Impact of Cloud Computing for Businesses


Development in technology has led to innovation of new technologies that are contributing greatly to business, as well as to other sectors. Invention of internet has been of great benefit and has also led to development. Cloud computing is one important possibility which has been brought about by availability of internet without which it is an impossibility. Although the technology is popular, the definition of the same is a contentious issue since many scholars have come up with different definitions. For instance, Gartner defines cloud computing as “a style of computing where massively scalable IT-related capabilities are provided ‘as a service’ using internet technologies to multiple external customers” (Gartner 2011).

It is also defined as a technology that is based on internet that enables information to be stored in servers so that it can be provided to customers or the clients on demand (Etro 2009). Such a technology has got great impacts on businesses and other small scale enterprises. With that background in mind, this paper shall focus on the cloud computing technology as well as the benefit of the same to small scale and medium sized enterprises.

The Concept of Cloud Computing

It is important to understand the concept of cloud computing to be in a position to understand the impacts of the same in business. According to the studies of Ramakrishnan, technology is more than just storing services in the internet. The same study defines cloud computing as a way of computing which involves providing information related technology services to many customers by the use of internet service. Cloud computing incorporates a lot of services such as infrastructure, software, platform as well as storage. The access of cloud computing is facilitated by internet protocols such as REST, HTTP and XML.

The infrastructure of cloud computing is supported by hosting as well as virtualization technologies. Therefore, as Gartner states, “cloud computing is the maturation and the coming together of several prior computing concepts like Grid Computing, ASP, Server Hosting, Utility Computing and Virtualization” (2011). Companies which provide different services that aid in computing are inclusive but not limited to IBM, Google, Amazon, as well as Microsoft. The figure below is a representation of cloud computing as a stack of different services.

Representation of cloud computing as a stack of services.
Figure 1: Representation of cloud computing as a stack of services.

Unique Features of Cloud Computing

Learning some features or characteristics of cloud computing is very important because it helps someone to understand the concept of the same more easily. High level of automation is a strong and an important characteristic of cloud computing. Systems are supposed to have very high level of self service than any other system of communication in an organization. Therefore, cloud computing is supposed to minimize work in an organization due to automation. To achieve self service, one needs to define certain services and then indentify the resources as well as the security to be used. It is then laid off and by so doing, the service becomes automated.

Cloud computing is characterized by high level of virtualization. This means that internet is a must as all services need to be availed online. Standard methods should be used to ensure that the service can be accessed easily by all types of clients. It is important for a cloud computing service to pool services together to enhance multi-customer usage. Cloud computing should allow for allocation of physical as well as virtual systems once a need arises. The process is important since it allows for the hiding of some of the machines that aid in processing, connectivity or even storage.

Rapid elasticity is also important in cloud computing since it allows for the provision of resources either manually or electronically. The characteristic allows either scaling up or out of more computers. Customers or clients should be made to believe that resources like computers can be put up on demand. Lastly, cloud computing is characterized by measured service. The resources used in cloud computing are not only measured but also audited. The report is also prepared and issued to the customers. Clients pay for the service based on a known scale which quantifies the services used. For instance, the customer may pay for the service based on the number of transactions which have been made, network used or the amount of power consumed (Smith 2009).

The Potential of Cloud Computing in Meeting the Needs of Businesses

Features and characteristic of cloud computing enables it to meet the needs of various businesses. For instance, since it is accessible as it is available online, it becomes easier to update business records. In case sales promotion is being carried out, salesmen can be able to access the database from any part of the country. By so doing, there is timely report which not only facilitates timely results but may eventually lead to provision of better services. Therefore, the fact that the technology is usually available online, it becomes easier for the customers and other people who may be involved in the business to access the service.

Cutting the production cost is the greatest need of various businesses and cloud computing is very beneficial in the same. Due to the use of cloud computing, the business institution is able to cut some of the operating expenses. For instance, buying expensive as well as advanced computer systems becomes unnecessary. Instead, the client is only required to buy a few things such as the monitor and input devices.

Failure to use work force may also end up cutting the costs involved in running the information technology department. In the view of the fact that the customer only pays for the service used and not the infrastructure, the service is usually treated as an expense. Consequently, it becomes quite easy not only to start but also to stop the business because the initial contract can be terminated as the need arises. Such a characteristic of cloud computing enables the business to manage the production cost efficiently and effectively.

A business needs to continue offering services to customers without major disruptions. Since cloud computing is based on open standards, its module can grow fast and be changed whenever a need arises. It uses open source software which can not only be changed but also improved frequently. Therefore, cloud computing is always in a position to meet the needs of the businesses (Rappa, 2004).

Meeting various needs of the businesses is also facilitated by its design as it contains different layers which are stack together from the bottom moving upwards. Cloud infrastructure is located at the bottom and it contains components that facilitate the functioning of the cloud. Such components may include resources used for storage and processing. It is important to note that the infrastructure has a provision for hiding some details like the hardware being used as well as the exact location of the data centre. In addition, the infrastructure also allows for scaling up or down on demand.

The second platform is referred to as cloud storage and it facilitates storage on the internet. The service has been made possible by server virtualization. Amazon Simple Storage Service (Amazon S3) is an example of such a service and enables retrieval and storage of any data on the internet.

The third layer is referred to as cloud platform as a service which aids in the provision of infrastructure which is used to develop software used for operating the web. The layer contains facilities used for the purpose of application design, deployment, development, application services and application version, to name just a few. Cloud component as a service is yet another layer of cloud computing. It incorporates definition of different software which runs across the internet. Examples of such applications include the web application services provided by Google like Sites and Gmail.

The application is advantageous because it can be updated regularly without using new disks for installation. Although it is disadvantageous as it depends on the internet, it is very beneficial because the user is able to get the updated version once it is made available. The figure below illustrates four different layers of cloud computing and examples of the vendors of the services.

Example of Cloud Computing Vendors.
Figure 2: Example of Cloud Computing Vendors.

Benefits of Cloud Computing to Small Scale and Medium Sized Enterprises

Small and Medium sized enterprises are more dynamic than big enterprises since they are able to adopt more easily to various changes that take place in the market. They are very important in any economy since they are mostly aimed at inventions and innovations. Due to lack of enough finances, SMEs are more challenged than the big enterprises. Companies that deal with information technology point out that it is increasingly hard to deal with small businesses because their market is usually fragmented and also do lack enough resources. However, due to the introduction of cloud computing, SMEs are now in a position to enjoy the same benefits in the field of information technology as the large scale enterprises (Furht & Escalante, 2010).

As highlighted earlier in this essay, cloud computing cuts down not only on the initial but also the operating costs. Due to this, it becomes quite easy to start up new businesses as there is no need to purchase new computer hardware as well as software and SMEs benefit greatly from the same. A study conducted in the European region by Etro (2009) illustrates that the introduction of cloud computing has led to creation of new SMEs in different sectors. Further studies illustrate that the impact of the same is more common in countries that are quick to adapt to new changes in the field of information technology. Italy leads in the formation of new businesses closely followed by Spain, France, Germany, United Kingdom and Poland.

Cloud Computing can be viewed as a rescue to the SMEs especially because it improves their competitiveness as they are able to afford the services that were initially used mostly by the big enterprises. For example, in case a SME wants to install an application that would help in the management of the customer relationship, they would only be required to subscribe to a cloud computing company to access the service. Initially, the company would have been required to establish an expensive information technology department.

There are other challenges that are usually associated with such an adventure like the need for more space in a company as well as the human resource to run the information technology department. Therefore, the availability of cloud computing is beneficial to SMEs and the same improves their competitiveness in the whole world.

Operating business for the small scale enterprises has become easier with the introduction of cloud computing. The SMEs are able to enjoy a service that is hosted securely by another company which ensures provision of quality services and also offers the backup systems. Since SMEs keep on expanding, such a venture is made easier because cloud computing offers services which can be upgraded to meet the needs of the customer as the service is quite flexible. Moreover, cloud computing companies ensure that their services are of high quality and available twenty four hours in a day. As a result, SMEs not only become reliable but are also able to improve their services which is a great advantage (Jaatun 2009)

As highlighted earlier, small scale enterprises have got many challenges but lack of recourses is a major challenge. Since cloud computing alleviates the need of most resources, the technology has contributed in lessening the challenges of SMEs. The service provider of the cloud computing technology takes up the burden of looking for recourses and skilled workers to help in the same. Therefore, it becomes cheaper for the SMEs to carry out various business activities. Smith (2009), illustrates that analysts point up that it is possible for SMEs to save a percentage of 15-50 due to the use of cloud computing.

Leverages of SMEs because of the availability of Cloud Computing

The availability of cloud computing has increased the leverages for the SMEs in various ways. For instance, due to the adoption of cloud computing, various SMEs are able to turn capital expense into operating expense. This is because while using cloud computing, the companies need not spend money on installing various hardware and software. In the Indian market, a number of companies have benefited greatly from cloud computing.

Hungama Digital Entertainment in India is one such company which has benefited greatly from the technology given that around 80% of their websites use cloud computing resulting to around 50% savings. The company believes that the benefit has been as a result of turning capital expenses in to operating expenses. Currently, the requirements of the customers keep on changing and the companies which adopt cloud computing are able to respond to such needs on demand.

Time is an important factor in any business and cloud computing has enabled the SMEs to execute the business activities within a short time. Studies of Dutta, (2010) illustrate that SMEs using cloud computing are usually in a position to save on time since they can execute a lot of activities within a short time and the same has got a great impact on time. Consequently, SMEs are usually in a position to compete with large companies and at times, they may even be in a better position since they are more flexible.

Various studies which are being conducted illustrate that SMEs which use cloud computing are usually in a position to adapt to new technologies that come up in the market. Although most of them are disadvantaged because they are usually unable to afford the capital required, cloud computing allows them to adapt to new changes since they are only required to pay for the service based on the usage. Using the recent technology is very important as it enables them to continue providing quality services to their customers. By so doing, they end up becoming competitive as the large enterprises ( The GFI software SMEs Technology Report, 2010).

In both the developed and the developing countries, SMEs are greatly contributing to the growth of the economy since they have a strong representation in the current market. Cloud computing has allowed the SMEs to provide quality services to the customers. Apart from that, they can also respond to the market demands almost immediately. Initially, it was only the large enterprises which were greatly contributing to the software market in the whole world. However, currently, SMEs are the key players since they are more innovative and are in a position to adopt to new technology. The same contribution in the market is expected to increase because by 2015, the software market will have grown from the current level of forty million US dollars to eight hundred US dollars (The cloud levels the playing field for SMEs 2010).


Relationship between Integration and Cloud Computing

The study has indicated that though cloud computing does not have a long history, the usage of the technology is on the increase because more firms are adopting the new technology. In that case, the need for cloud based data integration is also expected to increase. Cloud computing develops by building an enterprise architecture that is complex and distributed everywhere. It is usually bound together by integration technology to achieve its overall objective.

Therefore, integration is a service that is used to support cloud computing (Linthicum 2010). Integration in cloud computing is necessary because it increases accessibility, creates new services and also helps in dealing with the data that is disparate. However, it is important to note that cloud computing and integration cannot be synonyms because they posses similarities and differences. In particular, the two can be viewed as activities that can complement each other (Raines). In addition, some of the key features of cloud computing like elasticity, self provisioning, self healing and agility are also the driving forces of integration.

Therefore, it is not wrong to conclude that integration and cloud computing are related as they provide technological solution to businesses. However, it is important to note that the two work together and as highlighted earlier, they cannot replace each other.

Reference List

Dutta, D., 2010. SMEs push the cloud higher. Web.

Etro, F., 2009. The Economic Impact of Cloud Computing on Business Creation Emoployment and Outpput in Europe. Web.

Furht, B. & Escalante, A., 2010. Handbook of Cloud Computing. New York: Springer.

Gartner, 2011. Gartner Says Cloud Computing Will Be As Influential As E-business. Web.

Jaatun, M. G., 2009. Cloud Computing: First International Conference, CloudCom 2009, Beijing, China, Proceedings. New York: Springer.

Linthicum, D., 2010. The Importance of Integration in the Cloud. Web.

Raines, G., n.d., Cluod Computing and SOA. Web.

Ramakrishnan, R., n.d., What is Cloud Computing. Web.

Rappa, M., 2004. The Utility Business Model and the Future of Computing Services. IBM Systems Journal , 43 (1), pp. 32-42.

Smith, R., 2009. Computing in the Cloud. Research Technology Management , 52, pp. 1.

The cloud levels the playing field for SMEs. 2010. Web.

The GFI software SMEs Technology Report. 2010. Web.

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