Drivers of Cloud Computing

In the literature and industrial reports, researchers and practitioners have recognised many benefits and advantages that drive organisations to adopt Cloud Computing, and the key advantages of Cloud Computing include the following:

Technical Benefits

Technical benefits are indicated in many studies and reports as important drivers for organisations to adopt Cloud Computing (Carroll et al., 2011). The technical advantages of implementing cloud solutions are discussed as follows:

• Scalability and elasticity: Cloud Computing scalability feature has led many organisations to implement this model. This feature refers to the ability of the system to perform well when dealing with an increasing load on it (Gupta et al., 2013). Scalability was identified as the main driver for Cloud Computing adoption in North Bridge Future of Cloud Computing surveys in 2011, 2015 and 2016 (North Bridge, 2016) and the second most important factor in other reports (IDG Enterprise, 2016; Cloud Industry Forum, 2016). This feature is linked to elasticity, which refers to the ability of computing resources to be elastically provisioned and released up or down based on customers’ real needs (Khanagha et al., 2013). Both features are important for organisations, allowing them to react to customers’ needs quickly without the need to invest in extra IT resources (Pauly, 2011). The scalability feature is useful especially for Start-up and Small and Medium Sized (SME) organisations which can start with limited computing capabilities and expand these capabilities only when required (Chuang et al., 2015). Elasticity also provides cost savings for organisations since they can use a pay-per-use model and only increase their computing resources when there is a demand (Pauly, 2011). About 70% of finance executives who participated in a survey stated that Cloud Computing implementation improved their organisation’s ability to add, remove and modify IT capabilities on demand (CFO, 2012).

• Improve IT agility: Cloud Computing also improves organisations’ IT agility as it enables them to reduce the time between identifying the need for a new IT resource and delivering it (Oliveira et al., 2014). This capability has been reported as one of the main drivers for adopting Cloud Computing solutions in a Harvard Business Review report (Harvard Business Review, 2015).

• Faster and better access to IT resources: Cloud Computing can offer organisations access to the most current and cutting-edge IT resources without these having to be physically available at the organisations (Durao et al., 2014). In one study, 70% of the organisations surveyed were satisfied with the ability of Cloud Computing to grant them access to the best and newest technologies (CFO, 2012). Cloud Computing is a facilitator and a platform to use and develop advanced techniques and technologies like Big Data and Internet of Things (IoT) (Raghupathi & Raghupathi, 2014).

• Improve availability of IT resources: Cloud Computing delivers increased flexibility in using IT resources and improves availability of IT resources and business services by increasing system availability (up time) (Weinman, 2012). For example, some Cloud Computing providers achieve 99.9994% uptime (i.e. only three minutes of unavailability each year) (Cloud Standards Customer Council, 2012). Data availability can be improved also through Cloud Computing backup services, which will increase service availability (Weinman, 2012).

• Improve the performance of IT departments: Cloud Computing can improve the performance of IT departments by reducing maintenance time and efforts (Chang et al., 2014a). For example, the IT department at the Government of Maharashtra in India uses Cloud Computing services to complete planned maintenance without requiring any downtime of their applications (Mohapatra & Lokhande, 2014). Cloud Computing could also allow IT departments to gain access to the specialised technical skills and services of the cloud vendor, which could increase organisations’ IT competences and capabilities (Sultan, 2014).

• Better IT resources utilisation: Cloud Computing also helps enterprises to enhance their IT resources utilisation rates (Marston et al., 2011). For example, a study showed that organisations’ servers are only using 10 to 30% of their available computing power (Durao et al., 2014) while this percentage has been shown to increase to more than 70% when using Cloud Computing (i.e. private and hybrid models) (Garg & Buyya, 2012). Consequently, higher utilisation rates will lead to improving energy reduction, which supports green computing efforts and provides extra cost savings (Marston et al., 2011).

• Green Computing: Public cloud providers can adopt practices that make their data centres support green computing, such as using renewable energy resources. cloud service providers can improve the power efficiency of their data centres by 40% compared to traditional data centres (Garg & Buyya, 2012).

• Better backup and disaster recovery services: Cloud Computing can also improve backup and disaster recovery services since data may be stored in multiple locations at the same time, which will minimise the risk of the data being lost (Hsu et al., 2014). In one study, 59% of USA and UK organisations indicated that Cloud Computing had improved their disaster recovery and business continuity (Nicholson et al., 2013).

Economic Benefits

Cloud Computing can provide many financial and economic benefits which can be quantified in terms of money either generated or saved. Economic considerations have been found to have a significant influence on an organisation’s decision to move towards the Cloud Computing model. Factors related to business are considered as the main drivers for Cloud Computing adoption in many surveys (Carroll et al., 2011). The following section will outline the economic benefits of adopting Cloud Computing:

• Cost Reduction: For many organisations, cost saving is one of the main reasons to adopt Cloud Computing solutions (Armbrust et al., 2010; Marston et al., 2011). For example, the North Bridge Future of Cloud Computing Survey in 2011 showed that cost was the second driver for organisations to move to Cloud Computing and it was still ranked as the third primary driver in the 2016 survey (North Bridge, 2016). A study showed that 37% of organisations had the potential to achieve cost saving when implementing Cloud Computing solutions (RightScale, 2015). Cloud Computing can offer cost optimisations for organisations in different areas such as hardware costs, software costs, IT labour and energy consumption costs (Carroll et al., 2011). However, the selected delivery and service of the Cloud Computing model will determine the actual cost saving. While the public cloud delivery model can reduce the cost of hardware, the private cloud delivery model can lead to cost savings in other areas such as software and maintenance activities (Carroll et al., 2011; Chang et al., 2014b). A study conducted by Google and CFO Research indicated that 79% of the interviewed

finance executives anticipated that implementing a Cloud Computing project would lead to a 20% to 15% cost reduction in their organisation’s IT budget (CFO, 2012). The participants of the CFO survey showed cost reductions in different categories such as hardware-related costs (71% of the participants), costs related to system backup and data recovery (66%), software-related costs (66%) and IT labour costs (59%) (CFO, 2012). Another example of cost saving is the Maharashtra Government in India, which saved Rs. 500 million (approximately £5m) by using Cloud Computing solutions (Mohapatra & Lokhande, 2014).

• Moving CapEx to OpEx: Another economic benefit of Cloud Computing arises from converting Capital Expenses (CapEx) to Operating Expenses (OpEx) (Armbrust et al., 2009). A “Pay per use” model allows organisations to pay for Public Cloud Computing provision according to the actual consumption of computing resources without the need to invest in costly IT capital expenses (Chuang et al., 2015). This advantage was reported by many organisations’ executives as an important business factor to consider when implementing Cloud Computing solutions. For example, 23% of surveyed UK organisations have gained a reduction in capital IT expenditure by adopting Cloud Computing (Cloud Industry Forum, 2016). Consequently, organisations can spend more on core business activities by reducing IT upfront capital expense (Armbrust et al., 2009).

• Improving TCO: Total Cost of Ownership (TCO) for IT services in organisations is estimated to be reduced by between 10% and 30% by using Cloud Computing (Thakur et al., 2014). The implementation of a private cloud will increase the level of transparency regarding TCO with some cost savings in operational expenses (Marston et al., 2011). Improved transparency can be achieved using a Cloud Computing model which allows for measuring and monitoring the resources usage and IT operational expenses at a business unit level more precisely (Marston et al., 2011). Lowering TCO has been shown to be a driver of Cloud Computing adoption for 29% of UK organisations (Cloud Industry Forum, 2016).

• Increased Revenue: A study by the Harvard Business Review found that 40% of enterprises using Cloud Computing have increased their revenue and 36% increased their profit margin (Harvard Business Review, 2015). The study also showed that, as well as

providing cost savings, Cloud Computing can also allow the organisations to provide new services and products and to expand their market segments.

Organisational Benefits

Cloud Computing offers the organisations additional benefits besides the economic and technical benefits, which will be discussed as follows:

• Lower IT barriers to innovation: Many studies have shown that Cloud Computing can inspire innovation culture in organisations in many ways (Armbrust et al., 2009). For example, 50% of the respondents to the Harvard Business Review survey claimed that Cloud Computing increased their organisation’s ability to innovate (Harvard Business Review & Oracle, 2015). Cloud Computing can lower IT barriers to innovation by providing organisations with access to the latest technologies that were not previously accessible because of price and availability issues (Marston et al., 2011).

• Allowing more time to be spent on innovation and development: Cloud Computing also frees an organisation’s IT staff to spend more time on strategic initiatives and innovation. For instance, 60% of surveyed USA and UK organisations reported that Cloud Computing had allowed their IT staff to focus more on strategy and innovation activities instead of operational and maintenance activities (Nicholson et al., 2013).

• Allowing more financial support for innovation: Cloud Computing implementation can support the innovation process in organisations since it offers them financial savings and allows them to reinvest the money in product and service innovation. About 50% of surveyed USA and UK organisations expected that the money saved from Cloud Computing adoption would be reinvested in innovation activities (Nicholson et al., 2013).

• Enabling a flexible workforce: The ubiquitous nature of the cloud offers more flexibility for employees to work independently from any device and location (Hsu et al., 2014). Enabling flexible and mobile access to information was found to be one of the benefits that drive business transformation into Cloud Computing (KPMG, 2014; CFO, 2012).

• Allowing the delivery of new services, applications, and business models: Cloud Computing helps organisations to provide new services that were not possible before due to the previously higher costs for IT solutions (Marston et al., 2011). This was found to be one of the main benefits of Cloud Computing adoption in 28% of a number of surveyed UK organisations (Cloud Industry Forum, 2016). Services and applications related to Big Data, mobile technology and Internet of Things are examples of candidate services supported by Cloud Computing (Botta et al., 2016). Additionally, Cloud Computing can support organisations in the movement towards new business models and new markets (Shayan et al., 2013; Marston et al., 2011). For example, 44% of senior business and IT executives in the Oxford Economics and SAP report indicated that their organisations will rely on Cloud Computing to introduce new business models (Oxford Economics & SAP, 2014).

• The ability to react quickly to changing and dynamic business conditions: Another benefit of implementing Cloud Computing is the ability to react quickly to changing and dynamic business conditions by providing real-time information about the business, such as health informatic applications which are linked to sensors (Kuo, 2011). For example, 23% of the participants in an IDG survey outlined that Cloud Computing solutions provide their organisations with the flexibility to respond to changing market conditions (IDG Enterprise, 2016).

• Improving employees' collaboration: The studies also indicated that the adoption of Cloud Computing will improve collaboration between an organisation’s employees by using features such as mobile access and version control (Morgan & Kieran, 2013). A Harvard Business Review report showed that increased collaboration was the top benefit of implementing cloud solutions (Harvard Business Review, 2015).

Evaluating the literature and industrial reports shows that technical and economic benefits are the main drivers of Cloud Computing adoption. However, organisational benefits such as delivering new services and applications, ability to react quickly to changing market conditions and enabling innovation have been recognised in many studies, and the strategic values of Cloud Computing increase as it matures. Figure 2.4 shows the results of a study by IDG where

organisational benefits were considered among the most highly cited drivers of Cloud Computing implementation (IDG Enterprise, 2016).