Managerial Issues

**6. Managerial Considerations**

Companies must be competitive to provide the best products and services.  By embracing the latest technologies, processes, methodologies and applications is one way to accomplish this.  To make the best decisions managers must be dynamic and must be provided with the most up-to-date information to quicken changes in business processes.  It is difficult to quantify profitability in terms of information systems because most of the advantages are intangible.  A tool to aid managers to understand the prospective outcomes and benefits are cloud computing models [5,7,10].  Predominantly, the motive for change to cloud computing is seen from a cost perspective as organizations realize information technology is grossly underutilized but their investments for such processes are substantial.  There are other considerations and deciding factors when contemplating cloud computing.

More and more companies are moving their enterprise workloads to cloud-based deployment models.  What are their deciding factors in doing so?

This graph pictures the projected public cloud computing spending for a six month period starting in January, 2015.  Note, in terms of estimated spending, SaaS leads compared to IaaS and PaaS.

Figure 7 depicts increases of 34% spending for private clouds.  A large majority of businesses, 53% have company-owned private clouds, whereas 32% are using third-party clouds.

Various papers discuss two business models amenable to adopting cloud computing.  The first type of business model is for companies with an existing IT infrastructure.  The second type of business model is for startup, small or medium sized companies [4,7,10].

**6.1 Comparison of Existing vs. Startup Companies**

It may not be profitable or economical for companies with larger existing IT infrastructures to migrate or adopt cloud computing.  These companies spend less per capita to operate their own resources.  However, such companies could use cloud applications for non-critical services.

Literature refers to startup, small or medium organizations being the most eligible candidates for cloud computing.  There is no upfront investment in buying servers, building and floor space to build datacenters, no electricity costs and no acquisition of software licenses.  These organizations can have the same benefits of large companies without the hassle or cost.  Therefore, small companies can start out small and invest in resources to increase their hardware as their business grows.

**6.2 Return on Investment (ROI)**

Costs of migrating to the cloud are operational in nature as there is no initial investment.  Expenditure of cloud computing can be monthly or yearly and is based on pay-per-use.  Savings include the eradication of the datacenter or cutback in costs depending on the organization’s full or partial migration to the cloud.  Cost benefits also include flexibility of service, scalability, latest technology and elasticity of resources.  An added benefit of using the latest technology is it may point to additional profits for the organization.  Using cloud services for extra resources while maintaining its own datacenter for critical data is appropriate for a large enterprise.  This configuration may lead to a reduction in servers which is also a savings.

Companies can use cloud computing to explore, innovate and experiment with better applications and platforms.  This is a more efficient manner to perform these processes at a reduced cost than if the company were to purchase these services individually.

Because resources are made available in minutes, not weeks or months using cloud service, customer satisfaction is increased.  Dissatisfied and rejected users generate zero revenue and may never come back to a company due to poor service.  Scalability of cloud computing will enable a company to avoid under provisioning.

Working faster enables companies the ability to capture the loyalties of consumers earlier as well as allowing the company the potential to gain extra sales for an extended period of time.  Cloud computing will allow companies to complete work much faster.  Completing work much quicker enhances the time to market and could potentially allow for the company to charge a premium for their service or product.

**6.3 Miscellaneous Considerations for Cloud Computing**

There are a number of other considerations when contemplating cloud computing.  Numerous authors state that server usage tops 5% to 10% only as a global average.  This is due to organizations arranging for services that provide for peaks and spikes in service.  Therefore, cloud computing is advantageous when the company workload is highly variable.

For companies involved in computationally intensive jobs such as special effect movies and games, high-end animation, businesses involved in a variety of software and applications or research laboratories, cloud computing can be a great system.

For organizations that handle huge amounts of data which would require large bandwidth for storage and processing, cloud computing would not be a good asset as it would cost a substantial amount of money for these services [1,7].

A top listed concern for most organizations using cloud computing is security.  Even though there have been considerable advances in cloud securities, data needs to be guaranteed from fraud, abuse or unauthorized disclosure at every expense [10].  Therefore, not all services are cloud compatible.  Using cloud computing for highly critical work may not be reasonable.  There would need to be in place very strict service level agreements (Slaps) with the cloud provider.  The cloud could be very suitable for less critical work which is well standardized.

**6.4 When is Public Cloud Computing Preferable to Running a Private Cloud?**

As mentioned throughout the paper, if an organization is not sure of the demand for their services or if their services peak and spike over time, cloud computing would make sense.  Cloud computing would allow this type of organization to acquire only what computing resources they actually use.  Otherwise, organizations are paying for services that a mostly underutilized and costly.

Cloud computing allows an organization to purchase separately for resources; it makes economic sense to use a pay-per-use service model because most organizations do not make equal use of network bandwidth, computation or storage.

Migration to the cloud may be a one-time task; however, for organizations with large infrastructure the cost and effort can be significant.  This should be a consideration when determining the use of cloud computing.  Further savings may occur when converting to cloud computing for management of technology, maintenance and service costs [19].

Basic applications such as email and office or collaborative technologies which are general purpose applications are appropriate for moving to the cloud.  More difficult and costly a task would be to move internally developed applications, legacy applications and third-party software.

**6.5 How Businesses are Using Cloud Computing**

The above graph, from results of a survey by KPMG depicts ways in which businesses, mostly large enterprises, in 2014 were using cloud to automate their services, improve their business processes and allow for stronger mobile workforces by greater than 70% in each case.  The survey suggests there are other advantages in using cloud computing than cost savings such as a greater focus to central business needs as listed above in the graph [21].

 In Disney’s case, the 110 billion dollar corporation opted to integrate two cloud provider services to create their own private cloud.  Disney wanted greater control and to own its cloud outright.  Disney chose from cloud providers that offered layers of technology which could stand on their own enough to be integrated into other technologies.  In doing so, Disney was able to choose the best tools for the job despite where they came from.  This is a great adoption of cloud by an organization although critics may argue that it will cause more harm than good in the long run.

In my case, I am currently working with a venture capitalist to open a pain management laboratory.  Because this will be a small startup company, I am suggesting the use of cloud services for our computing needs.  A major factor in the use of cloud services will be cost savings.  However, because we will be dealing with billing patients through Medicare and Medicaid for services, we will be looking into a cloud program suitable for that function.  Medicare and Medicaid direct the use of electronic billing and I have found there are many cloud vendors that offer this type of service.

Cloud computing is a growing business.  Amazon Web Services (AWS) “may be the fastest growing corporate technology business of all time” [22].  Although Amazon was not the first cloud computing service provider it is by far the most successful at the present time.  It is estimated that AWS has an annual revenue worth approximately 6 billion dollars.  Amazon is on top of the market for innovation in cloud computing being the first to have rentable computers while also getting into the business of selling private cloud systems to organizations like the CIA.  Since then, Amazon has been swamped with similar requests from other organizations.