CBS February 2013 Cloud Computing in the context of outsourcing

4.500
successful cloud projects
4.5M
daily client transactions
>1M
managed virtual machines
through public cloud

80 %
revenue Growth in 2012
Cloud Computing

in the context of Outsourcing

Henrik Hasselbalch
Cloud Leder, IBM Danmark

© 2012 IBM Corporation

Cloud’s business enablers

Mobility, social media, increasing digitization and new analytics
capabilities are conspiring to drive broad business change

Major Technology Trends driving Business Change

Mobile revolution
 Connectivity, access and participation are growing rapidly
 Smart devices are becoming the primary route to get connected
 Devices are getting smarter as they are increasingly enriched by mobile apps

Social media explosion
 Social media is quickly becoming the primary communication and collaboration format
 GenY’s or “digital natives” use of technology and social media platforms is accelerating adoption
 Enterprises are adopting social media but are struggling to realize the value and manage risk

Hyper digitization
 Digital content is produced and accessed more quickly than ever before
 Internet traffic is growing globally driven by consumer use of video, mobile data, interconnectedness
 An increasing number of connected devices and sensors is further driving growth

The power of analytics
 New capabilities for real time analysis, predictive analytics and micro-segmentation are emerging
 Top performing companies use analytics to drive action and business value
 Analytics are making information “consumable” and is transforming all parts of the organization, from
customer intimacy to supply chain management

Source: IBV Analysis

IT is Being Challenged by Business

Business Opportunity

Time to Operations of IT

LOST BUSINESS


The Current It Challenge - Sprawl


Is IT ready for the challenge?
New server spending
Power & cooling costs
Server mgmt & admin costs 2013

1996

29% 68%

68% of IT Only 1 in 5
operating costs in 2013 will be for organizations allocate more than
management and 50% of IT budget to new
administration
* IDC; Converged Systems: End-User Survey Results
projects
presentation; September 2012; Doc #236966 * 2012 IBM Global Data Center Study


Danish CIOs 10 top priorities in 2013
1. Implementing new solutions: 27.3 procent

2. Support multiple platforms and operatingsystems: 26.8 procent

3. Modernise the infrastructure and/or applications: 26.4 procent

4. Improve and automate IT processes: 25.9 procent

5. Adjust IT-systems to changes business requirements: 23.6 procent

6. Reduce cost: 23.2 procent

7. Improve service: 19.5 procent

8. Secure a secure infrastructure: 17.3 procent

9. Optimise business processes by using IT: 16.8 procent

10. Keep old systems running: 10.9 procent
Kilde: IDC


Cloud’s business enablers

Cloud harnesses the capabilities born out of these trends to
empower six potentially “game changing” business enablers
Cloud’s Business Enablers

Business
2 Scalability
Cost  Provides limitless, cost- Market
1 Flexibility effective computing capacity 3 Adaptability
to support growth
 Shifts fixed to variable cost  Faster time to market
 Pay as and when needed  Supports experimentation

Ecosystem Masked
6 Connectivity 4 Complexity
 New value nets  Expands product sophistication
 Potential new Context-driven  Simpler for customers/users
businesses 5 Variability
 User defined experiences
 Increases relevance

Source: IBV Analysis

Cloud Enablement Framework

Organizations are leveraging cloud to enhance, extend and invent new
customer value propositions

Cloud Enablement
Framework

Customer Value Proposition

Enhance Extend Invent


Xerox’s “Mobile Print” cloud-based service Animoto’s Cinematic Artificial Intelligence Apple has used its iOS platform to create a
enables customers to print documents technology leverages cloud to affordably new need and a market for a range of office
remotely without installing printer drivers and analyze and edit user multimedia content from productivity tools, gaming and entertainment
without a direct connection a myriad of potential sources yet retain simple options and various other applications on a
self-service. mobile device like a tablet or phone.
Retain/attract customers for existing products
and services through enhanced user Generates new revenue by appealing to The Apple iOS brings together an ecosystem
experience. novice/ intermediate computer users entering with a radically different value proposition that
market and drawing customers away from has allowed Apple to generate entirely new
traditional commercial software revenue streams and dominate the market

8 © 2012 IBM Corporation

Cloud-enabled Business Model archetypes

Organizations can be classified across three archetypes using the Cloud
Enablement Framework: Optimizers, Innovators, and Disruptors

Positioning a Cloud initiative on the
Disruptors framework involves understanding the impact
Create

of the resulting Cloud business model.

Organization
Value Chain
Transform

Innovators
North Carolina State
University
Virtual Computing Lab
Optimizers 3M
Improve

Visual Attention Service
Comcast
XCloud-based Television
Platform
Customer Value Proposition


Cloud-enabled Business Model (CeBM) Accelerator

IBM’s Cloud-enabled Business Model Accelerator aims to help clients
envision new business models using cloud’s game changing enablers
The objective of this engagement is to identify business model innovation
Objective
Objective opportunities for your organization that are enabled using the ‘game-
changing’ attributes of the cloud.

Our approach includes
 Discussions with key stakeholders
 Presentations and education sessions
Approach
Approach
 Workshop based brainstorming
 Joint analysis guided by insights from IBM
 Synthesis and recommendations

Key takeaways from this engagement are a prioritized set of opportunities for
Takeaways
Takeaways cloud-enabled business model innovation and recommended next-steps.


Cloud is widely recognized as an increasingly important technology;
adoption is expected to accelerate rapidly in the coming years

What is Your Organization’s Level of The Global Cloud Computing Market is
Cloud Adoption? Forecast to Grow 22% per year through 2020
% of Respondents

91% $250B $241B

21% Piloting
72% $200B

$150B
28% Adopting $150B
38%

+33% $100B

Substantially
21%
41% Implemented $50B
+215% $41B
13%
$0B
Today 3 yrs
2011 2015 2020
Source: Sizing the cloud, Forrester Research, Inc., April 21, 2011

Source: (1) 2011 joint IBV/EIU Cloud-enabled Business Model Survey of 572 business & IT leaders; Q4. Which of the following most accurately describes your
organisation’s level of cloud technology adoption today and which do you expect will best describe it in three years?
Sizing the cloud , Forrester Research, April 21, 2011; http://www.cio.com/article/684338/Survey_CIOs_Are_Putting_the_Cloud_First

Cloud Computing
in the context of Outsourcing


The market will continue to grow across all categories of
cloud services
Across all cloud services, an average of 40% of European SMBs are
considering adding each in the next 3 years

Highest
Highest Web hosting is used by more than 50% of SMBs
penetration
penetration that have a website, and more SMBs plan to add it.

Largest in
Largest in SaaS applications will be the largest cloud
2015
2015 service category by 2015, reaching €7.4B.

Hosted communication and collaboration is the
Fastest
Fastest fastest growing cloud service category in Europe
Growing
Growing with a CAGR greater than 57%.

Source: Parallels SMB Cloud Insights™ (EUNA regional), 2012


Growth is not equal, however, and market composition is changing
The SMB cloud services market in Eastern and Southern Europe
is growing 2x faster than in Northern and Western Europe
2012 % 2015 %
of market CAGR of market

Northern 23% 23% 19%

Western 35% 20% 26%

Eastern 8% 45% 11%

Southern 34% 46% 44%

Source: Parallels SMB Cloud Insights™ (EUNA regional), 2012


Parallels estimates the SMB cloud market in Denmark is
about kr 830M and will grow to kr 1.6B by 2015
kr 1.6B
25% 3yr
25% 3yr
CAGR
CAGR
($280M USD)

kr 830M GR
($144M USD) CA
33% R
% CAG
46
A GR
9% C

A GR
27% C

2012 2015

Source: Parallels SMB Cloud Insights™ (EUNA regional) 2012


IBM ourselves looked at a 4 tier approach

Key Most Critical applications:
 Our application portfolio is 5% of total Tier 1

segmented into four tiers 24x7 Support

 We are migrating as many of the
Tier 4 applications as possible and 30% of total
Tier 2
24x7 Support
valuable to a production cloud
 Lowest-risk, lowest service
applications are being moved first. 21% of total
Tier 3
Apply lessons learned to Primary hours
subsequent migrations support

44% of total
Tier 4 Limited support

95% 98.5% 99.7% 100%
Availability
Production

The fundamentals of cloud value …

 Cloud value varies by workload and
deployment model
 Where you are coming from is as
important as where you want to be
• Don’t forget the journey
 Cloud is about reducing costs and
increasing flexibility
 Cloud is not rocket science, but it is
computer science

Cloud value

Does cloud always result in lower cost? Reduced
Cost
Increased
Flexibility

 Whether cloud saves money for the service consumer is a function of
• The value they get from the cloud
• What it takes to move their workload into the cloud
• Other things they’ll need to provide if they move into the cloud
• The cost for all the above

 With most private clouds the enterprise takes on the provider role
• Like traditional hosting, the enterprise owns the risk to balance supply and demand …
and the costs associated with that
• True cost should be measured at the enterprise level

“ … cloud computing does not always save money. In fact, it can drive cost up if it is
used simply to replace on-premises work with an exact duplicate of that work in the
cloud. Knowing when to redesign or when to use cost savings as a justification for
cloud computing is critical." -- “The (Not So) Future Web”, Gartner Inc.
Cloud value

The “other benefit” of cloud Reduced
Cost
Increased
Flexibility
“… All the emphasis (with cloud)
“… All the emphasis (with cloud)
is on cheaper and efficient ways
is on cheaper and efficient ways
to deliver IT. In reality it's also aa
to deliver IT. In reality it's also
way of delivering new industrial
way of delivering new industrial
value -- that's the more exciting
value -- that's the more exciting
thing." Erich Clementi, IBM's
thing." Erich Clementi, IBM's
Hidden Cloud on Forbes.com
Hidden Cloud on Forbes.com

 The “other” benefit of cloud -- the increased flexibility it provides – enables a new way of delivering IT
• In some applications, it may be the biggest (or only) benefit
• Enables quicker time-to-value, or new applications, shorter project lifecycles, etc.
• Industry analysts: The ability of cloud to enable speed to deliver will be bigger than cost savings in
driving adoption
 Cloud will be a foundational mechanism in the “as-a-service" transformation of IT delivery

Cloud value

The future is Hybrid Sourcing

Source: IDC


IBM SmartCloud represents the IBM vision for cloud computing

Business Process as a Service
Software as a Service

Platform as a Service

Infrastructure as a Service

Design Deploy Consume

Cloud Enablement Managed Cloud Cloud Business
Technologies Services Solutions
Enables private/hybrid cloud service Secure and scalable cloud managed Pre-built Cloud SaaS business
delivery and management services platform applications and solutions

Proven Strategy Consulting, Migration, & Management Expertise

Common Open Standards Technology and Industry Ecosystem


An enterprise-grade IaaS is the foundation for our Cloud services
incl PaaS and SaaS.

Rapid access, multi-tenant solution Robust multi-tenant solution, including
scaled and priced based on usage. managed production services.

Workloads Ideal for developing and deploying new Ideal for migration of traditional and higher
application designs availability applications

Operating system Linux, Windows Windows, Linux, AIX

Management level Self Service with advanced Fully managed
premium support

Availability 99.9% 99.9%

Security Virtual and some physical isolation Multiple levels of isolation
Software usage Bring your own / pay as you go / free developer use IBM provides operating system and tool licenses

Pricing Hourly usage-based with reserved options Monthly usage-based and fixed contract


Serving clients - Our Capabilities
CLOUD
29,000 employees in EMEA
Healthcare
60 Data Centres (99.000 sqm - Gross) managed by IBM

25 Strategic Data Centres, 11 European cities

99.9960% Data Centre Availability
(with 99.9999% for strategic DCs)
65,000 servers, z, p, i, x Series; 118,000 logical
partitions 3.3M electronic software distributions p/ year
Hosting about 155 petabytes of data for our clients 2.1M client initiated software distributions p/year
49,5% of the logical server images virtualised 60,000 network devices managed in Europe
880 000 devices have remote and on-site support
42 European countries covered

4 million mobile users with secure access

1.2 million contacts to service desks per month
23 languages
400 applications
20 different desktop images


Our delivery model balances risk, cost and operational efficiency

Globally Integrate
Achieves the optimum combination of quality, stability and skills
Onsite Local Regional Global
Service that requires a Service that needs to be Service that needs to be Service that can be






physical presence at the delivered from the same delivered from the same standardized to achieve
client location country continent maximum savings
Consulting Processing of sensitive data Similar time zone Ongoing operations






Front-end analysis Legal restrictions Similar culture Monitoring






Development


Central Europe
China
 Brno
 Shenzhen
North America  Székesfehérvár
  Shanghai
Boulder  Wroclaw
 Columbia
 Dalian
  Beijing
Dubuque
New
 East Fishkill
 Raleigh Malaysia
 Canada India
 Bangalore
Latin America  Pune
New  Buenos Aires  Delhi
 Costa Rica  Chennai
 Hortolandia  Hyderabad
 Sao Paolo

All follow uniform, best-practice service management processes2012 IBM Corporation
©

In SO Service Delivery, we execute on our strategy by investing in
innovative technologies, processes and skill portfolios

Standardize: Implement standard
solutions for all services,
maximizing economies of scale and
ease of enhancement

Globally Integrate: Source the
Automate: Eliminate manual
right skills at the right time globally
tasks to drive up quality and
reduce error

We are continually investing in key innovations and
intellectual property to differentiate our services
through exceptional quality outcomes


Energy Efficient Data Centers EU Code of Conduct
Awarded - created in response to increasing
energy consumption in data centers
IBM awarded participant status in the and the need to reduce the related
European Union Code of Conduct. Largest environmental, economic and
portfolio of data centers from a single
energy supply
company to receive the recognition
security impacts.
(January 2012)
The area of
submission 27 Data Centers -aim is to inform and stimulate data
Same best practices 15 Countries center operators and owners to
and controls
70749 m² RF reduce energy consumption in a
cost-effective manner without
Austria 2 hampering the mission critical
Belgium 2
Germany 2
function of data centers.
Denmark 3
Spain 1
Finland 1 - achieves this by improving
France 2 understanding of energy demand
Hungary 1
Ireland 1 within the data center, raising
Italy 1
Netherlands 1
awareness, and recommending
Poland 1 energy efficient best practice and
Portugal 4
Sweden 2 targets.
UK 3


The 4 catagories of ”Cloud Services”
Employee
Procurement
Benefits Mgmt.
Business
Industry-
Travel
specific
Layer 4 Processes Business Process-as-a-Service

Collaboration CRM/ERP/HR
Industry
Financials
Applications
Layer 3 Software-as-a-Service

Middlewar Web 2.0 Application Java
e Runtime Runtime
Developmen
Database
t
Layer 2 Tooling
Platform-as-a-Service

Data Center
Servers Networking Storage
Fabric

Shared virtualized, dynamic provisioning

Layer 1 Infrastructure-as-a-Service


IBM Global Process Services takes a balanced-shore approach

COVENTRY SHANGHAI
TAUNTON

FOSHAN
NEWCASTLE BERLIN KRAKOW
DALIAN
TORONTO
GREENOCK SWANSEA ISTANBUL

JEONJU
TULSA SAINT JOHN BUDAPEST
DELHI SAPPORO
RTP CHANDIGARH
BEAVERTON EDICOTT DUBLIN PARIS
GURGAON
TOKYO
BOULDER SOFIA KASAI
GREENVILLE BRAGA PUNE
OKINAWA
TUCSON BRATISLAVA FREETOWN
DALEVILLE MUMBAI KOLKATA
FUKUOKA
DALLAS
MANILA
SAN JOSE ATLANTA HORTOLANDIA CAIRO
KAMPALA VIZAG QUEENSLAND

SAO PAULO
F&A BUENOS AIRES BANGALORE CHENNAI BRISBANE

HR
SYDNEY
SCM
MONTEVIDEO ANTANANARIVO
CRM BALLARAT MELBOURNE
Industry-specific


The need:
Skype, initially a free, Internet-based communications service, built a portfolio of services offered at a fee.
Because of Skype’s rapid growth, it did not have the infrastructure, processes, governance or corporate
structure to deliver satisfactory levels of customer support. Skype recognized that efficient and effective
customer service was critical to the growth of its fee-based services and sought a business process operations
provider that could manage its email customer service operations.
The solution:
IBM GPS analyzed the client’s needs and created a service and response plan whereby IBM global resources
would provide email and live chat support for customer queries, service complaints and billing concerns. IBM
divided its activities among 3 sites to support the company’s international customer base: Cairo; Boulder,
Colorado; & Manila, Philippines. IBM provides email support in 7 languages and live chat support in English. In
addition IBM provides web content support for Skype Customer Services from our delivery centre in Bratislava.

The benefits:
 Skype customers experienced a significant improvement in customer services levels: email responses that
once took up to 24 hours now take 2 hours or less.
 At the beginning of the contract 85% of Skype customers corresponded through email. Today up to 50%
prefer the quicker response time & resolution rates of chat services. The expansion of live chat greatly
improved the speed of problem resolution.
 When IBM secured the contract, its initial point of contact resolution performance was 70%. As of April 2012,
the resolution rate has increased to more than 80%.
 As a result of the improvements in customer support and cross-selling by IBM Skype has experienced a 50%
increase in its fee-based service web pages.

And for We do AP, Payroll and
TravelExp Mgt

Unilever Europe: A global CPG company

The need:
This global consumer products company needed to simplify its complex finance
organization across 24 (100) countries and 18 ERP systems. It also needed to Why IBM?
achieve cost efficiencies to generate revenue for greater focus on its brand. “The successful partnership
between IBM and Unilever
Europe along with an
The solution: ambitious transformation
IBM implemented standardized finance processes and innovative technology under agenda will continue delivering
an award-winning joint governance model. Leveraging asset-based process models significant and sustainable
and global delivery capabilities, this transformational solution helped integrate the benefits for Unilever Europe.”
company and create a more flexible operating and financial model.

The benefits:
 New, centralized “One-Unilever” finance organization for greater efficiency and Solution components:
operational savings contributing to €700M annual savings for the company e-
 Accounts payable
na thre
 Travel & expenseo
 End-to-end process ownership and standardized processes and technology
i ces
for enhanced data quality, tighter controls and greater speed of information ser v
 Billss cash
roc e to nd
 Pan-European service management, including greater visibility and access to
n es s p Record to report ia; a
d
busi cilities
in e, In
information for decision making and continuous improvement
g ed fa ang alor
 Flexible, agile delivery model to meet Unilever’s evolving business na
ma from its tugal; B
ed Por
environment and drive greater benefits from economiesvidscaleodel
ro of m
p
IBM elivery nd; Br aga,
d a
tier ow , Pol ines.
p
Krak , Philip
ila
M an © 2012 IBM Corporation

"The short successes that can be gained in a brief time and
without difficulty, are not worth much."

Everything is relative...The Gazelle in Africa


CBS February 2013 Cloud Computing in the context of outsourcing

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