Emerging Enterprise Cloud Adoption Paths

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

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  • Emerging Enterprise Cloud Adoption Paths

    April 18, 2012

  • Everest Group is a leading global services advisory firm

    Range of servicesOverview

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

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

    StrategyConsulting and research services to turn insights into decisions

    StrategyConsulting and research services to turn insights into decisions

    SubscriptionsResearch reports, data sets, customized tracking services

    SubscriptionsResearch reports, data sets, customized tracking services

    insights, strategic decision-making approaches, and implementation expertise

    Distinctive combination of consulting

    ImplementationConsulting services to capture value from decisions

    ImplementationConsulting services to capture value from decisions

    ResourcesWebinars, research, and blogsResourcesWebinars, research, and blogs

    and research capabilities

    Over 1,000 engagements, covering IT and business processes

    We serve enterprises, service providers, and service enablers

    Service ProvidersEnterprises

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

    Services Industry

    Service Enablers

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

    contracts

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

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

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

    # of contracts Latin America Asia Pacific EMEA North America Total

    IO 28 113 512 513 1,166

    AO & IO 14 66 251 290 621

    Contract Volume Breakdown

    AO & IO 14 66 251 290 621

    Total 42 179 763 803 1,787

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

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

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

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

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

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

    Demand for FlexibilityDemand for Efficiency

    flexibility

    Increasing Value Focus Increasing Pace of Innovation Consumerization of IT Device proliferation

    C d l ti

    Ongoing budget pressure Demand for business value

    V d i i Compressed cycle time Strategic focus

    Vendor pricing Security and regulatory

    compliance

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

    variability; explosion of data / l it

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

    Anytime / anywhere access Speed / on-demand service Configurability

    Underutilization of dedicated hardware

    Suboptimal skill mixes Underachievement of

    economies of scale

    ExtremeDemands on

    IT and BusinessFunctions

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

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

    Efficiency Impact Flexibility Impact

    Next Generation Data Centers Dramatically lowered cost

    Standardization equals

    needs, creating game-changing opportunities

    s

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

    Reduced latency Simplified management Highly scalable

    speed Right-sized capacity Just-in-time capacity

    i

    o

    n

    M

    o

    d

    e

    l

    s

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

    Optimized staffing pyramid leading to improved resource utilization

    Remote support from low cost locations

    Improved access to specialized skills and technical expertise

    Enhanced resource scalability

    x

    t

    G

    e

    n

    e

    r

    a

    t

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

    Dynamic workload shift to achieve 4-5X efficiency gain

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

    On-demand processing and storage capacity

    Self-service provisioning Capital avoidance

    N

    e

    x Cost linked to consumption

    MobilitySmartphones, tablets, sensors and other mobile end point

    Lower device end-user TCO (for certain segments)

    Productivity improvements

    Simplified AppStore delivery of capabilities

    Always on connectivity

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

    and other mobile end-point technologies.

    y p Location and motion

    information utility

    y y Ubiquitous user access

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

    Server consolidation/ i t li ti

    Operational Levers Key Financial Levers

    Observations

    Effi i

    virtualization

    Multi-tenant service models

    Capex avoidance

    Reduced operations and

    Levers and impact differ by delivery model BPaaS

    Observations

    EfficiencyBenefits Management Automation

    Standardization Outsourced maintenance and support

    Reduced operations and mgmt costs

    BPaaS SaaS PaaS IaaS Private / hybrid cloud

    Cloud Cloud ImpactImpact

    Active workload management

    Increased Agility

    Private / hybrid cloud

    Economics sensitive to contextspecific factors Refresh cycle

    Flexibility Benefits

    g y

    Extended Reach

    New Capabilities

    Revenue growth Migration approaches

    and costSignificant variations in value impact across vendors / CSPs

    Reduced operating costs

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

    p

    Consumption-based billinge

    vendors / CSPscosts

  • Theres No Such Thing as Enterprise CloudThe Cloud is comprised of several different delivery models, each with different attributes and characteristics

    Business Business Process as aProcess as a

    Description

    End-to-end business process delivered as a

    Common Services Payroll Order-to-cash

    P t

    attributes and characteristics

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

    Software as a Software as a S iS i

    service

    Multi-tenant applications and business services

    Procure-to-pay Hire-to-retire

    CRM HCM

    PublicPublicCloud Cloud

    ServicesServices Platform as a Platform as a ServiceService

    Service Service ((SaaSSaaS))

    Multi-tenant application development and hosting

    Email Collaboration F&A

    Dev Only Dev + Runtime

    Infrastructure Infrastructure as a Service as a Service

    Service Service ((PaaSPaaS))

    Shared data center, infrastructure hardware and software resources

    p genvironments

    Compute (Server / OS) Storage Database

    Dev Runtime

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

    and software resources Database Networking Content Delivery

    Private / Hybrid Clouds Compute (Server / OS) Storage

    Internally shared data center, infrastructure hardware and software

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

    (On-Premise or Hosted) Databasehardware and software resources

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

    AAObserverObserver

    BBOpportunistsOpportunists

    CCSolutionersSolutioners

    DDTransformersTransformers

    EEProviderProvider

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

    enterprises are capturing value from cloud services

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

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

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

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

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

    Description

    Cloud Penetration

    None / limited Individual buyers

    Limited / Modest Ind. / dept buyers

    Modest LOB buyers

    Modest / Ext Enterprise buyer

    Modest / Ext Enterprise buyers

    None Individual use POC / pilots Limited Limited

    Cloud Penetration

    IaaS

    SaaS

    None Private POCs Limited Modest Extensive

    Business Business Business / IT IT Business / ITIT I fl

    Private / Hybrid

    Primary Buyers

    High Limited Modest High High

    None None Project basis Architect Broker

    IT InfluenceCloud strategy

    Integration

    Management

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

    None / Limited None / Limited None / limited Emerging Extensive

    None None Policy only Emerging Extensive

    Management

    Governance

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

    EliminateExcess Capacity

    Eliminate spend on unused peak

    3

    efficiencies from cloud infrastructure models

    capacityPrivate Cloud

    Server Utilization

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

    Move Peak Load to Public2

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

    Shift loads to fill valleys (where possible)

    Maximize private cloud

    Keep Base Load in Private

    1

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

    utilization

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

    Enterprise Workload Cost by Platform1$ / GHz hrs, Indexed vs Dedicated

    Hybrid models can drive truly disruptive economics

    100 Applicable at individual workload

    and portfolio level Dynamic bursting not required to

    capture initial benefits

    6560-65 Peak Load

    Public Cloud

    p

    Base LoadBase Load

    Public Cloud Shift spike compute hours

    to public cloud Pay only for consumption25

    Virtualized/ Private Cloud

    Public Cloud

    Dedicated Hybrid Model

    Base LoadBase LoadPrivate CloudPrivate Cloud

    Keep base compute Keep base compute hours in private cloudhours in private cloud

    Maximize utilizationMaximize utilizationPhysical

    ServerUtilization:

    7% N/A(service provider)

    18% 40%

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

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

    ( p )

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

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

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

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

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

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

    agreements for 12 operating companies into a single service provider

    Build a solution that has high

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

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

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

    Build a solution that has high availability during and after transition

    Reduce cost of IT

    Evaluated proposals for comprehensive

    Build a solution that has high availability during and after transition

    Reduce cost of IT

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

    Ability to transition quickly

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

    Ability to transition quickly

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

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

    Ability to transition quickly Assessed proposals for broad managed

    services solutions with different cloud mixes

    Range of savings potential

    Ability to transition quickly Assessed proposals for broad managed

    services solutions with different cloud mixes

    Range of savings potential

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

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

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

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

    timeline than original cloud proposaltimeline than original cloud proposal

  • Case Example I Global Energy CompanyService providers proposed a diverse set of solutions to meet the clients Next Generation IT solution design objectivesGeneration IT solution design objectives

    Dedicated Shared

    Solution Overview

    Solution leverages true public cloud (via partner)

    Solution Description

    Provider A PhysicalDedicated Private Cloud

    Public CloudVirtual Private CloudSAPSAP

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

    includes DR SLAs reflect standard (public) offering, not

    customized to client situation

    Provider B

    Dedicated Private CloudPhysical Virtual Private Cloud

    SAP

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

    Provider C Dedicated Private CloudPhysicalSAPSAP

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

    Client-specific SLA s met

    VirtualPhysicalBaselineSAPSAP

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

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

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

    100%50%25% 75%0% Inco...

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