CLOUD COMPUTING IN THE CONTEXT OF OFF-SHORING OF TECHNOLOGY

CLOUD COMPUTING IN THE CONTEXT OF OFF-SHORING OF TECHNOLOGY Chirag Patel and James Lawler Pace University 163 William Street New York, New York 10038 212-346-1013 lawlerj@aol.com ABSTRACT Business firms continue to offshore computer systems and technologies and can benefit economically by cloud computing. Countries not considered in the literature as off-shoring leaders in technologies can also benefit from furnishing cloud computing as a service to business firms in the United States. The authors of this exploratory paper analyze the feasibility of cloud computing as a method for off-shoring systems to countries not considered frequently as leaders in the off-shoring of technologies Indonesia, Philippines and Singapore. Elements of infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS) and software-as-a-service (SaaS) are examined in each of the countries, in order to evaluate the plausibility of firms in the United States investing prudently in cloud computing technology in these countries. This paper can benefit managers considering investment in cloud computing services and systems offered by technology firms hosting technologies in other countries and will furnish a foundation for further research study of the cloud and the off-shoring of technologies. KEYWORDS: Cloud, Cloud Computing, Indonesia, Infrastructure-as-a-Service (IaaS), Off- Shoring of Technology, Outsourcing, Philippines, Platform-as-a-Service (PaaS), Singapore, Software-as-a-Service (SaaS) Cloud Computing BACKGROUND AND DEFINITION Cloud computing is defined as a model for enabling convenient, on-demand network access [by business firms] to a shared pool of configurable computing resources that can be provisioned rapidly and released with minimal management effort or [cloud] service provider [CSP] [or technology firm] interaction [21]. Cloud computing is delivered in the following models: - Infrastructure-as-a-Service (IaaS), employed as on-demand services, such as networks, processors and storage; - Platform-as-a-Service (PaaS), employed as services, such as languages, operating systems, optimized middleware and tools; or - Software-as-a-Service (SaaS), employed as paying-as-you-go services, such as applications, data and processes [12].

Benefits of the models are in business agility [6], as deployment of new products or services is enabled by a faster on-demand infrastructure, not rigid infrastructures of information systems departments of business firms [2]. Elasticity is enabling optimized pay-as-you-go scalability of services in minutes, if not seconds, at a lower investment in over-or-under provisioning of systems [9]. The benefits of the cloud are cited frequently in the literature [10] and are evident in forecasts that cloud computing may not be an evolution but a revolution [22] potentially the most profound revolution since the Internet [8]. Estimates from the Forrester Group indicate that the global market for cloud computing will grow from $40.7 billion in 2011 to $241 billion in 2020, of which SaaS and PaaS will have the highest potential through 2020 [32]. Cloud computing as hyped in the literature may be for business firms the new mainstream platform [17] or strategic inflection point [4] of technology in 2011 2014. Off-Shoring of Systems and Technology Off-Shoring of Systems and Technology is defined as transferring of responsibility of information services, systems and technologies to a [domestic or foreign technology firm] third party [that is] hosting the services, systems and technologies in an [external] foreign country [11]. Business firms in the United States may benefit from the economics and efficiencies from the off-shoring of technologies on to cloud computing platforms if the platforms are hosted in countries evaluated as off-shoring leaders in technologies. However, countries not evaluated frequently as off-shoring leaders in technologies may be candidates for off-shoring of technologies due to the generic hosting of the technologies on the cloud [25] instant outsourcing [33]. In brief, countries not evaluated as off-shoring leaders may compete with the off-shoring leaders of technologies and may be feasible for business firms in the United States considering investment in outsourcing of technologies through the cloud. INTRODUCTION TO PAPER In this paper the authors explore countries not evaluated as off-shoring leaders that may have a feasible foundation to be participants through cloud computing platforms. Given exponential growth in the Asia and Pacific market a $55.9 billion market in information technology in 2011 [24], the analysis is currently explored from a choice of countries from the Asia Pacific Information Technology Series Market and Forecast 2006 2011 of the Springboard Research Group [24]. Indonesia, Philippines and Singapore are explored in this paper, and Korea, Malaysia and Vietnam may be explored in a later analysis. From earlier findings of the secondary author of the paper [11] evaluated for 2011, the offshoring leaders of China and India have benefited from factors fundamental in off-shoring of technologies:

Table 1: Leaders in Off-Shoring of Technologies Factors China India Competency Programming and Project High High Management Culture Cultural Affinity, Innovation Low High and Language Compatibility Economy Currency Fluctuation and Intermediate Intermediate Industry Growth Education Educational Labor Pool High High Geography Geographic Disturbances Intermediate Intermediate Government Corruption, Geopolitics Intermediate Low and Stability Law Intellectual Property, Legislation Low Intermediate and Tax Security Information and Infrastructure Low Intermediate Technology Investment in High High Infrastructure and Telecommunications Volatility Turnover of Information Low Intermediate Technologies Legend: High High Factor Level (from Literature), Intermediate Intermediate Factor Level and Low Low Factor Level Source: [11, Revised] Nevertheless, the off-shoring non-leaders of Indonesia, Philippines and Singapore have also benefited from the factors at high, intermediate and low levels in the earlier findings [11] enhanced for 2011, as noted below: Table 2: Non-Leaders in Off-Shoring of Technologies Factors Indonesia Philippines Singapore Competency Intermediate Intermediate High Culture Intermediate High High Economy Intermediate Intermediate High Education High Intermediate High Geography Intermediate Intermediate Intermediate Government Low Intermediate High Law Low Intermediate High Security Intermediate Intermediate Intermediate Technology Intermediate Intermediate Intermediate Volatility High Intermediate Low

Source: [11, Revised] For factors in general, and in feasible foundations for cloud platforms, it is clear that the nonleaders in the off-shoring of technologies infrastructure-as-a-service (IaaS), platform-as-aservice (PaaS) and software-as-a-service (SaaS) may be beneficiaries of a demand for offshoring of technologies that might be enhanced by the differentiation of cloud computing platforms, especially as the leaders in the technologies experience growth issues [35]. Literature is clear that countries are confronting an environment in which all of them may compete in an era of globalization [19], justifying the focus of the paper on the non-leaders in the off-shoring of technologies. FOCUS The paper explores the feasibility for the cloud as a method for the off-shoring of technologies to Indonesia, Philippines and Singapore. Elements of infrastructure-as-a-service (IaaS), platformas-a-service (PaaS) and software-as-a-service (SaaS) are explored for investment plausibility in these countries. Emphasis of this exploratory paper is on the features of cloud computing that may enable a foundation for off-shoring of technologies to these countries. This paper expands frequent literature on cloud computing to the niche of off-shoring to countries not considered leaders in technologies. The findings of this initial paper form a framework for further research study. METHODOLOGY The methodology of this paper consisted of a four credit Independent Project Study in Cloud Computing and Off-Shoring of Technology, conducted by an experienced graduate student in the Seidenberg School of Computer Science and Information Systems of Pace University, in the period of December 2010 July 2011. The student analyzed industry literature and attended practitioner conferences on cloud computing and outsourcing in the period of study. The analysis was done in five iterative stages and was focused from a literature survey: - Cloud computing concepts, models and practices; - Off-shoring methods of business firms in United States; - Off-shoring methods of domestic and foreign technology firms; - Off-shoring practices of leading technology firms in Asia Pacific Region; and - Potential of cloud computing processes and technologies in Indonesia, Philippines and Singapore of Asia Pacific Region. The foundation for this survey was an earlier Off-Shore Outsourcing Study [11] at the Seidenberg School conducted by the secondary author of this current study. Throughout the period of this current study, the student, who is the primary author, was supervised by the secondary author of this Study, an instructor in Cloud Computing, who synthesized the findings of the student.

PRELIMINARY ANALYSIS COUNTRY SNAPSHOTS The bulk of the preliminary analysis was done on the cloud computing potential of off-shoring practices of technologies of the non-leaders in the off-shoring of technologies of the study: Indonesia, Philippines and Singapore. Indonesia As a competitor to China and India, in essentially PaaS, Indonesia appears to be feasible for a cloud computing low level opportunity in PaaS (i.e. developmental projects in software and tools). Firms in Australia including Mitrais [15], and firms including Oracle and VM Ware in the United States, have invested in developmental projects that may enable a foundation for limited PaaS. The demand driver for the country is engineering skills of graduates from specialized Indonesian institutions that benefit off-shoring projects [15]. Indonesia benefits further from compensation efficiencies on projects of software [18]. Though PaaS may be a feasible opportunity for business firms considering investing in Indonesia, data center hosting is not frequent and Internet intensity is not high in Indonesia [36] for IaaS (i.e. networks, processors and servers). Firms installing data center operations for outsourcing services may be impacted by governmental intrusions on the services [5] [31]. SaaS (i.e. applications and processes) may not be a feasible opportunity for firms investing in Indonesia, given less compatibility in culture and language to the United States [26]. There are factors moreover of murky politics and regulations that are intrusions to investments [20] in not only SaaS but also PaaS and IaaS. Indonesia appears to be a country for limited PaaS outsourcing of projects of software. Indonesia is positioned to be a feasible but low level proposition for cloud computing constrained in the future to PaaS. Philippines Philippines appear to be feasible fundamentally for cloud computing intermediate level opportunity. The country has exceeded India in call centers [28]. AT&T, Cisco, Expedia, IBM and Microsoft have invested in call centers in the Philippines that may enable a foundation for SaaS (i.e. applications and processes). Tata Consulting Services of India has even invested in operations in the Philippines [3] [5] [29]. The demand drivers in the country are cost efficiencies from lower costs of higher skilled staff and higher incentives in taxation than in India. Philippines benefits further than India from more compatibility in culture to the United States. Though less favorable than in India, the infrastructure in telecommunications is feasible moderately in the Philippines [28] that it furnishes a foundation for SaaS if not in the future IaaS (i.e. networks of processes) or PaaS (i.e. optimized software and tools) from the skilled staff. The benefits however may be diluted by engineering and science skills that are higher in India than in the Philippines, though staff turnover is higher in India than in the Philippines. Philippines appear to be an evolutionary hub for investment in limited outsourcing of technologies. Philippines are positioned to be a feasible but intermediate proposition for cloud computing opportunity. Singapore

Of the non-leaders in technologies in the study, Singapore appears to be the most feasible country for a cloud computing high level opportunity. The country has more data centers than other countries in the Asia Pacific region exclusive of Hong Kong and Japan. HP and IBM have invested in data centers and laboratories in Singapore [1] [7] [13] [16] that may facilitate a foundation for IaaS (i.e. processors and servers). Google and Microsoft have invested in hubs of networks and network partners in Singapore [27] that may also furnish a foundation for Iaas (i.e. networks). The demand driver in the country is cost efficiency in the existing infrastructure of technologies in Singapore in contrast to that of the United States. Singapore benefits further from engineering and scientific skills of staff and standards equitable increasingly to those of Japan and the United State [23]. This contributes however to higher costs of outsourcing to Singapore than to India or China. Though costs may be a concern for business firms considering investment in the country, Singapore is considered to be ideally positioned to be the hub for investment in strategic technologies [30]. The country is implementing a broadband in2015 next-generation network of 1gbps for technology and business firms in Singapore [14]. Singapore is positioned to be a feasible high level optimal proposition for cloud computing opportunity. Indonesia, Philippines and Singapore PRELIMINARY SUMMARY ANALYSIS Indonesia, Philippines and Singapore appear to enable feasible cloud opportunities. Singapore affords immediate opportunity in infrastructure-as-a-service (IaaS) [i.e. networks, processors and servers]; Philippines affords opportunities in software-as-a-service (SaaS) [i.e. applications and processes] and further possibilities in IaaS and platform-as-a-service (PaaS) [i.e. software and tools]; and Indonesia affords limited opportunities in PaaS though the foundations extend from high to low levels. Any one of the models of IaaS, PaaS and SaaS affords a foundation for cloud computing potential in these countries. Table 3: Non-Leaders in Off-Shoring of Technologies - Cloud Computing Foundations Cloud Computing Potential Foundations Indonesia Philippines Singapore Infrastructure-as-a- - Low High Service (IaaS) Platform-as-a- Intermediate Low - Service (PaaS) Software-as-a- - Intermediate - Service (SaaS) Overall Potential Low Intermediate High

Legend: High High Potential, Intermediate Intermediate Potential, and Low Low Potential of Technologies Singapore and Philippines afford more competencies than Indonesia for enabling cloud computing opportunities. None of the countries appear to have matured infrastructures and methodologies for ensuring fulfilling services to business firms in the United States. The preliminary analysis discloses that business firms in the United States investing in these countries for cloud computing opportunities have to approach investment with a caution higher than in the countries considered leaders in the outsourcing of technologies. PRELIMINARY IMPLICATIONS From the preliminary findings, cloud computing is a feasible proposition in the off-shoring of technologies to the countries in the paper. Countries not considered as off-shoring leaders in technologies may be an alternative to business firms evaluating partnership with technology firms hosting systems and technologies in these countries. Countries evaluated as off-shoring leaders in technologies may not have a control of the field of off-shoring of technologies due to cloud computing. Cloud computing is also and may be even an immediate proposition for countries evaluated in the literature as off-shoring leaders in technologies. Technology firms hosting technologies in these countries may be more established in competencies for taking advantage of the cloud. Such firms may have higher budgets to invest in cloud computing sooner than firms in countries not off-shoring leaders, impacting the competitiveness of propositions presented by technology firms in the countries not off-shoring leaders in technologies. Business firms in the United States may consider a balanced country portfolio mix of technology firms hosting technologies in countries that are off-shoring leaders and countries that are not leaders in technologies. The strategy may enable business firms in the United States to choose the best of core competencies in cloud computing and off-shoring of technologies in different technology firms in different countries. This strategy may mitigate moreover the investing risks in one country, especially in a developed or emerging country. Business firms in the United States may have to be cautious of investment in technology firms hosting technologies in countries not evaluated as off-shoring leaders in technologies. These technology firms may not have matured methodologies for servicing business firms in the United States. This is a further factor impacting the competitiveness of propositions presented by these technology firms, in contrast to technology firms evaluated as off-shoring leaders in technologies. Finally, firms in the United States may have to demand evidence of methodologies from foreign or domestic technology firms in countries not evaluated as off-shoring leaders in technologies. These technology firms may not have proven processes and standards for integrating existing technologies with new technologies, such as cloud computing, as envisioned in this paper. In short, managers in the United States may have to exercise greater inquiry in propositions presented by technology firms in countries analyzed in this paper.

LIMITATIONS AND OPPORTUNITIES The paper is constrained in contribution to the field, as it is an exploratory study. Emphasis of the paper on the features of cloud computing without expanded explanation of issues of cloud management, and liabilities and risks of security [34], is limiting in impact on investment. Information on business firms in the United States that have expanded off-shoring practices of private and public cloud models of technologies is needed in a new paper. However, this paper furnishes opportunities for further in-depth research of countries developing, emerging and higher-tier in the Asia Pacific region as impacted by the cloud computing and off-shoring of technologies theme. This research will be initiated in 2012. CONCLUSION This paper can benefit practitioners considering cloud computing in the off-shoring of technologies to other countries. The exploratory findings of this paper disclose cloud computing as a feasible initial proposition in the off-shoring of technologies to Indonesia, Philippines and Singapore, the focus of the study. Business firms in the United States may consider cloud computing methodology and technology in the off-shoring of technologies to these countries not evaluated as off-shoring leaders and concurrently to those countries noted to be off-shoring leaders in technologies, in a balanced country portfolio strategy. Firms however must inquire of methodological practices and standards and learn of risks in any of these countries for a plausible proposition. The findings of this paper form an initial framework for further study in 2012. REFERENCES [1] Babcock, C. HP launches cloud lab in Singapore. InformationWeek, 2010, February 24, 1-2. [2] Betts, M. Report: Cloud information technology (it) ideal for testing innovative ideas. Computerworld, 2010, August 23, 5. [3] Chickowski, E. Outsourcing slideshow: 9 alternatives to Indian outsourcing. CIO Insight, 2009, March 23, 1. Retrieved from: http://www.cioinsight.com/c/a/outsourcing/9-alternativesto-indian-outsourcing-411423/. [4] Chorafas, D.N. Cloud computing strategies. Boca Raton, Florida: Taylor & Francis Group, 57, 2011. [5] Darmawan, I. & Farida, A. RIM asked to build data center in Indonesia. VIVAnews, 2010, August 5, 1. Retrieved from: http://us.en.vivanews.com/news/read/169233-rim-asked-to-builddata-center-in-indonesia. [6] Fogarty. Which applications should you move to the cloud?: 5 guidelines. CIO, 2010, August 18, 2. [7] Gwendolyn, R. IBM opens cloud computing laboratory in Singapore. sgentrepreneurs, 2010, May 7, 1. Retrieved from: http://sgentrepreneurs.com/news-stop/2010/05/07/ibm-opens-cloudcomputing-laboratory-in-singapore/. [8] Hugos, M. & Hulitzky. Business in the cloud: What every business needs to know about cloud computing. Hoboken, New Jersey: John Wiley & Sons, Inc., 38, 2011. [9] Klems, M. Twenty-One experts define cloud computing. Cloud Computing Journal, 2010, November, 1. [10] Kontzer, T. Your cloud checklist for 2015,.CIO Insight, 2011, January, 1-4.

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