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1 1 0 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 1 1 1 0 1 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 1

0 0 1 1 0 0 0 1 1 0 0 1 0 1 0 0 1 0 0 1 0 0 0 1 1 0 1 0 1 0 1 0 0 0 1 0 0 1 1

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LEADERS IN THE CLOUDIdentifying the Business Value of Cloud Computing for Customers and Vendors

KAMESH PEMMARAJUM.R. RANGASWAMI

MARCH 2010

REPORT

PREVIEW

It is tempting to dismiss cloud computing as another product of the well-oiled

technology hype machine. But consider these facts: Mega-technology vendors are

pouring billions of dollars into cloud products. Cloud vendors are realizing record

growth. Analysts forecast cloud services as a $100 billion-plus opportunity in just

a few short years. Is cloud computing worth all of this excitement?

In a word: Yes.

Think back to 1997 and the buzz surrounding the Internet. Consumers and com-

panies were excited about the technology’s potential but worried about security,

privacy, bandwidth, standards and more. In the end, what enabled the Internet to

transform communication and commerce?

Business value. Cloud computing will deliver even greater benefits to companies –

and it will revolutionize enterprise IT in the process.

Interviews with forty “Leaders in the Cloud” describe cloud computing’s ability to

increase ROI, decrease TCO, speed development, improve reliability and renovate

the perception of IT in their companies.

The result? A more agile, competitive business.

Realizing multi-fold decreases in cost compared to traditional solutions… Develop-

ing platforms in 15 minutes… Creating applications over a weekend… Consolidat-

ing server investments from 13 machines to 1… Reallocating IT budgets from

80 percent maintenance to 80 percent innovation…

These are but a few of the real-world examples of bottom-line business benefits

already being realized by cloud leaders and detailed in the pages of this report.

The journey to a cloud-based IT reality is only beginning. Gaps in technology and

vendor offerings remain to be filled. Legitimate concerns exist over security, in-

tegration and scale. Cultural and organizational challenges remain largely unad-

dressed.

The bottom line? “Leaders in the Cloud” proves that the business value of cloud

computing is real, the road to enterprise cloud adoption is shorter than most

experts think, and both customers and vendors must act now to build the cloud

solutions that will revolutionize business in the coming decade.

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1 0 1 1 0 0 1 0 1 0 1 0 0 0

1 1 1 0 1 0 1 0 1 1 0 0 1 0

1 0 1 0 0 0 1 0 0 1 1 0 0 0

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0 0 1 1 0 1 0 1 0 1 0 0 0 1

0 0 1 1 1 0 1 0 1 0 1 0 0 1

1 0 0 1 0 1 1 0 0 1 0 1 0 1

CLOUD LEADERS: ACT NOW

“People are asking the same questions

about the cloud today that they did

about Internet back in 1997.”

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1 0 0 1 0 1 0 0 1 0 0 1 0 0 0 1 1 0 1 0 1 0 1 0 0 0 1 0 0 1 1 1 0 1 0 1 0 1Contents:

Chapter 1: Executive Summary – The Business Value of Cloud Computing . . . . . . . . . . . . . . . 1

Chapter 2: Take Action Now: Strategic Recommendations for Customers and Vendors . . . . . . . . 6

Chapter 3: Methodology: In-depth Interviews and a Study of IT Executives . . . . . . . . . . . . . . . 9

Chapter 4: What Cloud Computing Means to Customers Today . . . . . . . . . . . . . . . . . . . 10

4.1 What the Cloud Is – and What It Isn’t: The Customer Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . 104.2 Will the Cloud Take Flight Soon? Why This Time is Different . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134.3 Are Customers Moving to the Cloud? Current State of Customer Cloud Initiatives and Projects . . 144.4 Complexity- and Confusion-as-a-Service: Unwrapping the Maze

of Cloud Options and Customer Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154.4.1 SaaS vs. PaaS vs. IaaS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154.4.2 Private vs. Public vs. Hybrid Clouds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164.4.3 Small and Midsize Businesses vs. Large Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194.4.4. Government vs. Commercial Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194.4.5 Segmentation by Service and Assurance Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Chapter 5: Understanding the“Why”of Enterprise Adoption: The Business Drivers . . . . . . . . . . 21

5.1 What Moves Customers to the Cloud? Internal Trigger Points and “Must Haves” for Adoption . . . 215.2 Is Cost the Primary Driver? Business Case, ROI and TCO Justification . . . . . . . . . . . . . . . . . . . . . . . 225.3 What Are Customers Spending in the Cloud? Current and Forecasted Cloud Initiatives. . . . . . . . . . 28

Chapter 6: Cloud Strategy and Road Map for Customers: The Path to an Agile Business . . . . . . . 30

6.1 Strategies for Realizing Global Benefits With Cloud Computing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306.2 Classifying and Cloud-Proofing the Application and Data Landscape . . . . . . . . . . . . . . . . . . . . . . . . 316.3 Service-Oriented Architecture: The Key to Painless Cloud Migration . . . . . . . . . . . . . . . . . . . . . . . . 336.4 Toward Efficient and Nimble Data Centers with Internal Clouds . . . . . . . . . . . . . . . . . . . . . . . . . . . 346.5 Leveraging SaaS and PaaS Where It Makes Sense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356.6 The Imminent Emergence of Hybrid Clouds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Chapter 7: Barriers and Roadblocks to Cloud Adoption: Uncovering Real-World Issues and Solutions . 38

7.1 The ‘Sacred Cow’ Issues: Security, Privacy and Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387.2 The Need for Regulations and Laws to ‘Catch-Up’ to the Cloud World . . . . . . . . . . . . . . . . . . . . . . 417.3 How Important and Useful Is Vendor Certification to Customers? . . . . . . . . . . . . . . . . . . . . . . . . . . 427.4 Are Standards a Barrier to Innovation or to Customer Adoption? . . . . . . . . . . . . . . . . . . . . . . . . . . . 427.5 Integration Challenges: Tackling the Tough Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437.6 The Nuances of Vendor Lock-In: What to Watch Out For . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447.7 Impact on the Home Team: Cultural Challenges in the IT Organization . . . . . . . . . . . . . . . . . . . . . . . 457.8 Immaturity of Vendor Offerings: Gaps and Issues in Current Technologies and Tools . . . . . . . . . . . . 47

Appendix A: Cloud Computing Case Studies and Best Practices from the Field . . . . . . . . . . . . . . 50

Acknowledgments/About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

1 LEADERS IN THE CLOUD: Identifying the Business Value of Cloud Computing for Customers and Vendors LEADERS IN THE CLOUD: Identifying the Business Value of Cloud Computing for Customers and Vendors

Sand Hill Group’s “Leaders in the Cloud” study examines the cloud computing

initiatives at companies today, the plans for future deployment, the business ben-

efits realized, the challenges encountered and the details on specific use cases of

cloud technology. Based on 40 in-depth interviews and quantitative surveys of more

than 500 IT executives, the study finds that even in its infancy, cloud computing is

already delivering significant value to companies. Consider the following summary

of research findings and the corresponding business benefits of cloud computing:

Strategic AlignmentFor decades, IT and business executives have struggled to speak the same lan-

guage, work together and align goals. But in our study, cloud leaders expressed op-

timism that change is on the horizon. CIOs were unanimous in saying the primary

driver for adopting cloud computing is to meet business needs (see page 21). As the

IT organization leverages the cloud to solve each problem with new levels of speed,

flexibility and cost-effectiveness, the business leaders gain renewed respect and

excitement for IT – and for the cloud. Early

inroads by SaaS vendors selling to non-IT ex-

ecutives resulted in security, governance and

maintenance concerns (see page 31). Today,

CIOs describe a more collaborative evalua-

tion of cloud solutions involving both IT and

business leaders with one common motivator:

advancing the goals of the company.

AgilityThe “agile business” is the focus of many corporate mission statements today. IT

executives believe cloud technology can help companies reach that goal: “business

agility” was the No. 1 driver of cloud computing adoption, mentioned by 49 percent

of respondents (see page 23). The concept of agility incorporates many of the ideas

detailed on the following pages, including

flexibility, speed and innovation. Enterprise

IT organizations can develop and deploy

cloud solutions quickly and efficiently. The

cloud enables enterprise IT organizations to

anticipate and respond to the changing needs

of the business more quickly and efficiently

than ever before.

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1 1 0 0 1 0 1 0 0 1 0 0 1 0 0 0 1 1 0 1 0 1 0 1 0 0 0 1 0 0 1 1 1 0 1 0 1Executive Summary:

The Business Value of Cloud Computing

“I have never established a cloud computing

strategy that everything needs to go off-premise

or move to some type of hosted model.

The driver behind it all is a business need.”

“We were halfway through the project

and the business decided to dramatically change

the requirements of the system. We were able to

respond much more quickly than the original

on-premise team would have delivered.”

The Bottom Line

The “Leaders in the Cloud” study found companies are achieving significant bottom-line business benefits from early cloud computing initiatives. Technological and organizational challenges to adoption remain, however CIOs report the pursuit of IT-driven business value will only increase their cloud computing commitment and investment in the near future.