Cloud Computing in the enterprise: Not if, but when and how?
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1 The Dbriefs Technology Executives series presents: Cloud Computing in the enterprise: Not if, but when and how? John Hagel, Director, Deloitte Consulting LLP Chris Weitz, Director, Deloitte Consulting LLP October 1, 2009
2 Agenda Cloud Computing in the enterprise Impact on IT industry and supply chain Waves of Cloud Computing evolution Cloud architectures and next generation enterprises Question and Answers Cloud Computing is a paradigm of computing in which dynamically scalable and often virtualized computing resources are provided as a service over the internet.
3 Poll #1 How do you expect Cloud Computing to affect enterprise IT? No real short-term impact, it s overhyped Good for consumers and startups, but not sure about others Will be useful for certain kinds enterprise services Will be a transformative technology in the long term Too soon to tell
4 Cloud Computing and enterprise IT services
5 Cloud Computing is currently described using commonly accepted definitions Cloud Computing services are said to include five major qualities On-demand self-service Ubiquitous network access Location independent resource pooling Rapid elasticity Pay per use Cloud Computing service types Software-as-a- Service Platform-as-a- Service Infrastructure-as-a- Service On-demand use of software over the internet or private networks Tools and environments to build and operate cloud applications and services Compute, storage, network, and operations resources as a service from the cloud 1
6 Cloud Computing delivery models vary by ownership and control of information Cloud Computing is delivered and used in different ways, with public, private, and hybrid combinations Public cloud (external) Virtualized computing services used by multiple customers, accessed across the Internet or a private network Private cloud (internal) Virtualized environments used internally by an enterprise, and controlled within the enterprise. Hybrid cloud A mixed environment with both public and private cloud services; includes virtual private clouds Community cloud Community clouds are used across organizations, allowing for collaboration among a community of interest 2
7 Economic pressures are driving enterprises to adopt Cloud Computing IT consumption models Cloud Computing presents a number of significant benefit opportunities for enterprise: Reduce amounts of IT capital equipment spending Pay-as-you-go model reduces capital expenditures Costs are treated as operating expense, Lower costs, reduced hardware purchases Increased flexibility, greater agility Allows greater flexibility and less time to complete projects Accelerated time to benefits Reallocation of staff resources Move staff from IT to other activities Focus on core vs. non-core activities 3
8 Adoption Enterprises adopting Cloud Computing services will follow a typical path adoption Software as a Service is the most mature and widely adopted service category. Other service types will follow a similar path. Enterprise adoption path of cloud computing High IaaS SaaS Adoption Internalization Institutionalization PaaS Positive Perception Understanding Low Unaware Awareness Time 4
9 As Cloud Computing grows, vendors expand and improve their services offerings Analysts are projecting continued growth and increased enterprise adoption of Cloud Computing in the future. Demand growth Enterprises are moving to cloud services out of economic necessity Analysts predict that revenue worldwide for companies providing cloud services will surpass $56 billion in 2009, a 21% increase from 2008, and the market will reach $150 billion by 2013* Supply growth IT product and service providers are shifting toward cloud models Vendors are competing to establish enterprise dominance *Gartner Forecast: Sizing the Cloud; Understanding the Opportunities in Cloud Services, 18 March
10 Poll #2 The potential benefits of Cloud Computing most important to my organization are: Project agility and quick time to market Ability to quickly scale up and scale down resources Resource management, staffing allocation and expertise Financial benefits, reduced capital expenditures Don t know/not applicable
11 What are enterprises doing with Cloud Computing? Enterprises are currently gaining experience and ramping up Cloud Computing in a wide variety of ways: Single-function SaaS offerings, such as CRM, sales force automation, human resources management, and /productivity apps Development, testing, and public-facing web sites Dynamic provisioning environments to achieve variable capacity on demand External collaboration environments using Community Clouds Private & public cloud hybrids 6
12 Adoption Cloud Computing adoption will map to the maturity of the vendor capabilities Cloud Computing adoption depends on vendors readiness to provide enterprise-class performance, reliability, and resiliency Nascent technology Early adopters Stable technology Virtual Private Clouds Google App Engine Microsoft Hosted Rackspace Terremark Force.com Workday Amazon Web Services Oracle On Demand Hosted VMware Netsuite Rightnow Mozy Gmail Illustrative snapshot: Dynamic markets require continual re-assessment Salesforce CRM Actively watch and conduct limited tests Pilot projects & business case development Consider broad implementation SaaS PaaS IaaS 7
13 Operations considerations for Cloud Computing Cloud Computing promises to transform IT operations, but we believe enterprises need to prepare for the changes Data controls Security and privacy Audit & assurance Tax and legal Backup and DR Vendor lock-in IT operations IT readiness Who owns the data? How is it be used? Are controls in place? How is security achieved? What is the level of privacy protection? Are there risk management controls to applications and data? Can you meet needs for legal compliance and tax issues? Are data backup, retention, disaster recovery practices sufficient? Is the vendor limiting interoperability or access to your data? What IT services and applications are best suited for the cloud? Are internal IT architecture and organization structures ready? Alignment with Enterprise Risk and Governance strategy will help organizations identify and address the key hurdles to successful adoption 8
14 Poll #3 What is the largest consideration for adoption of Cloud Computing in your organization? Data controls and ownership, audit and assurance Backup, DR, & retention Security and privacy Vendor lock-in and interoperability Don t know/not applicable
15 What should enterprises consider doing to prepare for Cloud Computing? Prepare for Cloud Computing by looking at options from the perspectives of economics, technical feasibility, and risk. Economic Return Technical Feasibility Risk & Control IT Services Portfolio Economic Fit Transition Cost Architecture Readiness Vendor Capability Data Control Governance Vendor Compliance Cloud Strategy Replace Consolidate Extend Benefit Analysis Migration Complexity Security & Privacy Greatest Value in Shortest Time 9
16 Enterprise Cloud Computing adoption tactics Enterprises are starting with targeted projects with a building block approach for adoption of Cloud Computing services: Starting small Start experimenting with non-critical applications and services, such as test, development, or research Learning from partners Leverage lessons from Cloud Computing use cases from partners and others in similar industry groups Customizing cloud services Let the cloud vendors know your specific requirements, and request customization and specific services characteristics Building new private clouds Learn from the cloud vendors to build virtualized elastic cloud environments on the internal IT infrastructure Expanding with hybrid clouds Expand private clouds in the datacenter to integrate with public clouds to develop optimum hybrid models 10
17 Cloud Evolution and Maturity in the Enterprise Exponential benefits are available for those who overcome the major hurdles associated with the Cloud s maturity curve Innovation Efficiency Effectiveness Focused Standardized Dynamic Built to Order IT Built to Run IT Self-Configured IT Cloud Offerings Private Clouds, SaaS Hybrid Clouds, PaaS, IaaS Cloud Ecosystems Capabilities Application-Based, Non-core or discrete functions Services-Oriented, Core & non-core business functions Federated/Distributed Services Mgmt, Dynamic Resource Allocation Business Drivers Cost, Flexibility, Time-to-Value Service Management, Agility Collaboration, Differentiation Challenges Security, Pricing Models, Vendor Lock-In & SLAs Governance, Policy Mgmt, Data/Service Decoupling Architectural Transformation, Vendor Standards 11
18 Impact on the IT industry and supply chain 2
19 Cloud Computing is impacting traditional IT Industry procurement models for the enterprise IT industry disruptions are encouraged by cloud computing: The economics of Cloud Computing helps enterprises move from traditional products to more affordable services Cloud Computing services are rapidly evolving in areas of existing IT capabilities Cloud Computing providers are moving to develop the capabilities required to serve core IT needs of enterprises Enterprises are procuring Cloud Computing services which align with their operations risk tolerance, marking the threshold for acceptance 12
20 Cloud Computing effect on the IT industry As Cloud Computing evolves, it will put great pressure on incumbents and current leaders of the IT industry. As enterprise IT infrastructure and applications become available as cloud computing, traditional IT solutions will retreat to narrower niches IT industry incumbents that cannot establish a Cloud Computing presence risk being pushed into shrinking precloud sectors New players in the IT industry will emerge, displacing many of the traditional leaders Within a few years, the IT industry structure may be significantly transformed, both the concentration of sectors and the industry leaders 13
21 Cloud Computing also presents opportunities for new business models in the IT industry Enterprise IT services can become a commodity resource which can be resold from enterprises to third parties Enterprises can create arbitrage opportunities on excess IT capacity and operational services Cloud-based consortiums can combine and partition off idle enterprise IT capacity across multiple suppliers Brokers and aggregators will offer two-way markets for Cloud Computing resources among enterprises 14
22 Poll #4 In your enterprise, which area of IT offer the greatest potential for optimization using Cloud Computing? IT Servers and Storage Software for Office Productivity Applications Enterprise Software (ERP) IT Outsourcing and Technology Services Don t know/not applicable
23 Cloud architectures and next generation enterprises
24 Cloud adoption will be shaped by two key elements High Capability of existing premise based platforms to meet business needs Low Low Differentiated value of cloud providers High 15
25 Cloud Computing will create four waves of disruption Disruption of other industries Disintegration of vertical Cloud Computing stacks Addressing unmet needs of business ecosystems New delivery models 16
26 Contrasting architectures Control Resources Transactions In-Out One control point Heterogeneous Fine grained Short-lived Autonomous entities Out-In Heterogeneous squared Coarse grained Long-lived Outlook Optimistic Pessimistic 17
27 Migration from an enterprise-centric operating model to an ecosystem-centric one requires a fundamental IT architectural shift From Enterprise INSIDE-OUT Architecture for scalable efficiency to Ecosystem OUTSIDE-IN Architecture for scalable learning and collaboration 18
28 SLA Policy In Wave 3, the distributed services architecture will evolve into true Service Grids A distributed architecture is required before web services technology can be broadly deployed to support enterprise and ecosystem activities Application Services Business application services Service grid management Service grid Datacenter infrastructure and network 19
29 Evolving industry structure Business as a service (BAAS) Varies Software as a service (SAAS) Fragmented Platform as a service (PAAS) APAAS EPAAS Vertical Concentration Horizontal Concentration Infrastructure as a service (IAAS) Horizontal Concentration 20
30 Questions and Answers
31 Join us November 5th at 2 PM ET as our Technology and Human Resource Executives series presents: Technology and People: Understanding the Workplace of Tomorrow
32 Contact info John Hagel Director, Center for Edge Innovation Deloitte Consulting LLP Chris Weitz Director, Technology Strategy and Architecture Deloitte Consulting LLP
33 This presentation contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte is not, by means of this presentation, rendering business, financial, investment, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this presentation.
34 About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.
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