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2014 Gartner, Inc. and/or its affiliates. All rights reserved.
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2014 Gartner, Inc. and/or its affiliates. All rights reserved.
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in Nine Industries
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Engagements
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500Consultants
Gartner at a Glance
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2014 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication may not be reproduced or distributed in any form without Gartner's prior written permission. If you are authorized to access this publication, your use of it is subject to the Usage Guidelines for Gartner Services posted on gartner.com. The information contained in this publication has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Gartner's research organization and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner's Board of Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, see "Guiding Principles on Independence and Objectivity."
William Maurer
Cloud Infrastructure aaS with Traditional Outsourcing Solutions
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2014 Gartner, Inc. and/or its affiliates. All rights reserved.
The Promise (Hype?) of CloudServices: What's Not to Love?
Easy IT as easy as the power from the plug
Much lower cost for acquisition and implementation
Simple to use
SPEED
Agility and scalability
Out-of-the-box ready
Pay as you go
Buy direct: No/limited need to get Procurement/IT approval
LOWER COST
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2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Re-thinking Data Center Outsourcing Bi-Modal Is In Your Future
IT Consumerization
Larger Available Market
Enterprise
suppliers, long-
term deals
Sourcing
Small, new
vendors, short-
term deals
Digital Workplace
Revenue Producing Solutions
Service Industrialization
Cost Improvement
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2014 Gartner, Inc. and/or its affiliates. All rights reserved.
3%
4%
5%
5%
5%
7%
7%
5%
8%
8%
10%
11%
21%
3%
5%
4%
6%
6%
7%
5%
12%
8%
10%
10%
9%
11%
4%
4%
7%
5%
7%
5%
8%
7%
9%
8%
9%
9%
10%
Shifting mix of sourcing choices (from T&M tofixed fee to managed services)
Moving Capex to Opex
Convergence of IT & operational technologies
Strategic determinations for use of cloud services
Enabling revenue enhancement
Overcoming staff shortages
Improving IT governance
Allowing IT to focus on key business initiatives
Business process improvement
Consolidating IT or business process operations(shared service centers)
IT process improvement
Improving competitive position
Reducing costs
Most important 2nd most important 3rd most important
Q02A. What are your organization's top three most important Infrastructure Services (or any subset of infrastructure) sourcing strategy objectives?
Most Important Infrastructure Services Sourcing Strategy Objectives
43%
17%
29%
24%
20%
26%
10%
16%
29%
16%
24%
19%
14%
n=383Top 3
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2014 Gartner, Inc. and/or its affiliates. All rights reserved.
$100 investment allocation
2015 Top 10 IT Budget Priorities
In 2015, Cloud Remains a Top Priority for IT Organizations Globally
Gartner's Annual IT Budget Survey
Gartner, February 2014 Number of Respondents = 1,523
78% of Respondents Are IT Managers or More Senior
Benefits Realization
Life Cycle Solutions
Speed
Insights
Co-innovation
Note: Darker Shade Indicates Nexus of Forces
Needs in New Services Delivery:
27%
26%
25%
19%
17%
17%
16%
15%
15%
14%
Cloud Computing (SaaS, PaaS, IaaS)
Virtualization (Server, Desktop, Storage)
IT Modernization
Mobile Technologies
Enterprise Software Modernization
Big Data, Information Management
Data Center Consolidation
Enterprise Software Implementation orUpgrade
Analytics and Business Intelligence
Customer Experience Management
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2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Key Issues (original in red, suggested by Victoria below ibn black font)
1. How do cloud services differ from traditional outsourcing?
2. What organizational and procedural changes are necessary when adopting cloud services?
3. What are service providers offering that could ease the transition to cloud services?
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2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Contracting Process Is Different
Cloud Services
SaaS Service Agreement
ServiceTerms and Agreement
These license terms are an agreement between the corporation and you.
Please read them
By clicking "I accept" you agree to the terms of the agreement.
I DECLINEI ACCEPT
Traditional Services
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2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Best Practice Contract Structure and Content
A
Relationship, Integration Governance
Guiding
PrinciplesServices Personnel
Assets and
Third-party
Contracts
Retained
Authorities
Fees and
Payment
Terms
Record-
keeping
Audit Rights
Represent.
Warranties
Covenant
Term and
TerminationDisentangle-
ment
Limitations
of Liability
Proprietary
Rights
Security and
Confiden-
tiality
Legal
Compliance
Indemnifi-
cationInsurance
Dispute
Resolution
Use of
Subcontrac-
tors
Miscellaneous
Master Service Agreement (MSA)
D
Communi-
cation
Plan
E
Transition/
Transfor-
mation
F
Demand
Management
Plan
G
Human
Capital
Management
H
Key
Personnel
K
Exit
Plan
L
Innovation
Plan
M
Measurement
Charter
N
SOW
SLA
Price
O
Risk
Analysis
Framework
C
Independent
Advisor
Charter
B
Strategic
Objective
Statement
J
Process
Ownership
Plan
I
Contract
Management
Attachment Attachment
Strategic
Relationship
Contract
Management
Term and
Termination
1
5
9
13
2
6
10
14
3
7
11
15
4
8
12
16 17 18 19
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Remains Dictated or Greatly Simplified Not in Cloud Contract
Best Practice Contract Structure Altered For as a Service Solutions
A
Relationship, Integration Governance
Services Personnel
Assets and
Third-party
Contracts
Fees
and
Payment
Terms
Record-
keeping
Audit Rights
Represent.
Warranties
Covenant
Disentangle-
ment
Limitations
of Liability
Proprietary
Rights
Master Service Agreement (MSA)
E
Transition/
Transfor-
mation
F
Demand
Management
Plan
G
Human
Capital
Management
H
Key
Personnel
K
Exit
Plan
L
Innovation
Plan
M
Measurement
Charter
N
SOW
SLA
Price
O
Risk
Analysis
Framework
J
Process
Ownership
Plan
I
Contract
Management
Attachment Attachment
Strategic
Relationship
Contract
Management
Guiding
Principles
Retained
Authorities
Term and
TerminationTerm and
Termination
Legal
Compliance
Indemnifi-
cationInsurance
Dispute
Resolution
Use of
Subcontract-
tors
Miscellaneous
17 18 19
Security and
Confidentiality
1
5
9
13
2
6
10
14
3
7
11
15
4
8
12
16
D
Communi-
cation
Plan
C
Independent
Advisor
Charter
B
Strategic
Objective
Statement
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Remains Dictated or Greatly Simplified Not in Cloud Contract
Altered State of Contract This is all that Remains, Some Big Holes
A
Relationship, Integration Governance
Services
Fees
and
Payment
Terms
Record-
keeping
Audit Rights
Represent.
Warranties
Covenant
Limitations
of Liability
Proprietary
Rights
Master Service Agreement (MSA)
E
Transition/
Transfor-
mation
K
Exit
Plan
L
Innovation
Plan
M
Measurement
Charter
N
SOW
SLA
Price
O
Risk
Analysis
Framework
I
Contract
Management
Attachment Attachment
Strategic
Relationship
Contract
Management
Guiding
Principles
Retained
Authorities
Term and
TerminationTerm and
Termination
Legal
Compliance
Indemnifi-
cationInsurance
Dispute
Resolution
Use of
Subcontract-
tors
Miscellaneous
17 18 19
Security and
Confidentiality
1
5
9
13
2
6
10
14
3
7
11
15
8
12
16
D
Communi-
cation
Plan
C
Independent
Advisor
Charter
B
Strategic
Objective
Statement
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Remains Dictated or Greatly Simplified Not in Cloud Contract
Altered State of Contract Worse This is all that We Can Negotiate
Master Service Agreement (MSA)
Attachment Attachment
Strategic
Relationship
Contract
Management
Retained
Authorities
Indemnifi-
cation
17 18 19
1
5
9
13
2
6
10
14
3
7
11
15
8
12
16B
Strategic
Objective
Statement
Limitations
of Liability
11
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2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Master
Service
Agreement
MSAGuiding
Principles
GP 1
Services
Sv 2
Personnel
Pn 3
Assets and
Third Party
Contracts
AT 4Retained
Authorities
RA 5
Fees and Payment Terms
FP 6
Record
Keeping
Audit Rights
RR 7
Representation
Warranties
Covenant
RW 8Term
Termination
Te 9
Disentangle-
ment
Da 10
Limitations of
Liability
LL 11
Proprietary
Rights
PR 12Security and
Confidentiality
SC 13
Legal
Compliance
LC 14
Indemnification
Id 15
Insurance
IsMiscellaneous
Mc19
Dispute
Resolution
DR 17
Use of
Subcontractors
US
16
18
Exit
Plan
EP K
Innovation
Plan
IP L
Measurement
Charter
MCM
SOW, SLA,
OLA, Price,
BHD
SP N
Risk
Analysis
Framework
RF O
Demand
Management
Plan
DM F
Human Capital
Management
Plan
HC G
Key Personnel
KP H
Contract
Management
CM I
Process
Ownership
Plan
PO J
Relationship,
Integration
Governance
RI A
Strategic
Objective
Statement
SO B
Independent
Advisor
Charter
IC C
Communication
Plan
CP D
Transition
Transformation
TT E
Attachment
ATT
Definitions
De
Licensing
Li
Acceptance
Ac20 21 22
Equipment
EqP
Chemistry of a Contract 2104Traditional ITO
22 Articles, 16 Attachments
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Master
Service
Agreement
MSAServices
Sv 2
Assets and
Third Party
Contracts
AT 4Retained
Authorities
RA 5
Fees and Payment Terms
FP 6
Record
Keeping
Audit Rights
RR 7
Representation
Warranties
Covenant
RW 8Term
Termination
Te 9
Disentangle-
ment
Da 10
Limitations of
Liability
LL 11
Proprietary
Rights
PR 12Security and
Confidentiality
SC 13
Legal
Compliance
LC 14
Indemnification
Id 15
Insurance
IsMiscellaneous
Mc19
Dispute
Resolution
DR 17
Use of
Subcontractors
US
16
18
Exit
Plan
EP K
Innovation
Plan
IP L
Measurement
Charter
MCM
SOW, SLA,
OLA, Price,
BHD
SP N
Risk
Analysis
Framework
RF O
Demand
Management
Plan
DM F
Contract
Management
CM I
Relationship,
Integration
Governance
RI A
Communication
Plan
CP D
Transition
Transformation
TT E
Attachment
ATT
Chemistry of a Contract 2104as a Service Solutions
18 Articles, 10 Attachments
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Cloud Service Contract
Pricing Is Different
Traditional Service Contract
Service-Level Agreement:
Price: Based on planned usage
Committed per negotiated terms
Service-Level Agreement:
Price:
My needs
Penalty
Reporting
Per usage
Reducing over time
Committed for three years
Standard
Needs of all
Weak/no credits
Pay as you go
Can change without notification
SLAs and pricing are not as prescriptive as traditional
service contracts.
Customized
Negotiated
Penalties
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Definitions, Pricing Models, Other Attributes - By Solution
IaaS PaaS STaaS
Definitions 22 15 12
Pricing Models 11 8 9
Service Levels 8 6 9
Contracts 12 14 15
Lengths 18 17 17
16
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2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Hidden Costs Are Different
Initial Setup CostsPilots
On-Premises
License
Conversions
With No
Credit
Sandboxing Fees
Reoccurring
Training Fees
Maintenance
and Support
Fees
Fees for Customers or Business Partners
Customization or
Integration Fees
Data Export
Fees
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Calculating the BusinessCase Is Different
Ongoing Cost: Per User Per Month (PUPM)
Additional Cost of "Premium Services"Cost to Manage Risk
and Quality: Security, Archiving, Interfaces
Cost to Get In and Out: Migration, Data Transfer, Exit Fees
ROI Is Often Further Away Than It Appears
Training IT and End Users
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Hosting/Collocation
Storage on Demand
Network Utility
SaaS
Infrastructure Utility
Cloud-Based System
Infrastructure Services
Cloud-Based Application
Infrastructure Services
Cloud-Based Business ProcessServices
Cloud-Based ApplicationServices
Vertical Business Process Utility
Horizontal Business Process Utility
Remote Managed Service
The Offerings and Delivery ModelsAre Different
Business Value-Add
IT Efficiency
Enterprise
One-to-One
SharedOne-to-Many
Business Strategy
Consulting
Custom BPO
Custom SolutionsIT Consulting
App. Development & Integrations Transaction
Processing
Desktop Management
Network Services
Help Desk Outsourcing
App. Mgmt.
-
Current Market Offerings Understand Your Provider, Pricing and Delivery Options
AccessManagement
OptimizationBusiness Value-Add
IT Efficiency
Creation
Valu
e
* Not a definitive list of companies
Cloud Computing
Infrastructure Utility SAP
Infrastructure Utility
Data Center Outsource
Application as a Service
Cloud Storage
One-to-one
delivery
One-to-many
delivery
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
The Vendor Relationship Is Different
It's about standardization and multitenancy, notabout custom terms.You are not special!
Software or infrastructure does not change. Youreally do "accept"!
Vendor defines the terms. And they can change atany time!
It's a "replicated" relationship, at best!
Vendor (One)
You (of Many)
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
The Result Is Different
Traditional Services Cloud Services
But noticeno net!
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Key Issues
1. How do cloud services differ from traditional outsourcing?
2. What organizational and procedural changes are necessary when adopting cloud services?
3. What are service providers offering that could ease the transition to cloud services?
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Cloud Sourcing Governance and Demand Management IT's New Critical Competency
1. Define who has the authority to acquire cloud services.
2. Establish governance, authorities and processes for evaluating cloud
services and suppliers.
3. Obtain input and agreement about cloud service requirements for
business and IT.
4. Develop demand management forecasting and planning processes
with the business units.
5. Continuously monitor, analyze, prioritize and forecast cloud
services requirements.
6. Proactively monitor consumption to spot trends in changing
requirements and unplanned utilization.
7. Report and evaluate the patterns of cloud service consumption
against forecasts and to modify contracts and providers as needed.
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
70%+ of organizations
update or advance their sourcing
strategy once a year or more frequently*
Change to Adopting Cloud Services: 1) Services Sourcing Strategy
1. Review demand and innovation processes to incorporate new models
2. Broaden sourcing governance to include business users, Gen Y, partners and update sourcing maxims
3. Monitor adoption of cloud services by your competitors
4. Align sourcing strategies to the pulse of business and market dynamics
*IT and Business Process Sourcing Survey, June 2014
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
45%+ of organizations
consider Total Cost of contracted
services the most important selection
criteria*
Change to Adopting Cloud Services: 2) Services and Providers Selection
1. Move mindset from detailed technical specifications to pilot and test
2. Move from complex RFPs to fast track selection among the few best qualified offerings
3. Don't fall for today'slow price
4. Focus on TCS, transition cost, volume baseline, change and demand management, Riskanalysis, DR/BC
*IT and Business Process Sourcing Survey, June 2012
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Change to Adopting Cloud Services: 3) Services and Contract Negotiation
1. Understand the trade offs you make with cloud services
2. Understand limitations: choice versus acceptance:
a) Service options, SLAs, price
b) Security, disaster recovery,
c) Availability, penalties
3. Understand which Ts&Csto negotiate:
a) Renewal price caps
b) Service availability guarantees
c) Audit, compliance
d) Liability, termination
Only 17% of cloud service contracts are signed as provided by the service provider.*
WARNING wrong changes break model
*IT and Business Process Sourcing Survey, June 2012
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Cloud services make cost more predictable and
contract easier (65% of organizations).
The opposite is true for 46%.*
Change to Adopting Cloud Services: 4) Services and Contract Management
1. Your future is hybrid, despite the term means nothing specific
2. Skill up to managing your specific combination of cloud and traditional services
3. Multisourcing competencies are the foundation for cloudsourcing management
4. Required tools, architecture and technical competencies vary based on services (IaaS, PaaS, SaaS, BPaaS)
*IT and Business Process Sourcing Survey, June 2012
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
DC Sourcing Options: The Decision-Making Tree
1. Location
2. Applications
3. Skills
USE CASEFeasibility
Options
4. Management
5. Size
6. Scope
7. Sharing
DCS Compass
8. Assets
9. Contract terms
10. Financials
Business Factors
Data Center ServicesMarket Map
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
DCO Decision-making Tree: Identify the Applicable Sourcing Scenarios
Category Main Factor Sub-factorsCustom
Factors RIM Co-lo. Hosting DCO IUS IaaS
USE CASE Location In country
USE CASE Application Complex DC consolidation
USE CASE Skills Critical issue Short term
DCS MAP Managed service Yes
DCS MAP Size >50 and
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Key Issues
1. How do cloud services differ from traditional outsourcing?
2. What organizational and procedural changes are necessary when adopting cloud services?
3. What are service providers offering that could ease the transition to cloud services?
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Cloud-Related Service Offerings:Many Outsourcers Claim It All
Public | Private | Hybrid | Community
Professional services
offerings can speed
successful adoption of
cloud services.
Look for providers
with demonstrable
cloud capabilities.
-
More Comprehensive Services
Cloud Service Providers: An InherentlyCrowded, Complex Ecosystem
Cloud-Based Technology Services (IaaS, PaaS, Security, Storage, etc.)
SaaS Integration and Governance (iPaaS), SaaS
SaaS Aggregation, Customization
Cloud-Enabled IT Outsourcing
Cloud-Enabled System Integration/Solutions
Cloud-Enabled BPaaS
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Cloud Services Roles
Cloud ConsultantsStrategists/Architects
CloudService Brokers
Application Infrastructure Services (PaaS)
Application Services(SaaS)
System Infrastructure Services(IaaS)
Business Process Services(BPU/aaS)
Co
mm
un
ica
tions
aa
S
Info
rma
tion
aaS
Se
cu
rity a
aS
CloudService Providers
Integrator
Aggregator
Customizer
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Recommendations: 10 Steps to Effective Cloud Sourcing
1. Confirm and document your cloud sourcing strategyWhy are you doing this? What results do you expect?
2. Prepare your organization for cloud services(IT and Business)
3. Investigate the market, clearly understand your options
4. Define the appropriate cloud service offerings
5. Determine the appropriate service level requirements
6. Select the providers and negotiate the terms
7. Integrate cloud services with internal systems and processes
8. Analyze and monitor demand
9. Monitor delivery performance and risk
10. Know when it's time to switch
-
2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Recommended Gartner Research
Manage Risk and Unexpected Costs During the Cloud Sourcing Revolution
F. Ridder, F. Karamouzis (G00211389)
Survey Analysis: Providers of IT and Cloud-Based Services Must Focus on the Details to Satisfy
Customer Demands
B. Igou, E. Anderson (G00228546)
Forecast: Public Cloud Services, Worldwide, 2010-2016, 2Q12 Update
E. Anderson and others (G00234814)
Cloud Services Brokerages Challenge Traditional IT Service Providers for Cloud Services Delivery
T. Bova, D. Plummer (G00233235)For more information, stop by Gartner Research Zone.
-
37
Events for Sourcing & Vendor Relationship Professionals
Experience live analyst expertise plus much more at a Gartner event.
Visit gartner.com/events
Sourcing & Strategic Vendor
Relationships Summit 2015
1 - 2 June, London, UK
3 5 November, Grapevine, TX (Dallas area)
Gartner IT Financial, Procurement &
Asset Management Summit 2015
21 - 22 September, London, UK
2 - 4 November, Grapevine, TX (Dallas area)
Outsourcing & IT Management Summit
2015
28 July, Tokyo, Japan
-
Gartner Symposium/ITxpo: The world's most important
gathering of CIOs and senior IT executives
38
Hundreds of analyst-led sessions, workshops, how-to clinics and more
Role-based tracks designed to address your key priorities and challenges
Immediately actionable take-awaysa clear action plan for the next three, six and 12 months
Mastermind Interview Keynotes with industry leaders
ITxpo exhibit floor with hundreds of top solution providers and exciting startups
October 19 - 22 Sao Paulo, Brazil
October 26 - 29 Gold Coast, Australia
November 2 - 5 Goa, India
November 8 - 12 Barcelona, Spain
May 19 21 Dubai, UAE
September 28 -30 Cape Town, South Africa
October 4 - 8 Orlando, FL
October 14 - 16 Tokyo, Japan
Visit gartner.com/symposium
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2015 Gartner, Inc. and/or its affiliates. All rights reserved. 39
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