Strategies for Cloud Computing Adoption for the Indian Banking Industry STRATEGIES FOR ADOPTION FOR INDIAN BANKING INDUSTRY

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1 STRATEGIES FOR ADOPTION FOR INDIAN BANKING INDUSTRY ' V. SAI RAGHU YOGENDRA MBA 2 ND YEAR SCHOOL OF MANAGEMENT STUDIES UNIVERSITY OF HYDERABAD GUIDE : DR. G.R. GANGADHARAN 1

2 Certificate by Guide This is to certify that Mr. V. SAI RAGHU YOGENDRA, 2nd year, School Of Management Studies, University of Hyderabad has done his summer internship during May July 2013 under my guidance. He, Guide: Dr.G.R.Gangadharan Signature: ABSTRACT Cloud Computing is a large-scale distributed computing paradigm that is driven by economies of scale, managed computing power, in which a pool of abstracted, virtualized, dynami- 2

3 cally-scalable storage, platforms, and services are delivered on demand to external customers over the Internet. This study provides insight into the pragmatic factors driving the adoption of cloud in the banking sector of India, as well as those aspects inhibiting adoption. we follow research methodologies including literature review and questionnaire survey. We also try to find the needs of banks to adopt cloud, and what would be the resources and skills required to be provided by the service providers and regulators for successful adoption of cloud by banking industry in India. Acknowledgement 3

4 I take this opportunity to thank my guide, Professor Dr. G.R. Gangadharan who was generous with his time to sit through my interim presentations, question my assumptions and thought process, and helped me stay focused. He shaped this research by ensuring academic rigor, thorough literature review, thought provoking discussions, and sharing key resources. He reviewed my work and suggested improvements to make it meet to the standards of IDRBT. He also secured responses from CIO's of various public sector banks as part of this research. So, on this context, I am grateful to the people who gave information about cloud computing adoption programs within their banks. Their contribution lays the foundation for the view that this report puts forth. Hereby, I also acknowledge the help I received from my faculty, SMS, HCU for their invaluable help. Table Of Contents 4

5 1. Introduction History of Cloud Computing Cloud Computing Characteristics Cloud Computing Trends Banking Industry Indian Banking Takes On Cloud Framework Of Study Theoretical Framework Objectives of Study Research Methodology Responses From The Primary Research Strategic Phase TOE Framework Cloud Adoption Model Assessing The Adoption Model and Its Phases Selecting The Correct Cloud Adoption Pattern Conclusion Impacts Upon Adopting To The Cloud Areas of Further Study Appendix Questionnaire Format Bibliography INTRODUCTION 5

6 1.1 History of Cloud Computing: Cloud Computing has been very often portrayed and perceived as a new technology but it is also widely accepted as an evolution of technologies such as client server architecture, World Wide Web, and networking. Some even call it mainframe 2.0. In 1960's, mainframes were used for computing and transaction processing with users accessing the computing resources through dumb terminals. 1980's saw the advent of protocols for networking and client server architecture. The World Wide Web and the Internet followed in the 1990s along with enablers such as web browsers. The decade also saw the emergence of application service providers, offering software packaged as service over the internet. The advent of Computing revolutionized postindustrial society and Cloud Computing shows signs of revolutionizing the information society. Idea that revolutionized Cloud Computing is moving from Clustering Computing to Grid Computing. Concept dating back to the 1960 s by John McCarthy, a computer scientist, brought up the idea that computation may someday be organized as a public utility". Cloud computing has been enabled by the availability of broadband networks and inexpensive end-user devices, as well as commodity computing nodes that can be simply interconnected and controlled, and virtualization to provide the appearance of isolating processes that share computers. Hence, we could this ability to connect users to computing and data resources via standardized networks emerged as a key enabler of cloud computing. Given the evolutionary nature of Cloud Computing, it could mean different things and thus it is prudent to pay attention to definition of Cloud Computing. Cloud Computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g. networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or cloud provider interaction. (Information Technology Laboratory - National Institute of Standards and Technology). With this definition on cloud computing, NIST also lays down Essential Characteristics, Service Models, and Deployment Models. 6

7 1.2 Cloud Computing Characteristics: 7

8 1.3 Cloud Computing Trends: Cloud Computing is one of the most talked about technology trends of the last decade. Banking Industry claim to be on the path to being cloud centric, vendors speak about cloud strategy, and industry analysts spend their time following the cloud revolution. All these can be taken as signs of hype, which might be tapering off as organizations get serious about cloud, and experience its true benefits and challenges. Industry and analysts alike expect cloud to become main-stream not immediately but over the course of next several years. Cloud Computing as Complement: Banks see Cloud Computing as complementary to their existing infrastructure, but not as a replacement. This affords them the flexibility to harness the benefits of cloud and reap returns on the investments that they have already made. Cloud Computing Pros: Reduced Hardware equipments for end users Better collaboration Improved Performance Pay for what you use Lower Hardware and Software maintenance Instant software updates Accessibility Less Expensive Increased Spending on Cloud: Banks, alike are either gradually allowing Cloud Computing to percolate into their structure, processes and infrastructure or are initiating programs which help them build on their past programs and realize the benefits of cloud. It also means that they are allocating budgets or increasing spend on Cloud Computing related programs. Worldwide spending on public IT cloud services will be more than $40 billion in 2012 and is expected to approach $100 billion in as estimated by IDC. PaaS Emerges Out of the Shadows: SaaS and IaaS have come to be recognized as key cloud services and there are expectations that PaaS offerings will grow as the market moves up the software stack (IDC). Public Sector lag Private Sector: Public sector are behind the Private sector across all aspects of adopting cloud including developing strategy, proof of concept, and staged implementation. Public sector see security as a key concern to be addressed. Cloud Computing cons: Security Issues Speed of Internet connection Too many platforms Time for Transition 8

9 2. BANKING INDUSTRY: The agility and cost-efficiency enabled by cloud computing has some large banks proactively testing the technology. But other bankers are cautiously awaiting answers to security and regulatory questions. We will never buy another data center. We will never buy another rack or server or storage device or network device again. I will never let any organization that I work for get locked into proprietary hardware or software again. I ll never tell my teams in the business that it will be weeks to get them hardware provision. I ll never pay up front for any infrastructure and certainly would never pay for any, or rent any, infrastructure that I would never use. - Michael Harte, CIO of Commonwealth Bank of Australia, in his speech to the Committee for Economic Development in Australia. Harte s comments encapsulate the two clearest benefits of cloud computing for banks: the ability to buy computing capacity, storage, network bandwidth, etc., on demand - paying only for what s used, rather than buying hardware or software up front and the speed and ease of provisioning and managing hardware and software when you tap into a true internal or external cloud. Cloud characteristics like zero up-front CAPEX, shared service delivery over the internet, agility, and a pay-for-use environment has got some large banks, proactively testing the technology. The banking industry has experienced unprecedented change in recent years. Regulatory pressures, narrowing margins, and fierce global competition require organizations to seek innovative strategies and solutions. To thrive in the new normal, banking institutions must focus on core business and cost containment without sacrificing the capability to adapt and respond as the market evolves. To meet the daunting demands for greater agility, efficiency, and managerial transparency, banks must align interdepartmental strategies and deliver solutions at a far greater pace than ever before. Banks, insurers, and other financial organizations have taken on myriad initiatives to refocus and realign their business models, leveraging a host of methods including Lean Six Sigma, performance analytics, and followthe-sun operational models. Traditionally, the cost and time required for technology enablement has hindered the ability for IT to satisfy business needs. Clearly, new tools are needed. So here enters the cloud computing. The cloud offers a host of opportunities for banks to build a more flexible, nimble and customer-centric business model that can drive profitable growth. Top banks are making private clouds their first priority in moving to a cloud-based application and data access model. The private cloud sits on the bank s internal network. The added control and security offered by the private cloud is likely to appeal to banks looking for a more cost effective way to access their core applications, such as payments or market data. In the coming times, of the three Cloud environments available Private, Public, and Hybrid, Financial Services firms will typically leverage Hybrid Cloud architecture to realize benefits (cost, speed, efficiency) while balancing requirements (security, compliance, quality of service) across various business functions. A hybrid cloud model enables banks to reap the benefits of cloud computing while also maintaining the security and confidentiality of their data. Many banks today have very specific challenges in areas of security and data privacy. Their existing IT establishments consist of highly fragmented IT landscapes of security and data privacy approaches and policies taken across different functions or business lines. This in turn carries a lot of risk and cost. Using the move to cloud computing to drive more consistency and automation in security and data privacy may actually provide a catalyst for driving greater security and reduced costs. Banks need to adopt very practical approach to security and data privacy in the cloud. Most banks tag data with different levels of sensitivity, from 9

10 low level (published widely with no restrictions) to ultra secure (only accessible by top decision makers). In the same way, banks will need to design their cloud to have similar and appropriate security built in, through a managed combination of both private and public clouds. So, for example, low level data and access may well be suitable to go onto a public cloud infrastructure service, whereas highly sensitive data may require dedicated servers housed in a DMZ with physical and logical security. Although, there will be several different levels of security in between. Responses On The Cloud From The Industry: Banks may not seem enthusiastic about public cloud now, but that was the case with outsourcing too. However, outsourcing did catch up with banks and today the banking industry is the most prolific utilizer of outsourcing services. So it maybe just a matter of time before banks warm up to public clouds as well. Our long-term vision for Yes Bank has the promise of bringing unprecedented flexibility to the bank s IT operations. Umesh Jain, CIO, Yes Bank The bottom line is that cloud provides a lot of agility within a reasonable cost structure, which should in turn allow the organization to provide services to its business lines faster. The business can in turn create new products and services quickly and grow the top line. At the same time, the virtualization aspect of the cloud should drive costs down. Alan Boehme, SVP, IT strategy and enterprise architecture, at ING (US) The top management in any organization would like to see IT as a 100% variable cost, but the fact is it is 60% fixed. Achieving this can be challenging, but cloud computing can help reduce fixed costs and convert them to variable costs, which are more elastic and responsive to changes in the top line. Sandeep Phanasgaonkar, President and CTO of Reliance Capital 10

11 2.1 Indian Banking Takes On Cloud: The Indian Banking CIO and the Cloud Indian banking CIOs are seeking ways and means of supporting banking operations through optimal IT investments. They are exploring some of the key imperatives that allow harnessing the power of cloud computing, be it virtualization, consolidation, etc. Since most large banks have already invested in captive datacenters the approach adopted is more towards private cloud implementations within these datacenters. Banking regulations are also undergoing rapid transformation and becoming more inclusive in nature. There is a huge potential for CIOs of Indian banks to adopt cloud computing technologies at the infrastructure layer. Changes in the banking landscape and regulatory requirements from RBI have driven banks today to implement a Core Banking Solution (CBS). Implementation of this solution would require an IT infrastructure aligned to the bank s business growth plan and one that meets the bank's disaster recovery requirements. The Cloud can provide a scalable, robust and a highly available IT infrastructure to support their growth and expansion plans at a fraction of a cost without the bank having to make huge capital investments. Up In The Cloud: By transitioning business and operations functions to the Cloud, banks can increase operational efficiency and decrease costs. Moreover, the reach and versatility of cloud-based server scan multiply the number of opportunities a bank has to introduce innovative products and services to the marketplace. The Cloud Brings Agility To Banks: Cloud computing enhances business agility where banks get the ability to react quickly to service requests not only from their internal IT staff but also to requests coming from external customers. Self-service and service automation that are attributes of cloud computing, reduce provisioning time and provide the right information in the right format at the right time. Cloud computing enables banks that develop applications internally to procure, configure a development environment in less time and with reduced operational requirements. Cloudbased web hosting can help deliver marketing campaign websites faster. This will allow banks to dynamically iterate and refine messages based on market insights and trends. Further, the flexibility of cloud-based operating models lets banks experience shorter development cycles for new products. This supports a faster and more efficient response to the needs of banking customers. Since the cloud is available on-demand, less infrastructure investments are required, saving initial set-up time. The Cloud enables faster time-to-market and greater flexibility for new products and services to be launched. And Opportunities Beyond Cost Savings The Cloud brings cost efficiencies no doubt an attractive proposition, but there is more to Cloud Computing than just cost reduction. In our opinion there are four areas where Cloud can create significant opportunities for banks to design new business models that are more customer centric and nimble and help them grow more quickly and more profitably. Building a frictionless and flexible ecosystem. Most compelling use case for cloud computing for banks likely will be in the way innovative services can be rolled out in a short span of time. The cloud gives banks an opportunity to break apart their own value chain - be it credit approval or back-office fulfillment. Ensuring greater customer centricity in a market where product differentiation is tough. One of the challenges which banking industry is facing is 11

12 that customer expectations and needs are more complex than ever. Banks need to provide a more engaging experience and deliver customer-centric services to retain old customers and attract new ones. In today s environment, firms need to rebuild trust through improved transparency and enhanced service levels to its customers. *An Analytics Solution Offered Through The Cloud Will Help Banks To: Deploy a shared business intelligence and analytics environment rapidly at optimal costs and will provide a single consistent view of the business enabling better decision-making. In addition, Cloud services will help banks to increase speed and responsiveness in test and development environments. This would enable shorter time-to-market and greater flexibility for new products and services. Speeding up time to market: Time to market can be reduced from months to weeks and from weeks to days, depending on the size of deployment. *A Self-Service Based, On-Demand And Real-Time Monitored Cloud Helps By: Eliminating procurement delays for computing hardware and software Expediting computing power for when existing applications need to handle peak loads Eliminating the upfront capital and time investment for procuring hardware for proof of concept work or rapid application development and testing. Providing high availability for banking applications Complexity, volume and size of operations have increased the need for high availability within the banking environment today. Customers expect banking operations to be available round the clock, 365 days in a year despite planned or unplanned outages. Cloud computing ensures high availability and centralized management across the bank s numerous applications and heterogeneous platform technologies for branch applications, call centers, payments and trading operations, and other core banking system and reduce the risk of downtime. *As A Result, Banks Can Derive Significant Business Benefits Like: Increasing competitive advantage and improved profitability. Enhanced customer experience. Banks can more deeply engage consumers by providing cutting-edge offerings via the web and social media. Potential offerings include improved access accounts, analytics, solicitations, and other information vital to consumer and commercial customers. The Cloud provides an opportunity for banks to think outside the box and become more creative in servicing clients thereby improving client relations and increasing customer loyalty. Additionally, cloud-based business management applications deliver on the promise of creating one view of the client without the costly integration and upgrade challenges found with disparate business applications. Infrastructure Savings: 12

13 With the cloud-based virtualization of desktops, datacenters, and local networks, banks can create savings from the commodity portion of IT expenses, freeing up capital for business facing applications. The Cloud s integrated, standardized platforms allow for greater scalability across organizations of every size. Placing Their Faith In The Cloud: For good reason, security and data privacy remain prime concerns for cloud implementers in the banking sector. The fear of having their data in the cloud is the single greatest hurdle that banking leaders must overcome to build trust and gain the benefits from cloud computing. Indeed, especially given that the cloud is a true multitenant environment, CIOs are concerned that their data could be stolen or compromised by hackers, mixed with data from their cloud providers other customers, or released by mistake. Should We Or Should We Not? A bank may have many reasons for moving to the cloud, but the primary reason will likely be applications. A key stumbling block for major investments in new technologies has always been the capital expenditure needed for new infrastructure. With cloud computing, banks only have to budget for operational expenses and pay for the services they use. This makes it easier and more cost effective to test new applications on the cloud versus current traditional infrastructures. No single cloud computing services model is expected to meet all the business requirements for every bank. Instead, banks should develop and maintain an application portfolio consisting of both cloud and on-premise applications. While investments in legacy systems are expected to continue, cloud based services are ideal for newer business areas. Cloud-based services are expected to provide the advantage of both lower investments in implementing business strategies and faster turnaround time for product and service offerings, especially those delivered over mobile devices and the Internet. At first, financial institutions will likely move non-core business applications to the Cloud. *Areas That Can Profit From Cloud Computing Include: Customer analytics Customer relationship management (CRM) Browser-based technologies such as enterprise content management IT development and application infrastructure. Since these functions are highly outsourced, banks can achieve cost savings through the cloud. However, before making the move to the cloud, Banks must clearly define the ROI for cloud-based projects. Banks should be cautious about making significant investments in acquiring IT infrastructure as this will eventually lead to aggregation of servers, which may potentially remain idle when not required. Moving to the cloud will not only allow the banks to save on CAPEX and interest cost but also derive significant cost efficiencies by provisioning resources on-demand (when they are required). Cloud solutions are flexible and scalable - capacity and processing power can be upgraded for peak times and downsized for quieter periods. *As A First Step, 13

14 cloud providers should explain the costs and implications of migrating existing banking applications and infrastructure to the cloud. Choose service providers with proven expertise in cloud services management. Banks should use a road map to best manage cloud services delivery programs. Service providers who have invested in pilot projects will have real-world experience and business cases for cloud computing initiatives. Banks can start small with applications such as CRM and then move on to core business applications. Understand data confidentiality and regulatory requirements: Banks may need to keep sensitive data within firewalls to fulfill local regulations and client confidentiality requirements. Therefore, private cloud-based operating models are currently a better first choice than public or hybrid clouds. As public clouds gain trust and confidence among consumers, banks can gradually transition to these models. Initiatives such as the Cloud Security Alliance are looking at these concerns. But to best take advantage of cloud computing, banks must have a clear understanding of privacy and regulatory issues to make informed decisions. Future directions for cloud computing in financial services: Financial services organizations are starting to use cloud computing technologies in a number of areas, in particular for mobile applications, innovation testing and micro-banking. Mobile banking: Mobile applications are ideally suited to running in the cloud because it is often infeasible to connect mobile clients directly into internal systems, whereas all mobile clients can readily connect to publicly available cloud services. Banks are now offering mobile applications to online banking customers and partners for checking balance, order new cheque books or stop payment orders. New service R&D: Financial services organizations are also increasingly leveraging the computing power that cloud services offer for research and development and testing of new services prior to any attempt at going into production. For example, the concept of cloud bursting enables organizations to leverage computing power on demand to run tests or do financial modeling without the huge investment of buying a datacenter. Many IT managers have been wary of cloud computing because of the prospect of private and sensitive data being sent up to third-party cloud services. However, with the development of technologies enabling the tokenization of data, there is now an opportunity to replace any private information with a random token that can be sent to the cloud service provider, and then swapped back with the real data when retrieved. In this way, the private data is never sent to the cloud provider. Usage of tokenization will certainly help the broader adoption of cloud computing within the financial services industry. Micro banking: Another trend emerging is the adoption in developing countries of cloud whereby micro banks are running their entire business on cloud computing. In such Greenfield scenarios here there has been limited prior investment in technology, it makes a lot of sense for micro banks to leverage cloud computing as opposed to making the capital expenditure on actual datacenters. 14

15 3 FRAMEWORK OF STUDY 3.1 Theoretical Framework: Cloud has over the last few years conquered the consciousness of businesses and is gradually getting translated into action. Now-a-days, there are mandates to go to cloud, programs which are centered on going to cloud, some Banks are in the cloud to a great extent. As cloud gets increasing traction, the literature is also developing. Cloud definitions present a logical starting point and of particular interest to this study. Cloud Computing has held organizations across the globe spell bound with its promise. As it moves from being a buzz word and hype into adoption, banks are faced with question of how to best adopt cloud. Existing frameworks of cloud adoption look at different aspects of cloud but stop short of taking a view of the complete spectrum and suggesting a path. Cloud Computing adoption requires that banks have readiness on multiple dimensions including Governance, Process Analysis and Improvement, Application Rationalization and Modernization, and Hardware and Software Standardization. Readiness in turn determines how far Banks can go in their cloud programs with key milestones being Proof of Concepts, Infrastructure Service, Virtual Desktop, Platform Service and Enterprise Software as Service. Readiness And Milestones inform us about multiple stages in cloud adoption. The analysis also indicates that Certain governance structures are most suitable for cloud adoption. The duration of cloud program for a large bank lies in years, even in multiple five year plans. Analysis of case studies indicate all these views and the systems modeling for enterprise software as Service, in addition corroborates the likely duration of cloud program. The proposed Cloud Computing Adoption Model can help organizations understand what capabilities they need to develop, where they are on the cloud adoption spectrum and how much time it could takes to go to cloud. Cloud Computing Definitions: Literature offers many Cloud Computing definitions. These definitions cover a spectrum of perspectives and come in various degrees of detail. Gartner s definition of cloud mentions about scalability, elasticity, and delivery as service. Forrester s definition indicates abstraction, scalability, hosting and billing. IDC has likened Cloud Computing to emerging IT model, and mentions real time delivery over the Internet. Communications of ACM differentiates between public and private clouds, and presents the view that cloud is data center hardware and software. NIST offers a definition which is detailed and talks about different types of computing resources, characteristics of Cloud Computing, and associated service modes and deployment models. For the purpose of this study we shall use the NIST definition of Cloud Computing. The definitions are given below. Gartner: Style of computing in which scalable and elastic IT-enabled capabilities are delivered as a service using Internet technologies Forrester: A pool of abstracted, highly scalable, and managed compute infrastructure capable of hosting end customer applications and billed by consumption IDC: An emerging IT development, deployment and delivery model, enabling real-time delivery of products, services and solutions over the Internet (i.e., enabling cloud services) (Gens). Communications of the ACM: The data center hardware and software is cloud. When a cloud is made available in a pay-as-you-go manner to the general public, it is a public cloud; the service being sold is utility computing. Private cloud refers to internal data centers of a business or other organiza- 15

16 tion, not made available to the general public, when they are large enough to benefit from the advantages of cloud computing. NIST: Cloud Computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g. networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or cloud provider interaction. Bank s Expectations From Cloud Solutions: Dynamic and flexible technology model to fully align with the changing needs of the business enabling businesses to provision technology resources based on demand and usage at the right level and at the right time, rather than having to plan upfront for capacity. Highly optimized and virtualized Infrastructure enabling scale and cost Efficiency enabling businesses to leverage the right hardware components and manage computing needs as a function of real time usage, rather than design and run with maximum capacity, redundancy and resiliency upfront. Fully automated service provision, monitoring and management for achieving agility enabling service providers to focus on managing hardware, software, services as well as end usage outcome, rather than for businesses to set up extensive and expensive operations organizations. Shared Services delivered across trusted domains delivering security of data, transaction & operations enabling integrated treatment of security across all the operating platforms (self and partner) for all the services rendered to the end users. Internet or Intranet based access model using high capacity bandwidth and ubiquitous connectivity enabling businesses to deliver business applications to their customers and associates on multiple devices. Service based acquisition model providing functionally rich capabilities on demand enabling businesses and customers to seek, evaluate, integrate and consume services that are most appropriate to their context, rather than build for scenarios and variations upfront. Significantly low start up costs and rapidly expandable capabilities that shift Capital Expenses enabling organizations to focus on business outcomes rather than planning technology, capacity, service development and deployment; IT services investments moves significantly into Operational expenses domain. Rapid innovation in services, features and operating models leveraging the capabilities of service provider(s) as compared to the need for internal and isolated investments and enabling the full impact of Innovation to reach all consumers rapidly. Issues Identified for the Study: Spurred on by industry trends, banks are increasingly looking to start in the cloud. The efforts of banks are finding resonance amongst vendors across all cloud service categories. Cloud adoption is almost equally being driven from the top and bubbling up from the bottom. Cloud Computing is helping banks address issues of cost, efficiency, flexibility, and scalability among others but at the same time is also raising following questions like: How should a large enterprise like bank, go about adopting cloud? Is there a particular path to be followed? Are certain steps necessary to cloud adoption process? Do certain characteristics define organizations in the process of cloud adoption? 16

17 Should certain competencies be developed for successful move to cloud? How do different organizations at different stages of cloud adoption look different from each other? 17

18 3.2 Objectives of Study: To have an exhaustive analysis on cloud computing characteristics, advantages upon adopting, preventive measures that are needed to be taken in case of threats hampering privacy and security of the data. Further, the objective of this report is to answer the above raised issues by having an in-depth analysis of large banks which are either thinking of moving to the cloud or have taken steps to adopting cloud, identify the emerging patterns, explore drivers of cloud computing, and craft a model for cloud computing adoption. The report laid emphasis on banks because they are complex institutions, with large number of employers having a global presence, and one of the biggest spenders on technology, but have not been at forefront in adopting to the cloud computing. 18

19 4. RESEARCH METHODOLOGY: The introduction gave a flavor of the multiple dimensions of cloud computing including some of the questions which this thesis attempts to answer. Before we get into discussion of Cloud Computing and its adoption, it shall be worthwhile to review the study approach. In this study, an attempt has been made to broad base the research and use a multi -pronged approach. The study derives its insights from a combination of primary research and also secondary research i.e., literature study. Cloud Computing is a constantly evolving domain, and the very nature of this evolution necessitates starting with the definition of cloud computing. A definition on cloud computing has been arrived reviewing the literature and framing an appropriate one which could stand the test of time and change. Identifying a definition was an important task, as the definition will determine what cloud can look like and how organizations can get to that. In addition, research is done to develop broader understanding of evolution of cloud, adoption pattern and trends. The study concludes by summarizing the key findings and suggesting areas of further investigation and research. 4.1 Responses From The Primary Research (Questionnaires- Refer Appendix): Conceptual Analysis: Bankers see Cloud Computing Adoption as a step ahead of Electronic Document Management. The potential drivers for its early adoption are shown in the figure below: 19

20 5. STRATEGIC PHASE: "Cloud is a journey and not a destination" The important thing for banks to remember is that cloud computing is a journey, not a destination, and that it alone cannot render sustainable competitive advantage. Cloud computing may soon prove indispensable as an answer to the daunting new demands for agility, transparency, and efficiency. Shrinking markets and global competition pose numerous challenges for banks the Cloud offers the speed, flexibility and real-time information needed to meet those challenges on a cost-effective basis. Though security is a major and legitimate concern with bankers, cloud providers are investing in capabilities that will allow them to adhere to higher standards of security and data protection. In the longer term, banks will have an application portfolio mix of on-premise and cloud-based services delivered across a combination of private, hybrid, and public cloud-based deployment models with the share of cloud services gradually increasing in the service mix. Private clouds are expected to increasingly become the deployment model for cloud services among banks, giving financial institutions full control through ownership and operations of their cloud systems. Early adopters are already realizing benefits relative to improved communications, scalability, information access, cross-departmental interconnectivity, time to market and client responsiveness. 5.1 Technology Organization Environment (T-O-E) Framework : For this report, TOE Framework has been used to identify technological factors, organizational factors, and environmental context for cloud computing adoption for Banks. TOE framework has been used to structure this report form the boundaries. The interviews focused on multiple aspects of cloud adoption within an organizational context including organizational goals and strategy, execution and program management, benefits realization and measurement of success, and organizational readiness and risk mitigation. What is TOE Framework? Fleischer, Chakrabarti and Tornatzky have put forth the TOE (Technology Organization Environment) framework. The framework explains that technological context, the organizational context, and the environmental context influence technology adoption decisions. The technological context includes all of the technologies that are relevant to the firm both technologies that are already in use at the firm as well as those that are available in the marketplace but not currently in use. A firm s existing technologies are important in the adoption process because they set a broad limit on the scope and pace of technological change that a firm can undertake". The organizational context refers to the characteristics and resources of the firm, including linking structures between employees, intra-firm communication processes, firm size, and the amount of slack resources. There are several ways in which this context affects adoption and implementation decisions The environmental context includes the structure of the industry, the presence or absence of technology service providers, and the regulatory environment TOE model has broad applicability and possesses explanatory power across a number of technological, industrial, and national/cultural contexts. It has been used to explain the adoption of - 20

21 electronic data interchange (EDI) (Kuan and Chau 2001), open systems (Chau and Tam 1997), enterprise systems (Ramdani et al. 2009), and a broad spectrum of general IS applications (Thong 1999). Enablers for Adoption of Cloud Computing in an Organization: Risk Mitigation To minimize risks associated with a new platform, new applications are being moved to cloud first. Other applications have been re-factored and are being tested before they go to cloud. Legacy applications continue to be on legacy platform. LFINT evaluated a number of technologies which could fulfill its needs. It tested the best possible alternatives and chose the technologies which fit its context and goals the best. Process Improvement Move to cloud has been supported by regularly occurring business process reengineering and continuous improvement. Elements of Transformation in an Organisation: Governance: CIOs and technology leaders across the IC will need to restructure the coordination, synchronization, and governance model from one centered on control within stovepipes to one that fully leverages innovation across the enterprise with agility in order to manage changes in operations and the supporting cultural shift to enable sharing data across the IC. The IC CIO believes that decision-making and governance of the IT shared services needs to be centralized rather than divided among the intelligence agencies. However, execution of those services (implementation and operations) will be largely decentralized. Standards: Agencies follow their own standards in IT. Current IT standards, architectures, and approaches are not scalable in the current budget scenario. Standardization is expected to help scale operations in the face of tight budgets. Setting standards could also help mitigate the proliferation of Shadow IT organizations (groups within agencies setting up their own IT infrastructure or contracting independently with third party service providers). Service Level Agreements: IC ITE Strategy envisages use of shared IT services across agencies. The agencies shall need agreement on standard levels of service to enable the community at large to operate in the new environment. IC ITE leaders will have to engage their stakeholders regarding the needed levels of service in order to help define baseline standards for these common IT services. Different committees shall determine the standards the community is going to use for data sharing, access control, identity and access management. IC is likely to standardize service definitions for IT shared services, especially cloud shared services. Business Process Change: There is a growing consensus within USIC that although there may be some near-term degradation, common components and business processes are not only inevitable in a challenging budget environment, but the right thing to do to better integrate the IC. 21

22 Culture: Moving to a shared architecture and IT shared services model will require significant cultural change in the IC, driven by the overarching need to share mission-related data. Leaders across the board will have to constantly inform and reassure the workforce and other stakeholders about how the effort will enhance their ability to achieve the mission and continually communicate the benefits and successes. As cultural barriers start to fall, standardization as part of shared services may raise concerns that individual initiative and creativity may be stifled. Balancing this dichotomy and creating a culture that understands and demonstrates these competing concepts where appropriate -- a culture where people think and behave differently will require strong leaders. Workforce Re-Skilling: The current IT workforce should be capable of implementing and supporting the early transition to a shared services solution for IT. However, a reinvestment of a portion of the savings will likely be needed to develop new skills as the implementation evolves. There will probably be less emphasis on system administrators and narrowly focused subject matter experts. To execute the plan for ICITE, there will need to be more focus on a government IT workforce comprised of generalists who have a greater blend of skills to manage the increasingly complex systems and an agile contractor workforce that has the expertise to fully implement the program 22

23 5.2 THE ADOPTION MODEL: The Adoption Model for an Organization like banks should follows a series of phases like: 1. Thinking 2. Initiating 3. Creating and 4. Riding Thinking (about cloud): Organizations in this stage are characterized by IT as we have known for the last two decades or so. Decentralized IT and Budgeting: IT function is more often than not diffused across business units and central IT, and they pursue their own budgetary goals. Moreover IT function is seen as a cost center. Inconsistent Governance and Enforcement of Standards: Diffused IT function leads to inconsistent governance of programs and lack of enforcement of standards, if standards exist. Lack of Standards and Policies: Organizations have central IT but since business units also have large scale IT functions, finding common ground on Standards and Policies becomes challenging. Heterogeneous IT Landscape: Business units use their empowerment to procure or develop a range of applications leading to an IT portfolio with a spectrum of solutions. Besides, the organizations typically have on premise enterprise applications, data centers with shared or dedicated machines, and long cycles for provisioning capacity. For organizations in this stage, the first accomplishment lies in the executives and the organization (if possible) developing an appreciation of cloud including its benefits, challenges, and applicability in specific context. In today s environment, almost everyone at the executive level should have heard of cloud. Assuming so, executives should be able to develop deeper appreciation and be ready to take the next step in less than a year Initiating (reach for cloud): This stage forms the bedrock of success of any cloud program and builds on the Executive and Organizational Awareness achieved in the previous stage. Executive Support: Organizations need to develop wide executive support for initiating cloud programs as such programs are broad in scope, impact and resource needs. Business Case and Budget: Cloud comprises a broad spectrum of service and deployment models. Organizations should clearly define their objectives for cloud program and make required budgetary allocation. Adoption Roadmap: Cloud programs, as evidenced by case studies, last many years. Hence creating a roadmap that identifies milestones to be achieved shall ensure that organizations stay on course. Adoption Roadmap is more often than not part of Business Case. Rethought IT Governance: Analysis of governance mechanism of organizations studied indicates that an IT Monarchy along with Business Monarchy or Federal structure is well suited to cloud programs. Depending upon the governance model that an organization follows for managing its programs, the organization could either decide to continue with its existing model or adopt a new one. 23

24 Hardware and Software Standardization: Organizations in this stage also make significant progress in defining hardware and software standards. They might have done this in bits and pieces earlier but such efforts need to be taken to decisive end. Legacy Mapping: Organizations should also start with legacy mapping in preparation for application rationalization and modernization to follow later. Legacy mapping falls within the boundary of Application Rationalization and Modernization. To set the stage for implementation and deployment later, the key milestones to be achieved in this stage are formulating a Governance Structure, setting Hardware and Software Standards, executing on RFPs and Tendering Process, and conducting Proof of Concepts. These milestones could take anywhere between 1 to 3 years to reach Creating (organizational cloud): Organizations in this stage are knee deep in the weeds of executing the cloud program and draw on the milestones achieved in the previous stage. Service Level Agreements: Cloud calls for providing technology solutions in the form of services. To ensure that the services meet needs of organizations and performance is at acceptable levels, organizations should define service standards. Application Rationalization and Modernization: Organizations should assess their IT landscape to retire, re-factor, recreate or retain existing applications. It sets the context for move to cloud including maintaining a parallel legacy infrastructure for supporting legacy applications. Change Management: Organizations studied in this research indicate that cloud programs have extremely broad scope and degree of impact. It has implications for people, structure and processes alike, and thus change management is of paramount importance. Key elements of addressing the change should be communication, incentives, training, resistance management, and reinforcement. Process Analysis and Improvement Initiatives: Cloud programs can affect changes at enterprise software level. For such changes to be impactful and fruitful, organizations can supplement their cloud programs with process change initiatives and take the opportunity to improve their processes. Vendor Retraining: Our study organizations indicate that cloud is accompanied by application refactoring and also change in technologies. Such change might necessitate vendor retraining if the implementing organization is using vendors who are new to the technologies identified for cloud programs and the refactoring standards being used. Vendor Retraining maps to Vendor Readiness. Vendor Readiness: Based on the readiness attained in this stage and the previous stages, organizations by this stage Rationalize and Modernize IT Landscape (within defined constraints), Identify Technologies and Select Vendors for supplying technologies (internal capability development), deploy Infrastructure as Service (with likely contracts with third parties for managing the infrastructure) and pluck the low hanging fruit of Virtual Desktop. This stage is much more intense than the previous stage and could take 2 to 3 years for execution Riding (the cloud): Cloud Champions: Organizations in this stage stimulate the adoption of cloud model through cloud champions who act as ambassadors for the program and stimulate adoption. Cloud Champions play an especially critical role in the development communities. Cloud champions are a critical tool for Change Management. 24

25 Change Management: During the process of deploying cloud platforms, Change Management program helps navigate employees through the process of change by making clear the need for change, benefits of change, and implementing reskilling and retraining plans. Centers of Excellence: Organizations can also set up Centers of Excellence to institutionalize the broader business process improvement initiatives and align them with higher cloud adoption milestones to be achieved. This stage is also marked by co-existence of legacy and cloud environments. Organizations can look to ride the cloud wave by offering Enterprise Software as Service and providing for a development of Platform as Service. This stage could take 2 to 3 years for execution. The above adoption process points to key elements like Readiness, Discernible patterns, characteristics of organizations at different stages of adoption and also indicative timelines for a full scale move to cloud as shown in the figure below: 25

26 5.3 Assessing The Adoption Model and Its Phases: Assessing the adoption model is done based on the: Readiness of the existing infrastructure, and, The Milestones it is going to achieve in the process of adoption with in a time frame as given in the above figure: Readiness: Literature of recent vintage abounds in those extolling the virtues of cloud and its benefits but as survey of literature indicates not so much has been written on what is necessary for a successful move to the cloud. Answers partly lie in that cloud is still a few years away from mainstream adoption and is gradually moving beyond hype. Some of these elements are true of any program but others are more cloud specific. Organizational Context: o Executive Support: Cloud adoption by its very nature is an enterprise wide initiative and as some examples indicate, needs large scale involvement of business functions, overhaul of existing technology landscape, and much more and all this done over a period of several years. This necessitates Executive Support at the highest levels to articulate program objectives, keep up implementation momentum, catalyze solutions to issues and provide oversight. Executive Support is the Holy Grail for any program of such a scale and has been stressed umpteen times as organizations have become more adept at adopting business technology, but what makes it different in the context of the cloud is that Executive Support shall be needed for a number of years, continuously and at a sustained level. o Business Case And Budget: Cloud programs need a clear articulation of business objectives to be met, the desired future and the necessary investments. How is this any different from other programs? There is an abundance of cloud definitions, cloud means different things to different functions in any organization, adoption of a particular cloud mode could lead an organization into a very different direction as compared to other. Cloud needs a number of associated programs and steps, more sources of benefits are being discovered over time, and needs investment with uncertain benefits far out in the future. o Governance: Critical to any program implementation, governance is even more so in the case of cloud because of reasons outlined for Executive Support and Business Case and Budget dimensions, and the emerging pattern is that cloud programs need a combination of Business Monarchy and IT Monarchy or Federal and IT Monarchy for implementation and multi-dimensional success. Organizations might accordingly need to recast their governance organizations to set themselves up for a cloud implementation. o Change Management : Cloud entails changes in IT organization, how business groups transact with IT organization and get their requirements met, job descriptions of personnel, vendor outlook and use of IT resources among others. Depending upon how big the cloud program is, these changes could be sweeping in nature requiring frequent, multi-faceted and sustained change intervention. The example organizations in advanced stages of cloud adoption have faced challenges related to change and have instituted programs to manage change. These organizations also cited cultural change as a significant issue to be tackled. 26

27 o Process Analysis And Improvement: Benefits of cloud are spread across infrastructure, platform and software horizontals. Benefits of the software horizontal are the most significant when accompanied by process analysis and improvement. Process analysis and improvement aligns business processes with the changes to the software applications and enables the business processes to best utilize the capabilities being offered by software applications. For the example organization which is working on the software horizontal of its cloud environment, business process modification and change is a key component of realizing cloud benefits. Technological Context: o Application Rationalization And Modernization: Moving to cloud provides an opportunity for organizations to evaluate their application landscape, understand the usefulness of application set, and do some spring cleaning. As is evident in the case examples, application rationalization and modernization was an integral piece of move to cloud. This is especially critical as in a post cloud world it is highly likely that there shall be two environments, the cloud environment and the legacy environment. Maintaining these two environments is not going to be friendly to the wallet. Modernization follows as applications which are in the cloud or moving to cloud should ideally measure up to the standards which have been set. Aspects of modernization could be standard development language, central administration of security policies, and refactoring existing applications o Service Level Definition: Cloud delivers organizational technology requirements in the form of services. Be it the internal IT organization which is delivering the service or an external entity, service levels define what is it that the end user organization desires from the service. For the internal IT organization, it also serves as performance measure. The example organizations have more or less defined their desired service levels and are using service levels such as Five Nines to drive their future programs. o Hardware And Software Standardization: Cloud implicitly calls for converting vertical stacks into horizontal s comprising infrastructure, platform and enterprise software. This horizontalization is possible if proper hardware and software standards are formulated. Each of the organizations studied as part of this thesis, but for one, developed standards over a period of time. Final push in the standardization drive was given by cloud initiatives. Standards were driven through dedicated architecture groups, which themselves underwent transformation through the cloud journey. Till the time standardization is not overdone, it drives flexibility and agility in an organization. Hardware and Software Standardization is critical driver for most of the cloud benefits and requires balancing act between today s priorities and future aspirations. Environmental Context: o Vendor Readiness: Cloud has disrupted business of traditional hardware and software vendors and at the same time created opportunities for new vendors to step in. While the traditional vendors have struggled to get their cloud offerings off the ground, upstarts have taken a lead. This means that organizations looking to move to cloud need to consider vendors not necessarily part of their historical consideration set. Organi- 27

28 zations also need to consider solutions which are open source based and thus challenge the standards that they have defined for themselves. Vendor readiness affects cloud adoption programs but for the purpose of this thesis vendor readiness is considered out of the study boundary as this factor is more often than not out of control of the adopting organizations. Milestones For organizations looking to adopt cloud or in the process of adopting cloud, the journey to cloud is marked with distinct milestones. All the example organizations have gone through one of these milestones in their journey. These milestones are progressive in nature, with one leading to another and the eventual state representing the acme of cloud adoption as it is defined today. These milestones will certainly vary with how organizations define their cloud programs. Technological Context: o Proof Of Concept: Lynch pin of any cloud move, Proof of Concepts serve as a test bed for tools which are expected to be deployed, integration between different layers of cloud and provides input for selection of technologies. Proof of Concepts are especially important in cloud as many of the tools used in cloud deployments are based on open source and the internal IT organizations might be using some of those tools for the first time. Proof of Concepts serve as an important milestone in cloud adoption. o Vendor Selection: Inputs from RFP / Tendering and Proof of Concept go into identifying partners for cloud implementation. These vendors could be across the spectrum including cloud consulting, application maintenance and refactoring, infrastructure management, cloud tools and technologies, and change management. Vendor selection is a milestone as it means that the organization has firmed up its options of the technologies to deploy and which partners to align with for execution. o Infrastructure Service: In the journey towards cloud, offering compute infrastructure service can be seen as a low hanging fruit. Once the hardware standards have been developed and appropriate technologies and tools identified, organizations can take the first decisive step towards cloud. Large organizations can better reap the benefits of Infrastructure Service as they have the scale of current demand and need for future capacity. o Virtual Desktop: Another of the low hanging fruits, virtual desktop brings cloud driven changes a step closer to the user. It offers numerous advantages such as central application of policies but also brings individual change into focus. Complementary to virtual desktop is Bring Your Own Device (BYOD) trend i.e., employees getting their personal devices such as laptops, tablets and smartphones to their offices and working on them rather than using devices provided by the organization. It provides extra justification to organizations to push for virtual desktop. Even in case of virtual desktop, parallel desktop environments will need to be maintained for people who travel frequently and need offline mode. o Platform Service: Software standards with underlying infrastructure enable the general availability of standardized development environment for an organization. Development platforms have become very common in public cloud but only recently started to appear in private clouds. Standardized development platform 28

29 shall need retraining and reskil ling of personnel across the IT organization and business units which take up application development. o Enterprise Software As Service: Perhaps of the most importance to end user, this stage signifies an organization being able to offer its enterprise application set as service which can be metered and charged, and in their conceptual execution as close as possible to public cloud SaaS offerings. Besides change in how organiza ions use such applications, it also demands change in the IT organization from a pure cost center to a hybrid cost / profit center model. It simultaneously requires the user organizations to recognize the IT organization as such. o Integrated Cloud Platform: Call it the Cloud El Dorado, this stage represents an organization which has been able to transform itself to a state where infrastructure, development environment, and enterprise software are all services that are metered, billed and eventually charged to user organizations. The services offer boundless scalability and response to even the minutest of changes. Organizational Context: o RFP And Tendering Process: Large organizations go through RFP and tendering process to articulate organizational objectives and requirements for external partners, and identify candidates for providing consulting on cloud, implementing cloud programs, and sustenance on an ongoing basis. This will typically be a multi-step process with learning opportunities for both the contracting organization and potential partners. This stage assumes significance from the standpoint of Service Level Definition and overall expectations from cloud program. Environmental Context: o Competitive Offerings: Cloud is likely to enable an organization to create new offerings especially Software as a Service. Such offerings can be additions to an existing solution suite or a new solution altogether. The Large Financial Institution has created Software as a Service offering that is being subscribed by customers. Cloud thus has the capability to enhance competitive position of an organization or enable the organization to offer better services to stakeholders. Since such competitive or service offerings are determined by a number of factors other than capability and readiness viz., environmental factors, it is being excluded from this analysis. The above assessment offers a number of insights listed below like: How ready an organization is on the dimensions outlined earlier, determines how far it can go in its cloud program. As a corollary, organizations should not look to initiate cloud programs unless they are ready or know how to plug the gaps which they have identified. Organizations need to address change management, process analysis and improvement, and application rationalization dimensions to make significant advances towards Enterprise Software as Service and Integrated Cloud Platform milestones. Infrastructure Service and Virtual Desktop milestones are low hanging fruits in cloud adoption. Development Platform falls in the middle ground between relatively easy to achieve and tougher to achieve such as Cloud only Platform. 29

30 Governance and Executive Support are critical to cloud adoption as all the organizations high on adoption curve have good governance mechanism and solid executive support. Vendor Selection and Proof of Concept can be parallel processes where in depending upon the organizational procurement procedures, either one can come first. But for sound decision making Proof of Concept should come before vendor selection. 6. SELECTING THE CORRECT CLOUD ADOPTION PATTERN: 30

31 Patterns contain best practices and expertise for complex tasks distilled from repeated client and partner engagements. Patterns help define good solutions in a clear format that addresses the reoccurring problems; this can then be applied in concrete use cases regardless of used technologies, including software, middleware, or programming languages. As more and more solutions are deployed to the cloud and as cloud computing becomes an emerging development field of commerce, new products and technologies are made available to cloud users; understanding cloud patterns, especially an adoption pattern, and reconciling the most appropriate pattern with your business's implementation scenario, motivation, and mitigation, can help you build a sound cloud solution. For example, a full cloud solution is one in which all of the IT resources resides in the cloud but it may not be the best solution for certain requirements like if the solution needs to integrate with IT components that either reside in on-premises or other cloud environments. Having topologies and patterns that match up with certain requirements help architects narrow in on the solution elements to support both functional, as well as non-functional, requirements. Patterns also help identify the implications of choosing one pattern over another, which helps architects highlight to the business the ramifications of the choice being made. The goal of this selection process is to help cloud architects select a suitable cloud adoption pattern that helps extend business capability and integrate existing on-premise systems with new services provided by cloud providers. The focus is mainly on the integration aspect that uses adoption patterns to support both cloud service models (Infrastructure as a Service IaaS], Platform as a Service [PaaS], Software as a Service [SaaS], and business process as a service) and cloud types (public, private, hybrid, and community) in an abstract form to categorize the cloud solution offerings. These abstracts should help you select a proper adoption model based on your own business model, desired cloud maturity level, and technology choices (such as software, platform, and tools) but the main goal remains to provide you with one of the first critical steps to a holistic path forward towards cloud implementation or extension. In the following sections, key cloud adoption patterns are reviewed and their attributes, characteristics, topology, motivation, and other decision factors are described. Supportingly, various user scenarios and case studies are given according to the context. Meeting the cloud adoption patterns: Generally speaking, there are four types of cloud patterns that are differentiated based on applications, data, and infrastructure-sharing characteristics: Applications are hosted in on-premise cloud (private cloud); data and infrastructure are not shared. Applications are hosted in the public cloud; data and infrastructure can be shared. A combination of both private and public (hybrid cloud) for applications; data and infrastructure are selectively shared. A community cloud, designed for specific community capabilities, to allow community users to collaborate among themselves. These cloud patterns are related but different for different cloud service models. Cloud service models can also categorized into four different groups: 31

32 Infrastructure as a Service Platform as a Service Software as a Service The Different Cloud Adoption Patterns are: 1. Primary Hybrid Cloud (PHC) 2. Extended Hybrid Cloud (EHC) 3. Full Cloud (FC) 4. Extended Full Cloud (EFC) The adoption pattern models given are based on the first group of characteristics and encompass some of all of the cloud service models. Here, each pattern's attributes, characteristics, and topology are outlined and motivating factors along with pros and cons are given. 1. Primary hybrid cloud (PHC): The primary hybrid pattern is a method for extending on-premise or hosted deployments into a cloud environment. Processing instances are deployed on demand or pre-allocated and they are not typically integrated into runtime service feeds. This pattern has a mono-direction scheme for service delivery that only relies on one source being operational at a time. The data center capabilities may offer such services as data services, business support services (for billing, customer management, etc.), operational support services (like service automation, metering, etc.), and support, monitoring, security, and network services. Characteristics: With this pattern, there is limited integration with on-premises components; components are loosely coupled with no bi-direction synchronization. There is no integration with other cloud solutions. Topology: Conceptually the primary hybrid pattern can be represented as in Figure 1: Figure 1. Primary hybrid cloud topology There is limited integration between the on-premise components on the left and the cloud components residing on the right. Logically it looks something like Figure 2: 32

33 Figure 2. Primary hybrid cloud logical structure Motivating Factors: Motivating reasons you might adopt this pattern include: You need additional capacity for processing that can't be met on premise and that can operate without limited input from on-premise systems. You have a need to pre-process a lot of raw data but you don't want to store all of it on-premise; you just want to store the results. You require software components that can't run on premise. You don't have the existing in-house skill set to set up the environment or run the software on premise. Your time-to-market is short and your business needs can be met with a cloud provider but can't be met with on-premise technology. You think you might need an extended hybrid cloud but you aren't ready to do that yet. Key User Scenarios: Businesses that use the primary hybrid pattern typically have these business requirements: You want to run additional batch processes but there are no processing windows currently available on your on-premise systems. You have a big data project that collects data from the Internet and you want to data mine it (for example, business intelligence [BI] reporting) based on inputs from onpremise systems. You want to host a content management system in the cloud that contains a subset of your content management system on premise. You need a test a new application that runs on an operating system that runs in the cloud but not on premise. You want to share on-premise data via replication for users who are off premise. You want to provide additional services (like data analytics) outside of the core services that are based on on-premise systems but are not necessary for the core business. You want to take outsource-specific e-commerce functionality, such as payment services or billing, to an SaaS provider. Deciding Factors: Factors that determine whether you adopt this pattern are: 33

34 You want to limit your commitment to a full cloud deployment. Risk isolation: For instance, batch processes may fail but may not have a service impact in a daily context and that would have minimum impact on your core business and would not need much support from on-premise facilities. Investment minimization: You want to quickly gain initial cloud experience before launching the full cloud. Flexibility: This pattern allows you to expand you existing business with the least amount of commitment. Minimize the integration and process dependency. You don't need to partition your data. No need for real-time transactions. Implications: If you adopt this primary cloud pattern, key implications to consider are: The need to maintain one support structure for the cloud and one for on-premise systems that may contain redundancies or conflicts. There may be little if any on-premise monitoring for the cloud environment that may require you to provide your own monitoring. The work that is required for you to do the limited integration from your on-premise systems to the primary hybrid cloud services. Establishing a governance model (for example, change control, QoS) and standards with the cloud provider. Contract management needs to be set up with terms and conditions. Security of cloud solution will likely differ from on-premise solutions. Existing operational support capabilities might not stretch to cloud solutions which may require review and refine current support structure. Establishing metrics to verify and audit the services the cloud provider offers. User education and training may be required to cover the extended capability. Application migration and patch management support. The need for a disaster recovery plan to include the cloud extension. There may be limits in your ability to receive real-time integration with the primary hybrid cloud services. 2. Extended hybrid cloud (EHC) Extended hybrid clouds involve attaching one or more on-premise or hosted environments to a cloud environment. It consists of a mixed resource environment, combining both local and cloud resources to provide a cloud service; it relies on both environments to deliver true endto-end functionality. Extended hybrid clouds have a bi-directional reliance for service delivery since they rely on two separate sources to be active and running in order to deliver a service. Characteristics: With this pattern, there is significant integration with on-premise components and the components are more tightly coupled with bi-direction synchronization. This differentiates it from the primary hybrid pattern. The data and functionality is somewhat tightly coupled between the existing IT and the cloud environment to deliver the expected service; however, this is a 34

35 standalone cloud solution and there is no integration with other cloud solutions. All integration is with on-premise systems. Topology: Conceptually, the extended hybrid pattern can be represented as shown in Figure 3: Figure 3. Extended hybrid cloud topology There is much closer integration between the on-premise components on the left and the cloud components residing on the right than there is in the primary hybrid pattern. Logically it looks something like Figure 4: Figure 4. Extended hybrid cloud logical structure Motivating Factors: The reasons you might adopt this pattern are: Cloud components depend on on-premise data stores or vice versa. On-premise operational facilities are necessary for the operation of cloud components or vice versa. On-premise processing is required for cloud processing or vice versa. Real-time or near real-time processing and communication with the cloud components and data store is required. 35

36 Key User Scenarios: Businesses that use the extended hybrid pattern typically have these business requirements: Transactional processing where your data is created, updated, or stored in a synchronous way both in the cloud and on premise. Business process transactions that require a blend of both cloud processing and onpremise processing to complete. Transactions where some key components must reside on premise while other components reside in the cloud. On-premise transactions where some reporting capability (such as expert data analysis, etc.) requires additional data and processes from the cloud for the reports. Deciding Factors: Factors that help determine whether you should adopt this pattern are: Enable reuse of the existing on-premise IT investment. Allow the ability to partition the data based on privacy considerations. Offer real-time or near real-time BI or process integration. Extend existing business capability via the cloud components. Implications: If you adopt this cloud pattern, key implications to consider are: On-premise operational staff must understand the cloud components and vice versa (for example, downtime, failover, etc.). You must require better management of the service level agreement. Before moving the workload and data to the cloud, you need to: o Validate data privacy and compliance o Validate and integrate flow of the workload Moreover, this pattern requires tight collaboration between the service consumer and provider since this pattern is based on bi-directional reliance. This includes: A middleware framework to choreograph and route the communications between the on-premise and cloud services. Governance processes and standards must be established to support change control and life cycle management. Planning and design of the integration, testing, and support. Clear roles and responsibilities must be defined; some organization and cultural changes may be required. Contractual agreement with external cloud providers must also be defined and agreed upon by all parties. Security of cloud solution will likely align with on-premise solutions. Operational support capabilities likely extend to cloud solutions. 3.Full cloud (FC): A full cloud solution involves delivering a production-ready solution using only cloud services from one or more cloud providers. All functional aspects of a full cloud solution used to 36

37 deliver the client-visible services (things like business and operations support systems) reside completely within a single cloud hosting environment. Non-production-facing elements such as development and testing may use a hybrid cloud or a fully on-premise solution. Also, nonproduction elements do not change the definition of full cloud for production purposes. Characteristics: With this pattern, there is no integration with on-premises components and support structure. All integration occurs with a single cloud environment and managed by one data-centerhosting provider. Application integration happens within the cloud platform and leverages the common cloud framework and IaaS. Topology: Conceptually the full cloud pattern can be represented as in Figure 5: Figure 5. Full cloud topology There is no integration between the on-premise components on the left and the cloud components residing on the right any integration occurs only within the cloud. Logically, it looks something like Figure 6: Figure 6. Full cloud logical structure Motivating Factors: The reasons that you might adopt this pattern are: 37

38 You need to guarantee success by using the best of breed, industry-proven cloud solution. You don't have in-house cloud skill set with either hardware or software currently to set up the cloud environment and develop and manage the solution. Your time-to-market is short and requires using an existing cloud provider. This is a short-term or an experimental business initiative and you want to leverage an external cloud environment to minimize upfront investment. Your cost consideration; it may be cheaper by using an external cloud provider than set up on your own environment. You may deploy the solution in a private managed cloud or public cloud environment that depends largely on your security and privacy, flexibility, support, and accessibility consideration. You may want to establish yourself as a cloud service provider (CSP) and offer your solution to your existing or new customers. The cloud service will provide a new ROI using a pay-as-you-go (PAYG), metering, and charge-back cloud model, as well as expand your commercial presence within your industry area. Key User Scenarios: Businesses that use the full cloud pattern typically have these business requirements: A need for short-term solutions such as a marketing event. Solutions that depend on technology that is incompatible with your on-premise IT. A proof of technology, proof of concept, or pilot program site. A new line of business or service offering. Joint venture sponsored by independent parties. Business process transactions requiring both cloud and on-premise processing or data where all the components reside in the cloud. Deciding Factors: Factors that determine whether you adopt this pattern are: The need to eliminate on-premise IT support The flexibility and elasticity of a cloud environment A more cost-effective model like PAYG A short time-to-market A new business ROI Implications: If you adopt this full cloud pattern, key implications to consider are: You must establish your own service level agreement with the cloud service provider to insure it will meet your operational needs. You also need to validate that the cloud will meet your data privacy and compliance requirements and standards. You must establish governance processes and standards to support change control and life cycle management as well as legal compliance. Business supporting services must be established to support the new cloud model; for example, subscription, customer on-boarding process, and financial management. Having a self-service web portal to support provisioning, reporting, etc. 38

39 The hosting provider must be able to support disaster recovery and backup to protect the integrity of the data and applications. Must have adequate service support and patch management to guarantee the health of the environment. Require proven change/release management processes and more than one environment - for example, dev/test, QA/DR, and production before the new functionality goes live. Extended Full Cloud (EFC): The extended cloud scenario is a simple extension of the full cloud. A provider who chooses to use more than one cloud data center and to link or decouple services may extend its service portfolio across numerous infrastructures. Characteristics: With this pattern, there is integration with one or more cloud solutions in other cloud environments. There is no integration with on-premise resources. Topology: Conceptually the extended full cloud pattern can be represented as in Figure 7: Figure 7. Extended full cloud topology Integration occurs between components residing in different cloud environments. Logically, it looks something like Figure 8: 39

40 Figure 8. Extended full cloud logical structure Motivating Factors: The reasons that you might adopt this pattern are the same motivation as the full cloud pattern, but with the additional need to integrate with other clouds. Key User Scenarios: Organizations that use pattern typically have these requirements: To provide a variety of cloud services (SaaS, PaaS, IaaS, business processes) that gives users access to services from different cloud service providers. To route users to different cloud services based on their request. To extract data from one cloud service, transform it, and then load it into a different cloud service. Deciding Factors: Factors that help determine that you adopt this pattern are similar to the full cloud pattern, namely: The need to eliminate on-premise IT support The flexibility and elasticity of a cloud environment A more cost-effective model like PAYG A short time-to-market A new business ROI Additionally, you need to address the ability to bring together other cloud services. Implications: If you adopt this pattern, the implications are similar to those of the full cloud pattern. In addition, you must also understand the operational aspects (and other aspects) of working with multiple cloud environments and more than one provider to address such considerations as: Adoption of open and industry standards Integration framework that allow you to integrate and choreograph the services Authentication and authorization support such as a federated identity manager with single sign-on functionality Multi-tenancy management Self-service portal such as a customer and provider web portal Uniform and common service platforms 40