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Coordinating the Relationship between IT Services Providers and Clients: The Case of Cloud Computing

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Coordinating the Relationship between IT Services Providers and Clients: The Case of Cloud Computing

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The focus of this research is on the IT service relationships that exist between clients and providers in cloud computing. Cloud computing is an important context in IT services management since it has become an increasingly popular delivery model. We use coordination theory and a case study of a cloud computing-based company to investigate how cloud service relationships are managed. Evidence of both the standardized and customized relationships is based on a case study of SiteWit, a new startup company that is both a user and provider of cloud services. This company is an interesting case to study, given the real-time, intensive nature of the technical demands, the multiple service relationships that must be managed, while at the same time minimizing costs. Abstract The focus of this research is on the IT service relationships that exist between clients and providers in cloud computing. Cloud computing is an important context in IT services management since it has become an increasingly popular delivery model. We use coordination theory and a case study of a cloud computing-based company to investigate how cloud service relationships are managed. Evidence of both the standardized and customized relationships is based on a case study of SiteWit, a new startup company that is both a user and provider of cloud services. This company is an interesting case to study, given the real-time, intensive nature of the technical demands, the multiple service relationships that must be managed, while at the same time minimizing costs.
Working Papers on Information Systems ISSN 1535-6078
Coordinating the Relationship between IT Services
Providers and Clients: The Case of Cloud Computing
Daphne Simmonds
University of South Florida, USA
Rosann Webb Collins
University of South Florida, USA
Don Berndt
University of South Florida, USA
Abstract
The focus of this research is on the IT service relationships that exist between clients and
providers in cloud computing. Cloud computing is an important context in IT services
management since it has become an increasingly popular delivery model. We use
coordination theory and a case study of a cloud computing-based company to investigate how
cloud service relationships are managed. Evidence of both the standardized and customized
relationships is based on a case study of SiteWit, a new startup company that is both a user
and provider of cloud services. This company is an interesting case to study, given the
real-time, intensive nature of the technical demands, the multiple service relationships that
must be managed, while at the same time minimizing costs.
Keywords: IT service relationships, SaaS, IaaS, Cloud Computing,
Permanent URL: http://sprouts.aisnet.org/10-123
Copyright: Creative Commons Attribution-Noncommercial-No Derivative Works License
Reference: Simmonds, D., Collins, RW., Berndt, D. (2010). "Coordinating the Relationship
between IT Services Providers and Clients: The Case of Cloud Computing," Proceedings >
Proceedings of SIGSVC Workshop . Sprouts: Working Papers on Information Systems,
10(123). http://sprouts.aisnet.org/10-123
Sprouts - http://sprouts.aisnet.org/10-123
Coordinating the Relationship between IT Services Providers and Clients: The Case of
Cloud Computing
Abstract
The focus of this research is on the IT service relationships that exist between clients and
providers in cloud computing. Cloud computing is an important context in IT services
management since it has become an increasingly popular delivery model. We use coordination
theory and a case study of a cloud computing-based company to investigate how cloud service
relationships are managed. Evidence of both the standardized and customized relationships is
based on a case study of SiteWit, a new startup company that is both a user and provider of cloud
services. This company is an interesting case to study, given the real-time, intensive nature of
the technical demands, the multiple service relationships that must be managed, while at the
same time minimizing costs.
Introduction
In the past we referred to information technologies (IT) in terms of application code and
databases, along with the physical servers, printers, and networks that provided the computing
infrastructure essentially hardware and software products. Now we speak of technologies as
services increasingly available from the virtualized world of cloud computing, built on a flexible
foundation of value-added services and “mash ups” of external services. Cloud computing has
created a shift for businesses from traditional IT business models to an Internet delivery model, a
phenomenon that is steadily gaining momentum. For IT providers, this shift facilitates “a move
toward managing IT „like a business‟”, [1]. It involves a shift from acquisition of software
through traditional licensing agreements to software acquired as a service (SaaS), and a shift
from the tradition of purchasing and maintaining infrastructure components and facilities to
infrastructure acquired as a service (IaaS), both accessed via the Internet.
Cloud computing is an exemplar of what Malone [2, p. 13] describes as a third order effect of
IT: an enabler of a shift toward more "coordination-intensive" structures. As they note, “IT can
facilitate adhocracies - very flexible organizations - highly decentralized networks of
communication among relatively autonomous entrepreneurial groups”. Organizational strategy
research identifies the complex network problem that arises when work is designed as webs of
organizations, enabled by information technology, in which the organizations have specialized
knowledge, are geographically dispersed, and require frequent and in depth interactions [3]. A
key “disadvantage of adhocracies is that they require large amounts of unplanned communication
and coordination” [4, p. 22]. When services are provided and coordinated via a market, as in
cloud computing, market forces lower the costs of those services, but at the same time
coordination costs (“all the information processing necessary to coordinate the work and people
and machines that perform the primary processes”) are higher [5, p. 485]. Williamson (1980)
notes that this tradeoff between the cost economies of products and services provided in the
market and the costs of coordination must be recognized in order to understand the best way to
organize economic activity [6].
The massive managerial and technical interdependencies between cloud services providers and
clients create many difficulties and costs. Large scale standardization a common coordination
mechanism in information technology) [3, 5, 6, 7, 8, 9] is leveraged by cloud computing
providers to minimize these costs and challenges. However, there are limits to the standardized
Sprouts - http://sprouts.aisnet.org/10-123
Coordinating the Relationship between IT Services Providers and Clients: The Case of
Cloud Computing
cloud computing relationship, which, when reached, require “punching a hole in the cloud”, i.e.,
customizing the relationship. Such customization results in additional coordination costs and
challenges. Our study uses coordination theory to understand the financial, managerial and
technical implications of customized versus standardized cloud computing service relationships.
Such knowledge will inform IT services management of this tension between standardized and
customized cloud services [5, p. 328]
Background
Cloud computing can be viewed as a business service network (BSN) that is “challenging from
both a technical and an economic perspective. … They raise many new questions about how to
foster collaboration and orchestrate processes among partners. BSNs must provide end-to-end
quality of service, including throughput, availability, transactional integrity, and reliability across
multiple partners”. [10, p.99] Coordination theory is used to understand what people do to
coordinate their actions when they work together on common goals, and thus is an appropriate
basis to understand the cloud computing network relationships. While the theory could be
criticized as not being a fully developed theory [11], it does however, provide guidance about
how to study the interactions between organizations in cloud computing. This includes
identifying the kind of coordination mechanisms that are appropriate for the type of inter-
dependencies between the different tasks, the tasks and sub-tasks, and the tasks and objects in the
world. In particular, the theory notes that where interdependencies exist, alternative coordination
mechanisms can be sought, some of which will lead to better outcomes than others [3, 4].
Coordination mechanisms such as trust, pricing, communication, standardization and authority
have been discussed in the literature [2, 3, 4]. Trust and authority however, are more commonly
used in single-firm supply chains. In these situations, the familiarity brought about by people
working together in or among units facilitates trust. Also, the existence of hierarchies within
these firms establishes authority and respect. This authority “serves as the basic organizing
principle for coordinating and controlling work across levels within an organization”, [3].
Our overall objective for a stream of research is to arrive at the major coordination strategies
used by both cloud service providers and clients in ensuring successful design and performance
of the supply chain. This is especially difficult given both have to make their services available
to multiple, and a wide cross-section of, clients. In this particular study, we use coordination
theory to analyze the relationship between IT services providers and clients in the cloud, and
focus on the coordination mechanism of standardization. We seek to answer the following
research questions:
1. How and why is standardization used as a coordination mechanism to ensure successful
design and performance in service supply chains in the cloud?
2. In the event that the standardization mechanism fails to ensure successful delivery of
cloud computing services, what alternatives are used?
3. What is the impact of both the standardization and alternative coordination mechanisms
on the costs of coordinating the cloud computing interdependencies?
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Coordinating the Relationship between IT Services Providers and Clients: The Case of
Cloud Computing
Method
We used case research method to pursue our investigation. Case research is ideal because it
allows us to (1) study information systems in a natural setting, learn about the state of the art, and
generate theories from practice”; (2) “answer how" and "why" questions, that is, to understand
the nature and complexity of the processes taking place” and finally; (3) “research an area in
which few previous studies have been carried out” [12]. Our study has the need for all these
three. This is a theory-based case study, in that coordination theory informs what constructs and
relationships are extracted from the rich, case study description.
Study Setting
SiteWit is a leader in online predictive analytics and paid search optimization software with
offices in Tampa (headquarters) and Silicon Valley. SiteWit.com provides an online marketing
optimization and predictive analytics platform that allows online marketers to optimize their
Google AdWords campaigns, with Bing, and Facebook soon to follow. Pay per click campaign
management is available within the SiteWit software as a service (SaaS) platform, along with
predictive analytics that segment and score website traffic. SiteWit offers a “freemium” model,
with all website monitoring, traffic reports, and predictive analytics available at no cost. Website
traffic monitoring relies on a comprehensive revenue attribution model that uses first click, last
click, and multi-click attribution to better understand how multiple visitor sessions affect
purchasing and other e-commerce actions. Active campaign management is offered at a flat fee
per campaign (no charges are based on a percentage of add spend).
Ricardo Lasa, CEO of SiteWit, notes that the three key goals are to “measure, optimize, and
predict” website visitor activities and improve the overall performance of online advertising
campaigns.
1. Measurement starts with detailed data collection at the individual page hit level. This low-
level data is group into sessions for each visitor to the client website. These sessions are then
threaded to give a historical picture of a visitor‟s behavior over time. For paid ad campaigns,
each individual click is assigned a cost and any revenue generated from online purchases or
other website goals is also allocated across a visitor‟s history. SiteWit uses three revenue
attribution models to provide insights: first click, last click, and multi-click attribution. A
first click perspective assigns the revenue to the first paid click and session for the particular
visitor, crediting whatever events started the process of purchasing (or accomplishing any
other goal). The more common last click model simply credits the last ad click before the
purchase, assuming the most recent events are somehow more influential. Finally, multi-
click attribution seeks to share revenue (and credit) across the whole chain events that led to
a purchase.
2. Optimization is aimed at improving the overall performance of online advertising
campaigns. The threaded session data is analyzed using a multidimensional approach that
looks at many small traffic segments, identifying the most productive locations, times, and
keywords for a particular ad campaign. A set of weekly recommendations are chosen from
the many alternatives and upon approval, SiteWit automatically implements any actions need
through the Google API (with no further human intervention). Since some policies may
require constant attention, SiteWit takes actions on behalf of the campaign manager as
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Coordinating the Relationship between IT Services Providers and Clients: The Case of
Cloud Computing
Infrastructure
SiteWit
SaaS Client
SaaS
Provision
IaaS
Provision
needed on a rolling schedule. In addition to campaign level recommendations, the
optimization process also incorporates bid management and position targeting based on the
ad locations on the search engine result page (SERP).
3. Prediction is focused on assigning a likelihood that a given website visitor will achieve a
goal, such as making an online purchase. SiteWit automates a sophisticated data mining
process that creates predictive models based on historical patterns in the threaded visitor
session data. These models are used to make explicit predictions and segment visitors, as
well as to generate visitor-specific quality scores.
While these three feature categories and brief descriptions provide only a high-level overview of
the technology, the essential processes and overall aim of the SiteWit software as a service
toolkit is hopefully captured. The whole SiteWit system is delivered using cloud computing,
with everything from data collection to data mining hosted in a virtual computing environment.
The figure above illustrates the SaaS BSN.
Results
Comprehensive standardization is leveraged by IaaS providers to coordinate the large-scale
delivery of their services. By standardizing, these providers minimize the costs and challenges of
supplying their service on a large-scale and to a variety of clients. For instance, the need for
communication is reduced as clients can easily discover what services are available, as well as
the detailed technical specifications and prices of each service option. With Many IaaS
providers, standardization goes beyond simply that of the service offerings; it also extends to
service management. As a result there are standard service contracts, which are mainly to be
found on the Internet.
Four areas where standardization was leveraged by cloud vendors for coordination with their
clients were of importance in the design and performance of the SiteWit service. In two of these
the services failed to satisfy SiteWit‟s needs. These were handled by introducing a level of
customization at a higher cost to SiteWit (though still remaining in the cloud). The other two
were considered successful; the first of them facilitated scalability, a critical factor for SiteWit in
the cloud adoption decision, and the second facilitated ease of communication with other SaaS
vendors for development of their design, yet another critical adoption factor for the company.
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Coordinating the Relationship between IT Services Providers and Clients: The Case of
Cloud Computing
1. Standardization and Latency Issues Customizing the Service.
Severe latency issues within the transaction processing databases were experienced with use of
standardized services. As the Chief Scientist at SiteWit explains:
“From the outset, the challenges of processing and tracking website traffic at the page level
were expected to be demanding, so high-speed solutions for logging page hits and
processing them outside the database, and then loading reasonably pre-digested data into
the database engine were developed. The cloud-based server used for the database engine
was the largest available with multiple processors and a lot of memory from the start. As
the load increased during live beta testing with some fairly large clients, peak database
loads climbed to unsustainable levels. Outright database failures were experienced. The
levels of virtualization software introduce delays at several key points in input/output
processing. So, the solution was to use a large, dedicated server without any virtualization.
That is, essentially to puncture a hole in the cloud and rent a traditional hosted server co-
located with the cloud servers (at a substantially higher cost).”
2. Standardization and Reliability and Recoverability Issues Customizing the Service.
Standardized services failed to provide the necessary reliability and data recoverability that
SiteWit required. Again, the Chief Scientist at SiteWit explains:
“One unexpected aspect of moving to a cloud infrastructure was the dramatic and abrupt
nature of crashes, essentially making failures discreet, i.e., either the system is running or
not. This level of indirection makes the experience of cloud failures seem more abrupt or
discreet. For instance, we experienced a “catastrophic” failure on one critical server, with
a simple notification delivered via e-mail: the CEO was online at the time and noted that at
one instant all was working and the next mouse click failed to deliver any data from the
website.
While there are certain services that are backed by replication in the cloud, they may simply
meet uptime goals, not provide complete recovery in the face of catastrophic failure. We
customized, restoring the old-fashioned way from a database backup and layering on top
more traditional approaches for high availability systems. Perhaps the most important
approach involved mirroring the core databases that handle website session processing,
data warehousing for data-driven optimization, and predictive modeling. Here the cloud
made some aspects easier, such as using different zones to ensure that the mirrors were
located in separate physical areas (like the east and west coasts). In addition, fail over
capabilities made the switch from one core database to the mirrored version fast and
automatic. Mirroring was used to provide a safety net for all core database functions”.
3. Standardization and Scalability A Successful Coordination Mechanism
The SiteWit architecture reflects a distributed processing approach with key activities located
both within the database, as well as separate application code. Most of the initial prototyping
was done within the database infrastructure to speed development, but as soon as the beta rollout
began, so did the debates about what tasks were better suited to external application
implementations. Among the earliest candidates for application code were all the demanding
web page processing tasks. These were implemented as dedicated applications that are suited
for execution on inexpensive cloud servers. So to meet escalating processing demands, it is
simply a matter of adding to the collection of very basic cloud servers (available at very
competitive prices). Currently, SiteWit relies on several of these infrastructure processors to
keep up with the increasing number of individual page hits that come into the collection servers.
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Coordinating the Relationship between IT Services Providers and Clients: The Case of
Cloud Computing
4. Standardization, APIs and Mashups A Successful Coordination Mechanism
Again, from the Chief Scientist, comes final thoughts regarding standardization in cloud
computing and flexible architectures via application programming interfaces (APIs) and
mashups:
“SiteWit implements an API that allows others to build on the platform by requesting and
reusing the detailed reports or predictive models. In turn, SiteWit also relies on other SaaS
vendors to accomplish many tasks that are not deemed to be a core competency. Tasks from
support ticket tracking and online form processing to customer surveys are implemented on
top of other services. This has allowed SiteWit developers to focus on core development
goals, while relying on best-of-breed solutions for other features. This strategy results in a
very targeted development process and flexible architecture, quite well-suited to cloud
computing”.
Discussion, Limitations, Conclusion
Cloud services are fairly new. We have attempted to find some of the major successes and issues
focusing on the standardized services offered. Standardization is a well-known coordination
mechanism. We used Coordination Theory to investigate the standardized features of
infrastructure services offered using a case study of the relationship between SiteWit (a SaaS
provider) and IaaS providers.
Three characteristics of cloud services appealed to the SiteWit team: Costs, scalability and the
flexibility to experiment with the service design. Two of these are stated in the literature as
adoption factors. As told by the Chief Scientist of SiteWit, In addition to cost savings from the
use of leased services as opposed to building infrastructure, scalability is a key factor in
delivering the Web-scale measurement and optimization services offered by SiteWit. Perhaps
most importantly, the flexibility to re-design and develop new features by using our modular
infrastructure has allowed us to continually innovate. There is certainly a learning curve in
building a company on top of a cloud computing platform, but overall it has been a definite
competitive advantage”.
We found that, in some cases, standardized and virtualized services were inadequate because of
the volume of, and great computational burdens associated with transaction processing at
SiteWit. We also found that standardized cloud services do not provide adequately for data
recovery (critical in any case and even more when faced with reliability issues). In these cases a
level of customization was required, increasing the costs of services for SiteWit. Where
scalability is concerned, standardization was helpful in that it allowed replication of the design
over new servers as required by SiteWit. Reliability was an issue compounded by the inability to
recover from simple cloud snapshots. Here again customization was required. In all cases the
cloud made available options that supported use of either standardized or customized services
and so, according to the SiteWit team, despite the issues encountered, “we retained our
commitment to the cloud”.
This study has the limitation of being based on a single case study. There has been debate over
number of cases used in case research, however as Eisenhart pointed out, “The concern is not
whether two cases are better than one or four better than three. Rather, the appropriate number of
cases depends upon how much is known and how much new information is likely to be learned
from incremental cases [13]. One advantage with the case we studied is that it provides a realistic
and evolving environment for analyzing the complex phenomena of cloud computing.
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Coordinating the Relationship between IT Services Providers and Clients: The Case of
Cloud Computing
References
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Working Papers on Information Systems | ISSN 1535-6078
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... However, most participants stressed how difficult it is to maintain that information given the highly dynamic environment. Many participants identified the use of standards as a common design coordination mechanism [55, 56] in their CSC. However, the majority of them also expressed their concern regarding building synergies along the service chain. ...
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