Power of Cloud

To optimize, innovate or disrupt?


Organizations shall carefully evaluate the various opportunities available to harness the power of cloud as an optimizer, innovator or disrupt – and find the right opportunity for their particular circumstances or product/service line.

To assist them in this regard, the three key actions to help reap the potential rewards associated with cloud- enabled business models are

  • Establish shared responsibility for cloud strategy and governance across the business and IT to help ensure cloud remains a top business priority.
  • Place a senior executive business leader, in partnership with the CIO, in charge of the firm’s cloud business strategy development. This collaboration should help clearly formulate an optimal cloud strategy and link it with business and marketing strategies. In the adoption phase, these leaders will communicate and drive cloud as a top business priority, as well as ensure that infrastructure and operational efficiency are optimized and business objectives are met.
  • Establish a governing committee of business and IT leaders to oversee cloud adoption and implementation. Determine which cloud business enablers should be leveraged and how they will be used. Develop and oversee the implementation of business changes (e.g., processes, outcomes) that cloud will enable within the organization and throughout industry ecosystem.
  • Look within and beyond your organization’s borders to maximize the value derived from cloud adoption.
  • Determine how your cloud strategy can impact the industry ecosystem, and identify new partners that cloud can help draw into your ecosystem. In addition, evaluate whether cloud can or should change the role in the ecosystem.
  • Use cloud to respond to industry’s end customers more effectively. Explore whether cloud can help enhance the value proposition with the current customers, and examine whether the firm can reach other customer segments by leveraging cloud.
  • Identify whether the organization seeks to be an optimizer, nnovator or disruptor and use cloud to innovate business model to realize that potential.
  • Consider organizational and market factors – corporate strategy, competitive dynamics, customer strategy, firm’s risk profile, how empowered the customers are, etc. that impact the firm cloud strategy.
  • Determine where – if at all – the organization is positioned in the Cloud Enablement Framework today.
  • Determine where the organization should be in the next three to five years – should it be an optimizer, innovator or disruptor? In considering this, remember that the framework is not a maturity model – a company does not have to first become an optimizer before becoming an innovator or disruptor. Rather, each company has to evaluate the opportunities and risks inherent within each archetype and determine “who” they want to be and what works best for the company, industry and customer set.
  • Build business and technology skills and capabilities to close the gap between your current and future cloud position or to maintain the current position if that is the goal.
  • Determine whether the cloud strategy should involve becoming a cloud service consumer or a provider of cloud-based offerings – or include elements of both.

Typically, cloud service consumers use cloud to enhance their business models and drive increased value for their customers or business. Cloud service providers, on the other hand, offer services via the cloud to enhance the business model of other organizations or their own. Cloud service providers might use cloud to engage in innovation within their own value chain or facilitate innovation within other value chains.

Navigating firm’s course in the cloud

As business leaders reflect on how their organizations can best realize the full potential of cloud to optimize, innovate or disrupt business models, they need to challenge existing approaches and realities.  They  shall imagine the possibilities associated with cloud-enabled business models by considering some questions:

  • What if  organization had access to unlimited computing resources to scale your business?
  • What if the organization had access to previously unaddressed customers or markets and could target them based on their individualized preferences through analytic insights?
  • What if the firm could give customers access to the organizations products and services anytime, anywhere and on any device?
  • What if the organization could inexpensively and rapidly develop and launch new product and service offerings?
  • What if organization could easily and seamlessly connect and collaborate with business partners and customers?
  • What if the organization could redefine its role in the industry and change its competitive positioning?

Cloud enabled Business Model Innovation


Cloud business enablers are already driving innovation across  customer value propositions and company and industry value  chains. Enterprises are applying cloud to generate additional  revenue streams by enhancing, extending and inventing new  customer value propositions. And cloud is being used to  improve, transform and create new organization and industry value chains . This has resulted in shifts in who  creates value, as well as how it is created, delivered and  captured


Organizations can use cloud to improve current products and services and enhance customers’ experiences to retain current and attract new customers, garnering incremental revenue.


Cloud can help a company create new products and services or utilize new channels or payment methods to attract existing or adjacent customer segments in an attempt to generate significant new revenues.


Companies can use cloud to create a new “need” and own a new market, attracting new customer segments and generating entirely new revenue streams Value chains


Cloud adoption can help an organization maintain its place in an existing value chain through increased efficiency and an improved ability to partner, source and collaborate.


By assisting in developing new operating capabilities, cloud can help a company change its role within its industry or enter a different industry.


Organizations can use cloud to build a new industry value chain or disintermediate an existing one, radically changing industry economics.

Cloud Enablement Framework

Using the extent to which an organization’s use of cloud can affect value propositions and value chains as dimensions, “Cloud Enablement Framework,” identifies three organizational archetypes: Optimizers, innovators and disruptors . These archetypes characterize the impact of an organization’s cloud-enabled business strategy.

They are based on the extent to which an organization enhances, extends or invents customer value propositions – and improves, transforms or creates new value chains.

The framework is not a maturity model.  It is not either  expected  or recommended  that organizations first start as optimizers and then become innovators and disruptors. Instead, an organization should determine its place in the Cloud Enablement Framework based on the company’s strategy, risk profile, competitive landscape, etc Optimizers use cloud to incrementally enhance their customer value propositions while improving organizational efficiency

 Optimizers stand to deepen their customer relationships without risking the potential failure inherent in radical new business models. While optimizers can expand the value they offer through improved products and services, enhanced customer experiences and broader channel delivery options, they tend to realize lower revenue and market share gains than innovators and disruptors.

Optimizer case study: North Carolina State University

Based in Raleigh, North Carolina State University is a comprehensive university known for its leadership in education and research and globally recognized for its science, technology, engineering and mathematics leadership.


With more than 31,000 students and nearly 8,000 faculty and staff, NCSU faced growing demand for academic computing resources, making it challenging to deliver the service level that its key user populations – students, instructors, researchers and administrators – require. The university not only wanted to fundamentally change the way it managed computing resources, it also wanted to enhance the user experience, position itself for continued growth and effectively control costs.

Cloud-enabled business model

In collaboration with IBM, NC State created its Virtual Computing Lab (VCL), a cloud-based technology that provides students, faculty and researchers access to the most advanced educational materials, select software applications, and computing and storage resources. The

VCL solution allows users to remotely access a desired set of applications and environments over the Internet – using a personal computer, laptop or mobile device – from anywhere at any time. The solution’s flexible and intelligent resource provisioning offers significant improvements in access, efficiency and convenience over the previous approach, allowing NC State to optimize operational efficiencies and enhance the user experience. In fact, the university has now provided access to the VCL to students throughout North Carolina, including those in elementary, high school, and other colleges and universities.

The Virtual Computing Laboratory (VCL) at North Carolina State University has been a pioneer in delivering secure on-demand computing services for education institutions. VCL was using cloud computing before the term came into popular use: It has been doing research on virtual computing since 2003 and began offering cloud services in 2004.

The VCL academic cloud is based on open-source technology and offers infrastructure-as-a-service, platform-as-a-service, and software-as-a-service, including support of high-performance computing services. The advantages of VCL’s cloud computing approach include consolidation of computing resources and technical support services, delivery of applications that would be difficult to install on student computers, and the extension of computing services to education institutions that otherwise would have only limited technology infrastructures.

As of 2009 VCL was serving more than 30,000 faculty and staff. A typical user accesses VCL through a web interface, going through a set of authentication and authorization steps and then choosing the desired kind of computing environment and time period from a set of pull-down menus.

VCL can dynamically move resources from one application to another, producing increased efficiency and lower costs. During semester breaks, for example, when most students are not using computing resources, the system assigns those resources to researchers with heavy computing requirements for activities such as running complex models and simulations.

VCL now offers services on a pilot basis to seven other North Carolina public universities, the North Carolina Community College System, and several out-of-state universities including three in India. Possible extension of these academic cloud services to K-12 schools are being planned.


Business results

  • Moving to a cloud-based infrastructure provided North Carolina State University with:
  • Increased flexibility to shift computing capacity between instructional, research and administrative needs
  • The ability to scale up to match significant growth in university enrollment
  • A chance to share its resources with students throughout the state, improving the education opportunities and lives of many.


Innovators utilize cloud to significantly extend customer value propositions, resulting in new revenue streams. In doing so, they transform their role within their industry or enter an adjacent market or industry space.

By extending and transforming, innovators have the opportunity to combine previously unrelated elements of the value chain and value proposition to gain competitive advantage.

3M Visual Attention Service

The 3M Visual Attention Service is an online scanning tool that scientifically analyzes design effectiveness based on how the average human eye responds. VAS marries vision science with technology to help designers, marketers and other communicators test the visual impact of their content and increase the probability that viewers will notice the most important elements of a design.


Since the global design community is made up of copious small design organizations, 3M needed to make the new capability accessible from anywhere, affordable to many and available as needed during a design project. By delivering VAS using cloud technology, 3M is able to offer the service on a continuous basis without requiring customers to install special software to use it. Hosting the solution via cloud also helps the company ensure the latest version is always available for customers.

A recognized world leader in technology research and  development, 3M wanted to make its decades of expertise in the  workings of the human visual system available as a service to  customers. Using the Windows Azure™ platform, 3M created a  Web-based application that gives designers the ability to invoke  complex algorithms to analyze the effectiveness of a design,  based on how the human eye will respond. By hosting its  application in Microsoft® data centers, 3M has made an  innovative service available to a global audience, while  minimizing its investment in hardware infrastructure and ongoing administration. The solution, which permitted developers to  evaluate frequent iterations of the application, helped the  company speed time-to-market for its service and achieve  higher quality results, faster than in a traditional development  environment.

Cloud-enabled business model

3M’s cloud-enabled business model allows it to offer a new solution, known as VAS, to a new audience – the creative design community. The cloud-based offering allows 3M to transform its role in the product development value chain by closely integrating with a global network of designers. The affordable, flexible, cloud-based, pay-as-you-go model allows the company to deliver VAS in a fast, user-friendly manner that fits into a designer’s existing design process.

The company developed a prototype of a  Web-based application, called the 3M  Visual Attention Service (VAS). The service  makes it possible for designers to test the effectiveness of their content using visual  attention models, which are based on algorithms that predict the elements of a  scene that a viewer is likely to see and to remember. The prototype, a Web-based  application that was hosted on 3M data  center servers, enabled users to upload  photographs of a physical environment or a  graphic design to the VAS. The  application’s processing engine then  evaluated the image for its “visual saliency”  and returned a map of the image that  indicated, using markings such as those  seen on a heat map, which areas of the  image were most likely to attract a viewer’s attention

3M believed that the most effective  approach would be to operate the VAS  application from a “cloud computing”  environment, in which the solution would  be hosted and managed on the Internet  and reside in an external partner’s data centers. The company evaluated hosted  infrastructure offerings from Microsoft and  others,, 3M chose  the Windows Azure™ platform from  Microsoft. Windows Azure is a cloud  services operating system that serves as  the development, service hosting, and  service management environment for the  Windows Azure platform. Windows Azure  provides developers with on-demand  compute and storage to host, scale, and  manage Web applications on the internet  through Microsoft data centers.Currently, VAS helps customers evaluate  any number of graphical or photographic  images that they choose to upload to the  application. In future versions, 3M plans to  provide customers with the ability to create  entire databases of test images, enabling  users to experiment with, for example, the  content of an advertisement in a variety of  design scenes—or, conversely, a number  of different types of advertising content in  one particular scene

Business results

  • By hosting VAS via cloud, 3M achieved:
  • A highly scalable environment – important during peak  design times
  • A low up-front investment and a flexible pay-as-you-go pricing model to help significantly reduce hosting costs and optimize profits
  • The ability to attract new customers with an innovative solution while facilitating tighter integration within the product design ecosystem


Disruptors invent radically different value propositions, generating new customer needs. They capture unique competitive advantage by creating a new or disrupting an existing industry or market

Disruptor case study: Comcast Xcalibur.

Disruptors often provide customers what they weren’t even aware they wanted or needed! By taking a risk.

Disruptor case study: Comcast Xcalibur

Comcast Corporation is a leading media, entertainment and communications company. It operates cable systems and develops, produces and distributes entertainment, news, sports and other content for global audiences. It is also one of the nation’s largest video, high-speed Internet and phone providers to residential and business customers.


In 2011, Comcast piloted Xcalibur, its next generation cloud- based TV platform that aims to revolutionize the way people watch TV. Xcalibur moves the company beyond the delivery of channels and video via set top boxes that use digital television technology to leveraging cloud architecture that delivers live TV service to any Internet-connected device. Leveraging Internet Protocol (IP) technology, the company can update its guide and add features more easily and cheaply. It also helps Comcast meet the demands of “connected customers” to watch TV wherever they want and access content sources more seamlessly.

Cloud-enabled business model

The cloud-based platform shifts the ability to control content into the cloud. It enables live video feeds that serve the ever- growing numbers and types of mobile and connected devices. Customers can find content tailored to their needs in new ways, for example, by using an iPad app to choose channels, on demand videos and Xfinity online streaming videos. They can then watch their selected content when and where they want – whether on TV, tablet or other device.

This personalized TV experience, combined with a powerful search engine and Internet apps to access non-TV content, as well as the ability to share via social media channels, allows Xcalibur to create a radically different customer value proposition, with the potential of attracting entirely new customer segments in the future.

Business results

The Wall Street Journal cited this move to the cloud as evidence of “a new phase in how Internet technologies are transforming television.” Benefits thus far to Comcast include:

  • Meeting customer demands for easier access to TV and other Internet-enabled content
  • Delivering content to more devices than before
  • Creating new apps faster and more cheaply
  • Making UI changes more quickly and easily.

Disruptors can gain “first-mover” advantage. IBM survey indicates a larger percentage of disruptors expect to outperform their peers in the next three years than do innovators or optimizers. While they face greater risks, disruptors tend to anticipate higher rewards

Cloud – a way for businesses to exploit the capabilities

Cloud has already changed both business and everyday life –  from consumers who perhaps unknowingly use it to access  their favorite music to companies that purposely harness its  powerful resources. While much activity and buzz relating to  cloud involves its technological capabilities, the benefits of  cloud adoption actually extend into the business realm.DigitalRevolutionInfographic

When utilized effectively, cloud capabilities offer numerous  opportunities to drive business innovation. Recent technology  and social connectivity trends have created a perfect storm of  opportunity for companies to embrace the power of cloud to  optimize, innovate and disrupt business models.

To more clearly determine how organizations use cloud today  and how they plan to employ its power in the future, IBM surveyed, in conjunction with the Economist Intelligence Unit,  572 business and technology executives across the globe. Its  research suggests that while cloud is widely recognized as an  important technology, relatively few organizations today  actively embrace it to drive business model innovation.

However, its survey also indicates this will change dramatically in the next few years, with more and more organizations  looking to cloud to drive new business and transform industries.

Through its research, IBM also identified some game-changing  business enablers powered by cloud. Organizations are  exploiting these business enablers to drive innovation that  extends well beyond IT and into the boardroom. Its analysis  reveals that some organizations are harnessing cloud to  transform both product and service development and recast  customer relationships. Through its survey of business and technology leaders, IBM discovered that organizations – both big and small, across  geographies and in virtually every industry – are embracing  cloud as a way to reduce the complexity and costs associated  with traditional IT approaches. Almost three-fourths of the  leaders in the survey indicated their companies had piloted,  adopted or substantially implemented cloud in their organizations – and 90 percent expect to have done so in three years. And the number of respondents whose  companies have substantially implemented cloud is expected to  grow from 13 percent today to 41 percent in three years.

In IT circles, it appears cloud has almost become mainstream.  Nearly half of the respondents in a recent CIO Economic  Impact survey indicated they evaluate cloud options first –  over traditional IT approaches – before making any new IT  investments.

And this cloud adoption phenomenon is not  limited to large companies. Its survey revealed that while a  higher percentage of large organizations (those with revenues more than US$20 billion) are experimenting with cloud, small  organizations are by no means left out of the game. In fact, 67  percent of companies with revenues less than US$1 billion and  76 percent of those with revenues between US$1 and 20  billion have adopted cloud at some level. It’s not surprising  then that the global cloud computing market is forecast to  grow 22 percent annually to US$241 billion by 2020.

Organizations are not only relying on cloud to enhance  internal efficiencies, but also to target more strategic business  capabilities. In fact, the respondents’ number-one objective for  adopting cloud is an external capability – that of increased  collaboration with external partners . Only one of  the top seven objectives cited focused on internal efficiencies,  with 57 percent looking to cloud to drive competitive and cost  advantages through vertical integration. The rest, such as new  channels, delivery markets and revenue streams, all relate to  improved business capabilities.

Interestingly, while its research clearly reveals organizations intend to rely on cloud to enhance their business capabilities,

only 38 percent cite cloud as a leading priority for the entire company. Rather, cloud is still viewed by many as an IT solution, with 62 percent citing cloud as a leading priority for their IT organizations.

IBM survey results suggest that organizations are just beginning to understand the power of cloud to help drive business innovation. Only 16 percent of survey respondents currently utilize cloud for sweeping innovation, such as entering new lines of business or industries, reshaping an existing industry or transitioning into a new role in their industry value chain. However, 35 percent plan to rely on cloud for business model innovation within the next three years.

Clearly, cloud is widely recognized as an important technology, offering capabilities that positively affect IT. However, its full business potential has yet to be realized or even understood by most organizations.

The world is experiencing a digital and mobile transformation, with more information available more quickly in more mediums than ever before. As part of this, consumers have jumped on the social media bandwagon, with many relying on it as their primary collaboration format. Add to this the advent of new analytics capabilities and the results are sweeping changes in almost every aspect of daily business and consumer life.

Cloud provides a way for businesses to exploit the capabilities borne of these digital trends to better meet customers’ needs and drive future growth. In fact, IBM research illuminates six key cloud attributes being used to power business model innovation, which It has dubbed business enablers: Cost flexibility, business scalability, market adaptability, masked complexity, context-driven variability and ecosystem connectivity.

Cost flexibility

Cost flexibility is a key reason many companies consider cloud adoption in the first place. More than 31 percent of executives surveyed cited cloud’s ability to reduce fixed IT costs and shift to a more variable “pay as you go” cost structure as a top benefit.

Cloud can help an organization reduce fixed IT costs by

enabling a shift from capital expenses to operational expenses.

IT capital expenses – which typically include enterprise software licenses, servers and networking equipment – tend to be less fluid, more expensive and harder to forecast than routine IT operating expenses. With cloud applications, there is no longer a need to build hardware, install software or pay dedicated software license fees. By adopting cloud services, an organization can shift costs from capital to operational – or from fixed to variable. The organization pays for what it needs when it needs it. This pay-per-use model provides greater flexibility and eliminates the need for significant capital expenditures.

Cost flexibility is certainly an appealing cloud attribute for Etsy, an online marketplace for handmade goods. In addition to bringing buyers and sellers together, Etsy also provides recommendations for buyers. Using cloud-based capabilities, the company is able to cost-effectively analyze data from the approximately one billion monthly views of its Web site and use the information to create product recommendations. The cost flexibility afforded through cloud provides Etsy access to tools and computing power that might typically only be affordable for larger retailers.

Business scalability

IT scalability is recognized by many as a major benefit of cloud adoption. However, cloud offers more than just IT scalability – it allows an organization to easily scale its business operations as well.

By allowing for rapid provisioning of resources without scale limitations, cloud enables a company to benefit from economies of scale without achieving large volumes on its own. Recognizing cloud’s ability to facilitate efficient growth and expanded options, approximately a third in the survey view business scalability as a top cloud benefit.

For this concept in action, consider Netflix, an Internet subscription service for movies and TV shows. Because it streams many movies and shows on demand, the company faces large surges of capacity at peak times. As Netflix began to outgrow its data center capabilities, the company made a decision to migrate its Web site and streaming service from a traditional data center implementation to a cloud environment. This move allowed the company to grow and expand its customer base without having to build and support a data center footprint to meet its growth requirements.

Market adaptability

In today’s economic environment, the ability to respond to rapidly changing customer needs is a key competitive differentiator. As such, companies continuously seek ways to improve their agility to adjust to market demands. A third of the executives IBM surveyed believe cloud can assist in this respect, citing market adaptability among cloud’s top benefits.

By enabling businesses to rapidly adjust processes, products and services to meet the changing needs of the market, cloud in turn facilitates rapid prototyping and innovation and helps speed time to market.

ActiveVideo certainly recognized cloud’s power to enhance market adaptability when it created CloudTV, a cloud-based platform that unifies all forms of content – Web, television, mobile, social, video-on-demand, etc. – onto any video screen. Content and applications from Web content creators, television networks, advertisers and other media entities can be developed quickly for CloudTV using standard Web tools.

CloudTV leverages content stored and processed in the

network cloud to significantly expand the reach and availability of Web-based user experiences, as well as to allow operators to quickly deploy a consistent user interface across diverse set top boxes and connected devices. The CloudTV approach of placing the intelligence in the network, rather than the device,

enables content creators, service providers and consumer electronics manufacturers to create new television experiences for their viewers.

Masked complexity

In addition to business scalability and market adaptability, cloud also offers the advantage of masking complexity. Cloud provides a way for organizations to “hide” some of the intricacies of their operations from end users, which can help attract a broader range of consumers. Because complexity is veiled from the end user, a company can expand its product and service sophistication without also increasing the level of user knowledge necessary to utilize or maintain the product or service. For example, upgrades and maintenance can be done in the “background” without the end user having to participate.

Masked complexity is perhaps less recognized than some of the other enablers, as 20 percent of the business leaders in the survey cited it as a top benefit. Xerox definitely recognizes this cloud attribute, however, as evidenced by its Xerox Cloud Print solution. With Xerox Cloud Print, workers can get their desired content in printed form wherever they might be by using Xerox’s cloud to access printers outside their own organization.

While printing from the cloud requires quite a bit of data management – with numerous files to be stored, converted to print-ready format and distributed to printers – the complexity is hidden from users.

Context-driven variability

Because of its expanded computing power and capacity, cloud can store information about user preferences, which can enable product or service customization. The context-driven variability provided via cloud allows businesses to offer users personal experiences that adapt to subtle changes in user-defined context, allowing for a more user-centric experience.

This is a significant cloud attribute, as evidenced by the more than 50 percent of respondents who cited “addressing fragmented user preferences” as important for their organizations.

Siri, the Apple iPhone 4S cloud-based natural language “intelligent assistant,” is all about context-driven variability. It allows users to send messages, schedule meetings, place phone calls, find restaurants and more.

And while other phones have some voice recognition features, Siri “learns your voice” as Wall Street Journal columnist Walt Mossberg put it.

Siri uses artificial intelligence and a growing base of knowledge about the user, including his or her location and frequent contacts, to understand not only what is said but what is meant. In a nutshell, it leverages the computing capabilities and capacity of cloud to enable individualized, context-relevant customer experiences.

Ecosystem connectivity

Another business enabler powered by cloud is ecosystem connectivity, which is recognized by a third of the respondents as a major benefit. Cloud facilitates external collaboration with partners and customers, which can lead to improvements in productivity and increased innovation. Cloud-based platforms can bring together disparate groups of people who can collaborate and share resources, information and processes.

Health Hiway is a great example of how cloud can enable ecosystem connectivity. A cloud-based health information network, Health Hiway enables the exchange of information and transactions among healthcare providers, employers, payers, practitioners, third-party administrators and patients in India. By connecting more than 1,100 hospitals and 10,000 doctors, the company’s software-as-a-service solution facilitates better collaboration and information sharing, helping deliver improved care at a low cost, particularly important in growing markets, such as India.

Business model Innovation – A generic Perspective

Business Model Innovation (BMI) refers to the creation, or reinvention, of a business itself. Whereas innovation is more typically seen in the form of a new product or service offering, a business model innovation results in an entirely different type of company that competes not only on the value proposition of its offerings, but aligns its profit formula, resources and processes, and its value network to enhance that value proposition, capture new market segments and alienate competitors.


Evolution and key principles of the theory

Adrian Slywotzky, a consultant and author of several books on economic theory and management has highlighted the importance of adjusting the Business-Design in order to adjust to value migration or drive value value migration within an industry.

Customer Value Proposition First and most important, a successful company is one that has found a way to create value for customers — that is, a way to help customers get an important job done. By job we mean a fundamental problem, in a given situation, that needs a solution. The best customer value proposition is an offering that gets that job–and only that job–done perfectly. The lower the price of the offering and the better the match between the offering and the job, the greater the overall value generated for the customer. The more important the job is to the customer, the lower the level of customer satisfaction with current options, and the better your solution is than your competitors’ at getting the job done, the greater the value for your company.

Profit Formula The profit formula is the blueprint that defines how the company creates value for itself. People often think that profit formulas and business models are interchangeable, but how you make a profit is only one piece of the model. It consists of the following:

Revenue model (price × volume)
Cost structure (assets; direct and indirect costs; and a model of how, and whether, scale affects costs)
Margin model (How much does each transaction need to net to cover the cost structure and deliver target profits?)
Resource velocity (How much revenue do we need to generate per dollar of assets and per dollar of fixed costs, and how quickly?)

Key Resources The key resources (or assets) are the people, technology, products, facilities, equipment and brand required to deliver the value proposition to the targeted customer. The focus here is on the key elements that create value for the customer and company, and the way those elements interact. Every company also has generic resources that do not create competitive differentiation.

Key Processes Successful companies have operational and managerial processes that allow them to deliver value in a way they can successfully repeat and increase in scale. These may include such recurrent tasks as training, development, manufacturing, budgeting, planning, sales and service. Key processes also include a company’s rules, metrics and norms.

Market context and circumstances fueling BMI

Bob Higgins, founder and managing general partner of Highland Capital Partners, is quoted in Johnson, Christensen and Kagermann’s Harvard Business Review article as saying, “I think historically where we [venture capitalists] fail is when we back technology. Where we succeed is when we back new business models.”

Business model innovations have reshaped entire industries and redistributed billions of dollars of value. Retail discounters such as Walmart and Target, which entered the market with innovative business models, now account for 75% of the total valuation of the retail sector. Low-cost U.S. airlines grew from a blip on the radar screen to 55% of the market value of all carriers. Over the past decade (1997-2007), 14 of the 19 entrants into the Fortune 500 owed their success to business model innovations that either transformed existing industries or created new ones.

A 2005 survey by the Economist Intelligence Unit reported more than 50% of executives believe that between now and 2010, business model innovation will be even more important for success than product or service innovation. A 2008 IBM survey of corporate CEOs echoed these results. Nearly all of the CEOs polled reported the need to adapt their business models; more than two-thirds said that extensive changes were needed.

An analysis of major innovations within existing corporations in the last decade (1998-2008), though, shows that precious few have been business-model related. And a recent American Management Association study determined that no more than 10% of innovation investment at global companies is focused on developing new business models. The authors therefore highlight five strategic circumstances companies commonly face that often require business model change:

The opportunity to address the needs of large groups of potential customers who are shut out of a market entirely because existing solutions are too expensive or complicated for them. This includes the opportunity to democratize products in emerging markets (or reach the bottom of the pyramid).

The opportunity to leverage a brand-new technology, wrapping the right business model around it or the opportunity to leverage a tested technology in a whole new market.

The opportunity to bring a job-to-be-done focus to a marketing-driven industry. Such industries tend to make offerings into commodities. But a jobs focus allows companies to redefine the industry profit formula.
The need to fend off low-end disruptors. If Tata’s 1 Lakh ($2300) Nano is successful, it will threaten other automobile makers.

The need to respond to a shifting basis of competition. Inevitably, what defines an acceptable solution in a market will change over time, leading core market segments to commoditize.

The innovation revolution spurred by venture capitalists decades ago has created the conditions in which scale enables big companies to shift from shackling innovation to unleashing it. Three trends are behind this shift:

The ease of innovation and its decreasing cost mean that start-ups now face the same short-term pressures that have constrained innovation at large companies. Taking a page from start-up strategy, large companies are embracing open innovation and integrating entrepreneurial behaviors with their existing capabilities. Innovation increasingly involves creating business models that tap big companies’ unique strengths. In this context, entrepreneurial individuals, whom the author calls “catalysts,” are working with corporations’ resources, scale, and growing agility to develop solutions to global challenges.

Here are the stories of four corporate catalysts: Keyne Monson, at Medtronic, spurred the creation of a program called Healthy Heart for All, which seeks to bring pacemaker technology to hundreds of thousands of Indians who desperately need it. Yuri Jain, at Unilever, sought and found a scalable solution to purifying drinking water–Pureit, a portable system that provides safe water at half a cent per liter. Nick Musyoka, at Syngenta, devised a program called Uwezo (Swahili for “capability”), which uses the sachet distribution model to provide smallholding farmers with affordable packages of crop protection chemicals. Colin Harrison, at IBM, was instrumental in developing the company’s Smarter Cities program, which offers bundled technological infrastructure and related services to help cities save money and improve lives.

In the complex sport of American football, teams rely on playbooks as thick as the Manhattan phone directory. But when it comes to creating innovative growth businesses—which is at least as complicated as professional football—most companies have not developed detailed game plans. Indeed, many managers have concluded that a fog enshrouds the world of innovation, obscuring high-potential opportunities. The authors believe that companies can penetrate that fog by developing growth strategies based on disruptive innovations, as defined by Clayton Christensen. Such innovations conform to a pattern: They offer an entirely new solution; they perform adequately along traditional dimensions and much better along other dimensions that matter more to target customers; and they are not initially appealing to powerful incumbents. Companies can develop customized checklists, or playbooks, by combining this basic pattern with analysis of major innovations in their markets. The key early on is to focus not on detailed financial estimates—which will always guide companies toward the markets most hostile to disruptive innovations—but on how well the innovation fits the pattern of success. It’s also crucial to encourage flexibility: Companies must be willing to kill projects that are going nowhere, exempt innovations from standard development processes, and avoid burdening project teams with extra financing, which can keep them heading in the wrong direction. Companies can create competitive advantage by becoming champions at defining the pattern of successful innovations and executing against it. But as that pattern becomes obvious—and others emerge—building a sustainable advantage on innovation competencies will again prove elusive.

In today’s increasingly complex environment, business model innovation can be critical to organizational success.

In a follow-up to the “IBM Global CEO Study 2008, The Enterprise of the Future,” we analyzed 28 successful business model innovators to understand how and when business model innovation is most valuable. The business model consists of four components: the value delivered to customers, how revenue is generated, how a company positions itself in the industry and how value is delivered.

In the new economic environment, companies can start developing a strategy and transformation approach by answering two questions: (1) Under what conditions should companies innovate their business model? and (2) What characteristics support the design and execution of successful business model innovation?

Successful timing of business model innovation depends on the economic environment, the specific market and industry conditions, and a set of internal factors impacting the organization.

It was found that successful companies are innovating their business model in three ways: (1) Revisiting the enterprise model to reduce cost through new partnership models and by re configuring the asset mix, (2) Using strong financial resources to introduce alternative industry models and disrupt competitors and (3) Rethinking revenue model and value propositions to respond to a different set of customer behaviors and market requirements.

Not every organization needs to innovate its business model immediately, but the capabilities need to be established in order to act when the time is right.

Three capabilities – we call them the Three A’s – can improve the execution of business model innovation: organizations need to be aligned with customer value, analytical to gain insight from differentiated intelligence, and enabled by an adaptable operating model.

Cloud Computing – Introduction

Although cloud computing is only a different way to deliver computer resources, rather than a new technology, it has sparked a revolution in the way organizations provide information and service.

cloudcomputing by Gartner

Originally IT was dominated by mainframe computing. This sturdy configuration eventually gave way to the client-server model. Contemporary IT is increasingly a function of mobile technology, pervasive or ubiquitous computing, and of course, cloud computing. But this revolution, like every revolution, contains components of the past from which it evolved.

Thus, to put cloud computing in the proper context, keep in mind that in the DNA of cloud computing is essentially the creation of its predecessor systems. In many ways, this momentous change is a matter of “back to the future” rather than the definitive end of the past. In the brave new world of cloud computing, there is room for innovative collaboration of cloud technology and for the proven utility of predecessor systems, such as the powerful mainframe. This veritable change in how we compute provides immense opportunities for IT personnel to take the reins of change and use them to their individual and institutional advantage.

Cloud computing is a comprehensive solution that delivers IT as a service. It is an Internet-based computing solution where shared resources are provided like electricity distributed on the electrical grid. Computers in the cloud are configured to work together and the various applications use the collective computing power as if they are running on a single system.

The flexibility of cloud computing is a function of the allocation of resources on demand. This facilitates the use of the system’s cumulative resources, negating the need to assign specific hardware to a task. Before cloud computing, websites and server-based applications were executed on a specific system. With the advent of cloud computing, resources are used as an aggregated virtual computer. This amalgamated configuration provides an environment where applications execute independently without regard for any particular configuration.

Cloud computing building blocks

The cloud computing model is comprised of a front end and a back end. These two elements are connected through a network, in most cases the Internet. The front end is the vehicle by which the user interacts with the system; the back end is the cloud itself. The front end is composed of a client computer, or the computer network of an enterprise, and the applications used to access the cloud. The back end provides the applications, computers, servers, and data storage that creates the cloud of services.

Layers: Computing as a commodity

The cloud concept is built on layers, each providing a distinct level of functionality. This stratification of the cloud’s components has provided a means for the layers of cloud computing to becoming a commodity just like electricity, telephone service, or natural gas. The commodity that cloud computing sells is computing power at a lower cost and expense to the user. Cloud computing is poised to become the next mega-utility service.

The virtual machine monitor (VMM) provides the means for simultaneous use of cloud facilities. VMM is a program on a host system that lets one computer support multiple, identical execution environments. From the user’s point of view, the system is a self-contained computer which is isolated from other users. In reality, every user is being served by the same machine. A virtual machine is one operating system (OS) that is being managed by an underlying control program allowing it to appear to be multiple operating systems. In cloud computing, VMM allows users to monitor and thus manage aspects of the process such as data access, data storage, encryption, addressing, topology, and workload movement.

A Virtual Machine Monitor (VMM) is a software program that enables the creation, management and governance of virtual machines (VM) and manages the operation of a virtualized environment on top of a physical host machine.

VMM is also known as Virtual Machine Manager and Hypervisor. However, the provided architectural implementation and services differ by vendor product.

 Virtual Machine Monitor (VMM)

VMM is the primary software behind virtualization environments and implementations. When installed over a host machine, VMM facilitates the creation of VMs, each with separate operating systems (OS) and applications. VMM manages the backend operation of these VMs by allocating the necessary computing, memory, storage and other input/output (I/O) resources.

VMM also provides a centralized interface for managing the entire operation, status and availability of VMs that are installed over a single host or spread across different and interconnected hosts.

For example, IBM’s VM/ESA can control multiple virtual machines on an IBM S/390 system.

In Microsoft Virtual Server 2005, Virtual Machine Monitor is the proprietary name for a kernel-mode driver that functions as a firewall between the host OS and the virtual machines. It can prevent any single program, running in one of the virtual machines, from overusing the resources of the host OS.

A cloud server is a logical server that is built, hosted and delivered through a cloud computing platform over the Internet. Cloud servers possess and exhibit similar capabilities and functionality to a typical server but are accessed remotely from a cloud service provider.A cloud server may also be called a virtual server or virtual private sever.

A cloud server is primarily an Infrastructure as a Service (IaaS) based cloud service model. There are two types of cloud server: logical and physical. A cloud server is considered to be logical when it is delivered through server virtualization. In this delivery model, the physical server is logically distributed into two or more logical servers, each of which has a separate OS, user interface and apps, although they share physical components from the underlying physical server. 

Whereas the physical cloud server is also accessed through the Internet remotely, it isn’t shared or distributed. This is commonly known as a dedicated cloud server.

The following are the layers the cloud provides:

    The infrastructure layer is the foundation of the cloud. It consists of the physical assets — servers, network devices, storage disks, etc. Infrastructure as a Service (IaaS) has providers such as the IBM® Cloud. Using IaaS  the IT organization don’t actually control the underlying infrastructure, but do have control of the operating systems, storage, deployment applications, and, to a limited degree, control over select networking components.

    Print On Demand (POD) services are an example of organizations that can benefit from IaaS. The POD model is based on the selling of customizable products. PODs allow individuals to open shops and sell designs on products. Shopkeepers can upload as many or as few designs as they can create. Many upload thousands. With cloud storage capabilities, a POD can provide unlimited storage space.

    The middle layer is the platform. It provides the application infrastructure. Platform as a Service (PaaS) provides access to operating systems and associated services. It provides a way to deploy applications to the cloud using programming languages and tools supported by the provider. IT Organizations do not have to manage or control the underlying infrastructure, but do have control over the deployed applications and, to some degree over application hosting environment configurations.

    PaaS has providers such as Amazon’s Elastic Compute Cloud (EC2). The small entrepreneur software house is an ideal enterprise for PaaS. With the elaborated platform, world-class products can be created without the overhead of in-house production.

Amazon Elastic Compute Cloud (Amazon EC2) is a cloud infrastructure offered under Amazon Web Services (AWS) that provides raw computing resources on demand.

Amazon EC2 provides computing instances that can be scalable in terms of computing power and memory, flexible by providing the option to host applications on multiple different platforms, and secure thanks to a tightly coupled multi-tenant architecture. Amazon EC2 enables the provision of a virtual server, which can incorporate massive amounts of computing power. This is available on a subscription-based utility computing model, and the user is billed only for the resources used.

Amazon EC2 is also known as Amazon Web Services EC2 (AWS EC2).

Amazon Elastic Compute Cloud is a pioneer cloud infrastructure product that allows users to create powerful virtual servers on demand. Amazon EC2 is hosted on the server consolidation/virtualization concept, where the entire computing power of server hardware can be divided into multiple instances and offered to the end-user over the Internet as a computing instance. 

Because the computing instances provided are software based, each unique instance is scalable and users can create an entire virtual data center over the cloud. Amazon EC2-created instances can be accessed by open-source Simple Object Access Protocol (SOAP) application programming interface (API) support, giving developers the liberty to create various types of applications, just as with an on-premises computing infrastructure. The instance provided by EC2, commonly known as a virtual machine, is created using Amazon Virtual Image and is hosted over Xen Hypervisor, a server virtualizing software.

The top layer is the application layer, the layer most visualize as the cloud. Applications run here and are provided on demand to users. Software as a Service (SaaS) has providers such as Google Pack. Google Pack includes Internet accessible applications, tools such as Calendar, Gmail, Google Talk, Docs, and many more.

Cloud formations

There are three types of cloud formations: private (on premise), public, and hybrid.

Public clouds are available to the general public or a large industry group and are owned and provisioned by an organization selling cloud services. A public cloud is what is thought of as the cloud in the usual sense; that is, resources dynamically provisioned over the Internet using web applications from an off-site third-party provider that supplies shared resources and bills on a utility computing basis.

Private clouds exist within  company’s firewall and are managed by your organization. They are cloud services organizations create and control within enterprise. Private clouds offer many of the same benefits as the public clouds — the major distinction being that your organization is in charge of setting up and maintaining the cloud.

    Hybrid clouds are a combination of the public and the private cloud using services that are in both the public and private space. Management responsibilities are divided between the public cloud provider and the business itself. Using a hybrid cloud, organizations can determine the objectives and requirements of the services to be created and obtain them based on the most suitable alternative.

IT roles in the cloud

Let us consider the probability that management and administration will require greater automation, requiring a change in the tasks of personnel responsible for scripting due to the growth in code production, IT may be consolidating, with a need for less hardware and software implementation, but it is also creating new formations. The shift in IT is toward the knowledge worker. In the new paradigm, the technical human assets will have greater responsibilities for enhancing and upgrading general business processes.

The developer

The growing use of mobile devices, the popularity of social networking, and other aspects of the evolution of commercial IT processes and systems, will guarantee work for the developer community; however, some of the traditional roles of development personnel will be shifted away from the enterprise’s developers due to the systemic and systematic processes of the cloud configuration model.

A recent survey by IBM, New developerWorks survey shows dominance of cloud computing and mobile application development demonstrated that the demand for mobile technology will grow exponentially. This development, along with the rapid acceptance of cloud computing across the globe, will necessitate a radical increase of developers with an understanding of this area. To meet the growing needs of mobile connectivity, more developers will be required who understand how cloud computing works.

Cloud computing provides an almost unlimited capacity, eliminating scalability concerns. Cloud computing gives developers access to software and hardware assets that most small and mid-sized enterprises could not afford. Developers, using Internet-driven cloud computing and the assets that are a consequence of this configuration, will have access to resources that most could have only dreamed of in the recent past.

The administrator

Administrators are the guardians and legislators of an IT system. They are responsible for the control of user access to the network. This means sitting on top of the creation of user passwords and the formulation of rules and procedures for such fundamental functionality as general access to the system assets. The advent of cloud computing will necessitate adjustments to this process since the administrator in such an environment is no longer merely concerned about internal matters, but also the external relationship of his enterprise and the cloud computing concern, as well as the actions of other tenants in a public cloud.

This alters the role of the firewall constructs put in place by the administration and the nature of the general security procedures of the enterprise. It does not negate the need for the guardian of the system. With cloud computing comes even greater responsibility, not less. Under cloud computing, the administrator must not only ensure data and systems internal to the organization, they must also monitor and manage the cloud to ensure the safety of their system and data everywhere.

The architect

The function of the architecture is the effective modeling of the given system’s functionality in the real IT world. The basic responsibility of the architect is development of the architectural framework of the agency’s cloud computing model. The architecture of cloud computing is essentially comprised of the abstraction of the three layer constructs, IaaS, PaaS, and SaaS, in such a way that the particular enterprise deploying the cloud computing approach meets its stated goals and objectives. The abstraction of the functionality of the layers is developed so the decision-makers and the foot soldiers can use the abstraction to plan, execute, and evaluate the efficacy of the IT system’s procedures and processes.

The role of the architect in the age of cloud computing is to conceive and model a functional interaction of the cloud’s layers. The architect must use the abstraction as a means to ensure that IT is playing its proper role in the attainment of organizational objectives.

To cloud or not to cloud: Risk assessment

The main concerns voiced by those moving to the cloud are security and privacy. The companies supplying cloud computing services know this and understand that without reliable security, their businesses will collapse. So security and privacy are high priorities for all cloud computing entities.

Governance: It addresses the question of how will industry standards be monitored?

Governance is the primary responsibility of the owner of a private cloud and the shared responsibility of the service provider and service consumer in the public cloud. However, given elements such as transnational terrorism, denial of service, viruses, worms and the like — which do or could have aspects beyond the control of either the private cloud owner or public cloud service provider and service consumer — there is a need for some kind of broader collaboration, particularly on the global, regional, and national levels. Of course, this collaboration has to be instituted in a manner that will not dilute or otherwise harm the control of the owner of the process or subscribers in the case of the public cloud.

Bandwidth requirements

If you are going to adopt the cloud framework, bandwidth and the potential bandwidth bottleneck must be evaluated in your strategy.

Virtualization implementers found that the key bottleneck to virtual machine density is memory capacity; now there’s a whole new slew of servers coming out with much larger memory footprints, removing memory as a system bottleneck. Cloud computing negates that bottleneck by removing the issue of machine density from the equation—sorting that out becomes the responsibility of the cloud provider, freeing the cloud user from worrying about it.

For cloud computing, bandwidth to and from the cloud provider is a bottleneck.

In today’s market the best answer is the blade server. A blade server is a server that has been optimized to minimize the use of physical space and energy. One of the huge advantages of the blade server for cloud computing use is bandwidth speed improvement. For example, the IBM BladeCenter is designed to accelerate the high-performance computing workloads both quickly and efficiently. Just as the memory issue had to be overcome to effectively alleviate the bottleneck of virtual high machine density, the bottleneck of cloud computing bandwidth must also be overcome, so look to the capabilities of your provider to determine if the bandwidth bottleneck will be a major performance issue.

Financial impact

Because a sizable proportion of the cost in IT operations comes from administrative and management functions, the implicit automation of some of these functions will per se cut costs in a cloud computing environment. Automation can reduce the error factor and the cost of the redundancy of manual repetition significantly.

There are other contributors to financial problems such as the cost of maintaining physical facilities, electrical power usage, cooling systems, and of course administration and management factors. As you can see, bandwidth is not alone, by any means.

Mitigate the risk

Consider these possible risks:

  •     Adverse impact of mishandling of data.
  •     Unwarranted service charges.
  •     Financial or legal problems of vendor.
  •     Vendor operational problems or shutdowns.
  •     Data recovery and confidentiality problems.
  •     General security concerns.
  •     Systems attacks by external forces.

With the use of systems in the cloud, there is the ever present risk of data security, connectivity, and malicious actions interfering with the computing processes. However, with a carefully thought out plan and methodology of selecting the service provider, and an astute perspective on general risk management, most companies can safely leverage this technology.

In conclusion

In this revolutionary new era, cloud computing can provide organizations with the means and methods needed to ensure financial stability and high quality service. Of course, there must be global cooperation if the cloud computing process is to attain optimal security and general operational standards. With the advent of cloud computing it is imperative for us all to be ready for the revolution.

History of Cloud computing

Cloud Computing Growth

Cloud Computing Growth

Although cloud computing is widely recognized as a technology game changer, its potential for driving business innovation remains virtually untapped. Indeed, cloud has the power to fundamentally shift competitive landscapes by providing a new platform for creating and delivering business value. To take advantage of cloud’s potential to transform internal operations; customer relationships and industry value chains, organizations need to determine how best to employ cloud-enabled business models that promote sustainable competitive advantage. This blog addresses the how to perform business model innovation with cloud computing technology platform and to drive new businesses and transform industries.Although cloud is widely recognized as a technology game changer, its potential for driving business innovation remains virtually untapped. Indeed, cloud has the power to fundamentally shift competitive landscapes by providing a new platform for creating and delivering business value. To take advantage of cloud’s potential to transform internal operations, customer relationships and industry value chains, organizations need to determine how best to employ cloud-enabled business models that promote sustainable competitive advantage.

 History of Cloud Computing

Every 10-15 years, the Information and Communication Technology (ICT) industry is transformed by innovations that fundamentally change the way we use computers, how we access information, how businesses derive value from ICT and even how consumers live their daily lives. The main-stream introduction of the Internet via the World Wide Web in 1995 was one such revolutionary change. It enabled ready access to information regardless of where it geographically derived from. It removed barriers to publish information, and to conduct business on-line. The web has indisputably and fundamentally changed entire industries, including publishing, music and telecoms, to name but a few.

In 2000, at the height of the dot-com bubble, Application Service Providers (ASP) entered the market, offering a simple browser interface for interacting with applications. Rather than hosting applications in-house, they could be hosted elsewhere, and were simultaneously offered to multiple clients, accessible via a browser. Salesforce.com, an enterprise software company with a customer relationship management (CRM) product is a successful example of an ASP.

Simultaneously, academic research institutions began to experiment with Grid Computing, so-called because it is analogous to the power grid, in which many power plants supply energy and consumers can draw power at will. Grid computing refers to distributed systems with non-interactive workloads that involve a large number of files, loosely coupled, heterogeneous and geographically dispersed. Around this time a third trend soon came into mainstream, which was Virtualization. Although the technology itself had been around for more than 30 years, Intel began to enable physical processors to host multiple operating systems concurrently. In this way, a physical server that previously may have only been used at 10-15% of its capacity could now be fully utilized. In 2004, Cloud Computing rose to public awareness. Essentially, it is the model used by companies (such as Salesforce.com, Amazon, Google, and Face book) that run their own infrastructures to be always on, with changes and upgrades occurring on the running system and the system scaling in accordance with demand.

Cloud Computing has since become the predominant way of delivering and consuming IT infra-structure (computation and storage), middle-ware and applications. In our opinion, Cloud Computing is one of the fundamental transformations that, as with the advent of the web, will change how we communicate, do business and offer services.

History of Cloud Computing: Timelines

1950: Scientist Herb Grosch (the author of Grosch’s law) postulated that the entire world would operate on dumb terminals powered by about 15 large data centers.

1960: John McCarthy opined that “computation may someday be organised as a public utility”In 1961, Stanford professor John McCarthy was one of the first to suggest a time-share, service bureau computing model.

1966: Douglas Parkhill’s book, “The Challenge of the Computer Utility” explained all the modern-day characteristics of cloud computing

1969: ARPANET developed, UNIX created

1970: ARPANET transformed itself into Internet

J.C.R. Licklider, a key man at ARPANET, predicted an “intergalactic computer network” from which users could access data or programs anytime, anywhere.

1990: Internet age started,

1991: CERN released Internet for general use

1993-94: Browsers such as Mosiac & Netscape launched

1995: The online auction website “eBay” was founded as AuctionWeb in San Jose, California, on September 5, 1995, by French-born Iranian-American computer programmer Pierre Omidyar. Jeff Bezos created Amazon.com, Inc. in 1994, and the site went online in 1995. It is named after the Amazon River, one of the largest rivers in the world, which in turn was named after Amazons, the legendary nation of female warriors in Greek mythology.

In A 1996 paper, The Self-governing Internet: Coordination by Design, MIT researchers used the term “cloud” to describe foundational elements of today’s movement.  Advances in hardware, software and networking brought the rise of application service providers in the 1990s.

A 1998 book, The Grid: Blueprint for a New Computing Infrastructure, described “a universal source of pervasive and dependable computing power that supports dramatically new classes of applications.”

1999: Salesforce.com launched in March 1999 by former Oracle executive Marc Benioff, Parker Harris, Dave Moellenhoff, and Frank Dominguez as a company specializing in software as a service (SaaS). Napster was launched in 1999. An 18-year-old college dropout named Shawn Fanning changed the music industry forever with his file-sharing program called Napster. Shawn Fanning, is the co-founder of Napster His idea was simple, a program that allowed computer users to share and swap files, specifically music, through a centralized file server.

2000: Dot com bubble bursts: After the dot-com bubble, Amazon played a key role in the development of cloud computing by modernizing their data centers. Having found that the new cloud architecture resulted in significant internal efficiency improvements whereby small, fast-moving “two-pizza teams” could add new features faster and more easily, Amazon initiated a new product development effort to provide cloud computing to external customers.

2006: Amazon launched Amazon Web Service (AWS) on a utility computing basis although the initial released dated back to July 2002. Amazon Web Services (AWS) is a collection of remote computing services (also called web services) that together make up a cloud computing platform, offered over the Internet by Amazon.com. The most central and well-known of these services are Amazon EC2 and Amazon S3.

2008: Eucalyptus became the first open-source, AWS API-compatible platform for deploying private clouds. Eucalyptus is a software platform for the implementation of private cloud computing on computer clusters. OpenNebula became the first open-source software for deploying private and hybrid clouds. OpenNebula is an open-source cloud computing toolkit for managing heterogeneous distributed data center infrastructures. OpenNebula is sponsored by C12G. C12G Labs is an enterprise software company which provides OpenNebula-based software and services. C12G (numeronym for Cloud Computing) was founded in April 2010.

2007: Salesforce launches Force.com, a web productivity tool. Force.com is a cloud computing platform as a service system from Salesforce.com.

2007-2010. With launch of iPhone, HTC’s first Android phone, Android-Apps, Samsung’s smartphone and a whooping sale of 1 million iPad in the first month of it’s launch, the enterprise market saw huge transformation that scripted a completely different IT market story driven totally by consumers. Cloud services got much needed boost with the launch of i-services for iPhone and iPad costumers. Cloud applications hosted on far away Data Centers became a rage which ultimately launched the golden era of cloud computing and services based upon “as a service” delivery-model.

2011: The year that truly made a mark for Cloud Computing. Several start-ups were founded that leveraged the cloud services.

According to the National Institute of Standards and Technology, the definition of cloud computing is “a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.”

Translated, this means that rather than maintaining your own expensive computer hardware, you can take advantage of a “host” computer over an Internet connection to access applications, content, and data that exists “in the cloud.” It functions much like the electric utility that powers your home.

Cloud Computing Origins

The idea of cloud computing dates back to the 1960s: That’s when the American computer scientist who coined the term “artificial intelligence,” John McCarthy (who died in October 2011), advocated that the use of that era’s huge computers could be offered much like a “public utility.” Much discussion followed, including the 1966 book The Challenge of the Computer Utility from Douglas Parkhill, but the idea died out until the early 2000s.

Amazon became a key cloud computing player in 2006 when it launched their Amazon Web Service for “utility computing.” IBM and Google entered the field a year later followed by Eucalyptus in 2008. Then in April 2009, the National Science Foundation (NSF) awarded $5 million in grants to 14 universities to participate in the “IBM/Google Cloud Computing University Initiative” to provide the computing infrastructure “to explore innovative research ideas in data-intensive computing.” Since then, the impact of cloud computing has prompted corporations and the U.S. federal government to use the Cloud to reorganize their huge computer infrastructures and decrease their spending budgets.

The concept was born in the 1960s from the ideas of pioneers like J.C.R. Licklider (instrumental in the development of ARPANET) envisioning computation in the form of a global network and John McCarthy (who coined the term “artificial intelligence”) framing computation as a public utility. Some of the first uses included the processing of financial transactions and census data.

Flash forward to 1997, when the term “cloud computing” was first used by information systems professor Ramnath Chellappa.

Within just a few years, companies began switching from hardware to cloud services because they were attracted to benefits like a reduction in capital costs as well as an easing in IT staffing issues. But the No. 1 benefit companies cite is efficiency. One of the first milestones for cloud computing was the arrival of Salesforce.com in 1999, which pioneered the concept of delivering enterprise applications via a simple website. The services firm paved the way for both specialist and mainstream software firms to deliver applications over the internet. The next development was Amazon Web Services in 2002, which provided a suite of cloud-based services including storage, computation and even human intelligence through the Amazon Mechanical Turk. Another big milestone came in 2009, as Web 2.0 hit its stride, and Google and others started to offer browser-based enterprise applications, though services such as Google Apps.

The most important contribution to cloud computing has been the emergence of “killer apps” from leading technology giants such as Microsoft and Google. When these companies deliver services in a way that is reliable and easy to consume, the knock-on effect to the industry as a whole is a wider general acceptance of online services.

According to a recent Carbon Disclosure Project report, companies that streamline operations to improve IT performance will not only reduce capital expenditures but they’ll shrink energy consumption and carbon emissions. The group estimated that, by 2020, U.S. organizations that move to the cloud could save $12.3 billion in energy costs and the equivalent of 200 million barrels of oil.

In 2009, revenue for cloud services was just over $58.6 billion. In 2011, IT spending is expected to top $2.6 trillion. And with cloud computing accounting for just 2.3 percent of that global market, there’s plenty of room for growth. The research firm Gartner projects that revenue for cloud services will approach $152.1 billion in 2014.

One factor that’s driving demand for cloud computing is the explosive growth of data. According to projections by Century Link, by 2015, the world will see a four-fold increase in the amount of data being created and replicated. And once all of that data comes into being, you need a way to store it all securely and allow end-users to access it efficiently.

Cloud computing has evolved through a number of phases which include grid and utility computing, application service provision (ASP), and Software as a Service (SaaS).

But the overarching concept of delivering computing resources through a global network is rooted in the sixties.

The idea of an “intergalactic computer network” was introduced in thesixties by J.C.R. Licklider, who was responsible for enabling the development of ARPANET (Advanced Research Projects Agency Network) in 1969.

His vision was for everyone on the globe to be interconnected and accessing programs and data at any site, from anywhere, explained Margaret Lewis, product marketing director at AMD. “It is a vision that sounds a lot like what we are calling cloud computing.”

Other experts attribute the cloud concept to computer scientist John McCarthy who proposed the idea of computation being delivered as a public utility, similar to the service bureaus which date back to the sixties.

Since the sixties, cloud computing has developed along a number of lines, with Web 2.0 being the most recent evolution. However, since the internet only started to offer significant bandwidth in the nineties, cloud computing for the masses has been something of a late developer.

One of the first milestones for cloud computing was the arrival of Salesforce.com in 1999, which pioneered the concept of delivering enterprise applications via a simple website. The services firm paved the way for both specialist and mainstream software firms to deliver applications over the internet.

The next development was Amazon Web Services in 2002, which provided a suite of cloud-based services including storage, computation and even human intelligence through the Amazon Mechanical Turk.

Then in 2006, Amazon launched its Elastic Compute cloud (EC2) as a commercial web service that allows small companies and individuals to rent computers on which to run their own computer applications.

“Amazon EC2/S3 was the first widely accessible cloud computing infrastructure service,” said Jeremy Allaire, CEO of Brightcove, which provides its SaaS online video platform to UK TV stations and newspapers.

Another big milestone came in 2009, as Web 2.0 hit its stride, and Google and others started to offer browser-based enterprise applications, though services such as Google Apps.

“The most important contribution to cloud computing has been the emergence of “killer apps” from leading technology giants such as Microsoft and Google. When these companies deliver services in a way that is reliable and easy to consume, the knock-on effect to the industry as a whole is a wider general acceptance of online services,” said Dan Germain, chief technology officer at IT service provider Cobweb Solutions.

Other key factors that have enabled cloud computing to evolve include the maturing of virtualisation technology, the development of universal high-speed bandwidth, and universal software interoperability standards, said UK cloud computing pioneer Jamie Turner.

Turner added, “As cloud computing extends its reach beyond a handful of early-adopter Google Docs users, we can only begin to imagine its scope and reach. Pretty much anything can be delivered from the cloud.”

Following the cloud

“Many IT professionals recognise the benefits cloud computing offers in terms of increased storage, flexibility and cost reduction,” said Songnian Zhou, chief executive officer of Platform Computing.

But he added that IT directors still have concerns about the security of their corporate data in the cloud. This means that it will be 2010 at the earliest before cloud adoption sees increased growth.

Julian Friedman, a specialist in emerging technologies, said that security and other concerns will soon be resolved.

“Considerations such as security, data privacy, network performance and economics are likely to lead to a mix of cloud computing centres both within the company firewall and outside of it.”

He added that today’s applications will naturally move towards a cloud model as they become more pervasively available through the web, require more data processing, and span the boundaries of multiple devices.

Experts seem to agree that cloud computing will ultimately transform today’s computing landscape.

Andreas Asander, vice-principal of product management at virtualisation security specialist Clavister, said that once the security issues are resolved, cloud computing services “can enable an enterprise to expand its infrastructure, add capacity on demand, or outsource the whole infrastructure, resulting in greater flexibility, a wider choice of computing resources and significant cost savings.”

It is clear that cloud computing can bring enormous benefits for IT users.

However, the bottom line for IT directors is that they will need to continue to manage their internal computing environments, whilst learning how to secure, manage and monitor the growing range of external resources residing in the cloud