The Natural Advantage Created for the

Service Industry by Cloud Computing

Niraj Juneja

Webscale Solutions

http://www.webscalesolutions.com

Consulting , IT Strategy and Research

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What is Cloud Computing

Key Benefits of Cloud Computing:Changes the economics of IT from

being a capital investment to utility cost. Just as, you buy electricity as compared to buying generators , with cloud computing, you buy computing as compared to buying computers

Allows you to smoothly scale your business based on customer growth

Efficient use of computing power with ability to support elastic demand needs. Renting 1 Machine for 1000 hrs is nearly the same renting 1000 machines for 1 hr.

Drastically reduces complexity in Information Technology Management and administration lowering the total cost of ownership (TCO) of IT.

Wikipedia: Cloud computing is Internet based development and use of computer technology  whereby shared resources, software, and information are provided to computers and other devices on demand, as with the electricity grid.

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Cloud Types and Stages of Adoption Starting with Infrastructure as a Service , “the Cloud” stack’s up to

Platform as a service and then to Software as a Service – which offers the maximum level of Service Modularity and consequently maximum opportunity for service industrialization.

Increasing Service Orientation (Modularity and Service Industrialization)

Increasing Cost Savings

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SaaSSoftware As a

Service

PaaSPlatform as a

Service

IaaSInfrastructure as a

Service

Traditional

Traditional Bare Metal Custom

Cloud Types – Examples and Key Players Amazon, a retail shop, started the Cloud Computing revolution by offering

incremental compute and storage services to small businesses. It came from the bottom of the market , as compared to traditional top-down Enterprise focused approaches and kick started the creation of an industry

In

creasi

ng

Focu

s

Decreasing Flexibility (Decreasing ability to Customize)

Traditional$2-$5 per server per hr C

SC

/IB

M Private$1 per server per hr

.GO

V

osl

vCommunity50 cents per server hr

AW

S /

G

oog

le Public1.5 to 5 cents per hour

Traditional in housedatacenters

Managed Services type offerings from vendors like HP / IBM / CSC

Enterprise Vendors like IBM / CSC / HP – mainly private cloud offerings

Amazon EC2 and S3

Google Storage

Google App Engine , Google Predict

Amazon SDB , Beanstock

Twilio

Gmail , google apps

Force.com

Salesforce.com

Microsoft azure

Microsoft Live

VMVare has the most significant PaaS Offering for the Enterprise

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State of Cloud Adoption

Adoption faster than generally anticipated for a new technology

Government’s and Large Enterprise’s are aggressively adopting this technology

Industry Adoption ExamplesNew York Times — Using 3000 servers for 2 days of batch

processing(converting TIF to PDF)Los Angeles County and GSA – Google Apps collaboration software(reducede

mail cost by 50%)Wendy’s — Short-term, interactive promotional site for $0.99 menu.USA.gov and Data.gov — Govt. information web site elastically scalesNASDAQ — Market Replay serviceUS Army — Testing troop vulnerability application on cloud platformEli Lilly — drug research Indy500.com — streams live race footage and statistics

We are here2006-07 2008-09 2010

2010 has seen Cloud Computing move through the Chasm of “early adopters” to “pragmatists”

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Opportunity for Combinatorial Innovation Cloud Computing and its successful adoption in the life of consumers and

Enterprises will enable combinatorial innovation leading to creation of a new breed of focused IT-BPO providers.

As seen in the build-out of the last big cloud – the electricity grid - in the 20th century, the real revolution was not the way it reduced the cost structure for corporations dependent on electrical power, but the way it created new businesses altogether. We saw an avalanche of new products outfitted with electric cords, many of which were inconceivable before the grid's arrival. We should expect the same with the build out of the service grid.

Cloud Computing enables sharing of data, at an unprecedented level in the terms of the breadth and depth of data. This creates a natural advantage for the service provider in providing value-added services that rely on analytics and big data.

Economics of scope and scale naturally favor the cloud provider.

Focused Service Firms

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The Proliferation of Data Cloud Computing enables the digital life like nothing before. All Data resides

in the cloud , we have direct instantaneous data access on any device , we have read-write to the data access from any device.

Just like the assembly line , in 1909, optimized the assembly of mechanical parts revolutionizing the factory , the cloud has the potential to optimize the knowledge industries creating new levels of efficiency and new organization structures.

Examples. Twilio utilizes the cloud and the economics of scale that comes along

with that to provide a telephony infrastructure that is not only cost effective by several factors compared to traditional vendors but also offered on a pay as you go pricing/

GetSatisfaction.com can do a better job of improving customer satisfaction for clients by not only having a dedicated team for the job , but also , by knowing the consumers , living the digital life, much better than any other Enterprise

Open Table is best placed to underwrite restaurant insurance policies because it controls the restaurant inventory and knows the menu, the items people eat , the number of people visiting the restaurant etc , more so than the traditional insurance carriers.

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Cloud Brokers - The Micro-Multinationals

“ There will be small number of big

players and a large number of small players in the cloud computing space ”.

– Dr. Eric Schmidt , CEO Google

The barriers to entry for online businesses have been dramatically reduced with cloud computing.

The Cloud Computing Market is evolving into a three Tier Structure Tier 1 – The Big Cloud Vendors : • The World only needs 5 Computers – Thomas Watson – IBM CEO (1943)• These are typically hyper-scale , pan-global , broadband service giants with massive

data centers. These are like the shell’s of the Oil industry Tier 2 – Cloud Brokers /Micro-multinationals,• Small vendors that add a specific value add(regional , domain specific , custom

suitability).• They might have their own data center , but typically rely on the Tier 1 vendors for

sourcing their computing power.

Tier 3 – Cloud Users – Individuals , Small businesses , Enterprises. Source their needs from Tier 1 or tier 2 based on their specific needs and scale.