Accenture Media & Entertainment Point of View. Not just blue-sky thinking: Cloud computing and the digital supply chain

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1 Accenture Media & Entertainment Point of View Not just blue-sky thinking: Cloud computing and the digital supply chain

2 Based on Accenture's work with the first generation of digital supply chain solutions, we believe cloud computing shows great promise in moving broadcast, studio and entertainment companies to the next generation of value. By using the cloud for selected digital supply chain processes transcoding, file transfer, vault services and so forth companies can address a number of constraints that a traditional IT infrastructure presents to the content management and distribution supply chain. Cloud computing offers companies the opportunity for nearly unlimited scalability to meet peak demands in processing the growing size and complexity of digital files. Beyond the processing that will continue to reside within their own data center, companies can meet variable needs by leveraging the cloud. This hybrid approach can help companies advance toward high performance by creating a more agile and responsive processing capability, differentiating their ability to serve customers and potentially reducing costs by 50 percent, and perhaps as much as 80 percent*.

3 Overview: The opportunity of the cloud Cloud computing has emerged in recent years as a new and important computing paradigm. The cloud can deliver almost unlimited scalability for hardware and software, variable costs (as opposed to fixed costs) for IT, and continuous upgrades for missioncritical software and hardware. With a cloud model, infrastructure availability expands or contracts to handle peak usage requirements, and cloud clients pay only for what they use much the way that we pay for water, telephone or electricity. For broadcast, studio and entertainment companies under increasing pressure to automate manual processes and to make their digital supply chain more integrated and efficient, cloud computing represents an important opportunity. Managing the hardware costs to manipulate and process hundreds of gigabytes of media data is a significant challenge. The files are huge, and the amount of computing power needed to process and distribute those files is variable, characterized by spikes of activity that may be followed by periods of much lower volume. Even though such peaks may only occur sporadically, the infrastructure must be sized to support those peaks a significant cost drain. If such resources are not available when needed, a company may not be able to process orders in time, resulting in poor customer service or the inability to make new deals. Cloud computing represents the opportunity to process digital media files on a pay-as-you-go basis, from remote locations using a global network. A base set of technologies and processing capabilities continues to reside within a company's data center. The cloud then allows users to augment those in-house capabilities accessing via the Internet vast technology resources that provide instant scalability and help companies avoid investments in hardware that is not consistently used. The cloud can support specific activities within the end-to-end processing on an as-needed basis: activities such as transcoding, watermarking, content security, metadata and other value-added services. Based on Accenture analysis, we believe such an approach to augmenting an in-house capability with cloud resources has the potential to reduce incremental costs for companies by at least 50 percent, and perhaps as much as 80 percent, while vastly improving service to customers*. Cloud computing also improves a company's agility and responsiveness. While hardware acquisition can be a lengthy and complex process, the cloud can instantly provide the resources needed to deal with spikes in demand. A key success factor for companies will be identifying which processes in the digital supply chain can leverage the cloud, at which point in the endto-end processing of files. Some recent reports about cloud computing have applied all or nothing thinking that actually obscures the potential value of cloud computing. What's critical for broadcast, studio and entertainment companies to bear in mind is that cloud computing offers the flexibility needed to address their challenges when it comes to variable or ad-hoc demand. Here is the right way to characterize the cloud: It's a resource that's ready with the processing capacity when you need it, helping you reduce your costs, deal with peak demand and serve your customers more effectively. *Accenture research Not just blue-sky thinking 1

4 Taking the digital supply chain to the next level of value and performance With a highly efficient digital supply chain, companies can strike superior or even exclusive deals because of their unique ability to serve their customers quickly and efficiently. The benefits of a digital supply chain For broadcast, studio and entertainment companies, the past few years have brought with them an explosion in media distribution channels and devices. This development has caused media suppliers to rethink the way media is created, distributed and consumed. The rise of service-oriented architecture (SOA), as well as improvements in network, storage and processing technologies, have enabled a new kind of supply chain with automated, file-based processes instead of time-consuming and costly manual processes. A fully digital supply chain the ultimate goal of these technological developments is an end-to-end capability representing a broad set of technologies and services, supported by a comprehensive network architecture. This type of supply chain helps companies manage their entire content management and storage processes digitally. Most companies' legacy media processing operations have limited scale efficiencies and can rapidly become overstretched by the increased operational effort needed to deliver tailored digital content. The digital supply chain, by contrast, represents an opportunity to create a highly efficient processing environment, characterized by streamlined steps and processes (see chart opposite), minimized use of physical media, increased visibility into storing and sharing of content, and a commitment to high quality, from creation through consumption. This digital environment also emphasizes high security and traceability. With a highly efficient digital supply chain, companies can strike superior or even exclusive deals because of their unique ability to serve their customers quickly and efficiently. 2 Accenture Media & Entertainment

5 How a digital supply chain works Encoding and ingesting Vaulting Processing and transformation Packaging and distribution Media is converted from source to file File-based media mezzanines are stored and backed up Content is processed and transformed according to customer needs Media files are packaged and delivered to customers over the network At a high level, the digital supply chain consists of the following steps: 1. Encoding and ingesting At the start of the digital supply chain, media is encoded from a variety of sources to a high-resolution, filebased copy. Automation of the encoding process is difficult, because human intervention is required to handle the physical media that go into the encoding workstation. Once the media has been converted to a file, it is enhanced with metadata and ingested in a digital vault. 2. Vaulting The digital source copy is transferred from the encoding facility to a digital vault. The digital vault is measured in many petabytes of data and many industry observers predict that such data loads will only increase. This large storage area is usually architected as a tiered storage pool from which files are retrieved for servicing customers. 3. Content processing and transformation Typical content processing and transformation may involve transcoding, watermarking, cropping, overlays or any other content transformation operations that can be automated from digital source material. 4. Packaging and distribution The final media file is packaged with the appropriate metadata for delivery to the customer. Delivery takes place over a network with business customers typically spread across the globe. Not just blue-sky thinking 3

6 Figure 1: Resource utilization and the digital supply chain Vaulting Content, processing and transformation Packaging and distribution Storage/network Processing Storage/network...fluctuations in demand, especially unforeseen spikes or peaks caused by orders that are larger than anticipated, may introduce significant risk to the business. Limitations of the digital media infrastructure Although companies have realized significant benefits from digital supply chains, experiences to date suggest that even greater opportunities for efficiency, speed and customer service are available if companies can overcome certain limitations inherent in the physical technology infrastructure. Consider how infrastructure resources processing power, storage and network are utilized to support the business processes in the digital supply chain. Figure 1 provides an overview of infrastructure resource utilization patterns across the different steps of the digital supply chain. As shown, the manner in which these resources are utilized is highly variable, driven by great fluctuations in demand. Storage requirements grow steeper at the launch of a digital supply chain program to support historical content ingestion. Requirements evolve toward steady growth for new features and episodes. The objective of the vault is to store mezzanines for future servicing; content typically is not deleted from the vault, adding to storage space challenges. Both the content transformation and distribution steps within the digital supply chain are driven by customer demand that tends to be volatile and difficult to predict. On a slow day an average of 100 gigabytes of data may be processed; on busy days, a company may need to deal with as much as 20 times that amount. Content transformation relies heavily on processing resources to perform operations such as transcoding, watermarking and content processing. The distribution step requires storage and network bandwidth to stage and serve customers orders over the network. 4 Accenture Media & Entertainment

7 Figure 2: Underutilization 1 Figure 3: Unexpected peaks 1 Demand Demand Capacity Capacity Bandwidth requirements are highly variable. Periods of limited utilization are interspersed with spikes of high activity. For example, content processing may sit idle for several hours while the system is waiting for orders to come in. When a big order arrives, a large pool of processing resources may be required. (See Figure 2.) Peaks and valleys pose a financial challenge to the digital supply chain. The system needs to be scaled for peak load in order to support the business. (See Figure 3.) For a media company managing its digital media infrastructure, these IT constraints translate directly into large capital expenditures for resources that are not utilized effectively. These fluctuations in demand, especially unforeseen spikes or peaks caused by orders that are larger than anticipated, may introduce significant risk to the business. When orders cannot be processed on time, the business may lose credibility (and money) because of the need to revert back to slower and more inefficient manual processes to meet the demand. Planning for peak demand is further complicated by the fact that new customers constantly enter the market and technology evolves quickly. Such variability makes it hard to forecast how much capacity will be required to process media orders in the future. That, in turn, can lead to either under- or over-allocation of infrastructure resources. With the demand for digital media continuing to grow at a rapid pace, suppliers will be required to continue to expand their IT infrastructure footprint. The speed at which demand is growing, combined with the complexity of the technology environment, will require frequent upgrades to existing infrastructure and continuing expansion of the infrastructure footprint. When orders cannot be processed on time, the business may lose credibility (and money) because of the need to revert back to slower and more inefficient manual processes to meet the demand. 1 Adapted from Above the Clouds: A Berkeley View of Cloud Computing Not just blue-sky thinking 5

8 Figure 4: Capacity growth and cost Cost Capacity t+2 Capacity t+1 Capacity t t t+1 t+2 Capital expenditure Operating expenditure Given the close correlation between demand and the need for IT infrastructure resources, companies are likely to incur short capitalexpense cycles to support expansion. Companies must increase their operations investments to maintain the digital supply chain infrastructure. (See Figure 4.) In addition to the high costs for existing suppliers, these costs also present a barrier to new entrants. The digital supply chain requires IT capabilities that depend on complex technologies with high acquisition costs. The typical supply chain infrastructure consists of a tiered storage infrastructure with storagearea network (SAN) and tape libraries, large storage pools, fast outbound and inbound network connections, and multiple processing servers. The high costs associated with setting up an in-house infrastructure often prevent many media suppliers from effectively transitioning to a digital supply chain. The benefits of moving selected digital supply chain processes onto the cloud Although the digital supply chain continues to be an important step forward in optimizing processes and reducing costs for broadcast, studio and entertainment companies, moving to the next level of value requires rethinking whether 100 percent reliance on an in-house digital media infrastructure is the best path forward. Such an approach can result in ineffective IT utilization, increased business risk and high costs. Therefore Accenture believes that media and entertainment companies should now be aggressively evaluating cloud computing service models as a way to augment selected processing capabilities during peak periods. (See Figure 5.) Using cloud computing on an as-needed basis has the potential to deliver a host of important potential benefits: 6 Accenture Media & Entertainment

9 Figure 5: Opportunities for leveraging the cloud for selected digital supply chain processes Encoding and ingesting Vaulting Processing and transformation Packaging and distribution Media is converted from source to file File-based media mezzanines are stored and backed up Content is processed and transformed according to customer needs Media files are packaged and delivered to customers over the network Cloud Instant access to virtually unlimited infrastructure resources With cloud computing, a virtually unlimited amount of computing resources can be obtained on a moment s notice procuring and decommissioning infrastructure resources in a variable manner. While these resources are obviously physically limited by the size of the cloud computing provider s infrastructure, the provider s capacity will typically exceed what most users need even at peak load. Lower costs due to usagebased pricing Cloud computing works on a utility paradigm, in which companies pay for computing resources as they pay for electricity, water or telecommunications services. That is, they pay only for the amount of resources utilized for the duration they were active. Such a pricing model is substantially different from traditional hardware procurement because cost is shifted from a capital expense to an operating expense. (See Figure 6.) The impact on cost is significant. For example, a company can decide to launch 100 servers with 8 CPUs for two hours and only pay for 200 hours of computing time. For the equivalent cost of running a single server on the company's own site, a company can run 100 servers on the cloud. Figure 6: Usage-based pricing Demand Operating expenditure Capacity The actual cost will vary based on how effectively computing resources Not just blue-sky thinking 7

10 Figure 7: Comparison of pricing models: Traditional in-house approaches vs. hybrid cloud models Traditional in-house cost model Cost model leveraging cloud computing In-house capacity Cloud capacity In-house capacity Fixed capacity cost Variable capacity cost We believe cost savings from a cloud-based approach to the digital supply chain are potentially dramatic: from a potential 50 percent savings to as high as 80 percent. are utilized. However, unit cost for similar orders should be relatively fixed, independent of the number of orders processed. In certain cases the cost per order will go down with volume as most cloud providers provide tiered pricing. Based on Accenture analysis, we believe cost savings from a cloudbased approach to the digital supply chain are potentially dramatic: from a potential 50 percent savings to as high as 80 percent. These numbers alone should be giving CIOs and other executives ample reason to consider cloud computing. (See Figure 7.) Opinions from different analysts currently differ about whether large enterprises can realize cost savings by moving to the cloud for their IT infrastructure needs. However, some of these analyses fail to consider the unique characteristics of a digital media environment, where the variable nature of usage and demand more clearly establishes the business case for moving to the cloud. Broadcast, studio and entertainment companies must be able to fulfill peak demand quickly and efficiently. The cloud is a way to meet that need quickly and at less cost, while simultaneously providing an organization with greater flexibility to support growth. Greater agility The speed with which computing resources can be acquired is far greater than the traditional hardware procurement cycle. For example, the time needed to procure and configure the hardware needed to process peak data loads is frequently measured in months. In the cloud, such capacity can be acquired in minutes. The availability of nearly unlimited infrastructure resources means that a digital supply chain infrastructure can adapt much faster to changes in demand. 8 Accenture Media & Entertainment

11 Figure 8: In-house operations vs. cloud operations Risk + cost Customer operated Customer operated Software Operating system, programs... Hardware CPU s, storage, switches, cabling, memory... Physical facility Electricity, cooling, floor space, security... Software Operating system, programs... Cloud operated Hardware CPU s, storage, switches, cabling, memory... Physical facility Electricity, cooling, floor space, security... Lower costs for entry Cloud computing capabilities are provided as an externally managed service. The ability to instantly obtain access to computing resources through a third party can greatly reduce the need that new entrants have had to build an IT infrastructure in-house. Furthermore, some cloud computing vendors provide the option to deploy applications to multiple, geographically distributed data centers at no additional cost. Lower cost of entry through cloud computing allows new digital supply chain initiatives to be launched more easily. Decreased operational burden A cloud computing platform abstracts the lower level infrastructure resources away from the customer by providing access to a virtualized environment that runs on top of a physical environment operated by the cloud vendor. These virtualized computing resources are managed directly by the customer through Web services. The customer does not deal directly with the platform s hardware environment and thus does not need to worry about lower-level concerns such as hardware maintenance and upgrades, datacenter expansion or any other overhead that comes with running a data center. This kind of abstraction not only hides complexity, but also shifts both the operational and risk burden away from the customer to the cloud provider. (See Figure 8.) Lower cost of entry through cloud computing allows new digital supply chain initiatives to be launched more easily. Not just blue-sky thinking 9

12 Guidance points in migrating successfully to the cloud Based on an analysis of the benefits and potential risks of migrating portions of the digital supply chain to the cloud and also based on a company's existing capabilities and readiness to change the following guidance points need to be closely considered: Vendor capacity and stability The digital supply chain must be able to accommodate large media files up to 200 gigabytes. The amount of data that a company may need to store on a single day could be as high as 5 terabytes. So companies need to carefully evaluate the provider's ability to provide this kind of capacity. The cloud provider must be able to support storage of very large files and support the network throughput required to upload files from the encoding facility to the cloud within a reasonable time window. Some cloud computing vendors are offering ways to load large data dumps directly from physical devices to the cloud. Cloud vendors can work with customers to establish dedicated network connectivity between a customer s data center and the cloud data center. Specialized capabilities such as file transfer acceleration technologies can optimize bandwidth utilization and allow customers to send large files reliably, quickly and securely over a long distance. Companies must also carefully assess the stability of the provider's business. Data migration to cloud-based approaches may introduce significant additional costs if the cloud platform goes out of business. Data protection and security For some companies, the idea of entrusting vital data to a third party in the cloud may be a formidable psychological barrier. Education and communication initiatives are often important here in helping executives understand where risks exist but equally important, where such risks are more a matter of perception than of reality. Companies that have persistent concerns may be able to attain a 10 Accenture Media & Entertainment

13 When it comes to using third-party digital media services on the cloud, security is certainly going to be a topic of discussion. better sense of assurance by keeping key data within reach through onsite back-ups. Media suppliers can make back-up copies that are kept on-site to alleviate the costs and risks associated with switching cloud vendors. When it comes to using third-party digital media services on the cloud, security is certainly going to be a topic of discussion. However, the legitimate counter to this concern is that a large cloud provider whose entire business is predicated on securing its clients data and applications would be in a better position to do so than the IT organization of a single company. Most cloud vendors support high levels of encryption and undergo industry-standard security audits. Based on our own analysis of the security features provided by various cloud vendors, it is important to assess a number of procedures and approaches for that must be in place in the cloud for data security. Platform viability Companies must be aware of certain inherent characteristics of a cloud computing platform. For example, a cloud platform typically provides a fixed set of infrastructure capabilities and will not allow customers to run their own hardware within the cloud. That means that specialized hardware such as tape decks, graphics cards or other mediaspecific devices cannot be deployed in the cloud. The platform needs to support the storage, processing and network capabilities necessary to support the digital supply chain. However, most steps in the digital supply chain, with the exception of encoding, do not rely on specialized hardware or may be modified to utilized software instead of hardware, so this characteristic of the cloud is not necessarily a serious impediment to success. Well-established vendors are quickly growing the number of enterprise-grade infrastructure capabilities they support and are eager to work with enterprises to enhance their services. Accenture has performed in-depth analyses of cloud computing platforms and is currently working with leading vendors to evaluate the capabilities required to support the digital supply chain. Software compatibility Most cloud vendors provide only a limited set of operating systems. Certain software components in the digital supply chain (e.g. codecs) are only supported on select operating systems. Companies should be communicating carefully with potential vendors about the compatibility issue. Vendors of highly specialized media software are often willing to work with customers to provide support for particular specifications. Accenture has found that one of the critical success factors for companies at this stage in the evolution of cloud Not just blue-sky thinking 11

14 Accenture is currently working with several video processing software vendors to enhance their licensing models to support deployment in the cloud. computing is an ongoing dialogue with relevant software vendors. It is vital that every part of the ecosystem of providers and clients pool their perspectives and work collaboratively toward common goals. Software licensing Traditional software licensing is often CPU- or volume-based. Transcoding software, for example, is priced per CPU. A traditional software licensing model is not well adapted for the cloud as a cloud-based solution may be built to automatically scale up to a number of CPU s which may not be known upfront. Furthermore, given the virtualized architecture of most cloud platforms, a distinction may have to be made between the number of virtual and physical CPUs. A number of vendors have started to offer cloud-based licensing models with pricing linked to the amount of time the software has actively been used. This often translates into a premium on top of the cloud vendor s price for running a server instance with the vendor s software installed on it. Accenture is currently working with several video processing software vendors to enhance their licensing models to support deployment in the cloud. Architecture Because of Accenture's heritage as a systems integrator, the architectural dimensions of large-scale infrastructure deployments are of special interest. A digital supply platform architecture will need to be enhanced to support deployment in the cloud. This is because the manner in which applications need to behave in the cloud may be dramatically different from the way that the same application would behave in a traditional environment. Consider several distinctive characteristics of the cloud: the ability to automatically scale up or down, the need for centralized storage devices accessible over web services, and dynamic networking. These are capabilities not typically found in the traditional data center. Significant architecture changes may therefore be required to reap the full benefits of a cloud-based supply chain. However, while additional effort may be required to port an existing supply chain application to the cloud, the long-term benefits should outweigh the cost of such a migration. 12 Accenture Media & Entertainment

15 Conclusion Although the modernizations inherent in a digital supply chain have generated many new efficiencies, significant inefficiencies still exist in terms of developing and maintaining a media-processing infrastructure. Compared to a traditional IT infrastructure, a digital media technology infrastructure places unique stresses on an organization. The digital supply chain continues to deliver enormous benefits to companies; but moving to the next phase of value requires an evolution to the existing operations of that supply chain leveraging cloud computing. When it comes to media processing, managing the hardware costs to manipulate and process hundreds of gigabytes of media data is a daunting challenge, especially because the demand for processing power is so variable. Companies are under intense pressure to scale up to serve an ever expanding set of distribution channels and devices both of which have increasingly diverse sets of requirements in how the content is tailored and formatted for consumption. Demand on any given day can vary by several terabytes. Companies must carefully consider whether they are being responsible stewards of their investments by maintaining hardware that is only needed for small portions of a given year. For existing broadcast, studio and entertainment companies as well as new entrants, cloud computing can enable the next generation of the digital supply chain. With an elastic digital media infrastructure that can expand or contract as needed, cloud computing in a digital media environment can help companies scale whenever needed to meet peak demands. They can also dramatically lower their costs, improve process speeds and provide a differentiated capability that can grow market share. Cloud computing can provide the agility and flexibility needed to adapt to ever-changing market conditions. Companies that intend to stay ahead of their competition need to consider the possible constraints of their traditional, in-house digital media infrastructure which may not effectively deal with unforeseen demand peaks, nor with future growth and technology change. Cloud computing has the potential to address many of these companies' ongoing needs. Even though challenges exist, cloud computing is an important part of the foundation for future digital supply chain platforms and therefore essential to achieving and sustaining high performance in these challenging times. Not just blue-sky thinking 13

16 Contact For more information on cloud computing and the digital supply chain, please get in touch with: C. David Wolf Global Lead, Digital Transformation, Accenture Media & Entertainment Thomas Van de Velde Ross M. Sonnabend Ross is on Twitter at: rsonnabendacn Website Copyright 2009 Accenture All rights reserved. Accenture, its logo and High Performance Delivered are trademarks of Accenture. This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative. About Accenture Accenture is a global management consulting, technology services and outsourcing company. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. With more than 181,000 people serving clients in over 120 countries, the company generated net revenues of US$23.39 billion for the fiscal year ended Aug. 31, Its home page is Media & Entertainment Accenture helps entertainment, broadcast, publishing, printing and portal companies adapt to the realities of the digital evolution and capitalize on new opportunities. More than 1,000 dedicated professionals provide media and entertainment companies with a distinctive combination of business and technology consulting, systems integration and outsourcing capabilities. Accenture has worked with 19 of the 20 largest media and entertainment companies in the world.