Of the five disruptive forces shaping IT today, Cloud Computing’s emergence as a preferred means of service delivery will have the most wide-ranging impact on all enterprises (see Figure 1).

Like water, electricity, phone and internet connectivity before it, IT services are fast taking on the characteristics of a utility1. The building blocks have been falling into place for the past decade: Computing and storage resources have been commoditized and their availability has proliferated. For ‘transporting’ the commodity, an efficient global network (the Internet) exists, and datacenters and IBX’s (Internet Business Exchanges) can host, distribute and meter the resources to ubiquitous mass customers. Finally, market mechanisms are emerging that enable service portability and even aggregation and brokering of supply. Being a utility means IT services become differentiated more by service levels and service quality than on a purely technology basis. Users (companies) can pick and choose what services they need when they need it at the quality and quantity they want, all without hefty sunk investments.

In short, the era of “asset-light” IT has arrived.

1 J. Clark, “Cloud computing’s utility future gets closer,” Cloud Watch, Nov 2012

Drive Your Business

Cloud ComputingA Practical Guide to Utilize Cloud in the Era of Asset-Light IT

Strategy Brief | Cloud Computing

1

There are five disruptive forces shaping IT

today, but none has more wide-ranging impact on all enterprises than the emergence of cloud as a preferred means of service delivery.

Responsibility for IT is Moving to the Business

Convergence of BPO and ITO

Big Data, Mobility and Analytics

Commoditization of IT and Global Delivery

Consumerization of IT

1

2

3

4

5

Commodization of most IT resources and services

Global access to these virtualized services

Cloud computing evolving into a utility+ =

Figure 1: Five Disruptive IT Trends

Source: WGroup

The fluctuations in demand for IT services

from any business are more severe than in other utilities, and IT services can indeed be “transmitted” globally with minimal “loss.” Thus aggregating demand globally makes perfect sense.

The value propositions of cloud (Figure 2) are compelling, not the least of which is its economics – fully 85%2 of distributed computing capacity sits idle at any moment. If only a small portion of that can be better utilized, the benefits of scale economy would outshine the benefits of centralized electricity generation. Furthermore, the fluctuations in demand for IT services from any business are more severe than in other utilities, and IT services can indeed be ‘transmitted’ globally with minimal ‘loss.’ Thus aggregating demand globally makes perfect sense. With cloud, the ability to absorb peak loading vastly improves, true costs become transparent, and the distribution of supply makes the overall system fault tolerant and self-healing. In a mutually beneficial interaction, users of cloud are also prompted to adhere to standard processes.

With the barrier of high-cost up-front IT investments removed, businesses are freed to test many more innovative products and services for employees or customers alike. However, since cloud truly implies a paradigm shift, IT organizations need to carefully consider the potential challenges that cloud migrations could bring. The challenges are along the three fronts of Capacity, Capability and Culture.

2 United States Department of Energy, May 18, 2007

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Realize New Business Services

Variabalize Cost & Reduce Complexity of Service Provisioning

Cloud enables creating new applications that are more • Collaborative • Data-intensive

• Available • Networked

• Easy to use

Cloud Adopters • Focus: cost reduction

and services agility

• Need: Determine post-cloud operational model

• Pay-per-usage models

• Self-service processes

• Self-healing operations

Mass Customization and 1-to-1 Marketing

Big Data Analytics

Low Latency Expert Systems

Global, Mobile Access to Services

Always on, distributed processing

Cloud-Based Business Services Providers

• Focus: Monetize new cloud-based services and reach new customers

• Need: Choose from below business models • Provide vertically Integrated cloud

services

• Provide SaaS using outsourced infrastructure

• Provide core domain-speci�c functionality with all non-core components outsourced

• Provide a specialized component on third party SaaS

to From Fixed CapexVariable Opex Fast and

Elastic Provisioning

(Self-Service)

Simplicity and Cost

Transparency (Complexity

Masking) Always Available,

Self-Healing

Process Standards

and Automation

Economy of Scale

to From Fixed CapexVariable Opex Fast and

Elastic Provisioning

(Self-Service)

Simplicity and Cost

Transparency (Complexity

Masking) Always Available,

Self-Healing

Process Standards

and Automation

Economy of Scale

CLOUDVALUE

DRIVERS

Figure 2: Cloud Value Drivers and Implications

Source: WGroup

Challenges of Cloud Capacity: Capacity concerns include both service reliability and performance of the cloud provider, as well as its ability to protect the privacy and security of data (at least for public or hybrid clouds.) As Figure 3 indicates, not all workloads are equally appropriate for migrating to cloud today. Careful selection and tuning of suitable workloads to migrate should always precede finalization of the cloud strategy. As a general rule, those workloads that are highly elastic in demand and less mission-critical are most suitable. And while data security is really not at bigger or lesser inherent risk in cloud than in other environments, proper design of data isolation and enterprise data governance should be in place prior to migration.

Capability: The extensive use of cloud will fundamentally change the role of IT—from service provider to service broker—and make additional demands on strong IT governance (Figure 4.) In this new role, IT must proactively engage business at the strategic level, because cloud’s true benefit is in enabling new kinds of competitive advantage and not merely a lower cost substitution for in-house systems. Since multiple cloud vendors are likely to be involved in providing different kinds of services within different cloud layers (IaaS, PaaS, SaaS and BPaaS), architectural integration and vendor management skills are paramount. Furthermore, the migration from traditional to cloud-centric service itself poses significant process and organizational risks, as users get accustomed to self-provisioning and services get recast into new packages (e.g., formerly separate functions of database, systems and network administration will be combined into a single cloud service.) IT must be well-versed in change management and organizational transformation skills.

“Workloads for migrating to cloud need to be carefully selected. Those that are highly elastic in demand and less mission-critical are most suitable.”

Eric LiangPrincipal, WGroup

Cloud Computing 3

** Except those requiring full use of multiple cores and hi performance �le systems or very high bandwidths

Web Apps

Compute-Intensive R&D** • Bioinformatics • Engineering simulations • Financial risk modeling

Big Data Analytics

Development and Test

Desktop and Devices

Collaboration Tools & Email

Traditional BI

Medical Imaging (not medical records)

Over�ow Storage, Offsite Backups

Generic Compute (One time batch jobs)

(Virtualized) SaaS Apps

Inelastic Demand

Online Transactions

(Unvirtualized ) Third Party SW

Highly Customized SW

Regulated / Auditable Processes

Highly Sensitive

Data

Highly Elastic Demand

(Daily, monthly, seasonal variations, unknown demand, or highly transient needs)

High Security/Mission Critical Low Security/Non-Mission Critical

Traditional Data Centers

Enterprise Private Cloud

Managed Private Cloud

Hosted Private Cloud

Hybrid Cloud Public Cloud

Less Ready

Ready

Figure 3: Workload Readiness for Cloud (Examples)

Source: WGroup

A s more and more IT procurement

decisions are made by business or directly by end users, IT must avoid becoming irrelevant due to disintermediation, but instead bring forth a new relevance as the leader of an ecosystem of suppliers both in and out of the cloud to deliver a total solution.

Culture: Finally, because of cloud’s potential to transform operational and customer service models, IT must proactively manage, and indeed champion, the cultural changes necessary to maximize benefits and avoid the pitfalls. While cloud-enabled rapid deployment and self-provisioning enhance efficiency and thus should be supported with new development models, a strong architectural governance framework becomes paramount to prevent technological fragmentation (back to the old pre-centralized IT days.) As more and more IT procurement decisions are made by business or directly by end users, IT must avoid becoming irrelevant due to disintermediation, but instead bring forth a new relevance as the leader of an ecosystem of suppliers both in and out of the cloud to deliver a total solution. All these imply new skills must be acquired, which the existing IT team should view as an opportunity and not a threat. When leveraged properly, the asset-light cloud-based model resolves a perpetual tension between business’ priority for agility, speed and more business value, and IT’s priority for lower cost and more architectural control (Figure 5.) New products and new services can evolve quickly through the innovation, adoption, standardization and then commoditization stages. The apparently conflicting priorities no longer need to be so, but are merely objectives emphasized at different stages of the maturation cycle of the new technology.

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SELECTION

INTEGRATION DELIVERY

GOVERNANCE

IMPACT OF CLOUD—IT AS A BROKER

OF SERVICES

Vendor governanceframework that

ensures accountablityand reduces risk

Proactive businessengagement, vendor and

solution evaluation

Focus on IT capabilitiessupporting architecture

and integration

End-to-end serviced deliveryand SLA management acrossmultiple cloud-based solutions

Figure 4: Characteristics of Cloud-Based Offerings That Impact IT Governance

Source: WGroup

How WGroup Can HelpTo gain new competitive advantages in the era of asset-light IT, an enterprise should not think of cloud as merely an alternative services delivery channel. Rather, it should take full advantage of this new modus operandi by extending its business vision to first determine which parts of the business can truly be revolutionized and when, along with a clear understanding of the financial impact. A comprehensive service delivery strategy and new IT operating models can then be developed, followed by selection of the highest priority workloads for migration.

WGroup is experienced in rigorous financial modeling (including TCO estimation) and technical assessment of IaaS as well as selection of SaaS partners. We bring expertise in IT organization and business redesign to take full advantage of the characteristics of cloud either as a user or as a provider. We help client organizations assess their overall IT capability maturity from the perspective of cloud readiness. Going beyond the formulation of cloud strategy recommendations, our consultants can also follow through with

Cloud Computing 5

Source: WGroup

Instead of this...

Replace with this...

Innovation: • Agility • Speed • Business Control

Ef�ciency: • Cost • Security • Architectural Control

Innovation

Commoditi-zation Adoption

Standardi-zation

• New products • New services

• Low cost • On demand • High availability

• Process ef�ciency • Operational excellence

• Customer satisfaction

• Customer experience

ASSET-LIGHTLEVERAGED MODEL

BUSINESSOBJECTIVES

ITOBJECTIVES

Figure 5: Cloud Can Replace the Tension Between IT and Business Objectives with Alignment

Source: Hunter Muller, “On Top of The Cloud,” Wiley, 2012

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Copyright © 2013 WGroup. All Rights Reserved.7

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About WGroup

Founded in 1995, WGroup is a boutique management consulting �rm that provides Strategy, Management and Execution Services to optimize business performance, minimize cost and create value. Our consultants have years of experience, both as industry executives and trusted advisors, to help clients think through complicated and pressing challenges to drive their business forward.

For more information on WGroup, visit http://thinkwgroup.com

assisting our clients to successful migration preparation, implementation and value tracking of cloud initiatives. Figure 6 delineates the components of a typical cloud transformation initiative and WGroup offerings, including:

• Cloud Readiness Assessment• Cloud Impact Analysis• Cloud Cost Model• Defining Scope of Cloud Migration• Develop Employee Skills and Implement Change Management Process• Cloud Governance Model• Recommendation of Potential Cloud Provider

For more details please contact WGroup:

Develop New Processes,

Chargeback and Governance

Models

Develop Future State IT

Operating ledoM

Develop Organizational Transformation

Roadmap

Plan Transition Details, PMO

Requirements. Set Up PMO

Analyze Detailed

Workloads

Select Vendor & Conduct

Negotiations; Finalize SLAs

Assess Cloud Readiness &

Analyze Scenarios

Construct Business Case(s)

for Change; Prioritize Areas

Understand Enterprise

Tech Strategy & Architecture

ssenisuB-duolCVision

Alignment

Service Delivery Strategy

Development

Cloud-centric IT Operating

Model Design

Migration Preparation Implementation

Determine Integration

Strategy With Legacy Systems

Survey Industry & Vendors;

Analyze Gaps

Choose Cloud Type & Services

oiloftroP

Standardize Images and

Migrate (may have multiple

waves)

Assist In New Skills

Development & .tmgM egnahC

Identify Risks, KPIs and Track

Bene�ts

Figure 6: The Five Phases of a Typical Cloud Transformation Initiative

Source: WGroup