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Grantham University *
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419
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Information Systems
Date
Nov 24, 2024
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docx
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6
Uploaded by ChancellorBravery96491
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Cloud Sourcing
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Cloud Sourcing
Introduction
Technological growth and development in cloud sourcing enable diverse organizations to
advance their operational systems for better or improved service delivery to target customers.
Notably, the integration of a cloud server by Netflix's video streaming service and the
anticipation of cost reduction undoubtedly played a significant role in the company's decision to
transition to Amazon Web Services. The move aimed to ensure Netflix experienced cost savings
by eliminating the expenses associated with the upkeep of its physical servers, including the
expenditure on server power consumption (Irailevsky et al., 2016). As a result, the choice to
transition to a cloud-based server was deemed the most rational and advantageous course of
action for Netflix. This case highlights the rationale, benefits, and drawbacks of transforming
Netflix's internal Information Technology department to Amazon Web Services, a Software-as-a-
Service (SaaS) cloud provider. Also, it is worth exploring how an alternative approach could
have involved maintaining their physical servers while striving to enhance their operational
efficiency and reduce costs.
Rationale
Noteworthy, after a significant database corruption incident in 2008, Netflix strategically
transitioned from its prosperous DVD rental business model to a cloud-based service platform
for film distribution (Irailevsky et al., 2016). In 2012, Netflix undertook the migration of its
whole range of services, encompassing both consumer-centric aspects and information
technology operations, to the infrastructure provided by Amazon Web Services. It was noted that
this change was necessary since all the essential components required to ensure the continued
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functionality of these servers can be accommodated within a storage closet after the transfer
process (Macaulay, 2018). Consequentially, the relocation of Netflix's infrastructure to cloud-
based platforms would liberate significant physical space and enhance the company's operational
adaptability by enabling the rapid deployment of numerous virtual servers within the shortest
time possible (Izrailevsky, 2016).
Benefits
As Netflix saw growth in its company operations, it became imperative to identify a
viable solution for effectively and efficiently storing its developing data. As a result of adopting
the cloud server paradigm, Netflix successfully transitioned from a data center including over
2,500 virtual servers to a more streamlined infrastructure consisting of merely two basic racks
housing 50 virtual servers (Saraf, 2022). Furthermore, Netflix not only improved its operational
efficiency but also attained a remarkable degree of adaptability, allowing the company to sustain
its growth and effectively respond to future customer and market demands without the need for
laborious and costly modifications to its physical server infrastructure (Izrailevsky, 2016). The
downsizing initiative also had a positive impact on Netflix's financial performance. Therefore,
the implementation of this adjustment led to cost reductions for the firm in terms of power usage,
hardware maintenance, as well as replacement expenses.
Drawbacks
The operational challenges faced by Netflix in managing its service cloud server were
experienced on December 24, 2012. During a significant portion of the day, Netflix had a
disruption in the accessibility of their cloud computing service, which can be attributed to a
technical problem related to their Elastic Load Balancing mechanism (Saraf, 2022). Due to the
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potential impact of these service outages and the increasing availability of streaming options, this
drawback detrimentally impacted Netflix's financial performance. This is mainly because it
happened during the holiday seasons when purchases of Netflix-compatible gifts are prevalent.
Despite the implementation of redundancy, the occurrence of disruptions in Netflix's operations
reiterates the financial risks inherent in exclusive dependence on a cloud-based server maintained
by a third-party entity (Admin, 2021). The cloud infrastructure is responsible for storing many
components of Netflix, such as its content library and user-related data, encompassing email
addresses and payment details. As such, the concern pertains to the relative ease with which
hackers can compromise cloud systems (Admin, 2021). For instance, if unauthorized individuals
get entry to the organization's servers, it adverse harm may be inflicted.
Alternatives
It is arguable that when Netflix decided to implement a cloud-based server architecture,
they were subjected to only a few feasible options due to their rapid growth as a corporation. As
a result, Netflix could have only retained the conventional approach of storing data on physical
servers rather than relying on cloud servers. With the successful establishment of a substantial
data center, the company would be poised to broaden its range of services and bolster its
infrastructure in a flexible manner (BrandPost, 2021). Thus, if Netflix persists in pursuing its
current trajectory, it will be necessary for the company to augment its capacity, leading to
escalated operational costs and potentially elevated subscription charges for its clientele.
Conclusion
Overall, the adoption of Amazon Web Services as the cloud-based server for Netflix was
a strategically advantageous move, extending beyond mere cost concerns. A significant
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proportion of organizations fail to achieve such a degree of adaptability and have challenges in
effectively responding to increasing demand. Netflix is an accomplished enterprise that has an
awareness of the constraints associated with cloud servers and has implemented precautionary
measures to mitigate potential issues. Hence, Netflix is projected to continuously innovate and
advance its cloud services to sustain customer needs and profitability.
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References
Admin. (2021, December 9).
Cloud migration challenges and solutions
. OpsWorks Co.
https://opsworks.co/cloud-migration-challenges-and-solutions/
BrandPost. (2021).
Data Centers and Cloud: Working Together to Power the Future
. CIO.
https://www.cio.com/article/189020/data-centers-and-cloud-working-together-to-power-
the-future.html
Izrailevsky, Y., Vlaovic, S., & Meshenberg, R. (2016, February 11).
Netflix - Completing the
Netflix Cloud Migration
. Netflix. https://about.netflix.com/en/news/completing-the-
netflix-cloud-migration
Macaulay, T. (2018).
Ten years on: How Netflix completed a historic cloud migration with AWS
.
Channel Asia. https://www.channelasia.tech/article/646530/ten-years-how-netflix-
completed-historic-cloud-migration-aws/
Saraf, N. (2022).
Netflix's Story of Migration to AWS
. Www.linkedin.com.
https://www.linkedin.com/pulse/netflixs-story-migration-aws-nilay-saraf?
trk=organization_guest_main-feed-card_reshare_feed-article-content
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