Cloud Computing Michael Davis 2008 Aug17

Management Briefing: Cloud Computing -
An Emerging Technology

Michael Davis
August 17, 2008

BUS552M Technology and Adaptive Systems
Professor Benn Konsynski

Cloud Computing - An Emerging Technology

IDENTIFICATION AND DEFINITION OF THE TECHNOLOGY

Many consider April 7, 1969 as the symbolic birth of the internet or December 1974,
when the internet name was adopted as significant dates for the internet. An often
overlooked date is March 1991, when the restriction for commercial internet use was
lifted. This date was followed by many significant event and technological introductions
for the internet, like Tim Berners Lee release of the World Wide Web, but the act of
allowing commerce transformed the access, usage, and ubiquity of the internet is
responsible for face of the current internet. The internet has reshaped many important
aspects of our daily lives including how we are informed, entertained, educated, and
communicate, and perform work. The internet and e-commerce has changed the
business models for many industries like music and film, but also ushered in the demise
of others like newspaper industry.

The explosive growth of e-commerce is a business driver requiring successful
companies to have an adaptive enterprise, to innovate, and to deploy application
services to the market faster and cheaper than the traditional corporation information
technology (IT) shop. The internet as a deployment platform represents a significant
paradigm shift from the traditional way businesses procure, plan, and deploy a new
application, infrastructure, or service. The ability to rapidly deploy internet based
services is no longer a competitive advantage, but a survival requirement to keep pace
with the competition. The traditional IT structure and model is not competitive for
innovation because of the amount of resources required to maintain existing technology
and significant associated costs. Darryl Plummer, managing Vice President of Gartner
Consulting, estimates “…about $8 out of every $10 spent on technology in corporations
is for maintaining systems, rather than innovating.” i

The internet free (no cost) and data access everywhere culture established conditions
where a new technology with a cheaper utility cost model for providing delivery of IT
services over the internet accessed via a browser could emerge. The services shift
from the IT shop data center to the internet is logical considering the soaring
deployment and ongoing new product and services maintenance costs (innovation), the
lack of speed to market with innovation, and the lost innovation opportunities due to up
front costs. The four factors which facilitated convergence helping to usher the
emergence delivery of computing over the internet are computing homogenization,
cheaper and increased penetration of broadband, computing economies of scale, and
shared data center resources.

Cloud computing is a not a new advancement or technology conceived in an advanced
technology lab in Silicon Valley, but a rather a concept combining several proven
concepts and extends and leverages existing models and technologies. Andres
Mendes, CIO of Special Olympics view is “Cloud computing is the logical corollary of
what happened in computing over the last 30 years. In a sense, it’s a return to the past;
time-sharing on steroids.”ii While others describe Cloud computing as a new technology
and others describe it as shrink wrapped utility or pay-as-you-use computing services.
The buzz around Cloud computing is growing, as well as its use and momentum
towards mainstream adoption. The optimistic future potential for Cloud computing is
that like the internet it’s impact will be revolutionary.
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EXPLANATION AND PROFILE OF THE TECHNOLOGY

So, what exactly is Cloud computing? Gartner defines
Cloud computing “as a style of computing where
massively scalable IT-enabled capabilities are
delivered “as a service’ to external customers using
internet technologies.”iii Cloud computing provides the
user a way to access their data and applications
anywhere via the internet, where the user does not
know where the service nor there data is hosted. As
the applications are accessed through an internet browser; the software is no longer
installed on the user or client computer which eliminates the user responsibility for
upgrading or patching software. The Cloud applications are hosted outside of the
enterprise in a private data center by a Cloud service provider. References for a video
or white papers on Cloud computing are at the end of the document.

A key aspect of Cloud computing is introducing a service based usage model rather
than the conventional purchase cost model. Cloud computing utilizes ‘metered’ or “pay-
as-you-use” approach like public utilities (i.e. electricity, water, or gas) for software,
storage and platform delivery completely from internet without any initial or upfront
technology investment. These cost models are referred to as Software as a Service
(SaaS), Storage as a Service (SaaS), and Platform as a Service (PaaS). The Cloud
user has the ability to leverage seemingly “infinite” and elastic processing resources of
clustered, networked, loosely-coupled servers to provide the IT services.

So, what is in the Cloud? The cloud is comprised of a collection of seven multi-layered
components: applications, hardware, infrastructure, platform, services, storage, and
standards. The table below provides a description for the Cloud computing components.

Component Description
Applications Eliminates need to install and run applications on the users computer
Hardware Designed and rely upon cloud services for application delivery
Infrastructure Delivery of infrastructure virtualization as a service without
Platforms Facilitate application deployment
Services Support interoperable network machine-to machine interaction
Storage Provides storage as a service billed on a utility basis
Standards Open standards

Cloud computing is several years from mainstream adoption, but is rapidly gaining
momentum with early adopters, installations, and users. Several of the key advantages
driving adoption include; reduced infrastructure investment and service costs, faster
deployment without capital expenses, and reduced service costs because of a simplified
IT infrastructure. Cloud computing provides efficiencies where seemingly ‘infinite’ or “on
demand” capacity is available for demand spikes and processing capabilities are
provided for scalability needs for rapid transaction growth eliminating the delays
associated with the normal technology procurement process.

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Despite, all of the predictions about the future of Cloud computing, the main
disadvantages are the risks associated with internet reliability, security, data privacy,
application latency and the financial stability of many Cloud service providers.
Improvements will be needed in many of these areas for many corporate organizations
to seriously consider moving mission critical applications into the Cloud.

RECENT APPLICATIONS

Cloud computing is in commercial use, so there are a myriad of popular applications
that are used on a daily basis. Examples of these applications include e-mail (i.e.
Gmail, Yahoo), wordpress.com, search engines, Wikipedia, Facebook, Myspace, and
Flickr. Providers are actively developing new products designed for the cloud. Likewise,
product and application providers of existing user applications are creating Cloud
versions of their products which can be sold through a pay-as-you-use model. For
example, Microsoft is creating online versions for all of their products (i.e. Office
Communications Online, Exchange Online, CRM Online and SharePoint Online).

Some of the recent Cloud applications include a variety of different products types.
Amazon has introduced Elastic Cloud Computing (EC2) which is a web service that
provides rapid scalability in the cloud and makes web scale computing easy for
developers. The Hewlett Packard (HP) Idea lab has released CloudPrint, a free product,
which allows the user to print email attachments, data, or web pages from a mobile
device. A company called, CherryPal, has introduced a $250 Linux based computer
without moving parts and only two watts of power accompanied by a free Cloud
Computing subscription. Google recently announced the capability to provide top quality
site search results for any website through the cloud computing model.

IDENTIFICATION OF MAJOR PLAYERS AND USERS

There are more than a handful of major players ranging from startups, online vendors,
to technology giants that are making significant impact in the Cloud computing arena.
The following major online players that are pushing the Cloud computing emergence:

Provider Product and Users/Customers
A provider of application performance services that improve edge
performance by moving cloud applications closer to target users.
Users/Customers: Cloud providers, individual users
A provider of virtualized Cloud infrastructure services; Amazon Web
Services (AWS), Simple Storage Service (S3) {file storage} and Elastic
Compute Cloud (EC2) {resizable cloud compute capacity}
Users/Customers: Cloud providers, businesses, individual users
A provider of online and mobile application products, tools, and suites.
Partnering with IBM and universities to build a worldwide Cloud
computing network. Users/Customers: individual users, business,
university students

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The provider of the first online CRM application encompassing sales
force automation, marketing automation, and customer service and
support. Users/Customers: Small and large business
The provider AppLogic, a grid operating system (infrastructure) than
runs on commodity servers connected via Gigabit Ethernet.
Users/Customers: BT, Nexplore, Woopra.
A provider of software products. Cloud computing consortium focused
on research and education to advance the development of
technologies, and infrastructure. Users/Customers: Cloud providers,
individual users

At an increasing rate, the number of new vendors making investments in Cloud
computing as a technology. The following vendors have made significant investments
pushing the Cloud computing emergence are the following:

In July 2008, Hewlett Packard, Intel, and Yahoo announced a Cloud computing
partnership focused on research and education to advance the development of
technologies for Cloud computing. The vendor consortium is a global, multi-data
center, open-source effort designed to promote research on software, data center
management and hardware for large-scale, internet-hosted computing. The
consortium is projecting the work will accelerate the speed of technological
breakthroughs that will facilitate faster and more powerful Cloud computing
products and services at a lower price point. The consortium plans to invite non-
founding members to participate in the test bed.
IBM and Google have formed a partnership to work with several major universities
in building a world wide network of servers for consumers and businesses.
Respectively, IBM and Google have announced the investment of $360 million and
$600 million on new data centers to deliver cloud computing services.

The Cloud computing users can be divided into the categories of individuals,
small/medium business, and large business. The largest user of Cloud computing are
the individuals who utilize the applications and products for leisure and work purposes.
The second largest user is small to medium business. Small to medium businesses
have limited infrastructure budgets and choose Cloud computing because of the low
usage costs, ease to maintain, and deployment speed. The percentage of medium size
companies using Cloud services has doubled since 2004. The large business group is
not currently a production or real time user, but rather is experimenting with web
services in the form of prototypes and evaluating Cloud computing while they wait for
the technology to provide mission critical class delivery requirements and fundamental.

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ASSESSMENT OF LIMITATIONS AND POTENTIAL

Limitations:

For the many large companies, there is a hesitancy to utilize the services or to trust that
Cloud computing has the maturity provided with existing technologies. The biggest and
perhaps largest limitation is the availability of the cloud or internet itself as an
uncontrolled network. The availability challenge for Cloud providers is how to quickly
mitigate the risk of external problems like flood, fire, and weather disaster impacting
availability and how quickly the application and the data (consistent and complete) is
available for online transaction processing. In simplest terms, if you loose the internet
connection, you lose the application. A closely coupled issue is failover capability or the
ability of the network to be configured so that it can be tolerant or resilient from single or
multiple component failures without interrupting user access to the application or data.
The Cloud providers will have to provide large companies with guarantees in the form of
service level agreements (SLA) with significant financial penalties if availability goals are
not met. Amazon’s S3 six-hour outage on July 20, 2008 is a highly visible example of
the availability challenge. Similar to SLA for availability, an SLA for response time will be
needed to handle the limitation of application latency. Application latency or maintaining
acceptable user response time is a challenge with conventional IT operations with the
existing infrastructure. Moving to the cloud where demand spikes and exponential
growth are realities and the challenge of maintaining application response times will be
more of a problematic issue.

The loss of control associated with Cloud computing is a small issue from a practice
sense, but will be difficult issue from IT culture perspective and a limitation. The IT world
is conditioned that the user owns their data and not to easily trust anyone with it. Under
Cloud computing, the users relinquish all control over the data and the location of the
data. The user data many be any in any location globally where potential considerations
local country laws, protections, and standards compliance may exist. In addition to the
lack of control are concerns regarding security. There isn’t a definitive security standard,
approach, or methodology for Cloud computing which is problematic as the application
and data are outside of the firewall. The data privacy issue for the cloud provider data
can keep track of or manipulate personal and proscribed information is a significant
issue based upon the large amount of hacking on the internet.

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Potential:

The sky is the limit for the potential of Cloud computing. Cloud computing has already
arrived for individuals small to medium business users. For example, the amount of
medium sized businesses, companies with 100 to 999 employees, using Cloud services
has doubled to 31% since 2004.iv There are five factors that helped to advance the
emergence of Cloud computing, but the most important factor is cost or the reduced
costs via the utility computing model. The elimination of up front investment in hardware
and reduced service and maintenance costs reduced total cost of ownership is driving
adoption. For example, the enterprise version of Google Apps costs $50 per user per
year, while a license of Microsoft Office Professional retails for $499.99.v Second, the
deployment speed with Cloud computing eliminates the new project IT shop backlog
and provides the ability to develop and deploy in weeks to keep pace with the market
and competition. Third, Cloud computing provides the ability to scale server and
storage resources with growth, but also elasticity to provide the processing resources
based upon spike or special demand. Fourth, the major investments of online and
traditional technology providers in research and development will create breakthrough
technologies and lower costs and create Cloud computing networks to propel the
mainstream adoption of the technology. Last, the evolving ubiquitous bandwidth,
acceptance, and usage of the internet and browsers globally as par of our lives

BRIEF HISTORY OF THE EVOLUTION OF THE TECHNOLOGY

It has been seventeen years since the National Science Foundation lifted the restriction
on the commercial internet use in March 1991 and Cloud computing promises to be the
full actualization from that decision. Cloud computing is combination of proven concepts
to extend existing models and technologies wrapped up as an overall service offered to
consumers with usage and pricing models that radically change the economics for
technology deployment and operation. The service philosophy enabled the vision to
package a viable outsource service model on the internet with an excellent value
proposition. The service orientation led way to adopting the cost model from utility
computing. The evolution in cost and economics has strengthened the service based
value proposition. The computing economics related to cost have dropped (aided by the
continued applicability of Moore’s Law) leading to a homogenization of computing or
cheaper hardware. The application of distributed computing economics where it is
cheaper from a network traffic perspective to locate the processing power as close
possible to the data has improved Cloud computing. The price of broadband access has
dropped by 50% since the late 1990’s coupled with the doubling of the penetration rate
to the household.

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In the 1990’s, a distributed processing technique known as “the grid” where loosely –
coupled computers composed in clusters provide a largely powerful virtual computer
was developed for heavy CPU intensive scientific, mathematical, and academic
calculations and problems. The approach provided insight into a technique and a cost
effective way to provide “on demand” resources required for Cloud computing. The
emergence of new programming models and applications designed to run in the cloud
along with new models for sharing data resources providing higher server utilizations,
but lower application support costs. The continual evolution of web applications,
communities, and hosting services on Web 2.0 provide more experience and expertise
will continue to aid the maturity of Cloud computing.

HOW SHOULD ONE DECIDE WHEN TO ADOPT AND HOW TO EMPLOY THE
TECHNOLOGY?

HP as a company has already fully embraced and is implementing a plan to employ the
technology. HP as a company has a leadership position in July 2008 as a founding
member of a Cloud computing consortium with Intel and Yahoo. The consortium
focused on research and education to advance the development of Cloud computing
technologies to act as a catalyst for mainstream adoption. Bringing to bear the
resources and processes for research and development that invest $3 billion annually to
Cloud computing is the best position choice as the new technology moves matures
towards mainstream adoption.

Significant opportunities exist for HP for leadership in several areas within Cloud
computing industry. As a leading technology provider in hardware, services, and
storage, HP could make a strategic investments or merger or acquisitions play for
companies that are providers in the areas of hardware, infrastructure, platforms,
services, or storage. With the future benefits of the pending EDS merger, HP could
develop an outsourcing line of business focused on providing Cloud computing data
center management, services, and deployment. HP can introduce HP branded servers
and storage as part of the hardware solution.

The decision for when technology providers should move the business applications and
how to employ Cloud computing is dependent upon the computing classification of
whether the computing is mission critical requiring 24x7 accessibility versus non mission
critical computing where the applications are tolerant of short periods of offline time.
Applications that are classified as non mission critical computing like document
management, analysis applications, and productivity tools are the first candidates for
adoption and Cloud implementation.

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If the application requirements are SLA based availability, failover capability, data
integrity, security and compliance like a mission critical application they should not be
adopted (should be kept behind the firewall) because the Cloud computing does not
provide high levels of these services. There have been several high profile recent
service outages including Amazon’s six hour S3 outage on July 20, 2008 which are
clear examples of why Cloud computing is not ready for mission critical computing
application. A mission critical application is to explore the benefit of initiating the work of
making their applications cloud enabled. An insight from David Cearley, a VP and fellow
at Gartner into the adoption thought process below.

“Placing limits on the use of cloud technology is a subtle issue that
companies have to examine closely, measuring the risk against when and
where Cloud computing can be effective. For example, by giving up some
control over the data, companies get in exchange costs economies. IT, along
with other C-level executives, must decide if that trade-offs is worthwhile.
Cearley continues “everything will eventually be available as a cloud service-
but any individual business, not everything will be accessed from the cloud.”vi

Reference the other comments on the adoption and leverage of the technology at the
end of this document for white papers on Cloud computing decision making and
adoption plans.

FUTURE DEVELOPMENT AND EXPECTATIONS

Gartner has identified Cloud computing as a Technology Trigger that is two to five years
from mainstream adoption as depicted on the 2008 Hype Cycle for Emerging
Technologies chart below.

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The promise of Cloud computing will quickly take over the mobile device and the
desktop space for non mission critical applications. The migration of small and medium
size business of non mission critical applications to Cloud computing has already
begun, but the adoption by large businesses will be very slow. When matures, Cloud
will provide improved reliability with service level agreements, improved security, and
data privacy. At this point, the large businesses outsourcing customers will be more
willing to consider becoming amongst the first to migrate mission critical applications to
private data centers and into the cloud. The promise of Cloud computing will be the
movement of application from the corporate IT shop and the transform the identity and
scope.

The future is bright for Cloud computing based upon a number of collaborative and
independent initiatives by strategic players. The investment made by the HP, Intel, and
Yahoo consortium in research and development promises to accelerate technological
breakthroughs that will facilitate faster and more powerful Cloud computing products
and services at a lower price point. IBM, Google, and university systems are jointly
building a global network of servers for consumers and businesses to establish the
infrastructure to potentially increase the reliability and availability of the Cloud. Weekly,
the news of more and more major companies making investments in the technology,
infrastructure, and various other elements which will rapidly drive the maturity of the
Cloud computing. The potential winners will be users, providers, and vendors as the
power, flexibility, and low cost of the internet will be more fully exploited. Gartner
Group’s John Willis states, “However you define it, I think Cloud technology will have a
footprint in every business that does IT within the next five years.”vii

OTHER COMMENTS ON THE ADOPTION AND LEVERAGE OF THE TECHNOLOGY

The following provides sources for additional information on the Cloud computing and
leveraging the technology.

• A video “What is Cloud Computing?” – Technology leaders attending Web 2.0
Expo provide their opinions created by Dan Farber, Editor and Chief at CNET is
available at (http://www.youtube.com/watch?v=6PNuQHUiV3Q).
• A white paper “Is Cloud Computing Ready For The Enterprise? Not Yet, But This
Disruptive Innovation Is Maturing Fast” by James Staten is available at
www.forrester.com.
• A white paper “Sunny Days Cloud Computing” authored by Dan Kusnetsky is
available at http://securitypark.bitpipe.com/detail/RES/1217439232_370.html

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REFERENCES

www.businessweek.com
www.cio.com
www.gizmodo.com
www.hp.com/idealab/us/en/
www.informationweek.com
www.pcmagazine.com
www.wikipedia.org

Brandl, Dennis “Manufacturing in the Clouds” Control Engineering, July 2008 p 28

Brandon, John “Living in the Cloud” PC Magazine, July 28, 2008

Brandon, John “What does Cloud Computing Mean for You” PC Magazine, June 23,
2008

Claburn, Thomas, “Amazon’s S3 Cloud Service Turns Into A Puff Of Smoke”
Information Week, July 28, 2008

Hoover, J. Nicholas, “Amid Data Center Land Grab, Microsoft Plows Into Iowa”
Information Week, August 4, 2008

King, Rachel, “How Cloud computing is Changing the World” Business Week, August
4, 2008

King, Rachel, “Cloud Computing: Small Companies Take Flight” Business Week Special
Report, August 4, 2008

Methvin, Dave, “S3 Failure Isn’t The First-And Won’t Be Last” Information Week, July
28, 2008

Montabano, Elisabeth, “Report: Cloud computing poised for enterprise adoption”
August 11, 2008

Perez Juan Carlos and Kirk, Jeremy, “Yahoo, Intel and HP Form Cloud Computing
Labs” CIO, July 29, 2008

Schwartz, Ephraim, “The Dangers of Cloud Computing” July 07, 2008 CIO Magazine

Sheelvant, Ray, “Is Cloud Computing Feasible?” IT Strategy Blog, March 31, 2008

Trovedo, Gunjan, “Demystifying Cloud Computing” CIO, July 28, 2008

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i
King, Rachel, “How Cloud Computing is Changing the World” Business Week (August 4, 2008) p2
ii
Snyder, Bill “Cloud Computing: Tales from the Front” CIO (March 5, 2008) p2
iii
Montalbano, Elizabeth, “Report: Cloud computing poised for enterprise adoption” Network World (August 11,
2008) p1
iv
King, Rachel, “Cloud Computing: Small Companies Take Flight” Business Week, (August 4, 2008) p1
v
King, Rachel, “How Cloud Computing is Changing the World” Business Week (August 4, 2008) p2
vi
Schwartz, Ephraim, “The Dangers of Cloud Computing” CIO (July 7, 2008) p1
vii
Brandon, John “What does Cloud Computing Mean for You” PC Magazine (June 23, 2008) p1

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Cloud Computing Michael Davis 2008 Aug17

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