ACG Research

ACG Research
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Thursday, January 27, 2011

Cloud Computing: A Value Proposition

The Internet is, no doubt, a marvel, definitely an unmatched entity with its constant technological advancements. Its popularity has been driven by our zeal to use technology to make our lives easier and simpler. It has become second nature for most us to use the Internet as our primary resource when looking for information. One of the marvels of the internet is cloud computing.

Cloud computing is technically defined as an Internet-based calculations where shared information, software, and information are disseminated to computers or any other devices. It allows users to access web browsers and information without buying or installing any software. If you've used Google mail or visited YouTube you have experienced cloud computing.

Cloud computing is very popular because it eliminates the need for physical or technological infrastructure. The user accesses services and pays for only what they use. The infrastructure of cloud computing deals with the setting up of software that is involved in cloud computing.

Cloud computing has the following five attributes:

Multitenancy (Shared Resources)
Unlike previous computing models, which assumed dedicated resources, for example, computing facilities allocated to a single user or owner, cloud computing is based on a business model in which resources are shared, for example, multiple users use the same resource, at the network level, host level, and application level.

Massive Scalability
Although organizations might have hundreds or thousands of systems, cloud computing allows for scalability to tens of thousands of systems as well as scale bandwidth and storage space.

Users can rapidly increase and decrease their computing resources as needed and release resources for other uses when they are no longer required.

Pay as You Go
Users pay for only the resources they actually use and for only the time they require them.

Self-Provisioning of Resources
Users self-provision resources, such as additional systems (processing capability, software, storage) and network resources. One of the attributes of cloud computing is elasticity of resources. This cloud capability allows users to increase and decrease their computing resources as needed.

The following are five more reasons why service providers should capitalize on cloud computing for their business and for their customers: value proposition, revenue, IT independence, data center efficiency and service provider differentiation.

Cloud Computing Advantages

The Value Proposition

Cloud computing has the potential to affect service providers' operating costs by reducing the hardware and software requirements of their current networks and platforms.

Network architectures that build on optimization and consolidation are a key interest and increasingly, a requirement for all service providers. Cloud computing platforms enable enterprises to provision an infrastructure and add computing capacity on demand. This elasticity promotes rapid deployment of solutions and allows service providers to scale their infrastructure based on demand and, consequently, to improve time to market for new services.

Cloud Computing Revenue

Cloud computing is one of the fastest growing segments in the IT industry, and service providers are uniquely positioned to capitalize on it because they already have the size and depth to build scalable services. By assuming an end-to-end position (application to end user) in the cloud computing value chain, the service provider can improve and add significant quality of service to user-to-application experiences. This network-based approach to service assurance can position service providers to capitalize on the software revenue market related to the use of the applications, a market that network providers have yet to fully explore and utilize.
IT Independence

With more employees scattered in global offices or telecommuting, Web-based services and applications are perfect for the rapidly changing enterprise workplace. Service providers can increase their revenue and market share and capitalize on Web-based application services by communicating and promoting the tangible business benefits to their customers.

Mobile communication, accelerated developments in broadband networking, open source technologies, and Web 2.0 have made on-demand services more reliable and affordable. Using cloud-based services, businesses can store more data than on private computer systems, allowing them to save on the processing power and hard-disk space required for desktop software while giving them access to an unlimited number of applications.

Additional benefits for businesses—and selling points for service providers—include lower costs, improved system performance, reduced software cost, instant software updates, data reliability, universal data access, and hardware/device independence.

Data Center Efficiency

With typical data center costs running to approximately 25 percent of total IT budgets, service providers are under pressure to find cost-efficient business solutions and models to operate their data centers. A cloud computing data center model enables rapid innovation, scalability, and supports of core enterprise functions, resulting in significant economies of scale.

A cloud computing data center reduces the need for additional hardware, software and facilities; for server network storage; operating systems and middleware provisioning; and for dealing with security issues, all of which are costly and time-consuming functions.

A cloud computing platform also increases the utilization of servers, which can range from 20 percent to 70 percent, resulting in a decrease in required infrastructure. This hardware reduction translates to a dramatic drop in some associated operations expenditures: rack space, real estate, power, and cooling. And let's not forget the cost savings associated with continuity and data center longevity. The average life expectancy of a large data center is 12 years. With the cost of developing a data center at approximately $500 million, cloud computing becomes both a business and operational value.

Service Provider Differentiation

Delivering cloud-based consumer and business-critical applications with solid SLAs not only allows service providers to differentiate themselves but also maximizes the value of the network while promoting a new business model.

Moving to a cloud-based platform does, however, pose challenges and concerns for service providers. Dealing with standards, security, performance, data compliance aligned with procedures and operations, and availability issues are just a few of the organizational and technical challenges service providers will have to address for cloud computing to offer a true value proposition.

Service providers can leverage their reputations and solid performances to offer reliable, comprehensive, and secure cloud services. Most importantly, service providers can show value by strongly emphasizing that cloud computing allows enterprises to focus on other aspects of their businesses without having to concentrate resources on IT, server updates, and maintenance issues—a win-win service offering for both service providers and their customers.

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