A Key to Cloud Efficiency: Aggregation

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1 A Forrester Consulting Thought Leadership Paper Commissioned By AT&T Survey finds significant operational efficiencies when cloud services are brokered by a service provider November 2012

2 Table Of Contents Executive Summary... 2 We Have How Many Cloud Services?!... 3 Enterprises moving to cloud are planning aggressive use... 4 Key to efficiency gains: Working with an aggregator... 6 Benefits from aggregation keep climbing the more cloud services you use... 9 Key Recommendations Appendix A: Methodology and Study Demographics Appendix D: Endnotes , Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to [1-L559ZY] About Forrester Consulting Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit Page 1

3 Executive Summary Cloud services can easily be bought directly from the cloud provider but the best way to achieve operational efficiencies from a collection of cloud services is to eschew this approach and buy them through a managed service provider. In October 2012, AT&T commissioned Forrester Research to craft, field, and analyze results from a custom survey to test this hypothesis across the greater enterprise market. Was it true that purchasing cloud services through a We ve moved from managing services to managing the SLAs of our strategic providers. IT Dir, large manufacturer managed services provider could yield lower overall costs, better performance, higher SLAs and other benefits over directly buying and managing these services yourself? In conducting in-depth surveys of 155 enterprise IT professionals and four follow up interviews, the results of this research validated the above hypothesis. Responding enterprises reported greater agility, flexibility, time to market, overall lower costs and better business innovation than were achieved when purchasing multiple services from a single vendor. The biggest gains found were operational efficiencies, that interviewees said came mainly through the greater experience and expertise of the service provider in delivering consistent operations, integration and supplementation to ensure best-fit between the cloud service and the business needs. Key Findings Forrester s study yielded three key findings: Operational efficiencies are the biggest win. Integrating a mix of cloud services into your enterprise can be a significant challenge. Enterprises have to balance the amount of customizations they do to the cloud service versus consuming the cloud service in as generic a way as possible to get the greatest cost efficiencies from the solution. Enterprise survey respondents found that managed service providers with more experience managing these services could help them find the greater balance, manage the inconsistencies from service to service and thus free up key IT staff for more critical projects. More than half of the survey respondents using an aggregated approach reported achieving these gains. Cost savings are real. According to survey respondents, yes, cloud services are cheaper to buy through a managed service provider than direct from the pure -play cloud provider. This one may seem counterintuitive until you realize the cost per seat of a Software as a Service (SaaS) solution or the cost of a virtual machine in an Infrastructure as a Service (IaaS) solution is just the beginning of the bill. More costs exist in the modification, integration and on-going operations of these services costs that can dwarf the initial per-seat charges. The benefits of buying cloud through an aggregator get better the more you buy. Survey respondents indicated that as enterprises added more and more cloud services to their portfolio, the benefits of going through a managed service provider increased. As standardization has not established itself in this space, managing the complexities of integration, varying SLAs, monitoring and adapting cloud services to your business practices gets tougher the more cloud services you bring into your business. As the number of cloud services goes up, so does the value of the service provider. Page 2

4 We Have How Many Cloud Services?! Ah, how we long for the halcyon days when IT was the sole source for new technology solutions. The advent of cloud services has turned every employee into a potential purchaser and yet IT is still expected to ensure availability, security and compliance for the company. And it seems today s IT departments are constantly surprised by each new cloud solution that comes over the wall to be managed. On top of this trend is IT s own desire to shift commodity workloads out to the cloud where they too can bring lower costs, economies of scale and greater agility to the company. But managing cloud services is a new endeavor for most traditional IT departments. And connecting to a cloud service is the start of the operational challenge not the end. How well is it working managing our cloud services ourselves? It isn t, said the VP of IT for a mid-sized manufacturer who responded to this survey. Part of the challenge was how little the cloud providers themselves understood about enterprise support needs. Sure, [our cloud provider] lets you know when they have a problem they you. Which isn t good if you are using [their service], he said. Is IT simply stuck with this problem? Is this just the new normal? Through inquiries with enterprise IT leaders who have been early adopters of cloud services, Forrester Research has found that for many of them, the path to more efficient management of cloud services has been through involving a managed services provider (a telecommunications company, a system integrator, a value-added reseller or other firm) in the active management, and purchase of, cloud services. These leading edge enterprises indicated that they could leverage the expertise of the service provider and its proven practices in managing cloud services for multiple clients to achieve greater efficiencies than they could achieve managing the clouds on their own. So in this commissioned research project, Forrester set out to see how widespread this experience was and if the average enterprise could expect the same. Our approach was to survey 155 US-based enterprise 1 IT leaders to see if it was true that purchasing cloud services through a managed services provider could yield lower overall costs, better performance, higher SLAs and other benefits, over directly buying and managing these services yourself. Our survey would split the respondents between those who have a collection of cloud services under management at a service provider from those who go it on their own to ferret out the key differences: What breadth of cloud/saas services are enterprise customers using or considering today? From our ForrSights surveys we knew the average enterprise had at least 4 SaaS solutions in house today, so we wanted to see what services were most commonly sourced this way and which would be considered out of bounds. What level of value is derived from having a service collection managed by a single provider? We sought to find out where the benefits were most commonly being achieved and whether these benefits were expected or unexpected. We also hoped to identify what should be the expected benefits and what might be expected but not realized by those using service providers in this way. What if any challenges are proven or perceived, related to a service provider collection? The study also sought to identify the pitfalls in outsourcing cloud service management to better guide enterprise clients through this use case. What are the vendor preferences for a service aggregator, and what drives those preferences? Certainly all service providers are not created equal. So we set out to identify what makes a good partner in cloud management. Page 3

5 Our survey respondents were from all major vertical markets and all were consuming cloud services today. Nearly 80% were expanding their consumption of cloud services. Respondents were roughly split between those who had a service provider managing a collection of cloud services on their behalf, and those who were managing the services themselves (see Figure 1). Figure 1 Nearly Half of Respondents Were Using a Service Provider to Manage Cloud Services Base: 155 US IT decision-makers with insight into Cloud/SaaS services decisions Enterprises moving to cloud are planning aggressive use Survey respondents were very clear on their plans for cloud services they are moving aggressively into greater cloud consumption. Nearly every category of cloud computing was under consideration by at least 30% of respondents (see Figure 2). Enterprises reported that the most commonly used cloud services today are office productivity, content management and Infrastructure as a Service (IaaS). In five years, business continuity would take over the top spot while nearly all other cloud service categories would be adopted by more than 30% of enterprise respondents. This strong shift to cloud services is driven jointly by the business desire for greater agility and better reliability and IT s goals of greater efficiency and cost reduction. An IT Operations manager and a mid-size manufacturer stated that, our motivation is cost savings, convenience and operational process savings and avoiding downtime. Page 4

6 Figure 2 All Services are Open for Cloud Replacement Base: 155 US IT decision-makers with insight into Cloud/SaaS services decisions However, aggressively moving to the cloud presents challenges. There s the complexity of managing a growing list of vendors who have incompatible services that have to be integrated with existing processes and systems. Enterprise IT has to monitor these services and their use of the service to ensure performance is adequate, costs are kept under control and that business needs don t go unanswered. For example, as your business incorporates a content management service into its practices you start to store your intellectual property in this service and that data needs to be properly protected. If the base security solution provided by the SaaS vendor doesn t meet your needs, you have to supplement their security with your own measures. And every employee who has access to a given cloud service needs a user ID and password to this service. IT has to manage these log-ins if it wants to ensure it could off-board an employee when they leave the company. And no SaaS service is an island. Business workflows will dictate integrations between the customer relationship management system and your financial system or enterprise resource planning application. These integrations must be built, managed and monitored to ensure business processes flow fluidly. These efforts to Page 5

7 supplement the base cloud service is what Forrester calls the Uneven Handshake and is a fact of IT Operations life in the cloud era (See Figure 2). No cloud service will fully meet your corporate needs out of the box. If these actions are taken one cloud service at a time, the result can be inconsistent architectures, redundant implementations and one-off efforts. All of these make managing multiple cloud services a serious headache but are easy mistakes to make for an enterprise just getting its feet wet in cloud computing. Someone has to close this gap. By default it is you, but it doesn t have to be. Figure 3 Managing Cloud Services is an Uneven Handshake Source: Justifying Your Cloud Investment: Test And Development, Forrester Research report, August 26, 2010 Key to efficiency gains: Working with an aggregator Why go through the pain of learning about each new cloud provider, determining what types of integrations they support, whether they can connect to your identity management system, what logs and other mechanisms they provide for monitoring their services and figuring out what you will have to do special for them when there are service providers who already know this. Many managed service providers can bring best practices in cloud management to your company that offload your limited staff from these responsibilities. Through partnerships with cloud service providers, managed service providers often have certified staff who are experts in the IaaS and other cloud services your company is using or wants to adopt. They already know what it will take to bring a new cloud service on board fast and have pre-defined integrations so one-offs and redundant efforts are minimized. And the more cloud services they have expertise on, you can reap greater benefits as you invest in more cloud services. Page 6

8 Survey respondents working with a service provider reported that the greatest cloud/saas benefits they are seeing center around operational efficiencies (See Figure 4). We ve moved from managing services to managing the SLAs of our strategic providers, said an IT director at a large manufacturer. He further reported that handing over the day-to-day management freed up his staff to work with the business on new capabilities and services, making his department more business-critical. Figure 4 Firms Consolidating Cloud Services See Greater Benefits Base: US IT decision-makers with insight into Cloud/SaaS services decisions in each segment More than 40 percent of the respondents to the survey who had a service provider managing their cloud services reported having achieved benefits including lower operational costs, greater security and operational efficiency benefits (see Figure 5). Approximately one third of these respondents said working with the service provider yielded lower costs per cloud service and more consistent SLAs and support. This one is a hard but a true lesson as all cloud services have different support models and SLAs, so aligning them to the needs of your help desk procedures, business availability and performance needs increases in complexity with each new cloud service brought on board. Having a service provider who can help normalize SLAs and support can make cloud consumption significantly easier. Page 7

9 Figure 5 Operational cost and security improve with aggregation Base: 73 US IT decision-makers who use a collection of 3 or more cloud/saas services provided and managed by a single vendor Passing that complexity to a service provider of course increases the base cost of using the cloud service but the additional costs are for operational responsibilities you would be incurring directly otherwise. This appeared to be a worthwhile tradeoff for the survey respondents. We want to focus on the users and not have to manage all these individual apps, said the IT director at a midsized local government agency. It s not really cheaper (sadly) but that isn t the motivation. While most enterprise IT shops are primarily motivated to cut costs, they must always balance this desire against the burdens on their internal staff both in on-going responsibilities and in training requirements. For many survey respondents it was a better use of their money to invest in a provider who could sit between them and their cloud service providers and take responsibility for these challenges off their hands. Single point of responsibility is a big deal for us, said the IT director at a large manufacturer, Not just to lay the blame but to ensure we don t take on services that aren t ready yet or mature enough. We ve done that in the past and it wasn t pretty. Page 8

10 Benefits from aggregation keep climbing the more cloud services you use Another key finding from this research was that enterprises reported increasing benefits from working with a service provider as they aggregated more cloud services under them (see Figure 6). Interviewees shed more light; that the complexities of cloud service management simply climb the more services your company consumes and thus an aggregator who can shield you from these complexities increases in value. Originally I would have said that multiple vendors was the way to go, to avoid lock-in. But now I m seeing a strong value in working with a vendor who has more experience and backing, said the VP of IT as a Midwestern manufacturer. We d buy services through them on their SLA to get the advantages. Figure 6 Benefits from Aggregating Cloud Services Stay high as More Services are Added Base : 151 US IT decision-makers with insight into Cloud/SaaS services decisions who identified benefits to an aggregated cloud service approach A key advantage to service aggregators is unifying the view into the cloud for the enterprise. The aggregator provides a dashboard for the services they aggregate and shows you the route-arounds when they execute them, said the VP of IT at another manufacturer. Additional key benefits include managing integrations and serving as a consistent first tier of support for handling service questions that might not clearly fall into the purview of a single cloud provider. For example, you may have a business service that involves an ecommerce site running in IaaS that pulls customer information from a SaaS-based CRM system. When the customer places an order, that order may pass through a cloud-based payment system and over to another SaaS based finance system. When an order fails, whose fault is it? If a service provider is managing all these relationships for you, there s no question about who you call. For this reason many survey respondents said the expertise of the service aggregator played a key role in their selection of cloud service providers. As one IT operations manager put it: We d evaluate one [cloud service] versus another based on cost and in-house familiarity. The aggregator s bent would be the trump card. As this IT manager for a local government put it: [There s] nothing I would not want them to do, so long as they could meet our privacy concerns. We re doing a whole lot more plumbing than business management. Page 9

11 KEY RECOMMENDATIONS If you want to get the most out of your cloud services aggregator, make sure you play to their strengths. By no means are they all created equal. Some are deep in networking, security and identity while others may be best in integration, customization and monitoring. The key is in balancing what you have direct expertise in managing (and feel you should manage yourself) and where the aggregator has core expertise that delivers you the best benefits by off-loading. A simple place to start is to draw the line between integration with systems you manage and those that lie in the cloud. You control the interfaces to the services that will remain in your data center and have the mechanisms in place to monitor them, so this should most likely stay with you. Above that line you will find, as you add more cloud services that many workflows will pass between cloud services, beyond the purview of your existing monitoring and management. Some key areas that service providers can lend the most assistance are: Identity and security federation. Every cloud service has its own credentials for your employees to use the service. You don t want individual employees managing these and few cloud services today can directly federate with your inhouse Identity server. Managed service providers with expertise in these areas can provide single-sign on solutions, validation of access rights, on-boarding and off-boarding of employees and monitoring of the now greatly-expanded security perimeter. Service providers can also ensure that your use of cloud services complies with security and regulatory requirements by supplementing base security offerings and actively managing use. Integration. Building and managing business workflows can be the most complex part of consuming cloud services. Rarely does an enterprise consume a cloud service in total isolation, with no information flowing in or out of the cloud service. More than likely you will have business processes that require key information or transactions to be passed between multiple cloud services. While most cloud services provide APIs for integration, there are few standards in place to define these connections. And your business workflows are not static. Service providers with expertise in this area can leverage pools of internal resources who stay up to date on the integration architectures of cloud services on behalf of all their clients, making the maintenance and agility around fast-moving business changes easier to implement. Leveraging the aggregator s expertise. No service provider can be expert in all things cloud. So it is imperative that you understand what cloud services they are experienced in, what areas of service they can best provide to you, and avoid asking them to managing things they don t. Ask for cloud service administration certifications, depth of engineering skill, dashboard integrations. Where an expertise is in question, ask for customer references to see how well they execute in these areas for other enterprises. Defining and maintaining your SLAs. A key role a service aggregator can play is in fulfilling the uneven handshake with a cloud provider who offers a standard SLA for its service and the specific performance and availability needs of your enterprise. The benefit of cloud services comes through their economies of scale. This is why they typically offer a standard SLA for their service to all customers. If they have to do a custom SLA for you, they likely cannot deliver you the same service and certainly not at the low price that attracted you in the first place. Often, achieving the SLA you want comes more in how you use the cloud service than in the base SLA they provide. Service providers bring an understanding of what you want and can normalize this across cloud services by supplementing the cloud s base SLA where needed with their actions. On an IaaS platform, this might mean ensuring all your workloads are deployed redundantly and across data center availability zones. These configuration moves increase workload SLAs. Free your IT team to engage the business and innovate. What s a better use of your precious in-house resources: monitoring a bunch of commodity cloud services or helping the company determine how it can better leverage all the technology options to win business? A key challenge for today s IT departments is business relevancy and it stems from the above question. When the focus in IT is managing existing systems, it diminishes business engagement. 2 And few companies today are not technology-driven. IT is typically the most knowledgeable part of any company about what s possible with technology services, yet it often doesn t have a seat at the table when new products and services are being conceived. 3 Don t perpetuate this problem as you embrace cloud services. Offload these responsibilities so your team can focus on new projects and capabilities. Page 10

12 Appendix A: Methodology and Study Demographics In this study, Forrester conducted an online survey of 155 US organizations with 500 or more employees to evaluate current use of cloud services, and particularly the use of a service aggregator for those services. Survey participants included IT decision-makers with insight into their organizations cloud/saas decisions. Questions provided to the participants asked about current use of services and cloud providers/aggregators, service aggregation benefits and challenges (actuals from those already using this approach, and predicted by those not using an aggregator), as well as vendor preference and selection criteria for cloud services. Forrester also conducted four in-depth follow-up interviews with participants from the online survey. The study was conducted in October Figure 7 Company sizes and industries represented Base: 155 US IT decision-makers with insight into Cloud/SaaS services decisions Page 11

13 Figure 8 Respondent roles and responsibilities Base: 155 US IT decision-makers with insight into Cloud/SaaS services decisions Appendix D: Endnotes 1 For the purposes of this study enterprises were defined as companies with 500 or more employees 2 Reference to latest MOOSE report by Andy Bartels 3 Source: BT 2020: IT's Future In The Empowered Era, Forrester Research Inc., January 7, 2011 Page 12

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