Cloud computing in any of its forms viz, IaaS, PaaS, or SaaS enables organizations to minimize their complexities in running their own infrastructure. According to Gartner, IT service industry is constantly facing challenges from two opposing areas – Business and IT. On the one hand, business organizations demand new and innovative systems to engage customers, gain new markets and promote efficient partner interactions. On the other, there is a constant demand for reliable and efficient IT services to handle business demands efficiently. Cloud based services due to their scalable nature can be considered an ideal solution to tackle both these challenges.
To understand how cloud can enable business agility, we consider one business example. Suppose the sales and marketing team identifies one new opportunity to be capitalized quickly, there is an immediate need for new systems and applications which normally takes over 3 or 4 weeks to setup, by which time the opportunity could be lost. Cloud models provide on-demand IT resources rapidly to make available the network infrastructure along with applications which can be used by the organization immediately to gain value. When this opportunity ceases the resources can be de-scaled, thus saving cost in investing and maintaining new hardware.
Organizations desiring to be agile tend to be more elastic in their approach in responding to changing market needs quickly and cloud models due to their elasticity allows organizations to innovate and experiment with minimum financial impact. Hence, business agility is the ability to capitalize on new potential opportunities much more quickly than competitors. According to one study done by HBR analytic services in 2014, companies are adopting cloud computing to increase business agility and gain competitiveness.
Cloud computing due to its ability to scale plays a key role fostering business agility. Scalability refers to functioning efficiently in changed business contexts. For example, consider an e-commerce portal selling gift items and life style products that performs around 2000 transactions per week on the average. The same portal can experience a rapid surge in the number of hits going up to 2 million transactions during festive season. In order to handle such sudden rise in volume, the servers, storage and network needs to scale upwards automatically to handle transactions easily. Cloud models provide automatic scaling or de-scaling of servers, storage and network bandwidth to handle large volumes efficiently. Likewise, again when the demand is low, the cloud bandwidth will adjust itself to the volume of data. Therefore, clouds helps to converge different business processes through rapid provisioning of resources (storage, compute, network, etc.) to handle changes in size or volume of data to fulfill changing business needs driven by external environments.
Cost optimization in cloud is another area for discussion within business circles. Cloud computing models do not require spending money on purchase of new hardware or there is no capital expenditure involved instead, the money spent in using a cloud service model is known as operating expenditure. There are two payment models offered by cloud service providers. One is known as pay-per-use model where the consumer is charged for utilizing a resource for a specified duration. Pay-per-use can be any type of resource such as hardware, software, or application (for example, storage in GB, CPU, network bandwidth, etc.). In this model the consumer pays for each resource utilized. The advantage here is that when the resource is not utilized or needs to scale down it can be returned back to the data center and no charges are billed to the consumer.
The other model is fixed price model where the consumer pays a fixed amount for certain amount of unit resources for a time period (normally in months or a year). Fixed price model is also known as subscription model. In the subscription model the consumer also pays for resources that are not actually used or consumed. This is seen as wastage of resource and cost. The company depending on its business need can choose the most appropriate pricing model in order to benefit from operating costs. It may also be noted that pay-per-use model is dynamic where the prices are changed according to resource purchased.
In addition to pricing, cloud computing optimizes cost to a large extent because the benefits of agility are more profound and substantial in the long run than mere cost savings. The scalable nature of cloud computing in its service delivery model along with the integration of external information sources caters to business growth efficiently. Cloud computing technologies with their service models is a true enabler for organizations to achieve business agility, scalability and cost optimization.