Building a Cloud Strategy  Cloud Based Services – Industry Trends and Implications

Jitender SinghDirector – Cloud Solutions Business

October 16th, 2013

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IaaS

PaaS

CaaS

SaaS

Private Cloud Public

Cloud

Managed Cloud

Hybrid Cloud

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Customers are seeking Creative Business Models

Customer Drivers for OPEX Models

Cash Management: Consume all network, telephony and applications

as a service Use capital in other areas of business

Flexible Delivery Options Up-scale, down-scale on demand Hosted, On Premise Managed, Hybrid

Managing and Reducing IT Complexity Reluctance to hire staff to manage VoIP/UC

technology complexity End-to-end SLA

Total Cost of Ownership Potential for cost savings, including people, capital

& operating cost Virtualization and shared infrastructure lowers the

cost to deliver services

Managing Obsolescence Refresh as technology evolves

Corporate-wide Standardization

Customer facing differentiation

ImplicationLarge Enterprises are not quite sure as to what implications Cloud will have on their

business, but are expecting a solution that offers cost savings, control, leverage and security first and scalability, flexibility, standardization and homogeneity in the long-run

OPEX MODELS

Managed Services

Assets on premiseOwned by Customer

Managed by 3rd Party

Dedicated(Private)

Shared Multitenant

(Public)

Hybrid(Assets on Premise

Apps from cloud)

Outsourced (COS)

Assets on premiseOwned by 3rd Party

Managed by 3rd Party

Hosted

Assets hosted by 3rd PartyOwned by 3rd Party

Managed by 3rd Party

Cloud Services

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Market View

• The various workplace technology markets will adopt cloud based strategies at different rates

• Trend to cloud is being led by hosted apps - i.e. Email, IM, Avaya LiveEngage, Conferencing, CRM, ERP (like SFDC, SAP) and laying the groundwork for hosted voice

• Hosted and Managed services - help customers make the transition to an all IP converged collaboration.

• Hybrid Solution – Interim step as Enterprises consider migration to Hosted / cloud

Transition to Cloud

$1.4M Avg

$3.5M Avg

Global Cloud Communications Market growing to $27B at 8% CAGR by 2017

Note:UCaaS, CCaaS, VaaS forecast includes Professional Services, Maintenance and Solution revenue for Private +Public offered through Managed, Hosted and SaaSSource: 2013 June Avaya Demand Forecast, Avaya Market Assessment

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Top Business Drivers for Cloud – Large Enterprise

There are a group of business drivers that combine to make hosted the preferred model and are difficult to sell against without a hosted solution.

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Market SegmentationCustomer Needs and Opportunity

Small Businesses• Needs Simplicity and Pricing

- Fixed cost, No worry- Help me focus on my business- Make me look bigger and more professional- Never miss a call; (missed call = missed revenue)- Front office capability- Simple productivity apps (e.g. voicemail to email)

Midmarket• Needs Bundles and Solutions

- High functionality and productivity, but make it easy- Multisite, flexible growth (e.g. add new office,

grow/shrink usage)- Ideal segment for managed / hosted

Large Enterprises • Needs Integration

• Sites, disparate CPE, IT apps, • Security, SLA’s • GLOCAL support from ‘trusted’ partner

Elasticity

Access

Price

Agility

Security

Customization

SLA

Control

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Dollars per user

40000 seats Key Drivers

Spend category On-premise UC Managed UCvs. On-premise UC

Hostedvs. On-premise UC

Implement and Deploy

Data Center Ops/IT Resources

Bandwidth

Moves/changes

Training

NWDC facilities

SW License Fees/Subscriptions

Software Support/Update

Handsets

PBXs/Servers

Maintenance

Total NPV of Ownership

Total Cost of Ownership

Ong

oing

ope

ratio

nal

supp

ort

Softw

are

Hard

war

e

3%

177

10

203

19

138

10

14

26

216

389

210

0

2

0

0

643

0

12

38

227

285

199

1,492 1,412 1,406

-3%

-24% -35%

-20% 228%

71% -99%

-5% -6%

947 902 820 -5% -13%

15

10

203

58

138

10

25

53

216

561

204

Deployment Options for Large Enterprise TCO of Hosted model is 13% lower in 3 year timeframe

• On-premise - Initial installation costs of servers/handsets

• Managed - Initial installation costs of handsets & management

• Hosted - Initial installation costs of handsets & hosting

• On-premise - Maintenance of network, servers, handsets requires 77 FTEs

• Managed - Maintenance of servers, handsets offset by increased maintenance cost

• Hosted - Maintenance of handsets offset by increased subscription cost

• On-premise - Cost of initial licenses, support and update

• Managed - Cost of initial licenses, and S/W update• Hosted - Cost of subscription & handsets

• On-premise - Cost of initial servers, handsets and server maintenance

• Managed - Cost of initial servers, handsets and total maintenance

• Hosted - Cost of initial gateways

3 Year TCO for Large Enterprise (Dollars per User)

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TCO Savings Sensitivity – over 3 years100 Seats SME Vs. 1000 Seats Medium Enterprise

3 year TCO savings for a 100 seat deployment ($ / user) 3 year TCO savings for a 1000 seat deployment ($ / user)

% TCO Savings

# Enterprise Seats

1,000 40,000

Illustrative Only – not per scale

A sweet spot for TCO savings exists potentially between 1,000 and (10,000?) seats

# Seats 100 1,000 40,000

TCO Savings 22% 25% 13%

100

13%

22%

25%

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Dollars per user

40000 seats Key Drivers

Spend category On-premise UC Managed UCvs. On-premise UC

Hostedvs. On-premise UC

Implement and Deploy

Data Center Ops/IT Resources

Bandwidth

Moves/changes

Training

NWDC facilities

SW License Fees/Subscriptions

Software Support/Update

Handsets

PBXs/Servers

Maintenance

Total Cost of Ownership

Total NPV of Ownership

Hard

war

eO

ngoi

ng o

pera

tiona

l su

ppor

tSo

ftwar

e

3%

294

10

203

32

138

17

14

44

360

648

210

0

2

0

0

0

12

63

378

476

199

2,101 1,970 2,201

-3%

-24% -35%

-28% 356%

113% -99%

-6% 5%

1,147 1,082 1,130 -6% -1%

26

10

203

97

138

17

25

88

360

935

204

1,072

Deployment Options for Large Enterprise TCO of Hosted model is similar to On-premise in 5 year timeframe

• On-premise - Initial installation costs of servers/handsets

• Managed - Initial installation costs of handsets & management

• Hosted - Initial installation costs of handsets & hosting

• On-premise - Maintenance of network, servers, handsets requires 77 FTEs

• Managed - Maintenance of servers, handsets offset by increased maintenance cost

• Hosted - Maintenance of handsets offset by increased subscription cost

• On-premise - Cost of initial licenses, support and update

• Managed - Cost of initial licenses, and S/W update• Hosted - Cost of subscription & handsets

• On-premise - Cost of initial servers, handsets and server maintenance

• Managed - Cost of initial servers, handsets and total maintenance

• Hosted - Cost of initial gateways

5 Year TCO for Large Enterprise (Dollars per User)

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ExampleValidates our TCO hypothesis and model

EMEA – 125,000 users (50,000 users would move to hosted)

NAR – 500,000 users (100,000 – 200,000 users would move to hosted)

8,451 sites in NAR and approx 1,000 sites in EMEA (5% large sites with 1000 users and up)

Current network topology is 1 data center supporting all sites.

Customer Scope Top Business Drivers

Flexibility to scale up and down based on usage

Shifting risk to service provider / Managing Technology obsolescence

Moving from Capex to Opex

Standardization

TCO savings (perceived – but not always realized)

TCO Profile

Evaluated On-premise, hosted and managed options over 3, 5 and 7 year horizon

Savings from hosted not as large as expected

– Hit or miss depending upon the site

– Savings from staffing, datacenter operations considered as soft costs

– Enterprise has a very lean, highly skilled staff at good rates – potential for retrain and redeploy

Bandwidth costs for hosted not considered significant

– Bandwidth costs are a significant cost driver within the enterprise network (e.g. when adding a new site)

– Incremental bandwidth costs between private network and CSP do not impact TCO significantly

Savings realized from SIP trunking

– Though WAN upgrades at sites offset savings achieved by negating local GW requirements

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