What is cloud computing?

Alex and Berta return to their desks after the meeting. They see Gloria rushing to the meeting room. Gloria is nervous, as it is her first presentation to the TRENDYCORP board about the cloud. Most of the board members are traditional businessmen and have very little to do with technology. She has rehearsed the presentation but still has butterflies in her stomach. She is expecting a lot of WHY and WHAT questions. Finally, everyone arrives on time and the presentation starts.

Gloria: Thank you everyone for making the time to be here. I am happy to walk you through the benefits we plan to achieve by migrating to the cloud. First, I will walk you through the current model of IT at TRENDYCORP, and later, I will talk about how cloud technologies can help us.

Gloria moves to the first slide on the screen:

Figure 1.2 – Server room (Source: Photo by Indrajit Das, at https://commons.wikimedia.org/wiki/File:139_Server_Room_01.jpg, used under Creative Commons Attribution-Share Alike 3.0 Unported license.)

Gloria: So currently, we are running some of our IT and business applications from this room. It is our data center and…

Before she can finish her sentence, a question is raised.

Board Member 2: Which applications?

Gloria: We have around 20 applications running here; some notable ones are our internal website, the invoicing system, inventory management system, payroll application, email servers, and some monitoring applications.

Board Member 2: Where are the rest?

She moves to the next slide and the picture looks similar but much bigger and tidier:

Figure 1.3 – The shared data center (Source: Photo by BalticServers.com, at https://commons.wikimedia.org/wiki/File:BalticServers_data_center.jpg, used under Creative Commons Attribution-Share Alike 3.0 Unported license.)

Gloria Those are being run from a shared data center we have on the outskirts of the town.

Board Member 1: I didn’t know that… but anyway, please proceed.

Gloria: So, currently, our applications are split across three locations; one is our own server room, the second is the third-party data center on the city outskirts, and the third is the leased data center near our manufacturing plant in Asia. We have a leased line network connection connecting these three locations so that our developers, who work from this office, can access and connect to the remote locations. As our business is growing at a rapid pace, the need to scale and operate our applications at the same pace is becoming a challenge. Over the past three years, our online business has surpassed traditional methods, and we have a growing customer base that is keeping our software development team busier than ever. I have put together some data points related to growth, budget, and estimations for the next two years in a printed report, which is in front of you.

All the board members open their folders and start browsing through them. Gloria takes a deep breath and drinks some water to soothe her nerves. As everyone is checking the report, the room is filled with an awkward silence. This goes on for a few minutes.

Board Member 3: If I read your estimates correctly, you are saying that we are already running 120% of the planned capacity for our IT needs.

Gloria: Yes, that’s true, and that is adding pressure to our overall online portfolio. On the one hand, we are running at a higher-than-estimated consumption of our applications, and on the other hand, our incident response time and the number of major incidents are increasing.

Board Member 3: Major incidents?

Gloria: A major incident is a highest-impact, highest-urgency incident. It affects a large number of users, depriving the business of one or more crucial services.

Board Member 3: Obviously, this is not good for business. Do we lose business when this happens?

Gloria: Yes, we do. Those numbers are on page 5.

Board Member 3: That’s alarming – and you mean to say we can address this by using the cloud?

Gloria: It may not happen overnight, but surely, it will be the right step – because if we keep going with the current model, we will be adding to the problem rather than solving it.

Board Member 3: So, this cloud will only solve current problems, or do we need to find some other solution for forthcoming problems?

Gloria: There are some additional advantages of using the cloud, and that’s what I want to discuss next.

Board Member 3 nods his head.

Gloria: Okay, so if there aren’t any further questions, I want to present the six major benefits of moving to the cloud.

She moves on to the next slide:

Figure 1.4 – Benefits of the cloud

Gloria: Currently, for every new project or capacity expansion in an existing project, we have to make a large capital expense. This includes an expense in terms of buying new servers, adding more storage, upgrading our internet, and more. Whereas with the cloud, we don’t have to make any capital expenses, we can use the cloud like a utility, as with electricity, and we pay only the usage charges, which are based on what we use. This model will allow us to trade capital expenses for variable expenses.

Board Member 2: Will it result in cost savings or just the same capital expense spread over in shorter chunks?

Gloria: We plan to achieve cost savings. I have added that estimation on page 8.

Board Member 2: A quick question: won’t these services be at a higher cost? Don’t we need to take the profit for the cloud provider into account? When I make a meal at home, it is obviously cheaper than having a meal in a restaurant.

Gloria: In the case of cookery, that is true, but in the case of cloud services, the answer is different. That’s the second benefit.

She moves to the next slide and explains:

Figure 1.5 – Economies of scale

Gloria: Cloud providers benefit from economies of scale. As an example, when one of our customers buys one product, they pay X amount, but when our dealers place an order of the same product in bulk quantity, they get a volume discount. Similarly, cloud providers buy in bulk, negotiate better contracts from hardware manufacturers, power providers, and real-estate companies, and keep their own cost low. This is translated into lower costs for the customer, and if the costs are lower, more customers will use their services, which results in the overall cost of services becoming lower. Some cloud providers get their hardware highly customized as per their requirements and cut down on the cost of things that they do not need. This results in a much lower price for customers.

Board Member 1: That’s an interesting way of doing business.

Gloria: As another benefit, we, as the customer, don’t have to worry about capacity. Currently, for every project, we launch or expand; we make a capacity estimation and buy resources based on these estimates – and if these estimates are wrong, we lose money or lose customers.

Board Member 1: Can you explain this?

Gloria: Let’s say our team estimates that for project X, we will need 10 resources. This is based on an estimation of 1,000 customers using that application. If the application is popular and we have more customers than estimated, then the 10 resources may not have enough capacity to handle the increased load and our customers will get a slower response from the application, which results in unsatisfied customers, and we may lose them if this is persistent. Conversely, if the utilization of resources is lower than the estimation, let’s say only 4 resources are being used because of less customer demand or a slow sales quarter, we are keeping those extra 6 resources running – and it costs us money to keep those unused resources running.

Board Member 2: Can somebody not shut down those resources?

Gloria: Yes, we do so, but that only saves the running cost, as with electricity and cooling, but the capital expense of buying that resource is not reversible. And after a finite lifetime—in most cases, it is 2 or 3 years—the resource will no longer be supported and we will have to buy support plans separately, which leads to the maintenance cost of older resources increasing. It is similar to how maintaining a very old car can become expensive as those parts are not in production anymore.

Board Member 2: So, we call the cloud provider to shut down those resources and start them again when we need them?

Gloria: Not exactly. We don’t need any human intervention for it. It is all programmable and sometimes built into the offering of the cloud provider, so we no longer have to guess the capacity for every project. We can start small and then shrink or expand the resources as needed.

Board Member 2: Okay.

Gloria: Also, since these resources are available on demand, we don’t have to go through lengthy procurement cycles, which sometimes take months. We can roll out new features more quickly, run multiple campaigns in parallel, compare their performance, and respond quickly to changing demands. This will increase the speed and agility of our IT team. We will be able to experiment more often, run more proofs-of-concept, and never worry about the high cost of failure, as in traditional systems.

Board Member 2: So, what will happen to the engineers we have on 24/7 support? Will this cloud leave them without a job?

Gloria: No. It will just change their focus. Currently, they are mostly in fire-fighting mode. They are always busy with undifferentiated heavy-lifting tasks, such as troubleshooting, capacity expansion, backups, or patching activities, and rarely get any time to add value. These activities don’t differentiate our business from our competition, as everyone has to do this – but once we start using the cloud, our support team will have more time to focus on things that add value to the business and differentiate us from the competition. They have shared lots of ideas and some of the ideas are pretty interesting. I am sure it can add a lot of value to our business. We can focus on what matters to our business.

Board Member 2: So, we won’t be needing backups or patching anymore?

Gloria: We will still need that, but it just becomes a checkbox activity with the cloud. We select a maintenance window for our workloads and the cloud provider will automate the process of backup, patching, and capacity expansion for us.

Board Member 3: That’s interesting – but what about our third location in Asia? Will it remain as it is or also go the cloud way? I don’t want to renegotiate the lease every time we expand our manufacturing units.

Gloria: We don’t have to. Cloud providers have facilities all over the globe and we plan to move supporting applications closer to the manufacturing plant in Asia – and we will be able to leverage other global locations too as we expand our manufacturing units. We can go global in minutes.

Board Member 3: That’s good. Do we need to hire local teams in those areas?

Gloria: No, our team from here can perform remote maintenance – and we hope to get a better connectivity speed and performance because of the cloud provider’s high-speed network.

Board Member 2: Much better. I am fully convinced after hearing you and seeing all the data you presented. Can you also send this report in an email?

Gloria: Yes, I will email you just after this meeting.

Board Member 1: I am convinced too – and we want to move faster, don’t we? I have heard that our competition is already doing so. We don’t want to be left behind.

Gloria: Thanks for your support on this. We have a few new team members who have joined us this week to accelerate our project.

Board Member 1: Keep us posted. And all the best. Thanks.

Gloria: Thank you.

The board members leave the meeting room. Gloria heaves a sigh of relief. She has achieved a milestone, Get buy-in from management, for the cloud project. As she exits the meeting room, she finds Alex and Berta heading toward the coffee machine.

Berta: You seem happy. I am sure the presentation went very well.

Gloria: Indeed.

Berta: Nice. Want to join us for a coffee?

Gloria: A little later. I have to send an important email. Enjoy your coffee.

Gloria dashes over to her desk. Berta and Alex casually walk toward the coffee machine.