Moving to the Cloud: Growing relevance for utilities

Growing relevance for utilities

Cloud computing is undoubtedly the next big thing in IT. It is estimated that 60 per cent of all IT workloads will be moved to the cloud over the next three to four years. According to an Infosys study, about 24 per cent of enterprises have already created a roadmap to invest in cloud computing. Cloud computing, in the simplest terms, refers to storing and accessing data and program on remote servers hosted on the internet instead of a personal computer’s hard drive. Cloud computing services entail the delivery of on-demand computing resources including applications and data centres over the internet on a pay-per-use basis.

Cloud computing services can be private, public or hybrid, depending on the business needs. Private cloud is an environment operated for a single organisation, managed internally or by a third party. In public cloud, services are rendered over a public network. Meanwhile, a hybrid cloud is a composition of public and private cloud. It offers the benefit of the other two models and an environment that renders services over a network that is open for public. As per the Infosys study, 69 per cent of the enterprises surveyed have invested in private cloud while 40 per cent have invested in public or hybrid clouds.

Categories of cloud services

There are three key categories of cloud services – software-as-a-service (SaaS), platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS).

  • SaaS: These services include software and database. Some of the SaaS providers are Google, Webex and IBM LotusLive.
  • PaaS: This includes a computing platform, which typically comprises an operating system, database and a web server. Users can develop their own products using these services. Some of the PaaS providers are Windows Azure and Salesforce.
  • IaaS: This is the most basic cloud service, which includes virtual machines, servers, storage and active network components. Some of the IaaS providers include Amazon web services, IBM and VMware.

Advantages of cloud computing

A key function of cloud computing is that it reduces both the capital and operating expenditures of an enterprise as resources are acquired only when needed and are paid for only when used. This ensures efficient resource utilisation.

In addition, cloud computing offers “just-in-time” infrastructure and provides the benefit of usage-based costing. Zero upfront costs and reduced time to market are other positives.

Another key advantage of cloud computing is the optimal utilisation of personnel. The use of cloud computing frees up valuable personnel, allowing them to focus on delivering value rather than maintaining hardware and software.

Besides, cloud computing offers scalability, that is, it allows for immediate scaling, either up or down, at any time without long-term commitment.

In contrast, on-premises storage systems entail high capex and opex, require in-house maintenance and support, and are installed on site.

Barriers to cloud computing

Despite several advantages, there are a few roadblocks to the adoption of cloud services and the lack of direct control is one of them. With data hosted by a cloud provider and not on the company’s premises, enterprises often feel that data is no longer under their direct control and is somehow more vulnerable to threats.

Security is another concern related to cloud computing. Enterprises feel that data hosted on a cloud environment, particularly on public cloud, is unsecured.

Besides, unpredictable pricing is a frequent concern for many companies considering cloud computing. Many cloud providers operate on a utility pricing model, wherein customers are charged by usage, which is similar to the pricing models in the telecom and electricity industries.

Data lock-in is also a key issue. Once a firm commits to the cloud computing service provider, it is bound to stick to the same provider. Further, viability and reliability of the service provider is a point of concern for many enterprises as software changes and updates made by the service provider are a little unpredictable.

Cloud solutions for utilities

Cloud computing is a suitable solution for electric utilities given their intermittent high resource requirements. For instance, advanced metering infrastructure, analytics and customer care applications have high resource requirements. Meanwhile, metering, billing and collection applications have medium resource requirements, and connection management, work and asset management applications have low resource requirements.

Distribution utilities need best-in-class business solutions to improve their return on investment. Utilities need to focus on their core business of network operations and customer service, and IT is an important enabler function in this regard. However, utilities spend precious capex on network improvement rather than on enabling functions like IT. Moreover, overall business value to utilities does not come just by provisioning IT systems but through additional business insights such as performance monitoring and alerts, business insights through analytics, cost-effective yet efficient operations of IT systems, and the ability to support solution extensibility and scalability.

An analysis of metering, billing and collection (MBC) applications without cloud showed that the utilisation of the central processing unit’s (CPU) database server went beyond the threshold about 141 times, memory utilisation of the database server went beyond the threshold 755 times, and memory utilisation of the MBC application server went beyond the threshold by about 1,901 times. Cloud-based applications can help avoid such instances. Distribution and retail utilities can operate their complete core business including contracts, sales and marketing, billing and collection, customer management, as well as web portal and mobile applications on the cloud. Similarly, a transmission utility can design complete architecture for the implementation of phasor measurement units on the cloud.

Global perspective

According to IDC Energy Insights, 74 per cent of global utilities consider public cloud as their dominant long-term strategy. About 87 per cent recognise the role of cloud services in providing better business continuity and disaster recovery. Over 82 per cent consider the total cost of ownership as the single most important consideration for choosing a cloud service. Meanwhile, 76 per cent respondents recognise that cloud providers can offer better security than that offered by their own IT security team. Overall, the survey results indicated that utilities are very optimistic about their future regarding cloud. In fact, they plan to make a significant leap in their cloud strategy in the next 24 months.

The most difficult management challenge utilities face in the adoption of cloud strategies is that their IT skill sets do not match with new cloud standards, methodologies and topologies. Therefore, 74 per cent of utilities believe they will need a third-party professional services firm for expertise to build a public cloud strategy. Meanwhile, 63 per cent indicate that giving control to a cloud provider is a barrier to the adoption of cloud. These barriers need to be addressed to increase the adoption of cloud computing across utilities.

Based on a presentation by Mitul Thapliyal, Senior Principal and Practice Leader (Energy, Utilities and Smart Cities), Infosys