Discuss about the Advantage and disadvantage of cloud computing for business.
In the present fast pacing business world, corporations use modern technologies for improving their operations in order to generate a competitive advantage over their competitors. With the popularity of the internet and online based services in organisations, the popularity of cloud computing has increased between companies, and they use it to performing their business activities. It uses the structure of remote servers for performing functions such as organising, keeping and processing information. A number of third-party cloud computing providers give these services to organisations. In this process, information is stored in the database of third-party operators rather than local computer systems of a company. It is useful because it reduces costs of a firm and provides them a competitive edge (Xu, 2012). Moreover, these services are highly reliable and they enable enterprises to access their data from worldwide. There are some challenges relating to use of cloud computing as well. The main issue is limited control over the information stored by a company. Furthermore, there is an issue of vendor lock-in and server downtime problems which affects the working of a corporation (Wang et al., 2012). These challenges make corporations sceptical about using cloud computing in their business. This report will analyse the advantage and disadvantage of cloud computing for business use. An example of ‘Netflix’ will be analysed in the report. This report will analyse examples of various other corporations to understand the benefits and limitations of the use of cloud computing in business.
The role of cloud computing has increased between modern enterprises. This report aims to analyse its benefits and limitations while using it for business purposes. This report will evaluate what is cloud computing and analyse how companies use it to perform their business functions. This report will analyse the example of Netflix to understand the role of cloud computing in business and what opportunities and challenges face by companies while using cloud computing in business.
The example of Netflix will be included in this report which is an American corporation that operates in the entertainment industry. Further, examples of various other organisations that use cloud computing in their business will also be included in the report. This report will conduct secondary research on the cloud computing by analysing a number of studies conducted on the topic.
Organisations across the globe use the latest technologies for performing their business functions to improve their efficiency. The cloud computing technology is a good example. It is used by corporations across the globe for performing business functions. As per Beloglazov, Abawajy and Buyya (2012), the use of cloud computing in the business enables enterprises to deliver computer-based services such as software, analytics, networking storage and others. There are three types of clouds which include public, private and hybrid. Private cloud is the local servers used by an organisation. Public cloud service is given by third-party companies called CSPs (cloud service providers). Hybrid cloud is a combination of both public and private cloud services. Dinh et al. (2013) stated that along with businesses, the public also uses cloud computing technology for various purposes such as documents editing, sharing content, sending emails, consuming media, storing private data, playing games and others. The companies use cloud computing due to its numerous advantages because it enables enterprises to improve the effectiveness and efficiency of their operations (Figure 3).
Netflix is of the corporations which use cloud computing for business purposes. The company was founded in 1997, and it offers the facilities of streaming media and video-on-demand facilities to its customers. It operates in the entertainment industry and offers its services in more than 190 countries. The company generates revenue of US$11.6 billion in 2017, and it has expanded its operations from online streaming to production of content as well (Feldman, 2018). As per Gomez-Uribe and Hunt (2016), the corporation is a good example of effective use of cloud computing because it has reimagined its use in the business to gain a competitive advantage over its competitors. For cloud computing services, the enterprise use services of ‘Amazon Web Services (AWS)’ which is the world’s largest cloud-based solution provider. The study of Berman et al. (2012) provided that the services of AWS enable Netflix to reduce the data usage and improve the quality of its services. Based on effective use of cloud data, the company has expanded its business into content production, and it has developed a number of original content that has become substantially successful such as House of Cards, Narcos, Stranger Things, Crown, and Orange is the New Black.
One of the primary benefits of cloud computing is that it assists organisations in performing business activities by saving their valuable resources. In order to generate a competitive advantage, organisations focus on minimising their expenses and increasing overall efficiency. The study of Arora and Parashar (2013) provided that most of the corporations hire facilities from third-party cloud service providers which assist them in saving their resources because it requires zero in-house storage expenses and application requirements. Expenses relating to upgrades and implementation of hardware components are also avoided by companies while using cloud computing technology. The lack of processing infrastructure or on-premise storage also reduces managing and controlling expenses of the enterprise. Furthermore, management expenditures such as power, electricity, air conditioning, and other administrative costs are reduced when companies hire the cloud computing services of third-party CSPs. As per Fernando, Loke and Rahayu (2013), the charges of cloud computing is based on usage of the enterprise, and it avoids costs relating to hardware and software management of the technology. It is a common misconception among firms that only large enterprise can afford the services of cloud computing.
The technology has become affordable, and it can be used by small and medium enterprises as well. For example, EasyJet is a low-cost British Airline which uses cloud computing to reduce their operations data. The company has achieved a 35 percent saving over three years by using cloud-based software for email security system (Ashford, 2010). In case of Netflix, the company started using cloud computing in 2008 for smaller operations whereas it started using it for customer services in 2015. According to Chou (2013), Netflix uses this technology for protecting its data from breaches, reducing operating expenses and providing high-quality, flexible services. The firm adds petabyte of storage and thousands of virtual servers in just minutes by using cloud-based data. Frank et al. (2013) provided that the ‘Netflix Open Connect’ technology allows the enterprise to offer its services worldwide without any issues or interruptions. The priority of Netflix is optimising their data for making it easily available globally, and it achieves that by using cloud computing technology.
The use of cloud computing technology assists companies in effectively managing their data. It simplifies and improves IT management system through central administration of the company’s resources, vendor managed infrastructure, and Service-level agreement (SLA) backed contracts. Hashem et al. (2015) stated that while using cloud computing technology, corporations did not have to focus on maintenance and upgrades of IT infrastructure that supports its services because the CSP manage them for the enterprise. The companies access their files and data through a web-based design which is simple to understand. Li and Du (2013) argued that a service-level agreement (SLA) ensures that CSPs will provide timely maintenance, delivery and management the IT services of a company. In case of Netflix, the SLA provided by AWS ensure that the company is able to get all the cloud storage that they need and did not have to face issues regarding management and upgrade of data servers.
Reliability of data is crucial for a business because it ensures that the company and customers are able to access the data of the enterprise when it is required. Dastjerdi, Tabatabaei and Buyya (2012) provide that a managed cloud service platform ensures that the hosting service provider of the enterprise is doing all the necessary functions relating to managing and controlling of the cloud computing data. The reliability of the corporation is increased based on the Service level agreement signed by the CSP. The SLA offers services such as 365 days availability. Wu, Garg and Buyyu (2012) stated that other than guaranteed availability, the CSPs offer creative and practical solutions to their clients along with professional services for ensuring that the IT infrastructure of the enterprise is operating effectively. A large number of global leading IT firms such as Google, Amazon and AT&T operate in the cloud computing industry which increases the trust of organisations in the cloud computing technology. Netflix uses services of Amazon Web Services for performing their business functions by using public cloud. Mak (2012) stated that Amazon is the market leading in cloud computing technology, and it offers different facilities to its clients such as faster data sharing, flexibility and high-quality data (Figure 1). The SLA of AWS guarantees that the company will offer 99.99 percent availability and durability to its customers.
Another advantage of cloud computing is that it protects organisations from disaster recovery in case any accident occurred at the workplace. The important data of corporations lost in case of a fire, mishap, or other accidents at the workplace if it is stored physically. However, in case of cloud computing, the data is stored on remote servers which can be accessed by the enterprise from anywhere, and it did not get lost if an accident occurs in the workplace. Gupta, Seetharaman and Raj (2013) provided that Netflix deals with a large number of data and security are a primary concern for the enterprise, therefore, cloud computing is an obvious choice because it protects the data from getting damage and the company can easily recover it after any disaster. According to Garcia-Valls, Cucinotta and Lu (2014), Netflix did not focus on upgrading its software because the CSP corporations automatically update their software and hardware making it more secure and easy to use. The use of cloud computing provides a competitive advantage to corporations by reducing their costs and increasing overall performance. For example, Netflix has dominated the entertainment industry, and it has gained a competitive advantage over its competitors such as Amazon Prime Video and Hulu Plus.
However, there are many challenges of using cloud computing in a business which negatively affects the business of enterprises. One of the main concern with cloud computing is the security of the company’s data (Figure 2). Although CSPs implement the latest and most advanced software features and firewalls to protect their clients, however, the risk of cyber-attack and data breach is also linked to the cloud computing. According to Zissis and Lekkas (2012), since the cloud is based on internet, a cybercriminal can hack into the database of a CSP and collects all the data of its clients. Furthermore, corporations have to share their confidential data with CSPs, and any negligence or carelessness of an employee could result in causing huge financial loss to organisations. For example, Apple iTunes was hacked, and it resulted in leaking private and sensitive pictures of more than 500 celebrities online (Butcher, 2014). Similarly, a data breach of Ashley Madison, an online dating website, resulted in the leak of over 25 gigabytes of confidential data of clients and the corporation had to pay $11.2 million to data breach victims. Netflix has suffered from data breaches as well (Moon, 2017). For example, episodes of its hit TV series ‘orange is the new black’ leaked online in 2017 because cybercriminals hacked into the cloud computing servers of the enterprise (Spangler, 2017). It resulted in causing financial loss to Netflix which shows how vulnerable corporations are against cyber-attacks while using cloud computing in business.
Another main concern with the use of cloud computing is the downtime of servers. The study of Puthal et al. (2015) provided that no CSP can guarantee 100 percent immunity from service outage. While using cloud computing in business, corporations have to rely on the internet, and they are exposed to issues relating to the internet such as downtime of server and service outage. In order to access their data, corporations are required to use a reliable, secure and fast internet connection, however, in case the internet is not working, or the speed is slower than the company cannot access its data. In case of physical storage of data, there are no issues of service outage, and the business runs as usual. Sharkh et al. (2013) provided that in case of cloud computing, the servers depend upon the internet and it can prohibit organisations from accessing their data. Moreover, the CSP companies could also face the issues of server downtime or connection issues which restrict corporations from accessing their data as well even when they are on a stable internet connection.
In case of Netflix, the corporation suffers from server downtime and service outage as well. As per Sen (2013), while enjoying their content on Netflix, customers did not prefer interruptions and lag in the media; however, downtime of servers could interrupt their programs. Netflix has established an official website for its users where they can check whether the services of the enterprise are working or whether it is facing any downtime issues (Netflix, 2018). It also shows how dependent corporations are on the internet while using cloud computing technology in the business. Yan (2016) stated that a stable, secure and fast internet connection is essential for companies while using cloud computing because without a stable connection they cannot access their data. Business operations of an enterprise stop if it only relies on cloud computing for performing business tasks. On the other hands, companies operating in emerging markets such as India, Indonesia and Thailand are not able to effectively use cloud computing because of slow and unreliable internet connection. Similarly, Netflix faces this issue as well. Most of its content is of high quality which required that its users must have a reliable and fast internet connection to enjoy its content.
While using cloud computing, vendor lock-in is a big concern for enterprises. Jadeja and Modi (2012) argued that although CSPs did not charge high prices at the beginning of their contract, however, they can hike up their prices after ending of their contract because they know companies will face many challenges in order to switch their data between CSPs. According to Sanaei et al. (2014), while transferring their data, corporations face a number of challenges, and they might have to switch their business setup as well. It also hinders their business because they cannot operate while transferring their data between CSPs. Netflix would also face these challenges in case the corporation decides to change its CSP. Similarly, organisations did not have any control over operations of CSPs, and they can take any business decision which might negatively affect their operations. The limited control over their data makes it difficult for organisations to accept the cloud computing technology as a primary solution for their business requirements
Conclusion
From the above-stated facts, it can be concluded that the use of modern technologies is common among organisations because they use it for increasing their efficiency. Cloud computing technology is becoming popular among companies across the globe. The corporations use this technology for organising, processing and keeping information. Netflix uses cloud computing to improve the quality and efficiency of its services which is offered by the enterprise to a global audience. The technology reduces overall administrative costs of enterprises. It makes it easier for them manage and access their data anywhere in the world. However, along with a number of advantages, the corporation also faces many challenges while using cloud computing technology in the business. The technology relies on the internet, and it is subject to server downtime. It is difficult for companies to transfer their data between two CSPs due to which they face the challenge of vendor lock-in. The information is also vulnerable towards cyber-attacks. Therefore, companies should assess whether cloud computing technology is beneficial for their business before completely relying on it. However, they can use it to perform different secondary business tasks which assist in reducing their overall costs and improving their performance which sustain their future growth.
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