MONETIZING THE CLOUD IN THE ENTERPRISE MARKET

Transcription

1 MONETIZING THE CLOUD IN THE ENTERPRISE MARKET An opportunity to protect and expand market share This EMC Perspective is addressed to newer IT service provider executives seeking ways to increase revenue, share, and profit in the enterprise customer market through cloud-based information technology services. We discuss: The enterprise market opportunity How cloud-based services fit enterprise needs Why ITSPs are well-positioned to meet those needs What cloud-based services hold high potential How customer-facing processes must change How to move from strategy to action Enterprise customers are looking to cloud computing for on-demand scalability for their computing infrastructure, cost-effective delivery of commodity services like and document management, and rapid access to new business applications and services. The new generation of IT Service Providers (ITSPs) are well positioned to deliver these cloudbased services to enterprises because they already own the components of enterprise computing; have experience managing extensive infrastructure with which to utilize; can differentiate themselves through service quality; and usually have existing trusted relationships with enterprise customers. IT Service Providers (SPs) can grow their share of the enterprise IT services spend through both new offerings and expanded pull-through of existing services and in the process protect their customer bases against intrusion by their competitors. They can also deepen customer relationships as their cloud services become regular and seamless extensions of an enterprise s IT environment. To capitalize on this opportunity, ITSPs must launch their cloud offerings expeditiously, and back them up with differentiating sales and service processes. E M C P E R S P E C T I V E

2 NECESSITY OR OPPORTUNITY? Gartner estimates that the cloud services market will grow to $150B by 2013, with much of this progressively being consumed by larger enterprises. 1 The market for enterprise-grade IT cloud services is wide-open, with many entities chasing the new opportunity: telecommunications carriers, outsourcers, hosting providers, newer pure-plays, and many more. This market has begun to move with amazing speed. Enterprise IT customers are now continually evaluating their portfolio, and looking for clear opportunities to move IT workloads to specialists who can offer lower costs, improved service levels, and new levels of flexibility. Enterprises want to take advantage of the cloud, both to lower the cost of commodity services, and to gain fast access to new software and services. They also want customizable solutions that fit into their already extensive computing environments, consultative sales that show them operational and financial opportunities, absolutely reliable service levels, and dedicated, high-touch support. In other words, they want from all of their IT services providers the kinds of capabilities that are being delivered internally using traditional approaches. Neither small and specialty competitors, nor utility services from Amazon or Google, can provide that complete package not against a large and established enterprise-focused SP that succeeds in putting the necessary pieces together. For example, one of the pieces is information systems backup and recovery services. Enterprises should be attracted to reliable cloudbased services that simultaneously lower their cost (because they use shared infrastructure) and improve business continuity (through flexible off-site backup). Enterprise-focused SPs have the expertise and scale to offer these services ones that traditional IT organizations can t match. One service leads to another, and the enterprise ITSP becomes a trusted full-portfolio provider over time. SPs including AT&T, Verizon, and BT are all offering variations of computing as a service or virtual data centers (servers, storage, and network capacity on demand), together with cloud-based web hosting and communication tools. Forrester Research finds most major SPs playing much the same game. 2 SPs are focusing on Infrastructure as a Service (IaaS) offerings, which is the sensible place to start. They can monetize their spare capacity as cloud services, and the delivery model is familiar. Their Software as a Service (SaaS) offerings are limited to communications solutions around collaboration and messaging, as well as a few business applications delivered in partnership with software vendors. Most SPs do not have Platform-as-a-Service (PaaS) offerings, even though they meet important enterprise needs for customizing mobile and other applications. Forrester concludes that the typical SP strategy for cloud services is understandable, but neither innovative nor likely to differentiate. We believe ITSPs can turn enterprise necessity into SP opportunity by offering more than the predictable minimum of cloud-based services. The keys to success include: Playing to unique ITSP strengths starting with trusted customer relationships and track records of flexible offerings and reliable service. Broadening the set of cloud services, while still targeting them for enterprise needs, and packaging them for industry verticals. 2

3 ENTER THE CLOUD Cloud computing is a game changer for technology services of all kinds. There has always been a fundamental tension in IT management: we want the computing environment to be robust and secure, but we also want it to be flexible and accessible. With cloud computing, it s now more possible to have it both ways. The cloud approach provides on-demand network access to a shared pool of configurable and scalable computing resources ranging from servers and storage, to information and applications, to productivity tools and user interfaces, to specialized business services. Technology assets and their capabilities are well-defined, modular, and connectable. Interface methods are standardized and published. Virtualization enables physical devices to be efficiently and securely shared, and heterogeneous technologies to work together. All of these resources can be managed as an efficient and flexible pool shared (as authorized) across the business, its customers, and its partners. It is important to note that these resources are also consumed differently as understandable business services that are accessed on-demand and often via self-service through a standard browser interface. Businesses enjoy more transparency into the services they consume, and can often pay according to actual usage. The cloud approach enables better performance on multiple fronts simultaneously: cost, manageability, information access, new capability deployment, coordination and collaboration, business continuity and security, and business innovation and growth. The consumer of cloud services can enjoy lower cost thanks to scale economies and faster access to a greater range of services. Those same benefits of cost, speed, and coverage can also be leveraged by the provider of cloud-based services to facilitate faster deployment of new offerings, and to provision and support them more cost effectively with the help of customer self-service. Concentrating on services that can be differentiated with focused IT capabilities, and that can drive increased usage of supporting infrastructure. Tapping into the SaaS revenue stream through partnerships with selected software vendors, and by offering turnkey environments IaaS, PaaS, and business software that enable enterprises to launch major applications quickly. Deploying selected PaaS offerings that enable enterprises to customize the functionality and management of their cloud services, and that provide enterprises with easy-to-use computing environments for business innovation. Adjusting sales, provisioning, support, administrative, and partner relationship processes to serve the enterprise market in new ways. For an enterprise-focused ITSP, the destination should be familiar. Cloud is the means of provisioning a comprehensive range of technology-based services with more efficiency and discipline than enterprise IT organizations can achieve on their own. HOW CLOUD-BASED SERVICES FIT THE ENTERPRISE Some enterprises have outsourced their IT operations and management to large technology services vendors. Such enterprises may be unlikely candidates for most additional cloud-based services because their outsourcers are entrenched and perhaps offering cloud services of their own. The exception may be some of the self-contained SP offerings discussed later. The majority of enterprises, however, choose to work with multiple vendors, select best-ofbreed technologies and applications, and actively manage the structure and evolution of their IT capabilities. They may outsource significant segments of IT, including telecommunications to SPs. However, they want to maintain flexibility, usually because business conditions change fast, and business flexibility and often strategy depend on IT capabilities and responsiveness. Large enterprises have extensive technology infrastructure, extensive sets of legacy systems, and pervasive business reliance on IT. So whenever they evaluate new services, they seek three basic, even indispensable, things: Reliable and Cost-Effective Capability Enterprises look to outside services for the functionality they need but cannot easily or cost-effectively develop or implement themselves. In addition, they are often willing to outsource existing activities to service providers who can perform them better and/or at lower cost. In both cases, the service must operate at the scale and performance expectations of the enterprise. Connectability The new service has to fit and work with the infrastructure in place, with minimum disruption. Ideally, the interfaces are few and standard, the bandwidth available, and the security methods sound. Enterprises want to avoid the initial and ongoing cost of integrating less-than-compatible technologies. Control To ensure reliable business performance, enterprises want much the same visibility into, and management over, outside services as they have in house. Specific yet flexible service level agreements provide a base, but the enterprise s IT managers also need transparency into the performance of the service (including business continuity) and control over its consumption. Cloud-based services meet these basic needs and meet them better than more traditional and isolated service offerings ever could. Scalable computing resources and easy access to new software deliver cost-effective capability. Standard interfaces and network capacity on demand facilitate connectability. Transparency and self-service enable management control. 3

4 ADDRESSING CHALLENGES WITH CLOUD-BASED SERVICES Large enterprises face a common challenge for many a dilemma in deploying IT. They need to enable the business to operate efficiently and to innovate rapidly, even though that entails using technology in very different ways. Enterprises have long struggled to innovate rapidly while operating efficiently because computing environments are built for operations more than innovation, and innovations disrupt the legacy environment. In the ideal scenario: The business has a technology environment for rapid experimentation and piloting, including the ability to draw upon existing information, applications, and infrastructure (without disrupting any of them), as well as the ability to tap into the capabilities of business partners and other outside resources via the Internet. For innovations that prove valuable, the business has the ability to scale them up rapidly and integrate them as needed into the rest of the computing environment (again with minimal disruption to the latter). Even though it is creating and integrating innovations continuously, the business controls its IT costs and cost structures, and continually improves the performance-for-price of its technology environment. Cloud-based services change the game and make it easier to innovate and operate together. A business innovation can incubate in a cloud-based platform, scale up when successful, and connect with the enterprise computing infrastructure through standard interfaces. In addition, the legacy infrastructure can tap cloud services for additional cost-effective capacity as needed, as well as leverage the favorable economics of the cloud day-in and day-out. WHY ITSPS HAVE AN ADVANTAGE Who can be the enterprise s gateway to the selective and secure consumption of cloud services? The best candidate is the SP who can demonstrate unique skills and processes that differentiate from commodity approaches. The SP who manages that differentiation enjoys significant advantages when it comes to expanding the cloud services that move through it: Most IT workloads are variable and difficult to forecast with any accuracy. ITSPs that provide flexible consumption options relieve IT organizations of the need to accurately forecast and size infrastructure. Traditional IT organizations are frequently challenged to react quickly to fast-moving business requirements such as new applications, new workloads, etc. Enterprise ITSPs can deliver the agility that many businesses crave. Enterprise ITSPs can afford to invest in important skills and specializations that are either difficult or expensive for all but the very largest enterprises (e.g., advanced security and GRC, business continuity, deep application expertise, etc.). Larger ITSPs that cover multiple geographies provide a compelling option for businesses that are expanding global operations versus building more data centers. Use of enterprise ITSPs enable progressive IT groups to focus more on solving business problems and creating new value versus building and maintaining bread-and-butter requirements. Some competitors in the cloud services market, particularly Google and Amazon, have extreme scale economies, but their offerings are generic and their support capabilities limited. Other specialized providers cannot offer comprehensive sets of services (though some may make good partners). Only the established SP enjoys the combination of trusted relationships, technology foundation, and service capability. 4

5 THE EXPANDED SERVICE STACK Most enterprise ITSPs start by combing computing, storage, and automated infrastructure management services, along with other disciplines, to offer a more complete enterprisegrade IaaS offering. Incorporating integrated tools for customizing, developing, and managing applications and services creates PaaS. Offering a variety of mainly third-party business applications and collaboration and productivity tools expands the SaaS layer. TOMORROW S SERVICE STACK TODAY S SERVICE STACK Selected Applications Services Managed VPN, Security Services Selected Applications Services Anti-virus, Anti-spam, Security Services Ports and Pipes Private Line, Frame Relay, ATM, Voice Software as a Service (SaaS) Business Applications and Productivity Tools Platform as a Service (PaaS) Applications Development and Authoring Platforms Infrastructure as a Service (IaaS) Compute, Storage, and Networking GLOBAL-SCALE TECHNOLOGY A global telecommunications SP is launching a storage-on-demand service that provides enterprise customers with control over the storage, distribution, and retrieval of their data anytime, anywhere, using any Web-enabled device. The backbone of the service is the EMC Atmos platform. This solution provides optimized multi-tenant cloud storage capabilities to customers of all sizes who need to move and manage large amounts of information cost-effectively supported by reliable service levels, data protection, secure access, and centralized policy-based information management. The platform also enables customers to move, or federate, data from on-premise (or internal) to offpremise (or external) clouds. Federation provides the cost and operational efficiencies of a cloud, while enabling customers to maintain control over what data resides where, and how information is distributed and handled globally. WHAT CLOUD SERVICES HOLD THE MOST POTENTIAL AS SP OFFERINGS? Infrastructure services provide the base. They are close cousins of the network services already provisioned and include support and administration. Infrastructure monitoring and management, as well as business continuity services, can be built into all infrastructure offerings. Business continuity can also be a standalone service for enterprises that want to leverage the cloud in terms of both cost and location control for systems backup and recovery. Servers, storage, and infrastructure management may be commodity services, but they drive additional network volume. In addition, there is opportunity for differentiation related to the ease-of-use of the web portal and infrastructure management tools provided to customers. The challenge for SPs is to build out robust cloud infrastructure, including those automated management tools. Platform services may prove to be the hidden opportunity because they get enterprise customers working with the SP in new ways. Three targeted platform services may appeal to enterprise customers: Tools for customizing mobile business systems can range from basic business applications able to run on today s mobile devices, to specialized applications and devices that transmit RFID and other sensor data. A new wave of productivity is being unleashed as enterprises learn to take advantage of more complete and instantaneous communication with the field. Cloud-in-a-box is a preconfigured bundle of server, storage, browser interface, and management software that serves as the starting point for any IT-based business experiment or pilot. This starter environment can then scale up with a successful business innovation, if it makes sense to continue running it in the cloud. Enterprise customers experience this cloud service as a natural extension of their own computing environments. 5 Tools can be offered for customizing and managing business applications, collaboration environments, and other SaaS offerings, including infrastructure management. The

6 platform service is part of the value-added bundle that makes it attractive for enterprises to run selected applications in the cloud. CONFIGURING A ROBUST CLOUD Cloud functionality comes about by deploying a set of sophisticated virtualization, storage, security, and infrastructure automation technologies. Working together, they implement six foundational delivery principles: 1.Secure Separation ensures the physical or logical separation of basic services such as servers and storage in use by customers or tenants. 2.Service Assurance automates the provisioning of services and enables reliable performance to tunable service level agreements. 3.Service Provider in Control supports the management of the cloud s operations for the SP, including integration of provisioning, support, billing, and reporting systems. 4.Tenant in Control supports the customer s management of on-demand services, access to support, and transparency into utilization and billing. 5.Security and Compliance employs identity and access management, encryption, and data loss prevention, enterprise key management, and other security methods to protect the tenants cloud environments. 6.Data Protection employs backup, recovery, replication, and data redundancy methods to ensure the tenants business continuity. The first four principles enable multitenancy, the flexible yet secure sharing of technology resources in a cloud. The last two focus directly on the protection of the data and applications hosted there for customers. Software services are projected as the fastest-growing segment of cloud services, and the revenues naturally accrue most directly to the software providers. The SP gains revenue from the increased use of network services from cloud-based systems. Opportunities to increase share of the revenue pie reside primarily in communication-centric services and in partnerships with software providers. SPs should offer a complete suite of , messaging, conferencing, collaboration, and social network software all network-based services that enterprises may prefer to run in the cloud for cost and manageability reasons. In partnering with software providers (for example, BT works with salesforce.com, NetSuite, and others), the SP s role is to make it easier and more effective for enterprises to run selected applications in the cloud. The SP can provide reliable and secure infrastructure for the applications to run on; PaaS services for managing and customizing the applications (including mobility); perhaps the front-line support service; and methods for the easy migration of applications and data to the cloud along with verification of their performance there. The software provider and SP team up to give the enterprise customer a turnkey approach for running applications in the cloud, and they share the revenue pie. In selecting business applications and partners, the SP may operate on two fronts. For the sake of coverage, it may opt to build a base of common, general-purpose business software, but focus on applications and software bundles for targeted industry verticals. Especially attractive today are information- and communications-intensive industries, such as healthcare and financial services, that are in flux and in need of new applications and infrastructure in a hurry. Here are two additional possibilities: The SP operates an applications mall a marketplace portal where customers can discover, evaluate, order, and provision software from certified SaaS providers. A mall is a convenient means of meeting the diverse software needs of small and mid-sized business customers. Larger businesses can shop around as well, and experiment with new software they may find valuable. Analytics-in-a-box is a bundle of analytics, information management, and collaboration software that serves as the rapid development environment for business analytics applications. This may prove to be a very useful cloud-based adjunct to the IT environment of many enterprises trying to make better use of analytics for a variety of business processes and decision making. ENHANCING CUSTOMER-FACING BUSINESS PROCESSES Expanding the IT services offerings for enterprise customers entails changes ideally, differentiating enhancements to basic business processes including sales, provisioning, support, and administration. The sales process may prove to be the most challenging. To guide customer adoption of a new range of services requires deeper knowledge of the customer s business, strategic initiatives, and who s who in the organization. It also involves knowing the customer s information systems, technology in the infrastructure, and IT management methods, as well as how the customer uses and seeks to leverage IT. Beyond knowing them well, enterprise customers also expect their major solutions providers to: Customize approaches to business needs through fast, efficient, flexible, and scalable delivery capabilities. 6 Demonstrate business experience and creativity, and be proactive in anticipating customer needs and opportunities.

7 Educate them on emerging technologies and applications that reduce costs or improve business performance. Interface with them under the guidance of a seasoned, focal-point sales executive who can view their business holistically and take decisions and actions quickly. For the more specialized SP sales force, that has perhaps been focusing more on product push than customer fit, this more comprehensive and consultative sales process entails a shift in mindset, as is depicted in the following diagram: From: Product focus Specialized expertise Technological know-how Network-centric Risk avoidance To: Solution focus Innovation expertise Customer know-how Marketing-oriented Risk management In contrast to sales, other processes will be enhanced largely through automation: Provisioning Customers should be able to access cloud services on demand via a selfservice portal that also provides them with the information for monitoring and managing consumption of those services. Customers should have the option to control business continuity parameters, including how data is handled and replicated, and how backup and recovery functions. Provisioning must also incorporate fast and reliable methods for migrating data and applications to the cloud. Support Customer support should be a differentiator for the SP provided it can handle the mix of enterprise customer needs (which can vary dramatically by location) and thus optimize the customer experience. Expect the mix to evolve as customers grow accustomed to doing more provisioning and support via self-service, and yet will call upon direct support representatives as needed. This flexible support model must, of course, operate in the context of service level agreements. Enterprise customer adoption of cloud services may be driven largely by cost, but service still makes or breaks the relationship. Billing Administrative processes, starting with billing, also need great flexibility. This includes direct billing that fits the enterprise customer s geography, financial structure, and other preferences, together with a variety of retainer and pay-by-use payment options. Partnering Especially in working with SaaS providers, partner management processes grow in importance. These include methods for information exchange, revenue sharing, mutual certification, protection of intellectual property, and joint marketing and sales. If responsibility for customer support is shared, those procedures must be airtight. The SP should think in terms of providing excellent service and experience not only to customers, but to its expanding ecosystem of SaaS and technology partners. For the SP, adjustments to these four process areas should be variations on a theme, because parallel (but simpler) versions of these processes are in place for network services. However, all must be revisited with the expanded services set and the enterprise customer in mind. The revised processes will be more automated, more customer-controlled, and more variable in execution. The key to success will be in keeping the variety manageable while keeping customers happy. 7

8 STRATEGY TO ACTION Does an SP have the market opportunity and capability to monetize cloud services for enterprise customers? The answer comes from a strategic assessment of marketplace factors, new business requirements, and realistic gap analysis. What is the desired future state? What are the business goals? What is the current state? What capabilities are on hand to move forward? What are the specific gaps, and how can they be filled incrementally, coherently, and in time to meet the goals? Keep in mind the opportunities for both new revenue from new services and additional pull-through revenue for current network services. TARGETING INDUSTRY VERTICALS Start with an analysis of the SP s customer base. In what industries are the SP s market presence, track record, and customer relationships strong? Which of those industries are information and technology intensive, in transition, or in need of new business capabilities or technology resources on demand? For each targeted industry, the SP should develop scenarios, or otherwise tell the story about how cloud services would fit its business performance, business change, information management, applications, and infrastructure needs. For example, the healthcare provider industry today needs: Secure and scalable storage and computing resources to handle the onslaught of data volume including that associated with implementing privacyprotected electronic health records. Scalable infrastructure for physician networks and collaboration. Scalable networks for participating in regional health information exchanges and implementing home health and other distributed medical applications (which increasingly call for location awareness and remote sensors). Platforms for the rapid and iterative development and deployment of medical informatics and other analytical applications as an institution pursues the twin imperatives of improving quality of care and reducing costs. Each of these industry challenges can be met with the help of cloud services that supplement and integrate with the healthcare provider s IT environment. Strategy becomes tangible in the form of a go-to-market playbook that lays out measurable objectives, the major components of a revised business model, and an implementation plan. The playbook s goal is to describe a realistic and innovative new operating model for the enterprise market. However, it s not designed to specify that model in complete or locked-in detail. As with any business initiative of broad scope and high business importance, implementation involves experiments, pilots, and learning as you go. A playbook contains some alternative plays and, ideally, anticipation of the conditions that may trigger pursuing an alternative. Implementation then puts the new pieces in place, such as process changes, technology and automation, and staff training all under the guidance of a clear governance and management structure. It also includes the key activities for tracking progress and performance, adjusting the playbook as needed, and capturing what is learned along the way. Strategy Playbook Execution 1. Marketing sizing and growth opportunities 2. Segmentation and industry vertical targeting 3. Customer needs and buying behavior 4. Competition and threat assessment 5. Customer experience analysis 6. Business model requirements 7. Sales/support capabilities assessment 8. Operational gaps assessment 9. Pro-forma financials and investment requirements 1. Segment-level strategy, goals, and objectives 2. Target customer profiles 3. Positioning and messaging 4. Product/service offerings and pricing 5. Sales and distribution strategy 6. Operational processes and procedures 7. Systems and tools requirements 8. Performance and knowledge management 9. Implementation plan, key milestones, and success factors 1. Establish program governance and management 2. Develop and rollout sales/support training 3. Operationalize process improvements 4. Develop and deploy technology, systems, and tools automation 5. Track progress and performance, revise the playbook as needed 6. Capture and reuse knowledge and key learnings In formulating strategy and developing a playbook, be sure to combine perspectives. Begin with an outside-in view. What will the desired future state look like to enterprise customers, and how will it serve their businesses? Then take the inside-out view. What new underlying people skills and technology capabilities will be needed to deliver the new cloud services? Finally, pay due attention to the who of implementation (many playbooks concentrate too exclusively on the what ). Who needs to be on board and supporting the cloud services 8

9 initiative? Who needs to be directly involved to make it succeed? Who needs to provide help and supplemental expertise? In all cases, the necessary whos are not only within the SP but also in its ecosystem of strategic partners. The inside perspective should also include anticipation about how the SP itself can capitalize on its cloud infrastructure and services. Cloud services are not only the best way to serve the enterprise market, but also ideally suited to execute flexible processes, improve information flow and collaboration, and contain costs within the SP s own operations. An initial, and potentially large, customer of cloud-based services should be the SP itself as it grows its capabilities to serve the enterprise market. In the process, it field tests services to be provisioned to customers. Cloud implementation creates a new platform for delivering services inside as well as out. It offers a way to improve process performance, cost structure, and flexibility in house, while increasing revenue and share, and deepening relationships among enterprise customers. What does success look like? Cloud services become natural, seamlessly incorporated, valueadded extensions of an enterprise s computing and business environment. The enterprise customer has reliable, cost-effective business and technological capability on demand. The SP deepens customer relationships and earns far more than its default network-based share of revenue in the growing cloud services market. EMC AFTERWORD A number of leading Communication Service Providers look to EMC and its product families VMware, RSA, and Mozy to deliver cloud services to their customers today. EMC hardware and software provides a key set of SP-ready features including integrated and highly scalable compute, storage, and network platforms (VCE), scale out storage (Atmos), and software to provide policy management, multi-tenancy allocation and control, self-service management consoles, and security features. EMC is also working with SPs across the globe, via EMC Consulting, to provide services that enable the development of cloud monetization strategies, and the plans that drive them to execution. EMC Consulting s communication industry experts are engaging with our SP clients to develop business strategies, technology blueprints, operational processes and tools, and organizational models to enable the delivery of cloud based services. EMC Consulting is also working with clients to segment their business markets and identify the appropriate cloud service/product mix. The goals are to design new processes and platforms for the discovery and automated provisioning of SaaS, and to develop new customer care and ISV partner relationship management models and processes. CONTACT US To learn more about how EMC products, services, and solutions can help solve your business and IT challenges, contact your local representative or authorized reseller or visit us at 1 Dataquest Insight: How and Why Telecommunications Carriers Must Pursue Cloud Services Opportunities Now, Alex Winogradoff, September 24, Forrester Research, Market Overview Of Cloud IT Services From Major Telcos, Paul Roehrig, Ph.D., September 1, EMC 2, EMC, Atmos, RSA, the EMC logo, and the RSA logo are registered trademarks or trademarks of EMC Corporation in the United States and other countries. Mozy is a trademark of Decho Corporation, an EMC company. VMware, is a registered trademark of VMware, Inc. in the United States and/or other jurisdictions. All other trademarks used herein are the property of their respective owners. Copyright 2011 EMC Corporation. All rights reserved. Published in the USA. 03/11 EMC Perspective H EMC Corporation Hopkinton, Massachusetts In North America