Decoding Cloud for the Non-IT Executive

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Stanton Jones, ISG

10 June 2015

Shared Services & Outsourcing Exchange

Decoding Cloud for the Non-IT Executive

© 2015 Information Services Group, Inc. All Rights Reserved 2

Democracy is the worst form of government, except for all those other forms that have been tried from time to time.

-- Winston Churchill


The democratization of enterprise technology

Started in 2006, AWS S3 now stores over 2 trillion objects and is growing over 100%

year-over-year.

The democratization of enterprise-class technology, via cloud, is fundamentally changing how we think about access to massive-scale technology on scale simply unimaginable just a decade ago.

200 TB of the 1000 Genomes Project data is available for free on S3; researchers using

EC2 to analyze.

Started in 2007, EC2 grows from almost 0 server to 11K racks of

servers, adding roughly 2,200 racks per year

Each innovation continues to build upon the previous innovation.

Source: https://huanliu.wordpress.com/


Democratization will accelerate as all sectors try to emulate

The traditional outsourcing market remains robust, however, as nearly all sectors transform to “as-a-service”, enabled by cloud, democratization will accelerate.

Source: ISG Research

As-a-Service Everything is easy to buy,

but is it what I need?

Computer Equipment

Software

Public Cloud $140

$110

Public & Telco Commercial

IT Services

Global Outsourcing

B B

Engineering Services


The sourcing industry is feeling the effect of cloud democratization

What was once a monolithic industry with few suppliers has exploded into a multi-sourced ecosystem with hundreds of providers.

Internal Shared Services / Captives

Function

Function

Function

Function

Function

All Towers

OR

Infrastructure ADM BPO Function(s)

Tower

Tower

Tower

Tower

Importance of Labor Arbitrage

Importance of Software, Platforms,

Labor Automation, & Scalability

Function

Social Media Collaboration

Mobility BYOD

Analytics & Big Data

Cloud

Computing & Storage

Service Integration

Strategic & Selective Sourcing Multi-Sourcing Confederation

MARKET 5 – 10 YEARS AGO LAST 5 YEARS NEXT 3 TO 5 YEARS


Apps and workloads are nexus of democratization trend

Applications are now center-stage; sourcing decisions will increasingly be focused on finding the best delivery model for each application, based on specific criteria:

Rationalization and Filtering Process

Tactical Implementation of Delivery Model

Application Portfolio Current State

4 Regulatory Constrains on Application and Data

1 Business Criticality, Cost of Migration and Maintenance

3 Security and Data Privacy Requirements

Traditional Data Center

IaaS: Virtual Private

IaaS: Public PaaS

2 Technical Suitability: Workload Attributes, Service Levels Required

Systematic, repeatable processes needed to continually evaluate an application profile.

SaaS


This creates a delivery model challenge

Cloud delivery models vary greatly across technology, operations, commercial and contractual considerations; sharing (multi-tenancy) disrupts traditional models.

PaaS

SaaS

IaaS: Public

Traditional Data Center

Iaas: Virtual Private

Iaas: Private

Hig

h

Leve

l o

f St

an

da

rdiz

ati

on

(te

chn

olo

gy,

SLA

s, t

erm

s)

Low High Business Ownership

Sharing Model

Hosting Location

Accounting Treatment

Cloud Characteristics

Management/ITIL Services

Multi-tenant

Opex (multi-year baseline commitment)

External

Self-service

Multi-tenant

Opex (no commitment)

External

Self-service

Multi-tenant or Dedicated

Opex (no commitment)

External

Self-service (ITIL-based management services available from SI ecosystem)

Multi-tenant or Dedicated

Opex (minimum commitment often required)

External

Self-service or ITIL-based managed services depending on vendor

Dedicated

Opex or Capex (for Opex, minimum commitment required)

Internal

Managed Services

Dedicated

Capex

Internal

Internally supported

Systems of Record (ERP, Transaction Processing)

Systems of Engagement (CRM, Mobile, Analytics)


Standard operating models are also problematic

While multi-tenancy can have massive strategic benefits, the sharing of software and hardware disrupts traditional processes around security & contracting.

Versus

Accept standard operating model & terms


As well as a supplier evaluation and selection challenge

“Moving to the cloud” has become standard fare in our industry; however, no such thing exists. “Moving to a cloud” is a better term to describe the shift.

‘The’ Cloud ‘A’ Cloud

Each provider has a unique API, often replacing standard ITIL

as the primary interface.


Cloud is not always cheaper, but is almost always faster

SaaS and IaaS should not always be considered levers to reduce cost; however, they should almost always be considered ways to move faster.

Public cloud software

►Avoid capex, however, pre-payment often req’d

►Business case based on upgrade avoidance

►Paying premium for premium features

Public cloud infrastructure

►Highly dependent on usage & features

►Generally won’t know cost until running

►High usage often unfavorable to internal IT


Which drives an entirely new sourcing process

Emerging IaaS Sourcing Model

Traditional IT Sourcing Model

Assess and design candidate workloads and service tiers

Engage market with solution-oriented RFS

Evaluate and compare vendor responses

Negotiate selected terms

Pilot selected workloads

Define Requirements, Service Levels, Categorize Assets

Develop Financial Base Case

Engage Market with prescriptive RFP


Negotiate, Contract, Transition

Sourcing for shared, multi-tenant platforms is fundamentally different than traditional ITO. SaaS and IaaS also differ significantly.

Emerging SaaS Sourcing Model

Determine SaaS readiness for specific application

Engage market with solution-oriented RFS


Negotiate price, baselines & selected terms

Prepay portion of subscription TCV; implement

Typical focus: reduce run cost via labor arbitrage.

Typical focus: get code into production faster, reduce capital for variable workloads.

Typical focus: increase customer, employee, partner engagement; analytics; mobile.

Accept standard operating model & terms


The way forward: Cloud democracy embedded with the rule of law

Cloud broker platforms and marketplaces may be the answer as they enforce “rule of law” versus “rule by law” because IT is subjected to same competitive pressures of external suppliers.

Change Change Change

Assess App for Cloud

Compare Different

Clouds

Collaboratively Design Solution

Add Managed Services

Order from IT Approved

Marketplace

View Estimated Bill

of IT

Get approval through

Workflow

Track Usage and Cost

Orchestrate & Provision

Living Order Management

Backup

Security

Monitor

Or

Jump to Marketplace Solution

$$$$$

$$$$$

$$$$$

$$$$$

Technical

Financial

Legal

Readiness Benefit

$

SLA

Cloud broker: can be

internal IT or managed services provider


Key Takeaways

Cloud creates opportunities to move much faster than traditional on-premises or outsourced options.

Cloud is not always cheaper, but can significantly reduce future capital expenditures.

Multi-tenancy creates significant strategic advantages, but also significantly disrupts the traditional sourcing process.

Cloud shifts significant levels of responsibility back to the buyer; take this into account when developing business case and target operating model.

A democratic approach to cloud, where IT competes like an external provider, via a brokerage-based approach, is where ISG believes the market is headed.


Let’s Connect

Stanton Jones Director & Emerging Technology Analyst

+1 281 795 2636 [email protected]

@stantonmjones linkedin.com/in/stantonjones

www.isg-one.com

Information Services Group is a leading technology insights, market intelligence and advisory services company, serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services, with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience of global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 800 employees and operates in 21 countries.

knowledge powering results®

http://www.isg-one.com/

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Decoding Cloud for the Non-IT Executive