1. BUSINESS MANAGEMENT SUPPORT
Business disadvantages using cloud computing?
Author: Maikel Mardjan
info@bm-support.org
© 2010 BM-Support.org Foundation. All rights reserved.

2. EXECUTIVE SUMMARY
Cloud computing is hot. But severe business risks and challenges
are involved to retrieve the promised business advantages of cloud
computing.
Conclusions:
 The main disadvantages are: security, loss of control,
unstable cost structure , potentially decreased business
flexibility, integration problems.
 An adaptive architecture, including a new business model
must be developed to retrieve business value
 Organizational changes are needed for adapting the
technology (procedures, skills, business model)
 Formulate and maintain an exit procedure to change from
CSP (Cloud Service Provider).
 Cloud computing technologies and business models have not
yet reached maturity. Standards are being developed.

3. OUTLINE
This presentation is a brief summary of the research on cloud
computing performed under supervision of the Business
Management Support Foundation.
The following questions will be answered:
 What is cloud computing
 What are the main disadvantages and pitfalls using cloud
computing
With Google returning more than 12 million search result on the
term ‘cloud computing’ the hype can not be ignored.

4. HYPE, FAD OR INNOVATION?
Cloud computing is rapidly gaining the interest of service providers,
programmers and the public as no one wants to miss the new hype.
So the real questions need to be answered:
 What is the real business value?
 What’s the innovative part?
 What are keen pitfalls using cloud computing?
 Is clustering the same as cloud computing?
 What happened with virtualization, grid computing, the
automatic data center and autonomic computing?
 What are the main risk involved?
 What is the new vendor lock-in?

5. AGENDA
What is cloud computing
 Definition of cloud computing
 Is cloud computing new?
 Manifestations of cloud computing
 Cloud deployment models
 What should cloud computing be?
The main disadvantages and pitfalls using cloud computing
 Security
 Dependency (loss of control)
 Cost
 Decreased flexibility
 Knowledge
 Integration
New business opportunities and conclusions

6. DEFINITION OF CLOUD COMPUTING
The lack of an agreed single definition makes answering ‘what’
question hard.
The NIST definition of cloud computing is:
Cloud computing is a model for enabling convenient, on-demand
network access to a shared pool of configurable computing
resources (e.g., networks, servers, storage, applications, and
services) that can be rapidly provisioned and released with minimal
management effort or service provider interaction.
In our opinion this definition covers the field of cloud computing.

7. IS CLOUD COMPUTING NEW?
Cloud computing is not a fundamentally new paradigm
Cloud computing draws on existing technologies and approaches,
such as:
 Utility Computing
 Software-as-a-Service
 Distributed computing
 Centralized data centers
What is new is that cloud computing combines and integrates these
approaches.
Cloud computing can be seen as the logical evolution in outsourcing
IT services. The promise is that with cloud computing every
company (big or small) can get IT services in a very simple way.

8. MANIFESTATIONS OF CLOUD COMPUTING
Multiple Service models:
 SaaS: Software as a Service
 PaaS: Platform as a Service
 IaaS: Infrastructure as a Service
• Implementations of specific business functions
• E.g. Google Docs, Salesforce CRM, SAP Business
SaaS by Design
• Provide computational resources through a
platform (Operating Systems)
PaaS • Dedicated APIs
• Resource Clouds (e.g. CPU’s, memory, storage,
network)
IaaS • Managed and scalable

9. CLOUD DEPLOYMENT MODELS
To make use of Cloud Computing companies can use services of a CSP
(Cloud Service Provider). But be aware of the different cloud service models
that are offered:
 Private Cloud: Internal within a company data center or dedicated
leased;
 Public Cloud: Cloud services provided to many customers from a
single technology stack;
 Hybrid cloud: Offers a possibility to mix private and public cloud
services;
Private
Cloud
With a public or hybrid cloud the CSP
Uses resource pooling to serve multiple
customers using physical and virtual
Deployment resources that are dynamically
Models assigned and reassigned.
Hybrid Public
cloud Cloud

10. WHAT SHOULD CLOUD COMPUTING BE?
In our opinion cloud computing should:
 Give you extra business value over a long period of time
 Ensures that the quick changing business needs can be
supported better than using traditional IT services
 Be a technology that enables business innovation
Currently cloud computing involves:
 Virtualization
 Automatic Scalability (rapid elasticity)
 On-demand deployment
 Internet delivery services
 Open source software
 Open standards
 Business innovation and requires business adaptability

12. AGENDA
What is cloud computing
 Definition of cloud computing
 Is cloud computing new?
 Manifestations of cloud computing
 Cloud deployment models
 What should cloud computing be?
The main disadvantages and pitfalls using cloud computing
 Security
 Dependency (loss of control)
 Cost
 Decreased flexibility
 Knowledge
 Integration
New business opportunities and conclusions

13. DISADVANTAGES USING CLOUD COMPUTING
Disclaimer:
Cloud computing technologies and business models have not
yet reached maturity.
So:
 All major CSP’s are still working on research and development
to give customers the level of services and quality required
for crucial business processes.
And:
 The processes needed within CSP’s and the IT technology
used by CSP is growing towards a landscape of extreme
complexity.
So what are the main disadvantages using cloud computing?

14. DISADVANTAGES: SECURITY
Security:
 No control over the business assets (data!). The main assets
in every company are its data files with valuable customer
information.
 A proper security model for cloud computing is not yet
developed. Security, privacy and compliancy is still difficult for
cloud solutions. Especially for public cloud services.
 Physical location of hardware and software is unknown. Site
inspections and audits are hard.
 Availability. Constant connectivity is required.
 Failure to compliance. E.g. HIPAA, SOX, PCI, SAS 70 and
audits.
 Risk of data loss due to improper backups or system failures
in the virtualized environment.

15. DISADVANTAGES: DEPENDENCY
Dependency (loss of control):
 Quality problems with CSP
 No influence on maintenance levels and fix frequency when
using cloud services from a CSP.
 No or little insight in CSP contingency procedures. Especially
backup, restore and disaster recovery.
 No easy migration to an other CSP.
 Measurement of resource usage and end user activities lies in
the hands of the CSP
 Tied to the financial health of another Company.

16. DISADVANTAGES: COST AND FLEXIBILITY
Flexibility:
 Special customization not possible.
 Possible lower rate of business IT innovation. The
technological innovation pace is dictated by CSP.
Cost:
 Hidden cost (e.g. compliancy regulations, backup, restore,
disaster recovery and problem solving.)
 Opaque cost structure due to highly flexible usage of cloud
services;
 Cost advantages is as hard to get when using outsourcing for
IT services in a traditional way.
 Risk of higher future is charges is real.

17. DISADVANTAGES: KNOWLEDGE AND
INTEGRATION
Knowledge:
 More and deeper knowledge is required for implementing and
managing SLA contracts with CSP’s
 Since all knowledge about the working of the cloud (e.g.
hardware, software, virtualization, deployment) is
concentrated at the CSP, it is hard to get grip on the CSP.
Integration:
 Integration with equipment hosted in other data centres is
difficult to achieve.
 Peripherals integration. (Bulk)Printers and local security IT
equipment (e.g. access systems) is difficult to integrate. But
also (personal) USB devices or smart phones or groupware
and email systems are difficult to integrate.

18. AGENDA
What is cloud computing
 Definition of cloud computing
 Is cloud computing new?
 Manifestations of cloud computing
 Cloud deployment models
 What should cloud computing be?
The main disadvantages and pitfalls using cloud computing
 Security
 Dependency
 Cost
 Decreased flexibility
 Knowledge
 Integration
>>New business opportunities and conclusions

19. NEEDED ORGANIZATIONAL CHANGES
When using cloud computing the following changes are needed:
 Adjustment on the main business model
 Adjustment on architecture and design for new and current
systems
 Adjustment on architecture method used to maximize the
advantages of the new technology
 New approach to implement new solutions using CSP services
 Adjustment on maintenance model
 Adjustment on cost model
 Paradigm shift at current business and IT departments.

20. NEW BUSINESS OPPORTUNITIES?
Cloud computing can enable new business opportunities.
New business models possible are e.g.:
 On demand IT
 Self service IT
 Pay-by-use
These models are possible from a infrastructure perspective , but
also out of a business application perspective.

21. DON’T GO?!
Cloud computing is about an automatic data center from a IT
perspective. But business and IT are allied.
One of the major changes that comes with cloud computing is that there
is a need to:
 Automate the processes around the various tools and
techniques used
So if you did not succeed the last 4 years with e.g.:
 SOA
 Building an automatic CMDB
 Automatic SCM (Software Configuration Management)
 Quality improvement for business and IT processes
 Governance
 Security baselines
Think again on how using cloud computing will impact your current
problem fields.

22. CONCLUSIONS
Cloud computing can give a significant business advantage!
To make Cloud Computing successful :
 Understand the risks involved
 An adaptive architecture, including a new business model
must be developed to retrieve new business value
 Organizational changes are needed for adapting the
technology (procedures, skills, business model)
 Understand the technology used by your CSP (Cloud Service
Provider)
 Formulate and maintain an exit procedure to change from
CSP.

23. ADVISE
To make Cloud Computing successful :
 Stay compliance : SOX, HIPAA, ISO , NIST e.g.
 Be robust for network failures and network performance
issues.
 Stay close to open source and open standard solutions when
choosing a CSP (Cloud Service Provider)
 Work from within a defined architecture to retrieve the
wanted results using cloud computing
 Be aware of the current lack of standards when using or
implementing cloud computing.
 Since long-term experience is lacking with the use of cloud
computing real business advantages in relation to
competitors is possible. But be aware of the many pitfalls that
makes you inflexible in the future.

24. FUTURE OR PRESENT?
The cloud computing paradigm is not the future.
The technology is already available for a number of years.
The future is about developing innovative business models
that use the technological advantages that cloud computing
enables.

25. MORE INFORMATION?
If you want more detailed information about other business research
questions regarding cloud computing. E.g.:
 Advantages or disadvantages of different vendor Solutions
 Open Source solutions available
 Open standards adaptation (e.g. Open Virtual Format- OVF)
 Integration aspects (business and IT systems)
 Organizational changes needed
 Quality systems for cloud computing
Read the full report, contact us, or contact one of our partners.

26. IT’S ALL ABOUT COLLABORATION!
Author info
About Maikel Mardjan:
- Msc Business Studies, University of Groningen
- Master Business Management (MBM), TSM Business School
- Msc Electrical Engineering, Delft University of Technology
More than 15 years experience in the field of: consultancy, IT, Open Source,
Internet, business research methods and innovation.

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