Business impact of cloud computing

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Business impact of cloud computing

  1. 1. Business Impact of Cloud Computing www.pwc.com David Lemphers Director, Cloud Computing @ PwC e: david.lemphers@us.pwc.com t: http://twitter.com/davidlem
  2. 2. PwC 2
  3. 3. PwC Sorry In Advance! 3
  4. 4. PwC What’s Going On? 4
  5. 5. PwC Customer’s Want On-Demand Services Cost •  Lower upfront costs and start-up capital makes launching new services easier and less risky Choice •  Consuming, composing and churning services is easier in the on- demand world Agility •  Subscribing to and consuming services as soon as required assists organizations adapt to rapidly changing market/customer requirements 5
  6. 6. PwC BUT: Traditional Business Is Not Currently Optimized Build Sell Run 6 Provider Customer
  7. 7. PwC Becoming On-Demand Requires Transformation 7
  8. 8. PwC And Great Tech! 8 Manage Provision
  9. 9. PwC So Where Do We Start? 9
  10. 10. PwC At a High Level Business •  Build -> Sell -> Deliver -> Support Service •  Provision -> Run -> Manage -> Deprovision Infrastructure •  Plan -> Procure -> Deploy -> Commission -> Maintain 10
  11. 11. PwC Step 1. Costs Start-Up •  Facilities (Capital) •  Infrastructure (Hardware, Software) •  Business Support (Legal, Consulting, etc.) Ongoing •  Variable •  Utilities (Power, water, network) •  Sustained Engineering •  Fixed •  Facilities (Operational) 11 COGS
  12. 12. PwC Cost of Goods Sold (COGS) •  Understanding and managing COGS is critical to a successful on- demand business •  Consumption based pricing translates directly to variable on-going costs •  What do you do with fixed/start-up costs? •  Perhaps a blended model? (Subscription + Consumption) 12
  13. 13. PwC Step 2. Business Model •  What are you going to be selling? •  Compute •  Storage •  Value-Add Services •  How will you charge customers? •  Subscription Plan •  Consumption Based Pricing •  Blended Model •  What are your “promises”? •  Service Level •  Quality of Service •  Compliance 13
  14. 14. PwC Relationship between Costs and Revenue •  Ensure your costs are closely aligned to revenue •  Revenue Recognition (Upfront Spend versus Trailing Revenue) •  Managing variable costs is easy •  You just pass these directly onto the customer •  Managing start-up/fixed costs is harder •  Why? •  Because it’s hard to predict your total customer base up-front when preparing your rate card •  Front-loading fixed costs can make your initial price point too high •  Back-loading fixed costs can result in aggressive losses early if you’re wildly successful at the start •  Churning your rate card can severely impact customer satisfaction, retention and adoption 14
  15. 15. PwC Step 3. Integrate Business Model into Technology Platform Sign-Up •  Pricing model and rate card •  Discounts and incentives Provisioning •  COGS Metering •  Compliance Billing •  Revenue Customer Support •  SLA 15
  16. 16. PwC Major Areas of Business Transformation 16
  17. 17. PwC Billing •  Billing is the most important part of an on-demand environment •  It is also the most frequent and critical interface to the customer •  Bill payment •  Usage Review •  Key focus areas •  Accuracy: This requires a massive investment of engineering effort early in the process •  Pricing: Applying SLA credits, discounts, peak/off-peak pricing, is non-trivial •  Compliance: With Federal, State and Local Tax regulations 17
  18. 18. PwC Integration Supply Chain •  Capacity planning and management Sales and Order Fulfillment •  Provisioning, Deprovisioning Operations and Support •  SLA, QoS (Dashboards, etc) CRM •  Customer Satisfaction •  Purchasing Behavior 18
  19. 19. PwC Capacity Planning •  One of the biggest challenges to running an on-demand cloud service •  Balancing under utilization and resource exhaustion is tricky •  Key focus areas •  Deterministic factors •  Current resources (# of servers, total ingress/egress bandwidth) •  Non-deterministic factors •  System load •  Impact of SLA •  When factoring deterministic and non-deterministic factors into your capacity planning, always remember to account for SLA targets 19
  20. 20. PwC Compliance Tax •  Sales Tax •  Income Tax •  Varies greatly from state to state, and even at the municipality level Legal •  Horizontal Standards (SAS 70, ISO 27001) •  Vertical Standards (HIPAA, FISMA) •  Location Concerns (Patriot Act and Non-US Customers) 20
  21. 21. PwC And the list goes on… Business Model Pricing Model Capacity Planning Facilities Management Procurement and Asset Management Business Process Integration Finance Risk Analysis Security Assessment BCP/DRP Support and Operations Policies and Governance Cross-Group Collaboration Change Management People and Change Maintenance and Warranty Compliance Tax Legal Technology Billing Application Migration and Compatibility Hybrid Environments (On-premise + Cloud) 21
  22. 22. PwC Summary •  Cloud Computing and On-Demand Services are exciting and customers want it •  Identify key business areas to transform and integrate with •  Focus on the go to market blockers first •  Develop skills and capabilities around new core competencies like billing, support and operations, compliance 22
  23. 23. PwC Let’s Talk! Thoughts? Questions? Comments? Insights? 23

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