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THE
                                  ROBERT GORDON
                                    UNIVERSITY
                                     ABERDEEN




                        FACULTY OF MANAGEMENT
                         Aberdeen Business School

Title: Cloud Computing Opportunity: Benefits and risks assessment
                 for Indian IT-services firms.

Name: Saurabh Jayarama Rao

Matriculation Number: 0917925

Submission Date: 4th May, 2011

Supervisor: Prof. Alan Hunt

Aim: To assess the benefits and risks involved in adoption of cloud
computing by     Indian IT services firms and to identify a cloud
adoptions strategy for prospective adopters

Objectives:

1. To identify the main drivers of adoption for Indian IT services
firms.
2. To identify the major risks associated with cloud computing
   adoption for the Indian IT-services firms
3. To identify the application workloads suitable for cloud service
adoption.
4. To suggest a cloud adoption strategy for prospective adopters
   within the Indian IT-services industry



Signed:                (Saurabh Rao)

   Total word count (excluding acknowledgements, diagrams, references,
   bibliography and appendices) 20,892

A Dissertation submitted in partial fulfilment of the requirements
for the MSc Degree in Management.




                                         i
ABERDEEN BUSINESS SCHOOL

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Name                 Saurabh Jayarama Rao

Email/contact tel    saurabhjr@hotmail.com 07031990789
no.:

Course:              Msc Management

Module:              Dissertation

Dissertation Title: Cloud Computing Opportunity: Benefits and risks
                     assessment for Indian IT-services firms.
Supervisor/Tutor:    Prof. Alan Hunt



   Before submitting confirm:

       a) that the work undertaken for this assignment is entirely my own and
           that I have not made use of any unauthorised assistance
       b) that the sources of all reference material have been properly
           acknowledged
       c) that, where necessary, I have obtained permission from the owners
           of third party copyrighted material to include this material in my
           dissertation.

I have read and agree to comply with the requirements for submitting the
dissertation as an electronic document.

I agree:

   •   That an electronic copy of the dissertation may be held and made
       available on restricted access for a period of 3 or more years to
       students and staff of the University through The Robert Gordon
       University Moodle.



                                        ii
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Signed...                  (Saurabh Rao )      Date…4th May 2011




                                       iii
THE
      ROBERT GORDON
       UNIVERSITY
        ABERDEEN




Cloud Computing Opportunity: Benefits and risks assessment for
                  Indian IT-services firms


                      Mr. Saurabh Jayarama Rao
                The Robert Gordon University, Aberdeen, UK
                        Aberdeen Business School
                           (Msc in Management)
                     Submission Date: 4th May, 2011.




                                    iv
ABSTRACT

Cloud Computing has steadily gained popularity during recent years.
Cloud Computing is a market friendly term for the services offered over
the air or internet. It mainly consists of SaaS (Software as a Service),
PaaS (Platform as a Service) and IaaS (Infrastructure as a Service).
These services are provided by major firms like google, Saleforce,
Microsoft, Amazon, Yahoo which benefit from efficient management of
resources and economies of scale. Clients can benefit from this facility by
paying only for the resources they use, flexibly increasing or decreasing
the capacity usage as per their IT needs and decrease their infrastructure
expenditure.


             Indian IT-services firms have been dominating the global
outsourcing industry since the last decade by providing IT services and
consulting solutions to their clients worldwide. Cloud computing offers a
new window of opportunity for Indian IT-services firms to act as cloud
delivery agents to their existing clients and establish their presence in the
unexplored cloud services market. However, many firms are not fully
convinced about the benefits of cloud computing and are unaware of the
risks involved. As cloud services is still in its early stages, there is lack of
clarity regarding the terms of service, security, data storage, control and
service level agreements.     There is significant marketing hype and fear
amongst the IT managers of losing a new opportunity or capabilities
which cloud can offer. Moreover, not all applications are well suited to be
migrated to cloud infrastructure.


          This report provides insights into the current benefits and risks
involved with cloud adoption by Indian IT-services firms. The factors
underpinning the current benefits and risks are identified and applications
suitable for cloud adoption are highlighted through critical assessment of
the application’s IT needs and cloud services features.


Keywords: Cloud Computing, Indian IT services, cloud concerns, cloud benefits,
cloud application, cloud delivery agent, adoption strategy.




                                       v
Acknowledgement


I sincerely thank the Almighty God who gives me the strength and
inspiration in all my life endeavours.


I would like to thank my thesis supervisor, Mr. Alan Hunt for his
excellent guidance; constructive inputs and prompt support in
making this research a success.


I would like to extend my heart-felt thanks to all the respondents
for their contribution in enabling me to carry out this research.


I would like to express deep appreciation to my parents, Mr.
Jayarama and Veena Rao and godfather Dr. Nandakishore Rao for
all their love, encouragement, support and undying belief in my
abilities.


Finally, I would like to thank my dear friend Stavin Lawrence
D’souza, without whose support, I would not have embarked on this
master’s journey, nor would have chosen a challenge research
topic.




                                   vi
Table of contents


1.0   Introduction and Research Problem.………………………..1
      1.1 Cloud Computing Opportunity in India………………..1
      1.2 Defining Cloud Computing………………………………….1
      1.3 Rationale………………………………………………………….2
      1.4 Aims and Objectives………………………………………….5


2.0 Literature Review……………………………………………………..6
      2.1 Background………………………………………………………6
          2.1.1 Indian IT-service Industry………………………6
          2.1.2 Cloud Computing… ……………………………….10
      2.2 Major Cloud Categories……………………………………18
          2.2.1 IaaS…………………………………………………….19
          2.2.2 PaaS……………………………………………………19
          2.2.3 SaaS……………………………………………………20
      2.3 Types of Cloud service delivery…………………………22
          2.3.1 Public cloud………………………………………….22
          2.3.2 Private cloud………………………………………..22
          2.3.3 Hybrid cloud…………………………………………23
      2.4 Cloud Market Structure……………………………………24
          2.4.1 Potential Growth Opportunities……………..26
          2.4.2 Potential Concerns for Cloud Adoption…….31
      2.5 Cloud Future Forecast……………………………………..34
      2.6 Relevant findings from Literature review…………..35


3.0 Research Methodology…………………………………………….36
      3.1 Secondary Research………………………………………..37
      3.2 Primary Research……………………………………………38
          3.2.1 Questionnaires……………………………………..41


                            vii
3.2.2 Interviews……………………………………………44
         3.2.3 Focus Groups……………………………………….46
    3.4 Research Design……………………………………………..46
         3.4.1 Questionnaire Design…………………………….51
         3.4.2 Interview Design……………………………….…53
    3.5 Sample Selection………………………………………….…54
         3.5.1 Sampling Technique……………………………...55
    3.6 Data Analysis……………………………………………….…56


4.0 Findings from Primary Research…………………………….…57
    4.1 Questionnaire Findings………………………………….…57
         4.1.1 Results from Part-1……………………………….57
         4.1.2 Part-2 Questionnaires……………………………58
    4.2 Interview Findings………………………………………….70


5.0 Analysis and Discussions………………………………………...81
    5.1 Key findings from Primary Research………………….81
         5.1.1 Major Drivers for cloud adoption…………....81
         5.1.2 Major Concerns for cloud adoption………….85
         5.1.3 Choice of Workload for public cloud………..92
         5.1.4 Choice of Workload for private cloud……...93


6.0 Conclusion……………………………………………………………..96
    6.1 The Research………………………………………………….96
    6.2 Conclusions from Research Objectives……………...97
         6.2.1 Conclusions from Research Objective-1…..97
         6.2.2 Conclusions from Research Objective-2…..98
         6.2.3 Conclusions from Research Objective-3…..99
         6.2.4 Conclusions from Research Objective-4…..99
    6.3 Managerial Recommendations..………………………100
Reference List
Biblography


                           viii
Appendix




                    List of Figures


 1. Overview of Cloud Computing Opportunity……………1
 2. Relationship between consumer and enabler………..4
 3. Future growth areas for IT services by Infosys
    Research…………………………………………………………..4
 4. IT service industry market share structure…………..7
 5. Wipro Revenue Distribution by geography……………8
 6. Annual Growth rates of Major Indian
    IT-services Firms……………………………………………….9
 7. Traditional Delivery Model………………………………….11
 8. Software as a Service Marketing Campaign………….13
 9. Factors enabling cloud computing……………………….14
 10. Cloud Computing Model.…………………………………..15
 11. Forrester Research Total Cost of Ownership
     Survey results………………………………………………..17
 12. Different types of Cloud Services………………………18
 13. Traditional IT vs different forms of
     Cloud services……………………………………………….19
 14. SaaS adoption in percentage…………………………...21
 15. Cost comparison of private vs public cloud………..23
 16. Benefits for IT firms………………………………………..24
 17. Industry Variability over a year………………………..29
 18. Survey of early cloud computing adopters….………30
 19. Survey Results for percentage of IT spending…….31
 20. Gartner survey on cloud users regarding
    Terms of service…..……………………………………………32



                             ix
21. Major Challenges Faced by Cloud customer..……….34
  22. Cloud Computing Growth Forecast…………..…….…..35
  23. Primary research and its types…………………………..39
  24. Types of questionnaires…………………………………….42
  25. Sector-wise Revenue break-up of Indian
     IT services firms………………………………………………….47
  26. Revenue break-up by services offered by
      IT services firms………………………………………………..48
  27. Cloud Computing Awareness results from part -1
           questionnaire………………………………………………58
  28. Graph representing the respondent’s country………..59
  29. Respondent’s cloud awareness level…………………….60
  30. Respondent’s experience profile…………………………..61
  31. Respondent’s work profile break-up……………………..62
  33. Respondent’s firm’s cloud adoption status…………….63
  34. Responses for main drivers for cloud adoption………64
  35. Responses reflecting the actual benefits achieved….65
  36. Responses for main concerns for cloud adoption……66
  37. Responses for public cloud workload suitability……..66
  38. Responses for private cloud workload choice…………67
  39. Responses from respondents
      whose firms have already adopted private cloud…….69
  40. Response from respondents working
       for firms planning cloud adoption in future……………70
  41. Cost comparison of private vs public cloud…………….84
  42. Responses to skill assessment for private
      cloud management………………………………………………91
  43. CIO survey conducted by Zinnov Research…………….94
1.0 Introduction and Research Problem
        This chapter highlights the cloud computing opportunity in
the context of the Indian IT-services industry, identifies the
research problem and establishes the research aims and objectives.


                                x
1.1 Cloud Computing Opportunity in India
           Cloud Computing has emerged as a new buzzword in the
field of Information Technology (IT) and IT-enabled Services (ITES).
The Indian cloud computing market which is currently valued at
$110 million is expected to grow ten-fold by 2015 to $1billion
(Subramaniam 2010). According to Gartner insights, Indian IT-
services companies will represent 20% of the cloud delivery market
through    their    cloud-enabled       IT-services     (Karamouzis        2009).
Nasscom (National Association of Software and Service companies),
a regulatory body for IT services in India, identified cloud services
as one of the areas offering non-linear growth and revenue models
to Indian IT-services firms and has undertaken strategic steps to
encourage firms to explore this opportunity (Nasscom 2010). The
Indian IT    services     firms   are    leveraging     their   existing    client
relationships and expertise in service delivery to emerge as
dominant delivery agents of cloud services (Hingorani 2009). This
study is limited to only those firms which provide IT-services and
consulting solutions from their development centres in India.


1.2 Defining Cloud Computing
           Gartner defines cloud computing as a style of computing
where massively scalable IT-related capabilities are provided ‘as a
service’   across   the    Internet     to   multiple    external   customers
(Bhupesh 2009). The resources in the cloud are pooled, virtualized
and networked which results in better efficiency, flexibility, low cost,
ease of use (EMC 2010) and customers access business services on
their own terms as illustrated below.




                                        xi
Fig. 1: Overview of Cloud Computing Opportunity (EMC 2010)


It is basically a market friendly term for subscription based services
offered over the internet which allows rapid increase or decrease in
capacity without additional investments in infrastructure, manpower
or licenses (Wittow and Daniel 2010). Figure below shows different
types of cloud services.


1.3 Rationale
         The decision to undertake this research was taken after
considering a wide range of aspects. Indian IT-service providers are
realizing the value of having competencies in hardware and
software in order to achieve economies of scale, retain customers
and improve profit margins (Bakshi and John 2010) Cloud services
delivery or reseller opportunity may provide the necessary platform
for Indian IT service providers to develop these competencies
(Jorge and Ted 2008). Currently, cloud-service providers offer the
platform and essential functionalities upon which the IT service
providers can build and run their client’s applications. These
arrangements are appealing to Indian IT services firms to offer
cloud consulting services and deliver customized applications


                                 xii
suitable for the cloud (Gartner 2010). Revenue from traditional IT
services could be eroded due to cloud offerings by new emerging
firms; hence there is an incentive to look for new ways to add value
(Quicke 2009). Moreover, with tight economy today, customers are
spending much less but demanding seamless access to content; a
Gartner study revealed that global IT spending declined by 6% in
2009 (Quicke 2009) and this has prompted the Indian IT-service
firms will have to look for growth opportunities wherever they can
find it. Most businesses are unclear whether cloud solutions are
ideal to satisfy their IT needs. For unsuitable applications, cloud
services are known to introduce unnecessary complexity, increase
operating costs and resulting in contract lockage with the service
provider (Thethi and Srivastava 2010). A lack of in-house expertise
in cloud architecture, identity management, security monitoring and
data handling may lead to poor decision making on the part of end-
user organisations (Ambrust 2010). Indian IT-services firms have
proven technical expertise and gathered domain knowledge of
diverse sectors through years of IT-services delivery and are
positioned appropriately to choose a right cloud solution for their
client (Chatterjee and Chakrabarty 2009). IT service providers are
the key relationship link between the consumer and the enabler of
cloud computing as shown in fig. below.




  Fig   2:   Relationship   between       consumer   and   enabler
  (Bakshi and John 2010)


                                xiii
Most IT-services firms may have to partner with large cloud service
providers like Microsoft, Google, Amazon etc and collaborate on
cloud-enabled service delivery and build trusted relationships
(Roehrig et. al 2010). Otherwise, new competition might arise with
cloud-service providers partnering with other start-ups. Moreover,
profits have to be shared with the cloud providers. Hence, there is a
greater need that IT firms utilise the cloud offering effectively to
differentiate their solution offering and improve profit margin (Vile
2009). According to industry trend survey by Infosys Research,
cloud computing has appeared as high growth area for IT service
providers as shown in chart below.




  Fig 3: Future growth areas for IT services by Infosys
  Research (Thethi and Srivastava 2010)


The above survey reveals that cloud computing was rated highly as
a service which would reduce total cost of operation (TCO) and
provide growth to the business.
         Thus, adopting cloud computing to provide cloud-enabled
services might prove to be beneficial for Indian IT-services firms.
Assessing the benefits and risk associated with cloud adoption by
Indian IT-services firms would provide insights into these aspects
and enable them to take informed steps. Moreover, planning an


                                  xiv
ideal adoption strategy is essential to fully benefit from cloud
services. Therefore, the research aim is, ”To assess the benefits and
risks involved in adoption of cloud computing by Indian IT services
firms and to identify a cloud adoptions strategy for prospective
adopters”.


1.4     Aims and Objectives
 The aims of the research are:
        -    To identify and critically assess the benefits and risks
             involved in adopting cloud computing services by Indian IT
             services firm.
        -    To identify a cloud adoption strategy for prospective
             adopters in the Indian IT-services industry.


 The objectives of this research are:
       To identify the main drivers of adoption for Indian IT services
         firms.
       To identify the major risks associated with cloud computing
         adoption for the Indian IT-services firms.
       To identify the application workloads suitable for cloud
         service adoption.
       To suggest a cloud adoption strategy for prospective adopters
         within the Indian IT-services industry.
2.0 Literature Review
            In order to fully understand the basis and background of this
study,      over   300   journal   articles,   whitepapers,   case   studies,
company reports, books and websites have been reviewed and key
insights have been drawn. The following literature review covers the
current Indian IT-services industry scenario, research highlighting
benefits and issues faced by the firms which have adopted cloud
computing, industry and customer’s strategy to enhance their cloud
experience, future forecast and areas of potential growth.


                                       xv
2.1 Background
2.1.1 Indian IT-Services Industry
               In simple terms, IT services is a form of outsourced
service which has emerged due to involvement of IT in various
fields such as banking, finance, telecom, insurance, healthcare etc
(Arora et. al.2008). According to NASSCOM, the regulatory body for
IT services in India, the Indian IT services industry “involves a full
range of engagement types that include consulting, systems
integration,   IT     outsourcing/managed   services/hosting   services,
training and support/maintenance” (Nasscom 2009). The Indian IT-
services industry mainly serves clients outside the Indian sub-
continent using the global delivery model and relies on abundance
of IT educated and english speaking human capital, low cost
facilitated by the weak Indian currency to gain competitive
advantage over other firms (Hingorani 2009). Firms in this industry
can be categorized into tier 1, tier 2 and emerging firms. Tier 1
firms have a major market share consisting of are Infosys
Technologies        Ltd,   Tata   Consultancy   Services   and    Wipro
Technologies and Satyam which has an estimated market share of
34-40% and employs approx. 340,000 (Hingorani 2009).Other
major players are IBM, Accenture, Cognizant, Patni Computers, HCL
technologies which fall in tier 2 category with 13-18% market
share. The industry has experienced high growth in the past decade
and is highly competitive. According to the NASSCOM-McKinsey
report, the total addressable market for global IT outsourcing is
approximately $300 billion, of which $130 billion will be outsourced
by 2012 of which India currently has 80% market share (Mckinsey
2005). Graph below shows market structure of IT services firms in
India.




                                    xvi
Fig 4: IT service industry market share structure
(Nasscom 2009)


Current Issues faced by Indian IT-services firms
The Indian IT-services industry predominantly gets its revenue from
clients situated in North America and Europe as highlighted below
by the 2010 revenue graph categorized by geographical segments
of Wipro technologies Ltd, a major Indian IT-service firm.




                                 xvii
Fig 5: Wipro Revenue Distribution by geography (Mulay
2010)


Countries in Europe and North America which were severely
affected by the downturn have reduced outsourcing IT services
work to India (Jain 2010). As major clientele for Indian IT-services
firms were from these countries, it resulted in lower growth rate for
all the Indian IT firms as shown in the graph below.




                                xviii
Fig 6: Annual Growth rates of Major Indian IT services Firms
(Gartner 2010)


Firms in developed countries originally started outsourcing to India
as it was a low cost alternative. Most of the back office
administrative works were outsourced to be automated so that the
firms can focus on their core areas of work and growth without
focussing on back-office administration process (Mckinsey 2005).
But since the outsourcing revolution in the 1990’s, India has been
growing at an average rate of 8% and with the rupee appreciation
against the dollar, the profit margins of the IT-service firms are
under pressure (Nasscom 2009). Other emerging countries like
China, Phillipines, Poland, Mexico, South Africa are providing IT
services and consulting solutions at a lower cost than India. Lower
end IT services works are being outsourced to China, Mexico and
Philippines as they offer better cost saving than India (Jorge and
Ted 2008). Moreover, the average salary of an IT knowledge worker
in India has increased to $5000 per year at the entry level and even
with the abundant human capital, the Indian IT firms are facing
severe shortage of skilled IT workers and experiencing high attrition
rate among staff as they go for better opportunities elsewhere
resulting in loss of investment incurred in training employees
(Matzke and McCarthy 2009). In order to still generate substantial
profit, the IT services firms in India have increased their billing rate
and thus are no longer the most attractive low cost option for
outsourcing (Wright 2009). The Indian IT-services firms are
attempting to overcome these problems by leveraging the expertise
and brand name gained during the previous years and moving up
the value chain by providing more complex, efficient solutions to the
clients in the IT services space (OECD 2006, Balakrishnan 2010). In
order to retain their existing clients, Indian IT-services firms are
engaging in partnerships such as strategic transformation partner


                                  xix
(McCarthey 2008), total outsourcing partner and client engagement
initiative (Stuchat 2010) which could result in long term association
with existing IT services provider.


2.1.2 Cloud Computing
               Traditionally, firms had to invest in infrastructure to
facilitate disk storage and processing. Moreover, they had to hire
skilled IT staff to maintain the infrastructure, regularly upgrade the
infrastructure, purchase licensing and monitor backup and disaster
recovery (Buttel 2010). This led to high initial investment (capital
expenditure) and high running costs (operating expenditure). The
firms   had   to   forecast   their   future   IT   requirements,   initiate
infrastructure planning and it would take weeks to procure the
hardware, configure and install it (Ryan and Loeffler 2010). The
process is illustrated using fig. 7 below.




Fig 7: Traditional Delivery Model (Doddavula and Gawande
2009)


A step-by-step explanation about the above figure is as follows
(Doddavula and Gawande 2009):
 The client’s business requirements are assessed by the solution
architect and project plan is prepared.
 The infrastructure team analysed the project plan and purchased
necessary infrastructure.




                                      xx
 The resources are then assigned for individual projects to fulfil
their infrastructure requirements. The same process repeated for
any further changes in requirements.


         Some applications such as email, I/O (input/output), stress
testing required additional amount of storage, processing during
some time. In order to cater to this variable demand, firms had to
provision additional infrastructure which would remain unutilized
during off peak hours (Wittow and Daniel 2010). These limitations
of traditional model led way to cloud computing. The underlying
idea for cloud Computing has evolved from rented time share
services offered during the early 70’s when computers were too
expensive for firms to afford. The hardware prices dropped during
80’s and firms started having their own computers. But the idea of
hosted and time shared services remained and evolved in parallel
(Collins and Vale 2010). During 90’s,       there was an outsourcing
boom and many companies focused on their core functions and
outsourced their IT related activities to IT service firms based in
India and other developing countries which were emerging a low
cost destination. Moreover, they offloaded their applications to the
dedicated infrastructure provided by these IT firms. This allowed
firms to transfer the cost of infrastructure to the IT service provider.
During 1990’s, with the development of internet, new service called
applications   service   provider   (ASP)   gained   popularity   which
provided shared infrastructure to the customers using multi-tenancy
model. This was an attractive proposition for smaller organisations
as they could now access solutions which they would not be able to
afford before (Shariff 2010).ASP aimed to provide consistency,
efficiency and flexibility for service providers to manage systems
and resources optimally. In turn, the service providers could reduce
their operating costs and offer affordable hosting services to their




                                    xxi
customers. ASP failed to make sustainable impact partly due to the
following reasons (Collins and Vale 2010):
   Internet-based communications were not fully trusted as they
      were in the early staged of development.
   The       multi-tenancy    model,      which   implies   that    multiple
      applications from different clients are residing on the same
      physical infrastructure, was unproven which raised concerns
      regarding data security.
   Firms could not accept the shared infrastructure policy of data
      and processes co-residing with other firms.
   Many ASPs failed to access new customers as their targeted
      small    businesses     had   collaborations   with    their   existing
      suppliers for their ongoing needs and most of them perceived
      ASP as a conflict with their existing business model and
      declined to support it (Shariff 2010).


Of the few ASP providers which survived, Salesforce.com (provides
sales force automation service requiring minimal integration with
other applications) was highly successful (Vile and Lock 2010). They
invested heavily on marketing and used the term “Software as a
Service” instead of ASP to generate new interest (Kelly 2009,
Collins and Vale 2010). Fig. below illustrates a salesforce.com
advertisement.




                                    xxii
Fig 8: Software as a Service Marketing Campaign (Kelly
   2009)


Following   the   success    of   SaaS,    the   cloud-service     providers
introduced platform as well as infrastructure on subscription basis
and these were known as PaaS (Platform as a Service) and IaaS
(Infrastructure   as   a     Service).     Hence,    Application    Service
Provisioning (ASP), mainframe servers purchased on rental basis is
similar to what cloud services offer. Therefore, cloud computing is
not fundamentally new concept or innovative technology (Smith,
Plummer and Cearley 2009). It has gained huge popularity in recent
years due to the combination of several factors:
    Superior speed, reliability and robustness of communication
      networks which allows high bandwidth levels.
    Highly    scalable     datacenter     infrastructure   with   powerful
      processor and memory at reduced cost (Smith, Plummer and
      Cearley 2009).
    Emergence of flexible software architecture with multiple
      abstraction levels necessary to isolate customers (Smith
      2009).




                                   xxiii
 Emergence           of    sophisticated     management           systems    and
     ubiquitous computing standards (Plummer et. al. 2008).
   Success of virtualisation (an enabling technology for cloud
     implementation which enables service providers to increase
     resource utilization through techniques such as pooling and
     multiplexing),          e-commerce       frameworks      and     development
     tools (Cervone 2010).
   All this at a low cost facilitated by economies of scale and
     widespread access options with a rich web-based user
     interface     (Bhupesh        2009).      Thus,     cloud      computing   has
     emerged       as    an     attractive     option    providing     choice   and
     flexibility   in    service     centric     IT     delivery.    Figure    below
     summarizes the above arguments.




Fig 9: Factors enabling cloud computing (Vile 2009)


Thus, the Indian IT-services firms which were offering traditional
hosting services until now,          have additional options of managing


                                       xxiv
their IT infrastructure using cloud based services as shown in figure
below which effectively consists of virtualization of all components
of data-center infrastructure including storage, network, systems
and the application stack.




Fig 10: Cloud Computing Model (Doddavula and Gawande
2009)


The working of the above model is explained below (Doddavula and
Gawande 2009):
 Client application issues request for increase or decrease in cloud
resources using the service portal provided by the cloud-service
provider.
 This request is redirected to service procurement system which
manages the resource allocation and provisioning.
 This system allocates the requested resource and the client is
billed according to the usage. Thus, in comparison with the
traditional model shown in figure 7, the resource allocation is
flexible and dynamic which results in reduced costs and reduced
reaction time.


Benefit for Service Providers
These services are provided by major firms like Google, Salesforce,
Microsoft, Amazon etc which already have huge capacity and
provide customized provisioning to the customer based on their




                                 xxv
needs. The service providers maintain high margin of profitability
due to the following factors:
 Major contributor to the costs of ownership of infrastructure is
power consumption costs. Large service providers bring down this
cost through bulk purchase agreements. Moreover, they take
advantage of geographic variability in electricity costs by setting up
their infrastructure at a cheaper country or state (Harms and
Yamartino 2010).
 Large firms are able to reduce the labour costs. Moreover, due to
virtualization which is the underlying technology enabling cloud;
single trained system administrator can maintain thousands of
servers at a time and the client’s IT worker can focus on building
new capabilities instead of performing repetitive maintenance tasks
(Reid et. al. 2009).
 The bargaining power of a large firm is considerably higher which
results in approx. 30% reduction in hardware procurement costs
(Thethi and Srivastava 2010).
 Finally, the service provider uses efficient resource management
processes which results in consistent and optimum utilization of
resources. Small firms or an independent IT firm would not be able
to fully utilize the infrastructure and the resulting idle time which
increases the operating expenditure. Using virtualization and multi-
tenancy architecture, cloud-service providers host multiple client
applications and resources on a single physical server; thus
increasing   its   utilization   efficiency   (Reid   et.   al.   2009).   The
economies of scale have resulted in lowering the total cost of
ownership by 80% as shown in fig below.




                                     xxvi
Fig 11: Forrester Research Total Cost of Ownership Survey
results (Reid et. al. 2009).


As illustrated in the figure above, the infrastructure costs decreases
with scale.


Benefit for Customers
Customers benefit from cloud-enabled services by paying only for
the resources they use, flexibly increasing or decreasing the
capacity usage as per their IT needs. This improves the quality of
service, decreases capital expenditure and operating expenditure,
provides them flexibility with seemingly unlimited capacity (Wittow
and Daniel 2010). If implemented effectively, cloud computing can
reduce the initial capital expenditure on IT to zero thus lowering the
risks, reduce operating expenses by 30-80%, provision with huge
capacity, improve quality of service, save energy and promote
Green IT (Ryan and Loeffler 2010). Gartner estimates that in the
next 5 years, cloud services would result in power savings of 8.5
billion kilowatt-hour (kWh), thus enabling enterprises to save
energy costs by 80% (Pettey and Steven 2010). However, some
issues raised by early cloud adopters include concerns regarding
data security, data ownership, service level compliance, privacy and



                                xxvii
reliability of the application in the cloud infrastructure (Gilbert
2010).


2.2 Major Cloud Categories
             Cloud computing can be categorised into three major
categories depending on components managed by the cloud.




   Fig. 12: Different types of Cloud Services (Adopted from
   Oracle 2009)


A detailed breakdown of the above figure with comparison to
traditional hosting is illustrated below.




                                  xxviii
Fig 13: Traditional IT vs different forms of cloud services
  (Vale 2010)


2.2.1 Infrastructure as a Service (IaaS)
         IaaS provides infrastructure components like servers, data
centers as a on-demand, flexible service that can scale up and down
when required by allocating and de-allocating resources at real time
(Doer 2009). As shown in fig 13, the backend of an application,
including server, storage, network, server operating system are
managed by the service provider and, the middleware and front-end
of the application is managed by the client. The costs are lowered
as there is no capital outlay requirement because IaaS is offered
using pay-as-you-go model. As the infrastructure needs are ever
increasing from e-mails, files, media and electronic records; cloud
enabled IaaS services can provide the essential infrastructure at
lower costs (Vile and Lock 2010).


2.2.2 Platform as a Service (PaaS)
        PaaS delivers Web application technologies in pre-packaged
deployment architecture, provides programming environment that


                                xxix
support implementation of the application and inter-process, inter-
application communication services; all this as a service delivered
over the internet (Mell and Grance 2010). As shown in figure 13 ,
the backend and the middleware is managed by the cloud-service
provider and only the front-end comprising of data and user
interface is managed by the client. The customer uploads Web
applications to this environment and pay for the services according
to metrics such as transaction count, total capacity of compute,
storage and network services (Plummer 2008). The resources in a
platform may be shared or located at multiple locations. The main
benefit is that capacity can be expanded or contracted instantly
allowing clients to migrate applications with fluctuating demands or
high processing needs to suit their needs thus reducing the
operating costs (Doerr 2009).


2.2.3 Software as a Service (SaaS)
In   traditional   on-premise   delivery   model,   customers   had   to
purchase the software, install, configure and then maintain it.
Whereas, in SaaS model, the software is not installed in the
customer’s infrastructure but installed and hosted in the cloud-
service provider’s infrastructure (Plummer 2008). As shown in fig.
5, the whole application stack is managed by the cloud-service
provider and delivered as a service over the network to the client.
The end user pays on a subscription basis using suitable payment
contracts such as “pay per use”, “pay per license”, “pay per hour”
basis. However, the end-users are unaware of where the service is
derived from and they can be provisioned with higher levels of
service when usage increases and de-provisioned easily thus
eliminating high overhead costs (Kelly 2009).


            SaaS has gained tremendous popularity and consists of
common business solutions such as Sales force Automation (SFA),


                                   xxx
Customer      Relationship   Management     (CRM),    and   Enterprise
Resource Planning (ERP) etc. Examples of SaaS include Google
Docs, Salesforce.com, Web mail services such as gmail.com etc
(computing 2010). A gartner survey showed that 90% of the
American firms have used SaaS in 2010 as shown in figure below.




   Fig 14: SaaS adoption in percentage (Gartner 2010)


Advantages to SaaS vendors (Mell and Grance 2010)
 Access to new accounts: Low budget firms can afford subscription
price than buyout price.
 Customer insight: the vendor can get insight on the customer’s
usage trends better than in the case of on-premise delivery.
 New value added services can be introduced rapidly and market
tested with the users.
 Piracy of software can be curbed as there cannot be pirated
version of online application.


Advantage to customer (Kelly 2009)
 Responsibility of maintenance, support, routine operation is
transferred    to   the   vendor   which   includes   planning,   patch
management and upgrades.
 Anytime, anywhere access.


                                   xxxi
 Improved security as application, data are not stored locally.
 Reduced Total cost of operation (TCO), time to market are
inherent benefits from SaaS.


2.3 Types of Cloud Service Delivery
              Cloud services are implemented and delivered to the
customers using one of the following three models: private, public
and hybrid.


2.3.1 Public Cloud
           Public cloud services provide various centralized services
from remote data-centers located at multiple locations and delivers
standard global services (Riverbed 2009).The complexity of dealing
with the physical infrastructure is completely abstracted. The cloud-
service   vendors   provide   unlimited,   scalable   infrastructure   on
subscription basis at low monthly cost (Hartig 2008).The cloud-
service providers drive down their costs by supporting multiple
businesses on their platforms. The customers benefit from dynamic
scalability and reduced risk by shifting infrastructure risks from the
enterprise to the cloud provider.


2.3.2 Private Cloud
           Private cloud is dedicated infrastructure provided by the
cloud-service provider solely for individual clients. It may be
managed by the client or third party such as the Indian IT-services
firm and the infrastructure may be situated on-premise or off-
premise and billed on a “pay-as-you-go” basis (Mell and Grance
2010). However, private cloud has limited resource capacity, unlike
public clouds and costs higher in terms of capital expenditure and
operating expenditure as the private infrastructure is dedicated to a
firm (Delifice 2010).




                                 xxxii
Graph below shows costs comparison for private and public cloud
solution plotted with “number of servers” on the x-axis.




Fig 15: Cost comparison of private vs public cloud (Roehrig,
Ross and Shanahan 2009)


Private clouds may serve as a transition phase to an organization’s
use of public clouds (Jansen and Grance 2010). As private clouds
are built exclusively for each client, it offers control over data,
security, compliance and quality of service (Hartig 2008). Private
cloud facilitates flexible movement and management of workload
between physical servers within the client’s firewall and enables
efficient integration, interdependencies and lowers operational costs
(Harms and Yamartino 2010). Moreover, private cloud increases
agility with reduced complexity in comparison with public cloud
(subramaniam 2010).


2.3.3 Hybrid Cloud
            Hybrid cloud model is a combination of both public and
private cloud. They can help to provide on-demand, externally
provisioned scale and be used to handle planned workload spikes in



                                xxxiii
private cloud (Vile 2010). It supports scenarios where-in private
cloud has a temporary need for extra resources and obtains it from
public cloud (ford 2010). Such private/public cloud integration is
also   known   as   “cloud-burst”   or   “surge   computing”   as   the
infrastructure bursts out in to the public cloud to obtain those
resources (Ford 2010). However, hybrid clouds introduce the
complexity of determining the distribution of application’s resources
across both a public and private cloud (Hickins 2008). Customers
can benefit from hosting non-critical resources entirely in the
external public cloud environment and manage critical ones on-
premise using private cloud (Chasler 2010).


2.4 Cloud Market Structure
The whole cloud offering scenario can be divided into three areas:
Enablers: the ones who provide cloud service. The enablers are
many including Google, Microsoft dominant in the retail space, IBM,
Amazon, HP, Oracle in enterprise arena, intel providing hardware
platform and vmware, Orangescape, citrix providing virtualization
solution (Joshi et. al. 2010).
Delivery agents: the ones who take the cloud service to the
customers with some value added features. IT services firms are
the major delivery agents of cloud services (Mhaiskar and Raichura
2010). The benefits achievable by delivery agents with suitable
adoption of cloud services are shown in fig. below.




                                 xxxiv
Fig 16: Benefits for IT firms (Mhaiskar and Raichura 2010)


The IT services firms can leverage cloud services in several areas
and increase their revenue and profit margins by:
     -   Lowering costs
           o Cloud-service providers provide a set of tools to
              design,    deliver   and    market   cloud   services   and
              enables IT services firms to deliver powerful, scalable
              processing along with scalable storage so that clients
              need   not focus      on performance and scalability
              aspects (Durkee 2010).
           o Cloud      services   reduce   application    development,
              deployment and support costs by translating capital
              expenditure to operating expenditure. Hence, there
              is no significant upfront investment for new projects
              (Buttel 2010).
     -   Faster time to market
           o IT firms need not plan investments in infrastructure.
              As the need arises, IT firms can quickly build, test
              and deploy applications to the cloud and reduce the
              response time considerably (Delifice 2010).
           o With cloud, the lead time to set up infrastructure is
              reduced from weeks to minutes; this small change


                                   xxxv
has an astounding impact on the reaction time to
              demand (Ambrust et. al. 2010).
     -   Offering new solutions
           o IT firms can offer new innovative solutions made
              possible   by   using     cloud   services   and   provide
              diversified offerings (Karamouzis 2010).
           o ISV’s can offer new solutions in different verticals like
              manufacturing, healthcare, financial services, energy
              and retail management.
     -   Extending cloud services
           o Cloud computing provides an opportunity for IT-
              services firms to extend the cloud-service providers
              offerings to its clients by acting as a delivery agent
              (Karamouzis 2010).
           o IT firms can offer varied solutions to their existing
              solutions such as online delivery instead of on
              premise installed software licenses (Mhaisjar and
              raichura 2010).


Customers: users of these services. As the sales model used by
cloud computing providers is subscription based, customer retention
and loyalty acquires prime importance as the customer has not
invested anything upfront and can move to other providers once the
contract lapses (Mhaisjar and raichura 2010).


2.4.1 Potential Growth Opportunities
              Service providers like Google, Salesforce, Microsoft,
Amazon and Yahoo have recognised huge business opportunity and
are leading way to cloud computing by providing advanced billing,
low cost, flexibility in the service agreements, enabling rapid
increase and decrease in resource and capacity based on demand
(Hickins 2008). Many early successful adopters of cloud computing


                                xxxvi
services have benefited highly from the ease of use of the services,
agility to changes in IT needs, reduction in time for services and
flexibility (Cearley and Phifer 2009). Moreover, as all the intricacies
of managing the services are handled by the service provider, the
client can just focus on its core business (Courtney 2010).
During the early years of IT development, businesses allocated
healthy proportion of their budget as IT capital expenditure
(Kakamanu and Portanova 2006). But since the economic recession
in 2008, firms have reduced their IT spending substantially and
delayed new capital expenditures and heavy investments.         So, IT
managers are facing greater pressure to reduce costs and improve
performance (Doerr 2009). Cloud computing is emerging as a viable
option as the enterprises do not own the infrastructure and they can
eliminate capital expenditures by consuming resources as a service,
paying only for what they use (Mather, Kumaraswamy and Latif
2009). Cloud services also enable IT departments to reduce costs
on application implementation, maintenance and security costs as
they are managed by the service provider and the service provider
benefits by achieving economies of scale (IBM 2010). "Green IT"
has recently been the focus of many firms with an intention to
demonstrate high Corporate Social Responsibility (CSR). Cloud
computing enable IT organizations to reduce power, cooling and
space usage to help enterprises create and sustain environmentally
responsible data-centers (McDonald 2010). Moreover, as many
firms are sharing servers, there are fewer servers used resulting in
efficient power usage (Berl et. al. 2009).


             Analysts believe that cloud computing will enhance
collaboration (Scale 2009). For example, many firms are migrating
their email application into Google cloud services and using Google
docsR which allows online storage of documents with authorized
speedy remote access increasing collaboration amongst teams


                                xxxvii
located at different geographies. Such collaborations enhance
security as the data is not stored locally on the user’s laptop or
smart phone and hence, there is no threat of data theft (Schadler
2009). Cloud services can provide enhanced experience for gamers
compete against other players globally and provides superfast
processing power required for sensor networks such as traffic and
weather        sensors   (Thethi    and    Srivastava       2010),       biomedical,
healthcare and geo-spatial computing (Knipp 2010). Many firms
have found cloud solutions to be ideal for load testing of
applications, wherein the applications are tested for their maximum
load-handling capability. Firms can schedule these tests by renting
extra resources on the cloud and just paying for what they use (IBM
2010). Cloud computing promises to reduce the response time for
applications. For example, for applications requiring 1000 hours of
processing time, firms can rent 1000 machines for one hour using
cloud services instead of using single on-premise machine for 1000
hours    (Buttel     2010).      Similarly,     applications      which    required
sequential processing, wherein output from one transaction formed
input for the next transaction, can be converted to real time
processing       using   cloud     computing      capabilities.    For    example:
retailers using batch services can use real time processing to tally
inventory and sales and order new stock immediately. This would
result    in    better   stock     management         and      reduce     operating
expenditures. Hence, clients would demand such services (Creeger
2009). With regard to Small and Medium Enterprises (SME’s), most
SME’s would have uncertain growth patterns. Hence, they would
have to provision 30-40 percent of their infrastructure for future
usage. This results in high risk upfront investment if they adopt
traditional service models (Creeger 2009). However, cloud services
allow them to use the services on subscription basis, thus reducing
the capital expenditure. Moreover, they can dynamically scale their
resources when the need arises. Hence operating expenditure is


                                      xxxviii
also reduced by efficient management (Creeger 2009). These
benefits are very encouraging as SME’s have small IT spending
budget and therefore couldn’t afford the high initial set-up costs
involved in traditional hosting services. Moreover, it offers new
opportunities for these firms to compete with the well established
high net worth firms (IBM 2010). Furthermore, the scalability
offered by the cloud services is beneficial when SME’s are growing,
enabling them to purchase infrastructure as “pay as you go” or on
rental basis and concentrate their money on key business activities
otherwise (Bhupesh 2009). The following figure shows the industry
variability in various sectors.




   Fig 17: Industry Variability over a year (Soumit et. al.
   2010)


For instance, during the festival season a gifting website would
experience higher traffic levels than otherwise. Moreover, the usage
of resources is subjected to time of day variability (Wittow 2011).
For example: an email server is utilized at a higher rate during
office hours and underutilized during the rest of the day. These
applications require high amount of resources at certain time period
and ability to scale up dynamically (Forbes Insights 2010). A survey
conducted by Forbes Insights on early adopters of cloud computing
revealed that 88% of the respondents found dynamic allocation of


                                  xxxix
resources to meet their IT objectives as major benefit of cloud
computing as shown in figure below.




   Figure 18: Survey of early cloud computing adopters
   (Adopted from Forbes Insights, 2010)


Therefore, clients can migrate such time-variable applications to the
cloud and by utilizing the dynamic scalability of resources facilitated
by cloud-services, they can reduce operating costs during off season
(Yah 2010). Moreover, the firms transfer the risk of investment to
the service provider as there are no upfront costs involved (Yah
2010). A survey conducted by Everest Research suggested that
firms spend a large portion of their budget as infrastructure
maintenance costs (Soumit et. al 2010). This leaves very small
portion for new app development which can generate new revenue
as shown in fig. below.




                                  xl
Fig 19: Survey Results for percentage of IT spending
    (Soumit et. al. 2010)


         Thus, cloud services have several advantages to offer for
businesses with diverse needs and high profitability and growth
prospects in providing cloud services has generated remarkable
interest to the cloud-service providers (Vile 2010).


2.4.2 Potential Concerns for cloud adoption
1             Many firms are still delaying a complete shift to cloud
computing services. Recent industry researches revealed that many
firms are holding on to their out-dated servers and legacy systems
even though they need a replacement (Smith 2009) and spending
substantial portion of their IT budget as maintenance costs of these
servers. They are not adopting cloud-enabled services as the
concepts of total virtualization and multi-tenancy are complex and
complicated for non-IT firms to comprehend (Courtney 2010). The
unclear rules over data storage compliance, data ownership, data
security, reliability and privacy are another major concern. 75% of
the firms which participated in a Forbes survey revealed that data
security was a major concern (Forbes Insights 2010). Another
survey by Gartner revealed that 100% of the firms have concerns
over unclear “terms of use” regarding data location and portability
provided by the service provider as shown in figure below.


                                  xli
2




     Figure 20: Gartner survey on cloud users regarding
     terms of service (Adopted from Plummer 2010)


Moreover, the Electronic Privacy Information Center (EPIC), which
addresses privacy issues related to information management;
Federal Trade Commission (FTC), which addresses IT-related
security complaints, has recorded large number of complaints
against major cloud-service providers breaching security rules (EPIC
2009). Data location concerns arise because different geographies
have different terms and regulations regarding how the data
security, privacy and storage (Mather, Latif and Kumaraswamy
2009). To illustrate the influence of this concern, UK communication
minister has announced full support for the development of cloud
computing stating international co-operation is essential to adopt
standard rules and regulations regarding security and privacy for
the success of cloud computing (Brittain 2010). Furthermore,
Gartner research claims that cloud computing will continue to be
vulnerable to security, privacy and data handling issues in the near
future as it is still maturing and better collaboration within the
industry is essential to overcome the deficits (Maurer 2011). Most


                                xlii
firms are unsure how they can leverage their existing infrastructure
and embrace cloud to leverage their performance and fulfil their
existing needs (Smith, Plummer and Cearley 2009). Surveys
indicate that if cloud computing is not a right solution, it can
unnecessarily add complexity to the existing IT infrastructure,
increase costs and introduce potential opportunity of legal conflicts
with the service provider (Smith 2009). Cloud service availability is
another major concern. Cloud vendors assure 99.99% system
availability but it doesn’t imply that cloud service is available for the
same time (Roehrig, Ross and Shanahan 2009). This is because of
the “pay-as-you-go” nature of cloud and clients pay for capacity or
throughput, rather than for system components. Although cloud
service providers offer unlimited scalability, dynamic scalability can
be   achieved   only   by   clearly   defining   time-based   scalability
requirements (Pallia 2010). Moreover, the highly dynamic nature of
the computing infrastructure makes it difficult to manage the
infrastructure (Roehrig, Ross and Shanahan 2009). As cloud
computing basically consists of services delivered over the internet,
it essentially involves hosting services (Cearley 2010). This means
that all the issues revolving around traditional hosting services
applies for cloud computing services including managing integration
of services, accountability, efficient technical support, regulatory
compliances, service levels across third party domains (Vile 2010).
As the client firms are locked into a contract, they will be severely
affected if any of these issues escalates to a conflict (Anthes 2010).
Figure below shows the major challenges faced by the customer:




                                  xliii
Figure 21: Major Challenges Faced by Cloud customers
   (Adopted from Nandana 2009)


2.5 Cloud Computing Future Forecast
         Leading industry analysts are predicting rapid growths in
cloud computing market. A Gartner Research suggests that by
2012, 80 percent of Fortune 1000 enterprises will use some form of
cloud computing service, and 30 percent will use cloud-computing
infrastructure services (Driver 2008). Another research by Gartner
estimates that firms worldwide will spend $112bn on SaaS, PaaS
and IaaS combined over the next five years (Courtney 2010). By
2014, approximately 34% of all new business software purchases
will be procured via SaaS and SaaS delivery will constitute about
14.5% of worldwide software spending across all primary markets
(Courtney 2010). Figure 5 below shows the prediction by industry
analyst firm, Gartner.




                               xliv
Figure 22: Cloud Computing Growth Forecast (Adopted from
Cearley and Phifer 2009)


2.6 Relevant findings from literature review.
            The benefits from cloud computing services cannot be
ignored and it might be beneficial for Indian IT-services firms
should develop a cloud adoption strategy. By engaging as delivery
agent of cloud services, Indian IT-services firms can enhance the
value of their offerings to their existing clients by positioning
themselves as cloud consulting and delivery partners, establish
trusted relationships with cloud-service providers and maintain their
competitive advantage as global outsourcing service provider.
However, the current cloud services have to be critically assessed
for the benefits and risks it offers for various applications. Surveys
conducted globally by Gartner, Forrester and other independent
industry analyst and research firms reveal that firms have adopted
cloud computing primarily to lower their infrastructure costs and
dynamic allocation of the resources. Some application having
variable resource requirement based on time and season are
appropriate to be migrated to the cloud. Hence, choosing suitable



                                 xlv
applications is critical for the success of cloud computing adoption
as unsuitable ones would increase operating costs, decrease
efficiency and expose the client’s application to serious security and
privacy risks. Moreover, many early adopters of cloud computing
have raised concerns regarding security, privacy and data location;
it is essential that these concerns are explored further to obtain
insights into the reasons underpinning these issues. Thus, the
primary research is focussed on assessing the main drivers for cloud
adoption by the Indian IT-services firms, understanding their main
concerns and applications suitable for cloud adoption.


3.0 Research Methodology
                In order to achieve the aims and objectives of the
research, it is essential that the research methodology developed is
robust and effective (Saunders, Lewis and Thornhill 2007). The
researcher contacted 400 people from working for his previous
employer,      Infosys   technologies        and      classmates      from     his
undergraduate batch, who were currently working in Indian IT-
services firms for an initial survey to gain information about their
knowledge of cloud computing. Facebook was used as a medium to
communicate the survey to the respondents, with majority of the
respondents already available in the researcher’s friend list. This
survey   revealed    that   74%    of      the   respondents        lacked   clear
understanding of cloud computing or their opinions would not be of
significant contribution to the research due to lack of expert
knowledge even though they were working in the IT services sector.
This   posed    a   significant   challenge      to    find   the    appropriate
respondents for questionnaires and interviews. The research was
carried out using both inductive and deductive approach. In
inductive research, the data is collected first and then theories are
developed after in-depth data analysis (Saunders, Lewis and
Thornhill 2007). This approach is used to establish a general



                                    xlvi
proposition based on observation (Ghauri and Gronhaug 2005). In
deductive approach, a conclusion is derived from a known premise
(Ghauri and Gronhaug 2005). Secondary research was conducted to
obtain the background and basis for this research and to define the
roadmap for primary research. The findings from primary research
were cross-validated and assessed by further secondary research.


3.1 Secondary Research
             Secondary data is the data which has already been
collected by someone else for various purposes other than to solve
the current research problem (Saunders et. al 2007). These data
are obtained through previous researches enable the researcher to
establish the background and context to the current research and
provides insights into the related theories associated with the
research topic (Blumberg et. al 2006). The secondary data is
compiled from findings of other researchers, industry experts,
analyst firms, completed surveys, questionnaires which can be used
to relate the research to the previous work conducted (Saunders,
Lewis and Thornhill 2007). The primary sources for the secondary
research were: the Georgina Scott Sutherland Library, databases
such as Business Source Premier, Emerald, Sage Journals Online,
Google Scholar, KeyNote, and Sage Publications, white papers
published by industry analyst Gartner, Forbes, RiverBed, Everest,
IDC Insight, Forrester and major cloud players including Google,
Oracle, Microsoft, IBM, Salesforce, Amazon; academic journals from
cloud computing association, cloud computing journal, journal of
internal law, communication of the ACM, internal property and
technology law journal, the computer journal, journal of enterprise
resource management, information systems journal, energy and
technology journal etc. Case studies, conference papers and reports
from the firms which have recently adopted cloud computing
solutions have also provide critical insights into their experience


                               xlvii
with the cloud. This secondary research conducted has provided an
underlying base for further research and generation of questions to
be   raised   during   the   primary   research.   However,   as   cloud
computing is still in its early stages and developing rapidly and the
Indian IT services sector, which is highly dynamic and turbulent;
the peer reviewed articles and journals were of little help to provide
insights on the current issues and trends related to Indian IT
services. Moreover, the researcher had to be highly selective while
adopting the findings from market reports, whitepapers, websites
and independent industry analyst journals as many were used as a
marketing tool by the cloud service providers and vendors. Hence,
primary research was of high importance to provide key insights to
the research.


3.2 Primary Research
         As the research problem is fairly new and unexplored, data
from the secondary research is not sufficient to address the
research problem clearly. Primary research would be beneficial in
addressing this gap (Ghauri and Gronhaug 2005). The main
drawback of primary research is that it is time consuming, costly,
fully dependent on the ability and willingness of the respondents
(Collis and Hussy 2009). Considering these disadvantages, it is
essential to have a well structured approach to perform primary
research. Figure below shows different ways to collect primary data.




                                  xlviii
Figure 23:Primary research and its types ( Ghauri and
Gronhaug 2005)


Primary research may be conducted using qualitative research,
which involves analysis and interpretation of data in non-numerical
format   or   quantitative   research    which   involves   analysis   and
interpretation of data in a numerical format (Ghauri and Gronhaug
2005). As the research focuses on a relatively new technology and
the business impact of which has not been fully understood nor
realized, a mixed methodology of using both qualitative and
quantitative method was used to conduct primary research.              The
major risk associated with primary research is that the respondents
might present their views as “what they want the solution to be”,
instead of presenting the actual information (Loonam and Loughan
2008). Qualitative research provides rich inputs to the research
which has to be interpreted and synthesised based on the context of
the research (Niell 2007). Although qualitative research is time
consuming, it was suitable for this research topic as the researcher
required in-depth information on the subject matter. The researcher
interpreted the raw data obtained from qualitative research into
information bearing in mind the context in which the data was


                                  xlix
obtained. Quantitative research was essential to get the numerical
and categorical data which can be measurable clearly such as the
level of satisfaction of the organisation with their cloud solution
rated from 1-5, number of critical risks which has aroused due to
cloud adoption etc. Quantitative research can be used to collect all
aspects precise measurable data regarding the target concepts and
the researcher is objectively involved in the research process (Niell
2007). The primary research consisted of questionnaires sent to
relevant target group and face to face or web based open-ended
interviews with the IT managers.
       The primary research was conducted in companies located in
Bangalore in India as bangalore is known as the silicon valley of
India with more than 1800 IT companies having its presence
including major cloud computing providers like Google, Amazon,
Oracle, IBM, major IT service providers having its head quarters
including Infosys, Wipro, Patni computers (Nasscom 2009).It is
rapidly growing in the IT sector with year-on-year increase in IT
exports by 52% (Nasscom 2009). It has a large base of skilled and
knowledgeable and easily accessible IT talent pool. As the research
demands expert and deep insight knowledge of the niche cloud
computing market, it should be targeted effectively to individuals
who posses this knowledge and understanding. The researcher had
worked in Infosys Technologies, head quarters in Bangalore for two
years and can utilize the assistance from the previously established
contacts within the IT industry. These IT-services firms have
updated insights on cloud computing developments as they serve a
wide range of clients ranging from healthcare, banking, and
insurance to gaming and geospatial firms worldwide (Karamouzis
2010). Hence, they would take keen interest to understand the
benefits, risks associated with cloud computing adoption to host
their client’s applications.




                                   l
3.2.1 Questionnaires
          A questionnaire is a list of carefully structured questions,
which were chosen after considerable testing with a view of eliciting
reliable response from a particular group of people (Collis and Hussy
2009). The main steps involved in designing a questionnaire are
summarized below:
 Design questions and instructions
 Determine order of precedence.
 Write accompanying letter
 Test this questionnaire with a small sample already chosen.
 Choose the method for distribution
 Plan strategy for dealing with the responses received
 Analyze the received data (Mingers 2003).
Clear designing of the questions and instructions is essential to
ensure that there is no subject error or subject bias (Saunders et.
al. 2007) and to get clear measurable results. Determining the
correct order of precedence is essential to achieve logical flow of
collecting information. The precedence of questions ensured that
the respondent’s details including work and organisation profile
were    collected     initially   before       moving   to    collecting    actual
information    regarding      the    research     problem     (Trochim      2006).
Moreover, questions which were irrelevant for a particular category
of respondent were not shown to the respondent. For example, the
respondents belonging to firms which had not adopted cloud
computing solutions were not asked about the actual benefits
realised by their firms from cloud adoption. The next steps were:


The    distribution   method        for   questionnaire      was   chosen    after
evaluating the following factors:
 Characteristics of the respondents
 Importance of reaching a particular person as respondent;



                                          li
 Size of sample required for analysis, taking into account the likely
response rate;
 Types of question asked
 Number of questions asked (Sauders, Lewis and Thornhill, 2007).




                                        Questionnaire
                                        Types




   Internet             Postal                          Telephonic            Collect and
   questionnaire        questionnaire                   questionnaire         deliver
                                                                              questionnaire




Figure 24: Types of questionnaires (adopted from: (Sauders,
Lewis and Thornhill, 2007).


As shown in figure above, the questionnaires can be sent through
post, telephone, ‘collect and deliver’ or using internet services
(Collis and Hussy 2009). Postal Questionnaires are not ideal
considering the time required to send and receive, postage cost,
poor delivery service (Sauders, Lewis and Thornhill, 2007).
The telephone questionnaire is widely used as a substitute for face
to face interviews. But the disturbing telephone lines, high call
costs, intruding nature of a phone call makes this technique
infeasible (Collis and Hussy 2009). From the consideration made
above,      the    research    was       conducted              with    internet    mediated
questionnaire because it effectively reaches a large sample size and
making compilation costs very low (Collis and Hussy 2009). The
Questionnaires were initially sent to a large sample of more than
400 skilled workers in IT services industry working in India.




                                             lii
The responses showed that 74% of the respondents did not possess
necessary expert knowledge or exposure in cloud computing to
contribute to the research with their opinions. Their opinions would
lead to wrong survey results and misguide the researcher. Hence,
the researcher had to reduce the sample size and target specific
people within the IT industry who were qualified, experienced and
exposed to cloud computing services so that their opinions were
accountable. The researcher realised that a different approach has
to be adopted to contact the right people and used different social
and business networking websites including linkedin.com,
apnacircle.com, siliconindia.com, forums including Computer society
of India (CSI), OWASP, Nasscom, IEEE Bangalore chapter, contacts
from previous employment, colleagues, seniors who are working in
IT firms and sent out e-mail questionnaires, paper handouts and
ensured that right category of people were contacted to understand
their perspective on cloud services. This seemed to be an
appropriate approach because the researcher could assess the work
and organisation profile of the members of these websites and
forums and their areas of interests in the IT space by reviewing
their profile and then getting in touch with relevant people. By
briefing the colleagues and seniors about the research
requirements, the researcher was able to contact experts in the
research area within the organisation. The questions (see appendix
1) were a mixture of open-ended and close-ended questions as the
researcher wanted to extract additional information from the
respondent’s experiences. The targeted respondents were
managers, IT consultants, and business analysts of the IT services
firms or IT-services division of other firms which were considering
cloud computing adoption in future or have already implemented
cloud computing services to one or more of their clients (see
appendix 2 for the list of firms contacted). These IT services firms
act as delivery agents by customizing the cloud services offered by


                                  liii
the cloud service providers to suit their clients needs after critical
assessment and appreciation of the client’s IT infrastructure
requirement. As it required specialised knowledge and expertise on
the subject, the number of respondents was limited to 90. As the
respondents would have worked on various other technologies,
different firms and in different countries, the researcher had to
ensure that the respondents answered the questionnaires based
solely on their experience, expertise and opinions with regard to
cloud implementation by “Indian IT service firms on outsourced
projects from various clients, i.e projects which were designed,
developed, tested, maintained by the firm’s development centres in
India. The cloud computing opportunity is assessed considering
Indian IT-services firms as delivery and consulting agents of these
cloud services to its existing clientele.” These instructions were
incorporated in the short note sent along with the questionnaires
describing the research aim and objectives which the respondents
had to acknowledge before taking part in the questionnaires.


3.2.2 Interviews:
          Interviews give clear insights to how people think and feel
about topics of concern to the research (Oppenheim, 2000). Face-
to-face interviews are beneficial when two individual have a topic of
common interest (Kvale and Brinkmann, 2009). The advantages of
conducting interviews are: researcher has control over the flow of
contents of the interview; informants can provide new information
and     different   perspectives    which   can     be    used   for    further
investigation on these lines. The disadvantages are: it provides
indirect information through the stages of interviews, the format of
the information received is not standard and sometimes difficult to
interpret.   The    interviews     conducted   by   the    researcher     were
focussed at extracting new information from the respondents from
their   experience,    knowledge      and   firm-specific    cloud     product


                                      liv
expertise    and   confirming,    validating      the    findings   of   the
questionnaires, secondary research and findings from previous
interviews. The researcher conducted semi-structured interviews
with the business analysts, IT managers, project managers of 17 IT
firms in Bangalore (see appendix 3 for firm’s list). Some interviews
were conducted online using Skype, TCS Sametime ®, Infosys
Communicator® to save the respondents time and convenience.
Semi structured interviews enabled the researcher to exclude some
questions irrelevant to the firm or the ones which the manager will
not be willing to reveal due to company policies. The researcher was
also able to ask new questions based on the previous responses.
The researcher first conducted the questionnaire survey with the
respondents and hence they were aware of the research problem
prior to their interview. Due to time, access and budget constraints,
the researcher was able conduct only 22 interviews. However,
considering that it covered 17 different firms (refer appendix-3 for
list of firms contacted and partial list of respondents name and
contact email) with respondents possessing adequate knowledge,
expertise and experience of cloud technology, it can be assumed
that the results of the interviews can be generalised. Moreover, as
the respondents are likely to be biased in their opinion, the
researcher had ensured that the findings from the interviews were
validated with appropriate secondary research findings and cross
validating with other interview respondents. However, theoretical
saturation was evident during the last few interviews which
prompted the researcher to proceed with the analysis of the
findings.   Theoretical   saturation    implies   that   almost     no   new
information could be extracted on the topic of research and all
current information obtained were cross-validated (Strauss and
Corbin 1998)




                                   lv
3.2.3 Focus Groups
        A focus group interview is a discussion with a small group of
participants on a specific topic. The attributes of a focus group are
the clear use of the group interactions, in order to collect quality
data. Focus groups are more specific, meaningful and more dynamic
than consumers filling out questionnaires and surveys (Hart 1998).
The researcher had planned to develop one focus group which had a
mix of participants with expertise in various aspects of cloud
computing implementation whilst planning the research proposal.
The advantage of this method is that participants can voice their
opinion and perspective towards this topic. The researcher will be
able to interpret the data depending on the context and conduct
qualitative   analysis   of   the   outcome     effectively   (Kvale   and
Brinkmann 2009). However, the initial survey findings revealed the
impracticability of conducting focus group discussions as the access
to skilled and expert participants was limited. Furthermore, these
participants, who are at managerial level, would not attend such
events unless they reap some kind of monetary or PR incentives.
Hence the researcher limited the primary research to comprise of
only questionnaires and interviews. However, the findings from the
interviews    and   questionnaire    were     cross-validated   with   the
respondents and theoretical saturation was evident while analysing
the responses of the last three interviews.


3.4 Research Design
         The researcher has used paper based and internet based
questionnaires to validate the findings from the secondary research
and to obtain insights into the current issues, challenges associated
with cloud computing adoption. As numerous applications can be
migrated into the cloud, it was essential to classify applications into
finite categories so that opinions from the respondents can be




                                    lvi
captured easily. The Indian IT services industry serves clients from
many sectors as shown in fig. below.




Fig 25: Sector-wise Revenue break-up of Indian IT services
firms (Nasscom 2009).
These clients have varying IT needs spanning across infrastructure
for   storage,   processing,   and   software.   Hence,   categorizing
workloads based on cloud service type such as SaaS, PaaS and IaaS
cloud would not be appropriate for this research. Moreover, the
services offered by Indian IT services firms range from lower-end
application development to high end complex system integration
and product engineering services as shown in fig. below.




                                 lvii
Fig 26: Revenue break-up by services offered by IT services
firms (Nasscom 2009)


Therefore, in order to achieve the third objective, which is to
identify the applications suitable for cloud computing adoption, it is
necessary that all the applications handled by the Indian IT-services
firms are categorised into well-defined classification based on their
IT needs.   Therefore, workload approach has been chosen as it
provides clear classification and is a proven effective method
implemented in other researches (Zinnov 2010). A generic approach
in categorising applications into workloads in the questionnaire
would result in ambiguous responses as the respondent would be
unsure about the scope of the workload. For example, some surveys
have “business application services” as one of the workload
categories. Although this categorisation might be appropriate in a


                                 lviii
different context, it’s not suitable for cloud service assessment as
business application services comprises of diverse applications such
as ERP (Enterprise resource planning), CRM (Customer Relationship
Management),     Payroll   Management,    Planning       and     Forecasting
applications, email applications etc. It is essential to get insights on
the respondent’s views on all these applications’s suitability to cloud
migration as they have different features and correspondingly, their
IT requirements also differ. Hence, the researcher has identified key
business applications, productivity tools, communication tools,
storage services, infrastructure services, analytics systems and
categorised them into individual workloads as shown in the chart
below.


Category                            Summarized explanation
CRM tools                           Services which can be bundled
                                    and   sold as        SaaS:    Customer
                                    Relationship Management (CRM),
                                    Salesforce management.
Project management tools            Hosted productivity tools            for
                                    project   management,          analysis,
                                    modelling and development.
Email and desktop applications      Personal    productivity   and
                                    administrative infrastructure
Development and testing tools       Tools used for rapid development
                                    and        simulating             target
                                    environment for the prototype to
                                    test it.
Trading applications                Online order management with
                                    customer, suppliers. Real time
                                    trading     with       low       latency
                                    requirement
Complex modelling applications      Applications involving intensive
                                    mathematical               calculations,
                                    simulations     in     gaming,      bio-


                                  lix
medical and life science sectors
Data   backup,     archiving    and Operational services handling
recovery                                backup, disaster recovery and
                                        data management tools.
Adaptive systems                        Systems having fluctuating or
                                        periodic     or    bursty        demand
                                        cycles. E.g: e-commerce sites,
                                        tax processing systems, seasonal
                                    purchase order systems
Conferencing       and         VOIP These       include                   hosted
infrastructure                          communication          tools    such     as
                                        audio, video conferencing, web
                                        based utilities
Data mining applications                Applications       involving           high
                                        performance       data     dependency
                                        analysis such as search engines,
                                        robotics,      financial        analytics,
                                        parallel logics.
Data warehouse                          Reporting database with complex
                                        processing and analysis
Transactional database                  Databases    with    roll              back
                                        capability        on           incomplete
                                        transactions to be used as a
                                        service.
Testing Infrastructure                  Infrastructure     and         processing
                                        platform for different capability
                                        testing such as load and stress
                                        testing
Training infrastructure                 These          include            hosted
                                        communication          tools    such     as
                                        audio, video conferencing, web
                                        based utilities
Mission critical workloads              Applications having compliance
                                        constraints,      high         level     of



                                   lx
accountability and criticality.
Secure storage records                 Data    storage     with      highly
                                       sensitive      privacy,      security
                                       requirements
Highly customized applications         Applications involving      bespoke
                                       customization regularly to adopt
                                       to changing client’s needs
Interdependent applications            Applications    having   complex
                                       interdependencies with multiple
                                       databases,     departments        and
                                       geographies.


The above description was provided for the respondents to assist
them in understanding the workload types. Respondents could
choose more than one option while selecting the workloads for
suitability. The results were validated during the interviews by
identifying the reasons underpinning the respondent’s selection of
workload.


3.4.1 Questionnaire Design
             The questionnaires were divided into two parts. As the
research problem demanded specialised knowledge, expertise and
experience    in   the   area   of   cloud   computing,   Part-1    of   the
questionnaires     extracted     respondent’s      relevant      background
information such as:
 Respondent’s definition of cloud computing
 Respondent’s awareness level in cloud computing solutions.
 Respondent’s position in the organisation.
 Respondent’s total years of IT experience.
 Respondent’s organisation’s core area of work.
 Whether cloud computing solution has already been implemented
in the organisation?




                                     lxi
 Whether the organisation is reviewing or planning to implement
cloud computing solution in future?


            The responses from the part-1 questionnaire established
the competency in cloud computing and experience in Indian IT-
services.    It    also   provided       details    regarding      whether     the
respondent’s firm had implemented cloud solution or planning to
adopt   cloud      solution   in   future.      Using   this    information,   the
researcher selected the respondents for part-2 questionnaires.
Researcher ensured that the respondents had sufficient expertise
and awareness in cloud computing, sufficient IT industry experience
to have better understanding of the clients application and domain,
suitable    work    profile   in   the     organisation     that    provides   the
respondent necessary information, in case such need arises.
Part-2 questionnaires were also customized and sent to the suitable
respondents so that irrelevant questions were excluded so that
respondents could provide valid inputs into the research. For
example, the questions regarding actual benefits from cloud
computing were sent only to respondents belonging to firms which
have    already      adopted       cloud        computing      solutions.   Part-2
questionnaires consisted of close-ended questions designed to using
appropriate metrics so that the responses could be quantified using
charts and measured effectively. Ranking method was considered
more appropriate to identify the factors such as main drivers, actual
benefits reaped, major concerns and private cloud preference as it
provides a holistic view of the respondent’s opinion. If the
respondents were asked to select only one option, then the results
would not reflect the underlying reasoning or order of preference of
the respondent’s choices. The questionnaires were targeted to get
insights into the following areas:
 To understand their main motivating factors which lead to the
adoption of cloud computing?


                                         lxii
 Understand the actual benefits reaped and major challenges
faced by the firms which have already adopted cloud computing
solutions currently faced by these firms.
 Understand the major concern hindering the prospective cloud
adopters regarding cloud adoption.
 Which cloud model do they recommend for prospective adopters
and why?
 Which application workloads do they find suitable for cloud
adoptions?


3.4.2 Interview Design
             Suitable respondents from part-2 questionnaires were
requested to take part in the interviews. The researcher attempted
to interview right proportion of respondents from IT-services, IT-
consulting and research roles; ensure right balance in interviewing
respondents from 2-10 years of IT work experience with different
roles in the firm. However, due to time and budget constraints, only
22 people participated in the interview. But, the researcher believes
that the results obtained are unbiased and can be generalised as
theoretical saturation was achieved during final stages of the
interview process. Interviews were targeted at understanding the
reasons underpinning the questionnaire survey responses and to
validate the results obtained from the questionnaire survey. This is
beneficial   as   the   researcher     will   be   able   to   identify   any
misinformation, biased results obtained due to errors in procedure
and design of the research. Moreover, first hand information can be
obtained on related areas (Niell 2007). The findings from the
interview were analysed, categorised and wherever the researcher
observed a need for clarification, the findings were cross validated
with other respondents. The insights obtained after analysis were
used to:




                                     lxiii
 Determine the main driving factors and concerns for cloud
adoption.
 Prime benefits and risks faced by the firms which have adopted
cloud computing
 Develop and recommend a suitable strategy for cloud adoption
by Indian-IT services firms in terms of application workloads and
cloud computing types.


3.5 Sample Selection
            To ensure that the findings from the research can be
generalised, unbiased and reliable; it is necessary to use a suitable
sample for the research (Strauss and Corbin 1998). Due to time,
resource and budget constraints, it is not possible to conduct the
research on a large scale and arrive at a consensus. Moreover, the
respondents     should   be    equipped       with    adequate      hands-on
knowledge,    experience      on   the     subject   to   provide   valuable
contribution to the project as it deals with current issues and
challenges (Saunders et. al. 1997). Hence, it was essential to
consider a sample of the population in question. Numerous
researchers believe that using sample approach would result in
accurate data collection and analysis as there is added emphasis on
designing and piloting the project to collect detailed information
(Henry 1990). Johns and Perrot (2008) claim that a sample size of
ten is sufficient for qualitative research involving interviews.
However, it is a standard practice to validate new findings from
interviews until theoretical saturation is reached (Bailey 2006).
Otherwise the findings are considered to be uneven, non precise
and biased. As the current research problem deals with relatively
new technology, which is not fully understood and time tested, the
researcher had selected the sample size of 80 for questionnaires
and 25 for interviews in order to achieve theoretical saturation.




                                    lxiv
3.5.1 Sampling Technique
          In order to answer the questionnaires, the respondents must
be exposed to cloud computing implementation, either as a part of
service provider, delivery agent, customer or as an end user.
Hence, the researcher has used purposive sampling technique to
ensure that relevant participants are sampled to take part in the
questionnaires and interview (Saunders et. al. 2007).
              The researcher used his previous contacts in Infosys
technologies and others within the IT industry in Bangalore,
business networking websites like Linkedin, apnacircle; forums like
IEEE, siliconeindia, Computer Society, OWASP, CII (confederation of
Indian Industries, Mysore), colleagues, college seniors to contact
relevant     people   and   filtered     the    right   respondents   using
questionnaires and reviewing their work profile. The selection
criteria were:
      -    The respondents should have adequate awareness and
           knowledge of cloud computing implementation either on
           technical areas, business case analysis, research, academic
           or consulting roles.
      -    The   sample must have            almost equal distribution of
           respondents working as analysts, consultants, manager
           with technical and domain expertise in delivering IT service
           and consulting solutions, and engineers from the developer
           community.
      -    The sample must consist of respondents from only the
           Indian IT-services firms or be a part of the subsidiary of
           global IT firm which has development centres in India and
           provides services to clients using the global delivery model
           or offshore-onshore model.


Considering the stringent criteria for purposive sampling which
involved filtering the respondents, contacting and requesting them


                                       lxv
to take part in the research demanded significant time and energy,
the researcher required over 40 days to complete the primary
research.


3.6 Data Analysis
             Comparative analysis method was used to compare the
results of the questionnaires, secondary research and interviews.
The results obtained from questionnaires were validated with the
interview respondents and interview findings were compared,
contrasted and cross validated during further interviews. The
quantitative results were analysed using reporting tools from
Survey Gizmo and Microsoft Excel spreadsheet package for graphs
and analysis. The qualitative results were analysed and converted to
findings keeping the context of the interview, background of the
respondent in mind.
      New information obtained were analysed, filter and sorted into
relevant categories. Conflicting information were cross validated
with other respondents and triangulation technique was used by
confirming   new   insights   from   primary   research   with   newer
publications through secondary research as advocated by Niell
(2007).




4.0 Findings from Primary Research
 This chapter takes the reader through the respondent’s profile,
results obtained from questionnaire survey and key findings
identified after quantitative analysis of the interview responses.




                                  lxvi
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service
Business Benefits of Cloud Computing to Indian IT Service

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Business Benefits of Cloud Computing to Indian IT Service

  • 1. THE ROBERT GORDON UNIVERSITY ABERDEEN FACULTY OF MANAGEMENT Aberdeen Business School Title: Cloud Computing Opportunity: Benefits and risks assessment for Indian IT-services firms. Name: Saurabh Jayarama Rao Matriculation Number: 0917925 Submission Date: 4th May, 2011 Supervisor: Prof. Alan Hunt Aim: To assess the benefits and risks involved in adoption of cloud computing by Indian IT services firms and to identify a cloud adoptions strategy for prospective adopters Objectives: 1. To identify the main drivers of adoption for Indian IT services firms. 2. To identify the major risks associated with cloud computing adoption for the Indian IT-services firms 3. To identify the application workloads suitable for cloud service adoption. 4. To suggest a cloud adoption strategy for prospective adopters within the Indian IT-services industry Signed: (Saurabh Rao) Total word count (excluding acknowledgements, diagrams, references, bibliography and appendices) 20,892 A Dissertation submitted in partial fulfilment of the requirements for the MSc Degree in Management. i
  • 2. ABERDEEN BUSINESS SCHOOL Copyright Declaration Form Name Saurabh Jayarama Rao Email/contact tel saurabhjr@hotmail.com 07031990789 no.: Course: Msc Management Module: Dissertation Dissertation Title: Cloud Computing Opportunity: Benefits and risks assessment for Indian IT-services firms. Supervisor/Tutor: Prof. Alan Hunt Before submitting confirm: a) that the work undertaken for this assignment is entirely my own and that I have not made use of any unauthorised assistance b) that the sources of all reference material have been properly acknowledged c) that, where necessary, I have obtained permission from the owners of third party copyrighted material to include this material in my dissertation. I have read and agree to comply with the requirements for submitting the dissertation as an electronic document. I agree: • That an electronic copy of the dissertation may be held and made available on restricted access for a period of 3 or more years to students and staff of the University through The Robert Gordon University Moodle. ii
  • 3. That during the period that it is accessible on Moodle the work shall be licensed under the Creative Commons Attribution-Non Commercial- Share A like 2.5 Licence to the end-user - http://creativecommons.org/licenses/by-nc-sa/2.5/ Signed... (Saurabh Rao ) Date…4th May 2011 iii
  • 4. THE ROBERT GORDON UNIVERSITY ABERDEEN Cloud Computing Opportunity: Benefits and risks assessment for Indian IT-services firms Mr. Saurabh Jayarama Rao The Robert Gordon University, Aberdeen, UK Aberdeen Business School (Msc in Management) Submission Date: 4th May, 2011. iv
  • 5. ABSTRACT Cloud Computing has steadily gained popularity during recent years. Cloud Computing is a market friendly term for the services offered over the air or internet. It mainly consists of SaaS (Software as a Service), PaaS (Platform as a Service) and IaaS (Infrastructure as a Service). These services are provided by major firms like google, Saleforce, Microsoft, Amazon, Yahoo which benefit from efficient management of resources and economies of scale. Clients can benefit from this facility by paying only for the resources they use, flexibly increasing or decreasing the capacity usage as per their IT needs and decrease their infrastructure expenditure. Indian IT-services firms have been dominating the global outsourcing industry since the last decade by providing IT services and consulting solutions to their clients worldwide. Cloud computing offers a new window of opportunity for Indian IT-services firms to act as cloud delivery agents to their existing clients and establish their presence in the unexplored cloud services market. However, many firms are not fully convinced about the benefits of cloud computing and are unaware of the risks involved. As cloud services is still in its early stages, there is lack of clarity regarding the terms of service, security, data storage, control and service level agreements. There is significant marketing hype and fear amongst the IT managers of losing a new opportunity or capabilities which cloud can offer. Moreover, not all applications are well suited to be migrated to cloud infrastructure. This report provides insights into the current benefits and risks involved with cloud adoption by Indian IT-services firms. The factors underpinning the current benefits and risks are identified and applications suitable for cloud adoption are highlighted through critical assessment of the application’s IT needs and cloud services features. Keywords: Cloud Computing, Indian IT services, cloud concerns, cloud benefits, cloud application, cloud delivery agent, adoption strategy. v
  • 6. Acknowledgement I sincerely thank the Almighty God who gives me the strength and inspiration in all my life endeavours. I would like to thank my thesis supervisor, Mr. Alan Hunt for his excellent guidance; constructive inputs and prompt support in making this research a success. I would like to extend my heart-felt thanks to all the respondents for their contribution in enabling me to carry out this research. I would like to express deep appreciation to my parents, Mr. Jayarama and Veena Rao and godfather Dr. Nandakishore Rao for all their love, encouragement, support and undying belief in my abilities. Finally, I would like to thank my dear friend Stavin Lawrence D’souza, without whose support, I would not have embarked on this master’s journey, nor would have chosen a challenge research topic. vi
  • 7. Table of contents 1.0 Introduction and Research Problem.………………………..1 1.1 Cloud Computing Opportunity in India………………..1 1.2 Defining Cloud Computing………………………………….1 1.3 Rationale………………………………………………………….2 1.4 Aims and Objectives………………………………………….5 2.0 Literature Review……………………………………………………..6 2.1 Background………………………………………………………6 2.1.1 Indian IT-service Industry………………………6 2.1.2 Cloud Computing… ……………………………….10 2.2 Major Cloud Categories……………………………………18 2.2.1 IaaS…………………………………………………….19 2.2.2 PaaS……………………………………………………19 2.2.3 SaaS……………………………………………………20 2.3 Types of Cloud service delivery…………………………22 2.3.1 Public cloud………………………………………….22 2.3.2 Private cloud………………………………………..22 2.3.3 Hybrid cloud…………………………………………23 2.4 Cloud Market Structure……………………………………24 2.4.1 Potential Growth Opportunities……………..26 2.4.2 Potential Concerns for Cloud Adoption…….31 2.5 Cloud Future Forecast……………………………………..34 2.6 Relevant findings from Literature review…………..35 3.0 Research Methodology…………………………………………….36 3.1 Secondary Research………………………………………..37 3.2 Primary Research……………………………………………38 3.2.1 Questionnaires……………………………………..41 vii
  • 8. 3.2.2 Interviews……………………………………………44 3.2.3 Focus Groups……………………………………….46 3.4 Research Design……………………………………………..46 3.4.1 Questionnaire Design…………………………….51 3.4.2 Interview Design……………………………….…53 3.5 Sample Selection………………………………………….…54 3.5.1 Sampling Technique……………………………...55 3.6 Data Analysis……………………………………………….…56 4.0 Findings from Primary Research…………………………….…57 4.1 Questionnaire Findings………………………………….…57 4.1.1 Results from Part-1……………………………….57 4.1.2 Part-2 Questionnaires……………………………58 4.2 Interview Findings………………………………………….70 5.0 Analysis and Discussions………………………………………...81 5.1 Key findings from Primary Research………………….81 5.1.1 Major Drivers for cloud adoption…………....81 5.1.2 Major Concerns for cloud adoption………….85 5.1.3 Choice of Workload for public cloud………..92 5.1.4 Choice of Workload for private cloud……...93 6.0 Conclusion……………………………………………………………..96 6.1 The Research………………………………………………….96 6.2 Conclusions from Research Objectives……………...97 6.2.1 Conclusions from Research Objective-1…..97 6.2.2 Conclusions from Research Objective-2…..98 6.2.3 Conclusions from Research Objective-3…..99 6.2.4 Conclusions from Research Objective-4…..99 6.3 Managerial Recommendations..………………………100 Reference List Biblography viii
  • 9. Appendix List of Figures 1. Overview of Cloud Computing Opportunity……………1 2. Relationship between consumer and enabler………..4 3. Future growth areas for IT services by Infosys Research…………………………………………………………..4 4. IT service industry market share structure…………..7 5. Wipro Revenue Distribution by geography……………8 6. Annual Growth rates of Major Indian IT-services Firms……………………………………………….9 7. Traditional Delivery Model………………………………….11 8. Software as a Service Marketing Campaign………….13 9. Factors enabling cloud computing……………………….14 10. Cloud Computing Model.…………………………………..15 11. Forrester Research Total Cost of Ownership Survey results………………………………………………..17 12. Different types of Cloud Services………………………18 13. Traditional IT vs different forms of Cloud services……………………………………………….19 14. SaaS adoption in percentage…………………………...21 15. Cost comparison of private vs public cloud………..23 16. Benefits for IT firms………………………………………..24 17. Industry Variability over a year………………………..29 18. Survey of early cloud computing adopters….………30 19. Survey Results for percentage of IT spending…….31 20. Gartner survey on cloud users regarding Terms of service…..……………………………………………32 ix
  • 10. 21. Major Challenges Faced by Cloud customer..……….34 22. Cloud Computing Growth Forecast…………..…….…..35 23. Primary research and its types…………………………..39 24. Types of questionnaires…………………………………….42 25. Sector-wise Revenue break-up of Indian IT services firms………………………………………………….47 26. Revenue break-up by services offered by IT services firms………………………………………………..48 27. Cloud Computing Awareness results from part -1 questionnaire………………………………………………58 28. Graph representing the respondent’s country………..59 29. Respondent’s cloud awareness level…………………….60 30. Respondent’s experience profile…………………………..61 31. Respondent’s work profile break-up……………………..62 33. Respondent’s firm’s cloud adoption status…………….63 34. Responses for main drivers for cloud adoption………64 35. Responses reflecting the actual benefits achieved….65 36. Responses for main concerns for cloud adoption……66 37. Responses for public cloud workload suitability……..66 38. Responses for private cloud workload choice…………67 39. Responses from respondents whose firms have already adopted private cloud…….69 40. Response from respondents working for firms planning cloud adoption in future……………70 41. Cost comparison of private vs public cloud…………….84 42. Responses to skill assessment for private cloud management………………………………………………91 43. CIO survey conducted by Zinnov Research…………….94 1.0 Introduction and Research Problem This chapter highlights the cloud computing opportunity in the context of the Indian IT-services industry, identifies the research problem and establishes the research aims and objectives. x
  • 11. 1.1 Cloud Computing Opportunity in India Cloud Computing has emerged as a new buzzword in the field of Information Technology (IT) and IT-enabled Services (ITES). The Indian cloud computing market which is currently valued at $110 million is expected to grow ten-fold by 2015 to $1billion (Subramaniam 2010). According to Gartner insights, Indian IT- services companies will represent 20% of the cloud delivery market through their cloud-enabled IT-services (Karamouzis 2009). Nasscom (National Association of Software and Service companies), a regulatory body for IT services in India, identified cloud services as one of the areas offering non-linear growth and revenue models to Indian IT-services firms and has undertaken strategic steps to encourage firms to explore this opportunity (Nasscom 2010). The Indian IT services firms are leveraging their existing client relationships and expertise in service delivery to emerge as dominant delivery agents of cloud services (Hingorani 2009). This study is limited to only those firms which provide IT-services and consulting solutions from their development centres in India. 1.2 Defining Cloud Computing Gartner defines cloud computing as a style of computing where massively scalable IT-related capabilities are provided ‘as a service’ across the Internet to multiple external customers (Bhupesh 2009). The resources in the cloud are pooled, virtualized and networked which results in better efficiency, flexibility, low cost, ease of use (EMC 2010) and customers access business services on their own terms as illustrated below. xi
  • 12. Fig. 1: Overview of Cloud Computing Opportunity (EMC 2010) It is basically a market friendly term for subscription based services offered over the internet which allows rapid increase or decrease in capacity without additional investments in infrastructure, manpower or licenses (Wittow and Daniel 2010). Figure below shows different types of cloud services. 1.3 Rationale The decision to undertake this research was taken after considering a wide range of aspects. Indian IT-service providers are realizing the value of having competencies in hardware and software in order to achieve economies of scale, retain customers and improve profit margins (Bakshi and John 2010) Cloud services delivery or reseller opportunity may provide the necessary platform for Indian IT service providers to develop these competencies (Jorge and Ted 2008). Currently, cloud-service providers offer the platform and essential functionalities upon which the IT service providers can build and run their client’s applications. These arrangements are appealing to Indian IT services firms to offer cloud consulting services and deliver customized applications xii
  • 13. suitable for the cloud (Gartner 2010). Revenue from traditional IT services could be eroded due to cloud offerings by new emerging firms; hence there is an incentive to look for new ways to add value (Quicke 2009). Moreover, with tight economy today, customers are spending much less but demanding seamless access to content; a Gartner study revealed that global IT spending declined by 6% in 2009 (Quicke 2009) and this has prompted the Indian IT-service firms will have to look for growth opportunities wherever they can find it. Most businesses are unclear whether cloud solutions are ideal to satisfy their IT needs. For unsuitable applications, cloud services are known to introduce unnecessary complexity, increase operating costs and resulting in contract lockage with the service provider (Thethi and Srivastava 2010). A lack of in-house expertise in cloud architecture, identity management, security monitoring and data handling may lead to poor decision making on the part of end- user organisations (Ambrust 2010). Indian IT-services firms have proven technical expertise and gathered domain knowledge of diverse sectors through years of IT-services delivery and are positioned appropriately to choose a right cloud solution for their client (Chatterjee and Chakrabarty 2009). IT service providers are the key relationship link between the consumer and the enabler of cloud computing as shown in fig. below. Fig 2: Relationship between consumer and enabler (Bakshi and John 2010) xiii
  • 14. Most IT-services firms may have to partner with large cloud service providers like Microsoft, Google, Amazon etc and collaborate on cloud-enabled service delivery and build trusted relationships (Roehrig et. al 2010). Otherwise, new competition might arise with cloud-service providers partnering with other start-ups. Moreover, profits have to be shared with the cloud providers. Hence, there is a greater need that IT firms utilise the cloud offering effectively to differentiate their solution offering and improve profit margin (Vile 2009). According to industry trend survey by Infosys Research, cloud computing has appeared as high growth area for IT service providers as shown in chart below. Fig 3: Future growth areas for IT services by Infosys Research (Thethi and Srivastava 2010) The above survey reveals that cloud computing was rated highly as a service which would reduce total cost of operation (TCO) and provide growth to the business. Thus, adopting cloud computing to provide cloud-enabled services might prove to be beneficial for Indian IT-services firms. Assessing the benefits and risk associated with cloud adoption by Indian IT-services firms would provide insights into these aspects and enable them to take informed steps. Moreover, planning an xiv
  • 15. ideal adoption strategy is essential to fully benefit from cloud services. Therefore, the research aim is, ”To assess the benefits and risks involved in adoption of cloud computing by Indian IT services firms and to identify a cloud adoptions strategy for prospective adopters”. 1.4 Aims and Objectives The aims of the research are: - To identify and critically assess the benefits and risks involved in adopting cloud computing services by Indian IT services firm. - To identify a cloud adoption strategy for prospective adopters in the Indian IT-services industry. The objectives of this research are:  To identify the main drivers of adoption for Indian IT services firms.  To identify the major risks associated with cloud computing adoption for the Indian IT-services firms.  To identify the application workloads suitable for cloud service adoption.  To suggest a cloud adoption strategy for prospective adopters within the Indian IT-services industry. 2.0 Literature Review In order to fully understand the basis and background of this study, over 300 journal articles, whitepapers, case studies, company reports, books and websites have been reviewed and key insights have been drawn. The following literature review covers the current Indian IT-services industry scenario, research highlighting benefits and issues faced by the firms which have adopted cloud computing, industry and customer’s strategy to enhance their cloud experience, future forecast and areas of potential growth. xv
  • 16. 2.1 Background 2.1.1 Indian IT-Services Industry In simple terms, IT services is a form of outsourced service which has emerged due to involvement of IT in various fields such as banking, finance, telecom, insurance, healthcare etc (Arora et. al.2008). According to NASSCOM, the regulatory body for IT services in India, the Indian IT services industry “involves a full range of engagement types that include consulting, systems integration, IT outsourcing/managed services/hosting services, training and support/maintenance” (Nasscom 2009). The Indian IT- services industry mainly serves clients outside the Indian sub- continent using the global delivery model and relies on abundance of IT educated and english speaking human capital, low cost facilitated by the weak Indian currency to gain competitive advantage over other firms (Hingorani 2009). Firms in this industry can be categorized into tier 1, tier 2 and emerging firms. Tier 1 firms have a major market share consisting of are Infosys Technologies Ltd, Tata Consultancy Services and Wipro Technologies and Satyam which has an estimated market share of 34-40% and employs approx. 340,000 (Hingorani 2009).Other major players are IBM, Accenture, Cognizant, Patni Computers, HCL technologies which fall in tier 2 category with 13-18% market share. The industry has experienced high growth in the past decade and is highly competitive. According to the NASSCOM-McKinsey report, the total addressable market for global IT outsourcing is approximately $300 billion, of which $130 billion will be outsourced by 2012 of which India currently has 80% market share (Mckinsey 2005). Graph below shows market structure of IT services firms in India. xvi
  • 17. Fig 4: IT service industry market share structure (Nasscom 2009) Current Issues faced by Indian IT-services firms The Indian IT-services industry predominantly gets its revenue from clients situated in North America and Europe as highlighted below by the 2010 revenue graph categorized by geographical segments of Wipro technologies Ltd, a major Indian IT-service firm. xvii
  • 18. Fig 5: Wipro Revenue Distribution by geography (Mulay 2010) Countries in Europe and North America which were severely affected by the downturn have reduced outsourcing IT services work to India (Jain 2010). As major clientele for Indian IT-services firms were from these countries, it resulted in lower growth rate for all the Indian IT firms as shown in the graph below. xviii
  • 19. Fig 6: Annual Growth rates of Major Indian IT services Firms (Gartner 2010) Firms in developed countries originally started outsourcing to India as it was a low cost alternative. Most of the back office administrative works were outsourced to be automated so that the firms can focus on their core areas of work and growth without focussing on back-office administration process (Mckinsey 2005). But since the outsourcing revolution in the 1990’s, India has been growing at an average rate of 8% and with the rupee appreciation against the dollar, the profit margins of the IT-service firms are under pressure (Nasscom 2009). Other emerging countries like China, Phillipines, Poland, Mexico, South Africa are providing IT services and consulting solutions at a lower cost than India. Lower end IT services works are being outsourced to China, Mexico and Philippines as they offer better cost saving than India (Jorge and Ted 2008). Moreover, the average salary of an IT knowledge worker in India has increased to $5000 per year at the entry level and even with the abundant human capital, the Indian IT firms are facing severe shortage of skilled IT workers and experiencing high attrition rate among staff as they go for better opportunities elsewhere resulting in loss of investment incurred in training employees (Matzke and McCarthy 2009). In order to still generate substantial profit, the IT services firms in India have increased their billing rate and thus are no longer the most attractive low cost option for outsourcing (Wright 2009). The Indian IT-services firms are attempting to overcome these problems by leveraging the expertise and brand name gained during the previous years and moving up the value chain by providing more complex, efficient solutions to the clients in the IT services space (OECD 2006, Balakrishnan 2010). In order to retain their existing clients, Indian IT-services firms are engaging in partnerships such as strategic transformation partner xix
  • 20. (McCarthey 2008), total outsourcing partner and client engagement initiative (Stuchat 2010) which could result in long term association with existing IT services provider. 2.1.2 Cloud Computing Traditionally, firms had to invest in infrastructure to facilitate disk storage and processing. Moreover, they had to hire skilled IT staff to maintain the infrastructure, regularly upgrade the infrastructure, purchase licensing and monitor backup and disaster recovery (Buttel 2010). This led to high initial investment (capital expenditure) and high running costs (operating expenditure). The firms had to forecast their future IT requirements, initiate infrastructure planning and it would take weeks to procure the hardware, configure and install it (Ryan and Loeffler 2010). The process is illustrated using fig. 7 below. Fig 7: Traditional Delivery Model (Doddavula and Gawande 2009) A step-by-step explanation about the above figure is as follows (Doddavula and Gawande 2009):  The client’s business requirements are assessed by the solution architect and project plan is prepared.  The infrastructure team analysed the project plan and purchased necessary infrastructure. xx
  • 21.  The resources are then assigned for individual projects to fulfil their infrastructure requirements. The same process repeated for any further changes in requirements. Some applications such as email, I/O (input/output), stress testing required additional amount of storage, processing during some time. In order to cater to this variable demand, firms had to provision additional infrastructure which would remain unutilized during off peak hours (Wittow and Daniel 2010). These limitations of traditional model led way to cloud computing. The underlying idea for cloud Computing has evolved from rented time share services offered during the early 70’s when computers were too expensive for firms to afford. The hardware prices dropped during 80’s and firms started having their own computers. But the idea of hosted and time shared services remained and evolved in parallel (Collins and Vale 2010). During 90’s, there was an outsourcing boom and many companies focused on their core functions and outsourced their IT related activities to IT service firms based in India and other developing countries which were emerging a low cost destination. Moreover, they offloaded their applications to the dedicated infrastructure provided by these IT firms. This allowed firms to transfer the cost of infrastructure to the IT service provider. During 1990’s, with the development of internet, new service called applications service provider (ASP) gained popularity which provided shared infrastructure to the customers using multi-tenancy model. This was an attractive proposition for smaller organisations as they could now access solutions which they would not be able to afford before (Shariff 2010).ASP aimed to provide consistency, efficiency and flexibility for service providers to manage systems and resources optimally. In turn, the service providers could reduce their operating costs and offer affordable hosting services to their xxi
  • 22. customers. ASP failed to make sustainable impact partly due to the following reasons (Collins and Vale 2010):  Internet-based communications were not fully trusted as they were in the early staged of development.  The multi-tenancy model, which implies that multiple applications from different clients are residing on the same physical infrastructure, was unproven which raised concerns regarding data security.  Firms could not accept the shared infrastructure policy of data and processes co-residing with other firms.  Many ASPs failed to access new customers as their targeted small businesses had collaborations with their existing suppliers for their ongoing needs and most of them perceived ASP as a conflict with their existing business model and declined to support it (Shariff 2010). Of the few ASP providers which survived, Salesforce.com (provides sales force automation service requiring minimal integration with other applications) was highly successful (Vile and Lock 2010). They invested heavily on marketing and used the term “Software as a Service” instead of ASP to generate new interest (Kelly 2009, Collins and Vale 2010). Fig. below illustrates a salesforce.com advertisement. xxii
  • 23. Fig 8: Software as a Service Marketing Campaign (Kelly 2009) Following the success of SaaS, the cloud-service providers introduced platform as well as infrastructure on subscription basis and these were known as PaaS (Platform as a Service) and IaaS (Infrastructure as a Service). Hence, Application Service Provisioning (ASP), mainframe servers purchased on rental basis is similar to what cloud services offer. Therefore, cloud computing is not fundamentally new concept or innovative technology (Smith, Plummer and Cearley 2009). It has gained huge popularity in recent years due to the combination of several factors:  Superior speed, reliability and robustness of communication networks which allows high bandwidth levels.  Highly scalable datacenter infrastructure with powerful processor and memory at reduced cost (Smith, Plummer and Cearley 2009).  Emergence of flexible software architecture with multiple abstraction levels necessary to isolate customers (Smith 2009). xxiii
  • 24.  Emergence of sophisticated management systems and ubiquitous computing standards (Plummer et. al. 2008).  Success of virtualisation (an enabling technology for cloud implementation which enables service providers to increase resource utilization through techniques such as pooling and multiplexing), e-commerce frameworks and development tools (Cervone 2010).  All this at a low cost facilitated by economies of scale and widespread access options with a rich web-based user interface (Bhupesh 2009). Thus, cloud computing has emerged as an attractive option providing choice and flexibility in service centric IT delivery. Figure below summarizes the above arguments. Fig 9: Factors enabling cloud computing (Vile 2009) Thus, the Indian IT-services firms which were offering traditional hosting services until now, have additional options of managing xxiv
  • 25. their IT infrastructure using cloud based services as shown in figure below which effectively consists of virtualization of all components of data-center infrastructure including storage, network, systems and the application stack. Fig 10: Cloud Computing Model (Doddavula and Gawande 2009) The working of the above model is explained below (Doddavula and Gawande 2009):  Client application issues request for increase or decrease in cloud resources using the service portal provided by the cloud-service provider.  This request is redirected to service procurement system which manages the resource allocation and provisioning.  This system allocates the requested resource and the client is billed according to the usage. Thus, in comparison with the traditional model shown in figure 7, the resource allocation is flexible and dynamic which results in reduced costs and reduced reaction time. Benefit for Service Providers These services are provided by major firms like Google, Salesforce, Microsoft, Amazon etc which already have huge capacity and provide customized provisioning to the customer based on their xxv
  • 26. needs. The service providers maintain high margin of profitability due to the following factors:  Major contributor to the costs of ownership of infrastructure is power consumption costs. Large service providers bring down this cost through bulk purchase agreements. Moreover, they take advantage of geographic variability in electricity costs by setting up their infrastructure at a cheaper country or state (Harms and Yamartino 2010).  Large firms are able to reduce the labour costs. Moreover, due to virtualization which is the underlying technology enabling cloud; single trained system administrator can maintain thousands of servers at a time and the client’s IT worker can focus on building new capabilities instead of performing repetitive maintenance tasks (Reid et. al. 2009).  The bargaining power of a large firm is considerably higher which results in approx. 30% reduction in hardware procurement costs (Thethi and Srivastava 2010).  Finally, the service provider uses efficient resource management processes which results in consistent and optimum utilization of resources. Small firms or an independent IT firm would not be able to fully utilize the infrastructure and the resulting idle time which increases the operating expenditure. Using virtualization and multi- tenancy architecture, cloud-service providers host multiple client applications and resources on a single physical server; thus increasing its utilization efficiency (Reid et. al. 2009). The economies of scale have resulted in lowering the total cost of ownership by 80% as shown in fig below. xxvi
  • 27. Fig 11: Forrester Research Total Cost of Ownership Survey results (Reid et. al. 2009). As illustrated in the figure above, the infrastructure costs decreases with scale. Benefit for Customers Customers benefit from cloud-enabled services by paying only for the resources they use, flexibly increasing or decreasing the capacity usage as per their IT needs. This improves the quality of service, decreases capital expenditure and operating expenditure, provides them flexibility with seemingly unlimited capacity (Wittow and Daniel 2010). If implemented effectively, cloud computing can reduce the initial capital expenditure on IT to zero thus lowering the risks, reduce operating expenses by 30-80%, provision with huge capacity, improve quality of service, save energy and promote Green IT (Ryan and Loeffler 2010). Gartner estimates that in the next 5 years, cloud services would result in power savings of 8.5 billion kilowatt-hour (kWh), thus enabling enterprises to save energy costs by 80% (Pettey and Steven 2010). However, some issues raised by early cloud adopters include concerns regarding data security, data ownership, service level compliance, privacy and xxvii
  • 28. reliability of the application in the cloud infrastructure (Gilbert 2010). 2.2 Major Cloud Categories Cloud computing can be categorised into three major categories depending on components managed by the cloud. Fig. 12: Different types of Cloud Services (Adopted from Oracle 2009) A detailed breakdown of the above figure with comparison to traditional hosting is illustrated below. xxviii
  • 29. Fig 13: Traditional IT vs different forms of cloud services (Vale 2010) 2.2.1 Infrastructure as a Service (IaaS) IaaS provides infrastructure components like servers, data centers as a on-demand, flexible service that can scale up and down when required by allocating and de-allocating resources at real time (Doer 2009). As shown in fig 13, the backend of an application, including server, storage, network, server operating system are managed by the service provider and, the middleware and front-end of the application is managed by the client. The costs are lowered as there is no capital outlay requirement because IaaS is offered using pay-as-you-go model. As the infrastructure needs are ever increasing from e-mails, files, media and electronic records; cloud enabled IaaS services can provide the essential infrastructure at lower costs (Vile and Lock 2010). 2.2.2 Platform as a Service (PaaS) PaaS delivers Web application technologies in pre-packaged deployment architecture, provides programming environment that xxix
  • 30. support implementation of the application and inter-process, inter- application communication services; all this as a service delivered over the internet (Mell and Grance 2010). As shown in figure 13 , the backend and the middleware is managed by the cloud-service provider and only the front-end comprising of data and user interface is managed by the client. The customer uploads Web applications to this environment and pay for the services according to metrics such as transaction count, total capacity of compute, storage and network services (Plummer 2008). The resources in a platform may be shared or located at multiple locations. The main benefit is that capacity can be expanded or contracted instantly allowing clients to migrate applications with fluctuating demands or high processing needs to suit their needs thus reducing the operating costs (Doerr 2009). 2.2.3 Software as a Service (SaaS) In traditional on-premise delivery model, customers had to purchase the software, install, configure and then maintain it. Whereas, in SaaS model, the software is not installed in the customer’s infrastructure but installed and hosted in the cloud- service provider’s infrastructure (Plummer 2008). As shown in fig. 5, the whole application stack is managed by the cloud-service provider and delivered as a service over the network to the client. The end user pays on a subscription basis using suitable payment contracts such as “pay per use”, “pay per license”, “pay per hour” basis. However, the end-users are unaware of where the service is derived from and they can be provisioned with higher levels of service when usage increases and de-provisioned easily thus eliminating high overhead costs (Kelly 2009). SaaS has gained tremendous popularity and consists of common business solutions such as Sales force Automation (SFA), xxx
  • 31. Customer Relationship Management (CRM), and Enterprise Resource Planning (ERP) etc. Examples of SaaS include Google Docs, Salesforce.com, Web mail services such as gmail.com etc (computing 2010). A gartner survey showed that 90% of the American firms have used SaaS in 2010 as shown in figure below. Fig 14: SaaS adoption in percentage (Gartner 2010) Advantages to SaaS vendors (Mell and Grance 2010)  Access to new accounts: Low budget firms can afford subscription price than buyout price.  Customer insight: the vendor can get insight on the customer’s usage trends better than in the case of on-premise delivery.  New value added services can be introduced rapidly and market tested with the users.  Piracy of software can be curbed as there cannot be pirated version of online application. Advantage to customer (Kelly 2009)  Responsibility of maintenance, support, routine operation is transferred to the vendor which includes planning, patch management and upgrades.  Anytime, anywhere access. xxxi
  • 32.  Improved security as application, data are not stored locally.  Reduced Total cost of operation (TCO), time to market are inherent benefits from SaaS. 2.3 Types of Cloud Service Delivery Cloud services are implemented and delivered to the customers using one of the following three models: private, public and hybrid. 2.3.1 Public Cloud Public cloud services provide various centralized services from remote data-centers located at multiple locations and delivers standard global services (Riverbed 2009).The complexity of dealing with the physical infrastructure is completely abstracted. The cloud- service vendors provide unlimited, scalable infrastructure on subscription basis at low monthly cost (Hartig 2008).The cloud- service providers drive down their costs by supporting multiple businesses on their platforms. The customers benefit from dynamic scalability and reduced risk by shifting infrastructure risks from the enterprise to the cloud provider. 2.3.2 Private Cloud Private cloud is dedicated infrastructure provided by the cloud-service provider solely for individual clients. It may be managed by the client or third party such as the Indian IT-services firm and the infrastructure may be situated on-premise or off- premise and billed on a “pay-as-you-go” basis (Mell and Grance 2010). However, private cloud has limited resource capacity, unlike public clouds and costs higher in terms of capital expenditure and operating expenditure as the private infrastructure is dedicated to a firm (Delifice 2010). xxxii
  • 33. Graph below shows costs comparison for private and public cloud solution plotted with “number of servers” on the x-axis. Fig 15: Cost comparison of private vs public cloud (Roehrig, Ross and Shanahan 2009) Private clouds may serve as a transition phase to an organization’s use of public clouds (Jansen and Grance 2010). As private clouds are built exclusively for each client, it offers control over data, security, compliance and quality of service (Hartig 2008). Private cloud facilitates flexible movement and management of workload between physical servers within the client’s firewall and enables efficient integration, interdependencies and lowers operational costs (Harms and Yamartino 2010). Moreover, private cloud increases agility with reduced complexity in comparison with public cloud (subramaniam 2010). 2.3.3 Hybrid Cloud Hybrid cloud model is a combination of both public and private cloud. They can help to provide on-demand, externally provisioned scale and be used to handle planned workload spikes in xxxiii
  • 34. private cloud (Vile 2010). It supports scenarios where-in private cloud has a temporary need for extra resources and obtains it from public cloud (ford 2010). Such private/public cloud integration is also known as “cloud-burst” or “surge computing” as the infrastructure bursts out in to the public cloud to obtain those resources (Ford 2010). However, hybrid clouds introduce the complexity of determining the distribution of application’s resources across both a public and private cloud (Hickins 2008). Customers can benefit from hosting non-critical resources entirely in the external public cloud environment and manage critical ones on- premise using private cloud (Chasler 2010). 2.4 Cloud Market Structure The whole cloud offering scenario can be divided into three areas: Enablers: the ones who provide cloud service. The enablers are many including Google, Microsoft dominant in the retail space, IBM, Amazon, HP, Oracle in enterprise arena, intel providing hardware platform and vmware, Orangescape, citrix providing virtualization solution (Joshi et. al. 2010). Delivery agents: the ones who take the cloud service to the customers with some value added features. IT services firms are the major delivery agents of cloud services (Mhaiskar and Raichura 2010). The benefits achievable by delivery agents with suitable adoption of cloud services are shown in fig. below. xxxiv
  • 35. Fig 16: Benefits for IT firms (Mhaiskar and Raichura 2010) The IT services firms can leverage cloud services in several areas and increase their revenue and profit margins by: - Lowering costs o Cloud-service providers provide a set of tools to design, deliver and market cloud services and enables IT services firms to deliver powerful, scalable processing along with scalable storage so that clients need not focus on performance and scalability aspects (Durkee 2010). o Cloud services reduce application development, deployment and support costs by translating capital expenditure to operating expenditure. Hence, there is no significant upfront investment for new projects (Buttel 2010). - Faster time to market o IT firms need not plan investments in infrastructure. As the need arises, IT firms can quickly build, test and deploy applications to the cloud and reduce the response time considerably (Delifice 2010). o With cloud, the lead time to set up infrastructure is reduced from weeks to minutes; this small change xxxv
  • 36. has an astounding impact on the reaction time to demand (Ambrust et. al. 2010). - Offering new solutions o IT firms can offer new innovative solutions made possible by using cloud services and provide diversified offerings (Karamouzis 2010). o ISV’s can offer new solutions in different verticals like manufacturing, healthcare, financial services, energy and retail management. - Extending cloud services o Cloud computing provides an opportunity for IT- services firms to extend the cloud-service providers offerings to its clients by acting as a delivery agent (Karamouzis 2010). o IT firms can offer varied solutions to their existing solutions such as online delivery instead of on premise installed software licenses (Mhaisjar and raichura 2010). Customers: users of these services. As the sales model used by cloud computing providers is subscription based, customer retention and loyalty acquires prime importance as the customer has not invested anything upfront and can move to other providers once the contract lapses (Mhaisjar and raichura 2010). 2.4.1 Potential Growth Opportunities Service providers like Google, Salesforce, Microsoft, Amazon and Yahoo have recognised huge business opportunity and are leading way to cloud computing by providing advanced billing, low cost, flexibility in the service agreements, enabling rapid increase and decrease in resource and capacity based on demand (Hickins 2008). Many early successful adopters of cloud computing xxxvi
  • 37. services have benefited highly from the ease of use of the services, agility to changes in IT needs, reduction in time for services and flexibility (Cearley and Phifer 2009). Moreover, as all the intricacies of managing the services are handled by the service provider, the client can just focus on its core business (Courtney 2010). During the early years of IT development, businesses allocated healthy proportion of their budget as IT capital expenditure (Kakamanu and Portanova 2006). But since the economic recession in 2008, firms have reduced their IT spending substantially and delayed new capital expenditures and heavy investments. So, IT managers are facing greater pressure to reduce costs and improve performance (Doerr 2009). Cloud computing is emerging as a viable option as the enterprises do not own the infrastructure and they can eliminate capital expenditures by consuming resources as a service, paying only for what they use (Mather, Kumaraswamy and Latif 2009). Cloud services also enable IT departments to reduce costs on application implementation, maintenance and security costs as they are managed by the service provider and the service provider benefits by achieving economies of scale (IBM 2010). "Green IT" has recently been the focus of many firms with an intention to demonstrate high Corporate Social Responsibility (CSR). Cloud computing enable IT organizations to reduce power, cooling and space usage to help enterprises create and sustain environmentally responsible data-centers (McDonald 2010). Moreover, as many firms are sharing servers, there are fewer servers used resulting in efficient power usage (Berl et. al. 2009). Analysts believe that cloud computing will enhance collaboration (Scale 2009). For example, many firms are migrating their email application into Google cloud services and using Google docsR which allows online storage of documents with authorized speedy remote access increasing collaboration amongst teams xxxvii
  • 38. located at different geographies. Such collaborations enhance security as the data is not stored locally on the user’s laptop or smart phone and hence, there is no threat of data theft (Schadler 2009). Cloud services can provide enhanced experience for gamers compete against other players globally and provides superfast processing power required for sensor networks such as traffic and weather sensors (Thethi and Srivastava 2010), biomedical, healthcare and geo-spatial computing (Knipp 2010). Many firms have found cloud solutions to be ideal for load testing of applications, wherein the applications are tested for their maximum load-handling capability. Firms can schedule these tests by renting extra resources on the cloud and just paying for what they use (IBM 2010). Cloud computing promises to reduce the response time for applications. For example, for applications requiring 1000 hours of processing time, firms can rent 1000 machines for one hour using cloud services instead of using single on-premise machine for 1000 hours (Buttel 2010). Similarly, applications which required sequential processing, wherein output from one transaction formed input for the next transaction, can be converted to real time processing using cloud computing capabilities. For example: retailers using batch services can use real time processing to tally inventory and sales and order new stock immediately. This would result in better stock management and reduce operating expenditures. Hence, clients would demand such services (Creeger 2009). With regard to Small and Medium Enterprises (SME’s), most SME’s would have uncertain growth patterns. Hence, they would have to provision 30-40 percent of their infrastructure for future usage. This results in high risk upfront investment if they adopt traditional service models (Creeger 2009). However, cloud services allow them to use the services on subscription basis, thus reducing the capital expenditure. Moreover, they can dynamically scale their resources when the need arises. Hence operating expenditure is xxxviii
  • 39. also reduced by efficient management (Creeger 2009). These benefits are very encouraging as SME’s have small IT spending budget and therefore couldn’t afford the high initial set-up costs involved in traditional hosting services. Moreover, it offers new opportunities for these firms to compete with the well established high net worth firms (IBM 2010). Furthermore, the scalability offered by the cloud services is beneficial when SME’s are growing, enabling them to purchase infrastructure as “pay as you go” or on rental basis and concentrate their money on key business activities otherwise (Bhupesh 2009). The following figure shows the industry variability in various sectors. Fig 17: Industry Variability over a year (Soumit et. al. 2010) For instance, during the festival season a gifting website would experience higher traffic levels than otherwise. Moreover, the usage of resources is subjected to time of day variability (Wittow 2011). For example: an email server is utilized at a higher rate during office hours and underutilized during the rest of the day. These applications require high amount of resources at certain time period and ability to scale up dynamically (Forbes Insights 2010). A survey conducted by Forbes Insights on early adopters of cloud computing revealed that 88% of the respondents found dynamic allocation of xxxix
  • 40. resources to meet their IT objectives as major benefit of cloud computing as shown in figure below. Figure 18: Survey of early cloud computing adopters (Adopted from Forbes Insights, 2010) Therefore, clients can migrate such time-variable applications to the cloud and by utilizing the dynamic scalability of resources facilitated by cloud-services, they can reduce operating costs during off season (Yah 2010). Moreover, the firms transfer the risk of investment to the service provider as there are no upfront costs involved (Yah 2010). A survey conducted by Everest Research suggested that firms spend a large portion of their budget as infrastructure maintenance costs (Soumit et. al 2010). This leaves very small portion for new app development which can generate new revenue as shown in fig. below. xl
  • 41. Fig 19: Survey Results for percentage of IT spending (Soumit et. al. 2010) Thus, cloud services have several advantages to offer for businesses with diverse needs and high profitability and growth prospects in providing cloud services has generated remarkable interest to the cloud-service providers (Vile 2010). 2.4.2 Potential Concerns for cloud adoption 1 Many firms are still delaying a complete shift to cloud computing services. Recent industry researches revealed that many firms are holding on to their out-dated servers and legacy systems even though they need a replacement (Smith 2009) and spending substantial portion of their IT budget as maintenance costs of these servers. They are not adopting cloud-enabled services as the concepts of total virtualization and multi-tenancy are complex and complicated for non-IT firms to comprehend (Courtney 2010). The unclear rules over data storage compliance, data ownership, data security, reliability and privacy are another major concern. 75% of the firms which participated in a Forbes survey revealed that data security was a major concern (Forbes Insights 2010). Another survey by Gartner revealed that 100% of the firms have concerns over unclear “terms of use” regarding data location and portability provided by the service provider as shown in figure below. xli
  • 42. 2 Figure 20: Gartner survey on cloud users regarding terms of service (Adopted from Plummer 2010) Moreover, the Electronic Privacy Information Center (EPIC), which addresses privacy issues related to information management; Federal Trade Commission (FTC), which addresses IT-related security complaints, has recorded large number of complaints against major cloud-service providers breaching security rules (EPIC 2009). Data location concerns arise because different geographies have different terms and regulations regarding how the data security, privacy and storage (Mather, Latif and Kumaraswamy 2009). To illustrate the influence of this concern, UK communication minister has announced full support for the development of cloud computing stating international co-operation is essential to adopt standard rules and regulations regarding security and privacy for the success of cloud computing (Brittain 2010). Furthermore, Gartner research claims that cloud computing will continue to be vulnerable to security, privacy and data handling issues in the near future as it is still maturing and better collaboration within the industry is essential to overcome the deficits (Maurer 2011). Most xlii
  • 43. firms are unsure how they can leverage their existing infrastructure and embrace cloud to leverage their performance and fulfil their existing needs (Smith, Plummer and Cearley 2009). Surveys indicate that if cloud computing is not a right solution, it can unnecessarily add complexity to the existing IT infrastructure, increase costs and introduce potential opportunity of legal conflicts with the service provider (Smith 2009). Cloud service availability is another major concern. Cloud vendors assure 99.99% system availability but it doesn’t imply that cloud service is available for the same time (Roehrig, Ross and Shanahan 2009). This is because of the “pay-as-you-go” nature of cloud and clients pay for capacity or throughput, rather than for system components. Although cloud service providers offer unlimited scalability, dynamic scalability can be achieved only by clearly defining time-based scalability requirements (Pallia 2010). Moreover, the highly dynamic nature of the computing infrastructure makes it difficult to manage the infrastructure (Roehrig, Ross and Shanahan 2009). As cloud computing basically consists of services delivered over the internet, it essentially involves hosting services (Cearley 2010). This means that all the issues revolving around traditional hosting services applies for cloud computing services including managing integration of services, accountability, efficient technical support, regulatory compliances, service levels across third party domains (Vile 2010). As the client firms are locked into a contract, they will be severely affected if any of these issues escalates to a conflict (Anthes 2010). Figure below shows the major challenges faced by the customer: xliii
  • 44. Figure 21: Major Challenges Faced by Cloud customers (Adopted from Nandana 2009) 2.5 Cloud Computing Future Forecast Leading industry analysts are predicting rapid growths in cloud computing market. A Gartner Research suggests that by 2012, 80 percent of Fortune 1000 enterprises will use some form of cloud computing service, and 30 percent will use cloud-computing infrastructure services (Driver 2008). Another research by Gartner estimates that firms worldwide will spend $112bn on SaaS, PaaS and IaaS combined over the next five years (Courtney 2010). By 2014, approximately 34% of all new business software purchases will be procured via SaaS and SaaS delivery will constitute about 14.5% of worldwide software spending across all primary markets (Courtney 2010). Figure 5 below shows the prediction by industry analyst firm, Gartner. xliv
  • 45. Figure 22: Cloud Computing Growth Forecast (Adopted from Cearley and Phifer 2009) 2.6 Relevant findings from literature review. The benefits from cloud computing services cannot be ignored and it might be beneficial for Indian IT-services firms should develop a cloud adoption strategy. By engaging as delivery agent of cloud services, Indian IT-services firms can enhance the value of their offerings to their existing clients by positioning themselves as cloud consulting and delivery partners, establish trusted relationships with cloud-service providers and maintain their competitive advantage as global outsourcing service provider. However, the current cloud services have to be critically assessed for the benefits and risks it offers for various applications. Surveys conducted globally by Gartner, Forrester and other independent industry analyst and research firms reveal that firms have adopted cloud computing primarily to lower their infrastructure costs and dynamic allocation of the resources. Some application having variable resource requirement based on time and season are appropriate to be migrated to the cloud. Hence, choosing suitable xlv
  • 46. applications is critical for the success of cloud computing adoption as unsuitable ones would increase operating costs, decrease efficiency and expose the client’s application to serious security and privacy risks. Moreover, many early adopters of cloud computing have raised concerns regarding security, privacy and data location; it is essential that these concerns are explored further to obtain insights into the reasons underpinning these issues. Thus, the primary research is focussed on assessing the main drivers for cloud adoption by the Indian IT-services firms, understanding their main concerns and applications suitable for cloud adoption. 3.0 Research Methodology In order to achieve the aims and objectives of the research, it is essential that the research methodology developed is robust and effective (Saunders, Lewis and Thornhill 2007). The researcher contacted 400 people from working for his previous employer, Infosys technologies and classmates from his undergraduate batch, who were currently working in Indian IT- services firms for an initial survey to gain information about their knowledge of cloud computing. Facebook was used as a medium to communicate the survey to the respondents, with majority of the respondents already available in the researcher’s friend list. This survey revealed that 74% of the respondents lacked clear understanding of cloud computing or their opinions would not be of significant contribution to the research due to lack of expert knowledge even though they were working in the IT services sector. This posed a significant challenge to find the appropriate respondents for questionnaires and interviews. The research was carried out using both inductive and deductive approach. In inductive research, the data is collected first and then theories are developed after in-depth data analysis (Saunders, Lewis and Thornhill 2007). This approach is used to establish a general xlvi
  • 47. proposition based on observation (Ghauri and Gronhaug 2005). In deductive approach, a conclusion is derived from a known premise (Ghauri and Gronhaug 2005). Secondary research was conducted to obtain the background and basis for this research and to define the roadmap for primary research. The findings from primary research were cross-validated and assessed by further secondary research. 3.1 Secondary Research Secondary data is the data which has already been collected by someone else for various purposes other than to solve the current research problem (Saunders et. al 2007). These data are obtained through previous researches enable the researcher to establish the background and context to the current research and provides insights into the related theories associated with the research topic (Blumberg et. al 2006). The secondary data is compiled from findings of other researchers, industry experts, analyst firms, completed surveys, questionnaires which can be used to relate the research to the previous work conducted (Saunders, Lewis and Thornhill 2007). The primary sources for the secondary research were: the Georgina Scott Sutherland Library, databases such as Business Source Premier, Emerald, Sage Journals Online, Google Scholar, KeyNote, and Sage Publications, white papers published by industry analyst Gartner, Forbes, RiverBed, Everest, IDC Insight, Forrester and major cloud players including Google, Oracle, Microsoft, IBM, Salesforce, Amazon; academic journals from cloud computing association, cloud computing journal, journal of internal law, communication of the ACM, internal property and technology law journal, the computer journal, journal of enterprise resource management, information systems journal, energy and technology journal etc. Case studies, conference papers and reports from the firms which have recently adopted cloud computing solutions have also provide critical insights into their experience xlvii
  • 48. with the cloud. This secondary research conducted has provided an underlying base for further research and generation of questions to be raised during the primary research. However, as cloud computing is still in its early stages and developing rapidly and the Indian IT services sector, which is highly dynamic and turbulent; the peer reviewed articles and journals were of little help to provide insights on the current issues and trends related to Indian IT services. Moreover, the researcher had to be highly selective while adopting the findings from market reports, whitepapers, websites and independent industry analyst journals as many were used as a marketing tool by the cloud service providers and vendors. Hence, primary research was of high importance to provide key insights to the research. 3.2 Primary Research As the research problem is fairly new and unexplored, data from the secondary research is not sufficient to address the research problem clearly. Primary research would be beneficial in addressing this gap (Ghauri and Gronhaug 2005). The main drawback of primary research is that it is time consuming, costly, fully dependent on the ability and willingness of the respondents (Collis and Hussy 2009). Considering these disadvantages, it is essential to have a well structured approach to perform primary research. Figure below shows different ways to collect primary data. xlviii
  • 49. Figure 23:Primary research and its types ( Ghauri and Gronhaug 2005) Primary research may be conducted using qualitative research, which involves analysis and interpretation of data in non-numerical format or quantitative research which involves analysis and interpretation of data in a numerical format (Ghauri and Gronhaug 2005). As the research focuses on a relatively new technology and the business impact of which has not been fully understood nor realized, a mixed methodology of using both qualitative and quantitative method was used to conduct primary research. The major risk associated with primary research is that the respondents might present their views as “what they want the solution to be”, instead of presenting the actual information (Loonam and Loughan 2008). Qualitative research provides rich inputs to the research which has to be interpreted and synthesised based on the context of the research (Niell 2007). Although qualitative research is time consuming, it was suitable for this research topic as the researcher required in-depth information on the subject matter. The researcher interpreted the raw data obtained from qualitative research into information bearing in mind the context in which the data was xlix
  • 50. obtained. Quantitative research was essential to get the numerical and categorical data which can be measurable clearly such as the level of satisfaction of the organisation with their cloud solution rated from 1-5, number of critical risks which has aroused due to cloud adoption etc. Quantitative research can be used to collect all aspects precise measurable data regarding the target concepts and the researcher is objectively involved in the research process (Niell 2007). The primary research consisted of questionnaires sent to relevant target group and face to face or web based open-ended interviews with the IT managers. The primary research was conducted in companies located in Bangalore in India as bangalore is known as the silicon valley of India with more than 1800 IT companies having its presence including major cloud computing providers like Google, Amazon, Oracle, IBM, major IT service providers having its head quarters including Infosys, Wipro, Patni computers (Nasscom 2009).It is rapidly growing in the IT sector with year-on-year increase in IT exports by 52% (Nasscom 2009). It has a large base of skilled and knowledgeable and easily accessible IT talent pool. As the research demands expert and deep insight knowledge of the niche cloud computing market, it should be targeted effectively to individuals who posses this knowledge and understanding. The researcher had worked in Infosys Technologies, head quarters in Bangalore for two years and can utilize the assistance from the previously established contacts within the IT industry. These IT-services firms have updated insights on cloud computing developments as they serve a wide range of clients ranging from healthcare, banking, and insurance to gaming and geospatial firms worldwide (Karamouzis 2010). Hence, they would take keen interest to understand the benefits, risks associated with cloud computing adoption to host their client’s applications. l
  • 51. 3.2.1 Questionnaires A questionnaire is a list of carefully structured questions, which were chosen after considerable testing with a view of eliciting reliable response from a particular group of people (Collis and Hussy 2009). The main steps involved in designing a questionnaire are summarized below:  Design questions and instructions  Determine order of precedence.  Write accompanying letter  Test this questionnaire with a small sample already chosen.  Choose the method for distribution  Plan strategy for dealing with the responses received  Analyze the received data (Mingers 2003). Clear designing of the questions and instructions is essential to ensure that there is no subject error or subject bias (Saunders et. al. 2007) and to get clear measurable results. Determining the correct order of precedence is essential to achieve logical flow of collecting information. The precedence of questions ensured that the respondent’s details including work and organisation profile were collected initially before moving to collecting actual information regarding the research problem (Trochim 2006). Moreover, questions which were irrelevant for a particular category of respondent were not shown to the respondent. For example, the respondents belonging to firms which had not adopted cloud computing solutions were not asked about the actual benefits realised by their firms from cloud adoption. The next steps were: The distribution method for questionnaire was chosen after evaluating the following factors:  Characteristics of the respondents  Importance of reaching a particular person as respondent; li
  • 52.  Size of sample required for analysis, taking into account the likely response rate;  Types of question asked  Number of questions asked (Sauders, Lewis and Thornhill, 2007). Questionnaire Types Internet Postal Telephonic Collect and questionnaire questionnaire questionnaire deliver questionnaire Figure 24: Types of questionnaires (adopted from: (Sauders, Lewis and Thornhill, 2007). As shown in figure above, the questionnaires can be sent through post, telephone, ‘collect and deliver’ or using internet services (Collis and Hussy 2009). Postal Questionnaires are not ideal considering the time required to send and receive, postage cost, poor delivery service (Sauders, Lewis and Thornhill, 2007). The telephone questionnaire is widely used as a substitute for face to face interviews. But the disturbing telephone lines, high call costs, intruding nature of a phone call makes this technique infeasible (Collis and Hussy 2009). From the consideration made above, the research was conducted with internet mediated questionnaire because it effectively reaches a large sample size and making compilation costs very low (Collis and Hussy 2009). The Questionnaires were initially sent to a large sample of more than 400 skilled workers in IT services industry working in India. lii
  • 53. The responses showed that 74% of the respondents did not possess necessary expert knowledge or exposure in cloud computing to contribute to the research with their opinions. Their opinions would lead to wrong survey results and misguide the researcher. Hence, the researcher had to reduce the sample size and target specific people within the IT industry who were qualified, experienced and exposed to cloud computing services so that their opinions were accountable. The researcher realised that a different approach has to be adopted to contact the right people and used different social and business networking websites including linkedin.com, apnacircle.com, siliconindia.com, forums including Computer society of India (CSI), OWASP, Nasscom, IEEE Bangalore chapter, contacts from previous employment, colleagues, seniors who are working in IT firms and sent out e-mail questionnaires, paper handouts and ensured that right category of people were contacted to understand their perspective on cloud services. This seemed to be an appropriate approach because the researcher could assess the work and organisation profile of the members of these websites and forums and their areas of interests in the IT space by reviewing their profile and then getting in touch with relevant people. By briefing the colleagues and seniors about the research requirements, the researcher was able to contact experts in the research area within the organisation. The questions (see appendix 1) were a mixture of open-ended and close-ended questions as the researcher wanted to extract additional information from the respondent’s experiences. The targeted respondents were managers, IT consultants, and business analysts of the IT services firms or IT-services division of other firms which were considering cloud computing adoption in future or have already implemented cloud computing services to one or more of their clients (see appendix 2 for the list of firms contacted). These IT services firms act as delivery agents by customizing the cloud services offered by liii
  • 54. the cloud service providers to suit their clients needs after critical assessment and appreciation of the client’s IT infrastructure requirement. As it required specialised knowledge and expertise on the subject, the number of respondents was limited to 90. As the respondents would have worked on various other technologies, different firms and in different countries, the researcher had to ensure that the respondents answered the questionnaires based solely on their experience, expertise and opinions with regard to cloud implementation by “Indian IT service firms on outsourced projects from various clients, i.e projects which were designed, developed, tested, maintained by the firm’s development centres in India. The cloud computing opportunity is assessed considering Indian IT-services firms as delivery and consulting agents of these cloud services to its existing clientele.” These instructions were incorporated in the short note sent along with the questionnaires describing the research aim and objectives which the respondents had to acknowledge before taking part in the questionnaires. 3.2.2 Interviews: Interviews give clear insights to how people think and feel about topics of concern to the research (Oppenheim, 2000). Face- to-face interviews are beneficial when two individual have a topic of common interest (Kvale and Brinkmann, 2009). The advantages of conducting interviews are: researcher has control over the flow of contents of the interview; informants can provide new information and different perspectives which can be used for further investigation on these lines. The disadvantages are: it provides indirect information through the stages of interviews, the format of the information received is not standard and sometimes difficult to interpret. The interviews conducted by the researcher were focussed at extracting new information from the respondents from their experience, knowledge and firm-specific cloud product liv
  • 55. expertise and confirming, validating the findings of the questionnaires, secondary research and findings from previous interviews. The researcher conducted semi-structured interviews with the business analysts, IT managers, project managers of 17 IT firms in Bangalore (see appendix 3 for firm’s list). Some interviews were conducted online using Skype, TCS Sametime ®, Infosys Communicator® to save the respondents time and convenience. Semi structured interviews enabled the researcher to exclude some questions irrelevant to the firm or the ones which the manager will not be willing to reveal due to company policies. The researcher was also able to ask new questions based on the previous responses. The researcher first conducted the questionnaire survey with the respondents and hence they were aware of the research problem prior to their interview. Due to time, access and budget constraints, the researcher was able conduct only 22 interviews. However, considering that it covered 17 different firms (refer appendix-3 for list of firms contacted and partial list of respondents name and contact email) with respondents possessing adequate knowledge, expertise and experience of cloud technology, it can be assumed that the results of the interviews can be generalised. Moreover, as the respondents are likely to be biased in their opinion, the researcher had ensured that the findings from the interviews were validated with appropriate secondary research findings and cross validating with other interview respondents. However, theoretical saturation was evident during the last few interviews which prompted the researcher to proceed with the analysis of the findings. Theoretical saturation implies that almost no new information could be extracted on the topic of research and all current information obtained were cross-validated (Strauss and Corbin 1998) lv
  • 56. 3.2.3 Focus Groups A focus group interview is a discussion with a small group of participants on a specific topic. The attributes of a focus group are the clear use of the group interactions, in order to collect quality data. Focus groups are more specific, meaningful and more dynamic than consumers filling out questionnaires and surveys (Hart 1998). The researcher had planned to develop one focus group which had a mix of participants with expertise in various aspects of cloud computing implementation whilst planning the research proposal. The advantage of this method is that participants can voice their opinion and perspective towards this topic. The researcher will be able to interpret the data depending on the context and conduct qualitative analysis of the outcome effectively (Kvale and Brinkmann 2009). However, the initial survey findings revealed the impracticability of conducting focus group discussions as the access to skilled and expert participants was limited. Furthermore, these participants, who are at managerial level, would not attend such events unless they reap some kind of monetary or PR incentives. Hence the researcher limited the primary research to comprise of only questionnaires and interviews. However, the findings from the interviews and questionnaire were cross-validated with the respondents and theoretical saturation was evident while analysing the responses of the last three interviews. 3.4 Research Design The researcher has used paper based and internet based questionnaires to validate the findings from the secondary research and to obtain insights into the current issues, challenges associated with cloud computing adoption. As numerous applications can be migrated into the cloud, it was essential to classify applications into finite categories so that opinions from the respondents can be lvi
  • 57. captured easily. The Indian IT services industry serves clients from many sectors as shown in fig. below. Fig 25: Sector-wise Revenue break-up of Indian IT services firms (Nasscom 2009). These clients have varying IT needs spanning across infrastructure for storage, processing, and software. Hence, categorizing workloads based on cloud service type such as SaaS, PaaS and IaaS cloud would not be appropriate for this research. Moreover, the services offered by Indian IT services firms range from lower-end application development to high end complex system integration and product engineering services as shown in fig. below. lvii
  • 58. Fig 26: Revenue break-up by services offered by IT services firms (Nasscom 2009) Therefore, in order to achieve the third objective, which is to identify the applications suitable for cloud computing adoption, it is necessary that all the applications handled by the Indian IT-services firms are categorised into well-defined classification based on their IT needs. Therefore, workload approach has been chosen as it provides clear classification and is a proven effective method implemented in other researches (Zinnov 2010). A generic approach in categorising applications into workloads in the questionnaire would result in ambiguous responses as the respondent would be unsure about the scope of the workload. For example, some surveys have “business application services” as one of the workload categories. Although this categorisation might be appropriate in a lviii
  • 59. different context, it’s not suitable for cloud service assessment as business application services comprises of diverse applications such as ERP (Enterprise resource planning), CRM (Customer Relationship Management), Payroll Management, Planning and Forecasting applications, email applications etc. It is essential to get insights on the respondent’s views on all these applications’s suitability to cloud migration as they have different features and correspondingly, their IT requirements also differ. Hence, the researcher has identified key business applications, productivity tools, communication tools, storage services, infrastructure services, analytics systems and categorised them into individual workloads as shown in the chart below. Category Summarized explanation CRM tools Services which can be bundled and sold as SaaS: Customer Relationship Management (CRM), Salesforce management. Project management tools Hosted productivity tools for project management, analysis, modelling and development. Email and desktop applications Personal productivity and administrative infrastructure Development and testing tools Tools used for rapid development and simulating target environment for the prototype to test it. Trading applications Online order management with customer, suppliers. Real time trading with low latency requirement Complex modelling applications Applications involving intensive mathematical calculations, simulations in gaming, bio- lix
  • 60. medical and life science sectors Data backup, archiving and Operational services handling recovery backup, disaster recovery and data management tools. Adaptive systems Systems having fluctuating or periodic or bursty demand cycles. E.g: e-commerce sites, tax processing systems, seasonal purchase order systems Conferencing and VOIP These include hosted infrastructure communication tools such as audio, video conferencing, web based utilities Data mining applications Applications involving high performance data dependency analysis such as search engines, robotics, financial analytics, parallel logics. Data warehouse Reporting database with complex processing and analysis Transactional database Databases with roll back capability on incomplete transactions to be used as a service. Testing Infrastructure Infrastructure and processing platform for different capability testing such as load and stress testing Training infrastructure These include hosted communication tools such as audio, video conferencing, web based utilities Mission critical workloads Applications having compliance constraints, high level of lx
  • 61. accountability and criticality. Secure storage records Data storage with highly sensitive privacy, security requirements Highly customized applications Applications involving bespoke customization regularly to adopt to changing client’s needs Interdependent applications Applications having complex interdependencies with multiple databases, departments and geographies. The above description was provided for the respondents to assist them in understanding the workload types. Respondents could choose more than one option while selecting the workloads for suitability. The results were validated during the interviews by identifying the reasons underpinning the respondent’s selection of workload. 3.4.1 Questionnaire Design The questionnaires were divided into two parts. As the research problem demanded specialised knowledge, expertise and experience in the area of cloud computing, Part-1 of the questionnaires extracted respondent’s relevant background information such as:  Respondent’s definition of cloud computing  Respondent’s awareness level in cloud computing solutions.  Respondent’s position in the organisation.  Respondent’s total years of IT experience.  Respondent’s organisation’s core area of work.  Whether cloud computing solution has already been implemented in the organisation? lxi
  • 62.  Whether the organisation is reviewing or planning to implement cloud computing solution in future? The responses from the part-1 questionnaire established the competency in cloud computing and experience in Indian IT- services. It also provided details regarding whether the respondent’s firm had implemented cloud solution or planning to adopt cloud solution in future. Using this information, the researcher selected the respondents for part-2 questionnaires. Researcher ensured that the respondents had sufficient expertise and awareness in cloud computing, sufficient IT industry experience to have better understanding of the clients application and domain, suitable work profile in the organisation that provides the respondent necessary information, in case such need arises. Part-2 questionnaires were also customized and sent to the suitable respondents so that irrelevant questions were excluded so that respondents could provide valid inputs into the research. For example, the questions regarding actual benefits from cloud computing were sent only to respondents belonging to firms which have already adopted cloud computing solutions. Part-2 questionnaires consisted of close-ended questions designed to using appropriate metrics so that the responses could be quantified using charts and measured effectively. Ranking method was considered more appropriate to identify the factors such as main drivers, actual benefits reaped, major concerns and private cloud preference as it provides a holistic view of the respondent’s opinion. If the respondents were asked to select only one option, then the results would not reflect the underlying reasoning or order of preference of the respondent’s choices. The questionnaires were targeted to get insights into the following areas:  To understand their main motivating factors which lead to the adoption of cloud computing? lxii
  • 63.  Understand the actual benefits reaped and major challenges faced by the firms which have already adopted cloud computing solutions currently faced by these firms.  Understand the major concern hindering the prospective cloud adopters regarding cloud adoption.  Which cloud model do they recommend for prospective adopters and why?  Which application workloads do they find suitable for cloud adoptions? 3.4.2 Interview Design Suitable respondents from part-2 questionnaires were requested to take part in the interviews. The researcher attempted to interview right proportion of respondents from IT-services, IT- consulting and research roles; ensure right balance in interviewing respondents from 2-10 years of IT work experience with different roles in the firm. However, due to time and budget constraints, only 22 people participated in the interview. But, the researcher believes that the results obtained are unbiased and can be generalised as theoretical saturation was achieved during final stages of the interview process. Interviews were targeted at understanding the reasons underpinning the questionnaire survey responses and to validate the results obtained from the questionnaire survey. This is beneficial as the researcher will be able to identify any misinformation, biased results obtained due to errors in procedure and design of the research. Moreover, first hand information can be obtained on related areas (Niell 2007). The findings from the interview were analysed, categorised and wherever the researcher observed a need for clarification, the findings were cross validated with other respondents. The insights obtained after analysis were used to: lxiii
  • 64.  Determine the main driving factors and concerns for cloud adoption.  Prime benefits and risks faced by the firms which have adopted cloud computing  Develop and recommend a suitable strategy for cloud adoption by Indian-IT services firms in terms of application workloads and cloud computing types. 3.5 Sample Selection To ensure that the findings from the research can be generalised, unbiased and reliable; it is necessary to use a suitable sample for the research (Strauss and Corbin 1998). Due to time, resource and budget constraints, it is not possible to conduct the research on a large scale and arrive at a consensus. Moreover, the respondents should be equipped with adequate hands-on knowledge, experience on the subject to provide valuable contribution to the project as it deals with current issues and challenges (Saunders et. al. 1997). Hence, it was essential to consider a sample of the population in question. Numerous researchers believe that using sample approach would result in accurate data collection and analysis as there is added emphasis on designing and piloting the project to collect detailed information (Henry 1990). Johns and Perrot (2008) claim that a sample size of ten is sufficient for qualitative research involving interviews. However, it is a standard practice to validate new findings from interviews until theoretical saturation is reached (Bailey 2006). Otherwise the findings are considered to be uneven, non precise and biased. As the current research problem deals with relatively new technology, which is not fully understood and time tested, the researcher had selected the sample size of 80 for questionnaires and 25 for interviews in order to achieve theoretical saturation. lxiv
  • 65. 3.5.1 Sampling Technique In order to answer the questionnaires, the respondents must be exposed to cloud computing implementation, either as a part of service provider, delivery agent, customer or as an end user. Hence, the researcher has used purposive sampling technique to ensure that relevant participants are sampled to take part in the questionnaires and interview (Saunders et. al. 2007). The researcher used his previous contacts in Infosys technologies and others within the IT industry in Bangalore, business networking websites like Linkedin, apnacircle; forums like IEEE, siliconeindia, Computer Society, OWASP, CII (confederation of Indian Industries, Mysore), colleagues, college seniors to contact relevant people and filtered the right respondents using questionnaires and reviewing their work profile. The selection criteria were: - The respondents should have adequate awareness and knowledge of cloud computing implementation either on technical areas, business case analysis, research, academic or consulting roles. - The sample must have almost equal distribution of respondents working as analysts, consultants, manager with technical and domain expertise in delivering IT service and consulting solutions, and engineers from the developer community. - The sample must consist of respondents from only the Indian IT-services firms or be a part of the subsidiary of global IT firm which has development centres in India and provides services to clients using the global delivery model or offshore-onshore model. Considering the stringent criteria for purposive sampling which involved filtering the respondents, contacting and requesting them lxv
  • 66. to take part in the research demanded significant time and energy, the researcher required over 40 days to complete the primary research. 3.6 Data Analysis Comparative analysis method was used to compare the results of the questionnaires, secondary research and interviews. The results obtained from questionnaires were validated with the interview respondents and interview findings were compared, contrasted and cross validated during further interviews. The quantitative results were analysed using reporting tools from Survey Gizmo and Microsoft Excel spreadsheet package for graphs and analysis. The qualitative results were analysed and converted to findings keeping the context of the interview, background of the respondent in mind. New information obtained were analysed, filter and sorted into relevant categories. Conflicting information were cross validated with other respondents and triangulation technique was used by confirming new insights from primary research with newer publications through secondary research as advocated by Niell (2007). 4.0 Findings from Primary Research This chapter takes the reader through the respondent’s profile, results obtained from questionnaire survey and key findings identified after quantitative analysis of the interview responses. lxvi