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What Is Cloud Computing?

Cloud computing is a broad term that simply means delivering computing services - which may include servers, databases, storage, networking, software, data analytics, security solutions, organizational systems, virtual computers, and much more - over the Internet. The term "cloud" came from a symbol in old flow charts and diagrams used to represent the Internet (see Figure 1.1). This symbol suggested resources exist, but we may not necessarily know exactly where they are or how they work. But, through Internet connections and Web-based interfaces, we can set up and configure exactly what we need to use. So, cloud computing becomes the mindset for shared resources that can be used economically from just about anywhere.

The phrase "Cloud Computing" originates from the "Cloud" symbol used in flow charts and diagrams to represent the Internet. The idea is that any computer with a Web interface has access to an incredible pool of computing resources, power, applications, and files.

Why Cloud Computing?

Cloud computing was the result of the perfect storm to continue the atmospheric paradigm. With the growing number of software systems, databases, security requirements, hardware needs, and so forth, IT specialists found it difficult to keep up. Becoming an expert in so many areas was daunting and beyond the capabilities of many Information Technology (IT) departments. Technologies changed continually. Hardware and software updates needed to be rolled out across organizations that often were spread out geographically. Chief Information Officers (CIOs) and IT managers looked for ways to reduce the burden and provide high end services to end users who needed to do their jobs.

At the same time, the Internet was maturing to the point where high-speed connections meant increasingly complex applications worked remotely. This opened the door to many new possibilities. Experts could be located anywhere that had an Internet connection. Suddenly, cloud computing concepts enabled IT specialists to offer new technologies within their organization without needing in-depth knowledge about, or high levels of expertise with each implementation. The cloud provided access to custom tool sets, even if the tools were used only on rare occasion. This allowed IT departments and users to cut costs and returned the focus to core business needs. Instead of IT driving the business, the business used IT to achieve success with its primary mission and to remove technology-related obstacles.

Figure 1.1 Flow chart origins of the cloud.

Cloud Computing's Focus

The benefits of cloud computing helped this new concept win rapid acceptance among Senior IT Managers (although lingering concerns remain which we will cover later). Today, cloud computing focuses on three primary areas: cost reduction, capacity planning, and business agility. All three areas relate to business needs and help make a case for moving to the cloud (see Figure 1.2).

Cost Reduction

IT costs generally come in two categories: (i) cost of new equipment/software (e.g. purchase costs); and (ii) ongoing costs of ownership (e.g. operational costs). As equipment ages and maintenance becomes more time consuming, operational costs can quickly escalate.

In many organizations, it is important to directly tie the costs of IT items to their related business uses. In other words, managers want to know how much it costs to accomplish business outcomes so the profitability of certain activities can be monitored. This alignment between IT costs and business performance can be very difficult to both understand and maintain. Several factors come into play here. First, software and hardware may be used in many ways and for many purposes across an organization. Second, IT expenditures often relate to what internal users expect their maximum usage to eventually become.

Think of it in this way. You have just graduated with your university degree. Your smart boy or girl friend sees the future value of your education and decides to make the relationship more permanent by proposing marriage (they love you as well I am sure!). You think ahead a little and decide to invest in your dream home. Even though it is just the two of you and you could happily live in a single room flat, you decide to buy a four bedroom mini-mansion with a swimming pool. The idea is that in the future, you will need bedrooms for your 2.5 children and a place for your mother-in-law to stay when she visits. If you were trying to allocate the costs, it would be a bit of a challenge. You do not have children yet, but you "bought" space where they will eventually sleep.

Figure 1.2 The focus of cloud computing.

Organizations face the same challenge. Do you buy for the future to leverage current purchasing power? Or do you wait until the last minute and face challenges that may include higher costs, slow implementation, and lack of availability? So, you can see the dilemma that many organizations face.

Figure 1.3 illustrates how purchases of software and hardware comprise part of a firm's total IT costs, but the ongoing costs can climb, particularly when a new item is acquired (represented by the stair step in "Purchases"). As items become older, often the cost of maintenance increases, sometimes in ways that were unexpected.

In most cases, operational overhead accounts for a large percent of IT budgets. Over time, these costs probably will exceed up-front investment and purchase costs. Think about everything that goes into operating expenses:

• Technical personnel with high levels of skills. This means regular training, certification and other costs are required.
• Software and hardware upgrades and patches that need testing, user training, and installation time.
• Software leasing costs. Many software packages require a yearly fee to pay for upgrades and so forth.
• Operation costs like electric utility bills and investments for cooling systems, surge protection, air filtration systems and so forth.
• The costs of security and access control measures must be in place. These operations are extremely important and include software, network, and physical infrastructure components (e.g. virus protection, intrusion detection, video cameras, locks, and so forth).
• Help desk, staff specialists, and administrative assistants might be required to track licensing, do training and provide daily assistance.
• In addition, many other expenses also exist (like insurance, audits, travel, staff meetings and retreats, et cetera).

Figure 1.3 Ongoing costs and purchases as part of total cost.

The costs of IT, since these are difficult to tie directly to a business activity, may be viewed as a cost sink. This often places IT expenditures right in the crosshairs of managers responsible for cutting costs and reducing budgets. So, IT managers must both innovate and cut costs. That can become a bit of a nightmare. Luckily, cloud computing can help eliminate many of these problems and we will investigate these advantages in Chapter 6.

Capacity Planning

Another area driving IT leaders into the cloud relates to capacity planning. This is the process of deciding how to prepare for the future. In the example of the house purchase, this would include discussions about how many children the happy couple might like to eventually have, how often visitors are expected, and other aspects of how future life is expected to unfold. As you can imagine, often planning and dreaming ends up a long way from reality.

In the IT world, similar activities occur. Capacity planning is the process used to determine and fulfill future demands expected to be placed on an organization's IT resources, duties, operations, and services. Often, the CIO or another senior IT leader is part of an organization's strategic planning group and works to understand the maximum and type of IT demand that may emerge. This figure is used to determine required resources and if existing IT assets are capable of meeting requirements for a specific time. Differences between perceived needs and existing capacity can have several results. If a discrepancy exists, a system might become overwhelmed, also called under-provisioned. Under-provisioned systems cannot meet the needs of the users. If the opposite situation exists and too much IT capacity exists, the system is considered over-provisioned. This is inefficiency and causes waste. Having too much capacity results in waste and money that could have been spent in other, more productive ways. Capacity planning focuses on minimizing any discrepancy, whether it results in over- or under-provisioning and seeks to achieve predictable efficiency and optimal performance levels.

Capacity planning can be approached from a variety of perspectives. Three popular approaches to capacity planning strategy are:

• Match Strategy which involves adding IT resources in small increments to match demand as best as possible. This strategy avoids over-provisioning but sometimes fails to take advantage of volume discounts. It also can result in systems that are not able to ramp up quickly enough (e.g. adding staff, training, and so forth).
• Lead...