Business Benefits of Cloud Computing to Indian IT Service


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A 20,000 word research thesis on Cloud Computing, the benefits and risks associated with its adoption in the context of Indian IT services industry.
Research carried out as a part of my Master's program in Robert Gordon University.

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Business Benefits of Cloud Computing to Indian IT Service

  1. 1. THE ROBERT GORDON UNIVERSITY ABERDEEN FACULTY OF MANAGEMENT Aberdeen Business SchoolTitle: Cloud Computing Opportunity: Benefits and risks assessment for Indian IT-services firms.Name: Saurabh Jayarama RaoMatriculation Number: 0917925Submission Date: 4th May, 2011Supervisor: Prof. Alan HuntAim: To assess the benefits and risks involved in adoption of cloudcomputing by Indian IT services firms and to identify a cloudadoptions strategy for prospective adoptersObjectives:1. To identify the main drivers of adoption for Indian IT servicesfirms.2. To identify the major risks associated with cloud computing adoption for the Indian IT-services firms3. To identify the application workloads suitable for cloud serviceadoption.4. To suggest a cloud adoption strategy for prospective adopters within the Indian IT-services industrySigned: (Saurabh Rao) Total word count (excluding acknowledgements, diagrams, references, bibliography and appendices) 20,892A Dissertation submitted in partial fulfilment of the requirementsfor the MSc Degree in Management. i
  2. 2. ABERDEEN BUSINESS SCHOOL Copyright Declaration FormName Saurabh Jayarama RaoEmail/contact tel 07031990789no.:Course: Msc ManagementModule: DissertationDissertation Title: Cloud Computing Opportunity: Benefits and risks assessment for Indian IT-services firms.Supervisor/Tutor: Prof. Alan Hunt Before submitting confirm: a) that the work undertaken for this assignment is entirely my own and that I have not made use of any unauthorised assistance b) that the sources of all reference material have been properly acknowledged c) that, where necessary, I have obtained permission from the owners of third party copyrighted material to include this material in my dissertation.I have read and agree to comply with the requirements for submitting thedissertation as an electronic document.I agree: • That an electronic copy of the dissertation may be held and made available on restricted access for a period of 3 or more years to students and staff of the University through The Robert Gordon University Moodle. ii
  3. 3. • That during the period that it is accessible on Moodle the work shall be licensed under the Creative Commons Attribution-Non Commercial- Share A like 2.5 Licence to the end-user - (Saurabh Rao ) Date…4th May 2011 iii
  4. 4. THE ROBERT GORDON UNIVERSITY ABERDEENCloud Computing Opportunity: Benefits and risks assessment for Indian IT-services firms Mr. Saurabh Jayarama Rao The Robert Gordon University, Aberdeen, UK Aberdeen Business School (Msc in Management) Submission Date: 4th May, 2011. iv
  5. 5. ABSTRACTCloud Computing has steadily gained popularity during recent years.Cloud Computing is a market friendly term for the services offered overthe air or internet. It mainly consists of SaaS (Software as a Service),PaaS (Platform as a Service) and IaaS (Infrastructure as a Service).These services are provided by major firms like google, Saleforce,Microsoft, Amazon, Yahoo which benefit from efficient management ofresources and economies of scale. Clients can benefit from this facility bypaying only for the resources they use, flexibly increasing or decreasingthe capacity usage as per their IT needs and decrease their infrastructureexpenditure. Indian IT-services firms have been dominating the globaloutsourcing industry since the last decade by providing IT services andconsulting solutions to their clients worldwide. Cloud computing offers anew window of opportunity for Indian IT-services firms to act as clouddelivery agents to their existing clients and establish their presence in theunexplored cloud services market. However, many firms are not fullyconvinced about the benefits of cloud computing and are unaware of therisks involved. As cloud services is still in its early stages, there is lack ofclarity regarding the terms of service, security, data storage, control andservice level agreements. There is significant marketing hype and fearamongst the IT managers of losing a new opportunity or capabilitieswhich cloud can offer. Moreover, not all applications are well suited to bemigrated to cloud infrastructure. This report provides insights into the current benefits and risksinvolved with cloud adoption by Indian IT-services firms. The factorsunderpinning the current benefits and risks are identified and applicationssuitable for cloud adoption are highlighted through critical assessment ofthe application’s IT needs and cloud services features.Keywords: Cloud Computing, Indian IT services, cloud concerns, cloud benefits,cloud application, cloud delivery agent, adoption strategy. v
  6. 6. AcknowledgementI sincerely thank the Almighty God who gives me the strength andinspiration in all my life endeavours.I would like to thank my thesis supervisor, Mr. Alan Hunt for hisexcellent guidance; constructive inputs and prompt support inmaking this research a success.I would like to extend my heart-felt thanks to all the respondentsfor their contribution in enabling me to carry out this research.I would like to express deep appreciation to my parents, Mr.Jayarama and Veena Rao and godfather Dr. Nandakishore Rao forall their love, encouragement, support and undying belief in myabilities.Finally, I would like to thank my dear friend Stavin LawrenceD’souza, without whose support, I would not have embarked on thismaster’s journey, nor would have chosen a challenge researchtopic. vi
  7. 7. Table of contents1.0 Introduction and Research Problem.………………………..1 1.1 Cloud Computing Opportunity in India………………..1 1.2 Defining Cloud Computing………………………………….1 1.3 Rationale………………………………………………………….2 1.4 Aims and Objectives………………………………………….52.0 Literature Review……………………………………………………..6 2.1 Background………………………………………………………6 2.1.1 Indian IT-service Industry………………………6 2.1.2 Cloud Computing… ……………………………….10 2.2 Major Cloud Categories……………………………………18 2.2.1 IaaS…………………………………………………….19 2.2.2 PaaS……………………………………………………19 2.2.3 SaaS……………………………………………………20 2.3 Types of Cloud service delivery…………………………22 2.3.1 Public cloud………………………………………….22 2.3.2 Private cloud………………………………………..22 2.3.3 Hybrid cloud…………………………………………23 2.4 Cloud Market Structure……………………………………24 2.4.1 Potential Growth Opportunities……………..26 2.4.2 Potential Concerns for Cloud Adoption…….31 2.5 Cloud Future Forecast……………………………………..34 2.6 Relevant findings from Literature review…………..353.0 Research Methodology…………………………………………….36 3.1 Secondary Research………………………………………..37 3.2 Primary Research……………………………………………38 3.2.1 Questionnaires……………………………………..41 vii
  8. 8. 3.2.2 Interviews……………………………………………44 3.2.3 Focus Groups……………………………………….46 3.4 Research Design……………………………………………..46 3.4.1 Questionnaire Design…………………………….51 3.4.2 Interview Design……………………………….…53 3.5 Sample Selection………………………………………….…54 3.5.1 Sampling Technique……………………………...55 3.6 Data Analysis……………………………………………….…564.0 Findings from Primary Research…………………………….…57 4.1 Questionnaire Findings………………………………….…57 4.1.1 Results from Part-1……………………………….57 4.1.2 Part-2 Questionnaires……………………………58 4.2 Interview Findings………………………………………….705.0 Analysis and Discussions………………………………………...81 5.1 Key findings from Primary Research………………….81 5.1.1 Major Drivers for cloud adoption…………....81 5.1.2 Major Concerns for cloud adoption………….85 5.1.3 Choice of Workload for public cloud………..92 5.1.4 Choice of Workload for private cloud……...936.0 Conclusion……………………………………………………………..96 6.1 The Research………………………………………………….96 6.2 Conclusions from Research Objectives……………...97 6.2.1 Conclusions from Research Objective-1…..97 6.2.2 Conclusions from Research Objective-2…..98 6.2.3 Conclusions from Research Objective-3…..99 6.2.4 Conclusions from Research Objective-4…..99 6.3 Managerial Recommendations..………………………100Reference ListBiblography viii
  9. 9. Appendix List of Figures 1. Overview of Cloud Computing Opportunity……………1 2. Relationship between consumer and enabler………..4 3. Future growth areas for IT services by Infosys Research…………………………………………………………..4 4. IT service industry market share structure…………..7 5. Wipro Revenue Distribution by geography……………8 6. Annual Growth rates of Major Indian IT-services Firms……………………………………………….9 7. Traditional Delivery Model………………………………….11 8. Software as a Service Marketing Campaign………….13 9. Factors enabling cloud computing……………………….14 10. Cloud Computing Model.…………………………………..15 11. Forrester Research Total Cost of Ownership Survey results………………………………………………..17 12. Different types of Cloud Services………………………18 13. Traditional IT vs different forms of Cloud services……………………………………………….19 14. SaaS adoption in percentage…………………………...21 15. Cost comparison of private vs public cloud………..23 16. Benefits for IT firms………………………………………..24 17. Industry Variability over a year………………………..29 18. Survey of early cloud computing adopters….………30 19. Survey Results for percentage of IT spending…….31 20. Gartner survey on cloud users regarding Terms of service…..……………………………………………32 ix
  10. 10. 21. Major Challenges Faced by Cloud customer..……….34 22. Cloud Computing Growth Forecast…………..…….…..35 23. Primary research and its types…………………………..39 24. Types of questionnaires…………………………………….42 25. Sector-wise Revenue break-up of Indian IT services firms………………………………………………….47 26. Revenue break-up by services offered by IT services firms………………………………………………..48 27. Cloud Computing Awareness results from part -1 questionnaire………………………………………………58 28. Graph representing the respondent’s country………..59 29. Respondent’s cloud awareness level…………………….60 30. Respondent’s experience profile…………………………..61 31. Respondent’s work profile break-up……………………..62 33. Respondent’s firm’s cloud adoption status…………….63 34. Responses for main drivers for cloud adoption………64 35. Responses reflecting the actual benefits achieved….65 36. Responses for main concerns for cloud adoption……66 37. Responses for public cloud workload suitability……..66 38. Responses for private cloud workload choice…………67 39. Responses from respondents whose firms have already adopted private cloud…….69 40. Response from respondents working for firms planning cloud adoption in future……………70 41. Cost comparison of private vs public cloud…………….84 42. Responses to skill assessment for private cloud management………………………………………………91 43. CIO survey conducted by Zinnov Research…………….941.0 Introduction and Research Problem This chapter highlights the cloud computing opportunity inthe context of the Indian IT-services industry, identifies theresearch problem and establishes the research aims and objectives. x
  11. 11. 1.1 Cloud Computing Opportunity in India Cloud Computing has emerged as a new buzzword in thefield of Information Technology (IT) and IT-enabled Services (ITES).The Indian cloud computing market which is currently valued at$110 million is expected to grow ten-fold by 2015 to $1billion(Subramaniam 2010). According to Gartner insights, Indian IT-services companies will represent 20% of the cloud delivery marketthrough their cloud-enabled IT-services (Karamouzis 2009).Nasscom (National Association of Software and Service companies),a regulatory body for IT services in India, identified cloud servicesas one of the areas offering non-linear growth and revenue modelsto Indian IT-services firms and has undertaken strategic steps toencourage firms to explore this opportunity (Nasscom 2010). TheIndian IT services firms are leveraging their existing clientrelationships and expertise in service delivery to emerge asdominant delivery agents of cloud services (Hingorani 2009). Thisstudy is limited to only those firms which provide IT-services andconsulting solutions from their development centres in India.1.2 Defining Cloud Computing Gartner defines cloud computing as a style of computingwhere massively scalable IT-related capabilities are provided ‘as aservice’ across the Internet to multiple external customers(Bhupesh 2009). The resources in the cloud are pooled, virtualizedand networked which results in better efficiency, flexibility, low cost,ease of use (EMC 2010) and customers access business services ontheir own terms as illustrated below. xi
  12. 12. Fig. 1: Overview of Cloud Computing Opportunity (EMC 2010)It is basically a market friendly term for subscription based servicesoffered over the internet which allows rapid increase or decrease incapacity without additional investments in infrastructure, manpoweror licenses (Wittow and Daniel 2010). Figure below shows differenttypes of cloud services.1.3 Rationale The decision to undertake this research was taken afterconsidering a wide range of aspects. Indian IT-service providers arerealizing the value of having competencies in hardware andsoftware in order to achieve economies of scale, retain customersand improve profit margins (Bakshi and John 2010) Cloud servicesdelivery or reseller opportunity may provide the necessary platformfor Indian IT service providers to develop these competencies(Jorge and Ted 2008). Currently, cloud-service providers offer theplatform and essential functionalities upon which the IT serviceproviders can build and run their client’s applications. Thesearrangements are appealing to Indian IT services firms to offercloud consulting services and deliver customized applications xii
  13. 13. suitable for the cloud (Gartner 2010). Revenue from traditional ITservices could be eroded due to cloud offerings by new emergingfirms; hence there is an incentive to look for new ways to add value(Quicke 2009). Moreover, with tight economy today, customers arespending much less but demanding seamless access to content; aGartner study revealed that global IT spending declined by 6% in2009 (Quicke 2009) and this has prompted the Indian IT-servicefirms will have to look for growth opportunities wherever they canfind it. Most businesses are unclear whether cloud solutions areideal to satisfy their IT needs. For unsuitable applications, cloudservices are known to introduce unnecessary complexity, increaseoperating costs and resulting in contract lockage with the serviceprovider (Thethi and Srivastava 2010). A lack of in-house expertisein cloud architecture, identity management, security monitoring anddata handling may lead to poor decision making on the part of end-user organisations (Ambrust 2010). Indian IT-services firms haveproven technical expertise and gathered domain knowledge ofdiverse sectors through years of IT-services delivery and arepositioned appropriately to choose a right cloud solution for theirclient (Chatterjee and Chakrabarty 2009). IT service providers arethe key relationship link between the consumer and the enabler ofcloud computing as shown in fig. below. Fig 2: Relationship between consumer and enabler (Bakshi and John 2010) xiii
  14. 14. Most IT-services firms may have to partner with large cloud serviceproviders like Microsoft, Google, Amazon etc and collaborate oncloud-enabled service delivery and build trusted relationships(Roehrig et. al 2010). Otherwise, new competition might arise withcloud-service providers partnering with other start-ups. Moreover,profits have to be shared with the cloud providers. Hence, there is agreater need that IT firms utilise the cloud offering effectively todifferentiate their solution offering and improve profit margin (Vile2009). According to industry trend survey by Infosys Research,cloud computing has appeared as high growth area for IT serviceproviders as shown in chart below. Fig 3: Future growth areas for IT services by Infosys Research (Thethi and Srivastava 2010)The above survey reveals that cloud computing was rated highly asa service which would reduce total cost of operation (TCO) andprovide growth to the business. Thus, adopting cloud computing to provide cloud-enabledservices might prove to be beneficial for Indian IT-services firms.Assessing the benefits and risk associated with cloud adoption byIndian IT-services firms would provide insights into these aspectsand enable them to take informed steps. Moreover, planning an xiv
  15. 15. ideal adoption strategy is essential to fully benefit from cloudservices. Therefore, the research aim is, ”To assess the benefits andrisks involved in adoption of cloud computing by Indian IT servicesfirms and to identify a cloud adoptions strategy for prospectiveadopters”.1.4 Aims and Objectives The aims of the research are: - To identify and critically assess the benefits and risks involved in adopting cloud computing services by Indian IT services firm. - To identify a cloud adoption strategy for prospective adopters in the Indian IT-services industry. The objectives of this research are:  To identify the main drivers of adoption for Indian IT services firms.  To identify the major risks associated with cloud computing adoption for the Indian IT-services firms.  To identify the application workloads suitable for cloud service adoption.  To suggest a cloud adoption strategy for prospective adopters within the Indian IT-services industry.2.0 Literature Review In order to fully understand the basis and background of thisstudy, over 300 journal articles, whitepapers, case studies,company reports, books and websites have been reviewed and keyinsights have been drawn. The following literature review covers thecurrent Indian IT-services industry scenario, research highlightingbenefits and issues faced by the firms which have adopted cloudcomputing, industry and customer’s strategy to enhance their cloudexperience, future forecast and areas of potential growth. xv
  16. 16. 2.1 Background2.1.1 Indian IT-Services Industry In simple terms, IT services is a form of outsourcedservice which has emerged due to involvement of IT in variousfields such as banking, finance, telecom, insurance, healthcare etc(Arora et. al.2008). According to NASSCOM, the regulatory body forIT services in India, the Indian IT services industry “involves a fullrange of engagement types that include consulting, systemsintegration, IT outsourcing/managed services/hosting services,training and support/maintenance” (Nasscom 2009). The Indian IT-services industry mainly serves clients outside the Indian sub-continent using the global delivery model and relies on abundanceof IT educated and english speaking human capital, low costfacilitated by the weak Indian currency to gain competitiveadvantage over other firms (Hingorani 2009). Firms in this industrycan be categorized into tier 1, tier 2 and emerging firms. Tier 1firms have a major market share consisting of are InfosysTechnologies Ltd, Tata Consultancy Services and WiproTechnologies and Satyam which has an estimated market share of34-40% and employs approx. 340,000 (Hingorani 2009).Othermajor players are IBM, Accenture, Cognizant, Patni Computers, HCLtechnologies which fall in tier 2 category with 13-18% marketshare. The industry has experienced high growth in the past decadeand is highly competitive. According to the NASSCOM-McKinseyreport, the total addressable market for global IT outsourcing isapproximately $300 billion, of which $130 billion will be outsourcedby 2012 of which India currently has 80% market share (Mckinsey2005). Graph below shows market structure of IT services firms inIndia. xvi
  17. 17. Fig 4: IT service industry market share structure(Nasscom 2009)Current Issues faced by Indian IT-services firmsThe Indian IT-services industry predominantly gets its revenue fromclients situated in North America and Europe as highlighted belowby the 2010 revenue graph categorized by geographical segmentsof Wipro technologies Ltd, a major Indian IT-service firm. xvii
  18. 18. Fig 5: Wipro Revenue Distribution by geography (Mulay2010)Countries in Europe and North America which were severelyaffected by the downturn have reduced outsourcing IT serviceswork to India (Jain 2010). As major clientele for Indian IT-servicesfirms were from these countries, it resulted in lower growth rate forall the Indian IT firms as shown in the graph below. xviii
  19. 19. Fig 6: Annual Growth rates of Major Indian IT services Firms(Gartner 2010)Firms in developed countries originally started outsourcing to Indiaas it was a low cost alternative. Most of the back officeadministrative works were outsourced to be automated so that thefirms can focus on their core areas of work and growth withoutfocussing on back-office administration process (Mckinsey 2005).But since the outsourcing revolution in the 1990’s, India has beengrowing at an average rate of 8% and with the rupee appreciationagainst the dollar, the profit margins of the IT-service firms areunder pressure (Nasscom 2009). Other emerging countries likeChina, Phillipines, Poland, Mexico, South Africa are providing ITservices and consulting solutions at a lower cost than India. Lowerend IT services works are being outsourced to China, Mexico andPhilippines as they offer better cost saving than India (Jorge andTed 2008). Moreover, the average salary of an IT knowledge workerin India has increased to $5000 per year at the entry level and evenwith the abundant human capital, the Indian IT firms are facingsevere shortage of skilled IT workers and experiencing high attritionrate among staff as they go for better opportunities elsewhereresulting in loss of investment incurred in training employees(Matzke and McCarthy 2009). In order to still generate substantialprofit, the IT services firms in India have increased their billing rateand thus are no longer the most attractive low cost option foroutsourcing (Wright 2009). The Indian IT-services firms areattempting to overcome these problems by leveraging the expertiseand brand name gained during the previous years and moving upthe value chain by providing more complex, efficient solutions to theclients in the IT services space (OECD 2006, Balakrishnan 2010). Inorder to retain their existing clients, Indian IT-services firms areengaging in partnerships such as strategic transformation partner xix
  20. 20. (McCarthey 2008), total outsourcing partner and client engagementinitiative (Stuchat 2010) which could result in long term associationwith existing IT services provider.2.1.2 Cloud Computing Traditionally, firms had to invest in infrastructure tofacilitate disk storage and processing. Moreover, they had to hireskilled IT staff to maintain the infrastructure, regularly upgrade theinfrastructure, purchase licensing and monitor backup and disasterrecovery (Buttel 2010). This led to high initial investment (capitalexpenditure) and high running costs (operating expenditure). Thefirms had to forecast their future IT requirements, initiateinfrastructure planning and it would take weeks to procure thehardware, configure and install it (Ryan and Loeffler 2010). Theprocess is illustrated using fig. 7 below.Fig 7: Traditional Delivery Model (Doddavula and Gawande2009)A step-by-step explanation about the above figure is as follows(Doddavula and Gawande 2009): The client’s business requirements are assessed by the solutionarchitect and project plan is prepared. The infrastructure team analysed the project plan and purchasednecessary infrastructure. xx
  21. 21.  The resources are then assigned for individual projects to fulfiltheir infrastructure requirements. The same process repeated forany further changes in requirements. Some applications such as email, I/O (input/output), stresstesting required additional amount of storage, processing duringsome time. In order to cater to this variable demand, firms had toprovision additional infrastructure which would remain unutilizedduring off peak hours (Wittow and Daniel 2010). These limitationsof traditional model led way to cloud computing. The underlyingidea for cloud Computing has evolved from rented time shareservices offered during the early 70’s when computers were tooexpensive for firms to afford. The hardware prices dropped during80’s and firms started having their own computers. But the idea ofhosted and time shared services remained and evolved in parallel(Collins and Vale 2010). During 90’s, there was an outsourcingboom and many companies focused on their core functions andoutsourced their IT related activities to IT service firms based inIndia and other developing countries which were emerging a lowcost destination. Moreover, they offloaded their applications to thededicated infrastructure provided by these IT firms. This allowedfirms to transfer the cost of infrastructure to the IT service provider.During 1990’s, with the development of internet, new service calledapplications service provider (ASP) gained popularity whichprovided shared infrastructure to the customers using multi-tenancymodel. This was an attractive proposition for smaller organisationsas they could now access solutions which they would not be able toafford before (Shariff 2010).ASP aimed to provide consistency,efficiency and flexibility for service providers to manage systemsand resources optimally. In turn, the service providers could reducetheir operating costs and offer affordable hosting services to their xxi
  22. 22. customers. ASP failed to make sustainable impact partly due to thefollowing reasons (Collins and Vale 2010):  Internet-based communications were not fully trusted as they were in the early staged of development.  The multi-tenancy model, which implies that multiple applications from different clients are residing on the same physical infrastructure, was unproven which raised concerns regarding data security.  Firms could not accept the shared infrastructure policy of data and processes co-residing with other firms.  Many ASPs failed to access new customers as their targeted small businesses had collaborations with their existing suppliers for their ongoing needs and most of them perceived ASP as a conflict with their existing business model and declined to support it (Shariff 2010).Of the few ASP providers which survived, (providessales force automation service requiring minimal integration withother applications) was highly successful (Vile and Lock 2010). Theyinvested heavily on marketing and used the term “Software as aService” instead of ASP to generate new interest (Kelly 2009,Collins and Vale 2010). Fig. below illustrates a salesforce.comadvertisement. xxii
  23. 23. Fig 8: Software as a Service Marketing Campaign (Kelly 2009)Following the success of SaaS, the cloud-service providersintroduced platform as well as infrastructure on subscription basisand these were known as PaaS (Platform as a Service) and IaaS(Infrastructure as a Service). Hence, Application ServiceProvisioning (ASP), mainframe servers purchased on rental basis issimilar to what cloud services offer. Therefore, cloud computing isnot fundamentally new concept or innovative technology (Smith,Plummer and Cearley 2009). It has gained huge popularity in recentyears due to the combination of several factors:  Superior speed, reliability and robustness of communication networks which allows high bandwidth levels.  Highly scalable datacenter infrastructure with powerful processor and memory at reduced cost (Smith, Plummer and Cearley 2009).  Emergence of flexible software architecture with multiple abstraction levels necessary to isolate customers (Smith 2009). xxiii
  24. 24.  Emergence of sophisticated management systems and ubiquitous computing standards (Plummer et. al. 2008).  Success of virtualisation (an enabling technology for cloud implementation which enables service providers to increase resource utilization through techniques such as pooling and multiplexing), e-commerce frameworks and development tools (Cervone 2010).  All this at a low cost facilitated by economies of scale and widespread access options with a rich web-based user interface (Bhupesh 2009). Thus, cloud computing has emerged as an attractive option providing choice and flexibility in service centric IT delivery. Figure below summarizes the above arguments.Fig 9: Factors enabling cloud computing (Vile 2009)Thus, the Indian IT-services firms which were offering traditionalhosting services until now, have additional options of managing xxiv
  25. 25. their IT infrastructure using cloud based services as shown in figurebelow which effectively consists of virtualization of all componentsof data-center infrastructure including storage, network, systemsand the application stack.Fig 10: Cloud Computing Model (Doddavula and Gawande2009)The working of the above model is explained below (Doddavula andGawande 2009): Client application issues request for increase or decrease in cloudresources using the service portal provided by the cloud-serviceprovider. This request is redirected to service procurement system whichmanages the resource allocation and provisioning. This system allocates the requested resource and the client isbilled according to the usage. Thus, in comparison with thetraditional model shown in figure 7, the resource allocation isflexible and dynamic which results in reduced costs and reducedreaction time.Benefit for Service ProvidersThese services are provided by major firms like Google, Salesforce,Microsoft, Amazon etc which already have huge capacity andprovide customized provisioning to the customer based on their xxv
  26. 26. needs. The service providers maintain high margin of profitabilitydue to the following factors: Major contributor to the costs of ownership of infrastructure ispower consumption costs. Large service providers bring down thiscost through bulk purchase agreements. Moreover, they takeadvantage of geographic variability in electricity costs by setting uptheir infrastructure at a cheaper country or state (Harms andYamartino 2010). Large firms are able to reduce the labour costs. Moreover, due tovirtualization which is the underlying technology enabling cloud;single trained system administrator can maintain thousands ofservers at a time and the client’s IT worker can focus on buildingnew capabilities instead of performing repetitive maintenance tasks(Reid et. al. 2009). The bargaining power of a large firm is considerably higher whichresults in approx. 30% reduction in hardware procurement costs(Thethi and Srivastava 2010). Finally, the service provider uses efficient resource managementprocesses which results in consistent and optimum utilization ofresources. Small firms or an independent IT firm would not be ableto fully utilize the infrastructure and the resulting idle time whichincreases the operating expenditure. Using virtualization and multi-tenancy architecture, cloud-service providers host multiple clientapplications and resources on a single physical server; thusincreasing its utilization efficiency (Reid et. al. 2009). Theeconomies of scale have resulted in lowering the total cost ofownership by 80% as shown in fig below. xxvi
  27. 27. Fig 11: Forrester Research Total Cost of Ownership Surveyresults (Reid et. al. 2009).As illustrated in the figure above, the infrastructure costs decreaseswith scale.Benefit for CustomersCustomers benefit from cloud-enabled services by paying only forthe resources they use, flexibly increasing or decreasing thecapacity usage as per their IT needs. This improves the quality ofservice, decreases capital expenditure and operating expenditure,provides them flexibility with seemingly unlimited capacity (Wittowand Daniel 2010). If implemented effectively, cloud computing canreduce the initial capital expenditure on IT to zero thus lowering therisks, reduce operating expenses by 30-80%, provision with hugecapacity, improve quality of service, save energy and promoteGreen IT (Ryan and Loeffler 2010). Gartner estimates that in thenext 5 years, cloud services would result in power savings of 8.5billion kilowatt-hour (kWh), thus enabling enterprises to saveenergy costs by 80% (Pettey and Steven 2010). However, someissues raised by early cloud adopters include concerns regardingdata security, data ownership, service level compliance, privacy and xxvii
  28. 28. reliability of the application in the cloud infrastructure (Gilbert2010).2.2 Major Cloud Categories Cloud computing can be categorised into three majorcategories depending on components managed by the cloud. Fig. 12: Different types of Cloud Services (Adopted from Oracle 2009)A detailed breakdown of the above figure with comparison totraditional hosting is illustrated below. xxviii
  29. 29. Fig 13: Traditional IT vs different forms of cloud services (Vale 2010)2.2.1 Infrastructure as a Service (IaaS) IaaS provides infrastructure components like servers, datacenters as a on-demand, flexible service that can scale up and downwhen required by allocating and de-allocating resources at real time(Doer 2009). As shown in fig 13, the backend of an application,including server, storage, network, server operating system aremanaged by the service provider and, the middleware and front-endof the application is managed by the client. The costs are loweredas there is no capital outlay requirement because IaaS is offeredusing pay-as-you-go model. As the infrastructure needs are everincreasing from e-mails, files, media and electronic records; cloudenabled IaaS services can provide the essential infrastructure atlower costs (Vile and Lock 2010).2.2.2 Platform as a Service (PaaS) PaaS delivers Web application technologies in pre-packageddeployment architecture, provides programming environment that xxix
  30. 30. support implementation of the application and inter-process, inter-application communication services; all this as a service deliveredover the internet (Mell and Grance 2010). As shown in figure 13 ,the backend and the middleware is managed by the cloud-serviceprovider and only the front-end comprising of data and userinterface is managed by the client. The customer uploads Webapplications to this environment and pay for the services accordingto metrics such as transaction count, total capacity of compute,storage and network services (Plummer 2008). The resources in aplatform may be shared or located at multiple locations. The mainbenefit is that capacity can be expanded or contracted instantlyallowing clients to migrate applications with fluctuating demands orhigh processing needs to suit their needs thus reducing theoperating costs (Doerr 2009).2.2.3 Software as a Service (SaaS)In traditional on-premise delivery model, customers had topurchase the software, install, configure and then maintain it.Whereas, in SaaS model, the software is not installed in thecustomer’s infrastructure but installed and hosted in the cloud-service provider’s infrastructure (Plummer 2008). As shown in fig.5, the whole application stack is managed by the cloud-serviceprovider and delivered as a service over the network to the client.The end user pays on a subscription basis using suitable paymentcontracts such as “pay per use”, “pay per license”, “pay per hour”basis. However, the end-users are unaware of where the service isderived from and they can be provisioned with higher levels ofservice when usage increases and de-provisioned easily thuseliminating high overhead costs (Kelly 2009). SaaS has gained tremendous popularity and consists ofcommon business solutions such as Sales force Automation (SFA), xxx
  31. 31. Customer Relationship Management (CRM), and EnterpriseResource Planning (ERP) etc. Examples of SaaS include GoogleDocs,, Web mail services such as etc(computing 2010). A gartner survey showed that 90% of theAmerican firms have used SaaS in 2010 as shown in figure below. Fig 14: SaaS adoption in percentage (Gartner 2010)Advantages to SaaS vendors (Mell and Grance 2010) Access to new accounts: Low budget firms can afford subscriptionprice than buyout price. Customer insight: the vendor can get insight on the customer’susage trends better than in the case of on-premise delivery. New value added services can be introduced rapidly and markettested with the users. Piracy of software can be curbed as there cannot be piratedversion of online application.Advantage to customer (Kelly 2009) Responsibility of maintenance, support, routine operation istransferred to the vendor which includes planning, patchmanagement and upgrades. Anytime, anywhere access. xxxi
  32. 32.  Improved security as application, data are not stored locally. Reduced Total cost of operation (TCO), time to market areinherent benefits from SaaS.2.3 Types of Cloud Service Delivery Cloud services are implemented and delivered to thecustomers using one of the following three models: private, publicand hybrid.2.3.1 Public Cloud Public cloud services provide various centralized servicesfrom remote data-centers located at multiple locations and deliversstandard global services (Riverbed 2009).The complexity of dealingwith the physical infrastructure is completely abstracted. The cloud-service vendors provide unlimited, scalable infrastructure onsubscription basis at low monthly cost (Hartig 2008).The cloud-service providers drive down their costs by supporting multiplebusinesses on their platforms. The customers benefit from dynamicscalability and reduced risk by shifting infrastructure risks from theenterprise to the cloud provider.2.3.2 Private Cloud Private cloud is dedicated infrastructure provided by thecloud-service provider solely for individual clients. It may bemanaged by the client or third party such as the Indian IT-servicesfirm and the infrastructure may be situated on-premise or off-premise and billed on a “pay-as-you-go” basis (Mell and Grance2010). However, private cloud has limited resource capacity, unlikepublic clouds and costs higher in terms of capital expenditure andoperating expenditure as the private infrastructure is dedicated to afirm (Delifice 2010). xxxii
  33. 33. Graph below shows costs comparison for private and public cloudsolution plotted with “number of servers” on the x-axis.Fig 15: Cost comparison of private vs public cloud (Roehrig,Ross and Shanahan 2009)Private clouds may serve as a transition phase to an organization’suse of public clouds (Jansen and Grance 2010). As private cloudsare built exclusively for each client, it offers control over data,security, compliance and quality of service (Hartig 2008). Privatecloud facilitates flexible movement and management of workloadbetween physical servers within the client’s firewall and enablesefficient integration, interdependencies and lowers operational costs(Harms and Yamartino 2010). Moreover, private cloud increasesagility with reduced complexity in comparison with public cloud(subramaniam 2010).2.3.3 Hybrid Cloud Hybrid cloud model is a combination of both public andprivate cloud. They can help to provide on-demand, externallyprovisioned scale and be used to handle planned workload spikes in xxxiii
  34. 34. private cloud (Vile 2010). It supports scenarios where-in privatecloud has a temporary need for extra resources and obtains it frompublic cloud (ford 2010). Such private/public cloud integration isalso known as “cloud-burst” or “surge computing” as theinfrastructure bursts out in to the public cloud to obtain thoseresources (Ford 2010). However, hybrid clouds introduce thecomplexity of determining the distribution of application’s resourcesacross both a public and private cloud (Hickins 2008). Customerscan benefit from hosting non-critical resources entirely in theexternal public cloud environment and manage critical ones on-premise using private cloud (Chasler 2010).2.4 Cloud Market StructureThe whole cloud offering scenario can be divided into three areas:Enablers: the ones who provide cloud service. The enablers aremany including Google, Microsoft dominant in the retail space, IBM,Amazon, HP, Oracle in enterprise arena, intel providing hardwareplatform and vmware, Orangescape, citrix providing virtualizationsolution (Joshi et. al. 2010).Delivery agents: the ones who take the cloud service to thecustomers with some value added features. IT services firms arethe major delivery agents of cloud services (Mhaiskar and Raichura2010). The benefits achievable by delivery agents with suitableadoption of cloud services are shown in fig. below. xxxiv
  35. 35. Fig 16: Benefits for IT firms (Mhaiskar and Raichura 2010)The IT services firms can leverage cloud services in several areasand increase their revenue and profit margins by: - Lowering costs o Cloud-service providers provide a set of tools to design, deliver and market cloud services and enables IT services firms to deliver powerful, scalable processing along with scalable storage so that clients need not focus on performance and scalability aspects (Durkee 2010). o Cloud services reduce application development, deployment and support costs by translating capital expenditure to operating expenditure. Hence, there is no significant upfront investment for new projects (Buttel 2010). - Faster time to market o IT firms need not plan investments in infrastructure. As the need arises, IT firms can quickly build, test and deploy applications to the cloud and reduce the response time considerably (Delifice 2010). o With cloud, the lead time to set up infrastructure is reduced from weeks to minutes; this small change xxxv
  36. 36. has an astounding impact on the reaction time to demand (Ambrust et. al. 2010). - Offering new solutions o IT firms can offer new innovative solutions made possible by using cloud services and provide diversified offerings (Karamouzis 2010). o ISV’s can offer new solutions in different verticals like manufacturing, healthcare, financial services, energy and retail management. - Extending cloud services o Cloud computing provides an opportunity for IT- services firms to extend the cloud-service providers offerings to its clients by acting as a delivery agent (Karamouzis 2010). o IT firms can offer varied solutions to their existing solutions such as online delivery instead of on premise installed software licenses (Mhaisjar and raichura 2010).Customers: users of these services. As the sales model used bycloud computing providers is subscription based, customer retentionand loyalty acquires prime importance as the customer has notinvested anything upfront and can move to other providers once thecontract lapses (Mhaisjar and raichura 2010).2.4.1 Potential Growth Opportunities Service providers like Google, Salesforce, Microsoft,Amazon and Yahoo have recognised huge business opportunity andare leading way to cloud computing by providing advanced billing,low cost, flexibility in the service agreements, enabling rapidincrease and decrease in resource and capacity based on demand(Hickins 2008). Many early successful adopters of cloud computing xxxvi
  37. 37. services have benefited highly from the ease of use of the services,agility to changes in IT needs, reduction in time for services andflexibility (Cearley and Phifer 2009). Moreover, as all the intricaciesof managing the services are handled by the service provider, theclient can just focus on its core business (Courtney 2010).During the early years of IT development, businesses allocatedhealthy proportion of their budget as IT capital expenditure(Kakamanu and Portanova 2006). But since the economic recessionin 2008, firms have reduced their IT spending substantially anddelayed new capital expenditures and heavy investments. So, ITmanagers are facing greater pressure to reduce costs and improveperformance (Doerr 2009). Cloud computing is emerging as a viableoption as the enterprises do not own the infrastructure and they caneliminate capital expenditures by consuming resources as a service,paying only for what they use (Mather, Kumaraswamy and Latif2009). Cloud services also enable IT departments to reduce costson application implementation, maintenance and security costs asthey are managed by the service provider and the service providerbenefits by achieving economies of scale (IBM 2010). "Green IT"has recently been the focus of many firms with an intention todemonstrate high Corporate Social Responsibility (CSR). Cloudcomputing enable IT organizations to reduce power, cooling andspace usage to help enterprises create and sustain environmentallyresponsible data-centers (McDonald 2010). Moreover, as manyfirms are sharing servers, there are fewer servers used resulting inefficient power usage (Berl et. al. 2009). Analysts believe that cloud computing will enhancecollaboration (Scale 2009). For example, many firms are migratingtheir email application into Google cloud services and using GoogledocsR which allows online storage of documents with authorizedspeedy remote access increasing collaboration amongst teams xxxvii
  38. 38. located at different geographies. Such collaborations enhancesecurity as the data is not stored locally on the user’s laptop orsmart phone and hence, there is no threat of data theft (Schadler2009). Cloud services can provide enhanced experience for gamerscompete against other players globally and provides superfastprocessing power required for sensor networks such as traffic andweather sensors (Thethi and Srivastava 2010), biomedical,healthcare and geo-spatial computing (Knipp 2010). Many firmshave found cloud solutions to be ideal for load testing ofapplications, wherein the applications are tested for their maximumload-handling capability. Firms can schedule these tests by rentingextra resources on the cloud and just paying for what they use (IBM2010). Cloud computing promises to reduce the response time forapplications. For example, for applications requiring 1000 hours ofprocessing time, firms can rent 1000 machines for one hour usingcloud services instead of using single on-premise machine for 1000hours (Buttel 2010). Similarly, applications which requiredsequential processing, wherein output from one transaction formedinput for the next transaction, can be converted to real timeprocessing using cloud computing capabilities. For example:retailers using batch services can use real time processing to tallyinventory and sales and order new stock immediately. This wouldresult in better stock management and reduce operatingexpenditures. Hence, clients would demand such services (Creeger2009). With regard to Small and Medium Enterprises (SME’s), mostSME’s would have uncertain growth patterns. Hence, they wouldhave to provision 30-40 percent of their infrastructure for futureusage. This results in high risk upfront investment if they adopttraditional service models (Creeger 2009). However, cloud servicesallow them to use the services on subscription basis, thus reducingthe capital expenditure. Moreover, they can dynamically scale theirresources when the need arises. Hence operating expenditure is xxxviii
  39. 39. also reduced by efficient management (Creeger 2009). Thesebenefits are very encouraging as SME’s have small IT spendingbudget and therefore couldn’t afford the high initial set-up costsinvolved in traditional hosting services. Moreover, it offers newopportunities for these firms to compete with the well establishedhigh net worth firms (IBM 2010). Furthermore, the scalabilityoffered by the cloud services is beneficial when SME’s are growing,enabling them to purchase infrastructure as “pay as you go” or onrental basis and concentrate their money on key business activitiesotherwise (Bhupesh 2009). The following figure shows the industryvariability in various sectors. Fig 17: Industry Variability over a year (Soumit et. al. 2010)For instance, during the festival season a gifting website wouldexperience higher traffic levels than otherwise. Moreover, the usageof resources is subjected to time of day variability (Wittow 2011).For example: an email server is utilized at a higher rate duringoffice hours and underutilized during the rest of the day. Theseapplications require high amount of resources at certain time periodand ability to scale up dynamically (Forbes Insights 2010). A surveyconducted by Forbes Insights on early adopters of cloud computingrevealed that 88% of the respondents found dynamic allocation of xxxix
  40. 40. resources to meet their IT objectives as major benefit of cloudcomputing as shown in figure below. Figure 18: Survey of early cloud computing adopters (Adopted from Forbes Insights, 2010)Therefore, clients can migrate such time-variable applications to thecloud and by utilizing the dynamic scalability of resources facilitatedby cloud-services, they can reduce operating costs during off season(Yah 2010). Moreover, the firms transfer the risk of investment tothe service provider as there are no upfront costs involved (Yah2010). A survey conducted by Everest Research suggested thatfirms spend a large portion of their budget as infrastructuremaintenance costs (Soumit et. al 2010). This leaves very smallportion for new app development which can generate new revenueas shown in fig. below. xl
  41. 41. Fig 19: Survey Results for percentage of IT spending (Soumit et. al. 2010) Thus, cloud services have several advantages to offer forbusinesses with diverse needs and high profitability and growthprospects in providing cloud services has generated remarkableinterest to the cloud-service providers (Vile 2010).2.4.2 Potential Concerns for cloud adoption1 Many firms are still delaying a complete shift to cloudcomputing services. Recent industry researches revealed that manyfirms are holding on to their out-dated servers and legacy systemseven though they need a replacement (Smith 2009) and spendingsubstantial portion of their IT budget as maintenance costs of theseservers. They are not adopting cloud-enabled services as theconcepts of total virtualization and multi-tenancy are complex andcomplicated for non-IT firms to comprehend (Courtney 2010). Theunclear rules over data storage compliance, data ownership, datasecurity, reliability and privacy are another major concern. 75% ofthe firms which participated in a Forbes survey revealed that datasecurity was a major concern (Forbes Insights 2010). Anothersurvey by Gartner revealed that 100% of the firms have concernsover unclear “terms of use” regarding data location and portabilityprovided by the service provider as shown in figure below. xli
  42. 42. 2 Figure 20: Gartner survey on cloud users regarding terms of service (Adopted from Plummer 2010)Moreover, the Electronic Privacy Information Center (EPIC), whichaddresses privacy issues related to information management;Federal Trade Commission (FTC), which addresses IT-relatedsecurity complaints, has recorded large number of complaintsagainst major cloud-service providers breaching security rules (EPIC2009). Data location concerns arise because different geographieshave different terms and regulations regarding how the datasecurity, privacy and storage (Mather, Latif and Kumaraswamy2009). To illustrate the influence of this concern, UK communicationminister has announced full support for the development of cloudcomputing stating international co-operation is essential to adoptstandard rules and regulations regarding security and privacy forthe success of cloud computing (Brittain 2010). Furthermore,Gartner research claims that cloud computing will continue to bevulnerable to security, privacy and data handling issues in the nearfuture as it is still maturing and better collaboration within theindustry is essential to overcome the deficits (Maurer 2011). Most xlii
  43. 43. firms are unsure how they can leverage their existing infrastructureand embrace cloud to leverage their performance and fulfil theirexisting needs (Smith, Plummer and Cearley 2009). Surveysindicate that if cloud computing is not a right solution, it canunnecessarily add complexity to the existing IT infrastructure,increase costs and introduce potential opportunity of legal conflictswith the service provider (Smith 2009). Cloud service availability isanother major concern. Cloud vendors assure 99.99% systemavailability but it doesn’t imply that cloud service is available for thesame time (Roehrig, Ross and Shanahan 2009). This is because ofthe “pay-as-you-go” nature of cloud and clients pay for capacity orthroughput, rather than for system components. Although cloudservice providers offer unlimited scalability, dynamic scalability canbe achieved only by clearly defining time-based scalabilityrequirements (Pallia 2010). Moreover, the highly dynamic nature ofthe computing infrastructure makes it difficult to manage theinfrastructure (Roehrig, Ross and Shanahan 2009). As cloudcomputing basically consists of services delivered over the internet,it essentially involves hosting services (Cearley 2010). This meansthat all the issues revolving around traditional hosting servicesapplies for cloud computing services including managing integrationof services, accountability, efficient technical support, regulatorycompliances, service levels across third party domains (Vile 2010).As the client firms are locked into a contract, they will be severelyaffected if any of these issues escalates to a conflict (Anthes 2010).Figure below shows the major challenges faced by the customer: xliii
  44. 44. Figure 21: Major Challenges Faced by Cloud customers (Adopted from Nandana 2009)2.5 Cloud Computing Future Forecast Leading industry analysts are predicting rapid growths incloud computing market. A Gartner Research suggests that by2012, 80 percent of Fortune 1000 enterprises will use some form ofcloud computing service, and 30 percent will use cloud-computinginfrastructure services (Driver 2008). Another research by Gartnerestimates that firms worldwide will spend $112bn on SaaS, PaaSand IaaS combined over the next five years (Courtney 2010). By2014, approximately 34% of all new business software purchaseswill be procured via SaaS and SaaS delivery will constitute about14.5% of worldwide software spending across all primary markets(Courtney 2010). Figure 5 below shows the prediction by industryanalyst firm, Gartner. xliv
  45. 45. Figure 22: Cloud Computing Growth Forecast (Adopted fromCearley and Phifer 2009)2.6 Relevant findings from literature review. The benefits from cloud computing services cannot beignored and it might be beneficial for Indian IT-services firmsshould develop a cloud adoption strategy. By engaging as deliveryagent of cloud services, Indian IT-services firms can enhance thevalue of their offerings to their existing clients by positioningthemselves as cloud consulting and delivery partners, establishtrusted relationships with cloud-service providers and maintain theircompetitive advantage as global outsourcing service provider.However, the current cloud services have to be critically assessedfor the benefits and risks it offers for various applications. Surveysconducted globally by Gartner, Forrester and other independentindustry analyst and research firms reveal that firms have adoptedcloud computing primarily to lower their infrastructure costs anddynamic allocation of the resources. Some application havingvariable resource requirement based on time and season areappropriate to be migrated to the cloud. Hence, choosing suitable xlv
  46. 46. applications is critical for the success of cloud computing adoptionas unsuitable ones would increase operating costs, decreaseefficiency and expose the client’s application to serious security andprivacy risks. Moreover, many early adopters of cloud computinghave raised concerns regarding security, privacy and data location;it is essential that these concerns are explored further to obtaininsights into the reasons underpinning these issues. Thus, theprimary research is focussed on assessing the main drivers for cloudadoption by the Indian IT-services firms, understanding their mainconcerns and applications suitable for cloud adoption.3.0 Research Methodology In order to achieve the aims and objectives of theresearch, it is essential that the research methodology developed isrobust and effective (Saunders, Lewis and Thornhill 2007). Theresearcher contacted 400 people from working for his previousemployer, Infosys technologies and classmates from hisundergraduate batch, who were currently working in Indian IT-services firms for an initial survey to gain information about theirknowledge of cloud computing. Facebook was used as a medium tocommunicate the survey to the respondents, with majority of therespondents already available in the researcher’s friend list. Thissurvey revealed that 74% of the respondents lacked clearunderstanding of cloud computing or their opinions would not be ofsignificant contribution to the research due to lack of expertknowledge even though they were working in the IT services sector.This posed a significant challenge to find the appropriaterespondents for questionnaires and interviews. The research wascarried out using both inductive and deductive approach. Ininductive research, the data is collected first and then theories aredeveloped after in-depth data analysis (Saunders, Lewis andThornhill 2007). This approach is used to establish a general xlvi
  47. 47. proposition based on observation (Ghauri and Gronhaug 2005). Indeductive approach, a conclusion is derived from a known premise(Ghauri and Gronhaug 2005). Secondary research was conducted toobtain the background and basis for this research and to define theroadmap for primary research. The findings from primary researchwere cross-validated and assessed by further secondary research.3.1 Secondary Research Secondary data is the data which has already beencollected by someone else for various purposes other than to solvethe current research problem (Saunders et. al 2007). These dataare obtained through previous researches enable the researcher toestablish the background and context to the current research andprovides insights into the related theories associated with theresearch topic (Blumberg et. al 2006). The secondary data iscompiled from findings of other researchers, industry experts,analyst firms, completed surveys, questionnaires which can be usedto relate the research to the previous work conducted (Saunders,Lewis and Thornhill 2007). The primary sources for the secondaryresearch were: the Georgina Scott Sutherland Library, databasessuch as Business Source Premier, Emerald, Sage Journals Online,Google Scholar, KeyNote, and Sage Publications, white paperspublished by industry analyst Gartner, Forbes, RiverBed, Everest,IDC Insight, Forrester and major cloud players including Google,Oracle, Microsoft, IBM, Salesforce, Amazon; academic journals fromcloud computing association, cloud computing journal, journal ofinternal law, communication of the ACM, internal property andtechnology law journal, the computer journal, journal of enterpriseresource management, information systems journal, energy andtechnology journal etc. Case studies, conference papers and reportsfrom the firms which have recently adopted cloud computingsolutions have also provide critical insights into their experience xlvii
  48. 48. with the cloud. This secondary research conducted has provided anunderlying base for further research and generation of questions tobe raised during the primary research. However, as cloudcomputing is still in its early stages and developing rapidly and theIndian IT services sector, which is highly dynamic and turbulent;the peer reviewed articles and journals were of little help to provideinsights on the current issues and trends related to Indian ITservices. Moreover, the researcher had to be highly selective whileadopting the findings from market reports, whitepapers, websitesand independent industry analyst journals as many were used as amarketing tool by the cloud service providers and vendors. Hence,primary research was of high importance to provide key insights tothe research.3.2 Primary Research As the research problem is fairly new and unexplored, datafrom the secondary research is not sufficient to address theresearch problem clearly. Primary research would be beneficial inaddressing this gap (Ghauri and Gronhaug 2005). The maindrawback of primary research is that it is time consuming, costly,fully dependent on the ability and willingness of the respondents(Collis and Hussy 2009). Considering these disadvantages, it isessential to have a well structured approach to perform primaryresearch. Figure below shows different ways to collect primary data. xlviii
  49. 49. Figure 23:Primary research and its types ( Ghauri andGronhaug 2005)Primary research may be conducted using qualitative research,which involves analysis and interpretation of data in non-numericalformat or quantitative research which involves analysis andinterpretation of data in a numerical format (Ghauri and Gronhaug2005). As the research focuses on a relatively new technology andthe business impact of which has not been fully understood norrealized, a mixed methodology of using both qualitative andquantitative method was used to conduct primary research. Themajor risk associated with primary research is that the respondentsmight present their views as “what they want the solution to be”,instead of presenting the actual information (Loonam and Loughan2008). Qualitative research provides rich inputs to the researchwhich has to be interpreted and synthesised based on the context ofthe research (Niell 2007). Although qualitative research is timeconsuming, it was suitable for this research topic as the researcherrequired in-depth information on the subject matter. The researcherinterpreted the raw data obtained from qualitative research intoinformation bearing in mind the context in which the data was xlix
  50. 50. obtained. Quantitative research was essential to get the numericaland categorical data which can be measurable clearly such as thelevel of satisfaction of the organisation with their cloud solutionrated from 1-5, number of critical risks which has aroused due tocloud adoption etc. Quantitative research can be used to collect allaspects precise measurable data regarding the target concepts andthe researcher is objectively involved in the research process (Niell2007). The primary research consisted of questionnaires sent torelevant target group and face to face or web based open-endedinterviews with the IT managers. The primary research was conducted in companies located inBangalore in India as bangalore is known as the silicon valley ofIndia with more than 1800 IT companies having its presenceincluding major cloud computing providers like Google, Amazon,Oracle, IBM, major IT service providers having its head quartersincluding Infosys, Wipro, Patni computers (Nasscom 2009).It israpidly growing in the IT sector with year-on-year increase in ITexports by 52% (Nasscom 2009). It has a large base of skilled andknowledgeable and easily accessible IT talent pool. As the researchdemands expert and deep insight knowledge of the niche cloudcomputing market, it should be targeted effectively to individualswho posses this knowledge and understanding. The researcher hadworked in Infosys Technologies, head quarters in Bangalore for twoyears and can utilize the assistance from the previously establishedcontacts within the IT industry. These IT-services firms haveupdated insights on cloud computing developments as they serve awide range of clients ranging from healthcare, banking, andinsurance to gaming and geospatial firms worldwide (Karamouzis2010). Hence, they would take keen interest to understand thebenefits, risks associated with cloud computing adoption to hosttheir client’s applications. l
  51. 51. 3.2.1 Questionnaires A questionnaire is a list of carefully structured questions,which were chosen after considerable testing with a view of elicitingreliable response from a particular group of people (Collis and Hussy2009). The main steps involved in designing a questionnaire aresummarized below: Design questions and instructions Determine order of precedence. Write accompanying letter Test this questionnaire with a small sample already chosen. Choose the method for distribution Plan strategy for dealing with the responses received Analyze the received data (Mingers 2003).Clear designing of the questions and instructions is essential toensure that there is no subject error or subject bias (Saunders 2007) and to get clear measurable results. Determining thecorrect order of precedence is essential to achieve logical flow ofcollecting information. The precedence of questions ensured thatthe respondent’s details including work and organisation profilewere collected initially before moving to collecting actualinformation regarding the research problem (Trochim 2006).Moreover, questions which were irrelevant for a particular categoryof respondent were not shown to the respondent. For example, therespondents belonging to firms which had not adopted cloudcomputing solutions were not asked about the actual benefitsrealised by their firms from cloud adoption. The next steps were:The distribution method for questionnaire was chosen afterevaluating the following factors: Characteristics of the respondents Importance of reaching a particular person as respondent; li
  52. 52.  Size of sample required for analysis, taking into account the likelyresponse rate; Types of question asked Number of questions asked (Sauders, Lewis and Thornhill, 2007). Questionnaire Types Internet Postal Telephonic Collect and questionnaire questionnaire questionnaire deliver questionnaireFigure 24: Types of questionnaires (adopted from: (Sauders,Lewis and Thornhill, 2007).As shown in figure above, the questionnaires can be sent throughpost, telephone, ‘collect and deliver’ or using internet services(Collis and Hussy 2009). Postal Questionnaires are not idealconsidering the time required to send and receive, postage cost,poor delivery service (Sauders, Lewis and Thornhill, 2007).The telephone questionnaire is widely used as a substitute for faceto face interviews. But the disturbing telephone lines, high callcosts, intruding nature of a phone call makes this techniqueinfeasible (Collis and Hussy 2009). From the consideration madeabove, the research was conducted with internet mediatedquestionnaire because it effectively reaches a large sample size andmaking compilation costs very low (Collis and Hussy 2009). TheQuestionnaires were initially sent to a large sample of more than400 skilled workers in IT services industry working in India. lii
  53. 53. The responses showed that 74% of the respondents did not possessnecessary expert knowledge or exposure in cloud computing tocontribute to the research with their opinions. Their opinions wouldlead to wrong survey results and misguide the researcher. Hence,the researcher had to reduce the sample size and target specificpeople within the IT industry who were qualified, experienced andexposed to cloud computing services so that their opinions wereaccountable. The researcher realised that a different approach hasto be adopted to contact the right people and used different socialand business networking websites including,,, forums including Computer societyof India (CSI), OWASP, Nasscom, IEEE Bangalore chapter, contactsfrom previous employment, colleagues, seniors who are working inIT firms and sent out e-mail questionnaires, paper handouts andensured that right category of people were contacted to understandtheir perspective on cloud services. This seemed to be anappropriate approach because the researcher could assess the workand organisation profile of the members of these websites andforums and their areas of interests in the IT space by reviewingtheir profile and then getting in touch with relevant people. Bybriefing the colleagues and seniors about the researchrequirements, the researcher was able to contact experts in theresearch area within the organisation. The questions (see appendix1) were a mixture of open-ended and close-ended questions as theresearcher wanted to extract additional information from therespondent’s experiences. The targeted respondents weremanagers, IT consultants, and business analysts of the IT servicesfirms or IT-services division of other firms which were consideringcloud computing adoption in future or have already implementedcloud computing services to one or more of their clients (seeappendix 2 for the list of firms contacted). These IT services firmsact as delivery agents by customizing the cloud services offered by liii
  54. 54. the cloud service providers to suit their clients needs after criticalassessment and appreciation of the client’s IT infrastructurerequirement. As it required specialised knowledge and expertise onthe subject, the number of respondents was limited to 90. As therespondents would have worked on various other technologies,different firms and in different countries, the researcher had toensure that the respondents answered the questionnaires basedsolely on their experience, expertise and opinions with regard tocloud implementation by “Indian IT service firms on outsourcedprojects from various clients, i.e projects which were designed,developed, tested, maintained by the firm’s development centres inIndia. The cloud computing opportunity is assessed consideringIndian IT-services firms as delivery and consulting agents of thesecloud services to its existing clientele.” These instructions wereincorporated in the short note sent along with the questionnairesdescribing the research aim and objectives which the respondentshad to acknowledge before taking part in the questionnaires.3.2.2 Interviews: Interviews give clear insights to how people think and feelabout topics of concern to the research (Oppenheim, 2000). Face-to-face interviews are beneficial when two individual have a topic ofcommon interest (Kvale and Brinkmann, 2009). The advantages ofconducting interviews are: researcher has control over the flow ofcontents of the interview; informants can provide new informationand different perspectives which can be used for furtherinvestigation on these lines. The disadvantages are: it providesindirect information through the stages of interviews, the format ofthe information received is not standard and sometimes difficult tointerpret. The interviews conducted by the researcher werefocussed at extracting new information from the respondents fromtheir experience, knowledge and firm-specific cloud product liv
  55. 55. expertise and confirming, validating the findings of thequestionnaires, secondary research and findings from previousinterviews. The researcher conducted semi-structured interviewswith the business analysts, IT managers, project managers of 17 ITfirms in Bangalore (see appendix 3 for firm’s list). Some interviewswere conducted online using Skype, TCS Sametime ®, InfosysCommunicator® to save the respondents time and convenience.Semi structured interviews enabled the researcher to exclude somequestions irrelevant to the firm or the ones which the manager willnot be willing to reveal due to company policies. The researcher wasalso able to ask new questions based on the previous responses.The researcher first conducted the questionnaire survey with therespondents and hence they were aware of the research problemprior to their interview. Due to time, access and budget constraints,the researcher was able conduct only 22 interviews. However,considering that it covered 17 different firms (refer appendix-3 forlist of firms contacted and partial list of respondents name andcontact email) with respondents possessing adequate knowledge,expertise and experience of cloud technology, it can be assumedthat the results of the interviews can be generalised. Moreover, asthe respondents are likely to be biased in their opinion, theresearcher had ensured that the findings from the interviews werevalidated with appropriate secondary research findings and crossvalidating with other interview respondents. However, theoreticalsaturation was evident during the last few interviews whichprompted the researcher to proceed with the analysis of thefindings. Theoretical saturation implies that almost no newinformation could be extracted on the topic of research and allcurrent information obtained were cross-validated (Strauss andCorbin 1998) lv
  56. 56. 3.2.3 Focus Groups A focus group interview is a discussion with a small group ofparticipants on a specific topic. The attributes of a focus group arethe clear use of the group interactions, in order to collect qualitydata. Focus groups are more specific, meaningful and more dynamicthan consumers filling out questionnaires and surveys (Hart 1998).The researcher had planned to develop one focus group which had amix of participants with expertise in various aspects of cloudcomputing implementation whilst planning the research proposal.The advantage of this method is that participants can voice theiropinion and perspective towards this topic. The researcher will beable to interpret the data depending on the context and conductqualitative analysis of the outcome effectively (Kvale andBrinkmann 2009). However, the initial survey findings revealed theimpracticability of conducting focus group discussions as the accessto skilled and expert participants was limited. Furthermore, theseparticipants, who are at managerial level, would not attend suchevents unless they reap some kind of monetary or PR incentives.Hence the researcher limited the primary research to comprise ofonly questionnaires and interviews. However, the findings from theinterviews and questionnaire were cross-validated with therespondents and theoretical saturation was evident while analysingthe responses of the last three interviews.3.4 Research Design The researcher has used paper based and internet basedquestionnaires to validate the findings from the secondary researchand to obtain insights into the current issues, challenges associatedwith cloud computing adoption. As numerous applications can bemigrated into the cloud, it was essential to classify applications intofinite categories so that opinions from the respondents can be lvi
  57. 57. captured easily. The Indian IT services industry serves clients frommany sectors as shown in fig. below.Fig 25: Sector-wise Revenue break-up of Indian IT servicesfirms (Nasscom 2009).These clients have varying IT needs spanning across infrastructurefor storage, processing, and software. Hence, categorizingworkloads based on cloud service type such as SaaS, PaaS and IaaScloud would not be appropriate for this research. Moreover, theservices offered by Indian IT services firms range from lower-endapplication development to high end complex system integrationand product engineering services as shown in fig. below. lvii
  58. 58. Fig 26: Revenue break-up by services offered by IT servicesfirms (Nasscom 2009)Therefore, in order to achieve the third objective, which is toidentify the applications suitable for cloud computing adoption, it isnecessary that all the applications handled by the Indian IT-servicesfirms are categorised into well-defined classification based on theirIT needs. Therefore, workload approach has been chosen as itprovides clear classification and is a proven effective methodimplemented in other researches (Zinnov 2010). A generic approachin categorising applications into workloads in the questionnairewould result in ambiguous responses as the respondent would beunsure about the scope of the workload. For example, some surveyshave “business application services” as one of the workloadcategories. Although this categorisation might be appropriate in a lviii
  59. 59. different context, it’s not suitable for cloud service assessment asbusiness application services comprises of diverse applications suchas ERP (Enterprise resource planning), CRM (Customer RelationshipManagement), Payroll Management, Planning and Forecastingapplications, email applications etc. It is essential to get insights onthe respondent’s views on all these applications’s suitability to cloudmigration as they have different features and correspondingly, theirIT requirements also differ. Hence, the researcher has identified keybusiness applications, productivity tools, communication tools,storage services, infrastructure services, analytics systems andcategorised them into individual workloads as shown in the chartbelow.Category Summarized explanationCRM tools Services which can be bundled and sold as SaaS: Customer Relationship Management (CRM), Salesforce management.Project management tools Hosted productivity tools for project management, analysis, modelling and development.Email and desktop applications Personal productivity and administrative infrastructureDevelopment and testing tools Tools used for rapid development and simulating target environment for the prototype to test it.Trading applications Online order management with customer, suppliers. Real time trading with low latency requirementComplex modelling applications Applications involving intensive mathematical calculations, simulations in gaming, bio- lix
  60. 60. medical and life science sectorsData backup, archiving and Operational services handlingrecovery backup, disaster recovery and data management tools.Adaptive systems Systems having fluctuating or periodic or bursty demand cycles. E.g: e-commerce sites, tax processing systems, seasonal purchase order systemsConferencing and VOIP These include hostedinfrastructure communication tools such as audio, video conferencing, web based utilitiesData mining applications Applications involving high performance data dependency analysis such as search engines, robotics, financial analytics, parallel logics.Data warehouse Reporting database with complex processing and analysisTransactional database Databases with roll back capability on incomplete transactions to be used as a service.Testing Infrastructure Infrastructure and processing platform for different capability testing such as load and stress testingTraining infrastructure These include hosted communication tools such as audio, video conferencing, web based utilitiesMission critical workloads Applications having compliance constraints, high level of lx
  61. 61. accountability and criticality.Secure storage records Data storage with highly sensitive privacy, security requirementsHighly customized applications Applications involving bespoke customization regularly to adopt to changing client’s needsInterdependent applications Applications having complex interdependencies with multiple databases, departments and geographies.The above description was provided for the respondents to assistthem in understanding the workload types. Respondents couldchoose more than one option while selecting the workloads forsuitability. The results were validated during the interviews byidentifying the reasons underpinning the respondent’s selection ofworkload.3.4.1 Questionnaire Design The questionnaires were divided into two parts. As theresearch problem demanded specialised knowledge, expertise andexperience in the area of cloud computing, Part-1 of thequestionnaires extracted respondent’s relevant backgroundinformation such as: Respondent’s definition of cloud computing Respondent’s awareness level in cloud computing solutions. Respondent’s position in the organisation. Respondent’s total years of IT experience. Respondent’s organisation’s core area of work. Whether cloud computing solution has already been implementedin the organisation? lxi
  62. 62.  Whether the organisation is reviewing or planning to implementcloud computing solution in future? The responses from the part-1 questionnaire establishedthe competency in cloud computing and experience in Indian IT-services. It also provided details regarding whether therespondent’s firm had implemented cloud solution or planning toadopt cloud solution in future. Using this information, theresearcher selected the respondents for part-2 questionnaires.Researcher ensured that the respondents had sufficient expertiseand awareness in cloud computing, sufficient IT industry experienceto have better understanding of the clients application and domain,suitable work profile in the organisation that provides therespondent necessary information, in case such need arises.Part-2 questionnaires were also customized and sent to the suitablerespondents so that irrelevant questions were excluded so thatrespondents could provide valid inputs into the research. Forexample, the questions regarding actual benefits from cloudcomputing were sent only to respondents belonging to firms whichhave already adopted cloud computing solutions. Part-2questionnaires consisted of close-ended questions designed to usingappropriate metrics so that the responses could be quantified usingcharts and measured effectively. Ranking method was consideredmore appropriate to identify the factors such as main drivers, actualbenefits reaped, major concerns and private cloud preference as itprovides a holistic view of the respondent’s opinion. If therespondents were asked to select only one option, then the resultswould not reflect the underlying reasoning or order of preference ofthe respondent’s choices. The questionnaires were targeted to getinsights into the following areas: To understand their main motivating factors which lead to theadoption of cloud computing? lxii
  63. 63.  Understand the actual benefits reaped and major challengesfaced by the firms which have already adopted cloud computingsolutions currently faced by these firms. Understand the major concern hindering the prospective cloudadopters regarding cloud adoption. Which cloud model do they recommend for prospective adoptersand why? Which application workloads do they find suitable for cloudadoptions?3.4.2 Interview Design Suitable respondents from part-2 questionnaires wererequested to take part in the interviews. The researcher attemptedto interview right proportion of respondents from IT-services, IT-consulting and research roles; ensure right balance in interviewingrespondents from 2-10 years of IT work experience with differentroles in the firm. However, due to time and budget constraints, only22 people participated in the interview. But, the researcher believesthat the results obtained are unbiased and can be generalised astheoretical saturation was achieved during final stages of theinterview process. Interviews were targeted at understanding thereasons underpinning the questionnaire survey responses and tovalidate the results obtained from the questionnaire survey. This isbeneficial as the researcher will be able to identify anymisinformation, biased results obtained due to errors in procedureand design of the research. Moreover, first hand information can beobtained on related areas (Niell 2007). The findings from theinterview were analysed, categorised and wherever the researcherobserved a need for clarification, the findings were cross validatedwith other respondents. The insights obtained after analysis wereused to: lxiii
  64. 64.  Determine the main driving factors and concerns for cloudadoption. Prime benefits and risks faced by the firms which have adoptedcloud computing Develop and recommend a suitable strategy for cloud adoptionby Indian-IT services firms in terms of application workloads andcloud computing types.3.5 Sample Selection To ensure that the findings from the research can begeneralised, unbiased and reliable; it is necessary to use a suitablesample for the research (Strauss and Corbin 1998). Due to time,resource and budget constraints, it is not possible to conduct theresearch on a large scale and arrive at a consensus. Moreover, therespondents should be equipped with adequate hands-onknowledge, experience on the subject to provide valuablecontribution to the project as it deals with current issues andchallenges (Saunders et. al. 1997). Hence, it was essential toconsider a sample of the population in question. Numerousresearchers believe that using sample approach would result inaccurate data collection and analysis as there is added emphasis ondesigning and piloting the project to collect detailed information(Henry 1990). Johns and Perrot (2008) claim that a sample size often is sufficient for qualitative research involving interviews.However, it is a standard practice to validate new findings frominterviews until theoretical saturation is reached (Bailey 2006).Otherwise the findings are considered to be uneven, non preciseand biased. As the current research problem deals with relativelynew technology, which is not fully understood and time tested, theresearcher had selected the sample size of 80 for questionnairesand 25 for interviews in order to achieve theoretical saturation. lxiv