CASE STUDY
I already Have the answer but I need paraphrase
What business benefits do cloud computing services provide? What problems do they solve?
2. What are the disadvantages of cloud computing?
3. How do the concepts of capacity planning, scalability, and TCO apply to this case? Apply these concepts both to Amazon and to subscribers of its services.
4. What kinds of businesses are most likely to benefit from using cloud computing? Why?
S h o u l d B u s i n e s s e s M ove t o t h e C l o u d ?
CASE STUDY
Cloud computing has just begun to take off in the business world. The biggest player in the cloud computing marketplace is one you might not expect: Amazon. Under its
Web Services division (AWS), Amazon has streamlined
cloud computing and made it an affordable and sensi-
ble option for companies ranging from tiny Internet-
start-ups to established companies like FedEx.
AWS provides subscribing companies with flexible
computing power and data storage, as well as data
management, messaging, payment, and other
services that can be used together or individually
as the business requires. Anyone with an Internet
connection and a little bit of money can harness
the same computing systems that Amazon itself
uses to run its now $48 billion a year retail business.
To make the process of harnessing the cloud
simpler, Amazon added an automated service called
CloudFormation that helps customers get the right
amount of computing resources. Customers provide
the amount of server space, bandwidth, storage,
and any other services they require, and AWS can
automatically allocate those resources.
Since its launch in March 2006, AWS has contin-
ued to grow in popularity, with $1 billion in business
in 2011 and hundreds of thousands of customers
across the globe. In fact, Amazon believes that AWS
will someday become more valuable than its vaunted
retail operation. Amazon’s sales pitch is that you
don’t pay a monthly or yearly fee to use their com-
puting resources—instead, you pay for exactly what
you use. For many businesses, this is an appealing
proposition because it allows Amazon to handle all
of the maintenance and upkeep of IT infrastructures,
leaving businesses to spend more time on higher-
value work.
The difference between cloud computing today
and the cloud computing of the past is the scale
of today’s clouds and the amount of digital data
requiring storage. This number has increased
exponentially in the past few years. Web companies
used to build dozens of data centers, often up to a
half a billion dollars in cost per center. Leading cloud
companies such as Amazon, Google, and Microsoft
have built software that uses automated methods to
spread data across the globe and control thousands
of servers, and they have refined data center designs
with the goal of increasing efficiency. Now, more
than ever, companies are turning to cloud computing
providers like these for their computing resources.
Zynga is a good example of a company using cloud
computing to improve its business in a new way.
Zynga is the developer of wildly popular Facebook
applications like FarmVille, Mafia Wars, and many
others. With over 290 million monthly active users,
Zynga’s computing demands are already signifi-
cant. When Zynga releases a new game, however, it
has no way of knowing what amount of computing
resources to dedicate to the game. The game might
be a mild success, or a smash hit that adds millions
of new users. The ability to design applications that
can scale up in the number of users quickly is one of
Zynga’s competitive advantages.
Because of the uncertainty surrounding resource
usage for new game launches, Zynga uses Amazon’s
cloud computing platform to launch new offerings.
That way, it can pay only for the resources it ends up
using, and once game traffic stabilizes and reaches a
steady number of users, Zynga moves the game onto
its private zCloud, which is structurally similar to
Amazon’s cloud, but operates under Zynga’s control
in data centers on the East and West coasts. Zynga’s
own servers handle 80 percent of its games. (Zynga
recently started selling extra capacity on zCloud
to other game-makers.) To streamline the process
of moving application data from Amazon to the
zCloud, Zynga has automated many computing tasks,
selected hardware and chip configurations that are
very similar to Amazon’s, and makes significant use
of virtualization.
There are a few reasons why Zynga is well- suited
to use this combination of public and private clouds.
The first is its business model, which involves games
that have a tendency to be boom or bust. Rather
than spending on computing resources of its own
before the launch of each game, it’s much more
cost-effective to use Amazon’s cloud services until
Zynga can more accurately predict the computing
power it needs. As a recent start-up, Zynga lacks
the accumulated legacy systems and infrastruc-
ture typically found in older companies. The more
systems a company has, the tougher it is to integrate
its applications and data with cloud systems.
Although the consequences for server downtime
are not as catastrophic for Zynga as they would
be for a financial services firm, Zynga still needs
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99.9 percent uptime. On its own financial reports,
Zynga recognized that a significant majority of
its game traffic had been hosted by a single ven-
dor and any failure or significant interruption in
its network could negatively impact operations.
Amazon Web Services had an outage for several
hours in April 2011 that made it impossible for
users to log into some of Zynga’s games.
However, owning data centers also comes with
risks. If the demand for Zynga’s games were to
drop dramatically, Zynga would have too much IT
infrastructure on its hands and losses could result.
The most likely scenario has Zynga owning part of
its data centers and relying on external services such
as Amazon for the rest.
Not all companies use cloud computing in the
same way that Zynga does, but many do. Outback
Steakhouse wasn’t sure how popular an upcoming
coupon promotion would be, so the company used
Microsoft’s Azure cloud to launch the promotion.
Outback ended up selling an unexpectedly large
670,000 coupons. Using the cloud, it was able to
avoid taxing in-house systems unnecessarily.
InterContinental Hotels has revamped its
infrastructure to include both private and public
cloud usage. To improve response time for custom-
ers, InterContinental moved its core room reserva-
tion transaction system onto a private cloud within
its own data center, but it moved room availability
and pricing Web site applications onto public cloud
data centers on the East and West coasts. In fact,
InterContinental hopes to put all of its publicly
accessible information in these public clouds so
that customers receive faster results to site queries.
Customers receive data faster if the data are located
on a server that is physically close to them, and
cloud computing helps InterContinental to take
advantage of this.
Start-up companies and smaller companies are
finding that they no longer need to build a data
center. With cloud infrastructures like Amazon’s
readily available, they have access to technical
capability that was formerly only available to much
larger businesses. For example, online crafts market-
place Etsy uses Amazon computers to analyze data
from the 1 billion monthly views of its Web site. Etsy
can then use its findings to create product recom-
mendation systems that allow customers to rank
which products they like best and to generate a list of
100 products they might enjoy. Etsy’s engineers and
managers are excited about their ability to handle
these types of issues on someone else’s computer
systems.
IBM, Cisco, and other traditional data center
giants realize that cloud computing is a threat
to their technology infrastructure business. As a
solution to rising computing costs, they have been
steering their customers toward virtualization
software, which allows them to run many more
applications on each individual server that they buy.
There are also many companies that simply have too
much legacy technology to use the cloud effectively.
For example, Credit Suisse has 7,000 software
applications running on its systems that have been
developed over the past 20 years. Ensuring that all of
these applications would work the same way in the
cloud would be more trouble than it’s worth.
Many other companies share Zynga’s con-
cern about cloud reliability and security, and this
remains a major barrier to widespread cloud adop-
tion. Amazon’s cloud experienced significant out-
ages in April and August 2011 and again on June
14 and 29, 2012. Normally, cloud networks are
very reliable, often more so than private networks
operated by individual companies. But when a cloud
of significant size like Amazon’s goes down, it sends
ripples across the entire Web.
According to Amazon, a simple network
configuration error caused a major multiday service
outage in Amazon’s East Coast region from April
21–24, 2011. Amazingly, the error was most likely
a simple error made by a human being during a
routine network adjustment. Sites affected included
Reddit, Foursquare, Engine Yard, HootSuite, Quora,
Zynga, and many more. On June 14 and June 29,
2012, AWS suffered outages due to power failures in
its primary East Coast data center in North Virginia.
Many popular Web sites, including Netflix, Heroku,
Quora, and Pinterest, as well as Web sites of smaller
companies, were knocked offline for hours.
The outages were proof that the vision of a cloud
with 100 percent uptime is still far from reality.
Experts have conflicting opinions of how serious
this is. A June 2012 report issued by the Paris-based
International Working Group on Cloud Computing
Resiliency estimated that the major cloud comput-
ing services were down about 10 hours per year or
more, with average availability at 99.9 percent or less.
Even this small amount of downtime can lead to large
revenue losses for firms that need 24/7 availability.
Nevertheless, some large cloud users such as Netflix
believe that overall cloud service availability has
steadily improved. Neil Hunt, Netflix’s chief product
officer, believes the cloud is becoming more reliable,
and that AWS gives Netflix much larger scale and
technical expertise than it would have otherwise. A
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number of experts recommend that companies for
whom an outage would be a major risk consider using
another computing service as a backup.
Still, cloud computing has finally gone
mainstream, and the major cloud providers have
the sales numbers to prove it. Amazon, Microsoft,
Google, and other cloud providers will have to
continue to work to avoid outages, while other
companies must decide whether the cloud is right
for them, and if so, how to most effectively use the
cloud to enhance their businesses.
Sources: Charles Babcock, “How Game-Maker Zynga Became a
Cloud Vendor,” Information Week, May 14, 2012; Charles Babcock,
“Cloud’s Thorniest Question: Does It Pay Off?” Information Week,
June 4, 2012; Zack Whittaker, “Amazon Explains Latest Cloud Outage:
Blame the Power,” ZDNet, June 18, 2012; Stuart J. Johnston, “Cloud
Outage of 13 Providers Reveals Downtime Costs,” searchcloud-
computing.com, June 22, 2012; Charles Babcock, “4 Companies
Getting Real Results from Cloud Computing,” Information
Week, January 15, 2011; Charles Babcock, “Amazon Launches
CloudFormation to Simplify App Development,” Information Week,
February 28, 2011; Ashlee Vance, “The Cloud: Battle of the Tech
Titans.” Bloomberg Businessweek (March 3, 2011); Peter Svensson;
Steve Lohr, “Amazon’s Trouble Raises Cloud Computing Doubts,”
The New York Times, April 22, 2011; Charles Babcock. “Post Mortem:
When Amazon’s Cloud Turned on Itself,” Information Week, April
29, 2011; Patrick Thibodeau, “Amazon Cloud Outage Was Triggered
by Configuration Error, “Computerworld, April 29, 2011; and Charles
Babcock, “Zynga’s Unusual Cloud Strategy is Key To Success,”
Information Week, July 1, 2011.
CASE STUDY QUESTIONS
1. What business benefits do cloud computing
services provide? What problems do they solve?
2. What are the disadvantages of cloud computing?
3. How do the concepts of capacity planning,
scalability, and TCO apply to this case? Apply
these concepts both to Amazon and to subscribers
of its services.
4. What kinds of businesses are most likely to benefit
from using cloud computing? Why?
236 Part Two Information Technology Infrastructure
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