Essential Characteristics of Cloud Computing as Digital Transformation

A survey of 2,000 executives conducted by Cognizant in 2016 identified the top five ways digital transformations generate value:     

• Accelerating speed to market     
• Strengthening competitive positioning     
• Boosting revenue growth     
• Raising employee productivity     
• Expanding the ability to acquire, engage, and retain customers  

Digital transformation is also a cultural change.

Cloud Computing as Digital Transformation

Since cloud computing is now a widely used operating model for virtually all organizations in every industry, cloud computing for digital transformation is now an essential element to every organization’s future. This transition minimizes the amount of financial capital needed to affect a given business model while simultaneously enabling customer service delivery models that guarantee a determinate amount of income for a specified operational expense. It reduces the traditional technology usage model (a selection, acquisition, operation, and maintenance of information technologies process) and increases the use of the technology services consumption model (evaluation, consumption, reevaluation, and selective replacement process). Collectively referred to as hybrid IT, all these resource options transform the customer experience, internal operational processes, and the targeted business models.

Three Significant Market Sectors

Cloud computing, also known as information technology-as-a-service (ITaaS), was quickly adopted by many businesses and organizations because of its ability to deliver value in three significant market sectors: Infrastructure-as-a-service (IaaS), Platform-as-a-service (PaaS), and Software-as-a-service (SaaS). These models, known collectively as cloud computing service models, deliver dramatic improvements in cost control, flexibility, speed to market, reliability, and resilience—all of which are vital cloud computing adoption drivers.

Consumption models differ from traditional IT acquisition models wherein a specific technology is purchased, owned, and operated by the customer.

IaaS

In infrastructure-as-a-service, fundamental computing resources (i.e., compute, storage, and network services) are provided to a customer who can install and run any application onto a specified operating system.

Management of the cloud infrastructure remains the responsibility of the service provider, but the customer has control over operating systems, storage, applications, and possibly limited control of select networking components.

The emergence of cloud changes this traditional view of infrastructure’s role with commoditization and enabling service consumption through an on-demand, pay-as-you-go model.

The IaaS service model depends on a large scale and the significantly high degree of automation needed to support significant internal user workloads or those across multiple cloud deployments.

PaaS

When consuming platform-as-a-service, the end customer is operating in an integrated development environment (IDE) provisioned and maintained by the cloud service provider. In this service model, customer-created or acquired applications can be deployed onto the cloud infrastructure. 

Recently, significant strides and efforts have been taken to ensure that open-source stacks are both supported and utilized, thus reducing lock-in, which can be described as an inability to stop consuming services from a specific CSP due to economic, operational, or similar reasons. Open-source software stacks can also help avoid interoperability issues if the enterprise changes CSPs. The ability to support a wide range of underlying hosting environments for the platform is also a key PaaS benefit. While a requirement to code to specific APIs was enforced by cloud service providers, developers were able to run applications in multiple environments. This approach is the model employed when the consumer uses the provider’s applications running on a cloud infrastructure.

Commercialization of the Internet

Offering or consuming cloud computing services both economically and profitably across a broad marketplace, however, involves much more than just technology changes.

The commercialization of the internet resulted in the following:     

• Development and near ubiquity of easy-to-use, visually attractive computing devices       
• The rapid growth of globally interconnected wide-area networks     
• Abandonment of then widely used, tightly coupled client-server business applications in favor of loosely coupled application architectures     
• The disappearance of thick client software interfaces and the broad adoption of thin-client browsers (these foundational technical changes were blended with a standards-based and highly automated operational approach)
• Operational and policy adaptations that explicitly recognize IT service consumption characteristics align the organization’s internal processes with key cloud computing characteristics

5 Essential Characteristics of Cloud Computing

Coined by the United States National Institute of Standards and Technology (NIST), there are five “essential characteristics of cloud computing.†

These characteristics succinctly describe the technical, operational, and economic aspects of this revolutionary approach to information technology:      

• On-demand self-service     
• Broad network access     
• Resource pooling     
• Rapid elasticity     
• Measured service  

On-demand self-service enables the provisioning of cloud resources on demand, whenever and wherever they are required. From a security viewpoint, this has introduced challenges to governing the use and provisioning of cloud-based services, which often violate organizational policies.

Resource pooling, the third essential characteristic, addresses the improved resource utilization rates cloud computing can deliver.

Cloud Computing Deployment Models

With cloud computing, resources are grouped in pools for use across all customer groups, which is referred to as multitenancy. Avoiding multitenancy and resource pooling violates the cloud computing economic model resulting in operational cost that generally exceeds that of a traditional datacenter.

A key benefit exploited by many organizations is the ability to charge departments or business units for their use of services.

There are four generally accepted cloud computing deployment models:     

• Private cloud refers to a proprietary environment (network or data center) owned and architected for use by a specified entity that uses a cloud computing approach to provide services behind a firewall.
• Public cloud is a publicly available service, generally over the Internet, in which a customer can access cloud service provider resources as a free service or offered on a pay-per-usage model.
• Multiple organizations share a community cloud environment under a joint governance structure. This model gives many of the public cloud benefits while providing heightened levels of privacy, security, and regulatory compliance.
• A hybrid cloud is formed by combining any of the other deployment models, typically public and private cloud.

Private Cloud

The private cloud deployment model is normally for the exclusive use of the owning organization, its employees, and the designated business ecosystem.

When using a private cloud, the organization enjoys increased control over data, underlying systems, and applications.

Private clouds have become more popular among large organizations with legacy systems, customized environments, and when significant technology investments have already been made.

Public Cloud

A public cloud may be owned, managed, and operated by a business, academic, or government organization, or some combination of them.

Public cloud providers typically have the scalability to meet customer needs, and customers benefit financially because they pay only for what they consume.

Hybrid Cloud

Don’t confuse “hybrid cloud†with “hybrid IT.†The latter term refers to the use of cloud infrastructure in combination with management services or traditional data centers.

Components of this broader IT implementation mix are the following:     

• Traditional data centers, where the organization pays for the total cost of ownership of all the hardware and software.
• Managed service provider, where the organization pays a third party to provide IT hardware, software, and professional services.
• Cloud computing, where the cloud service provider (CSP) pays for ownership of all hardware and software, and the CSP pays the salaries and benefits for all operational staff.

This form of business model is disruptive to traditional goods and services because of the zero cost and instant economics of digital information goods in today’s pervasive digital network environment.

The digital nature of platform economics can be leveraged to design, develop, and deliver new products, services, and capabilities as well.

Organizations that successfully embed platform economics into their digitally transformed business models and processes can establish market differentiation through innovation.

Business models that take advantage of platform economics include freemium offers where customers receive a basic level of service for free, then are charged for extra function or capacity on top of the base price. (Examples of such freemium services include Dropbox and Evernote.)

By executing a platform economics business model on a cloud computing platform, organizations can capture revenue before consuming any IT services. All of this, however, requires operational and policy adaptations which explicitly recognize IT service consumption characteristics that align the organization’s internal processes with key cloud computing characteristics.

Ready to dive deeper into cloud computing and digital transformation? Pre-order your copy of my forthcoming book, Click to Transform!

Article generated by AI in cooperation with Leaders Press based on Kevin Jackson’s Click to Transform.