Field Research Project Cloud Computing

Published Date: 02 Nov 2017

Introduction

Information technology is a fast track industry and so it is imperative to keep ourselves abreast of the changes that happen around us. As future global leaders, we want to lay our research in an area which would help us achieve a long term goal of self learning, adding value to our organisations when we go back to our work places. There is ample scope of business growth in the technology space as long as companies are creating value for themselves and foraying into new spaces and investing in research.

In today’s world the word computer is just an old adage until it is related to its peripheral benefits. Man has come a long way from Stone Age to technology age to cutting edge digital age that impacts business today. The focus today is on the various aspects of IT and its relevance in various fields. One such aspect is the much talked about cloud computing. As an analogy for the Internet, "the term cloud" is a known cliché, but when combined with the term "computing," the meaning gets fuzzier. Cloud computing was in its nascent stage and is gradually evolving into a stronger platform. Cloud computing comes into focus only when you think about what IT always needs: a way to increase capacity or add capabilities without investing in licensing new software, infrastructure, or training and recruitment. (Gruman, 2008).Cloud computing encompasses any subscription-based or pay-per-use service that, in the real time over the medium of Internet, extends IT’s capabilities. Cloud is a continuation of the virtualization trend that has been underway for more than 15 years. This trend of virtualisation has now reached a tipping point where Cloud can create and deliver value for enterprises.

What we now commonly refer to as Cloud computing is the result of an evolution of the widespread adoption of virtualization, service-oriented architecture commonly known as SOA, utility and autonomic computing. Effectively, Cloud is simply a next evolution of infrastructure management in the data centre where we went from an ability to manage heterogeneous hardware, then software, then applications within the data centre, then across the enterprise, and now with Cloud, across multiple enterprises. Cloud can be

thought of as a management system, widely recognized for its technological capabilities, and it is seen by many as a goal on its own. In this view, Cloud computing can serve as a commodity for IT optimization.

We see two most prominent industries that use cloud based services in the global market i.e. financial sector and the telecommunications sector, contributing 16% and 10% of the cloud business respectively (IBM confidential). Analysis of the cloud space invoked us to study more about cloud computing and hence choosing the telecommunication industry as our pivot which might surpass the banking sector’s presence in cloud space as more and more telecommunication giants join the race in future.

Through our field research project we want to analyse the following things:

Impact that cloud computing has had on the telecommunication sector

Benefits of using cloud computing by the telecommunication sector

Why do organisations invest in cloud

Theoretical Framework

Understanding ‘The Cloud Concept’

The National Institute of Standards and Technology (NIST) define cloud computing as "a model for enabling rather convenient, on-demand network access to a shared pool of configurable resources (e.g. servers, storage, applications, network and services) that can be provisioned quickly and rapidly and also released with minimal management effort or service provider interaction."

Cloud computing refers to both the applications delivered as services over the Internet and the hardware and systems software in the data centres that provide those services.

Clouds can be broadly categorised into three types depending on their usage. (Grance, 2009)

Public clouds – This type of cloud is made available in a pay-as-you-go manner to the public, and the service that is being sold is utility computing. These clouds are mostly run by third parties, and applications from various consumers are mixed together on the cloud's servers, storage systems, and networks. This type of clouds is most often hosted away from customer base (such as internet), and provide a way to lessen customer risk and cost by providing a flexible and temporary extension to the current infrastructure. (Armbrust, 2009)

Private clouds - Refers to the internal data centres of a certain business or other firms, that are not made available to the public, when they are big enough to benefit from the benefits of cloud computing. These clouds are built for the discrete and exclusive use of only one consumer that provides the best possible control over data, security, and service. The firm owns the entire infrastructure and has complete authority over how applications are deployed on the platform. Private clouds may be deployed in a bigger environment such as enterprise datacentre, and could be deployed at a collocation facility if needed. (Lee, 2012)

Hybrid clouds - is a mix of both public and private cloud models. This type of cloud help to externally provisioned scale, on demand. The power of augmenting a private cloud with the advantages of a public cloud could be used to maintain consistency in service levels during workload imbalance. This specific behaviour is often seen with the use of storage clouds to

support Web 2.0 applications. Workload spikes, also known as "surge computing" is often used to handle abnormal spikes in workload whereas to perform routine and periodic activities public clouds can be deployed easily. The technology of Hybrid clouds allows distributing various applications of a firm on a healthy mix of public and private cloud. (Srivastava, 2011)

After classifying clouds into three categories based on their usage, this paper’s focus is to holistically analyse two areas of the telecommunication where cloud as a technology is used to provide benefits to other customers to whom the Communication service providers cater and how telecommunication sector uses cloud for its own benefit. With telecom operators’ move to embrace the two-sided business models, the entire telecommunication industry is under rejuvenation and transformation of their internal support systems. This leaves them with the capability to expose network assets and interfaces that can be exploited by such features as location and presence, and by assets such as user profiles. CSPs (Communication Service Providers) can use these attributes (for e.g., user preferences and activities and analytics) with 3rd party cloud services that would lead to their value enhancement by making them more contexts relevant to users. Of course, they can also embed these attributes with their own cloud offerings. Irrespective of the mode of use, the nexus between both the components are critical in two-sided business models.

Telecommunication firms as providers of Cloud

Cloud computing gives communication service providers new opportunities to move

up in the information and communication technology (ICT) value chain. By virtue of the control they have over the communication infrastructure, network service providers have two important advantages compared with cloud providers from other industries.

First, they offer domestic and business connectivity. In networking terms, no other player is closer to the consumer. As a consequence, network service providers have the ability to instantiate cloud functionality that users can access with a minimum latency.

Second, network service providers can tailor connectivity to the needs of their users;

for example, by dynamically upgrading the connectivity between sites involved in high-definition video production. In other words, they can allocate – on demand and for an

arbitrary period of time – the cloud server resources, such as data centres, and the high-bandwidth pipes that interconnect the data centres and user.

Telecom operators could also offer a fourth category of cloud services known as ‘Network as a service (NaaS)’. This provides a capability to the cloud service user to use network/transport connectivity services and/or inter-cloud network connectivity services.  NaaS revolves around the optimal use of resource allocations taking network and computing resources as a unified whole. (wikipedia)

Telecommunication firms as adopters of Cloud

Telecom service providers operate in a complex operational environment today, heavily dependent on technologies to run their networks and support the delivery of their services. Telecommunication companies have embraced the latest cloud technology to make the most out of its use in achieving potential higher by catering to their clientele, though it is equally beneficial for the telecom firms to start using cloud themselves. With telecom companies having the potential of higher growth, early movers and early adopters who can have the muscle power, the operators are trying to transform their organisations, moving away from legacy systems to adopt cloud services to achieve operational efficiency within the organisation, make substantial cost savings and gain efficiently.

Cloud-based services are also highly suitable for product prototyping and trialling ahead of large-scale market launches.

As users of cloud computing, telecom operators can either:

Simply switching their important business functions and applications to harness the real flexibility, efficiency and operational gains just as any large enterprise would. The service providers can move their ERP systems or other important functions to cloud technology and become their own customers. This would enable them to reduce their total cost of ownership and their initial investments in various technologies and domains can in fact be channelized to one area.

Simultaneously commercialise those cloud-based applications that have been adopted, becoming both users and providers of the service in their organisations at the same point in time. An opportunity exists in mundane/routine telecom functions like OSS/BSS, where a telecom operator outsources its billing and customer care to an OSS/BSS specialist while partnering with the specialist to offer that functionality to other firms, such as utilities providers or over the top providers.

Apparently, the telecom companies are expected to move to a very different model where all the networks would be spread across various geographies, no longer in the operator’s domain and certain parts of the network functionality and service intelligence could be used on a pay-per-use or pay-as-you-grow basis far from the reach of third party scavengers. (Ericsson, 2012)

The diagram below is a schematic model on which our two pronged theory is laid out.

Source : Ericsson - A world of communication

Though our research framework is based on two aspects of cloud computing for communication service providers, it is also necessary to describe the platforms and service models of cloud. NIST also defines three primarily used service models for cloud computing (GARRISON, 2012). The extensible use of these service models help cloud users or adopters to fulfil their needs in terms of technology which is used in the research paper. All the communication service providers use these models and platforms mentioned below to cater to the needs of their own firm as well as the needs of their client:

• Software-as-a-Service (SaaS)

SaaS is the capability to use the providers/users applications running on a cloud infrastructure. The applications deployed on SaaS are accessible from the client devices and interfaces mainly through an interface such as a web browser (e.g., web email, portals). The end user does not manage the underlying cloud infrastructure which includes network, various servers, operating systems, storage facilities, or even individual application capabilities.

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• Platform-as-a-Service (PaaS)

PaaS essentially provides the ability to the client to deploy custom applications using different programming languages onto the cloud infrastructure that are provided/supported by the service provider. In this model the user need not manage the underlying cloud infrastructure including network, servers, operating systems, or storage. However the user has certain level of control over the deployed applications and hence the right to retain the host applications within environment configurations provided by the provider.

• Infrastructure-as-a-Service (IaaS)

IaaS on the other hand is the provision of processing, storage, networks, and other fundamental computing resources where the user may deploy and run proprietary software, such as operating systems, storage, deployed applications for his own use. (Buttell, 2010)

Srivastava K, Kumar A (2011) discusses the infrastructure models in cloud computing and the considerations for cloud computing architects to make when moving from a standard enterprise application deployment model to one based on cloud computing. The diagram given below is the topology for using the various platforms mentioned above for firms who are cloud service providers or adopters.

Source: Thoughts On cloud

Literature Review

Evolution of Cloud in telecom Industry:

In an attempt to understanding cloud computing it’s a good idea to know evolution of the computing technology. Cloud computing evolution goes back to 1980’s when it started with grid computing by solving large problems with parallel computing and making mainstream by Globus Alliance. In 1990’s utility computing offered clusters as virtual platforms for computing with a metered business model. In early 2000s – SaaS raised the level of virtualization to the application, with a business model of charging by the value of the application to subscribers. Late 2000s marked the focus on infrastructure and applications for users can gain access to applications at any time, from any place through their connected devices. By 2010s - The cloud computing evolves and matures with better security, more prevalent standards, improved process optimization, composite SLAs and expanded connectivity( IBM confidential).

After tracing the growth of cloud historically, we found the present day cloud service a key factor for businesses to consider. The growing importance and relevance of cloud is seen in the decision of the UK government to ensure all future purchases are "consistent with cloud computing". It plans to shift all future digital services to a private, secure cloud name ‘g-Cloud’. This cloud dedicated to government agencies shall help the UK government hopes to realise a return on investment in 3 years, post which the benefits of elastic scaling, infrastructure savings and rapid provisioning will reduce the costs substantially. (Philip Hunter, 2009)

With the present day growth of cloud, entrepreneurial businesses no longer find IT set up costs as a barrier to entry in the market since cloud offers computing as a utility that can be bought on demand. (Smith, 2009)

The next key idea in the literature was the importance of cloud services in the telecom sector. Cloud computing technology is now gradually being introduced to the telecommunications industry as demand from operators for mobile Internet services has started to take off (Bin, 2011)

For telecom consumers cloud means they don’t have to store anything not applications, not photos, not videos etc .So in case the data is lost, customers need not worry as the data is all there in the cloud. For business cloud can enable powerful computing on devices such as Mobile, PC, Tablet etc. (AT&T, 2011)

As mentioned by Steve Gold (2012), an innovative service offering by telecom firms was the use of Voice over IP, or Internet telephony, to host regular geographic UK numbers (01xxx and 02xxx) in the cloud, and then send inbound calls to the device of choice – this could be a regular landline or a mobile phone using GSM/3G cellular, or alternatively a mobile using VoIP technology across 3G or Wi-Fi channel. By porting the landline into the cloud the monthly line rental is non-existent and we are able to call to multiple devices.( Gold,2012)

Literature has also shown the foray of telecom firms not only in cloud services as SAAS but now even as IAAS. (Komatsu puts IT into Telstra's cloud, 2010) Our study of telecom providers in Sydney brought us to Telstra which is trying to establish enterprise-grade cloud computing services in Australia.

Australia’s premier service provider, Telstra has been building its cloud computing capabilities to both benefit the firms internal approach to IT as well as build a new service offering for its enterprise customers. The Komatsu deal is the second major cloud computing deal won by Telstra in the past year. Komatsu plans to push all of its IT services to Telstra's infrastructure-as-a-service environment. Reasons to consider a new approach to IT sourcing for Komatsu included ageing infrastructure, expiring contracts, and the need to gear up for a doubling of processing and storage capacity as part of a business transformation project and SAP expansion. In addition, the company is growing rapidly, so speed of deployment is important. Geographically dispersed operations in mining and construction locations meant that Komatsu was seeking a vendor that could deliver reliable services integrated end-to-end (Komatsu puts IT into Telstra's cloud, 2010).

While we see such widespread adoption of cloud, the primary question each firm needs to address is what benefit they aim to derive out of adoption of cloud services. Its significance to consumers and businesses is frequently addressed in various literatures and our research stressed upon this growing need for business to adopt this technology. Ernst and young stated that ‘Cloud computing is a fundamental shift in IT that will alter the technology industry power structure, improve business agility for all industries and increase everyone’s access to computing, storage and communications power’ (Ernst and Young, 2011) . Some key points were made on why cloud adoption is a natural move for businesses in the next century.

Business benefit of adopting Cloud services :

Deloitte (2009) discuss the key benefit the cloud services provide to businesses on adoption.

Costs: Reduces upfront IT CAPEX investments for users of both hardware & software since vendors spread their own costs across customers. The key driver is the ‘ pay as you go’ pricing model, where charges are based on its consumption via a subscription model or utilization-based alternative. Also, consumers can pay in parts to subscribe with minimal upfront costs instead of paying for hardware and licenses upfront. Also, cost related to software upgrade, maintenance cost etc. could be transferred to cloud service providers. It also streamlines the IT procurement process by reducing the investment costs & by avoiding administrative costs of multiple level approval process which is traditionally the IT Way. (Deloitte, 2009)

Return on Investment: Accelerates payback and improves Return on Investment (ROI): A lower initial investment and faster deployment time for Cloud deployments leads to quicker benefits and positive ROI. The efficiency gains are primarily linked to the scalability (or elasticity) of Cloud deployments. (Deloitte, 2009)

Risks: Reduces the risks linked to IT deployments, by transferring them (in part) to Cloud providers. (Deloitte, 2009)

Accelerated deployment: Business cycles are accelerating in a web-enabled world, with businesses requiring immediate deployment of their supporting IT environment. Achieving this is possible only by leveraging out of the box solutions benefiting from optimized procurement, set-up, and migration time, as well as relatively high standardization. This reduced lag between business & IT helps business focus on the real business issues. IT within organizations should be focussed change agents instead of wasting efforts maintaining the internal IT structure. (Deloitte, 2009)

Extreme Scalability: Firms can instantaneously scale up or down their IT infrastructure (processing power, or storage and networking or number of users) as per consumption needs, without costly upgrades or wait times and no capacity constraints. (Deloitte, 2009)

The figure 3.a represents the payback period and ROI curve of cloud computing versus in house computing decisions.

Source: Deloitte

Fig: 3.a – ROI curves for Cloud Computing vs On premise Computing

These businesses needs drive the need for a shift of services to the cloud in most firms. Additionally, specifically for the telecommunication industry, the clouds ability to instantly deliver simple, sophisticated, easy-to-use computer applications and information will help meet the business need generated by the proliferation of smart mobile devices, which are similar to handheld wireless computers. (Ernst and Young, 2011)

The literature has further explored the multibillion dollar business opportunity available to cloud service providers (CSP). Analysis by Informa, on the cloud strategy of over 130 CSPs across the world has revealed an accelerating investment and activity to secure revenues from their network assets. (Navigating the Telecom Cloud, 2012).

Business Opportunity for Service Providers

Fig 3.b: spend on cloud pursuits in various continents

The figure 3.b highlights the spending on cloud pursuits in various continents. While revenue growth rates are beyond 100% per annum are common, only a few make higher than 5% of overall revenues from such cloud services. The literature recognises the need for CSPs to promptly secure long-term profits from these services since demand for

is shifting to emerging markets and across customer segments. (Navigating the Telecom Cloud, 2012).

Recognizing the cloud as an untapped source of business, telecom operators are getting ready to increase their Information and communications technology (ICT) wallet share by exploiting this next wave of opportunity. The global investments in cloud is projected to be more than double from an US$55 billion in 2011 to almost US$130 billion annually by 2015. U.S.-based Verizon has already spent over US$2 billion in 2011, including a major acquisition, to capture a significant share of the global cloud services opportunity. France Telecom’s Orange Business Services has invested €750 million in its global network in 2011 to support cloud based service delivery. Telstra, in Australia, has partnered with leading software, hardware and IT services companies, and acknowledged that cloud offerings will produce 25 to 30 percent of its total revenue within the next five years. The Australian operator plans to make $800 million, cloud-related investments during that period. (Ericsson, 2012)

Further literature review to the CSP’s use of cloud Enablement Framework to enhance the value chain and customer value propositions: They identify 3 main enablers, and company need’s to identify where it fits in the framework based on their strategies, risk appetite & their goals. (Fox, 2012)

Optimizers use Cloud to perform current business more efficiently and effectively, in this way they can increase their customer value propositions by improving the connectivity, speed or the storage space etc. (Michael Armbrust, 2010)

Innovators use Cloud to significantly improve customer satisfaction through leveraging unique assets of CSP while delivery current services, resulting in new revenue generating streams based on new business models, which increases the roles and responsibilities of service provider within the value chain (Michael Armbrust, 2010)

Disruptors rely on Cloud to develop radically different value propositions or what’s called the out of Box ideas. Understand customer needs to generate new market segments, by enhancing the end-customer experience through creating new Business. (Michael Armbrust, 2010)

Key Trends:

2012 Forecast/Growth Rate (Gartner, 2012): Widespread consumerism with Cloud computing

Telecom operators have recognised it as a source of new revenues, with global investments in cloud services projected to more than double from an estimated US$55 billion in 2011 to almost US$130 billion annually by 2015 (Ericsson, 2012)

Following the industry trend, below are examples of telecom industry, which reference to our theoretical framework of adopters & providers:

Cloud as Adopter/Optimizer: O2 will offer Microsoft Cloud services as part of a new partnership between Microsoft and O2 in Ireland. The first service available to O2 business customers from Microsoft is Office 365, cloud productivity solution of Microsoft. O2 can explore the full potential of office 365 and will be able to avail services including Microsoft Office, email and communications on a basis of subscription from O2. This particular deal removes upfront costs of software buying, instead offering customers access to the service

on a payment basis through a single bill from O2. Services such as mobile broadband, voice, and fixed phone lines will be offered with Office 365 software. Subscribers will find it beneficial from packaged offering from O2(Microsoft, 2011)

Cloud as Provider/Innovator: This is a current example of Telecom Company providing a combination of services such as PaaS, SaaS, IaaS .Singapore’s SingTel has been chosen to deploy a private cloud computing infrastructure on a whole-of-government basis. To cover all government bodies in Singapore, G-Cloud provides the first private cloud infrastructure to be developed on large scale.

For an initial five years SingTel will provide and maintain G-Cloud with an option for renewal of a further five years. The G-Cloud is a whole-of-government private cloud infrastructure that is multi-tenanted, and it meets the required security assurance for the government. of cloud computing advantages will be delivered through G-Cloud. The benefits include multi-tenancy of services, virtualisation of automation with on-demand provisioning and rapid scalability. The G-Cloud will need to address the different levels of governance & security needs of the Singapore government. This will create standards across the board by sharing of computing resources and applications across all government agencies thus leading to faster response and reduction in IT operating costs. With innovation being one of the foundations of the G-Cloud’s design, its extensible & unique platform can also be used for trying & piloting new and innovative applications without any heavy initial cost and asset of ownership.

G-Cloud services redefine the government sector’s delivery of online services, both to public and internally as well. G-Cloud opens the entryway for more government owned e-services to be delivered quickly, securely, on-demand & at less cost plus anywhere and anytime. (SingTel, 2012)

The next key aspect in the literature studied, covered the various challenges faced by cloud adopters before they move their respective IT structures on the cloud. Before adopting cloud as a service or even providing cloud as a service to various businesses it is essential to understand the challenges faced and provide solutions to meet the same.

Challenges and Debates in Cloud Adoption

Armbrust. M, Fox. A, Griffith. R and Others (2010) discuss some key challenges which providers of cloud face when selling these services to potential customers.

Business Continuity and Service Availability: The primary concern with adopting cloud computing services is its continuous availability and chances of disruption. In spite of several data canters in different geographic regions with different network providers, there could possibly be common software infrastructure or systems which put customers at risk if the firm goes bankrupt. Large customers need the assurance of a business continuity strategy for crisis situations before migration. (Armbrust, 2010) This argument against cloud is however debatable with authors citing the offsite nature of cloud services as a plus for firms who have data stored in in-office servers. Cloud environments additionally meet regulations for business continuity, by bodies such as Securities and Exchange Commission. (Buttell, 2010)

Data Lock-In: The storage for cloud computing is proprietary or not standardized, thus making it difficult for customers to extract data from one website and run on another. Such a dependency may lock-in customers and be attractive to providers, but users are vulnerable to reliability issues, price increases , and risks of providers going bust. (Michael Armbrust, 2010)

Data Confidentiality/Auditability: Data security is the primary objections to cloud computing. Additionally, requirements for auditability, such as Sarbanes-Oxley and Health and Human Services Health Insurance Portability and Accountability Act (HIPAA) regulations are essential before moving all corporate data to the cloud. Clouds use virtualization as a primary security mechanism. It protects against users who try to attack the underlying cloud infrastructure. But limitations and bugs in virtualization software or incorrect network virtualization could lead to access to sensitive portions in the provider’s infrastructure. (Ernst and Young, 2011)

Limitation of Session oriented services: A challenge specific to the telecommunication industry is the virtualization of telecommunication (telecom) services, which are session-oriented by nature and currently run on dedicated hardware. Existing mechanisms for running services in the cloud are typically web services with short-lived sessions making them resilient to intermittent failures of the network or endpoints. However, Chang, Y ; Hari, A ; Koppol, P;Martin, A & Stathopoulos, T (2012) have identified that such mechanisms are insufficient for implementations of typical telecom services where sessions are long-lived and service users are intolerant of service and network interruptions. Hence telecom providers need to work towards meeting this challenge. (Chang, 2012)

Cloud Computing is the Future of Telecom

As the world is moving towards wireless smart phone world, it is causing rundown for some telecom companies, but it’s also creating opportunities for many telecom companies. One such company is Kuwait Telecom Company. Koreans spend lot of their time at work compared to US or European counterparts. The company is building "Smart work centers" using Cloud Computing and smart technology to decentralize Work places. Because they can work from anywhere, closer to home and customers, it saves the time that is wasted in commuting to & from workplaces, reduces carbon emission, traffic congestion etc. It provides work from home options which many companies adapt these days as a cost saving methodology. (Hugos, 2011)

There are valuable future opportunities for Australian telecommunication sector as well in cloud computing: But the Australian Government needs to ensure that these opportunities are grasped and unnecessary barriers removed. Given the low cost of infrastructure for users of the cloud, Australian start-ups can compete on ideas, rather than on the amount of resources (cash or equipment) they have. The cloud will catalyse development of new products and services. (Mudge, 2010)

Research Methodology

Our research paper focuses on secondary research. During the course of the research we felt worthwhile to keep the fulcrum of our methodology on secondary data collected from academic journals, other research papers, online articles, white papers etc.

We collected information from various academic journals for the literature review. This provided useful insights into the current obstacles in the telecom industry in adopting cloud and providing cloud services.

During the course of our research we referred to many white papers which gave us a bird’s eye view about various aspects of cloud technologies in the telecommunication sectors.

As part of our ongoing research methodology we would choose case studies and industry relevant data to help us broaden the knowledge about the industry standards. Apart from this, we also intend to do primary research by meeting people from industry and ask them relevant questions.