The Road to on Demand

THE ROAD TO THE ON-DEMAND DATA CENTRE: A USER GUIDE 1

© Ovum 2004. Unauthorised reproduction prohibited.

The road to the on-demand data centre: a user guide

By Gary Barnett, Neil Ward-Dutton

November 2004

On-demand has become the principal focus for hype in the IT industry in the new millennium. Setting aside the supply-side hyperbole, there is benefit to be had. The journey towards an on-demand data centre offers end-user organisations a framework that will enable them to evolve their IT assets to achieve cost reduction, infrastructure simplification and improved service delivery.

On-demand and the on-demand data centre IBM CEO Sam Palmisano coined the term ‘on-demand’ in 2003. It describes a vision of IT resources aligned with the needs of organisations: better integrated, more flexible and responsive, more manageable, and – crucially – more cost effective.

Ovum uses the term ‘on-demand data centre’ to represent the technology foundation for on-demand business (see our On-demand data centre market analysis for details). Providing one or more elements of this foundation is the focus of most IT vendors, and the concept of on-demand has been taken up with enthusiasm across the industry. Some vendors anxious to differentiate themselves from Big Blue have chosen different terms, but fundamentally the ‘vision’ of most of the leading hardware vendors is surprisingly similar.

This is where things get complicated, because much of the vendor hype surrounding foundation technology for on-demand business (hereafter, ‘the on-demand data centre’) misses the point. Vendors are promoting the on-demand data centre as a way to deliver innovation, and are painting a picture of on-demand ‘nirvana’ that isn’t practical today, and may not even be worthwhile achieving tomorrow.

Why every end-user organisation should start the journey The goal of an on-demand data centre is a worthwhile one and, simply put, you’re never going to become an ‘on-demand business’ if you don’t start the journey. More importantly – even if realisation of an on-demand data centre seems a very long way off, there are significant benefits to be gained by taking the first steps towards it.



End-user IT has to be leaner, fitter and smarter

It’s not good enough to simply complain that the business doesn’t understand IT and that IT doesn’t understand the business. You have to do something about it.

The only way that you can even hope to deliver the kind of IT that the business wants is by transforming your approach to it:

• simplification: we’ve overdosed on technology, now is the time to start switching things off

• consolidation: the cost of managing dozens (in some cases hundreds) of under-utilised servers is consuming budget that you should be spending on helping the business to innovate

• flexibility: the more ‘stuff’ you have littering your IT portfolio the harder it is to make changes. If you’re constantly telling the business ‘we can’t deliver that in the timescale you want’ or ‘it will cost a lot to link those two applications’, you shouldn’t be surprised if the business thinks you’re hindering rather than helping

• reliability: IT has a poor record of reliability, both in terms of its ability to keep the basic stuff running and in its ability to deliver things when they are promised.

The on-demand approach is key to delivering the kind of IT that the business wants

At its heart, the concept of an on-demand business mandates a much more ‘engineered’ approach to technology. The on-demand data centre places the emphasis on simplifying and automating technology infrastructure. If you cannot achieve this, you’re unlikely to achieve the other goals that the business has set for you.

On-demand data centre myths and red herrings debunked As with any new ‘big thing’, there are hundreds of claims and promises being made on behalf of on-demand data centre technology by its proponents.

We need to be as clear about what the on-demand data centre is ‘not’ as we are about what it is.

The on-demand data centre is not a new concept

IBM offered clients dynamic provisioning and usage-based pricing back in the days before most marketing executives were born. It was called ‘timeshare’, and allowed a large number of clients to share the resources of a mainframe computer on a timeshare or usage-based pricing model.

On-demand data centre technology borrows all of its ideas from existing technologies, such as systems management tools and clustering technology.



In fact, the only thing that is ‘new’ about the on-demand data centre is the marketing, driven by an upsurge of interest from both the supply and demand side.

The on-demand data centre is not about business innovation

The on-demand data centre does not directly confer on adopters (as some vendors falsely claim) the ability to deliver business innovation. An on-demand data centre approach to IT assets is not about doing business better – it is about doing it for less.

The defining characteristics of the on-demand data centre approach are that consumers are concerned about only two things:

• how much it will cost

• how reliable it will be.

The on-demand data centre is all about paving the way for innovation; it makes it easier for innovation to happen, but if you think that by implementing an on-demand IT infrastructure your organisation is suddenly going to become more innovative, then you’re going to be sorely disappointed.

The core of the on-demand data centre is not about hardware virtualisation or grid computing

While not completely bogus, the enthusiasm of vendors for hardware virtualisation and grid computing is misplaced. The true cost of owning technology lies in its ongoing administration and maintenance. As the cost of hardware falls, and CPU power becomes a pervasive commodity like water, few consumers are going to care that much if they spill a little.

Although it is wrong to state that the on-demand data centre concept is just about asset and resource management, the biggest savings will come from the better management of computing resources – rather than the optimal utilisation of those resources. There is a subtle difference here.

The key to innovation lies in knowing what things change and what things don’t

In truth, very few organisations actually need to be able to ‘transform their business processes overnight’, and suppliers must be careful when talking about innovation and business process change – too much innovation, or innovation for innovation’s sake, is very bad. Successful organisations don’t radically change direction once a month, or even once a year.

It’s common for supporters of on-demand technology to talk about its ability to deliver ‘innovation’. However, the real secret to success lies not in ‘constant change’ to all processes, but ‘constant adjustment’ to a small set of key processes.



We have created a model that divides business processes into three classes – each with different rates of change according to the level of differentiation they deliver, as shown in Figure 1.

Figure 1 Different classes of business process…different rates of change

Delivery processes

Assembly processes

Utility processes

Source: Ovum

Core business processes

The lowest sedimentary layer is made up of a set of core business processes which actually change very little over time. While these core business processes are subject to refinement and gradual evolution, they do not lie at the heart of a company’s competitive edge – they’re things you have to do to be in business (like payroll and building management), but which don’t differentiate you from your competitors. These are effectively ‘utility processes’.

Internal business processes

The next class is made up of those internal business processes that define the ‘product’ or the ‘service’ that the organisation makes or provides. This represents the ‘offer’ that the company makes to the market. These processes are usually



composed by connecting together utility processes and adding new business rules. We call these ‘assembly processes’.

Externally focused processes

The most volatile class of process is that which forms the link between an organisation and the outside world. These processes need to change rapidly in order to respond to market demand, enable the company to develop and market new offerings. We call these ‘delivery processes’.

Eighty percent of all business processes belong in the ‘utility’ category

While this is a huge generalisation, and is likely to vary significantly depending on the type of business, most business processes belong in the lowest, and slowest-changing, sedimentary layer. They do not need to be changed at lightning speed. The secret of success for most organisations lies not in the rate of change they can support across their entire portfolio of business processes but in their wisdom in choosing which things to change, and which things to leave as they are.

All of IT can get value from an on-demand data centre approach

No matter what business process is being automated, it depends on infrastructure technology to provide a ‘home’ in which the applications that support the business process can execute.

This infrastructure takes the form of hardware, operating systems, network services and middleware. All of these ‘things’ are essential to the operation of the application, but, like utility business processes, they do not differentiate the organisation – except when they fail. This class of differentiation is akin to your choice of electricity supplier – none of your customers care who generates your electricity, until you have a power cut.

The role of partners in on-demand

While we believe that most organisations can achieve many of the benefits of on-demand without engaging partners to help them, the concept of outsourcing (or more accurately ‘sourcing’) is intrinsic to the process.

As organisations move closer to on-demand ‘nirvana’, it becomes easier to outsource the delivery and management of different elements of their IT portfolio. Indeed, as you move beyond acquiring on-demand technology towards the acquisition of on-demand outcomes, outsourcing becomes increasingly relevant. The focus of end-user IT has to be on those activities and supporting technologies that provide some degree of differentiation. The other activities and technologies may be essential but they should be treated (and sourced) differently. Wherever a technology is performing a ‘utility’ service (that is essential but non-differentiating), you should consider alternative approaches to sourcing it. You might outsource the management of your



infrastructure, or even its delivery. This enables you to establish clear service levels and budgets for these services, and frees you up to focus on the things that make a difference to your immediate customers: the business.

The journey to the on-demand data centre – six stages

Six steps to heaven

We define six categories to identify the degree to which technology is managed as an on-demand resource, as shown in Figure 2. The first category, which we call ‘ad hoc’, implies little or no formal approach to the management of resources – with individual administrators left largely to their own devices. The sixth category (‘on-demand’) implies that resources are managed, provisioned and configured completely automatically.

Figure 2 Six stages of the journey to the on-demand data centre

Ad hoc

Structured

Centralised

On-demand

Increasing levels ofstandardisation and

automation

Poor resource usage,inconsistent management

and administration

Order

Chaos

Level 1 Level 2 Level 3 Level 4 Level 5 Level 6

Automated

Consolidated

Source: Ovum

All organisations fall somewhere on a line between ‘chaotic/ad hoc’ and ‘ordered/on-demand’ in terms of the way they manage and utilise technology.

In practice, most organisations have different approaches to different types of technology, so a single organisation may manage its departmental file servers in an ad hoc fashion, while applying high levels of automation and discipline to the management of its Unix servers and mainframe assets.



As an organisation moves along this line, the following benefits are achieved:

• reduced management costs

• reduced hardware costs

• improved reliability

• improved resource utilisation.

Movement between management categories isn’t necessarily linear

While we present the six categories as a hierarchy, because there is a general trend towards greater automation and consolidation, movement between categories isn’t necessarily linear – and outsourcing doesn’t become an option only once you’ve reached a certain level.

Each category explained

We describe the characteristics of each category in Figure 3.



Figure 3 Characteristics of each category

Category Characteristics

1 Ad hoc Desktops and servers managed and provisioned on an ad hoc basis.

Little or no effort made to standardise.

High cost of maintenance, poor levels of reliability.

Wide variation in server utilisation.

2 Structured Standard processes adopted.

Desktops and servers administered locally, according to central policy.

More consistent server reliability.

Lower maintenance costs.

3 Centralised Standard processes adopted and applied centrally.

Many servers are co-located at the centre; distributed servers managed from the centre.

Consistent server reliability.

More constant server utilisation.

4 Automated Standard processes adopted and applied using automation technology.

Admin costs significantly reduced.

Server reliability consistently high.

High server utilisation.

5 Consolidated Number of servers reduced by consolidating workloads.

Hardware and admin costs reduced.

Consistent server reliability.

High server utilisation.

6 On-demand Standard processes adopted

Fewer servers administered centrally via management tools according to central policy defined in terms of business requirements.

Optimal server reliability.

Optimal server utilisation.

Optimal cost management.

Source: Ovum

Benefits are subject to diminishing return

While moving an asset from one management category to the next will deliver improvements, both in terms of cost and service levels, it is worth noting that the incremental returns diminish as assets move towards the ‘highest’ category (six), as shown in Figure 4.



The benefits of moving from category one to category two are very significant. In some cases we’ve seen cost reductions in excess of 50%.

The benefits of moving from category five to category six are likely to be much slimmer – we would expect cost benefits in the order of 5–10% (which is still significant if your budget amounts to several million dollars).

Figure 4 Six steps to heaven – the law of diminishing returns

Source: Ovum

Ad hoc

Structured

Centralised

On-demand

Stage of automation

Ret

urn

on m

ovin

g to

nex

t lev

el

5

10

15

20

25

30

Automated

Consolidated

0

But don’t take our word (or a vendor’s) for it

Our estimates are, of necessity, generic. They will not apply to your organisation. You will need to look carefully at the cost of migration against the likely cost saving that it will deliver.

We strongly advise that you approach this purely from a ‘costs saved’ perspective, and ignore any potential ‘soft benefits’ that a move to the next level may bring.

Where are end-user organisations on the journey?

Very few end users can claim to have achieved full automation, let alone ‘on-demand’ status. Our research indicates that the bulk of organisations fall into the structured/centralised category, as shown in Figure 5. Thankfully, the number that still dwells in the mire of ‘ad hoc’ is falling, but even the best run IT shops have some machines that fall into that category.



Figure 5 Six steps to heaven – distribution

Source: Ovum

Ad hoc

Structured

Centralised

On-demand

Stage of automation

Dis

trib

utio

n

Automated

Consolidated

The stage of automation varies widely by platform class

Figure 5 hides the fact that there is typically a big difference between different platforms. Figure 6 separates platforms into three classes – Intel, Unix and mainframe.



Figure 6 Six steps to heaven – distribution across different platform types

Source: Ovum

Automated

Consolidated

Ad hoc

Structured

Centralised

On-demand

Stage of automation

Dis

trib

utio

n

Intel

Unix Mainframe

Figure 6 illustrates that Intel-based servers and PCs account for a very significant proportion of the problem. There are several reasons for this:

• they are much more numerous

• they don’t traditionally belong to the category of ‘enterprise server’, and haven’t benefited from the decades of management and administration best practice that the mainframe and its younger cousin ‘the mid-range’ have

• they have not traditionally been under the control of ‘central IT’.

A fourth class of technology is just about to add to the ‘management nightmare’

We have deliberately omitted a fourth technology type from our analysis, because, today at least, it isn’t present in sufficient numbers to have a major impact. However, within 24 months mobile devices will present a challenge that organisations will not be able to ignore, as shown in Figure 7.

Mobile devices are growing virally within end-user IT, but most IT organisations are hopelessly unprepared for the additional burden in terms of management and administration that they bring.



Figure 7 Six steps to heaven – distribution of mobile devices

Source: Ovum

Ad hoc

Automated

Consolidated

Structured

Centralised

On-demand

Stage of automation

Dis

trib

utio

n

Preparing for the journey Given that there are clear benefits in moving from one management category to the next, while your ultimate goal may be to implement an on-demand data centre, your focus should initially be just on getting to the ‘next step’. The following six preparatory tasks will get you well on the way. These are things that you can do today (they don’t depend on things that have been promised but not yet delivered by vendors), and they will deliver most of the benefits that your on-demand journey has to offer.

Task 1: find out where you are

Begin by auditing your technology portfolio – including all of the machines and devices that make up your IT portfolio.

Assign each device a number corresponding to the ‘stage’ of management that is applied to it.

The business has to be engaged here to help you establish priorities – identify which technologies support the most crucial business processes and concentrate on those to begin with.



Task 2: level the playing field

Having audited your technology portfolio, the next step is to try to bring the majority into line with the current level of best practice within your organisation.

Start with the badly managed hardware and work up.

Task 3: define and enforce best practice

This step has little to do with technology; it has more to do with people. You should develop a set of best practices/standard procedures and then ensure that they are applied consistently across the organisation. Note that a best practice is not a best practice simply because it has been written down or published on the intranet. A best practice can only ever be best practice if it is put into practice.

At this stage, and the next, it is worth looking at your sourcing options. Having identified a set of resources that need to be managed in a certain way, it is definitely worth seeing whether a third party can deliver the quality of service you’re looking for at lower cost than you can deliver internally.

Task 4: look for ‘easy’ server consolidation opportunities

Identify any straightforward consolidation opportunities (like storage resources, or file-and-print servers). With today’s levels of network reliability, and the low cost of internal networking, it is increasingly difficult to justify departmental or workgroup servers.

There will be more complex consolidation opportunities, but in many cases some integration work may be required. At this stage, your focus should be on the quick wins. The more involved projects should be treated separately and as with task three, you should consider engaging a third party to help.

Task 5: use automation to lower the cost of maintaining desktops and servers

Having established standards and best practice, and eliminated obviously redundant servers, the next step is to use automation technology to lower the cost of managing and maintaining your server and desktop PC portfolio. Software distribution and patch management technology greatly reduces the cost of keeping an estate up to date, and also significantly increases the likelihood that updates will actually happen.

This is another point at which sourcing becomes a question worth asking: ‘could a third-party service provider deliver the levels of service I need at a lower cost than I could?’

Task 6: initiate a review of your business processes

In this step, we’re calling on you to conduct a review of your business processes (along with the technologies and applications that support them) in order to establish which processes are ‘utility’ services or processes that can readily be outsourced, and which are differentiating ones over which you want to retain control.



Moving on

If you can move a significant proportion, if not all, of your IT asset portfolio to the on-demand management category, your journey will be more or less complete.

Once you have reached this level of management automation, a number of choices will be open to you. You can consider taking a homegrown approach to on-demand, by managing all of your resources internally. Alternatively you can elect to outsource components of your infrastructure on an ‘on-demand’ basis.

The secret is focus

The only way you will deliver the simplification, cost reduction and flexibility that the business is crying out for is by being completely focused.

It is not enough just to know the route to on-demand – you have to follow it.

Documents

The Road to on Demand