The Opportunities In Cloud Services

Published Date: 02 Nov 2017

Academia has further explored the multibillion dollar business opportunity available to cloud service providers (CSP), thereby increasing the Information and communications technology (ICT) wallet share. Analysis by Informa, on the cloud strategy of more than 130 CSPs across the world has revealed an accelerating investment and activity to secure revenues from their network assets. (Camille Mendler, 2012).

The figure 3.a highlights the spend on cloud pursuits in various continents. While revenue growth rates comfortably exceeding 100% per annum are common, only a handful generate higher than 5% of overall revenues from cloud services. The literature recognises the need for CSPs to act now to secure long-term profits from cloud services since demand for cloud services is shifting to emerging markets and across customer segments. (Camille Mendler, 2012)

It’s critical to understand why cloud computing has become the need of the hour. Its significance consumers and business is frequently addressed in various literatures.

‘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)

The key driver of Cloud computing is its pay as you go pricing model, where charges are based on its consumption via a subscription model or utilization-based alternative. Some key advantages

Costs : Reduces upfront IT CAPEX investments for users of both hardware & software since vendors spread their own costs across customers. 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.

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.

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

(Armbrust. M, Fox. A, Griffith. R and Others, 2010)

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.

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.

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

Source: Deloitte

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

Telecom operators have been quick to recognise the benefits of cloud and a source of new revenues. The 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. Telecom operators should exploit this next wave of opportunity by exploring their position in the emerging cloud value chain. U.S.-based Verizon, has already spent over US$2 billion in 2011 alone, including a major acquisition, to capture "a big share" of the global cloud services opportunity. France Telecom’s Orange Business Services has invested €750 million in its global network backbone in 2011 to enable cloud based service delivery. Telstra, in Australia, has partnered with leading software, hardware and IT services companies, and declared that cloud offerings will generate 25 to 30 percent of its total revenue within the next five years. The Australian operator plans to make A$800 million, cloud-related investments during that period (A world of communication- Ericsson, 2012)

Challenges and Debates in Cloud Adoption

Business Continuity and Service Availability : The primary concern with adopting cloud computing services is its continuous availability and chances of disruption. In spite of multiple data canters in different geographic regions using different network providers, there may be common software infrastructure and accounting 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. (SOURCE ?) . 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, A. , 2010)

Data Lock-In : The storage for cloud computing are essentially 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 cloud computing providers, but their users are vulnerable to price increases, to reliability problems, or even to providers going out of business. (SOURCE ?)

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 must before moving corporate data to the cloud. Clouds use virtualization as a primary security mechanism. It protects against attempts by users to attack the underlying cloud infrastructure. But limitations and bugs in virtualization software or incorrect network virtualization may allow user code access to sensitive portions of the provider’s infrastructure.

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 targeted towards web services with short-lived sessions where the services are often resilient to intermittent failures of the network or endpoints. Chang, Y ; Hari, A ; Koppol, P;Martin, A & Stathopoulos, T (2012) have identified that such mechanisms are inadequate for implementations of typical telecom services where sessions are often long-lived and service users are intolerant of service and network interruptions .Hence telecom providers need to work towards meeting this challenge.