Changing the economics of the data center

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  • The data center, and the role of IT, is changing. Cost pressures, technology changes, and the advent of game-changers like cloud are forcing IT executives to look at how to deliver IT differently. What we’re going to cover today is how Cisco’s Unified Data Center platform can help you evolve your data center from a cost center to a service center.Cisco’s unique unified approach in the data center can help you redefine the economics of your IT operations, so you can spend more of your resources on delivering innovation to your business. With our unified architecture, Cisco can help increase business agility, reduce CapEx and OpEx through financial efficiency, and dramatically simplify your IT operations.  To set the stage for how Cisco accomplishes this, I’d like to start by looking at the current state of most IT operations. .
  • Today, data centers are under pressure from multiple angles. It’s widely understood that the data center sits at the core of IT and therefore is key to how IT can deliver service and value back to the business. One angle of challenge to IT in the data center is coming from the business, because the business itself is under pressure. Companies today are facing a more competitive environment where speed of innovation is important. This means that the ability to do more with less – and faster – is increasing important. For example, brick-and-mortar retailers continue to be under pressure to change and modify their services based on challenges from companies like Amazon. How does one do that with an inflexible IT? Then you have the technology trends that are driving change. Cloud, for instance, has fundamentally impacted IT by enabling “shadow IT”, with all the associated risks that come with it. With the increase in data – whether big data or video – more opportunities exist to leverage data for business intelligence. However, this has caused a huge spike in the past in energy, which is why power and cooling is one of the key challenges data center managers face. Finally, more employees are expecting to choose their own device and IT is beginning to recognize both the risk and the opportunity.  CIOs are expected to help solve the business challenges by harnessing these trends
  • We see a number of trends. At first glance, these trends might not seem like anything new. What's different is that technology is now available that lets organizations deal with these trends in a new way. Organizations still face the same pressures to innovate, to respond to changing demands, and to meet expectations. But technology is now at a point where it can help organizations face these many challenges in a new way.  Consumers, employees, and partners have come to expect the same kinds of deep, intimate, and on-demand relationships that they experience every day in their personal lives. Technology is making it possible to deliver those kinds of relationships on a very broad basis. At the same time, we're seeing that innovation is coming from a wider variety of places. New devices are being introduced rapidly, and IT teams have to be prepared. Organizations are looking for new platforms that support these devices -- the next iPad, the latest smartphone -- so they can keep up with market velocity and manage market volatility. And, of course, everyone is being tasked to do more with less. In the public and private sectors alike, organizations are looking to technology to enhance services while working with consistent or smaller budgets.Ultimately, the business has increased pressures around Growth Margin and Risk, which IT needs to be able to support and address.(SALES TEAMS – Use these slides to generate discussions on what the customer wants to focus on)------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Data Sources: Rising Expectations (HBR, 9/3/10 "IT in the Age of the Empowered Employee" http://blogs.hbr.org/cs/2010/09/it_in_the_age_of_empowered_employees.html?cm_sp=blog_flyout-_-cs-_-it_in_the_age_of_empowered_employees)Market Velocity(Deloitte, - BUILDING SUPPLY CHAIN EXCELLENCE IN EMERGING ECONOMIES (http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_mfg_chapter2_globalization_engelkoudalopt_optimized.pdf) Innovation Everywhere (Harvard Business Review  http://hbswk.hbs.edu/archive/5258.html) Financial Pressures (AT Kearney (Global Champions 2009) http://www.atkearney.com/images/global/pdf/Global_Champions_2009.pdf) “In fact, of the 2500 companies analyzed, only 42 large and internationally operating companies have managed to show any positive value growth over the 5-year period”
  • Lets talk that idea to the next level. How does a CEO see their business and how does the CIO see their DC capabilities to support them.As we have already discussed, the business is under 3 huge pressure points around Business Growth, Margin and RiskFor Growth, how does the business respond to the market quickly and drive market Reach for example in new geographies or new Branch openings. Furthermore how can the business gain better insight with Market Responsiveness (new services), CRM for Customer Sat. & Retention or drive Customer Expansion: Scaling for Mergers and AcquisitionsThe Data center capabilities can help drive growth and drive the business. By enabling the ability to drive new service creation and faster application deployment through service profiling and rapid provisioning of resource pools, the business can enable service creation without infrastructure spend, and drive increased service level agreements.Cost cutting, margin, efficiencies are all a critical element for business, particularly in today’s economic climate. Whilst the business maintains a laser like focus on cutting cost and increasing margins through Customer Retention / Satisfaction, Brand awareness and Loyalty and better ROI for investments, the efficient, agile data center is driving service Optimization, service quality and customer value through cloud based services and using a robust converged architecture to reduce costs, whilst simultaneously enhancing the applications experience and increase productivity through a scalable platform for Collaboration tools (UC on UCS). All these areas, ultimately help the business balance the cost of Maintenance V’s Innovation spend, freeing up more resources for innovative new technology, and less on maintaining legacy infrastructure.Finally, the element of risk in a business must be minimsed and mitigated. Whilst the business is focused on Governing and Monitoring Changing Compliance rules and Regulatory environment, they are highly concerned with Security of data, policy management & access. The DC must ensure a consistent policy across services, so there is no compromise on quality of service V’s quantity of services, and whilst enabling the Speed of Delivery through policy-based provisioning, ensuring Integrated management can reduce the control points. Furthermore, the business needs the flexibility to roll out and try new services quickly, whilst being sure they can retract them quickly (if they prove unsuccessful), with limited impact.All these areas show how closely the IT environment, and the DC in particular, can have a major impact on the business.
  • Businesses have realized the strategic advantages that technology can deliver—so IT organizations continue to see an increase in requests for new functionality that make new products and services available to end customers. But, the reality is, of course, that IT budgets and resources are fixed. And, perhaps the biggest challenge for the IT is that typically the vast majority of their budget—a full 70-80%--is consumed by maintenance activities. This includes managing existing assets, adds/moves/changes, system management and keeping up with existing demands. When 80% of your resources are dedicated to “keeping the lights on”, there is very little left for innovation. What many IT groups will attempt to do is fund innovative projects and pilots (iPad in the enterprise, cloud for dev/test, and so forth) to gauge how they can impact the business and drive innovation. However, budgets to accomplish are continually getting squeezed by the cost of doing business. The result-- the list of unfunded projects and missed opportunities start to add up—and the CIO struggles to make the desired contribution to the business.
  • Let’s take a look at the root causes of this maintenance predicament and some other recent cost trends you might be seeing in your data center.Today, the data center makes up 44% of overall IT spend. The traditional model of data center investment was to build in silos—often with dedicated resources for lines of business—and to design them for peak environments. Unfortunately, this model had some inherent inefficiencies because resources couldn’t be shared and, for the majority of the time, applications weren’t maximizing the capability of the server platform, which drove up costs via underutilization of resources A few other things jump out. First, more than 50% of the cost is the combination of people and software, with energy and facilities as the next largest chunk (contributing no new value-add to the IT department—it’s required to simply keep things running). One may come to the conclusion that infrastructure doesn’t matter that much, but when you actually analyze the root cause of the spiraling costs in people and software, one quickly realizes that they are related to the infrastructure – and the software to manage it. For instance, if we double click on servers, while the cost of hardware has been flat or declining for the past 15 years, the cost of managing and operating servers has been growing steadily and now represents 2/3 of the total spend associated with servers. The problem has been exacerbated by virtualization because higher server utilization has come at the price of increasing complexity that shows in the rising Opex costs.   Before we do that let’s look at some of the trends going on within CapEx and OpEx at the bar chart. Note that server and power and cooling costs seem to be remaining steady. Even with the inherent efficiencies of server virtualization—companies continue to need to invest in servers because of the growth in project demand they continue to experience.  But where increase pain is really being felt is in the area of management and administration costs associated with your virtual servers. This stems from the problem of the traditional approach to management in so many IT organizations. Because a wide variety of traditional servers, software systems, storage have been utilized, and implemented in silos—most system management functions are complicated—designed to try to integrate solutions that were never designed to work together. Virtualization, of course, means there is increasing movement of virtual machines—and the need to ensure key information and adequate security moves with them. Without a simpler approach to management, administration costs will continue to escalate.
  • Most customers, throughout the years, have believed that the best way to rebalance the economics in the data center is to enable and deliver IT as a Service. If IT can move from its current methodology of addressing business needs with dedicated IT infrastructure to addressing them via more efficient, automated on-demand services, IT offerings can be more consistent, timely, and more responsive to business needs. In the past, the technology wasn’t really there to enable that. Now, capabilities such as virtualization and cloud can help customers deliver these services rapidly.   This vision should give organizations the flexibility to deliver these services in house via a private data center or private cloud, as well as giving IT the option to leverage external services as well via software as a service, external public cloud services, or integration with partners.
  • It’s important to acknowledge that getting to the point where an organization can implement IT-as a Service does not take place all at once. Different customers will take different journeys with different destinations. For some, it’s all about doing what they do now, only better and more efficiently. For others, it’s about adding new capablilites so enhance what they do today. And finally, for others, it’s about making that full-blown transformation to service-driven IT.  Cisco views these four stages as predictable milestones along the way—each having a definable blue print that incorporates both savings and measureable value points. Consolidation is doing what you do today only more efficiency. Virtualization comes in the form of a tool (vSphere) and a strategy (end-to-end delivery, mobility, elasticity). Standardization is a phase that runs across all the phases honestly – it’s about the people and processes as well as the technology. It’s important to evolve the organization, processes and people skills to take advantage of consolidation and virtualization so that you can truly enable IT-as-a-Service.
  • The Unified Data Center is a platform that changes the economics of the data center by unifying networking, compute, storage and management into a common fabric-based architecture designed to deliver business agility, IT simplicity and financial flexibility.  Unlike other solutions, which continue to build layers of management software to stitch together a legacy infrastructure, this platform is designed specifically to enable on-demand provisioning from shared pools of infrastructure resource across physical and virtual environments.  This approach helps move from legacy IT to IT-as-a-Service, which is a much simpler and more efficient model for data center operations. The Unified Data Center is made up of three components:Unified Fabric describes our switching architecture for service-enabled LAN, SAN and converged networks. With a consistent NX-OS operating system across the MDS and Nexus portfolios, capabilities optimized for virtualization, and security, load balancing and WAN optimization solutions in both a physical and virtual form factor, customers can deploy a intelligent, scalable and highly available infrastructure. Unified Computing describes our fabric-based x86 architecture. By creating a networked, highly programmable platform optimized for virtualization and cloud, customers have a computing platform that can be rapidly deployed and easily maintained while being able to provide switching, policy and services down to the virtual machine.Unified Management brings together Cisco’s Intelligent Automation for Cloud, which provides a self-service portal, service catalog, management and orchestration capabilities along with the Network Services Manager for automated network provisioning, and UCS Manager for UCS programmability.  
  • There are those that will choose to embark only on a technology path versus an architectural one. While that might seem like the simplest short-term solution, it leads to suboptimal technology benefits. And potentially, complications as you try to scale down the road. With an architectural approach, however, you start seeing reduced total cost of ownership, and better productivity—all resulting from being able to work from anyplace on any device. Ultimately, you’re able to scale your business while managing risk and driving the business to greater growth with increased customer satisfaction and greater customer interactions. This is the architectural advantage.
  • Those statistics are impressive in their own right, but what is even more exciting is the ability to replace those costs with resources dedicated to new, value-added projects for the business. Cisco Unified Data Center helps IT spend more of its resources on its vision of adding strategic innovation.
  • In conclusion—we realize that IT organizations have greater demands than they ever have before. We believe that the best way to address them is through IT services delivered on demand—with a foundation that integrates technology, people, and processes. Cisco UCS is founded on this unified approach—and will allow your organization to redefine data center economics—and dedicate the majority of your resources toward delivering innovation for the business.  
  • Changing the economics of the data center

    1. 1. Cisco Unified Data CenterChanging the Economics of the Data CenterRajesh RegeSVP - Data Center, Virtualization & CloudCisco Systems India© 2011 Cisco and/or its affiliates. All rights reserved. 2010 Cisco Confidential 1
    2. 2. Business Security and Budget 24x7 Business Compliance Agility Constraints Business Challenges Technology Trends Proliferation Cloud Data Deluge of Devices Energy Efficiency© 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 2
    3. 3. Rising Market Velocity Expectations and Volatility Consumers/Staff Want the Growth New Competitors, New Business Same Personalized, On-demand Models, Accelerated Business Treatment They Are Used to in Processes, etc. Their Personal Lives Margin Innovation Everywhere How do you leverage Financial Innovations when it can come from ANYwhere, Risk Pressures ANYone, and at ANYtime New Market Expectations Are Creating Conflicting Growth- expense Management Objectives© 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 3
    4. 4. Business Goals DC Capabilities(CEO Focus) Growth (CIO Focus)Market Responsiveness and New service creation,New markets, customers, faster applicationmodels, acquisitions, deployment acceleratingbranches Revenue Increased Margins, Profitability throughCustomer satisfaction and Margin service quality, cloudretention, Increased ROI on based customer models‗value-add‘ IT spend and converged architectureRisk Mitigation, Compliance Riskand Regulatory environment, New Business ModelsSecurity of data, policy governance/risk, policy-management and access based provisioning, Integrated management reduces control points© 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 4
    5. 5. Managing Growing Demand for IT Projects Unfunded project Unfunded project Funded Unfunded project Unfunded project New Projects Missed Maintenance Business 70-80% Opportunities IT Budgets© 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 5
    6. 6. SERVER-RELATED SPEND (CAPEX+OPEX) OVERALL SPEND DISTRIBUTION WW Spending on Servers, Power & Cooling,and Mgmt. / Administration High $300 OPEX 7% 2% IDC, 2011 7% $250 Customer Spending ($B) 29% $200 10% $150 $100 11% $50 22% 12% $0 People Software Energy / Facilities Power & Cooling Expense Servers Networking Storage Mgmt. & Administration—Virtual Servers Mgmt. & Administration—Standalone Servers Disaster Recovery Overhead Server Spending Source: Gartner—Cisco IT, ―Data Center Cost Portfolio‖ Source: IDC, ―New Economic Model for the Datacenter‖© 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 6
    7. 7. Business IT Service On-Demand Objectives Offerings Services PEOPLE, PROCESS, TECHNOLOGY Traditional Virtualized Cloud End-User Business Applications Computing Computing Applications© 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 7
    8. 8. Automate Consolidate Virtualize the Standardize Service Assets Environment Operations Delivery Increased Agility, Efficiency and Simplicity Increased Cloud Readiness© 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 8
    9. 9. Holistic Fabric-Based Approach Physical Business Compute Agility Management Network Unified Financial Virtual Data Efficiency Center Storage Security Cloud IT Simplicity Open Resilient Secure Scalable© 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 9
    10. 10. The Architectural Advantage Growth Enablement Transformation Growth Enablement Transformation  Run IT as a business  New markets and  Internal service business models provider model Resiliency  Global expansion  Service-oriented  User experience architecture Capacity Resiliency Capacity  Increase data center tiers  Build and occupy data centers  Multi-site architecture  Optimize demand  Move out of high risk geographies  Consolidate where appropriate © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 10
    11. 11. The Architectural Advantage Business Advantage Expand Business Business Agility Opportunities Business Manage Scalability Growth Business Manage Resiliency RiskOperational Reduce Efficiency TCO Technologies Compute Network Storage Security Virtualization Mgmt. © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 11
    12. 12. Changing the Economics of the Data Center Funded Project Funded Funded Project Project Maintenance 40–50% NEW IT Budgets© 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 12
    13. 13. Key Takeaways Changing the Cisco Unified Data The Cisco Approach Economics of the Data Center Is a Platform Delivers the Promised Center Requires a Designed From the Benefits of Business Unified Approach to Ground up to Deliver Agility, Financial People, Process and IT as a Service Efficiency and IT Technology Simplification© 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 13
    14. 14. Thank you. rajesh.rege@cisco.com© 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 14

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