Cloud Computing Economics for Information Technology Industry – Research Proposal

Overview

Cloud computing has drawn great attention recently as a result of its unmatched advantages. Services of cloud computing can be provided across different sectors that include governance, education, and banking among others. Enterprises are establishing means to employ to enhance their migration to cloud. This study focuses on Cloud economics and how SMEs could do their self-assessment for cloud adoption. The paper begins by defining cloud computing. Cloud computing is defined by the National Institute of Standards and Technology (NIST) as a model that enables appropriate, on-demand access of network to a shared configurable pool of computing resources such as applications, networks, services, storage, and servers, which can be released and provisioned with minima interaction of the service provider or management effort.

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The figure provided below demonstrates the shift from traditional computing model to cloud computing model:

Service Models

There are basically three models of services provided by providers of cloud service. They are as demonstrated below:

1. Infrastructure as a Service (IaaS): This denotes on-demand infrastructural resources provisioning, normally in forms of virtual machines (VMS). Available IaaS providers include Fleciscale, GoGride, and Amazon EC2.
2. Platform as a Service (PaaS): denotes offering resources of platform layer which include frameworks of software development and support of operating system. Providers of PaaS include Microsoft Windows Azure, Force.com, and Google App Engine.
3. Software as a Service (SaaS): It denotes to offering on-demand application via the internet. Providers of SaaS include Rackspace and Salesforce.com.

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Deployment Models

There are basically three distinct models of deployment provided by providers of cloud service. They include hybrid cloud, public cloud and private cloud.  Public cloud is also equated by some authors to community cloud. In a model of public cloud, a third party provides IT services that include hardware or application via internet to a firm on the basis of pay-per use or a monthly fixed rent. Assets of IT are shared and services are offered to multiple businesses. Public cloud examples include Google AppEngine and Amazon EC2. Models of public cloud are more attractive to small customers since they cannot their personal onsite IT infrastructure and thus, they can implement public cloud for their requirements. Public cloud assist them gauge their enterprises based on their needs. Public cloud appears to be the prospect of IT infrastructure requirements since it can be employed to start-ups and to big players as well.

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Private cloud model, just as implied by the name, it is the employed of cloud by a private body. In this case, cloud service is only accessible to users in the enterprise. The form of model is attractive to the customers that need extra data control. It lowers the security regulation compliance and concerns needed for a firm. However, it also poses a data loss risk to natural disaster, since the entire data is stored in corporate firewalls. A hybrid model on another hand is a combination of public and private cloud services, characteristically in combination to outdated on-premises IT solutions. This technique complements the current infrastructure that stands for a sunk cost, though complex to scale, with a scalable, flexible infrastructure established on demand. Many firms fear loss of data control and thus, hybrid model will be highly preferred. Community model is another form of model that is equivalent to a public cloud. Nevertheless, tis access is restricted to a particular cloud users’ community. It might be co-owned by the members of the community or by a third-party provider of cloud that provide limited access to a public cloud. The community cloud members are basically responsible for the development of community cloud.

Deployment of cloud models: Cloud benefits, features and types

Type of Cloud	Features	Benefits
Public	Used on shared basis by several organizations and is managed and hosted by a provider of third party service. Computing resources are retrieved as external services rather than products which can be installed, purchased, and managed in an organization.	Aptitude to scale the computing resources allocation rapidly to match business demand fluctuations. Utility-founded pricing, so as users can just pay for used computing services (instead of the entirely load capacity). Possibly large scale of economies.
Private	To be used exclusively by a one organization and characteristically managed, hosted and controlled in private data centres. The operation and hosting of private clouds might be outsourced to a provider of third party service, though a private cloud is segregated for exclusive one organization use. It is the most common type of cloud employed currently in Australia, and characteristically the initial step in a cloud journey of a company.	Regards the most secure alternative, though with minimized possibility foe productivity gains and economies of scale available via multi-tenants choices.
Community	It is utilized by a group of associated organizations that desire to utilize common cloud environment of computing for instance, local councils that offers joint services. Its efficiency lies between that of public and private cloud	It allows trade-off between minimized economies of scale and increased security.
Hybrid	Both public and private models are implemented by one organization.	Permits for multiple methods of deployment to attain particular agency/business requirements.

Source: (KPMG Report, 2012).

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Characteristics

The significance attributes of cloud computing based on NIST include:

1. On-demand self-service: allowing a consumer to access resources of IT without any other form of human interaction
2. Access of broad network: Making abilities to be accessible via standard techniques and available via the network which promote utilization by thick or thin heterogeneous client platforms.
3. Pooling of resource: To serve many customers by use of a multitenant model with virtual and physical resources energetically reassigned and assigned based on the demand of the consumer
4. Rapid elasticity: used for rapid scaling out and swift resources release for scaling in
5. Measured service: to optimize and control the use of resource automatically, offering transparency for both the consumer and provider of the service utilized.

Advantages

The business share common benefits for both private and public cloud are:

1. Enhanced efficiency- since both private and public cloud are founded on grid virtualization and computing, they both provide high utilization and high efficiency as a result of sharing joint resources, and allowing improved balance of workload across several applications.
2. Increased availability – another advantage of being founded on grid computing is that applications can exploit high architecture availability which eliminates and minimizes unplanned and planed downtime, enhancing levels of user service and continuity of business.
3. Elastic scalability – grid computing also offers private and public cloud with elastic scalability, which is that, the aptitude to remove and add computing aptitude demand. This is an essential benefit for temporary applications, applications containing unpredictable growth, and high variable workload.
4. Fast deployment – since both private and public cloud can offer access self-service computing resources shared pool, and since there are shared, reusable and standard hardware and software components, deployment of application is highly accelerated.
5. Low starting costs – public clouds are cheaper and faster to embark, offering users with reduced entry barrier since there is no need to install, configure and procure hardware.

Cloud Spending Overview by Industry of Financial Services:

Source: (Tower Group.Destination, 2015).

Aspects Challenging and Favouring Cloud Adoption

Aspects Favouring Adoption of Cloud	Aspects Challenging Adoption of Cloud
Optimization of Capital   ·         Adoption of cloud offers the aptitude to change Fixed Infrastructure Costs (CAPEX) to Variable Costs (OPEX). ·         Cloud allows change to pay-per-use model and is cost-effective when it benefit from CAPEX cloud transition.	Availability and Security   Providers of cloud service are unwilling to assume full security responsibility in the cloud because security is a joint role Even cloud providers that are most reliable have experienced immense and outages impact in business. Maturity of cloud service provider is an ultimate query and the industry is only out of its early period. Nevertheless, secure access to client information that is publicly available can be offered by providers of cloud service. For instance client research, insights and research reports.
Increased Revenue Potential   ·         Cloud computing releases organizations from repetitive IT activities and permits workers to centre on more innovative, strategic and revenue-creating work. ·         Research forecasts businesses augmented incomes from cloud enablement could attain US$1.1 trillion per year by 2015	Cross-Border Data Access Rules   ·         Cross-border movement of data across the U.S. and the EU continues to create concern, as government across the world insists on information privacy that include protection directive for European Data. ·         A number of cloud providers that include Microsoft and AWS have recently began taking part in the programs of safe harbour
Infrastructure Agility and Scalability   No or minimum requirement of implementation service, software license and hardware. Small and medium enterprises (SMEs) implement cloud computing early since cloud allows scalability of infrastructure when required. Large companies can attain agility of infrastructure via proper cloud integration and management change	Vendor High Switching Cost or Dependency   Cloud service providers in SaaS offer resources access through web interfaces, command line tools or proprietary APIs. Costs of switching will be high, and getting a provider providing an equivalent range of features may be hard.
Utilization of Resource   Eliminates the network over-provisioning issues with spare ability or under-provisioning with higher demand than available resources. Drives centres on the central competency as cloud releases budget, effort and time.	Cloud Service Providers Limited Liability   Providers of cloud service do not share whole liability (penalty or loss of income) in cases of Service Level Agreements (SLAs) violations.
Minimum Requirements for Data Readiness   Requirements for cloud transition data readiness are very minimal, thus less time is required to implement cloud services. Any data saved in databases can be taken to the cloud. Converters are gladly employed for the data in file format available for conversion.

Source (Cognizant Report, 2014).

Return on Investment

Quantifying Cloud Derived Benefits	Quantifying Adoption Cost
Incremental Revenue and Cost Savings   Measure hosting, hardware, software and workforce cost; Potential to shift from Capex to Opex. Approximate extra revenue created via cloud transition Approximate savings from cloud transition reinvested for opportunities of revenue-creation.	Cost of Transition   Approximate the cost incurred to create the cloud platform with the current system. Cost to handle integration difficulties and change management. Measure the component of recurring cost that includes cloud platform security cost, subscription fee, coordination cost and transaction fee.
Potential Enhancement of Performance   Evaluate the performance enhancement potential in timeliness, quality and productivity. Evaluate the user experience quality, effort saved, automation, and utilization. improvement	Cost Related to Possible Risks   The risk costs vary based on the applications criticality. Risk cost measure employed in cloud implementation (such as effect of service outage) by transferring weightage of risk to applications founded on criticality. Comprehend up front what the strategy of exit will be, and develop those ROI analysis costs.

Source: (Cognizant Report, 2014).

Possible Cloud Benefits

Benefit	Comment	Public	Private
Enhanced efficiency	Since both private and public cloud are founded on grid virtualization and computing, both provide high utilization and high efficiency because of sharing resources pooled, allowing enhanced balance of workload across various applications.	Yes	Yes
Increased availability	Another advantage of being founded on computing grid is that applications can exploit a high architecture availability which eliminates or minimizes unplanned and planned downtime, enhancing business continuity and users’ levels of service.	Yes	Yes
Elastic scalability	Grid computing offers public cloud and private cloud (when outsourced), containing elastic scalability; this is the aptitude to remove and add computing ability based on demand. This is an essential benefit foe applications containing unpredictable growth, for temporary applications, or extremely variable workload.	Yes	Yes
Fast low upfront deployment costs	Deployment of application is highly accelerated since both private and public cloud can offer self-service access to joint computing resources pool, and because the hardware and software components are shared, reusable and standard	Yes	Yes
Economies of scale	Public clouds are cheaper and faster to begin, offering user a low entry barrier since there is no requirement to install, configure and procure hardware. Big public clouds appreciate economies of scale in management efficiencies and purchasing power of equipment. Saving might be transferred to consumers, and will progressively be so since competition in this sector augment with time.	Yes	No
Simpler to manage	Public clouds might need less IT experts to administer, manage, patch, and update among others. Users depend on providers of public cloud services rather than an internal department of IT.	Yes	No
Operating expense	Public clouds are compensated by the operating cost budget, frequently by the user’s business line, instead of the department of IT. Cost of capital is avoided an aspect that offer financial benefit to some organizations.	Yes	No

Source: (Oracle, Oracle Cloud Computing –An oracle White Paper, 2010)

Indicators of Key Performance

Terms	Definitions
Quality
Usability	Level of use ease and user experience improvement.
Error Rate	Default rates, average time between failures
Green Benefits	Hardware or Service Application as well as KwH savings.
Performance
Utilization	Aptitude to lower workloads.
Capacity	The workload size contrasted to accessible infrastructure.
Time
Timeliness	Level of service responsiveness, recovery mean time.
Volume	Processed per time unit.
Time to provision	Time needed to network provision and resources storage.
Profitability
Margin Growth	Aptitude to create margin increase and revenue in every unit of revenue.
Revenue Growth	Revenue growth rate, novel market acquisition rate, aptitude to augment profits/customers.
Value Generated	Business generated value in every effort hour / Business generated value in every consumed watt.
Cost
CAPEX costs	CAPEX expense on ownership of premise against cloud CAPEX expense.
OPEX costs	OPEX expense on ownership of premise against cloud OPEX expense.
Total Cost of Ownership (TCO)	On-premise TCO of physical asset against cloud TCO.
Support Cost	Headcount support expert or Support time.

Source: (Cognizant report, 2014).

Literature Review

This paper is based on the review of about forty research papers that include papers from international and national journals, white papers from different reputed companies and personal research papers. The summary of every paper is briefly represented. The literature review offers an understanding in the subject and assists understand the current and past scenarios.  The summaries of different research papers are presented below. The author’s name and the publication year is mention unless where these details are not provided in the paper.

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In their paper, Yaboah-Boateng and Essandoh (2014) researched the aspects that impact the cloud computing technology adoption by SMEs in the growing nations. They established that OPEX and CAPEX reduction for IT infrastructure, enhanced employees collaboration, time reduction and cost of maintenance were the main drivers fuelling cloud adoption. The most impacting obstacles were lack of knowledge, lack of trust, inadequate internal expertise, and poor internet link. The paper also affirms that the need of access to speedy internet at an affordable price and national policy which can ease cloud adoption by SMEs, and therefore closing the digital gap in the growing nations. Kumar et al. (n.d.) has conducted a wide literature survey on the cloud computing economics. In this paper, outcomes of various surveys show ineffective utilization of IT resources by different organizations across the world. For instance, 45 per cent of equipment budget was used though only 6 per cent of server ability was tapped. He finally concluded that economies of scale can be attained only if there is consolidation of resources resulting to extra efficient utilization of IT infrastructure.

Bhat (2013) identifies thee varying institutions that include public ordering, markets, and private ordering that are needed for cloud computing adoption by Indian SMEs. Markets would inspire the employment of cloud by offering incentives to the SMEs though public ordering would control the cloud service providers (CSP). Private ordering would enhance aggregation of negotiation contracts and cloud requirement with CSPs. It also demonstrated that smaller frequency and volume could augment the cloud usage cost by SMEs that would hamper the cloud adoption. However, this issue could be handled is SMEs implement cloud as a group. Androcec (n.d.) proposes simulation use for identifying cloud computing benefits. The researcher also raised a concerned regarding the cloud services current prices sustainability. The cloud computing economics utilization is compelling though whether they will be there in the future is still questionable. Therefore, enterprises require to do cloud computing benefit analysis for the long run.

Armbrust et al. (2009) considers that though the cloud computing economic appeal is frequently described as changing capital costs to operating costs, more precise advantages to the client is expressed  in the “pay as you go” phrase. The minimized capital cost provides the chance for core investments of the employed capital. Marstone et al. (2010) recognizes various stakeholders and offers set of outlines that requires to be adhered by them. Sometimes data requires to be shifted between organizations which are with varying cloud vendors. Therefore, cloud offers desire to create interoperability standards in different cloud service vendors. Cloud computing is not just striking in the economic view but also in the technological view. Cloud integrates IT efficacy with business agility. In this case, IT efficacy refers to greatly scalable IT infrastructure while agility of business refers to IT intensive utilization in business real time analytics.

Veigas et al. (n.d.) have evaluated how emerging markets that include South Africa, China, South Korea, India, Russia and Brazil are the essential global shift drivers towards the cloud computing. Great investments are being developed to develop infrastructure to improve IT development. This paper also focuses on different initiatives that are taken by these countries and how it is boosting their economic development. Xie (2011) claims that countries in the third world can allow IT services by utilizing cloud that would have traditionally lacked the IT services development. Cloud has also assisted start-ups companies to lower their operational expenses and to lower innovation barriers as demonstrated in the applications that include Facebook and Youtube.  In addition, cloud opens up novel channels that were not probable in the past. They include mobile interactive applications which are context, environment and location aware. Xie claims that regulation is the most essential aspect that hampers the cloud computing adoption.

Misra and Mondal (2010) evaluated economic factor of shifting to cloud. They create a model to evaluate the company’s suitability to shift to cloud. Different aspects that include the IT resources size, the resources utilization pattern, the data sensitivity they are addressing and criticality of the company’s performed work were taken into consideration. All of these aspects were assigned weight based on their significance and a final score was computed founded on a mathematical formula. If a firm was established to be appropriate, the ROI would be computed then founded on another formula to establish the returns that could provide to the firm. In Aljabre (2012) views businesses in the economic crisis era require to cut costs but offer reliable services. This requirement can be attained if enterprises embrace technology of cloud computing. The author employed Amazon’s model of cloud computing to illustrate that the largest cloud technology beneficially would be the medium and small enterprise that would be able to employ resources on basis of pay-per-use. Cloud computing provides a flexibility to organizations employees to work from remote places therefore increasing productivity and lowering commuting time.

Boja et al. (2012) evaluated the cloud computing impact on the sector of education by shifting university IT infrastructure into a cloud. The IT traditional infrastructure in an educational industry employs distributed computing that is very expensive. Utilization of cloud would reduce the costs drastically. Cloud provides some security aspects such as enhanced improbability that means it is improbable to establish the data storage location. Other security aspects that include virtualization make data cloning easy makes cloud suitable for deployment. The key paper’s features is demonstrating how cloud is modifying the way services are offered via the educational services example. Laverty et al. (2014) suggested that the utilization of macroeconomic and micro analysis to enhance IT and business policies. They gave the reasons for resources underutilization that is economic of scale, back-up, and peak time demand fulfilment among others.  Economic analysis gets hold of cost benefits that include opportunity costs as well as other intangible advantages that are not generally captured by decision making or financial model. The authors recommended the economic analysis utilization as a tool to determine external setting and act as required.

In their paper, Hashemi et al. (2013) presented the cloud computing use in e-government. The paper lists down the advantages of utilizing cloud computing in e-government that include increased transparency, enhanced management of policy, and improved reliability. Government requires making data transfers laws since providers of cloud service are situated in a different country and they have to adhere to the laws of their origin country and the country they provide data to. This will assist in improved coordination among different governments in different nations. In this context it discloses an essential fact that different nations have different laws to be adhered to while employing cloud services if the provider is from a different country. CISCO (2010) also developed a cloud computing paper which reports that technology cost has drastically reduced in the last 50 years though there is a big expenditure part used on IT infrastructure. It forecasts that in future, most services will be delivered via public or private clouds. Cloud computing assists in changing fixed expenses into variable expenses and thus, lowering the organizations’ borne expenditure. It also denoted that internal cloud adoption in an organization is not more about changing technology but more about change in IT management and culture. Internal cloud performs as a change from traditional IT infrastructure to hybrid and public clouds and therefore it assist SMEs in cloud technology upgrading.

IT giant HP (2011) white paper on a complete approach to establish a ready cloud network for a business indicates that developing a private cloud is extra challenging as compared to public cloud. Private clouds are said to be more demanding on network and they need high flexibility, high scalability and low latency. However, still the benefits that a private clout gives to a business are much bigger as compared to adoption challenges. Evaluating enterprise cloud readiness includes the training amount needed for staffs to effectively control private cloud. In his paper, Etro (2009) evaluated the cloud computing impact on creation of business, output and employment in Europe founded on the model of DSGE. Cloud computing according to him has been cost cutting revolution that has assisted the development of a huge number of SMEs since the obstacles to IT infrastructure have been minimized because of cloud. It outlines the governments need to moderate the cloud technology that would eventually boost the growth of the economy. Cloud technology diffusion could contribute about 0.05 to 0.3% to the yearly growth rate.

In their research, Gupta and Kaur (2013) have reflected security issues and benefits experienced in cloud computing. They clarify that cloud computing is comprised of three aspects that include data centres, distributed servers and client. Transfer of secure data, interfaces of secure software, data separation, secured stored data, and user access management are the main security problems that requires to be handled in cloud computing. In KPMG (2012) report, a reputed consulting company referred to as “Modeling the Economic Impact of Cloud Computing”evaluated all Australian sectors concerning the effect of cloud. The companies can lower their spending and generate a higher output by employing same input. This productivity increase will impact the GDP positively. The result demonstrated 25 per cent decline in operation spending and50 per cent in capital spending.

A research company Verdantix (2011) conducted a study on a project of carbon disclosure to establish the carbon impact on environment by use of cloud computing. The research was conducted on 11 world companies by use of cloud computing for about 2 years. A model was constructed to evaluate economic benefits and carbon emission by use of data from the 11 firms. The research demonstrated that a distinctive US FMCG firm can lower emissions of carbon dioxide by 25000 metric for more than five years and a big volumes of energy. In their paper, Harjani and Gopalan (2013) clarified a new “Green Cloud Computing” concept. Green computing is defined as the IT resources use in an eco-friendly manner. Green cloud is the integration of the cloud power to green computing. On the other hand, Gonzalez et al. (2012) recognized central problems in cloud and grouped then in different classes that include interfaces, network security, legal, data security, compliance and governance among others, proposed answers for the same. Present providers of cloud lack enough security level and thus, they require synchronizing security responses to attain it.

Adekunle et al. (2012) researched on economics associated to cloud and smaller companies requirement to implement cloud. The enterprises requirement to identify their individual needs since there is a very big range of services provided by cloud providers. By utilizing cloud services, enterprises can offer quality service with full time operational customer support. Cloud allows SMEs to contest with larger companies by eliminating the earlier huge gap in the IT resources accessible in larger companies and small companies. According to Devasena (2014), cloud services growth is accredited to increased utilization of mobile commerce, e-commerce and social media. The cloud computing effect has been so influential that it has currently found a position in formulation of business strategy. The SMEs requirements are satisfied greatly by shifting into cloud technology. Ahmed (2012) contrasted cloud computing with current technologies that include utility computing, virtualization and grid computing and demonstrates how cloud integrates benefits of all the three technologies.

Khajeh-Hosseini et al. (n.d.) conducted a study in a UK founded SME that moved its in-house infrastructure of IT to Amazon’s EC2, which is cloud service offered by Amazon. The outcomes were remarkable as the firm cloud saved 37% expenses for a period of 5 years. However, according to the authors, shifting into cloud requires analysis of general change related to it. Feiman and Clearley (2009) suggested a model of business value by quantifying various values of business. The model was founded on values that include social impact, economics, risk and trust, agility, simplicity, as well as innovation and creativity. The model was utilized to contrast and evaluate the cloud infrastructure as well as IT traditional infrastructure. This assisted enterprises to recognize where cloud utilization is extra effectual as compared to IT traditional infrastructure. The decision to implement IT should be founded on cautious value assessment that can be generated using clouds.

The CFO research report in association to Google (2012) studied 310 US financial executives. The survey demonstrated surprising results since although 64 per cent of respondent confirmed that they saved 20 per cent of operational expenses by shifting to cloud, 81 per cent claimed that the cloud provided improved productivity of employees. There was considerable reduction in data recovery expenses, hardware associated expenses, software associated expenses, and labour expenses. However, still, a huge number of directors consider data security as the greatest cloud adoption challenge. Zhang et al. (2010) demonstrated art implementation state in his paper. Cloud computing lowers risk of business by transferring risk to providers of cloud service who are great experts in dealing with such risks. The paper later gives details regarding a number of famous cloud services such as Microsoft Azure, Google app Engine, and Amazon EC2, and contrasts them on different aspects. It finally presents the study drawbacks that include energy management and software frameworks among others for advanced study on cloud.

Prakash and Gopalkrishnan (2012) proposed that enterprises should only shift to cloud after comprehensive testing. There are different types of testing that include non-functional and functional testing. Different tools that include IBM’s Rational Robot or HP’s Quick Test Pro can evaluate the cloud performance through regression evaluation. Koenevs et al. (2012) also acknowledged 18 main cloud computing performance indicators that are categorized into three classes that include margin associate, quality associated, cost related and time related. Three financial measurements include cost benefit analysis (CBA), total cost of ownership (TCO) and return on investment (ROI) are employed to determine how efficient the cloud is for a company. It also provides a varying perception on cloud adoption by SMEs. Low volumes of transaction can obstruct adoption of cloud by smaller firms.

The Economic (n.d) report elaborated on how cloud computing will impact the economy and jobs. It also claimed that cloud effect will essentially vary by sector and country. The shift from capital cost to operating cost will create effect on accounting and taxation practices. The cloud usage will change the work to higher level duties from maintenance level. The Accenture (2010) reports on sustainability and cloud computing evaluated small, medium and large energy usage and carbon emissions industries. The report identified efficiency of data centre, dynamic provisioning, server utilization, and multi tenancy as main aspects in lowering carbon emission and consumption of energy. With regard to saving of energy, it was established that minor industries could mostly benefit by saving 90 per cent of the current energy that is being utilized.

The CII (2012) “The Indian cloud revolution” report describes cloud computing as a troublemaking technology that can act as an economic growth accelerator. In India, government has been among the biggest cloud users. Government is utilizing cloud for comprehensive growth by linking data to people, despite of location and time. SMEs according to the report are turning to be the main generators of employment for the growing population of India. Cloud computing can assist the growth of SMEs by offering easy IT infrastructure access to start new enterprises. Booz et al. (n.d.) proposed to consider utilization of life cycle processes and transition expenses while assessing cloud economics. Most evaluations overlook these aspects resulting to an erroneous cloud adoption economic advantage. It also claims that it will take about four years to counterbalance the first investment enhanced in cloud migration.

The VMware (2011) white paper on cloud computing and business agility designates how cloud could assist enterprises to be more agile. Agility of business implies the aptitude adapt swiftly and cost efficiently in reaction to the environment change. Visionary executives perceive cloud not just as an IT infrastructure, but also as a business transformation strategic tool. Cognizant (2014) report provides a view on financial services companies’ adoption of cloud. Portfolio management, corporate action, analytics, reporting, market data and CRM are a few processes of business that cloud gives solutions. Industry of financial services is anticipated to use $25 Billion by 2015 on cloud computing.

A KPMG (2013) report outlined the patterns to cloud adoption and its obstacles. It reports on revenues share increase from services of cloud to rise from 27 per cent to 50 per cent in the following two years. Concern regarding control of loss against the data is the key obstacle to cloud adoption. Joyent (2012) white paper clarifies that cloud services are not equal. Actually, some infrastructure of cloud might be more expensive and this does not guarantee their success. This contests the common idea that shifting to cloud will automatically benefit an enterprise. Thus enterprises require to adopt effective could techniques to guarantee the cloud benefits.

West (2014) introduced varying theories that include transaction cost theory, resource based theory, agency theory, and dynamic anility theory among others foe assessing cloud migration sustainability for agencies of government. It outlines that the most essential migration aspect of cloud vendor is trust.  Microsoft (2010) research paper demonstrates that cloud computing assists in saving by lowering server cost and augmenting utilization of server by demand aggregation. Cloud computing will assist in developing novel solution that will alter the industry dynamics.

With this background, a research thesis is proposed to evaluate the IT industry cloud computing economics as a case study for Indian software selected companies.

Study Significance

To establish an IT firm, the cost of IT infrastructure matters a lot. All companies, both SMEs and large companies, in a traditional IT environment have to spend a huge amount of money on IT infrastructure. Thus the use of cloud computing option that can lower expenses related with manpower and infrastructure can bring rapid changes in IT in the future. Therefore, there is great importance of understanding the economics of cloud computing.

Universe of Research

Ten firms will be identified by the researcher by use of sampling methods among a number of firms to provide a fair representation in large sized and SME firms that are  shifting to cloud computing and research economics related with the shift. The 10 firms’ universe will be sourced from Mumbai since Mumbai is regarded as the biggest IT services exporter in India.

Research Question

The research question assists in limiting the study topic focus. The research study will centre on answering the questions below:

Q1: How is cloud computing advantageous to IT firms?

Q2: How is cloud computing economies going to alter the IT industry dynamics?

Hypothesis

A hypothesis of a research is a testable opinion statement. It is developed from the research question by substituting the phrase “how”, and also by substituting the question mark with a full-stop. The research hypothesis in this case will be:

Cloud computing is of great advantage to the IT firms and the cloud computing economics are going to alter the IT industry dynamics.

However, a hypothesis cannot be tested directly, but it needed to be changed into a null hypothesis. A null hypothesis is developed from the direct hypothesis by including the phrase “not” or “no” to the statement. For instance, the research question null hypothesis will be:

Cloud computing is not of great advantage to the IT firms and the cloud computing economics are not going to alter the IT industry dynamics.

Null hypothesis will be employed for all arithmetical testing and not the direct hypothesis. The statistical test result will allow either 1) the null hypothesis rejection, or 2) fail to turn down the null hypothesis. Therefore, the proposed research alternative and null hypothesis is:

Null Hypothesis

H0: “Cloud computing is not of great advantage to the IT firms and the cloud computing economics are not going to alter the IT industry dynamics”.

Alternative Hypothesis

H1: “Cloud computing is of great advantage to the IT firms and the cloud computing economics are going to alter the IT industry dynamics”.

Research Scope, Objectives and Methodology:

Main Objective

The main research objective is to evaluate through qualitative and quantitative evaluation the research question on, “Cloud computing is of great advantage to the IT firms and the cloud computing economics are going to alter the IT industry dynamics.”

Sub-Objectives

In attaining the key objectives, the sub-objectives presented below must be framed:

1. To evaluate different cloud models comprehensively
2. To evaluate the characteristics of cloud service
3. To identify the cloud economics
4. To present cloud computing disadvantages and advantages

Sample and the Study Scope

To begin with, an extensive range of research paper containing about forty research papers have been evaluated to enhance the understanding of the cloud nuances and its fundamental concepts. The researcher later selected 10 firms by use of a model among various firms to represent large sized and SMEs firms that have moved to cloud computing fairly to research on economics associated to the. The research will be founded in Mumbai since it is one of the biggest IT services exporters in India, and all firms chosen for the research must be based in Mumbai. The interaction of the study would comprise of owners, main decision makers and IT managers of the selected firms.

Data Sources

The research will be founded on both secondary and primary data. Primary data refers to the data to be gathered by the research in the field through survey, interview, questionnaire, and observation among others. Secondary data refers to company reports constitute and other records that regard the selected firms, websites, industrial report, internet, sector reports, reference books, and periodicals.

The cloud computing economics theme will be derived via primary studies and secondary research with the assistance of personal interviews and questionnaires. The cloud computing associated advantages and economics with regard to 10 chosen universe firms adopted for the research will be systematically presented and culled out.

Data Analysis

The data gathered from different sources both secondary and primary sources will be assessed by employing suitable statistical tools, applicable formulas and ratios, percentages, weighted averages and quantitative judgemental forecasting analysis. The study will also be supported by solid quantitative evaluation.

Study Period

The research will cover duration of 5 years that will run from 2010 to 2015 where suitable cloud implementation in the chosen Indian firms might differ in cloud adoption periodicity.

The Study Limitations

1. The study will be limited to 10 selected firms founded on sampling method
2. The study will involve both quantitative and qualitative research techniques
3. The study will be founded on subjective view and the arithmetic data that is eventually going to be evaluated with the statistical tools assistance. Thus, it might not be totally free from mistakes

The Thesis Structure

The proposed research has 7 chapters that include:

1. Chapter one will give the introduction, study objectives, limitation, methodology, discussion of data analysis tools, and highlight on chapters.
2. Chapter two will be review of the literature
3. Chapter three will comprehensively evaluate different cloud models
4. Chapter four will focus on characteristics of cloud service
5. Chapter five will evaluate the cloud economics
6. Chapter six will analyse the cloud computing disadvantaged and advantages
7. Chapter seven will give the summary of the research, give the research recommendation and conclude the study

Conclusion

Cloud computing has for a number of years been the slogan and many regard it as a technology that will drastically alter the IT implementation in business. The cloud computing economics do encourage the businesses to shift from in-house traditional infrastructure to cloud. However, they need to understand that upgrading is also as important as the infrastructure in this change. Cloud migration needs right vision and mind-set to ensure successful adoption of cloud and sustainment of the adoption advantage. According to the research cloud will determine the IT future and many businesses will be forced to embrace cloud by competition. New start-ups and SMEs will benefit more from the loud since it provides IT infrastructure by use of pay-per-use technique. Therefore the research on cloud computing economics will gain great importance in these companies.

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