What is Cloud Computing?
According to the National Institute of Standards and Technology (NIST), cloud computing is defined as: ‘a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction’ (Ruparelia, 2016, p. 4). This essay will discuss the historical development of Cloud Computing technology, the major stakeholders and current state of the industry, and the benefits and disadvantages of the technology.
The Visionaries – Heads in the clouds
Cloud computing has its origins in the 1960s, with two notable figures heavily involved in its conception. J. C. R. Licklider, former director of the Defense Advanced Research Projects Agency (ARPA), was the first to envision a network of geographically separated devices, enabling the computer to function as communications tool rather than a mathematical/operational one. Licklider’s vision led to the creation of the ARPAnet, the precursor to the internet. John McCarthy, renowned for coining the term ‘artificial intelligence’, also proposed timesharing a method allowing multiple computers to access and utilise the resources of a powerful (and expensive) mainframe system.
Development of Cloud Technology
Despite the work of these visionaries, cloud computing developed slowly until the 1990s, at which point there was sufficient bandwidth to advance the technology (Mohamed, 2018). In 1994, Professor Noah Prywes gave a presentation at Bell Labs, during which he proposed that US telecommunications heavyweight AT&T should invest in providing computing/IT services to companies as a utility (Faynberg, Lu, & Skuler, 2016). At the time, this was a radical (and seemingly impossible) proposal as telecommunications companies of this era made their money selling physical technology and equipment. While the idea of enabling companies to outsource their IT infrastructure was appealing, Prywes’ vision wouldn’t be realised until a decade later.
One of the forerunners of commercial cloud computing was Salesforce, which commenced operation in 1999 and provided customer management software to enterprise customers via the internet (Mohamed, 2018). Despite its lead, Salesforce would soon be joined by the likes of Amazon, Microsoft and IBM (MarketLine, 2018).
The Cloud Computing Market
According to an industry report by MarketLine (2018), the cloud computing market is growing rapidly, having tripled in value since 2014 and growing 30.5% in 2017 to reach a total market value of $120.8 billion. The industry is forecast to reach over $352 billion by 2022, although growth is predicted to slow after this point as a larger proportion of the market implements the technology and cloud computing moves towards commodification.
Currently there are four major companies dominating the cloud computing market. The market leader is Amazon Web Services (AWS), with data centres in 5 continents and servicing businesses in 190 countries. Amazon was an early entrant to the cloud computing market, launching AWS in 2006.The other major competitors are Microsoft Azure, IBM, and Google Cloud. Despite coming to dominate the cloud computing industry, each of these companies started life with a different market offering. IBM is arguably the most logical fit for the industry, given the company started as an IT infrastructure and software service provider. The other three, despite starting life as an online book retailer, a search engine and an operating system vendor respectively, have each managed to carve out a sizeable portion of the industry.
Industry Categories: SaaS, Paas & IaaS
The three categories within the cloud computing industry are infrastructure as a service (IaaS), platform as a service (PaaS) and software as a service (SaaS) (Faynberg et al., 2016). Each varies according to the components of the IT stack managed by the service provider (See Figure 1).
Figure 2 shows the industry breakdown by category, with the most valuable segment being SaaS, accounting for $72 billion of the total industry value.
Who Benefits from Cloud Computing?
There are a multitude of benefits resulting from cloud computing, effecting both consumers and businesses of all sizes.
Firstly, the economic benefits of this technology cannot be understated. Traditionally companies would need to manage every component of their IT stack, requiring a significant amount of infrastructure, equipment, technical expertise, manpower and, most importantly, investment. Cloud computing alleviates the cost of implementing and maintaining some (or all) of these components, and therefore allows companies to instead focus the extra resources on their own products or services (See Figure 3). This has resulted in radical shift in corporate expenditure models. Previously companies needed to contribute an initial fixed investment in order to use the above technologies. Now they can simply subscribe to the services of a technology provider and pay only for the services they actually use (Ruparelia, 2016).
Additionally, these capabilities can be deployed rapidly, significantly shortening time-to-market for the companies that acquire them. This has significantly reduced the barriers to entry for start-ups and smaller businesses to enter the technology market, largely eliminating the need to invest in on-premise legacy hardware (Mohamed, 2018).
Cloud computing also offers users a great deal of flexibility to businesses. The cost of cloud services is elastic, meaning a company can rapidly increase its computing resource consumption during periods of high demand, or decrease its usage when demand is low. Furthermore, users are only billed for the resources they actually use, meaning no waste is incurred. Users are also able to easily migrate their systems from or between cloud providers in order to take advantage of new developments in the technology (Pendse, 2017).
Cloud Computing and the Consumer
Cloud Computing also has important implications for consumers. Many products and services we use regularly are based on the principles of cloud computing. Dropbox, Spotify, Netflix and even Facebook are examples of cloud-based software services. While some consumers are concerned over the shift towards the renting or shared economy model that these service providers utilise, there are considerable advantages. For one, much like how companies no longer need to invest significant capital in hardware and IT infrastructure, consumers also face fewer barriers to entry. Previously, an avid music fan would have required a sound system, a physical storage medium (e.g. a cd, cassette or vinyl) with their desired music on it, a device to play music, and the accompanying space to store all of this equipment. The affordances of cloud computing have meant that now instead of investing in all of this, consumers are able to subscribe to a service like Spotify or Apple Music and access a vast library of audio material from their phone, circumventing the need for any other equipment save perhaps some speakers or a pair of headphones.
There is also a considerable environmental benefit to cloud computing. Given the growth of the industry, the energy consumed by cloud service providers is predicted to increase significantly (See figure 4), reaching 8000 terawatt hours by 2030. Despite this, a centralised cloud-based data centres show considerable promise in terms of sustainability, consuming 87% less energy to store a byte when compared to traditional decentralised data centres (Di Salvo, Agostinho, Almeida, & Giannetti, 2017).
There are some notable disadvantages to cloud computing, all of which apply to both enterprises and individual consumers. Security is a major concern, as typically all of the data hosted by a cloud service provider is centralised on their own systems. As such, if the service provider should suffer a cyber-attack, all of their customers’ data is put at risk. However, there are some solutions to this issue, such as the use of localised or hybrid data storage models (in which sensitive data can be stored locally), the use of data encryption, and protection via identity verification and access management.
Servers maintained by a cloud service provider can be compromised not just by cyberattacks, but also by bugs, outages or physical disturbances like natural disasters. While having detached or offshore data centres is advantageous, particularly with regard to cost, there are also significant disadvantages. In 2012, electrical storms in Northern Virginia saw Amazon’s servers go down, resulting in crashes for Netflix, Spotify and Instagram, as well as a significant number of other companies utilising AWS. Although these outages typically don’t last long, they are a major inconvenience to both customers and those companies effected.
Despite being a multi-billion dollar industry, cloud computing is still in its infancy. Considerable growth is expected in this industry and will primarily be led by the major players within the market. However, due to CC’s ability to reduce barriers to entry in the technology sector, we will likely see development and innovation at all levels, particularly in the SaaS category. There are many benefits to CC, however the most significant is the economic advantage provided to users through centralised IT infrastructure. There are also substantial benefits for businesses and consumers alike in terms of convenience, flexibility and sustainability. Notwithstanding, concerns around the vulnerability of cloud servers, particularly as a result of cyberattacks or service outages, have slowed adoption of this technology.
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