Distinguishing, Evaluating, and Selecting Cloud Service Providers

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This presentation is focused on addressing the broad category of Cloud Service Providers. Gartner will provide a overview of how Cloud Service Providers are being defined and how they different from traditional providers of outsourcing or products. And more importantly, what are they offering that is different, new and seeks to solve business problems for the enterprise. This session will provide an overview of these areas and begin the discussion of how do clients develop the business case for certain cloud services offerings.

Topics Discussed
Gartner analysts discussed with participants the following topics:

What is a cloud service provider and how does it differ from traditional outsourcing providers?
How will the approaches to evaluate and select among these providers differ?
How does the business case analysis differ?

Published in: Technology

Distinguishing, Evaluating, and Selecting Cloud Service Providers

  1. 1. Distinguishing, Evaluating, and Selecting Cloud Service Providers Frances Karamouzis Notes accompany this presentation. Please select Notes Page view. These materials can be reproduced only with written approval from Gartner. Such approvals must be requested via e-mail: vendor.relations@gartner.com. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
  2. 2. Welcome! Here’s how to participate in today’s webinar • You can listen to the presentation using your computer’s speaker system as the default (VoIP). • Or dial the conference line by selecting Use Telephone in the webinar audio pane. • Have a question for the presenter(s)? Type it into the Questions pane—we will answer as many as time permits. • A recording of this presentation will be sent to you within 48 hours. • If you would like a copy of today’s presentation, contact your Gartner Account Executive or e-mail us at: GartnerWebinars@gartner.com. • Please note you may be polled during the webinar; only aggregate answers will appear. Notes accompany this presentation. Please select Notes Page view. These materials can be reproduced only with written approval from Gartner. Such approvals must be requested via e-mail: vendor.relations@gartner.com. Gartner is a registered trademark of Gartner, Inc. or its affiliates.
  3. 3. Our world-class, objective insight is drawn from thousands of daily client interactions 10,000 60,000 Client Clients Enterprises 5,500 100,000 Benchmarks IT End-User Inquiries 65% of Fortune 1000; 2 Million+ 85% of IT End-User Global 500 Searches 60+ 650 Analysts Conferences Across 80 Countries 10,000 3,700 Media CIOs Inquiries Notes accompany this presentation. Please select Notes Page view. These materials can be reproduced only with written approval from Gartner. © 2009 Gartner, Inc. and/or its affiliates. All rights reserved. vendor.relations@gartner.com. Such approvals must be requested via e-mail: Gartner is a registered trademark of Gartner, Inc.Gartner, Inc. or its affiliates. Gartner is a registered trademark of or its affiliates. 2
  4. 4. Why Cloud and Alternative Delivery? A Number of Inconvenient Truths Explosion of Change From the Status Quo • Plan for peak = • Shelfware • 1:10 ratio more resources ($1 software, $10 services) • Custom solutions • Delivery process • Low server utilization rates • Not user-friendly complacency • Huge capex • People-based = • Low agility levels human error • High energy costs Hardware Infrastructure Software Services
  5. 5. Key Issues 1. What is a cloud service provider and how does it differ from traditional outsourcing providers? 2. How will the approaches to evaluate and select among these providers differ? 3. How does the business case analysis differ?
  6. 6. Framework Demand Side Supply Side Support or Enabling Business of Business of Business Side of Business Process Sample Process — Prospect to Cash Application Portfolio Java, .NET SAP, Oracle, Exchange COBOL Applications Layer Composite Applications Packaged Applications Legacy Applications Message-Oriented Middleware Transaction Middleware Portals Application Servers Database Management Web Services Application Components Systems Data Center Database Admin. Help Desk Infrastructure Network Desktops/Clients Storage Security
  7. 7. Industry Nomenclature NIST Additional The consumer accesses, Categories Gartner configures and/or Categories extends the service and builds everything needed SaaS above the service Service PaaS boundary — or just uses the service. providers can be IaaS Mgmt. and Security Business Services service Information Services consumers Application Services at the same App. Infrastructure Services Cloud time. System Infrastructure Services Enablers The provider optimizes everything below the service boundary, and hides implementation details & complexity from the consumer.
  8. 8. A Look at Just One Slice: Permutations Abound Application Services SaaS PaaS Application Infrastructure Services System Infrastructure Services IaaS V-Cloud
  9. 9. Aggregation of Cloud New World Outsourcing Solutions & IT Services Demand Side Supply Side Support or Enabling Business of Business of Business Side of Business Process Sample Process — Prospect to Cash Application Portfolio Java, .NET SAP, Oracle, Exchange COBOL Applications Layer Composite Applications Packaged Applications Legacy Applications Transaction Middleware Portals Application Servers Database Management Web Services Application Components Systems Data Center Database Admin. Help Desk Infrastructure Network Desktops/Clients Storage Security
  10. 10. Standard Risks + Cloud Impact Risk Heighten Cloud Impact Service Structure Transparency, reliability, redundancies, (Manage and Operate) legal capabilities Breach detection, traceability, audit Security and IP availability, remedy and recovery Governance New competency requirements, decision-making process, execution Performance Structure Links to business drivers, compliance requirements Metrics (Reporting and Analytics) Definitions and design structure, baselines Agility Business shifts, new products or services, regulatory changes
  11. 11. New Cloud-Specific Risks Risk Black Hole Effect (Obscured Structure & Delvery) Immature Vendor Landscape Hidden Costs Data Ownership, Portability & Location Service Remediation Configurability
  12. 12. Key Issues 1. What is a cloud service provider and how does it differ from traditional outsourcing providers? 2. How will the approaches to evaluate and select among these providers differ? 3. How does the business case analysis differ?
  13. 13. Selecting an IT Service Provider Define Scoring Determine Determine Criteria System Weightings Criteria for Evaluation Scoring Level Weighting Risk Industry and Process Expertise • Significantly 20 • Key focus on exceeds the source of Technology Expertise and requirements risks Provided Solution 20 • Somewhat exceeds • Highlight all Critical Success Factors requirements scores less (cultural fit, contracting practices, • Meets requirements 20 than 7 and key personnel, time to market) begin risk • Somewhat below management Project-Specific (RFP requirements adherence, price points) 20 • Significantly below requirements Vendor Organizational Profile 5 Reference Checks 15 Evaluating and selecting the IT service provider is only one portion of a multifaceted decision.
  14. 14. Selecting Software (ERP Suite) Business Functionality Support — Depth & Breadth User-Specific or Enterprise-Specific Processes Functional Enterprise-Specific Industry Requirements Core Application Suite and Process Integrity Process Continuous Innovation, Improvement Business-Oriented Application Delivery Strategies Industry Ability to Support Process Standardization and Global-Scale Competitiveness Support for Information Users Model-Driven Packaged Applications Ease Embedded Analytics Support for Information Users Integration Social Applications Technology Mobile Strategy Interoperability Modular Independence SaaS and Cloud Technologies Channels Business Networks (such as RFID, Multienterprise Processes) Support for Information Users Life Cycle Long-Term TCO Life Span Strategy Support, Services and Ecosystem
  15. 15. Now the Twist… Selecting a Solution-Based Service (Cloud Aggregated Option) When clouds roll in, you must concurrently evaluate and select: (1) Software (2) Middleware (3) Infrastructure (4) IT Service Options (5) Delivery Models
  16. 16. Evaluation Cycle Traditional 6 to 12 months Cloud-Enabled 3 to 5 months Market Analysis 6-12 weeks RFP 8-16 weeks Vendor Evaluation Responses, 6-12 weeks References Service Requirements 8-16 weeks Terms and Conditions 4-8 weeks Due Diligence 4-12 weeks Contracting Negotiate 4-12 weeks Award Contract 2-4 weeks New Solution Transition 4-24 weeks
  17. 17. Evaluation Cycle Market Analysis Vendor Evaluation RFP 8-16 weeks Time Savings Responses, 6-12 weeks References Service Requirements 8-16 weeks New Steps Terms and 4-8 weeks Conditions More Diligence Due Diligence 4-12 weeks Contracting Negotiate 4-12 weeks Unforgiving! Award Contract 2-4 weeks New Solution Transition 4-24 weeks
  18. 18. Critical "Heightened" Steps Business & Risk "Configured” Due Diligence Technical Assessment Gap Analysis Architecture Strategy • Define • Business • "Comprise" • Proof of Compressed Assessment Concept • Technical • Processes & New • Pilot Bundling • "Disentangle" Governance Options Required • References • Agility Scope • Delivery • Baseline • Configuration/ • Private Cloud Capabilities Customization Option • IT Service Options • Hidden Cost Required • SLA and OLA Analysis • Integration w/ Analysis • Infrastructure • Software • Obscurity Business Case Applications, • Audit Factor Infrastructure, • Middleware and Data
  19. 19. Key Issues 1. What is a cloud service provider and how does it differ from traditional outsourcing providers? 2. How will the approaches to evaluate and select among these providers differ? 3. How does the business case analysis differ?
  20. 20. First Step … Building the Business Case Analysis Option 1 Option 2 Option 3 Base Costs Traditional Cloud Hybrid Options Infrastructure Traditional Assets portion Infrastructure Item 1 Servers, Storage, Infrastructure Item 2 Network, Desktops IaaS Applications Application Layer Enterprise Apps. Application Element 1 Databases PaaS Middleware Application Element 2 Operating Systems SaaS People, Resources for IT Services Initial Deployment & Bus. Consulting Ongoing Management IT Consulting Aggregation/ Systems Integration Brokerage Outsourcing Hidden Costs
  21. 21. Building the Business Case Analysis Base Cost Analysis Option 1 Option 2 Base Costs Traditional Cloud Infrastructure Traditional Not a direct Assets portion Infrastructure Item 1 one-to-one Servers, Storage, Network, Desktops comparison Infrastructure Item 2 IaaS Applications Application Layer Enterprise Apps. Application Element 1 Databases PaaS Middleware Application Element 2 Operating Systems Imperative: SaaS IT Services Total Cost of People, Resources for Initial Deployment & Bus. Consulting Sourcing Ongoing Management IT Consulting Aggregation / Comparison Systems Integration Brokerage Outsourcing Additional Costs
  22. 22. Example 1: Wipro: Provisioning of Infrastructure Self service portal for automation of server provisioning Parameters Before After Server Provision cycle • 46 days • 35 mins Avg Server Cost • $2000 • $800 Utilization • <10% • 40% Reprovisioning of Assets • Nil • Reduce capex 30% Silos • Physical machines and • Removed silos with 500+ application silos virtual machines License Management • Highly Inefficient • Effective Network bandwidth • Increased network • 1 NIC cords for 32 servers bandwidth Energy Cost • High • Lower 21 3/10/2010
  23. 23. Example 2: Cloud E-Mail vs. On-Premises E-Mail, Circa 2012 On-Premises Cloud 5 to 10 Thousand Scale Tens of Millions Higher-Touch Ops Model Lights Out $120/User/Year Cost $24/User/Year SAN & DAS Storage Type DAS $25/GB/Year Storage Cost $3.75/GB/Year 500MB Storage Amount 6GB Yes Tape Backup No Fat Client Thin
  24. 24. Total Cost of Sourcing Factoring Risk-Adjusted Cost (RAC) Year 1 Year 2 Year 3 Year N Base Costs Technology Assets (Hardware and Software) People, Resources for Cost Initial Deployment & Ongoing Management Additional Costs Information Security & Risk Management Risk Country Risks Maturity Risk Competency Risk Operations Risk
  25. 25. Total Cost of Sourcing Factoring Risk-Adjusted Cost (RAC) Base Costs Year 1 Year 2 Year 3 Year N Technology Assets On- Off- On- Off- On- Off On- Off- (Hardware and premises premises premises premises premises premises premises premises Software) People, Resources for Initial Deployment & Ongoing Management Optional variables: Additional Costs include or exclude Information Security & one-time Risk Management costs Country Risks Maturity Risk Competency Risk Operations Risk
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  29. 29. Distinguishing, Evaluating, and Selecting Cloud Service Providers Frances Karamouzis Notes accompany this presentation. Please select Notes Page view. These materials can be reproduced only with written approval from Gartner. Such approvals must be requested via e-mail: vendor.relations@gartner.com. Gartner is a registered trademark of Gartner, Inc. or its affiliates.

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