Topic 1: Cloud Computing

ADM3378 Emerging Topics in MIS

Telfer School of Management,
University of Ottawa
 Agenda
• What is cloud computing?
• Cloud layers
• Cloud deployment models
• Cloud challenges
• Could security and privacy
• Cloud elasticity
• Cloud business models
• Cloud pricing example
• Spot vs. on-demand servers
• Four Cloud Trends
• Discussion: Amazon & Cloud Computing
• Guest Speaker – TBD

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 What is cloud computing?
• When computing resources
(hardware, software) are
accessible through the
Internet (i.e., the cloud)
– You only need a browser (i.e.,
thin client) that runs on a
desktop, laptop, netbook, or
a handheld device

• Cloud = “giant shared

computer”

• Cloud = “computing and

storage on tap”

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 What is cloud computing?
• When “resources (e.g.,
CPU and storage) are
provided as general
utilities that can be
leased and released by
users through the
Internet in an on-
demand fashion”
 What is cloud computing?
• According to The National
Institute of Standards and
Technology (NIST)
– Cloud computing is a model
for enabling 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.

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Is cloud computing a new concept?
• “... computing may
some day be organized
as a public utility, just as
the telephone system is
a public utility” John
McCarthy, computer
scientist, MIT 1961 (September 4, 1927 – October 24, 2011)

“was an American computer scientist and cognitive

scientist. McCarthy was one of the founders of the
discipline of artificial intelligence” [Wikipedia]

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Is cloud computing a new concept?
• 50 years ago, time sharing systems were
introduced (several users were able to share
computing resources using “dumb” terminals
over telephone lines
• In the 1980s, with the PC, users were able to
control their own computing resources
(hardware and software)
• In the 1980s, to address the “isolation” of the PC,
client-server computing was introduced offering
a central repository for shared data, while the PC
enabled users to run programs locally

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 Is cloud computing a new concept?
Share expensive IT
1 resources

Give more
power to 2
users
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- Move everything
to the Internet
and use a thin
client
- Clouds promise Users keep
convenience, the power but
reliability, share 3
elasticity, and resources
economy

Combine IT Go beyond
resources to the LAN, 4
solve hard share with the
problems world [14]
5

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 Battleground for Big Tech

• How Cloud Computing Became a Big Tech

Battleground | WSJ – YouTube

[14]

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 Similarity with to the electric grid
• In the early 1900s, factories
used to generate their own
electricity
• With the coming of the
electric grid, factories
immediately plugged into
the grid
• Similarity with cloud
computing:
– Organizations are getting rid
of their in-house data centers
and connecting to the cloud
(a new grid based on
broadband Internet)

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 Why are we talking about it now?
• We’ve been using cloud computing for years
(e.g., Hotmail), so why are we talking about it
now?
• The cloud in affecting our lives, with more and
more of our data being stored on the cloud
• The browser (and web technologies such as Ajax)
evolved to offer good and simple interfaces
comparable to those of desktop applications
(e.g., Google Docs vs MS Office)
• Broadband is more available and affordable
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 Why are we talking about it now?
• Users have no time to learn how to manage their IT
infrastructure - they just want it to work
• Users are overwhelmed with viruses, spyware, etc.
• Users have discovered the convenience of the SaaS
(Software as a Service) model (e.g., web based email)
– No worry about installing, upgrading, maintaining, and
securing software
• Users have grown accustomed to mobility (access data
from anywhere, on any device) and collaboration
• Utilization of traditional data centers is very low
• Question: can you think of other reasons?
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 Cloud computing examples
• Google Docs (equivalent to
MS Office), and other
applications such as Gmail
• Salesforce.com CRM, used
for sales, marketing and
customer service
– Founded in 1999 with the
slogan “No Software”
• Amazon Web Services
(AWS): data storage priced
by Gigabyte-month, and
computing capacity priced
by CPU-hour

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 Main characteristics of the cloud
• Shared infrastructure
– Uses virtualization to share physical resources, storage,
and networking capabilities
• Dynamic provisioning
– Provision of services based on demand; expansion and
contraction of service capabilities as needed
• Network access
– Needs access to the Internet from devices such as PCs,
laptops, mobile phones, etc. using standard APIs (mostly
based on HTTP)
• Managed metering
– Consumers pay for the services they actually use
REDHAT: Virtualization is technology that lets you create useful IT services using resources that are traditionally bound to ha
It allows you to use a physical machine's full capacity by distributing its capabilities among many users or environments.

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 Dynamic nature of the Cloud
• Three main advantages of cloud computing over
traditional computing
– When demand for a service varies in time
– When demand is unknown in advance (e.g., a web
start-up might need to support a spike in demand
when it becomes popular, followed by a reduction
when customers turn away)
– Users who perform batch processing can use more
resources to finish faster
• E.g., using 1000 EC2 servers for one hour costs the same as
using one server for 1000 hours

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 Cloud and small business
• Low barrier to entry
• Reduced capital expense
– companies can start small and increase resources as
their needs increase
• Pay-per-use
• Ability to scale up and down as demand requires
• Better reliability and performance
– “economies of scale” enable cloud providers to invest
in better technology, better security & better business
continuity solutions
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 Cloud layers
• Infrastructure as a service (IaaS)
– Physical infrastructure, provides computing, storage,
and networking capabilities
• Platform as a service (PaaS)
– The operating system and other utilities are part of the
platform
– Consumers purchase access to the platforms, enabling
them to develop and deploy their own applications
• Software as a service (SaaS)
– Consumers access applications hosted on the cloud -
e.g., Salesforce.com, gmail.com, Google Docs

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 Cloud layers

- Complete business applications focused on

Target:
users/businesses
SaaS end-user requirements, or web services
Provides applications - e.g., Google Docs, Facebook, Salesforce

- Operating system (OS) and development

PaaS framework, no need to directly manage OS,
Target: databases, etc.
developers
Provides an application
- APIs available for building applications, pre-
development platform built application components, etc.
- e.g., Google App Engine

- Physical infrastructure (CPU, memory, disk,

Target: IaaS bandwidth) + Virtualization
administrators
Provides computing power - No need to purchase or manage a data center
- e.g., Amazon EC2, Amazon Simple Storage
Service (S3)

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 Cloud layers
• IaaS Example: Amazon EC2 (Elastic Compute
Cloud)
– Looks much like physical hardware, users having
control over the entire software stack from the kernel
upward
– “is a web service that provides resizable compute
capacity in the cloud. It is supposed to make web-
scale computing easier for developers.” [Source:
Amazon Web Services]
– A small EC2 computing instance (server) costs
US$0.10 per hour (1.2 GHZ processor, 1.7 Gigabytes
memory, 160 Gigabytes disk space)
Introduction to Amazon EC2 - Elastic Cloud Server &
Hosting with AWS - YouTube
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 Cloud deployment models
• Private cloud
– Cloud infrastructure deployed, maintained, and operated for a specific
organization
– The operation may be in-house or with a third party (but dedicated to the
client)
– E.g., Google has a private cloud that it uses to deliver services such as email,
maps, etc.
– User has more control on data and security
– Similar to in house data center?
• Public cloud
– The cloud infrastructure is available to the public on a commercial basis by a
cloud provider
– E.g., Amazon EC2, Google App Engine
– User has less control on data and security
• Hybrid clouds
– Part of the infrastructure runs in a private cloud, the rest in public clouds

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Cloud deployment models

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 Public Cloud Services – Spending
Forecast
Worldwide Public Cloud Services End-User Spending Forecast (Millions of U.S. Dollars)

BPaaS = business process as a service; IaaS = infrastructure as a service; PaaS = platform as a service; SaaS = software as a
service
Note: Totals may not add up due to rounding.
Source: Gartner (August 2021)
  2020 2021 2022
Cloud Business Process Services (BPaaS) 46,066 51,027 55,538

Cloud Application Infrastructure Services 58,917 80,002 100,636

(PaaS)

Cloud Application Services (SaaS) 120,686 145,509 171,915

Cloud Management and Security Services 22,664 25,987 29,736

Cloud System Infrastructure Services (IaaS) 64,286 91,543 121,620

Desktop as a Service (DaaS) 1,235 2,079 2,710

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Total Market 313,853 396,147 482,155
 Cloud challenges
• Latency* & bandwidth related issues because
cloud services are often remote
• Security, compliance, and regulatory issues
because data is accessible to third parties
• Data and application interoperability
– Cloud providers need to support data and
application interoperability so that customers can
combine any cloud provider’s capabilities into
their solutions
*Latency is the time it takes for data to be transferred between
its original source and its destination, measured in milliseconds. 23
 Cloud challenges
• Data portability: the ability to switch to a new
cloud provider or bring the systems back in-house
• Customers expect choice, speed, and flexibility
which puts pressure on cloud providers
• Browser-based user interface
– Still limited capabilities (but improving)
– duplicating the familiar desktop interface is challenging,
even though new web technology addresses this
problem to a certain degree

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 Cloud security & privacy

dinCloud: An alarming factor about these attacks is that each attack exploited a different vulnerability of the cloud network.
The target organizations belong to different industries and are of different sizes, from small to large.

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 Cloud security & privacy
• The cloud is as vulnerable as the Internet
(accidents, sabotage, hackers, etc.)

• Cloud computing raises privacy concerns because

the service provider has access to all the data,
and could accidentally or deliberately disclose it
or use it for unauthorized purposes

• Privacy legislation can help, but it is not enough

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 Cloud security & privacy
• Who controls or owns the data?
– If you move to another service provider, can you
take your data with you?
– Can you lose access to your data if you don’t pay
your bills?
– Do you have the power to remove and destroy
documents that are no longer needed?

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 Cloud security & privacy
• Cloud computing simplifies security for cloud
users by outsourcing it to a highly skilled third
party
– User data will be more secured in the cloud (e.g.,
users usually don’t backup data on their PCs)
• To solve the problem of third parties having
access to client companies’ data, encryption
can be used (not just for the transfer, but data
will be kept encrypted all the time)

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 Cloud security & privacy
• Data in the cloud remains encrypted and hence
protected from the cloud provider
– Search: users, provided with the proper credentials
and the necessary software (as part of a browser
plug-in), can search for and download the desired
data in encrypted form
– Processing: research on the ability to “process
encrypted data” is seeing some progress

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 Cloud elasticity
• Estimates of server utilization in traditional in
house data centers ranges from 5% to 20%
– Over-provisioning: when a service is not popular,
costly resources are wasted
– Under-provisioning: when a service becomes
popular but there are not enough resources
Missing potential customers and revenue
• For Web 2.0 applications, the cloud can
support 100 users one day, and 100,000 the
next
Web 2.0 refers to websites that emphasize user-generated content, ease of use, participatory culture and interoperability for end users
e.g. Wikipedia, Facebook 30
 Cloud elasticity
• Elasticity: the ability to add or remove
resources (CPU, storage, etc.)
– e.g., one server at a time with Amazon EC2
• The cloud gives the impression of “infinite
computing resources” available on-demand
and quickly enough to follow load surges
• Elasticity of the cloud is enabled by
virtualization*
*Virtualization is technology that lets you create useful IT services using resources that are traditionally bound to hardware.
It allows you to use a physical machine's full capacity by distributing its capabilities among many users or environments.
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 Cloud business models
• For individuals: free with advertizing and
sharing personal information (to be used for
targeted marketing)
• For businesses: subscription based
– e.g., Google Apps for Business: $50/user/year
• Includes: Messaging apps: Gmail and Google Calendar
and Google Groups for Business; Collaboration apps:
Google Docs, Sites, and Video for Business ; 24/7
support; etc.

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 Cloud pricing example
• Suppose you need 100 servers for 3 years
– Option 1:
• Use the cloud at $0.40 per instance-of-server-hour
• 100 servers * $0.40 instance-hour * 3 years * 8,760
hours/year = $1,051,200
– Option 2
• Buy the servers at $1,500 each
• 2 staff members at $100,000/year
• Electricity for 100 servers: $13,140/year
• 100 servers * $1500 + 3 years *13,140 electricity/year + 3
years * 2 staff * 100,000 salary/year = $789,420

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 Cloud pricing example
• If you run servers at 100% utilization rate,
then buying is better
• If you run servers at 75% utilization rate or
less, then cloud computing is better

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 Spot vs. on-demand servers
• IaaS platforms rent servers under different
contracts
– The difference is in terms of cost and availability
guarantees
– On-demand server: consumer can request it any time, and
it incurs a fixed cost per unit of time of use
– Spot server: the cost varies based on the spot market’s
supply and demand; and spot servers are revocable by the
platform

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 Spot vs. on-demand servers
• Amazon EC2 uses an auction mechanism for its
surplus idle resources (the size of which changes
continuously)
– Customer specifies an upper limit (bid) on the maximum hourly
price they are willing to pay for a spot server, and EC2 revokes
(with a 2 min warning) the server whenever its price rises above
the bid
– Spot servers are usually cheaper (up to 90% off) but they offer
weaker availability guarantees than on-demand servers
• Discussion: Discuss within your group the concept
of auction mechanism.
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 Spot vs. on-demand servers
• Customer must balance the cost-availability
trade-off
– A high bid might increase costs but also increase
server availability
• Types of applications suitable for spot servers:
– Fault-tolerant and flexible applications (can stop
and resume without failing)
• For more see:
https://aws.amazon.com/ec2/spot/
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Four Cloud Trends (Gartner)
• Cloud Ubiquity*
• Regional Cloud Ecosystems
– Growing geopolitical regulatory fragmentation,
protectionism and industry compliance
• Sustainability and Climate Change impact
• Automated Programmable Infrastructure
– Less Manual Interventions

*the fact of appearing everywhere or of being very common.

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 Discussion:
Amazon & Cloud Computing
• In a 2014 letter to shareholders, referring to
Marketplace, Prime, and Amazon Web
Services, Jeff Bezos (CEO) wrote [source]:
– “A dreamy business offering has at least four
characteristics. Customers love it, it can grow to a
very large size, it has strong returns on capital,
and it's durable in time.”
– “When you find one of these, don't just swipe
right, get married.”

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