Impact of busines model elements on cloud computing adoption


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Impact of busines model elements on cloud computing adoption

  1. 1. Impact of Busines Model Elements on Cloud Computing Adoption Kristina Bogataj, Iskra sistemi, Slovenia Andreja Pucihar, FOV UM, Slovenia
  2. 2. Cloud computing overview
  3. 3. Evolution of Cloud Computing Market Source:
  4. 4. Cloud Computing – when and why?• Response to manage complex technologies• Enabling virtualization technology• Scalabilty challenge• Cost presure
  5. 5. Cloud computing hype cycle Source: Mitchell Smith, D. (2012): Hype Cycle for Cloud Computing, Gartner Group
  6. 6. 2013 Global CIO Top 10 TechnologiesMark P. McDonald, M.P. (2013): New Priorities, Technologies and Leaders Shaping the Future of ITFebruary 21, 2013
  7. 7. What is Cloud Computing?
  8. 8. What is Cloud Computing• Cloud computing presents a significant turning point in IT service and facilities provision: – deployment, development, management, maintenance, and billing• Ubiquitous, on demand available, dynamically scalable, virtualized IT services and facilities – provided to the user based on minimum of provider`s intervention Source: Mell, P., Grance, T. (2011a). The NIST Definition of Cloud Computing. Recommendations of the National Institute of Standards and Technology
  9. 9. Cloud computing characteristics• On-demand self-service – computing capabilities (e.g. server time and network storage) provided as needed – automatically without requiring human interaction• Broad network access – capabilities are available over the network – accessed through standard mechanisms – use by heterogeneous thin or thick client platforms (e.g., mobile phones, tablets, laptops, and workstations). Source: Mell, P., Grance, T. (2011a). The NIST Definition of Cloud Computing. Recommendations of the National Institute of Standards and Technology
  10. 10. Cloud computing characteristics• Resource pooling – computing resources are pooled to serve multiple consumers using a multi-tenant model – with different physical and virtual resources – dynamically assigned and reassigned according to consumer demand – examples of resources include storage, processing, memory, and network bandwidth Source: Mell, P., Grance, T. (2011a). The NIST Definition of Cloud Computing. Recommendations of the National Institute of Standards and Technology
  11. 11. Cloud computing characteristics• Rapid elasticity – capabilities can be elastically provisioned and released, in some cases automatically, to scale rapid changes in demand• Measured service – resource usage can be monitored, controlled, and reported, providing transparency for both the provider and consumer of the utilized service (e.g., storage, processing, bandwidth, and active user accounts) Source: Mell, P., Grance, T. (2011a). The NIST Definition of Cloud Computing. Recommendations of the National Institute of Standards and Technology
  12. 12. Cloud computing benefits Source:• Business agility – shorten IT projects, – deliver results faster, – cheaper, with more quality• Better use of resources• Reduced spending (pay per use)• Use of latest technologies• Standardization• Less operatoinal issues - improved flexibility, accesability• Streamline processes• Less in-house IT staff And beyond: New, innovative business models design
  13. 13. Cloud computing service models• Software as a service (SaaS) – End users use provider’s applications running on a cloud infrastructure• Platform as a service (PaaS) – Application developers deploy onto the cloud infrastructure consumer-created or acquired applications created using programming• Infrastructure as a service (IaaS) – Network architects use processing, storage, networks, and other fundamental computing resources Image source:
  14. 14. Value for different types of users Image credit: Source:
  15. 15. Deployment models• Private cloud – The cloud infrastructure is provisioned for exclusive use by a single organization Writer/PrivateCloudWillPushPublicCloudtoMaturit_44CF/image_6.png – It may be owned, managed, and operated by the organization, a third party, or combination of them – It may exist on or off premises.• Public cloud – The cloud infrastructure is provisioned for open use by the general public. – It may be owned, managed, and operated by a business, Image Source: academic, or government organization, or some combination of them. – It exists on the premises of the cloud provider. Source: Mell, P., Grance, T. (2011a). The NIST Definition of Cloud Computing. Recommendations of the National Institute of Standards and Technology
  16. 16. Deployment models• Hybrid cloud – The cloud infrastructure is a composition of two or more distinct cloud infrastructures (private, community, or public) • remain unique entities, are bound together by standardized or proprietary technology that enables data and application portability• Community cloud – The cloud infrastructure is provisioned for exclusive use by a specific community of consumers from organizations that have shared concerns (e.g., mission, security requirements, policy, and compliance considerations). – It may be owned, managed, and operated by one or more of the organizations in the community, a third party, or some combination of them – It may exist on or off premises. Source: Mell, P., Grance, T. (2011a). The NIST Definition of Cloud Computing. Recommendations of the National Institute of Standards and Technology
  17. 17. There are many clouds in the sky
  18. 18. Where are we?• Consumer – Everybody uses it, but we may not know it! Image source: David Fletcher (2013): The Lighter Side Of The Cloud – The Cloud Conclusion (
  19. 19. Cloud Computing - Consumer• Personal clouds – GMail – Google Drive – Dropbox – Facebook – Twitter – Amazon bookstore – iTunes –…
  20. 20. Cloud Computing - Provider• Software as a service (SaaS) – Traditional applications: Email, ERP, Collaboration – Innovative applications: Social media• Platform as a service (PaaS) – Provide ecosystem for partners developing new services • Google Apps • iTunes• Infrastructure as a service (IaaS) – Virtualization infrastructure – Data storage infrastructure
  21. 21. Cloud Computing - Enterprise• Cloud computing becomes a strategic focus of many organizations – Business potential – Rapid development of IT• Agility• Innovation support• More efficient IT governance• Cost savings• Security, trust concerns Image source: pAQo5KGH1M34cPPyrlSMcyzNwT8G_LA8rWQPeQmMyovFwIiXA
  22. 22. Current state• Cloud computing deployment vary by different industries (Gartner group 2012): – most widely spread in hi-tech industry – financial industry adopted PaaS and IaaS in a means of private cloud – government institutions most often use SaaS in a means of public cloud.
  23. 23. Current state in Slovenia• Cloud computing market in Slovenia has reached a value of 11,95 million $ (private and public cloud) in 2010 (IDC consulting, 2010) – private cloud market has reached over 7 million $.• Public cloud market value in Slovenia in 2010: – Romania 65% value of Slovenian market – Bolgaria 9% value of Slovenian market – Slovakia 118% of Slovenian market – Czech 314% of Slovenian market – Russia 230% of Slovenian market• Higher adoption of public cloud in production companies• Higher adoption of private cloud in financial sector and trading copmpanies
  24. 24. Future predictions• Gartner group predicts, that in 2015 the total market value of cloud computing will reach $ 176.8 billion. – a) Software solutions and services: $ 21.3 billion, – b) Platform as a Service: $ 2.4 billion, – c) Infrastructure as a Service: $ 19.59 billion.
  25. 25. Cloud computingresearch challenges
  26. 26. Considerations for cloud computing adoption Business advantage Other factors Ease of development Time to deployment Quality of cloud services Cost advantagesSecurity concernsSource: Anderson, E.; Britz, B. (2012): High-Tech Tuesday Webinar: Cloud or Fog: Clearing the Air Around Cloud Services, Gartner Group (September 2012)
  27. 27. Cloud computing challenges• Cloud computing is here, advantages are defined, good examples identified• Predicted further developments and wider future adoption• Adoption in Slovenia is not that fast as foreseen• To achieve full advantages of cloud computing it is necessary to understand aspects of all players in the market: – Providers – Users
  28. 28. Cloud computing challenges• Majority of research is focused to technological issues of adoption• The need to investigate business perspective of adoption – European Commission tends to accept the strategy for cloud computing development (legal, technological and commercial aspects)• The need to offer approprate business models for cloud computing – to achieve and support wider adoption
  29. 29. Cloud computing challenges• Cloud computing providers are trying to create a competitive advantage with new business models in the market.• By cloud computing adoption organizations tend to maximize the added value of its usage.• It is necessary to clearly define business models and the most important factors that impact cloud computing adoption.
  30. 30. Cloud computingbusiness model – research framework design
  31. 31. Business model definition• The popularity of "business models" started to increase at the end of the 90s.• Business model can be defined as logic of organization that reflects its business strategy.• Business models are not static. – They need to be adjusted, depending on the needs of users, technology, market and regulatory factors.
  32. 32. Cloud computing research framework Business models factors Product Innovation Users Infrastructure management Point of view Impact Cloud computing adoption Customer Providers relationship management FinancesFigure 1: Cloud computing research framework – factors affecting cloud computingadoption (adapted from Osterwalder, 2004)
  33. 33. Product innovation• Product innovation covers all aspects related to the offering of the company: – services and the manner in which company differentiates itself from its competitors. – the ability to offer value to a customer demands with a range of specific capabilities.• It is composed of the: – value proposition, – target customer segments, – capabilities.• These elements need to be assured in order to deliver the value to the customers
  34. 34. Customer relationship management• CRM helps companies to define: – target customers – strategies of customer data collection, its management and use for CR improvements – creation of desired offer of products and services – customer loyalty
  35. 35. Infrastructure management• Infrastructure management describes the value system configuration – necessary to deliver the company offering – to establish and maintain customer relationship.• It is composed of the: – activity configuration – in-house resources and assets – company’s partner network
  36. 36. Finances• Finances defines revenue model and costs structure.• Logic of revenue generation is an indicator of business results and organizational success• Different pricing models: – fixed – dynamic – based on market conditions
  37. 37. Cloud computing research framework• The research framework presents: combination of: – Osterwalder´s (2004) business model definitions – business model elements identified in the 5th FP project E-Factors: A Thematic Network and E- Business Models (E-Factors Consortium, 2003) – other identified factors from prior research in the investigated field • including interviews with cloud computing providers and users
  38. 38. Cloud computing research framework Source: Adopted by Osterwalder 2004, E-Factors 2003, interviews 2012
  39. 39. Research methodology and preliminary results
  40. 40. Research methodology• Three main research hypotheses were introduced, investigating the influence of business model factors on cloud computing adoption• Beside main hypothesis, we wanted to identify potential differences in opinion, based on company role – Users with/users without experiences – Users/providers, …• Introduced research framework was further developed to individual factor´s level
  41. 41. Research limitations• Business model factors were investigated for three cloud computingy service types: SaaS, PaaS, Iaas• Invited CEOs and CIOs / companies in Slovenia – Users (300 micro enterprises, 300 small enterprises, 300 medium enterprises, 300 large enterprises) – Providers (300)• 80 companies responded – 60 users – 20 providers
  42. 42. Results 1/3• The most important business model factors for cloud computing adoption (Linkert scale) Business model factor Cloud computing service type Trust building mechanisms:  System security  Service quality All  Service and system availability  Service recovery procedures
  43. 43. SaaS, PaaS, IaaS
  44. 44. Results 2/3• The most important business model factors for cloud adoption (Linkert scale) Business model factor Cloud computing service type Service value for customer:  Economic value / cost savings  Service usability  Service flexibility  Customer support services Provider´s capability: SaaS  Knowledge and experiences Trust building mechanisms:  User authentication  In case of changing the provider
  45. 45. SaaS
  46. 46. SaaS
  47. 47. SaaS
  48. 48. Results 3/3• The least important business model factors for cloud adoption (Linkert scale) Business model factor Cloud computing service type Service value for customer:  Service trademark Marketing: All  Publications Service billing:  Based on market value  Based on target customers PaaS & IaaS Marketing:  Use of partners’ marketing channels
  49. 49. SaaS, PaaS, IaaS
  50. 50. SaaS, PaaS, IaaS
  51. 51. PaaS, IaaS
  52. 52. SaaS, PaaS, IaaS
  53. 53. Recommendations for cloud computing providers• Rethink about your business model: – Service value for customers: • economic value (cost savings) • service usability • service flexiblitiy • service trademark • customer support service – Providers intangible assets • knowledge and experiences
  54. 54. Recommendations for cloud computing providers– Trust building mechanisms (the most important group): • user authentication • system security • service quality • service and system availability • service recovery • provider shift trust building mechanisms– Prefered revenue model • pay per use • pay per service
  55. 55. Recommedations for enterprise to prepare for cloud computing• Rethink the IT value proposition – Competitive need for business agiity – Fast deployment of capabilities enabling business aility• Re-architect existing platforms – The cloud model involves reducing the scope of core enterprise platforms to essential enterprise-wide end- to-end processes and shared data – Focus on designing interfaces between more minimalist enterprise platforms and external cloud services
  56. 56. Recommedations for organization to prepare for cloud computing• Redesign your IT governance – Effective adoption of cloud services will depend on the ability of IT and business leaders to decide on adoption strategy • which capabilities should be local and which should be global. – centralized governance models may change toward more distributed models • which may extend to include vendors. Source: MIT Sloan: CISR Research Briefing (2012)
  57. 57. Recommedations for organization to prepare for cloud computing• Reallocate IT budget – From capital expenditure to operational expenditure (cloud computing)• Refocus on user needs and preferences – Platforms and solutions must go beyond supporting (or enforcing) standardized enterprise processes (ERP) – Corporate computing platforms must empower employees personal working styles. • High usability expectations and device preferences • Beyond standardization of enterprise processes (ERP) Source: MIT Sloan: CISR Research Briefing (2012)
  58. 58. Recommedations for organization to prepare for cloud computing• Redevelop the IT organization – IT people no longer design, build, and run—they now broker, orchestrate, and exploit. Source: MIT Sloan: CISR Research Briefing (2012)
  59. 59. And more … Awareness of advantages Develop adoption strategy Choose the provider & threatsLook to the future – stay alert Take advantages Implement Links to original image sources available at
  60. 60. Questions and Answers Kristina Bogataj Andreja Pucihar