Why some companies succeed: How to take advantage of the cloud

White Paper Why some companies succeed: How to take advantage of the cloud Executive Summary: The companies that achieve the greatest success in using cloud computing are those that incorporate the cloud into a broad IT strategy. These companies address the unique challenges facing their industry and position, and identify the primary concerns such as cost control, agility, or scalability that will drive the future improvement they need. Then they study their existing workloads and capacity to identify gaps that cloud services are best suited to fill. With specific objectives in mind, they re able to establish a productive long-term partnership with a smart, responsive cloud service provider. Beyond all the hype about the cloud, some companies are achieving great savings, and some aren t. For example, some HP customers have realized a Total Cost of Ownership (TCO) savings of up to 56 percent. 1 But other companies have actually lost money moving to the cloud. What s the difference? What s the key to using the cloud to your advantage rather than following the crowds to an overpriced, disappointing non-event? How have some companies big, mediumsized, or small done it? In our experience, the key differentiator has less to do with operational, architectural, or competitive choices, and more to do with the big picture: strategy. 1 See the HP whitepaper Transform data center economics and meet dynamic business needs at http://h20195.www2.hp.com/v2/getpf.aspx/4aa2-5606enw.pdf 1 of 16 Latisys White Paper > ecember 2012

Table Of Contents Identifying Strategic Goals... 3 efined ifferentiated ebunked Improving Business Functions... 5 Achieving Specific Solutions... 8 Overcoming Challenges to Cloud Success... 10 What to Put in the Cloud... 13 Conclusion: Integrate the Cloud... 15 Cloud 3: efined, ifferentiated, ebunked istinguishing cloud computing reality from cloud hype can be a daunting task. To help achieve a greater understanding of the cloud, we ve examined some of the key assumptions, myths and drivers that decision makers face as they build their cloud IT infrastructure strategy, and included these efinitions, ifferentiators and ebunked myths as sidebars throughout this white paper. To view them all online, click here. About Latisys In a time where IT leaders are called upon to be builders and brokers of complex services challenged to do more with less, but faster than ever before Latisys responds with an innovative approach to solution design and service delivery. Unlike today s massive IaaS vendors who provide rigid, overpriced commodity products, Latisys has created a highly scalable model to consistently deliver exactly what customers need, when they need it. End-to-end IT Outsourcing Solutions from Colocation to Enterprise Cloud Proven Scalability and Financial Strength SOC2 Type II and SOC3 Audited Processes Expert People Serving as an Extension of your Team 2 of 16 Latisys White Paper > ecember 2012

Identifying Strategic Goals Smart companies use the cloud as part of an IT strategy. Although the phrase IT strategy can have many different meanings, in this context we re referring to the high-level plan to meet increasing demand for IT resources. Most companies must provide users with complex systems that achieve high performance in secure and scalable environments. These companies must manage mission-critical applications and increasing workloads across multiple platforms while transforming legacy applications and processes. They must accommodate ever-increasing storage and network capacity and do it all at a reasonable cost. The particulars of these decisions vary by company, but for each of them, the long-term vision of how to meet these challenges comprises the IT strategy. As functions such as e-mail become increasingly mission-critical, and as users gravitate toward rich media, most such strategies require new resources. So where to get them? Few CEOs are willing to increase the percentage of budget allotted to IT. They re wary of capital-intensive development efforts, mindful of a legacy of misspent investments in IT. Meanwhile, reducing other existing IT expenses through virtualization has been a surprisingly productive approach for the past few years but most companies have already gone as far as they can with such efforts. The Cloud efined ifferentiated efined: ebunked Some users and executives push for the cloud. Yet many IT leaders resist, citing concerns with security, vendor lock-in, performance, availability, and integration. And although these concerns are legitimate, users rarely find them persuasive. According to the National Institute of Standards and Technology (NIST), cloud computing is a model for enabling ubiquitous, convenient, ondemand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. This is why successful companies have an IT strategy. To be effective, to deliver ongoing value to the company, IT must be more than merely a provider of services. It must have a strategy to understand how external forces will continue to transform the business, and seek opportunities to move in the right direction. The value of IT comes in knowing which of the users problems are best served by the cloud, and making the appropriately strategic deployments. It comes in judging those problems, and other opportunities, in the context 3 of 16 Latisys White Paper > ecember 2012

of the business overall goals. It also comes in knowing how to avoid threats. Successful companies negotiate these opportunities and threats by having not just any strategy, but a good one. Let s move to the cloud is a poor strategy and so is We can t put anything in the cloud. The savviest companies have strategies that find unique, upto-date, company-specific answers to the classic challenge of seeking to provide business users with the services they need while optimizing budgets. The cloud is merely one of many vehicles that these companies use to accomplish that strategy. 4 of 16 Latisys White Paper > ecember 2012

Improving Business Functions For most companies, the IT strategy identifies one or more business challenges that will define the coming years. Three potential examples are: 1. Cost Control: As compute and storage requirements explode, how can companies avoid huge future capital outlays to purchase new processors or storage devices? efined ifferentiated The Cloud ebunked ebunked: Myth #1: Cloud Computing is the Cheapest IT Outsourcing Option Subtraction by Addition? In the cloud you pay for only what you need to use, avoiding the need to engineer your infrastructure for peak levels of activity. However, the cloud does represent an additional layer of orchestration (an additional software component that a service provider delivers to users to enable self-management, faster provisioning and granular control). So predictable levels of activity the same configuration consuming the same amount of resources for the same period of time will cost more in the cloud than they would in a dedicated environment. You realize cost savings when you pursue a strategy that leverages dedicated hosting for predictable workloads and the cloud for variable workloads. Be sure to fully understand the ongoing usage and access fees associated with the infrastructure you are deploying to avoid any surprise charges. And challenge your vendor to tailor a hybrid dedicated-and-cloud solution to your specific needs. Learn more» The operational advantage of the cloud is that it pools utilization across companies, so that one company can take advantage of another s under-utilization. The financial advantage is that the cloud simultaneously shifts capital expenses (CapEx) to operating expenses (OpEx), which frequently results in better profits. Thus, smart companies that have an IT strategy focused on cost control use the cloud to improve hardware utilization and finances. Some even use it to improve the utilization of their most important resources their people. For example, many companies that run their email systems on Microsoft Exchange know that Exchange administrators are hard to find. Likewise, they may have legacy applications that require maintenance from senior IT staffers. By outsourcing such functions, they reduce headaches and improve employee morale. In the case of Exchange, their IT strategy likely debated the appropriateness of outsourcing an application as critical as email and concluded that email may be critical to the business but is not one of its core competencies. Successful companies thus gain significant savings from using the cloud to support their IT strategy with regards to scale, utilization, and CapEx-to-OpEx. They also manage expectations, realizing that the biggest effects are often not in reducing this year s budget but in containing potential future cost increases. 2. Speed and agility: The pace of business today is faster than ever, and some businesses are held back by long, bureaucratic processes associated with IT resources. One such process is the provisioning of software tools to information workers. Many cloud service 5 of 16 Latisys White Paper > ecember 2012

providers are now offering software-as-a-service (SaaS) applications to perform functions such as customer relationship management (CRM). Although these applications have many drawbacks, including limitations in security and flexibility, a huge advantage is that where internal software development efforts can take years, these applications can be available in hours. Successful companies thus evaluate how the benefits and drawbacks of such applications fit into the priorities set by their overall IT strategy. Less hyped, less transformative, but often boasting a bigger cost/ benefit ratio is reforming the process of provisioning hardware. Provisioning in the cloud can reduce the time and costs associated with software development testing or other such temporary demands. The old approach often required several days to get a server up and running and loaded with the appropriate data. Provisioning infrastructure-as-a-service (IaaS) in the cloud, a new server can be ready in hours. (See Figure 1.) Then, when the temporary demand is complete, de-provisioning the test environment ends its cost drain. Many successful companies also use the cloud to instantaneously provision CapEx-free resources for permanent demands, rather than purchase new hardware. They can thus improve time-to-revenue and agility in expanding into new customer segments, quickly taking advantage of multiple site deployment, or experimenting with expansions of latency-sensitive applications. traditional IT infrastructure cloud infrastructure Business selects application Purchase assets Set up Facilities Load OSs Patch VMs, OSs, applications Set approvals, Access controls Test and quality IT planning meetings Coordinate install process Load VMs eploy application Activate service Install servers Set up networks Set up storage Manage over lifecycle Figure 1: Using Cloud Infrastructure Can Speed and Simplify the Provisioning Process 6 of 16 Latisys White Paper > ecember 2012

3. Elasticity: Successful companies use their IT strategy to understand their workloads. They realize that they have three choices in addressing bursting demand in those workloads: a) suffer from underutilization, b) crash regularly during spikes, or c) take advantage of cloud resources that can expand and contract with their needs. Examples of bursting demand include: when monthly financial reports are due, after a product is featured on TV, when an oil well is hot and needs to transmit massive amounts of seismic data, or when daily web traffic peaks. Such scaling to react to customer needs is generally of huge benefit to a company s business users. They can plan more confidently without capacity restraints. They can easily expand to new geographies or markets, execute promotional blitzes, or otherwise quickly respond to market changes. In our experience, one of the biggest differentiators between companies that succeed or fail in the cloud is how well they understand their workloads. When they know if and how their demand bursts, they use cloud resources to manage it. When they don t understand their workloads, they end up making poor cloud purchasing decisions. efined ifferentiated ebunked The Cloud efined: Cloud service is elastic (users can consume as much or as little of a service as they want at any time), sold-on-demand, and fully managed by the provider. More importantly, cloud computing makes it possible to increase capacity and add capabilities on-demand without investing in new infrastructure, training new personnel or licensing new software. The word cloud represents a metaphor for the way IT resources need not be tied to a specific physical location, but can be shared over a network. 7 of 16 Latisys White Paper > ecember 2012

Achieving Specific Solutions The IT strategy may also identify one or more specific business solutions that may be particularly well suited to the cloud. Three potential examples include: 1. isaster recovery. Many companies that are successful with the cloud start their journey with disaster recovery (R). Rather than buying additional on-premise hardware to back up a mission-critical solution, they back it up in the cloud. They gain flexibility and options and most importantly pay only for what they consume. The cloud backup is, by definition, in a different location, so they re protected against physical disasters in the datacenter. Cloud R is there waiting for when disaster strikes, but at minimal cost. There are engineering concerns. That s why a company needs an IT department rather than simply giving every employee a ropbox account. R must be appropriately architected we like to use the phrase converged infrastructure, which involves integrated failover and fault tolerance. Successful companies also structure the contract with their cloud service provider so that they can spin up resources as needed (during the disaster) but not pay for them until then. A good cloud service provider will be happy to work with its clients on these issues. The successful efined ifferentiated ebunked companies are paying attention to these concerns, then using R to meet large portions of their cost containment objectives. The Cloud ifferentiated: The cloud is commonly categorized into three service models (software, platform, and infrastructure), and four deployment models (private, community, public and hybrid). These distinctions have arisen because of some of the concerns and benefits of the cloud discussed in this white paper and in a companion Latisys e-book entitled How to Take Advantage of the Cloud. 2. Storage. One common IT challenge is the growing role of large files, whether they re used to shoot and edit promotional videos or to harness Big ata for business intelligence. To meet that storage demand, inefficient companies build a new data center or two, since they probably need a true secondary site. And then they need capital investments in power, cooling and hardware. They need software licenses, staff, and perhaps specialized equipment. Efficient companies use the cloud instead. 8 of 16 Latisys White Paper > ecember 2012

Typically, cloud storage is really cheap storage in that businesses can trade performance for price if all they need is a place to store files. The challenge is that cheap cloud storage is one-dimensional used to store flat files or images but not meant for applications with real-time compute. Enterprise cloud storage is available on-demand as a company turns up its virtual private cloud, and it is highly scalable and elastic, so the company consumes as much as it needs on a pay-as-you-go basis. Coming with performance tiers and service level agreements (SLAs), it is important to note a service entirely different from cheap storage. So companies that successfully take advantage of the cloud for storage as always, driven by their IT strategy have distinguished their needs for cheap storage as opposed to their needs for enterprise cloud storage. They may use cheap storage to save more money, but more importantly, they may also use enterprise cloud storage to save a little bit of money while retaining the performance their users need. 3. Bursting demand. As discussed above, smart companies use the cloud to meet variable peaks in computing requirements. For example, software development efforts that use scrum processes have short intervals of intensive Quality Assurance testing. They can turn on a cloud test environment, run the scrum through testing, and then turn off the test environment as everyone goes back to development. Note that there are multiple types of bursts. The one people most commonly think of because it usually offers the largest cost savings is a simple burst to consume public cloud resources. But companies that succeed with the cloud often go beyond this simplistic model. For example, many companies with the need for tighter security have built an on-premises private cloud to accommodate bursting demand. And some companies for whom the private cloud is too limited have structured a hybrid cloud that consumes public-cloud resources using private-cloud security. 9 of 16 Latisys White Paper > ecember 2012

Overcoming Challenges to Cloud Success Companies that succeed with the cloud usually didn t luck into it. They thought hard, in advance, about how to solve the very real challenges to making the cloud work. Indeed, we believe that one reason there s been some backlash against the cloud is that cloudhype often doesn t acknowledge why issues like compliance and performance matter. Here s how we ve seen smart companies address them. 1. Security and compliance. Successful companies don t dump their entire IT infrastructures into the public cloud, because that approach abandons security. IT departments in these companies (like most) have as their top priority to maintain the security of intellectual property and other sensitive materials. Indeed, depending on the industry, many companies even face legal compliance requirements designed to demonstrate data security. efined The Cloud IaaS: Infrastructure-as-a-Service is virtual, on-demand compute, memory and storage resources. PaaS: Platform-as-a-Service is an ecosystem of pre-integrated components; Business-in-a-Box. SaaS: Software-as-a-Service is software and associated data that is centrally hosted and then accessed via a web browser. Learn more here» ifferentiated ebunked ifferentiated: Many successful companies address security and compliance by working with a cloud service provider who understands these issues. Perhaps it s a provider with experience in the industry, enough to understand the various regulations and standards. 2 Perhaps it s a provider who deals with many different types of compliance regimes across many customers and industries, thus giving a macro view of compliance issues. Perhaps it s a provider with an architecture that allows for simpler compliance testing. Perhaps it s a provider who can even sit down with the company s auditors to confirm that it is following best practices. This is where talking about the cloud can get dangerous because there are so many types of clouds. Many public cloud service providers put multiple customers in a single pool. epending on your security and compliance needs, that may 2 Examples of regulations and standards include the Health Insurance Portability and Accountability Act of 1996 (HIPAA, http://www.hhs.gov/ocr/privacy/hipaa/understanding/summary/index.html), the Federal Risk and Authorization Management Program (FedRAMP, http://www.gsa.gov/portal/category/102371), and the Payment Card Industry (PCI) Security Standards Council (https://www.pcisecuritystandards.org). 10 of 16 Latisys White Paper > ecember 2012

not be a problem. However, smart companies have thought about these issues in relation to their IT strategy, and understand in which situations a public cloud is appropriate and which situations require a private cloud service provider, perhaps one with a three-tier architecture that meets the SOC 2 reporting framework. 3 Obviously no cloud service provider can assume responsibility for any of its clients compliance. But successful companies have found providers that understand what it takes, and can organize themselves to support efforts to achieve that compliance. Other companies the ones who choose providers lacking these skills end up putting more of a burden on their IT departments, thus defeating much of their purpose in moving to the cloud. 2. Performance. umping entire IT infrastructures into the public cloud risks subjecting users to poor quality of service. It s not just theoretical: many IT departments have tried running an application on, say, Amazon Web Services and they report that it runs more slowly than it does on-premise. Companies that are unsuccessful in the cloud have often accepted this sad tradeoff: they are saving money only by lowering quality. Users get upset, IT staffers feel helpless, and although both blame the cloud, the real fault lies with their company s failure to follow a meaningful IT strategy. Successful companies, on the other hand, understand that not all clouds are created equal. Some private cloud providers offer tiered services allowing clients to pick the quality of service level they need. Thus, successful companies choose differing performance levels for different applications. Likewise, although some cloud providers sadly use generic hardware, or hardware that s not optimized for multi-tenancy, successful companies choose a cloud provider that uses brand-name servers, blades, firewalls, and load 3 The American Institute of Certified Public Accountants (AICPA) created the Service Organization Control (SOC) framework with three levels of reports: SOC 1 on financial controls; SOC 2 on internal controls related to security, availability, confidentiality, processing integrity and privacy; and SOC 3 auditor summary of the effectiveness of internal controls. More information is available here. 11 of 16 Latisys White Paper > ecember 2012

balancers that are built for multi-tenancy and provide greater security and isolation. 4 3. Optimization. By optimization we mean right-sizing IT infrastructure to fit a specific company s strengths and needs. Successful companies use the cloud to complement their existing infrastructure as they plan for the future. As they seek to optimize, they decide which applications to move to the cloud, seeking to balance security and cost savings, performance and elasticity, power and flexibility. In other words, they make the same types of decisions that IT has been making for decades: how to deploy and consume, how to secure and manage, and when to build vs. buy. For these companies, the successful IT strategy has listened to the naysayers. Cloud computing is a trendy topic right now, and so it needs to be resisted by people who don t want to live through a horror story or over-hyped non-event (Y2K, anyone?). When the advocates of cloud computing can listen to the critiques, and the rationales behind them, they can learn about how the critics see the company s traditional strengths and future challenges. Successful companies thus use conflict to create growth, use debate about the cloud to create optimization. 4 Cloud performance requires enterprise-grade infrastructure. An example of a cloud provider demonstrating that infrastructure quality is here. 12 of 16 Latisys White Paper > ecember 2012

What to Put in the Cloud Some successful companies don t have any IT resources at all. They put it all in the cloud. For example, consider the developer of an iphone application or game: The demand could be huge and instantaneous, or it could build slowly and then burst, or it might not do much at all. Cloud resources help meet that demand with speed, scalability, and minimal up-front costs. However, the number of companies that can operate entirely in the cloud like this is extremely limited. efined ifferentiated The Cloud ebunked ebunked: Myth #2: It s Best to Go All In When Migrating to the Cloud on t bet on it. Certain applications are clear matches for the burstability and elasticity cloud solutions provide: file sharing; social media; testing and development; email; server virtualization; and SaaS. But there are many applications where the answer isn t as clear-cut. Legacy enterprise commercial off-the-shelf (COTS) applications require significant due diligence due to the hierarchical nature of their architecture. These applications might be a great fit for the cloud, but traditional hosting may be a more ideal solution. More than ever, it s essential for companies to carefully evaluate the costs associated with transitioning to the cloud and be realistic about what they are trying to achieve. Learn more» Most enterprises that successfully take advantage of the cloud do so in much smaller proportions. Their IT strategy takes into account their legacy hardware and applications and competencies and talent and advantages. They know that they do have some workloads that need to be on-premises, because of meaningful competencies and investments in missioncritical, latency-dependent, complex functions. They see their IT department as being about the strategy of empowering workers with information and they see the cloud as merely the location of (some of) the physical resources to accomplish that strategy. Successful companies make a strategic choice for each of their applications across a variety of locations: on-premises, cloud, or in outsourced colocation or managed hosting deployments. They ask of each application: Is cloud the right location for this? They often discover the answer is yes for situations such as: Truly variable workloads Applications that weigh down their cost structure, for example in software licensing Fragile or maintenance-heavy applications that keep them up at night 13 of 16 Latisys White Paper > ecember 2012

Indeed, the successful companies don t just ask if an application belongs in the cloud. They know that cloud services come in multiple service models and deployment models. They may even view cloud computing as a subset of IT outsourcing, thus asking not, Can I send this function to the cloud? but instead, Can I outsource this function, and if so, where? (See Figure 2) Phrasing the question this way helps them link this decision to their strategic goals financial flexibility, redundancy, security, elasticity, etc. The answer to the question (basic public cloud, customized private cloud, managed hosting, managed services, etc.) thus arises out of the resulting profile of their needs. Figure 2: The Cloud and IT Outsourcing As an enterprise leverages the business benefits of IaaS solutions, it may come to see the cloud as a set of choices in the wider question of IT outsourcing. Using a set of Workloads and Use Cases, and influenced by corporate Priorities and Requirements, the enterprise chooses which components of its infrastructure to outsource and how. It then looks for a service provider to help select the optimal IaaS solutions for its business. 14 of 16 Latisys White Paper > ecember 2012

Conclusion: Integrate the Cloud Companies that succeed with the cloud do so by integrating the cloud into an IT infrastructure portfolio based on a comprehensive IT strategy. They do not use the cloud to substitute for that strategy. Instead, they see the cloud as a valuable vehicle to accomplish strategic goals, such as cost control and business agility. They use cloud solutions to save money on disaster recovery and storage, and to scale to meet bursting demand. But they do so while ensuring security, compliance, and performance. Their objective is always to use the cloud and other IT outsourcing options to help right-size their on-premises infrastructure investments. efined ifferentiated The Cloud ebunked ebunked: Myth #3: Cloud Computing = Loss of Control Quite the contrary. While some are concerned that outsourcing their IT will result in a loss of control, the beauty of the cloud is that it s really more of a trade-off. When you own and self-manage your hardware, you are obviously in full control over configuration and performance. But as you outsource more and begin to move workflows, applications and data to the cloud, what you lose in direct control over hardware, you gain in complete control over IT resources and usage. The cloud enables you to spin up and down virtual instances on demand, tailoring storage, RAM, CPUs and more in ways you simply couldn t do easily or as often in a dedicated environment. Learn more» For these companies, interaction with a cloud service provider is not the beginning of the process, but a late step. It comes after the formulation of the strategy which is a highly individual exercise, specific to the company. The strategy helps these companies approach cloud service providers with a sort of checklist of their needs. (See checklist on following page.) In this way they can effectively compare providers and get the best solution for their investment, thus putting the final finishing touch on a great IT strategy. 15 of 16 Latisys White Paper > ecember 2012

The cloud checklist: Key considerations when adding cloud to your IT infrastructure portfolio What are my workloads? q Purpose q Production q Test & evelopment q Proof of Concept q isaster Recovery q Compute and performance requirements q Storage Capacity q Storage IOPS q Networking q RAM q CPU q Physical vs. virtual q Application type q Core to business q Ancillary q Elasticity q How do my peak needs compare with my average needs? q How much do I need, how quickly do I need it, and for how long? q Variable? q Cyclical? q Seasonal? What kind of access do we need to these applications: q Who needs to access the applications? q Where are users located? q In one office q Spread out in remote locations q Is the application: q Public-facing q Internal only What level of security is required? q Are there specific security requirements? q Network firewall q IPS q Web application firewall q Anti-Virus q Are there specific compliance requirements? q PCI q HIPAA q FISMA q SSAE16 / SAS70 q SarbOx q GLBA q FedRAMP q Other How does this environment relate to the rest of my IT infrastructure? q Interoperability? q On-Premise vs. outsourced? q Core to business vs. ancillary? q Geographic considerations where is the data stored? Where are the VMs housed? What resources and capabilities do I require for: q Solution design q Migration planning q Ongoing support Call us at 866-956-9594 to walk through this checklist with someone from our team of enterprise cloud hosting and migration experts. We can also assess your current IT infrastructure and examine your requirements relative to security, performance, management, governance, compliance and cost and present you with a streamlined Enterprise Cloud Migration Plan that ensures your business is optimized for strategic IT growth moving forward. For more information, please visit our Take Your IT On-emand page, or email our Cloud Solution Engineering team at Latisys_Cloud@latisys.com. 16 of 16 Latisys White Paper > ecember 2012