CLOUD STORAGE: A BUSINESS MODEL for ENTERPRISES



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CloudStorageStrategy.com presents CLOUD STORAGE: A BUSINESS MODEL for ENTERPRISES Should you build your own PRIVATE CLOUD? Includes access to a customizable spreadsheet to test revenue assumptions by Deepak Kanwar VP of Cloud Readiness Services, Mezeo Software underwritten by

Enterprises: Should you build your own PRIVATE CLOUD? With the ever present discussions about cloud storage, it is very likely that you, as the IT leader of an enterprise, have wondered about its viability and applicability to your business. It may been triggered by a hallway conversation with your CEO or your CFO who wants to know why Amazon can offer storage at $0.15 per GB/month and your internal costs are much higher. It could have been an intriguing article you read on your last flight, or perhaps the topic was discussed at the last analyst conference you attended. Is it right for you? The resounding response of course is, it depends! Cloud Storage, as we define it, is storage that is accessed over a network via web services APIs (typically REST based). The characteristics of cloud storage make it an appealing service for your environment for several reasons. It supports rapid scalability. It provides the economic benefits of a public cloud without exposing you to the risk of storing your data outside of your premises or on a multitenant cloud storage service. It enables new capabilities. It helps check the unabated growth of your storage infrastructure. For many enterprises, the business cases can be very compelling. BUSINESS DRIVERS FOR CLOUD STORAGE DOWNLOAD Enterprise Cloud Storage Business Model >> cloudstoragestrategy. com/enterprise 1. Enterprises recognize that using a public cloud can lower their storage costs, but they are concerned about the security and privacy of the data stored outside of their firewall. 2. Enterprises are looking for ways to control storage costs in an environment where storage growth is unabated.

3. Enterprises seek ways to address issues surrounding large file transmissions email suffers because of size limitation and specialized software can get expensive especially in larger organizations. 4. Enterprises are looking for ways to eliminate security vulnerabilities associated with data being stored on USB drives such as flash drives, etc. 5. Finally, enterprises are always looking for ways to improve the productivity of their employees. It is still very early in the game, but Amazon (the pioneer of the public cloud marketplace) has created a buzz. Amazon s on demand storage can be obtained at $0.15 per GB/month. Forget your infrastructure, forget your storage capacity planning and forget your backup concerns. Just hook up to Amazon, and you have storage for $0.15 per GB/month. Given that the typical enterprise storage costs runs at $0.50 to $0.70 per GB/month, the promise of $0.15 creates a very challenging situation for the IT decision maker. Undoubtedly, there are economic benefits to the move to the cloud. However, there some concerns with the use of public clouds in general: 1. Security Public clouds work hard towards maintaining privacy and confidentiality of data; however, with data maintained in a shared infrastructure, the possibility of compromised data integrity and/or confidentiality always exists. 2. Regulatory Compliance The Patriot Act in the US allows the government to subpoena all data stored within the US. This might not be acceptable to many organizations. European Privacy Acts require that data be stored within the country of origin. Storing in the datacenter of out of country Service Provider cloud might not meet these requirements.

3. Service Levels A typical service level agreement offered by Service Provider tends to be 99.9%, while this might be acceptable for some organizations, this might be a red flag for others. 4. Total Cost Once you include the Service Provider add on for bandwidth use, the equation for a public cloud might not appear as favorable anymore. If these issues are not of much consequence to your organization, you should absolutely evaluate the public cloud. However, for decision makers that are uncomfortable with these issues, we recommend you read on. This paper identifies some of the more compelling value propositions that continue to drive enterprise interest in a private cloud. Using the accompanying model you can evaluate seven propositions (see FIGURE 1: Cloud Storage Business Model for Enterprises) and identify the fit and relevance in your environment. Based upon our experience, the question for many readers will change from, should I be leveraging a private cloud? to how quickly can I get started? DOWNLOAD Service Provider Cloud Storage Enterprise Model http://www.cloudstoragestrategy.com/enterprise

FIGURE 1: Cloud Storage Business Model for Enterprises Cloud Storage Business Model for Enterprises Note: Values in white cells can be over ridden by the user, yellow cells contain calculated values Section 1. Assumptions Discount Rate 10% Storage capacity managed/storage Administrator (TB) 200 Number of users in your organization 5,000 Cost of In house Private cloud storage (GB/month) $0.20 Average Cost of fully loaded employee $60,000 Cost of In house traditional storage (GB/month) $0.50 Cost of fully loaded Storage Administrator $90,000 Section 2. Value Proposition: In House Backup Total number of Servers in your organization 500 Total number of Desktops in your organization 5,000 Average Backup Data/Server (TB) 2.00 Average Backup Data/Desktop (TB) 0.05 Monthly Growth 2% Using Service Provider Backup Leveraging In house cloud to enable backup Cost of Server Client/Month $0.00 Cost of Server Client/Month $35.00 Cost of Desktop Client/Month $0.00 Cost of Desktop Client/Month $7.00 Cost of Storage Administrators $0 Cost of Storage Administrators $47,813 Bandwidth cost per GB/month $0.10 Bandwidth cost per GB/month $0.10 Storage cost per GB/month $0.50 Storage cost per GB/month $0.20 Cost for Month 1 $640,000 Cost for Month 1 $256,000 3 Year TCO $28,820,791 3 Year TCO $15,325,557 3 Year Savings $13,495,234 Section 3. Value Proposition: Thin provisioning = No loss in productivity Submitting requests for additional storage (fixed quota) Using Private Cloud to Thin Provision users (no fixed quota) Number of requests for additional storage (employee/month) 0.2 Number of requests for additional storage (employee/month) 0 Lead time to provision additional storage (days) 3 Lead time to provision additional storage (days) 0 Productivity lost during the waiting period 2% Productivity lost during the waiting period 0 Storage Admin time to provision additional storage (hrs) 0.25 Storage Admin time to provision additional storage (hrs) 0 Cost for Month 1 $29,148 Cost for Month 1 $0 3 Year TCO $903,324 3 Year TCO $0 3 Year Savings $903,324 Section 4. Value Proposition: Risk Management Achieving anytime anywhere access using portable devices Using Secure Private Cloud to achieve anytime anywhere access Number of removable devices in use in the organization 1,000 Number of removable devices in use in the organization 200 Cost of lost device Cost of lost device Value of data on each device $2,000 Value of data on each device $2,000 Impact to organizational reputation from data leak $10,000 Impact to organizational reputation from data leak $10,000 Possible penalties because of a data leak $10,000 Possible penalties because of a data leak $10,000 Real cost of a lost device $22,000 Real cost of a lost device $22,000 Total current risk exposure for your organization $22,000,000 Total current risk exposure for your organization $4,400,000 Annual security expense as a % of your risk exposure 5% Annual security expense as a % of your risk exposure 5% Cost of Mezeo Clients to enable ubiquitous access $2 Cost for Month 1 $91,667 Cost for Month 1 $18,333 3 Year TCO $2,840,863 3 Year TCO $878,085 3 Year Savings $1,962,778 Section 5. Value Proposition: Productivity Gains Increase in productivity from using a single tool 1.00% Value of increased productivity/ month $250,000 3 Year Savings $7,747,809 Section 6. Value Proposition: Large File Transmission Using specialized software to enable Large File Transmission Using Mezeo clients to enable Large File Transmission Cost of specialized software per user/per month $10 Cost of Mezeo clients $2 Cost for Month 1 $50,000 Cost for Month 1 $10,000 3 Year TCO $1,549,562 3 Year TCO $309,912 3 Year savings $1,239,649

TUTORIAL: HOW TO USE THE CLOUD STORAGE BUSINESS MODEL The model itself is divided into nine sections. The first section is the assumptions, and the next eight represent the seven different value propositions covered in this model. The final section shows a graphical representation of the data covered in the model. This model covers the following propositions: In house Backup Thin Provisioning Risk Management Productivity Gains Large File Transmissions Workstation Storage Upgrades Email vs. Sharing Not all value propositions will be relevant to each organization; as such this model is written to allow you to evaluate each proposition independently. Please Note: The prices that are used in this model are list prices, depending upon your relationship with the specific vendor, the prices might be lower. Below are the instructions for each proposition. The white cells within the model need your input while the yellow cells are calculated values. Section 1: Assumptions Discount Rate Enter the rate by which you would like to discount your future cash flows. For example, using a 10% discount rate would indicate that your organization views $100 earned a year from now would be the same as $90 today.

Number of users in your organization Enter the number of users in your organization. Please include contractors and part time workers in this count. Average Cost of a fully loaded employee Enter the average total compensation for your employee. Please include the cost of benefits such has vacation, health insurance, retirement contributions, etc., in this calculation. Cost of a fully loaded Storage Administrator Enter the total compensation of your storage administrators. Please include the cost of benefits such as vacation, health insurance, retirement contributions, etc. Storage capacity managed per Storage Administrator Enter the average total capacity managed by one storage administrator (150 TB to 200 TB is the norm). Cost of In house private cloud storage (GB/month) The number of $0.20 reflected in the model is an average based upon multiple business analysis, and includes the cost of the storage infrastructure, Mezeo platform, rack space, etc. This is based upon a 36 month amortization of the hardware. Depending upon your specific cost structure this number may change. Cost of traditional in house storage The number of $0.50 reflected in the model is an average based upon multiple business analysis. This is based upon a 36 month amortization of the hardware. Section 2: Value Proposition: In House Backup Section 2. Value Proposition: In House Backup Total number of Servers in your organization 500 Total number of Desktops in your organization 5,000 Average Backup Data/Server (TB) 2.00 Average Backup Data/Desktop (TB) 0.05 Monthly Growth 2% Using Service Provider Backup Leveraging In house cloud to enable backup Cost of Server Client/Month $0.00 Cost of Server Client/Month $35.00 Cost of Desktop Client/Month $0.00 Cost of Desktop Client/Month $7.00 Cost of Storage Administrators $0 Cost of Storage Administrators $47,813 Bandwidth cost per GB/month $0.10 Bandwidth cost per GB/month $0.10 Storage cost per GB/month $0.50 Storage cost per GB/month $0.20 Cost for Month 1 $640,000 Cost for Month 1 $256,000 2010 CloudStorageStrategy.com 3 Year TCO $28,820,791 and Mezeo Software. All rights reserved. 3 Year TCO $15,325,557 3 Year Savings $13,495,234

Brief description: It is quite common for Backup, a huge consumer of storage, to be handed to a service provider. However, a classic Tier 3 storage consumer backup is a perfect fit for an in house private storage cloud. Depending upon your environment, a private cloud can provide you with a very compelling business case and the security and assurance that the data are stored inside your firewall. Total number of Servers in your organization Enter the total number of servers in your organization whose data are being backed up currently (or need to be backed up). Total number of Desktops in your organization Enter the number of desktops in your organizations whose data are being backed up (or need to be backed up). Please make sure to include the desktops assigned to part time workers and contractors if their data also need to be backed up. Average backup data per Server Enter the average data that are backed up per server. As you make this calculation, please remember backup data size might far exceed the data currently existing on the server to accommodate versions and additional copies for redundancy. Monthly Growth Enter the monthly growth of your backup data. Cost of Server Client/month Enter the cost per month of the server client that your service provider might have offered you. This client typically sits on the server and manages the data flow, encryption, de dupe, etc. Cost of Desktop Client/month Enter the cost per month of the desktop client that your service provider might have offered you. This client typically sits on the desktops and manages the data flow, encryption, de dupe, etc. Cost of Storage Administrator (Calculated Value)

When using a service provider, the storage administration will be handled by the provider, thus the default value of $0. However, when using an in house cloud your storage administrators will be responsible for management of the storage. This value is automatically calculated for you. Bandwidth cost per GB/month Enter the cost of bandwidth per GB/Month. (Bandwidth is typically sold as sustained Megabit per month; an approximate conversion is 316 GB per month for 1 Megabit of bandwidth). Cost for Month 1 (Calculated Value) This is the cost of ownership for Month 1. 3 Year TCO (Calculated Value) assumptions section) of the cost of ownership for the 3 year period. 3 Year Savings (Calculated Value) assumptions section) of the savings realized from the value proposition. Section 3: Value Proposition: Thin Provisioning Section 3. Value Proposition: Thin provisioning Submitting requests for additional storage (fixed quota) Using Private Cloud to Thin Provision users (no fixed quota) Number of requests for additional storage (employee/month) 0.2 Number of requests for additional storage (employee/month) 0 Lead time to provision additional storage (days) 3 Lead time to provision additional storage (days) 0 Productivity lost during the waiting period 2% Productivity lost during the waiting period 0 Storage Admin time to provision additional storage (hrs) 0.25 Storage Admin time to provision additional storage (hrs) 0 Cost for Month 1 $29,148 Cost for Month 1 $0 3 Year TCO $903,324 3 Year TCO $0 3 Year Savings $903,324 Brief description: Storage is typically allocated to employees on a fixed quota basis. When they reach their quota, the employees submit tickets requesting additional storage. Since at this point they would have almost used up all of their allocated storage, any delay in the provisioning will invariably impact their productivity. Depending upon storage administrator s priorities and backlog, provisioning additional storage can typically take three to five days.. By using thin provisioning

(soft quota) enabled by a private cloud, the situation where employees run out of space can be completely eliminated. Number of requests for additional storage Enter the total number of requests that an employee submits per month for additional storage. With thin provisioning, there is just a soft quota and hence no need to request additional storage. Lead time to provision additional storage (days) Enter the number of days it takes for the provisioning to be accomplished. There is usually a delay because of help desk/storage administrator backlog. Productivity lost during the waiting time Despite their best intentions, employees may not request additional storage until they completely run out of storage and actually get an error message. Enter the impact to productivity as they wait to get provisioned on additional storage. Storage Administrator time to provision additional storage Enter the monthly growth of your backup data. Cost for Month 1 (Calculated Value) This is the cost of ownership for Month 1. 3 Year TCO (Calculated Value) assumptions section) of the cost of ownership for the 3 year period. 3 Year Savings (Calculated Value) assumptions section) of the savings realized from the value proposition. Section 4: Value Proposition: Risk Management Section 4. Value Proposition: Risk Management Achieving anytime anywhere access using portable devices Using Secure Private Cloud to achieve anytime anywhere access Number of removable devices in use in the organization 1,000 Number of removable devices in use in the organization 200 Cost of lost device Cost of lost device Value of data on each device $2,000 Value of data on each device $2,000 Impact to organizational reputation from data leak $10,000 Impact to organizational reputation from data leak $10,000 Possible penalties because of a data leak $10,000 Possible penalties because of a data leak $10,000 Real cost of a lost device $22,000 Real cost of a lost device $22,000 Total current risk exposure for your organization $22,000,000 Total current risk exposure for your organization $4,400,000 Annual security expense as a % of your 2010 risk exposure CloudStorageStrategy.com 5% and Mezeo Software. Annual security All rights expense reserved. as a % of your risk exposure 5% Cost of Mezeo Clients to enable ubiquitous access $2 Cost for Month 1 $91,667 Cost for Month 1 $18,333 3 Year TCO $2,840,863 3 Year TCO $878,085 3 Year Savings $1,962,778

Brief description: Employees need access to their data. In absence of an adequate tool, they resort to inexpensive solutions such as USB based drives. While these devices are convenient and quite inexpensive, they can expose an organization to massive risk. Providing employees a tool that enables them to access their data anytime and from any internet connected device minimizes (if not completely eliminates) the need for the USB devices. Typically, companies allocate a percentage of their risk exposure to mitigate the risk; thus reducing the risk exposure instantly reduces the total spend allocation on the mitigation. Number of removable devices in use in the organization Enter the total number of USB devices such as flash drives, passports and SD cards that are currently in use within the organization. Value of data on each device Enter the value of data on each device. While this is a judgment call, think in terms of the impact of a price list making its way to your competitor on to the web, or a leaked design document for an upcoming product. Depending upon the nature of the data, the financial impact can vary dramatically. Impact to organizational reputation from data leak Enter the cost of impact to organizational reputation from a data leak. Possible penalties because of a data leak Enter the possible financial penalty as a result of a data leak. Because of privacy and other regulations, there could be stiff penalties associated with a data leak. In addition to punitive damage, there could also be a possibility of prison terms. Real cost of a lost device (Calculated Value) This is a calculated value and indicates the true cost of a lost device. Total current risk exposure for your organization (Calculated Value) This is a calculated value and indicates total risk exposure of your organization stemming from these removable devices. Annual security expense as a % of your risk exposure

Enter the percentage (in terms of your risk exposure) that your organization allocates for mitigation of risk. Cost for Month 1 This is the cost of risk management for Month 1. 3 Year TCO (Calculated Value) assumptions section) of the cost of ownership for the 3 year period. 3 Year Savings (Calculated Value) assumptions section) of the savings realized from the value proposition. Section 5: Value Proposition: Productivity Gains Section 5. Value Proposition: Productivity Gains Increase in productivity from using a single tool 1.00% Value of increased productivity/ month $250,000 3 Year Savings $7,747,809 Brief description: Productivity gains can be realized by providing employees with a single easy to use tool that can be used for storage, large file transmission, file sharing, etc. Increase in productivity from using a single tool Enter an expected increase in productivity from use of a single tool. Cost for Month 1 This is the total cost of ownership for Month 1. 3 Year TCO (Calculated Value) assumptions section) of the cost of ownership for the 3 year period. 3 Year Savings (Calculated Value) assumptions section) of the savings realized from the value proposition. Section 6: Value Proposition: Large File Transmission Section 6. Value Proposition: Large File Transmission Using specialized software to enable Large 2010 File CloudStorageStrategy.com Transmission and Mezeo Software. Using All Mezeo rights clients reserved. to enable Large File Transmission Cost of specialized software per user/per month $10 Cost of Mezeo clients $2 Cost for Month 1 $50,000 Cost for Month 1 $10,000 3 Year TCO $1,549,562 3 Year TCO $309,912 3 Year savings $1,239,649

Brief description: Transmission of large files continues to be a challenge for most organizations. Email attachment size is usually limited to 10 to 20 MB, and most other options introduce an element of risk (see removable devices above). Many organizations end up getting a subscription to specialized software to address this issue. Cost of specialized software per user/per month Enter the monthly subscription fee for that specialized software that helps in the transmission of large files. Cost for Month 1 This is the total cost of ownership for Month 1. 3 Year TCO (Calculated Value) assumptions section) of the cost of ownership for the 3 year period. 3 Year Savings (Calculated Value) assumptions section) of the savings realized from the value proposition. Section 7: Value Proposition: Workstation storage upgrades Section 7. Value Proposition: Workstation storage upgrades Upgrading workstations to meet growing storage needs Using the In house cloud to meet growing storage needs Number of workstations in house 500 Number of workstations in house 500 % receiving storage upgrades per month 3.0% % receiving storage upgrades per month 0% Average increase in storage capacity (TB) 1.5 Addl capacity in the cloud for the increased need (TB) 22.5 Average cost per upgrade $400 Cost for Month 1 $6,000 Cost for Month 1 $3,456 3 Year TCO $185,947 3 Year TCO $107,106 3 Year Savings $78,842 Brief description: As employees continue to use their desktop storage, they need additional storage. Even though the cost of hardware has come down, there is still a cost to upgrade. When a private cloud is being used to supplement the storage pool, the need for upgrades is completely eliminated.

Number of workstations in house Enter the total number of workstations in house. Percentage receiving storage upgrades per month Enter the Percentage (in terms of the total number) of workstations that receive a storage upgrade each month. When using the in house cloud, additional storage needs will be met by the cloud, thus no upgrades will be needed. Additional capacity in the cloud to meet the increased need (Calculated Value) Since the upgrades are not being performed on the local machine, there will be a need to increase the capacity of the private cloud to accommodate the increased storage. Average cost per upgrade Enter the average cost per upgrade. Please include the cost of the hardware, software and people (the IT technician who performs the upgrade). Again, when using the in house cloud to meet the additional storage needs, there will be no upgrade costs. Cost for Month 1 This is the total cost of ownership for Month 1. 3 Year TCO (Calculated Value) assumptions section) of the cost of ownership for the 3 year period. 3 Year Savings (Calculated Value) assumptions section) of the savings realized from the value proposition. Section 8: Value Proposition: Email vs. Sharing Section 8. Value Proposition: Email vs. sharing Storage used by 1MB email attachment sent to 4 people (MB) 51.5 Storage used by 1MB file shared with 4 people (MB) 16 Average attachment size per email (MB) 3 Average size of a shared file 3 Number of attachments sent per day per employee 5 Number of files shared per day per employee 5 % of attachments sent within the organization 60% % of shares inside the organization 60% Storage used by these attachments (GB) 45,264 Storage used by these shares (GB) 14,063 Cost of storage GB/month $0.50 Cost of storage (GB/month) 0.200 Cost for Month 1 $22,632 Cost for Month 1 $2,813 3 Year TCO $701,389 3 Year TCO $87,163 3 Year Savings $614,226

Brief description: An IDC paper, The Diverse and Exploding Digital Universe, highlights how a single email with 1MB attachment when sent to four people consumes a total of 51MB of storage. (Source: The Diverse and Exploding Digital Universe, An Updated Forecast of Worldwide Information Growth Through 2011, March 2008, by International Data Corporation.) In other words, email suffers from attachment size limitations and is also an inefficient way of data sharing. Storage used by 1MB email attachment sent to Four people/ Storage used by 1M file shared with Four people (Calculated Values) These are calculated values and come from the IDC paper referenced in the Brief description. Average attachment size per email (MB)/Average size of a shared file (MB) Enter the average size of an attachment that accompanies an email. Keep in mind that not all emails have attachments. This value will also be used to populate the Average size of a shared file cell. Number of attachments sent per day per employee/number of files shared per day per employee Enter the number of attachments sent per day per employee. This value will also be used to populate the Number of files shared per day per employee cell. Percentage of attachments sent within the organization/percentage of shares inside the organization Enter the percentage of the total attachments sent within the organization. This value will also be used to populate % of shares inside the organization cell. Storage used by these attachments/ Storage used by these shares (Calculated Value) These are calculated values and indicate total amount of storage that is being used by the attachments/shares. These numbers are based upon the IDC paper referenced earlier. Cost of storage GB/month (Calculated Value)

These numbers come from the assumption section. Cost for Month 1 This is the total cost of ownership for Month 1. 3 Year TCO (Calculated Value) assumptions section) of the cost of ownership for the 3 year period. 3 Year Savings (Calculated Value) assumptions section) of the savings realized from the value proposition.

Section 9: Graphs Lower Backup costs by hosting data in house $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 Service Provider Backup TCO In House Backup TCO 3 Year Savings Minimize productivity loss because of provisioning delays $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 Manual storage provisioning Thin Provisioning 3 Year Savings Reduce Risk Management Costs Enhance Productivity by Standardizing Tools $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Anytime access via Portable Devices 3 Year Savings Access through In house Cloud $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 3 Year Savings Lower the costs for Large File Transmission Eliminate costs related to Workstation Upgrades $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Using Specialized Software Using Mezeo Clients 3 Year savings $250,000 $200,000 $150,000 $100,000 $50,000 $0 Addl Storage via Workstation Upgrade 3 Year Savings Addl Storage via In House Cloud Control Storage growth by Sharing rather than Emailing $800,000 $600,000 $400,000 $200,000 $0 Cost of Email related Storage Cost of "Sharing" related storage 3 Year Savings

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