1 March 24, 2011 Cloud Computing Carlos Passi, Assistant Controller, Business Transformation, IBM Corp. Steve Ford, CFO, TradeCard
2 Agenda Using Cloud computing to deliver innovation and efficiency A new consumption and delivery model Case Studies TradeCard IBM Development Cloud Round Table 2
3 March 24, 2011 Using Cloud computing to deliver innovation and efficiency Carlos Passi Assistant Controller, Business Transformation, IBM Corp.
4 Cloud is a shift in the consumption and delivery of IT with the goal of simplifying to manage complexity more effectively. Cloud is: A new consumption and delivery model Cloud addresses: Cost reduction Scale Utilization Self-service IT agility, flexibility and delivery of value Cloud represents: The industrialization of delivery for IT supported services Cloud includes: Deployment models: public, private, hybrid Delivery models: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), Software as a Service (SaaS) and Business Process as a Service 4
5 The operational benefits most organizations are looking for in the cloud 1. Cost savings IT and line-of-business decision-makers demand at least 20% cost savings to move into the public cloud. 2. Flexibility After security, deployment flexibility is the biggest driver of cloud adoption worldwide. 3. Security Nearly 25% of developers cite security as the primary inhibitor to cloud adoption. 4. Ease of Use As use extends from IT to line-of-business leaders, and ultimately to every employee, simplicity becomes increasingly critical. 5. Scalability and Accessibility As your organization grows, you need the computing capacity to match. You also need access from anywhere in the world, at any time 5
6 There are three ways to acquire IT capabilities Software, hardware and services Pre-integrated systems and appliances Provided as services Cloud computing is a new delivery and consumption model or methodology spanning all 3 ways. 6
7 What is different about cloud computing? Without cloud computing With cloud computing Virtualized resources Automated service management Standardized services Location independent Rapid scalability Self-service Software Software Hardware Storage Hardware Storage Networking Software Storage Networking Hardware Networking Note: Elements of cloud computing taken from NIST, Gartner, Forrester and IDC cloud computing definitions 7
8 Cloud computing delivers IT and business benefits Virtualized Higher utilization Economy of scale benefits Lower capital expense Doing more with less 8 Standardized Automated Easier access Flexible pricing Reuse and share Easier to integrate Faster cycle times Lower operating expenses Optimized utilization Improved compliance Optimized security End user experience Higher quality services Breakthrough agility and reducing risk
9 Design a cloud computing deployment as part of the existing IT optimization strategy and roadmap Standardize and automate Consolidate Reduce infrastructure complexity Reduce staffing requirements Manage fewer things better Lower operational costs Virtualize Remove physical resource boundaries Increase hardware utilization Reduce hardware costs Simplify deployments Standardize services Reduce deployment cycles Enable scalability Flexible delivery 9
10 The impact of cloud computing is extending into driving business transformation Businessfocused An enabler of business transformation Creating new business models Enabling speed and innovation Reengineering business process Supporting new levels of collaboration Transformation IT-focused An evolution of information technology Changing the economics of IT Automating service delivery Radically exploiting standardization Rapidly deploying new capabilities Efficiencies 10
11 Adoption of cloud computing will be workload driven Workload characteristics determine standardization Test for Standardization Web infrastructure applications Collaborative infrastructure Development and test High Performance Computing... Examine for Risk Database Transaction processing ERP workloads Highly regulated workloads... Explore New Workloads High volume, low cost analytics Collaborative Business Networks Industry scale smart applications... 11
12 Workloads may be at different levels of readiness for cloud 12
13 There is a spectrum of deployment options for cloud computing Private IT capabilities are provided as a service, over an intranet, within the enterprise and behind the firewall Public IT activities / functions are provided as a service, over the Internet Enterprise data center Enterprise data center Enterprise A Enterprise B A Users B Private cloud Managed private cloud Third-party operated Hybrid Hosted private cloud Third-party hosted and operated Shared cloud services Internal and external service delivery methods are integrated Public cloud services Free Register Credit Card Click to contract 13
14 Public and Private Clouds are preferred for different workloads Top private workloads Top public workloads Data mining, text mining, or other analytics Security Data warehouses or data marts Business continuity and disaster recovery Test environment infrastructure Long-term data archiving/preservation Transactional databases Industry-specific applications ERP applications Audio/video/Web conferencing Service help desk Infrastructure for training and demonstration WAN capacity, VOIP Infrastructure Desktop Test environment infrastructure Storage Data center network capacity Server Database- and application-oriented workloads emerge as most appropriate Infrastructure workloads emerge as most appropriate Source: IBM Market Insights, Cloud Computing Research, July n=1,090 14
15 Cloud Deployment Economics Economic Drivers Standardization Automation Scale Utilization Major Factors that Impact each Driver What workloads are you running? To what scale are those workloads? How varied are the utilization patterns of the workloads? Greenfield or Existing applications? What are the software licensing Ts and Cs for virtual vs. physical? Are there internal policy / governance issues that will limit the benefits of cloud? Are there legal / regulatory constraints to leveraging shared infrastructure inside or outside the company? What level of hardware and network isolation are required for the workload? Cloud works? (y/n) If yes, choose deployment model ROI 15
16 Cloud Scale Economics: Simple Infrastructure Model Large fixed costs to set up the cloud translate to the need to have sizable scale to reach a point of inflection on cost Cost per VM Hour Enterprise Model (Third Party SW) Large Scale Cloud Service Provider Enterprise with 3 rd Party Hypervisor Large Scale Cloud Service Provider Scale is an important factor to determining whether the economics make sense for dedicated infrastructure - Point of inflection in cost for Enterprise is about 32,000 VMs Service providers have larger fixed costs for developing the service platform - Point of inflection is at about 150K VMs 2x cost reduction from 160K to 600K VMx , , , , , ,000 Number of VMs ( 1 vcpu 2GB memory & 160GB storage ) Note: Example for simple x86 cloud environments, 1vcpu, 2 GB Mem, 160 GB Ram, not applicable to all workloads, numbers for illustration only. Costs vary substantially depending on infrastructure needed to run specific workloads 16
17 Cloud Scale Economics: Simple Infrastructure Model Scale of the workload impacts decisions to deploy dedicated vs. procuring shared cloud models from a service provider. $0.50 Cost per VM Hour $0.45 $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 There are large upfront costs to setting up cloud infrastructures, which require scale Enterprise Model (Third Party SW) This point of indifference varies by workload $0.05 Cloud Service Provider Price $ ,000 10,000 15,000 20,000 25,000 30,000 Number of VMs ( 1 vcpu 2GB memory & 160GB storage ) Note: Example for simple x86 cloud environments, 1vcpu, 2 GB Mem, 160 GB Ram, not applicable to all workloads, numbers for illustration only. Costs vary substantially depending on infrastructure needed to run specific workloads 17
18 Workload Considerations for Migration Costs When you have to move work, there are other factors: standardization & migration costs. There is a tradeoff between how much you spend to move, vs. the return you get in run Work load Migrat ion Diffic ult y 5 6 Migration Costs Increase with Complexity 1. Standalone workloads - potential for migration to AIX/UNIX/Linux virtual machines via Bulk Move capability 4 2. Easier workloads also potential for bulk move capability. Complexity increases if multiple apps co-mingled across server ecosystems Medium complexity - due to size, security and risk. Managing connections to upstream & downstream applications is a must 4. Complex workloads multiple applications & servers comprise the workload. All must move together to reduce Test requirements. Lack of adherence to standards and versions elongates migration 5. Very Complex - dependent on ISV s investment in code running on that platform. ERP applications typically require upgrades and vendor mandated tools & migration methodology. Testing is long pole 6. Completely custom often requires remediation to resolve O/S specific calls, third-party product usage and availability on target O/S is a key factor 18
19 Security is among a top concern with cloud computing... People and identity Mitigate the risks associated with user access to corporate resources Data and information Understand, deploy and properly test controls for access to and usage of sensitive data Application and process Keep applications secure, protected from malicious or fraudulent use, and hardened against failure Network, server and end point Optimize service availability by mitigating risks to network components Physical infrastructure Provide actionable intelligence on the desired state of physical infrastructure security and make improvements 19
20 A systematic approach to cloud computing can ensure a successful implementation. Plan Understand strategic direction Analyze workloads Determine delivery model Define architecture Build the business case Build Integrate public cloud services Design and construct private clouds Quality assurance (test) Security and compliance Lifecycle management Deliver Pilot Deploy Consume Manage Optimize 20
21 In Summary In the end, scale and utilization dominate the economics you can only get these through high degrees of standardization and automation Greenfield deployments have a simpler economic equation because its just run costs that matter Existing workload migrations need to weigh cost/complexity of migration with run cost benefits of standardization and automation again, scale and utilization matter 21
22 Connect. Transact. Profit. TradeCard s Case Study
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31 March 24, 2011 Development & Test Cloud in IBM Carlos Passi Assistant Controller, Business Transformation, IBM Corp.
32 Agenda Why Focus on Dev/Test? The Story of Dev/Test The Dev/Test Experience IBM Results New Uses of Dev/Test Cloud Conclusion 32
33 Pain vs Gain - Characterization by Workload Higher Gain Legacy or highly complex services Small scale or high volume Analytics Analytics Desktop Desktop Dev/Test Dev/Test Workloads amenable to standardization Storage Storage Harder Delivery Self-contained applications/ w3cloud w3cloud SOA Security & Easier Business Resiliency Delivery High amount of data transfer Tradeoffs Long-running, stable demand High degree of workload customization/configuration Blue Significant application Blue Harmony Harmony redesign to conform to cloud architecture Notes Notes Environ Environ Focus Higher Gain Easy Delivery Rapid Adoption Long/Short Term Increased ROI Lower Gain 33
34 Our Development/Test Cloud enables lower cost hosting while providing increased service for internal development The Project Enable internal development teams to more quickly build and manage their development/test environments based on several OS and middleware templates available via the Cloud. Before Dev/test environments are provisioned manually via System Administrators; average 5 day turnaround Lower server utilization rates; 35% virtualization today After Development/Test Cloud Time and cost savings resulting from self-service enables the hosting support team to handle significant growth, new clients, and innovations in technology and services Reduced provisioning time from 5 days to 1 hour Increased flexibility to de-provision images when no longer needed, freeing up system resources Increased rate of virtualization and consolidation Reduced system admin labor spent building environments and deploying middleware products Increased standardization reducing defects and out of profile costs 34
35 Dev/Test Streamlined End Users Service Portal Service Request Catalog Automation Administration Costs Dev Test Availability Infrastructure Usage Metrics Automated Billing Increase Virtualized Infrastructure Billing Features: Usage Reports - Base OS/Web Image - Memory - CPU - Disk - MW Support Service Provisioning Engine Workflows Scripts Standardization Time to Market 35
36 IBM Results Controller (Supplier) Perspective. Expected ~60% adoption. Realized ~100% Custom configurations adopting standard offering Reduce non standard costs Benefits virtualization strategy Reduced capital expenditures Increased consolidation Decreased labor costs Improved admin to server ratio Other Focus areas on high of value use presented transformation Avoid red tape of server enablement Time to Value Decreased cost of development (Time and Materials) Usage based costing Rapid prototyping Finance (Consumer) Perspective 36
37 New Use for Dev/Test - Using the Dev/Test Cloud as part of our Generation Open (GenO)/Liquid program and TopCoder partnership The Project. GenO is a community-based collaboration model for business application development With TopCoder/Liquid, the community model is extended, permitting project teams to access subcontracted services to help with application design and development work through software competitions. The Dev/Test Cloud enables the GenO Liquid team to rapidly provision images on required platforms, with software needed to support coding competitions for TopCoder resources. 37 Benefits using the Development/Test Cloud Allocation based billing for cloud services aligns to TopCoder model for short term computing needs (+/- week). Avoid paying for full month of hosting (e.g., 75% savings from traditional hosting) Eliminate the cost of manual set up for each new images Increased hardware utilization and standardization An innovative new way to source and complete projects that uses competitions and free cycles to deliver value to projects With TopCoder/Liquid, professionals operate in an innovative peer-based model, and compete against others to deliver work on time that meets quality objectives.
38 Conclusion IBM has a tremendous optimization opportunity available to it by leveraging cloud Making good progress in an evolving, maturing space Exciting work with tremendous interest from many constituencies We can t go fast enough! 38
39 39 Business Transformation and Information Technology
40 Round Table Discussion 40
41 Carlos Passi Assistant Controller, Business Transformation IBM Corporation Steve Ford Chief Financial Officer TradeCard 41