Turun kauppakorkeakoulu • Turku School of Economics

THE CHANGE INTRODUCED BY THE CLOUD

COMPUTING IN THE SOFTWARE INDUSTRY

AND MOBILE BUSINESS

Software Business Course

Author:

Kim Anh Pham (606217)

Instructor:

Prof. Hannu Salmela

27.4.2015

Turku

Table of Contents

1 INTRODUCTION ................................................................................................... 3

1.1 Research questions ......................................................................................... 3

1.2 Research objectives ........................................................................................ 4

2 THEORETICAL FOUNDATION .......................................................................... 5

2.1 Cloud Computing Technology ....................................................................... 5

2.1.1 Definition and characteristics ............................................................ 5

2.1.2 Advantages and Disadvantage of cloud computing ........................... 6

2.2 Mobile business .............................................................................................. 7

3 IMPACT OF CLOUD COMPUTING TO MOBILE BUSINESS .......................... 9

3.1 Benefits .......................................................................................................... 9

3.2 Challenges .................................................................................................... 10

4 CONCLUSION ..................................................................................................... 12

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1 INTRODUCTION

The rise of cloud computing has brought many new opportunities to the software industry, par-

ticularly to the e-commerce and mobile business. Many studies have discussed the innovative

nature of this technology and its impact on the software industry. As we all acknowledged,

cloud computing has been slowly changing the users’ behavior. It leads to the significant

change in the method of digital business is delivered and managed.

Moreover, research of the mobile business have grown significantly in recent years. Having

driven by the penetration of smartphone and mobile devices, combining with the enormously

increase of mobile cellular subscriptions worldwide, mobile applications became a high value

business in the modern time where time and convenience are emphasized. Since the late 2000s,

with the emergence of cloud computing technology and its rapid development, mobile business

has expanded gradually, especially in the mobile services area.

Mobile business (m-business) is defined as a new business model facilitated by the deployment

of mobile devices and wireless technologies to create values of information and services acces-

sibility at any time and from anywhere to users (IT Glossary, 2013).

Through the majority of publications and studies, this writing presents the understanding and

assessment of changes in the mobile business under the impact of cloud computing technology.

The writing is structured as following: the first chapter is an introduction, research questions

formulation and research’s objectives. Chapter 2 provides a brief overview of theoretical foun-

dation. These theories are the keys of the discussion. The results of the analysis are presented

and discussed in chapter 3. The writing concludes with a summary.

1.1 Research questions

Recognizing the dramatic growth of cloud computing technology and Software as a Service

(SaaS) in the software industry over the world, this writing attempts to understand how the

cloud computing technology effects the mobile services in the mobile business (m-business).

As any other trends, this technology, certainly, has brought shortcomings for the both service

providers and users. However, with some limits of the resource, this writing will focus on the

difficulties for only service providers. Therefore, the main research questions will be discussed

from the mobile business perspective including:

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What are benefits and advantages that cloud computing technology drives for mobile

services in m-business?

What are challenges and obstacles that enterprises of the ecosystem face in applying

cloud computing technology into their businesses?

1.2 Research objectives

To answer the above questions, a number of publications and articles are examined and ana-

lyzed. The main objectives of the writing are to analyze the impact of cloud computing on mo-

bile services to determine values created for firms by adopting and applying this new technolo-

gy to their strategies. What are main reasons that drive changes of the mobile service? Are

there potential risks and difficulties that they have to face when deploying this technology to

develop their services?

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2 THEORETICAL FOUNDATION

2.1 Cloud Computing Technology

2.1.1 Definition and characteristics

As Investopedia defines, cloud computing is a type of internet-based technology service that

allows users to access computing resources and storage space at anytime from anywhere with

electronic devices over a network connection. Users do not need to connect directly to a local

server, so that they can work remotely. For example, icloud of Apple where you can store and

share your contacts, photos, music, and retrieve them anywhere with your devices connected to

the internet. However, in fact, cloud computing refers both the applications delivered at ser-

vices, the hardware and systems in the data center that host and serve those services (Armbrust,

M., et al, 2010). In other words, the data center hardware and the software is a cloud.

There are four different types of cloud:

Public cloud is available to general public. It exists on the premises of the cloud provid-

er.

Private cloud is customized and exclusively provided to a single business or an organi-

zation. It may be owned and operated by an organization, a third party or both. A private cloud

may exist on or off premises.

Community cloud is delivered and used by a community of users who have shared same

concerns. It is owned by one or more of the organizations in the community.

Hybrid cloud composites of two or more different cloud infrastructures with standard-

ized technology to enable data and application portability.

Mobile cloud computing is another concept developed following cloud computing. It is a com-

bination of the cloud computing and the mobile environment. Basically, it refers an infrastruc-

ture of data storage and data processing happening outside of the mobile devices. In other

words, mobile applications move computation power and storage from the mobile devices to

the cloud (Goyal, M. & Signh, S., 2014).

In cloud, software is ubiquitous and accessible to the users over the internet through a cloud

service provider, for example, a web browser as a service, so called Software-as-a-Service or

SaaS (Ohjala & Tyrväinen, 2011). The services or applications are called utility computing.

Examples of SaaS are Google docs, Google maps and Facebook. The applications run on a

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cloud infrastructure. The cloud computing is the combination of SaaS and utility computing

(Armbrust, M., et al, 2010) as displayed in figure 1 below.

Besides SaaS in cloud, there are also Platform as a Service (PaaS) and Infrastructure as a

Service (IaaS). This writing will discuss SaaS as a main service model which is vital to the

mobile business.

Figure 1: Users and providers in cloud computing (Armbrust, M., et al, 2010)

According to National Institute of Standards and Technology NIST (Mell, P. & Grance, T.,

2011), cloud computing possesses some critical characteristics which enable ubiquitous, con-

venience as follow:

On-demand self-service: a buyer can receive and adjust computing capabilities as needed

automatically without unnecessary human interaction with service providers.

Broadband network access: resources are available to be accessed over the network

Resource pooling: computing resources are pooled to serve multiple users independent

from different locations

Elasticity: capabilities are elastically provisioned and delivered with demand. It usually

appears to be infinite and available at any time.

Measured service: computing resource usage can be monitored, controlled and measured

transparently for both providers and buyers of the utilized service.

2.1.2 Advantages and Disadvantage of cloud computing

There are some important benefits for firms operating in the software business for considering

of implementation a new technology. Some of the benefits are hardware infrastructure, cost,

flexibility, and scalability. Cloud computing has brought huge advantages regarding both tech-

nical issues and cost structure for firms. The cloud computing technology can provide virtually

infinite resources according to a firm’s need and strategy. In reality, there are possibilities of

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unexpected load surge happening of a project or a business. The cloud computing makes it

available on demand in order to eliminate the up-front commitment by a firm. The firm does

not necessarily plan far ahead for the unscheduled occurrence of resource capacity. It shows the

value of flexibility and transference of risk of over-provisioning (underutilization) and under-

provisioning (saturation) (Armbrust, M., et al, 2010). This unique characteristic enables oppor-

tunities for Small and Medium Enterprises (SMEs) or start-up companies. These enterprises

can start with small projects and increase the resources when the demand grows. Besides, the

IT infrastructure investment usually requires a heavy investment to build for SMEs; therefore,

cloud technology offers a great cost advantage for firms. Moreover, cloud technology is con-

sidered as a service which a firm pays for the actual use of computing resources on a flexible

time period basis, as said ‘pay as you go’ or usage-based pricing. For example, storage by

month and web server by day or even hour for cost saving and economic of scale benefit to the

buyers.

Despite numerous advantages that cloud computing provides to enterprises, there are still have

some weaknesses needed to be improved. Firstly, there is still difficulty in data lock-in. The

storage APIs for cloud computing are still proprietary which does not allow buyers easily ex-

tract their data and programs from one site to run on another (Armbrust, M., et al, 2010). It

leads to the risk of losing storage data such as customer data of a firm. The data confidentiality

is another obstacle of current cloud computing technology. In fact, security threat is always a

problem of any technology; however, it causes more concern than ever. Security responsibility

involves many parties, cloud users, cloud providers and probably also third parties of interme-

diate layers. Moreover, the performance is unpredictable and problematic due to relying on the

network and disk I/O performance.

2.2 Mobile business

As Jouni Paavilainen (2002) defined in his book, mobile business is “the exchange of goods,

services, and information using mobile technology.” Regarding this definition, the mobile busi-

ness includes communication, transactions and other value added services.

Mobile business is a promising industry along with the widespread of e- commerce. Similar to

other emerging industries, mobile business is continuously changing under complex environ-

ments caused by rapid technological development (Camponovo, G. & Pigneur, Y., 2003)

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Mobility is one of an essential characteristics of the mobile business. It brings a distinctive ad-

vantage for creating a value proposition in mobile services. Its attributions include freedom of

movement (usage of services on the move), ubiquity (services accessibility anywhere), locali-

zation (user’s location-based service offers), instant connectivity and personalization which

make mobile commerce so different from the traditional e-commerce (Camponovo, G. &

Pigneur, Y., 2003; Paavilainen, J. 2002). This unique attribute broadens the competencies of

application and services development by creating accessibility through partnerships or acquisi-

tions. Moreover, it renovates the existing business structures by imposing threats to traditional

firms in telecommunications and service providers. In other words, in order to provide com-

pleted mobile services solutions, it is indispensable to collaborate with different partners such

as mobile operators, content providers, system integrators, application developers, etc. to build

a strong eco-system in the mobile business. Therefore, sustainable network and partnership

management become core activities to create value chain in the mobile industry.

Mobile services are added value which users can access from their mobile devices. The princi-

ple actor is the application providers who provide mobile application and platforms such as

middleware as value proposition (Camponovo, G. & Pigneur, Y., 2003). Furthermore, technol-

ogy-enabled applications, instant messaging, location-based technologies and personalization

services are utilized time and location factors in mobile devices. These key concepts are used in

innovating new mobile services.

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3 IMPACT OF CLOUD COMPUTING TO MOBILE BUSINESS

Regardless current technology and advancement, a mobile multimedia database is still facing

several challenges, such as limited storage, data management, synchronization, and data con-

sistency. However, mobile cloud computing is still becoming an innovative solution in current

market scenario. In fact, cloud computing presently is not only used in personal computers, it

also gives a heavy impact on the mobile technology and mobile business.

3.1 Benefits

From cost to innovation, cloud computing has given major impacts on mobile business. The

integration of mobile computing and cloud computing offers the optimal services for users and

also brings competitive advantages for service providers. Cloud computing leverages the cus-

tomer experience by delivering effective services to meet the users’ expectations.

Due to the limited computational capacity and power supply of mobile devices which are una-

ble to run heavy multimedia and security algorithms, it becomes a critical issue required partic-

ular consideration when developing mobile applications. Cloud computing technology is re-

garded as a solution to provide service platform. Storage and computational capacity are among

the most advantages provided by cloud computing. Users can put behind the concern of storing

and managing a large amount of multimedia data such as images, audio, video, and text within

the limited storage of their devices because, in mobile cloud computing, data storage and data

processing happen outside of the mobile device. Mobile applications also are not constrained

by storage capacity on the mobile devices because their data now is transferred and stored in

the cloud. It brings benefits not only to the smartphone users but also facilitates for a broader

range of mobile subscribers (Khan, A. & Ahirwar, K., 2011). Moreover, it is faster to transfer

data by using a cloud. Thus, it provides a significant advantage for developers to offer mobile

applications without worrying about the constraints of devices capacity of operation and capital

investment in infrastructure.

Cloud computing is dominated by a cost advantage. Using cloud services drive efficiencies and

cost reductions for mobile service providers (Willcocks, L. et al. 2011). The importance of out-

sourcing industry is increasing dramatically in the use of external service provision, which

leads to a smaller internal IT infrastructure and function of mobile service providers. At the

highest level of impact, the necessity of transforming the whole business process into a cloud

corporation, which manages a complex ecosystem of cloud providers, IT suppliers, and mobile

service providers both internal and external. In other terms, it minimizes costs, especially for

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small businesses for less investment on hardware at their premises. As the result, this reduces

the price of mobile services to the end users besides the diverse of features and applications.

In addition to the increase in customer experience, reliability is also improved. Data is stored

and backed up on the cloud is an effective way to enhance the quality of services. This reduces

the possibility of losing data and application on the mobile devices. Furthermore, the cloud can

remotely provide security services, for example, virus scanning, malicious code detection and

authentication (Khan, A. & Ahirwar, K., 2011; Goyal, M. & Signh, S. 2014).

In a study about mobile cloud computing of Goyal, M. and Signh, S. (2014), in mobile com-

merce, the applications generally include finance, healthcare, advertising and shopping which

cover some tasks that require mobility such as mobile transactions and payments, and messag-

ing. The mobile commerce has to face various challenges due to the dependence on the internet

and mobile devices, for example, low network bandwidth, high complexity of mobile device

configurations and security. Hence, mobile commerce applications are integrated into cloud

computing environment to address these issues.

Another application of mobile service is mobile learning. It utilizes a cloud with the unlimited

storage capacity and powerful computation to provide richer services with large data resources,

faster network transmission and longer battery life for the devices (Goyal, M. & Signh, and S.

2014).

The mobile game industry is growing enormously and a potential market for mobile service

providers. The game engine that requires large computing resources is moved to the servers in

the cloud. It can save energy for devices to run the game, increase the playing time for gamers.

One of the most vital applications of mobile services is the healthcare and wellness application.

Mobile healthcare and wellness are particularly improved with physical storage, security and

privacy, resources accessibility, convenience, etc.

Therefore, cloud computing is capable of providing innovation not just cost reductions and

leads to gain a competitive advantage in differentiation in the mobile business and the software

business industry.

3.2 Challenges

Although mobile cloud computing is promising and full of opportunities, it has certainly faced

several challenges. As known, all mobile services are provided via the mobile internet; there-

fore, network availability and intermittency are key obstacles. Mobile applications require a

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high demand of wireless network bandwidth (mobile network). The problem of network laten-

cy, packet loss, response time will consequence negatively impact on users’ experiences. For

example, for mobile payment service and mobile commerce, transactions delay, interrupted

game (Khan, A. & Ahirwar, K., 2011; Goyal, M. & Signh, S. 2014).

According to Goyal, M. and Signh, S. (2014), accessibility of internet connection influences to

service availability in cloud computing is more critical than in traditional way. For instance, all

data is transferred to cloud and mobiles are not be able to connect to the cloud to obtain ser-

vices, users’ activities will be interrupted or frozen completely which might cause some cost

issues and customers’ satisfaction.

Mobile cloud computing uses different mobile nodes to access to the cloud which is highly

heterogeneous; therefore, it is difficult to handle the wireless connectivity to satisfy the mobile

services requirements which are always connectivity and availability, on-demand scalability

and energy efficiency of mobile devices. The interruption of using services might affect heavily

to services providers and the mobile business.

In the current reality, data security threat of the cloud is still the main obstacle of the mobile

business regardless a continuous development of technology. Mobile cloud computing is yet

vulnerable, especially when mobile phones integrate to global positioning system (GPS) de-

vice, there is a higher risk of having privacy penetration.

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4 CONCLUSION

This writing has discussed briefly the impact of cloud computing on mobile business. The writ-

ing emphasized benefits and challenges of cloud computing and SaaS from mobile service pro-

viders perspective.

Cloud computing technology is highly potential which brings opportunities to the software in-

dustry and the mobile business. It provides multiple benefits by improving users’ experiences.

According to the recent research of Danyl Bosomworth (2015), people who use mobile devices

to access the internet will outnumber those who use PCs in 2015. Moreover, 80 percents of

internet users own smartphones. The research also reveals that consumers prefer spending time

on media via mobile applications (89 %) compared to the time spend via mobile web.

Besides, 50 percents of SMEs acknowledged that information access from multiple devices is a

primary motivation for moving to the cloud. Firms will possibly invest capital allocated to IT

budget more on the cloud computing technology to save cost in long term strategies. It proves

that the importance of cloud computing directly impacts the prospective of the mobile business

growth.

The mobile services include mobile commerce, mobile learning, and mobile healthcare. They

are supported by mobile cloud computing which encourages to expanding the diversity of the

mobile business.

In addition to opportunities and advantages, cloud computing has also brought new challenges

to the mobile environment. Nevertheless, there are multiple ways to solve these obstacles in

order to expand the utilization of cloud computing for the mobile business. From this perspec-

tive, cloud computing or mobile cloud computing is highly potential to develop further to be-

come one of the mobile technology trends in the future.

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