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.
Grateful 7 speech thanking everyone that has helped.pdf
Business Benefits of Cloud Computing to Indian IT Service
1. THE
ROBERT GORDON
UNIVERSITY
ABERDEEN
FACULTY OF MANAGEMENT
Aberdeen Business School
Title: Cloud Computing Opportunity: Benefits and risks assessment
for Indian IT-services firms.
Name: Saurabh Jayarama Rao
Matriculation Number: 0917925
Submission Date: 4th May, 2011
Supervisor: Prof. Alan Hunt
Aim: To assess the benefits and risks involved in adoption of cloud
computing by Indian IT services firms and to identify a cloud
adoptions strategy for prospective adopters
Objectives:
1. To identify the main drivers of adoption for Indian IT services
firms.
2. To identify the major risks associated with cloud computing
adoption for the Indian IT-services firms
3. To identify the application workloads suitable for cloud service
adoption.
4. To suggest a cloud adoption strategy for prospective adopters
within the Indian IT-services industry
Signed: (Saurabh Rao)
Total word count (excluding acknowledgements, diagrams, references,
bibliography and appendices) 20,892
A Dissertation submitted in partial fulfilment of the requirements
for the MSc Degree in Management.
i
2. ABERDEEN BUSINESS SCHOOL
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Name Saurabh Jayarama Rao
Email/contact tel saurabhjr@hotmail.com 07031990789
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Course: Msc Management
Module: Dissertation
Dissertation 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
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dissertation.
I have read and agree to comply with the requirements for submitting the
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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
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ii
3. • That during the period that it is accessible on Moodle the work shall be
licensed under the Creative Commons Attribution-Non Commercial-
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Signed... (Saurabh Rao ) Date…4th May 2011
iii
4. THE
ROBERT GORDON
UNIVERSITY
ABERDEEN
Cloud 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. ABSTRACT
Cloud Computing has steadily gained popularity during recent years.
Cloud Computing is a market friendly term for the services offered over
the 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 of
resources and economies of scale. Clients can benefit from this facility by
paying only for the resources they use, flexibly increasing or decreasing
the capacity usage as per their IT needs and decrease their infrastructure
expenditure.
Indian IT-services firms have been dominating the global
outsourcing industry since the last decade by providing IT services and
consulting solutions to their clients worldwide. Cloud computing offers a
new window of opportunity for Indian IT-services firms to act as cloud
delivery agents to their existing clients and establish their presence in the
unexplored cloud services market. However, many firms are not fully
convinced about the benefits of cloud computing and are unaware of the
risks involved. As cloud services is still in its early stages, there is lack of
clarity regarding the terms of service, security, data storage, control and
service level agreements. There is significant marketing hype and fear
amongst the IT managers of losing a new opportunity or capabilities
which cloud can offer. Moreover, not all applications are well suited to be
migrated to cloud infrastructure.
This report provides insights into the current benefits and risks
involved with cloud adoption by Indian IT-services firms. The factors
underpinning the current benefits and risks are identified and applications
suitable for cloud adoption are highlighted through critical assessment of
the 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.
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6. Acknowledgement
I sincerely thank the Almighty God who gives me the strength and
inspiration in all my life endeavours.
I would like to thank my thesis supervisor, Mr. Alan Hunt for his
excellent guidance; constructive inputs and prompt support in
making this research a success.
I would like to extend my heart-felt thanks to all the respondents
for 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 for
all their love, encouragement, support and undying belief in my
abilities.
Finally, I would like to thank my dear friend Stavin Lawrence
D’souza, without whose support, I would not have embarked on this
master’s journey, nor would have chosen a challenge research
topic.
vi
7. Table of contents
1.0 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………………………………………….5
2.0 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…………..35
3.0 Research Methodology…………………………………………….36
3.1 Secondary Research………………………………………..37
3.2 Primary Research……………………………………………38
3.2.1 Questionnaires……………………………………..41
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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……………………………………………….…56
4.0 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………………………………………….70
5.0 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……...93
6.0 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..………………………100
Reference List
Biblography
viii
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
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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…………….94
1.0 Introduction and Research Problem
This chapter highlights the cloud computing opportunity in
the context of the Indian IT-services industry, identifies the
research problem and establishes the research aims and objectives.
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11. 1.1 Cloud Computing Opportunity in India
Cloud Computing has emerged as a new buzzword in the
field 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 market
through 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 services
as one of the areas offering non-linear growth and revenue models
to Indian IT-services firms and has undertaken strategic steps to
encourage firms to explore this opportunity (Nasscom 2010). The
Indian IT services firms are leveraging their existing client
relationships and expertise in service delivery to emerge as
dominant delivery agents of cloud services (Hingorani 2009). This
study is limited to only those firms which provide IT-services and
consulting solutions from their development centres in India.
1.2 Defining Cloud Computing
Gartner defines cloud computing as a style of computing
where massively scalable IT-related capabilities are provided ‘as a
service’ across the Internet to multiple external customers
(Bhupesh 2009). The resources in the cloud are pooled, virtualized
and networked which results in better efficiency, flexibility, low cost,
ease of use (EMC 2010) and customers access business services on
their own terms as illustrated below.
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12. Fig. 1: Overview of Cloud Computing Opportunity (EMC 2010)
It is basically a market friendly term for subscription based services
offered over the internet which allows rapid increase or decrease in
capacity without additional investments in infrastructure, manpower
or licenses (Wittow and Daniel 2010). Figure below shows different
types of cloud services.
1.3 Rationale
The decision to undertake this research was taken after
considering a wide range of aspects. Indian IT-service providers are
realizing the value of having competencies in hardware and
software in order to achieve economies of scale, retain customers
and improve profit margins (Bakshi and John 2010) Cloud services
delivery or reseller opportunity may provide the necessary platform
for Indian IT service providers to develop these competencies
(Jorge and Ted 2008). Currently, cloud-service providers offer the
platform and essential functionalities upon which the IT service
providers can build and run their client’s applications. These
arrangements are appealing to Indian IT services firms to offer
cloud consulting services and deliver customized applications
xii
13. suitable for the cloud (Gartner 2010). Revenue from traditional IT
services could be eroded due to cloud offerings by new emerging
firms; hence there is an incentive to look for new ways to add value
(Quicke 2009). Moreover, with tight economy today, customers are
spending much less but demanding seamless access to content; a
Gartner study revealed that global IT spending declined by 6% in
2009 (Quicke 2009) and this has prompted the Indian IT-service
firms will have to look for growth opportunities wherever they can
find it. Most businesses are unclear whether cloud solutions are
ideal to satisfy their IT needs. For unsuitable applications, cloud
services are known to introduce unnecessary complexity, increase
operating costs and resulting in contract lockage with the service
provider (Thethi and Srivastava 2010). A lack of in-house expertise
in cloud architecture, identity management, security monitoring and
data handling may lead to poor decision making on the part of end-
user organisations (Ambrust 2010). Indian IT-services firms have
proven technical expertise and gathered domain knowledge of
diverse sectors through years of IT-services delivery and are
positioned appropriately to choose a right cloud solution for their
client (Chatterjee and Chakrabarty 2009). IT service providers are
the key relationship link between the consumer and the enabler of
cloud computing as shown in fig. below.
Fig 2: Relationship between consumer and enabler
(Bakshi and John 2010)
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14. Most IT-services firms may have to partner with large cloud service
providers like Microsoft, Google, Amazon etc and collaborate on
cloud-enabled service delivery and build trusted relationships
(Roehrig et. al 2010). Otherwise, new competition might arise with
cloud-service providers partnering with other start-ups. Moreover,
profits have to be shared with the cloud providers. Hence, there is a
greater need that IT firms utilise the cloud offering effectively to
differentiate their solution offering and improve profit margin (Vile
2009). According to industry trend survey by Infosys Research,
cloud computing has appeared as high growth area for IT service
providers 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 as
a service which would reduce total cost of operation (TCO) and
provide growth to the business.
Thus, adopting cloud computing to provide cloud-enabled
services might prove to be beneficial for Indian IT-services firms.
Assessing the benefits and risk associated with cloud adoption by
Indian IT-services firms would provide insights into these aspects
and enable them to take informed steps. Moreover, planning an
xiv
15. ideal adoption strategy is essential to fully benefit from cloud
services. Therefore, the research aim is, ”To assess the benefits and
risks involved in adoption of cloud computing by Indian IT services
firms and to identify a cloud adoptions strategy for prospective
adopters”.
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 this
study, over 300 journal articles, whitepapers, case studies,
company reports, books and websites have been reviewed and key
insights have been drawn. The following literature review covers the
current Indian IT-services industry scenario, research highlighting
benefits and issues faced by the firms which have adopted cloud
computing, industry and customer’s strategy to enhance their cloud
experience, future forecast and areas of potential growth.
xv
16. 2.1 Background
2.1.1 Indian IT-Services Industry
In simple terms, IT services is a form of outsourced
service which has emerged due to involvement of IT in various
fields such as banking, finance, telecom, insurance, healthcare etc
(Arora et. al.2008). According to NASSCOM, the regulatory body for
IT services in India, the Indian IT services industry “involves a full
range of engagement types that include consulting, systems
integration, 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 abundance
of IT educated and english speaking human capital, low cost
facilitated by the weak Indian currency to gain competitive
advantage over other firms (Hingorani 2009). Firms in this industry
can be categorized into tier 1, tier 2 and emerging firms. Tier 1
firms have a major market share consisting of are Infosys
Technologies Ltd, Tata Consultancy Services and Wipro
Technologies and Satyam which has an estimated market share of
34-40% and employs approx. 340,000 (Hingorani 2009).Other
major players are IBM, Accenture, Cognizant, Patni Computers, HCL
technologies which fall in tier 2 category with 13-18% market
share. The industry has experienced high growth in the past decade
and is highly competitive. According to the NASSCOM-McKinsey
report, the total addressable market for global IT outsourcing is
approximately $300 billion, of which $130 billion will be outsourced
by 2012 of which India currently has 80% market share (Mckinsey
2005). Graph below shows market structure of IT services firms in
India.
xvi
17. Fig 4: IT service industry market share structure
(Nasscom 2009)
Current Issues faced by Indian IT-services firms
The Indian IT-services industry predominantly gets its revenue from
clients situated in North America and Europe as highlighted below
by the 2010 revenue graph categorized by geographical segments
of Wipro technologies Ltd, a major Indian IT-service firm.
xvii
18. Fig 5: Wipro Revenue Distribution by geography (Mulay
2010)
Countries in Europe and North America which were severely
affected by the downturn have reduced outsourcing IT services
work to India (Jain 2010). As major clientele for Indian IT-services
firms were from these countries, it resulted in lower growth rate for
all the Indian IT firms as shown in the graph below.
xviii
19. Fig 6: Annual Growth rates of Major Indian IT services Firms
(Gartner 2010)
Firms in developed countries originally started outsourcing to India
as it was a low cost alternative. Most of the back office
administrative works were outsourced to be automated so that the
firms can focus on their core areas of work and growth without
focussing on back-office administration process (Mckinsey 2005).
But since the outsourcing revolution in the 1990’s, India has been
growing at an average rate of 8% and with the rupee appreciation
against the dollar, the profit margins of the IT-service firms are
under pressure (Nasscom 2009). Other emerging countries like
China, Phillipines, Poland, Mexico, South Africa are providing IT
services and consulting solutions at a lower cost than India. Lower
end IT services works are being outsourced to China, Mexico and
Philippines as they offer better cost saving than India (Jorge and
Ted 2008). Moreover, the average salary of an IT knowledge worker
in India has increased to $5000 per year at the entry level and even
with the abundant human capital, the Indian IT firms are facing
severe shortage of skilled IT workers and experiencing high attrition
rate among staff as they go for better opportunities elsewhere
resulting in loss of investment incurred in training employees
(Matzke and McCarthy 2009). In order to still generate substantial
profit, the IT services firms in India have increased their billing rate
and thus are no longer the most attractive low cost option for
outsourcing (Wright 2009). The Indian IT-services firms are
attempting to overcome these problems by leveraging the expertise
and brand name gained during the previous years and moving up
the value chain by providing more complex, efficient solutions to the
clients in the IT services space (OECD 2006, Balakrishnan 2010). In
order to retain their existing clients, Indian IT-services firms are
engaging in partnerships such as strategic transformation partner
xix
20. (McCarthey 2008), total outsourcing partner and client engagement
initiative (Stuchat 2010) which could result in long term association
with existing IT services provider.
2.1.2 Cloud Computing
Traditionally, firms had to invest in infrastructure to
facilitate disk storage and processing. Moreover, they had to hire
skilled IT staff to maintain the infrastructure, regularly upgrade the
infrastructure, purchase licensing and monitor backup and disaster
recovery (Buttel 2010). This led to high initial investment (capital
expenditure) and high running costs (operating expenditure). The
firms had to forecast their future IT requirements, initiate
infrastructure planning and it would take weeks to procure the
hardware, configure and install it (Ryan and Loeffler 2010). The
process is illustrated using fig. 7 below.
Fig 7: Traditional Delivery Model (Doddavula and Gawande
2009)
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 solution
architect and project plan is prepared.
The infrastructure team analysed the project plan and purchased
necessary infrastructure.
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21. The resources are then assigned for individual projects to fulfil
their infrastructure requirements. The same process repeated for
any further changes in requirements.
Some applications such as email, I/O (input/output), stress
testing required additional amount of storage, processing during
some time. In order to cater to this variable demand, firms had to
provision additional infrastructure which would remain unutilized
during off peak hours (Wittow and Daniel 2010). These limitations
of traditional model led way to cloud computing. The underlying
idea for cloud Computing has evolved from rented time share
services offered during the early 70’s when computers were too
expensive for firms to afford. The hardware prices dropped during
80’s and firms started having their own computers. But the idea of
hosted and time shared services remained and evolved in parallel
(Collins and Vale 2010). During 90’s, there was an outsourcing
boom and many companies focused on their core functions and
outsourced their IT related activities to IT service firms based in
India and other developing countries which were emerging a low
cost destination. Moreover, they offloaded their applications to the
dedicated infrastructure provided by these IT firms. This allowed
firms to transfer the cost of infrastructure to the IT service provider.
During 1990’s, with the development of internet, new service called
applications service provider (ASP) gained popularity which
provided shared infrastructure to the customers using multi-tenancy
model. This was an attractive proposition for smaller organisations
as they could now access solutions which they would not be able to
afford before (Shariff 2010).ASP aimed to provide consistency,
efficiency and flexibility for service providers to manage systems
and resources optimally. In turn, the service providers could reduce
their operating costs and offer affordable hosting services to their
xxi
22. customers. ASP failed to make sustainable impact partly due to the
following 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, Salesforce.com (provides
sales force automation service requiring minimal integration with
other applications) was highly successful (Vile and Lock 2010). They
invested heavily on marketing and used the term “Software as a
Service” instead of ASP to generate new interest (Kelly 2009,
Collins and Vale 2010). Fig. below illustrates a salesforce.com
advertisement.
xxii
23. Fig 8: Software as a Service Marketing Campaign (Kelly
2009)
Following the success of SaaS, the cloud-service providers
introduced platform as well as infrastructure on subscription basis
and these were known as PaaS (Platform as a Service) and IaaS
(Infrastructure as a Service). Hence, Application Service
Provisioning (ASP), mainframe servers purchased on rental basis is
similar to what cloud services offer. Therefore, cloud computing is
not fundamentally new concept or innovative technology (Smith,
Plummer and Cearley 2009). It has gained huge popularity in recent
years 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. 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 traditional
hosting services until now, have additional options of managing
xxiv
25. their IT infrastructure using cloud based services as shown in figure
below which effectively consists of virtualization of all components
of data-center infrastructure including storage, network, systems
and the application stack.
Fig 10: Cloud Computing Model (Doddavula and Gawande
2009)
The working of the above model is explained below (Doddavula and
Gawande 2009):
Client application issues request for increase or decrease in cloud
resources using the service portal provided by the cloud-service
provider.
This request is redirected to service procurement system which
manages the resource allocation and provisioning.
This system allocates the requested resource and the client is
billed according to the usage. Thus, in comparison with the
traditional model shown in figure 7, the resource allocation is
flexible and dynamic which results in reduced costs and reduced
reaction time.
Benefit for Service Providers
These services are provided by major firms like Google, Salesforce,
Microsoft, Amazon etc which already have huge capacity and
provide customized provisioning to the customer based on their
xxv
26. needs. The service providers maintain high margin of profitability
due to the following factors:
Major contributor to the costs of ownership of infrastructure is
power consumption costs. Large service providers bring down this
cost through bulk purchase agreements. Moreover, they take
advantage of geographic variability in electricity costs by setting up
their infrastructure at a cheaper country or state (Harms and
Yamartino 2010).
Large firms are able to reduce the labour costs. Moreover, due to
virtualization which is the underlying technology enabling cloud;
single trained system administrator can maintain thousands of
servers at a time and the client’s IT worker can focus on building
new capabilities instead of performing repetitive maintenance tasks
(Reid et. al. 2009).
The bargaining power of a large firm is considerably higher which
results in approx. 30% reduction in hardware procurement costs
(Thethi and Srivastava 2010).
Finally, the service provider uses efficient resource management
processes which results in consistent and optimum utilization of
resources. Small firms or an independent IT firm would not be able
to fully utilize the infrastructure and the resulting idle time which
increases the operating expenditure. Using virtualization and multi-
tenancy architecture, cloud-service providers host multiple client
applications and resources on a single physical server; thus
increasing its utilization efficiency (Reid et. al. 2009). The
economies of scale have resulted in lowering the total cost of
ownership by 80% as shown in fig below.
xxvi
27. Fig 11: Forrester Research Total Cost of Ownership Survey
results (Reid et. al. 2009).
As illustrated in the figure above, the infrastructure costs decreases
with scale.
Benefit for Customers
Customers benefit from cloud-enabled services by paying only for
the resources they use, flexibly increasing or decreasing the
capacity usage as per their IT needs. This improves the quality of
service, decreases capital expenditure and operating expenditure,
provides them flexibility with seemingly unlimited capacity (Wittow
and Daniel 2010). If implemented effectively, cloud computing can
reduce the initial capital expenditure on IT to zero thus lowering the
risks, reduce operating expenses by 30-80%, provision with huge
capacity, improve quality of service, save energy and promote
Green IT (Ryan and Loeffler 2010). Gartner estimates that in the
next 5 years, cloud services would result in power savings of 8.5
billion kilowatt-hour (kWh), thus enabling enterprises to save
energy costs by 80% (Pettey and Steven 2010). However, some
issues raised by early cloud adopters include concerns regarding
data security, data ownership, service level compliance, privacy and
xxvii
28. reliability of the application in the cloud infrastructure (Gilbert
2010).
2.2 Major Cloud Categories
Cloud computing can be categorised into three major
categories 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 to
traditional hosting is illustrated below.
xxviii
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, data
centers as a on-demand, flexible service that can scale up and down
when 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 are
managed by the service provider and, the middleware and front-end
of the application is managed by the client. The costs are lowered
as there is no capital outlay requirement because IaaS is offered
using pay-as-you-go model. As the infrastructure needs are ever
increasing from e-mails, files, media and electronic records; cloud
enabled IaaS services can provide the essential infrastructure at
lower costs (Vile and Lock 2010).
2.2.2 Platform as a Service (PaaS)
PaaS delivers Web application technologies in pre-packaged
deployment architecture, provides programming environment that
xxix
30. support implementation of the application and inter-process, inter-
application communication services; all this as a service delivered
over the internet (Mell and Grance 2010). As shown in figure 13 ,
the backend and the middleware is managed by the cloud-service
provider and only the front-end comprising of data and user
interface is managed by the client. The customer uploads Web
applications to this environment and pay for the services according
to metrics such as transaction count, total capacity of compute,
storage and network services (Plummer 2008). The resources in a
platform may be shared or located at multiple locations. The main
benefit is that capacity can be expanded or contracted instantly
allowing clients to migrate applications with fluctuating demands or
high processing needs to suit their needs thus reducing the
operating costs (Doerr 2009).
2.2.3 Software as a Service (SaaS)
In traditional on-premise delivery model, customers had to
purchase the software, install, configure and then maintain it.
Whereas, in SaaS model, the software is not installed in the
customer’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-service
provider and delivered as a service over the network to the client.
The end user pays on a subscription basis using suitable payment
contracts such as “pay per use”, “pay per license”, “pay per hour”
basis. However, the end-users are unaware of where the service is
derived from and they can be provisioned with higher levels of
service when usage increases and de-provisioned easily thus
eliminating high overhead costs (Kelly 2009).
SaaS has gained tremendous popularity and consists of
common business solutions such as Sales force Automation (SFA),
xxx
31. Customer Relationship Management (CRM), and Enterprise
Resource Planning (ERP) etc. Examples of SaaS include Google
Docs, Salesforce.com, Web mail services such as gmail.com etc
(computing 2010). A gartner survey showed that 90% of the
American 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 subscription
price than buyout price.
Customer insight: the vendor can get insight on the customer’s
usage trends better than in the case of on-premise delivery.
New value added services can be introduced rapidly and market
tested with the users.
Piracy of software can be curbed as there cannot be pirated
version of online application.
Advantage to customer (Kelly 2009)
Responsibility of maintenance, support, routine operation is
transferred to the vendor which includes planning, patch
management and upgrades.
Anytime, anywhere access.
xxxi
32. Improved security as application, data are not stored locally.
Reduced Total cost of operation (TCO), time to market are
inherent benefits from SaaS.
2.3 Types of Cloud Service Delivery
Cloud services are implemented and delivered to the
customers using one of the following three models: private, public
and hybrid.
2.3.1 Public Cloud
Public cloud services provide various centralized services
from remote data-centers located at multiple locations and delivers
standard global services (Riverbed 2009).The complexity of dealing
with the physical infrastructure is completely abstracted. The cloud-
service vendors provide unlimited, scalable infrastructure on
subscription basis at low monthly cost (Hartig 2008).The cloud-
service providers drive down their costs by supporting multiple
businesses on their platforms. The customers benefit from dynamic
scalability and reduced risk by shifting infrastructure risks from the
enterprise to the cloud provider.
2.3.2 Private Cloud
Private cloud is dedicated infrastructure provided by the
cloud-service provider solely for individual clients. It may be
managed by the client or third party such as the Indian IT-services
firm and the infrastructure may be situated on-premise or off-
premise and billed on a “pay-as-you-go” basis (Mell and Grance
2010). However, private cloud has limited resource capacity, unlike
public clouds and costs higher in terms of capital expenditure and
operating expenditure as the private infrastructure is dedicated to a
firm (Delifice 2010).
xxxii
33. Graph below shows costs comparison for private and public cloud
solution 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’s
use of public clouds (Jansen and Grance 2010). As private clouds
are built exclusively for each client, it offers control over data,
security, compliance and quality of service (Hartig 2008). Private
cloud facilitates flexible movement and management of workload
between physical servers within the client’s firewall and enables
efficient integration, interdependencies and lowers operational costs
(Harms and Yamartino 2010). Moreover, private cloud increases
agility with reduced complexity in comparison with public cloud
(subramaniam 2010).
2.3.3 Hybrid Cloud
Hybrid cloud model is a combination of both public and
private cloud. They can help to provide on-demand, externally
provisioned scale and be used to handle planned workload spikes in
xxxiii
34. private cloud (Vile 2010). It supports scenarios where-in private
cloud has a temporary need for extra resources and obtains it from
public cloud (ford 2010). Such private/public cloud integration is
also known as “cloud-burst” or “surge computing” as the
infrastructure bursts out in to the public cloud to obtain those
resources (Ford 2010). However, hybrid clouds introduce the
complexity of determining the distribution of application’s resources
across both a public and private cloud (Hickins 2008). Customers
can benefit from hosting non-critical resources entirely in the
external public cloud environment and manage critical ones on-
premise using private cloud (Chasler 2010).
2.4 Cloud Market Structure
The whole cloud offering scenario can be divided into three areas:
Enablers: the ones who provide cloud service. The enablers are
many including Google, Microsoft dominant in the retail space, IBM,
Amazon, HP, Oracle in enterprise arena, intel providing hardware
platform and vmware, Orangescape, citrix providing virtualization
solution (Joshi et. al. 2010).
Delivery agents: the ones who take the cloud service to the
customers with some value added features. IT services firms are
the major delivery agents of cloud services (Mhaiskar and Raichura
2010). The benefits achievable by delivery agents with suitable
adoption of cloud services are shown in fig. below.
xxxiv
35. Fig 16: Benefits for IT firms (Mhaiskar and Raichura 2010)
The IT services firms can leverage cloud services in several areas
and 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. 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 by
cloud computing providers is subscription based, customer retention
and loyalty acquires prime importance as the customer has not
invested anything upfront and can move to other providers once the
contract 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 and
are leading way to cloud computing by providing advanced billing,
low cost, flexibility in the service agreements, enabling rapid
increase and decrease in resource and capacity based on demand
(Hickins 2008). Many early successful adopters of cloud computing
xxxvi
37. services have benefited highly from the ease of use of the services,
agility to changes in IT needs, reduction in time for services and
flexibility (Cearley and Phifer 2009). Moreover, as all the intricacies
of managing the services are handled by the service provider, the
client can just focus on its core business (Courtney 2010).
During the early years of IT development, businesses allocated
healthy proportion of their budget as IT capital expenditure
(Kakamanu and Portanova 2006). But since the economic recession
in 2008, firms have reduced their IT spending substantially and
delayed new capital expenditures and heavy investments. So, IT
managers are facing greater pressure to reduce costs and improve
performance (Doerr 2009). Cloud computing is emerging as a viable
option as the enterprises do not own the infrastructure and they can
eliminate capital expenditures by consuming resources as a service,
paying only for what they use (Mather, Kumaraswamy and Latif
2009). Cloud services also enable IT departments to reduce costs
on application implementation, maintenance and security costs as
they are managed by the service provider and the service provider
benefits by achieving economies of scale (IBM 2010). "Green IT"
has recently been the focus of many firms with an intention to
demonstrate high Corporate Social Responsibility (CSR). Cloud
computing enable IT organizations to reduce power, cooling and
space usage to help enterprises create and sustain environmentally
responsible data-centers (McDonald 2010). Moreover, as many
firms are sharing servers, there are fewer servers used resulting in
efficient power usage (Berl et. al. 2009).
Analysts believe that cloud computing will enhance
collaboration (Scale 2009). For example, many firms are migrating
their email application into Google cloud services and using Google
docsR which allows online storage of documents with authorized
speedy remote access increasing collaboration amongst teams
xxxvii
38. located at different geographies. Such collaborations enhance
security as the data is not stored locally on the user’s laptop or
smart phone and hence, there is no threat of data theft (Schadler
2009). Cloud services can provide enhanced experience for gamers
compete against other players globally and provides superfast
processing power required for sensor networks such as traffic and
weather sensors (Thethi and Srivastava 2010), biomedical,
healthcare and geo-spatial computing (Knipp 2010). Many firms
have found cloud solutions to be ideal for load testing of
applications, wherein the applications are tested for their maximum
load-handling capability. Firms can schedule these tests by renting
extra resources on the cloud and just paying for what they use (IBM
2010). Cloud computing promises to reduce the response time for
applications. For example, for applications requiring 1000 hours of
processing time, firms can rent 1000 machines for one hour using
cloud services instead of using single on-premise machine for 1000
hours (Buttel 2010). Similarly, applications which required
sequential processing, wherein output from one transaction formed
input for the next transaction, can be converted to real time
processing using cloud computing capabilities. For example:
retailers using batch services can use real time processing to tally
inventory and sales and order new stock immediately. This would
result in better stock management and reduce operating
expenditures. Hence, clients would demand such services (Creeger
2009). With regard to Small and Medium Enterprises (SME’s), most
SME’s would have uncertain growth patterns. Hence, they would
have to provision 30-40 percent of their infrastructure for future
usage. This results in high risk upfront investment if they adopt
traditional service models (Creeger 2009). However, cloud services
allow them to use the services on subscription basis, thus reducing
the capital expenditure. Moreover, they can dynamically scale their
resources when the need arises. Hence operating expenditure is
xxxviii
39. also reduced by efficient management (Creeger 2009). These
benefits are very encouraging as SME’s have small IT spending
budget and therefore couldn’t afford the high initial set-up costs
involved in traditional hosting services. Moreover, it offers new
opportunities for these firms to compete with the well established
high net worth firms (IBM 2010). Furthermore, the scalability
offered by the cloud services is beneficial when SME’s are growing,
enabling them to purchase infrastructure as “pay as you go” or on
rental basis and concentrate their money on key business activities
otherwise (Bhupesh 2009). The following figure shows the industry
variability in various sectors.
Fig 17: Industry Variability over a year (Soumit et. al.
2010)
For instance, during the festival season a gifting website would
experience higher traffic levels than otherwise. Moreover, the usage
of resources is subjected to time of day variability (Wittow 2011).
For example: an email server is utilized at a higher rate during
office hours and underutilized during the rest of the day. These
applications require high amount of resources at certain time period
and ability to scale up dynamically (Forbes Insights 2010). A survey
conducted by Forbes Insights on early adopters of cloud computing
revealed that 88% of the respondents found dynamic allocation of
xxxix
40. resources to meet their IT objectives as major benefit of cloud
computing 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 the
cloud and by utilizing the dynamic scalability of resources facilitated
by cloud-services, they can reduce operating costs during off season
(Yah 2010). Moreover, the firms transfer the risk of investment to
the service provider as there are no upfront costs involved (Yah
2010). A survey conducted by Everest Research suggested that
firms spend a large portion of their budget as infrastructure
maintenance costs (Soumit et. al 2010). This leaves very small
portion for new app development which can generate new revenue
as shown in fig. below.
xl
41. Fig 19: Survey Results for percentage of IT spending
(Soumit et. al. 2010)
Thus, cloud services have several advantages to offer for
businesses with diverse needs and high profitability and growth
prospects in providing cloud services has generated remarkable
interest to the cloud-service providers (Vile 2010).
2.4.2 Potential Concerns for cloud adoption
1 Many firms are still delaying a complete shift to cloud
computing services. Recent industry researches revealed that many
firms are holding on to their out-dated servers and legacy systems
even though they need a replacement (Smith 2009) and spending
substantial portion of their IT budget as maintenance costs of these
servers. They are not adopting cloud-enabled services as the
concepts of total virtualization and multi-tenancy are complex and
complicated for non-IT firms to comprehend (Courtney 2010). The
unclear rules over data storage compliance, data ownership, data
security, reliability and privacy are another major concern. 75% of
the firms which participated in a Forbes survey revealed that data
security was a major concern (Forbes Insights 2010). Another
survey by Gartner revealed that 100% of the firms have concerns
over unclear “terms of use” regarding data location and portability
provided by the service provider as shown in figure below.
xli
42. 2
Figure 20: Gartner survey on cloud users regarding
terms of service (Adopted from Plummer 2010)
Moreover, the Electronic Privacy Information Center (EPIC), which
addresses privacy issues related to information management;
Federal Trade Commission (FTC), which addresses IT-related
security complaints, has recorded large number of complaints
against major cloud-service providers breaching security rules (EPIC
2009). Data location concerns arise because different geographies
have different terms and regulations regarding how the data
security, privacy and storage (Mather, Latif and Kumaraswamy
2009). To illustrate the influence of this concern, UK communication
minister has announced full support for the development of cloud
computing stating international co-operation is essential to adopt
standard rules and regulations regarding security and privacy for
the success of cloud computing (Brittain 2010). Furthermore,
Gartner research claims that cloud computing will continue to be
vulnerable to security, privacy and data handling issues in the near
future as it is still maturing and better collaboration within the
industry is essential to overcome the deficits (Maurer 2011). Most
xlii
43. firms are unsure how they can leverage their existing infrastructure
and embrace cloud to leverage their performance and fulfil their
existing needs (Smith, Plummer and Cearley 2009). Surveys
indicate that if cloud computing is not a right solution, it can
unnecessarily add complexity to the existing IT infrastructure,
increase costs and introduce potential opportunity of legal conflicts
with the service provider (Smith 2009). Cloud service availability is
another major concern. Cloud vendors assure 99.99% system
availability but it doesn’t imply that cloud service is available for the
same time (Roehrig, Ross and Shanahan 2009). This is because of
the “pay-as-you-go” nature of cloud and clients pay for capacity or
throughput, rather than for system components. Although cloud
service providers offer unlimited scalability, dynamic scalability can
be achieved only by clearly defining time-based scalability
requirements (Pallia 2010). Moreover, the highly dynamic nature of
the computing infrastructure makes it difficult to manage the
infrastructure (Roehrig, Ross and Shanahan 2009). As cloud
computing basically consists of services delivered over the internet,
it essentially involves hosting services (Cearley 2010). This means
that all the issues revolving around traditional hosting services
applies for cloud computing services including managing integration
of services, accountability, efficient technical support, regulatory
compliances, service levels across third party domains (Vile 2010).
As the client firms are locked into a contract, they will be severely
affected if any of these issues escalates to a conflict (Anthes 2010).
Figure below shows the major challenges faced by the customer:
xliii
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 in
cloud computing market. A Gartner Research suggests that by
2012, 80 percent of Fortune 1000 enterprises will use some form of
cloud computing service, and 30 percent will use cloud-computing
infrastructure services (Driver 2008). Another research by Gartner
estimates that firms worldwide will spend $112bn on SaaS, PaaS
and IaaS combined over the next five years (Courtney 2010). By
2014, approximately 34% of all new business software purchases
will be procured via SaaS and SaaS delivery will constitute about
14.5% of worldwide software spending across all primary markets
(Courtney 2010). Figure 5 below shows the prediction by industry
analyst firm, Gartner.
xliv
45. Figure 22: Cloud Computing Growth Forecast (Adopted from
Cearley and Phifer 2009)
2.6 Relevant findings from literature review.
The benefits from cloud computing services cannot be
ignored and it might be beneficial for Indian IT-services firms
should develop a cloud adoption strategy. By engaging as delivery
agent of cloud services, Indian IT-services firms can enhance the
value of their offerings to their existing clients by positioning
themselves as cloud consulting and delivery partners, establish
trusted relationships with cloud-service providers and maintain their
competitive advantage as global outsourcing service provider.
However, the current cloud services have to be critically assessed
for the benefits and risks it offers for various applications. Surveys
conducted globally by Gartner, Forrester and other independent
industry analyst and research firms reveal that firms have adopted
cloud computing primarily to lower their infrastructure costs and
dynamic allocation of the resources. Some application having
variable resource requirement based on time and season are
appropriate to be migrated to the cloud. Hence, choosing suitable
xlv
46. applications is critical for the success of cloud computing adoption
as unsuitable ones would increase operating costs, decrease
efficiency and expose the client’s application to serious security and
privacy risks. Moreover, many early adopters of cloud computing
have raised concerns regarding security, privacy and data location;
it is essential that these concerns are explored further to obtain
insights into the reasons underpinning these issues. Thus, the
primary research is focussed on assessing the main drivers for cloud
adoption by the Indian IT-services firms, understanding their main
concerns and applications suitable for cloud adoption.
3.0 Research Methodology
In order to achieve the aims and objectives of the
research, it is essential that the research methodology developed is
robust and effective (Saunders, Lewis and Thornhill 2007). The
researcher contacted 400 people from working for his previous
employer, Infosys technologies and classmates from his
undergraduate batch, who were currently working in Indian IT-
services firms for an initial survey to gain information about their
knowledge of cloud computing. Facebook was used as a medium to
communicate the survey to the respondents, with majority of the
respondents already available in the researcher’s friend list. This
survey revealed that 74% of the respondents lacked clear
understanding of cloud computing or their opinions would not be of
significant contribution to the research due to lack of expert
knowledge even though they were working in the IT services sector.
This posed a significant challenge to find the appropriate
respondents for questionnaires and interviews. The research was
carried out using both inductive and deductive approach. In
inductive research, the data is collected first and then theories are
developed after in-depth data analysis (Saunders, Lewis and
Thornhill 2007). This approach is used to establish a general
xlvi
47. proposition based on observation (Ghauri and Gronhaug 2005). In
deductive approach, a conclusion is derived from a known premise
(Ghauri and Gronhaug 2005). Secondary research was conducted to
obtain the background and basis for this research and to define the
roadmap for primary research. The findings from primary research
were cross-validated and assessed by further secondary research.
3.1 Secondary Research
Secondary data is the data which has already been
collected by someone else for various purposes other than to solve
the current research problem (Saunders et. al 2007). These data
are obtained through previous researches enable the researcher to
establish the background and context to the current research and
provides insights into the related theories associated with the
research topic (Blumberg et. al 2006). The secondary data is
compiled from findings of other researchers, industry experts,
analyst firms, completed surveys, questionnaires which can be used
to relate the research to the previous work conducted (Saunders,
Lewis and Thornhill 2007). The primary sources for the secondary
research were: the Georgina Scott Sutherland Library, databases
such as Business Source Premier, Emerald, Sage Journals Online,
Google Scholar, KeyNote, and Sage Publications, white papers
published by industry analyst Gartner, Forbes, RiverBed, Everest,
IDC Insight, Forrester and major cloud players including Google,
Oracle, Microsoft, IBM, Salesforce, Amazon; academic journals from
cloud computing association, cloud computing journal, journal of
internal law, communication of the ACM, internal property and
technology law journal, the computer journal, journal of enterprise
resource management, information systems journal, energy and
technology journal etc. Case studies, conference papers and reports
from the firms which have recently adopted cloud computing
solutions have also provide critical insights into their experience
xlvii
48. with the cloud. This secondary research conducted has provided an
underlying base for further research and generation of questions to
be raised during the primary research. However, as cloud
computing is still in its early stages and developing rapidly and the
Indian IT services sector, which is highly dynamic and turbulent;
the peer reviewed articles and journals were of little help to provide
insights on the current issues and trends related to Indian IT
services. Moreover, the researcher had to be highly selective while
adopting the findings from market reports, whitepapers, websites
and independent industry analyst journals as many were used as a
marketing tool by the cloud service providers and vendors. Hence,
primary research was of high importance to provide key insights to
the research.
3.2 Primary Research
As the research problem is fairly new and unexplored, data
from the secondary research is not sufficient to address the
research problem clearly. Primary research would be beneficial in
addressing this gap (Ghauri and Gronhaug 2005). The main
drawback 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 is
essential to have a well structured approach to perform primary
research. Figure below shows different ways to collect primary data.
xlviii
49. Figure 23:Primary research and its types ( Ghauri and
Gronhaug 2005)
Primary research may be conducted using qualitative research,
which involves analysis and interpretation of data in non-numerical
format or quantitative research which involves analysis and
interpretation of data in a numerical format (Ghauri and Gronhaug
2005). As the research focuses on a relatively new technology and
the business impact of which has not been fully understood nor
realized, a mixed methodology of using both qualitative and
quantitative method was used to conduct primary research. The
major risk associated with primary research is that the respondents
might present their views as “what they want the solution to be”,
instead of presenting the actual information (Loonam and Loughan
2008). Qualitative research provides rich inputs to the research
which has to be interpreted and synthesised based on the context of
the research (Niell 2007). Although qualitative research is time
consuming, it was suitable for this research topic as the researcher
required in-depth information on the subject matter. The researcher
interpreted the raw data obtained from qualitative research into
information bearing in mind the context in which the data was
xlix
50. obtained. Quantitative research was essential to get the numerical
and categorical data which can be measurable clearly such as the
level of satisfaction of the organisation with their cloud solution
rated from 1-5, number of critical risks which has aroused due to
cloud adoption etc. Quantitative research can be used to collect all
aspects precise measurable data regarding the target concepts and
the researcher is objectively involved in the research process (Niell
2007). The primary research consisted of questionnaires sent to
relevant target group and face to face or web based open-ended
interviews with the IT managers.
The primary research was conducted in companies located in
Bangalore in India as bangalore is known as the silicon valley of
India with more than 1800 IT companies having its presence
including major cloud computing providers like Google, Amazon,
Oracle, IBM, major IT service providers having its head quarters
including Infosys, Wipro, Patni computers (Nasscom 2009).It is
rapidly growing in the IT sector with year-on-year increase in IT
exports by 52% (Nasscom 2009). It has a large base of skilled and
knowledgeable and easily accessible IT talent pool. As the research
demands expert and deep insight knowledge of the niche cloud
computing market, it should be targeted effectively to individuals
who posses this knowledge and understanding. The researcher had
worked in Infosys Technologies, head quarters in Bangalore for two
years and can utilize the assistance from the previously established
contacts within the IT industry. These IT-services firms have
updated insights on cloud computing developments as they serve a
wide range of clients ranging from healthcare, banking, and
insurance to gaming and geospatial firms worldwide (Karamouzis
2010). Hence, they would take keen interest to understand the
benefits, risks associated with cloud computing adoption to host
their client’s applications.
l
51. 3.2.1 Questionnaires
A questionnaire is a list of carefully structured questions,
which were chosen after considerable testing with a view of eliciting
reliable response from a particular group of people (Collis and Hussy
2009). The main steps involved in designing a questionnaire are
summarized 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 to
ensure that there is no subject error or subject bias (Saunders et.
al. 2007) and to get clear measurable results. Determining the
correct order of precedence is essential to achieve logical flow of
collecting information. The precedence of questions ensured that
the respondent’s details including work and organisation profile
were collected initially before moving to collecting actual
information regarding the research problem (Trochim 2006).
Moreover, questions which were irrelevant for a particular category
of respondent were not shown to the respondent. For example, the
respondents belonging to firms which had not adopted cloud
computing solutions were not asked about the actual benefits
realised by their firms from cloud adoption. The next steps were:
The distribution method for questionnaire was chosen after
evaluating the following factors:
Characteristics of the respondents
Importance of reaching a particular person as respondent;
li
52. Size of sample required for analysis, taking into account the likely
response 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
questionnaire
Figure 24: Types of questionnaires (adopted from: (Sauders,
Lewis and Thornhill, 2007).
As shown in figure above, the questionnaires can be sent through
post, telephone, ‘collect and deliver’ or using internet services
(Collis and Hussy 2009). Postal Questionnaires are not ideal
considering 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 face
to face interviews. But the disturbing telephone lines, high call
costs, intruding nature of a phone call makes this technique
infeasible (Collis and Hussy 2009). From the consideration made
above, the research was conducted with internet mediated
questionnaire because it effectively reaches a large sample size and
making compilation costs very low (Collis and Hussy 2009). The
Questionnaires were initially sent to a large sample of more than
400 skilled workers in IT services industry working in India.
lii
53. The responses showed that 74% of the respondents did not possess
necessary expert knowledge or exposure in cloud computing to
contribute to the research with their opinions. Their opinions would
lead to wrong survey results and misguide the researcher. Hence,
the researcher had to reduce the sample size and target specific
people within the IT industry who were qualified, experienced and
exposed to cloud computing services so that their opinions were
accountable. The researcher realised that a different approach has
to be adopted to contact the right people and used different social
and business networking websites including linkedin.com,
apnacircle.com, siliconindia.com, forums including Computer society
of India (CSI), OWASP, Nasscom, IEEE Bangalore chapter, contacts
from previous employment, colleagues, seniors who are working in
IT firms and sent out e-mail questionnaires, paper handouts and
ensured that right category of people were contacted to understand
their perspective on cloud services. This seemed to be an
appropriate approach because the researcher could assess the work
and organisation profile of the members of these websites and
forums and their areas of interests in the IT space by reviewing
their profile and then getting in touch with relevant people. By
briefing the colleagues and seniors about the research
requirements, the researcher was able to contact experts in the
research area within the organisation. The questions (see appendix
1) were a mixture of open-ended and close-ended questions as the
researcher wanted to extract additional information from the
respondent’s experiences. The targeted respondents were
managers, IT consultants, and business analysts of the IT services
firms or IT-services division of other firms which were considering
cloud computing adoption in future or have already implemented
cloud computing services to one or more of their clients (see
appendix 2 for the list of firms contacted). These IT services firms
act as delivery agents by customizing the cloud services offered by
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54. the cloud service providers to suit their clients needs after critical
assessment and appreciation of the client’s IT infrastructure
requirement. As it required specialised knowledge and expertise on
the subject, the number of respondents was limited to 90. As the
respondents would have worked on various other technologies,
different firms and in different countries, the researcher had to
ensure that the respondents answered the questionnaires based
solely on their experience, expertise and opinions with regard to
cloud implementation by “Indian IT service firms on outsourced
projects from various clients, i.e projects which were designed,
developed, tested, maintained by the firm’s development centres in
India. The cloud computing opportunity is assessed considering
Indian IT-services firms as delivery and consulting agents of these
cloud services to its existing clientele.” These instructions were
incorporated in the short note sent along with the questionnaires
describing the research aim and objectives which the respondents
had to acknowledge before taking part in the questionnaires.
3.2.2 Interviews:
Interviews give clear insights to how people think and feel
about topics of concern to the research (Oppenheim, 2000). Face-
to-face interviews are beneficial when two individual have a topic of
common interest (Kvale and Brinkmann, 2009). The advantages of
conducting interviews are: researcher has control over the flow of
contents of the interview; informants can provide new information
and different perspectives which can be used for further
investigation on these lines. The disadvantages are: it provides
indirect information through the stages of interviews, the format of
the information received is not standard and sometimes difficult to
interpret. The interviews conducted by the researcher were
focussed at extracting new information from the respondents from
their experience, knowledge and firm-specific cloud product
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55. expertise and confirming, validating the findings of the
questionnaires, secondary research and findings from previous
interviews. The researcher conducted semi-structured interviews
with the business analysts, IT managers, project managers of 17 IT
firms in Bangalore (see appendix 3 for firm’s list). Some interviews
were conducted online using Skype, TCS Sametime ®, Infosys
Communicator® to save the respondents time and convenience.
Semi structured interviews enabled the researcher to exclude some
questions irrelevant to the firm or the ones which the manager will
not be willing to reveal due to company policies. The researcher was
also able to ask new questions based on the previous responses.
The researcher first conducted the questionnaire survey with the
respondents and hence they were aware of the research problem
prior 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 for
list of firms contacted and partial list of respondents name and
contact email) with respondents possessing adequate knowledge,
expertise and experience of cloud technology, it can be assumed
that the results of the interviews can be generalised. Moreover, as
the respondents are likely to be biased in their opinion, the
researcher had ensured that the findings from the interviews were
validated with appropriate secondary research findings and cross
validating with other interview respondents. However, theoretical
saturation was evident during the last few interviews which
prompted the researcher to proceed with the analysis of the
findings. Theoretical saturation implies that almost no new
information could be extracted on the topic of research and all
current information obtained were cross-validated (Strauss and
Corbin 1998)
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56. 3.2.3 Focus Groups
A focus group interview is a discussion with a small group of
participants on a specific topic. The attributes of a focus group are
the clear use of the group interactions, in order to collect quality
data. Focus groups are more specific, meaningful and more dynamic
than consumers filling out questionnaires and surveys (Hart 1998).
The researcher had planned to develop one focus group which had a
mix of participants with expertise in various aspects of cloud
computing implementation whilst planning the research proposal.
The advantage of this method is that participants can voice their
opinion and perspective towards this topic. The researcher will be
able to interpret the data depending on the context and conduct
qualitative analysis of the outcome effectively (Kvale and
Brinkmann 2009). However, the initial survey findings revealed the
impracticability of conducting focus group discussions as the access
to skilled and expert participants was limited. Furthermore, these
participants, who are at managerial level, would not attend such
events unless they reap some kind of monetary or PR incentives.
Hence the researcher limited the primary research to comprise of
only questionnaires and interviews. However, the findings from the
interviews and questionnaire were cross-validated with the
respondents and theoretical saturation was evident while analysing
the responses of the last three interviews.
3.4 Research Design
The researcher has used paper based and internet based
questionnaires to validate the findings from the secondary research
and to obtain insights into the current issues, challenges associated
with cloud computing adoption. As numerous applications can be
migrated into the cloud, it was essential to classify applications into
finite categories so that opinions from the respondents can be
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57. captured easily. The Indian IT services industry serves clients from
many sectors as shown in fig. below.
Fig 25: Sector-wise Revenue break-up of Indian IT services
firms (Nasscom 2009).
These clients have varying IT needs spanning across infrastructure
for storage, processing, and software. Hence, categorizing
workloads based on cloud service type such as SaaS, PaaS and IaaS
cloud would not be appropriate for this research. Moreover, the
services offered by Indian IT services firms range from lower-end
application development to high end complex system integration
and product engineering services as shown in fig. below.
lvii
58. Fig 26: Revenue break-up by services offered by IT services
firms (Nasscom 2009)
Therefore, in order to achieve the third objective, which is to
identify the applications suitable for cloud computing adoption, it is
necessary that all the applications handled by the Indian IT-services
firms are categorised into well-defined classification based on their
IT needs. Therefore, workload approach has been chosen as it
provides clear classification and is a proven effective method
implemented in other researches (Zinnov 2010). A generic approach
in categorising applications into workloads in the questionnaire
would result in ambiguous responses as the respondent would be
unsure about the scope of the workload. For example, some surveys
have “business application services” as one of the workload
categories. Although this categorisation might be appropriate in a
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59. different context, it’s not suitable for cloud service assessment as
business application services comprises of diverse applications such
as ERP (Enterprise resource planning), CRM (Customer Relationship
Management), Payroll Management, Planning and Forecasting
applications, email applications etc. It is essential to get insights on
the respondent’s views on all these applications’s suitability to cloud
migration as they have different features and correspondingly, their
IT requirements also differ. Hence, the researcher has identified key
business applications, productivity tools, communication tools,
storage services, infrastructure services, analytics systems and
categorised them into individual workloads as shown in the chart
below.
Category Summarized explanation
CRM 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 infrastructure
Development 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
requirement
Complex modelling applications Applications involving intensive
mathematical calculations,
simulations in gaming, bio-
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60. medical and life science sectors
Data backup, archiving and Operational services handling
recovery 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 systems
Conferencing and VOIP These include hosted
infrastructure communication tools such as
audio, video conferencing, web
based utilities
Data 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 analysis
Transactional 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
testing
Training infrastructure These include hosted
communication tools such as
audio, video conferencing, web
based utilities
Mission critical workloads Applications having compliance
constraints, high level of
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61. accountability and criticality.
Secure storage records Data storage with highly
sensitive privacy, security
requirements
Highly customized applications Applications involving bespoke
customization regularly to adopt
to changing client’s needs
Interdependent applications Applications having complex
interdependencies with multiple
databases, departments and
geographies.
The above description was provided for the respondents to assist
them in understanding the workload types. Respondents could
choose more than one option while selecting the workloads for
suitability. The results were validated during the interviews by
identifying the reasons underpinning the respondent’s selection of
workload.
3.4.1 Questionnaire Design
The questionnaires were divided into two parts. As the
research problem demanded specialised knowledge, expertise and
experience in the area of cloud computing, Part-1 of the
questionnaires extracted respondent’s relevant background
information 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 implemented
in the organisation?
lxi
62. Whether the organisation is reviewing or planning to implement
cloud computing solution in future?
The responses from the part-1 questionnaire established
the competency in cloud computing and experience in Indian IT-
services. It also provided details regarding whether the
respondent’s firm had implemented cloud solution or planning to
adopt cloud solution in future. Using this information, the
researcher selected the respondents for part-2 questionnaires.
Researcher ensured that the respondents had sufficient expertise
and awareness in cloud computing, sufficient IT industry experience
to have better understanding of the clients application and domain,
suitable work profile in the organisation that provides the
respondent necessary information, in case such need arises.
Part-2 questionnaires were also customized and sent to the suitable
respondents so that irrelevant questions were excluded so that
respondents could provide valid inputs into the research. For
example, the questions regarding actual benefits from cloud
computing were sent only to respondents belonging to firms which
have already adopted cloud computing solutions. Part-2
questionnaires consisted of close-ended questions designed to using
appropriate metrics so that the responses could be quantified using
charts and measured effectively. Ranking method was considered
more appropriate to identify the factors such as main drivers, actual
benefits reaped, major concerns and private cloud preference as it
provides a holistic view of the respondent’s opinion. If the
respondents were asked to select only one option, then the results
would not reflect the underlying reasoning or order of preference of
the respondent’s choices. The questionnaires were targeted to get
insights into the following areas:
To understand their main motivating factors which lead to the
adoption of cloud computing?
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63. Understand the actual benefits reaped and major challenges
faced by the firms which have already adopted cloud computing
solutions currently faced by these firms.
Understand the major concern hindering the prospective cloud
adopters regarding cloud adoption.
Which cloud model do they recommend for prospective adopters
and why?
Which application workloads do they find suitable for cloud
adoptions?
3.4.2 Interview Design
Suitable respondents from part-2 questionnaires were
requested to take part in the interviews. The researcher attempted
to interview right proportion of respondents from IT-services, IT-
consulting and research roles; ensure right balance in interviewing
respondents from 2-10 years of IT work experience with different
roles in the firm. However, due to time and budget constraints, only
22 people participated in the interview. But, the researcher believes
that the results obtained are unbiased and can be generalised as
theoretical saturation was achieved during final stages of the
interview process. Interviews were targeted at understanding the
reasons underpinning the questionnaire survey responses and to
validate the results obtained from the questionnaire survey. This is
beneficial as the researcher will be able to identify any
misinformation, biased results obtained due to errors in procedure
and design of the research. Moreover, first hand information can be
obtained on related areas (Niell 2007). The findings from the
interview were analysed, categorised and wherever the researcher
observed a need for clarification, the findings were cross validated
with other respondents. The insights obtained after analysis were
used to:
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64. Determine the main driving factors and concerns for cloud
adoption.
Prime benefits and risks faced by the firms which have adopted
cloud computing
Develop and recommend a suitable strategy for cloud adoption
by Indian-IT services firms in terms of application workloads and
cloud computing types.
3.5 Sample Selection
To ensure that the findings from the research can be
generalised, unbiased and reliable; it is necessary to use a suitable
sample for the research (Strauss and Corbin 1998). Due to time,
resource and budget constraints, it is not possible to conduct the
research on a large scale and arrive at a consensus. Moreover, the
respondents should be equipped with adequate hands-on
knowledge, experience on the subject to provide valuable
contribution to the project as it deals with current issues and
challenges (Saunders et. al. 1997). Hence, it was essential to
consider a sample of the population in question. Numerous
researchers believe that using sample approach would result in
accurate data collection and analysis as there is added emphasis on
designing and piloting the project to collect detailed information
(Henry 1990). Johns and Perrot (2008) claim that a sample size of
ten is sufficient for qualitative research involving interviews.
However, it is a standard practice to validate new findings from
interviews until theoretical saturation is reached (Bailey 2006).
Otherwise the findings are considered to be uneven, non precise
and biased. As the current research problem deals with relatively
new technology, which is not fully understood and time tested, the
researcher had selected the sample size of 80 for questionnaires
and 25 for interviews in order to achieve theoretical saturation.
lxiv
65. 3.5.1 Sampling Technique
In order to answer the questionnaires, the respondents must
be exposed to cloud computing implementation, either as a part of
service provider, delivery agent, customer or as an end user.
Hence, the researcher has used purposive sampling technique to
ensure that relevant participants are sampled to take part in the
questionnaires and interview (Saunders et. al. 2007).
The researcher used his previous contacts in Infosys
technologies and others within the IT industry in Bangalore,
business networking websites like Linkedin, apnacircle; forums like
IEEE, siliconeindia, Computer Society, OWASP, CII (confederation of
Indian Industries, Mysore), colleagues, college seniors to contact
relevant people and filtered the right respondents using
questionnaires and reviewing their work profile. The selection
criteria were:
- The respondents should have adequate awareness and
knowledge of cloud computing implementation either on
technical areas, business case analysis, research, academic
or consulting roles.
- The sample must have almost equal distribution of
respondents working as analysts, consultants, manager
with technical and domain expertise in delivering IT service
and consulting solutions, and engineers from the developer
community.
- The sample must consist of respondents from only the
Indian IT-services firms or be a part of the subsidiary of
global IT firm which has development centres in India and
provides services to clients using the global delivery model
or offshore-onshore model.
Considering the stringent criteria for purposive sampling which
involved filtering the respondents, contacting and requesting them
lxv
66. to take part in the research demanded significant time and energy,
the researcher required over 40 days to complete the primary
research.
3.6 Data Analysis
Comparative analysis method was used to compare the
results of the questionnaires, secondary research and interviews.
The results obtained from questionnaires were validated with the
interview respondents and interview findings were compared,
contrasted and cross validated during further interviews. The
quantitative results were analysed using reporting tools from
Survey Gizmo and Microsoft Excel spreadsheet package for graphs
and analysis. The qualitative results were analysed and converted to
findings keeping the context of the interview, background of the
respondent in mind.
New information obtained were analysed, filter and sorted into
relevant categories. Conflicting information were cross validated
with other respondents and triangulation technique was used by
confirming new insights from primary research with newer
publications through secondary research as advocated by Niell
(2007).
4.0 Findings from Primary Research
This chapter takes the reader through the respondent’s profile,
results obtained from questionnaire survey and key findings
identified after quantitative analysis of the interview responses.
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