how to succeed in the cloud (financially)
DESCRIPTION
George Brown discusses cloud computing and what businesses can do to capitalize on the commoditization of IT.TRANSCRIPT
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© 2013 Rand Group, LLC , All Rights reserved.
www.randgroup.com
Cloud Computing for FEI Houston
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Agenda for Today
What is cloud computing?
Why is it so compelling?
What are the business issues?
What should be done at the finance level in
2013?
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› Founded Salesworks in 1986, acquired by Rand Group in January 2013
› Worked extensively in strategy, software selection, marketing and sales automation for clients like;
› Microsoft
› Deloitte.› BDO
› Putnam Investments
› Blue Cross Blue Shield
› Federated Investors
› HSBC Bank
About George Brown
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› Since 2009 has been engaged by Microsoft worldwide in developing their cloud strategy;
› Go to market approach› Channel economics› Organizational development› Changes in buying behaviors
› Worked in the following regions on their behalf;› USA, Canada, UK, Western Europe, Eastern Europe,
Russia, China, LATAM
About George Brown
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What is Driving Cloud Computing?
The Mass Commoditization of IT
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What Business Customers are Demanding
An ability to access and analyze their data › Anywhere, anytime, instantly
› From any device they hold in their hand at the time
Keep projects and processes moving in their organizations› More intuitive user interface› Better cross application integration› More real business information in their hands
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What business customers are demanding
A reduction in both capital (CapEx) and operating (OpEx) expense› Pay only for what they use
Lower total cost of ownership› No maintenance or enhancement costs› Far less hardware infrastructure› Fewer FTE’s dedicated to the IT function
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What Business Customers are Demanding
Vertically-specific applications› Out-of-the-box functionality
› Add-on apps and functions when needed
Flexibility & Scalability› Use 10 or 1,000 servers on demand
› BOM, MRP, ECO, simulations
Time to value› Speed to market on innovative products› Speed to implementation
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1. Paying for software that isn’t used
2. Paying for hardware when it is not used
3. Buying new hardware for new applications And still be short of cycles for peak demand needs
4. Managing complex upgrade cycles
5. Developing and testing their own applications
6. Creating an ever growing IT department to manage all the details
What Businesses Want to Stop Doing
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Disruptive Changes & History
Others: broadband, railways, VOIP, music, digital photo
ELECTRICITY NEWSPRINT AUTOMOBILES RADIO SEARCHENGINES
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It’s the re-imagination of everything ……
VS
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It’s the re-imagination of everything ……
VS
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It’s the re-imagination of everything ……
VS
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Cloud Computing
What…Applications delivered as services that are
always available, scale as required, are
provisioned just-in-time, run on shared
industry-standard hardware, and are billed on
a pay-as-you consume basis
Accelerates speed to solution, lowers total
cost of ownership, and allows for more budget
to be allocated for innovation vs. maintenance
Why…
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Cloud Computing
What…Applications delivered as services that are
always available, scale as required, are
provisioned just-in-time, run on shared
industry-standard hardware, and are billed on
a pay-as-you consume basis
Accelerates speed to solution, lowers total
cost of ownership, and allows for more budget
to be allocated for innovation vs.
maintenance
Why…
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Cloud
Mainframe
Client Server
Technology
Centralized computing and storage, thin
clients
PCs and servers for distributed
computing, storage, etc.
Large DCs, commodity HW,
scale-out, devices
Economic
Optimized for efficiency due to high cost
Optimized for agility due to low
cost
Order of magnitude better efficiency and
agility
Business
High upfront costs for
hardware and software
Perpetual license for OS and application software
Pay as you go, and only for what you
use
Generational ShiftDifferent Business Models
Source: Microsoft white paper: “Economics of the Cloud,”
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On-PremisesBuy my own
hardware, and manage my own data
center
› Buy own machines, connectivity, software, etc.
› Upfront capital costs for the infrastructure
› Complete control and responsibility
HostedPay someone to host my application using
hardware that I specify
› Rent machines, connectivity, software
› Lower capital costs, but pay for fixed capacity, even if idle
› Less control, but fewer responsibilities
› Pay-as-you-go› Shared, multi-tenant
environment› Offers pool of
computing resources, abstracted from infrastructure
Cloud Pay someone for a pool of computing
resources that can be applied to a set of
applications
Defining Cloud ComputingClarity around the options
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Alphabet Soup
IaaS = Infrastructure as a Service
PaaS = Platform as a Service
SaaS = Software as a Service
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The Real Benefits of Cloud – What You Have to Manage
Applications
Data
Runtime
Middleware
O/S
Virtualization
Servers
Storage
Networking
Applications
Data
Runtime
Middleware
O/S
Virtualization
Servers
Storage
Networking
Applications
Data
Runtime
Middleware
O/S
Virtualization
Servers
Storage
Networking
Applications
Data
Runtime
Middleware
O/S
Virtualization
Servers
Storage
Networking
Traditional IT IaaS PaaS SaaS
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› All developers can quickly deliver highly available, secure,and infinitely-scalable applications
› Rich end-user experience anywhere from any device
› Mainframe of the future: 1000× as powerful at a fraction of the cost
› Maximum efficiency on industry-standard hardware› Your datacenter or ours
› Resilient to hardware and software failure› 24×7 availability with “9 to 5” management› “Restart, reboot, reimage, replace”
10X-40X more efficient
10X-40X faster to market
10X-40X cheaper to operate
* Microsoft whitepaper
Source: Microsoft white paper: “Economics of the Cloud,” - www.microsoft.com/presspass/presskits/cloud/docs/The-Economics-of-the-Cloud.pdf
Cloud ComputingThe platform for the new generation
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What is the Forecast?
Software as a Service (SaaS) and cloud-based business application services will grow from $13.4 billion in 2011 to $32.2 billion in 2016, a five-year CAGR of 19.1%. Source: Market Trends: Platform as a Service, Worldwide, 2012-2016, 2H12 Update Published: 5 October 2012 ID:G00239236.
IDC reports that enterprise cloud application revenues reached $22.9B in 2011 and is projected reach $67.3B by 2016, attaining a CAGR of 24%. IDC also predicts that by 2016, $1 of every $5 will be spent on cloud-based software and infrastructure. Report, Worldwide SaaS and Cloud Software 2012–2016 Forecast and 2011 Vendor Shares, Link: http://www.idc.com/getdoc.jsp?containerId=236184
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What is the Forecast?
Gartner Group is predicting Infrastructure as a Service (IaaS), cloud management & security devices, and Platform-as-a-Service (PaaS) are growing from $7.6B in 2011 to $35.5B in 2016, a CAGR of 36%. Source: Forecast Analysis: Enterprise Infrastructure Software, Worldwide, 2011-2016, 3Q12 Update Published: 18 October 2012 ID:G00234775.
The three most popular net-new SaaS solutions deployed are CRM (49%), Enterprise Content Management (ECM) (37%) and Digital Content Creation (35%). The three most-replaced on-premise applications are Supply Chain Management (SCM) (35%), Web Conferencing, teaming platforms and social software suites (34%) and Project & Portfolio Management (PPM (33%). Source: User Survey Analysis: Using Cloud Services for Mission-Critical Applications Published: 28 September 2012
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Market Response
Salesforce
Netsuite Concur RightNow
Annual Revenue $1.9b $213m $293m $207m
Revenue Growth 38% 23% 18% 29%
Employees 6,352 1,084 1,200 920
Customers 104,000 7,200 10,000 1,900
Market Cap $16.58b $2.47b $2.62b $1.44b
Valuation Multiple*
8.56 11.59 8.94 6.95
*market cap/annual revenue
all data taken from SEC filings
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What are the Business Issues?
1. Security
2. Control
3. Compliance
4. Risk Transfer
5. Disaster recovery
6. Availability and performance
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“60% of corporate data is unprotected, and 1 out of 10 laptops are stolen within 12 months”
Adrian Joseph, Managing Director, Google Enterprise
On Security
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Data Security Risks
Mitigation Strategy What happens now
Contractual obligations Most cloud provider already have this
Security audits of vendors Most do it now and comply with standards such as US SAS70 Type 2 or SSAE No.16 (Statement on Standards for Attestation Engagements)
Certification of vendor by trusted third party
Many cloud vendors already are ISO/IEC 27001:2005 certified
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Data control is governed by:
› Process, procedure, audit / testing for validation, routine restore of backups, routine systematic security testing
› Assuming because it is in your building it is under your control is a false sense of security.
Control
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› Cloud providers are increasingly certified as complying with relevant industry-specific norms and regulations, such as SAS 70, SOX, HIPAA and PCI DSS and a host of others.
› In most cases the ability of cloud providers to store, retrieve and protect data for 7 years is better than most corporations
“Over time, people will start to view an external service provider as more compliant than internal”
Greg Papadopoulos, CTO, Sun Microsystems
Compliance
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By using cloud based applications many risks are transferred to the vendor;
› Maintaining the application› Solving bugs (the more tenants the more urgent)› Maintaining compatibility with other technologies
(mobile, browser, hardware, OS)› Day to day management › Security
Risk Transfer
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› Disaster Recovery is a major advantage of cloud providers; all major players have redundant availability and full backups of what is stored / used in their operations.
› Offsite of main Data center› Options include full duplicate data center
› This means if you use cloud solutions your disaster recovery could be seamless
Disaster Recovery
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› The norm in the cloud is 3 - 9’s› 99.9% Uptime
› Performance is often more a factor of your ISP (internet service provider) rather than the actual cloud solution.
Availability and Performance
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› Per user per month
› Storage space in gigabytes
› Upload / download speed
› Integrations (priced monthly based on size of company)
Discounts are based on:
› Length of term (1 – 3 years), out clauses
› Payment option (monthly, quarterly, annually)
› Volume of useage
Cloud pricing
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1. Google
2. Amazon
3. Microsoft
4. Salesforce.com
The major players
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1. Cloud computing has many clear advantagesROI, scale, flexibility, risk transfer
2. Fact based evaluation of security and complianceCompare your current IT infrastructure to that of a credible supplier (Google, Microsoft, Amazon, IBM)
3. There will be resistance to change inside your IT organization
More cloud solutions = fewer IT FTE’s
4. The advantages and risks unique to your business must be assessed against a fabric of fact.
Conclusion
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What to do in 2013?
1. Include cloud in your overall 2013 IT strategy › Doesn't mean do it now, but get it in the strategy
3. Examine workloads that can be moved to the cloud to reduce costs
› Systematically reduce costs and complexity from your environment
4. Experiment if you already have not, don’t let competitors get the upper hand in cost
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© 2013 Rand Group, LLC.
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