The Myths and Magic of Cloud Computing and How it is Revolutionizing the World

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1 The Myths and Magic of Cloud Computing and How it is Revolutionizing the World Jay Roy Chief Executive Officer Practical Intelligence for Ensuring Profitability IMA DFW - Fall 2011 Dallas, TX

2 Cloud Computing Confusion at its Best vs. 1

3 What is Cloud Computing? Learning Objectives 1. What is It and why has it suddenly become popular? 2. Why should our company move to the cloud? 3. As a financial or IT professional, why should I care about it? 4. What should I fear about the cloud and what are my risks? 5. What technical things do I need to know about it? 6. How can I add value to my organization using the cloud? 7. How do I use this as another tool in my tool box? 2

4 Poll Question Poll Question 1 Do you think cloud computing is all hype about another technology fad OR really here to stay? 3

5 Table of Contents What Is Cloud Computing? Basic Primer, Jargon and Technical details The Myths (and Potential Downsides) of Cloud Computing The Magic (and Potential Benefits) of Cloud Computing The Implications of the Cloud How the Cloud is Revolutionizing the World of the Finance Executive How You can Add Value to Your Organization Using the Cloud Examples of Cloud Computing in Daily Life Conclusion and Key Takeaways Predictive Dashboards LLC 4

6 Poll Question Poll Question 2 Do you care if your personal health information is being stored at a onsite premise or in the clouds? 2011 Predictive Dashboards LLC 5

7 Poll Question Poll Question 3 Do you care if your organization s information (accounts receivable) is being stored at a on-site premise or in the clouds? 6

8 What is Cloud Computing? Basic Primer, Jargon and Technical Details 7

9 What is the Cloud? Ø The term cloud is used as a metaphor for the Internet representing infrastructure Ø Originally, a cloud drawing was used to depict a telephone network; Currently it is used to depict the infrastructure as the Internet on computer network diagrams 8

10 What is Cloud Computing? - Primer Cloud computing is the delivery of computing as a service rather than a product, whereby shared resources, software, and information are provided to computers and other devices as a utility (like the electricity grid) over a network (typically the Internet). A standardized IT capability (services, software, or infrastructure) delivered via Internet technologies in a pay-per-use, self-service way 9

11 What is Cloud Computing? - Primer Ø Cloud Computing ( CC ) is a broad term for delivering hosted services over the Internet by service providers Ø Cloud computing has a few unique characteristics which separates it from traditional hosting: Ø Services are sold on a unit basis (e.g. per minute/hour) similar to buying services from a utility (pay for what you use) Ø Services can be purchased on an on-demand or as-needed basis and scalable to adjust to customer needs Ø Services are offered and fully managed by a third-party 10

12 What is Cloud Computing? A Snapshot of Configurations 11

13 What is Cloud Computing? - Primer Ø Cloud Computing has 3 main categories of service delivery: Ø Software-as-a-Services (SaaS) Ø Platform-as-a-Service (PaaS) Ø Infrastructure-as-a-Service (IaaS) 12

14 What is Cloud Computing? - SaaS Software-as-a-Service: A software (service) delivery model in which business applications and their data are hosted by a Cloud Provider in a cloud and accessed by users through a thin client (web browser). Examples: Google Mail or Salesforce.com 13

15 Example of SaaS Salesforce.com 14

16 What is Cloud Computing? - PaaS Platform-as-a-Service: A service delivery model in which a Cloud Provider allows customers to rent virtualized servers and associated services for running existing applications or developing and testing new ones. Examples: Google Apps Engine or Force.com 15

17 Example of PaaS Google Apps Engine 16

18 What is Cloud Computing? - IaaS Infrastructure-as-a-Service: A provisioning model in which Cloud Provider supplies all of the infrastructure including, offering the customer the ability to deploy and run software, including OSs and applications. The Cloud Provider owns the equipment and is responsible for maintaining and operating it. Examples: Rackspace, Amazon Web Services 17

19 Example of IaaS Amazon Web Services 18

20 Why has the Cloud suddenly become so popular? Robust Apps & User Interfaces Shrinking IT Budgets Outsourcing Critical Mass Services-based Economy Shared Services Weak Economy Distributed Computing Cheap Pervasive Broadband Increased Computing Speeds Rising Licensing Costs 19

21 What is Cloud Computing? Types of Clouds Ø Cloud Computing has only one Internet but three deployment methods: Ø Private Single tenant it is cloud infrastructure operated solely for a single organization (i.e. you), whether managed internally or by a third-party and hosted internally or externally. (e.g. Your Company Cloud) Ø Public Many tenant An offering from a service provider to many clients who share the cloud processing power concurrently. The service provider s public cloud clients share applications, processing power and data storage space communally. Client data are commingled, but segregation is provided through the use of metatags Ø Hybrid Many tenant is cloud infrastructure composed of two or more clouds, private or public, that remain unique entities but are bound together by standardized technology that enables data and application portability 20

22 What is Cloud Computing? Types of Clouds Ø Other Cloud Computing deployment methods: Ø Virtual Private Cloud is a private cloud existing within a shared or public cloud (e.g. Amazon Web Services) Ø Community Clouds A private-public cloud with users having a common connection or affiliation, such as a trade association, the same industry or a common locality. The community cloud business model allows a CSP to provide cloud tools and applications specific to the needs of the community. When the community is in a PaaS cloud, the SOA applets can be specific to communal requirements, e.g., business-process-specific, industry-specific. (e.g. ) Ø Variety of Other Cloud Solutions in progress 21

23 What is Cloud Computing? Attributes Defining Clouds Source: ISACA IT Control Objectives for Cloud Computing 22

24 What is Cloud Computing? A Visual of a Private Cloud Data Center Internet Private Cloud Your Enterprise 23

25 Quick Comparison between Private vs. Public Clouds Public Cloud Private Cloud Public Cloud Private Cloud Hosted at Service Provider Site Supports Multiple Customers Often utilizes shared infrastructure Supports connectivity over the Internet Suited for information that is not sensitive Can be cheaper than private cloud Hosted at an Enterprise or Service Provider Site Supports only one Customer Does not utilize shared infrastructure Supports connectivity over private network or the Internet Suited for information that is sensitive and demands high security 24

26 The Myths (and the Potential Downsides) of Cloud Computing 25

27 The Myths (and Potential Downsides) of Cloud Computing Are the following Myths or Truth? 1. CC can t handle my environment s security & privacy requirements 2. Migrating our work environment to the Cloud is just too hard 3. CC is too expensive and or potential savings is too good to be true 4. CC is an IT project & has no real business value 5. CC does not integrate well with on-premise or other clouds solutions All of these concerns have some level of validity but Without doing your home work, the myth becomes reality! 26

28 Debunking Myth 1 Cloud Computing can t handle my security and privacy requirements Facts Ø 50% or more of traditional security breaches are perpetrated by internal personnel Ø Not all cloud solutions are equally secure or insecure (reason for hybrids) Ø Some security risks are very real and some are perceived Overcoming the Myths Your responsibility Ø Perform a security analysis Ø Use encryption technologies Ø Use federated identity management systems 27

29 Debunking Myth 2 Facts Migrating our work environment to the Cloud is just too hard Ø The decision regarding which applications, infrastructure and data to migrate will be one of the biggest technological hurdles not to mention latency and interoperability Ø Not all cloud provider do migration well, migration is still your responsibility Ø Integration points are opportunities for failure missing links (UI, data, functional) Overcoming the Myths Your responsibility Ø There are many ways to migrate: virtual machines, web-interfaces or porting to a cloud platform but figure out how you will do this and by whom Ø Have your own migration plan and very solid back up plan 28

30 The Magic and the Benefits of Cloud Computing 29

31 The Magic and Benefits of Cloud Computing Are the following Magic or just Illusions? 1. Cloud computing will provide dramatic savings in IT costs 2. Our organization will be able to execute strategies faster 3. Cloud computing will free up internal resources for strategic tasks 4. Cloud Computing will enhance performance and stability 5. Cloud computing will enhance our flexibility and usage of resources 30

32 The Magic of Cloud Computing Lucky Rabbit's Foot Facts Cloud Computing will provide dramatic savings in IT costs Ø Cost Savings are as good as your projected usage. Minimum costs and hidden charges need to be considered. Ø Need to consider intangible costs of moving infrastructure and people s time Ø Need to consider how you are going to save on what IT costs (hardware, software, etc.) Validating the Magic Your responsibility Ø Due diligence through adequate planning and up front discussions with cloud provider is necessary to realize benefits. Ø Develop a road map of workloads to be migrated and cost out the savings 31

33 Accounting for IT Investments using Cloud Economics Source: Forrester Research, Inc. Talking to your CFO About Cloud Computing 32

34 Accounting for IT Investments using Cloud Economics Source: Forrester Research, Inc. Talking to your CFO About Cloud Computing 33

35 Accounting for IT Investments using Cloud Economics Source: Forrester Research, Inc. Talking to your CFO About Cloud Computing 34

36 The Implications of the Cloud 35

37 Poll Question Poll Question 4 Do you think the average business person cares if his business information is in the clouds? 36

38 The Implications of Cloud Computing Who Cares? Yeah! I m Concerned Whatever!?! Some CIOs And IT Geeks Some CIOs And Corp Attorneys General Business Person Or Hip 20 Something Work 37

39 The Implications of the Cloud Ø To Cloud or Not to Cloud Dealing with fear or lagging behind the curve Ø Organization structure and legal boundaries Ø Strategy and competitive advantage considerations Ø Talent and People aspects Ø Cost considerations including Service Level Agreements SLAs, Ø Trusted vendors? Standards to fall back on? Ø Security, risks and business continuity considerations (What-if there is a breach?) Ø Work-Life Balance considerations Being On 38

40 How the Cloud is Revolutionizing the World of the Finance Executive 39

41 CC is Revolutionizing the World of the Finance Executive CC impacts us in a variety of ways Ø Decision making about how the organization delivers its products and services to internal customers will change Ø The focus of Auditing and Accounting will move to the digital era Ø Business Models will be in flux especially in the area of variable and overhead costs Ø Risk & Reputation Management will take precedence in the short-term Ø Talent & Knowledge The CC Department? Ø Success Metrics Its working! Really? Ø Outsource or Not Outsource Impacts on you and your customers Ø Work-Life Balance Being On 24/7 40

42 CC is Revolutionizing the World of the Finance Executive Ø Accounting for IT investments will be dramatically simplified Ø The Financial Executive will shift focus to a monitoring and benchmarking focus Ø The finance function will be scrutinizing the value of internal IT resources and costs versus outsourcing IT activities from the cloud. Ø The finance team will be responsible for negotiating subscription fees instead of license fees Ø Cloud providers will have to justify and quantify their value in terms of security, compliance, service levels, compared to the marketplace Ø Finance department will be monitoring: subscription fees/per-user fees, resource usage and direct costs 41

43 How You can Add Value to your Organization 42

44 How You can Add Value to your Organization Educational Perspective Ø Educate your personnel of what the cloud is Host a Lunch & Learn for your team to understand the technical, administrative, value-adds/detracts details Ø Research specific cloud offerings specifically to your industry or niche Remember Caveat emptor Buyer beware Not all cloud services are equal Ø Understand the contractual arrangements i.e. Service Level Agreement ( SLA ) and identify the gotchas for people involved with purchasing the service Ø Understand how your IT audit function will audit the Cloud Review the latest requirements from ISACA Ø If considering cloud adoption, understand and develop a road map for implementation and migration of applications used in your function 43

45 How You can Add Value to your Organization Administrative/Contractual Perspective Ø Perform a Risk and Cost/Benefit Analyses on Cloud Computing for your situation Ø Understand the contractual arrangements i.e. Service Level Agreement ( SLA ) and identify the gotchas for people involved with purchasing the service Ø Assist in the development of the project plan to migrate to cloud if you own the financial applications Ø Improve your budget - Stop paying for services that you may use for free Ø Find out what your recourse would be if cloud computing isn t for you i.e. what things do you own (e.g. data, applications, etc.) and how to move off from that cloud provider 44

46 How You can Add Value to your Organization Security and Technological Perspective Ø Review and update your IT governance and IT change management processes with new cloud policies and practices into your Sox and compliance requirements Ø Perform and hire capable professionals to advise, develop and test cloud security regardless of the delivery model you utilized Ø Incorporate potential cloud failures into your business continuity and disaster recovery planning requirements Ø Keep abreast of changes through governance committees including cloud computing issues and identify a resource for providing regular briefings Ø Attend security and technological conferences, webinars and user groups to ensure your business and IT personnel are competent in this domain Ø Get familiar about costs to maintain an appropriate level of security see it as an investment not an expense 45

47 How You can Add Value to your Organization Business Process and Internal Controls Perspective Ø Understand how your business processes will change and affect financial reporting Ø Understand how your IT audit function will audit the Cloud Review the latest requirements from ISACA Ø Identify and incorporate into your Enterprise Risk Assessments the new risks resulting from using cloud computing Ø Discuss with your Audit Firm how changes will affect your audit 46

48 Examples of Cloud Computing in Daily Life 47

49 Case Study: The New Start-Up (Cloud Computing Start-Up) Ø A next-generation start-up that nearly used all cloud services to begin its operations 48

50 Examples of Cloud Computing that we may be familiar with 49

51 Case Study: Business Intelligence (BI) in the Clouds 50

52 Case Study: Business Intelligence (BI) in the Clouds Challenges Predictive Dashboards had to Overcome: Ø Choosing an infrastructure provider was challenging Ø Understanding the jargon, technologies and the varied offerings was overwhelming Ø Defining the minimum and appropriate standards was vexing Actions Taken: Ø Talked to as many providers and other SaaS-based Cloud Providers to make sense of and compared the offerings and figured out the Do s and Don ts Ø Punted on the standards issue and felt we could wait a while but ensured ourselves the minimum amount of security Results: Ø Learned not only the technology issues and but also the business issues of the cloud Ø Learned that technology constantly evolves and you re always in development mode 51

53 Conclusion & Key Takeaways 52

54 Conclusion & Key Takeaways Conclusion: Cloud computing has the potential for revolutionizing the ways businesses and individuals operate. However, be a skeptic! At its core, CC is another outsourcing mechanism and must be monitored. Don t forget, it s still your responsibility. Takeaway: Cloud Computing has many positives but the learning curve can be steep both technologically and administratively. The benefits can far outweigh risks. There are huge opportunities and potential for financial professionals to add value to this area and to your organization Takeaway: Cloud computing is not without risk. Do your due diligence. Unforeseen disasters may await you including security breaches, cost overruns, technological challenges, privacy issues, etc. 53

55 Poll Question Poll Question 5 Now, do you think cloud computing is Myth or Magic? 54

56 Sources, References, and Trademarks Ø Forrester Research, Inc. Talking to your CFO About Cloud Computing Ø ISACA IT Control Objectives Ø The Lego Minifigure is a trademark of The Lego Group 55

57 The Myths and Magic of Cloud Computing and How it is Revolutionizing the World Jay Roy, Chief Strategy Officer T: