The ultimate guide to assessing and exploiting the customer value and revenue potential of the Cloud A new business model is sweeping the world the Cloud. And, as with any new technology, there is a great deal of fear, uncertainty, and doubt surrounding cloud computing. Cloudonomics radically upends the conventional wisdom, clearly explains the underlying principles and illustrates through understandable examples how Cloud computing can create compelling value whether you are a customer, a provider, a strategist, or an investor. Cloudonomics covers everything you need to consider for the delivery of business solutions, opportunities, and customer satisfaction through the Cloud, so you can understand it and put it to work for your business. Cloudonomics also delivers insight into when to avoid the cloud, and why. * Quantifies how customers, users, and cloud providers can collaborate to create win-wins * Reveals how to use the Laws of Cloudonomics to define strategy and guide implementation * Explains the probable evolution of cloud businesses and ecosystems * Demolishes the conventional wisdom on cloud usage, IT spend, community clouds, and the enterprise-provider cloud balance Whether you're ready for it or not, Cloud computing is here to stay. Cloudonomics provides deep insights into the business value of the Cloud for executives, practitioners, and strategists in virtually any industry not just technology executives but also those in the marketing, operations, economics, venture capital, and financial fields.
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The ultimate guide to assessing and exploiting the customer value and revenue potential of the Cloud A new business model is sweeping the world the Cloud. And, as with any new technology, there is a great deal of fear, uncertainty, and doubt surrounding cloud computing.
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Preface xv Acknowledgments xxi CHAPTER 1 A Cloudy Forecast 1 Clouds Everywhere 2 Cashing In on the Cloud 6 Beyond Business 8 Clarifying the Cloud 11 Farther On 12 Summary 13 Notes 13 CHAPTER 2 Does the Cloud Matter? 17 Productivity Paradox 19 Competitiveness Confrontation 21 Summary 26 Notes 26 CHAPTER 3 Cloud Strategy 29 Insanity or Inevitability? 30 Democratization of IT 31 Industrialization of IT 32 Strategy 33 The Cloud: More than IT 35 The Networked Organization 38 Form Follows Function, IT Follows Form 41 Aligning Cloud with Strategy 42 Everyware, Anywhere 42 Summary 44 Notes 44 CHAPTER 4 Challenging Convention 49 What Is the Cloud? 50 Economies of Scale 50 Competitive Advantage and Customer Value 52 Cloud Ecosystem Dynamics 55 IT Spend 58 Issues with the Cloud 59 Summary 61 Notes 61 CHAPTER 5 What Is a Cloud? 63 Defining the Cloud 64 On-Demand Resources 66 Utility Pricing 67 Common Infrastructure 68 Location Independence 69 Online Accessibility 70 Difference from Traditional Purchase and Ownership 70 Cloud Criteria and Implications 72 Is the Cloud New or a New Buzzword? 73 Summary 75 Notes 76 CHAPTER 6 Strategy and Value 77 Access to Competencies 77 Availability 79 Capacity 79 Comparative Advantage and Core versus Context 80 Unit Cost 80 Delivered Cost 80 Total Solution Cost 82 Opportunity Cost and Cost Avoidance 83 Agility 83 Time Compression 84 Margin Expansion 85 Customer and User Experience and Loyalty 86 Employee Satisfaction 87 Revenue Growth 87 Community and Sustainability 87 Risk Reduction 88 Competitive Vitality and Survival 88 Summary 89 Notes 89 CHAPTER 7 When and When Not to Use the Cloud 91 Use Cases for the Cloud 91 Inappropriate Cloud Use Cases 101 Summary 104 Notes 104 CHAPTER 8 Demand Dilemma 107 A Diversity of Demands 108 Examples of Variability 109 Chase Demand or Shape It? 120 Summary 121 Notes 122 CHAPTER 9 Capacity Conundrum 125 Service Quality Impacts 126 Fixed Capacity versus Variable Demand 127 Splitting the Difference 129 Better Safe than Sorry 131 Capacity Inertia 134 Summary 135 Notes 135 CHAPTER 10 Significance of Scale 137 Is the Cloud Like Electricity? 139 Distributed Power Generation 140 Is the Cloud Like Rental Cars? 141 Capital Expenditures versus Operating Expenses 143 Benchmark Data 145 Cost Factors 147 Benchmarking the Leaders 150 Size Matters 151 Summary 155 Notes 155 CHAPTER 11 More Is Less 159 Is the Cloud Less Expensive? 159 Characterizing Relative Costs and Workload Variability 161 When Clouds Cost Less or the Same 163 If Clouds Are More Expensive 164 Beauty of Hybrids 164 Cost of the Network 167 Summary 169 Notes 170 CHAPTER 12 Hybrids 171 Users, Enterprise, and Cloud 172 Hybrid Architecture Implementations 174 Summary 180 Notes 180 CHAPTER 13 Fallibility of Forecasting 181 Even Stranger than Strange 182 Demand for Products and Services 183 System Dynamics 185 Whips and Chains 186 Exogenous Uncertainty 186 Behavioral Cloudonomics of Forecasting 187 Summary 190 Notes 191 CHAPTER 14 Money Value of Time 193 Demand and Resource Functions 193 Cost of Excess Capacity 195 Cost of Insufficient Capacity 196 Asymmetric Penalty Functions, Perfect Capacity, and On Demand 197 Flat Demand 197 Uniformly Distributed Demand 197 Better Never than Late 199 MAD about Being Normal 200 Triangular Distributions 201 Linear Growth 201 Exponential Growth 202 Random Walks 204 Variable Penalty Functions 206 Summary 207 Notes 208 CHAPTER 15 Peak Performance 209 Relationships between Demands 210 Lessons from Rolling Dice 212 Coefficient of Variation and Other Statistics 215 Statistical Effects in Independent Demand Aggregation 216 Significance of 1/ ffiffiffiffi mp 218 Issues with Perfectly Correlated Demand 220 Community Clouds 220 Simultaneous Peaks 221 Peak of the Sum Is Never Greater than the Sum of the Peaks 222 Utilization Improvements 224 Summary 225 Notes 226 CHAPTER 16 Million-Dollar Microsecond 227 On Time 228 Rapidity Drives Revenue 230 Built for Speed 232 Summary 233 Notes 233 CHAPTER 17 Parallel Universe 235 Limits to Speedup 236 Amdahl versus Google 237 Free Time 240 Summary 243 Notes 243 CHAPTER 18 Shortcuts to Success 245 Rapid Transit 246 Sending Letters 247 Short on Time 249 Bandwidth Isn t Enough 252 Summary 253 Notes 253 CHAPTER 19 Location, Location, Location 255 Latency and Distance 255 Circle Covering and Circle Packing 257 Inverse Square Root Law 258 Spherical Caps and the Tammes Problem 260 Summary 263 Notes 263 CHAPTER 20 Dispersion Dilemma 265 Strategies for Response Time Reduction 266 Consolidation versus Dispersion 268 Trade-offs between Consolidation and Dispersion 269 Benefits of Consolidation 270 Benefits of Dispersion 271 The Network Is the Computer 272 Summary 274 Notes 274 CHAPTER 21 Platform and Software Services 277 Infrastructure as a Service Benefit 279 Paying on Actuals versus Forecasts 280 Installation 280 Investment 281 Updates 281 Service-Level Agreements 281 Continuously Earned Trust 282 Visibility and Transparency 282 Big Data and Computing Power 283 Ubiquitous Access 283 Response Time and Availability 284 Multitenancy, Shared Data 284 Cloud-Centric Applications 284 Scalability 285 Communities and Markets 285 Lock-in 285 Security and Compliance 286 PaaS: Assembly versus Fabrication 287 Innovation and Democratization 287 Deconstructing the Pure SaaS Model 288 Summary 290 Notes 291 CHAPTER 22 Availability 293 Uptime versus Downtime 295 Availability and Probability 296 Availability of Networked Resources 296 Availability via Redundancy and Diversity 297 On-Demand, Pay-per-Use Redundancy 300 Summary 301 Notes 301 CHAPTER 23 Lazy, Hazy, Crazy 303 Behavioral Economics 303 Loss and Risk Aversion 304 Flat-Rate Bias 305 Framing and Context 307 Need for Control and Autonomy 307 Fear of Change 308 Herding and Conformity 309 Endowment Effect 310 Need for Status 311 Paralysis by Analysis of Choice 311 Hyperbolic Discounts and Instant Gratification 312 Zero-Price Effect 313 Summary 313 Notes 314 CHAPTER 24 Cloud Patterns 317 Communications Patterns 317 Hierarchies 321 Markets 323 Repository 326 Perimeters and Checkpoints 326 Summary 327 Notes 328 CHAPTER 25 What s Next for Cloud? 329 Pricing 329 Ecosystems, Intermediaries, and the Intercloud 332 Products versus Services 336 Consolidation and Concentration 336 City in the Clouds 338 Spending More while Paying Less 339 Enabling Vendor Strategies 340 Standards, APIs, Certification, and Rating Agencies 344 Commoditization or Innovation? 345 Notes 349 About the Author 353 About the Web Site 355 Index 357
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CLOUDONOMICS The Business Value of Cloud Computing It has created vast wealth for companies that seemed to spring up overnight, and it has brushed aside corporate icons, even entire industries, that once seemed unassailable. It has helped topple brutal dictatorships and has brought IT from the backroom into the boardroom, making it the centerpiece of some of the most farsighted and successful corporate strategies of the new millennium. It is the cloud, and it has forever changed the way business is done. But what is the cloud, really? How does it work and how is it being deployed by some of today's most successful companies? More importantly, how can you harness its awesome power to help you wage and win the never-ending battle for profits and market share? Find the answer to these questions and much more in Cloudonomics. Written by Joe Weinman, one of the world's most influential cloud thought leaders, this book is a gold mine of ideas, insights, and inspiration for leaders of established companies and for aspiring entrepreneurs who dream of being the force behind the next Amazon, Google, Facebook, or Twitter. Using fascinating and instructive case studies to illustrate his points, Weinman drills down past the hype and hysteria, the myths and misconceptions, to uncover fundamental principles underlying how the cloud works, how it's used, and how it will evolve in a business context. Among other priceless takeaways, you'll discover: Where the conventional wisdom errs, and how to keep your IT and strategy on courseHow core characteristics of the cloud—such as on-demand resources, usage-based charging, and geographic dispersion—translate into business value: revenue growth, cost and risk reduction, and customer experience enhancementWhy the cloud isn't just plumbing, but can become a cornerstone of your strategy, even in non'IT intensive businessesHow to leverage new cloud business modelsHow behavioral economics—humans' "predictable irrationality"—impacts cloud adoptionHow cloud technology and ecosystems are likely to evolve over the next decade With a dynamic companion website, this book offers a critical, in-depth review of the cloud and its business uses now and in the near future, and an inspiring exploration of the business paradigm shift it has engendered. Cloudonomics is "must" reading for CIOs, CEOs, CFOs, strategists, IT managers and practitioners, students and academics, and all forward-thinking corporate leaders and entrepreneurs.
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"In his new book, Joe Weinman explores many of the areas being impacted by the cloud computing phenomenon, offering compelling value propositions. He spells out, extremely thoroughly, the business cases and cost justifications that go behind cloud computing efforts. He also provides 28 business areas where cloud does and doesn't make business and financial sense." (, September 2012)
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John Wiley & Sons Inc
742 gr
233 mm
171 mm
31 mm
P, 06
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Product format
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JOE WEINMAN is Senior Vice President, Cloud Services and Strategy, Telx, and a former executive at HP, AT&T, and Bell Labs. He is the founder of Cloudonomics and the Cloudonomics(R) blog. He is a frequent global keynote speaker, a prolific inventor awarded fifteen patents, and a guest contributor syndicated to a variety of print and online publications, such as Bloomberg Businessweek, Forbes, CNNMoney, InformationWeek, and He has been interviewed frequently in the press and on global broadcast television.