There has been much speculation that we are fast approaching a switch to cloud computing as the standard form of delivery for IT services. Cloud computing service providers are quick to extol the apparent cost benefits of moving to a cloud based model and the increased reliability of the internet together with the development of more sophisticated encryption technologies means that both the private and public sector organisations are looking more seriously at cloud-based offerings.
Despite the recent growth in the cloud computing sector, this type of service provision is not a new phenomenon. Cloud computing is a development from the Application Service Provider (ASP) model which has been operated for many years and more recently major IT suppliers such as Google, Microsoft and Amazon have been opening up cloud services to both business and consumer users.
Into the cloud (whatever that is)
There has been a swift take up of cloud based services by consumers, with a recent study in the US showing that within the past year 76% of the respondents had used some form of internet-based cloud services. Although it appears that the terminology is not catching on so quickly, as despite the widespread use, only 22% of respondents were familiar with the term “cloud computing”.
While consumer usage is undoubtedly growing, the real test for service providers is to develop cloud based services which address the needs and concerns of business users. With a traditional one-to-many cloud based set-up, the cost savings are obvious. Cloud users don’t need to purchase or install software and companies don’t have to run their own applications or data servers. The service provider hosts the applications and provides computing power from their data centres, benefiting from massive economies of scale and dramatically lowering the costs of IT service provision. However, for business users in particular, there are other factors which need to be considered in addition to cost and the growing data protection regulation together with the increased dependency on IT services are providing genuine challenges for organisations looking to move to cloud based systems.
This article looks at some of the key commercial issues associated with cloud based services and examines the role of service level agreements (SLAs) and other contractual documents in managing the relationship between service providers and business users.
Not all clouds are the same
There is an array of different services and cloud based business models available. However, they typically fall into three categories of service:
- Software as a service – (also known as software on demand)
- Platform as a service –
- Infrastructure as a service –
As well as being three categories of service, there are also three basic cloud structures:
- Private cloud – This means that the cloud infrastructure is only assessable by one customer. If a shared data centre is used the hardware used for each customer will be physically separated from other hardware. A private cloud can be managed internally or by a third-party and hosted internally or externally.
- Community cloud – A community cloud shares infrastructure between several organisations which have a common purpose or concern (for example, Government bodies, banks).The services can be managed by one of the interested organisations or by a third-party and can be hosted internally or externally.
- Public cloud – This is the traditional cloud model. Resources are made available over the internet and are shared by all users. The services are hosted and managed externally by a third party provider.
It is also possible to have a hybrid cloud which combines two or more clouds (private, community, or public) that remain unique entities but are bound together, offering the benefits of multiple deployment models.