Chapter 4
The Cloud Computing Paradigm Shift
Cloud computing represents a fundamental paradigm shift, bypassing many traditional functions provided by personal computers, workplace IT departments, and even government services. This transformative potential spans social, work, and business domains.
In the social sphere, cloud computing will transform life through three primary change agents: societal clouds, personal clouds, and clouds of things. Societal clouds serve groups with common elements-whether defined by geography, hobbies, languages, or interests. Examples include international clouds for organizations like NATO or the EU, national clouds for healthcare or politics, and community clouds for shared interests. Healthcare societal clouds could aggregate de-personalized data to track disease trends in real-time, predicting infection spread and optimizing resource distribution.
Personal clouds extend beyond today's storage services to encompass leisure and well-being, finance, and shopping. Future personal clouds might include video-streaming services, health wallets that store medical history and connect with monitoring devices, driving profiles that inform insurance rates, financial clouds that automatically generate tax returns, and shopping clouds that analyze buying patterns and manage electronic payments.
A cloud of things manages non-living entities for living users through the Internet of Things. Home clouds might control security systems, smoke detectors, curtains, lighting and heating based on personalized profiles for different occupants. Workplace facilities clouds could manage meeting rooms, tracking availability and coordinating with security or catering services.
In the workplace, two major trends are revolutionizing how we work: the replacement of traditional workstations with zero/thin clients and ubiquitous computing that enables work on any device. Zero clients (with embedded OS) and thin clients eliminate locally installed applications in favor of cloud-based solutions, reducing IT management overhead and improving security by centralizing data storage. Ubiquitous computing allows secure access to corporate resources from anywhere, anytime, on any device, transforming IT departments into cloud service brokers maintaining catalogs of approved applications.
Traditional businesses operate with a hub-and-spoke IT model where central IT manages core applications while business units handle specialized applications, often creating "shadow IT" that poses security risks and support challenges. Cloud computing is transforming this dynamic by lowering spending thresholds and reducing technical expertise needed to deploy applications. To survive, central IT departments must evolve into cloud service brokers that maintain service catalogs and manage provider relationships, shifting IT from a technical function to a specialized purchasing role.
Chapter 5
Understanding Cloud Pricing and Value Models
Every cloud service involves costs and benefits that must be carefully evaluated. Cloud providers use various pricing structures, while users need value models to assess benefits, enabling objective comparison between services and informed financial decisions.
Price models derive from underlying cost models that account for infrastructure, operations, inflation, power, licensing, labor, and capital expenses, plus margin and risk factors. These costs convert to recurring and non-recurring price elements that form monthly service charges. While cloud computing primarily uses utility and service-based models today, understanding all pricing approaches helps users evaluate options for private, community or hybrid cloud implementations.
Utility models meter usage and charge accordingly through regular payments. They include consumption-based models (paying for storage, processing power, and memory used), transaction-based models (charging per business transaction, data access, or application use), and subscription-based models (fixed regular payments regardless of actual usage). Transaction pricing works best when volumes are predictable and processes clearly defined, while subscription models resemble "all-you-can-eat" arrangements with contractual periods.
Service models base pricing on delivered benefits like SLA performance, risk transfer, or cost savings. They include fixed price models (transferring delivery risk through SLAs), volume-based models (charging by user count, storage, transaction speed, or bandwidth), and tiered pricing structures that establish pricing levels based on SLAs, volume, or spending thresholds.
Performance models rely on key benchmarks to determine pricing, often originating from employee compensation or outsourcing strategies. These include outcome-based pricing (rewarding cloud providers with bonus payments linked to specific business outcomes), business-linked models (assessing cloud computing's contribution to key performance indicators), and gain-share pricing (comparing actual performance against historical baselines to determine rewards).
Marketing-driven price models focus on attracting maximum customers and then monetizing the relationship. The freemium model offers limited functionality for free while charging for premium features, while the razor-and-blades model combines an inexpensive base component with profitable reusable components-like selling cheap razors but expensive blades.
Value represents benefits minus costs-essentially a cost-benefit analysis where benefits are specified in SLAs. In cloud computing, seven standard value models define common patterns of user benefit: operating expense, user demand flexibility, price flexibility, agility for time to market, location flexibility, asset optimization, and profit margin.
Traditional IT services require upfront capital expenditure and extra capacity to maintain SLAs, representing opportunity costs since that capital could be invested elsewhere. Cloud computing's operating expenditure model uses elasticity to avoid both opportunity costs and losses, with computing capacity growing to match business demand.
To translate cloud computing's value into financial terms, four key metrics are essential: payback method, net present value (NPV), return on investment (ROI), and time to market (TTM). The payback method measures how quickly you recoup your investment, ROI calculates the percentage of investment recouped, NPV accounts for the time value of money, and TTM measures revenue acceleration from faster market entry.
Chapter 6
Security, Governance and Compliance in the Cloud
Security in cloud computing must be holistic, encompassing organizations, users, applications, and devices while maintaining data integrity and privacy end-to-end. IT security protects computer systems and data from unintended use through six key attributes known as the "Parkerian hexad": confidentiality (controlling information access), possession (defining who controls information), integrity (ensuring data correctness), authenticity (verifying information origin), availability (enabling timely access), and utility (maintaining usability).
Security must follow the entire data journey-from user through network to computing system, software, storage device, backup device, and finally to archival systems. Each element must maintain consistent security characteristics aligned with user requirements for privacy, data integrity, and security. Elements sharing the same security characteristics can be grouped within a common security boundary called a security container, establishing trust among internal elements through network segmentation.
To enter a security container, three procedures are employed: identification (ascertaining user identity), authentication (verifying legitimacy through something you have or know like smart cards or passwords), and authorization (determining what authenticated users can do based on their roles).
Security monitoring employs multiple defense layers, including firewalls at security container boundaries, logs tracking users, services, and data, authentication monitoring, intrusion detection systems, and client-side protection through anti-malware software. End-user devices often represent the security chain's weak link, though thin or zero-client computing can mitigate this vulnerability through centrally managed operating systems.
Data integrity ensures information remains uncompromised during transmission and storage by authenticating endpoints, securing communication channels, and encrypting data itself. Channel encryption uses certificates to create Secure Socket Layer (SSL) connections through a handshake protocol, while checksums verify data integrity through algorithms that compute verification values.
Data loss prevention systems protect data in all three states: data-at-rest (inactive data stored in digital form), data-in-motion (fluid data being transported between endpoints), and data-in-use (active data in constant use). These systems discover, identify, monitor, manage and protect data throughout its entire lifecycle from creation through destruction.
Data privacy concerns personally identifiable information (PII)-information that can distinguish an individual's identity or is linkable to an individual. While most countries have data protection laws governing retention and transmission of such data, many directives are impractical and widely ignored. Data privacy depends on data integrity tools, with encryption being crucial for both "data at rest" and data in transit.
Cloud computing evolves faster than legal frameworks, creating opportunities for early adopters to exploit regulatory gaps. The challenge lies in jurisdictional complexity-when a cloud service operates across multiple countries (company location, user location, data storage location, and hosting location), determining which regulations apply becomes problematic. Users must specify legal jurisdiction before adopting cloud services, understanding who will access their data and which legal systems govern those interactions.
Chapter 7
Cloud Computing Use Cases: From Infrastructure to Business Processes
Cloud computing offers different levels of abstraction through its service models, each with specific use cases. Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) are particularly suited for computing-intensive workloads, storage, backup, and hosting applications with variable user demands.
A university department needing to solve complex problems quickly could create a community cloud where multiple universities contribute equal computing resources. The elastic nature of cloud computing ensures constant resource availability by utilizing computers across different time zones. This approach offers cheaper computing through resource sharing, reduced computation time, and more efficient IT infrastructure investment.
Website hosting presents unique challenges: unpredictable traffic patterns, traffic bursts during marketing campaigns or product launches, and infrastructure needs that must scale with business growth. The IaaS/PaaS cloud computing model perfectly addresses these web hosting requirements through its elasticity and usage-based pricing structure.
Cloud-based backup services provide critical protection against data loss, offering geographical separation from your primary location to protect against disasters like fires. To mitigate security risks, users can employ strong encryption before backing up files. For those already using cloud storage, it's advisable to use a different provider for backups to ensure data remains accessible if one provider experiences outages or business failure.
Software as a Service (SaaS) delivers complete applications where users only care about data accuracy and timeliness. Use cases include customer relationship management (CRM), billing and invoicing, collaboration tools, office productivity suites, and image rendering.
Customer relationship management helps companies manage interactions with current and prospective customers, allowing client description and follow-up strategy creation while providing reporting and dashboards to assess customer growth and attrition metrics. Major advantages of SaaS-based CRM include accessing customer records from anywhere, standardizing sales team performance tracking, and gaining instant revenue growth visibility.
As computing shifts from desktop to cloud, office productivity tools like word processing, presentation, and spreadsheet software are increasingly available as SaaS offerings. Microsoft provides Office 365 while Google offers Docs, Sheets, and Slides for online document creation and real-time collaboration. With computing power concentrated in the cloud, users need less powerful client devices, leading to the rise of thin-client devices like Chrome Books and Chrome Boxes.
Information as a Service (INaaS) provides manipulated data as meaningful information. While data lacks context, information provides contextual data, and knowledge adds expertise to information. INaaS integrates IaaS, PaaS, and SaaS components with well-defined interfaces, flexibility for business needs, deployment across various cloud models, scalability through elasticity, automation, and utility-based pricing.
Use cases for INaaS include regulatory information (delivering information about regulations applicable to a particular organization), tax information (providing relevant tax information wherever and whenever needed), price information (transforming raw price data into actionable information relevant to immediate circumstances), health-related information (alerting users or designated contacts when health readings reach certain levels), and curriculum information (delivering student-specific timetables for lectures, tests, lab sessions, and homework assignments).
Business Process as a Service (BPaaS) delivers vertical or horizontal business processes using workflows, cloud computing technologies, and consumption-based price models in an automated or semi-automated manner. As the highest abstraction level in cloud computing, it builds upon and incorporates other abstraction levels (IaaS, PaaS, SaaS, and INaaS).
BPaaS use cases include taxation and tax planning (automating information retrieval to ensure current data availability), payroll functions (processing salary payments, pay slips, and tax deductions), training delivery (leveraging BPM's optimization knowledge to create powerful change potential for the training industry), examinations and testing services (integrating with the learning experience through webcams and voice biometrics for identification), and health monitoring (storing health information, automatically assessing it to raise alerts if health deteriorates, and sending vital information to doctors).
Chapter 8
Transitioning to the Cloud: Strategies for Success
When transitioning to cloud computing, organizations need a strategy comparing current and future IT landscapes. Five distinct usage models exist, classified by how tightly IT couples with business. The first model uses a single IT service provider controlled by central IT. A better approach uses multiple providers with central IT as broker. The third-order model introduces a service integrator to handle integration between providers and business units. The service delivery model addresses cloud services natively, with central IT maintaining a catalog of services while business units engage directly with providers. The most evolved model-service consumption-distributes IT functions within business units, making the organization more agile with minimal central IT oversight focused on standards and governance.
Interoperability-the capability to use similar cloud services from different providers-is essential across all usage models. It extends beyond technical matters to billing, reporting, management, business processes, and data integration regardless of cloud delivery model. Organizations need a comprehensive interoperability checklist covering governance, compliance, security, data integration, process integration, business continuity, monitoring, and billing to ensure seamless service operation.
Cloud transition provides an opportunity to redesign business processes for greater efficiency. The Business Process Re-design model created by Hammer and Champy offers a structured approach to improving processes alongside cloud adoption. The model evaluates whether processes are necessary, then implements only those deemed essential-some as BPaaS services, some using other cloud models, and others outside the cloud entirely, based on organizational requirements and critical success factors.
When transitioning to cloud or evaluating new services, organizations need clear requirements as benchmarks for comparison and SLA development. Requirements fall into three categories: functional (maturity, interoperability, feature-set, usage model), non-functional (security, availability, resilience, network capacity), and business-related (pricing, risks, business continuity, support, reporting). Organizations can create weighted scoring matrices to evaluate services against these requirements, with weights reflecting organizational priorities.
The cloud maturity model provides a framework with five progressive levels: performed, defined, managed, adapted, and optimized. It evaluates maturity across five dimensions: people, processes, monitoring/reporting, governance, and financial management. Organizations can have different maturity levels across dimensions, with overall maturity determined by where most characteristics align. The model serves dual purposes: creating improvement strategies for transitioning to higher maturity levels and understanding cloud computing best practices.
Chapter 9
The Future of Cloud Computing
Cloud computing's role as an enabling technology for automation and abstraction positions it to create paradigm shifts in work, society, and life. Emerging technologies and trends related to cloud computing will catalyze changes in the future technology landscape.
The Internet of Things (IoT) connects numerous devices with microprocessors to the Internet. When services supporting these devices are automated in the cloud, you get the Internet of Services (IoS). The processing that monitors IoT devices and executes services to support them typically resides in specialized clouds called "Cloud of Things and Services" (CoTS), which may be private, public, community or hybrid depending on needs. These services can be applied to smart homes, wearables, smart cities, smart grids, and retail, with applications extending to banking, manufacturing, healthcare, farming and transport.
Personal clouds serve individual needs: storing documents, electronic wallets (financial or health), shopping baskets, and media. With IoT and wearables, people increasingly measure health metrics like blood pressure and heart rate, storing them in health wallets developed by Microsoft, Google, and Apple. This creates an intersection between personal clouds and CoTS-your health wallet could alert you, your doctor, or family if metrics exceed certain thresholds.
As cloud providers gain experience, service costs should decline according to the "experience curve" concept, which suggests that as organizations gain experience producing a product or service, costs decrease by 20-30% in real terms each time accumulated experience doubles. This experience curve manifests in cloud computing through reduced technical skill requirements and less effort needed to use cloud services over time.
A potential innovation is a cloud service exchange where cloud services can be bought and sold as commodities in real-time, similar to a stock market. This would be easier for lower abstraction services (IaaS, PaaS) than higher ones (BPaaS). Interoperability would be crucial, allowing services to be replaced seamlessly and instantaneously. Users would benefit from fair pricing based on supply and demand, with real-time price and service discovery enabling instantaneous trades.
Cloud computing will continue to transform business practices by enabling greater automation without infrastructure investment, allowing businesses to instantly access scalable computing through monthly payments. This will likely increase workplace productivity, though temporary job displacement may occur before new types of jobs emerge. Technology has dramatically shrunk our world, allowing new businesses to achieve in months what once took years. Cloud computing extends this global reach to automated business processes and information availability, making it the ideal platform for entrepreneurs to rapidly launch new businesses with minimal financial investment.
