A Guide To Finding Your Cloud Power


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A Guide To Finding Your Cloud Power

  1. 1. Conversations CHANGEabout A Guide to findinG your Cloud Power
  2. 2. A Conversation about Change Every business has unique and dynamic needs. I am sure yours is no different. Being constantly connected yet maintaining security, increasing productivity and agility, reducing capital expenses – the demands from IT are changing. Now, it’s not just about doing the same things in a new way but about a new way of doing new things. A recent Gartner poll found that by 2012, 80% of Fortune 1000 enterprises will be using some form of cloud or off-premises computing services, and 20% of businesses will own no IT assets. We believe that the answer is in the cloud; and it’s going to change the way you do business. Consider how fast we have shifted online as users – to store data, connect with friends and using apps on our we believe personal mobile devices. Your workplace undoubtedly stands to gain by integrating with this ‘consumerisation’. that the With the most comprehensive IT solutions of the cloud on earth, we now bring you the power to take control of this change - develop and host applications with infinite scalability (Windows Azure), stay secure with your private cloud answer is in (Windows Server Hyper-V), enable productivity and real-time collaboration (Office 365) and get better customer the cloud; connection (Microsoft Dynamics CRM Online). With investments worth US $2.3 billion in cloud infrastructure, over 30,000 dedicated engineers and more than 9000 Microsoft Partners, the Microsoft cloud is Enterprise-ready.and it’s going I invite you to explore more of the cloud to experience the benefits of the change that the cloud brings - beingto change the ready for anything, but paying only for actual results; being able to scale as high or low as you want; save energy, space and yet be omnipresent. way you do As a technologist, our cloud opens up a world of choices for you. With solution-specific benefits, a whitepaper on the ‘Economics of the business. Cloud’ and business impact studies of organisations that have moved to the Cloud, this handbook will help you start a conversation of change within your organisation. This is an exciting journey for any business interested in being what’s next. we call it cloud power, and it’s yours for the taking. Warm Regards, Sanket Akerkar, Managing Director, Microsoft India www.cloudpower.in
  3. 3. contentsYour Guide toNavigatiNg the CloudTHE CLOUD POWER PACK 1 - 13 RESOURCES 14 - 61Explore the areas in which IT can change your business for the better Explore and share the power of cloud in business with whitepapers and real-life case studiesSCALE Applications to near infinity 2 The ECONOMICS of the Cloud 15 - 35Build applications flexibly on the familiar Windows Azure platform Read this Microsoft Whitepaper to understand the long-term vision of the underlying economics of cloud computingCONNECT PEOPLE without making them meet 4Drive productivity by communicating with Microsoft Online Services in the Cloud CASE STUDIES of Cloud Power @ Work 36 to 61CREATE a real-time collaboration hub 6 SEAMLESS MIgRATION @ 36Enable people to work across time zones and locations with Microsoft Office 365 30,000 employees migrate to the Cloud without interrupting business or daily operationsDRIVE greater control and IT efficiency in your Private Cloud 8 Improved PRODUCTIvITY @ 44Transform IT services for greater business intelligence with Microsoft System Center A simplified user experience improves collaboration and cuts IT costs by 30%and Windows Server Hyper-V EffICIENCY in the Private Cloud @ 49KNOW what your customers want 10 120 servers become 20 with data center budgets getting cut by 40%Respond faster with better customer intelligence with Microsoft Dynamics CRM Online IT as a SERvICE @ 54What Cloud Power holds for You 12 A global company builds an online Visual Attention service application on Windows AzureBenefit from working with Microsoft Cloud Services
  4. 4. the most CompreheNsivesolutioNs for the Cloud. oN earth.the Microsoft Cloud for Businesses SOfTWARE as a Service PLATfORM as a Service iNfRASTRUCTURE as a servicethe Microsoft Cloud for Consumers Windows Live TM TM Hotmail Windows Live TM Windows Messenger Update
  5. 5. piCK Your fOR IT PROfESSIONALS Cloud poWer On-demand computing with the right Infrastructure to actively host, scale and manage all your services with ease and Here’s what the Cloud means for everyone in your organisation speed. Plus the choice to keep high-value With the cloud, you can create a flexible IT ecosystem that addresses needs as they arise, backed applications on-premises and move by the confidence that you always have the ability to do so. The Microsoft technologies that you commodity workloads to the cloud. have already invested in is a great place to start.SCALE Applications to near infinity | Pg 2 CONNECT without having to meet | Pg 4 fOR DEvELOPERS Easy scalability and reduced time to market for developing applications on the Windows Azure Platform. Our family of CREATE a Real-time on-demand services provides a familiar collaboration hub | Pg 6 deployment experience that helps focus on coding and reduces complexity. fOR INfORMATION WORKERS Productivity from any location from the PC, phone and web with familiar Applications, now on the cloud. Our powerful communication and collaboration tools provide security-enhanced connectivity and federated access control. TRANSFORM IT services in your Enterprise | Pg 8 KNOW what your customers want | Pg 10 1
  6. 6. sCale APPliCAtionS easily scale your Applications develop without boundaries Creating in the cloud to neAr infinity means no more worries While running applications about servers, storage or Offer your developers a flexible and familiar in the Cloud, you don’t have hardware. Your developers environment to easily create and host to worry about scalability or can focus on the code with cloud-based applications with Windows Azure performance issues. If there a test bed always at hand is a sudden demand or load and go from a test server expected on the servers, the to a production server performance can be boosted almost immediately. easily by just increasing the get the poWer to processing capabilities. Cloud Power @ Work Analysts View “By running manageCarbon “Just as Windows played Cloud Power @ Work (HCL’s new carbon-data a significant part in “Windows Azure helps 3M management application) on earlier shifts, Windows customers take advantage of Windows Azure, our customers Azure is poised to take an complex algorithms that encapsulate can be up and running in important role in this new 30 years of research and get simple, one-quarter of the time that it world. If youre responsible powerful results from their browser, took with an on-premises model.” for charting your firms almost instantly.” RAjESH BABU SURAPARAjU, path, understanding and TERRY COLLIER, Marketing Manager, 3M Product Manager, HCL evaluating the Azure on creating and launching a web-Based Visual Read More> environment makes Attention service for customers on Windows Azure good sense.” Read More> David Chappell & Associates2
  7. 7. Avoid training costs The interoperable Azure A Secure platform integrates with what Frameworkno more data you already have. Visual Studio Use the security frameworkmaintenance developers can start building you are familiar with many ofWith SQL Azure, you can easily applications in no time and the Windows Azure servicesprovision and deploy multiple also work across SOAP, REST, using the core .Net libraries,databases without having to XML and PHP platforms from keeping much of the securityinstall, setup, parch or manage a single location. and encryption details theany software. High-availability same. A firewall mechanismand built-in fault tolerance Cloud Power @ Work enables you to allow ormakes physical administration “The software distribution system prevent connections fromobsolete. we built with Windows Azure is 10 various sources, right down to times cheaper than our previous specifying IP addresses or IPCloud Power @ Work solution... Most of our developers range.“By using these tools to rapid are experienced with Visual Studioby build applications and services tools. That was a good argument for Cloud Power @ Workand migrate them to the Windows using the Windows Azure platform, “Windows Azure gives ITAzure platform, we will be able to because we can use the same departments, incredible flexibilityhelp our customers quickly react development environment.” and efficiency in deploying newto market changes without major ELMAR STOECKER, Director Portfolio services. As a trusted third party,capital expenditures.” Management, Siemens IT Solutions and Services VeriSign adds a layer of (online)CHANDRA SURBHAT, Global Head of Microsoft Read More> security to those environments.” Try it NowBusiness Solutions, Wipro Technologies RYAN WHITE, Product Marketing ManagerRead More> for SSL, VeriSign on adding VeriSign® SSL Certificates on Windows Azure. Read More> Know More 3
  8. 8. CoNNeCt PeoPle witHout real-time meetings without the travel Connect with colleagues and An always-connected remote workforce Employees on the move MAkinG tHeM Meet engage customers in real-time can easily stay in touch with meetings, trainings or events presence, instant messaging Help information workers meet and stay on Microsoft Live Meeting. (IM), and PC-to-PC audio updated from any location with secure Interact by sharing applications and video calling with Office online communication services for email, or desktops and using the Communications Online. conferencing, chat and networking multiple video and VoIP audio Availability can also be shown capabilities. Whiteboard tools through embedded presence and high-fidelity recording also in Microsoft Outlook. poWer up help keep notes. CoNNeCtivitY With Cloud Power @ Work Cloud Power @ Work “We have improved our Analysts View “Our goal in the long term is to organizational efficiency by “Exchange Server 2010 replace many of the PBX systems. 30 percent. We have senior (is) an upgrade worth The enhanced voice capabilities management using Windows Mobile considering. Look simplify everything, cost less, and devices who needs messages ‘on for improvements in give people more functionality. I the go’, mobile users who need to three areas: back-end don’t see a downside.” access email from any connectivity improvements largely jOHN TSCHANNEN, Director of IT and User framework and sales personnel who connected to storage; Services, Energizer, on deploy the voice over work from cyber cafes and access benefits to information IP (VoIP) capabilities of Microsoft Office email using Outlook Web Access.” workers; and built-in basic Communications Online MANI MULKI, Vice President-IT, archiving capabilities.” Read More> Godrej Industries Limited Forrester Research, Inc. Read More> Read More>4
  9. 9. increased emailreliability and security familiar tools thatMoving to the cloud helps your can be used by allIT team provide multiple filters Mobile access to Exchangeand virus-scanning engines Online is available from allusing Microsoft Forefront Online Seamless online email-ready phones, spanningProtection to protect from migration Windows Phone, the iPhone,spam, viruses and phishing With Exchange Online, users Android, Palm, Nokia, andscams. A central administration can acess their familiar Outlook Blackberry devices. Chooseconsole helps manage account online without needing between on-premises andsubscriptions, provision users, a VPN connection. You can online mailboxes dependingreset passwords, and configure migrate all mailbox content on what users want.services from any location with including e-mail, calendarInternet access items, contacts, and tasks. Cloud Power @ Work ”I’ve been able to provide equal orCloud Power @ Work Cloud Power @ Work better email service at a much lower”In moving from Exchange Server ”In a five-month timeframe, we cost, which is a big win for Godiva.2007 to Exchange Server 2010, the big migrated roughly 30,000 people to a We’re looking at a $250,000 annualdriver will be the changes to service hosted solution, without impacting savings from eliminating Notes.”availability…. We can design a system their business or interrupting their STEvE WHITELAM, Director of Informationthat will have a much higher level of day-to-day operations.” Technology, Global Shared Services, Godivauptime.” ESAT SEzER, CIO, Coca Cola Enterprises Chocolatier on productivity gains from moving toSTEvEN PRESLEY, IT Engineer - Staff, Qualcomm on Read More> Microsoft Online Services Know Morecutting email recovery time from 10 minutes to less Read More>than 30 secondsRead More> 5
  10. 10. Create A reAl-tiMe Connecting across devices and versions Making the most of new opportunities Ensure reliability and CollABorAtion HuB Make it easy to access, edit connectivity for all users - from and share Office documents, colleagues located around Connect your information workers presentations and spreadsheets the world, to temporary across time zones and geographies to share from the PC, phone or browser employees to people from information and work together in real time using Microsoft Office 365. a new acquisition. With Users can collaborate across no server purchases or different platforms (PC or deployments on SharePoint Mac), different Microsoft Office Online, empower a small poWer up versions and even without satellite office, interim staff, CollaboratioN bY have Microsoft Office on their computers (from any web or a newly acquired business to work better together right browser). from the start. Analysts View “Cloud-based email and Cloud Power @ Work Cloud Power @ Work collaboration services will ”Infosys is going to use Office Web “Departments are getting see 10% penetration of Apps extensively, and we expect it to information out to stores faster, the enterprise email and drastically reduce the time it takes to because SharePoint Online is so easy messaging market by complete RFPs and budgets.” to use. We are excited to start using 2012 and will near 65% vIvEK BHARATHAN, Lead Technology Specialist, workflows to automate common penetration by 2020.” Infosys, on overcoming document version processes such as onboarding new Gartner compatibility across 100,000 Microsoft Office users employees.” Read More> Read More> RHONDA COBB, Information Technology Manager, REEDS Jewelers Read More>6
  11. 11. enabling knowledge sharing quickly Sharing data A unified enterprise content reliably without management system can help infrastructure costs employees easily share best All documents and files saved practices and expertise with online are hosted on Microsoftwork with blogs, wikis, search, surveys servers maintained by ourwhat you know and RSS feeds. Users can also own trained experts. Patches Know MoreThe familiar interface of Microsoft easily create and maintain and security updates areOutlook and Office applications collaborative workspaces supplied in real time, ensuringis now extended online with using meeting and team site that users always work onOffice 365 for Enterprises. templates. the latest, most up-to-dateMeaning no learning curve plus versions of applications.now online productivity features Cloud Power @ Workfor your employees. “Together with Microsoft, we hit the Cloud Power @ Work overall goal in 142 days and helped “Moving to Online ServicesCloud Power @ Work Aviva achieve the deployment in will enable us to reduce our IT“The speech-to-text features will be around one half of the cost of the operational costs by roughly 30%great for our 20,000 or so mobile original budget” of what we’re currently spending.device users because they will be able TOBY REDSHAW, CIO, Aviva, on creating 1 The ability to introduce a variableto access their voice-mail messages intranet in 12 languages for 60,000 employees cost subscription model for theseeven if they can’t call into the system.” Read More> collaborative technologies allows usDEAN SEPSTRUP, Product Manager for Exchange, to more rapidly scale or divest ourBoeing on the Voice-Mail Preview that’s helping investment as necessary.”drive employee productivity ALASTAIR ROBERTSON,Read More> VP, Information Workplace Read More> 7
  12. 12. traNsform end-to-end Management it SerViCeS Efficiency through Rs. Control Automation and migrating in your enterPriSe automation online doesn’t mean loss Drive efficiency through Build a flexible and efficient of control. In fact, you can private cloud infrastructure now manage your entire greater flexibility and control of IT services using Windows Server 2008 R2 IT infrastructure spanning in your own private cloud Hyper-V and System Center. physical on-premises and By automating data resources virtual cloud environments management and following from a single screen. a self-service model, you can poWer up busiNess save on operational costs in Cloud Power @ Work agilitY With physical administration and troubleshooting. “We chose Windows Server 2008 R2 Hyper-V because we have Analysts View standardized our IT setup on “For most organisations, Cloud Power @ Work Microsoft technologies. Moving to virtualisation will provide the ”We have trimmed our physical a new platform would have meant foundation and the stepping- server holdings from 120 to merely lack of predictability and increased stone for the evolution to private 20 servers. The expenses on server costs” cloud computing… Security must boxes have dropped drastically by 40 SHYAM CHANDRAMANI, Unit Manager - become adaptive to support percent of our data center budget.” Global Server Team, Mphasis Limited a model where workloads are SANDEEP gANDHI, Sr. Manager, Data Center Read More> decoupled from physical hardware Operations, KPIT Cummins and dynamically allocated to a Read More> fabric of computing resources.” Thomas Bittman, Gartner analyst Read More>8
  13. 13. faster time to market With its flexibile setup, private cloud technology accelerates development Maximise your itfreedom to focus times for custom applications investmentson business and lets IT respond quickly to Leverage your existing Try it NowSimplifying IT management and changing business needs. The assets and skill sets - acrossthe assurance of security means private cloud can integrate identity (Active Directory),more time for you to focus on with existing toolsets and management (System Center)developing solutions that would provide symmetry with your and developer technologies Know Morehave not been possible before. on-premises or cloud (.Net, SQL Server and database. Visual Studio) - to work onCloud Power @ Work private and public cloud“Microsoft has invested billions of Cloud Power @ Work environments.dollars in cloud technologies, which “You simply plug in and use thegives us peace of mind... confidence relevant resources... The ability to Cloud Power @ Workat the Associated Press that our data receive these resources as a service “With Windows Azure, we didn’tis secure, even though it is made it possible for us to have to make changes to theoff-premises.” considerably speed up the process architecture of our solution to get itPRAMOD ANCHUPARAYIL, Software Architect, of reaching customers. Plus, we running. To start up quickly - that isAssociated Press on hosting its Breaking News API avoided spending US $50,000 on really big for us.”on Azure hardware and a hosting facility.” RAIK DITTRICH, Innovation Manager, T-SystemsRead More> NIR HAgSHURY, Chief Technical Officer, TicTacTi Read More> Read More> 9
  14. 14. know wHAt your ensuring rapidCustomers user adoption Inflexible software and a poor Closing user experience often hamper deals faster wAnt usage of CRM applications. Microsoft Dynamics CRM Give sales professionals Strengthen customer Online provides an entire suite instant fast access to interactions, improve marketing of marketing, sales and service customer data and history and boost sales with easy when connected to the In- online access to information solutions within the familiar ternet and even when offline. interface of Microsoft Office Sales prospects and Outlook on the PC or when customers can be informed accessed online, ensuring rapid of new product and service poWer up Customer user adoption and fast results. offerings with wizard-based relatioNs bY Cloud Power @ Work communication tools. Analysts View “We know that salespeople find the Cloud Power @ Work “Microsoft Dynamics CRM new system much easier to use. The “It would have taken 70 hours a shines by offering flexibility rate of responses in our new system month to get the pre-opportunity for large and midsized has increased by 30 to 45 percent data that now is just there in the organizations… Offering over what it was in Salesforce.com.” system. Our efficiency has soared buyers the ‘Power of Choice’ AISHA THOMAS, Marketing IT Manager, Unico by well over 100 percent with so that companies may Read More> Microsoft Dynamics CRM Online.” jEff KIELY, choose how to deploy, how Vice President of Sales and Marketing, Trion to pay, and how to use the Read More> application.” The Forrester Wave10
  15. 15. Generating Better informationgreat demand sharingUnderstand your customers Ensure customer loyalty withbetter and target your resources consistent, efficient service Growing with yourto the areas of highest return by empowering customer business needswith a comprehensive set of service personnel with the right Easy-to-use wizards andmarketing capabilities. Marketing information. Customer data point-and-click customizationprofessionals can increase can be made available as and tools help you customise and Try it Nowmarketing effectiveness and when needed - through the connect your CRM data withtrack key performance with user interface, online or as an existing business system dataintuitive data segmentation tools, exported web file. The intuitive in real-time. The pay-per-usercampaign management features configuration capabilities can model delivered online, makes Know Moreand marketing analytics, all be tailored to fit your business setting up quick to scale asavailable online. needs by quickly adding or required without any server modifying fields, forms, workflow setup or expensive hardwareCloud Power @ Work and reports. upgrades.“Using Marketing Automation inMicrosoft Dynamics CRM, we now Cloud Power @ Work Cloud Power @ Workdeliver over 5,000 birthday emails a “Microsoft Dynamics CRM has been “By switching to Microsoft Dynamicsday to participants, reminding them essential to helping us improve CRM Online from Salesforce.com,to celebrate their birthdays with us.” our customer satisfaction levels we’re saving nearly $13,000 eachHEATHER DORR, Senior Manager of Marketing and implement an effective sales month with 160 users.”Information Systems, Cold Stone Creamery which management process. It provides a jOEL fRIEDMAN, CIO, Century Paymentshas enrolled over 15 lakh Birthday Club participants single version of our customer data Read More>with thousands of new members joining everyday to all our sales staff.”Read More> UMAIR CHAUDHARY, COO, Barclays Bank LP, UAE and Gulf on increasing customer satisfaction by 15 percent Read More> 11
  16. 16. What Cloud poWer holds for You Benefit from working with Microsoft Cloud Services - the most comprehensive set of solutions for the cloud doN’t throW aNYthiNg aWaY Move only what you want to the cloud with a hybrid model of on-premises and off-premises resources. paY for What Build on your existing IT happeNs assets and connect them to IT costs are now online services. flexible – just pay per user per month on any application as a service. Different usage models also help you accurately predict costs.12
  17. 17. 15 Years of experieNCe develop faster When you work in the Build applications faster thanNo more Microsoft Cloud, you ever with a million-strongmaiNteNaNCe leverage the knowledge developer base writing toAlways use the latest and expertise of 15 years, Microsoft platforms and alWaYs availablesoftware without worrying ranging from applications more coming through our All the resources needed forabout upgrades and (Hotmail) to search (Bing) interoperability support of a robust cloud computingpatches. The cloud and platforms (Xbox Live) third-party solutions. infrastructure - a globalautomatically updates to reach, a commitment tothe latest versions. security, 99.9 percent uptime SLA with 24/7 service and support. help at haNd staY seCure Our ecosystem of 9,000 Your data is stored on aNo traiNiNg partners - spanning ISVs, global network of 200+required value-added resellers and enterprise-class data centersAll your users can easily systems integrators - choose with SAS 70 and ISO 27001 loWer Costsmove to and from the from our ecosystem to help security certifications audited No more paying forcloud, using their skill sets you in migration, hosting by an independent third hardware and facilityand familiarity with the services and creating party. expenses. Cut down onproducts they currently use. customised applications. maintenance and operationalGet a consistent experience overheads by paying foracross all devices. service. 13
  18. 18. why the Cloud makes Business Sense resourCes Thousands of companies are discovering why making their IT an enterprise- ready service makes business sense. Explore more with our whitepaper and see how global companies are seeing business benefits in the Microsoft Cloud. The Economics of the Cloud | Pg 15 Seamless migration at Coca Cola Enterprises | Pg 36 Improved Productivity at GlaxoSmithKline | Pg 44 Efficiency in the Private Cloud at KPIT Cummins | Pg 49 IT as a Service at 3M | Pg 5414
  19. 19. Computing is undergoing a seismic shift from client/server to the cloud, a shift similar in importance and the impact to the transition from mainframe to client/server. Speculation abounds on how this new era will evolve ineCoNomiCs of the coming years, and IT leaders have a critical need for a clear vision of where the industry is heading. We believe the Cloud the best way to form this vision is to understand the underlying economics driving the long-term trend. In this paper, we will assess the economics of the cloud by using in-depth modeling. We then use this framework to better understand the long-term IT landscape. For comments or questions regarding the content of this paper, please contact Rolf Harms (rolfh@microsoft.com) or Michael Yamartino (michael.yamartino@microsoft.com) 15
  20. 20. Introduction By the 1920s the number of cars had already reached 8 million, and today there are over 600 million cars – proving Daimler wrong hundreds of times over. W hen cars emerged in What the early pioneers failed to realize was that profound reductions in both the early 20th century, cost and complexity of operating cars and a dramatic increase in its importance they were initially called in daily life would overwhelm prior constraints and bring cars to the masses. “horseless carriages”. Understandably, people were skeptical at first, and Today, IT is going through a similar change: the shift from client/server to they viewed the invention through the cloud. Cloud promises not just cheaper IT, but also faster, easier, more the lens of the paradigm that had flexible, and more effective IT. Just as in the early days of the car industry, it‘s been dominant for centuries: the currently difficult to see where this new paradigm will take us. The goal of horse and carriage. The first cars this whitepaper is to help build a framework that allows IT leaders to plan also looked very similar to the for the cloud transition2. We take a long-term view in our analysis, as this is horse and carriage (just without the a prerequisite when evaluating decisions and investments that could last for horse), as engineers initially failed to Horseless Carriage Syndrome decades. As a result, we focus on the economics of cloud rather than on specific understand the new possibilities of the new paradigm, such as building for technologies or other driving factors like organizational change, as economics higher speeds, or greater safety. Incredibly, engineers kept designing the often provide a clearer understanding of transformations of this nature. whip holder into the early models before realizing that it wasn‘t necessary anymore. In Section 2, we outline the underlying economics of cloud, focusing on what makes it truly different from client/server. In Section 3, we will assess the Initially there was a broad failure to fully comprehend the new paradigm. implications of these economics for the future of IT. We will discuss the positive Banks claimed that, The horse is here to stay but the automobile is only impact cloud will have but will also discuss the obstacles that still exist today. a novelty, a fad”. Even the early pioneers of the car didn‘t fully grasp the Finally, in Section 4 we will discuss what‘s important to consider as IT leaders potential impact their work could have on the world. When Daimler, arguably embark on the journey to the cloud. the inventor of the automobile, attempted to estimate the long-term auto market opportunity, he concluded there could never be more than 1 million Source: Horseless Carriage Thinking, William Horton Consulting 1 cars, because of their high cost and the shortage of capable chauffeurs1. Cloud in this context refers to cloud computing architecture, encompassing both public and private clouds. 216
  21. 21. Fig. 2: Cloud OpportunityeCoNomiCsof the CloudEconomics are a powerful force in shaping industry transformations. Today‘sdiscussions on the cloud focus a great deal on technical complexities andadoption hurdles. While we acknowledge that such concerns exist and are Source: Microsoftimportant, historically, underlying economics have a much stronger impacton the direction and speed of disruptions, as technological challenges are fig. 3: Beginning the Transition to Client Server Technologyresolved or overcome through the rapid innovation we‘ve grown accustomedto (Fig. 2). During the mainframe era, client/server was initially viewed as a toytechnology, not viable as a mainframe replacement. Yet, over time theclient/server technology found its way into the enterprise (Fig. 3). Similarly,when virtualization technology was first proposed, application compatibilityconcerns and potential vendor lock-in were cited as barriers to adoption. Source: “How convention shapes our market”Yet underlying economics of 20 to 30 percent savings3 compelled CIOs to longitudinal survey,overcome these concerns, and adoption quickly accelerated. Shana Greenstein, 1997.The emergence of cloud services is again fundamentally shifting the economics Cloud also allows core IT infrastructure to be brought into large data centersof IT. Cloud technology standardizes and pools IT resources and automates that take advantage of significant economies of scale in three areas:many of the maintenance tasks done manually today. Cloud architectures • Supply-side savings. Large-scale data centers (DCs) lower costs per server.facilitate elastic consumption, self-service, and pay-as-you-go pricing. • Demand-side aggregation. Aggregating demand for computing smoothsThe massive aggregate scale of these mega DCs will bring considerable and overall variability, allowing server utilization rates to increase. • Multi-tenancy efficiency. When changing to a multitenant application3 Source: Dataquest Insight: Many Midsize Businesses Looking Toward 100% Server Virtualization. model, increasing the number of tenants (i.e., customers or users) lowers Gartner, May 8, 2009 the application management and server cost per tenant. 17
  22. 22. Fig. 4: ECONOMIES OF SCALE (ILLUSTRATIVE) 2.1 Supply-Side Economies of Scale Cloud computing combines the best economic properties of mainframe and client/server computing. The mainframe era was characterized by significant economies of scale due to high up-front costs of mainframes and the need to hire sophisticated personnel to manage the systems. As required computing Source: Microsoft power – measured in MIPS (million instructions per second) – increased, cost declined rapidly at first (Fig. 4), but only large central IT organizations had The economies of scale emanate from the following areas: the resources and the aggregate demand to justify the investment. Due to Cost of power: Electricity cost is rapidly rising to become the largest element of the high cost, resource utilization was prioritized over end-user agility. Users‘ total cost of ownership (TCO),5 currently representing 15%-20%. Power Usage requests were put in a queue and processed only when needed resources were Effectiveness (PUE)6 tends to be significantly lower in large facilities than in available. With the advent of minicomputers and later client/server technology, smaller ones. While the operators of small data centers must pay the prevailing the minimum unit of purchase was greatly reduced, and the resources became local rate for electricity, large providers can pay less than one-fourth of the easier to operate and maintain. This modularization significantly lowered the national average rate by locating its data centers in locations with inexpensive entry barriers to providing IT services, radically improving end-user agility. electricity supply and through bulk purchase agreements7. In addition, research However, there was a significant utilization tradeoff was, resulting in the current has shown that operators of multiple data centers are able to take advantage state of affairs: datacenters sprawling with servers purchased for whatever of geographical variability in electricity rates, which can further reduce needed existed at the time, but running at just 5%-10% utilization4. energy cost. 4 Source: The Economics of Virtualization: Moving Toward an Application-Based Cost Model, IDC, Cloud computing is not a return to the mainframe era as is sometimes November 2009. 5 Not including app labor. Studies suggest that for low-efficiency datacenters, three-year spending on suggested, but in fact offers users economies of scale and efficiency that power and cooling,including infrastructure, already outstrips three-year server hardware spending. exceed those of a mainframe, coupled with modularity and agility beyond what 6 Power Utilization Effectiveness equals total power delivered into a datacenter divided by critical power – the power needed to actually run the servers. Thus, it measures the efficiency of the datacenter in client/server technology offered, thus eliminating the tradeoff. turning electricity into computation.The best theoretical value is 1.0, with higher numbers being worse. 7 Source: U.S. Energy Information Administration (July 2010) and Microsoft. While the average U.S. commercial ratesome locations offer power for is 10.15 cents per kilowatt hour, as little as 2.2 cents per kilowatt hour18
  23. 23. Infrastructure labor costs: While cloud computing significantly lowers laborcosts at any scale by automating many repetitive management tasks, largerfacilities are able to lower them further than smaller ones. While a singlesystem administrator can service approximately 140 servers in a traditionalenterprise,8 in a cloud data center the same administrator can service Fig. 5:thousands of servers. This allows IT employees to focus on higher value-add RECENT LARGEactivities like building new capabilities and working through the long queue of DATA-CENTER PROJECTSuser requests every IT department contends with. Source: Press RelesesSecurity and reliability: While often cited as a potential hurdle to public cloud ongoing R&D to bear on running them more efficiently, and make them moreadoption, increased need for security and reliability leads to economies of scale efficient for their customers. Providers of large-scale DCs, for which running themdue to the largely fixed level of investment required to achieve operational is a primary business goal, are likely to benefit more from this than smaller DCssecurity and reliability. Large commercial cloud providers are often better able which are run inside enterprises.to bring deep expertise to bear on this problem than a typical corporate ITdepartment, thus actually making cloud systems more secure and reliable. 2.2 Demand-Side Economies of ScaleBuying power: Operators of large data centers can get discounts on The overall cost of IT is determined not just by the cost of capacity, but also by thehardware purchases of up to 30 percent over smaller buyers. This is degree to which the capacity is efficiently utilized. We need to assess the impactenabled by standardizing on a limited number of hardware and software that demand aggregation will have on costs of actually utilized resources (CPU,architectures. Recall that for the majority of the mainframe era, more than 10 network, and storage)9. In the non-virtualized data center, each application/work-different architectures coexisted. Even client/server included nearly a dozen load typically runs on its own physical server10. This means the number of serversUNIX variants and the Windows Server OS, and x86 and a handful of RISC scales linearly with the number of server workloads. In this model, utilization ofarchitectures. Large-scale buying power was difficult in this heterogeneous 8 Source: James Hamilton, Microsoft Research, 2006. 9 In this paper, we talk generally about resource utilization. We acknowledge there are important differencesenvironment. With cloud, infrastructure homogeneity enables scale economies. among resources.For example, because storage has fewer usage spikes compared with CPU and I/O resources,Going forward, there will likely be many additional economies of scale that we the impact of some of what we discuss here will affect storage to a smaller degree. 10 Multiple applications can run on a single server, of course, but this is not common practice. It iscannot yet foresee. The industry is at the early stages of building data centers very challenging to move a running application from one server to another without also movingat a scale we‘ve never seen before (Fig. 5). the operating system, so running multiple applications on one operating system instance can create bottlenecks that are difficult to remedy while maintaining service, thereby limitingagility. Virtualization allows the application plus operating system to be moved at will. 19
  24. 24. servers has traditionally been extremely low, around 5 to 10 percent11. To meet service level agreements, capacity buffers have to be built in to Virtualization enables multiple applications to run on a single physical server account for a certain probability that many people will undertake particular within their optimized operating system instance, so the primary benefit of tasks at the same time. If servers are pooled, this variability can be reduced. virtualization is that fewer servers are needed to carry the same number of workloads. But how will this affect economies of scale? If all workloads had 2. Time-of-day patterns: There are daily recurring cycles in people‘s behavior: constant utilization, this would entail a simple unit compression without consumer services tend to peak in the evening, while workplace services tend impacting economies of scale. In reality, however, workloads are highly variable to peak during the workday. Capacity has to be built to account for these daily over time, often demanding large amounts of resources one minute and peaks but will go unused during other parts of the day causing low utilization. virtually none the next. This opens up opportunities for utilization improvement This variability can be countered by running the same workload for multiple via demand-side aggregation and diversification. time zones on the same servers (Fig. 7) or by running workloads with complementary time-of-day patterns (for example, consumer services and We analyzed the different sources of utilization variability and then looked at the enterprise services) on the same servers. ability of the cloud to diversify it away and thus reduce costs. Fig. 7: TIME-OF-DAY PATTERNS FOR SEARCH We distinguish five sources of variability and assess how they might be reduced: 1. Randomness: End-user access patterns contain a certain degree of randomness. For example, people check their email at different times (Fig.6). Fig. 6: RANDOM VARIABILITY (EXCHANGE SERVER) Source: Bing Search volume over 24-hour period 11 Source: The Economics of Virtualization: Moving Toward an Application-Based Cost Model, IDC, Source: Microsoft November 2009.20
  25. 25. Fig. 9: MULTIRESOURCE VARIABILITY (ILLUSTRATIVE)3. Industry-specific variability: Some variability is driven by industrydynamics. Retail firms see a spike during the holiday shopping season whileU.S. tax firms will see a peak before April 15 (Fig. 8).Fig. 8: INDUSTRY-SPECIFIC VARIABILITY Source: Microsoft While it‘s possible to adjust capacity by buying servers optimized for CPU or storage, this addresses the issue only to a limited degree because it will reduce flexibility and may not be economic from a capacity perspective. This variability will lead to resources going unutilized unless workload diversification is employed by running workloads with complementary resource profiles. Source: Alexa Internet 5. Uncertain growth patterns: The difficulty of predicting future need forThere are multiple kinds of industry variability - some recurring and predictable computing resources and the long leadtime for bringing capacity online is(such as the tax season or the Olympic Games), and others unpredictable (such another source of low utilization (Fig. 10).as major news stories). The common result is that capacity has to be built for Fig. 10: DIVERSIFYING RANDOM VARIABILITYthe expected peak (plus a margin of error). Most of this capacity will sit idle therest of the time. Strong diversification benefits exist for industry variability.4. Multi-resource variability: Compute, storage, and input/output (I/O)resources are generally bought in bundles: a server contains a certain amountof computing power (CPU), storage, and I/O (e.g., networking or disk access).Some workloads like search use a lot of CPU but relatively little storage or I/O,while other workloads like email tend to use a lot of storage but littleCPU (Fig. 9). Source: Microsoft 21
  26. 26. For startups, this is sometimes referred to as the TechCrunch effect. Enterprises large, multi-geography organizations, the majority of employees and users and small businesses all need to secure approval for IT investments well in will live in similar time zones, bringing their daily cycles close to synchrony. advance of actually knowing their demand for infrastructure. Even large private Also, most organizations do not tend to have workload patterns that offset one companies face this challenge, with firms planning their purchases six to another: for example, the email, network and transaction processing activity twelve months in advance (Fig. 10). By diversifying among workloads across that takes place during business hours is not replaced by an equally active multiple customers, cloud providers can reduce this variability, as higher- stream of work in the middle of the night. Pooling organizations and workloads than-anticipated demand for some workloads is canceled out by lower-than- of different types allows these peaks and troughs to be offset. anticipated demand for others. A key economic advantage of the cloud is its ability to address variability in resource utilization brought on by these factors. By pooling resources, variability Fig.11: is diversified away, evening out utilization patterns. The larger the pool of DIVERSIFYING resources, the smoother the aggregate demand profile, the higher the overall RANDOM utilization rate, and the cheaper and more efficiently the IT organization can VARIABILITY meet its end-user demands. We modeled the theoretical impact of random variability of demand on server utilization rates as we increase the number of servers12. Fig. 11 indicates that a Source: Microsoft theoretical pool of 1,000 servers could be run at approximately 90% utilization Industry variability results in highly correlated peaks and troughs throughout without violating its SLA. This only holds true in the hypothetical situation each firm (that is, most of the systems in a retail firm will be at peak capacity where random variability is the only source of variability and workloads can around the holiday season (e.g., web servers, transaction processing, payment be migrated between physical servers instantly without interruption. Note that processing, databases)13. Fig. 12 shows industry variability for a number of higher levels of uptime (as defined in a service level agreement or SLA) become different industries, with peaks ranging from 1.5x to 10x average usage. much easier to deliver as scale increases. 12 To calculate economies of scale arising from diversifying random variability, we created a Monte Carlo model to simulatedata centers of various sizes serving many random workloads. For each simulated DC, workloads (which are made to resemble hypothetical web usage patterns) wer Clouds will be able to reduce time-of-day variability to the extent that they successively added until the expected availability of server resources dropped below agiven uptime of are diversified amongst geographies and workload types. Within an average 99.9 percent or 99.99 percent. The maximum number of workloads determines the maximum utilization rate at which the DC‘s servers can operate without compromising performance. organization, peak IT usage can be twice as high as the daily average. Even in 13 Ideally, we would use the server utilization history of a large number of customers to gain more insight into such patterns. However, this data is difficult to get and often of poor quality. We therefore used web traffic as a proxy for the industry variability.22
  27. 27. Microsoft services such as Windows Live Hotmail and Bing take advantage of Windows Azure because every frame of their movies takes eight hours tomulti-resource diversification by layering different subservices to optimize render today on a single processor, meaning it would take 272 years toworkloads with different resource profiles (such as CPU bound or storage render an entire movie. As they said, We are not that patient. With Azure,bound). It is difficult to quantify these benefits, so we have not included multi- they can get the job done as fast as they need. The result is huge spikesresource diversification in our model. in Pixar‘s usage of Azure as they render on-demand.Some uncertain growth pattern variability can be reduced by hardwarestandardization and just-in-time procurement, although likely not completely.Based on our modeling, the impact of growth uncertainty for enterprises withup to 1,000 servers is 30 to 40 percent overprovisioning of servers relative toa public cloud service. For smaller companies (for example, Internet startups), Fig 12:the impact is far greater. INDUSTRY VARIABILITY Source: MicrosoftSo far we have made the implicit assumption that the degree of variability willstay the same as we move to the cloud. In reality, it is likely that the variability • Batch processes will become real time: Many processes — for example,will significantly increase, which will further increase economies of scale. There accurate stock availability for online retailers — that were previouslyare two reasons why this may happen: batch driven, will move to real-time. Thus, multi-stage processes that• Higher expectation of performance: Today, users have become were once sequential will now occur simultaneously, such as a manufac- accustomed to resource constraints and have learned to live with them. turing firm that can tally its inventory, check its order backlog, and order For example, users will schedule complex calculations to run overnight, new supplies at once. This will amplify utilization variability. avoid multiple model iterations, or decide to forgo time-consuming and costly supply chain optimizations. The business model of cloud allows We note that even the largest public clouds will not be able to diversify away all a user to pay the same for 1 machine running for 1,000 hours as he variability; market level variability will likely remain. To further smooth demand, would for 1,000 machines running for 1 hour. Today, the user would likely sophisticated pricing can be employed. For example, similar to the electricity wait 1,000 hours or abandon the project. In the cloud, there is virtually market (Fig. 13), customers can be incented to shift their demand from high no additional cost to choosing 1,000 machines and accelerating such utilization periods to low utilization periods. In addition, a lower price spurs processes. This will have a dramatic impact on variability. Pixar Animation additional usage from customers due to price elasticity of demand. Demand Studios, for example runs its computer-animation rendering process on management will further increase the economic benefits of cloud. 23
  28. 28. 365-S to assess the impact. In dedicated instances, the same activities, such Fig. 13: VARIABLE PRICING IN ELECTRICITY as applying software patches, are performed multiple times – once for each instance. In a multi-tenant instance such as Office 365-S, that cost is shared across a large set of customers, driving application labor costs per customer towards zero. This can result in a meaningful reduction in overall cost, especially for complex applications. Fig.14: Source: Ameren Illinois Utilities UTILIZATION OVERHEAD 2.3 Multi-tenancy Economies of Scale Source: Microsoft The previously described supply-side and demand-side economies of scale can be achieved independent of the application architecture, whether it • fixed component of server utilization amortized over large number be traditional scale-up or scale-out, single tenant or multitenant. There is of customers: For each application instance, there is a certain amount another important source of economies of scale that can be harnessed only of server overhead. Fig. 14 shows an example from Microsoft‘s IT if the application is written as a multitenant application. That is, rather than department in which intraday variability appears muted (only a 16 running an application instance for each customer – as is done for on-premises percent increase between peak and trough) compared to actual variability application and most hosted applications such as dedicated instances of in user access. This is caused by application and runtime overhead, which Microsoft Office 365 – in a multitenant application, multiple customers use a is constant throughout the day. By moving to a multitenant model with single instance of the application simultaneously, as in the case of shared a single instance, this resource overhead can be amortized across all Office 365. This has two important economic benefits: customers. We have examined Office 365-D, Office 365-S, and Microsoft • fixed application labor amortized over a large number of customers: Live@edu data to estimate this overhead, but so far it has proven In a single-tenant instance, each customer has to pay for its own technically challenging to isolate this effect from other variability in the application management (that is, the labor associated with update and data (for example, user counts and server utilization) and architectural upgrade management and incident resolution). differences in the applications. Therefore, we currently assume no benefit We‘ve examined data from customers, as well as Office 365-D and Office from this effect in our model.24
  29. 29. Applications can be entirely multitenant by being completely written to take This raises the question: what impact will the Cloud Economics we describedadvantage of these benefits, or can achieve partial multi-tenancy by leveraging have on the IT budget? From customer data, we know the approximateshared services provided by the cloud platform. The greater the use of such breakdown between the infrastructure costs, costs of supporting andshared services, the greater the application will benefit from these multi- maintaining existing applications, and new application development costs (Fig.tenancy economies of scale. 16). Cloud impacts all three of these areas. The supply-side and demand-side savings impact mostly the infrastructure portion, which comprises over half of2.4 Overall Impact spending. Existing app maintenance costs include update and patching labor,The combination of supply-side economies of scale in server capacity end-user support, and license fees paid to vendors. They account for roughly a(amortizing costs across more servers), demand-side aggregation of workloads third of spending and are addressed by the multi-tenancy efficiency factor.(reducing variability), and the multi-tenant application model (amortizing costs Fig 16: IT SPENDING BREAKDOWNacross multiple customers) leads to powerful economies of scale. To estimatethe magnitude, we built a cost scaling model which estimates the long termbehavior of costs.Fig. 15 shows the output for a workload that utilizes 10 percent of a traditionalserver. The model indicates that a 100,000-server datacenter has an 80% lowertotal cost of ownership (TCO) compared to a 1,000-server datacenter. Source: Microsoft New application development accounts for just over a tenth of spending14, even though it is seen as the way for IT to innovate. Therefore IT leaders generally Fig 15: ECONOMIES OF want to increase spending here. The economic benefits of cloud computing SCALE IN THE CLOUD described here will enable this by freeing up room in the budget to do so. We will touch more on this aspect in the next paragraph as well as in Section 3. 14 New application development costs include only the cost of designing and writing the application and excluding the cost of hosting .them on new infrastructure. Adding these costs results in the 80% / 20% split seen elsewher Source: Microsoft 25
  30. 30. a bit of a horseless carriage in that the underlying platform and tools were 2.5 Harnessing Cloud Economics not designed specifically for the cloud. The full advantage of cloud computing Capturing the benefits described above is not a straightforward task with today‘s can only be properly unlocked through a significant investment in intelligent technology. Just as engineers had to fundamentally rethink design in the early resource management. The resource manager must understand both the status days of the car, so too will developers have to rethink design of applications. of the resources (networking, storage, and compute) as well as the activity of the Multi-tenancy and demand-side aggregation is often difficult for developers applications being run. Therefore, when writing new apps, Platform as a Service, or even sophisticated IT departments to implement on their own. If not done most effectively captures the economic benefits. PaaS offers shared services, correctly, it could end up either significantly raising the costs of developing advanced management, and automation features that allow developers to focus applications (thus at least partially nullifying the increased budget room for new directly on application logic rather than on engineering their application to scale. app development); or capturing only a small subset of the savings previously described. The best approach in harnessing the cloud economics is different for packaged apps vs. new/custom apps. Packaged applications: While virtualizing packaged applications and moving them to cloud virtual machines (e.g., virtualized Exchange) can generate some Fig.17 CAPTURING savings, this solution is far from ideal and fails to capture the full benefits CLOUD BENEFITS outlined in this Section. The cause is twofold. First, applications designed to Source: Microsoft be run on a single server will not easily scale up and down without significant additional programming to add load-balancing, automatic failover, redundancy, To illustrate the impact, a startup named Animoto used Infrastructure-as-a- and active resource management. This limits the extent to which they are able to Service (IaaS) to enable scaling - adding over 3,500 servers to their capacity in aggregate demand and increase server utilization. Second, traditional packaged just 3 days as they served over three-quarters of a million new users. Examining applications are not written for multi-tenancy, and simply hosting them in their application later, however, the Animoto team discovered that a large the cloud does not change this. For packaged apps, the best way to harness percentage of the resources they were paying for were often sitting the benefits of cloud is to use SaaS offerings like Office365, which have been idle - often over 50%, even in a supposedly elastic cloud. They re-architected architected for scale-out and multi-tenancy to capture the full benefits. their application and eventually lowered operating costs by 20%. While Animoto is a cloud success story, it was only after an investment in intelligent resource New/custom applications: Infrastructure-as-a-Service (IaaS) can help capture management that they were able to harness the full benefits of cloud. PaaS some of the economic benefits for existing applications. Doing so is, however, would have delivered many of these benefits out-of-the-box without any additional tweaking required.26