I D C E X E C U T I V E B R I E F

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1 I D C E X E C U T I V E B R I E F I n f r a s t r u c t u r e a s a S e r v i c e : T h e F u t u r e o f I T February 2009 Global Headquarters: 5 Speen Street Framingham, MA USA P F Adapted from AT&T's Cloud Strategy: From Hosting to Utility Computing by Melanie Posey, IDC #lcus and Infrastructure as a Service: Evolution, Not Revolution, AT&T Networking Exchange Webinar, October 23, 2008 Introduction At many enterprises, business processes and functions are increasingly IP and network enabled, including marketing, sales/transactions, customer service, Web sites/web presence, day-to-day administrative operations, and mission-critical internal enterprise applications. In today's environment, enterprises require agile IT infrastructure solutions to meet the demands of rapidly changing business requirements. Service providers have responded to this need over the years with ever-evolving portfolios of offerings and service delivery models that address the age-old question of build versus buy. During the past decade or so, technology advancements have enabled new service provider approaches to IT infrastructure managements, with each new development building upon those that came before. Now, we are seeing the emergence of the next stage of service management IT infrastructure as a service (IaaS). IaaS is essentially an evolution from "traditional" managed hosting and represents an important step in making IT infrastructure more flexible and agile. This Executive Brief examines the IaaS model and explores how enterprises can implement IaaS to achieve the dynamic IT service delivery models needed to meet both business and IT objectives. The Benefits of IaaS IaaS is a new approach to IT infrastructure management and service delivery that builds upon traditional fully managed hosting solutions. While definitions of IaaS may vary depending on the provider, IaaS in general is a platform-oriented approach that leverages a standard, virtualized IT infrastructure foundation featuring scale-up/scale-down computing capacity on demand, storage, and datacenter networking services (virtualized firewalls, intrusion detection, antivirus, and system load balancing). IaaS incorporates the monitoring, client support, and life-cycle management aspects of traditional fully managed solutions, along with service-level guarantees for the entire IDC_745

2 solution environment. What IaaS adds to the mix is the ability to source all of the components hardware, infrastructure software (i.e., operating system and database), and bandwidth as a complete turnkey solution managed by the service provider. Enterprises are moving beyond the view that IT is a mere cost center. Today, organizations look to IT to support all kinds of business initiatives. In an IDC survey asking CIOs to rank the top directives handed down by management, respondents ranked "improving efficiency of business operations" as slightly more important than cost reduction, indicating that corporate executives are viewing IT as a business enabler (see Figure 1). Figure 1 Key CIO IT Directives Q. How would each of the following rate as key IT directives issued by your organization's executive management? Efficiency is more important than many other issues Improve efficiency of business operations Reduce costs 58% 54% Innovation 34% Response time 33% Reduce IT & network complexity Globalization 26% 20% n = 200 Notes: Values represent those respondents rating each item "extremely important." Multiple responses were allowed. Source: IDC's Network/IT Convergence Survey, 2007 Enterprises increasingly have requirements that often result in challenges for the technology and operations functions. New, more dynamic IT service delivery models are needed to meet enterprises' IT and business objectives IDC

3 Increased business agility. Transformation and globalization are permanent features of today's business environment. The Internet has enabled a broad range of new business models, changing the way companies engage and interact with customers, partners, suppliers, and employees. The Internet also created the need for tighter linkage between IT infrastructure and business processes. This business transformation is fueling enterprise demand for a new approach to IT IaaS that offers the dynamic infrastructure foundation needed to help drive down capital and operational expenditures, improve the customer experience, and reduce risk by improving the ability to adapt to change in a cost- and time-efficient manner. Market optimization. Today, business opportunities can emerge rapidly; in turn, companies need the ability to respond rapidly in terms of their customer base, product offerings, corporate resources, and supplier/partner relationships. Companies need to be able to scale up/down quickly, and this need for agility extends to all corners of today's business the products and services offered to customers, employee development and training, partner ecosystem creation and maintenance, and corporate resources (including IT infrastructure) that support these activities. When new opportunities arise for example, increased interest in a new product based on an extremely successful marketing campaign IaaS enables enterprises to cope with increased Web site traffic and ecommerce activity by dynamically adding more IT resources without having to purchase, deploy, and integrate additional infrastructure. In this way, the enterprise focuses on its core value proposition while relying on the service providers' IaaS to scale the underlying IT resources needed to support service delivery. Information and service availability. Information and data increasingly drive business processes. The different parts of business ecosystems need ubiquitous/reliable access to the information, and the data and processes around data access need to be secure and compliant with various governance regulations and legal requirements. This gets at the shift in the organizational dynamics of enterprise IT. Since IT infrastructure and the applications they run on are the engine of integrated, interconnected business processes, enterprises need access to components (servers, storage, security, networking) that can be pooled and linked together in an architecture that provides an adaptive platform. With IaaS, the service provider has already done the hard work of building and maintaining this infrastructure framework and also manages individual enterprises' environments (including the provision of on-demand capacity) on an ongoing basis. Information and services are "always on," leaving the enterprise free to devote management and financial resources to the core business IDC 3

4 Investment prioritization. Few CIOs have unlimited capital to invest these days. Businesses need to undertake investment in ways that provide both variable and lowest-cost approaches. IaaS can serve as a component of hybrid deployment models that support both average and peak load infrastructure resources. We're past the era of IT deployment models where you build it once, pile on more resources as needed, and that's it. At the same time, we're not yet (and may never be) at the stage where every enterprise IT requirement can be sourced on a pure "utility" basis like water or electricity. Service providers can deploy dedicated IT infrastructure (increasingly partitioned or virtualized to serve multiple workloads) for steady-state day-to-day operations and leverage IaaS on-demand resources to handle periodic or unexpected traffic spikes, for application testing/development, and for unpredictable or as-yetunknown infrastructure resource requirements. IaaS eliminates the need to fund additional capital investments for each new application deployment. The "service" part of IaaS means that enterprises can simply purchase access to a fully managed IT infrastructure stack in a scalable fashion that aligns with changing business needs. Collaboration/distribution. Today's business world is interconnected and global; multiple internal and external players need to be able to share and disseminate information and business intelligence easily and seamlessly. However, collaboration and distribution requirements can change quickly, requiring rapid-response IT infrastructure that can be scaled to meet immediate business needs. For all of these dynamic business conditions and requirements, the underlying IT and network infrastructure can play a key role not just as a cost center but also as a business enabler. Furthermore, the IaaS service delivery model, alone or in conjunction with traditional dedicated managed hosting offerings, provides an adaptive IT infrastructure environment. For enterprises considering IaaS, there are numerous benefits to turning over the provisioning and management of IT infrastructure to a third-party provider (see Figure 2). Cost savings typically emerges as the top decision factor year over year. However, it is important to note that there are multiple dimensions to cost savings many of which factor into other listed items such as internal skills/resources and improved security and backup capabilities. Furthermore, these demand drivers for third-party IT infrastructure services also map to the business requirements outlined earlier IDC

5 Figure 2 Demand Drivers for Managed Hosting Q. How well do each of the following describe your reasons for choosing to use a third-party service provider instead of/in addition to maintaining your Web site/ Web-based applications internally? % extremely/very important Cost savings 64% Performance/scalability Improved security Improved backup/redundancy capabilities Lack of internal skills/resources Time to market/speed of implementation Facilitate technology upgrades/migrations Enterprise IT infrastructure consolidation process Enterprise datacenter constraints Meet regulatory compliance mandates 58% 57% 54% 53% 52% 50% 49% 46% 45% Other 32% Factors behind the move to "traditional" hosting apply equally to on-demand service models. n = 317 Notes: Multiple responses were allowed. Base = respondents who outsource the hosting of their public Web site(s) and/or internal Web-/IP-based applications infrastructure Source: IDC's 2008 U.S. WAN Manager Survey These demand drivers for managed hosting are equally applicable to the on-demand IT-infrastructure-as-a-service model. This underscores the key point that the evolution to IaaS begins with embracing the notion of using (and trusting) a third-party service provider to manage your IT infrastructure in the first place. Missing in all the industry chatter about new utility- or cloud-based IT service delivery models is the notion of performance management. Adaptive, flexible infrastructure is not just aggregated IT resource pools. These resources need to be overlaid with management and automation that enables near zero-touch responsiveness to changing load requirements. Furthermore, enterprise-class services require dynamic infrastructure that is governed by business rules, making IaaS more than just servers and storage "out there" in the cloud that is, a comprehensive managed services approach that provides on-demand options IDC 5

6 Considerations Naturally, new service delivery models do not gain 100% acceptance all at once, and there are often cultural and other inhibitors to adoption. A recent IDC survey found that typical reasons for handling IT infrastructure in-house include perceived lack of cost savings, given the ability to leverage existing infrastructure; confidence that the required technical skills and expertise already exist in-house; desire to maintain direct control of Web-based operations; and the perception of improved security, flexibility, performance, and regulatory compliance by keeping operations in-house. Companies that handle their IT infrastructure needs internally often assume that competitive or strategic advantage derives from in-house management and maintenance of the hardware, software, and network elements that support IP-enabled applications and business processes. Furthermore, these companies assume that inhouse hosting is, by definition, a lower-cost option because existing IT staff can simply take on new responsibilities and respond to changing requirements. Companies that have opted for IaaS, however, view the "build-versusbuy" decision in the broader context of total cost of ownership (TCO). Using this life cycle oriented perspective, companies take into account not only whether they have the budget, personnel, and technological expertise to manage their IT infrastructure requirements today but also whether these internal resources are flexible and scalable enough to handle tomorrow's requirements. Ultimately, the in-house versus outsourced hosting decision hinges on companies' assessments of their business objectives and the core competencies needed to achieve these goals. IT infrastructure and the expertise needed to build and manage application environments are not ends in and of themselves; rather, they are a means to an end. Conclusion At the end of the day, IaaS provides enterprises with simplified, performance-oriented IT infrastructure solutions that facilitate enduser interaction with an application, business process, or service. It's not about hardware and software it's about the ability to do business over the network. IaaS makes this easier with flexible platforms and tools tailored to different load and availability requirements. It's important to keep in mind that IaaS is a complement to (not a replacement for) the traditional managed hosting model. The new model provides "pay-as-you-go" scalability and flexibility, but for applications with fixed, predictable resource/usage requirements, managed hosting (traditional or dedicated virtualized) may suffice. Enterprises should consider IaaS particularly for large-scale Web-enabled applications, staging/test environments, or in situations where rapid deployment/provisioning is vital IDC

7 When making the decision about an IaaS service provider, enterprises should consider whether the service being offered is a comprehensive solution or simply raw compute/storage power delivered as a utility. Other key considerations include change management and provisioning processes, the ability to mix and match hosting service delivery models, security procedures and safeguards, customer service/support tools and capabilities, and service-level agreements. Ultimately, application requirements and business objectives should dictate enterprises' service delivery model choices not vendor and/or market hype. IaaS is the next evolution of managed hosting, providing dynamic sourcing elements that accommodate variable demand at variable cost. Furthermore, IaaS, in combination with traditional managed hosting, offers up a range of IT infrastructure options that help to break down IT silos and better align and integrate IT infrastructure and business process requirements. COPYRIGHT NOTICE The analyst opinion, analysis, and research results presented in this IDC Executive Brief are drawn directly from the more detailed studies published in IDC Continuous Intelligence Services. Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from IDC. Contact IDC Go-to-Market Services at or the GMS information line at to request permission to quote or source IDC or for more information on IDC Executive Briefs. Visit to learn more about IDC subscription and consulting services or to learn more about IDC Go-to-Market Services. Copyright 2009 IDC. Reproduction is forbidden unless authorized IDC 7

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