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Proformative:The Three Stages of Cloud Economics

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Investments in information technology have a direct and fundamental impact on the success of an organization's revenue-generating activities. As a consequence, the business' financial leadership has a …

Investments in information technology have a direct and fundamental impact on the success of an organization's revenue-generating activities. As a consequence, the business' financial leadership has a crucial stake in understanding and influencing IT decisions.
The presentation content focuses on a three-stage approach geared toward building profit models around well-planned cloud implementations. Discover how CFOs are in a unique position to lead this effort and make the IT organization aware of its impact on revenue and profitability

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  • 1. Event Sponsor © 2011 Proformative. Proprietary and confidential
  • 2. Welcome to ProformativeProformative is the largest and fastest growing online resource forsenior level corporate finance, treasury, and accounting professionals.An ad-free, noise-free community of more than 400,000 CFOs,Controllers, Treasurers and related professionalsA resource where corporate finance and related professionals excel intheir careers through: Uniquely valuable, online Peer Network Direct subject-matter-expert advice Valuable Features and ResourcesAll of it completely free and noise-freeCheck it out at www.proformative.com © 2011 Proformative. Proprietary and confidential
  • 3. Learning ObjectivesAfter participating in this event you will be able to:• Define why "Cloud Computing Always Saves You Money" is a myth• Define how your organization can deploy three stages of cloud technology toimprove revenue•Define how to "Drive Up IT Business Relevancy by Mapping Cloud Economics to theBusiness" © 2011 Proformative. Proprietary and confidential
  • 4. 4 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 5. Activate Cloud EconomicsMaximizing the benefits of cloud computingJames Staten. VP and Principal Analyst5 © 2009 Forrester Research, Inc. Reproduction Prohibited 2011
  • 6. Scale out turns on the cloud. Scaling down turns on cloud economics.6 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 7. What makes a cloud a cloud Definition: A standardized IT capability (services, software, or infrastructure) delivered in a pay-per-use, self-service way.7 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 8. Not everything is cloud . . . and shouldn’t be Deliver New Cloud Economics Web Traditional IT Dedicated Cloud services hosting Storage billing VM -as-a- DC MSP SaaS service IaaS outsourcing hosting On- DB-as-a- PaaS ASP IT demand service virtualization scaling Traditional computing Cloud computing • Fixed cost/terms • Variable costs/terms • Varied deployments • Standardized deployments • Single tenant •Multitenant • More manual • Highly automated • High control • Low control • High customization •Limited customization 8 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 9. Speed Is Still The Biggest Driver For Cloud Adoption “How important were the following in your firm’s decision to adopt cloud computing IaaS?” 4 5 - Very important On-demand capacity and scalability (available when 34% 45% needed, now and in the future) Lower capital expenditures by purchasing services 33% 38% instead Improved IT infrastructure manageability and flexibility 39% 32% Lower total cost of ownership for servers 29% 39% Provides developers with fast, easy resources for test 37% 26% and development Faster time to market with new business capabilities 34% 27% Improved disaster recovery and business continuity 32% 29% Ability to use as peak capacity for times of high 27% 32% usage, such as the holiday season Temporary or project-based capacity needs, like 28% 22% special projects Improved power and cooling efficiency 23% 20% Base: 148 North American and European IT decision makers at enterprises who have implemented or have plans to implement SaaS Source: Forrsights Hardware Survey, Q3 20119 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 10. Enterprise cloud use examples  AP — enabling content mashups and new uses via a cloud API  NASDAQ — Market Replay service  US Army — Testing troop vulnerability application on cloud platform  Pathwork Diagnostics — cancer tissue analysis 10 © 2011 Forrester Research, Inc. Reproduction ProhibitedSources: www.NASDAQ.com, www.espnfanzone.com, Indy500.com
  • 11. The basics of cloud economics Elastic scale delivers just-in-time capacity • As demand rises, resources are added. • Requires apps to scale out • Load balancing governs Pay-per-use keeps costs low • No upfront payment • No commitment whether you use it or not • Costs aligned to use Self-service fuels productivity • If you can build it, you can deploy it — fast. • API access drives use of automation.11 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 12. NVoicePay taps the cloud to expand its marketAP Assist: Enable electronic payments for SMBs 90% of B2B invoice payments are still by check. Solution: SaaS-based vendor payment – $0.40 per payment; free vendor sign-up “Building a mission-critical B2B – Tight integration with key SMB systems (i.e., ADP for car payment network would have been dealers, First Data payment clearing-house) nearly impossible without the low – Needed elastic scalability, fast deploy, and iteration  Forecasted huge transaction volumes cost, pay-as-you-go [cloud].”  Traditional hosting was more expensive — — Karla Friede, CEO, NVoicePay wouldn’t achieve scale. – Needed reusable cloud services to speed development – Needed effectively 100% availability for ―Payment Dial Tone‖  The alternative was to build a massively expensive data center. 12 © 2011 Forrester Research, Inc. Reproduction Prohibited For more info, check out NVoicePay website (http://nvoicepay.com/wp-content/uploads/2010/10/NVoicePay-MS-Case-Study.pdf).
  • 13. But cloud costs can be deceiving $0.08 per hour for a Small VM X 24 hours X 30 days = $57.60 Cost optics Add in network and storage costs = $157.60/month Traditional hosting for the same: = $50/month13 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 14. The key to benefitting from the cloud Elasticity Transiency14 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 15. Turning cloud economics to your favor is the key Elastic scale: Scaling down for profitability • How quickly can you turn off resources no longer in use? • How small can you get your base footprint? • Are you leveraging caching as much as you can? What you scale matters • Discrete component scaling drives efficiency. • Autoscaling cloud services often costs less. • Where traffic goes affects cost. When and where you do things matters • Some cloud services have off-peak pricing concepts. • Some cloud services have better costs for certain services/uses.15 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 16. How NVoicePay activates cloud economicsIf it’s running, it’s cutting into profitability Profits are pennies on each $0.40 transaction Mission: Lower the cost of each payment – Scale only when necessary  Scale only what needs to be scaled when necessary – Chatter can cost you  Traffic flowing out of the cloud costs $$  Keep this traffic to a minimum using: – Caching, Batching, Rich-client actions – Use cloud services to speed development  Cloud-based Service Bus and Access Control  Cloud-based Storage 16 © 2011 Forrester Research, Inc. Reproduction Prohibited For more info, check out NVoicePay website (http://nvoicepay.com/wp-content/uploads/2010/10/NVoicePay-MS-Case-Study.pdf).
  • 17. The Stage of Cloud Economic Maturity Stage One: Scale Up • Deploying transient applications that come and go based on need, business cycles or other on-demand bases • Leveraging elastic applications that grow with traffic loads17 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 18. Cost optimize your deployments Dedicated Virtual Cloud hosting hosting, infrastructure (traditional SaaS outsourcing) Web App Logic Web DB (RAC) (static) Web Custom Common Fixed Transient Owned Metered18 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 19. Cost optimize your portfolio - overall Internal Virtual Public Virtual Physical Trad out cloud hosting cloud Flexible CapEx OpEx OpExCommon Custom Custom CommonTransient Fixed Fixed TransientMetered Owned Owned Metered 19 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 20. Cloud economics apply to public as well as private clouds But who gets cloud economics is different with private cloud Private cloudSource: See the April 2009 ―Which Cloud Computing Platform Is Right For You?‖ report. 20 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 21. The Stage of Cloud Economics Stage One: Scale Up • Deploying transient applications that come and go based on need, business cycles or other on-demand bases • Leveraging elastic applications that grow with traffic loads Stage Two: Scale Down • Using performance monitoring and consumption thresholds to reduce application scale as soon as traffic subsides • Optimizing application designs and architectures to finely control application scale and shrink baseline footprint Stage Three: Profit Center • Designing or rearchitecting services around cloud economics that deliver new profit potential for the company • Deploying service over a hybrid architecture that matches the economics of each application component21 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 22. Recommendations Understand the profitability profile of cloud apps • How does it generate revenue? • What actions are taken to get that revenue? • What components are involved? • What does the transaction flow cost? Analyze the performance profile • What parts best belong on what type of deployment? • Where can applications be replaced by SaaS? • Are applications with transiency exhibiting this behavior? Bake cloud economics into new app design • Think cloud first – takes design changes • Be prepared to move apps out of the cloud if their pattern changes • Revisit your portfolio often — as the cloud matures quickly.22 Entire contents © 2008 Forrester Research, Inc. All rights reserved.
  • 23. Thank youJames Staten+1 650.581.3824jstaten@forrester.com @Staten7www.forrester.com © 2009 Forrester Research, Inc. Reproduction Prohibited
  • 24. Today’s presentation powered by Forrester’s Forrsights  Forrester’s Forrsights delivers forward-looking insight into:  Buying behavior shifts  Business model migrations  Disruptive technologies (e.g. Cloud, Mobility, SaaS, Video)  We help strategists at vendors responsible for setting strategy and identifying market opportunities  Data comes from more than 24,000 respondents from SMBs and enterprises in 12 countries— with quotas set across 7 major verticals and sub- segmentations available. Dedicated Forrsight Data Advisors work with clients to offer guidance around using data to support strategic initiatives.  Forrsights helps understand all the players – not just IT. Business Decision IT Makers Employee Decision Workforce Makers Buying Decision Want to see more Forrsights data? Email: Forrsights@forrester.com24 © 2011 Forrester Research, Inc. Reproduction Prohibited
  • 25. Polling Questions© 2011 Proformative. Proprietary and confidential
  • 26. Panel Discussion and Q&A© 2011 Proformative. Proprietary and confidential
  • 27. We will send you a follow-up survey and wouldappreciate your feedback.Please join us at www.proformative.com to ask anyadditional questions you may have and to continuethis conversation with your peers and the expertsyou heard from today. If you have questions about CPE Credit please contact Tonya Walsh at twalsh@proformative.com © 2011 Proformative. Proprietary and confidential
  • 28. Event Sponsor © 2011 Proformative. Proprietary and confidential

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