Why cloud computing?

The origin of “cloud computing” term is unknown but the concept of cloud has been there in since internet. I have seen diagrams with cloud depicting the internet or grid of sophisticated computer network. Back in old web development days I used to deploy websites and its database on remote web/database hosting servers available publicly which shared resources between different websites/databases hosted on these servers. The concept of cloud computing is the same but goes beyond websites and database and has a lot to offer.

Today the concept of cloud has evolved to an abstract remote network of computers providing processing, storage and networking capability which can be accessed via internet. Cloud computing refers to the usage of dynamically allocated resources based on demand via remote calls. The concept is an analogous to the SOA (Service oriented architecture) which provides processing, execution and business logic abstraction and reusability accessed remotely. Cloud computing goes beyond this and provides infrastructure capabilities (IaaS), platforms (PaaS) and software (SaaS) as a service which can be reused, shared, dynamically allocated and called remotely.

SOA was a paradigm shift in distributed computing from the conventional peer to peer communication and provides business benefits like lower cost, less time to market the product and technological benefits like reusability of business functions, less connectivity management, less support overhead and less effort in IT change management. I won’t go into the details of how SOA is capable to provide these benefits. You can search more about SOA if you have confusions and questions about it.

Similarly cloud computing is a paradigm shift in the business and technology model. Cloud computing also has private, public and hybrid deployment models. I will focus on public cloud deployment and discuss the factors that benefits business and technology of the organization.

Changing the Business Model:

First let’s take a look how cloud computing fits and changes the business model. By business model I mean the cost, payment, calculation and business focus shifts for an organization. If an organization adapts public cloud computing it will be renting resources than owning the resources. This will effect the balance sheet of the organization shifting CAPEX to OPEX model, meaning that amortization of resources over the years will be replaced by operating expenses which is analogous to rather than owning a car hiring a taxi. In addition, avoiding the cost of owning the resources will enable the organization to use its capital investment in its core business. You can think for e.g. instead of investing your money to buy a car & maintaining it you can use this money in other core activities and keep hiring a taxi. This means you are having pay-as-you-go model instead of paying upfront which will be helpful in increasing the liquidity for the organization.

This also transfers the technology risks like upgrades, downtimes and maintenance issues to the cloud hosting company. This is analogous to our car example that if you hire a taxi you don’t care about its maintenance, breakdowns or accidents. You ensure that whenever you want to travel you can do so without any hiccups.

So this ensures business continuity without owning the risks and mitigation methods.

There is a marketing hype that cloud computing helps organizations to save costs and achieve economies of scale. I would say it can be possible but in reality we have to look at a lot of factors. If our renting cost outweighs the owning cost then we are in a loss from cloud computing and economies of scale is an illusion. So the organization adapting cloud computing has to do its analysis and then justify this point. Normally predicting or formulating the justification of adapting cloud computing vs. owning the resources would be a challenge and would require due diligence, vision and planning. In the upcoming blog post I plan to write about some use cases of cloud computing and genes of applications that might be a good candidate to host in the cloud due to their nature and are widely accepted in the industry to be hosted in the cloud rather on premises.

Changing the Technology model:

Other important factor is elasticity and dynamic allocation of resources based on demand. This is the beauty of cloud computing that you pay for what you use and can scale up/down or de allocate resources for any duration at any point of time. This factor is very important for companies which have significant variation in customer base, business cycles and peak business hours. Lets take an example of a new dynamic website which attracted people and needs scaling up continuously because of the increase in usage and customer base. Moreover it’s used to the maximum in peak hours for 7-8 hours while rest of the time the resources are sitting idle.

In contrast if we use fixed on premises hardware it would be very difficult to scale up the hardware all the time involving downtimes and resulting in unsatisfied customers. It would also waste resources when the business cycle is in a recession or during non peak hours. For e.g. take an example of a web site selling tickets for FIFA world cup. This website is a good candidate to host in the cloud because the maximum customers logged in would be in day time in the region where the world cup has to be hosted and the volume of customers can vary. Also after some time the web site will be depreciated, in this case de allocating resources from the cloud would be easy rather than liquidating a lot of hardware.

Summing it up, the factors mentioned in this article can urge the organization to adapt cloud computing and shift the business and technology paradigm. There are a lot of myths and misconceptions about cloud computing like privacy, data security and re-architecting of applications which hopefully I will write about in the upcoming posts.

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