Cloud Computing

Prepared by : Shekhar Avasarala

Source: Gartner report and other related documents 1

 Moving into the Cloud
• The next evolution in computing
Cloud computing refers to the idea of delivering personal (email, word processing, presentations, etc.) and business productivity
applications (sales force automation, customer service, accounting, etc.) from centralized servers that share resources like storage,
processing and bandwidth more efficiently by a cost factor of at least 5-10x.

• A shift back to centralized Cloud computing, away from client-server

Cloud Computing harkens back to the days of the mainframe and centralized computing. Client-server computing represented a break
from the model of mainframe computing. Minicomputers and PCs became powerful and cheap enough to run application code locally
and away from mainframe. The limitation of Internet and width forced a lot of the processing to occur locally on PCs and
minicomputers. However, with broadband Internet, optical networking and advances in computing power and storage it’s becoming
less relevant where the server is located.

• Shift creates a $100+ billion opportunity

Cloud software is not as mature as client-server, but the trajectory is changing. We estimate this represents a $160 billion addressable
market opportunity. It includes $95 billion in business and productivity apps, and another $65 billion in online advertising

• Significant economic savings and value creation with the Cloud model
The economic model of client-server computing is challenged by rising cost and complexity of maintaining dedicated IT professionals
for silos of infrastructure. The Cloud model gets more leverage from hardware, software and IT administration costs vs. Client-server.

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 On demand biz apps to leverage..
• Zoho offers a personal productivity suite (word processing, spreadsheets,
database, etc.)
• Salesforce.com offers CRM apps.
• Workday offers HR functionality
• Taleo offers recruiting apps as a service.
• SuccessFactors offers employee performance management as a service
• Salary.com offers compensation management as a Service
• NetSuite offers ERP functionality (accounting, sales, inventory, orders,
• ecommerce, etc.)
• Concur offers Travel and Expense automation as a hosted Cloud service

Stitch together all of these Cloud business applications with SOA (Services Oriented Architecture)
and Web services and you have most of the functionality a business would need.

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 What the concept includes…
Cloud Computing concept incorporates combinations of the following:
 Infrastructure as a service (IaaS)
 Platform as a service (PaaS)
 Software as a service (SaaS)

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 Cloud Computing - Concept
 Cloud computing is the delivery of applications over the Internet
 Cloud computing refers to the idea of delivering personal (e.g., email,
word processing, presentations.) and business productivity applications
(e.g., sales force automation, customer service, accounting) from
centralized servers.
 These servers share resources like storage, processing and bandwidth
more efficiently by a cost factor of at least 5-10x
 Services are delivered over the Internet from shared servers, rather than
from software loaded onto a personal computer or local server. The
shared servers are likely located in a data center run by Google, Microsoft,
Amazon or some other third party, and it is these data centers that are
considered to be ‘the Cloud’.

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 SaaS – Software as a service
• SaaS or otherwise called as OnDemand
• OnDemand has two essential criteria:
– It is paid for on a subscription basis; and
– The software is hosted by the vendor and accessed by the customer
over the Internet.
• The pure OnDemand business model, which involves both subscription
pricing and hosted deployment, is the opposite of the traditional software
model.
• OnDemand really is about providing a service, not selling software.

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 Paas – Platforms as a service
• Some OnDemand companies initially started out providing apps as an
OnDemand service. But they have since built platforms that can be used
to deploy new apps, provided either by partners or the customers
themselves
• Overall, OnDemand platforms are having significant traction with
companies. Even among large companies (more than 25,000 employees),
60% of companies would prefer an OnDemand platform to the traditional
alternative.
• Traction among small companies is significantly higher, in excess of 80%.
This reflects their willingness to embrace platforms that allow for more
rapid and cheaper deployment of apps that are more user-friendly.

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 IaaS – Infrastructure as a Service
• Infrastructure vendors provide raw physical capacity for Cloud computing.
This may include any combination of hosting, a development
environment, and/or storage.
– As an example, with managed hosting (e.g., through IBM or
Terremark), customers get all their infrastructure provided to them
and are responsible only for the apps sitting on top, relieving them of
the infrastructure burden.
– Other alternatives are vendors (e.g., Google) who allow you to build
your own apps using their development environment, and then have it
hosted on their service through the Cloud.
– Similarly, Amazon provides Cloud storage with its S3 offering.

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A who’s who of the Cloud

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 Shift in Technology

Cloud computing made possible by the shift to internet technologies that are
built on Webbased standards and protocols
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 Why the Cloud now…
• The Cloud has been enabled by a confluence of technology advances Cloud
computing has been enabled by the emergence of broadband capacity, and makes
use of low-cost commodity hardware and virtualization

• Cloud computing is a shift away from client-server computing

Cloud computing is a significant challenge to established software companies –
notably Microsoft – but even others such as Oracle, and SAP

• Cloud computing is, in some ways, a throw-back to the mainframe days

Cloud computing is similar in some ways to the mainframe model. One similarity is
that the end-users interact with the mainframe through a zero-footprint client (a
dumb terminal in mainframe terminology). They send instructions via the Internet to
a remote application that acts as a service-based utility. Another similarity is that
Cloud computing optimizes the joint usage of system resources and significantly
improve overall efficiency.

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 Cost Comparison
For an OnPremise application deployment, the actual software is only a fraction of the cost.

On the other hand, to deploy 1.1 million OnDemand CRM users, Salesforce.com incurred ~$513mn in
direct cost (which includes capex and cost of revenue). Thus, the implied average cost to deploy one
OnDemand subscriber is ~$468 ($513mn/1.1mn subs). This compares to the $10,000/license for an
OnPremise deployment, a savings of 20x.
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On-Premise Vs On-Demand

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 Growth Drivers

The many technology drivers that have enabled Cloud computing

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 Advantages of Cloud Computing
 Common s/w version - When a company upgrades its Cloud application,
all customers are upgraded at the same time.
 Improved reliability: With so much effort dedicated to one infrastructure,
the reliability tends to be much higher than most customers can achieve
on their own
 Fewer data center personnel: This is because they are focused on one
system for hundreds or thousands of customers, instead of hundreds or
thousands of systems, one for each customer
 Better data center personnel: The cost savings allow Cloud companies to
invest in the best and most knowledgeable people.
 Full redundancy: Most Cloud companies now have multiple data centers,
which provide complete redundancy in the case of a disaster.

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 Benefits
 Cost savings
 Pay-as-you-go pricing
 Resource Flexibility
 Ease of use and speed of deployment
 Vendor accountability
 Low switching costs

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 Barriers
 Reliability concerns
 Performance issues
 Security concerns
 Difficulty customizing
 Organizational inertia

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