1 LANDesk White Paper Choose the Service Desk Delivery Model that Makes Sense Cloud, On-Premise, Hybrid
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3 Contents Introduction: No One Software Delivery Model Fits All... 4 Defining the Three Delivery Models... 4 Cloud Computing... 4 On-Premise... 4 A Hybrid Model of Cloud and On-Premise... 4 Benefits and Considerations of the Three Models... 5 Benefits of the Cloud Model... 5 Consider Long-Term Financial Requirements... 5 Consider Security and Availability Requirements... 6 Consider the Ability to Integrate with Other Tools in a Hybrid Model... 6 Benefits of the On-Premise Model Consider the Upfront Capital Investment and Higher Operating System Costs... 7 Consider Upgrades and Longer Development Cycles... 7 The Perpetual Model is Not Going Away... 7 Benefits of the Hybrid Model... 7 Conclusion
4 LANDesk White Paper Choose the Service-Desk Delivery Model that Makes Sense Introduction: No One Software Delivery Model Fits All Managing change in your IT operations infrastructure is compounded by the size, complexity and geographic dispersion of your environment, regulatory requirements and challenges from the competition. Astute organizations strive to implement best-practice IT Service Management (ITSM) to orchestrate the delivery of successful IT support to employees and customers while working to drive efficiency, reduce costs, manage risk, improve control and increase productivity. Having the right ITSM solutions in place and the software delivery mechanisms to employ them aid your efforts to streamline operations and maintenance tasks, automate and standardize processes, reduce errors and transition from a reactive environment to one that s more proactive and service oriented. Cloud computing continues to reshape today s enterprise landscape, and IT professionals are in the throes of defining how they provide support capabilities to end users. In an effort to assist organizations that are evaluating service desk solutions and delivery mechanisms, this white paper defines and discusses three service desk software delivery models 1) cloud computing, 2) traditional on-premise, and 3) a hybrid of the cloud and on-premise models and weighs in on the benefits and considerations of each. The main takeaway of this paper is that no one particular delivery mechanism is better or more valuable than another. In other words, how the software is delivered is not the primary differentiator. The key to making a wise business decision is having a thorough understanding of your organization s infrastructure and your current requirements in terms of technology and growth plans. Consider all the options carefully, balance the business, security and technical needs, and choose the service desk application and delivery model that best suit your requirements. And remember that since organizations don t stay static, your needs may evolve over time. You should have the flexibility to transition between delivery models. Defining the Three Delivery Models Cloud Computing Cloud computing is a model in which software and its associated data are hosted in the cloud and typically accessed by users via a Web browser. It has become a common delivery option for many business applications, including accounting, customer relationship management, sales force automation, enterprise resource planning, invoicing and human resource management and more recently IT Service Management (ITSM). Cloud computing frequently includes a software subscription component, known as Software as a Service (SaaS). In this model, organizations don t own the service desk software application; they pay a concurrent or fixed/named license fee on a periodic subscription basis for a term of typically three to five years. Should they decide to stay with the software, they would renegotiate for another term. From an infrastructure perspective, the service desk software vendor provisions or delivers a SaaS tool for its customers and handles all the bug fixes, patches and major upgrades, plus it monitors the tool for availability and performance, correcting any incidents. On-Premise The on-premise (also on-premises) software delivery approach refers to the traditional method of installing and running software at an organization s building or physical site, or on servers hosted by a managed service provider. As increasing numbers of solutions are developed for the cloud, on-premise software has sometimes come to be called traditional or old-style software. Nevertheless, it remains the preferred delivery model in industries such as banking, finance and defense that require the ability to supervise and secure locally owned or controlled data on the site. Purchasing service desk software for use on-premise usually follows the perpetual model where organizations buy the application, purchase fixed/named or concurrent licenses, install them on their own servers or pay someone to host the servers, and then pay a yearly support and maintenance fee. Such organizations can still be very large, distributed and Internetbased, but they own, install and manage the software application within the organization. A Hybrid Model of Cloud and On-Premise The hybrid approach to software delivery encompasses a combination of external cloud computing services and internal resources (either a private cloud or traditional infrastructure, operations and applications) in a coordinated fashion. Services, integration points and even data can be split between cloud and on-premise, creating synergy across the enterprise and enabling secure usage based on business priorities, the type of data, and the service or location. 4
5 LANDesk White Paper Choose the Service-Desk Delivery Model that Makes Sense Benefits and Considerations of the Three Models Benefits of the Cloud Model It s safe to say that SaaS tools accessed via the cloud computing model are growing in every market. As reported by Gartner analyst David M. Coyle, there has been a marked increase over the past three years in the number of Gartner client organizations purchasing IT service desk tools that use the cloud delivery model compared with the traditional, installed on-premise perpetual licensing model. 1 Some of the primary benefits in opting for a cloud delivery model include: A lower cost of IT operations, with no capital investment or costs for infrastructure or software maintenance; you purchase SaaS tools through the operating budget and not the capital budget A faster route to live provisioning and ease of managing multi-site service desks You subscribe to a service rather than take ownership of a license; a predictable pricing model means you pay a subscription fee for the software year after year, for as long as you want to use the software, providing control over ongoing management costs IT operations become the software vendor s responsibility Additional benefits of the cloud model include: Easy access for service desk staff from anywhere Managed backups and upgrades that deliver new functionality regularly SLA-guaranteed uptime and service credits Highly elastic model enables you to scale up or down or have variable traffic throughout the year Consider Long-Term Financial Requirements For some service desk software providers, their sole positioning and key differentiation is a cloud-only delivery message. It s virtually all they promote or talk about. When you take longterm financial requirements into account, a cloud-only approach and its associated SaaS subscription pricing can become more expensive than perpetual, on-premise pricing over a long period of time. Says Gartner Inc. s David Coyle: In Year 1, the cost of a perpetual model tool, with its large capital cost paid upfront, is typically two to three times the cost of a SaaS tool. However, in Years 2, 3, 4, etc. of using the software, the expense of SaaS tools catches up to the expense of the perpetual model tools. Although many dependency factors affect total cost of ownership, IT organizations start to see the total cost of ownership of a perpetual model tool equal that of a SaaS tool in Years 4 or 5 of the software purchase. Gartner finds that many IT organizations only evaluate the cost of the new IT service desk tool in Year 1 and, therefore, come to the flawed conclusion that SaaS is significantly less expensive than perpetual licensing. Alternatively, we find that many IT managers only plan their budgets one year in advance and often can t, or don t, want to see past the current year s budget. In IT organizations that lack the foresight and discipline of multiyear budgeting and long-term total-cost-ofownership calculations, we often find the argument that SaaS is cheaper to be a major driver for SaaS tools. We strongly recommend that clients evaluate the long-term total cost of ownership of SaaS versus a perpetual model tool when making their tool purchasing decisions. 2 An Accenture research report supports this view: The top reason organisations initiate cloud computing is to save money. Bargain prices on cloud services are a big part of their allure. Add the savings from eliminating the cost of servers, software licences, maintenance fees, data centre space, and the benefits of replacing a large up-front capital expense with a low, pay-for-use operating expense, and the financial appeal of cloud computing is obvious. To date, they are pursuing at least six ways to reduce IT costs by using clouds. A caveat is in order: not all organizations report that they are saving money as expected. In one study of software-asa-service users, only about half of the executives reported a positive return on investment from SaaS, while a quarter found the cost was greater than they had budgeted. And while many executives vouch for savings, others have expressed doubts. IT executives are concerned that the low cost of quickly accessing cloud services, and savings from avoiding up-front IT purchases, can be overwhelmed by the cost of increased usage. Pricing models for cloud computing, which sometimes require long-term contracts, can make the technology s vaunted flexibility financially impossible even if 1 David M. Coyle, SaaS Continues to Grow in the IT Service Desk Market, Gartner, Inc., 29 March 2011, p. 1 2 Ibid, p. 4 5
6 technically feasible. Clouds have great potential for savings, but the only way executives can know for sure that they will reduce costs is to conduct a rigorous cost analysis. 3 Consider Security and Availability Requirements Not all types of cloud computing raise the same privacy and confidentiality risks, but it s safe to say that any information stored in the cloud ultimately ends up on a physical or virtual machine owned by a particular organization or individual located in a specific country. That stored data may be subject to the laws of the country where the organization is headquartered or where the physical machine is located. This is where country-specific data laws such as the USA Patriot Act can come into play, for example. Originally enacted in 2001 and amended in 2005, the act includes provisions that allow the FBI access to any business record. Although a court order is necessary, the FBI s authority under this act extends to data records maintained by a US cloud provider. Organizations that operate in industries with strict legislation and compliance requirements should consider such issues as security and the handling, location and redundancy of data over the Internet when making a decision about how a software application is delivered. Also with a cloud computing model, service availability is out of your control. Since data upload and import times over the Internet are variable, you may want to consider on-premise or hybrid options if the application is business-critical. Consider the Ability to Integrate with Other Tools in a Hybrid Model Organizations requiring service desk functionality beyond the standard incident, problem and change management, and that include the ability to integrate with other IT service management tools, may need to look beyond cloud-only options to a hybrid model of cloud and on-premise. Proven service desk solutions that feature strong integration capabilities with on-premise applications and data sources and that don t require heavy coding capability are worth evaluating. Gartner, Inc. states: As is the case for purchasing on-premises solutions, Gartner advises organizations to evaluate service desk solutions based on their abilities to integrate with other IT service management (ITSM) tools that contributed to the larger IT service support strategy. Because SaaS solutions are packaged to natively integrate ITSM functions, it is important for organizations to consider their long-term requirements in an ITSM suite in terms of the suite s ability to address challenges specific to improving IT service support, and how those meeting those challenges align with business objectives. Gartner finds that many clients flock to SaaS without this evaluation, and the perception of SaaS (a flexible and easy-to-understand cost structure, absence of infrastructure costs and requirements) further exacerbates the tendency for organizations to make technology-driven decisions, as opposed to decisions based on current processes and capabilities. 4 Benefits of the On-Premise Model With the on-premise delivery model, the service desk application is installed and running within the organization or on servers hosted by a managed service provider in a private cloud. Here are some of the primary benefits in opting for this model: All aspects of the service desk software implementation, such as performance, availability and maintenance windows are under your control Full QA, staging and test development are under your control as well Complete database accessibility; you can reach raw data when required for reporting, do more things with the data, process it and report on it in various ways, and connect it to other systems for additional uses Information security is under the complete control of your own security policies Provides the benefits of a rich client starting point, enabling the phased adoption of ITIL processes You can potentially take advantage of a richer client interface as most cloud solutions have slight interface restrictions Integration with other services or data is easier Offers a potentially lower cost of ownership over time; the fixed cost of licenses are known over time and ownership is retained Consider the Upfront Capital Investment and Higher Operating System Costs An on-premise delivery model typically requires an upfront capital investment in software licenses once the contract is signed, along with an additional maintenance and support 3 Jeanne G. Harris and Allan E. Alter, Cloudrise: Rewards and Risks at the Dawn of Cloud Computing, November, 2010, pgs. 8 & 10 4 Jarod Greene & Jeffrey M. Brooks, IT Service Desk Software-as-a-Service Vendor Landscape, Gartner, Inc., 28 October 2011, p. 6 6
7 fee paid annually. It s also worth noting that new hardware for the service desk tool comes out of the capital budget, while the subscription fees of the SaaS model come out of the operating budget. In IT organizations where capital for new hardware and software purchases is hard to come by, the operating budget may be the only option available for purchasing new tools. You should also anticipate higher hardware and database operating system costs and the need to expand on-premise storage limits. Consider Upgrades and Longer Development Cycles The responsibility of software upgrades in the on-premise delivery model falls to the IT organization, which can consume time and resources. While the cost of licenses in this delivery model are known, most vendors that offer tools for this model typically have much longer development cycles compared with SaaS to release new functionality. Waiting on the vendor s timetable for an upgrade could lessen operational agility, and if you need to scale up you may need to buy more hardware and/or fund more administrators. The Perpetual Model is Not Going Away While the SaaS model continues to garner more media attention and hype, the perpetual model isn t going away. Gartner Inc. s David Coyle states: As strong as the growth in the SaaS model for the IT service desk has been and is predicted to be, it will not replace the traditional perpetual model. The flip side of our prediction that 50% of all new IT service desk tool purchases will utilize the SaaS model by 2015 is that the other 50% will use the perpetual model. The potential advantages of the perpetual model over SaaS including better security, compliance to data privacy laws, better manageability, lower long-term total cost of ownership, increased availability and stronger integration across a large suite of IT service management tools will continue to attract IT organizations and service providers to this traditional model. 5 Benefits of the Hybrid Model The hybrid delivery model combines the benefits of both cloud and on-premise computing, helping organizations maximize their investment in existing systems, as well as adjust and adapt as their enterprise environment shifts and grows. It frees organizations to choose where the service desk application is located, and how the software is licensed. Unlike pure cloud-based solutions, the hybrid option provides the technology that opens numerous possibilities to integrate with on-premise business and HR functions and data, desktop systems, services and automated processes. The hybrid approach may be best when the service desk needs to pull data from various sources such as Active Directory (AD), databases, Excel spreadsheets and accounting systems. What s more, applications can be run where they fit in the corporate infrastructure. Those organizations that consider a hybrid model typically do so because they may: 1) require integration with on-premise solutions; 2) have security concerns (typically government entities or heavily regulated industries like finance); or 3) are running mission-critical applications. There is also the aspect of geographic flexibility. For example, an organization may want the application at headquarters to be on-premise but it becomes cost prohibitive to implement the same approach at the remote offices, hence the need to offer it in the cloud. And from a disaster recovery perspective, it may make sense to host the service desk software on-premise and have it backed up in the cloud. Rather than forcing organizations to choose just one delivery platform, the hybrid hosting option provides access to both. As reported in eweek.com, the way many SaaS applications are being sold restricts an organization s ability to adapt: The extraordinary pace of technology change is transforming the way organizations run IT, with growing numbers opting to evolve from on-premises to cloud-based or hosted models for core applications. But the current way technology is being sold is actually constraining an organization s ability to adapt. Organizations should not be forced to move to an all cloud-based solution or to retain all technology in-house. Instead, organizations must look to mix and match technologies, maximizing the pros and cons of each infrastructure model to deliver the most robust and cost-effective solution for each business at any particular point in time. 6 5 David M. Coyle, SaaS Continues to Grow in the IT Service Desk Market, Gartner, Inc., 29 March 2011, p. 5 6 Harnish, Ed, Cloud-Based vs. On-Premises: How to Maximize Benefits of Each Infrastructure Model, eweek.com, 27 August
8 Conclusion When it comes to implementing your service desk, no single software delivery model fits all. Moreover, each delivery mechanism comes with its own benefits and considerations. Where the service desk is a non-critical system, or where cost concerns or short-term usage are the primary drivers, of if you want to use your in-house IT resources for other projects, consider SaaS and the cloud. If you require that all aspects of service desk performance, security, availability and maintenance windows be under your control, and if you need complete database accessibility and a potentially lower cost of ownership over time, consider the on-premise model. If you re looking for the greatest flexibility along with tight, live integration with databases, automation processes and accounting systems, consider the hybrid approach. Even if you opt for a SaaS solution in the near term, you should keep the hybrid alternative open down the road, especially as you identify and acquire on-premise applications that you need to work with. In the end, you should be in a position to balance the benefits of cloud-based accessibility and premise-managed security. You should be able to optimize the configuration of your service desk by leveraging the cloud, your existing on-premise infrastructure, or taking advantage of both via a hybrid approach. It s important to look beyond the financial returns to the underlying benefits of each model and evaluate what makes the most sense for your organization.