financial impact of cloud computing
DESCRIPTION
This deck is from a talk I gave to a group of CPAs to help explain the financial impacts of Cloud Computing for businesses.TRANSCRIPT
The Financial Impact of Cloud
Kris BliesnerCEO
• Defining Cloud• Public Cloud vs. Private Cloud• Cloud Use Cases• Financial Impacts of Cloud
Topics
Defining Cloud
• BPaaS = Business Process as a Service• SaaS = Software as a Service• PaaS = application Platform as a Service• IaaS = Infrastructure as a Service
Cloud Service Definitions
BPaaS•Customer Management•E-Commerce Enablement•Finance & Accounting•HR•Industry Ops•Cloud Payments•Supply Mgmt
SaaS•BI•CRM•Digital Content Creation•ERP•Office Suites•Project Mgmt•Web Conferencing•Etc.
PaaS•Application Development•Application Infrastructure & Middleware•BI Platforms•Database Management Systems
IaaS•Compute•Storate•Network•Print
Mgmt and Security
•IT Ops Mgmt•Security•Storage Mgmt
A Public Cloud Taxonomy (Gartner’s)
What your IT Infrastructure used to look like:
What Cloud IT Infrastructure looks like:
Your new datacenter/server room
Microsoft Quincy Datacenter470,000 sq ft
What is Cloud Computing?An analogy: think of electricity services…
Power is a utility service - available to you on-demand and you pay only for what you use.
You simply plug into a vast electrical grid managed by experts to get a low cost. Reliable power supply is available to you with much greater efficiency than you could generate on your own.
What is Cloud Computing? (Continued)
Cloud computing is also a utility service, giving you access to technology resources managed by experts and available on-demand.
You simply access these services over the internet or via VPN, with no up-front costs and you pay only for the resources you use.
Drivers of Cloud Adoption
• Mobility• Innovation• Lower costs• Need for agility • Business continuity• Core competencies
Attributes of Public Cloud IaaS
No capital expenditure Pay as you go and pay only for what you use True elastic capacity; scale up and down Improves time to market You get to focus your engineering resources on what
differentiates you vs. managing the undifferentiated infrastructure resources
By the hour cost model changes everything
Batch processing Backup/recovery Elastic capacity “By the hour” + elasticity = unlimited
infrastructure (When I need it)
Its about Time!
Who is Responsible for What?
Cloud Provider
Facilities
Physical security
Physical infrastructure
Network infrastructure
Virtualization infrastructure
2nd Watch or Customer
Architecture build
Engineering build
Security groups
Firewalls
Network configuration
Monitoring and reporting
Customer
Operating system
Application
Application development
Application fixes/patches
Customer contact
Compliance
Public Cloud vs. Private Cloud
Public Cloud•Accessible from the Internet•Shared by many customers•Vendor owned platform
Private Cloud
•Accessible from Internet and/or Private Company Network•Dedicated•Company Owned
Hybrid Cloud•Combination of Both Public and Private Cloud•Customer controls access (not necessarily Public entry)
Public vs. Private Cloud
What’s missing from Private Cloud?
Pay as you Go Lower Overall Costs
StopGuessing Capacity
Agility / Speed / Innovation
Avoid Undifferentiated Heavy Lifting
Go Global in Minutes
Public Cloud ✔ ✔ ✔ ✔ ✔ ✔
“Private” Cloud X X X X X X
How are they different financially?Private Cloud Public Cloud
Upfront Costs Significant – businesses have to buy “capacity” before it is available to use.
No upfront costs
Capital Expense Network, Servers, Storage, Backup and associated facilities.
No capital expense
Operating Expense Repairs and Maintenance, Telecom Telecom+
Procurement Weeks or months for new capacity or upgrades
Minutes
Contracts Support and Maintenance + Facilities
Support extra
SLAs Typically strong SLAs ($$) Weak SLAs – Use at your own risk.
Common Use Cases
Models for Consumption
• Simple bets on specific workloads
• Focus is on achieving a project outcome
• Parts of the datacenter in scope
Calculated Approach
• Service Catalog driven approach
• Focus is on building internal migration factory
• Entire datacenter in scope
All In
• Customer or Market driving need to innovate
• Focus is on business results – Cloud is innovation enabler
• Business line initiating move
Market Driven
Extend Your Data Center with the Cloud
Users orCustomers
Customer Data Center
VPN
EC2 Instances
EC2 Instances
Availability Zone 1
Add capacity! Use the cloud as your backup data center
Front-end Your Large Application from the Cloud
Users orCustomers
Availability Zone 1
EC2 Instances
EC2 Instances
Availability Zone 2
VPN
Customer Data Center
Run Entire Datacenter in the Cloud
Highly Redundant Infrastructure
Support for dynamic load Support for high data security
requirements Intrusion Detection Auditing Logging
Workloads
Web Applications
Disaster Recovery
Data Analytics
Marketing Campaign Management
Everything (Datacenter Migrations)
Drivers
Mobility
Innovation
Lower costs
Need for agility
Business continuity
Core competencies
What workloads are Enterprises moving to the Cloud?
Confidential. Property of 2nd Watch, Inc.
How are Enterprises using AWS?
Definitions:• Compute – EC2, RDS & EBS (Servers)• Storage – S3, RRS and Glacier (SAN/NAS)• Network – Data transfer (Telecomm)• Other Services – Application Services
(Caching, etc.)
Confidential. Property of 2nd Watch, Inc.
1960’s and 70’s – Mainframes1980’s – PC 1990’s – Client Server
2000’s – Web 2.0, SaaS2010’s – Infrastructure as a Service (IaaS)
Capital Investment
Human Investment
Investment Evolution of IT Infrastructure
Financial Impact of Cloud
Financial Impact of Cloud
• Massive changes to IT Total Cost of Ownership• Opex vs. Capex• Time to market/revenue
Demand
Q1 Q2 Q3 Q4 Q1
200k
300k
600k
Time
IT Demand
A TCO Example – Retail IT Demand
Demand
Q1 Q2 Q3 Q4 Q1
wasted capacity
lost customers, ordered hardware
wasted capacity
wasted capacity
wasted capacity
200k
300k
600k
Time
Capacity of resources
Actual demand
Maintaining on-premises infrastructure for peak demand is expensive
Demand
Cloud IaaS
Public Cloud enables companies to match resources to demand
Q1 Q2 Q3 Q4 Q1
200k
300k
600k
Demand
Time
TCO Examples Use only what you need when you need it
Schedule your servers!
Hint: Our backup server costs < $1 per month
Hint: Our developers don’t work 24x7
Change your instance size
Installs, busy days, etc.
Make a Template for your Application(s)
Manage your Templates in a Source Code Repository
Track Changes!
Deploy/Destroy 100’s or 1000’s of servers and infrastructure with one click
DevTest Staging
TCO Summary
• The cost of both success and failure has been reduced significantly.• Moving to public cloud can save companies 30-40% on average of
their annual IT costs.• Some of our customers have experienced larger savings (75-80%+)!• A true apples to apples comparison includes the entire datacenter
and all relevant support staff and contracts.• There is massive research and industry papers documenting Cloud
savings
IT Spend Now Shifting to Opex
Traditional Capital Expense• Servers• Storage• Network Equipment• Backup Equipment• Datacenter Facility (Building and
Equipment)
Operating Expense• Cloud Services
• SaaS• IaaS/PaaS
• Connectivity• Additional spend for cloud “link”
On-Premises
Experiment Infrequently
Failure is expensive
Less Innovation
Experiment Often
Fail quickly at a low cost
More Innovation
$ Millions Nearly $0
The path to innovation – Fail Fast
“I have not failed. I've just found 10,000 ways that won't work.” - Thomas Edison
Things to Watch
• Spending Controls• Who is authorized to “buy”• Monitoring and alerting for account thresholds (e.g. dev/test or
backup)
• Segregation of Duties• Anyone can start using Cloud – and they do• How do you ensure things are tested before release?
• Security and Compliance• You can never outsource ownership• Periodically check with vendors for ROC reports
1) Enterprise Systems Integrator for AWS2) Over 300 projects on AWS since 20113) Focus on Enterprise IT Operations
4) Enterprise Office 365 Partner5) Azure for dev/test workloads
A Leader in Cloud Implementations
