Open any respectable publication or market report today and you cannot escape the mention of “Cloud Computing”
(See you got it here too !).

The media all around us is so full of this buzz word on the Gartner hype cycle, “Cloud Computing”. With so many different messages and definitions, the cacophony of different interpretations of Cloud Computing only serves to confuse most people. There are many new strange looking acronyms like SaaS, PaaS, IaaS, StaaS, etc running all over the place adding to the chaos. This article is an attempt to “demystify” Cloud Computing, hopefully without adding to the confusion we already have around us.

So what is Cloud Computing all about?

Gartner defines Cloud Computing as “A style of computing where scalable and elastic IT-enabled capabilities are delivered as a service to customers using Internet technologies.”
Forrester defines Cloud Computing as "A pool of highly scalable and managed compute infrastructure capable of hosting end-customer applications and billed by consumption."
NIST (National Institute of Standards & Technology) has released a detailed, “Official” version of the definition of Cloud Computing running into several pages.

Confused already?

I have not yet started with definition of Cloud Computing by multitude of other “experts” in the market.

In simple terms, Cloud is a “disaggregated mass of storage, network and computing resources accessible in a dynamically scalable form in on-demand mode” … getting more complicated?

By resources, I am referring not to IT trained people as is normally done in IT organizations, but the various devices and applications and networks used by the IT organization and enterprise users.

Types of Clouds
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To simplify it further, every enterprise IT system is made up of devices & applications that allow users to store information, share information through networks and compute or process information. Usually these resources are spread across the organization with each user able to use only a fraction of the resources available to him/her. This amounts to significant over-investment and under-utilization of IT resources. For example, most of us use only a small part of all the applications available to us in Microsoft Office in our routine, though we have to pay for the full package. Some people use Excel more than anything else and some others use Powerpoint and some others use MS Word more than anything else, most of the time. Very few users actually use all the applications that we pay for when we buy the MS Office license, with significant enough frequency to justify over even 50-60% of the license cost.

In cloud computing these distributed resources are connected to a common platform that can be accessed by all users across the organization on need basis, leading to ready availability and dynamic scalability owing to tapping the under-utilized resources to their fullest potential. This is called virtualization of resources – making the functionalities available in the virtual (online) world.

With this kind of a set-up, the organization enjoys dynamic upward and downward scalability, high resilience and flexibility and better utilization of IT resources. All of this, when done within the limits of an enterprise, is known as a “Private Cloud” or “Enterprise Cloud”. In this case, various parts of the enterprise use the common infrastructure (Cloud) in a pay per use mode through a system of “internal charge-backs” When done on a larger scale for public access, it becomes a “Public Cloud” of which the Google Documents facility is an example. Here the revenue model is either pay-per-use based or free to use to grow volumes and earn revenues to advertisements.

A third kind of Cloud is a Hybrid Cloud set up where there is a secure private cloud on the enterprise side which is connected to a public cloud environment in a secure and controlled manner to enable access to information and services to customers.

Cloud Enabled Services & Cloud Enablement Services
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Various service providers offer a variety of services leveraging the Cloud, based on their own capabilities and investments.
Application vendors offer SaaS or Software as a Service which is a refined version of the erstwhile hosted application services in the name of ASPs. In SaaS the applications are available on a pay-per-use basis and is also referred to as “Apps on Taps” by some.

StaaS or Storage as a Service is offered by providers who set up huge storage farms (yes they call them farms) and make storage available on a pay per use model such as pay-per-GB or pay-per-month for unlimited GB, and many other pricing models.

IaaS or Infrastructure as a Service is offered by providers who put together storage, network and computing infrastructure on a large scale and allow users to use it on a pay-per-use basis. They use various models such as server rentals per day or pay per computing cycle and many other such pricing models. Bandwidth allocation and server resources are essential elements of IaaS. The IaaS architecture specifies dynamic scaling of bandwidth. A cloud computing installation should never be overwhelmed by peak demand, because the infrastructure service should be able to quickly add the resources needed to accommodate peak demand.

PaaS or Platform as a Service is the delivery of a computing platform in a pay-per-use service mode. The service delivery model allows the customer to rent virtualized servers and associated services for running existing applications or developing and testing new ones. Enterprise IT managers often prefer to use PaaS for setting up application development and testing environments in an upward and more importantly, downward scalable mode, to avoid sinking huge infrastructure investments in resources that are required to full capacity for short time intervals. Many small IT service providers and ISVs (independent software vendors) also find PaaS very useful.

Some IT service providers also offer Cloud Enablement Services and Cloud Testing services. Cloud testing services refer to third-party testing of a Cloud set up by someone else to check for compliance with the mutually agreed upon expectations as per the terms of the contract, before payment is released to the provider who created the Cloud.

Cloud Enablement Services refer to services aimed at helping enterprises set up their own enterprise Cloud. This is a combination of a series of services as listed below:

Cloud Readiness Assessment:
Consultants from the provider organization study the existing IT set up and test it for readiness to move to a Cloud environment. This involves assessment of the portfolio of applications, hardware and connectivity infrastructure and also the way the processes are organized across the organization. Based on this assessment, the Consultant creates a roadmap.

Running the roadmap:
In this phase, the provider focuses on optimizing the IT resources through various steps such as applications portfolio rationalization, process re-engineering for optimization, geographical consolidation, etc. Once the existing IT environment is fully optimized in its current offline form, the consultants work on virtualizing it and creating relevant charge-back mechanisms to meter and charge for usage.

Testing the Cloud:
The Cloud that is ready in the background is then tested offload and on peak load to ensure it lives up to its promise of dynamic scalability, resilience and functionality.

Launching the Cloud:
Once the entire Storage, Network & Computing resources portfolio is virtualized and is ready for pay-per-use in an on-demand mode, training is conducted for the IT staff to get them ready to manage and maintain the Cloud. The Cloud is then officially launched by migration of the access from offline to Cloud mode. In many cases, the entire process is transparent to the end users and they may not even know their access has been transferred to Cloud mode, unless required by specific regulations.

Benefits of Cloud Computing
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The way Cloud is created, or meant to be created, it has the following inherent benefits for the user:

Elasticity / Dynamic Scalability:
Just like a rubber-band, that can be stretched as much & when required and post use can return to its original steady state, Cloud offers dynamic upward and downward scalability where additional capacity can be added ON DEMAND in a matter of minutes or even seconds, at times even transparent to the users. Scale down can also happen equally fast when the need for excess capacity does not exist anymore. This is very useful for known cyclical spikes and also unknown volume spikes in activity. A good example is an online retail store that has a huge cyclical / seasonal volume spike around say Christmas where the retailer would have to provision infrastructure to handle volumes as high as twice or thrice of the usual steady-state volume. If the infrastructure is unable to scale up when required, the site would crash and there would be a huge opportunity loss. If the retailer prepares for the spike and provisions for the peak infrastructure all year round, it is a waste of investment for the rest of the year. It is much easier to provision for the additional infrastructure through Cloud service providers, for only the specific time of the year. The provisioning is dynamic in a matter of seconds or minutes as against waiting for weeks to install an additional server. Another example could be that of a portal of an anti-virus software vendor that faces the peril of sudden, unpredictable rise in traffic on a virus outbreak, or an online stock trading portal that may face sudden spikes in volume on major positive or negative news.

Conversion of IT CAPEX to IT OPEX:
The cloud offers an effective way of converting IT CAPEX (capital expenditure) to OPEX (operational expenditure) with a pay-on-use pricing model. It negates the need for forecast-based sunk investments in IT infrastructure too.

Speed of Provisioning:
IT managers can provision for a specific development or testing environment within minutes if not hours instead of the weeks that are required in the offline world. With the scalability being dynamic and various pricing models available, Cloud offers a speedy way of provisioning IT resources. Cloud also helps reduce time for application roll-outs and upgrades for months and quarters to a matter of hours.

Disaster Recovery & Business Continuity:
With shared IT infrastructure, often physically located over a wide geography and with provision for dynamic mirroring, the Cloud can provide a virtually infallible IT infrastructure.

Cost Effectiveness:
Especially in case of enterprise Clouds, underutilized infrastructure can be used much more effectively in a shared manner. For public and hybrid Clouds too, the long-term cost of pay-per-use is much lower than the long-term cost of ownership due to high utilization. Maintenance and upgrade costs are reduced to almost negligible levels through SaaS and virtualized infrastructure.

Challenges & Concerns
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Now that we have looked at the silver lining of the Cloud, let us also look at the dark side, as lightning bolts usually come from there and could have lethal consequences. Despite its obvious (aren’t they very obvious now?) advantages, there are certain challenges and concerns too.

Security:
There is always a security threat in using shared resources. However this can be addressed with enterprise Cloud with a thick and smart security layer around the infrastructure and putting together specific identity and access management policies and procedures to minimize the risk. In case of public Cloud, especially in B2B scenario, appropriate vendor evaluation and strict SLAs and damage clauses could protect your interests. Discretion MUST off course be used in deciding what goes on the public cloud. Risk can also be managed by using a selective Cloud migration strategy, instead of going all-out on the Cloud.

Regulations:
With Cloud, having a disaggregated mass of IT infrastructure and applications, often spread across geographies, there are concerns about where the data is being stored and regulations in some geographies may prohibit certain kind of data to be sent out to less secure locations. There is often no way around regulations and hence these regulations could be used as one of the guiding principles in deciding what goes on the Cloud and what does not.

Licensing Issues:
Not all software vendors are yet offering SaaS or Cloud licenses for their products. This becomes a challenge when creating a Private Cloud within the enterprise where one of the features will be “apps on taps”. Decision to enable SaaS on enterprise Cloud ought to be made after discussing these issues with the relevant vendors and arriving at some mutually agreeable solution.

Bandwidth Costs:
Operating a Cloud enabled environment requires HUGE bandwidth availability with suitable redundancies to avoid crash of business operations in case of connectivity outage. Some calculations ought to be made to check the potential increase in bandwidth cost against the expected benefits accruing from Cloud.

Multi-vendor Management:
Most organizations would struggle to find a single Cloud provider that can address all its requirements. This means signing up with different vendors and managing the multiple relationships, which often has the potential to sap the management bandwidth significantly. There is also the concern around interoperability of offerings of different vendors. This risk can be mitigated through systematic vendor evaluation and selection and with well drafted SLAs.

There may be some more challenges and concerns potential buyers and actual users of Cloud may be facing, but the above are the most common. Most of these can be addressed with a little discretion and proper planning.

Conclusion
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Like any new technology or concept, Cloud computing too has its enthusiasts and naysayers. However it is obvious that Cloud is emerging as the new industry standard for organizations globally due to the obvious benefits it offers. As it happens with any new concept or technology, early adopters will adopt for competitive advantage and laggards will follow over time when the benefits are proven and the creases are ironed out. As providers and buyers mature and as the hype settles, Cloud computing will over time become just another way of using IT resources in a shared manner. Till the time that it actually happens, it will be good to remember the age-old adage –

“Look Before You Leap”.

******************************************************************************************** Ravindra Shriram Datar
Head - Global Marketing
Datamatics Global Services Limited

I was reading an article about how measuring Average Handle Time (AHT) in a Financial Services company, did not allow a very eager Financial Services Agent to provide the best service she could have provided a customer.

The customer wanted to do something on the Financial Services company online website, but the Average Handle Time (AHT) metric did not allow her to spend more time on the phone with the customer, and give him more information that would have made his online interaction with the company's website easier. Seems like that would brought the AHT metric for the whole center, as well as that particular agent down. So she had to bite her tongue and not tell the customer about something that would have prevented frustration on his part in the first phone call even though she knew about it! When he tried doing what he wanted to do, he could not and has to call them again on the phone!

The center explained that they were trying to increase the Customer Satisfaction KPI and if the AHT value goes up, the Customer Satisfaction KPI might suffer because that meant someone else was waiting to be serviced. However the above customer who had to call back again, would definitely would have brought that measurement down anyway!

So they may not have achieved anything more than frustrating an important customer!

Measurement and Reporting of KPIs should also identify these kinds of outliers, or exceptional cases, and allow them to be included in the analysis of the KPI performance. Metrics drive behavior and your interpretation of metrics should not enable the driving of undesirable behavior, eventually!

Many time, once we put technologies and metrics together, we think we have put behavior on auto-pilot! We may have automated the driving of undesired outcomes, rather than the desired ones instead! They are our tools and not ends in themselves. The ends, we will have to be very clear about and communicate them well!

Exceptions and outliers happen all the time and as long as we interpret metrics and measurements along with them, we should be fine!

The young man knows the rules but the old man knows the exceptions - Oliver Wendell Holmes

A simplification of Pricing your product or service could simplify a lot of your business processes and save you money in the long run! Hard to believe, but I can give you an example from my own recent experiences!

Recently I was in both New York City and Washington D.C. In both places, I took a lot of the local Subway for my transportation. Both were excellent public transportation systems to get around the city, easily.

In NY city, I was not frustrated in my using the subway, but in Washington, D.C, I was. I bet that administering business processes in NY city also is easier for their authorities than it is in Washington D.C.

All because of how they price their service!

NY City subway systems price any trip at a flat $2 a trip that gets swiped away from your card or you put in the tokens you get when you enter a station, any of their stations. Once inside, you can travel any number of trains or connections for any distance as long as you don’t exit any of their stations but take connections onward. No remembering where you entered and where you exited!

In Washington, D.C, trips are priced anywhere from $1.35 to $3.95 depending upon distances travelled on their system. This requires the ticket recording the place you are entering, calculating the price when you exit your destination station and taking it off from the value stored.

This is where I, as a user of the system got into a lot of hassles. The magnetic stripe got wiped out after I entered a station and the problem was known only at my exit station. Had to go talk to the station agent and get another ticket. The value left over in the ticket could be refunded only by one of their far away stations because that’s where their sales office was! What a hassle!

I am sure Washington D.C generates the same revenues per average passenger trip (about $2) that NY City does. The DC Metro system could simplify a lot of things for themselves as well as and provide a simpler hassle-free experience for their customer but just moving to a simple flat rate of pricing their service.

There could be many business process complications coming from a simple act of how you price your product! This is where you can save yourself a lot of hassle, costs, and customer complaints by simply following a simpler pricing strategy!

Something to think about!

Almost all quality improvement comes via simplification of design, manufacturing... layout, processes, and procedures. - Tom Peters

.... and Pricing!

Quite often, Process Design or Redesign are burdened with a lot of Legacy Thought! Sometimes, it may be better to start a Design or a Redesign of a Business Process with a clean sheet rather than make marginal improvements!

Many processes just evolve from nothing, or have a lot of outdated steps that may have been necessary when they were designed for the first time but may be outdated today!

Plus, technology may have evolved over the last two decades a business process has been under use, and now may be a good time to rethink processes. It may be time to evaluate whether what it being done inside the process is of any use, and of relevance today, or may be better done at an order of magnitude more efficiency and effectiveness than used to be done before!

Sometimes, it may be better to start with a clean sheet and design or redesign a business process from scratch!

Home Mortgage Loans in the U.S, are a great example of how a business itself has evolved over a period of time and how the design and redesign process may need to be thought of on the fly. Mortgage loans used to a local affair with local banks making and owning loans for a long time. Then national banks started buying them from the local banks and servicing them. There are now online ways of applying for loans and increased automation at the backend have also speeded up and simplified many of the subprocesses in mortgage loan processing.

Today, Offshore outsourcing and use of the Service Providers's systems, people and processes adds one more wrinkle to this whole thing that were not there even five years ago!

So today, if you were to Design or Redesign a 20 year or even a five year old Mortgage Loan Process, it may be better for you to start with a clean sheet approach! Failure to do this will only mean that your processes will be competing with a new company that was put together say five years ago and may be more efficient and effective than you are!

Legacy and Age may not make business processes more efficacious! You should be lucky if they don't set you back as compared to your competitors!

Age is something that doesn't matter, unless you are a cheese. - Billie Burke

Even as we speak, the global corporate world is embarked on a silent, huge, effort in letting paper go not much beyond the mailroom!

Digitization of all paper, whether coming in from customers as orders, or invoices from vendors is being undertaken on a huge scale. All documents coming into the mailroom are scanned, digitized and the paper sent way immediately to outsourced archival services. Thereafter, companies prefer handling them only in digitized image form!

Storage costs falling in price dramatically in the last few years fuelled by outsourcing and offshoring of business processes have spurred this large scale digitization on an accelerating scale. Many companies, even if they are not outsourcing, are consolidating functions like Human Resources, Accounting and Finance, Order Processing, etc in centralized locations, in Shared Services Centers. For example, many Grocery Supermarket chains in the U.S used to have accountants distributed geographically. Now they are being consolidated into central Shared Services Centers. Shared Services Centers have come about to a large part because of Digitization again.

However, what is being realized quickly, and even more significant than cost savings due to consolidation is that for Continuous Process Improvement to succeed, Digitization is an essential first step in instantly enabling a lot of waste in time, effort and physical movement of paper!

Digitized documents at instantly available anywhere in the world, cutting down mountains of waste in unnecessary handling of paper.

Simple, but a lot of gain in one single stroke of technology!

It is the framework which changes with each new technology and not just the picture within the frame - Marshall McLuhan