How Much is the Sky? Cloud Services Reduce Costs. White Paper. Evaluating the Monetary Aspects of Moving to the Cloud

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1 How Much is the Sky? Evaluating the Monetary Aspects of Moving to the Cloud Expected savings from lower up-front capital costs, more predictable operational costs, and economies of scale are driving the inexorable march to cloud adoption by organizations of all types. But these vaunted cost savings aren t a slam dunk. Today s cloud market is still the Wild West, with vendors slapping the cloud moniker on all manner of services. If you don t carefully define what services you need and assess exactly what the vendor offers, you can easily wind up with a partial solution. Filling the gap between the cloud services you bought and the ones you need will then demand additional expenditures and a complete solution may end up costing far more than expected. is 23 percent. 4 With savings like these, it s not surprising that organizations are steadily marching toward cloud adoption. This paper helps clarify the financial benefits of a cloud solution, the most common types of cloud services available, and which services you ll need to implement your PTC solution in the cloud. Cloud Services Reduce Costs Cloud adoption is rapidly becoming a reality. In a recent survey of 1,242 IT professionals, CDW found that 38 percent are implementing or maintaining a cloud solution. 1 Most of these users (88%) are doing so to cut costs. 2 These savings are proving substantial. Nucleus Research examined 70 case studies 3 of companies adopting cloud-based software as a service (SaaS) applications and found that they delivered 1.7 times greater ROI than on premise applications, and a study by Rackspace found that the average cost reduction Sources of savings Cost savings come from several sources: lower up-front capital costs, more predictable operational costs, and economies of scale that are passed along to the customer. Lower capital costs With cloud computing, you no longer need to purchase infrastructure or data center space up front to run your applications. You pay only for the services you need, when you need them Page 1 of 5 How Much is the Sky?

2 Predictable operational costs You ll pay a pre-defined cost, which might be a monthly subscription or a usage-based charge. Staff to implement, administer, and maintain the entire system (e.g., the datacenter, servers, the operating system, the database, the network, and the application) is included in the price. Economies of scale Cloud vendors share infrastructure and labor costs among large numbers of customers. This means the vendor can optimize the hardware and the staff necessary to operate and manage the datacenter, infrastructure, and applications to reduce costs. Many cloud providers pass savings along to their customers that include: Lower power costs: When you run your own data center, servers aren t fully utilized. Idle servers waste energy. Better hardware utilization improves the efficiency of power use. Resilience without redundancy: When you purchase your own servers, you need to buy extra hardware to support testing and staging activities as well as ensure against hardware failure. This spare hardware is expensive. Cloud computing allows you to scale up as needed to eliminate expense associated with idling hardware. Lower staffing costs: If you use specialized software for example PTC solutions you need an IT expert who s fully up-to-speed on its operation, as well as a backup person to take over at night or when the primary administrator is out of the office. Yet administering the specialized software is not necessarily a full time job. With a cloud-based PTC service, the provider spreads the available expertise over multiple clients. These technicians work with the software full time to keep their skills fresh. You gain full coverage at a lower cost. An Abundance of Options Although most cloud services deliver cost savings, not all cloud services are created equal. There are a plethora of cloud service variations, including: Infrastructure as a Service (IaaS): Furnishes servers and/or storage resources and network resources along with staff to implement and administer these systems. Platform as a Service (PaaS): Delivers a platform (e.g., programming languages and tools) that customers use to develop applications that will then be delivered to end users via the cloud. Software as a Service (SaaS): Offers application functionality to customers via a web browser. SaaS includes all the back-end services needed to operate the application in the cloud. These types of services can be delivered using various flavors of cloud: Public cloud: A hosted service available over the Internet. Multiple customers share the service provider s infrastructure. While this is the least costly option, some customers are concerned about security in the public cloud. Private cloud: Cloud service is implemented within the corporate firewall that s controlled by the IT department. This model is more expensive, but can alleviate security concerns when security is limited to a local area network (LAN). Hybrid cloud: Uses both private and public clouds to perform distinct functions within the same organization. Virtual private cloud: An on-demand, configurable pool of shared computing resources that are allocated within a public cloud environment. This flavor of cloud provides some isolation between different organizations sharing the resources to improve security. Page 2 of 5 How Much is the Sky?

3 Compare Apples to Apples Given all the options available, it s critical to understand what you need and what the service provider delivers before you contract for cloud services. Without this understanding it s easy to be misled by a low price, only to find that that the service you purchased doesn t provide what you really need, causing you to purchase costly additional services. Consider the differences between an IaaS and a SaaS offering. What IaaS includes An IaaS service typically provides low-level server, storage, and networking infrastructure. The service provider typically charges using a consumption or use-based model. You pay only for the services you use and can scale your usage up or down as needed. A typical IaaS service will include: Server hardware and maintenance Network hardware and maintenance Power for servers Power for HVAC/Utilities Facilities (UPS, Rack, Maintenance) Storage System and data backup and off-siting These services assume that you will properly size servers for the necessary computer power, architect for redundancy to ensure availability, and develop a disaster recovery strategy. You are also responsible for the performance of the application running on the servers. SaaS is more comprehensive In contrast, a SaaS model delivers comprehensive services. SaaS delivery includes all the infrastructure services delivered by the IaaS model, but the service provider also sizes servers and is accountable for availability as well as a disaster recovery strategy and architecture. Service providers typically charge a monthly subscription with the actual cost determined by some measure of value and usage. For example, many SaaS providers will offer tiered services, where you pay one monthly amount for X level of service, a different amount for Y level of service,or a third amount for Z level of service. SaaS offerings typically include: Infrastructure Server hardware and maintenance Network hardware Hardware and network maintenance Power for servers Power for HVAC/Utilities Facilities (including UPS, rack, maintenance) Storage System and data backup and off-siting Licenses Operating system license Database license Software license Page 3 of 5 How Much is the Sky?

4 Application support Application administration After-hours support Infrastructure Support DBA administration SA administration Upgrade support Labor to perform system upgrades Training to maintain competency of administrators When Cloud Service Selection Goes Wrong: A Real-World Example As you can see, IaaS offerings are quite different than SaaS ones, but because the complex array of choices can be quite confusing, it s easy to inadvertently select the wrong option. If you do, costs can escalate quickly. For example, a global company approached PTC about purchasing software, but didn t want to manage it internally. They wanted SaaS, but chose an IaaS as their cloud provider due to the low costs. The company initially thought the IaaS provider would set everything up for them. However, the IaaS provider simply gave the company a link to their portal so it could configure the servers themselves. The company had to contract with a third party to configure and administer their servers, and set up the network and disk space. Unfortunately, this third party had no experience as a database administrator or with PTC software. Nor did the consultant know how to ensure that the environment was resilient in case a server went down. So the company ended up hiring a third company to set up the database, run the PTC software, and ensure application and infrastructure resiliency. So instead of paying one organization to do everything, the company ended up paying three organizations to set up the system for them. Finally, the company decided to use PTC to run their entire solution for them on a SaaS basis. The moral of the story is that you need to understand exactly what the cloud service provider delivers. Because the company didn t take this step, it spent considerable time, effort, and money to hobble together the complete solution it really needed. Technical Considerations In addition to delivering the right services, the cloud service you select needs to meet your technical requirements. For SaaS customers, this includes security, access control, performance, and capabilities. Security Be sure your data centers and data are secure. Data centers should comply with standards that include ITIL, SSAE-16 reporting, and International Organization for Standardization (ISO) 27001: 2013 standards. The solution should also deliver proactive disaster recovery, apply security patches as needed, and perform nightly backups. Access control End users need to access the service consistently and in a secure manner. The service should offer a 99.5 percent available SLA. Data should be encrypted travelling to and from the cloud using HTTPS. Performance The service provider should be accountable for sizing your server resources based on your use case to ensure good performance without over provisioning, which can drive up costs. They should also anticipate growth by monitoring the system and proactively tuning it. Page 4 of 5 How Much is the Sky?

5 Capabilities The service provider should be able to fully host your software. It should evaluate integrations and customizations for security risks. And it should be able to upgrade the software and accommodate your customizations as necessary. Conclusion Cloud services have become widely accepted for their ability to reduce costs, but these savings can only be fully realized if the chosen vendor provides the full range of services and technical capabilities that you require. Before making the move to cloud services, carefully evaluate the provider to be sure you find the right match. Learn more about PTC Cloud Services your application s operations and environment. They ensure consistent application availability with proactive monitoring, performance tuning, and speedy issue resolution with immediate access to PTC R&D and technical support. Speak to a PTC Cloud Services expert today to discuss your requirements and successfully move your PTC solution to the cloud. 2015, PTC Inc. All rights reserved. Information described herein is furnished for informational use only, is subject to change without notice, and should not be taken as a guarantee, commitment, condition or offer by PTC. PTC, the PTC logo, Product & Service Advantage, Creo, Elements/Direct, Windchill, Mathcad, Arbortext, PTC Integrity, Servigistics, ThingWorx, ProductCloud and all other PTC product names and logos are trademarks or registered trademarks of PTC and/or its subsidiaries in the United States and other countries. All other product or company names are property of their respective owners. J4922 How Much is the Sky WP EN 0115 PTC Cloud Service has more than 15 years of experience helping clients realize the full value of their solution investment by placing hosting and application management in the hands of the experts. Our PTC Cloud Services professionals continually optimize Page 5 of 5 How Much is the Sky?