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1 Research in Action White Paper: The Hidden Costs of Managing Applications in the Cloud SPONSORED BY: The Hidden Costs of Managing Applications in the Cloud 1

2 The Hidden Costs of Managing Applications in the Cloud Executive Summary In December 2012, Compuware commissioned Research in Action, to conduct a global, independent survey of senior IT professionals attitudes and concerns relating to cloud computing. The survey included 468 IT decision makers from organizations across a range of industries in the Americas, Europe, and Asia. The results revealed that cloud computing will be the highest priority area for investment over the coming years, and that failure to properly manage the performance of cloud-based applications results in increased costs and prevents companies from realizing the full potential benefits of cloud computing. The study shows that companies are increasingly relying on the cloud to deliver their business-critical applications and the supporting infrastructure that lies at the core of their business operations. While it has been established that cloud computing delivers rich services to organizations on a scalable, pay-as-you-go basis from anywhere, at any time, the complexity of these services has increased dramatically, over time. This presents an increased risk to companies that leverage these services as their business-critical applications become more dependent on the cloud. Since many of these services, such as e-commerce platforms, are externally focused, any disruption becomes very visible to customers. These disruptions can therefore cause customer churn, reputational damage, and ultimately loss of revenue. Bearing this in mind, companies need to focus on ensuring that Service Level Agreements (SLAs) with cloud providers are strictly adhered to, and that when problems occur they are quickly resolved. However, many companies fail to put the tools in place to ensure they are monitoring performance across their cloud environments, let alone proactively preventing issues before they occur. As a result, they are unable to identify the cause of issues or manage their contracts, leading to a degraded quality of service and poor management visibility. Ultimately, the findings of this study revealed that, despite the growing use of cloud and its importance to the enterprise, there are justifiable concerns around balancing the cost and agility benefits of cloud computing with the challenges of delivering great application performance and end-user experiences in public, private, and hybrid cloud environments. In this whitepaper, we have compiled the complete results of the survey, along with a comprehensive analysis of the data, and an overview of potential solutions. Key highlights from this study include: Full cloud integration (public, hybrid, private) will be the top priority for a quarter of companies over the next five years 79% of companies are concerned about the hidden costs of cloud services for their applications 64% of senior IT professionals cite poor end-user experience as their biggest management concern with cloud computing 81% of CIOs are either already using cloud-based ecommerce platforms or are planning to within the next 12 months 73% of companies are still using outdated methods to track and manage application performance The Hidden Costs of Managing Applications in the Cloud 2

3 Investment priorities To understand the significance of cloud computing in terms of risk and cost, it is critical to understand the investments being made. The research shows that cloud infrastructure, including public, hybrid, and private, is the number one area of investment in 2013: with renegotiating outsourcing contracts in second place; and Big Data and analytics coming in third (chart 1). Within the cloud space, almost a quarter of companies will invest for test and backup purposes in 2013 (chart 2); with implementation of private clouds showing as the second biggest area of investment, followed by public and hybrid cloud (chart 2). Looking out over the next 12 months, however, we see a much more dramatic pattern. When participants were required to pick a single top area of investment over the time period, nearly a quarter chose cloud for test and backup as their top investment. Furthermore, when looking at cloud investments as a whole (including private and hybrid cloud initiatives and SAP in the cloud), a whopping 65.6% of respondents indicated cloud as a top investment area for 2013 (Chart 2). When taking a longer-term view covering the next five years, we can see that cloud computing is still topping the agenda as the number one area of investment, followed by mobile IT, then business analytics, big data and in-memory computing (chart 3). From a cloud trends perspective, almost a quarter of respondents identified full cloud integration (public, hybrid, private) as the most important trend in cloud computing over the coming five years, followed by end-to-end cloud SLAs and QoS and cloud service brokers (chart 4). Looking at the statistics, it is clear that cloud adoption is now mainstream, and companies understand the benefits of agility, flexibility, and time-to-value that cloud services can deliver. The results show that cloud is a highly significant area of IT spending, and that the range of services that are being delivered through the cloud is expanding. Companies are now moving towards more sophisticated cloud environments, with a mixture of private, public, and hybrid technologies and using them to deliver more business-critical functions. Chart 1: Cloud infrastructure number one investment area for IT in % of companies are planning to invest in cloud infrastructure in 2013; 9.6% in renegotiating outsourcing contracts; 9.2% in Big Data and analytics. Chart 3: Cloud computing number one investment area over next 5 years. 16.5% of companies place cloud computing at the top of the investment agenda for the next five years, Mobile IT 13.5%, business analytics, big data and in-memory 11.3%. Chart 2: Cloud for test and backup is number one investment in cloud computing over the next 12 months. 24.1% of companies plan to invest in cloud for test and backup; 17.1% for private cloud; 15% public and hybrid cloud. Chart 4: Full cloud integration key trend in the next 5 years. Full cloud integration most important trend in cloud computing according to 24.8% of respondents, end-to-end cloud SLAs and QoS 13.5%, cloud service brokers 12.8%. The Hidden Costs of Managing Applications in the Cloud 3

4 Bearing this in mind, businesses need to ensure they are making the most of their investments, highlighting the importance of holding providers accountable for Service Level Agreements (SLAs). This is evidenced by the fact that end-to-end cloud SLAs and QoS form the second biggest trend in cloud to look out for over the coming five years. Complexity in the Cloud Following IT investment, the research highlighted the specific cloud services that are currently in use or planned for use over the coming years. It is evident that ecommerce is presently the most widely used cloud service, with almost four fifths of companies (78%) already using it (chart 5). Half of companies are also using cloud services (47%) intend to use hybrid cloud services over the next 24 months; added to that, over a third (34%) intend to use ad services,such as Google Ad Word), and public IaaS (chart 6). The research shows that with the integration of public, hybrid, and private clouds, managing and monitoring the IT environment is a growing challenge. No longer is the IT department in sole control of the services being delivered to end users, since a variety of cloud services and providers are being used to deliver end user applications. This in turn is presenting a management challenge: how do you monitor and manage IT services that you no longer directly deliver or have visibility over? With the range of different cloud services being used within organizations increasing, so will the complexity and management challenges involved. This complexity not only increases the risk of cloud service failure, by having more links in the application delivery chain, but it can also make troubleshooting problems much more difficult. Concerns Relating to Cloud Computing As investment in cloud increases, the stakes are raised for cloud to deliver on all its promised cost savings. However, the research shows that the majority of companies (79%) are concerned that there may be hidden costs associated with cloud services (chart 7). Chart 5: ecommerce most commonly deployed cloud service in today s enterprises. 78% of companies use cloud services for ecommerce, 50% for public cloud SaaS, and 50% for social media. such as public SaaS and social media -- organizations that are regularly integrating with third-party solutions. When looking at the next two years, the complexity grows as more companies plan to take on evermore sophisticated services. Almost half of all respondents Chart 7: 79% of companies are concerned about the hidden costs of cloud services for their applications Chart 6: Widespread uptake in hybrid cloud services planned over next 2 years. 47% intend to use hybrid cloud services over the next 2 years, 34% intend to use ad services, and 34% intend to use public IaaS. In particular, companies are concerned about the impact poor performance in cloud services can have on their revenues. When asked about the top three concerns relating to management of cloud services, poor end-user experience was cited by 64.3% of respondents as the most significant risk. The most common concern was poor experience due to performance bottlenecks, followed by the impact of poor performance on brand reputation and/or customer loyalty, and loss of revenue due to availability, performance, or troubleshooting cloud services (Chart 8). The Hidden Costs of Managing Applications in the Cloud 4

5 As previously outlined, the cloud is now recognized as a key enabler for business. However, CIOs are right to carefully consider the impact cloud and third-party services can have on the end-user experience and the potential associated costs. Hidden costs can include direct loss of revenue, damage to reputation, weakened customer relationships, and reduced productivity. As such, companies need to maintain focus on ensuring SLAs are met and Quality of Service is maintained. It is therefore not surprising that performance issues dominate the top CIO concerns in relation to using cloud services. Yet, the research clearly demonstrates that despite the recognition of performance as the top concern, most companies are failing to put measures in place to properly monitor and manage problems and prevent them from occurring. Chart 8: Performance issues top concern for management of Cloud services. 64% of companies cited poor end-user experience due to performance bottlenecks as one of their top 3 management concerns in relation to cloud services; 51% cited the impact that poor performance can have on brand reputation, and 44% loss of revenue due to availability, performance, and troubleshooting. However, despite the concern around performance and the focus on the end-user experience, many companies are not taking a proactive approach to managing the performance of their cloud applications. In fact, 73% of companies are still using outdated methods to track and manage application performance, relying on tactics such as availability/uptime or response time, rather than monitoring the enduser experience (chart 9). Moreover, the most common metric used to track application performance in the cloud is simple availability or uptime, rather than more granular end-user metrics such as response time, page rendering time, and user interactivity time. Conclusion This Research in Motion study of IT decision makers highlights the fact that while cloud is a great enabler, and investment is pouring in, many companies either fail to recognize the challenges related to cloud performance or to adequately safeguard the performance of complex, mission-critical services and applications. Both of these issues dominate the questions around respondents concerns about cloud services. With the introduction of ever-more sophisticated infrastructure, integrating hybrid, private, and public, as well as third party applications such as social media, ecommerce and ads, there is no doubt that cloud, and the IT environment overall, is growing in complexity. As such, the opportunities for performance issues are increased and resolution is complicated, as companies struggle to find the root cause of issues when they occur. Such issues have a direct impact on the business, increasing the overall operational costs of cloud services that may initially remain hidden. It is apparent that businesses recognize these risks, listing performance challenges in the top three concerns in relation to cloud services above issues such as security. Despite this, most are failing to take a proactive approach to managing performance in cloud environments. Often, companies are responding reactively to problems that occur and then firefighting in the dark to solve these issues. Chart 9: Availability/Update still main metric used to track application performance in Cloud. 33.3% of respondents measure performance by availability/uptime; 23.7% measure response time; 18.2% track the end-user experience. All of these concerns are due to one simple fact: most traditional application performance monitoring tools simply don t work in cloud environments. The dynamic and physically remote characteristics of cloud-based applications require a new, smart, and automated approach for proactive monitoring that not only identifies end-user experience problems, but also accelerates a company s ability to find and fix those problems. Effectively monitoring and managing modern cloud-based applications and services requires a new approach designed to work in today s complex, hybrid, and dynamic environments. The Hidden Costs of Managing Applications in the Cloud 5

6 Companies should be looking to invest now in solutions that can ensure they are monitoring the end-user experience and proactively managing the performance of their cloud-dependent applications. To that end, a new generation of APM solutions has emerged that allows organizations to regain visibility and reclaim control. Cloud applications can be deployed faster, with fewer issues and no blind spots. Visibility into third-party services can be achieved seamlessly, across the entire application delivery chain. Additionally, it can be done in hours, not weeks or months like the old generation. Key characteristics of new generation APM for the cloud include: Application Centric Monitoring and Analysis Focus on enabling your operations team to understand what matters-- the performance and stability of your business applications. Modern APM solutions should be able to show you the source of performance and available challenges through the lens of your business transactions, with visibility across application and infrastructure performance to pinpoint issues. Smart Analytics Modern applications are complex. You should look for key capabilities like automatic multi-variant baselines and out-of-thebox dashboards for IT operations and business managers that can radically reduce the time to value and quickly show whether problems are internal or due to third-party cloud services. Integrated User Experience Management Modern APM should provide visibility to the end-user experience across the application delivery chain (including cloud services) with both proactive synthetic monitoring and reactive real user monitoring. Furthermore, your solution should be seamless across web, mobile web, and mobile native applications, enabling you to prioritize issues based on business impact or the number of users affected. Synthetic Testing Together With Transaction Tracing Ensuring third parties and cloud providers meet performance and availability SLAs is critical, and modern APM should provide the transactional detail and context necessary to resolve problems quickly. The ability to document specific issues in the context of a complete end-to-end transaction and share deep session data with service providers can clarify issues and accelerate MTTR. Fast Time to Value Manual set-up and configuration is both slow and error-prone. Modern APM solutions should be self-learning and autoadaptive for easy set-up and management of even the most dynamic, elastic cloud environments. Graphical Analysis Look for an APM solution that automatically builds a graphical representation of your application and its dependencies--including 3rd party cloud services, in real-time. Visualizing transaction flows Methodology Compuware commissioned Research in Action, an independent research and consulting company, to conduct a study looking at the impact of cloud computing. In December 2012, the independent research firm interviewed 468 senior IT professionals from large enterprises, across a range of industries in the Americas, Europe, and Asia. The firm spoke with 104 senior IT professionals in the U.S., 53 in Germany, 52 in the U.K., 51 in France, 51 in The Americas (rest), 51 in Asia Pacific, 42 in Europe (rest), 31 in Italy, and 33 in Benelux. Research In Action GmbH is a leading independent information and communications technology research and consulting company. The company provides both forward-looking as well as practical advice to enterprise as well as vendor clients. 2013, Research In Action GmbH reproduction prohibited. The Hidden Costs of Managing Applications in the Cloud 6

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