Serious cyber incidence: Nico Nico Douga system down

 

The whole system down of Dwango Co,. Ltd. & Kadokawa group is a serious incidence especially in Japanese network. All the websites and the whole network server of Japanese video posting sites Nico Nico Douga (the potential competitor of YouTube) is completely down, and the recovery will take at least 1 month plus. This cyber incidence should be considered as a national cricis of Japan as Nobuhiro Tsuzi, the outsourced agent of the cyber security department of Japanese police, and Hiroyuki Nishimura, one of the initial founders, say. The vulnerability of Japanese server centre and the cyber security is questioned. Also, the shut-down of Nico Nico Douga causes the significant loss of the opportunity for the market competition and the entertainment creators. There are also various resources of BGM and pictures shared among many creators including YouTubers are stored in Nico Nico sites. Mr Tsuzi and Mr Nishimura, one of the initial founders, suspect it will take more and this cyber incidence is considerably serious.

 

Nothing to be afraid of the Artificial Intelligence (AI)

I always wonder why people tend to be afraid of the AI so much. It sounds just a resemblance to those industrial workers kicked out of their factory job when a new machinery was introduced during the industrial revolution. I actually believe that the further AI development will rather make humanity thrive instead of being destroyed.

I have realised that people in general tend to overestimate the artificial intelligence (AI) because of what the media agitate. The AI is just an application whose capacity really depends on the underneath structure, the infrastructure and the platform. Well, there is no worry to be afraid of the AI taking over humans. The AI is more intelligent for some field but not all the fields which humans are familiar with. 

Moreover, the neuron network of the AI and the humans are completely different. The brain cells and the nerves of humans and the majority natural creatures are interrelated with the other organs of their body. For instance, gut heavily influences their thought process and mindset. In contrast, the AI thought process and neuron networks are self-contained inside their CPI and memory.

Low-tech firms should rather adopt the public cloud!

Many small and medium companies as well as public institutes of the local authorities tend to be reluctant to adopt an advanced information technological (IT) apparatus such as the public cloud service due to their cost concern as well as their conservative characteristics. They tend to assume that they will not take an advantage of the large scale of economies offered by the public cloud service. However, these firms are actually those which will take a considerably high benefit of using the public cloud service. It is explained with the example of using Amazon Web Service (AWS).

 

The first issue is the version update including the cyber security. The average cost of the version update is heavier for smaller firms so that it is actually more cost efficient to rely on one unified provider. AWS updates their versions of the physical machines as well as the cyber security measures adapted to the latest requirements for the most recent environment for their entire global network. Furthermore, some of the security package, such as AWS Shield, come as the standard package.

 

The second issue is the maintenance of the physical apparatus in their on-premises environment. These small companies and relatively IT illiterate local authorities tend to often neglect properly looking after their on-premises environment and maintaining its durability. Moreover, they tend to be more prone to natural disasters striking their place. All in all, they had rather better locate their electrical data while implementing their cross regional redundancy of the entire database in case of a disaster and a cyber security threat.

 

Regarding their data management, AWS offers various types of database (DB) depending on conditions and usages. Amazon Dynamo DB handles non-structured data with a large volume so that electrifying the information is flexible to query and store. Amazon Aurora is autoscalable across the multi-regions so that the data redundancy is guaranteed in case of various disasters and the access overflow undermining the data-handling capability.

 

If they are worried about moving their data at once, AWS offers the data migration services such as AWS Snowball and AWS Snowmobile (called AWS Snow-family overall). These offer the option of outsourcing the entire data migration from their on-premises to AWS server network. Perhaps, these small and medium companies as well as the local authorities had better migrate the entire data and maybe the entire IT configuration to the public cloud in order to cut their expenditure for their IT staff as well as their physical space and apparatus.

 

There are still many individuals worried about the privacy and the countermeasure against the data leakage. Nevertheless, storing data in their nondurable vulnerable on-premises environment seems to be far riskier than outsourcing the database and the storage to the public cloud vendor. In addition, the scalablity and the redundancy across the regions enable to flexibly link and query the data across various places at any time available. Therefore, it is also expected to improve their administrative efficiency too.

 

My own AWS configuration architectural map

 

The AWS IoT architectural plan for manufacturering companies

 

While working for various manufacturing industry, it is often wondering whether their administrative processes can be more efficient. They had better adopt the internet of things (IoT) and the cloud data management. These manufacturers and their retailers should take an advantage of the currently available public cloud technology as the means of the digital transformation (DX) which national governments frequently put emphasis on nowadays.

 

There are still many manually carried out tasks in a manufacturing business. There are too many repetitive input and output processes which can be reduced by sharing the database via the globally connected public cloud network. Furthermore, by applying the artificial intelligence (AI) and the statistical inferences using the shared database, it will instantly optimise balancing the available supply of production and stock and the demand from the purchase order.

 

Let’s examine the possibility of the IoT tool for the manufacturing industrial DX with reference to Amazon Web Service (AWS), the public cloud infrastructure provider accounting for the largest public cloud market share at 33%. The whole company group across regional and even national borders can share the same Amazon Elastic Computer Cloud (EC2) and various types of databases such as Amazon Relational Database Service (RDS) for structured data and Amazon Dynamo DB for non-structured data inside the AWS network. In addition, various advanced technologies for gathering streaming data, big data analysis, and the artificial intelligence (AI) based deep learning are available.

 

Sharing EC2 enables all the members across the borders to access applications and data installed into the shared platform inside the public cloud infrastructure. This prevents the repetitive processes of forwarding data between the departments by logging in from each location. Vendors outside the company group can also directly access the platform within the restriction by the information privacy. Moreover, the risk of causing the security hole of the entire network can be mitigated under the unified cyber security tool and various firewalls already prepared by the AWS instead of expecting all the departments to look after under their own responsibility.

 

Please kindly refer to this architectural map to read the following parts.

 

Amazon Kinesis can collect the real time streaming data from a factory to send this data to the IoT device set. This IoT devices prepared in the public cloud enable to control and monitor the production line and the storage conditions by simultaneously referring to both the external and the internal data timely delivered to the production site. There is also the correlational data-analysis estimating the potential influence over the storage volume and the quality control in advance. Thus, this is expected to prevent some critical supply management errors such as mismatching the recorded data and the actual data.

 

The information related to the product supply is then forwarded to the database. The database also simultaneously collects the purchase order data processed the retail management side. Then, AWS Lambda analyses these simultaneously collected data to send to the AI module called Amazon SageMaker offering the deep-learning analysis of various factors. Instead of allocating the costly human resources for bridging between the production site and the customer side, this automated data-link is expected to instantly match the supply requirements with the timely demand requirements without the conventional time-consuming negotiation.

 

Amazon SageMaker, the AI module, connected with the big data of the business is expected to enable this manufacturing business to optimise both demand and supply simultaneously at an instant pace. The production supply and its logistics can be optimised by referring to the customer demand trends and the exogenous factors influencing the supply quantity and quality.

 

These simultaneous data analyses can instantly offer the timely business management reports by using the database specialising in the graph presentation with some analytic footnotes such as Amazon Neptune and Amazon Redshift. This automated process can eliminate the conventional repetitive manual workloads. Moreover, it helps their management decision process with a fast objective report purely based on the mechanical data analysis because this new reporting system prevents the human bias and errors.

 

Regarding the customer relation, the manufacturer may directly contact to and deal with their customers via their own retailing website which can be directly connected to the entire supply management system equipped with the IoT devices and the big data analytics. They may no longer need their retail specialist agents negotiating between the manufacturer and their customers. All the conventional middle-men jobs are automatically carried out within the entire public cloud architectural mechanism with little humans’ help.

 

This autoscaling mechanism of the public cloud can instantly adjust the customer service costs depending on the real time demand volume. The conventional way relying on the contracted retailers requires to keep paying the agent fee regardless of the sales shortage. Furthermore, this conventional way cannot catch up with the suddenly but temporarily increasing sales volume. The human retailers are unable to be scaled up/down instantly like machines. By contrast, this new system is literally the machine base with the excellent scalability! Therefore, there is neither excess nor shortage of the product supply volume regardless of any demand level on spot.

 

Overall, this public cloud provision is efficient by means of not only time-wise but also cost-wise. It reduces the reliance on humans’ intuition requiring the long-term experience as well as the complex human relationship easily causing some corruption issues.

Cloud Revolution !

When I started knowing the existence of the public cloud services such as Amazon Web Service (AWS), Microsoft Azure (MS Azure), and Google Cloud Platform (GCP), I realised that it would be a remarkable innovation enough to be called revolution. Revolution alters the socioeconomic structure even including the infrastructural fundament and the ethical code. As same as the political revolution, the introduction of the public cloud is the business revolution!

First of all, the biggest impact is that there is no computer room containing servers, database (DB), and their network side a company office by using the public cloud service. These physical devices are located in the remote centre owned by the public cloud vendor so that they are simply outsourced.

This is advantageous for the accounting administration because it can avoid the capital expenditure and tax levied on it. In addition, its charge is based on pay-as-you-go so there is little need for preparing for the estimated volume usage. There is neither dead-weight loss of not using the computer enough or lacking the computer capacity due to the sudden heavy traffic while running a business.

The initial investment for the capital expenditure often challenges new entrepreneurs establishing their new firm. This factor used to discourage newly entering entrepreneurs from starting their own business. However, the public cloud has eased starting an entrepreneur to flexibly open their new business since its emergence. It is almost like a miracle enabling an individual to directly connect to the already configured server network without building her/himself!

In the past, starting a new business alone used to be considered as reckless. It used to require a reasonable size of the company office and more than one staff to operate a new business in order to maximise the full potential of the capital initially invested such as an office and devices. By contrast, the public cloud allows to start a business without any preparation for both devices and their space. Therefore, this is indeed a liberation for a lone entrepreneur from the territorial pressure and the labourers’ riot!

Another advantage for this entrepreneur is that s/he can flexibly travel around the world as long as it is connected to the public cloud service. No office at a fixed place is required to sit in! This entrepreneur can travel freely and budget her/his budget more flexibly without being bound to looking after a physical property. It emancipates an individual from the landlord’s rent seeking oppression!

In conclusion, the public cloud usage is indeed a revolution replacing the already obsolete norms and values in the entrepreneurship! Because big companies employing individuals are no longer able/willing to employee them to look after, it may be more important for them to start their own business instead of expecting these companies to hire them.

 

The Cloud Types, the VPC, the public and private subnet, and the DMZ

 

In terms of the on-premises computing environment, the ownership of the physical computer device belongs to the user. However, an antinomy of the on-premises computer is not necessarily the could computing. There are two spectrums: The one determines where the device ownership belongs to, and the other determines where this device actually located in.

The ownership of the rental server belongs to the provider even though it is leased to be located inside the user's property. The clouds are distinguished between the private cloud and the public cloud depending on their ownership: The former belongs to the user whereas the latter belongs to the provider meanwhile both are located on the place distant from where the user is physically at.

The private cloud is established by an individual firm under its own responsibility of its maintenance and security update as well as its own exclusive right of using and modifying it. It also secures its privacy unless it is infiltrated by some wrongdoers with their hacking and virus attack. The disadvantage of owning the private cloud is its cost inefficiency of their maintenance and various updates including the cyber security.

For a relatively small-scale private ownership, the operation inside the on-premises can be achieved with the smaller budget than establishing its own private cloud. The cloud facility requires a bigger scale maintenance and update so that the private cloud may be more suitable for a huge organisation to handle. Nevertheless, even for a huge organisation, it will be more cost efficient to outsource the cloud service to the cloud provide specialising in the cloud computing provision.

On the other hand, even for a small-scale usage, the public cloud is useful because the user does not need to be responsible for the whole physical machinery maintenance unlike the private cloud. The user can simply subscribe the service instead of purchasing the entire package of software and device. Furthermore, instead of incurring the capital investment expenditure, the user can include the usage cost as the variable operation cost so that it is efficient by means of their administration accounting and tax payment. 

To take an advantage of the cloud computing, the public cloud is more likely to be cost efficient than the others due to its scale merit and its capacity. The major public cloud providers in the world are Amazon Web Service (AWS) (33% market share in 1Q2022), Microsoft (MS) Azure (22%), and Google Cloud Platform (GCP) (10%). These providers specialise in the cloud computing provision including specialised customer-support, maintenance, security update, product improvement, and the new product instalment. 

To use the public cloud service, the user selects which region to use. Then, this user is offered to use one or the multiple Availability Zone (AZ). Inside one AZ, the user determines the number of subnets to use where each subnet size is determined by a block of the IP address size determined by the CIDR (Classless Inter-Domain Routing) notation.

While using the public cloud, there is a service securing the privacy and the security of the server instances and the other services as though the user were using them inside her/his own private cloud network in an AZ. This is called the Virtual Private Cloud (VPC). Each subnet can be allocated inside the VPC while these subnets are usually categorised into the two types: the private subnet and the public subnet.

Instead of risking all the subnets facing both the infiltration risk and the overflowing access, it should allocate some subnets specialising in filtering these accesses as well as analysing their characteristics and traffic volume. Therefore, there needs a buffer demilitarised zone (DMZ) between the inbound accesses from outside the VPC and the private subnets inside the VPC so that the public subnet is allocated there between the gateway of the VPC and the private subnets. The public subnet and the Firewalls such as the Network Access Control List of AWS stand there to form the DMZ as the front-line defending the architecture behind. 

Placing only one network Firewall eases the infiltration of the intruders as well as the sudden access traffic overflow undermining the entire architecture configured inside the public cloud. The first line Firewall is set in front of the public subnet. The second line Firewall is set between this public subnet and each private subnet. The DMZ is the zone between two Firewalls where the public subnet bisecting these two Firewalls.

In AWS for example, there are the Load Balancers (LBs) with different task for each different duty. These LBs are in chage of equalising the divided traffic volume to each of the server instance to prevent them from receiving the excess volume undermining their performance. The Application Load Balancer (ALB) is often placed in the public subset distributing the access traffics to lead them to each destination connected to the private subnet areas. The Network Load Balancer (NLB) is often placed in the private subnet distributing the access traffics to lead them to each server instance depending on the traffic volume of these accesses to each instance. 

Because these LBs do their multitasking of not only balancing the traffic volume to each instance but also the health check of each instance to detect whether or not is capable to receive the access.  Therefore, the division of labour among these LBs becomes necessary to protect the entire architecture inside this network from the asymmetric or malfunctioning access traffic to this network.

In conclusion, it seems to be the trend of shifting the ownership of the computing system. Big organisations such as not only major private corporations but also government institutes have also started being more reliant on the public cloud. Small enterprises also take an advantage of this trend: By switching their main computing environment to the public cloud, they no longer need to deal with preparing for the spare, the physical devices, the cost payment for them, and the uncertainty of the future cost and benefit estimates. This is because the outsourcing of the autoscaling capacity as well as the physical and security maintenance to the specialist provider solve these issue. Hence, it is predicted that the public cloud provision will be popular more and more as the time passes.

Networking, Protocols, and Domain Name Service (DNS)

 

The letter "HTTP" found on the URL (Uniform Resource Locator) while surfing the internet is the abbreviation of the Hyper Text Transfer Protocol. There is a term "IP address" required for the internet access, and the IP is short for the Internet Protocol. These are the protocol of transferring data via the network connection: the IP is for the internet layer and the HTTP is for the application layer. There are also the other various networking protocols. The layer structure description here mainly follows the OSI Reference Model.

 

The protocols for the application layer are not only the HTTP but also the FTP for the data transfer to the file server, the POP3 for E-mail, and SSL/TLS for the data transfer with encryption for example. The AWS network architecture provides the ostensible sample. The Application Load Balancer (ALB) deals with the internet-facing side of the traffic with the HTTP to the public subnet directly connected to the internet to distribute the traffic access volume to those inside the public subnet. The Network Load Balancer (NLB) deals with the internal side of the traffic with the SSL/TLS to distribute the traffic access volume coming from those in the public subnet to those inside the private subnet. 

 

The SSL/TLS is the protocol also used for the transport layer connecting between the application layer (via the session layer and the presentation layer) and the network layer. The network layer represents the inside network of the on-premises environment connecting the physical layer via the data link layer. The network layer requires its protocol for its data transfer among these physical devices by linking their data together. The network layer is the gateway to outside the on-premises via either the internet connection or the Direct Connect via the transport layer, and this requires the protocol too.

 

 

As shown in the the URL, the HTTP is followed by the domain such as "art-blue-liberalism.blogspot.com".  This is addressing the website with the name which humans are accustomed with while computers are not. Computers understand and process various tasks by means of numbers so they address the website by the number such as the IP address. 

 

Therefore, the networking needs the domain name service (DNS) resolving a name to numbers.  The DNS resolves the domain name such as "art-blue-liberalism.blogspot.com" to the IP address such as 192.0.2.1 in IPv4, and 2001:db8:0:1234:0:567:8:1 in IPv6 (Ref. Wikipedia).

 

There is the DNS allocated in order to transform to manage the domains and the IP addresses among these access connections.  It is similar to the phone book while looking for a telephone number by searching the name of a person or an organisation in the index.

 

The DNS server checks its own cache memory to find an IP address for the domain name when it receives the query. If not found there, then, this query is sent to the root servers, the root of the DNS hierarchy, which are operated by a number of the organization and evenly allocated in the world. But, instead of directly providing the DNS server with the IP address, the root server requests the Top Domain Server (TDS) to instruct the DNS server to find how and where to look for the IP address matching with the queried domain name.

 

Database and Storage

 

The main components of computer are Central Processing Unit (CPU), Memory, and Storage. With comparison to human brain, CPU is the core part in charge of thought processes, Memory takes part of the short-term memory assisting these processes, and Storage covers the long-term memory storing information about experiences and knowledge. The computer server is composed of them while proportion of each component depends on the work duty of each server. A personal computer (PC) contains these three components together with a smaller scale inside it. People are often confused with the difference between the database (DB) server and the storage server because they tend to think both functions are the same or similar to each other whereas they take a part of different roles from each other. 

The DB server deals with sorting the data which must be ready to be downloaded, uploaded, and queried at any time the task is carried out inside this server network. Its weight on CPU and Memory is relatively higher than the storage server specialising in Storage. The DB server needs constant electricity supply all the time for running its CPU and Memory. There are basically two types of database, the vertically scalable database for the structured datasets, sorted out by the specialised programming language such as the Standard Query Language (SQL), and the horizontally scalable database for non-structured datasets. The former is good at the complex processes of handling the datasets required to be properly structured whilst the latter is for handling the multiple kinds of large datasets together at once. There are also furthermore specialised DB servers for such as data analysis, chart creation, data transfer, and data warehousing requiring a complex data query. In particular nowadays, the big data handling is so demanded all the more that an independent DB function each purpose is necessary to equip. Therefore, each independent DB server for each specialised task is more required than before. 

The storage server is for storing various sorts of information including the information of the already processed data and the archive memories of any workload of the entire server network. Although it does not need a constant electric supply, there is a required process for querying the information query. For example, with reference to Amazon Web Service (AWS), Amazon Athena, the interactive query service applying the standard SQL for analysis, is used for calling the storage service of AWS called Amazon Simple Storage Service (S3). The snapshots of various archives are stored there as a backup for a sufficiently long time period, which requires the process for restoring them. The logs of actions taking places in a server network are often stored in the storage service because the quantity created for the logs is huge and they have to be stored without being modified for a long-term. A static website, not needing a constant feed of streaming data, can be located in the storage server such as Amazon S3 instead of the server instance such as Amazon Elastic Computer Cloud (EC2).

Overall, focusing on the difference between their tasks, it clarifies the difference between DB and storage specialising in their own unique tasks borne to each other. Specialised DB is demanded for various specialised data handling tasks. Various compliance issues demand a durable storage capable to store the information set with a substantially high volume in a sufficiently long term. The key to understand it is to understand the factors of these computer components.

As a service (●aaS) via the public cloud

 

The information technology (IT) services are categorised into various levels nowadays. At this time, the business models providing customers and clients with the services via the online connection such as the internet rather than using services only within the on-premises environment. Most notably, there are three categories of services, the software as a service (SaaS), the platform as a service (PaaS), and the infrastructure as a service (IaaS).

Nowadays, many IT service providers offer the subscription service available online rather than the offline purchasing. The notable advantages are agility, availability, and scalability of the resource preparation as well as reliance on the providers for the content and security update and the physical space saving for the physical stuff. The shared access offered by the public cloud is now popular than ever.

The internet connection is not only the online connection option. There is a service called the direct connect connecting users' computer and the server network of the provider located in a remote data centre. The internet connection requires to secure the connection security preventing various incidents such as data breach and information fraud as well as the available IP address allocated to this connection. Then, the direct connect service to the public cloud system is often preferred in order to keep the stable access with an efficient financial cost per use (the internet connection tends to be more expensive for a regular high volume information transaction). For example, there is a movement for various financial institutes to shift their crypto asset management from the internet connection to the direct connect access to the specialised data centre. 

The most familiar service may be the SaaS because it is convenient for users to start using it. The software is already prepared by the providers so that they can simply use the ready-made application and data by just accessing it. Many companies adopt the Enterprise Resource Planning (ERP) outsourced as subscribing to this service via online instead of purchasing cartridge, CD, or the licence cord offering the software product. The disadvantage is its inflexibility of customisation and modification of applications and data adapted to the users' own requirements and environments.

The PaaS offers a more flexible service for customising and modifying applications and data via the platform composed of the operating system (OS) e.g., Microsoft (MS) Windows, middleware, and runtime is ready. When MS introduced its public cloud service MS Azure, many people thought its compatibility with the commonly distributed OS, the MS Windows, would be high. By contrast, the operation system and its server network architecture may require more flexibility enough to customise their own platform. Then, the IaaS introduced in the next paragraph can be the option.

The IaaS has become popular for the IT engineers to install since Amazon introduced its public cloud service called Amazon Web Service (AWS). The notable benefit is reducing the workloads for maintenance and security update as well as saving space and labour for the physical infrastructure composed of servers, databases, and their network in their on-premises. It is even beneficial to combine the already established on-premises environment and the public cloud services as a hybrid. Another notable useful point is Autoscaling elastically adjusting the volume use by means of its fluctuant demand, which is beneficial not only for the access and service maintenance management but also the financial accounting including the cost calculation and the tax payment. Because AWS was the first pioneer having popularised the public service, this seems to be the main business core of Amazon nowadays. 

In conclusion, considering these characteristics, it is predicted that more businesses will shift their IT basis to this "as a service" due to their convenience and resource scalability. In one of the Bank of England press conferences in 2021, the adoption of the public cloud services by many major private banks was hotly debated. Regardless of its controversy over the national compliance issues, it seems to be the unstoppable inevitable phenomenon across the border in 2020s like the globalisation movement of socio-economy seen in 2000s.

Autoscaling

 * Without Autoscaling: The fixed cost approach

 * With Autoscaling: The variable cost approach

Autoscaling is one of the remarkable advantages of using the public cloud because of its elasticity of the volume usage. This factor is also beneficial by means of the financial accounting.  However, Autoscaling is not that perfect as much as the salespersons from the public cloud providers advertise.  This short essay picks up the typical benefits and challenges of installing the public cloud especially because of its Autoscaling.

Autoscaling is a notable advantage of the public cloud which is usually emphasised in the introductory guideline of the public cloud advertisement. First of all, it allows its users to elastically adjust their quantity usage at each time period, instead of fixing the quality usage, depending on the fluctuant quantity demanded at each time period. This is useful to avoid both the dead-weight of the volume usage while the low access traffic and the volume shortage while the high access traffic.

Focusing on the accounting aspect, it can covert its usage cost to the variable operational cost instead of the capital or fixed-cost = liability. In many cases, it is often advantageous because it is likely to avoid paying the high tax levied onto the capital expenditure. By contrast, the cost covered for the public cloud is often accounted as the variable operational cost which is actually useful to reduce the total tax payment. Regardless of the total cost amount, in many administrative accounting cases, it provides individuals and their firms with the tax payment advantages.

At the same time, Autoscaling does not perfectly work as the textbooks and the introductory guideline of the public cloud explains. In reality, there is a limit of calling for extra instances at once because there is a certain maximum number of the server instances within a certain time period e.g., being able to call 5 instances per minute. There is a physical barrier of scaling the instances depending on each situation.

Furthermore, there is a case that the load balancer misjudges the health check of each connected server instance and the access control. This load balancer can accidentally call unwanted instances by falsely detecting as broken, deleted, or over-capacity or some errors of the monitoring tools and the metric/log information. In addition, there can also be a human error of typing the programmes of directing the traffic control or the security/monitoring setup. This may incur a considerable financial disadvantage of excess instances called by Autoscaling. 

All in all, the Autoscaling mechanism is still an attractive characteristic of using the public cloud to optimise the operational availability as well as the financial efficiency. Nevertheless, it must take an account of the dysfunctions of Autoscaling such as the latency of calling the instances and the extra possible costs caused by both machinery and human errors. On the top of what the salespersons and the textbooks indicate, the users had better refer to the actual experiences of its real application.

Why Public Cloud?

 

As mentioned in the previously posted article, the public cloud service has become popular among considerably many banks and companies and unavoidably influential enough to worry the Bank of England and the other regulatory bodies of the UK and the EU. Whereas they admit the accessibility and convenience of these public cloud services, these European authorities are worried about sharing their core information of their national economies with these foreign 3rd parties.

Even with their non-disclosure agreement (NDA), the property right of these information data has been no longer exclusive since it is agreed to execute and store them in devices owned by a 3rd party, and these 3rd party service providers are only a handful of the foreign private enterprises nowadays. The European central banks, governments, and other regulatory bodies are thus anxious about the phenomenon that private banks and companies in their nations rely on these foreign public cloud services all the more nowadays.

Well, whenever a brand new technology emerges, these tends to always be a certain degree of an anxiety reaction to it. The public cloud service can be compared to the utility companies supplying electric power from their power plant having emerged since the early 1900s. (Ref. Investopedia, 1st May, 2020) Before these utility companies were established, each individual firm needed to prepare for, maintain, and update their own on-premise power generator while the majority switched to relying the electric power supply from a specialised utility company due to its accessibility and convenience owing to its big scale merit.

※ The following shows the architectural icons and the configuration examples by referring to the imaginary world public cloud architectural design instead of the real world one in order to avoid both the copyright violation and the favouritism to a particular private corporation.

 

As a matter of fact, it is really advantageous for economic agents to increase their share of using the public cloud for their computer based operations and data storage. The public cloud providers bear responsibility for the durability of their infrastructure (servers, storages, and networks) often together with their platform (O/S, middleware, and Runtime) as well as updating their cyber security of them (The platform security depends on the service types, and the users are responsible for the security of applications and data unless using the software as a service (SaaS)). By outsourcing the cyber security update and the maintenance of the infrastructure, possibly with the platform, economic agents can spare more of their time and effort for their daily operations and various projects.

 

In addition to the aforementioned advantage in time saving by outsourcing maintenance and security updates, the scale merit of the public cloud is a remarkable advantage. This scale merit is the most critical key to optimise the net benefit of using the public cloud. Because of using the physical infrastructure, possibly together with the platform, already prepared in the outsourced data centre, the configuration and its redundancy process are agile and flexible.

The most symbolic function of the public cloud is the scalability of instances launched on servers. ]The on-premise server which is statistically set up to serve for a specific purpose e.g. data base server, mail server, web server, etc. Then, the users have to pay the fixed cost for equipping and maintaining these physically present devices. 

 

 

 On the other hand, the public cloud launches an instance of various types on a server and dynamically increase and decreases the number of servers while also switching the instance types depending on the user's demand at each period. The scalability of the server-instances enables the users to convert their fixed cost of preparing their server usage to the variable cost. In another word, by switching from their on-premise server to this scalable instance (the virtual server in the cloud is often called "instance" in short) they can switch their payment to a pay-per-usage model which avoids paying for unused computer capacities thanks to these scalable server instances in agile and flexible configuration.

In terms of the capacity control, it does not require users to estimate the capacity to use in advance because the public cloud service automatically scales it to match the supplies capacity with the demanded capacity every scheduled period. In terms of the on-premise environment, it is extremely costly and environmentally unfeasible to increase and decrease server machines and replaces their inside instances every short period (hourly and daily). By contrast, the cloud computing offers such an elasticity enabling flexibility to dynamically increase and decrease the number of instances. 

 

On the other hand, the public cloud launches an instance of various types on a server and dynamically increase and decreases the number of servers while also switching the instance types depending on the user's demand at each period. The scalability of the server-instances enables the users to convert their fixed cost of preparing their server usage to the variable cost. In another word, by switching from their on-premise server to this scalable instance (the virtual server in the cloud is often called "instance" in short) they can switch their payment to a pay-per-usage model which avoids paying for unused computer capacities thanks to these scalable server instances in agile and flexible configuration.

In terms of the capacity control, it does not require users to estimate the capacity to use in advance because the public cloud service automatically scales it to match the supplies capacity with the demanded capacity every scheduled period. In terms of the on-premise environment, it is extremely costly and environmentally unfeasible to increase and decrease server machines and replaces their inside instances every short period (hourly and daily). By contrast, the cloud computing offers such an elasticity enabling flexibility to dynamically increase and decrease the number of instances.

 

This is the example of the configuration based on the simple idea. This example tends to be seen in such as a simple relatively small internet shopping site purely operated via the web.  Majority of functions are located in the virtual private cloud (VPC). The VPC is designed for protecting these programmes from the outside access as though forming the private cloud limiting the outside access.  The load balancing function represented by Symmetric Loader distributes the access loads to Scalable Instances (Redundancy is implemented).  

 

Then, the data of transaction, etc. are gathered in Vertically Scalable Database, most notably installing SQL. Then, the gathered data in Vertically Scalable Database are sent to one Scalable Instance specially assigned for an analysis.  

 

Storage Bucket outside the VPC stores the analysis data from this Scalable Instances and the logs of all the programmes' activities. 

 

The access going out of the VPC requires to set up the point where the connection ends there.  The edge of the VPC is equipped with the gateway connecting between the VPC and outside which is represented by Edge Portal here.

This example is more complex.  This model combines the public cloud with the on-premise configuration.  Like a gaming company, there is always a certain amount of a fixed volume of the loads whilst the total volume is very fluctuating over time periods.  

This type of company tends to manage their staff ID access managements and remain their core functions within their on-premise environment. It needs to directly connect the on-premise environment and the public cloud environment to frequently forward and connect their information, data, etc. between them.  Then, there is Straight Access between the on-premise environment and the public cloud environment.

 

There is the domain name service (DNS) is allocated in order to transform to manage the domains and the IP addresses among these access connections.  The DNS also has a function of balancing the loads between the available paths.  

There is a newly introduced database server represented as Horizontally Scalable Database, most notably NoSQL database.  This database is used for more qualitative data which are not relational like what Vertically Scalable Database which handling more quantitative relational data. 

 

Overall, the public cloud services are really passionate to study and image to use in a real business field, and it will certainly keep growing enough to become non-negligible to mention while discussing about economics and other forms of social science. Even in politics, the controversy on this emerging technology will be a hot topic.  This blog project is going to furthermore focus on the present states and the possible and feasible development of the public cloud from now on.

 

 

FinTech and Public Cloud

I have been really surprised at one of the latest speeches of Bank of England (BoE). Both the BoE staff and the interviewers frequently focused on the rising influence of the public cloud far more than the currently ongoing negative impacts of COVID-19 pandemic and the anticipated future economic outlook.  Their main current concern is that many of private financial institutes rely on using the public cloud services, and their reliance is furthermore growing nowadays.  

They admitted that these private agents frequently use the public cloud service because of its convenience.  The main concern of both British and Europeans is that only a limited number of the cloud service providers outside Europe offering such a service.  Despite its convenience and accessibility, they are worried about the potential security threats of sharing the financial and personal information with the limited number of the private sector outside their country. Therefore, they implied something like reinforcing the security audit conducted by the public entities.  

The underling aspect is that FinTech (abbreviated form of Financial Technology) is rapidly growing in the world.  FinTech requires the providers to be capable with supplying the elastic loads of the service usage volume which dynamically changes across time, place, and occasion.  

The conventional use of the on-premise computer servers incurs the fixed cost for setting the servers and the maintenance cost for the servers and the operating system (OS).  By contrast, by outsourcing such as the servers (The infrastructure) and possibly the OS and the middleware (The platform) as well, and their maintenance, the usage of the public cloud service can transfer their cost from fixed to variable.  Furthermore, by outsourcing the servers, etc., the these economic agents can be concentrated on their projects without taking much time and efforts on preparing for their on-premise infrastructure (and possibly the platform too depending on the service). 

In order to understand how significant the public cloud service is for the FinTech industry, it is accessed by means of the following five forces analysis:

    Competitive rivalry: Reasonably High

What FinTech offers already varies from online money transaction to the crypto-currency based on the blockchain management. They are already in various kinds of competitions.  As long as their technology enables the duplication of their rival technology, it allows them freely join the competition.  At the same time, there is still a barrier of the entry: Information technology (IT) literacy and the efficient use of the latest available technology are the key condition to enter this market.  For example, the usage of the public cloud service is essential for the cost and operational efficiency to compete with the others. 

    Threat of substitute products: Relatively Low

Only and the biggest substitute product is the traditional conventional financial institutes such as major banks and asset management companies.  FinTech is already the most technologically advanced financial service.  Then, the older financial services are their only substitutes.  Majority of economic agents in the world feel like being familiar with the traditional financial industries and the fiat-currency based trades, and various services offered by FinTech are still relatively new to them.  Therefore, there are still people stick to the older services instead of adapting FinTech in their daily life.  However, more and more people have already started realising how convenient FinTech services are. Unless there is a revolutionary invention of any unimaginable alternative product taking place, there is a little threat from substitute products.

    Bargaining power of buyers: Relatively High

 

FinTech is one of the attempt to liberate the financial market. This aims at capturing the demand dead-weight caused by the monopolistic power of the conventional financial institutes.  

The favourable characteristic of FinTech is offering the lending money to those who are struggling to borrow money from the conventional financial institutes.  Then, FinTech lenders are assumed to often offer a lower interest rate (r(Inv.) ) than the conventional counterparts by lowering the cost of risk monitoring.  Furthermore, in order to attract more savers/investors producing their lending resources, FinTech companies inevitably offer a higher return than the conventional counterparts (represented as r(Sav.) ).   

The key for FinTech industry to survive to thrive, these companies highly rely on attracting customers who used to be unfamiliar with these newly introduced services with both the higher accessibility for borrowers and the better convenience for savers/investors.   In order to achieve this objective, the procurement side mentioned in "Bargaining power of suppliers" is highly relevant.

    Threat of new entrants: High

Not only the conventional financial institutes and traders but also those from the other industry types such as the IT media also join this market competition.  In order to attract more customers, it offers something which the conventional financial services hardly offer is the key.  For example, on the top of managing the customers' financial assets (The service outcome), it offers "enjoyment" while using this service (The service process). 

The media companies have a strong advantage of offering the "entertainment" in their offering service.  For example, they can adapt some gaming elements in financial services. Then, customers enjoy not only their monetary gain by using the service but also the entertainment while using the service. 

Both the financial transfer and the accessing entertainment incur a very elastic load of service usage.  Moreover, these entrants need to spare enough time and resources for their project of inventing their extra service elements without spending too much time, energy, and cost.  The public cloud service fits in with what is required to accomplish both requirements.

    Bargaining power of suppliers: Relatively Low

In order to offer the lower lending interest rate with the higher saving interest rate for the users, the cost efficiency is indeed the crucial factor to reduce the lending fee and the investment return.  Then, the procurement becomes an unavoidable factor to achieve this goal.  At this time, taking an advantage of the public cloud, potentially lowering various costs, is the essence of reducing the cost. 

All in all, FinTech and the Public Cloud are something tied up with each other in order to thrive in the world economy.  FinTech has a potential to liberate the entire world financial economy by offering a wider range and more convenient services.  Then, the public cloud offers a higher degree of liberating the market by assisting the new entrants of the financial market.