cbs february 2013 cloud computing in the context of outsourcing

© 2012 IBM Corporation

Cloud Computing

in the context of Outsourcing Henrik HasselbalchCloud Leder, IBM Danmark

4.500successful cloud projects

4.5Mdaily client transactions

through public cloud

>1Mmanaged virtual machines

80 %revenue Growth in 2012


Mobility, social media, increasing digitization and new analytics capabilities are conspiring to drive broad business change

Mobile revolution Connectivity, access and participation are growing rapidly Smart devices are becoming the primary route to get connected Devices are getting smarter as they are increasingly enriched by mobile apps

Major Technology Trends driving Business Change

Social media explosion Social media is quickly becoming the primary communication and collaboration format GenY’s or “digital natives” use of technology and social media platforms is accelerating adoption Enterprises are adopting social media but are struggling to realize the value and manage risk

Hyper digitization Digital content is produced and accessed more quickly than ever before Internet traffic is growing globally driven by consumer use of video, mobile data, interconnectedness An increasing number of connected devices and sensors is further driving growth

The power of analytics New capabilities for real time analysis, predictive analytics and micro-segmentation are emerging Top performing companies use analytics to drive action and business value Analytics are making information “consumable” and is transforming all parts of the organization, from

customer intimacy to supply chain management

Source: IBV Analysis

Cloud’s business enablers


IT is Being Challenged by Business

Business Opportunity

Time to Operations of IT

LOST BUSINESS


The Current It Challenge - Sprawl


Is IT ready for the challenge?

* 2012 IBM Global Data Center Study

68% of IT operating costs in 2013 will be

for management and administration

Only 1 in 5

organizations allocate more than 50% of IT budget to new projects

2013

68%29%

1996

* IDC; Converged Systems: End-User Survey Results presentation; September 2012; Doc #236966

New server spendingPower & cooling costsServer mgmt & admin costs


Danish CIOs 10 top priorities in 2013 1. Implementing new solutions: 27.3 procent

2. Support multiple platforms and operatingsystems: 26.8 procent

3. Modernise the infrastructure and/or applications: 26.4 procent

4. Improve and automate IT processes: 25.9 procent

5. Adjust IT-systems to changes business requirements: 23.6 procent

6. Reduce cost: 23.2 procent

7. Improve service: 19.5 procent

8. Secure a secure infrastructure: 17.3 procent

9. Optimise business processes by using IT: 16.8 procent

10. Keep old systems running: 10.9 procent

Kilde: IDC


Cloud harnesses the capabilities born out of these trends to empower six potentially “game changing” business enablers

Source: IBV Analysis

Cloud’s Business Enablers

Cost Flexibility

1

Shifts fixed to variable cost Pay as and when needed

Business Scalability2

Provides limitless, cost-effective computing capacity to support growth

Masked Complexity4

Expands product sophistication Simpler for customers/usersContext-driven

Variability 5

User defined experiences Increases relevance

Ecosystem Connectivity 6

New value nets Potential new

businesses

Market Adaptability

Faster time to market Supports experimentation

3

Cloud’s business enablers


Organizations are leveraging cloud to enhance, extend and invent new customer value propositions

8

Customer Value Proposition

Enhance Extend Invent

Cloud Enablement Framework

Xerox’s “Mobile Print” cloud-based service enables customers to print documents remotely without installing printer drivers and without a direct connection

Retain/attract customers for existing products and services through enhanced user experience.

Animoto’s Cinematic Artificial Intelligence technology leverages cloud to affordably analyze and edit user multimedia content from a myriad of potential sources yet retain simple self-service.

Generates new revenue by appealing to novice/ intermediate computer users entering market and drawing customers away from traditional commercial software

Apple has used its iOS platform to create a new need and a market for a range of office productivity tools, gaming and entertainment options and various other applications on a mobile device like a tablet or phone.

The Apple iOS brings together an ecosystem with a radically different value proposition that has allowed Apple to generate entirely new revenue streams and dominate the market

ExtendExtend InventInventEnhanceEnhance

Cloud Enablement Framework


Organizations can be classified across three archetypes using the Cloud Enablement Framework: Optimizers, Innovators, and Disruptors

Positioning a Cloud initiative on the framework involves understanding the impact of the resulting Cloud business model.

Organization

North Carolina State University

Virtual Computing Lab

3M

Visual Attention Service

Comcast

XCloud-based Television Platform

Impr

ove

Tra

nsfo

rmC

reat

e

Enhance Extend Invent

OptimizersOptimizers

DisruptorsDisruptors

InnovatorsInnovators

Val

ue

Ch

ain

Customer Value Proposition

Cloud-enabled Business Model archetypes


IBM’s Cloud-enabled Business Model Accelerator aims to help clients envision new business models using cloud’s game changing enablers

The objective of this engagement is to identify business model innovation opportunities for your organization that are enabled using the ‘game-changing’ attributes of the cloud.

Our approach includes Discussions with key stakeholders Presentations and education sessions Workshop based brainstorming Joint analysis guided by insights from IBM Synthesis and recommendations

Key takeaways from this engagement are a prioritized set of opportunities for cloud-enabled business model innovation and recommended next-steps.

ObjectiveObjective

ApproachApproach

TakeawaysTakeaways

Cloud-enabled Business Model (CeBM) Accelerator


13%

41%21%

28%38%

21%

Today 3 yrs

Cloud is widely recognized as an increasingly important technology; adoption is expected to accelerate rapidly in the coming years

Source: (1) 2011 joint IBV/EIU Cloud-enabled Business Model Survey of 572 business & IT leaders; Q4. Which of the following most accurately describes your organisation’s level of cloud technology adoption today and which do you expect will best describe it in three years? Sizing the cloud , Forrester Research, April 21, 2011; http://www.cio.com/article/684338/Survey_CIOs_Are_Putting_the_Cloud_First

Piloting

Adopting

SubstantiallyImplemented

+215%

+33%

72%

91%

What is Your Organization’s Level of Cloud Adoption?

% of Respondents

The Global Cloud Computing Market is Forecast to Grow 22% per year through 2020

$0B

$50B

$100B

$150B

$200B

$250B

2011 2015 2020

$241B

$41B

$150B

Source: Sizing the cloud, Forrester Research, Inc., April 21, 2011


Cloud Computing in the context of Outsourcing


The market will continue to grow across all categories of cloud services

Hosted communication and collaboration is the fastest growing cloud service category in Europe with a CAGR greater than 57%.

SaaS applications will be the largest cloud service category by 2015, reaching €7.4B.

Across all cloud services, an average of 40% of European SMBs are considering adding each in the next 3 years

Web hosting is used by more than 50% of SMBs that have a website, and more SMBs plan to add it.

Source: Parallels SMB Cloud Insights™ (EUNA regional), 2012

Highest penetration

Highest penetration

Largest in 2015

Largest in 2015

Fastest GrowingFastest

Growing


Growth is not equal, however, and market composition is changing

The SMB cloud services market in Eastern and Southern Europe is growing 2x faster than in Northern and Western Europe

2012 % of market

23%

35%

8%

34%

CAGR2015 %

of market

Source: Parallels SMB Cloud Insights™ (EUNA regional), 2012

Northern

Western

Eastern

Southern

23%

20%

45%

46%

19%

26%

11%

44%


Parallels estimates the SMB cloud market in Denmark is about kr 830M and will grow to kr 1.6B by 2015

kr 830M($144M USD)

33% CAGR

2015

25% 3yr CAGR

25% 3yr CAGR

Source: Parallels SMB Cloud Insights™ (EUNA regional) 2012

kr 1.6B($280M USD)

46% CAGR

9% CAGR

27% CAGR

2012


IBM ourselves looked at a 4 tier approach

Our application portfolio is segmented into four tiers

We are migrating as many of the Tier 4 applications as possible and valuable to a production cloud

Lowest-risk, lowest service applications are being moved first. Apply lessons learned to subsequent migrations

Tier 2

Tier 4

Tier 1

Tier 3

Availability

100%98.5%95% 99.7%

Key Most Critical applications: 5% of total

24x7 Support

30% of total24x7 Support

21% of totalPrimary hours support

44% of totalLimited support

Production


Cloud value varies by workload and deployment model

Where you are coming from is as important as where you want to be

• Don’t forget the journeyCloud is about reducing costs and

increasing flexibility

Cloud is not rocket science, but it is computer science

The fundamentals of cloud value …

Cloud value


Does cloud always result in lower cost?

“ … cloud computing does not always save money. In fact, it can drive cost up if it is used simply to replace on-premises work with an exact duplicate of that work in the cloud. Knowing when to redesign or when to use cost savings as a justification for

cloud computing is critical." -- “The (Not So) Future Web”, Gartner Inc.

Whether cloud saves money for the service consumer is a function of

• The value they get from the cloud

• What it takes to move their workload into the cloud

• Other things they’ll need to provide if they move into the cloud

• The cost for all the above

With most private clouds the enterprise takes on the provider role

• Like traditional hosting, the enterprise owns the risk to balance supply and demand … and the costs associated with that

• True cost should be measured at the enterprise level

Reduced Cost

Increased Flexibility

Cloud value


The “other benefit” of cloud

“… All the emphasis (with cloud) is on cheaper and efficient ways to deliver IT. In reality it's also a way of delivering new industrial value -- that's the more exciting

thing." Erich Clementi, IBM's Hidden Cloud on Forbes.com

“… All the emphasis (with cloud) is on cheaper and efficient ways to deliver IT. In reality it's also a way of delivering new industrial value -- that's the more exciting

thing." Erich Clementi, IBM's Hidden Cloud on Forbes.com

The “other” benefit of cloud -- the increased flexibility it provides – enables a new way of delivering IT• In some applications, it may be the biggest (or only) benefit• Enables quicker time-to-value, or new applications, shorter project lifecycles, etc.• Industry analysts: The ability of cloud to enable speed to deliver will be bigger than cost savings in

driving adoptionCloud will be a foundational mechanism in the “as-a-service" transformation of IT delivery

Reduced Cost

Increased Flexibility

Cloud value


Source: IDC

The future is Hybrid Sourcing


IBM SmartCloud represents the IBM vision for cloud computing

Common Open Standards Technology and Industry Ecosystem

DeployDesign

Business Process as a Service

Software as a Service

Platform as a Service

Infrastructure as a Service

Consume

Enables private/hybrid cloud service delivery and management

Cloud Enablement

TechnologiesSecure and scalable cloud managed

services platform

Managed Cloud

ServicesPre-built Cloud SaaS business

applications and solutions

Cloud Business

Solutions

Proven Strategy Consulting, Migration, & Management Expertise


IBM provides operating system and tool licenses

Fully managed

An enterprise-grade IaaS is the foundation for our Cloud services incl PaaS and SaaS.

Rapid access, multi-tenant solution scaled and priced based on usage.

Robust multi-tenant solution, including managed production services.

Workloads

Operating system

Management level

Availability

Security

Software usage

Pricing

Ideal for developing and deploying new application designs

Ideal for migration of traditional and higher availability applications

Linux, Windows Windows, Linux, AIX

Self Service with advanced premium support

99.9% 99.9%

Virtual and some physical isolation Multiple levels of isolation

Bring your own / pay as you go / free developer use

Hourly usage-based with reserved options Monthly usage-based and fixed contract


29,000 employees in EMEA

60 Data Centres (99.000 sqm - Gross) managed by IBM

25 Strategic Data Centres, 11 European cities

99.9960% Data Centre Availability (with 99.9999% for strategic DCs)

65,000 servers, z, p, i, x Series; 118,000 logical partitions

Hosting about 155 petabytes of data for our clients

49,5% of the logical server images virtualised

880 000 devices have remote and on-site support

Serving clients - Our Capabilities

3.3M electronic software distributions p/ year

2.1M client initiated software distributions p/year

60,000 network devices managed in Europe

42 European countries covered

4 million mobile users with secure access

1.2 million contacts to service desks per month

23 languages

400 applications

20 different desktop images

CLOUD Healthcare


Our delivery model balances risk, cost and operational efficiency

Globally IntegrateAchieves the optimum combination of quality, stability and skills

India Bangalore Pune Delhi Chennai Hyderabad

China Shenzhen Shanghai Dalian Beijing

North America Boulder Columbia Dubuque East Fishkill Raleigh Canada

All follow uniform, best-practice service management processesAll follow uniform, best-practice service management processes

Latin America Buenos Aires Costa Rica Hortolandia Sao Paolo

Central Europe Brno Székesfehérvár Wroclaw

Global

Service that can be standardized to achieve maximum savings

Ongoing operations

Monitoring

Development

Local

Service that needs to be delivered from the same country

Processing of sensitive data

Legal restrictions

Onsite

Service that requires a physical presence at the client location

Consulting

Front-end analysis

Regional

Service that needs to be delivered from the same continent

Similar time zone

Similar culture

Malaysia

New

New


In SO Service Delivery, we execute on our strategy by investing in innovative technologies, processes and skill portfolios

Standardize: Implement standard solutions for all services, maximizing economies of scale and ease of enhancement

Globally Integrate: Source the right skills at the right time globally

Automate: Eliminate manual tasks to drive up quality and reduce error

We are continually investing in key innovations and intellectual property to differentiate our services

through exceptional quality outcomes


Energy Efficient Data Centers AwardedIBM awarded participant status in the European Union Code of Conduct. Largest portfolio of data centers from a single company to receive the recognition (January 2012)

The area of submission 27 Data Centers

15 Countries70749 m² RF

Same best practices and controls

Austria2Belgium 2Germany 2Denmark 3Spain 1Finland 1France 2Hungary 1Ireland 1Italy 1Netherlands 1Poland 1Portugal 4 Sweden 2UK 3

EU Code of Conduct - created in response to increasing energy consumption in data centers and the need to reduce the related environmental, economic and energy supplysecurity impacts.

-aim is to inform and stimulate data center operators and owners to reduce energy consumption in a cost-effective manner without hampering the mission critical function of data centers.

- achieves this by improving understanding of energy demand within the data center, raising awareness, and recommending energy efficient best practice and targets.


Infrastructure-as-a-Service

Platform-as-a-Service

Software-as-a-Service

Servers Networking Storage

Middleware

Collaboration

Financials

CRM/ERP/HR

Industry Applications

Data Center Fabric

Shared virtualized, dynamic provisioning

Database

Web 2.0 ApplicationRuntime

JavaRuntime

Development

Tooling

The 4 catagories of ”Cloud Services”

Business Process-as-a-Service

Employee Benefits Mgmt.

Industry-specific

Processes

Procurement

Business Travel

Layer 1

Layer 2

Layer 3

Layer 4


F&A

HR

SCM

CRM

Industry-specific

TAUNTON

SAINT JOHN

TORONTO

TULSA

RTP BEAVERTON

BOULDER

SAN JOSE

GREENVILLE BRAGA

DUBLIN

CAIRO HORTOLANDIA

BUENOS AIRES

MONTEVIDEO

MUMBAI

SOFIA

COVENTRY

KRAKOW

SHANGHAI

PUNE

KOLKATA

VIZAG

CHENNAI

MANILA

BRISBANE

TOKYO

SAPPORO

JEONJU

DALIAN

BALLARAT

TUCSON

DALLAS

DALEVILLE

ATLANTA

EDICOTT

SAO PAULO

BUDAPEST

CHANDIGARH

ISTANBUL

PARIS

GREENOCK

NEWCASTLE

BANGALORE

ANTANANARIVO

BRATISLAVA FREETOWN

KAMPALA

OKINAWA

FUKUOKA

QUEENSLAND

SYDNEY

MELBOURNE

DELHI

GURGAON

FOSHAN BERLIN

SWANSEA

KASAI

IBM Global Process Services takes a balanced-shore approach


The need: Skype, initially a free, Internet-based communications service, built a portfolio of services offered at a fee. Because of Skype’s rapid growth, it did not have the infrastructure, processes, governance or corporate structure to deliver satisfactory levels of customer support. Skype recognized that efficient and effective customer service was critical to the growth of its fee-based services and sought a business process operations provider that could manage its email customer service operations.

The solution:IBM GPS analyzed the client’s needs and created a service and response plan whereby IBM global resources would provide email and live chat support for customer queries, service complaints and billing concerns. IBM divided its activities among 3 sites to support the company’s international customer base: Cairo; Boulder, Colorado; & Manila, Philippines. IBM provides email support in 7 languages and live chat support in English. In addition IBM provides web content support for Skype Customer Services from our delivery centre in Bratislava.

The benefits: Skype customers experienced a significant improvement in customer services levels: email responses that

once took up to 24 hours now take 2 hours or less.

At the beginning of the contract 85% of Skype customers corresponded through email. Today up to 50% prefer the quicker response time & resolution rates of chat services. The expansion of live chat greatly improved the speed of problem resolution.

When IBM secured the contract, its initial point of contact resolution performance was 70%. As of April 2012, the resolution rate has increased to more than 80%.

As a result of the improvements in customer support and cross-selling by IBM Skype has experienced a 50% increase in its fee-based service web pages.

And for We do AP, Payroll and TravelExp Mgt


Unilever Europe: A global CPG company

The need:This global consumer products company needed to simplify its complex finance organization across 24 (100) countries and 18 ERP systems. It also needed to achieve cost efficiencies to generate revenue for greater focus on its brand.

The solution:IBM implemented standardized finance processes and innovative technology under an award-winning joint governance model. Leveraging asset-based process models and global delivery capabilities, this transformational solution helped integrate the company and create a more flexible operating and financial model.

Why IBM?“The successful partnership between IBM and Unilever Europe along with an ambitious transformation agenda will continue delivering significant and sustainable benefits for Unilever Europe.”

Solution components: Accounts payable Travel & expense Bill to cash Record to report

The benefits: New, centralized “One-Unilever” finance organization for greater efficiency and

operational savings contributing to €700M annual savings for the company

End-to-end process ownership and standardized processes and technology for enhanced data quality, tighter controls and greater speed of information

Pan-European service management, including greater visibility and access to information for decision making and continuous improvement

Flexible, agile delivery model to meet Unilever’s evolving business environment and drive greater benefits from economies of scale

IBM provided managed business process services on a three-

tier delivery model from its facilities in

Krakow, Poland; Braga, Portugal; Bangalore, India; and

Manila, Philippines.


"The short successes that can be gained in a brief time and without difficulty, are not worth much."

Everything is relative...The Gazelle in Africa

cbs february 2013 cloud computing in the context of outsourcing

Technology

ibm corporation

business value analytics

business processes

lost business

business requirements

resulting cloud business

public cloud

cloud computingin