Cloud Characteristics

Cloud computing is the next big step in the evolution of computing; It is not just hype.  Although it sounds complex, the cloud environment has but five essential characteristics, four full deployment models, and three service models as depicted below:

Cloud Characteristics

  • On-demand self-service, i.e., end users drive provisioning and delivery
  • Elasticity of computing resources, i.e., scales up or down rapidly as required
  • Measured services i.e., measures usage/utilization and bases payment on usage
  • Broad network access, i.e., can be accessed over the network using standard mechanisms and a range of Web enabled devices (laptop, smartphones, PDAs)
  • Pooled resources i.e. pooled computing resources shared across consumers

Cloud Deployment Models

  • Private: Operated for a single organization
  • Public: Available to the general public or large industry group, owned by an organization selling cloud services
  • Community: Shared by several organizations, supporting a specific community
  • Hybrid: Two or more cloud models that remain unique entities but are bound together by standardized or proprietary data/application technology.

Cloud Service Models

  • Infrastructure as a Service – IaaS: (e.g., infrastructure traditionally provided by servers, desktops and network equipment, but instead delivered over the internet and which can be scaled up or down as needed)
  • Platform as a Service – PaaS: (e.g., software development, storage and hosting are accessed as a service over the internet)
  • Software as a Service – SaaS: (e.g., on-demand applications provided through an internet browser, eliminating the need to install, run and maintain programs on internal systems)

Core challenges mean core opportunities

As enterprises first approach the cloud, their tendency is to perceive the work as primarily IT-centric. But in reality, understanding the cloud requires a much broader view. The cloud is being driven by three broad sets of people and principals: service providers, business users and IT users.

The challenge going forward will be to balance objectives, needs and wants against real capabilities and risks. As such, coordinating and harmonizing the advancement of the cloud represents a massive undertaking

Impact: business transformed

Cloud is transformative in that it is creating new business opportunities as companies harness its power to efficiently facilitate new revenue, services and businesses. It is breaking down barriers in the supply chain, as well as creating more effective and timely interaction between clients and suppliers. It is delivering speed, agility and cost reduction to IT and other functional areas within the enterprise. The transformative impact of cloud can readily be seen across the enterprise in areas such as HR, CRM, and IT infrastructure.

The KPMG 2011 Global Cloud Survey of end-users shows that a significant number of companies believe fast-evolving cloud capabilities will heavily impact business models. While cloud-driven cost reductions may hold the most promise (half of KPMG 2011 Global Cloud survey participants expect as much), the impact on the business model could be much more extensive. Cloud calls for executives to challenge their thinking, to look at old problems in a new light, and to create new opportunities.

Where are we going and what are we spending?

Signs of growing comfort and familiarity with cloud environments are everywhere. Today, 40% of the businesses surveyed are currently evaluating the cloud (19%) or using/testing the technology (21%). KPMG firms have observed large organizations migrating email, CRM, components of HR, point of sale, hosting, and other applications to a cloud environment.

81% of businesses are either planning their initial forays (within the next year), are in early or advanced stages of experimentation, or have full cloud implementations in place.

Has total cost of ownership been evaluated properly?

Cost savings are generally a required outcome of cloud migration. The thinking is that cloud has the potential to significantly reduce IT costs as companies are able to shift from large capital expenditures to ongoing operational outlays. Putting many infrastructure and development initiatives in the hands of third parties also has the potential to reduce staff costs. In migrating to the cloud, three-quarters of the KPMG survey respondents say that economic factors are important (40%) or extremely important (37%). That is, these companies will not migrate to a cloud environment without meaningful savings.

Many hidden cloud cost drivers

It is critical that buyers closely scrutinize potential and claimed cloud computing savings across the lifecycle of a cloud deployment. It is imperative to consider factors that may drive cost and risk assessments. These include costs of integration into legacy systems, customization and configuration, service provider management/relations, security, controls and assurance etc.


The era of the cloud is a significant evolution in the provision of IT services and business, opening the door to transform business and drive innovation inside and outside organizations.

Nonetheless, acquirers of cloud technology and services will likely experience significant transformation of business processes alongside a reduced total cost of ownership across their organization – if, and only if, managed properly. As more organizations look to take cloud into their business and IT organization, it is important to weigh the cost savings and other appealing aspects such as flexibility and agility against the critical issues such as risk, compliance, tax and other issues that may have implications for adopting firms.

About the Author

Ian Wood
Ian Wood -

IT Advisory, KPMG