Running head: STRATEGIC POSITIONING AND CLOUD COMPUTING
Strategic Positioning and Cloud Computing
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Abstract
Computing has been modified into a version comprising products and services which are
converted into merchandise as well as supplied in the fashion comparable to conventional
amenities. This is called cloud computing. A PESTEL analysis of cloud computing clearly show
key drivers as well as barriers in the macro-environment around cloud computing. The current
cloud owners are likely to have an edge over traditional media companies and over other
upcoming companies too. They are able to distribute fixed expenses across far more units, make
use of more effective technologies, or even command improved conditions with suppliers.
Moreover, consumers might have confidence in more robust businesses a lot more for that
critical product or service and the existing cloud companies have a massive end users' base.
Capital requirements for cloud computing are immense and this just serves to consolidate the
established companies. Additionally, the fact they are firmly established gives an added benefit.
These benefits are magnified by the fact that the cloud companies are concentrated suppliers in
an expansive market, their buyers have reduced power, and the alternatives to cloud computing
are uneconomical or not as popular. Another edge for cloud computing companies is that market
rivalry is not intense, despite the fairly large number of providers, due to an extensive market.
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Strategic Positioning and Cloud Computing
Computing has been modified into a version comprising products and services which are
converted into merchandise as well as supplied in the fashion comparable to conventional
amenities just like drinking water, power, fuel, as well as telephone systems. In this particular
version, consumers gain access to products and services depending on their particular needs
devoid of consideration to the location where the products and services are generally managed or
even the way they tend to be supplied. Numerous computing developments currently have agreed
to supply this particular computing-as-utility prospect and included in this are cluster computing,
grid computing, and a lot more lately, cloud computing (Buyya et al., 2008, p.1). This essay
seeks to use tools and techniques for strategic positioning and explain how the owners of ‘the
cloud’ gain competitive advantage over traditional media industry companies.
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About Cloud Computing
Cloud Computing is the term for both programs provided like services online and also the
equipment as well as systems software within the data centers that offer these solutions. The
actual service solutions themselves have always been known as Software as being a Service
(SaaS). The data center computer hardware as well as software programs are actually that which
we usually label the Cloud. Each time a Cloud is made obtainable in some sort of a pay-as-yougo fashion for the general public, we tend to label it the Public Cloud; the particular services
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offered are usually Utility Computing. Existing instances of public Utility Computing consist of
Amazon Web Services, Microsoft Azure as well as Google AppEngine. We make use of the
expression Private Cloud in order to make reference to intrinsic data centers of any enterprise or
any additional institution which are certainly not distributed around for the general public. As a
result, Cloud Computing is usually the sum of the SaaS in addition to Utility Computing,
although it doesn't usually incorporate Private Clouds (Armbrust et al., 2009, p.3).
The Macro-environment Around Cloud Computing
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PESTEL Analysis of Cloud Computing
When environmental variations affect the particular functionality in companies inside the
market, a well known method, the PESTEL exploration, may be applied in order to investigate
the overall environment. This PESTEL evaluation identifies the particular political, economic,
social, technological, environmental in addition to legal aspects impacting on the environment
within which an organization ought to run. Evaluating an environment offers understanding in
the distinctive modifications, the actual ramifications most of these variations have for
company’s strategies, and also the development involving unique methods necessary to
comprehend all of them (Walsh, 2005, p.115). The broad macro-environment around cloud
computing can be analyzed in terms of political, economic, social, technological, environmental
and legal factors.
Political. All the significant political range of aspects impacting the positioning
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associated with cloud computing information facilities revolve about jurisdictional concerns. The
particular laws and regulations, guidelines, as well as policies of any specific legal system may
have a substantial effect on the particular cloud service provider and also the cloud end user.
Government authorities - by means of regulation, policy, and laws - can certainly choose to
constrain or even encourage the growth associated with cloud computing inside a specific
jurisdiction (Jaeger, Lin, Grimes, and Simmons, 2009; Sim, 2010).
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Little government control exists, but there is a strong push for regulations to be put in
place. It is likely that among the regulations put in place, regulations on dependability as well as
culpability will be one of them. End users should anticipate the particular cloud to become a
dependable resource, particularly if a cloud service provider gets control of the work associated
with operating critical programs, and definitely will anticipate apparent delineation associated
with culpability in the event that significant complications take place. Security and safety,
personal privacy, as well as anonymity are other critical areas. End users will certainly anticipate
the cloud service provider will certainly avert unauthorized admission to access both records as
well as code, understanding that delicate information will continue to be confidential. End users
will in addition anticipate the cloud service provider, additional 3rd parties, as well as
government authorities are not going to keep an eye on their own actions. The only real feasible
exclusion could be with regard to cloud companies, which might need to selectively keep an eye
on utilization with regard to quality management reasons. Also, admittance and also utilization
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constraints are to be regulated. End users will certainly anticipate to be able to access as well as
make use of the cloud wherever and while they desire without having barriers from the cloud
company or even 3rd parties, and that their particular intellectual property privileges are
generally upheld (Jaeger, Lin and Grimes, 2008, p.9; Pearson, 2009).
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Economic. Economic need requires placing your data close to the program, because the
expense of wide-area networking seems to have decreased much more gradually (and continues
to be comparatively higher) compared to all the other IT hardware expenses. Even though
hardware resource expenses continue to keep drop, they will accomplish this with shifting rates.
For instance, computing along with storage expenses are generally decreasing more rapidly as
compared to WAN expenses. Cloud Computing can easily monitor all these variations - in
addition to possibly forward all of them through to the consumer – in a better way compared to
setting up one’s private data center, ending up in a better fit for costs to specific resource
utilization (Armbrust et al., 2009, p.10). Market-oriented computing perceives computing assets
with economic terminology in a way that resource end users will have to compensate resource
suppliers just for making use of the particular computing resources. Consequently, it
has the capacity to offer rewards, like providing inducement for resource vendors to be able to
chip in their own assets for other people to make use of as well as make money from them,
controlling the supply as well as demand associated with computing resources in market balance
by giving inducement for resource consumers to be able to back away whenever needed,
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eliminating the necessity for any core planner (throughout the mediation between the consumer
and service provider with regard to setting up quality of service targets as well as service
charges), and also permitting both consumers and vendors to generate separate judgments to
maximize their own utility and earnings respectively (Buyya et al., 2008, p.3).
Social. Cloud computing is becoming increasingly popular (Hayes, 2008). Olsen, the
CTO of Coghead, strongly feels that cloud computing has grown to be prosperous not
necessarily due to the fact that a lot of core IT communities announced the fact that cloud
computing is definitely superior. In contrast, cloud computing has grown to be preferred out of
grassroots acclaim, as a result choices expressed by small establishments, new vendors, or even
within the departmental tier in organizations (Creeger, 2009, p.55). The global recognition
associated with various computing paradigms differs as time passes. From search engines'
internet lookup general trends, it may be noticed that cluster computing appeared to be the
popular expression in the course of the 1990s, right from early 2000, Grid computing gained
popularity, and not too long ago, Cloud computing begun gathering popularity and passed all the
other in the April of 2008 (Buyya, Yeo and Venugopal, 2008, p.3).
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Despite the popularity, people do not trust the cloud companies with their data. A study
on Facebook best illustrates this. Facebook end users have concerns regarding who is able to
gain access to their own private information. While as many as 60% of the end users nearly have
confidence in their own close friends wholly in relation to their private information, substantially
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a lesser number (18%) have confidence in the company itself (Facebook) to a similar level; lot
fewer (6%) have confidence in unknown people (Guha, Tang and Francis, 2008). The popularity
of this service, however, is immense: It has in excess of 750 million established end users and
individuals devote more than seven hundred billion minutes monthly in Facebook (Facebook,
2011).
Technological. Empowering the systems which particularly aid the cloud computing
feature is crucial. These systems include things like server visualization, storage, programming
frameworks, energy efficiency in data centers, interoperability, load balancing procedures,
networking infrastructure, security, as well as network bandwidth. Without having growth for
these systems cloud computing definitely would not be present (Rimal, Choi and Lumb, 2009,
p.47). Insufficient standardization for visualization as well as APIs and also concerns about
interoperability tend to be stalling additional all round customer base. The particular obstacles
which impede uptake may be summarized as: accessibility or business operation continuity, data
lock-in, privacy of data as well as ability for auditing, chokepoints in information sending,
instability of functions, deficiencies in scalable storage, glitches within huge distributed units,
and inability to scale swiftly (Armbrust et al., 2010, p.54; Staten, 2008).
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Environmental. Data centers can be seen as not being environmentally sustainable as they
call for clearing of an appropriate physical area where to set up all the warehouse-sized
structures. Data centers additionally use up enormous levels of power (for energizing as well as
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cooling down all the computer servers). Today, a substantial data center uses equally as much
energy singularly just as one aluminum smelting foundry, with just one Microsoft company
premises within Chicago requiring 3 power substations in order to supply its persistent
dependence on 200 MW in electrical power. Jointly, the data facilities within the United States
use up electrical energy at a level comparable to that of a significant metropolis corresponding to
the power usage of Las Vegas. Data centers absorbed 1 % of the total planet’s electrical power
throughout 2005, and therefore the carbon footprint associated with data centers could exceed
that associated with airline travel and several additional conventional industrial sectors prior to
2020. By that period, networked computing may possibly use up one half of the planet’s
electrical energy (Jaeger, Lin, Grimes, and Simmons, 2009). Steps are being taken, however, to
decrease the power consumption by using enhanced load balancing. Additionally, the carbon
emissions saved by the enhancement of remote communications are immense and will continue
to improve as the quality of service for cloud computing gets enhancements (Berl et al., 2009,
p.5).
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Legal. Regulatory demands imply that businesses need to be cautious regarding the place
their own information becomes processed, and for that reason, are unable to make use of cloud
solutions coming from any open marketplace. (Buyya et al., 2008, p.7). Geographical location's
liberty and also the chance of vendor "subcontracting" bring about IT perils, legalities as well as
conformity problems that tend to be distinctive to cloud computing (Heiser and Nicolett, 2008,
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p.1). Regulations are bound to impact access, reliability, security, data confidentiality and
privacy, liability, intellectual property, ownership of data, fungibility, and auditability in the
cloud (Jaeger, Lin, Grimes, and Simmons, 2009; DeVore, 2010).
Industry and Sectors Around Cloud Computing
Industries as well as sectors are typically assessed by employing Porter’s 5 Forces model.
Competition to get revenue moves over and above well-known marketplace competitors to
incorporate 4 additional competitive factors too: consumers, suppliers, prospective entrants, and
also alternative solutions. The prolonged competition which results out of all of 5 factors
specifies an industry’s framework as well as forms the character associated with competing
interaction in a marketplace (Porter, 2008, p.25).
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Entrants. Fresh entrants to a market bring in fresh potential along with a need to acquire
industry share which places stress around prices, expenses, and also the rate associated with
investment essential to be competitive. Particularly if completely new entrants tend to be
diversifying out of some other market segments, they are able to make use of prevailing abilities
as well as cash flows in order to shake up competing firms. Barriers to entry for firms tend to
limit other companies from entering into the market, however. These barriers, which have
relevance to cloud computing, are: supply-side economies of scale; demand-side benefits of
scale; capital requirements; and incumbency advantages independent of size (Porter, 2008,
pp.25-27).
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Supply-side economics associated with size come up whenever companies which
manufacture by bigger amounts benefit from reduced expenses for each component for the
reason that they are able to distribute fixed expenses across far more units, make use of more
effective technologies, or even command improved conditions with suppliers (Porter, 2008,
p.25). The existing cloud companies are massively large and they set up massive cloud facilities
which give them an edge over traditional media companies. These are Microsoft, Google and
Amazon (Armbrust et al., 2010, p.52).
Demand-side advantages of scale, also referred to as network effects, crop up within
industrial sectors in which a buyer’s readiness to purchase the company’s product or service
heightens along with the amount of many other consumers that additionally patronize the
particular business. Consumers might have confidence in more robust businesses a lot more for
that critical product or service (Porter, 2008, p.27). The fact that the existing cloud companies
have a massive end users' base means that they are likely to have an edge over traditional media
companies and over other upcoming companies too. Amazon, for instance, was able to garner up
to 40.28 billion dollars from its operations in the previous fiscal year, a fact that illustrates its
wide client base (Yahoo, 2011).
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Capital requirements for cloud computing are immense. The desire to invest substantial
financial resources so as to be competitive can certainly dissuade fresh entrants (Porter, 2008,
p.27). The setup costs and running costs for a data center are usually immense: from the
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infrastructure requirements to powering the plant, the costs can be prohibitive (Berl et al., 2009,
p.2; Rimal, Choi and Lumb, 2009, p.47). This certainly gives an edge to the cloud computing
giants such as Amazon, Microsoft, IBM and Google.
Regardless of what their own size is, incumbents could possibly have cost or even
quality benefits unavailable to prospective competitors. The cloud computing companies have
recognized brand identities which give them the advantage over other companies. They are
therefore able to capitalize on this and drive consumer trends towards cloud computing (Porter,
2008, p.27).
Suppliers. Robust suppliers seize a lot more of the benefit for themselves through asking
for increased charges, restricting quality or even products and services, or even transferring
expenses to industry players. The supplier group can be ultra powerful when it is a lot more
focused compared to the sector it markets to. This is precisely what is happening in the cloud
computing sector, where the owners of the cloud are few, but the possible market is extensive.
This is the opposite of powerful buyers (Porter, 2008, p.29). The cloud services are offered by
Internet Service Providers and Web Hosting companies, and these are estimated at 33,157 as
spread over the top five geographical regions for this kind of services (Cohen, 2010; Intac,
2010). The world population stands at 6,928,198,253 people (CIA, 2011). This, of course, means
that the buyers do not wield much power as the suppliers do.
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Substitutes. The substitute does exactly the same or possibly a comparable work as an
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industry’s product or service using diverse methods. The substitutes to cloud computing are onsite servers, Grid computing, and cluster computing (Buyya, Yeo and Venugopal, 2008, p.3). All
these, however, preceded cloud computing
Degree of Competitive Rivalry
Competition amongst already present rivals normally takes several familiar varieties,
such as cost discounting, fresh product or service introductions, promotional initiatives, as well
as service enhancements (Porter, 2008, p.32). A more substantial amount of companies boosts
competition simply because much more companies have to contend for the very same clients as
well as resources. The quantity of businesses managing cloud as well as visualization
technologies is fairly substantial currently, and this may be considered a hint regarding high
competition. On the contrary these products and offers are very diverse, thus numerous niche
products and solutions have a tendency to establish. Following market expansion, companies
have got to battle to get market share. Within an expanding market, companies can boost
revenues thanks to the growing market. Naturally, the actual cloud visualization market is
without a doubt currently flourishing and can continue expanding through the subsequent years,
which means fight regarding consumers as well as fight with regard to market share will start
when the market gets saturated and when organizations begin supplying identical products and
solutions (Lindner, Vaquero, Rodero-Merino and Caceres, 2010).
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Conclusion
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The PESTEL analysis clearly show key drivers as well as barriers in the macro-
environment around cloud computing. Little government control exists, but there is a strong push
for regulations to be put in place. It is likely that among the regulations put in place, regulations
on dependability, liability, Security and safety, personal privacy, as well as anonymity will
feature prominently. The analysis also shows that people have really taken to cloud computing,
perhaps as a consequence of the arena's economic ramifications for businesses, concerns about
privacy notwithstanding. The lack of technological standardization is what primarily makes this
arena not mature, but it can also be seen as an opportunity for the owners of cloud to expand by
covering the shortcomings of present technologies. Another key driver revealed by PESTEL
analysis may be towards the adoption of energy-efficient data plants, and placing these in
geographical localities whose laws allow for the fulfillment of the clients' need for anonymity
and zero monitoring.
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The current cloud owners are likely to have an edge over traditional media companies and over
other upcoming companies too. They are able to distribute fixed expenses across far more units,
make use of more effective technologies, or even command improved conditions with suppliers.
Moreover, consumers might have confidence in more robust businesses a lot more for that
critical product or service and the existing cloud companies have a massive end users' base.
Capital requirements for cloud computing are immense and this just serves to consolidate the
established companies. Additionally, the fact they are firmly established gives an added benefit.
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These benefits are magnified by the fact that the cloud companies are concentrated suppliers in
an expansive market, their buyers have reduced power, and the alternatives to cloud computing
are uneconomical or not as popular. Another edge for cloud computing companies is that market
rivalry is not intense, despite the fairly large number of providers, due to an extensive market.
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