Home > Articles > Networking

Introduction to Cloud Computing

This chapter describes the Cloud Services Market, explains what that means and how it can benefit your business, and provides examples of possible pitfalls to watch for.
This chapter is from the book

Cloud services are arguably the most rapidly growing and evolving approach to delivering applications and services from anywhere to any customer, on any device. A shift is happening with cloud computing that spans the realms of technology and business; a shift that will dramatically change business and how it uses technology to deliver on its requirements. Are you ready?

The Cloud Services Market

Cloud is a logical but fundamental shift in how individuals, enterprises, governments, and more conduct business, interact, and use technology. The ability to have specialized tasks undertaken by third parties is the way in which business has evolved for decades. Think of FedEx for logistics, supply chain, and transport services; ADP for payroll, HR, and benefits administration; the Big Four accounting firms for tax and audit capabilities; or one of the many production facilities located around the world. This ability to hand off critical tasks that can be done more efficiently by a third party, whether they are core or noncore to your business, is a common business model and is how cloud services can benefit you, too. There are several dimensions to cloud computing. Commonly, you will experience sales pitches in terms of public and private cloud solutions—public clouds being solutions offered by third parties, and private clouds being cloudlike solutions you implement within your own data centers. Regardless of where the cloud service is housed however, the benefits are found in being able to pick and choose the most appropriate service when needed, and your business becomes focused on optimizing your own unique IP, business methodologies, and capabilities, while linking in the nonessential services from the best source. It is about delivering quickly and supporting your operational agility.

And it is critical that you understand how you can take advantage of the best opportunities for your organization, too, because your partners and competitors are likely already doing so. A study in August 2009, by F5 Computing of more than 200 mid- to large organizations found that 80% were in trial stages for public and private cloud services deployments for their businesses. Organizations are adopting cloud services aggressively, as detailed in Figure 1.1, with 50% reporting that they have already deployed a public cloud services implementation. Consequently, cloud services are also meriting budgetary consideration, with 66% of respondents indicating that they have a dedicated budget for cloud services initiatives.

Figure 1.1

Figure 1.1 Stages of use for a public cloud and a private cloud

Most types of organizations can benefit from cloud services. Large enterprises can often find private clouds compelling because they deal with the maintenance or replacement of legacy systems, cost management, the requirements to launch new services faster, and similar broader competitive issues. Small companies and start-ups can find it easier to make use of the newer business solutions and offer new services to compete with established or much larger competitors. Almost all organizations experience business pressures that can be alleviated through the right application of cloud services.

Legacy solutions must provide a baseline of capabilities, from supporting existing data to providing appropriate new or improved functionality. In addition, until cloud services are seen as being a dominant model for IT delivery, the use of cloud services may be politically sensitive in some organizations, for either valid regulatory, governance, or security reasons, or alternatively, from a job-security perspective. (In Chapter 12, "Creating a Successful Cloud Roadmap," endterm," we discuss the chasms that need to be crossed for different types of organizations, and this is one area in which organizations require best practices before moving forward.) These organizations are definitely more likely to use or be aligned with private clouds, because IT departments try to leverage internally cloud architecture benefits to optimize their data centers. This is often portrayed as, and sometimes parlayed into, an entrée to more-public cloud options.

New solutions have an advantage of generally being able to be architected to use new technologies. This is certainly true for most start-ups benefiting from public cloud offerings. In particular, infrastructure offerings of storage, compute, and networking enable a start-up to create its solution without significant investment in such hardware and its related installation and management requirements. The same potential is there for larger organizations that need immediate capacity without a hit on capital expenditure.

Governments are seeing similar reasons to chase cloud solutions. On September 15, 2009, Vivek Kundra, chief information officer (CIO) within the U.S. Office of Management and Budget, gave a talk at NASA Ames Research Center on the administration's long-term cloud computing policy. In that talk, Kundra noted that of a $77-billion federal IT budget, the U.S. government spent $19 billion on infrastructure alone. The key goals were noted as cutting costs and reducing the environmental impact of the government's computer systems. Citing examples, such as in doubling of federal energy consumption between 2000 and 2006 and duplication of efforts and associated costs across agencies, Kundra saw cloud computing as an incredibly strategic force to mitigate these challenges.

October 2009, IDC released its "IT Cloud Services Forecast: 2009-2013,"1 and estimated that of the $400 billion customers would spend on IT, $17.4 billion (5% of spend) will be consumed as cloud services. By 2013, customer spending on IT cloud services will grow almost threefold, to $44 billion (10% of spend). While acknowledging there are risks, the expectation is that few mission-critical systems will be moved to the cloud, but significant benefits can be gained elsewhere through nonessential and controlled approaches.

January 27, 2010, the U.K. government announced its strategy to create a private governmental "cloud computing" solution. As reported in the Guardian, 2 this is "part of a radical plan that it claims could save up to £3.2bn a year from an annual bill of at least £16bn." In one example of expected benefits, they note that "cloud-based infrastructure could cut costs of government computing significantly and also satisfy its drive for a 'green' agenda by reducing power usage. The Inland Revenue, for example, is presently seeing a huge demand for its online tax return system—but that peaks every tax season and then drops substantially."

Obviously, the goal is to support the peaks and valley's as needed, and share the resources among other departments throughout the rest of the year.

Fundamentally, the market for cloud services is nascent but growing explosively due to a combination of unbridled exuberance, and even more important (as we examine in this book), a compelling set of business drivers. Guy Rosen's State of the Cloud for May 20103 shows that of the top 500K sites worldwide, more than 3,000 sites were hosted by cloud infrastructure service providers as of April 2009 and more than 5,000 sites by April 2010. That's around 40% growth year over year. But, as noted in the same report for March 2010, cloud solutions constitute just 1.01% of the sample. Looking at the higher-level cloud services is more challenging as a whole, but almost every version of the metrics shows significant growth, too. A poster child for cloud services is Salesforce.com. Their 2010 annual financial report showed year-over-year worldwide growth of 17,000 corporate customers to a total of 72,000, just shy of 31%. Fiscal year revenues for 2010 were $1.3 billion, a 21% year-over-year increase.

The growth in cloud services based on vendor metrics so far is remarkable, and the room to grow is immense. The business drivers for cloud services include intense economic pressures and harsh realities being experienced globally, time-to-market concerns, competitive pressures, criminal threats, and more.

Cloud services have achieved a level of awareness faster and greater than many previous technology solutions. Cloud services are having a global impact in so many aspects of the business world right now, from individuals to global corporations, from small businesses to the largest of governments, from the richest nations to the poorest. Even senior executives are asking their CIOs what the "cloud strategy" is.

However, confusion surrounds what cloud services are, and how to best capitalize on all the options available. With these factors in mind, it is also the case that those interested and ultimately influencing a cloud strategy range well beyond technology professionals. The use of cloud services will increase significantly as a result. So, there are lots of silver clouds offering huge cost savings, speed of delivery, and more. However, there are some dark linings in those clouds, and risks are being ignored as the allure of cheaper solutions becomes a focus. The goal of this book is to help you develop the best approach for your organization to get the most from cloud services solutions.

  • Cloud is not a panacea!

It is neither possible nor sensible to wholesale move your entire enterprise to using cloud services and thus prosper. Established business will have existing, often purpose-built infrastructure that they depend on. Larger organizations will be especially aware of their existing systems on which they depend and cannot change in an instant. Concerns about performance, reliability, availability, and security are often mentioned as barriers to adopting cloud services, and the subsequent requirements must be understood to successfully manage any migration and the associated risks. This generally requires long-term planning and project management. Smaller organizations, start-ups especially, are looking for and are able to gain immediate benefits from cloud services. They can adapt and manage the risks because the cost benefits have significantly greater weighting in such evaluations.

It is sensible to look for a combination of tactical and strategic moves to take advantage of the opportunity cloud services offer. It makes sense to focus on key initiatives and requirements that can be met by cloud services. It makes sense to piece together the right parts of cloud services to improve your business processes, speed up system and product delivery, or even create a completely new product or business. Consider how small concepts and capabilities joined together can create something incredible!

Robert Kearns invented the intermittent windshield wiper in 1963, and filed his first patent around the technology in 1964. After showing his invention to several car companies, Kearns saw the concept stolen and patents infringed when major car companies started to roll out their own. The road to common use of the intermittent wiper and the subsequent decades of lawsuits against Ford, Chrysler, General Motors, and Mercedes for patent infringement forms the basis of the 2008 film Flash of Genius. The courtroom scene was compellingly watchable, as Kearns argued against the Ford lawyer's charge that the patent was invalid because it was an obvious use of existing parts. Not so obvious is a core requirement for a valid patent. This argument was countered by Kearns, who showed that although it may have been made of common components, the resultant solution was far from common, but rather gestalt.

Whereas Ford asked a scientist to testify that the invention was a simple set of existing circuits, Kearns pointed out that when Charles Dickens wrote the classic Tale of Two Cities, it was not the use of common words that made it great or original, it was the arrangement of them into something new.

In many respects, cloud computing can be seen as a set of simple components, technologies, and processes, itself built upon a legacy of more common ones. Yet with a flash of genius, the cloud can deliver new, unique, and incredibly valuable solutions. The cloud offers an immense wealth of choice components and services for enterprises of all sizes to build new things in new ways.

Kearns, however, did not completely change a historical business model. For that, we can look at a much more strategic and game-changing example.

In 2001, Apple Computer introduced the iPod. Some considered the iPod a simple MP3 player that would need to compete with a multitude of existing products, ultimately appealing primarily to the Apple zealots. Its unique selling point was a new method to control the device called the scroll wheel. Less compelling to many at the time was the binding of the iPod to a simple media management tool called iTunes. However, Apple's combination of hardware, software, and services created a new market model that monumentally changed the music industry.

Regardless of anyone's specific proclivities or polarized position about Apple and its walled-garden approach to the business, it is clear that Apple has won a majority of the online music market for now.

Up until 1999, record companies worldwide largely owned their domains, managing the majority of music production and distribution from the artist through to the consumer. By 2005, the market had massively shifted, and those same dominant companies were beginning to reel from continuous hits to that dominant position. Customers could download music from the Internet. Furthermore, in another part of the industry, artists if they so choose could begin to create, promote, and distribute their own product on the Internet, organizing their own licensing for products such as T-shirts and tchotchkes. The heavy lifting of organizing tours and bookings was now possible through direct online access to venues, unless those venues were locked into contracts, of course.

The market changed and control was being eroded. Music sales were declining, and piracy was an easy target to blame. The reality was much more complex, however. The once-dominant companies had failed to observe and respond effectively to a multitude of societal, technological, economic, and business models

Quite simply, Apple created an environment that people wanted to be part of...an experience. The choices remain for anyone to avoid or vacate the Apple environs, its unique approaches, and rights management mélange. Microsoft offers an arguably worthy competitive vertical solution in Zune, comprising hardware, software, and services that match Apple's. There are many individual component solutions that when combined offer the same sorts of capabilities, yet the Apple solution is still compelling enough for most to remain loyal. Moreover, it is not just a technical or business model that makes it so. It is a mystique and market presence that allows Apple to maintain such a following, never mind the accessory and secondary markets that have been created in their wake.

Meanwhile, back in the broader music industry, the industry group, primarily in the United States, responded to the market threats with measures that have been decried as everything from draconian and misdirected (suing individuals, lobbying political support to create or update laws, and more). As a result of not responding to a shift in the market, they lost value and their position of power.

  • Hey, shift happens! Be ready for it.

The movie industry has faced a similar problem. Because of the move to digital distribution of their content that can be easily moved over the Internet, users can more easily access it through this new means. Unless a business model is found that embraces and extends this reality, the movie industry risks suffering a similar experience, arguably in a much shorter time frame. They are experiencing unprecedented shift.

Worldwide, many are excited by the prospect of owning Amazon's Kindle. Although there is much to admire in the hardware in the Kindle device, Amazon is attempting to create a vertical market juggernaut like Apple's. However, competitors are coming in thick and fast to try to own this new vertical market, using a similar model, and therein lies another key point to be made. The benefits of cloud services can be capitalized on often without requiring significantly new intellectual property. However, business models will be broken as a result.

For now, let's be clear: This is not the story of patent litigation or legal issues. It would be a mistake to say that cloud will devastate the landscape of business. However, it is not a stretch to say that the landscape will shift radically in the next ten years because of how cloud services will be used to revolutionize markets. Here, we exhort you to critically consider how your business will be impacted by the cloud approach to using resources, and prepare for some of the most significant changes to business processes and opportunities for change in decades.

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information

To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.


Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.


If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information

Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.


This site is not directed to children under the age of 13.


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information

If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information

Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents

California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure

Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact

Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice

We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020