Cloud Computing for Business


Why this Guide Is Important

Every few years there is a new hot topic that becomes the focus for media and analyst attention. Enormous benefits are stated, and there are staggering predictions for market growth. The benefits may be real, and the predictions may be accurate, but they are given in such general terms that it is hard for a particular company to understand how it can take advantage of the new phenomenon and share in the growth.

This is certainly the case with cloud computing. Many benefits are claimed, including greater agility, lower cost, improved security, reduced risk, easier compliance with regulation, higher-quality IT support, and better business continuity. Analysts predict compound annual growth rates of over 25% in the cloud computing market.

“So does this mean,” you might ask, “that my company can grow by 25% by using cloud computing? And, if so, how exactly do we do it?”

The authors of this Guide believe that cloud computing is a major development in IT, that it will grow as predicted, and that it can deliver real business benefits to companies.

It is a complex concept. It is not based on a single technological breakthrough, but comes about through the combination of several innovations and improvements, most notably the development of virtualization, the increasing capacity of the Internet and the growing sophistication of Internet-based technologies. It has five essential characteristics: on-demand self-service, broad network access, resource pooling, rapid elasticity, and measured service. It has three service models: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS). It has four deployment models: private cloud, public cloud, community cloud, and hybrid cloud.

Essential Characteristics

Service Models

Deployment Models

On-demand self-service

Broad network access

Resource pooling

Rapid elasticity

Measured service

Infrastructure as a Service (IaaS)

Platform as a Service (PaaS)

Software as a Service (SaaS)

Private cloud

Public cloud

Community cloud

Hybrid cloud

The Characteristics and Models of Cloud Computing

You cannot simply say: “We will use cloud computing,” and expect your company to be transformed, as at the wave of a magic wand. It may not be the best choice in every situation, or in every enterprise. You must understand cloud computing, the different forms it can take, the different ways it can be used, and the different ways in which it can benefit your company.

For a company to adopt cloud computing successfully, depending on the change it is imposing, various stakeholders must be involved. As is also the case with traditional outsourcing, new skills may be needed and old skills may be obsolete. The transition may imply a large change-management exercise.

The company’s executives must have a shared understanding. Many parts of the company are affected, and there are complex decisions to be made. Making the transition to cloud computing requires a corporate team effort.

The Open Group is a consortium of companies that provide and use IT products and services. Many of those companies are thinking of using cloud computing, some are using cloud computing, and some are providing cloud computing solutions. They have gained or are gaining the understanding that they need for this. This Guide does not represent the views of any one of those companies, but it reflects their combined experience, and makes their shared understanding available to the wider IT community.

Cloud computing has a huge potential. To realize that potential, a company must use the form of cloud computing most suited to its needs, and in the way that will give it the best advantage. The aim of this Guide is to give you the information and understanding that you need to help your company to do this, and gain the maximum benefit from cloud computing.

Who this Guide is for

Cloud computing will affect many people in any organization that uses it, both directly and indirectly.

Members of the governing board of an enterprise may not be concerned with day-to-day operations, but will need to understand the language of cloud computing and the key factors involved in its use in order to provide overall direction.

Cloud computing has significant impact on IT investment and running costs. It also changes the risks that the organization runs in relation to IT. The CIO or CTO is responsible for ensuring that an organization has the IT capabilities that it needs, and that they give a good return on the money invested in them. The ROI is also of prime concern to the CFO. All of these officers are concerned with the risks run by the organization. The use of cloud computing is likely to have an impact on the enterprise’s ability to change and innovate, risk model, financial model, and organizational structure. This impact concerns them, and should also concern the CEO.

IT managers are responsible for the provision and operation of the IT capabilities, and for the management of the departments that support them. They will be intimately involved in the use of cloud computing.

Line-of-business managers are responsible for the effective operation of their departments, and for making a profit or using resources cost-effectively. They will be concerned to ensure that cloud computing increases effectiveness and profitability in their business areas. In non-commercial enterprises, heads of departments responsible for service delivery will have similar concerns.

Marketing managers will be concerned with the reduced time-to-market that cloud computing can bring, and in the impact that its use might have on the enterprise’s image.

Many large enterprises have specialist risk managers. They will be concerned with the cloud computing risk model. Security managers will be concerned with the different threats that are presented by the adoption of cloud computing. Compliance managers will be concerned with whether the use of cloud computing is affected by laws or other regulations to which the enterprise is subject.

Procurement managers will be concerned with choosing and buying cloud services, and with gaining feedback on the value of those services in operation.

Business and enterprise architects want to understand cloud from a business point of view. IT consultancies providing outsourcing or integrating cloud services on behalf of organizations need to know how they can best deliver the services their clients require.

This Guide is for all of these people, and indeed for all executives whose companies are using, or thinking of using, cloud computing.

How this Guide is Organized

This Guide is organized as described below.

  • Chapter 1: What is Cloud?

    The first chapter explains what cloud computing is and describes how it can be used.

    The explanation is based on the standard definition of cloud computing developed by the US National Institute of Science and Technology [NIST]. It includes an overview of the definition and sections on cloud computing Essential Characteristics, Service Models, and Deployment Models.

    This is followed by a brief discussion of an extension of the NIST model that many people advocate, Business Process as a Service, and a summary comparison with traditional environments.

    Organizations can take different roles in providing cloud services, developing and providing added services that are based on cloud services, and using cloud services and added services. There are different issues and considerations that impact each role. This is discussed in Providing and Using Cloud Services.

    The really exciting thing about cloud computing is its potential to transform business. The final section of the chapter sketches this broader impact. Organizations can create and use IT and business services on-demand from optimal sources to maximize utilization and cost-effectiveness, and this is leading to a new paradigm with cloud-supported business ecosystems.

  • Chapter 2: Why Cloud?

    This chapter discusses the main reasons why enterprises are adopting cloud computing, under the headings of Agility , Productivity, Quality, Cost, and New Business Opportunities.

  • Chapter 3: Establishing your Cloud Vision

    Your business situation is either a problem or an opportunity for which you are seeking a solution that includes IT enablement. You see a technological possibility as the way to solve your problem, or seize your opportunity. This is your architecture vision. This chapter describes how to establish an architecture vision with cloud computing as the technical possibility.

    The first essential step in establishing the vision is to ensure that you understand your business context. The chapter starts by putting forward a set of considerations that will help you achieve that understanding – see Understanding the Business Context. This section is derived from the Cloud Buyers Requirements Questionnaire [BUYERSQ] previously published by The Open Group.

    The book includes three large examples to illustrate and explain its ideas. These describe fictional companies that are chosen to show different aspects of cloud computing. These examples are introduced in the next section of the chapter – see Three Example Cloud Projects. Spreadsheets containing the figures and calculations from these examples are available for download from The Open Group web site.

    There follows a cloud buyer’s decision tree – see Assessing Cloud Suitability – The Cloud Buyer’s Decision Tree – that helps you to determine whether cloud computing belongs in your vision, and in what form. Cloud computing can bring business benefits to many enterprises. It is, however, not always the right solution, and there are several forms of cloud computing, which have different advantages in different situations. The decision tree is an aid to decision-making, not a definitive algorithm, and was previously published by The Open Group as a White Paper [BUYERSTREE].

    The final section of the chapter – The Example Project Visions – illustrates the application of the decision tree to establish a cloud vision, using the three large examples.

  • Chapter 4: Buying Cloud Services

    Many enterprises that adopt cloud computing will do so by buying cloud services, and the process of doing so is described in this chapter. The chapter includes discussion of the key factors to consider – cost models, security, availability, performance, manageability, and so on – and describes how to model the use of cloud services. This material is assumed by some parts of the subsequent chapters, and is important even if you will not be directly involved in purchasing a cloud service.

    Buying and using cloud services follows a lifecycle, in which services are selected and their use is reviewed as a basis for renewing or replacing them. The chapter follows this lifecycle, describing the successive phases of Determining Fit, Establishing Requirements, Selection, and Monitoring.

  • Chapter 5: Understanding Cloud Risk

    Risk is a fundamental issue for any enterprise. This chapter is about how to understand the main risks associated with cloud computing. Its approach is based on the Mosaic approach to risk management that was developed at the Carnegie-Mellon University Software Engineering Institute (CMU SEI).

    Risk management is a core business activity of all enterprises, large and small. The first section gives a brief introduction to the Mosaic approach to the topic.

    In this approach, a mission risk is a systemic risk that affects a program’s ability to achieve its key objectives. The chapter describes the typical mission risks for cloud computing projects, and explains the particularly complex factors that affect one of them – system quality.

    The final section of the chapter describes the process of risk assessment for cloud computing projects – see Continuing Risk Assessment.

  • Chapter 6: Building ROI from Cloud Computing

    Return on Investment (ROI) is perhaps the most widely-used measure of financial success in business. If you have a proposal to use cloud computing in place of in-house IT, this is how you and others will want to assess it. This chapter discusses the qualities of cloud computing that affect ROI, and describes how to measure, and maximize, your ROI from cloud computing. It is based on the White Paper Building Return on Investment from Cloud Computing [CLOUDROI] previously published by The Open Group.

    How does cloud computing contribute to ROI? There are a number of fundamental drivers that impact on investment, revenue, cost, and timing that can be positively influenced by using cloud services. They are described in the first four sections of the chapter. They relate to Productivity: More Business with Less IT, Speed: Getting There More Quickly, Size: Breaking New Ground, and Quality: Improved Margin from Better Service.

    The remaining two sections – Comparing ROI of Cloud and Traditional IT Solutions and Measuring and Tracking ROI – describe how to compare cloud and traditional IT solutions and how to monitor the drivers to maintain and build ROI from cloud computing. They are illustrated using the three large examples.

  • Chapter 7: The Challenge

    The final chapter summarizes the key drivers and issues for cloud computing, and describes the challenge that it presents to the business executive.

  • Appendix A

    The appendix contains the set of cloud business use-cases developed by The Open Group – see Cloud Computing in Use. The set was originally published as a White Paper [CBUC]. The appendix includes some additional material: analyses of the actors in the use-cases, and of the benefits that the use-cases show.

  • There is also a Glossary of abbreviations and terms used.