existing staff of IT from their every day activities (Creeger, 2010). Many organizations will not be willing to spend any capital on new ideas and they will be willing to for on operation basis and this helps them to cut costs. They do represent new types of technologies, new standards which have been developed; new technique being introduced and also can represent new markets (Federico, 2010 p. 25). Companies having development projects, they can provide a production scale system which is multiple to system which are on demand in the cloud thus saving expense and time which was in the traditional scenarios and thus enabling faster handoff to operations from development. When the projects are completed they could be turned again without pay paying anything else. In most cases the typical disaster recovery expenses are estimated to be almost twice the cost of the used infrastructure (Cloud computing world, 2012, p.115). This flexibility helps the organization to save lot money will be used to send people manually to different areas. 3.4 Cloud services allows portability of the capital and labor Cloud computing technology is providing a lot of greater portability, greater opportunities for collaboration and interconnection and device independence. With data and applications located in the cloud it is very easy to enable the users the accessibility of the system without considering their current location or may regardless of what device they are using so long as they are in a place that has internet (Lewin, 2009, para. 63). This portability helps the employees of organizations in that they can operate in any area of the world helping the businesses to expand and to even have virtual location as long as the employees can access internet where they are. 3.5 Reduction of power usage hence reducing expenses It is clearly indicated that most of the internal data centers are normally oversized and they do not run to their full capacity. This helps the businesses and companies to use less power thus helping them to reduce on administrative expense thus increasing their profits. Creeger (2010) stated that for the organization that are spread all over at different time zones and may be the computing power is not used in one location; their power can be harnessed by being used by offices in another geographical location (Creeger, 2010). This reduces the amount of hardware that is required and also makes sure that the power being used is reduced drastically. Using the cloud computing virtual offices are easily set up and the workers do easily work from home. The sales people who are travelling can easily access the information they need without going back to the office. This helps the businesses by reducing their expenses of hiring new offices. Figure1.1 Cloud computing profitability and usage after its deployment. The above graph shows that the usage of the three sites increased after the deployment of the cloud computing thus increasing the profit. The first two years the companies were not using cloud computing but the last two years they were using cloud services and their total sales increased by a big margin. 4.0 Disadvantages of cloud computing 4.1 Prone to hackers and unauthorized users leading to crime One of the major concern and which has been seen as the main disadvantage is the security. It has been observed and the research done that for more than 70% of the breaches of intellectual property are normally as a result of attack which are made inside the organization (Federico, 2010). It seem there will a major concern to the security of cloud computing in years to come because as the systems become more and more complex the hackers are becoming complex with time. Although the organizations that deal with insecurity like the Cloud Security Alliance are at the forefront to address these issues. It is in the same way that some bank banking are taking time to offer mobile banking and internet banking, some of the organization are reluctant to accept the cloud computing and makes business to lag behind the technology by the technology and thus they do not full benefit from it ( Mackenzie, 2010). In general security is one of the major threat when businesses implement clod services and they incur a lot of money when improving security. 4.2 Data location and privacy The other disadvantage of the cloud computing is the data location and the privacy that should be involved to it. The data in the cloud computing do subsist on physical servers in the world somewhere and the location of these servers is very critical to the laws and to the computing world. This will be very important especially to companies that perform their business across different countries and the different data management and data privacy do apply to these different countries (Judith, Robin, Marcia & Fern, 2010). For example there is a limit on the data for the citizens of the European Union that is stored on the other countries. Also many regulators of the bank do require that the financial data of the customers to stay in their home country. Many of the compliance regulations do require that the data should not be intermixed with the other forms of data like databases and shared servers. Large cloud computing providers like the Google and the Microsoft have realized this as an issue and they are allowing customers to specify where they want the data to be located. 4.3 Internet dependency and performance The other disadvantage of cloud computing is the latency, performance and internet dependency. The major concern of this cloud computing is that it always relies on the performance internet connection, quality and the availability (Jothy & Arthur, 2011). When the company is moving an application which is in-house to the cloud there will be some trade offs which will be certain in terms of the performance. Most of the organization applications were not designed with cloud in the mind. If an organization is considering an investment in the cloud computing it has to consider the cost which will be involved in network infrastructure improvement that will help in the running of the application in the clouds. The advantage is that the bandwidth increases with time and the other approaches such as the pre-fetching, compression, dynamic caching and the other associated web-acceleration will result to major improvements in performance to the end users (Ronald & Russell, 2010). During the software development, the software has to be designed to fit in the cloud computing for the maximum performance to be achieved. 4.4 Service levels and availability Service and availability has also been considered as a disadvantage to cloud computing in that there is a potential of down time if the availability of the system is compromised for use. There has been a very crucial issue for the business application in that since every minute in business is very important then if it happens that there is down-time even if is for one minute then this will affect the revenue and finally may cause damage to the business reputation (Rajkumar, James & Andrzej, 2011). The last but not the least which can be considered as a disadvantage, is the movement of the cloud platform which initially appears to be easy but it’s difficult. There are different cloud providers that impose different architectures which are different from the architectures that are used by the enterprise applications. A very big organization with many users of the system and the access rights keep on changing now and then they will find it difficult to shift to cloud platform. In reality many enterprises that would like to shift to cloud computing will end up having new applications. The application that they already have might be used for a short time. 4.5 legal challenges due to introduction of new rules The introduction of new technologies leads to introduction of new rules and legal issues and this to introduction of charges of registration (Mackenzie, 2010). In the long run this will have effects on the business side and it will lead to extra charges. 5.0 The risks of cloud computing 5.1 Privacy is not observed and businesses can loss information as a result of this. Most of the attackers do target shared tenancy environment. A virtual machine (VM) is normally software execution of a computer that does run its own applications and operating system as if it was a real physical machine (VM2009). Using the virtual machines it is possible for the attackers who monitor the cache to be in a position to steal information from the machine. The hacking have a negative effect to business because it may cause leakage of information to a rival company and this may lead to losses. This leakage of information to the third party does cost businesses and companies a lot and preventing the leakage is a challenge which they pay a lot of money. This increases the operating expenses of these companies. 5.2 Unauthorized persons abuse the cloud services leading to leakage of information IaaS providers do provide their customers with unlimited storage capacity, network and compute. Any person who is valid can register and start using the cloud services immediately. PaaS have been suffering from hackers. The future areas that have created much concern are the key cracking and password cracking (Price, 2008). The attack may lead to leakage of information which may lead to person committing fraud e.g. in financial institution. Persons can register with an ill motive and they can abuse the data given to them and distribute to the wrong people. Companies trying to reduce abuse also do cost it money and thus also increase to operating expenses. 5.3 The businesses are at risk of insecurity from technology criminals There was an issue that was raised about any possibility of the cloud computing servers being vulnerable for criminal exploitation. The other risk that is involved in the cloud computing is the vulnerability to malware (Cloud Security Alliance, 2009, para. 25). Many businesses and companies do invest a lot of capital to make sure the security of its information is there. This requires them to hire professionals and to get security gadget from the right companies which is a lot of money. The risk of data availability can be associated with the risk of cloud computing. When the security is compromised then the organization or the businesses suffer losses due to loss of data which can be used against them. 5.4 Natural disasters which cannot be prevented On of the risk that involves business continuity in cloud computing when the internet connectivity is lost may be due to disasters which are natural because the business in cloud computing rely on internet access to their corporate information. If any vulnerability is detected in a particular service that is being provided by the cloud computing services provider then this may lead the business to terminate its access to the clod service provider until the vulnerability is rectified (Ronald & Russell, 2010). Disasters lead to the physical loss of the hardware and also loss of data. For companies to prevent disaster it has to have strong building thus they do incur extra costs to construct it. 5.5 The cost of sustaining is substantial due to carbon emissions It has believed that cloud computing saves a lot of energy. This is only applicable to countries which has moderate temperatures e.g. Switzerland. If the data centers are distributed all over they can have an effect on the green houses gases due to emission of carbon (Creeger, 2010). Businesses will incur extra cost by trying to reduce this gases thus this will increase their operational expenses. 7.0 Conclusion There is a lot of discussion about the cloud computing an some people does not believe that it works and that is why they are very reluctant to embrace. The other body believes that cloud computing in one form or the other will have a great influence on the technology arena in the years to come. If we believe that the group that believes that the cloud computing will work then there is several ways in which we can be involved in it which ranges from hybrid internal solutions to private clouds (Dubey & Wagle, 2009). Considering that the cloud computing services is not silver bullet technology then there is a recommendation that any decision that will be made in relation to investing in it then it is important that is done on basis of project by project. Cloud computing has made Amazon to change form a normal online bookseller to becoming a big cloud provide has shown that then cloud computing leads to developments and profitability. Cloud computing do have the potential to change how do our business in the coming future. References Bartholomew, D. (2009). Cloud rains opportunities for software developers. Retrieved from http://www.aic.gov.au/documents/C/4/D/%7BC4D887F9-7D3B-4CFE-9D88-567C01AB8CA0%7Dtandi400.pdf Creeger, M. (2010). Cloud computing. Communications of the ACM, 52(8), 50-56 Cloud computing world, (2012). Cloud Computing Solutions to Common Business Problems. Retrieved from http://www.cloudcomputingworld.org/cloud-computing/how-cloud-computing-will-affect-your-business-in-the-next-five-years.html Cloud Security Alliance (2009). Security guidance for critical areas of focus in cloud computing. Retrieved from http://www.cloudsecurityalliance.org/csaguide.pdf. Dubey, A. & Wagle, D. (2009). Delivering Software as a Service. The McKinsey Quarterly, 15(2), 31-82. Federico, E. (2010). “The Economic Impact of Cloud Computing on Business Creation, Employment and Output in Europe.” Review of Business and Economics, 54(2), 179-208 Jothy, R., & Arthur, M. (2011), The cloud at your service: The when, how and why the enterprise cloud computing, Greenwich: manning publications. Keizer, G. (2009). VMware bug allows Windows hack to attack Macs. Retrieved from http://www.networkworld.com/news/2009/041509-vmware-bug-allowswindows- hack.htm Lewin, K. (2009). Federal cloud computing initiative overview. Retrieved on February 28, 2012, from,. Mark, S. (2012). Impact of cloud computing in your business. Retrieved from http://www.vital-mag.net/2011/09/the-impact-of-cloud-computing-on-your-business Mell, P. (2009). Effectively and securely using the cloud computing paradigm. Retrieved from http://csrc.nist.gov/ groups/SNS/cloud-computing/cloudcomputing- v26.ppt. Mackenzie, A. (2010), Wirelessness: Radical Empiricism in network cultures, Cambridge: MIT Press. Murthy, C. (2010), Data Communication and Networking, Canada: Globe Media. Macdonald, K. (2010), Above the clouds: Managing Risk in the world of clod computing, Cambridge: IT Governance. Price, M. (2008). The paradox of security in virtual environments. Journal of advanced Computing, 41(11), 22–38. Rajkumar, B., James, B., & Andrzej,G. (2011), Cloud computing: Principles and paradigms, Australia: John wiley and Sons Inc publication. Ronald, L., & Russell, D. (2010), Cloud Security: A comprehensive Guide to Cloud computing, Indanapolis: wiley. Zittrain, J. (2009). Saving the Internet. Harvard Business Review, 12(3), 85-136 Read More