Cloud as Catalyst: Navigating the Business+IT Transition

Cloud as Catalyst: Navigating the Business+IT Transition March 21, 2012 EuroCloud France Paris Bill McNee Founder and CEO Saugatuck Technology bill.mcnee@saugatucktechnology.com Westport, CT Falmouth, MA Santa Clara, CA Wiesbaden Germany Copyright 2011 ǀ Saugatuck Technology, Inc. ǀ All Rights Reserved ǀ www.saugatucktechnology.com ǀ +1.203.454.3900

Key Trends A sea-change in perspective about the use and value of the Cloud has occurred, with enterprise leaders now fully embracing Cloud-enabled business computing architectures. The Cloud is now seen as a powerful catalyst for rapid innovation, enabling new business and IT solutions, uniting geos, enabling mobile execs / commerce, and linking social nets to business decisions. Hybrid on-premise+cloud architectures are the preferred path forward for most enterprises short-term especially in North America. Yet these may be transitory. The biggest exceptions to this rule are smaller European, and the leapfrogging Asian firms that are moving more rapidly to a pure-cloud future, that will dominate ALL purchase plans globally by 2016. While CRM, Collaboration, Customer Support and HCM will lead Cloud solution demand through 2016 followed by Collab. Commerce and BI / Analytics on prem solutions closer to the money (e.g., Finance / Accounting, Budgeting, Reporting/Planning, GRC) will be slower to migrate to Public and Private Clouds. Social computing and Mobility solutions key aspects of the boundary-free enterprise are finding expression within the enterprise portfolio as key value differentiators for organizations that can harness their decision power and outreach to customers and business partners. The rise of terabytes of business data has tipped the scales toward financial return in the mgmt. of data quality to ensure Advanced Analytic platforms are supplied with high-quality materials for business insight. A new role and mission for IT is emerging that focuses on enabling business innovation and proactively managing solutions and their providers, including systems mgmt, change mgmt. and vendor mgmt. as key disciplines, that require new skill sets and place a premium on interpersonal communication. Data integration and automated workflow in the Cloud will remain critical capabilities for long-term success, especially for hybrid large-enterprise environments. Cloud Services Providers will prosper with a range of offerings, including Cloud-enabled BPO, BPaaS, and ddiscrete services in support of fisvs and dbusinesses migrating workloads. Page: 2

Shifting IT Priorities Driven by Cloud The Internet was about connecting computers the Web was about connecting the world the Cloud is about connecting businesses, rethinking business processes, and driving rapid innovation and new business opportunities. IT as a Cost Center Era of Flat IT Budgets Cost efficiency paramount while maintaining value delivery Need to redefine mission, role & responsibility of IT in new Cloud-centric era Evolving enterprise architecture Need to Support Growth / Innovation Continued digital transformation of the business internal process improvement, new Cloud-enabled products / services (Cloud Business), new partner and delivery models Innovative use of new technologies Cloud, Social Business, Mobility, Big Data, et al Globalization helping the business remain relevant & competitive in global era Source: Saugatuck Technology Inc. Page: 3

Cloud s Evolving Strategic Importance for CIOs / CTOs Dramatic change in attitude by CIOs / CTOs since 2010 in the degree and speed with which Cloud is now viewed as fundamental to IT planning and strategy. Strong consensus emerging among the CIOs / CTOs that Cloud is just another weapon in the growing arsenal of tools to address evolving business needs with a de facto recognition that the future will definitely be a mixed environment of on-prem, hosted, and public/private Cloud services, including hybrid deployments. Source: Saugatuck Technology, Jan. 2012, n=12 large enterprise CIO / CTO deep dive interviews (all global companies) Page: 4

What the CIOs / CTOs Had to Say Quotes from Recent CIO/CTO Interviews It seems inevitable that a good chunk of IT solutions will be Cloud-based in the future. Getting in front of the curve is important. (CIO, LifeScience) Our users are demanding it, and the flexibility and speed that the Cloud provides. More and more of our solution providers are now ONLY providing Cloud solutions. This is becoming less about an IT decision, and more about a market shift & growing end-user demand. (CIO, Media/Ent) We believe that t all of our business applications should be delivered as cloud solutions. We are in the process of giving up our physical assets (data center) and moving existing applications to a cloud hosting provider and making gplans to get rid of all of our traditional applications. (VP IT Plan, BusSvcs) We operate two data centers with many apps having large databases at the core. We are not jumping wholehog into the Cloud. Instead, we are nibbling at the edges, getting familiar through testing and investments in small, non-critical apps. (CIO, MktSvcs) Our environment demands such high levels of security that public cloud is out of the question; but we are investigating private cloud. (CIO, FinSvcs) Saugatuck Insight Most of the large enterprise IT leaders we spoke in Jan. 2012 are now well beyond the learning phase. Roughly 25 percent are now aggressively moving toward the Cloud, in all of its forms. While still a minority, this group is developing and adopting 3-5 year plans to deploy a fully enabled Cloud application / infrastructure environment, including plans to rip / replace a large chunk of their current data center footprint. The vast majority (65% +), however, are taking a more pragmatic approach, leveraging the Cloud for new business requirements as they arise but largely leaving the existing footprint in place. Only one of the twelve deep-dive interviews we conducted (8%) had no Cloud investment plans at present. Source: Saugatuck Technology Inc. Page: 5

Saugatuck s Cloud EcoStack Level 4 What Is It? What Is In It? Who Is In It? Cloud Business Services and Operations Level 3 Cloud Business Solutions Business Process Outsourcing, Managed Services, Systems Integration, Related Services Software -as-a-service (SaaS) Accenture, Appirio, Cognizant, Comcast, IBM, Infosys, Dell Services, SAP, Symantec, Tenzing, Verizon, Wipro ADP, Ariba, Adaptive Planning, Dell Host Analytics, Intacct, Microsoft, NetSuite, Oracle, Salesforce, SAP SuccessFactors, Symantec, Taleo, Workday Level 2 Cloud Platforms & Hubs Platform -as-a-service (PaaS), Hosted services (e.g., analytics, business services, app dev, DBMS, integration, ti security) Accenture, Amazon, Apprenda, Dell Boomi, Google, HP, IBM, Joyent, Microsoft, OpSource, Oracle, Progress Rackspace, SafeNet, Salesforce,, Savvis, Servoy,, Scribe, VMware Level 1 Cloud Infrastructure Services Infrastructure -as-a- Amazon, AT&T, HP, IBM, Joyent, Service (IaaS) / Cloud Latisys, Microsoft, NaviSite, NTT, Computing (e.g., OpSource / Data Dimension, Peer 1, computing, storage) Rackspace, Savvis, Verizon, Wipro Level 0 Cloud Technologies Basic hardware, software, networking, and services Cisco, Dell, HP, IBM, Intel, Microsoft, OpenStack, Oracle, Red Hat, Ubuntu, VMmare Source: Saugatuck Technology Inc. Page: 6

The Evolving Cloudscape Through 2015, the largest driver of Cloud IT workloads will continue to be Cloud Business Solutions (including business apps, social business IT and mobile solutions). Key drivers shift from better, faster and cheaper to transforming the enterprise. High Ado option SaaS 1.0 Wave I: 2001-2006 Cost-Effective Software Delivery Early SaaS Adoption Stand-alone Apps Multi-tenancy Limited Configurability Focus on TCO / rapid deployment The Rise of Cloud IT and Cloud Business Wave II: 2005-2010 Integrated Business Solutions Mainstream SaaS Adoption Integrated w/ Business SaaS Integration Platforms Business Marketplaces and SaaS Ecosystems Customization Capability Focus on Integration SaaS 2.0 Cloud IT Era Wave III: 2008-2013 Wave IV: 2011-2016 Workflow-Enabled Measured, Monitored, Managed Business Transformation Business Processes Cloud IT Gestation Post-SaaS Adoption Period Ubiquitous SaaS Adoption Intelligent Hubs Linking Platforms SaaS Remains Core Focus on Business Transformation Virtualization on Mobile Devices ISV to SaaS Enablement PaaS Enables Elastic Cloud Infrastructure Server and Application Virtualization Composite Solutions Standards for Workload Portability SaaS Development Platforms (PaaS) IaaS at the Margins SLAs for Composite Service Offerings Public Cloud Infrastructure (IaaS) Support at Business Process Level but evolving Cloud Collaboration Platforms Customized, Personalized Workflow Mobility, Collaboration and Social Business technologies Explode End-to-End Cloud Business Processes Low 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Saugatuck Technology Inc. Page: 7

After the Storm The Shift to the Cloud Accelerates Through 2016, Hybrid-Cloud becomes the enterprise platform of choice a transitional platform, however, en route to a future dominated by public and private clouds. By 2016, 75 percent or more of NEW enterprise IT spend will be Cloud-based or Hybrid. 60% 50% 40% 30% 20% 10% 0% My company s preference for deploying new business software (on a continuum from On-premise to Hybrid-Cloud to pure-play Cloud) will be: 50% 40% 10% 18% 63% 19% 47% 2012 2014 2016 On-premise Cloud / On-premise(Hybrid or highly Interwoven deployemnt) Cloud-based(pure-play) 39% But significant differences by region! North America 2012 2014 2016 Cloud-based (pure-play) 5% 14% 34% Cloud / On-premise (Hybrid) 41% 67% 54% On-premise 53% 19% 11% Europe 2012 2014 2016 Cloud-based (pure-play) 17% 23% 42% Cloud / On-premise (Hybrid) 35% 59% 41% On-premise 48% 17% Asia Pac 2012 2014 2016 Cloud-based (pure-play) 11% 26% 47% Cloud / On-premise (Hybrid) 47% 58% 39% On-premise 42% Source: Saugatuck Technology, 2012 Cloud Business Solution Survey,Global, l N=228 (Feb 2012) Page: 8

SaaS Business Software Purchase Plans Collaboration / Communications / Social CRM / Salesforce Automation Customer Service / Support Human Resources / Talent Management ecommerce / Collaborative Commerce Procurement / Sourcing / Spend Management Software Development / Test Business Intelligence / Advanced Analytics Budgeting / Reporting / Planning Governance, Risk and Compliance ERP / Manufacturing / Supply Chain Finance / Accounting 24% 27% 20% 22% 17% 8% 8% 10% 17% 15% 10% 14% 14% 19% 15% 20% 15% 19% 19% 17% 14% 14% 18% 15% 14% 17% 18% 14% 15% 14% 15% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Aleady in Use (by YE2011) 2012 2013 2014 2015 or Beyond Source: Saugatuck Technology n=228 Notes on the Data No business software category will remain without massive Cloud use by YE2014. Finance/Accounting looks to advance significantly through YE 2014. Three clear tiers emerge over time, delineated by Not Planning to Implement and with the top tier clearly based on current adoption trends: Collaboration, CRM, Customer Support, & HR. In top-tier categories, we see strong slowdowns in adoption through 2013, with re-acceleration in 2014. Saugatuck Insight: This indicates the purchase of at least one instance in each category, and not all instances or uses. The core message is that the move toward the use of Cloud-based business software is inexorable, but not universal or complete. The fact that no categories add up to 100% suggests strongly that not all business software will be Cloud-based in the foreseeable future. And again, the closer we get to core enterprise money, the less Cloud presence is expected. Page: 9

SaaS Business Software Purchase Plans Select Solutions by Region 2015+ 2014 2013 2012 Installed 2015+ 2014 2013 2012 Installed 2015+ 2014 2013 2012 Installed Collaboration / Social HCM/ Talent Management 2015+ 2014 2013 2012 Installed CRM / Salesforce Automation 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% BI / Advanced Analytics 0% 20% 40% 60% 80% 100% Asia Europe North America 2015+ 2014 2013 2012 Installed 2015+ 2014 2013 2012 Installed ecommerce / Collab Commerce 0% 20% 40% 60% 80% 100% Finance / Accounting 0% 20% 40% 60% 80% 100% Source: Saugatuck Technology n=228 Notes on the Data North America is the dominant region for Not Planning to Implement in Cloud across most solution categories Asia (followed closely by NA) leads in Collaboration Already in Use. Asia is also the dominant region for implementing ecommerce by 2012. Saugatuck Insight: Asian responses for Already Installed and for Planning to Implement by Year End 2012, 2013, and 2014 across most solution areas suggest near-term focused objectives for both internal and trading partner efficiencies. Page: 10

SaaS/Cloud Experiences Key statements regarding Cloud usage over time: The most important long-term benefits of Cloud are greater business flexibility and agility vs. cost savings. Strongly Agree + Agree Mobile devices significantly improve value and usefulness of Social Cloud solutions. 61% The risk of Cloud provider lock-in is an important business and technology concern at my company. My company is leveraging the Cloud for internal cost savings and business process improvement. Software-as-a-Service (SaaS) will continue to lead our Cloud spending through 2015 (vs. IaaS, PaaS, BPaaS et al). Embedding social capabilities into important business workflows is critical to our company s success. 65% 56% 55% My company is leveraging Cloud to create revenue-producing products / services. 45% We can prove ROI from using Cloud-based social tools. 40% Cloud Business Solutions have met or exceeded our value expectations. 37% 53% 46% Notes on the Data Overall, SaaS/Cloud are being deeply integrated into ongoing business operations and management. The trends toward more integrative uses and benefits are more clear. Costs are seen as lower than anticipated - even so, nearly 2/3 of executives don t agree that SaaS has met business value expectations. Mobility s influence is clear- though perhaps not yet understood. And while CRM has long been the leading We have reduced our procurement spend by using B2B marketplaces and 34% SaaS business solution Collaborative Commerce capabilities in the Cloud. worldwide, it has not yet Cloud is costing more than we anticipated. 32% been seen to increase sales revenue. We have increased our sales revenue by using Cloud CRM and marketing tools. 31% Source: Saugatuck Technology n=228 Page: 11

Infrastructure TCO: Cloud vs. In-house by Workload Size By YE2013, 85 percent of large enterprise data center capacity will be virtualized. By YE2014, 75 percent (+) of large enterprises will use Private Clouds for general workloads. Public or Private Cloud Workload Sizes and Descriptions Small Medium Large Public Cloud + Hosted / Hosted / Dedicated Private Public Cloud Dedicated Private Cloud Cloud Web serving on 8 dedicated Web Serving on 2 Web Serving on 6 virtual images servers virtual images Database on dedicated server Database on a cluster Database on 1 Application on 2 virtual images + 2 Application on 6 dedicated virtual image dedicated servers servers, Workload Application on 4 500 GB of disk 3.5 TB of disk Attributes virtual images Each virtual image consists of 4 Each dedicated server consists 250 GB of disk CPUs and 6 GB of memory of 12 CPU and 64 GB of memory Each virtual image Each dedicated server consists of DB cluster is two machines each consists of 2 CPUs 12 CPUs, 64 GB of memory with 80 CPUs and 256 GB and 4GB of memory memory Projected Savings vs. 20% to 40% 25% to 35% 15% to 20% Typical In-House Source: Saugatuck Technology Inc. Saugatuck Insight: Vendors of Public Clouds and Hosting options can usually price dedicated equipment at 80% or less of what all but the largest firms can attain due to their costs of HW acquisition, and economies-of-scaleinsitecosts in site costs, staffing, etc. Page: 12

Large Enterprise Infrastructure Operating View 2015 Elastic and Just-in-time Infrastructure: Agility Dynamic and instantaneous availability of unlimited resources. All aspects of data center (including storage function and specialized functionality such as security) become plug & play and location / infrastructure independent. Separation between Cloud and on-premises resources vanishes as enterprise infrastructure becomes logically seamless / homogeneous. Workload characteristics define the optimal infrastructure (e.g., dedicated, virtualized, internal private cloud, external private cloud, or public cloud). Evolving Infrastructure Value: Massive Reduction in Support Costs Universal abstraction eliminates inter-layer dependency testing and maintenance Systems Integration testing shifts to Cloud / Platform provider Massive reduction in people and support costs. Self Aware Applications and Service Levels: IT Mgmt Business Value Tools, processes, and service providers evolving to manage hybrid workloads spanning architectures and infrastructures. IT management shifts from managing assets to managing businesses processes / outcomes. Technology management skills increasingly become secondary to business and supplier management skills. Source: Saugatuck Technology Inc. Page: 13

Cloud Drives New Mission for IT Period of IT Change: Pre-Cloud Transitory Cloud Future Primary Architecture Client / Server SaaS / Hybrid-Cloud Cloud Primary Management Asset & Cost Control Asset & Cost Definition Asset & Cost Roles Coordination Primary Mission Core Control Mission Standard Approach to IT Development and Delivery Primary Approach to Business Data Supporting Business Operations Enabling Business Improvement Enabling Business Innovation Standardization of Standardization of Standardization(s) of Technologies & Providers Providers & Services Interfaces 1. Buy 2. Build/Adapt 3. Outsource Business Data Storage & Protection 1. Buy & Rent 2. Outsource 3. Build/Adapt Master Data Management 1. Rent 2. Outsource 3. Adapt 4. Buy Master Data and Process Integration Primary Role in Integration of Things and Integration of Things, Integration of Data, Integration ti Data Data and Services Services, and Processes Scope of Provider, Device, and App Mgmt. Responsibility Dozens of providers, 100s of devices, 1,000s of programs 100s of providers, 1,000s of devices, 100,00s of programs 100s of providers, 1,000s of devices, 100,000s of programs Source: Saugatuck Technology Inc. Page: 14

Executive Summary Cloud is, in effect, still in its infancy. Yet it is already changing how enterprises (both large and small) do business, find business, and build business because it is fundamentally changing how technologies are delivered and used to enable the enterprise. The greatest Cloud opportunities for any enterprise or IT provider are in enabling new ways of doing business, and creating entirely new businesses. Over the short-term, Hybrid-Cloud becomes the enterprise platform of choice. However, it is only a transitional platform, en route to a future dominated by public and private clouds. In order to fully enable and support Cloud, traditional enterprise IT organizations, structures, and practices must be disassembled and rebuilt. Enterprise IT, in its traditional form, is not strong or pliable enough to enable or support effective enterprise Cloud use for business in most organizations. The greatest t threat t from Cloud is faced by those enterprises not investigating or using it to improve business. Denying or preventing Cloud use effectively thwarts enterprise business growth. As with any business tool, Cloud must be effectively and efficiently managed in order to deliver business value. Given its infancy, the most advanced and effective uses of Cloud (and Cloud management practices) are still not well-known outside of a few, experienced executives and enterprises. Page: 15

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