Current knowledge and background


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Current knowledge and background

  1. 1. 2011IS Issue- Cloud Computing Girish Subramaniam Katz Graduate School of Business 1/1/2011
  2. 2. This paper highlights the current background and knowledge in Issues in CloudComputing and its adoption with respect to the Financial Services Industry. The sourcesfor the research include: 1) Academic Research 2) Trade Press- Information Week, CIO, Business Week 3) Consulting Firms- Deloitte, IBM 4) Personal Connections 5) BlogsSNAPSHOT: After all the research, it is clear that there are issues with respect to CloudComputing that restricts its adoption by Financial Services Industry. Everybody acknowledgesthese issues as in agreement with respect to how it should be approached. For example, a lot ofexperts suggest using private clouds instead of public to avoid data security I. Real-life Examples of Issues with respect to Cloud Computing:Two major IT disasters for Amazon and Sony
  3. 3. Issues that came out of the Academic Research/StudiesChallenge #1: Safeguarding data securityPotential adopters are concerned about the security of data outside the corporate firewall. Arelated issue has to do with offshore data housing, which can pose problems of legislativecompliance when data crosses borders. In the short term, most companies can avoid these issuesby using domestic cloud facilities.
  4. 4. Because a cloud provider hosts multiple clients, each can be affected by actions taken againstany one of them, as in distributed denial-of-service attacks server requests that inundate aprovider from widely distributed computers. This is what happened, for example, in the wake ofthe Wiki Leaks activities: when attacks came into the provider hosting WikiLeaks, all otherclients were affected as well.Challenge #2: Managing the contractual relationshipCloud computing contracts are a mix of outsourcing, software and leasing. Some observers haveargued that contracting for cloud is simpler than traditional approaches to IT sourcing becauseonly one contract is required instead of multiple agreements for software, hardware and systemsintegration. In reality, however, few software, platform or infrastructure providers meet all of aclient‟s functional requirements, so contracting for cloud services typically involves ecosystemsof providers that must be integrated to provide complete solutions.Cloud contracts generally focus on service-level agreement (SLA) guarantees, but the network ofinteractions within the overall ecosystem increases the complexity of SLAs. Software-as-a-service providers, for example, often share a single platform for all users, and so they cannotprovide each client with a differentiated SLA. At present, relatively low compensation is offeredby providers for breaches of SLAs, but competition should improve this situation, as should thedevelopment of cloud standards.Research also found that cloud providers are currently not adequately focused on providingenterprise contracting requirements. The problem with cloud services today is that many of theservice providers have not evolved to the point that they are comfortable being custodians ofdata. That is, many providers have historical roots in product development, not service provision,so they often do not adequately understand what it means to have service liability.Challenge #3: Dealing with lock-inExit strategies and lock-in risks are key concerns for companies looking to exploit cloudcomputing. There is always a switching cost for any company receiving external services.However, cloud providers have a significant additional incentive to attempt to exploit lock-in. Ifcomputing were to become a very liquid commodity, and if switching to a lower-cost providerwere too easy, margins would rapidly become razor thin.When contracting for a cloud service, executives should be aware of two forms of lock-in. Thefirst form, technology lock-in, concerns the cost of moving a business service from one cloudplatform to another. Once a company is on a particular platform, it is often more cost-effective topurchase additional services compatible with existing onesthus increasing lock-in. A secondform, institutional lock-in, occurs when technologies become embedded within organizationalroutines and users work practices. Particularly for users of software-as-a-service, suchinstitutionalism can have a serious impact on the ability to switch cloud providers--whichincreases the severity of lock-in.Challenge #4: Managing the cloud
  5. 5. Although many dramatic predictions are being made about the impact of cloud computingamongthem, the claim that traditional IT departments will become obsoleteour research supports theconclusion that cloud impacts are likely to be more gradual and less linear. Nevertheless, thecloud does carry with it significant disruption to business as usual, leading to two particularmanagement challenges.First, once introduced into the enterprise, cloud services can be easily updated or changed bybusiness users without the direct involvement of the IT department. And it is in the providersinterests to develop functionality that expands usage and spreads it across the organization. Somaintaining overall, strategic control of services can be difficult. This independence of thebusiness when it comes to IT services also means that IT must work harder to gain the ongoingattention of the C-suite and to extend its strategic role.Second, organizations are still slow in developing management capabilities and principles foroperating with cloud services. Such strategies should focus on the multiple contracts needed for acloud ecosystem. Effective supervision of usage, SLAs, performance, robustness and businessdependency is vital. Monitoring the external providers services must be done, but internal cloudmonitoring should also be introduced. Support provided by cloud providers can be variable, andorganizations should develop their own support services, either internally or with third parties.Issues addressed by Consulting Firms/VendorsIT leaders need to develop and practicethe means to understand the threatsand levels ofassurance that affect agiven application or capability so theycan establish a”risk baseline“ fortheiradoption of cloud computing.- AccentureTo realize the benefits of cloud computing while overcoming the inherent challenges,organizations must take a holistic approach.-IBMIssues addressed in BlogsWith Google returning more than 12 million search result on the term „cloud computing‟ thehype cannot be ignored.-BlogCloud computing technologies and business models have not yet reached maturity. Therefore allmajor CSP‟sare still working on research and development to give customers the level ofservices and quality required for crucial business processes. The processes needed within CSP‟sand the IT technology used by CSP is growing towards a landscape of extreme complexity.-BlogIssues addressed in Trade PressSources Issue Recognition CommentsBBC Amazon and Sony disasters led to the panic amongst other industriesBusiness Week Articles such as “Security Explore the use of private
  6. 6. threats make private clouds clouds for industries wherein better” indicates that Business data is sensitive week does recognize the issueInformation Week/CIO Financial Services Industry has been the slowest in adopting cloud computing due to the fear of Data Security. Information security is the primary concern of this industry.Annotated Bibliography (Sources)By Professor Leslie Willcocks, Dr. Will Venters and Dr. Edgar A. Whitley from the London School of Economics andAccenture Computing for Financial Institutions Support-MaikelMardjan Reich Week- Busting Cloud Computing Myths Data Security Blog Week Systems and Technology IT infrastructure Computing Security Issues has been shared on