Cloud Computing Takes Off

Cloud computing is taking off and is now the fastest-growing form of computing, with companies spending about $175 billion on cloud infrastructure in 2014, an increase of 20 percent over the previous year. By 2017, enterprise spending on the cloud will reach $235.1 billion. The biggest players in the cloud computing marketplace include Amazon Web Services division (AWS), Microsoft, and Google. These companies have streamlined cloud computing and made it an affordable and sensible option for companies ranging from tiny Internet startups to established companies such as FedEx. For example, AWS provides subscribing companies with flexible computing power and data storage as well as data management, messaging, payment, and other services that can be used together or individually as the business requires. Anyone with an Internet connection and a little bit of money can harness the same computing systems that Amazon itself uses to run its retail business. If customers provide the amount of server space, bandwidth, storage, and any other services they require, AWS can automatically allocate those resources. Amazon's sales pitch is that you don't pay a monthly or yearly fee to use their computing resources - instead, you pay for exactly what you use. Economies of scale keep costs astonishingly low, and AWS has been able to reduce its prices 50 percent every three years. To remain competitive, other cloud computing vendors have had to reduce their prices as well. Great savings for the customer! Cloud computing also appeals to many businesses because the cloud services provider will handle all the maintenance and upkeep of their IT infrastructures, allowing these businesses to spend more time on higher-value work. For example, using AWS helped Merrifield Garden Center reduce costs, improve the stability and security of its applications and data, and eliminate the burden of managing IT infrastructure hardware so it can focus on new customer-facing initiatives to grow the business. Startup companies and smaller companies are finding that they no longer need to build their own data center. With cloud infrastructures like Amazon's readily available, they have access to technical capability that was formerly available to only much larger businesses. San Francisco-based Socialcam provides a popular mobile social video application currently installed on more than 20 million iPhone and Android smartphones. The Socialcam application makes it easy to take a video of any size, post it online, and share with friends. It became so popular that the company's engineers couldn't install hardware fast enough to keep up with demand. By moving to the AWS cloud, Socialcam can quickly add or remove capacity to meet demand. Netco Sports produces the Canal+ Football app that enables viewers to replay any move from any camera angle, on any device, within 3 minutes after it happens. By using AWS, Netco Sports can scale 100 servers in less than 10 minutes to support streaming for 500,000 viewers. Ufora, which was started in 2011, uses AWS to help hedge funds and other financial companies run complex computer models for analyzing vast quantities of data. Five years ago, this type of programming would have taken months of coding and hardware costing more than $1 million. Using AWS, the cost of all that computing power is only around $10. Although low overhead and infrastructure management costs make public cloud computing especially attractive to startups, the financial benefits of cloud computing for large and midsized organizations are less apparent. Cliff Olson, director of infrastructure systems at FP International, Inc., a Fremont, California-based packaging company, notes that paying a public cloud provider a monthly service fee for 10,000 or more employees will probably be more expensive than having the company maintain its own IT infrastructure and staff. Companies also worry about unexpected runaway costs from using a pay-per-use model. Integrating cloud services with existing IT infrastructures, errors, mismanagement, or unusually high volumes of web traffic will run up the bill for cloud service users. Gartner Inc. technology consultants advise clients contemplating public cloud services to take into account the number of machines an organization will run, the number of hours per day or per week they'll run, and the amount of storage their data will require. Additional costs include regularly recurring license charges; the rate of change for the data; and how much new data the business is expected to generate. A very large company may find it cheaper to own and manage its own data center or private cloud, but as public clouds become more efficient and secure and the technology grows cheaper, large companies will start using more cloud resources. A major barrier to widespread cloud adoption is concern about cloud reliability and security. Amazon's cloud experienced significant outages in April and August 2011; on June 14 and 29, 2012; on December 24, 2012; on January 31, 2013; and on August 25, 2013. Normally, cloud networks are very reliable and often more so than private networks operated by individual companies. However, when a cloud of significant size like Amazon's goes down, it sends ripples across the entire web. The August 2013 outage was caused by a hardware failure lasting 49 minutes at Amazon's U.S.-East data center in northern Virginia. It led to spiraling problems at a host of well-trafficked online services, including Instagram, Vine, AirBnB, and the mobile magazine app Flipboard. Amazon attributed the outage to glitches with a single networking device that resulted in data loss. That said, as cloud computing continues to mature and the major cloud infrastructure providers gain more experience, cloud service and reliability have steadily improved. According to reports from CloudHarmony, Amazon Web Services EC2 only had 2.43 hours total downtime in 2014 across all regions. However, Microsoft Azure web services suffered 40 hours of downtime that year, and Microsoft was heavily criticized for poor communication with its customers and partners when unscheduled downtime occurred. A number of experts recommend that companies for whom an outage would be a major risk consider using another computing service as a backup. Most midsized and large companies will gravitate toward a hybrid approach. For example, InterContinental Hotels revamped its IT infrastructure to include both private and public cloud usage. To improve response time for customers, InterContinental moved its core room reservation transaction system onto a private cloud within its own data center, but it moved room availability and pricing website applications onto public cloud data centers on the East and West coasts. Customers receive data faster if the data are located on a server that is physically close to them, and cloud computing helps InterContinental to take advantage of this.

Case Study Question

1. What business benefits do cloud computing\ services provide? What problems do they solve?

2. What are the disadvantages of cloud computing?

3. What kinds of businesses are most likely to benefit from using cloud computing? Why?