BUSINESS MANAGEMENT SUPPORT

Business disadvantages using cloud computing?

© 2010 BM-Support.org Foundation. All rights reserved.

Author: Maikel Mardjaninfo@bm-support.org

EXECUTIVE SUMMARY

Cloud computing is hot. But severe business risks and challenges are involved to retrieve the promised business advantages of cloud computing.

Conclusions:

The main disadvantages are: security, loss of control, unstable cost structure , potentially decreased business flexibility, integration problems.

An adaptive architecture, including a new business model must be developed to retrieve business value

Organizational changes are needed for adapting the technology (procedures, skills, business model)

Formulate and maintain an exit procedure to change from CSP (Cloud Service Provider).

Cloud computing technologies and business models have not yet reached maturity. Standards are being developed.

OUTLINE

This presentation is a brief summary of the research on cloud computing performed under supervision of the Business Management Support Foundation.

The following questions will be answered:

What is cloud computing

What are the main disadvantages and pitfalls using cloud computing

With Google returning more than 12 million search result on the term ‘cloud computing’ the hype can not be ignored.

HYPE, FAD OR INNOVATION?

Cloud computing is rapidly gaining the interest of service providers, programmers and the public as no one wants to miss the new hype.

So the real questions need to be answered:

What is the real business value?

What’s the innovative part?

What are keen pitfalls using cloud computing?

Is clustering the same as cloud computing?

What happened with virtualization, grid computing, the automatic data center and autonomic computing?

What are the main risk involved?

What is the new vendor lock-in?

AGENDA

What is cloud computing

Definition of cloud computing

Is cloud computing new?

Manifestations of cloud computing

Cloud deployment models

What should cloud computing be?

The main disadvantages and pitfalls using cloud computing

Security

Dependency (loss of control)

Cost

Decreased flexibility

Knowledge

Integration

New business opportunities and conclusions

DEFINITION OF CLOUD COMPUTING

The lack of an agreed single definition makes answering ‘what’ question hard.

The NIST definition of cloud computing is:

Cloud computing is a model for enabling 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.

In our opinion this definition covers the field of cloud computing.

IS CLOUD COMPUTING NEW?

Cloud computing is not a fundamentally new paradigm

Cloud computing draws on existing technologies and approaches, such as:

Utility Computing

Software-as-a-Service

Distributed computing

Centralized data centers

What is new is that cloud computing combines and integrates these approaches.

Cloud computing can be seen as the logical evolution in outsourcing IT services. The promise is that with cloud computing every company (big or small) can get IT services in a very simple way.

MANIFESTATIONS OF CLOUD COMPUTING

Multiple Service models:

SaaS: Software as a Service

PaaS: Platform as a Service

IaaS: Infrastructure as a Service

SaaS

• Implementations of specific business functions

• E.g. Google Docs, Salesforce CRM, SAP Business by Design

PaaS

• Provide computational resources through a platform (Operating Systems)

• Dedicated APIs

IaaS

• Resource Clouds (e.g. CPU’s, memory, storage, network)

• Managed and scalable

CLOUD DEPLOYMENT MODELSTo make use of Cloud Computing companies can use services of a CSP (Cloud Service Provider). But be aware of the different cloud service models that are offered:

Private Cloud: Internal within a company data center or dedicated leased;

Public Cloud: Cloud services provided to many customers from a single technology stack;

Hybrid cloud: Offers a possibility to mix private and public cloud services;

DeploymentModels

Private Cloud

Public Cloud

Hybrid cloud

With a public or hybrid cloud the CSP Uses resource pooling to serve multiplecustomers using physical and virtualresources that are dynamicallyassigned and reassigned.

WHAT SHOULD CLOUD COMPUTING BE?

In our opinion cloud computing should:

Give you extra business value over a long period of time

Ensures that the quick changing business needs can be supported better than using traditional IT services

Be a technology that enables business innovation

Currently cloud computing involves:

Virtualization

Automatic Scalability (rapid elasticity)

On-demand deployment

Internet delivery services

Open source software

Open standards

Business innovation and requires business adaptability

AGENDA

What is cloud computing

Definition of cloud computing

Is cloud computing new?

Manifestations of cloud computing

Cloud deployment models

What should cloud computing be?

The main disadvantages and pitfalls using cloud computing

Security

Dependency (loss of control)

Cost

Decreased flexibility

Knowledge

Integration

New business opportunities and conclusions

DISADVANTAGES USING CLOUD COMPUTING

Disclaimer:

Cloud computing technologies and business models have not yet reached maturity.

So:

All major CSP’s are still working on research and development to give customers the level of services and quality required for crucial business processes.

And:

The processes needed within CSP’s and the IT technology used by CSP is growing towards a landscape of extreme complexity.

So what are the main disadvantages using cloud computing?

DISADVANTAGES: SECURITY

Security:

No control over the business assets (data!). The main assets in every company are its data files with valuable customer information.

A proper security model for cloud computing is not yet developed. Security, privacy and compliancy is still difficult for cloud solutions. Especially for public cloud services.

Physical location of hardware and software is unknown. Site inspections and audits are hard.

Availability. Constant connectivity is required.

Failure to compliance. E.g. HIPAA, SOX, PCI, SAS 70 and audits.

Risk of data loss due to improper backups or system failures in the virtualized environment.

DISADVANTAGES: DEPENDENCY

Dependency (loss of control):

Quality problems with CSP

No influence on maintenance levels and fix frequency when using cloud services from a CSP.

No or little insight in CSP contingency procedures. Especially backup, restore and disaster recovery.

No easy migration to an other CSP.

Measurement of resource usage and end user activities lies in the hands of the CSP

Tied to the financial health of another Company.

DISADVANTAGES: COST AND FLEXIBILITY

Flexibility:

Special customization not possible.

Possible lower rate of business IT innovation. The technological innovation pace is dictated by CSP.

Cost:

Hidden cost (e.g. compliancy regulations, backup, restore, disaster recovery and problem solving.)

Opaque cost structure due to highly flexible usage of cloud services;

Cost advantages is as hard to get when using outsourcing for IT services in a traditional way.

Risk of higher future is charges is real.

DISADVANTAGES: KNOWLEDGE AND

INTEGRATION

Knowledge:

More and deeper knowledge is required for implementing and managing SLA contracts with CSP’s

Since all knowledge about the working of the cloud (e.g. hardware, software, virtualization, deployment) is concentrated at the CSP, it is hard to get grip on the CSP.

Integration:

Integration with equipment hosted in other data centres is difficult to achieve.

Peripherals integration. (Bulk)Printers and local security IT equipment (e.g. access systems) is difficult to integrate. But also (personal) USB devices or smart phones or groupware and email systems are difficult to integrate.

AGENDA

What is cloud computing

Definition of cloud computing

Is cloud computing new?

Manifestations of cloud computing

Cloud deployment models What should cloud computing be?

The main disadvantages and pitfalls using cloud computing

Security

Dependency

Cost

Decreased flexibility

Knowledge

Integration

>>New business opportunities and conclusions

NEEDED ORGANIZATIONAL CHANGES

When using cloud computing the following changes are needed:

Adjustment on the main business model

Adjustment on architecture and design for new and current systems

Adjustment on architecture method used to maximize the advantages of the new technology

New approach to implement new solutions using CSP services

Adjustment on maintenance model

Adjustment on cost model

Paradigm shift at current business and IT departments.

NEW BUSINESS OPPORTUNITIES?

Cloud computing can enable new business opportunities.

New business models possible are e.g.:

On demand IT

Self service IT

Pay-by-use

These models are possible from a infrastructure perspective , but also out of a business application perspective.

DON’T GO?!

Cloud computing is about an automatic data center from a IT perspective. But business and IT are allied.

One of the major changes that comes with cloud computing is that there is a need to:

Automate the processes around the various tools and techniques used

So if you did not succeed the last 4 years with e.g.: SOA Building an automatic CMDB Automatic SCM (Software Configuration Management) Quality improvement for business and IT processes Governance Security baselines

Think again on how using cloud computing will impact your current problem fields.

CONCLUSIONS

Cloud computing can give a significant business advantage!

To make Cloud Computing successful :

Understand the risks involved

An adaptive architecture, including a new business model must be developed to retrieve new business value

Organizational changes are needed for adapting the technology (procedures, skills, business model)

Understand the technology used by your CSP (Cloud Service Provider)

Formulate and maintain an exit procedure to change from CSP.

ADVISE

To make Cloud Computing successful :

Stay compliance : SOX, HIPAA, ISO , NIST e.g.

Be robust for network failures and network performance issues.

Stay close to open source and open standard solutions when choosing a CSP (Cloud Service Provider)

Work from within a defined architecture to retrieve the wanted results using cloud computing

Be aware of the current lack of standards when using or implementing cloud computing.

Since long-term experience is lacking with the use of cloud computing real business advantages in relation to competitors is possible. But be aware of the many pitfalls that makes you inflexible in the future.

FUTURE OR PRESENT?

The cloud computing paradigm is not the future.

The technology is already available for a number of years.

The future is about developing innovative business models that use the technological advantages that cloud computing

enables.

MORE INFORMATION? If you want more detailed information about other business research questions regarding cloud computing. E.g.:

Advantages or disadvantages of different vendor Solutions

Open Source solutions available

Open standards adaptation (e.g. Open Virtual Format- OVF)

Integration aspects (business and IT systems)

Organizational changes needed

Quality systems for cloud computing

Read the full report, contact us, or contact one of our partners.

IT’S ALL ABOUT COLLABORATION!

Author infoAbout Maikel Mardjan:

- Msc Business Studies, University of Groningen- Master Business Management (MBM), TSM Business School- Msc Electrical Engineering, Delft University of TechnologyMore than 15 years experience in the field of: consultancy, IT, Open Source, Internet, business research methods and innovation.

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