Cloud conf2012

© 2012 IBM CorporationIM AR

Cloudnomics:The Power of Cloud

Clouds “game changing” attributes are revolutionizing industry value chains, forcing companies to embrace new business models

Cezar Taurion

Technical Evangelist

© 2012 IBM Corporation2 IM AR

What are general trends in the IT industry?

Gartner

� Cloud Computing

� Mobile Applications & Media Tablets

� Next-GenerationAnalytics

� Social Analytics

� SocialCommunications & Collaboration

� Video

� Context-AwareComputing

� UbiquitousComputing

� Storage ClassMemory

� Fabric-BasedInfrastructure and Computers

Forrester

� Smart Computing

� Empowerment

� Cloud Computing

� IT as Business Technology

� Mobile Enterprise Apps

� Disruption-as-a-Service

� HW-SW-Appliances

� Next-Gen Analytics

� IT and Sustainability

� Social Media

IDC

� Cloud Computing in theDatacenter

� Public Cloud Services

� Platform-as-a-Service

� Enterprise Mobility

� Free SW, Open Source

� BPM Platforms

� BI and Analytics

� Enterprise Data

� Social Media

� Smart Devices

Ovum

� IT Security

� Data Management

� Business Analytics

� Mobility

� Datacenter Transformation

� Cloud Computing

� Collaboration

� IT and Sustainability

� Drive IT as Business

� Context-Aware Computing

Source: Gartner, cio.de, IBM MD Germany, IBM MI, HorizonWatch

IBM Horizon Watch 2012

� Cloud Computing

� Virtualization

� Social Business

� Mobile Computing

� Big Data

� Analytics

� IBM Watson

� Human / Computer Interaction

� Security

� Sustainability & Green IT

� Consumerizationof IT



13%

41%21%

28%38%

21%

Today 3 yrs

Nearly half (48%) of CIOs surveyed evaluate cloud options first, over

traditional IT approaches, before making any new IT investments

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

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

Piloting

Adopting

SubstantiallyImplemented

+215%

+33%

72%

91%

What is Your Organization’s Level of Cloud Adoption?

% of Respondents

The Global Cloud Computing Market is Forecast to Grow 22% per year through 2020

$0B

$50B

$100B

$150B

$200B

$250B

2011 2015 2020

$241B

$41B

$150B

Source: Sizing the cloud, Forrester Research, Inc., April 21, 2011


14% 10%5%

21%22% 34%

32%44%

43%

<$1B $1B - $20B >$20B

Piloting

Adopting

SubstantiallyImplemented

67%

76%82%

Company Annual Revenues

Today, at least two thirds of companies of all sizes are actively either experimenting with or implementing cloud

Source: (1) 2011 joint IBV/EIU Cloud-enabled Business Model Survey of 572 business & IT leaders, Q4, n=363

What is Your Organization’s Level of Cloud Adoption?% of Respondents; Today



IT is drawn to cloud’s cost, efficiency and control…

…while business users are drawn to cloud’s simplified,self-service experience and new service capabilities.

of CIOs plan to use cloud—up from 33% two years ago.

of business executives believe cloudenables business transformation and leaner, faster, more agile processes.

2011 IBM CIO Study, London School of Economics, December 2010

Eff

icie

ncy

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rmati

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IT and Business are attracted to cloud for different reasons.


Virtualized environments only get benefits of scale if

they are highly utilized

Drives lower capital requirements

Reduced complexity, increased automation possible; reduced

admin burden

Take repeatable tasks and automateL

ab

or

Le

ve

rag

eIn

fra

str

uc

ture

L

eve

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Clients who can “serve themselves” require less support and get services

Major factors driving cloud

Self Service

Automation of Management

Standardization of Workloads

Virtualization of Hardware

Utilization of Infrastructure


Envisioning the full potential of cloud requires organizations to challenge existing approaches in their business and industry

… you could reach hitherto unaddressed customers or

markets and target them based on their individualized preferences

through analytical insights?

Reflecting on your business, question yourself – “What you would do if…

… you had access to unlimited computing

resources to scale your business?

… you could easily and seamlessly connect and

collaborate with business partners and customers?

… you could inexpensively and rapidly develop and

launch new product & service offerings?

…you could give any of your customers access to any of your products and services anytime, anywhere, on any

device?

…you could redefine your role in your industry and change your competitive

positioning?


Value delivered

Change management

Test provisioning

Install database

Install of operating system

Provisioning environment

Design and deploy business applications

From traditional To cloud

Months

Weeks

1 day

1 day

▄

Months

Days or hours

20 minutes

12 minutes

30–60 minutes

51% cost savings

Days/Weeks

Cloud is a real Paradigm Shift


In addition to enhancing internal efficiencies, organizations clearly intend for cloud to improve their business capabilities

35%

28%

30%

25%

29%

31%

26%

27%

29%

26%

29%

22%

15%

17%

Increased collaboration with external partners

Competitive/cost advantages thru vertical integration

New delivery channels/markets

New/enhanced revenue streams

Competitive differentiation thru specialization

Rebalanced mix of products/ services

Flexible pricing models

Important Very Important

How Important are the Following Objectives for Adopting Cloud?% of Respondents

Source: 2011 IBM/EIU Cloud Survey Results, Q5: How Important are the Following Objectives for Adopting Cloud?, n= 572

62%

57%

56%

54%

51%

46%

43%

Business Capabilities Internal Efficiencies


61%

54%

36%

68%

63%

48%

Changingproduct/service mix

Finding additionalsources of revenue

Developing flexiblepricing models

Invention of new customer value propositions comprise ways in which cloud is used to create new customer needs and form new markets

How is Cloud Substantially Changing Your Customer Value Proposition?

% of Respondents

Source: 2011 IBM/EIU Cloud Survey Results, Q9ac/bc : How do you intend to change your value proposition ? n (today) = 28; n (in 3 years) = 136. The question has a reduced sample size, since only those respondents were asked this who affirmatively answered Q9a1/b1 (Impact of cloud on value proposition ) with Substantially changing the value proposition in order to generate additional revenues

Today In 3 years


47%

37%

8%

3%

3%

2%

10%

48%

16%

17%

4%

5%

Improve existing capabilities in single area ofour value chain

Improve existing capabilities across multipleareas of our value chain

Change our role within industry ecosystem

Redesign our industry ecosystem

Enter a new industry

Create a new business model/new industry

Creation of new enterprise or industry value chains or

ecosystems can drive value through industry model innovation

Source: 2011 IBM/EIU Cloud Survey Results, Q8: What is the primary focus of your organisation’s cloud technology adoption strategy ? n (today) = 572; n (in 3 years) = 572

What is the Primary Focus of Your Organization’s Cloud Adoption

Strategy?% of Respondents

Today In 3 years


Cloud harnesses the capabilities borne out of these trends to empower six potentially “game changing” business enablers

Source: IBV Analysis

Cloud’s Business Enablers

Cost Flexibility

1

� Shifts fixed to variable cost� Pay as and when needed

Business Scalability

2

� Provides limitless, cost-effective computing capacity to support growth

Masked Complexity

4

� Expands product sophistication� Simpler for customers/usersContext-driven

Variability5

� User defined experiences� Increases relevance

Ecosystem Connectivity

6

� New value nets� Potential new businesses

Market Adaptability

� Faster time to market� Supports experimentation

3


Cost Flexibility

Cloud enables businesses to reduce fixed IT costs and shift to a more variable, “pay-as-you-go” cost structure

1

Characteristics� Shifts CapEx to OpEx, when and as

needed� Shifts cost from fixed to variable� Generates faster payback and higher

ROI

Finding� 31% of executives see cloud’s ability

to provide pay-as-you go, cost flexibility as a top benefit1

Source: (1) 2011 joint IBV/EIU Cloud-enabled Business Model Survey of 572 business & IT leaders; Q6a3-Q6b3(1): Expected benefits of cloud – Greater cost flexibility (today and next three years), N=572


Cost Flexibility

Cloud enables businesses to reduce fixed IT costs and shift to a more variable, “pay-as-you-go” cost structure

1

Characteristics� Shifts CapEx to OpEx, when and as

needed� Shifts cost from fixed to variable� Generates faster payback and higher

ROI

Finding� 31% of executives see cloud’s ability

to provide pay-as-you go, cost flexibility as a top benefit1

Example: Etsy – the world’s handmade marketplace

The cloud frees up capital by significantly reducing the need for IT investment

� Etsy is an online marketplace to buy and sell handmade goods. In addition to bringing buyers and sellers together, Etsy offers product recommendations based on analysis of buyer preferences

� Etsy uses cloud based analytics capabilities for its targeted marketing approach by renting hundreds of computers every night to analyze data from a billion views of its website.

� Cost flexibility of the cloud allows Etsy access to tools and compute power that only large retailers like Gap or Ikea could previously afford.

Source: (1) 2011 joint IBV/EIU Cloud-enabled Business Model Survey of 572 business & IT leaders; Q6a3-Q6b3(1): Expected benefits of cloud – Greater cost flexibility (today and next three years), N=572



Cloud enables businesses to grow efficiently, expanding the range of business options

Characteristics� Rapid / elastic provisioning of resources� No scale limitations� Benefit from scale economics without

achieving large volumes on your own

Finding� 32% of executives see business

scalability as a top cloud benefit1

2

Source: (1) 2011 joint IBV/EIU Cloud-enabled Business Model Survey of 572 business & IT leaders,\; Q6a2-Q6b2(1): Expected benefits of cloud – More scalable and flexible services (today and next three years), N=572; Source: (2) http://radar.oreilly.com/2011/05/netflix-cloud.html



Cloud enables businesses to grow efficiently, expanding the range of business options

� Netflix streams movies on-demand with large surges of capacity required at peak times.

� Use of cloud allowed Netflix to rapidly scale up its business without having to buy, support and operate infrastructure and resources to meet its growth requirements

Characteristics� Rapid / elastic provisioning of resources� No scale limitations� Benefit from scale economics without

achieving large volumes on your own

Finding� 32% of executives see business

scalability as a top cloud benefit1

Example: Netflix

Cloud’s ubiquitous and nearly unlimited computing power drives scale economics and enables self-provisioning and peak/non-peak responsiveness

2

Source: (1) 2011 joint IBV/EIU Cloud-enabled Business Model Survey of 572 business & IT leaders,\; Q6a2-Q6b2(1): Expected benefits of cloud – More scalable and flexible services (today and next three years), N=572; Source: (2) http://radar.oreilly.com/2011/05/netflix-cloud.html


Escalability + Cost Flexibility

50.000 core cloud utility supercomputer in the AWS cloudthat was projected 12.5 years of computing time with a US$ 21 millioncost, to a 3 hour simulation with a cost of US$ 4.828,85 per hour to run. AWS built the 42°fastest supercomputer in the world.


Customer Value Proposition

What is my customer value proposition?

� What mix of products and services?

� Which customer needs are being satisfied?

How will I do what I do?

� What kind of delivery structures?

� Which operating model?

� What is the cost structure?

What is my role in the value chain?

� What to do and when to rely on others?

� Where to specialize and how to set up interdependent networks?

Valu

e C

hain

Which customers am I serving?

� Which customer segments?

� What type of relationships to maintain?

� Which channels?

How do I generate revenue?

� Which pricing models?

� How and where to capture value?

Cloud business enablers are already driving innovation across company/industry value chains and customer value propositions

20

Cloud Enablement Framework


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


Enhance Extend Invent

Enhance

� Improve current value proposition to retain/attract customers for existing products and services

� Appeal to existing customer segments

� Garner incremental revenue

Extend

� Extend value proposition to attract customers to different products and services

� Attract existing or adjacent customer segments

� Generate significant new revenues

Invent

� Construct radically different value proposition to create a new “need” and own the market

� Form new customer segments

� Generate entirely new revenue streams

21



Invent: Some organizations are using cloud to invent entirely new customer experiences by creating new offerings

Invention of new customer value propositions comprise ways in which cloud is used to create new customer needs and form new markets

Situation

� Apple’s iOS platform enables anyone to create an application –around gaming, productivity or entertainment – for use on an Apple mobile device. The best apps are sold through the AppStore.

Value Created

� A completely new ecosystem of professional and amateur developers

� A radically different value proposition that dominates the market

Source: 2011 IBM/EIU Cloud Survey Results, Q9ac/bc : How do you intend to change your value proposition ? n (today) = 28; n (in 3 years) = 136. The question has a reduced sample size, since only those respondents were asked this who affirmatively answered Q9a1/b1 (Impact of cloud on value proposition ) with Substantially changing the value proposition in order to generate additional revenues


Cloud is also being leveraged to improve, transform and create new organization and industry value chains

Imp

rove

Tra

ns

form

Cre

ate

Improve

� Increase efficiency and effectiveness of the organization

� Increase partnering, sourcing, and collaboration

Transform

� Change organizational role within the industry or enter a different industry value chain

� Develop new operating capabilities

� Enter adjacent industries

Create

� Build a new industry value chain or disintermediate an existing one

� Radically change industry economics

Valu

e C

hain



Create: Organizations expecting to use cloud to redesign their business model or industry, will quadruple over the next 3 years

Creation of new enterprise or industry value chains or

ecosystems can drive value through industry model innovation

Situation

� Salesforce.com radically altered the traditional software industry by offering a cloud-based, managed solution that automated the critical function of marketing, sales and customer relationship management

Value Created

� Rules for delivery, usage, support and licensing of critical business software were radically rewritten

� Balance of power in the industry is now shifting from the traditional software licensing model to a software-as-a-service model

Source: 2011 IBM/EIU Cloud Survey Results, Q8: What is the primary focus of your organisation’s cloud technology adoption strategy ? n (today) = 572; n (in 3 years) = 572


We classify organizations according to the extent to which theiruse of cloud impacts value chains and value propositions

Disruptors create radically different value propositions, generate new customer needs and segments. They disintermediate existing industries or even create new ecosystems

Innovators significantly extend customer value propositions resulting in new revenue streams and transform their role within their industry or enter a different industry ecosystem

Optimizers use the cloud to incrementally enhance their customer value propositions while improving their organization’s efficiencyIm

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Optimizers

Disruptors

Innovators

Organizations should determine how and to what degree

cloud can be used to enable their business model



These categories map closely to IBM’s innovation classifications, which characterize the spectrum of business innovation

Optimizers

Disruptors

Innovators

Product and Service Innovation

Operational Innovation

Revenue Model Innovation

Enterprise Model Innovation

Industry Model Innovation

Pro

du

ct

an

d S

erv

ice

a

nd

Op

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tio

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no

va

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Bu

sin

es

s M

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el

Inn

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IBM’s Innovation Classifications


Organizations generally fall into one of the three categories: optimizers, innovators or disruptors

Imp

rove

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rmC

rea

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Optimizers

Disruptors

Innovators

Va

lue

Ch

ain


Positioning of an organization’s cloud-enabled initiative within the CeBM framework involves understanding the impact of the business model, not merely the intent.

Force.com

Application Platform

3M

Visual Attention Service

Xerox

Mobile Print

Apple


Animoto

Custom Presentations

North Carolina State University

Virtual Computing Lab

Organization




Imp

rove

Tra

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rmC

rea

te


Optimizers

Disruptors

Innovators

Va

lue

Ch

ain



Force.com


3M


Xerox

Mobile Print

Apple


Animoto




Organization


3M Visual Attention Service



Imp

rove

Tra

nsfo

rmC

rea

te


Optimizers

Disruptors

Innovators

Va

lue

Ch

ain



Force.com


3M


Xerox

Mobile Print

Apple


Animoto




Organization


In the next three years, disruptors expect to significantly outperform both innovators and optimizers

Optimizers

Innovators

Disrupters

54%

57%

68%

Source: (1) 2011 joint IBV/EIU Cloud-enabled Business Model Survey of 572 business & IT leaders

Q9bc1-4(1): Changes to Value Proposition to increase revenue in three years (N=67) q1- How would you describe your organization’s financial performance compared with your peers? (over the next 3 years) (Percentage of responses) N= (next 3 years) : Optimizers: 193; Innovators: 335; Disruptors: 44

An

ticip

ate

d o

ver

the n

ex

t 3 y

ears

Percentage of respondents expecting to significantly or somewhat outperform peers


Cloud’s business enablers are fuelling innovation and empowering organizations to optimize, innovate and disrupt business models

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Optimizers

Disruptors

Innovators


Va

lue

Ch

ain


Context-driven Variability

5

Masked Complexity

4

Market Adaptability

3


2


6

Cost Flexibility

1


Cloud offers six “game changing”business enablers …

…that are fuelling innovations across enterprise value chains and customer value propositions…

…empowering organizations to optimize, innovate or disrupt business models

Organizations need to assess themselves using the Cloud Enablement Framework

and examine the potential to innovate by leveraging the cloud’s business enablers


Establish shared responsibility for cloud strategy and governance across the Business and IT

� Place a senior executive Business leader, in partnership with the CIO, in charge of your firm’s cloud adoption. This collaboration should:

– Clearly communicate and drive cloud as a top business priority

– Ensure that infrastructure and operational efficiencies are optimized as well as business objectives are met

� Establish a governing committee of Business and IT leaders to oversee cloud business strategy development

– Determine which cloud business enablers should be leveraged and how they will be used

– Clearly link your cloud adoption strategy with your business and marketing strategies

– Architect and oversee the implementation of business changes (e.g., processes, outcomes) that cloud will enable within your organization and throughout your industry ecosystem

Context-driven Variability

5

Masked Complexity

4

Market Adaptability

3


2


6

Cost Flexibility

1



Bechtel’s New Benchmarks

Source: CIO Computing, November 2008

COMPANY TECHNOLOGY BENCHMARK WHAT BECHTEL LEARNED

COMPANY BECHTEL

Wide-Area Network $10-$15 per megabit $500 per megabitData Centers located where there is

already a lot of bandwidth lowers

cost and bring data to the network

Servers

1 System

Administrator per

20,000 servers

1 System

Administrator per

100 servers

Built whatever, whenever, wherever

business wanted. Google

standardized server infrastructure

Virtualization

Storage costs 15

cents per gigabyte

per month

Storage costs $3.75

per gigabyte per

month

Storage was 'cheap' because storage

was virtualized and more highly

utilized

Applications

1 Application for 1

million users.

Upgraded 4 times

per year

230 Applications up

to 5 versions each;

Upgrades and

training were

constant

Converting 50 most heavily used

applications into single instance

software as a service apps run from

a Google like portal


Look beyond your organization’s borders to maximize value derived from your cloud adoption

• Determine how your cloud strategy can impact your industry eco-system

• Determine how cloud can help your industry eco-system sustain competitive advantage

• Identify new partners that cloud can help draw into your eco-system

• Evaluate whether cloud can change your role in your industry’s ecosystem

• Use cloud to respond to your industry’s end customers more effectively

• Explore whether cloud can help enhance your value proposition with your current customers

• Examine whether you can reach other customer segments by leveraging the cloud


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Strategize whether your organization will be an Optimizer, Innovator or Disruptor

• Consider organizational and market factors –corporate strategy, competitive dynamics, customer strategy, your firm’s risk profile, how empowered your customers are – that impact your cloud strategy

• Determine where your organization is positioned on the Cloud Enablement Framework today

• Determine whether your organization should be an Optimizer, Innovator, or Disruptor in the next three years

• Determine whether your cloud strategy should involve becoming an consumer or a provider of cloud-based offerings – or include elements of both

• Identify your organization’s operating model requirements, including skills and capabilities, to action your cloud strategy

Impro

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Optimizers

Disruptors

Innovators

Illustrative Potential cloud Strategies


The realities of cloud versus hype

Source: Market Insights and Gartner

Reality Today

Internal IT plus 3rd party for some things

Everything in the cloud and all at once

Cloud Hype

Sourcing mixture -retain legacy, plus

private/hybrid, public

Future Reality

Trad. SO Trad. SO

So, no “BIG BANG” !

≠

People tend to overestimate what will happen two years from now andunderestimate what will happen in 10.


Consolidate

Standardizeand automate

� Reduce infrastructure complexity

� Reduce staffing requirements

� Manage fewer things better

� Lower operational costs

� Remove physical resource boundaries

� Increase hardware utilization

� Reduce hardware costs

� Simplify deployments

� Standardize services

� Reduce deployment cycles

� Enable scalability

� Flexible delivery

=Cost

Flexibility

Virtualize

Dynamic

Cloud Computing deployment became part of the existing Business & IT optimization strategy and

roadmap


Ready

for Cloud

Some workloads are ready for cloud delivery

Sensitive Data

Complex Processes & Transactions

Regulation Sensitive

Not yet Virtualized

3rd Party SW

Highly Customized

Analytics

Collaboration

Development & Test

Workplace, Desktop & Devices

Infrastructure Storage

Infrastructure Compute

Business Processes

Industry Applications

Pre-Production Systems

Information Intensive

Isolated Workloads

Mature Workloads

Batch Processing

May not yet

be ready

for migration


Cloud Computing has moved beyond the hype. It is a highly disruptive trend that brings with it new opportunities

41

“Cloud services are interconnected with and accelerated by other disruptive technologies, including

mobile devices, wireless networks, big data analytics, and social networking. As during the

mainframe and PC eras, the new platform promises to radically expand the users and uses of information technology, leading to a wide and entirely new variety of intelligent industry solutions.” –IDC

Disruption

“In 2012, mobile workers and consumers will embrace tablets, mobile content, mobile video and personal cloud services at unprecedented levels. Nearly 1 in 5 professionals with three or more devices will adopt a personal cloud service for online storage, backup and synching.” – Yankee Research

“What supply chain models did to manufacturing is what cloud computing is doing to in-house data centers. It is allowing people to optimize around where they have differentiated capabilities.” – Gartner

Opportunity

Mobile Cloud Services


What is coming?

In 2021, cloud computing is simply computing,

corporate office parks are senior housing facilities and

the IT organization of the future has been absorbed by

the business.

� Internal IT becomes an internal cloud.

� IT becomes a services broker.

� IT will become a function of the business.

Gartner, 2011


IT Service Provider “IT as a function of the business“

IT Strategy for the next decade: an evolution of today‘s focus topics

VirtualizationConsolidation

Cloud

AutomationAutomationAutomationAutomation

SOA

on demand

Service Management

Service QualityCyber CrimePrevention

Big Data

Analytics

Operational Excellence

MobilityCollaborationCollaborationCollaborationCollaboration

Open Source Social MediaData CenterOptimization

Appliances

Smart Devices

Cost Pressure

DataManagement

IT Security

...

...


Obrigado!

[email protected]

www.ibm.com/developerworks/blogs/page/ctaurion

@ctaurion

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