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Presentation given at Cloud Fair Seattle 2012 on Emerging Enterprise Cloud Adoption Paths
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Emerging Enterprise Cloud Adoption Paths
April 18, 2012
Everest Group is a leading global services advisory firm
Range of servicesOverview
More than 20 years of experience d i i Gl b l 1000 StrategyStrategy S b i tiS b i tiadvising Global 1000
Recognized for positioning clients for the next generation of global services − combination of deep
StrategyConsulting and research services to turn insights into decisions
StrategyConsulting and research services to turn insights into decisions
SubscriptionsResearch reports, data sets, customized tracking services
SubscriptionsResearch reports, data sets, customized tracking services
insights, strategic decision-making approaches, and implementation expertise
Distinctive combination of consulting
ImplementationConsulting services to capture value from decisions
ImplementationConsulting services to capture value from decisions
ResourcesWebinars, research, and blogsResourcesWebinars, research, and blogs
and research capabilities
Over 1,000 engagements, covering IT and business processes
We serve enterprises, service providers, and service enablers
Service ProvidersEnterprises
Rich data sets and subscription research based on over 75 business processes, 150 service delivery locations, 500 captives, 100 service providers, and 18,000 outsourcing
Services Industry
Service Enablers
Proprietary & Confidential. © 2012, Everest Global, Inc. 2
contracts
ITO and the Enterprise Cloud OpportunityOver $500 billion in infrastructure-related outsourcing contracts are coming to term in the next three yearsthe next three years
Global Infrastructure-related Outsourcing Contracts Announced TCV, US$ billions
Global Infrastructure-related Outsourcing Contracts by Expiration Year Estimated ACV, US$ billions
# of contracts Latin America Asia Pacific EMEA North America Total
IO 28 113 512 513 1,166
AO & IO 14 66 251 290 621
Contract Volume Breakdown
AO & IO 14 66 251 290 621
Total 42 179 763 803 1,787
Total ACV (US$) $1 billion $5 billion $28 billion $49 billion $84 billion
A d ti 5 9 6 3 5 9 6 2 6 1
Proprietary & Confidential. © 2012, Everest Global, Inc. 3
Average duration 5.9 years 6.3 years 5.9 years 6.2 years 6.1 years
Total TCV (US$) $7 billion $29 billion $168 billion $306 billion $510 billionSource: Everest Group Transaction Intelligence Database
Global IT Services Market ForcesEnterprises face pressure to respond to extreme market demands for efficiency and flexibility
Demand for FlexibilityDemand for Efficiency
flexibility
Increasing Value Focus Increasing Pace of Innovation
“Consumerization” of IT Device proliferation
C d l ti
Ongoing budget pressure Demand for business value
V d i i Compressed cycle time Strategic focus
Vendor pricing Security and regulatory
compliance
Drive to Improve Utilization Need for Responsiveness Rapid volume growth; high
variability; explosion of data / l it
High cost “single-tenant” modelsU d tili ti f Extreme complexity
Anytime / anywhere access Speed / on-demand service Configurability
Underutilization of dedicated hardware
Suboptimal skill mixes Underachievement of
economies of scale
ExtremeDemands on
IT and BusinessFunctions
Proprietary & Confidential. © 2012, Everest Global, Inc. 4
Impact of Next Generation IT ComponentsDisruptive Next Generation IT models are positioned to meet the demanding market needs creating game changing opportunities
Efficiency Impact Flexibility Impact
Next Generation Data Centers Dramatically lowered cost Standardization equals
needs, creating game-changing opportunities
s
Data CentersDesigned to take advantage of modular, hyper-scale and high-density principles
Reduced latency Simplified management Highly scalable
speed ‘Right-sized’ capacity ‘Just-in-time’ capacity
ion
Mod
els
Talent FactoriesHigh talent, low cost resources organized by an optimized workforce pyramid
Optimized staffing pyramid leading to improved resource utilization
Remote support from low cost locations
Improved access to specialized skills and technical expertise
Enhanced resource scalability
xt G
ener
at
Cloud ServicesIT delivered as a service through private, public, and/or hybrid cloud models
Dynamic workload shift to achieve 4-5X efficiency gain
Pooled resources/multi-tenancyC t li k d t ti
On-demand processing and storage capacity
Self-service provisioning Capital avoidance
Nex Cost linked to consumption
MobilitySmartphones, tablets, sensors and other mobile end point
Lower device end-user TCO (for certain segments)
Productivity improvements
Simplified ‘AppStore’ delivery of capabilities
‘Always on’ connectivity
Proprietary & Confidential. © 2012, Everest Global, Inc. 5
and other mobile end-point technologies.
y p Location and motion
information utility
y y Ubiquitous user access
Enterprise Cloud Business Value DriversCloud delivery models are creating enterprise-class value across several operational and financial leversand financial levers
Server consolidation/ i t li ti
Operational Levers Key Financial Levers
Observations
Effi i
virtualization
Multi-tenant service models
Capex avoidance
Reduced operations and
Levers and impact differ by delivery model• BPaaS
Observations
EfficiencyBenefits Management
Automation
Standardization Outsourced maintenance and support
Reduced operations and mgmt costs
• BPaaS• SaaS• PaaS• IaaS• Private / hybrid cloud
Cloud Cloud ImpactImpact
Active workload management
Increased Agility
• Private / hybrid cloud
Economics sensitive to context–specific factors• Refresh cycle
Flexibility Benefits
g y
Extended Reach
New Capabilities
Revenue growth• Migration approaches
and costSignificant variations in value impact across vendors / CSPs
Reduced operating costs
Proprietary & Confidential. © 2012, Everest Global, Inc. 6
p
Consumption-based billinge
vendors / CSPscosts
There’s No Such Thing as ‘Enterprise Cloud’…‘The Cloud’ is comprised of several different delivery models, each with different attributes and characteristics
Business Business Process as aProcess as a
Description
End-to-end business process delivered as a
Common Services Payroll Order-to-cash
P t
attributes and characteristics
Process as a Process as a Service Service ((BPaaSBPaaS))
Software as a Software as a S iS i
service
Multi-tenant applications and business services
Procure-to-pay Hire-to-retire
CRM HCM
PublicPublicCloud Cloud
ServicesServices Platform as a Platform as a ServiceService
Service Service ((SaaSSaaS))
Multi-tenant application development and hosting
Email Collaboration F&A
Dev Only Dev + Runtime
Infrastructure Infrastructure as a Service as a Service
Service Service ((PaaSPaaS))
Shared data center, infrastructure hardware and software resources
p genvironments
Compute (Server / OS) Storage Database
Dev Runtime
as a Se ceas a Se ce((IaaSIaaS))
and software resources Database Networking Content Delivery
Private / Hybrid Clouds Compute (Server / OS) Storage
Internally shared data center, infrastructure hardware and software
Proprietary & Confidential. © 2012, Everest Global, Inc. 7
(On-Premise or Hosted) Databasehardware and software resources
Enterprise Cloud Adoption PatternsA set of common adoption paths and strategies are beginning to emerge for how enterprises are capturing value from cloud services
AAObserverObserver
BBOpportunistsOpportunists
CCSolutionersSolutioners
DDTransformersTransformers
EEProviderProvider
Cloud a low priority due Cloud adoption Cloud adoption Cloud models leveraged Cloud models providing
enterprises are capturing value from cloud services
Cloud a low priority due to risk and / or perceived adoption constraints (e.g., regulatory requirements)
Cloud adoption opportunistic; primarily driven by business unit / departmental initiatives
Cloud adoption intentionally driven by business / functional use cases and needs
Cloud models leveraged broadly across the enterprise, integrated with traditional models, often driving wide-scale IT transformation
Cloud models providing foundation for new, integrated service delivery ‘business model’ based on services market principles
Description
Cloud Penetration
• None / limited• Individual buyers
• Limited / Modest• Ind. / dept buyers
• Modest• LOB buyers
• Modest / Ext• Enterprise buyer
• Modest / Ext• Enterprise buyers
• None • Individual use • POC / pilots • Limited • Limited
Cloud Penetration
IaaS
SaaS
• None • Private POCs • Limited • Modest • Extensive
• Business • Business • Business / IT • IT • Business / ITIT I fl
Private / Hybrid
Primary Buyers
• High • Limited • Modest • High • High
• None • None • Project basis • Architect • Broker
IT InfluenceCloud strategy
Integration
Management
Proprietary & Confidential. © 2012, Everest Global, Inc. 8
• None / Limited • None / Limited • None / limited • Emerging • Extensive
• None • None • Policy only • Emerging • Extensive
Management
Governance
Enterprise Cloud Infrastructure EconomicsImproving utilization and eliminating excess capacity are the key to realizing cost efficiencies from cloud infrastructure models
EliminateExcess Capacity
Eliminate spend on unused ‘peak’
3
efficiencies from cloud infrastructure models
capacityPrivate Cloud
Server Utilization
Shift peak loads to public cloud(s)L d d
Move ‘Peak’ Load to Public2
Leverage on-demand ‘pay-as-you-go’ flexibility
Shift loads to fill valleys (where possible)
Maximize private cloud
Keep ‘Base’ Load in Private
1
Proprietary & Confidential. © 2012, Everest Global, Inc. 9
utilization
Cloud Infrastructure Services Impact Infrastructure delivery based on the cloud has the potential to unlock extraordinary workload level economics and flexibility benefitsworkload-level economics and flexibility benefits
Enterprise Workload Cost by Platform1
$ / GHz hrs, Indexed vs Dedicated • Hybrid models can drive truly
‘disruptive’ economics
100• Applicable at individual workload
and portfolio level• Dynamic bursting not required to
capture initial benefits
6560-65 ‘Peak’ Load
Public Cloud
p
‘Base’ Load‘Base’ Load
Public Cloud• Shift ‘spike’ compute hours
to public cloud• Pay only for consumption25
Virtualized/ Private Cloud
Public Cloud
Dedicated Hybrid Model
Base LoadBase LoadPrivate CloudPrivate Cloud
•• Keep ‘base’ compute Keep ‘base’ compute hours in private cloudhours in private cloud
•• Maximize utilizationMaximize utilizationPhysical
ServerUtilization:
7% N/A(service provider)
18% 40%
Proprietary & Confidential. © 2012, Everest Global, Inc. 10
1 Assumes average workload mix and profile; 15% of total peak workload hours shifted to public cloud in an on-demand model; does not include application migration costsSource: Everest Group Cloud Value Assessment Model
( p )
Enterprise Cloud ImpactRecent engagements illustrate the value creation potential of cloud solutions f th t ifor the enterprise
Case Example I Case Example I --Fortune 200 Global Energy CompanyFortune 200 Global Energy CompanyCase Example I Case Example I --Fortune 200 Global Energy CompanyFortune 200 Global Energy Company
Case Example II Case Example II --Fortune 250 Consumer Goods CompanyFortune 250 Consumer Goods CompanyCase Example II Case Example II --Fortune 250 Consumer Goods CompanyFortune 250 Consumer Goods Companyo tu e 00 G oba e gy Co pa yo tu e 00 G oba e gy Co pa yo tu e 00 G oba e gy Co pa yo tu e 00 G oba e gy Co pa y
Formulated sourcing strategy for corporate IT infrastructure supporting operations in 28 countries on 5 continents
Formulated sourcing strategy for corporate IT infrastructure supporting operations in 28 countries on 5 continents
o tu e 50 Co su e Goods Co pa yo tu e 50 Co su e Goods Co pa yo tu e 50 Co su e Goods Co pa yo tu e 50 Co su e Goods Co pa y Consolidated IT Outsourcing
agreements for 12 operating companies into a single service provider
Build a solution that has high
Consolidated IT Outsourcing agreements for 12 operating companies into a single service provider
Build a solution that has highcontinents– Reduce asset ownership– Outsource commodity skills– Secure variable pricingExplored Next Generation cloud
continents– Reduce asset ownership– Outsource commodity skills– Secure variable pricingExplored Next Generation cloud
– Build a solution that has high availability during and after transition
– Reduce cost of IT
Evaluated proposals for comprehensive
– Build a solution that has high availability during and after transition
– Reduce cost of IT
Evaluated proposals for comprehensive Explored Next Generation cloud solutions with 4 global providers– Strong cloud capabilities– SAP expertise and global reach
Ability to transition quickly
Explored Next Generation cloud solutions with 4 global providers– Strong cloud capabilities– SAP expertise and global reach
Ability to transition quickly
Evaluated proposals for comprehensive IT infrastructure outsourcing– Traditional IT outsourcing solutions– Cloud-based solution
Evaluated proposals for comprehensive IT infrastructure outsourcing– Traditional IT outsourcing solutions– Cloud-based solution
– Ability to transition quickly Assessed proposals for broad managed
services solutions with different cloud mixes
Range of savings potential
– Ability to transition quickly Assessed proposals for broad managed
services solutions with different cloud mixes
Range of savings potential
Awarded contract to provider that proposed cloud-based solution, albeit with a more conservative transformation timeline than original cloud proposal
Awarded contract to provider that proposed cloud-based solution, albeit with a more conservative transformation timeline than original cloud proposal
Proprietary & Confidential. © 2012, Everest Global, Inc. 11
– Range of savings potential– Variety of cloud intensiveness– Range of savings potential– Variety of cloud intensiveness
timeline than original cloud proposaltimeline than original cloud proposal
Case Example I – Global Energy CompanyService providers proposed a diverse set of solutions to meet the client’s Next Generation IT solution design objectivesGeneration IT solution design objectives
Dedicated Shared
Solution Overview
• Solution leverages true public cloud (via partner)
Solution Description
Provider A PhysicalDedicated Private Cloud
Public CloudVirtual Private Cloud
SAPSAP
• Solution leverages true public cloud (via partner)• ~80% of workloads to cloud-based services;
includes DR• SLAs reflect standard (public) offering, not
customized to client situation
Provider B
Dedicated Private CloudPhysical Virtual Private Cloud
SAP
• 82% of workloads to private cloud, includes DR• SAP resides fully in cloud environment• No minimum commitments required• SLAs reflect shared environment
Provider C Dedicated Private CloudPhysical
SAPSAP
• Solution aggressively virtualizes (20:1 ratio) and transitions to a dedicated, single-tenant environment; excludes DR
• Client-specific SLA s met
VirtualPhysicalBaselineSAPSAP
• Status quo does not transform infrastructure• No formal service levels; no self-service portal; no
consumption-based service model; no service catalog; no ability to track application usage
Proprietary & Confidential. © 2012, Everest Global, Inc. 12
100%50%25% 75%0%• Incomplete DR provided for select business
applications
Case Example I – Global Energy CompanyThese solutions afforded very different value propositions for the client
IT Infrastructure Annual CostIndexed US$, Year 1 Baseline1 = 100
140
150
160 BaselineProvider AProvider B
Indexed US$, Year 1 Baseline 100
• Nearly 30% improvement in cost
110
120
130 Provider C provided by public cloud-enabled
solution
• Even modest use of public cloud to drive utilization appears to have
80
90
100
110 substantial benefit
• All provider solutions include enhanced scope (albeit with some SLA tradeoffs)
60
70
80
Year 1 Year 2 Year 3 Year 4 Year 5
• Rapid changes in cloud service provider landscape make provider selection an important success factor
Public cloud-
enabled
Proprietary & Confidential. © 2012, Everest Global, Inc. 13
1 Transition costs are spread over 2 years; retained costs excluded.
Case Example II – North America Consumer Goods Company
Client requirements Traditional infrastructure solutionTraditional infrastructure solution
Proposed provider solutionsq
Solution must provide high availability infrastructure, with heightened sensitivity during
Traditional infrastructure solution• Assets owned by service provider,
delivered from provider facilities• No offshore dedicated to client, only
leveraged resources offshore
Traditional infrastructure solution• Assets owned by service provider,
delivered from provider facilities• No offshore dedicated to client, only
leveraged resources offshoreheightened sensitivity during transition
Key decision criterion is magnitude and timing of cost
leveraged resources offshore• 50%-90% of desired SLAs met• Perceived risk of service disruption
during transition was moderate
leveraged resources offshore• 50%-90% of desired SLAs met• Perceived risk of service disruption
during transition was moderate
savings Total scope included
infrastructure and applications (this case example focuses on
Cloud-based solution• Dedicated private cloud for most
Cloud-based solution• Dedicated private cloud for most (this case example focuses on
infrastructure) RFP guided service providers
toward traditional solution
applications (including SAP)• No movement of client’s existing,
owned equipment• 90% of desired SLAs met
applications (including SAP)• No movement of client’s existing,
owned equipment• 90% of desired SLAs met
Proprietary & Confidential. © 2012, Everest Global, Inc. 14
• Perceived risk of service disruption during transition was low
• Perceived risk of service disruption during transition was low
Case Example II – North America Consumer Goods Company
IT Infrastructure Annual CostIndexed US$, Year 1 Baseline = 100
200
250 BaselineProvider 1Provider 2Provider 3Provider 4
$,
150
• 38% cost improvement provided by cloud-enabled solution
• All provider solutions address
50
100
psubstantially same scope as Baseline
• Represents initial pricing from all providers (expectation for Cloud-
0Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
p ( psubstantial concessions from finalists were met)
• Provider 4’s cloud-centric solution provided compelling
Enabledsolution
Proprietary & Confidential. © 2012, Everest Global, Inc. 15
Footnote: Transition costs are included. Providers ramp-up services in first two years. Provider 1 is the incumbent. Client chose cloud provider. Analysis based on largest subsidiary of the parent company.
economic advantages
Cloud Business Value DriversEverest Group experience suggests that infrastructure-related cloud services provide the most attractive cost related opportunities
Value Impact
Server consolidation/
services provide the most attractive cost-related opportunities
SaaSPaaSPrivate Hybrid IaaSInfrastructure Apps
HigherLower
Operational Levers
Efficiency
virtualization
Multi-tenant service models
ManagementEfficiencyBenefits
Management Automation
Standardization
Cloud Cloud ImpactImpact
Active workload management
Increased Agility
Flexibility Benefits
Extended Reach
New Capabilities
Proprietary & Confidential. © 2012, Everest Global, Inc. 16
Consumption-based billing
Cloud Service Provider LandscapeDifferent cloud service provider groups are adopting distinctive strategies and possess different biases and incentives that impact value capturepossess different biases and incentives that impact value capture
Legacy IT Services Talent Model Network Providers Cloud Pioneers
Strategic fit
• Business model • Difficult balance of traditional • Focus remains on talent • Difficult balance of traditional • Built from start for cloud• Business model Difficult balance of traditional and cloud models
Focus remains on talent services to enable cloud
Difficult balance of traditional and cloud models
Built from start for cloud
• Alignment • Conflicting goals, especially with existing revenue base
• Poor fit with infrastructure • Good alignment with standard delivery; less go-to-market
• Sharp cloud focus
• Investment model • Bias toward client funding of initiatives
• Little appetite for investment beyond talent factory
• Strong alignment with historical approaches
• Oriented to support rapid cloud growthy y pp g
Offerings
• Structure/packaging • Legacy elements tend to appear in cloud offerings
• Biases toward enabling rather than core solution
• Network-centric flavor often exists
• Highly standard cloud not always enterprise-friendly
• Delivery capability • Cloud delivery capabilities • Talent model focused • Building capabilities • Most advanced cloud-focusedy p yoften mixed with legacy
Go-to-market
• Sales approach • Enterprise-focused • Enterprise-focused • Underdeveloped for enterprise • Largely absent for enterprise
• Pricing models • Strongly influenced by legacy, • Talent-based • Advanced, consistent with • Sophisticated, cloud-centricPricing modelsrisk-shifting frame of reference
legacy
• Solutioning • Strong enterprise-class skills • Enterprise-oriented • Limited enterprise solution focus
• Poor enterprise capability
Example providers
Proprietary & Confidential. © 2012, Everest Global, Inc. 17
p p
Everest GroupLeading clients from insight to action
S BilScott BilsPartner – Next Generation IT Practice LeaderEverest GroupEverest Group
[email protected]: @sbils, @everest_cloud 512-550-0207 (m)214-341-3043 (o)214-341-3043 (o)
Proprietary & Confidential. © 2012, Everest Global, Inc. 18
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