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Cloud compounding impact on businesses Essay

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Updated: Nov 20th, 2019

Definition of cloud compounding

Cloud compounding refers to a configuration that permits the provision of ubiquitous and efficient real-time network access to pooled computing resources. These resources are configurable and include networks, storage, servers, services and applications. Access to these resources is fast and requires minimal management effort or intervention by a service provider. Cloud compounding allows users in a network to access resources that are not in the user computer but elsewhere in the internet (Gartner, 2012).

How it works

The cloud was a product of global computing infrastructure developed by large online based companies such as Google and Amazon, to run their own operations. These companies developed large data centers in different parts of the world with high speed connections, and identified business opportunities in providing additional data storage and computing services to other organizations.

The data centers can hold tens of thousands of servers, each of which runs an operating system application that is capable of providing numerous ‘virtualized’ atmospheres to clients. Consumers can use these environments to operate their own programs, without intruding on other applications running concurrently on the same server (Gartner, 2012).

Efficient management of the virtualization process is possible through the integration of systems that enhance stability and security of the cloud. The three main types of clouds are public, private and hybrid clouds. These clouds are used for various services as infrastructure, applications and platforms (Gartner, 2012).

Advantage of cloud compounding

Cloud services are useful to consumers, businesses ad public authorities. The most popular cloud service for businesses involves productivity suites that function in a similar manner to popular applications like word editors. An example of such a cloud suite is ‘Office 365’ by Microsoft, which contains word processing, spreadsheets and presentation tools.

Cloud compounding provides organizations with a flexible form of outsourcing since it minimizes ICT operation and maintenance costs, while enabling the consolidation and optimization of computer hardware and software resources (Fielder & Brown, 2012).

Businesses are able to save on costs that would have, otherwise, been used to purchase expensive infrastructure. Using the cloud allows companies to allocate operational budgets as required and allows businesses to try out various novel services and roll-out the most effective ones. This allows small businesses with limited infrastructure to access the necessary business services that are available on the cloud including business continuity planning, management of demand spikes and full outsourcing requirements.

Clouds enhance the collaboration process between various organizational functions by forming the link between multiple providers. Cloud compounding also reduces the infrastructure requirements for new businesses, which allows them to focus their limited resources on scaling (Fielder & Brown, 2012).

Disadvantages of cloud compounding

Consumers and businesses are faced with cloud compounding challenges. The main concerns for consumers include data security, provider failures and access to law enforcement. The primary concerns for businesses are confidentiality of corporate data, privacy and integrity of services. Other challenges for businesses associated with cloud compounding include loss of control of services, lack of liability of providers, intra-cloud migration challenges and vague terms of payment (Fielder & Brown, 2012).

The main hurdle for both consumers and businesses in adopting cloud compounding are lack of privacy and standardisation. Data security risks involve the interception of data during authentication and communication within the cloud. Providers are not transparent on safety mechanisms for cloud users, though they provide dedicated clouds that are managed by individual organizations. Additional safety procedures involve audit and verification of systems of the providers (Fielder & Brown, 2012).

Contribution to business value and performance

Cloud compounding has different uses depending on the user. For consumers, the cloud is used for file storage, email, payment, information and content sharing and music and video streaming.

Businesses, on the other hand, are motivated to take up cloud compounding in order to reduce capital expenditure, allow flexible scalability of IT infrastructure, enhance business continuity due to ease of recovery from disasters, optimize on computing capacity, eliminate the need for expertise and better control of marginal costs. Businesses use the cloud for project management, as a collaboration platform and for the design of custom programs (Gartner, 2012).

Cloud compounding is useful in business operations since it enables organizations to focus their finances on necessary resources. It allows for economies of scale, access to a wide variety of services and proficient use of resources. Businesses that use cloud compounding are able to increase their performance in two ways. To start with, companies use clouds to overcome the drudgery of putting up and sustaining IT infrastructure.

This enables them to direct their resources to the optimization of available infrastructure. Secondly, clouds provide businesses with flexibility in terms of easy modification of existing IT infrastructure in scaling the organization. The costs involved in transforming the company IT infrastructure, due to changes in the business processes, are considerably less compared to changing traditional IT services (Gartner, 2012).

Research shows that small businesses and start-ups are migrating to cloud compounding faster than the larger organizations. For instance, mobile application markets are cloud enabled. This is due to the numerous benefits associated with cloud compounding. The widespread adoption of businesses to cloud compounding is expected to increase due to its characteristic of improving business agility and the tendency of companies to move towards green initiatives (Fielder & Brown, 2012).


Fielder, A., & Brown, I. (2012). Cloud Computing: Internal Market and Consumer Protection. Policy Department A: Economic and Scientific Policy.

Gartner, D. P. (2012). The Business Landscape of Cloud Computing. Financial Times: The connected business.

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