WHITE PAPER Opportunities in Private Cloud Computing via a Turnkey Approach

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1 WHITE PAPER Opportunities in Private Cloud Computing via a Turnkey Approach Sponsored by: Microsoft Michelle Bailey January 2011 Global Headquarters: 5 Speen Street Framingham, MA USA P F EXECUTIVE SUMMARY The enterprise datacenter is undergoing a reinvention. The previous 10 years of datacenter operations will look nothing like the next 10 years, and much of this change is driven by a combination of new technologies as well as shifting governance and IT automation. To address increasing physical server proliferation, organizations have been aggressively introducing virtualization. While virtualization has helped reduce the number of physical servers in the datacenter, it has led to virtual server sprawl. IDC estimates that the density of virtual machines (VMs) will grow from an average of five VMs per physical server in 2008 to more than eight by 2013 and that management and administration expenses to maintain virtual servers will become the largest single element of server spending by In response, datacenters are entering what IDC has identified as the next wave of IT that of "cloud computing." While many think of cloud computing as the servicesbased delivery of compute, storage, and/or applications over the public Internet, IDC believes that there is a more important trend in the enterprise datacenter around private cloud computing, or the delivery of IT as a service on IT organizations' own infrastructure. With cloud computing, organizations now have several options for their application infrastructure, including on-premises servers, public cloud services (which are hosted at a service provider's site and open to a largely unrestricted universe), or private cloud services (which are built using dedicated hardware and designed for a single enterprise with restricted access and which could be housed on-premises or at a service provider's location). Today, customers can select the approach that works best for them based on the specific requirements of their organization and applications. Overall benefits of cloud computing include higher levels of responsiveness to business needs, automation, improved orchestration, and faster provisioning. By shifting the management burden to either an outsourced provider or a highly automated layer of infrastructure, organizations can reduce the labor hours required to manage and maintain their servers, whether physical or virtual, and can replace periodic large capital outlays with operational costs on a monthly or an annual basis. IDC expects that enterprises that do not improve their automation capabilities, whether through cloud computing or otherwise, will see their IT costs continue to rise significantly.

2 Microsoft has recently come to market with Windows Azure platform, the Windows Azure platform appliance, and Hyper-V Cloud offerings. Windows Azure platform is a cloud-based approach to build, deploy, and manage scale-out applications and databases using traditional Microsoft tools and frameworks including.net and SQL. Microsoft offers public cloud services out of its own datacenter based on the Windows Azure platform. To support private cloud offerings based on Windows Azure, Microsoft has packaged the Windows Azure platform appliance as a turnkey solution that allows service providers and large enterprises to deploy Windows Azure. Hyper- V Cloud is another new set of Microsoft programs and offerings designed to make it easier for customers and partners to build and deploy their own cloud infrastructures with Windows Server and System Center. Hyper-V Cloud consists of deployment guidance and the Fast Track offering, which includes predefined, validated hardware and software designed for rapid deployment of private clouds based on Windows Server 2008 R2, Hyper-V, and System Center. Hyper-V Cloud also includes a service provider partner program for hosted dedicated clouds. Microsoft's approach is to enable customers to integrate existing applications on Windows Server with the Windows Azure cloud platform through consistent identity, development, and management tools. These tools span private and public cloud deployments so that customers can leverage their existing skill sets and more easily build, migrate, or extend out to the public cloud. Enterprises and service providers want to realize the scalability, time to market, and cost benefits of cloud computing without having to rely solely on public clouds. By taking advantage of the private cloud capabilities of Hyper-V Cloud and the Windows Azure platform appliance, organizations can still maintain levels of control and sovereignty of data required for mission-critical applications or to meet key compliance or network latency requirements. SITUATION ANALYSIS Challenging Economics of Datacenter Growth Previous-generation application infrastructure was built using server hardware located in the enterprise datacenter. Until the advent of VMs, enterprises frequently deployed applications on dedicated physical hardware. Including development and test hardware, more than one physical server was usually required per application. As the number of applications grew, datacenters suffered server sprawl and escalating capital and operating costs for datacenter management and power and cooling. Virtualization has helped alleviate aspects of sprawl and power consumption, but as the number of virtual machines explodes, the net effect is replacement of physical server sprawl with virtual server sprawl. This is leading to even greater management costs because doubling the number of VMs still doubles the amount of work for administrators. High Capital and Operational Costs for Physical Servers The result is server sprawl in the datacenter and an explosion in the global installed base of servers, which IDC estimates grew from just over 5 million in 1996 to 32 million in IDC estimates that there was an installed base of nearly 30 million virtual machines in 2005 and anticipates that the installed base of virtual machines 2 # IDC

3 worldwide will surpass 80 million by As a result of this explosive growth, staffing costs on systems maintenance have risen 600% to over $120 billion annually, and the cost to power and cool installed servers has more than tripled from $2 billion to $10 billion per year. Aging Datacenter Facilities Hamper Future Growth The average age of a datacenter in the United States is 12 years, meaning that the typical datacenter was not built to support today's sprawling systems environment and high server densities. Power and cooling has become the number 1 operational problem for the datacenter and is the primary factor limiting most datacenter growth. While IT organizations have been able to adapt by introducing supplemental power and cooling equipment and deploying energy management techniques, these strategies increase the burden on management overhead and can require significant integration investments. Further, with many organizations' datacenters operating at or near their capacity, their ability to rapidly scale to adapt to new organizational demands with in-house IT infrastructure is limited. Time to Market Supporting a large physical server infrastructure can also hinder IT's ability to move rapidly to support changing business requirements. The time required to build, test, and fix servers and deploy them into a production environment can take weeks or even months depending on the processes and constraints of the organization. In the past, this may have been sufficient lead time for most organizations' application deployments, but as the pace of business continues to increase, enterprises require ways to speed the time to deploy servers from weeks or months to days or even hours. Entrusting their application infrastructure to a cloud provider, organizations can ensure that their infrastructure works out of the gate and can rapidly spin up new capacity, without going through the time required to roll out new server deployments. Drivers of Cloud Computing To address these challenges, organizations are turning to cloud computing, both public and private. Cloud computing builds off the best practices of the past decade and allows organizations to obtain compute resources as a shared, standard service, usually with elastic scaling, use-based pricing, and user interface (UI) technologies accessible via standard, published APIs. The promise of cloud computing is that it can drive higher levels of automation, orchestration, provisioning, and deployment. Cloud computing also addresses one of the key economic challenges of server infrastructures: administrator management. By significantly reducing the human element in the management of the infrastructure and application layer, organizations can scale out their infrastructure without having to scale IT staff. By automating many of the manual tasks that are performed by administrators today, organizations can maintain their server infrastructure with their existing IT staff while continuing to grow their application portfolio. Finally, because computing activities in the cloud can be quickly scaled up and down, cloud computing delivers an infrastructure that can more flexibly adapt to changing business requirements IDC #

4 Primary Benefits for Customers In a 2010 IDC survey of IT decision makers, respondents identified "lower total cost of ownership" (TCO), the ability to "aid in disaster recovery," and "improved availability" as the top 3 criteria in their consideration to move applications to the public cloud. Interestingly, three additional criteria followed closely behind, namely "lower IT software costs," "lower IT hardware costs," and "lower datacenter utility costs." In the same survey, when respondents were asked to identify the three most important criteria in moving applications to the private cloud, "improved availability," the ability to "aid in disaster recovery," and the facilitation of "improved utilization of IT resources" were the top rated. Improved responsiveness to changes in workload demand was also highly rated (see Figure 1). For public cloud computing, IDC believes that the primary benefits that will resonate with customers are those that are fiscally focused, along with the essentially mandatory requirements of availability and disaster recovery. In contrast, the key benefits of private cloud computing that appeal to potential customers focus less on TCO and more on improved utilization of IT resources, availability, and disaster recovery. 4 # IDC

5 FIGURE 1 Importance of Criteria Related to Moving to a Public or Private Cloud Q. Rate the following criteria for their importance in your decision to move applications to a public/private cloud. Improved availability Aids in disaster recovery Improve utilization of IT resources Lower total cost of ownership Improve response to changes in workload demand Lower IT hardware costs Lower datacenter facility costs Simplif ied management Speed time to deployment Lower IT services/maintenance costs Lower IT sof tware costs Save on IT staff headcount (Mean rating) Public Private n = 255 Note: Responses were based on a scale of 0 10, where 0 = not at all important and 10 = extremely important. Source: IDC's Datacenter and Cloud Computing Survey, January IDC #

6 Growth in Private Cloud to Address Concerns over Control and Sovereignty of Data Cloud computing started with the public cloud and consisted of multitenant services that were hosted by a service provider and addressed the needs of the market, not an individual company. While public cloud offers the benefits of reduced operating personnel costs, greater scalability, and increased agility, some applications particularly those with strict compliance requirements require an organization to retain stricter control and sovereignty over the data. These environments triggered the evolution of private cloud. Private cloud deployments consist of integrating networking, storage, and server hardware with management tools and server virtualization. One of the main benefits of private cloud is that it can be tailored to suit the needs of a specific company or organization. With private cloud deployments, organizations drive higher levels of automation, provisioning, and deployment orchestration and are able to scale their infrastructure in a way that ensures control over the data in the deployment without having to scale IT staff. Private clouds are well-suited for data-intensive, missioncritical workloads that have high requirements for security, availability, and serviceability as well as for applications that, for compliance reasons, require a greater degree of control and ownership of the data. While companies are adopting both public cloud and private cloud, IDC data indicates that they are moving more rapidly to private cloud deployments than public cloud deployments over the next three years. In IDC's 2010 survey of IT decision makers, the majority of survey respondents (57%) ranked their likelihood of deploying a private cloud at least a "5" out of "10" (with "10" being most likely), compared with 42% for public cloud. In the same survey, 29% of organizations said they are "currently using" or "plan to use" private clouds, with another 44% "considering" private clouds for their organizations. This data demonstrates both the interest in and the early stage nature of the technology. While IDC forecasts growth in both public cloud and private cloud, we expect faster growth in server revenue to support private cloud, with private cloud computing server spending growing from $2.6 billion in 2009 to $5.7 billion in 2014, corresponding to a CAGR of 17.3%. This reflects both a faster growth in actual units shipped for private cloud and significantly higher average selling values (ASVs) for private cloud. A NEW APPROACH TO DATACENTER ECONOMICS Combating Virtual Machine Sprawl As discussed earlier, physical server sprawl was temporarily alleviated by the introduction of virtual machines. However, these same VMs themselves soon led to more server sprawl, but of the virtual kind. As organizations continue to deploy virtualization, IDC expects the installed base of physical servers to flatten out while the number of virtual machines explodes. 6 # IDC

7 IDC predicts that 2010 will be the first year that virtual machine shipments will outnumber shipments of physical servers. IDC estimates that more than half of all workloads were virtualized by the end of 2010 and expects that greater than twothirds will be virtualized by Virtual machine density (or virtual machines per physical server) will rise from an average of five VMs per physical server in 2008 to more than eight per physical server by Further, IDC expects that by 2013 more than 80 million virtual and physical servers will be installed. This robust adoption of VMs by the industry is a strong and powerful indicator of the market's comfort with virtual technologies. However, if VMs are deployed over the next five years as they have been for the past five years in-house, with ceaseless growth in complexity and requirements for systems management the number of headaches and sleepless nights will grow exponentially. Growth in VMs Leads to Spiraling Operational Costs Virtualization has helped enterprises reduce their physical server sprawl, drive consolidation, and increase server utilization. This has helped lower up-front capital costs and extends the life of the datacenter and drives up the levels of availability; however, many organizations are arriving at the hard realization that virtual machines are not in fact a cure-all for the woes of physical server sprawl. The shift from physical machines to virtual machines has yielded some very real economic benefits to organizations, particularly in terms of reduced capital costs and operating costs for areas such as power and cooling. But other cost elements have continued to spiral out of control, namely the personnel costs to manage and maintain the server environment. In fact, because of the explosion in growth in virtual machines in the datacenter, IDC forecasts that management and administration expenses to maintain virtual servers will grow to become the largest single element of server spending by 2013 (see Figure 2) IDC #

8 FIGURE 2 Worldwide Spending on Servers, Power and Cooling, and Management/Administration 300 Customer spending ($B) Server spending Management and administration standalone servers Management and administration virtual servers Power and cooling expense Source: IDC, 2011 To date, most businesses have underinvested in systems management and automation tools relative to the investments that have been made in virtualization adoption. This means that many datacenters still employ manually intensive processes, including the integration of service management frameworks, resulting in greater burdens on staffing, which is already limited in expansion in the current global recession. This manual intervention often means that systems are disconnected from business processes and the ability to adapt to change in response to the business is hampered. IDC expects that IT management costs will continue to rise significantly if customers don't improve automation capabilities for their virtualized environments. CLOUD COMPUTING: THE NEW ERA OF IT IT Options Driven by Business Requirements Cloud computing is now evolving to more customized approaches for customers, depending on their needs. This has helped create the distinction between public cloud and private cloud computing solutions. Today, multiple technology options are now available to CIOs. No longer is the technology infrastructure limited merely to servers deployed and managed in-house; now the infrastructure can be designed to run in a vendor's datacenter or with a 8 # IDC

9 discrete service provider. The major infrastructure choices available for today's IT organizations include: Traditional on-premises deployments. On-premises server deployments especially nonvirtualized workloads can be the preferred deployment method for applications that have very strict compliance requirements or other requirements that necessitate keeping all data on servers physically under the organization's control. Private cloud, hosted by the enterprise. These deployments not only provide key benefits of cloud computing, such as automation, scalability, and flexibility, but also enable organizations to satisfy their requirements for strict compliance and control. In this form, internal IT staff must still manage the cloud technology infrastructure. Private cloud, hosted by a managed service provider (MSP). These deployments provide even more benefits of the cloud, with the added benefit of outsourcing the management of the cloud technology infrastructure to the service provider. Applications that could be a good match for private clouds hosted by MSPs include mission-critical workloads such as business processing or decision support. Public cloud. These deployments take full advantage of cloud benefits but provide the least degree of control and compliance. Applications for which public cloud deployments could be a good fit include collaboration, HR, scale-out Web, and . Given the multiple options available to customers, it is important for them to define their technology and vendor strategies and determine whether they are better served in a private cloud environment in-house or with an MSP a public cloud environment, or an architecture that leverages both types of cloud computing. Further, cloud computing enables new frameworks for application development. Many new computing solutions are coming to market that enable developers to build applications that leverage the relatively unlimited hardware resources with cloud computing so that they can scale up as they add more users or as business needs change. These new tools enable developers to build applications knowing that these resources are available to them. Benefits of Private Cloud Computing IDC sees a range of benefits associated with private cloud computing. These benefits include: Reduced burden on the IT staff. One of the great benefits of cloud computing is its degree of automation. Today, the average number of physical servers managed by a single system administrator is 25, and with virtualization, the number grows to 43 VMs per administrator. IDC expects that by leveraging the built-in automation tools that come with private cloud solutions, IT organizations could potentially manage VMs per administrator depending on the applications and IT processes. Greater scalability. Without the need to deploy, test, and fix physical servers, organizations can spin compute capacity up or, more importantly, down at a moment's notice IDC #

10 Faster time to market. If an application development team requires five servers to be online in hours, the server team can provide the appropriate resources without having to provision new physical servers. High availability and workload balancing. With cloud computing, when the systems management tools determine that the infrastructure supporting an application is about to go down, they can automatically launch a new virtual machine and shift the load to it. Ability to maintain control over data and regulatory environments. Private cloud computing brings together the benefits of public cloud computing while still enabling an organization to maintain control over its data, including where it is physically located, who can access it, and the physical security profile. This control also enables customers to more closely adhere to regulatory constraints for data locality, disaster recovery, and privacy. Ability to provide consistent support and service-level agreements (SLAs). With private cloud computing, IT organizations can apply business process based SLAs to ensure that mission-critical applications continue to operate in the event of an outage, while tier 2 and tier 3 applications can continue to be supported in a more cost-effective environment. Driving New Levels of Policy Management in the Datacenter While cloud computing is enabling and, in some instances, forcing organizations to change their approach to technology deployment, organizations must also change the processes and policies governing their technology deployments. In addition to the technology benefits cloud computing provides, it can also be a strong catalyst for driving best practices in policy management. For example, when datacenters made the transition to VMs, many relaxed their policies for requesting and approving server deployments because they assumed that VMs were "practically free." This contributed to the VM sprawl we see today. Organizations are starting to reel their processes back in, requiring justification and approval for deploying new VMs, much like they did with physical servers. Having to justify the need for new servers makes sense, whether those servers are physical or virtual. BUY VERSUS BUILD: CHANGING HARDWARE AND SOFTWARE IN RELATION TO THE NEW ERA OF IT In the past, organizations building out an IT infrastructure effectively acted as their own systems integrator, purchasing servers, storage, networking, and management software and performing an implementation project to deploy and integrate these technologies. Dependencies and risks had to be identified and evaluated, tasks and project plans had to be assembled and executed against, and change management had to be put in place. 10 # IDC

11 Service providers and enterprises looking to deploy private cloud must go through a similar process to assemble an appropriate infrastructure on which to host customers' applications. This can be an expensive, time-consuming, and risky process because it is not always easy to deploy cloud infrastructures that meet the required levels of automation, availability, and scalability, particularly for environments that demand high levels of regulatory compliance and data protection. Hardware Needs A fully deployable cloud computing infrastructure must include several hardware technology areas: Server. A cloud infrastructure requires the use of scalable servers that include built-in hardware redundancy, system-level reliability features, and advanced system management software. Storage. All enterprise applications require storage to maintain application and user data. Any viable cloud infrastructure will incorporate storage that is both highly scalable and accessible. Network. All cloud computing networks must provide high levels of security, data integrity, failover and reliability, and of course, high levels of scalability. Software Needs Software requirements for a successful cloud computing infrastructure include: Programming languages and tools. To create applications in the cloud environment, developers need access to a robust set of developer tools and applications, ideally the same set of tools and applications they use for other noncloud development efforts. Management tools: environmental. A successful cloud computing environment must include appropriate tools that measure, monitor, and maintain datacenter key performance indicators (KPIs) such as space, power, cooling, and security and that support discovery, inventory and visualization, monitoring, reporting, and infrastructure optimization. Management tools: VM based. Cloud computing management tools must combine the substantial advances in server virtualization and integration with comprehensive virtualization management suites. Additionally, they must incorporate new management tool capabilities, including self-service provisioning and chargeback capabilities to automate many of the manual IT administrator tasks in a constantly escalating virtual environment. Management tools: operating systems and applications. Management tools should also enable management of operating systems and applications. It is not sufficient for a management tool to limit its focus to the operation of the hypervisor if the applications that reside on top of them are unavailable or lacking resources. Management tools must extend in scope from the hypervisor all the way up the stack to the operating system and applications. One benefit of working in a private cloud environment is that robust application monitoring capabilities can be 2011 IDC #

12 integrated to provide IT staff with visibility into potential issues in all areas of the IT infrastructure that may arise before they cause major outage. Flexibility for application development. For developers to most successfully leverage the features and benefits of both private and public clouds, there must be new frameworks for application development that are as flexible as clouds themselves. Database. Cloud-based relational data services are important tools for leveraging the benefits of cloud computing. OVERVIEW OF MICROSOFT PRIVATE CLOUD SOLUTIONS Microsoft's Server and Cloud Computing Strategy For decades, Microsoft has been a leader in providing on-premises technology to develop, deploy, and manage enterprise applications, enterprise databases, and operating system infrastructure. With its Hyper-V virtualization technology and System Center management tools and its more recent Windows Azure platform offering, Microsoft has established its presence as a provider of technology and services for cloud computing as well (see Figure 3). FIGURE 3 Microsoft Cloud Computing Strategy: "Four Bridges" Source: Microsoft, # IDC

13 The Microsoft server platforms, on the left side of Figure 3, display some of Microsoft's on-premises options and include offerings such as Windows Server, SQL Server, System Center, and Visual Studio. With its cloud offerings, Microsoft is extending its on-premises products into hosted deployment options, implementable both via public cloud hosted at Microsoft datacenters and via private cloud with cloud computing technologies that can be implemented by a hosting provider or enterprises. Critical to the Microsoft cloud computing vision is the fact that its on-premises and cloud-based offerings are in fact largely equivalent in features, functionality, and user experience. Whether deployed on-premises or via the public cloud hosted in Microsoft datacenters, these Microsoft offerings use common development tools, management tools, and identity. So, for example, developers already familiar with the.net development environment can continue to develop to the same standards in the Windows Azure environment, customers who have deployed Active Directory can federate identities in private and public clouds, and System Center can be used as a single pane for datacenter and application management, whether on-premises or at a public cloud. Hyper-V Cloud Hyper-V Cloud is a set of programs and offerings from Microsoft focused on making it easier for partners and businesses to build their own private cloud infrastructure-as-aservice offerings using Windows Server, Hyper-V, and System Center. Windows Server 2008 R2, Microsoft's server platform, already delivers virtualization and management capabilities through Windows Server 2008 R2 Hyper-V. These technologies, along with Microsoft System Center's enterprise management suite and the recently released System Center Virtual Machine Manager 2008 R2 Self-Service Portal 2.0, provide hypervisor, operating system, and management components required for organizations to implement private clouds. One of the key components of Microsoft's private cloud strategy is the Hyper-V Cloud Fast Track program. With the Fast Track program, Microsoft and its partners deliver integrated private cloud solutions based on predefined, validated hardware and software configurations, comprising compute, storage, networking resources, virtualization, and management software. These programs and offerings help reduce the risk and increase the speed of private cloud deployments. Dell Inc., Fujitsu Ltd., Hitachi Data Systems (HDS), Hitachi Ltd., HP, IBM Corp., and NEC Corporation have already signed on as Hyper-V Cloud partners. In addition, Microsoft has the following additional programs in its Hyper-V Cloud offerings: Hyper-V Cloud Service Provider Program. Microsoft has more than 70 service provider partners around the world who offer infrastructure as a finished, fully hosted service built on Hyper-V cloud technologies. Microsoft Service Provider partners can deliver a fast and cost-effective implementation for cloud services, both private and public. Service providers include Agarik (France); Fasthosts (United Kingdom, United States); Hostway Corp. (United States, United Kingdom, Netherlands, Germany, France, Belgium, Romania); and Korea Internet Data Center IDC #

14 Hyper-V Cloud Deployment Guides. For customers who want to build their own private clouds on top of existing infrastructure investments, Microsoft now offers tools and guidance based on expertise developed during hundreds of Microsoft Consulting Services (MCS) private cloud customer engagements over the past few years. This element of the Hyper-V Cloud program optimizes enterprises that require high levels of flexibility, control, and customization. Hyper-V Cloud Accelerate. To tie it all together, Microsoft is making significant investments to help customers and partners fund assessments, proofs of concept, and production deployments. These services will be delivered by MCS and prequalified members of the Microsoft Partner Network and are designed to help enterprises and service providers more rapidly realize the benefits of private clouds. Windows Azure Platform The Windows Azure platform is a platform-as-a-service cloud offering that consists of compute, storage, and management automation tools that can run across hundreds or thousands of servers. The platform is designed for high availability and dynamic scaling of applications as well as self-service provisioning. The Windows Azure platform provides a set of development services so that developers can build directly onto the Windows Azure platform. One of the key differentiators of the platform is that it automates management of all the libraries and the runtime environment without the developer having to manage the operating system. This infrastructure management is automated via a unique fabric controller that significantly reduces cost of operations and manual intervention. Windows Azure platform consists of six primary components: Windows Azure. The core Windows environment used to develop and run cloud applications SQL Azure. Relational database services in the cloud based on SQL Server Fabric Controller. Manages servers, load balancers, switches, provisioning, operating system updates, application availability, and other platform components (The fabric controller provides the unique automation capabilities of the platform.) Windows Azure AppFabric. Cloud-based infrastructure services for applications running in the cloud or on-premises Windows Azure Marketplace. An online service for purchasing cloud-based data and applications Windows Azure Connect. A range of cloud networking technologies including network connectivity between on-premises and Windows Azure resources designed to be simple and easy to manage 14 # IDC

15 The Windows Azure platform is an open platform, just like Windows Server. It runs general-purpose programming languages including.net, Python, Java, Ruby, and PHP. It supports multiple development environments including Visual Studio and Eclipse. The Windows Azure platform was initially offered as a public cloud offering hosted out of Microsoft's datacenters, but Microsoft has recruited three service providers Dell, Fujitsu, and HP to run and offer Windows Azure in their own datacenters as well. ebay is one of the first enterprise customers to deploy the Windows Azure platform as a private cloud. Complements and Integrates with Hyper-V Cloud Platform The Windows Azure platform is designed to integrate with the core cloud-enabling technologies found in Microsoft Windows Server, Hyper-V, and System Center. For example, an organization with Hyper-V can run an infrastructure consisting of a number of servers as a cloud. The Hyper-V Virtual Machine Manager, along with System Center, takes care of many basic deployment and provisioning functions, as well as workload balancing, and provides a fully functional management suite. One of the main design tenets of Windows Azure is that developers and IT operations should focus as much as possible only on application management while management of the operating system, hypervisor, and hardware is as automated as possible. Consequently, Windows Azure can automatically determine when an application requires more resources and spins up additional VMs to support the application. Alternatively, if it detects that an application instance is nonresponsive, it will automatically create an additional application instance to ensure high availability with no human intervention. The Azure platform is intentionally architected with recovery and availability as a foundational building block, even during operating system upgrades or updates. With the integration of hardware and software technologies, users should never experience downtime because an application will fail over to another active instance. Importantly, the management capabilities of the Windows Azure platform enable a single IT administrator to manage hundreds and hundreds of servers and thousands of instances. Windows Azure Platform Appliance In July 2010, Microsoft announced plans to release the Windows Azure platform appliance. The Windows Azure platform appliance enables Microsoft to provide service providers with an integrated software stack and validated hardware framework for offering cloud computing services to their customers. The appliance also enables enterprises to run private cloud services in their own datacenters based on Windows Azure. The appliance is a turnkey cloud solution that consists of the Windows Azure platform; the SQL Azure platform; and a Microsoft-specified configuration of network, storage, and server hardware. Like Windows Server, Azure is designed for high levels of scalability as well as multitenancy and is optimized for datacenter efficiency. The hardware is being built and will be delivered by a variety of partners, including Dell, Fujitsu, and HP. ebay is also an initial customer of the appliance, and it is deploying its Java-based ecommerce platform on the appliance IDC #

16 Providing a Buy Versus Build Option for Private Cloud Computing Infrastructure By offering Windows Azure as an appliance, rather than restricting Windows Azure to services provided out of Microsoft's datacenter, Microsoft is making it easier for service providers and enterprises to deploy private clouds. Instead of having to integrate the piece parts, organizations can simply purchase a package of preconfigured, pretested server, storage, network, and management tools. This allows the service provider or enterprise to focus on its core business and not have to worry about assembling and integrating the necessary components to build a cloud infrastructure on its own. While service providers, government agencies, and large businesses will be the initial target market for this offering, small to medium-sized businesses are an eventual target as well. Benefits of the Microsoft Approach Some of the benefits of the Microsoft approach to providing cloud computing technologies with Hyper-V Cloud, Windows Azure platform, and the Windows Azure platform appliance are as follows: Streamline deployment of private cloud infrastructure. Service providers and enterprises looking to deploy private cloud infrastructures no longer need to validate the necessary hardware, software, and networking components out of piece parts. Manage both public cloud and private cloud from a single platform. Microsoft System Center enables customers to manage their applications end to end, from the physical hardware, to the VM, to the application, whether it runs on a private cloud in their datacenter or on Windows Azure. Leverage existing investments. With Hyper-V Cloud and Windows Azure platform offerings, customers can build on existing Microsoft investments and skill sets, including application development, database management, and heterogeneous hypervisor and operating system management. Leverage both private cloud and public cloud capabilities to best suit customers' needs. With a common development and management platform, applications can be written to leverage the cloud platform that best meets the needs of the business. For instance, a customer-facing front end could reside on Windows Azure, with the core SQL Server database running on a private cloud on-premises. Automate management of cloud infrastructure. Customers can move to a more automated infrastructure and reduce time spent on dealing with day-to-day infrastructure issues such as provisioning VMs or workload balancing. Windows Azure platform appliance acts as an automation orchestration layer that takes care of management of the entire management infrastructure that is deployed via the fabric controller. System Center and Hyper-V Cloud Fast Track offerings optimize deployments to increase automation and reduce management overhead. 16 # IDC

17 Support use of traditional development tools, languages, and management. Because Windows Azure supports native.net and other leading development frameworks, developers don't have to learn a new language to use Windows Azure or deploy applications to a Hyper-V Cloud. In addition, identity tools are also consistent across the Microsoft cloud platforms. Provide a seamless transition between environments. Customers who are looking to get the benefits of cloud computing but are not ready to make the full investment to obtain a private cloud infrastructure can start with a public cloud deployment based on Windows Azure platform or at a Microsoft service provider partner running the Hyper-V Cloud. Then if they are ready to move to private cloud, they can seamlessly migrate to a deployment based on Windows Azure platform appliance or Hyper-V Cloud Fast Track. Improve datacenter efficiencies. Windows Azure platform has a built-in automated service management layer via its fabric controller that lowers overall datacenter TCO and the number of manual tasks required in maintaining the datacenter. Similarly, by increasing server densities and improving infrastructure automation, Hyper-V Cloud can reduce datacenter TCO while providing more flexibility in deployment options. Provide enterprise-class failover capabilities. Hyper-V Cloud and Windows Azure platform provide failover capabilities designed to be easy to deploy and to minimize application downtime. Support massive scalability. Windows Azure can support hundreds to thousands of servers and thousands to tens of thousands of application instances within a single environment, enabling organizations to achieve true cloud computing scale via a turnkey solution. ebay has adopted the Windows Azure platform appliance because of this unique capability. CHALLENGES AND OPPORTUNITIES IDC sees a number of opportunities and challenges for vendors, service providers, and customers of private cloud services. Opportunities include: Organizations can choose infrastructure based on workload. As always, IT is about the application, not the hardware. Hardware simply enables the application to work properly. Therefore, it is important to consider which cloud model best fits the application's needs. Typically, private cloud will work well for mission-critical applications such as business processing and situations in which the data must be under close control for regulatory or compliance reasons. Having multiple choices enables organizations to tailor the environment and TCO to their specific application needs. Cloud is considered a part of the overall IT portfolio. At first, deploying cloud behind a few low-risk workloads is a good idea. In reality, IDC believes that over time, most organizations should optimize their infrastructure by diversifying between public cloud, private cloud, and traditional IT to optimize TCO and business agility IDC #

18 Challenges include: Customer perceptions of security and control. One of the key customer concerns with the public cloud environment regards where the data is stored, what security protocols are protecting it, and who has access to it. Customers may have compliance requirements that require them to ensure data is not shipped out of country, has four-hour recovery times, etc. In fact, in a recent IDC survey of IT managers, 45% of respondents rated security the number 1 concern for moving to public cloud deployments. Private cloud, of course, addresses some of these issues because it allows companies to maintain sovereignty and control of their data while still getting the benefits of the cloud platform. Additional complexity in the IT decision. In the past, CIOs had a relatively easy set of decisions when it came to providing their IT infrastructure. They had to identify and purchase the best hardware and software to suit their organization's needs within the available cost profile and then implement and manage it to the best of their team's ability. Today, the burden on CIOs is much greater. They must choose whether to build and maintain infrastructure in the organization's datacenter or to use private or public clouds. If they opt for private cloud, they must decide whether to do so internally or via an outsourced service provider. CIOs not only must decide the best place for each application to live but also must consider changes that may be required to processes and procedures. Need to pick the right partners. There is also a greater burden on IT to consider carefully who it chooses as a partner. Contract management, internal processes, experience, and geographic reach all play a role. For example, if the organization wants to roll out services to sub-saharan Africa or Eastern Europe, it doesn't want to find out that its partner cannot offer services there. CONCLUSION With the rapid adoption of server virtualization and the emergence of new cloud computing technologies, organizations are being pressed to identify the best ways to offer developers and end users an infrastructure that is scalable, flexible, and costefficient. Enterprises have addressed the recent wave of physical server sprawl by implementing virtualization, which solved only some of the problems. In fact, the subsequent wave of virtual server sprawl, which we are in the midst of today, threatens to send costs to manage and maintain those VMs through the roof. Cloud computing addresses many of these challenges. With cloud technology, organizations can achieve greater degrees of automation, scalability, and availability while reducing the management burden on their own staff. For certain applications and business scenarios, enterprises can also shift costs from large capital outlays every six months or so to regular monthly fees. However, cloud computing introduces new concerns over security and data sovereignty in public cloud deployments. IDC believes that these concerns with cloud computing can be addressed by deploying a private cloud. But building a private cloud can be an expensive, difficult, and risky proposition, requiring the service provider or enterprise to integrate disparate components. 18 # IDC

19 With its Hyper-V Cloud, Windows Azure platform, and Windows Azure platform appliance, Microsoft has bundled and packaged the required cloud technologies, making it easier for service providers and enterprises to build private cloud environments and take advantage of the many benefits of cloud computing. Copyright Notice External Publication of IDC Information and Data Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason. Copyright 2011 IDC. Reproduction without written permission is completely forbidden IDC #