Management Information Systems, 13TH ED.
MANAGING THE DIGITAL FIRM
Kenneth C. Laudon ● Jane P. Laudon
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Learning Track 2: Cloud Computing
Introduction
2.0 Leading Examples and Services
4.0 Business Pros and Cons of Cloud Computing
Introduction
Cloud computing is a vision of computing in the 21st Century in which most computer and
IS functionality is located on the Internet rather than on your personal computer, iPhone and
Blackberry, or corporate data center. Put simply, cloud computing is computing on the Internet.
As we see later in this essay, cloud computing is not just a technological juggernaut that inelucta-
bly is rolling over the landscape. It’s also a business product line for the largest computing corpo-
Cloud computing is fashionable. Cloud computing is also a very imprecise slogan that gets mixed
up with other social values like eciency, productivity, and “Green computing” which sends some
Chapter 5: IT Infrastructure and Emerging Technologies
Chapter 5 Learning Track 2 2
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talking about. What is it? It’s complete gibberish. It’s insane. When is this idiocy going to stop?
Everything is cloud computing these days and we’ve been doing it for years.”
1.0 Cloud Computing: Getting it Straight
Cloud computing is much more than just computing on the Internet-that happened already in the
1990s if not before. e reality is that cloud computing involves a number of different capabilities.
Figure 1–1 provides a graphical and more robust definition of cloud computing. In this view, cloud
FIGURE 1-1: Cloud Computing
Applications servers: cloud computing involves making standardized software applications avail-
able to users over the Internet. Rather than purchase software or build a software development
platform, customers can use applications running over the Internet.
Chapter 5 Learning Track 2 3
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Salesforce.com which provides customer relationship management software online to thousands of
business firms around the world.
Salesforce.com is an example of Software as a Service (SaaS), a concept which is intimately linked
with cloud computing. . Other examples of SaaS provided by application servers are Google Apps
Examples of entire application development platforms on the Web include Amazon’s Elastic
Computer Cloud (EC2) which provides a virtual programming environment; Google App Engine;
Microsoft Live Mesh; and Sun network GRID. While each of these provide “platform as a service,”
they offer different services and capabilities.
In cloud computing, thousands and even hundreds of thousands of computers are located in cloud
data centers. e largest application server installation is arguably Google which has an estimated
500,000 simple PC like blade servers to perform billions of searches a day.
ere are several advantages for using cloud applications:
◆ Reduces the need for customers to purchase computers to run applications, along with the tele-
communications and staff required.
Chapter 5 Learning Track 2 4
storage infrastructure that Amazon uses to run its own global network of web sites. e service
aims to maximize benefits of scale and to pass those benefits on to developers.
Costs for large scale data storage start at 15 cents per gigabyte for the first 50 terrabytes.
Telecommunications costs start at 10 cents per gigabyte in, and 17 cents per gigabyte out. e
cost of storing 1 gigabyte of information in a typical corporate storage area network (a managed
Infrastructure: In order to provide application and storage services online, cloud providers
construct elaborate and large data centers-the infrastructure of cloud computing. is involves
acquiring physical buildings for its computers, securing sucient power resources for the comput–
ers, establishing fail-safe telecommunications links with the Internet, and providing data security
One of the largest cloud computing infrastructures to date is supplied by IBM’s Blue Cloud initia-
tive. By 2008 IBM announced it was building “cloud computing services” into nine IBM data
centers around the globe, each costing about $350 million each. One data center in Singapore was
specifically designed to be a cloud computing center. What’s inside a Blue Cloud data center? Not
Chapter 5 Learning Track 2 5
components in a cloud data center. Air conditioning and computer power consumption are the
leading cost factors in operating a cloud data center. IBM has taken a number of innovative steps
to reduce the power consumption of its computers by 40% when compared to standard, stand alone
servers, and reduced the oor space required by 50%. Cloud computing is “green computing,” and
much more sparing of electricity than millions of PCs on corporate desktops.
e technologies being offered to the community by IBM’s Blue Cloud centers include IBM
Rational software development tools, WebSphere Application Server software and DB2 data-
Management Services Cloud computing is about more than hardware, software and physical
buildings. It’s about management of all of these elements, and in addition, other value added servic–
es that roughly fit under the rubric of “management services.” For instance, a group of managers
Managers of data centers provide to their customers the following services:
◆ System optimization
◆ Consulting services
◆ Hardware and software maintenance
◆ Continuity planning
2.0 Leading Examples and Services
Cloud computing is in its infancy. It tends to leverage the resources of very large hardware manu-
facturers, but even service oriented firms like Amazon have the potential to play a large role in
cloud computing. Amazon’s example may open the door to even more cloud services being provid-
ed by very large firms with excess computing capacity on their hands.
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Table 1–1 describes some of the large vendors providing cloud computing services today.
TABLE 1-1 Cloud Computing Vendors and Services
Functional Area Business Process
Amazon Elastic Computer
(EC2 and S3)
Broadly based cloud environment providing computing and storage; various
Web APIs; AMI (Amazon machine image) programming environment. Utilizes
Amazon’s spare computing capacity required by its retail operations.
IBM Blue Cloud Extensive cloud services from computing and storage to proprietary software
3.0 Cloud Computing: Related Concepts
ere were many precursors to cloud computing that at times become confused with cloud
computing. Table 1–2 describes some of these other concepts and phenomenon.
TABLE 1-2 Cloud Computing: related Concepts
Functional Area Business Process
Cluster computing Computers linked together generally in a local area
network (same building) to provide redundancy, and
dedicated to a small number of tasks.
Chapter 5 Learning Track 2 7
4.0 Business Pros and Cons of Cloud Computing
Cloud computing offers business firms the potential for significant cost reductions for both soft–
ware and hardware. Software should be less costly because its cost can be spread eciently over
a large number of users. Hardware should be less expensive because large data centers can keep
their computers operating at much higher capacity levels than a single firm. e single firm is no
For this reason, large corporations have so far only off–loaded their non-critical and non-strategic
applications to the cloud. Other managers are concerned about becoming a “captive” of proprie-
tary software offered by some vendors such as IBM and HP. What happens if you want to switch
to another provider?