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Analysis of applications and success factors of cloud computing for small- and medium-sized businesses

Master's Thesis 2012 84 Pages

Computer Science - Commercial Information Technology

Excerpt

CONTENTS

Kurzfassung

Abstract

1 Introduction
1.1 Context
1.2 Objective and structure
1.3 Methods

2 Fundamentals
2.1 Fundamentals of software applications
2.1.1 Definition and characteristics
2.1.2 Type of software applications
2.1.2.1 Email communication
2.1.2.2 Office applications
2.1.2.3 Project management
2.1.2.4 Team collaboration
2.1.2.5 Customer relationship management
2.1.2.6 Procurement
2.1.2.7 Web development
2.1.2.8 Unified messaging
2.1.2.9 Enterprise resource planning
2.1.2.10 Fleet management
2.1.2.11 Human resource
2.2 Fundamentals of cloud computing
2.2.1 Definition and characteristics
2.2.2 Computer topology evolution
2.2.2.1 Mainframe
2.2.2.2 Client-Server
2.2.2.3 Mesh topology
2.2.3 Cloud computing service models
2.2.3.1 Infrastructure as a Service
2.2.3.2 Platform as a Service
2.2.3.3 Software as a Service
2.2.4 Advantages and limitations of cloud computing
2.2.4.1 Advantages of cloud computing
2.2.4.2 Limitations of cloud computing
2.3 Fundamentals of success factors
2.3.1 Definition and characteristics
2.3.2 Methods to identify success factors
2.3.2.1 Analysis of demand
2.3.2.2 Analysis of competition
2.4 Fundamentals of small- and medium-sized businesses
2.4.1 Definition and characteristics
2.4.2 Definition of small- and medium-sized businesses
2.4.2.1 Small-sized businesses
2.4.2.2 Medium-sized businesses

3 State-of-the-art research
3.1 Cloud computing in the insurance industry
3.2 Cloud computing in the logistics sector

4 Empirical survey
4.1 Objective
4.2 Method
4.3 Sample
4.3.1 Industry distribution
4.3.2 Employees distribution
4.3.3 Revenues distribution

5 Analysis of cloud computing applications for small- and medium-sized businesses
5.1 Acceptance and usage of cloud computing
5.1.1 Acceptance of cloud computing
5.1.2 Usage of cloud services models
5.2 Cloud computing solutions
5.2.1 Infrastructure as a service solution
5.2.1.1 Storage
5.2.1.2 Processing / Computing power
5.2.2 Platform as a Service solution
5.2.2.1 Application deployment and hosting
5.2.2.2 Storage
5.2.2.3 Development environment
5.2.3 Software as a Service solution
5.2.3.1 Team collaboration
5.2.3.2 Email communication
5.2.3.3 Web development
5.2.3.4 Customer relationship management
5.2.3.5 Project management
5.2.3.6 Unified messaging
5.2.3.7 Office documents
5.2.3.8 Enterprise resource planning
5.2.3.9 Fleet management
5.2.3.10 Human resource management

6 Analysis of success factors for cloud computing for small- and medium- sized businesses
6.1 Security related factors
6.1.1 Overview
6.1.2 Data security
6.1.3 Data storage in Germany
6.1.4 Security audits
6.2 Cost related factors
6.2.1 Overview
6.2.2 Low cost
6.2.3 Price transparency
6.3 Technology related factors
6.3.1 Overview
6.3.2 Service stability
6.3.3 Interoperability
6.3.4 Customization
6.4 Support related factors
6.4.1 Overview
6.4.2 Support in german language via phone and email
6.4.3 On-site support
6.4.4 Support regarding cost efficiency
6.5 Supplier related factors
6.5.1 Overview
6.5.2 Headquarter in Germany
6.5.3 Customer references
6.5.4 Certified employees
6.5.5 Market leadership

7 Conclusions

A Online survey
A.1 Screening
A.1.1 Frage S
A.1.2 Frage S
A.1.3 Frage S
A.1.4 Frage S
A.2 Derzeitige Ausstattung an EDV/IT-Lösungen
A.2.1 Frage G
A.2.2 Frage G6/1a, Filter: Frage G5 Pos. 1 (E-Mail Kommunika- tion) geklickt
A.2.3 Frage G6/2a, Filter: Frage G5 Pos. 2 (Unified Messaging) geklickt
A.2.4 Frage G6/2b , Filter: Frage G5 Pos. 2 (Unified Messaging) geklickt
A.2.5 Frage G6/3a , Filter: Frage G5 Pos. 3 (Textbearbeitung, Tabellenkalkulation und Präsentationen) geklickt
A.2.6 Frage G6/4a , Filter: Frage G5 Pos. 4 (Projektmanagement) geklickt
A.2.7 Frage G6/5a , Filter: Frage G5 Pos. 5 (Teamzusammenarbeit) geklickt
A.2.8 Frage G6/6a , Filter: Frage G5 Pos. 6 (Kundenkontaktman- agement bzw. Kundenpflege - CRM) geklickt
A.2.9 Frage G6/7a , Filter: Frage G5 Pos. 7 (Betriebswirtschaftliche Belange) geklickt
A.2.10 Frage G6/8a, Filter: Frage G5 Pos. 8 (Personalwesen) geklickt
A.2.11 Frage G6/9a, Filter: Frage G5 Pos. 9 (Aussendienstunter- stützung) geklickt
A.2.12 Frage G6/10a, Filter: Frage G5 Pos. 10 (Unterstützung des Einkaufsprozesses) geklickt
A.2.13 Frage G6/11a, Filter: Frage G5 Pos. 11 (Web Applications Development) geklickt
A.2.14 Frage G
A.2.15 Frage G
A.2.15.1 Antwortmöglichkeiten:
A.2.16 Frage G
A.2.17 Frage G11, Filter: G10 Pos. 1-
A.2.18 Frage G12, Filter: G10 Pos. 3-
A.2.19 Frage G
A.2.20 Frage G14, Filter: Frage G13 Pos. 3-4 geklickt (“kommt in Frage“/ “in nächster Zeit geplant“)
A.2.21 Frage G15 , Filter: Frage G13 Pos. 3-5 geklickt (“kommt in Frage“/ “in nächster Zeit geplant“/“wird bereits genutzt“)
A.2.22 Frage G16, Filter: Frage G15_1 Pos. 1-2 (“SaaS wird bereits genutzt“, “Nutzung ist geplant“)
A.2.23 Frage G21, Filter: Frage G15_3 Pos. 1 (“IaaS wird bereits genutzt“)
A.2.24 Frage G22, Filter: Frage G13 Pos. 3-5 geklickt (“kommt in Frage“/ “in nächster Zeit geplant“/ “wird bereits genutzt“)
A.2.25 Frage G23, Filter: Frage G13 Pos. 3-5 geklickt (“kommt in Frage“/ “in nächster Zeit geplant“/ “wird bereits genutzt“)
A.2.26 Frage G24, Filter: Frage G13 Pos. 3-5 geklickt (“kommt in Frage““in nächster Zeit geplant““wird bereits genutzt“)
A.2.27 Frage G25, Filter: Frage G13 Pos. 3-4 geklickt (“kommt in Frage“/“in nächster Zeit geplant“)
A.2.28 Frage G26, Filter: Frage G13 Pos. 1-4 geklickt (“noch nichts von Cloud gehört“/“kommt nicht in Frage“/“kommt in Frage“/“in nächster Zeit geplant“)

List of Figures

List of Abbreviations

Bibliography

KURZFASSUNG

Cloud Computing hat eine große Bedeutung in der Industrie gewonnen, hauptsächlich bei kleinen und mittelständischen Unternehmen, auf Grund der vielen Vorteile im Hinblick auf Kosteneinsparungen, schnellere Produkteinführungszeit, Skalierbarkeit, Flexibilität und Optimierung von Ressourcen.

Heute wird Cloud Computing als die nächste IT-Revolution betrachtet und eine sehr große Anzahl von Artikeln, Bücher, Veröffentlichungen und technischen Berichten steht in der Literaturwelt zur Verfügung.

Im Rahmen dieser Masterarbeit werden die relevantesten Cloud Computing Anwen- dungen für kleine und mittelständische Unternehmen identifiziert. Zusätlich wer- den die zentralen Erfolgsfaktoren für die Einführung von Cloud Computing Anwen- dungen auf Basis der empirischen Untersuchung analysiert, die als Teil der Arbeit durchgeführt wurde.

Schließlich werden sowohl die Vor- und Nachteile der verschiedenen Cloud Computing Modelle, als auch die wichtigsten Ergebnisse der aktuellen Forschung im Cloud Computing Bereich vorgestellt.

ABSTRACT

Cloud computing is gaining importance in the industry and specially within small- and medium-sized companies due to the many benefits in terms of cost savings, faster time to market, scalability, cost flexibility and optimization of resources.

Today, cloud computing is considered as the next IT revolution and the number of articles, books, papers and technical reports flood the literature.

Within the scope of this master thesis, relevant cloud computing applications for small- and medium- sized companies are identified and the key success factors for adoption of cloud computing services are analyzed based on the empirical investigation performed as part of this work.

Finally, the benefits and constraints of the different cloud computing service models are presented including also the state-of-the-art research in the cloud computing area and a summary of the most important results.

CHAPTER 1

Introduction

1.1 Context

The way people and companies are communicating and interacting with each other is nowadays very different than decades ago. The standalone mainframe solution in charge of processing information was enhanced with client-server solutions. With the propagation of the internet, quick distribution of information and the interwork- ing among systems started playing an important role. Today, new technologies are enabling companies to virtualize the infrastructure and execute applications using the internet, opening immense possibilities of using software and information tech- nologies ”in the cloud”.

Cloud computing is considered as the next IT revolution as well as just a hype. The term is not only found in several articles, specialized magazines, books and conferences, but it is also a subject widely discussed in the consulting industry.

Focusing on the industry, cloud computing is gaining importance in many small- and medium-sized companies due to the many benefits in terms of cost savings, faster time to market, mobility and flexibility, among others. Additionally, small- and medium-sized companies using cloud computing services can concentrate on the core business and do not need to invest any effort in setting up and running an own infrastructure and software, which can be replaced with cloud computing solutions.

1.2 Objective and structure

In the scope of this master thesis, cloud computing applications for small- and medium-sized companies are identified as well as the key success factors for adop- tion of cloud computing services are analyzed based on the empirical investigation performed in scope of this work. The advantages and disadvantages of the different cloud computing service models are also presented including the state-of-the-art re- search in the area. Additionally, an analysis of the acceptance and current usage of cloud computing in small- and medium-sized businesses is included.

This master thesis is divided into seven chapters:

Chapter 1 gives a short introduction and describes the structure of the document.

Chapter 2 gives basic information about the different software applications used in the industry. Additionally, the term cloud computing is introduced as well as the fundamentals of the success factor’s theory. Finally, the forms and characteristics of small- and medium-sized businesses are explained.

Chapter 3 presents the state-of-the-art research in cloud computing and summarizes some studies available in the literature, which focus on the cloud computing model and its implementation in different industry branches. The main results concerning applications and key success factors for adoption of cloud computing services are also presented.

Chapter 4 gives information about the empirical investigation performed within the scope of this master thesis and presents the method used and the survey’s sample.

Chapter 5 presents the results of the empirical investigate and analyzes the usage of cloud computing solutions and of the most significant cloud applications for smalland medium-sized businesses.

Chapter 6 outlines the key success factors for adoption of cloud computing services based on the empirical investigation.

Chapter 7 summarizes the analysis of applications and success factors for small- and medium-sized business which were analyzed in this master thesis.

1.3 Methods

Diverse specialized literature and internet websites were used for the preparation of this master thesis. The literature used focuses mainly on cloud computing. The most relevant aspects handled in this literature are:

-The implementation and acceptance of cloud computing in different branches
-The relevance of cloud computing as a new option for companies
-The opportunities and risks of using cloud computing from a corporate point of view
-The strategical approach of cloud computing

The complete literature is available in the library of the Bonn-Rhine-Sieg University of Applied Sciences in Rheinbach and Sankt Augustin, Germany.

Many computer related definitions were taken from business informatics books as well as from experienced and specialized magazines prepared by companies with a broad cloud computing theoretical and practical experience like T-Systems. Cloud computing related definitions were taken also from specialized research companies pioneers in the cloud computing area like Gartner research and Forrester research. The websites from salesforce and the ”initiative cloud services made in Germany” were also important sources used in this work.

Some investigations already done in the cloud computing area were used within the scope of this master thesis: the diploma thesis investigating the application of cloud computing in E-business1 gives a good overview to cloud computing and its application; an empirical investigation performed by the Fraunhofer institute2 related to the application of cloud computing in the health insurance area provides good information about the practical use of cloud computing. This last study gave good guidelines for the empirical studies done in this work.

Finally, an empirical investigation was done as part of the master thesis, which has been performed in cooperation with the cloud services business unit of Deutsche Telekom. The study consisted of an online survey directed to IT decision makers of small- and medium-sized companies. A total of 613 companies had participated in the survey. The main focus of this survey was the identification of relevant cloud computing applications and the key success factors for the adoption of cloud computing services.

CHAPTER 2

Fundamentals

2.1 Fundamentals of software applications

2.1.1 Definition and characteristics

Software applications1 are used to perform specific tasks using computer systems. In the last years, software applications gained an important role for facilitating the process of many tasks in parallel and improving the efficiency in the companies. An application software2may consist of a single program, such as a specific invoice program or a chat program. It may be also a collection of programs or software packages that interact closely together to accomplish different tasks, such as spread- sheet or text processing functions. This software is commonly known as software suite. There are also very specific software applications used for engineering, pro- cess automation or billing processing. Finally, complex software applications used to coordinate the different aspects of the value chain management play a key role in the companies as the different processes are controlled and managed from a unique application.

2.1.2 Type of software applications

Following sections present the most relevant software applications used in a wide range of industries.

2.1.2.1 Email communication

Email communication software3 allows to send and receive text messages including also files, audio and video independently of the platform used. It is possible to send email messages to different receiver. It is not required that the users are online in order to receive the messages as they are stored in the exchange servers. Email software is one of the most used applications in companies.

2.1.2.2 Office applications

Office applications4 refer to applications used to support office activities for word processing, spreadsheet calculations, preparation of presentation slides, graphic arts and database processing. There exist in the market several office applications such as Microsoft office, Lotus Smart Suite, Star Office and Wordperfect Office. The most known application suite is Microsoft Office, which includes Microsoft Word, Excel, PowerPoint and Access. The applications work closely together allowing the easy interaction and object exchange among each other.

2.1.2.3 Project management

Project management applications5 allow project managers and team members to keep track of any project from its conception to its launch. The software manages all the project related aspects including resource management, budget management, time management, task assignments, quality control, issue reports and documenta- tion management. Project management software provides a centralized view to the whole project and gives more transparency to all involved team members.

2.1.2.4 Team collaboration

Team collaboration software6offers proper conditions for the support and coordina- tion of work related tasks within the company or among different companies. Using team collaboration software, project teams can work together to solve common prob- lems and achieve better and faster goals. The team members have the possibility to work in parallel independant of the time and location. Team collaboration software has gained ultimately more importance with the globalization, the internationaliza- tion and the geographical distances between teams within the companies.

Team collaboration software combines different office and communication software such as the tools already mentioned in 2.1.2.1 and 2.1.2.2 but also includes project management functions, such as team tasks and time management, shared calendars, real-time joint view of information as well as problem solving processes in teams.

2.1.2.5 Customer relationship management

Customer relationship management software7gives the company the tools required to manage customer information. This information is important in order to deliver the customers what they want, provide them the best customer service possible, cross-sell and up-sell more effectively, close deals, understand who the customer is and retain current customers. The customer relationship management software will collect, manage and link the customer information with the goal of optimizing the customer’s interaction.

2.1.2.6 Procurement

Procurement software8supports the purchase automatization functions in the com- panies.

All the activities related to create and approve purchase orders, select and order any product or service, receive and match an invoice and pay a bill are handled electronically and can be analyzed separately. The procurement department benefits of the information’s centralization as it is possible to see what was ordered, ensure the needed approvals are available and compare current prices to get the best deal for the company.

2.1.2.7 Web development

Web development software9 relates to software applications used to facilitate the design, implementation and deployment of a company’s internet website, applica- tions and web services. This type of software consists of a programming-oriented set of tools for linking web pages to databases and for manipulating other software components. A HTML editor for web development is included generally.

2.1.2.8 Unified messaging

Unified messaging software10is used to improve the communication within the com- pany, accelerate and improve the quality of decisions based on real-time information, improve operational effectiveness and reduce travel and expenses cost. The main components of a unified messaging software are instant messaging, fax, email, web conferencing, real-time collaboration, presence and telephony integration.

2.1.2.9 Enterprise resource planning

Enterprise resource planning software11 allows the companies to use a system of integrated applications to manage the business by integrating all aspects of the company’s value chain including development, manufacturing, logistics, sales and marketing. Specifically, the enterprise resource planning software consists of different enterprise software modules, each one is focused on a specific area of the business process. The most common modules include those for product planning, material purchasing, inventory control, sales, accounting, marketing, finance and HR. The most important goal of the enterprise resource planning software is to provide one central repository for all information that is shared by all business processes in order to improve the flow of data across the company.

2.1.2.10 Fleet management

Fleet management software12 is used for managing all the aspects and operations related to a fleet of vehicles operated by a company. Among the main functions of fleet management software are to manage all the processes, tasks and events such as notification of routine maintenance, scheduled maintenance, warranty tracking, work scheduling, depreciation, expense tracking, work order, parts inventory management and operational cost tracking.

2.1.2.11 Human resource

Human resource software13 is used to support the human resource activities of the companies. The main functions of this software is to provide support in the recruitment process, payroll, time repoint, benefit administration, learning and training management, performance record, scheduling and absence management.

2.2 Fundamentals of cloud computing

2.2.1 Definition and characteristics

The term cloud computing refers to the possibility to execute any kind of process using a server connected to the internet. It is possible to upload and download documents, videos or pictures, which is commonly known as online storage. Cloud computing facilitates as well the execution of computer programs without having them installed at the own machines as the software is executed from supplier’s servers connected to internet.

There are many definitions available to describe the term cloud computing. One simple definition14 refers to cloud computing as the delivery of computing services without owning an own infrastructure.

Other entities define cloud computing as follows:

-NIST15defines cloud computing as 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. This cloud model is composed of five essential characteristics (on- demand self-service, broad network access, resource pooling, rapid elasticity, measured service), three service models (cloud software as a service (SaaS), cloud platform as a service (PaaS), cloud infrastructure as a service (IaaS)) and four deployment models (private cloud, community cloud, public cloud, hybrid cloud).
-Gartner16 considers cloud computing as a style of computing where massively scalable IT-related capabilities are provided ”as a service” across the internet to multiple external customers.
-Forrester17 sees cloud computing as a pool of abstracted, highly scalable, and managed infrastructure capable of hosting end-customer applications and billed by consumption.
-T-Systems, a german IT consulting company, defines cloud computing181920as the renting of infrastructure and software, as well as bandwidths, under defined service conditions. These components should be able to be adjusted daily to the needs of the customer and offered with the upmost availability and security. Included in cloud computing are end-to-end service level agreements (SLAs) and use-dependent service invoices.

Other definitions and aspects of cloud computing can be found in the following bibliographic references2122232425:

In general terms, cloud computing refers to offer solutions and applications to the end users without a need for installation and deployment in the own end user premises. A cloud computing service can be software as a service, which delivers the entire application. In the infrastructure as a service model26, only the servers and operating systems are provided, and customers deploy their own applications on the hardware.

Section 2.2.3 will explain in detail the existing cloud computing service models.

The cloud computing model is characterized by the benefits offered to the companies in terms of productivity, cost and flexibility. Cloud computing is seen as a trend with high potential to dominate the IT market due to the many advantages offered compared to current IT technologies. Nowadays, companies are forced to increase productivity, improve the cost structure and react faster to the changing market. By using cloud computing, companies benefit of the flexibility, scalability, price efficiency and mobility that can be reached with this service model.

Gartner research27 estimates the cloud services revenue reached 68.3 US billion in 2010. Looking at the future, Gartner estimates the industry will strongly growth and reach a revenue of about 148.8 million by 2014.

2.2.2 Computer topology evolution

Over the last years, the computer topology moved from a monolithic and central- ized environment based on mainframes to a distributed environments based on the client-server model. Recently, mesh environments are gaining importance. The mesh connectivity allows each system to communicate directly to others increasing the redundancy within the system. As a result, the data processing and storage may be shared between them in a dynamic manner. Figure 2.128 shows the computer topology evolution stages.

2.2.2.1 Mainframe

Mainframe computers29 were introduced in the 1960s and consisted of centralized servers, which were deployed at customer’s premises. This technology consisted of high available and performance computer systems that were very expensive and complex. Mainframes used normally the star network topology. This topology consists of computers connected directly to a mainframe.

Mainframes30 were initially designed for big companies requiring the processing of high amount of information and data. Mainframes were scalable systems and connected to high-speed disk subsystems.

illustration not visible in this excerpt

Figure 2.1: Connectivity evolution

2.2.2.2 Client-Server

The client-server model31 introduced the possibility for a service requesters (also called client) to send tasks or workloads into a network for the further processing by service receivers (also called server). The servers receiving the requests process the information themselves or send it further to other computers connected to the network.

The servers in the client-server architecture32 have high capacity and high perfor- mance for computing processing. This architecture provides a higher availability than the mainframe model as the clients are not only connected to one single server and in case of failover of one server, any other server connected to the network can process the information. The client-server model started to be used in the 1980s as applications were migrated from mainframes to networks of desktop computers.

2.2.2.3 Mesh topology

Finally, with the popularization of internet in the 1990s, the technology has seen an increased trend into the mesh connectivity. The mesh connectivity33allows that each computer on the network can communicate to each other. Data processing, storage or any other computer process required can be dynamically shared and executed between systems. This model is highly scalable as the processes can be executed by distributed servers. Cloud computing bases on the mesh connectivity model. Figure 2.234 summarizes the computer topology evolution and presents the main characteristics.

illustration not visible in this excerpt

Figure 2.2: IT topology evolution

2.2.3 Cloud computing service models

With the introduction of cloud computing, companies perceive the deployment of infrastructure and software applications in a different way. There is not longer a need to invest high amount of money buying expensive and redundant systems or purchasing a high number of software licenses.

Several services models are identified in cloud computing covering from infrastruc- ture and database virtualization to user applications. As of today, three cloud computing service models are identified in the literature as the most relevant:

-Infrastructure as a service
-Platform as a service
-Software as a service

The most know payment model is the pay-as-you-go-model (PAYG)35.

Figure 2.336shows some applications for each cloud computing service model, which will be described in more detail in the following sections 2.2.3.1, 2.2.3.2 and 2.2.3.3.

illustration not visible in this excerpt

Figure 2.3: Cloud computing service models

2.2.3.1 Infrastructure as a Service

Infrastructure as a Service (IaaS)37 operates at the lowest service level and refers to features including infrastructure like server, network, storage, memory and other computer related resources. Companies do not need to invest high amount of money purchasing, maintaining and operating an IT infrastructure as the complete infras- tructure is operated and maintained by the cloud computing supplier. Additionally, companies can deploy any operating system and execute any application required. Cloud computing suppliers use the economies of scale by reducing the complexity of deploying a customer-specific infrastructure. Instead of this, a pool of servers and other infrastructure resources are setup and are made available to the companies. The term infrastructure as a service is also known as virtualization.

Figure 2.438presents some different types of IaaS services.

illustration not visible in this excerpt

Figure 2.4: Infrastructure as a service stack

2.2.3.2 Platform as a Service

Platform as a Service model (PaaS)39operates at a higher level than infrastructure as a service. The platform as a service model provides the resources needed to develop, build, deploy, execute and maintain applications from the internet without the need to install the software in the own servers.

PaaS services include application design, development, testing, deployment and hosting. Figure 2.540describes some further possible services applicable to PaaS.

illustration not visible in this excerpt

Figure 2.5: Platform as a service stack

By adopting the PaaS service model41, companies do not need to manage or control the underlying cloud infrastructure including network, servers, operating systems or storage, but they can still control the deployed applications and modify the configuration settings for the application-hosting environment.

2.2.3.3 Software as a Service

Software as a Service (SaaS)42is the most known and widest cloud computing service model used currently for the companies and people around the world. This model offers to customers business functionalities using the internet as enabler. Companies can use any software without installation at the own premises, without paying exces- sive and unnecessary license costs and without worrying about update installation and maintenance. The application can be accessed via internet using normally a web browser and independently of operating system or device used.

Figure 2.643presents some applications covered by the SaaS model.

illustration not visible in this excerpt

Figure 2.6: Software as a service stack

2.2.4 Advantages and limitations of cloud computing

2.2.4.1 Advantages of cloud computing

Adoption of cloud computing services brings many advantages for the companies44. The most important advantages of using cloud computing are described below:

-Possibility for the company to concentrate on core business
-There is not need for the company to invest resources in getting IT knowledge as the supplier brings its own expertise and specialized personal
-State-of-the-art solutions including infrastructure and software applications are always available as well as automatic updates
-Anywhere and anytime access independent of the device, computer or terminal used
-Reduction in the time to market due to factors such as the access to the latest technology
-High number of possible suppliers offers possibilities to reduce costs
-Economical advantages as there is no need for initial investment cost, reduction of operational cost and maintenance cost
-Cost efficiency is reached because the users of cloud computing only pay for the real service usage
-Multi-Tenancy plays an important economical aspect in terms of economies of scale. Adopting cloud computing services, users can share the same computing resources and there is not need to deploy a dedicated system for a unique user
-System scalability is one of the most important advantages of using cloud computing services. In case extra licenses or more servers are required, solution can be easily adapted to company’s needs
-High system availability as agreed in service level agreements (SLAs) due to supplier’s high performance systems
-Higher innovation potential by the use of state-of-the-art infrastructure, platforms and software. Companies benefit from the automatic updates performed directly from the suppliers
-Professional support by cloud computing supplier compared to small company.

2.2.4.2 Limitations of cloud computing

Following limitations45 should be considered when adopting cloud computing ser- vices:

-Data security is considered the most important limitation and barrier factor for companies adopting cloud computing services. There are many constraints related to the security of information
-Correct functionality of infrastructure and software applications are highly dependent to internet access’ availability and speed
-Companies implementing cloud computing services do not have the possibility to build up their own IT competence
-Adoption of cloud computing services adds high dependencies to supplier.

2.3 Fundamentals of success factors

2.3.1 Definition and characteristics

Success factors analysis46 provides a set of variables with information where com- panies need to focus their resources and capabilities in order to succeed and gain competitive advantage in the market. The term success factor was defined initially by Chuck Hofer and Dan Schendel. They defined success factors47as ”those variables that management can influence through its decisions and that can affect significantly the overall competitive positions of the firms in an industry. Within any particu- lar industry they are derived from the interaction of two sets of variables, namely, the economic and technological characteristics of the industry and the competitive weapons on which the various firms in the industry have built their strategies”.

Having knowledge of those success factors is not a guarantee for superior profitability but a good starting point to understand the industry environment and plan an effective business strategy48, which will be used to allocate correctly the resources and capabilities in order to reach industry success.

Different studies49 have been performed in order to provide empirical evidence of which business strategies lead to success and what are the key success factors. One of the most known studies is the profit impact of marketing strategy (PIMS) re- search program. The empirical investigation identified several strategic aspects that influence profitability. Among the most important strategic factors studied were market share, product quality, order of market entry and capital intensity. One of the most important results states the strategic factors are highly correlated with the profitability.

2.3.2 Methods to identify success factors

Based on Robert Grant’s approach, two important aspects need to be considered for a company to succeed: The first aspect refers to knowing the customers and delivering them products they are willing to buy (see section 2.3.2.1). The second aspect consists of having a very good knowledge of the competition and its complex environment (see section 2.3.2.2). Figure 2.750shows a basic framework introduced by Robert Grant which is used to identify key success factors.

2.3.2.1 Analysis of demand

The process of analysis of demand consists mainly in identifying who are the cus- tomers, what are their needs and what are the decision criteria they use to choose a particular product and company51. Once the factors have been identified, further analysis needs to be performed. For example, if customer’s choice of software appli- cations is based primarily in the data security and this is connected to the location

illustration not visible in this excerpt

Figure 2.7: Framework to identify key success factors

of the servers, options related to server location offshore or in-customer-premises should be included into the offer by a cloud computing supplier. Finally, Robert Grant refers in his book about the importance for a company to consider a customer not as a source of bargaining power but as a source of profit and as the main goal for the company’s existence.

2.3.2.2 Analysis of competition

The second process consists on analyzing the current competition’s situation in the industry52: how intense is the competition and what are its key dimensions. In the software market, consumers choose mainly the suppliers on the basis of market lead- ership and interoperability to existing systems. To reach this position, companies need to invest sufficiently enough resources in marketing advertising and product development.

2.4 Fundamentals of small- and medium-sized businesses

2.4.1 Definition and characteristics

Small- and medium-sized businesses play a very important social and economical role in many countries around the world53. As an example, 99% of the companies in the european union are represented by small- and medium-sized businesses. They provide around 90 million jobs and contribute to entrepreneurship and innovation.

The categorization of small- and medium-sized businesses is made based on the employees headcount and the revenues. The employees headcount is an initial criterion for determining in which category an small- and medium-sized business is located. It covers full-time, part-time and seasonal employes. The revenues is the second aspect to consider and it is determined by calculating the income that a company received during a year from its sales and services.

In general terms, small- and medium-sized businesses characterize for employing fewer than 250 persons and for having revenues not exceeding 50 million euro. Typically, small-and medium-sized businesses are export-oriented, focus on innova- tive and high value manufactured products and have a worldwide domination of a niche market. They are typically privately owned and based in small rural com- munities. Many of the successful small-and medium-sized companies characterize for a long-term oriented approach with the adoption of modern management prac- tices, like focusing on employee satisfaction, implementation of lean manufacturing practices and total quality management.

2.4.2 Definition of small- and medium-sized businesses

2.4.2.1 Small-sized businesses

Small-sized businesses are defined as companies employing fewer than 50 persons and with revenues not exceeding 10 million euro54.

2.4.2.2 Medium-sized businesses

Medium-sized businesses consist of companies which employ fewer than 250 persons and which have revenues not exceeding 50 million euro55.

[...]


1 11 Möller, Christian: Cloud Computing-Einsatz im E-Business, 2010

2 23 Weidmann, Monika; Renner, Thomas; Rex, Sascha: Cloud computing in der Versicherungsbranche, 2010

1 See 44 Webopedia, IT Business Edge: Application software definition, <http://www.webopedia.com/TERM/A/application.html>

2 See 37 Open projects software: Software definition, <http://www.openprojects.org/software-definition.htm>

3 See 50 Holey, Thomas, et al: Wirtschaftsinformatik, 2007, p. 279

4 See 43 Holey, Thomas, et al: Wirtschaftsinformatik, 2007, p. 272

5See41Project management software: Project management software definition, <http://www.projectmanagementsoftware.com>

6See56Holey, Thomas, et al: Wirtschaftsinformatik, 2007, p. 281

7See 45 Webopedia, IT Business Edge: Customer relationship management software, <http://www.webopedia.com/TERM/C/CRM.html>

8See55Holey, Thomas, et al: Wirtschaftsinformatik, 2007, p. 287

9See40PC magazine encyclopedia: Web development software, <http://www.pcmag.com/encyclopedia>

10See34IBM corporation: Unified communications, <http://www-142.ibm.com/software/products/us/en/category/SWAAA>

11See 46 Webopedia, IT Business Edge: Enterprise Resource Planning software, <http://www.webopedia.com/TERM/E/ERP.html>

12See51Wikipedia: Fleet management software, <http://en.wikipedia.org/wiki/Fleet_management_software>

13See53Wikipedia: Human resource management system,

<http://en.wikipedia.org/wiki/Human_resource_management_system>

14See 10 Metzger, Christian, et al: Cloud computing Chancen und Risiken aus technischer und unternehmerischer Sicht, 2011, p. 2

15See36National Institute of Standards and Technology: NIST Definition of Cloud Comput- ing, <http://csrc.nist.gov/publications/nistpubs/800-145/SP800-145.pdf>, pp. 2-3 16See29Gartner research: Gartner says cloud computing will be as influential as E-business, <http://www.gartner.com/it/page.jsp?id=707508>

17See27Forrester Research: Cloud computing definition, <http://www.forrester.com/rb/research>

18See16T-Systems Enterprise Services, White Paper. Cloud Computing I, 2011 19See17T-Systems Enterprise Services, White Paper. Cloud Computing II, 2011 20See18T-Systems Enterprise Services, White Paper. Dynamic Services, 2011

21See19Van Zütphen, Thomas: Avancen aus der Wolke, 2011

22See15Terplan, Kornel; Voigt, Christian: Cloud Computing, 2011

23See21Velte, Anthony, et al: Cloud computing: A practical approach, 2010

24See1Baun, Christian; Kunze, Marcel: Cloud computing: Web-basierte dynamische ITServices, 2010

25See20Van Zütphen, Thomas: Der CIO als Cloud-Broker, 2011

26See 39 PC magazine encyclopedia: Definition of cloud computing, 2012

27See28Gartner research: Gartner Says Worldwide Cloud Services Market to Surpass $68 Billion in 2010, <http://www.gartner.com/it/page.jsp?id=1389313>

28See14Rhoton, John: Cloud Computing Explained, 2010, p. 31

29See52Wikipedia: Grossrechner, <http://de.wikipedia.org/wiki/Grossrechner, 2012> 30See47Webopedia, IT Business Edge: What is mainframe?, <http://www.webopedia.com/TERM/M/mainframe.html>

31See48Wikipedia: Client-server model, <http://en.wikipedia.org/wiki/Client-server_model>

32See38PC magazine encyclopedia: Definition of client/server, <http://www.pcmag.com/encyclopedia>

33See 14 Rhoton, John: Cloud Computing Explained, 2010, pp. 30-31

34See:24Bias, Randy: Debunking the ”No Such Thing as A Private Cloud” Myth, <http://www.cloudscaling.com/blog/cloud-computing/debunking-the-no-such-thing-as-a-private- cloud-myth/>

35See 36 National Institute of Standards and Technology: NIST Definition of Cloud Comput- ing, <http://csrc.nist.gov/publications/nistpubs/800-145/SP800-145.pdf>, 2011, pp. 2-3 36See 14 Rhoton, J.: Cloud Computing Explained, 2010, p. 22

37See14Rhoton, John: Cloud Computing Explained, 2010

38See14Rhoton, John: Cloud Computing Explained, 2010, pp. 13-14

39See 21 Velte , Anthony, et al: Cloud computing: a practical approach, 2010, p. 13 40See 14 Rhoton, John: Cloud Computing Explained, 2010, pp. 13-14

41See36National Institute of Standards and Technology: NIST Definition of Cloud Computing, 2011, pp. 2-3

42See21Velte , Anthony, et al: Cloud computing: A practical approach, 2010, pp. 13-14

43See14Rhoton, John: Cloud Computing Explained, 2010, pp. 13-14

44See 10 Metzger, Christian, et all: Cloud computing, Chancen und Risiken aus technischer und unternehmerischer Sicht, 2011, p. 38f

45See10Metzger, Christian, et all: Cloud computing, Chancen und Risiken aus technischer und unternehmerischer Sicht, 2011, p. 38f

46See 4 Grant, Robert: Contemporary strategy analysis, 2002, p. 100

47See5Hofer, Chuck; Schendel, Dan: Strategy formulation: Analytical concepts, 1977, p. 7748See4Grant, Robert, Contemporary strategy analysis, 2002, p. 100

49See2Buzzel, Robert: The PIMS program of strategy research. A retrospective appraisal, 2004

50See 4 p. 97 51See 4 p. 97

52See4Grant, Robert, Contemporary strategy analysis, 2002, p. 97

53See 3 European Union: Commission recommendation concerning the definition of micro, small and medium-sized enterprises, 2003

54See3European Union: Commission recommendation concerning the definition of micro, small and medium-sized enterprises, 2003

55See 3

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Title: Analysis of applications and success factors of cloud computing for small- and medium-sized businesses