Adding Cloud to the Service Delivery Mix: Business Drivers and Organizational Considerations


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This jointly authored white paper examines how organizations are confronting
the challenges of integrating cloud-based services into a traditional managed
services model. General considerations around industry- and company specific
objectives are outlined, and case studies are used to illustrate a range
of scenarios, strategies and benefits achieved.

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Adding Cloud to the Service Delivery Mix: Business Drivers and Organizational Considerations

  1. 1. ADDING CLOUD TO THE SERVICE DELIVERY MIXBusiness Drivers and Organizational ConsiderationsBy Stanton Jones, ISG, and Kalyan Kumar,
  2. 2. INTRODUCTIONLarge global organizations today are pursuing increasingly aggressivestrategies to reap the benefits of cloud computing. SMBs, meanwhile, havealready found that the barriers to a “go to cloud” strategy are minimal. Withthe advent of cloud computing, true “IT and Business alignment” is beingachieved, as IT is at last becoming sufficiently agile to meet business needs.What began as Boardroom discussions have rapidly evolved into project plansnow reaching execution stage. In today’s “show me” environment, identifyingspecific workloads and matching them to appropriate cloud-based servicesand deployment models that achieve rapid results is imperative.While recognizing that cloud computing is the future of IT, enterprises aretaking a pragmatic approach of gradual adoption. Indeed, traditional ITdelivery models remain highly relevant, and businesses are by no meansdiscarding their existing systems to move lock, stock and barrel to “thecloud.”Successful cloud deployments tend to be discrete initiatives focusedon specific business requirements and workloads. Clients, moreover, perceivecorrectly that implementing cloud solutions is not as easy as cloud supplierssuggest. Enterprises seek pragmatic adoption, focusing on business continuityand other associated risks, and are demonstrating readiness to adapt to cloudsolutions. As such, cloud capabilities are being integrated into the existingservice delivery framework to form a journey of adoption – which typically isa mix of in-house, managed service, captive, and offshore operations.This jointly authored white paper examines how organizations are confrontingthe challenges of integrating cloud-based services into a traditional managedservices model. General considerations around industry- and company-specific objectives are outlined, and case studies are used to illustrate a rangeof scenarios, strategies and benefits achieved.ADDING CLOUD TO THE SERVICE DELIVERY MIX■STANTON JONE &KALYAN KUMAR 1
  3. 3. CLOUD MYTHS MYTH 3: Cloud is InsecureLet’s examine common myths and misperceptions Reality: Because cloud security threats are very wellsurrounding cloud computing and try to clear the fog. documented and clearly understood, cloud-based services are generally designed and built to be moreMYTH1: Cloud computing always results in cost savings secure than traditional large enterprise data centers.Reality: Whether cloud computing can save money or Specific security and compliance requirements can alsonot depends on how the solution is implemented and be addressed. Customers must focus on a deep divemanaged. Most companies do not adequately consider approach into contracts and SLAs to ensure that theythe hidden cost of cloud adoption – costs that include meet their organizations data location, control, andmigration, handling workload complexity (elements like security requirements. Cloud providers and customerssize of instance), data center selection, operating system must be able to segregate between security, regulatoryand bandwidth costs, etc. When comparing the cost of a compliance and other considerations. . For example datacloud deployment to a traditional initiative, the costs of can be secure in cloud but not comply with certainpower, cooling, administration, staffing, and data center compliance norms. This requires candid discussion andreal estate for deploying the same application in-house clarity from both the sides.or in traditional hosting must also be considered.Ultimately, cloud implementation costs are recovered MYTH 4: Cloud leads to Vendor lock-inthrough significant benefits in terms of business agility Reality: Once a customer is tied to one vendor’sand responsiveness. The key to cost-effectiveness in the platform, moving to another vendor (e.g., VMware tocloud is to align cloud implementation and management Citrix to Microsoft) can potentially be very difficult due toto business requirements. design constraints. One way to address this issue is to work with a service provider that can manage a multi-MYTH 2: Virtualization is Cloud Computing vendor hybrid cloud solution and eco system. The abilityReality: Virtualization is integral to cloud computing but to manage multi-vendor Service Level Agreements, avoidthe two are not synonymous. Specifically, automation lock-in and ensure flexibility at different levels isand management around virtualization results in the essential, and should be discussed in advance andability of cloud-based services to deploy and scale documented in contractual obligations.infrastructure rapidly, on-demand, on a pay-as-you-gobasis from a shared pool of resources.ADDING CLOUD TO THE SERVICE DELIVERY MIX■STANTON JONE &KALYAN KUMAR 2
  4. 4. CLOUD OBJECTIVESHCL surveyed over 40 customers over the past 12 months and identified four factors driving an increased focus on cloudadoption:  Cost Reduction  Scalability  Consolidation  Service ImprovementRecent client experiences illustrate how businesses are using cloud adoption to address these objectives.ADDING CLOUD TO THE SERVICE DELIVERY MIX■STANTON JONE &KALYAN KUMAR 3
  5. 5. Objective 1: Cost Reduction In practice, this approach can help a business manageWhile the economy is improving, cost reduction is always the vagaries of business cycles. A major Europeanan imperative; indeed, the HCL survey shows that cost industrial manufacturer engaged HCL to provision areduction remains the dominant objective driving cloud highly flexible IaaS solution to accommodate variations inadoption globally. In addition, cloud platforms provide demand that frequently spike 30 percent up or down.the option to cost efficiently pilot new processes and The infrastructure was characterized by:applications, freeing up critical capital to invest in growth  Over 200 server instances ramping up to 1000areas. instancesHCL is currently working with a major North American  A “SAP on demand” Infrastructure starting fromroadside assistance company to achieve a 40 percent over 2250K SAPS and ramping up to 850K SAPScost reduction of in-scope activities through covering the entire SAP estateimplementation of a hybrid cloud solution for specific  Storage/Backup capacity ranging from over 100 TBelements of both infrastructure and applications. In going up to over 500 TB.addition to cost savings, the client’s objectives include The solution – implemented over 30 months – yieldedincreased agility through standardized solutions to speed cost savings and provided flexibility in catering to ad hocdeployment, as well as process improvement through server build requests, as well as flexibility andtransitioning to a fully ITIL-compliant operational transparency in pricing and volume scalability to respondframework. to frequent changes in demand.ISG, meanwhile, recently worked with an operating Objective 3: Consolidationgroup of a large media conglomerate, which owns more Cloud platforms – or, more specifically, IaaS and SaaSthan 15 business-to-business information services, models – enable operational consolidation by eliminatingelectronic databases and publications that are organized the connection between physical servers and theinto multiple business units. By consolidating its applications that run on these servers. Workloads alsoproduction application hosting to an integrated managed become more flexible, and are more easily able to movehosting and Cloud IaaS environment, the company is in between service delivery models, like traditionalanticipating a 50 percent reduction in hosting managed hosting and cloud costs year-over-year, in addition to nowhaving access to world-class hosting capabilities to match Operational consolidation enabled by cloud has manyits needs for both growth and agility. benefits, chief among them service improvement and cost reduction.Objective 2: ScalabilityScalability is one of the key potential benefits of cloud- For example, ISG recently helped a leading globalbased service delivery. For example, in a traditional learning company assess how external hosting of itsservice delivery environment, provisioning of server infrastructure using cloud might enhance its IT serviceresources can take weeks, resulting in a significant delivery model. Committed to providing strategic andbusiness constraint. An infrastructure-as-a-service (IaaS) technologically innovative offerings that help assess,cloud-based delivery model, meanwhile, enables self- extend and enhance classroom learning, the company isprovisioning on-demand. In this instance, a customer can increasingly dependent on an IT infrastructure thatrealistically renegotiate an existing service level around allows reliable access to its products and services.provisioning time and use an IaaS service delivery modelto address a real business issue. The solution, however,by no means requires a full-scale transition to cloudcomputing.ADDING CLOUD TO THE SERVICE DELIVERY MIX■STANTON JONE &KALYAN KUMAR 4
  6. 6. Following years of growth, the company’s infrastructure INDUSTRY AND ORGANIZATIONALhad become fragmented and unwieldy. A multitude of CONSIDERATIONSphysical and virtual systems was dependent on many Businesses seeking cloud-based solutions must develop aserver hosting locations. ISG assisted in developing a new strategy based on an introspective analysis ofinfrastructure strategy that enabled migration and requirements. The strategy must address a range ofconsolidation to a single externally-sourced provider that critical areas that include application availabilityoffers a hybrid environment composed of traditional requirements, pricing/cash flow/ROI, serviceserver hosting plus cloud IaaS services. management and technical complexity.The consolidation of global infrastructure not only A clearly defined roadmap on cloud adoption/migrationprovided the company improved service levels, but will is another critical success factor and may requireproduce a 10% reduction in operating costs over the prioritizing applications to transition to the cloud. Thiscourse of the five-year contract. Cost reductions are process involves a portfolio assessment as an initial stepdriven by the consolidation of infrastructure, the followed by evaluation of various criteria such asretirement of its corporate data center, and the criticality, technology and architecture. Typically, genericprovider’s economies of scale and greater process or non-critical applications for messaging andautomation. collaboration are early movers to the cloud.Objective 4: Service Improvement Enterprises must respond to specific businessWhile a relatively low priority among clients surveyed, requirements when defining cloud service andcloud solutions have the potential to drive significant deployment models. Industries with particularly stringentgains in service improvement. security requirements – such as financial services,A major North American insurer faced several challenges healthcare, and defense – have traditionally viewedin managing and tracking day-to-day sales and business hardware-based physical separation of data as afunctions. Specifically, manual processes forced sales necessity; the idea being that physical separation ofrepresentatives to use individual contact management customer data not only providers better security, buttools for their relationships. This process was unwieldy also limits collateral damage should a breach occur.and inefficient but also meant that the company lost In many industries regulatory requirements have failedvaluable relationship history every time a rep left. to keep up with technology advances. As a result, manyManagement sought an automated approach through a IT organizations seeking to adopt cloud-based servicesCRM system to manage information to support the sales are currently constrained by outdated regulations. Forprocess and to increase collaboration with field agents. example, cloud options and benefits are limited forA public cloud solution for the sales function addressed customers requiring hardware-based separation ofthese objectives by streamlining manual processes and critical data. An offering characterized by “shared” ordelivering easy access to required information on the “multi-tenant” deployment can’t be considered, sincesame platform. Management achieved real-time visibility that offering uses software at some level to segregateinto key sales metrics and comprehensive, consistent data on shared resources. While customers today dosales information. The cloud also made it possible to have the option of selecting which components of theretire legacy application in a few months, thereby offering are shared and which are dedicated, thesereducing the need for new IT staff and complex training. options tend to be limited to a select number of Infrastructure-as-a-Service (IaaS) providers.ADDING CLOUD TO THE SERVICE DELIVERY MIX■STANTON JONE &KALYAN KUMAR 5
  7. 7. The requirement to separate data with hardware A strong need exists for virtual infrastructurenarrows the set of alternatives to some form of a private management, cloud lifecycle management, policy-basedcloud in a client’s data center or a dedicated private management and orchestration applications. Vendor-cloud in a service provider’s data center. While these agnostic cloud management platforms go beyond theoptions address the security and data segregation issues, capabilities of hypervisor-based element managers tothey dilute the key benefits of cloud delivery, such as solve many of the problems associated with fast-growingreduced capital spending and highly scalable applications virtualization and cloud environmentsenabled through resource pooling. Organizational culture is another critical but oftenAt the other end of the spectrum, customers deploying overlooked consideration. Specifically, is the organizationgreen-field applications and emerging businesses less adaptable to changes associated with cloud-basedburdened by legacy applications or regulatory service delivery?requirements are more open to the concept of sharedinfrastructure, and are therefore able to leverageadditional cloud benefits. Indeed, using the cloud to CONCLUSIONestablish or enhance market positioning is an area of Recent experience shows that market hyperventilationopportunity for companies seeking to leapfrog the regarding the potential benefits of cloud computing isbarriers that market leaders create through deep cash giving way to a more reasoned approach, wherebybalances. clients are picking and choosing specific business problems, identifying the workloads that support theseBesides this, other considerations that CIOs must address business issues, then identifying the appropriate cloudwhen cloud decisions are made include: service and deployment model to adopt. A state of cloud  Current IT investments computing maturity is achievable by following a  Cloud integration and migration pragmatic adoption approach. Enterprises focusing on  Hybrid cloud management consolidation and virtualization have already started  Applications and data compliance in the cloud their cloud journey.  Service management in the cloud The results are positive, in terms of the benefits we  Multi-vendor evaluation and management observe being achieved in terms of addressing critical  Security in the cloud business issues.  Monitoring and controlADDING CLOUD TO THE SERVICE DELIVERY MIX■STANTON JONE &KALYAN KUMAR 6
  8. 8. LOOKING FOR A STRATEGIC PARTNER?Stanton Jones is Analyst, Emerging Technology at ISG. Kalyan Kumar is VP & Chief Technology Architect, HCL Technologies– ISD.For more information, contact Alex Kozlov, Director of Marketing, at Services Group (ISG) (NASDAQ: III) is a leading technology insights, market intelligence and advisory servicescompany, serving more than 500 clients around the world to help them achieve operational excellence. ISG supportsprivate and public sector organizations to transform and optimize their operational environments through research,benchmarking, consulting and managed services, with a focus on information technology, business process transformation,program management services and enterprise resource planning. Clients look to ISG for unique insights and innovativesolutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience ofglobal leadership in information and advisory services. Based in Stamford, Conn., the company has more than 800employees and operates in 21 countries. For additional information, visit 111312 © Copyright 2012 Information Services Group – All Rights Reserved