Five Key Themes in Enterprise Cloud Computing Migration

1 Copyright © 2011 WaveLength Market Analytics LLC and Winn Technology Group, Inc. All Rights Reserved.

Five Key Themes in Enterprise Cloud Computing Migration

A Research Report, May 2011

So what is a key theme anyway?

2

A key theme is a recurring perception or observation, reflecting major vulnerabilities, strengths, or opportunities. These obviously differ by tech segment and company, but those with broad application are highlighted here.

3

Five key themes in enterprise cloud computing migration

2Enterprise cloud computing will be bigger and grow faster than most think – 6 converging trends together create substantial enterprise economies that only increase with cloud computing.

3 Winners will be determined by their ability to differentiate service offerings, which will include function/app + ecosystem + user experience + pricing.

4 Cloud computing growth will drive network and data center equipment spending in carrier and enterprise segments for medium-‐term equipment transitions.

5 Understanding enterprise buying behaviors in the Early Cloud Era paramount to tapping market opportunities.

1 We’re now in the Early Cloud Era, moving from a client-‐server environment to a cloud computing architecture.

4

Using industry history as a guide, enormous technology shifts change the market dynamics between entrenched competitors and challengers creating new winners and losers.

•  Cloud computing current penetration into enterprise market is surprisingly high, but its percentage of IT is very low, so it’s much too early to pick winners.

•  Singular inevitability: business models will change for nearly all technology and telecommunications segments.

Key theme #1 We’re now in the Early Cloud Era, moving from a client-‐server environment to a cloud computing architecture.

5

Industry-‐leading enterprises need experience in Cloud. To avoid being left behind, these Cloud Pioneers dabble with non-‐mission critical apps.

•  Apps will quickly evolve to mission critical ones as cloud computing empowers new and truly transformative ways, particularly those enabling mobility.

•  Cloud computing is a mile wide and an inch deep, but rapidly growing as our survey results more than 20% of IT will be in the Cloud by 2015.

Key theme #2 Enterprise cloud computing will be bigger, faster than most think – 6 converging trends (cost and app speed deployment efficiencies, SANs, virtualization, IT outsourcing, data center upgrades and mobility) together create substantial enterprise economies that only increase with cloud computing.

6

With proven growth and monetization models, AWS and Salesforce.com will be challenged. With an increasing number of vendors competing for the customer, long-‐term winners will be determined by differentiated service offerings will include: •  The ecosystem of partners offering a complete

solution, •  User experience aspects that seek to address

current user concerns, such as management tools, network performance, Interoperability with multiple clouds/internal clouds, legacy application support, service levels, and SLAs,

•  Pricing and costs because it’s a business where scale and economics are everything.

Key theme #3 Amazon’s AWS and Salesforce.com currently lead the market, but with many vendors competing for the customer, differentiated service offerings that include function + user experience + ecosystem+ pricing will determine the winners.

7

Cloud means new performance demands on the WAN and the data center requiring new efficiencies in 1) new equipment to power it and 2) software to manage it.

•  Cloud = new enterprise WAN performance demands = new service provider demand.

•  Initial surge will be accommodated via capacity upgrades; but ultimately to compete, service providers must make fundamental network architecture changes to rapidly deploy new services and to guarantee performance and service levels.

Key theme #4 Cloud computing growth will drive network and data center equipment spending in carrier and enterprise segments for medium-‐term equipment transitions.

8

The fight for the enterprise customer is already underway, but vendors that will thrive will… •  Target business management, as well as IT, •  Identify and nurture your best partners, as

many vendors and integrators, and service providers are involved in the sale and solutions,

•  Learn how best to support the leading role that applications play,

•  Step up to the challenge and excel at making and managing substantial and mutually beneficial partnerships, particularly as the market changes.

Key theme #5 Understanding enterprise buying behaviors in the Early Cloud Era paramount to tapping market opportunities.

9

Five key themes in enterprise cloud computing: key theme #1






10

Using industry history as a guide, enormous technology shifts change the market dynamics between entrenched competitors and challengers creating new winners and losers.

•  Cloud computing current penetration into enterprise market is surprisingly high, but its percentage of IT is very low, so it’s much too early to pick winners.

•  Singular inevitability: business models will change for nearly all technology and telecommunications segments.

Key theme #1 We’re now in the Early Cloud Era, moving from a client-‐server environment to a cloud computing architecture.

11

The computing evolution continues

1960s 1970s 1980s 1990s 2000s 2010s

12

58% are doing “something” in the Cloud

42.1%

16.8%

8%

33.2%

S: For each of the following types of cloud deployment, we’d like to know if it’s currently in production, in trial, is planned in 24 months? N=127

Cloud Pioneers: Using Cloud Computing

Cloud Planners: Planning for Cloud

Cloud Stragglers: No Plans

More enterprises are doing or thinking about the Cloud than those that are not.

13

Cloud Pioneers: In Trial

According to the 2008 US Business Census, there are 18,469 “non-‐public” organizations with 500 or more employees. So, this means 7,591 are using or testing a cloud solution, 3,103 are planning, and 7,775 have no plans

14

However, the exact percentage of IT that is cloud is unknown, but certainly very low.

15

“Cloud computing is only in its infancy. Today the best data we have seen suggests that well over 90% of computing capacity is run in-‐house by the same organizations that consume it.”

Lanham Napier, Rackspace Hosting CEO Feb. 10. 2011, Q4 2010 Earnings Conference Call

16

Just who are Cloud Pioneers anyway?

28.8%

31.3%

52.6%

Cloud Stragglers

Cloud Planners

Cloud Pioneers

Medium (101-‐999 employees) Large (1000 employees +)

Q: For each of the following types of cloud deployment, we’d like to know if it’s currently in production, in trial, is planned in 24 months? N=127 17

Cloud Pioneers are larger organizations, commercial as opposed to government, with global networks, more remote and mobile workers, and already using a cloud solution, as opposed to just testing.

18

What types of clouds do Cloud Pioneers use? Will that change in the near future?

19

Besides SaaS, Pioneers mostly use private clouds and PaaS

9%

11%

21%

25.7%

32.2%

54.8%

78.2%

Hybrid Cloud

Public Cloud

Internal Private Cloud

IaaS

Hosted Private Cloud

PaaS

SaaS

Clouds in use/piloted


In the next 24 months, Pioneers and Planners will aim for internal private, public, and hybrid clouds

21

5.1%

7.9%

7.9%

10.5%

10.5%

11.7%

Public Cloud

PaaS

IaaS


Hybrid Cloud


23.1%

29.4%

33.1%

36.3%

36.3%

46.9%


PaaS

IaaS

Hybrid Cloud

Public Cloud


Cloud planned by all segments in the next 24 months

Additional clouds planned by Cloud Pioneers


Hybrid and public clouds are high on the list, suggesting quick market development reminiscent of the VOIP market rise.

22

“We added just over 9,000 net servers in 2010. Which means that even though we are the leading hosting and Cloud computing specialists, we captured only one tenth of a percent of the total addressable market in 2010. All these data points arrive at the same conclusion. That the hosting and Cloud computing market is still in its very early stages.”

Lanham Napier, Rackspace Hosting CEO Feb. 10. 2011, Q4 2010 Earnings Conference Call

23

Five key themes in enterprise cloud computing: Key theme #2






24

Industry-‐leading enterprises need experience in Cloud. To avoid being left behind, these Cloud Pioneers dabble with non-‐mission critical apps.

•  Apps will quickly evolve to mission critical ones as cloud computing empowers new and truly transformative ways, particularly those enabling mobility.

•  Cloud computing is a mile wide and an inch deep, but rapidly growing as our survey results more than 20% of IT will be in the Cloud by 2015.

Key theme #2 Enterprise cloud computing will be bigger, faster than most think – 6 converging trends (cost and app speed deployment efficiencies, SANs, virtualization, IT outsourcing, data center upgrades and mobility) together create substantial enterprise economies that only increase with cloud computing.

25

It’s already a large market already scratching the surface of an enormous one

26

So what is motivating cloud adoption?

27

Cost cutting, speedy app deployment, mobility drive cloud

71% 63%

52% 52% 47%

42%

17.1%

38.7%

9.1% 18.8% 15.2%

8.6%

Reduce operational costs

More rapid application deployment

Increase mobility More nimble IT organization

Change Software licensing

Reduce management overhead

Motivators to transition to cloud

Cloud Pioneers & Planners Stragglers

Q: Using a scale from 1 to 6where 1 is not at all important and 6 is extremely important, please rate the following as motivators in your transition to cloud computing? N=127 % who say motivator is 5 or 6. 28

According to Cisco, 2014 enterprise mobile traffic will be 27x greater than 2009

…and enterprise mobility has barely begun.

29

The ability for seamless growth without CapEx is a winner

58.3%

78.6%

61.5%

It’s important to have the ability to handle application usage spikes and

seamless growth without heavy capital investment

Cloud Stragglers Cloud Planners Cloud Pioneers

Q: On a 1 to 6 scale, how much do you agree with the following statements… ? N=127 30

Economies gained by IT outsourcing also drive cloud

39.7% 35.4% 33.3% 31.6%

22.8% 18.8%

34.4%

21.9%

15.6%

21.9% 21.3%

28.8% 25%

13.9% 13.9%

Disaster Recovery Perimeter Security Network Management

Data back-‐ups Storage

IT outsourced functions

Pioneers Planners Stragglers

Q. Yes or no, do you outsource any of the following functions… ? (n=126) 31

With their higher levels of nearly every type of IT outsourcing, Cloud Pioneers clearly demonstrate link between higher levels of IT outsourcing and cloud.

32

Pioneers have higher percentage of IT that is outsourced

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Stragglers

Planners

Pioneers

% of IT managed by outsourced 3rd parties

Greater than 31% 11-‐30% 1-‐10% None

Q: Regarding your IT infrastructure, approximately what percentage is outsourced to a 3rd parties for management… ? (n=126) 33

Pioneers also have higher levels of data center outsourcing

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Stragglers

Planners

Pioneers

Data center strategy

Internally hosted and managed Some or all data center outsourcing No data center

Q: Which best describes your data center operations… ? (n=126) 34

And Pioneers consistently outsource apps more often

How are the following apps managed? Do you outsource management of… Pioneers Planners Stragglers

Portals 28.3% 6.5% 2.2%

Email 25.8% 6.5% 6.4%

Collaboration 25% 12.9% 4.5%

Customer Relationship Management (CRM) 19.4% 13.8% 0%

Communications 17.2% 19.4% 5%

Tier 1 Storage 15.3% 6.9% 4.9%

Desktop Apps (excluding email) 14.5% 6.9% 2.1%

Business Intelligence 11.7% 3.4% 0%

Supply Chain/ERP 6.6% 6.9% 2.3%

Accounting/Finance 6.5% 10.3% 0%

Q: We want to know how your apps are managed. Do you outsource management of… ? N=127 35

Expect even more outsourcing in coming years

16%

21.4%

32.4%

Our organization will increase outsourcing in the next 24 months

Cloud Pioneers Cloud Planners Cloud Stragglers


Other converging technology trends also drive cloud.

37

Pioneers and Planners use more networked storage

87%

71.2%

89.5%

52.9%

70.3%

41.7%

SANs NAS

Storage in use


Q: Do you store app data using local storage, a storage area network, network attached storage or a hybrid… ? N=127 38

Pioneers and Planners also use more virtualized servers and storage

72.7%

62.3%

52.6%

68.4%

58.1%

46.3%

Virtualize Servers Virtualize Storage

% using virtualization


Q: Regarding servers, approximately what percentage is virtualized… ? N=127 39

With higher levels of server virtualization

.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

Stragglers

Planners

Pioneers

% of servers that are virtualized

Low (Less than 10%) Mid (11-‐40%) High (41-‐70%) Very High (71%+)

Q: Regarding servers, approximately what percentage is virtualized… ? N=127 40

And high levels of storage virtualization

.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

Stragglers

Planners

Pioneers

% of storage that is virtualized

Low (Less than 10%) Mid (11-‐40%) High (51%+)

Q: Regarding storage, approximately what percentage is virtualized… ? N=127 41

So with the rise of public clouds and greater levels of virtualization, to mitigate those risks associated with resource virtualization in a shared Cloud, expect Pioneers and Planners to demand the ability to segment some virtual network components by Cloud tenant.

42

Pioneers and Planners, seeking to remain leaders in their own industries, are testing the Cloud waters, but with what apps?

43

Apps that are not mission critical apps making the Cloud move

6%

2%

8%

8%

9%

8%

10%

2%

2%

4%

11%

4%

9%

12%

11%

9%

14%

11%

12%

6%

20%

14%

19%

0% 10% 20% 30% 40% 50% 60% 70%

Desktop apps

Accounting/Finance

Communications

Tier 1 storage

Supply Chain/ERP

Business intelligence

Back-‐up storage/disaster recovery

Collaboration

HR

Portals

CRM

Email

In Production In Trial In Planning Process

Q. Again for apps, is a cloud computing architecture in production, in trial, planned, or not planned? N=78 44

However, this is due to change as greater numbers are planning for supply chain, Tier 1 storage than those that actually use them today. Note expected levels of unified communications in the Cloud, likely driven by the need to better serve remote and mobile workers, nearly 27.4% either use, pilot, or plan to use it.

45

Not all applications will quickly go to the Cloud quickly, some may never be moved, but the types of applications that will be moved to the Cloud are relatively consistent among both Pioneers and Planners.

46

However… app development speed is not really faster than client-‐server, at least not yet

17%

48.9%

34%

Strongly Disagree/Disagree

Neither

Strongly Agree/Agree

We were able to develop our cloud applications much more quickly than our client server applications

Q: On a 1 to 6 scale, how much do you agree with the following statements… ? Base = Pioneers (N=58) 47

…Nor did it yield those cost savings…

18.8%

52.1%

29.2%


Neither


Our expectations for ROI were completely met with our cloud solution


Nonetheless, Pioneers still say they’re mostly satisfied

10.4%

41.7%

47.9%


Neither


We are completely satisfied with our cloud solution


…and plan to use cloud for a both new and legacy apps

15% 21%

38%

21%

6%

25%

15% 20%

35%

5%

Develop a new custom application

using in-‐house developers

Implement a new packaged application

Migrate a legacy application

At least 2 approaches

All approaches

Cloud usage in the next 24 months to...

Cloud Pioneers Cloud Planners

Q: Does or will your organization in the next 24 months, use cloud architecture to… ? N=127 50

Suggesting that enterprises will adopt cloud faster than previous new technology paradigms.

51

In just three years, Pioneers and Planners expect about 30% of IT to be in the Cloud

20.4%

32.3%

15.8%

30.5%

2.8%

11.2%

2012 2015

% of IT outsourced to Cloud provider by...


Q: What percentage of your IT will be outsourced to a cloud provider by 2012? 2015? N=127 52







53

With proven growth and monetization models, AWS and Salesforce.com will be challenged. With an increasing number of vendors competing for the customer, long-‐term winners will be determined by differentiated service offerings will include: •  The ecosystem of partners offering a complete

solution, •  User experience aspects that seek to address

current user concerns, such as management tools, network performance, Interoperability with multiple clouds/internal clouds, legacy application support, service levels, and SLAs,

•  Pricing and costs because it’s a business where scale and economics are everything.

Key theme #3 Amazon’s AWS and Salesforce.com currently lead the market, but with many vendors competing for the customer, differentiated service offerings that include function + user experience + ecosystem+ pricing will determine the winners.

54

Salesforce.com is first billion dollar Cloud company in 2010

55

“Other”, where AWS resides, approaches $1 billion in 2010

$120 $140

$163

$231

$188 $203

$240

$341

Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010

Amazon's "Other" revenue segment in millions of $

56

“In terms of AWS, we're extremely pleased with how AWS is going. It's growing at a very fast rate. …But we did see actually an acceleration of growth in AWS from Q3 to Q4. So built into that number, it actually accelerated.”

Thomas Szkutak, Amazon CFO in Q4 2010 Earnings Call

57

Accelerating demand brings entrants both established -‐-‐ think HP or IBM with service enablement for service providers or Cisco-‐EMC joint venture, Acadia -‐-‐ and start-‐ups aplenty, sparking new waves of acquisitions (think Verizon purchase of Terremark or Time Warner Cable purchase of NaviSite).

58

So many tech segments compete for the customer

59

Software Vendors

Hardware Vendors

Telecom Service

Providers

Managed Services/IT Outsourcing Providers

Systems Integrators

Infrastructure as a Service

Cloud Services-enabling Products & Services Consulting & Professional Services for Cloud

Communications as a Service

= Business model re-alignment and sales channel challenges for entire industry

Software as a Service Platform as a Service

Cloud Vendors

Albeit different depending on the tech segment, all are fighting for differentiation -‐ itself rooted in understanding what limits cloud adoption.

60

As for security concerns, reduced control & data breaches are tops for all segments

4.1 4.06 4.03 4.03 3.8 3.33

4.15 3.89 4.34

3.3

4.11 4.01

4.79 4.75 4.95

4.09 4.6 4.65

Reduced control/visibility

Data in transit access breaches

Stored data access breaches

Compliance requirements

Denial of service attacks

App access breaches

Concerns limiting cloud adoption


Q: Using a scale from 1 to 6 where 1 is not at all important and 6 is extremely important, please rate the following as security concerns that limit adoption to cloud computing? N=127 (Score represents an average rating where the max is 6)

61

Overall, Pioneers are concerned less about security than Planners and far less concerned than Stragglers. So, securing cloud apps is likely a real barrier for both the mainstream enterprise, and for mission-‐critical app migration to The Cloud.

62

To mitigate security risks, enterprises need visibility and control into their traffic’s network paths, as well as the networks and network resources used on backup. The ability to restrict certain traffic from being transported beyond borders or to certain networks is also useful. Encryption that can be dynamically applied on a per-‐user, per application, per location or network path for data rest and/or in transit is also key.

Therefore, completely standards-‐based security compliance will be an essential component of any cloud solution.

Non-‐security cloud concerns differ significantly by group

Extent following concerns limit cloud adoption?


Average Rank Average Rank Average Rank Network delays 4.13 6 4.14 8 5.75 1

Initial start-‐up costs too high 5.16 2 3.98 10 5.27 2 Lack of trusted 3rd party relationships 5.64 1 4.09 9 5.14 3 Lack of reporting/management tools 4.11 7 4.63 5 5.02 4

Reduced control/visibility 4.80 4 4.26 7 4.58 5 Network downtime 3.95 9 5.16 3 4.23 6

No vendor neutral APIs 4.40 5 5.05 4 4.23 7 Technology not yet proven 4.98 3 4.26 6 4.10 8

Lack of audit/remediation/reporting 4.11 8 5.77 1 4.08 9

Poor interoperability b/t cloud venders & internal IT

3.93 10 5.28 2 3.96 10

Q: Using a scale from 1 to 6where 1 is not at all important and 6 is extremely important, please rate the following as concerns that limit adoption to cloud computing? N=127 65

Let’s look at the top five concerns for each group, as each one gives us different clues to how the market will develop.

66

Pioneers’ concerns driven by cloud experience show how their cloud solution could work better

4.58

5.02

5.14

5.27

5.75


Lack of reporting/management tools

Lack of trusted 3rd party relationships

Initial start-‐up costs too high

Network delays

Pioneers’ concerns with cloud

Q: Using a scale from 1 to 6where 1 is not at all important and 6 is extremely important, please rate the following as concerns that limit adoption to cloud computing? N=58 (Score represents an average rating where the max is 6)

67

Based on REAL cloud experience, network performance is clearly Pioneers’ biggest concern that limits cloud adoption. This is significant. Mission-‐critical applications won’t move full-‐scale into the Cloud until carrier networks offer scalable end-‐to-‐end application performance.

68

From a network perspective, the Cloud’s impact has significant impact on network management, operational support systems, business support systems, and security. So successful Cloud services require network operator infrastructure that is capable of highly-‐scalable and intelligent IP-‐aware transport.

In addition, infrastructure must be able to process significant amounts of traffic and potentially also session data; the ability to gain some understanding of traffic type without necessitating intrusion at the packet header will also be of value.

Stragglers concerns driven by lack of qualified help, cost, and perceptions that cloud is not proven

4.4

4.8

4.98

5.16

5.64

No vendor neutral APIs


Technology not yet proven

Initial start-‐up costs too high

Lack of trusted 3rd party relationships

Stragglers’ concerns with cloud

Q: Using a scale from 1 to 6where 1 is not at all important and 6 is extremely important, please rate the following as concerns that limit adoption to cloud computing? N=53 (Score represents an average rating where the max is 6) 71

Since Stragglers view the Cloud as unproven, they are a long way from it. Nonetheless, they do show the importance of educated channel partners – also a requirement of a more mainstream market.

72

Planners, in solutions design mode, want billing, management, and interoperability

4.63

5.05

5.16

5.28

5.77

Lack of reporting/management tools

No vendor neutral APIs

Network downtime

Poor interoperability b/t cloud venders & internal IT

Lack of audit/remediation/reporting

Planners’ concerns with cloud

Q: Using a scale from 1 to 6where 1 is not at all important and 6 is extremely important, please rate the following as concerns that limit adoption to cloud computing? N=32 (Score represents an average rating where the max is 6) 73

Planners point to how vendors can differentiate as the market develops from Early Could to the Middle Cloud Era. Vendors must address issues such as data portability between apps, vendor neutral APIs, interoperability of clouds, measurable SLAs, and remediation that is truly usage-‐based.

74

Ultimately, enterprise IT wants cost savings and outsource responsibility for tactical implementation of the IT strategy and do so without losing control of strategy and the day-‐to-‐day management decisions.

75

Management tools with extremely granular and flexible reporting are key, as the enterprise will need to control Cloud services on an aggregate and on a per application, per enterprise location/site, per service, per user, and per user class basis. This helps IT and network resources understand what is being used, when, and by whom.

76

SLAs equal to network SLAs will be important to developing cloud market

64%

42.9%

42.9%

We won’t migrate any applications to public clouds without 99.999% availability SLAs



Cloud and network service providers will need to prove availability over time and at peak periods, so SLAs demonstrating that availability will be critical. Operators will be expected to seamlessly integrate charge-‐back mechanisms and present enterprise customers with a single invoice integrating true pay-‐per-‐usage for all services.

User experience improvements to enable hybrid clouds critical to develop market

• Pricing • Packaging

Early Cloud Differentiators

• Early Cloud plus • Scalability & performance • Management and remediation tools

• Interoperability • Real Service Level Agreements (SLAs)

Middle Cloud Differentiators • Concurrent transparency

& transformational • New features/functions, while undefined at this point, most certainly be required

Beyond Middle Cloud

We are here

More Enduring Differentiation Current offerings very similar; no sustainable differentiation

79







80

Cloud means new performance demands on the WAN and the data center requiring new efficiencies in 1) new equipment to power it and 2) software to manage it.

•  Cloud = new enterprise WAN performance demands = new service provider demand.

•  Initial surge will be accommodated via capacity upgrades; but ultimately to compete, service providers must make fundamental network architecture changes to rapidly deploy new services and to guarantee performance and service levels.

Key theme #4 Cloud computing growth will drive network and data center equipment spending in carrier and enterprise segments for medium-‐term equipment transitions.

81

What are the opportunities for hardware vendors?

82

Let’s first take a quick look at data center projects.

83

Most Pioneers and Planners finished, or are working toward data center consolidation

18.9% 16.1%

11.9%


Data center consolidation

Completed/In Process Planned within 24-‐months

Q: For each of the following we’d like to know if it’s currently in production, in trial, being planned in the next 24 months, no plans at this time or don’t know … ? N=127 84

Most have or are working toward expanding data center capacity

32.4%

43.3%

20.6% 23%

33.3%

19%


Data center expansion



While optimizing data center energy

50.7% 46.7%

22.6% 23.2%

16.7%

24.2%


Data center power / energy optimization



And increasing switching capacity to handle the growing load

47.8%

32%

17.2% 18.8%

28%

12.1%


10G switching



They also improve manageability with management tools

59.1% 58.1%

38.3%

15.2%

3.2%

16.7%


Integrated management tools



And performance/efficiencies with automation tools

44.8%

58.6%

31.7% 26.9%

3.4%

20%


Automation tools



Let’s take a look at technology strategies and projects enterprises pursue prior, during, and after cloud deployment.

90

Before cloud deployment, security is upgraded and SANs are used

7.4%

10.7%

14.8%

17.9%

28.6%

25.9%

37%

42.1%

39.3%

3.9%

9.8%

16.1%

14.3%

14.5%

17.2%

10.9%

18.2%

25.9%

Migrate to tierless storage

Implement NAS

Add WAN optimization

Increase servers that are virtualized

Increase LAN bandwidth to desktop

Increase WAN bandwidth for faster speeds

Migrate storage to SAN

Implement encryption

Upgrade perimeter security

Before Cloud deployment

Cloud Planners Cloud Pioneers

Q: For each of the following were they necessary before cloud computing, during initial deployment, follow-on work, future plans, or no plans? N=78 91

Makes good sense and explains why Pioneers are not as concerned about security.

92

Pioneers also migrate to storage area networks and increase WAN and LAN bandwidth.

93

Other Pioneers improve WAN performance during deployment

7.1%

7.1%

11.1%

22.2%

10.7%

18.5%

3.9%

9.3%

5.5%

18.2%

11.8%

12.7%

5.4%

17.9%

10.3%





Implement NAS




Increase WAN bandwidth for faster speeds

Part of initial deployment

Cloud Planners Cloud Pioneers

Q: For each of the following were they necessary before cloud computing, during initial deployment, follow-on work, future plans, or no plans? N=78 94

Still others plan to increase WAN bandwidth afterwards

10.5%

10.7%

22.2%

14.8%

21.4%

35.7%

29.6%

42.9%

33.3%

18.2%

21.8%

11.7%

21.4%

24.1%

33.3%

41.8%

30.3%

56.9%






Implement NAS



Increase WAN bandwidth for faster connection speeds

Post-‐Cloud deployment projects

Cloud Planners

Cloud Pioneers

Q: For each of the following were they necessary before cloud computing, during initial deployment, follow-on work, future plans, or no plans? N=78

95

But remember, Pioneers are still most concerned about network delays.

96

And facing rapidly growing traffic demands that will be 3x greater in 2014 than 2009

97 97

How can the WAN or the carrier network provide the required performance? Service providers will ultimately be judged on a Quality of Experience that is based on end-‐to-‐end performance of network, infrastructure, application, and management tools.

98

Initially, network service providers will increase capacity, but eventually, they will have to fundamentally re-‐architect the network. Same with storage, it needs a new architecture purpose-‐built for the Cloud, combining storage, network, content, and context intelligence.

99

Network service providers must offer differentiated network performance and availability service levels to suit differing application needs; it allows transport network monetization required for successful operations and prevents over-‐the-‐top application providers from being “under-‐fed” from a performance perspective. So policy management will be key.

100

The impetus on the network provider will be two-‐fold; they must ensure a high Quality of Experience of the Cloud service while significantly lowering transaction processing and billing costs. Remember that Cloud will be a business of shaving pennies, so efficient resource management of network and data resources is critical.

Carrier equipment needs to support these imperatives. A dynamic control plane will be a vital to maximizing cloud resources; it must also have access into the data plane and integrate multiple layers in the solution. Compression and caching, especially for wireless, will also be essential to efficient content delivery with optimal caching locations determined by the frequency with which content is accessed.







103

The fight for the enterprise customer is already underway, but vendors that will thrive will… •  Target business management, as well as IT, •  Identify and nurture your best partners, as

many vendors and integrators, and service providers are involved in the sale and solutions,

•  Learn how best to support the leading role that applications play,

•  Step up to the challenge and excel at making and managing substantial and mutually beneficial partnerships, particularly as the market changes.

Key theme #5 Understanding enterprise buying behaviors in the Early Cloud Era paramount to tapping market opportunities.

104

Who is involved in the buying decision?

105

Top management is very involved

30.4%

35.7%

47.2%

Top business management is very involved with purchasing decisions regarding cloud

computing



Vendors need a more “top down” sales approach. Any time a strategic advantage is involved, as well as significant cost reduction, there’s opportunity to sell at the executive level. Those looking to become the trusted third party would be well-‐served by focusing here, as well.

107

Executives need simple, high level, targeted marketing and sales materials. Follow IBM’s lead in teaching executives to understand and prepare for sales discussions.

108

Enterprises do not and will not go it alone

48.1%

14.3%

35.1%

We are more likely to use a consultant to help create our cloud strategy than work with

cloud service provider partners



Many involved partners within the ecosystem of vendors

48%

40% 33%

28% 29% 29%

21%

45% 50%

45% 45%

35% 30% 30%

Software vendors

Consultants Systems Integrators

VARs Hardware vendors

Non-‐Telco Service

Providers

Telco Service Providers

Involved partners


Q: For each of the following types of participants in cloud implementation, on a scale of 1 to 6 where 1 means “not at all involved” and 6 is very Involved,” what’s the involvement level of… ? N=78 110

What trusted third parties do what? What are the roles of differing ecosystem members?

111

Pioneers mostly involve software and integrators for crafting strategy

33.3%

33.3%

50%

71.4%

30%

22.2%

77.8%

12.5%

17.6%

25%

29.4%

30.4%

31.6%

32.1%

VARs

Non-‐Telco Service Providers

Telco

Hardware

Consultants

Systems Integrators

Software

Highly involved partners: create cloud strategy


112 Q: For each of the following types of participants in cloud implementation, on a scale of 1 to 6 where 1 means “not at all involved” and 6 is very Involved,” what’s the involvement level of… ? N=78

Planners involve nearly everyone, but they’re planning.

113

Software and VARs most involved in developing solution

20%

16.7%

12.5%

22.2%

16.7%

40%

37.5%

18.2%

18.8%

21.1%

22.7%

25%

33.3%

34.6%

Telco

Hardware

Systems Integrators

Consultants


VARs

Software

Highly involved partners: develop cloud application



Integrators and non-‐telco service providers most involved in cloud app migration

12.5%

16.7%

40%

50%

22.2%

50%

25%

13.3%

20%

25%

26.9%

27.3%

40%

42.1%

VARs

Hardware

Telco

Software

Consultants


Systems Integrators

Highly involved partners: migrate cloud application



Consultants and hardware partners most involved in management

16.7%

18.2%

19.2%

20.0%

20.0%

26.7%

31.8%

Systems Integrators

Telco

Software


VARs

Hardware

Consultants

Cloud Pioneers' cloud app management partners


Offering successful, comprehensive Cloud solutions will require skill diversity, meaning a strong ecosystem offering complementary, best of breed strengths. Partnerships must be significant and meaningful, and the ability to manage them must become a core competency.

117

Enterprises may say they want an overall integrator for an entire solution, but we think they will be as unlikely to implement a single-‐vendor, end-‐to-‐end Cloud solution as they have been to implement single-‐vendor, end-‐to-‐end network solutions.

118

Software & integrator most important partners

.0%

8.7%

17.4%

8.7%

8.7%

47.8%

8.7%

5.1%

8.5%

8.5%

15.3%

16.9%

16.9%

28.8%

Telco service providers

Value-‐added resellers

Hardware vendor partners

Consultants

Non-‐telco service providers

Systems integrator partners

Software vendor partners

Most important partner



Software vendors have a solid market position because the Cloud is really about the app. Integrators need to reinforce their position by saying that the Cloud is really distributed IT resource placement and management, requiring a very strong yet equal understanding of computing, applications, security, and the underlying network.

120

It will be challenging for network service operators to establish the credibility for their own infrastructure or software-‐as-‐a-‐service offerings. They need to concentrate on services closer to their core competency or extensions of current services. Obvious ones are storage, which is similar to web hosting, or Cloud-‐based unified communications and apps supporting or enhancing mobile communications.

121

What is important in the buying decision?

122

Professional services key to purchase decision

42%

19% 13% 11% 9% 6%

60%

39% 36% 31%

19% 14%

48%

10% 19%

14% 10%

%

45%

60%

10%

55%

%

30%

Professional services

Business process re-‐engineering

Performance management & monitoring

SLAs Creation of vertical

applications

Training

Critical capabilities in selecting most important partner

Cloud Pioneers-‐ First Mention Cloud Pioneers-‐ Overall Cloud Planners-‐ First Mention Cloud Planners-‐Overall

Q: In selecting your most important partner, which 2 capabilities were most critical… ? N=78 123

The market demands qualified professional services, measureable SLAs and business process re-‐engineering also needed, while performance management & monitoring lag …but probably won’t for long, as management offers genuine differentiation.

124

Professional services will become increasingly important as the market moves toward the Middle Cloud Era. Expect enterprises to look for demonstrable professional services experience in, including substantive investment in best practices, knowledge management, resource allocation, and tool development.

125

The network: a cloud service’s most evaluated infrastructure component

21.2%

12.1%

33.3%

15.2% 18.2%

20%

13.3%

33.3%

13.3%

20% 22%

18%

28%

14% 18%

Storage infrastructure

Servers Network Management tools Virtualization software

Most evaluated infrastructure component


Q. Starting with a 1, please ran the following according to how much evaluate a cloud provider’s underlying infrastructure? N=78 126

Since the network will likely get the most scrutiny, even as larger share of equipment sales shifts to service providers, equipment vendors will still need powerful brands.

127

Willingness for long contracts still low

35.4%

35.4%

29.2%


Neither



We would sign a multi-‐year contract with our cloud services provider

But expect this to change in the next few years. In the Early Cloud Era, there’s likely relatively little loyalty to those third parties that help with cloud strategy, planning, or deployment – so there’s still much opportunity. This is likely short-‐term as better-‐defined Cloud service offerings appear along with a maturing market.

129

What do these key themes mean to your business?

WaveLength Market Analytics LLC (www.wlanalytics.com)

Winn Technology Group, Inc. (winntech.net)

with contributions from Telecom Strategy Partners LLC (telecomstrategypartners.com)

Channel Navigator LLC (channelnav.com)

Copyright © 2011 WaveLength Market Analytics LLC and Winn Technology Group, Inc. All Rights Reserved.

•  Goal: Understand broad enterprise migration-‐to-‐the Cloud trends and the channel to customer

•  Random sample drawn from Winn Enterprise/mid Market DB that included high-‐level IT decision-‐makers (Senior Managers, Directors, and VPs)

•  Primary research data collection methodology collected by Winn Q3/Q4 2010 by using a telephone survey, supplemented by e-‐survey, landing page provided to provide respondents the ability to answer via Web, and incentives to increase response rates

•  Sample size = 127; weighted to present distribution of US companies greater than 500 employees

•  Screener to define respondent as Cloud Pioneer or Planner: Organizations using only SaaS not included; they had to use another cloud service model and must actually have IT staff working on it

Appendix: Goals and Methods