Advantage and Disadvantage of Cloud Computing for Business

This report analyses the advantage and disadvantage of cloud computing for business use. An example of ‘Netflix’ will be analysed in the report. This report will analyse examples of various other corporations to understand the benefits and limitations of the use of cloud computing in business.

Running head: CLOUD COMPUTING 0
Business Research
Advantage and Disadvantage of Cloud Computing for Business

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Table of Contents
Introduction................................................................................................................................2
Project Objective........................................................................................................................3
Project Scope..............................................................................................................................3
Literature Review.......................................................................................................................4
Conclusion..................................................................................................................................9
References................................................................................................................................10
Appendix..................................................................................................................................14
List of Figures
Figure 1: Amazon Web Services Market Share.......................................................................14
Figure 2: Cloud Computing Challenges...................................................................................14
Figure 3: Growth in Adaptation of Cloud Computing.............................................................15
Figure 4: Increasing Cloud Computing Revenues...................................................................15

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Introduction
In the present fast pacing business world, corporations use modern technologies for
improving their operations in order to generate a competitive advantage over their
competitors. With the popularity of the internet and online based services in organisations,
the popularity of cloud computing has increased between companies, and they use it to
performing their business activities. It uses the structure of remote servers for performing
functions such as organising, keeping and processing information. A number of third-party
cloud computing providers give these services to organisations. In this process, information is
stored in the database of third-party operators rather than local computer systems of a
company. It is useful because it reduces costs of a firm and provides them a competitive edge
(Xu, 2012). Moreover, these services are highly reliable and they enable enterprises to access
their data from worldwide. There are some challenges relating to use of cloud computing as
well. The main issue is limited control over the information stored by a company.
Furthermore, there is an issue of vendor lock-in and server downtime problems which affects
the working of a corporation (Wang et al., 2012). These challenges make corporations
sceptical about using cloud computing in their business. This report will analyse the
advantage and disadvantage of cloud computing for business use. An example of ‘Netflix’
will be analysed in the report. This report will analyse examples of various other corporations
to understand the benefits and limitations of the use of cloud computing in business.

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Project Objective
The role of cloud computing has increased between modern enterprises. This report aims to
analyse its benefits and limitations while using it for business purposes. This report will
evaluate what is cloud computing and analyse how companies use it to perform their business
functions. This report will analyse the example of Netflix to understand the role of cloud
computing in business and what opportunities and challenges face by companies while using
cloud computing in business.
Project Scope
The example of Netflix will be included in this report which is an American corporation that
operates in the entertainment industry. Further, examples of various other organisations that
use cloud computing in their business will also be included in the report. This report will
conduct secondary research on the cloud computing by analysing a number of studies
conducted on the topic.

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Literature Review
Organisations across the globe use the latest technologies for performing their business
functions to improve their efficiency. The cloud computing technology is a good example. It
is used by corporations across the globe for performing business functions. As per
Beloglazov, Abawajy and Buyya (2012), the use of cloud computing in the business enables
enterprises to deliver computer-based services such as software, analytics, networking storage
and others. There are three types of clouds which include public, private and hybrid. Private
cloud is the local servers used by an organisation. Public cloud service is given by third-party
companies called CSPs (cloud service providers). Hybrid cloud is a combination of both
public and private cloud services. Dinh et al. (2013) stated that along with businesses, the
public also uses cloud computing technology for various purposes such as documents editing,
sharing content, sending emails, consuming media, storing private data, playing games and
others. The companies use cloud computing due to its numerous advantages because it
enables enterprises to improve the effectiveness and efficiency of their operations (Figure 3).
Netflix is of the corporations which use cloud computing for business purposes. The
company was founded in 1997, and it offers the facilities of streaming media and video-on-
demand facilities to its customers. It operates in the entertainment industry and offers its
services in more than 190 countries. The company generates revenue of US$11.6 billion in
2017, and it has expanded its operations from online streaming to production of content as
well (Feldman, 2018). As per Gomez-Uribe and Hunt (2016), the corporation is a good
example of effective use of cloud computing because it has reimagined its use in the business
to gain a competitive advantage over its competitors. For cloud computing services, the
enterprise use services of ‘Amazon Web Services (AWS)’ which is the world’s largest cloud-
based solution provider. The study of Berman et al. (2012) provided that the services of AWS
enable Netflix to reduce the data usage and improve the quality of its services. Based on
effective use of cloud data, the company has expanded its business into content production,
and it has developed a number of original content that has become substantially successful
such as House of Cards, Narcos, Stranger Things, Crown, and Orange is the New Black.
One of the primary benefits of cloud computing is that it assists organisations in performing
business activities by saving their valuable resources. In order to generate a competitive
advantage, organisations focus on minimising their expenses and increasing overall

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efficiency. The study of Arora and Parashar (2013) provided that most of the corporations
hire facilities from third-party cloud service providers which assist them in saving their
resources because it requires zero in-house storage expenses and application requirements.
Expenses relating to upgrades and implementation of hardware components are also avoided
by companies while using cloud computing technology. The lack of processing infrastructure
or on-premise storage also reduces managing and controlling expenses of the enterprise.
Furthermore, management expenditures such as power, electricity, air conditioning, and other
administrative costs are reduced when companies hire the cloud computing services of third-
party CSPs. As per Fernando, Loke and Rahayu (2013), the charges of cloud computing is
based on usage of the enterprise, and it avoids costs relating to hardware and software
management of the technology. It is a common misconception among firms that only large
enterprise can afford the services of cloud computing.
The technology has become affordable, and it can be used by small and medium enterprises
as well. For example, EasyJet is a low-cost British Airline which uses cloud computing to
reduce their operations data. The company has achieved a 35 percent saving over three years
by using cloud-based software for email security system (Ashford, 2010). In case of Netflix,
the company started using cloud computing in 2008 for smaller operations whereas it started
using it for customer services in 2015. According to Chou (2013), Netflix uses this
technology for protecting its data from breaches, reducing operating expenses and providing
high-quality, flexible services. The firm adds petabyte of storage and thousands of virtual
servers in just minutes by using cloud-based data. Frank et al. (2013) provided that the
‘Netflix Open Connect’ technology allows the enterprise to offer its services worldwide
without any issues or interruptions. The priority of Netflix is optimising their data for making
it easily available globally, and it achieves that by using cloud computing technology.
The use of cloud computing technology assists companies in effectively managing their data.
It simplifies and improves IT management system through central administration of the
company’s resources, vendor managed infrastructure, and Service-level agreement (SLA)
backed contracts. Hashem et al. (2015) stated that while using cloud computing technology,
corporations did not have to focus on maintenance and upgrades of IT infrastructure that
supports its services because the CSP manage them for the enterprise. The companies access
their files and data through a web-based design which is simple to understand. Li and Du
(2013) argued that a service-level agreement (SLA) ensures that CSPs will provide timely
maintenance, delivery and management the IT services of a company. In case of Netflix, the

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SLA provided by AWS ensure that the company is able to get all the cloud storage that they
need and did not have to face issues regarding management and upgrade of data servers.
Reliability of data is crucial for a business because it ensures that the company and customers
are able to access the data of the enterprise when it is required. Dastjerdi, Tabatabaei and
Buyya (2012) provide that a managed cloud service platform ensures that the hosting service
provider of the enterprise is doing all the necessary functions relating to managing and
controlling of the cloud computing data. The reliability of the corporation is increased based
on the Service level agreement signed by the CSP. The SLA offers services such as 365 days
availability. Wu, Garg and Buyyu (2012) stated that other than guaranteed availability, the
CSPs offer creative and practical solutions to their clients along with professional services for
ensuring that the IT infrastructure of the enterprise is operating effectively. A large number of
global leading IT firms such as Google, Amazon and AT&T operate in the cloud computing
industry which increases the trust of organisations in the cloud computing technology. Netflix
uses services of Amazon Web Services for performing their business functions by using
public cloud. Mak (2012) stated that Amazon is the market leading in cloud computing
technology, and it offers different facilities to its clients such as faster data sharing, flexibility
and high-quality data (Figure 1). The SLA of AWS guarantees that the company will offer
99.99 percent availability and durability to its customers.
Another advantage of cloud computing is that it protects organisations from disaster recovery
in case any accident occurred at the workplace. The important data of corporations lost in
case of a fire, mishap, or other accidents at the workplace if it is stored physically. However,
in case of cloud computing, the data is stored on remote servers which can be accessed by the
enterprise from anywhere, and it did not get lost if an accident occurs in the workplace.
Gupta, Seetharaman and Raj (2013) provided that Netflix deals with a large number of data
and security are a primary concern for the enterprise, therefore, cloud computing is an
obvious choice because it protects the data from getting damage and the company can easily
recover it after any disaster. According to Garcia-Valls, Cucinotta and Lu (2014), Netflix did
not focus on upgrading its software because the CSP corporations automatically update their
software and hardware making it more secure and easy to use. The use of cloud computing
provides a competitive advantage to corporations by reducing their costs and increasing
overall performance. For example, Netflix has dominated the entertainment industry, and it
has gained a competitive advantage over its competitors such as Amazon Prime Video and
Hulu Plus.

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However, there are many challenges of using cloud computing in a business which negatively
affects the business of enterprises. One of the main concern with cloud computing is the
security of the company’s data (Figure 2). Although CSPs implement the latest and most
advanced software features and firewalls to protect their clients, however, the risk of cyber-
attack and data breach is also linked to the cloud computing. According to Zissis and Lekkas
(2012), since the cloud is based on internet, a cybercriminal can hack into the database of a
CSP and collects all the data of its clients. Furthermore, corporations have to share their
confidential data with CSPs, and any negligence or carelessness of an employee could result
in causing huge financial loss to organisations. For example, Apple iTunes was hacked, and it
resulted in leaking private and sensitive pictures of more than 500 celebrities online (Butcher,
2014). Similarly, a data breach of Ashley Madison, an online dating website, resulted in the
leak of over 25 gigabytes of confidential data of clients and the corporation had to pay $11.2
million to data breach victims. Netflix has suffered from data breaches as well (Moon, 2017).
For example, episodes of its hit TV series ‘orange is the new black’ leaked online in 2017
because cybercriminals hacked into the cloud computing servers of the enterprise (Spangler,
2017). It resulted in causing financial loss to Netflix which shows how vulnerable
corporations are against cyber-attacks while using cloud computing in business.
Another main concern with the use of cloud computing is the downtime of servers. The study
of Puthal et al. (2015) provided that no CSP can guarantee 100 percent immunity from
service outage. While using cloud computing in business, corporations have to rely on the
internet, and they are exposed to issues relating to the internet such as downtime of server
and service outage. In order to access their data, corporations are required to use a reliable,
secure and fast internet connection, however, in case the internet is not working, or the speed
is slower than the company cannot access its data. In case of physical storage of data, there
are no issues of service outage, and the business runs as usual. Sharkh et al. (2013) provided
that in case of cloud computing, the servers depend upon the internet and it can prohibit
organisations from accessing their data. Moreover, the CSP companies could also face the
issues of server downtime or connection issues which restrict corporations from accessing
their data as well even when they are on a stable internet connection.
In case of Netflix, the corporation suffers from server downtime and service outage as well.
As per Sen (2013), while enjoying their content on Netflix, customers did not prefer
interruptions and lag in the media; however, downtime of servers could interrupt their
programs. Netflix has established an official website for its users where they can check

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whether the services of the enterprise are working or whether it is facing any downtime issues
(Netflix, 2018). It also shows how dependent corporations are on the internet while using
cloud computing technology in the business. Yan (2016) stated that a stable, secure and fast
internet connection is essential for companies while using cloud computing because without a
stable connection they cannot access their data. Business operations of an enterprise stop if it
only relies on cloud computing for performing business tasks. On the other hands, companies
operating in emerging markets such as India, Indonesia and Thailand are not able to
effectively use cloud computing because of slow and unreliable internet connection.
Similarly, Netflix faces this issue as well. Most of its content is of high quality which
required that its users must have a reliable and fast internet connection to enjoy its content.
While using cloud computing, vendor lock-in is a big concern for enterprises. Jadeja and
Modi (2012) argued that although CSPs did not charge high prices at the beginning of their
contract, however, they can hike up their prices after ending of their contract because they
know companies will face many challenges in order to switch their data between CSPs.
According to Sanaei et al. (2014), while transferring their data, corporations face a number of
challenges, and they might have to switch their business setup as well. It also hinders their
business because they cannot operate while transferring their data between CSPs. Netflix
would also face these challenges in case the corporation decides to change its CSP. Similarly,
organisations did not have any control over operations of CSPs, and they can take any
business decision which might negatively affect their operations. The limited control over
their data makes it difficult for organisations to accept the cloud computing technology as a
primary solution for their business requirements.

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Conclusion
From the above-stated facts, it can be concluded that the use of modern technologies is
common among organisations because they use it for increasing their efficiency. Cloud
computing technology is becoming popular among companies across the globe. The
corporations use this technology for organising, processing and keeping information. Netflix
uses cloud computing to improve the quality and efficiency of its services which is offered by
the enterprise to a global audience. The technology reduces overall administrative costs of
enterprises. It makes it easier for them manage and access their data anywhere in the world.
However, along with a number of advantages, the corporation also faces many challenges
while using cloud computing technology in the business. The technology relies on the
internet, and it is subject to server downtime. It is difficult for companies to transfer their data
between two CSPs due to which they face the challenge of vendor lock-in. The information is
also vulnerable towards cyber-attacks. Therefore, companies should assess whether cloud
computing technology is beneficial for their business before completely relying on it.
However, they can use it to perform different secondary business tasks which assist in
reducing their overall costs and improving their performance which sustain their future
growth.

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Appendix
Figure 1: Amazon Web Services Market Share
(Source: Columbus, 2015)
Figure 2: Cloud Computing Challenges
(Source: Weins, 2017)

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Figure 3: Growth in Adaptation of Cloud Computing
(Source: Weins, 2017)
Figure 4: Increasing Cloud Computing Revenues
(Source: Richman, 2016)