Cloud Computing: What is it really?

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Content Copyright © 2010 Bloor. All Rights Reserved.

There is a noise going about that cloud computing can cut costs, speed implementations, and scale quickly. However, the noise may be slightly off-the mark—particularly in product pitches!

Just what is Cloud Computing? provides the following definition, “Cloud computing is a general term for anything that involves delivering hosted services over the Internet. These services are broadly divided into three categories: Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS).” The term cloud is used as a metaphor for the Internet, based on the cloud drawing used to depict the Internet in computer network diagrams as an abstraction of the underlying infrastructure it represents. Martin Banks, Associate Analyst at Bloor Research for Data Centres, told me, “I prefer the term Exostructure—an externally sourced (and theoretically limitless) seamless extension of an internal IT systems infrastructure that delivers information services on a fee-paying basis. This is looking at the issue from the users’ point of view.”

Infrastructure-as-a-Service, like Amazon Web Services, provides virtual server instances with unique IP addresses and blocks of storage on demand. Customers use the provider’s application program interface to start, stop, access and configure their virtual servers and storage.

Platform-as-a-Service in the cloud is defined as a set of software and product development tools hosted on the provider’s infrastructure. Developers create applications on the provider’s platform over the Internet. PaaS providers may use APIs, website portals or gateway software installed on the customer’s computer., (an outgrowth of and GoogleApps are examples of PaaS. Developers need to know that currently, there are not standards for interoperability or data portability in the cloud.

In the Software-as-a-Service cloud model, the vendor supplies the hardware infrastructure, the software product and interacts with the user through a front-end portal. SaaS is a very broad market. Services can be anything from Web-based email to inventory control and database processing. Because the service provider hosts both the application and the data, the end user is free to use the service from anywhere.

A cloud service has three distinct characteristics that differentiate it from traditional hosting.

  • It is sold on demand, typically by the minute or the hour;
  • A user can have as much or as little of a service as they want at any given time; and
  • The service is fully managed by the provider (the consumer needs nothing but a personal computer and Internet access).

So what does this really mean to a business? Well, rather than running computer applications on an in-house computer, you run them on an external machine, which could be anywhere in the world, and access the application programs via the internet. It also means that the data associated with the application is held externally to your organisation. So the application is hosted on a server with the associated data being stored in a database—all on a server run by a third party.

There is just one more piece that we need to understand and that is that a cloud service can be either public or private. What does this mean? A public cloud sells services to anyone on the Internet. Amazon Web Services is the largest public cloud provider at the time of writing. A private cloud is a proprietary network or a data centre that supplies hosted services to a limited number of people. Just one more term that you need to understand and that is virtual private cloud; this is when a service provider uses public cloud resources to create their private cloud.

What makes cloud computing so appealing at the moment? In a recent article[1], Nigel Stanley, Bloor Research’s Security Practice Leader, said the following, “In an economic downturn cloud computing oozes sexiness. The thoughts of off loading your data to a third party gets financial types excited as they start to see how much money can be saved.” Cloud computing means that rather than purchasing software, which would go on your CAPEX, you pay for it when you use it so it comes off your OPEX budget instead. Banks feels that, in fact, cloud computing will also reduce your OPEX spend as well as the implementation costs and associated consultancy costs will be less as well. On one point that Banks made I am not sure that I would agree with in that he felt the integration cost would also be smaller; I am not so sure and would advocate budgeting the same as an in-house implementation.

So how can cloud computing be used in manufacturing? CRM has been one of the first areas covered; this being piloted by with its launch in 2000.’s CRM solution is broken down into several modules: Sales, Service & Support, Partner Relationship Management, Marketing, Content, Ideas and Analytics.’s Platform-as-a-Service product ( Platform) allows external developers to create add-on applications that integrate into the main Salesforce application and are hosted on’s infrastructure. currently has 55,400 customers and over 1,500,000 subscribers. Why CRM? Well the answer, in my view, is due to the need to support a mobile sales force that needs to be able to record information easily and quickly without necessarily having contact always to the centre. Couple this with the need for the centre to have control over this distributed workforce and you create an ideal environment for cloud computing solution.

A number of the large ERP vendors, such as SAP, provide cloud capabilities. SAP launched its Business ByDesign in September 2007. Over the past couple of years Business ByDesign has been plagued by some really bad press. In September 2009, SAP gave a briefing to the industry on how it was tackling a number of the issues. These included:

  • Scalability issues: all customers run on their own blade servers
  • Overly “feature-rich”: the suite was originally designed to meet all of the needs of its customer base instead of focusing on specific functionality
  • Lack of corporate commitment: SAP is cutting R&D funding and shifting resources to other products
  • Runs on NetWeaver: a full instance is too heavy for a SaaS application and finding “cloud developers” who have full Java EE stack experience may be tough

Infor entered the market in October 2008 with the launch of a SaaS version of ERP SyteLine. This is a very typical entry from an existing vendor in that it allows a user to move seamlessly between SaaS and on-premises deployment, or vice-versa.

Microsoft Dynamics entered the SaaS market in 2007 with the introduction CRM Live. This is run at Microsoft data centres around the world, along with all the other “Live” products such as Live Small Business Office. Software-plus-Services for Microsoft Dynamics ERP is the new capability being offered. This allows a user to choose to implement their Microsoft Dynamics software as a wholly-owned on-site solution, via online services, all or partly- hosted, or in any combination.

Oracle entered the market last year with the introduction of an offering comprising its Oracle Sourcing and Oracle Sourcing Optimization products. Nagaraj Srinivasan, Oracle’s vice president for EBS supply chain management, in an interview with Managing Automation in March 2009, described the primary focus as being on automating the transactional aspects of material procurement. The tool can be used to aggregate demand; determine whether an RFP, RFQ, or other sourcing process is needed; compile contract terms; notify and qualify suppliers; establish prices and discounts and conduct multi-round negotiations; and aggregate and award bids. In addition, Oracle is offering CRM as a SaaS, called CRM On Demand.

Cloud Computing-based manufacturing solutions are emerging as viable competitors to products from established vendors. These cloud solutions are most commonly used for supply chain visibility, transportation management and supplier/contract negotiation. Vendors are rapidly creating cloud computing modules to address other manufacturing issues, such as: supply chain execution, shop floor planning, demand planning and production scheduling.

But where else? Christian Verstraete, HP’s Chief Technologist for Manufacturing and Distribution services, believes a couple of areas will quickly become the favourites of manufacturing companies and these include:

  • Cross enterprise collaboration. Verstraete sees cross-enterprise collaboration as being a current weak point in Supply Chain management. The required integrated environment would require the exchange of structured and unstructured data, of synchronous and asynchronous communication. By integrating multiple concepts of social networking and providing them in an integrated, cloud based environment, companies could use a variety of collaboration mechanisms to perform key business processes without having to manage the environment. Data can be contributed by the parties on request, limiting the sensitive data in the cloud. Mike Frichol, founder of Pragmatic Papers, stated:[2]. “Cloud computing provides a geographically dispersed network approach that is much better aligned to serve all these trading partners trying to communicate with each other through different systems. Supply chains are networks. Cloud computing comprises networks for delivering business applications anywhere, anytime—that should significantly improve supply chain capabilities, communication and coordination.”
  • High Performance Computing. Verstraete foresees the needs for additional computing power, as companies increase the use of digital models to virtually test their products and/or to understand their business environment better through business intelligence and decision making. The models used are typically highly parallelizable and fit well for a cloud environment as long as the amount of data they need to be provided with is not large, when the network could become a bottleneck.

But cloud computing can get a business in hot water if they have not thought through the many consequences, and this particularly means data security. Stanley states, “Without assurances that organisational data will be totally secure in a remote site the whole concept of cloud computing is dead in the water.” So securing the cloud is vital for its success. With companies trusting their corporate data—their most important asset—to third party organisations, what another of my Bloor colleagues, Peter Cooke, describes as the holy trinity of confidentiality, integrity and accessibility, has to be assured. The infrastructure underpinning this is Identity Access Management (IAM). Without it, system access security is non-existent.

Another worry is about the ability of the provider of the service ability to still be around tomorrow. Raimund Genes, CTO at Trend Micro, the global security company, in a recent eBook[3]. “You need a provider that will be in business three years from now. When you give up your IT infrastructure, you need a reliable service provider.” Banks stated that “With Cloud Computing you must realize that your business process in no longer in your complete control. It is wrapped into the cloud service and in the control of the provider” Therefore it is imperative that when choosing a cloud service provider, you choose one that is likely to be there for the long-haul, or a supplier that has a strategy to manage the situation if they are not there. Could we ESCROW agreement for business processes locked in cloud services?

The goal of cloud computing is to provide easy, scalable access to computing resources and IT services. Cloud computing users gain some significant economic advantages. They have no capital expenses. They have reduced service costs because of a simplified IT infrastructure. They do not have to buy systems scaled to their worst case use scenarios, and there is a reduction in large client applications. The primary disadvantages are the risks associated with Internet reliability, security and access of data, and the financial stability of the service provider.

[1] Generating Maximum Value from your IT Security Spend – An Analyst’s Perspective. Nigel Stanley, Bloor Research, 29 September, 2009.

[2] The Cloud Computing Advantage for Companies that Outsource Manufacturing, Dr. Katherine Jones, Industry Week, April 24, 2009

[3] What to Expect from Cloud Computing,, Three Steps to Secure Cloud Computing, Robert McGarvey, 2009