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Emerging Enterprise Cloud Adoption Paths April 18, 2012

Emerging Enterprise Cloud Adoption Paths

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Presentation given at Cloud Fair Seattle 2012 on Emerging Enterprise Cloud Adoption Paths

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Page 1: Emerging Enterprise Cloud Adoption Paths

Emerging Enterprise Cloud Adoption Paths

April 18, 2012

Page 2: Emerging Enterprise Cloud Adoption Paths

Everest Group is a leading global services advisory firm

Range of servicesOverview

More than 20 years of experience d i i Gl b l 1000 StrategyStrategy S b i tiS b i tiadvising Global 1000

Recognized for positioning clients for the next generation of global services − combination of deep

StrategyConsulting and research services to turn insights into decisions

StrategyConsulting and research services to turn insights into decisions

SubscriptionsResearch reports, data sets, customized tracking services

SubscriptionsResearch reports, data sets, customized tracking services

insights, strategic decision-making approaches, and implementation expertise

Distinctive combination of consulting

ImplementationConsulting services to capture value from decisions

ImplementationConsulting services to capture value from decisions

ResourcesWebinars, research, and blogsResourcesWebinars, research, and blogs

and research capabilities

Over 1,000 engagements, covering IT and business processes

We serve enterprises, service providers, and service enablers

Service ProvidersEnterprises

Rich data sets and subscription research based on over 75 business processes, 150 service delivery locations, 500 captives, 100 service providers, and 18,000 outsourcing

Services Industry

Service Enablers

Proprietary & Confidential. © 2012, Everest Global, Inc. 2

contracts

Page 3: Emerging Enterprise Cloud Adoption Paths

ITO and the Enterprise Cloud OpportunityOver $500 billion in infrastructure-related outsourcing contracts are coming to term in the next three yearsthe next three years

Global Infrastructure-related Outsourcing Contracts Announced TCV, US$ billions

Global Infrastructure-related Outsourcing Contracts by Expiration Year Estimated ACV, US$ billions

# of contracts Latin America Asia Pacific EMEA North America Total

IO 28 113 512 513 1,166

AO & IO 14 66 251 290 621

Contract Volume Breakdown

AO & IO 14 66 251 290 621

Total 42 179 763 803 1,787

Total ACV (US$) $1 billion $5 billion $28 billion $49 billion $84 billion

A d ti 5 9 6 3 5 9 6 2 6 1

Proprietary & Confidential. © 2012, Everest Global, Inc. 3

Average duration 5.9 years 6.3 years 5.9 years 6.2 years 6.1 years

Total TCV (US$) $7 billion $29 billion $168 billion $306 billion $510 billionSource: Everest Group Transaction Intelligence Database

Page 4: Emerging Enterprise Cloud Adoption Paths

Global IT Services Market ForcesEnterprises face pressure to respond to extreme market demands for efficiency and flexibility

Demand for FlexibilityDemand for Efficiency

flexibility

Increasing Value Focus Increasing Pace of Innovation

“Consumerization” of IT Device proliferation

C d l ti

Ongoing budget pressure Demand for business value

V d i i Compressed cycle time Strategic focus

Vendor pricing Security and regulatory

compliance

Drive to Improve Utilization Need for Responsiveness Rapid volume growth; high

variability; explosion of data / l it

High cost “single-tenant” modelsU d tili ti f Extreme complexity

Anytime / anywhere access Speed / on-demand service Configurability

Underutilization of dedicated hardware

Suboptimal skill mixes Underachievement of

economies of scale

ExtremeDemands on

IT and BusinessFunctions

Proprietary & Confidential. © 2012, Everest Global, Inc. 4

Page 5: Emerging Enterprise Cloud Adoption Paths

Impact of Next Generation IT ComponentsDisruptive Next Generation IT models are positioned to meet the demanding market needs creating game changing opportunities

Efficiency Impact Flexibility Impact

Next Generation Data Centers Dramatically lowered cost Standardization equals

needs, creating game-changing opportunities

s

Data CentersDesigned to take advantage of modular, hyper-scale and high-density principles

Reduced latency Simplified management Highly scalable

speed ‘Right-sized’ capacity ‘Just-in-time’ capacity

ion

Mod

els

Talent FactoriesHigh talent, low cost resources organized by an optimized workforce pyramid

Optimized staffing pyramid leading to improved resource utilization

Remote support from low cost locations

Improved access to specialized skills and technical expertise

Enhanced resource scalability

xt G

ener

at

Cloud ServicesIT delivered as a service through private, public, and/or hybrid cloud models

Dynamic workload shift to achieve 4-5X efficiency gain

Pooled resources/multi-tenancyC t li k d t ti

On-demand processing and storage capacity

Self-service provisioning Capital avoidance

Nex Cost linked to consumption

MobilitySmartphones, tablets, sensors and other mobile end point

Lower device end-user TCO (for certain segments)

Productivity improvements

Simplified ‘AppStore’ delivery of capabilities

‘Always on’ connectivity

Proprietary & Confidential. © 2012, Everest Global, Inc. 5

and other mobile end-point technologies.

y p Location and motion

information utility

y y Ubiquitous user access

Page 6: Emerging Enterprise Cloud Adoption Paths

Enterprise Cloud Business Value DriversCloud delivery models are creating enterprise-class value across several operational and financial leversand financial levers

Server consolidation/ i t li ti

Operational Levers Key Financial Levers

Observations

Effi i

virtualization

Multi-tenant service models

Capex avoidance

Reduced operations and

Levers and impact differ by delivery model• BPaaS

Observations

EfficiencyBenefits Management

Automation

Standardization Outsourced maintenance and support

Reduced operations and mgmt costs

• BPaaS• SaaS• PaaS• IaaS• Private / hybrid cloud

Cloud Cloud ImpactImpact

Active workload management

Increased Agility

• Private / hybrid cloud

Economics sensitive to context–specific factors• Refresh cycle

Flexibility Benefits

g y

Extended Reach

New Capabilities

Revenue growth• Migration approaches

and costSignificant variations in value impact across vendors / CSPs

Reduced operating costs

Proprietary & Confidential. © 2012, Everest Global, Inc. 6

p

Consumption-based billinge

vendors / CSPscosts

Page 7: Emerging Enterprise Cloud Adoption Paths

There’s No Such Thing as ‘Enterprise Cloud’…‘The Cloud’ is comprised of several different delivery models, each with different attributes and characteristics

Business Business Process as aProcess as a

Description

End-to-end business process delivered as a

Common Services Payroll Order-to-cash

P t

attributes and characteristics

Process as a Process as a Service Service ((BPaaSBPaaS))

Software as a Software as a S iS i

service

Multi-tenant applications and business services

Procure-to-pay Hire-to-retire

CRM HCM

PublicPublicCloud Cloud

ServicesServices Platform as a Platform as a ServiceService

Service Service ((SaaSSaaS))

Multi-tenant application development and hosting

Email Collaboration F&A

Dev Only Dev + Runtime

Infrastructure Infrastructure as a Service as a Service

Service Service ((PaaSPaaS))

Shared data center, infrastructure hardware and software resources

p genvironments

Compute (Server / OS) Storage Database

Dev Runtime

as a Se ceas a Se ce((IaaSIaaS))

and software resources Database Networking Content Delivery

Private / Hybrid Clouds Compute (Server / OS) Storage

Internally shared data center, infrastructure hardware and software

Proprietary & Confidential. © 2012, Everest Global, Inc. 7

(On-Premise or Hosted) Databasehardware and software resources

Page 8: Emerging Enterprise Cloud Adoption Paths

Enterprise Cloud Adoption PatternsA set of common adoption paths and strategies are beginning to emerge for how enterprises are capturing value from cloud services

AAObserverObserver

BBOpportunistsOpportunists

CCSolutionersSolutioners

DDTransformersTransformers

EEProviderProvider

Cloud a low priority due Cloud adoption Cloud adoption Cloud models leveraged Cloud models providing

enterprises are capturing value from cloud services

Cloud a low priority due to risk and / or perceived adoption constraints (e.g., regulatory requirements)

Cloud adoption opportunistic; primarily driven by business unit / departmental initiatives

Cloud adoption intentionally driven by business / functional use cases and needs

Cloud models leveraged broadly across the enterprise, integrated with traditional models, often driving wide-scale IT transformation

Cloud models providing foundation for new, integrated service delivery ‘business model’ based on services market principles

Description

Cloud Penetration

• None / limited• Individual buyers

• Limited / Modest• Ind. / dept buyers

• Modest• LOB buyers

• Modest / Ext• Enterprise buyer

• Modest / Ext• Enterprise buyers

• None • Individual use • POC / pilots • Limited • Limited

Cloud Penetration

IaaS

SaaS

• None • Private POCs • Limited • Modest • Extensive

• Business • Business • Business / IT • IT • Business / ITIT I fl

Private / Hybrid

Primary Buyers

• High • Limited • Modest • High • High

• None • None • Project basis • Architect • Broker

IT InfluenceCloud strategy

Integration

Management

Proprietary & Confidential. © 2012, Everest Global, Inc. 8

• None / Limited • None / Limited • None / limited • Emerging • Extensive

• None • None • Policy only • Emerging • Extensive

Management

Governance

Page 9: Emerging Enterprise Cloud Adoption Paths

Enterprise Cloud Infrastructure EconomicsImproving utilization and eliminating excess capacity are the key to realizing cost efficiencies from cloud infrastructure models

EliminateExcess Capacity

Eliminate spend on unused ‘peak’

3

efficiencies from cloud infrastructure models

capacityPrivate Cloud

Server Utilization

Shift peak loads to public cloud(s)L d d

Move ‘Peak’ Load to Public2

Leverage on-demand ‘pay-as-you-go’ flexibility

Shift loads to fill valleys (where possible)

Maximize private cloud

Keep ‘Base’ Load in Private

1

Proprietary & Confidential. © 2012, Everest Global, Inc. 9

utilization

Page 10: Emerging Enterprise Cloud Adoption Paths

Cloud Infrastructure Services Impact Infrastructure delivery based on the cloud has the potential to unlock extraordinary workload level economics and flexibility benefitsworkload-level economics and flexibility benefits

Enterprise Workload Cost by Platform1

$ / GHz hrs, Indexed vs Dedicated • Hybrid models can drive truly

‘disruptive’ economics

100• Applicable at individual workload

and portfolio level• Dynamic bursting not required to

capture initial benefits

6560-65 ‘Peak’ Load

Public Cloud

p

‘Base’ Load‘Base’ Load

Public Cloud• Shift ‘spike’ compute hours

to public cloud• Pay only for consumption25

Virtualized/ Private Cloud

Public Cloud

Dedicated Hybrid Model

Base LoadBase LoadPrivate CloudPrivate Cloud

•• Keep ‘base’ compute Keep ‘base’ compute hours in private cloudhours in private cloud

•• Maximize utilizationMaximize utilizationPhysical

ServerUtilization:

7% N/A(service provider)

18% 40%

Proprietary & Confidential. © 2012, Everest Global, Inc. 10

1 Assumes average workload mix and profile; 15% of total peak workload hours shifted to public cloud in an on-demand model; does not include application migration costsSource: Everest Group Cloud Value Assessment Model

( p )

Page 11: Emerging Enterprise Cloud Adoption Paths

Enterprise Cloud ImpactRecent engagements illustrate the value creation potential of cloud solutions f th t ifor the enterprise

Case Example I Case Example I --Fortune 200 Global Energy CompanyFortune 200 Global Energy CompanyCase Example I Case Example I --Fortune 200 Global Energy CompanyFortune 200 Global Energy Company

Case Example II Case Example II --Fortune 250 Consumer Goods CompanyFortune 250 Consumer Goods CompanyCase Example II Case Example II --Fortune 250 Consumer Goods CompanyFortune 250 Consumer Goods Companyo tu e 00 G oba e gy Co pa yo tu e 00 G oba e gy Co pa yo tu e 00 G oba e gy Co pa yo tu e 00 G oba e gy Co pa y

Formulated sourcing strategy for corporate IT infrastructure supporting operations in 28 countries on 5 continents

Formulated sourcing strategy for corporate IT infrastructure supporting operations in 28 countries on 5 continents

o tu e 50 Co su e Goods Co pa yo tu e 50 Co su e Goods Co pa yo tu e 50 Co su e Goods Co pa yo tu e 50 Co su e Goods Co pa y Consolidated IT Outsourcing

agreements for 12 operating companies into a single service provider

Build a solution that has high

Consolidated IT Outsourcing agreements for 12 operating companies into a single service provider

Build a solution that has highcontinents– Reduce asset ownership– Outsource commodity skills– Secure variable pricingExplored Next Generation cloud

continents– Reduce asset ownership– Outsource commodity skills– Secure variable pricingExplored Next Generation cloud

– Build a solution that has high availability during and after transition

– Reduce cost of IT

Evaluated proposals for comprehensive

– Build a solution that has high availability during and after transition

– Reduce cost of IT

Evaluated proposals for comprehensive Explored Next Generation cloud solutions with 4 global providers– Strong cloud capabilities– SAP expertise and global reach

Ability to transition quickly

Explored Next Generation cloud solutions with 4 global providers– Strong cloud capabilities– SAP expertise and global reach

Ability to transition quickly

Evaluated proposals for comprehensive IT infrastructure outsourcing– Traditional IT outsourcing solutions– Cloud-based solution

Evaluated proposals for comprehensive IT infrastructure outsourcing– Traditional IT outsourcing solutions– Cloud-based solution

– Ability to transition quickly Assessed proposals for broad managed

services solutions with different cloud mixes

Range of savings potential

– Ability to transition quickly Assessed proposals for broad managed

services solutions with different cloud mixes

Range of savings potential

Awarded contract to provider that proposed cloud-based solution, albeit with a more conservative transformation timeline than original cloud proposal

Awarded contract to provider that proposed cloud-based solution, albeit with a more conservative transformation timeline than original cloud proposal

Proprietary & Confidential. © 2012, Everest Global, Inc. 11

– Range of savings potential– Variety of cloud intensiveness– Range of savings potential– Variety of cloud intensiveness

timeline than original cloud proposaltimeline than original cloud proposal

Page 12: Emerging Enterprise Cloud Adoption Paths

Case Example I – Global Energy CompanyService providers proposed a diverse set of solutions to meet the client’s Next Generation IT solution design objectivesGeneration IT solution design objectives

Dedicated Shared

Solution Overview

• Solution leverages true public cloud (via partner)

Solution Description

Provider A PhysicalDedicated Private Cloud

Public CloudVirtual Private Cloud

SAPSAP

• Solution leverages true public cloud (via partner)• ~80% of workloads to cloud-based services;

includes DR• SLAs reflect standard (public) offering, not

customized to client situation

Provider B

Dedicated Private CloudPhysical Virtual Private Cloud

SAP

• 82% of workloads to private cloud, includes DR• SAP resides fully in cloud environment• No minimum commitments required• SLAs reflect shared environment

Provider C Dedicated Private CloudPhysical

SAPSAP

• Solution aggressively virtualizes (20:1 ratio) and transitions to a dedicated, single-tenant environment; excludes DR

• Client-specific SLA s met

VirtualPhysicalBaselineSAPSAP

• Status quo does not transform infrastructure• No formal service levels; no self-service portal; no

consumption-based service model; no service catalog; no ability to track application usage

Proprietary & Confidential. © 2012, Everest Global, Inc. 12

100%50%25% 75%0%• Incomplete DR provided for select business

applications

Page 13: Emerging Enterprise Cloud Adoption Paths

Case Example I – Global Energy CompanyThese solutions afforded very different value propositions for the client

IT Infrastructure Annual CostIndexed US$, Year 1 Baseline1 = 100

140

150

160 BaselineProvider AProvider B

Indexed US$, Year 1 Baseline 100

• Nearly 30% improvement in cost

110

120

130 Provider C provided by public cloud-enabled

solution

• Even modest use of public cloud to drive utilization appears to have

80

90

100

110 substantial benefit

• All provider solutions include enhanced scope (albeit with some SLA tradeoffs)

60

70

80

Year 1 Year 2 Year 3 Year 4 Year 5

• Rapid changes in cloud service provider landscape make provider selection an important success factor

Public cloud-

enabled

Proprietary & Confidential. © 2012, Everest Global, Inc. 13

1 Transition costs are spread over 2 years; retained costs excluded.

Page 14: Emerging Enterprise Cloud Adoption Paths

Case Example II – North America Consumer Goods Company

Client requirements Traditional infrastructure solutionTraditional infrastructure solution

Proposed provider solutionsq

Solution must provide high availability infrastructure, with heightened sensitivity during

Traditional infrastructure solution• Assets owned by service provider,

delivered from provider facilities• No offshore dedicated to client, only

leveraged resources offshore

Traditional infrastructure solution• Assets owned by service provider,

delivered from provider facilities• No offshore dedicated to client, only

leveraged resources offshoreheightened sensitivity during transition

Key decision criterion is magnitude and timing of cost

leveraged resources offshore• 50%-90% of desired SLAs met• Perceived risk of service disruption

during transition was moderate

leveraged resources offshore• 50%-90% of desired SLAs met• Perceived risk of service disruption

during transition was moderate

savings Total scope included

infrastructure and applications (this case example focuses on

Cloud-based solution• Dedicated private cloud for most

Cloud-based solution• Dedicated private cloud for most (this case example focuses on

infrastructure) RFP guided service providers

toward traditional solution

applications (including SAP)• No movement of client’s existing,

owned equipment• 90% of desired SLAs met

applications (including SAP)• No movement of client’s existing,

owned equipment• 90% of desired SLAs met

Proprietary & Confidential. © 2012, Everest Global, Inc. 14

• Perceived risk of service disruption during transition was low

• Perceived risk of service disruption during transition was low

Page 15: Emerging Enterprise Cloud Adoption Paths

Case Example II – North America Consumer Goods Company

IT Infrastructure Annual CostIndexed US$, Year 1 Baseline = 100

200

250 BaselineProvider 1Provider 2Provider 3Provider 4

$,

150

• 38% cost improvement provided by cloud-enabled solution

• All provider solutions address

50

100

psubstantially same scope as Baseline

• Represents initial pricing from all providers (expectation for Cloud-

0Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

p ( psubstantial concessions from finalists were met)

• Provider 4’s cloud-centric solution provided compelling

Enabledsolution

Proprietary & Confidential. © 2012, Everest Global, Inc. 15

Footnote: Transition costs are included. Providers ramp-up services in first two years. Provider 1 is the incumbent. Client chose cloud provider. Analysis based on largest subsidiary of the parent company.

economic advantages

Page 16: Emerging Enterprise Cloud Adoption Paths

Cloud Business Value DriversEverest Group experience suggests that infrastructure-related cloud services provide the most attractive cost related opportunities

Value Impact

Server consolidation/

services provide the most attractive cost-related opportunities

SaaSPaaSPrivate Hybrid IaaSInfrastructure Apps

HigherLower

Operational Levers

Efficiency

virtualization

Multi-tenant service models

ManagementEfficiencyBenefits

Management Automation

Standardization

Cloud Cloud ImpactImpact

Active workload management

Increased Agility

Flexibility Benefits

Extended Reach

New Capabilities

Proprietary & Confidential. © 2012, Everest Global, Inc. 16

Consumption-based billing

Page 17: Emerging Enterprise Cloud Adoption Paths

Cloud Service Provider LandscapeDifferent cloud service provider groups are adopting distinctive strategies and possess different biases and incentives that impact value capturepossess different biases and incentives that impact value capture

Legacy IT Services Talent Model Network Providers Cloud Pioneers

Strategic fit

• Business model • Difficult balance of traditional • Focus remains on talent • Difficult balance of traditional • Built from start for cloud• Business model Difficult balance of traditional and cloud models

Focus remains on talent services to enable cloud

Difficult balance of traditional and cloud models

Built from start for cloud

• Alignment • Conflicting goals, especially with existing revenue base

• Poor fit with infrastructure • Good alignment with standard delivery; less go-to-market

• Sharp cloud focus

• Investment model • Bias toward client funding of initiatives

• Little appetite for investment beyond talent factory

• Strong alignment with historical approaches

• Oriented to support rapid cloud growthy y pp g

Offerings

• Structure/packaging • Legacy elements tend to appear in cloud offerings

• Biases toward enabling rather than core solution

• Network-centric flavor often exists

• Highly standard cloud not always enterprise-friendly

• Delivery capability • Cloud delivery capabilities • Talent model focused • Building capabilities • Most advanced cloud-focusedy p yoften mixed with legacy

Go-to-market

• Sales approach • Enterprise-focused • Enterprise-focused • Underdeveloped for enterprise • Largely absent for enterprise

• Pricing models • Strongly influenced by legacy, • Talent-based • Advanced, consistent with • Sophisticated, cloud-centricPricing modelsrisk-shifting frame of reference

legacy

• Solutioning • Strong enterprise-class skills • Enterprise-oriented • Limited enterprise solution focus

• Poor enterprise capability

Example providers

Proprietary & Confidential. © 2012, Everest Global, Inc. 17

p p

Page 18: Emerging Enterprise Cloud Adoption Paths

Everest GroupLeading clients from insight to action

S BilScott BilsPartner – Next Generation IT Practice LeaderEverest GroupEverest Group

[email protected]: @sbils, @everest_cloud 512-550-0207 (m)214-341-3043 (o)214-341-3043 (o)

Proprietary & Confidential. © 2012, Everest Global, Inc. 18

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