cloud clarity

7/29/2019 Cloud Clarity

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Evaluate

Model

Governance

Risk mitigation

Hybrid

Savings

Management

Competitive advantage

Servers

CRM

Services

Migrate

Web-based

Strategy

Consumer

Collaboration

Enterprise

Public

ance

Applications

e-mailChange Management

ProvidersMarketplace

Third-party

Private Security

Speed-to-market

adiness

KPMG INTERNATIONAL

Clarity inthe Cloud

A global study of the

business adoption of Cloud

kpmg.com


2/48 2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member rms o the KPMG network o independent rms are aliated with KPMG International. KPMG International provides no client serv ices. All rights reserved.


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Clarity in the Cloud: A Global study o the business adoption o Cloud | c

ContentsForeword 1

Executive summary 2

Introduction 5

Core challenges mean core opportunities 6

Outcome: business transormed 7

Cases in point 9

Where are we going and what are we spending? 12

Adopting cloud services 21

Has total cost o ownership been evaluated properly? 23

Functionality is essential; 26it is a question o good enough vs. perect.

Tax in the equation, a relevant variable 32

Who should lead cloud eorts? 33

Conclusion 36

Insights & implications 37

Interviewees 41

Additional reading 42

2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member rms o the KPMG network o independent rms are aliated with KPMG International. KPMG International provides no client serv ices. All rights reserved.


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The impact, opportunity and risk o cloud.

Its here.

Its now.

Find out what your peers are doing today.



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Foreword

Clarity in the Cloud: A Global study o the business adoption o Cloud | 1

The cloud rolls in, inexorably. Speak with any cloud enthusiast and the pitch is ull oallusions to the associated transormative and cost-saving opportunities. But whatis this cloud, really, and how should it be approached by businesses?

The term is overused. Essentially, whether it is implemented as a public, private, orhybrid environment, a true cloud solution is one where users can access a fexiblevolume o services as needed via the internet. And indeed, such an approach hasthe potential to deliver signicant cost savings. Even more intriguing are the ways inwhich the cloud may lead to undamental innovations and process breakthroughs.

But the path rom concept to reality is by no means clearly marked. Challenges areeverywhere. They begin with an essential recalibration o traditional needs includingsecurity, fexibility, accessibility, and scalability. Next, businesses and technologyproviders must strike new deals, developing pricing and service level agreementsthat more accurately refect the shiting nature o service provision. Finally,navigating through the cloud will require large doses o change management, asbusinesses and providers revisit the distribution o the scope and scale o IT acrosstheir enterprises and indeed the value chain.

The potential or cost-saving, innovation, and business transormation is enormous.Not surprisingly, most businesses today are at least in the planning and testingstage o their initial cloud orays. Meanwhile, a ast-growing minority are well intoull or partial implementation.

It is our belie that it is essential or businesses to get moving toward the cloud. Butit is equally crucial that they take the care needed to improve the chances o gettingit right. At whatever pace businesses progress toward the cloud as they encounterobstacles and achieve early successes they learn. The report that ollows is onemeans by which we hope to access and share these lessons. We trust you will ndits insights and guidance o value.


Steven Hill

Vice Chair o Strategic Investments,

KPMG LLP (US) and Global Cloud

Executive Sponsor

E: [email protected]


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Executive summary

2 | Clarity in the Cloud: A Global study o the business adoption o Cloud

Transform your business with the cloud.This drumbeathas punctuated just about every technology and businessconversation over the past ew years. Fueled by hype,oversimplication and promotion, cloud provocateurscan carry on at length about what cloud is and how it cantransorm your business. Few can tell you what companiesare actually doing to benet rom the cloud or how to createand deploy a cloud strategy that is truly transormative.

Not surprising. Cloud adoption is raught with business andoperational challenges surrounding technology, security,total cost o ownership, and the intersection with business

strategy and operations. Most have very little experience withactual implementation. Whats more, ew have addressedthe ull impact o cloud integration with other applicationsand data, organizational redesign and change management,compliance, taxes, and security.

To bring some clarity to the issue, KPMG International andForbes Insight conducted a global survey in 2011. The survey wasconducted among more than 900 individuals rom 15 countriesworldwide. Respondents were rom both the client communityo end-users, with input rom both IT directors and executivemanagement in companies with more than US$200m inrevenues, and cloud vendors.

From all angles, the responses showed increased readiness toaccept and exploit the benets o cloud. And while the cloudcontinues to have many denitions, our report highlights whereit is going, underscoring that this seemingly simple and fexiblesolution can create complexity i not managed properly.

The real transormative impact o the cloud

Cloud istransormative in that it is creating new businessopportunities as companies harness its power to ecientlyacilitate new revenue, services and businesses. It is breakingdown barriers in the supply chain, creating more eective

and timely interaction between clients and suppliers. It is

delivering speed, agility and cost reduction to IT and otherunctional areas within the enterprise. The transormativeimpact o cloud can readily be seen across the enterprise inareas such as HR, CRM, and IT inrastructure.

Many early adopters have implemented the cloud in areasthat are sel-contained, primarily in areas that are not rie withcomplexity and multiple applications, and that do not requireintegration with core enterprise applications or inrastructure.Others have pushed orward more broadly in new, start-up orevolving businesses, oten with increased speed over theirsister organizations burdened with legacy systems. And while

there are notable ground-breakers pushing cloud to the edge,the majority has ocused on controlled implementations toimprove the odds o success.

Key fndings include:

The cloud is commonplace, but its scope varies widely.Over hal o the businesses and government enterprisessurveyed have already conducted either a ull (24%) or partial(35%) cloud implementation o some unctions. The vastmajority has tested these new technologies and processes,and they are using them on a small scale. Some typical areaso cloud implementation are or email, sales management

and other available Sotware as a Service (SaaS) oerings.The research notes that in 2011, 19% o the respondentsindicated spending on cloud represents 10% or more o totalIT expenditures with 65% citing 10% or less.

Early investment centers on Sotware as a Service (SaaS).Again, the majority o early adopters are getting their eet wetusing basic, available tools in the cloud. O the respondents,46% o planned implementations are in a SaaS environment.However, signicant numbers o end users are also exploringthe use o Inrastructure as a Service (IaaS) and Platorm as aService (PaaS) models.

81% o businesses are either planningtheir initial orays, are in early oradvanced stages o experimentationor have ull implementations.



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Approximately 45% o therespondents are neither evaluatingthe tax implications o cloud nor dothey know i these actors are beingevaluated within their organization.


Executives believe that cloud environments have the

potential to transorm business and operating models.Eighty-seven percent say, at the very least, the coming changewill be signicant. This view is consistent among companieso all sizes and whether the respondents work within ITunctions or business units. It is not a surprise that cloudproviders believe that business and corporate IT executivesunderestimate the degree o change that could result romcloud adoption.

The vanguard already resides in the cloud. Right now, 81%o businesses are either planning their initial orays, are in

early or advanced stages o experimentation or have ull-oncloud implementations. While the scope may be controlled,and the approach measured, there is indeed activity.Remarkably, respondents at one in 10 businesses say they arealready running their core IT services using cloud technology,although this number varies widely by geography.

Substantial cost savings are on their way.Both businessand IT executives as well as providers believe cloudenvironments will deliver cost savings. The prevailing wisdompoints to economies o scale, meaning the cost o eachunit o computing value within a cloud environment will alldramatically over time. As or business processes, executives

believe innovation will lead to streamlining. But an intriguingnding is this: while providers promote up to 30% savings, mostbusiness executives would be happy with 10%15% savings.

Opportunities exist to overcome barriers to success.Executives are particularly intrigued by potential gains in areassuch as speed to solution and widespread accessibility as wellas fexibility, scalability, security and advanced technology.

Buyers are concerned by risks o provider perormance,

downtime and data security. Recent headlines exposingcompromised data and temporary shutdowns o variousname-brand organizations and cloud providers remain ront

and center or many potential adopters. However, providerinput suggests that such ears are overstated and that inreality, the cloud will be a saer, more secure and more reliableIT environment than these customers have ever known.

Private clouds will dominate the most critical unctions.Many actors drive the decision over public or private cloud.Industries with the strongest adoption o private cloudsare nancial services, healthcare and diversied industrials(averaging 45% o respondents), with nancial servicesand healthcare acing heavy regulatory and complianceissues that are exacerbated, though not impossible in thecloud. Organizations custom-congured applications andinrastructure also contribute to the need or private cloudsolutions versus the standardized solutions among publicclouds.

Business unit executives and CIOs views diverge whenit comes to cloud leadership. IT executives see migrationto the cloud as their initiative; and, consequently, they believethat it should be led by the Chie Inormation Ocer. In theminds o business executives, however, the natural leader ocloud-based initiatives should be the CEO. Not surprisingly,post-implementation expectations are similar. Ultimately,responsibilities will likely be shared with relative infuencedepending on the services in question: businesses will tendto control ownership o applications; IT executives will tend tomanage inrastructures. Unless this trend is managed properly,organizations will ace new silos and integration challenges.

Enter the Chie Integration Ocer as the traditional CIOs roleexpands to break down potential silos and integrate internal andexternal business needs, systems and partners.

Ignoring tax issues raises concern. Approximately 45% othe respondents are either not evaluating the tax implicationso cloud or dont know i these actors are being evaluated.Ignoring tax issues has never changed the responsibility o thepayer, which makes taxation a critical issue or those wishingto evaluate all implications o the cloud environment.

I you are seeking to assess the potential implications ocloud or your business and IT organization, please reer tothe Issues and Implications section at the end o the study.

It is intended to serve as an executive checklist to thoughtullytest the opportunities and challenges o cloud.



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9/48

Introduction


Web-based beginnings

The most common and easily recognizable cloud examples are web-based servicesor email, Customer Relationship Management (CRM) and web hosting. Manyare simple consumer applications, while businesses are considering ar moresophisticated systems. For businesses, cloud services are oten developed in oneo two ways:

Privateclouds,wheretheapplications,dataandnecessaryinfrastructureare

dedicated to a single party that retains direct management oversight; and

Publicclouds,wheredataandapplicationsofnon-relatedpartiesmayresideon

the same servers and are more likely to be primarily managed by a third party.

Hybrid clouds, as the name suggests, are combinations o these two methods.Whether public, private or hybrid, the actor that most commonly signies a cloudsolution is a users ability to obtain as-needed services rom the internet based onfexible volumes o resources.

The cloud marketplace has been evolving or years, as many traditional applicationservices and inrastructure hosting providers migrate to a cloud model. This maturity

is creating a viable market or enterprises looking at service delivery options. Thefexibility and agility provided by the cloud is appealing, and it can be managed todeploy signicant competitive advantage.

DefnitionsKPMG used the ollowing denition o the cloud computing or the purposes othis survey.

IaaS:(e.g.,infrastructuretraditionallyprovidedbyservers,desktopsand

network equipment instead delivered over the internet and can be scaled upor down as needed)

PaaS:(e.g.,softwaredevelopment,storageandhostingareaccessedasaservice over the internet)

SaaS:(e.g.,on-demandapplicationsprovidedthroughaninternetbrowser,

eliminating the need to install, run and maintain programs on internal systems)

BPaaS:(e.g.,businessprocessoutsourcing(BPO)isprovisionedusinga

cloud computing model; bundled with SaaS/PaaS/IaaS and delivered overthe internet

Whether public, privateor hybrid, the actorthat most commonly

signies a cloudsolution is a usersability to obtain as-needed services romthe internet basedon fexible volumeso resources.



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Core challengesmean core opportunities


As enterprises rst approach the cloud, their tendency is to perceive the work asprimarily IT-centric. But in reality, understanding the cloud requires a much broaderview. In many situations, the cloud is being driven by an ecosystem o participants.So it becomes vital to think o the evolution o cloud environments in terms o threebroad sets o people and principals: service providers, business users and IT users.

Another challenge is that size matters. Smaller organizations, with less legacy IT

inrastructure and ewer constituents, are able to more rapidly and aggressivelyinvest in deploying cloud capabilities. Any cloud implementations requirecooperation, agreement and compromise along with intensive ocus and hard work.The challenge going orward will be to balance objectives, needs and wants againstreal capabilities and risks. As such, coordinating and harmonizing the advancemento the cloud represents a massive undertaking. But the rewards can be signicantand transormative.

To the cloud: three constituencies

Geography

Geography

Industry

Company size

Business

Users

IT Users

Service Providers

Core

Challenges

The challenge goingorward will be tobalance objectives,

needs and wantsagainst real capabilitiesand risks.



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Outcome: business transormed


Transormation a distinct change in the way business solves problems and gearsor growth is coming. The survey o end-users shows that a signicant number ocompanies believe ast-evolving cloud capabilities will heavily impact business models.While cloud-driven cost reductions may hold the most promise (hal o survey participantsexpect as much), the impact on the business model could be much more extensive.Indeed, nearly a third o respondents, 32%, believe the arrival o cloud environments will

drive nothing short o a undamental change in their business models. And nearly our in10 users (39%) expect cloud will change interactions with customers and suppliers. Only12 percent o respondents elt cloud would have no impact on their business models.Consequently, 88% eel some kind o business model change will occur.

Cloud calls or executives to challenge their thinking, to look at old problems in anew light, and to create new opportunities. KPMG rms have observed severalrecent examples where organizations are converting historical business models intorevenue opportunities through cloud. One example is a company selling goods andservices that identies additional need-based sales opportunities related to a keyproduct. The company is developing a new business model to package and deliverthis inormation to its clients via a new cloud-based model, thereby driving a newrevenue stream. Similar examples are seen worldwide.

It will fundamentally change

our business model

It will change our interaction

with customers and suppliers

It will provide management with

greater transparency on transactions

It will reduce costs

It will accelerate time to market

No significant impact

Other

32%

39%

32%

50%

35%

12%

1%

Which of the following best describes the impact of cloud on your business model?

0 10 20 30 40 50 60

Multiple responses allowed.

Source: KPMG International, 2011, Clarity in the Cloud

Cloud calls orexecutives to challengetheir thinking, to look at

old problems in a newlight, and to create newopportunities.



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Cloud, more than any new technology since the internet, is seen as the harbingero transormation. The ndings are consistent regardless o company size (thosewith annual revenues above and below US$1 billion as well as between IT andnon-IT executives). Even companies with a large installed base o sotware or otherelements o enterprise IT anticipate a highly signicant degree o change as a resulto cloud adoption.

Regional dierences

Executives rom Asia are signicantly more likely to describe the changes stemmingrom cloud environments as driving a undamental shit in their business models.For example, organizations in emerging markets or those that have not investedheavily in legacy inrastructure can leaprog the competition technically by adopting

the latest available systems and capabilities via the cloud model.

0 10 20 30 40 50 60

It will fundamentally change

our business model

It will change our interaction

with customers and suppliers

It will provide management with

greater transparency on transactions

It will reduce costs

It will accelerate time to market

No significant impact

Other

Global average (medium)

50%49%

45%57%

39%40%

30% 49%

32%33%

27%37%

Which of the following best describe the potential impact of cloud on your business model/operations?

32%

12%13%

15%6%

1%2%


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Cases in point


More than the data alone, it is instructive to delve into the people and companieswho are working with cloud today. In these cases, executives are seeing manybenets as they learn rom their cloud implementations.

More options in Italy

Silvio Sperzani, CIO o ENEL, Italys largest and Europes second largest electric

utility, says that cloud environments are moving rapidly, From buzzword tosomething real. For now, his group is just beginning its analysis o the potentialbenets o a cloud environment. Still, Sperzani is already convinced that cloudmigration, will lead to a more fexible IT service model and more options inbusiness processes.

Preparing new processes throughout Europe

A senior executive rom one o Europes most geographically wide reaching banksbelieves that cloud environments will have a proound impact on business processes.The cloud, he explains, will provide the means to speed up prototyping o newproducts or applications or customers. Meanwhile, he sees cloud migration as ameans to accelerate the adoption o new and more ecient and eective processes

and technologies. Though we realize we have much to do beore we can take ulladvantage o these developments, we are starting to prepare now.

Strategic advantage in global advertising

At advertising and communications agency JWT India, Sunil Mehta, CIO, believesthat the whole point o investing in a cloud environment is to achieve strategicadvantage. We want to make certain that we are always in a position to takeadvantage o any next-generation applications, says Mehta. Achieving a stateo continuous transition to the most ecient processes and technologies will beeasier within the cloud, he adds.

Cost reductions and strategic benefts or fnancial frms

Anil Jaggia, CIO o HDFC Bank, one o Indias largest nancial services providers,says that cost reductions rom the cloud will be signicant. However the strategicbenets are ar and away more vital than the cost savings. He adds, Agility beingable to quickly and eciently provision or deprovision; being on the oreronto innovation and being able to transition quickly: these are the objectives worthattaining.



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Legacy systems tendto ossiy, restrictingestablished businessesand preventing themrom pursuing that nextnew idea. Pat Howard, IBM Partner and

VP Global Services

Extremely important

Important

Neither important nor unimportant

Unimportant

Extremely unimportant

Enormous innovation or IBM and its clients

From a provider standpoint, IBM Partner and Vice President or Global Services PatHoward believes that, i anything, business and IT executives are underestimating thelikely strategic impact o cloud migration. Howard says these new technologies andprocesses are leading to a period o enormous innovation and competitive disruption.All thats coming opens up strategic possibilities that just were never there beore,notes Howard. Legacy systems tend to ossiy, restricting established businessesand preventing them rom pursuing that next new idea. However, within a cloudenvironment, Howard believes companies will be able to achieve greater agility orexample, by being better able to quickly organize to serve new customers, developproducts or deliver services.

Overall, says Howard, I dont believe everyone yet ully realizes how much thisstimulates innovation; how many opportunities will be presented; how many newchallenges will need to be addressed; and how much change is coming.

How important are strategic factors in driving your organizations adoption of a cloud environment?*

Figures may not add up to 100% due to rounding.

*Strategic factors (e.g., business process transformation, linkage to business partners, speed to market, focus on core competencies)

33%

3%

2%

44%

19%

0 10 20 30 40 50


Demand driven supply chain retail

A KPMG retail client is using cloud as a supplier network, reducing data latency

between and among suppliers. In some cases, the client has reduced lead timeson inormation exchange rom 30 days to 1 day, and the suppliers are able to modiythe exchange o material accordingly yielding signicant benet or all parties in theprocess. So as demand changes at the store, all parties can see and act upon thechanges. Leveraging the cloud as a community platorm can signicantly reduceinormation latency resulting in more product getting to the right place at the righttime with less inventory through the supply chain.



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Without legacy systemsand processes, start-up rms and emergingbusinesses in maturerms can be ready orcloud-based applicationsand platorms.

Enabling innovation and investments technology

KPMG recently worked with a large client to support its emerging, or start-up,businesses. Innovation is one o the undamental pillars o this companys corporatestrategy as it acquires and/or incubates companies that design, develop, and marketnext-generation products.

Historically, each new business worked autonomously to design its own operationsprocesses and to source and deploy enabling technologies. The company oundit was spending too much time and money on technology development anddeployments when it should have been ocused on its go-to-market strategies.Its goal was to design, develop, and implement a common set o operationalbusiness processes and an enabling IT architecture that a new business could

plug and play. The process and IT architecture needed to be fexible and scalable,supporting various e-commerce business models with a high degree o re-use o itscore processes and unctionality. In addition, standardized reporting was needed toenable the corporate entity to understand the perormance o each new business its protability, its growth potential, and its challenges or limitations.

The incubator model oers particular advantages or broad cloud deployment.Without legacy systems and processes, the greeneld is immediately ready ordeployment o cloud-based applications and platorms. Ready-made applicationsand architecture will be available or businesses as they enter the market. Thescope is broad rom the user access, to cross-enterprise applications (sales,marketing, customer services, order management, accounts receivable andpayable, inventory management and purchasing), and to identity access. The

need or supporting resources is reduced. At the same time, the larger businessreporting, compliance and data needs will be met, and relevant inormation can beed back into the core nancial and operating systems.




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Where are we going andwhat are we spending?


As weve seen, signs o growing comort and amiliarity with cloud environmentsare everywhere. Today, 40% o the businesses surveyed are currently evaluatingthe cloud (19%) or using/testing the technology (21%). KPMG rms have observedlarge organizations migrating email, CRM, components o HR, point o sale,hosting, and other applications to a cloud environment. Several are using the cloudto enable new business models to develop in and around existing businesses,

resulting in additional revenue streams. More oten than not, early migrations aretargeted or areas o limited complexity. Another 13% o enterprises are beyondthe testing stage and are now transitioning core business processes. Even morestriking, one in ten enterprises are already running core IT unctions in the cloud.

As highlighted in the Executive summary, 81% o businesses are either planningtheir initial orays (within the next year), are in early or advanced stages oexperimentation, or have ull cloud implementations in place. And companies withmore than US $1 billion in revenues appear to be leading the way.

0 5 10 15 20 25 30

Evaluating

Using/testing aspects

Embraced/transitioning

Running all core IT services on the cloud

Plan to implement in next year

Plan to implement in next 2 years

Plan to implement in 2+ years

Not considering

Dont know

What is the status of your organizations current use of a cloud environment?

24%

25%

16%

12%

12%

11%13%

14%

7%

8%

8%

10%

13%

13%

3%

3%3%3%

5%

5%

10%

6%

4%4%

4%

13%13%

18%

8%11%

11%

11%

20%

21%21%

19%

Global Americas EMA ASPAC



Heavily regulatedindustries, such asnancial services

and healthcare,demonstrate a strongerlikelihood o adopting aprivate cloud.



17/48


0 5 10 15 20 25 30

Evaluating

Using/testing aspects

Embraced/transitioning

Running all core IT services on the cloud

Plan to implement in next year

Plan to implement in next 2 years

Plan to implement in 2+ years

Not considering

Dont know

What is the status of your organizations current use of a cloud environment?

< US$1b

17%

15%

11%

4%

3%

6%

8%

8%13%

2%4%

10%

8%

12%

14%

23%

22%22%

> US$1b




Other dierences arise among varying geographies. For example, only 7% ocompanies rom the Americas are already running all core applications in the cloud,compared to those 13% rom Europe, Middle East and Arica (EMA) and 11% romAsia Pacic.

Companies today are starting out with the basics the most undamental, low

risk and rmly established cloud capabilities. A good example is again, JWT India.According to CIO Sunil Mehta, We have been in the cloud now or over oneyear. The company began with the migration o email management to MicrosotExchange. At rst, says Mehta, People were anxious, and to no small degreerustrated, as the shit required us to make many changes and adjustments. Andwhile operational challenges still remain, says Mehta, overall, we are very pleasedwith the results and will continue to examine new opportunities in the cloud.

Many companies have taken such initial steps and are likely poised or moreinvolved phases o cloud adoption. Conditions are such that IBMs Howard believesthat in the coming year or two, Were going to see the adoption curve turn into ahockey stick dramatic growth.


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0%

12%

35%

610%

1120%

More than 20%

Dont know

9%

13%

24%

11%

20%

13%

19%

6%

17%

16%

17%

24%

5%

6%

End 2011


This view is borne out by the surveys statistics, which show that executives expecttheir budgets or cloud products and services to grow signicantly as a percentageo annual IT expenditures. For example, 17% o enterprises will have more than20% o their budgets dedicated to cloud-based services by the end o 2012, uprom 6% in 2011. Such growth, says Howard, will be driven by many actors, notleast o which is the numerous early success stories coming to light. Companies,says Howard, know that their competitors are eyeing this and they realize theycannot aord to get let behind.

What is your estimated budget for cloud as a percentage of annual IT expenditures?

End 2012

0 5 10 15 20 25


In looking or urther clarity on what these numbers mean by region, the ollowingcharts indicate that uptake is considered to be higher in Asia Pacic comparedwith Europe or the Americas. By 2012, Asia Pacic respondents expect to spend22% o their total IT budgets on cloud, compared to 13% and 18% in Europe andthe Americas, respectively. The greatest uncertainty about budget allocated tocloud is in the Americas and Europe, where about 18% o respondents share thatuncertainty, compared with 11% in Asia Pacic.



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Americas Region: What do you estimate your organization will budget for cloud as a

percentage of your annual IT expenditures in each of the next 2 years?

11%

13%

10%

3%

7%

6%

21%

20%

21%

18%

18%

18%

22%

11%

Americas 2011


Americas 2012

0 5 10 15 20 25

Don't know

More than 20%

11-20%

6-10%

3-5%

1-2%

0%


EMA Region: What do you estimate your organization will budget for cloud as a


7%

14%

11%

26%

20%

19%

25%

13%

13%

17%

20%

3%

8%

4%

0 5 10 15 20 25 30

Don't know

More than 20%

11-20%

6-10%

3-5%

1-2%

0%

EMA 2011


EMA 2012




20/48


13%

24%

20%

13%

19%

16%

5%

24%

6%

11%

17%

17%

8%

5%

Global 2011

ASPAC region: What do you estimate your organization will budget for cloud as a



Global (all respondents): What do you estimate your organization will budget for cloud as

a percentage of your annual IT expenditures in each of the next 2 years?

Global 2012

0 5 10 15 20 25

Don't know

More than 20%

11-20%

6-10%

3-5%

1-2%

0%



As or deployment models, respondents currently plan to rely most oten on a privatecloud. This is particularly true o end-users rom companies with revenues greater thanUS$1 billion, in which 47% plan to deploy a private cloud model. There are industry-specic dierences in the adoption o private vs. public cloud. Not surprisingly, heavily

regulated industries, such as nancial services and healthcare, demonstrate a strongerlikelihood o adopting a private cloud. Additionally, mature manuacturing rms andretailing rms are opting or private clouds in stronger numbers.

6%

14%

26%

21%24%

22%

11%

12%

14%

18%

7%

13%

3%

7%

ASPAC 2011


ASPAC 2012

0 5 10 15 20 25 30

Don't know

More than 20%

11-20%

6-10%

3-5%

1-2%

0%



21/48


Private

Public

Hybrid

Community

No cloud

Dont know

IT vs. non-IT organizations: What type of cloud environment does your

organization use/intend to use?

46%

39%

30%

30%

33%

33%

17%

15%

5%

8%

8%

15%

IT Non-IT

0 10 20 30 40 50



Private

Public

Hybrid

Community

No cloud

Dont know

Companies by revenue size: What type of cloud environment does your organization

use/intend to use?

All < US$1b > US$1b

41%

30%

33%

34%

34%

16%

15%

17%

7%

5%

8%

13%

11%

16%

31%

30%

39%

47%

0 10 20 30 40 50





22/48


All sectors: What type of cloud environment does your organization use/intend to use?

41%42%

42%42%

33%

30%42%

31%37%

25%29%

16%26%

18%26%

35%6%

16%17%

21%23%

11%

11% 16%11%

4%13%

15%28%

7%7%

5%2%

7%12%

6%8%

9%3%

8%22%

14%5%

8% 10%19%

21%9%

21%24%24%

15%11%

37%44%

46%20%

22%30%

31%22%

34%31%

28%

45%45%

46%34%

46%31%

29%

11%

All Sectors



Technology Financial Services

Diversified Industrials/Manufacturing Retailers Government

Healthcare and Pharma Consumer Goods Manufacturers

Energy and Natural Resources

Food and Drink Manufacturers

AcademiaCommunications & Media

0 10 20 30 40 50

Dont know

Cloud is not/will not be used by my organization

Community cloud (a rules-based environment

shared by organizations with similar needs,

perspectives or requirements, such as

geography, industry, supply chains, etc.)

Public cloud (a shared environment

used by many organizations)

Hybrid cloud (a combination

of public and private cloud)

Private cloud (a closed environment for a single

organization hosted by a third party)



23/48


Public clouds lag. For now.

Fewer respondents consider either a public cloud or a community cloud a rules-based environment shared by many organizations and groups.

However, this is something that could change over time as trust in public cloudmodels increases. Outsourced services like payroll and HR have been on a sharedserver or many years. Eventually, people may become less concerned with a publiccloud as they are today.

While ewer companies may consider a public cloud, to make an inormed choicethey may nonetheless need to understand how a public model operates. Manyimportant actors are nancial. Buyers considering a private cloud need to askwhether they want to take ownership o the equipment or access the usage in

the manner o a public cloud. Ultimately, many wonder what is really gained indeploying a private cloud. Economics are dependent on the individual situation, andpros and cons exist or both. Many will compromise into some orm o both models,depending on the application.

Examples o how organizations are using the cloud to transorm their businessesexist throughout the world. To better dene practical usage o the cloud, we oer aew examples.

Private vs. public cloud fnancial services

One KPMG client in the nancial services industry was acing signicant marketpressures, regulatory pressures and security issues. The IT organization was trying

to help new products get to market quickly with agile processes while acingpressure to reduce costs. The environment was complex and highly heterogeneous,which led to high support and maintenance costs.

To evaluate and prepare or the cloud, the company began by determining whattype o cloud would best suit their needs. They assessed their readiness or changeby looking at governance, process, compliance and technical architecture. Theylooked at applications, and most importantly, they assessed the people, processand technology critical to operationalizing within the cloud.

Based on security and technical actors, they chose a private cloud, and the costsavings justied the move orward.



24/48

Outsource IT frst, cloud next energy

Another KPMG client, a large energy company, had outsourced much o its ITunction several years beore. The size o that project and the scale o changeit required led to a painul process that ultimately did not result in the savingsexpected. Nonetheless, having reviewed the lessons learned rom this experience,company leadership decided it was ready or a large-scale cloud migration.

In some respects, this company sees the promise o cloud as being similar to thato outsourcing. Motivated by the ability to ocus on its core competencies and ongrowing the business, this organization has ound viable options in the market tohandle the capacity o its thousands o servers.

The business intends to migrate more than 50% o its inrastructure assets to a

cloud environment. The migration is targeting the most modern applications andinrastructure; legacy and old line applications continue to present challenges ina cloud environment. As with the adage: one rock moved tends to uncover anunanticipated issue or problem as the testing o the legacy applications continue.Successul migration o non-core applications to a cloud inrastructure should enablethe company to reach its goal, control its costs and help it grow aster.




25/48


Adopting cloud services

About hal o end-users (46%) say their most likely investments will be in cloud-delivered Sotware as a Service (SaaS). However, at 35% and 34% respectively,Inrastructure as a Service (IaaS) and Platorm as a Service (PaaS) also gureprominently in corporate cloud investment.

46%

35%

35%

34%

41%

32%

33%

9%

14%

10%

16%

9%

10%

48%

45%

Which of the following cloud environments will your organization most likely invest in?

0 10 20 30 40 50

SaaS

PaaS

My organization does not have plans

to invest in a cloud environment

Dont know

Total Users (n = 805) Users (IT) (n = 237) Users (Business) (n = 568)

IaaS

SaaS (Software as a Service): Software and applications to run various business operations over a network.

Examples include: salesforce.com, Google Docs, mobile me, Microsoft Office Live

IaaS (Infrastructure as a Service): Renting shared computing infrastructure, such as servers, storage, processing capacity,

database and other peripherals. Examples include: amazon.com, rackspace

PaaS (Platform as a Service): A platform that enables developers to write applications to run on the cloud.

Examples include: force.com, Google App Engine, Windows A zure





26/48


46%

47%

38%

55%

44%

9%

10%

11%

7%

14%

16%

16%

9%

The chart below highlights regional dierences in cloud service model investments.Underscoring Asia Pacics enthusiasm or the cloud, these results indicate astronger than average anticipated investment in SaaS, IaaS and PaaS models thanexpected in the Americas or EMA.

Which of the following cloud environments will your organization most likely invest in?

Global Americas



EMA ASPAC

0 10 20 30 40 50 60

35%

34%

28%

27%

33%

33%

49%

SaaS

IaaS

PaaS

My organization does not have plans

to invest in a cloud environment

Dont know

SaaS (Software as a Service): Software and applications to run various business operations over a network.

Examples include: salesforce.com, Google Docs, mobile me, Microsoft Office Live

IaaS (Infrastructure as a Service): Renting shared computing infrastructure, such as servers, storage, processing capacity,

databases and other peripherals. Examples include: amazon.com, rackspace

PaaS (Platform as a Service): A platform that enables developers to write applications to run on the cloud.

Examples include: force.com, Google App Engine, Windows Azure



27/48

Has total cost o ownership beenevaluated properly?


Three-quarters orespondents go on tosay that cost savings/reductions are essentialbeore they will take anysignicant steps towardthe cloud.

Cost savings are generally a required outcome o cloud migration. Traditional thinkingis that cloud has the potential to signicantly reduce IT costs as companies are ableto shit rom large capital expenditures to ongoing operational outlays. Putting manyinrastructure and development initiatives in the hands o third parties also has thepotential to reduce sta costs.

In migrating to the cloud, three-quarters o respondents (77%) say that economicactors are important (40%) or extremely important (37%). That is, these companieswill not migrate to a cloud environment without meaningul savings. Worth noting isthat equal percentages o IT and non-IT executives, 75% in both instances, maintainthis view regarding the importance o cost.

Key cloud cost drivers, many hidden

Total cost o ownership is a critical aspect o migrating to the cloud. While costsavings, potentially signicant, are typically advertised and assumed, extensive,well-documented evidence does not exist to veriy that companies have realizedsuch savings. It is critical that buyers closely scrutinize potential and claimed cloudcomputing savings across the liecycle o a cloud deployment. In this process, it isimperative to consider actors that may drive cost and risk assessments, such as:

Costsofintegrationintolegacysystems

Customizationandconguration

Ongoingusertrainingandretrainingand

Supportcosts.

Extremely important

Important


Unimportant


37%

40%

19%

3%


Examples of economic factors include: cost savings, shifting capital expenditures to operational expenditures.

How important are economic factors in driving your organizations adoption of a cloud environment?

2%

0 10 20 30 40 50




28/48


Overheadandcomplexityofmanagingmultipleclouddeployments

Serviceprovidermanagement/relations

Security

Controlsandassurance

Organizationalprocesschangetoadapttocloudstandardization

Supplyanddemandchallengesresultoverestimatingcomputingneeds

Taximplications

Reduced costs are a prominent eature o a cloud-based approach. The total costo ownership o hardware and sotware, including stang costs, should be lowerwithin a cloud environment. Such lower costs should in turn translate into lower IToverhead allocations or business units.

But other cost benets are also evident. Consider a start-up or rapidly expandingenterprise: recruiting and maintaining IT sta takes time and eort and leads tohigher ongoing costs. Companies oten retain enough IT personnel to handle peakperiods o eort, resulting in excessive stang costs. Relative to the traditionalapproach to enterprise IT, companies could nd the cloud to be a lower costsolution.

Voicing an even stronger message on economic benets is IBMs Howard.Nothing happens i the economics arent there, says Howard. But in this case,cloud environments are poised to deliver a step change. Look at the potential

improvements in asset utilization and shared services models and you recognizethe price point or each unit o IT value delivered is about to plunge. To Howardsthinking, I believe corporations [cost reduction] expectations should be rightthrough the ceiling.

Providers think thethreshold needed or ITsavings is signicantlyhigher than users do.


Expectations gap

An intriguing nding o the parallel studies is the gap in expectations between end-users and providers o cloud services. Both end-users and providers were asked:what threshold o savings would be necessary to prompt the shit to a cloud-basedenvironment? Looking at IT costs alone, 45% o end-users say they could bepersuaded with savings o merely 1% to 10%. By comparison, providers tend tobelieve that end-users will demand much more. While only 10% o users say they

would need savings o 25% or more, the gure rises to 19% or providers.

The realization: this question is about perception, not providers actual costs, and

providers may actually be overestimating the degree of savings end-users may

demand. Each party needs to take steps to understand pricing requirements and

total costs.


29/48

What percentage reduction in IT or Non-IT costs do you generally believe would be needed?



IT Costs (n=565)

Providers

Users


Non-IT Costs (n=551)

IT Costs (n=91) Non-IT Costs (n=88)

45%

42%

31%

33%

34%

28%

37%

31%

10%

15%

19%17%

12%

14%

13%

19%

0 10 20 30 40 50

110% reduction

1125% reduction

More than 25% reduction

Dont know

PercentagereductioninIT

andNon-ITcosts



30/48

Functionality is essential; it is aquestion o good enough vs. perect.


Executives meanwhile insist that cloud environments should score equally highmarks on technical and unctional capabilities. Eight o ten users (80%) maintainthat unctional actors such as speed to solution and widespread accessibility are either important (43%) or extremely important (37%). Similarly, 79% say thattechnical actors such as fexibility, scalability, security, and advanced technology are

either important (42%) or extremely important (37%).

For cloud-delivered products and services to take hold, says Michael Sylvia,Distinguished Engineer & Director at IBM, end-users have to see the value too.IBM provides cloud-based services both internally and externally. With regard toother IBM business units, Sylvia says cloud services are being very well received.

Development and testing

Take or example the provisioning o development testing environments orprogrammers. In the past, sotware developers would approach the IT teamwith highly detailed requests speciying a range o programs, releases and othervariables. Responding, says Leslie Gordon, Vice President, Oce o the CIO atIBM, could take as long as a week and it was labor intensive. Today, however,IBM oers its sotware developers a cloud-delivered, sel-service provisioning tool.Developers dont have as many options, says Gordon, but they can requestsomething thats close enough to what they need and have it in an hour. This rapidlevel o deployment, however, assumes that contractual constructs are in placeand that ideally the user organization is able to adequately manage this level o on-demand consumption.

In addition, developers can make their requests any time o the day or night.Moreover, they can pause their work, save their projects and remove them rom theserver, thereby reducing internal ee allocations and reeing up resources that canbe used to support other developers.

Sel-sourced environmentsInitially, Gordon and Sylvia believed that the existence o the new provisioning toolmight reduce the number o requests or manually congured test environments byas much as 40% or 50%. But in practice, 80% 90% o test environments are nowsel-sourced through the cloud. As Sylvia explains, it turns out that developers aremore interested in agility than they are in getting their environments perect. AddsGordon,theyre willing to settle or good enough as opposed to perect i they canget it ast and that translates into eciency all around.

Functionality is also o critical importance to ENELs Sperzani. And it is or thisreason, the executive maintains, that mission critical processes are not likely to behanded over to a cloud provider. We have a ew that are unique to our business andwhere we are very sophisticated in-house. We are already running these processes

at a low cost, explains Sperzani.

It turns out thatdevelopers are moreinterested in agility thanthey are in getting theirenvironments perect.



31/48

Still, the executive believes there will be ample opportunity to benet romcloud service providers in specic niches. There will be a layer within ourprocesses where someone may be better than we are. This is particularly true oinrastructure. Sperzani continues, Basically, I see this as a possibility to buyinrastructure or varying volumes as a service... Inrastructure tends to be very

rigid. I like the idea o something much more fexible.

Leading edge technologies

For some o our executives interviewed, access to such leading-edge technical/unctional capabilities, is one o the most attractive aspects o the envisaged cloudenvirons. But or cloud providers, IT is what we do. As such, the very businessmodel o cloud providers depends on the delivery o seamless, ultra-ecient,stable and fexible IT services. Moreover, providers can take advantage o scale tocontinuously invest in and rene their technologies and processes assuming they areprotable, o signicant scale, and nancially sound enough to withstand a dynamicmarketplace because not every cloud provider will survive in the longer term.So to the extent a greater share o IT operations is ceded to specialist providers,

organizations can share in scale economies that would not otherwise be available.


The role o CIO needsto evolve rom ChieInormation Ocerto Chie IntegrationOcer, to lead andintegrate the businessmore tightly withenabling technologiesand to ensure theinteroperability o anincreasingly disparate

set o applications andinrastructure.



32/48


Extremely important

Important


Unimportant


37%

42%

16%

3%

1%

Examples of technical factors include: flexibility, scalability, simplicity, security, advanced technology


KPMG anticipates that the role o the CIO will change signicantly as organizationsstruggle with the dynamic integration needs that cloud models present. A new,or evolved C-position, Chie Integration Ocer, will be needed to integrate thebusiness more tightly to technology and to ensure the interoperability o anincreasingly disparate set o applications and inrastructure.

How important are technology factors in driving your organization's adoption of a cloud environment?

0 10 20 30 40 50

Extremely important

Important


Unimportant



How important are functional factors in driving your organization's adoption of a cloud environment?

37%

43%

16%

3%

1%

0 10 20 30 40

Examples of functional factors include: speed to solution, functional capabilities, everywhere accessibility




33/48


44%

29%

20%

18%

16%

15%

15%

14%

13%

13%

13%

12%

9%

8%

2%

0 10 20 30 40 50

Security and perormance concerns

While cloud may promise signicant benets, it also has its risks. Depending onthird-party providers raises the stakes or many users, particularly when theyare accustomed to overseeing and managing critical issues such as security andperormance. Importantly, security is a challenge inside and outside o the cloud.Breaches across the spectrum o providers, organizations and global corporationsexist in and out o the cloud.

When asked about the top challenges/concerns they aced in adopting a cloudenvironment, 44% o end-user respondents cited security, and 29% expressedconcern about overall cloud perormance. One th o companies cited concerns overinteroperability or integration. Arguably, the interoperability and integration issues

will create more challenges over time as organizations look to better leverage internaland external data and inormation. Other key concerns include IT governance, loss ocontrol over customer data and availability.

What do you believe are the top challenges or concerns your organization faces in

adopting a cloud environment?

Other

Dissatisfaction with

offerings/pricing by vendors

Lack of customization opportunities

Difficulty making a business case

for adopting a cloud environment

Not sure the promise of a cloud

environment can be realized

Lack of confidence in ability of cloud

vendors to perform

Response time

Regulatory compliance

Measuring ROI

Availability

Loss of control over data with respect

to customers

IT governance

Difficulty integrating cloud

with existing systems

Performance

Security





34/48


Security in the cloud presents unique actors to consider ranging rom externaldata storage, to multi-tenancy, use o the internet and the need to integrate back tointernal applications. Can you encrypt your data suciently to be able to trust a thirdparty managing this critical inormation? Will your data governance model allow or acloud migration?

Some of the key risks and challenges in adopting cloud

Cloud adoption requires a careful examination of the potential operational risks and challenges in addition to the technology questions.

Financial Managementand Tax

Movement from CapEx to OpEx model impacts existing budgeting, forecasting, and reporting processes

CapEx to OpEx model and changes in the character and source of service impacts tax considerations

Outdated tax laws and regulations create uncertainty when characterizing the various cloud transactions

Cloud ROI and cost/benefit analysis are complicated by need for knowledge of existing cost of delivery

and future use of service.

Security and

Privacy

Data may be stored in cloud (1) without proper customer segregation allowing possible accidental or

malicious disclosure to third parties and/or (2) in a legal jurisdiction where the rights of data subject

are not protected

Loss of governance of critical areas, e.g., vulnerability management, infrastructure hardening, or physical security

Weak logical access controls due to cloud vendors IAM immaturity.

Operational

Cloud adoption introduces rapid change in the organization

Cloud sourcing may impact existing organizational roles and could require new skills or make others redundant

Business resiliency/disaster recovery needs and plans will change and require updating.

Data &

Technology

Risk of creating independent silos of information perpetuate the problem of data integrity, quality, and insight

Business can bypass the IT function to implement technology solutions, posing challenges for IT governance

Cloud delivery models dramatically change how IT delivers technology services to support business requirements

Cloud adoption opens the four Data Center walls to external IT Services providers, creating new risks.

Regulatory and

Compliance

Lack of visibility into the Cloud Service Providers (CSPs) operations inhibits analysis of its compliance

with pertinent laws and regulations

Complexity of records management/records retention creates challenges

Lack of industry standards and certifications for cloud providers creates risks.

VendorManagement

Lack of clarity of ownership responsibilities between cloud vendor and user company

No prevalent standards for vendor interoperability

Extensive reliance on CSPs.



35/48


Virtually all interviewees maintain that security is paramount. However, as HDFCBanks Jaggia explains, the real issue is whether data is held in a public or privatecloud. I we stay in a private cloud with standard security measures and rewalls,and no co-mingling o data, I do not see security as a key issue. Moreover, as longas the cloud is private, I do not believe it will be an issue or regulators, who areotherwise aggressive in policing privacy and related issues in the banking industry.Perormance issues the importance o cloud providers avoiding downtime andmaintaining agreed-to service levels also gure prominently among both end-userand provider interviewees.

However, in the case o both security and perormance, providers participating insurvey interviews say that such concerns are in some ways overblown. Considerseveral recent episodes o prominent cloud-providers experiencing signicantdowntime. As one provider explained, Any data center at any company can go downrom time to time. And i its a server o a mid-market company, it wont be in thenewspapers you will never hear about it. Theres risk in running your own servers.

The provider argues, the risk o a cloud provider ailing materially or any extendedperiod is substantially lower.

Compliance isnt that important, until it is

Responsibility or compliance remains with the customer, not the cloud vendor, socare and discretion are warranted. End-users will need to keep a close watch onthe reliability and controls put in to place by the scores o would-be cloud serviceproviders. This vigilance will be especially important or business executives who

are accountable or managing the risks o potential security breaches and overallperormance. As JWTs Mehta explained, his company is Sarbanes-Oxley-compliant(SOX). So i we are going to allow anyone to host our applications or data, we willneed to know i they in turn are SOX-compliant. And our clients will want to knowtoo. So in truth, says Mehta, cloud-based services will need to be more rmlyestablished as accepted, sae and reliable beore we proceed with anything ogreater signicance.

As a result, reporting standards are changing. Statement on Accounting Standards70 (SAS 70) reports do not review and account or the collocation o data, and assuch, new Service Organization Control (SOC) reports, specically SOC 1, SOC 2 andSOC 3 are now ocusing on issues prevalent within the cloud, such as collocation.The SOC reports now include a test o security, not available beore through SAS 70.

Interestingly, in a cloud environment, end-users attempting to audit their transactionsand processes may nd them co-mingled with others and unable to provide an audito their transaction as beore. Please see the Issues and Implications section atthe end o this report or suggestions o topics to cover during the review process oevaluating cloud.

Cloud-based serviceswill need to be morermly established asan accepted, sae andreliable set o businessprocesses.

The risk o a cloudprovider ailing materiallyor any extended periodis substantially lower(than in-house IT).



36/48

Tax in the equation,a relevant variable


Only respondents in the United States were asked their views on taxes withrespect to the cloud. Interestingly, almost 45% o both providers and users eitherhave not considered cloud-related tax issues or dont know i their organizationshave done so. KPMG rms experience shows that organizations operating in thecloud should address critical actors such as a migration rom capital expenditures

to operating expenditures, character and sourcing o income, implications ointercompany charges and the impact o using third parties or services rather thaninternal employees. These issues are manageable, but they should be addressed toreduce the risk o tax exposure. Importantly, organizations that proactively manageand plan or the tax issues associated with operating in the cloud may unlocksignicant value or their organization.

Yes, from a tax strategy perspective

Yes, in terms of compliance and reporting

Yes, in terms of strategy,

compliance and reporting

No, we have not consideredtax separate from other business decisions

Dont know

24%

24%

20%

23%

23%

31%

18%21%

21%

10%

21%

25%

26%

26%

17%

20%

17%22%

20%

21%

Have you considered the impact of cloud migration on your organizations taxes?

Total Users U.S. Total Users U.S. Users (IT) U.S. Users (Business) U.S. Total Providers

0 5 10 15 20 25 30 35

16%14%

14%

8%16%

Figures may not add up to 100% due to rounding




37/48

Who should lead cloud eorts?


It is critical that IT, thebusiness, audit, risk,compliance and taxteams are consultedwhen migrating to thecloud.

Traditionally, cloud is seen as an IT issue, but many organizations would like to seeadoption driven by corporate strategy, not IT. The transormative impact o cloud willundoubtedly require leadership rom the business.

Asked which executive should lead eorts toward cloud adoption, about our-in-10end-user survey respondents cited either the Chie Inormation Ocer (25%) orChie Technology Ocer (14%). Similar percentages chose strategic and operationalC-suite executives, including the CEO (23%), COO (11%), and CFO (7%).

As might be expected, a respondents opinion on who should lead cloud adoptionmay depend on the persons current responsibilities. Those involved in technologyare more likely to turn to the CIO; those in operations and strategy point to theCEO. This survey did not ask about everyone who should contribute to the cloudconversation. While it inquired about the leaders, it is critical that IT, the business,audit, risk, compliance and tax teams are consulted when migrating to the cloud.

It is also important to dierentiate between dierent orms o leadership. A CEO,or example, along with a board o directors and an audit committee, might lead insetting the overall cloud agenda and dening levels o investments, but the CEO

should not lead operationally. Clarity around the transormative nature o cloud can

In your opinion, who in your organization should lead the process of cloud adoption?

23%

7%

11%

25%

14%

1%

1%

13%

5%

0 5 10 15 20 25

Other

General counsel

Line of business heads

Other C-level executive

CTO

CIO

COO

CFO

CEO




38/48


In your opinion, who in your organization should lead the process of cloud adoption?

14%

26%

5%

8%

12%

9%

33%

22%

17%

13%

0%

1%

1%

1%

15%

12%

5%

4%

0 5 10 15 20 25 30 35

Other

General counsel



CTO

CIO

COO

CFO

CEO

IT Non-IT




come rom across the C-suite. Business unit executives may take charge o deningbusiness requirements and benets, with IT executives dening and managing thetechnical architecture and leading cloud oerings technical vetting eorts.

Executive management, IT, and line-o-business executives all need to be involvedto ensure successul implementation o the cloud environment.

In practice, on-demand point solutions tend to be purchased by the lines o

business themselves. But in other instances, they are approached rst by the CIO.Cloud-based point solutions may be the path to the rst meaningul implementationat any given company, But all customers quickly learn that integration across theenterprise is vital. Added IBMs Howard, It doesnt really matter who makes therst move in the end, I dont believe anything o a signicant nature is going tohappen without CIO sponsorship.


39/48


13%

8%

14%

26%

17%

1%

2%

15%

5%


CIOs always in the mix

Post implementation, the CIO and CTO remain the top choices or managing theservice level perormance o cloud providers. Again, non-IT executives tend to votesignicantly more heavily or the CEO than do IT executives (who more heavily avorthe CIO and CTO).

As or how businesses will evaluate the ongoing perormance o their cloud-based environments, the most requently cited means, at 59%, is cost. However,managers in nearly equal numbers (56%) say they will also look at productivity.As Anand Sankararaman, Senior Vice President IT o HDFC Bank explained,The overall perormance eciency, eectiveness, cycle time, reductions inturnaround time is what will also matter. Business managers will also evaluate

their implementations based on the revenues they are able to generate throughcloud-based channels as well the scope o geographic access.

And according to IBMs Michael Sylvia, You will also likely see usage becoming amore important metric. I know in our case thats something were tracking careully,the degree to which others are actually using the cloud services were providing.

Who should be responsible for managing service level performance of external cloud providers after

a cloud environment has been adopted?

0 5 10 15 20 25 30

Other

General counsel



CTO

CIO

COO

CFO

CEO




40/48

Conclusion


The era o the cloud is a signicant evolution in the provision o IT servicesand business, opening the door to transorm business and drive innovationinside and outside organizations. Undoubtedly, the ull story will unold atdierent rates at dierent companies and sectors, as some move cautiouslyand others make a bold dash. Nonetheless, acquirers o cloud technology and

services will likely experience signicant transormation o business processesalongside a reduced total cost o ownership across their organization i, andonly i, managed properly. As more organizations look to take cloud into theirbusiness and IT organization, it is important to weigh the cost savings and otherappealing aspects such as fexibility and agility against the critical issues such asrisk, compliance, tax and other issues that may have implications or adoptingrms. For insight into more o these critical issues, please see the Issues andImplications section, an executive guide on how to evaluate and think throughthe implications o cloud.



41/48

Insights & implications

Many cloud studies and research reports exist, providing a view

into cloud trends and deployments. This research study took

input rom over 900 executives. KPMG has gained insights not

only rom this survey, but rom our member rms clients who

are actually experiencing transormation enabled by cloud. Based

on that knowledge, we oer below a Whats Next? guide or

executives to help them appropriately measure the opportunities,

set against the challenges, o the cloud.

For all executives evaluating cloud solutions:

Identifygapsinyourbusinessperformance,competitive,geographic,etc.and

determine i the cloud can help ll those gaps.

Evaluatecollaborationandinformationexchangeneedswithprovidersand

clients. Are there elements o your business where inormation is exchanged

that could be migrated to a cloud environment? Could these be converted tonew business opportunities and ways to expand revenue? Will the cloud createnew eciencies?




42/48


Assesstheeconomicsofaprivatevs.publiccloud.Theeconomicdifferencescan

be signicant, based on individual requirements, while the risks, such as security,need to be actively managed.

Measurerisksvs.rewardsasyouassesscloudprovidersclaimsandcapabilities.

Understandwherethecloudproviderinternalorexternal willforce

organizational process changes, and assess the change managementimplications and plan. Are there any organizational redesign actors to consider?Does your current operating model support the cloud migration plan? I not, haveyou properly designed your target operating model?

Focusondecipheringandvalidatingcloudcomputingcostsavingsclaims.Test

these claims against total cost o ownership calculations that include compliance,tax and change management implications. As these are unique by organization?(They are oten inaccurate when provided by a vendor.)

Testthecustomizationneedsofyourbusiness.Themorecustomizationneeded,

the less likelihood o cloud success. Is the desired customization critical?

Denebusinessintegrationissues,withspecicemphasisondatathatmaynow

be scattered across the enterprise. Understand how the data architecture mustevolve to address the cloud and inter-cloud and inter-enterprise operability.

Assessinternalstaff,currentrolesandchangesneededandhowwellcurrent

skills map to the cloud model being designed or implemented.

Considerifacloudprojectdoesnotenterthetypicalcapitalbudgetingand

approval process, will it exist outside corporate governance models? Whatmechanisms are in place to ensure corporate governance is maintained?

Howwillbusinesscontinuityanddisasterrecoveryfactorintoyourcloud

migration strategy?

Understandthecontractingprocess.Asofferingsbecomemorestandardized,

so goes the contract. Make sure your organization can fex to the providersrequirements and you understand what is negotiable. Understand the optimumcontract length such that your project provides the fexibility needed to move asthe market evolves.

RemembertoconsiderServiceLevelAgreementsandhowtheywillbe

managed. Are the right mechanisms in place with your current vendor

management strategy to eectively manage cloud projects?

Assessyourvendormanagementriskstrategywithacloudlens.Vendorsarealso

going through a their own transormation to cloud delivery models, deliveringsignicant nancial and operational impact. Ensure that your management strategyproperly measures the vendors nancial ability to restructure its business model.

Determinetheassurancereportingneedsforyourcloudvendor.Requirements

that worked or outsourcing, such as the historic SAS 70, may not provide theassurance you need in a cloud environment. Assess the shit o testing an entireprocess vs. a transaction and whether this is sucient.

Dontforgetinternalaudit,globalsecurityandregulatoryimplicationsofdata

privacy, storage, co-location, tax nexus, etc. How do you audit the co-mingled

world o cloud? How do you determine that all regulatory requirements are met?Will you give your data encryption key to your vendor? Is your vendor required todisclose a data breach?



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For IT proessionals

Workcloselywithbusinessunitleaderstodevelopacomprehensivecloud

strategy and plan o action. Create the enterprise vision and roadmap or cloud.Identiy proo o concept opportunities to leverage.

Areyourtechnologyplatformsanacceleratororinhibitortoyourcorporate

strategy?

Educatebusinessunitleadersonthecloudsrealisticcapabilitiesandpotential

rom an IT perspective.

Deploycompetentspecialiststostudythecloudmarket,itscapabilities,

oerings and providers.

Evaluatetheinteroperabilityofcloudsolutionsagainstcurrentapplications,platorms and inrastructure. Assess their readiness or cloud migration.Ensure the assessment is objective.

Re-denetheroleoftheCIOasitevolvesfromITprovidertoChiefIntegration

Ocer, who has the opportunity to drive business models and innovation.

Developvariousscenarioplansforcloudadoptionanddeploymentacrosseach

cloud clarity

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