Charting the Cloud: A Competitive Landscape for Challenging Times | Current Analysis Telebriefing

<body> <p>Charting the Cloud: Competitive Landscape for Challenging Times <br /> </p> <p>May 20, 2009<br /> Amy Larsen DeCarlo<br /> Principal Analyst, Managed IT Services</p> <p>1</p> <p>Agenda<br /> </p> <p>- The Next Big Thing</p> <p>- Defining Terms</p> <p>- A Natural Evolution</p> <p>- Landscape in Transition</p> <p>- Forward Momentum, and the Expected Backlash</p> <p>- Conclusion</p> <p> </p> <p>2<br /> </p> <p>Cloud Services Take Off </p> <p>3</p> <p>The Next Big Thing</p> <p>Cloud Computing is Everywhere.<br /> .Falling IT budgets and the maturing underlying technologies (e.g. virtualization) drive more businesses to look at outsourced delivery models</p> <p>.Merrill Lynch projects cloud computing market for business applications will reach $95 billion by 2011</p> <p>.Cloud services aren’t just for SMBs</p> <p>- Large public and private sector organizations are giving the cloud serious consideration<br /> </p> <p>.The Google Effect </p> <p>- More software vendors, including Microsoft, transition to a subscription-based SaaS model<br /> </p> <p>.Providers offer more managed IT services using an online delivery model</p> <p>4<br /> </p> <p>All in the Timing</p> <p>The attraction is obvious –dramatically reduced costs, greater efficiency and flexibility, and fewer IT headaches. All these benefits will appeal to a big prospect pool, particularly in a down economy where cost cutting is turning into a game changer as IT is asked to do more with less. </p> <p><br /> 5<br /> </p> <p>ew Reality or the Latest Chapter in the Hype Cycle?<br /> An argument is brewing. Exactly what is cloud computing? And does it really represent a brand new paradigm or is it just a slick marketing term for an old model? <br /> “Maybe I’m an idiot, but I have no idea what anyone is talking about. What is it? It’s complete gibberish. It’s insane. When is this idiocy going to stop?”<br /> -Larry Ellison, Oracle CEO, October 2008 on Cloud Computing</p> <p>6<br /> </p> <p>Coming to Terms<br /> Cloud computing refers to a scalable online delivery model for software applications and other IT resources that uses a shared resource model to support a cost-effective pricing structure. Cloud services can be provisioned quickly without requiring excessive administrative intervention on the part of the end user’s organization.<br /> </p> <p>7<br /> </p> <p>Components of the Cloud<br /> .Delivered via public web or private IP network</p> <p>.Often (but not always) leverages virtualization to support a lower-cost multi-tenant environment where resources are pooled</p> <p>.Employs something approximating a self-service on-demand model where resources can be scaled up or scaled down to meet time-specific usage requirements</p> <p>.Accessible via fixed or mobile devices </p> <p>.Applies Pay-per-use and subscription based pricing models</p> <p>.Can be a hosted, managed, or hybrid solution</p> <p>8<br /> </p> <p>At Your Service<br /> Cloud computing includes:<br /> .Software-as-a-Service</p> <p>- Hosted vendor applications delivered by a provider over an IP network<br /> </p> <p>.Computing-as-a-Service</p> <p>- IT resources such as processing, storage, bandwidth delivered as needed<br /> </p> <p>.Platform-as-a-Service</p> <p>- Provider offers the facilities, hardware, and other resources to support the delivery of customer-developed applications through the cloud</p> <p>9</p> <p>Historical Perspective <br /> </p> <p>10</p> <p>Natural Evolution</p> <p>So does cloud computing represent a seismic shift or is this a case of what is old is new again? The truth is a little of both. Today’s cloud services, while a major step forward from the past, are a direct descendant of the solutions delivered by application service providers (ASPs) of the late 90s.</p> <p><br /> 11</p> <p>But Didn’t the ASP Market Fail?<br /> .The IP infrastructure has grown up</p> <p>- Greater global and regional connectivity</p> <p>- Bandwidth isn’t the bottleneck it was<br /> </p> <p>.The applications are more stable and flexible</p> <p>.Virtualization technology matures </p> <p>.More sophisticated security </p> <p>.Better self-management tools</p> <p>.Improved provider business models and pricing structures</p> <p> </p> <p>12<br /> </p> <p>While the ASP market collapsed for a variety of technical and business reasons, the model itself didn’t failed. It just evolved. So what has changed is the last nine years?<br /> </p> <p>Demand Side Economics<br /> .Globalization </p> <p>.Need to interact more effectively with employees in other geographies, as well as partners and customers</p> <p>.Reduced budgets/Limited staffing resources/increased expectations</p> <p>.Rapidly rising data center costs and expensive software licensing fees</p> <p>.Added recessionary pressures to eliminate new CapEx and slash OpEx </p> <p>.Early success stories inspire greater confidence And…</p> <p>.Recognition by both SMBs and enterprises that it can be more cost-effective to offload the management of non-core applications and IT resources to a trusted third-party provider</p> <p> </p> <p>13</p> <p>What is driving the need for more elastic managed IT services? </p> <p>Candidates for Success</p> <p>.Email and other collaborative applications</p> <p>.Storage (Back up and restore) </p> <p>.Security and compliance</p> <p>.Application development/testing</p> <p>.Customer relationship management (CRM) and other supporting business applications</p> <p>.Processing and other computing resources to scale to meet variable utilization requirements</p> <p>.Supporting IT and networking functions</p> <p><br /> 14<br /> </p> <p>While anecdotal evidence shows demand for cloud services is on the rise, not all aspects of IT are a good fit for online delivery from an external provider. What works? </p> <p>Mapping New Terrain </p> <p>15</p> <p>Landscape in Transition<br /> Rising demand is driving IT vendors and managed services providers to alter their delivery models and, in many cases what they are delivering. The result is a fundamental change in the competitive landscape that is producing has is producing new rivalries, partnerships, and new business models. </p> <p><br /> 16<br /> </p> <p>Intersecting Interests<br /> Pure-Play SaaS/<br /> Transitioning ISVs</p> <p>Hosting/Utility Computing <br /> Providers</p> <p>Specialists</p> <p>System Integrators/<br /> Global Consultancies</p> <p>Telecom Providers</p> <p>17</p> <p>A Crowded and Complicated Playing Field<br /> .Pure-play SaaS (e.g. Salesforce.com and Google) and transitioning software vendors (e.g. Microsoft and IBM)</p> <p>.Specialized solution providers and vendors offering services through the cloud (e.g. managed storage providers including EMC; providers of hosted and managed security services such as McAfee, Cisco, etc.)</p> <p>.Telecom service providers (AT&T, BT Global Services, Orange Business Services, Verizon Business)</p> <p>.Hosting and utility computing providers (Amazon, NTT, OpSource, Rackspace, SAVVIS)</p> <p>.System integrators and global consultancies (Accenture, CSC, HP/EDS, IBM)</p> <p><br /> 18<br /> </p> <p>SaaS/Transitioning ISVs<br /> Advantages<br /> .Ownership of the core application </p> <p>.In-house development expertise</p> <p>.For established ISVs, a loyal installed base and an established reseller channel<br /> </p> <p>Challenges <br /> .Lack of scalable data center and network infrastructure</p> <p>.For transitioning vendors, making a profitable move from a licensed to a subscription-based model</p> <p>.Expanding third-party sales network to support new product distribution model</p> <p>.Lack of complementary services solutions <br /> </p> <p>Solutions<br /> .Partner with hosting and network service providers to ramp up quickly and cost-effectively</p> <p>.Tap reseller and channel partners to retain existing clients and add clients in new geographies, verticals</p> <p>19<br /> </p> <p>The Specialists </p> <p>Advantages<br /> .Deep technical expertise in a critical area or areas (such as threat management, hosted mail security, or data restoration) </p> <p>.Ownership of the product and related technologies</p> <p>.Extensive partnerships, often including reseller relationships<br /> </p> <p>Challenges <br /> .Limited data center facilities and lack of network infrastructure</p> <p>.Making the transition from licensed or straight equipment sales to subscription-based model</p> <p>.Fine-tuning channel relationships to support the as-a-service model <br /> </p> <p>Solutions <br /> .Partner with hosting and network services providers</p> <p>.Consider where an alliance with another vendor or provider to create a bundle solution may help broaden appeal and create the opportunity for a higher price point</p> <p>20<br /> </p> <p>Telecom Providers </p> <p>Advantages <br /> .Scalable network infrastructure and data center facilities</p> <p>.Global reach</p> <p>.Design, integration and management experience in key areas such as unified communications and security</p> <p>.Ability to bundle together multiple solutions and deliver them through the cloud</p> <p>.Established enterprise and SMB customer base<br /> </p> <p>Challenges <br /> .Viewed as providers of commodity services</p> <p>.Lack of application and vertical industry expertise</p> <p>.Limited consultative resources</p> <p>.Containing costs to acquire and complete engagements<br /> </p> <p>Solutions<br /> .Deepen alliances with vendors, ISVs and integrators around packaged solutions for specific technology areas (business continuity, compliance management) and verticals (public sector, healthcare)</p> <p>.Move services down market to tap into SMB demand</p> <p>.Position as a consultative partner</p> <p> </p> <p>21</p> <p>Hosting and Utility Computing Providers </p> <p>Advantages<br /> .Scalable data center facilities </p> <p>.Ownership of the product and any related patents, etc.</p> <p>.Strong customer base can function as an ecosystem <br /> </p> <p>Challenges <br /> .Lack of network ownership</p> <p>.Elasticity of their environment</p> <p>.Fine-tuning channel relationships for as-a-service model <br /> </p> <p>Solutions <br /> .Partner with multiple telecom providers to provide flexible network options</p> <p>.Heavy investment in application development to create a flexible and reliable service delivery</p> <p>.Work closely with hardware vendors and ISVs</p> <p>22</p> <p>System Integrators and Global Consultancies <br /> Advantages<br /> .Solutions-oriented approach appeals to enterprises</p> <p>.Extensive vertical industry and application-specific expertise</p> <p>.Significant consulting staffs</p> <p>.Broad geographic reach</p> <p>.Loyal client base<br /> </p> <p>Challenges<br /> .Doesn’t own the network infrastructure</p> <p>.May have limited hosting facilities</p> <p>.Customized approach too costly for a pay-per-use<br /> </p> <p>Solutions <br /> .Fill in the facilities and infrastructure gap through partnerships with hosting and telecom providers</p> <p>.Partner in building platform-as-a-service implementations</p> <p> </p> <p>23<br /> </p> <p>Jockeying for Position </p> <p>So which type of company is in the best position to capitalize on growing demand for cloud services? The truth is, it depends. Each type of provider brings their own particular set of strengths and weaknesses. This said, providers that own their own facilities and thus have the immediate ability to scale have a big advantage. <br /> </p> <p>24<br /> </p> <p>Making a Play for the Cloud –with a Little Help<br /> Co-opetition is the name of the game as companies. Providers fill in their gaps through alliances with customers and third party partners against whom in other instances they would compete. </p> <p><br /> 25<br /> </p> <p>So Where are We Now? <br /> <br /> 26</p> <p>Change is in the Air</p> <p>.In 2009, Salesforce.com becomes the first SaaS company to take in $1 billion in annual revenues</p> <p>.Pharmaceutical company GlaxoSmithKline prepares to transition 100,000 workers from Lotus Notes to Microsoft’s Business Productivity Online Suite this year</p> <p>.Cap Gemini signs French auto parts dealer Valeo to move 30,000 workers to Google Apps</p> <p>27</p> <p>While it is still early days for pay-per-use services, subscription-based multi-tenant cloud services are no longer just a novelty. <br /> Consider the numbers…<br /> </p> <p>But so are the Challenges </p> <p>.A crowded and very competitive field</p> <p>.Widely publicized service outages give prospective customers pause</p> <p>.Security concerns</p> <p>.Resistance from within customer organization to hand over IT tasks to a third party</p> <p>.Tight margins and complex partner relationships</p> <p>.Continued global economic turmoil likely to keep many enterprises at bay</p> <p>.Regulatory issues</p> <p><br /> 28</p> <p>Standing out from the Crowd</p> <p>.Raise the bar on availability and response time SLAs</p> <p>.Restore service quickly following an outage and communicate openly with customers about any incidents</p> <p>.Invest in security –and reporting </p> <p>.Offer cloud services bundles that incorporate applications with a industry-specific orientation</p> <p>.Add complementary support services in areas </p> <p>.Give customers the controls with self-management tools</p> <p>.Think Globally, act locally –data center presence in many countries will help meet data privacy regulations<br /> </p> <p> </p> <p>29</p> <p>Getting on the Right Track</p> <p>30</p> <p>Forward Momentum</p> <p>.An attractive cost model is driving demand</p> <p>.The entire IT industry is looking at how to tap into the cloud</p> <p>.Even the biggest proponents of a conventional licensed model are transitioning to deliver some applications using an online delivery model</p> <p>.SMBs are leading the way but more enterprises are trialing –and buying –cloud services</p> <p>.Resource-constrained small businesses can outsource their supporting IT functions –storage, collaboration, etc. to a cloud services provider for a fraction of what they pain to manage it internally </p> <p>31</p> <p>A real change in how managed IT services are delivered is underway</p> <p>And the Inevitable Backlash<br /> .Unreliable service delivery </p> <p>.Recessionary pressures</p> <p>.Ineffective security</p> <p>.Challenges integrating cloud services with internal legacy applications</p> <p>.Failure to scale up and down to meet customer needs </p> <p>.A price point that is too low –or too high</p> <p>.Trust issues</p> <p>.Compliance questions</p> <p><br /> 32</p> <p>Making the Cloud Pitch<br /> .Eliminate costly operational expenses –utilities, management support, etc. </p> <p>.Offload installation and maintenance responsibilities (and costs) for software</p> <p>.Slash capital spending </p> <p>.Guarantee performance and reliability</p> <p>.Reassure on security and compliance</p> <p>.Promote business benefits (better collaboration, improved productivity, etc.) associated with cloud services</p> <p><br /> 33</p> <p>Market Makers <br /> Cloud computing success depends on<br /> .Guaranteed Stability, security, and price </p> <p>.Standardization </p> <p>.Scalability and agility</p> <p>.Application integration expertise </p> <p>.Strong customer support and communications</p> <p>.Effective Cost Containment</p> <p>.Innovative pricing models </p> <p>.Solid third-party partnerships</p> <p> </p> <p>34</p> <p>Forecasting a Bright Future </p> <p>.Still early days for cloud services but the future looks promising</p> <p>.Economic climate is a mixed blessing</p> <p>.Will certainly help drive more innovation and growth in the managed IT services as a whole</p> <p>.Sheer investment by providers in new technologies and business models will drive advances</p> <p>.Demand from key customer verticals such as the public sector will yield more growth</p> <p>.Cloud services show signs of real staying power. </p> <p><br /> 35</p> <p>36<br /> For more information, please contact…</p> <p>Amy Larsen Decarlo</p> <p>adecarlo@currentanalysis.com</p> <p>|Voice| +1 703.323.1154</p> <p>www.currentanalysis.com<br /> Q&A</p> <p></p> </body>