The Complex and Opaque Cloud Ecosystem: Recommendations for IaaS Providers for a Successful Positioning in the Ecosystem

The Complex and Opaque Cloud Ecosystem: Recommendations for IaaS Providers for a Successful Positioning in the Ecosystem

Reimar Weissbach (Technical University of Munich, Germany), Alexander Bogislav Herzfeldt (Technical University of Munich, Germany), Sebastian Floerecke (University of Passau, Germany) and Christoph Ertl (Technical University of Munich, Germany)
Copyright: © 2020 |Pages: 25
DOI: 10.4018/978-1-7998-1294-4.ch007


In the complex and opaque cloud business ecosystem, service providers face several challenges. The fastest growing field of IaaS is evolving towards a commodity market, resulting in an increasing price competition. By first examining current challenges for cloud service providers, giving a theoretical background on value facilitation with a focus on the areas of value creation, and describing a state-of-the-art cloud ecosystem model, a sound understanding of the current situation is established. The role of value facilitation and standardization as core capabilities for successful IaaS providers are discussed and identified as being crucial for successful long-term survival in the competitive ecosystem. Additionally, learnings from expert interviews are analyzed, and five concrete recommendations for IaaS providers are derived. These recommendations should serve the management of IaaS providers in order to compare, challenge, and potentially adapt their current business models.
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Scientific literature has come up with numerous definitions for cloud computing over the years, either with a stronger business or technical focus. The National Institute of Standards and Technology (NIST) has established a more technical definition that has become the standard both in theory and practice in the meantime. According to NIST, [c]loud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. (Mell & Grance, 2011, p. 2).

A closer look shows that the technology which enables cloud services is not new. Cloud computing is a combination of existing technologies and concepts such as virtualization, autonomic computing, grid computing and usage-based pricing (Zhang et al., 2010). Despite its low degree of novelty in technological terms, cloud computing has fundamentally changed the way IT resources are provided and utilized (Armbrust et al., 2010; Marston et al., 2011). Several scholars therefore see cloud computing as joint development of computing technology and new business models (Floerecke & Lehner, 2018b).

There have been two dominating developments of cloud computing in recent years. On the one hand, public clouds based on large-scale Internet data centers such as offered by Amazon Web Services or Microsoft and on the other hand smaller data centers that host clouds from different users. The latter type is usually found in metropolitan areas and efficiency gains are leveraged by joint management and administration (Zhou et al., 2017). This chapter focuses on the first type, the large-scale cloud computing service providers.

The introduction of cloud computing resulted in an expansion and also in some circumstances replacement of traditional value chains in IT service provision by network-like relations, forming a complex business ecosystem (Böhm et al., 2010; Leimeister et al., 2010). The main trigger for the emergence of the cloud ecosystem was that cloud computing became an enabler for new, innovative business models (Böhm et al., 2011; Iyer & Henderson, 2012). However, research on cloud computing has rather focused on the technical aspects so far. Less consideration has been given to the major changes within the business perspective of IT provisioning (Herzfeldt et al., 2018).

A business ecosystem represents an environment for systemic innovations, where different companies cooperate to deliver customer solutions (Adner, 2017; Moore, 1993). According to the biological ecosystem perspective by Moore (1993), an organization cannot actively choose to be part of an ecosystem or not. Each organization that provides or uses any cloud service or product automatically becomes part of the cloud ecosystem. As organizations continuously enter and leave the business ecosystem, relationships are formed, renewed and dissolved, a business ecosystem thus is highly dynamic (Basole et al., 2015).

Key Terms in this Chapter

Business Ecosystem: A business ecosystem generally represents a pertinent scope for systemic innovations where different interrelated and interdependent companies cooperate in order to mutually deliver customer solutions.

Resource-based view: The resource-based view analyzes and interprets internal resources of an organization and emphasizes resources and capabilities in formulating strategy to achieve sustainable competitive advantages.

Business model: A business model is made up of several constitutive components acting as a tool for depicting, innovating and evaluating the business logic of an organization.

Value Co-Creation: Value co-creation is a joint process that takes place on a co-creation platform involving a service provider and a customer, where the service provider’s service (production) process and the customer’s consumption and value creation process merge into one process of direct interactions.

Managed Services: Managed services are the extension of offering pure cloud services towards the customer. Whereas a cloud service provision is e.g., Infrastructure-as-a-Service (IaaS), the managed service could be managing a web server based on the given infrastructure.

Cloud Computing: Cloud computing is a new technology mix based operations model where computing services (both hardware and software) are delivered on-demand to customers over a network in a self-service fashion, independent of device and location. The literature distinguishes between three main service models (Infrastructure-as-a-Service, Platform-as-a-Service and Software-as-a-Service) and four deployment models (public, hybrid, private and community).

Value Facilitation: The way a service provider contributes to the customer’s value creation by offering resources representing potential value-in-use.

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