Cloud: To Build or Buy - Can You Justify On-Premises IT?

MT46: Cloud: to build or buy?
Can you justify on-premises IT?

Agenda:
• Adoption & trends
• Building the business case
• Myths and realities
• Next steps

IT operations
Needs
• Meet service levels
• Extend security
policies into the cloud
• Automate manual
tasks
Business Driver
Transform to a
trusted service
provider/broker
State of cloud in the enterprise
Business leaders
Needs
• Faster time to market
• Enable transformation
• Improved efficiency
and visibility
Business Driver
Leverage cloud as a
strategic advantage
Needs
• Advocated on-demand,
self-service
• Choice of tools, resources
and technology
Developers
Business Driver
More productivity,
fewer constraints
Challenges
• No unified plan
• Disparate systems
• Limited cloud expertise
• Legacy systems
management

Can anyone get beyond the hype?
4

The business case for cloud is agility
Q: What is your
main driver in
moving to private
cloud?
Source: Gartner Data Center Conference Poll, December 2013

Key takeaways: 2014 Forrester Report
The public cloud market is now in hypergrowth
7
By the year 2020:
Public cloud market will rise to $191 Billion,
increasing 20% over 2011
• Attractiveness of cloud is
rising, but barriers to
adoption still remain
• Concerns about security,
integration, performance, and
cost models remain.
• Cloud adoption will be a
complement to, not a
replacement of,
on-premises
• Cloud will become an
increasingly large part of
technology market, especially as
a complement to core on-
premises transactional systems.
Global public
cloud platform
services
Cloud
business
services
Cloud apps
or
SaaS
$44
Billion
$14
Billion
$131
Billion

From: ESG Research Report: 2015 IT Spending Intentions Survey. Source: Enterprise Strategy Group, 2015.
The increasing use of cloud computing to reduce/contain
costs – ESG Research

9From: ESG Research Report: 2015 IT Spending Intentions Survey. Source: Enterprise Strategy Group, 2015.
2014 to 2015 spending change in specific
technology areas – ESG Research
Q: To the best of your
knowledge, to what extent
will your organization’s
2015 IT spending for each
technology listed change
relative to 2014?
(percent of respondents)
2015 spending will increase
2015 spending will stay flat
2015 spending will decrease

Forrester Total Economic
Impact (TEI) of Private Cloud

Forrester’s Total Economic Impact: a framework for
studying and quantifying impact of solutions or market
trends on organizations & businesses.
• Survey of 40 customers across broad range of
organizations, and two deep-dive customer
interviews
• As part of the TEI methodology, Forrester
synthesized a composite organization and applied
financial & efficiency modeling to further validate
analysis and results.
Baseline: The Total Economic Impact of Private Cloud
Cost Savings And Business Benefits Enabled By Private Cloud

The analysis points to three year benefits of $13,545,616 versus three year costs of
$6,406,435, adding up to a net present value (NPV) of $7,139,181.
With private cloud:
– IT management efficiency was improved 10%,
– application delivery was reduced by 30 days, and
– the composite organization experienced additional savings in business end-user
productivity and hardware, software, and facilities cost savings.
Overall results and key findings from exec summary
Source: Forrester Research, Inc.
ROI
111%
NPV
$7,139,181
Payback
13.2 months

Cloud =
data center
outsourcing
You need a one
cloud solution
“Cloud means loss of
control & securityCloud & Automation
means IT teams
become obsolete
Common cloud assumptions
Cloud costs more
to build than buy
“Cloud“ means
public cloud
Cloud takes a long
time to deploy
Virtualization
=
Private Cloud
Cloud is always
about money!

Of the customers interviewed or surveyed
– “Prior to the investment in private cloud, most of these organizations had virtualized
less than 50% of their infrastructure environment. Approximately half of the
respondents were also using public cloud resources at the time of the private cloud
investment.”
Message here is: anyone can be a candidate for private & hybrid
cloud, not just your mature, highly virtualized customers.
You have to be killing it with virtualization
to be ready for a private cloud…

FTEs affected 55 55 55
Average overall time savings for
management and support
5% 10% 10%
Projects per year affected 10 10 10
Average days saved for delivery
per project
15 30 30
Average FTE fully-loaded annual
compensation
$120,000 $120,000 $120,000
Metric Calculation Year 1 Year 2 Year 3
Automation means IT staff is obsolete…

Among many other challenges, this was a common thread:
– Provisioning of resources was often a lengthy process, which frustrated business
users and application developers responsible for innovation and operational
efficiency. This meant that some business units relied on public cloud resources,
circumventing IT…
“If we hadn’t gone the private cloud route, we would have been inundated
with physical servers. Our data centers were constrained already and we
didn’t want to build new ones. Or our users would have gone third party.”
~ Staff technologist
Bad processes drive users underground

Internally, they have to SELL IT!
– Private Cloud is NOT a “Field of Dreams” scenario (build it & they will come)
– Driving adoption of the platform is KEY
– Create new usage patterns & ways for IT & business units to work together
Customers surveyed spoke about how they REDEFINED their IT management
– Broke down silos & changed the structure to suit the business better
– Created new, cross functional roles (i.e. Cloud admin)
– Take a “cloud first” approach
Business leaders and IT management MUST BE
the driving force for change

The Organization experienced a number of quantified benefits:
6 (+1) Primary Economic Benefits
1. IT management and project delivery efficiencies.
2. Improved business agility and productivity.
3. Server and facilities cost savings.
4. Software, storage, and Networking cost savings.
5. Improved security and compliance.
6. Reduced downtime.
7. Decreased use of public cloud resources. While not quantified as part of
the financial business case, this benefit is described in more detail within the
study.

1. IT Management & Project Delivery Efficiencies
Save hundreds of project days!

Application innovation & performance improvement yield incremental revenue of $1M / year on average.
2. Business Agility & Productivity = BIG $$$
It’s not just lip-service
Incremental revenue $1,000,000 $1,000,000 $1,000,000
Average improvement in business end-
user productivity
2% 4% 4%
Business end-users affected 1,250 2,500 2,500
Average end-user fully-loaded
compensation
$65,000 $65,000 $65,000
Productivity capture 30% 30% 30%
Improved business agility and
productivity
B1+(B2*B3*B4*B5) $1,487,500 $2,950,000 $2,950,000
Risk adjustment ↓15%
Improved business agility and
productivity (risk-adjusted)
$1,264,375 $2,507,500 $2,507,500

While the organization’s
networking cost savings are
due to reducing the data
center footprint and
virtualizing networking assets,
another important contributor
to networking cost savings is
potential reduction of ISP
network costs.
By reducing the use of
public cloud services,
organizations may see
further networking cost
savings that are not
included in this study.
4. Networking cost savings & avoidance
Annual software spend $17,760,000
Average software cost savings 1% 2% 2%
Annual storage spend $5,328,000
Average storage cost savings 7% 10% 28%
Annual networking spend $9,990,000
Average networking cost savings 3% 4% 6%
Software, storage, and networking cost
savings
(D1*D2)+(D3*D4)+(D5*D6) $850,260 $1,287,600 $2,446,440
Risk adjustment ↓5%
Software, storage, and networking
cost savings (risk-adjusted)
$807,747 $1,223,220 $2,324,118

• Public cloud services reduction
• While The Organization continues to host some of its applications on the
public cloud, bringing applications in-house helped to reduce public
cloud costs by approximately $240,000 per year.
• Potential adjustment in amount of big pipes required to support # of users
receiving application services externally (this was not included in this
study)
• Benefit of unified governance & control of externally hosted data &
apps (efficient hybrid cloud usage becomes the norm)
7. Reduction of public cloud usage + Full visibility
for seamless hybrid cloud environment

Total benefits roll up
Benefit Category Year 1 Year 2 Year 3 Total Present Value
IT management and project delivery efficiencies $359,308 $718,615 $718,615 $1,796,538 $1,460,447
Improved business agility and productivity $1,264,375 $2,507,500 $2,507,500 $6,279,375 $5,105,668
Server and facilities cost savings $310,175 $474,715 $506,350 $1,291,240 $1,054,732
Software, storage, and networking cost savings $807,747 $1,223,220 $2,324,118 $4,355,085 $3,491,385
Improved security and compliance $693,500 $693,500 $693,500 $2,080,500 $1,724,632
Reduced downtime $285,000 $285,000 $285,000 $855,000 $708,753
Total benefits (risk-adjusted) $3,720,105 $5,902,550 $7,035,083 $16,657,738 $13,545,616

Next Steps - Driving
the transformation

Technology is not the reason implementations fail

People make hybrid cloud real
Challenges:
- Staff buy-in
- Shifting IT culture
- New IT-business relationship
- Turning IT into change leaders
- Developing career paths
- Better implement matrix organizations
Leadership:
- What is their motivation?
Changing roles:
- Capacity planning
- Service management process owners
New org. structures:
- Service-focused
- Incubated
- Cloud brokerage
New roles:
- Orchestration/brokerage specialist
- Service manager
- Infrastructure admin
- Cloud service provider expert
- Cloud service architect

CIO checklist
 Decide if private or hybrid is right for your organization
 Private cloud is growing but giving way to hybrid cloud
 Identify the right use cases/services for your cloud.
 Build internal cloud champions.
 Keep a maniacal focus on the business goals.
 Create metrics that measure success —especially agility.
 Design with future public cloud interoperability in mind — think broker.
 Incubate your private cloud project —staff, processes and technology.

Scan this code & Download the Forrester TEI NOW!

Placeholder -- Dell cloud estimator tool

Things to do when you leave Dell World
Meet with your Dell team, do a whiteboard session
and run your ROI numbers;
Research your cloud options – start small, think
future;

Things to do while you’re here at Dell World
Expo areas to see
• Explore the solutions center “Data Center” and “Cloud” areas
Other sessions to attend
• MT47: So you need to build a private cloud. What now? Best
practices for building your cloud
• MT48: Prescriptive Cloud Services for the Future Ready
Enterprise
• MT51: Extensibility: The key to managing your entire cloud
portfolio

Financial Summary: 13.2 month payback, 111% ROI

VRTX compared to public cloud for database services
63.9%
lower five year TCO,
13 month payback
Opex factors:
Cost per VM running OLTP
database services
*Includes hardware, software,
maintenance, energy and
administrative salary
Build versus buy? On premises can have better TCO
Principled Technologies study, Jun. 2013 - http://www.principledtechnologies.com/Dell/VRTX_vs_cloud_0613.pdf

MS private cloud on Dell m1000e versus public cloud
$359,193
$959,494
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
Dell solution
with Microsoft private cloud
Leading public
cloud service
Dollars(US)
Five-year TCO
Year 5
Year 4
Year 3
Year 2
Year 1
62.6% lower
five year TCO,
15 month
payback
Principled Technologies study, Aug. 2014 - http://www.principledtechnologies.com/Dell/Microsoft_Private_Cloud_TCO_0914.pdf

Controlling cloud costs:
• OLTP database services simulated
for 3500 orders per minute
• Cost/VM running workload on
public cloud versus on-premises
including hardware, software,
energy and administrative salary
Principled Technologies study, Aug. 2014 - http://www.principledtechnologies.com/Dell/Microsoft_Private_Cloud_TCO_0914.pdf
$600K
saved *
*$600,301.01 saved with the Dell – Microsoft cloud solution
MS private cloud on Dell m1000e versus public cloud

Cloud: To Build or Buy - Can You Justify On-Premises IT?

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Cloud: To Build or Buy - Can You Justify On-Premises IT?