Cloud Computing – A CFO Briefing

Presented by:Joe Nathans, COO and CIO Services

Cloud Computing – Key Trends

The economics of public cloud computing are accelerating the pace of change occurring in enterprise software today and shifting the balance of purchasing power away from IT to line-of-business leaders1. Cloud computing is driving:

• Dramatic cost reductions in infrastructure and applications

• A movement of IT staff out of the organization

• Ability to create large international networks on the fly

• Accessibility of strategic applications from Big Data to innovative point solutions

• Low cost development environments fueling application innovators

• Subscription pricing – CapEx to OpEx

2 > http://www.forbes.com/sites/louiscolumbus/2012/07/02/forecasting-public-cloud-adoption-in-the-enterprise-2/

The Scale & Efficiency of Cloud Computing Drives Down TCO

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• Supply-side savings. Large-scale data centers (DCs) lower costs per server.

• Demand-side aggregation. Aggregating demand for computing smooths overall variability, allowing server utilization rates to increase.

• Multi-tenancy efficiency. When changing to a multi-tenant application model, increasing the number of tenants (i.e., customers or users) lowers the application management and server cost per tenant.

Source: Microsoft1

Lower TCO Drives Compelling Cost & Productivity Opportunities

Infrastructure as a Service (IaaS) Software as a Service (SaaS)

Large Amazon Reserved Instance $.08/ hr.1,000 Spot Instances (Big Data) $124.00/hr.Typical $150 M Organization (25 Servers)• ERP, LOB Applications, Exchange, File Server, Remote

Desktop Services, Full Hot Site• $4,000/mo., a 60% savings over Co-Lo

• SAP Business byDesign, $149 per user/mo.• Business Objects, $650/month + $.49/hr. for 5 named

users. Includes support.• Alfresco Document Management from $49/mo.• Salesforce.com, Enterprise Edition $125/user/mo.

Platform as a Service (PaaS) Overall Productivity

Full multi-tenant development environment, with billing services, workflow, reporting, release management, and data base management• $2,000 per month/100 users/100 applications/1M

Records• 60% productivity gains over typical development

environment

From 2012 IDC Study of 11 organizations that deployed applications on Amazon Web Services• 626% Five year ROI• 7.1 month payback period• 72% downtime reduction• 52% IT productivity increase• 70% Five year TCO savings

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IaaS – Infrastructure as a ServiceCloud Computing – A CFO Briefing

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Gartner Magic Quadrant for IaaS

Amazon Web Services (AWS) is a clear market, price and innovation leader, but other vendors may better match specific requirements:

• AWS usually has the lowest cost, but not always

• AWS does not provide managed services

• AWS enterprise-class support is a 10% uplift to the entire bill and is geared toward technically knowledgeable, expert users

• Consultative sales support is limited

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The Amazon Web Services Environment

Amazon operates in 8 regions, containing 21 availability zones (data centers) along with dozens of edge locations.

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Networking & load balancing from peaks to off hours. Automatic traffic re-routing

Data Storage from for high speed applications (EBS) to archive

Virtual servers with preconfigured or custom operating systems (AMIs)

Rapidly provision & manage services

Performance monitoring & alerts

Pay per use business applications, e.g. BI & Content Management

IaaS Case Study – $150M Construction Management Firm

Based on an IT Assessment, our client was at substantial risk for:• A sustained business interruption.

• Three recent incidents had already occurred.

• A permanent loss of data.

• Inability to pay 900 Union Employees at Government locations

• Inability to conduct daily operations

• Inability to complete and submit bids with investments of $250,000 to $1 Million

• Inability to communicate and respond to emergency situations

• Malicious attacks and fraud

• Loss of productivity, data integrity and contract compliance

• Inability to scale the business

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Solution: Migrated to Amazon Web Services

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Improved Business continuity

> Automatic redundant data storage

> Geographically dispersed availability zones

> East Coast Disaster Recovery Hot Site with 1 hr. TTR and

virtually no data loss

Improved Flexibility & Scalability

> Quickly scale-up/scale-down

> Rapidly provision new applications

> Lowered costs

Improved Security

> SAS 70 Type II, PCI DSS Level 1

> ISO 27001, FISMA

> Encrypted VPN connections

Corporate HQ Remote Offices

AWS Cost Comparison

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Expense TypeAnnual Cost

ExplanationAWS Co-Lo In-House

Reserved Instance Expense $44,547 Usage of 139,776 reserved instance hours (16 reserved instances) at an average price of $0.32 per hour

On-demand Instance Usage $3,390 Usage of 3,494 on-demand instance hours (4 on-demand instances) at an average price of $0.97 per hour

Server Hardware $28,352 $28,352 Purchase price of 20 total servers ($85,056) divided by useful life of 3 years

Network Hardware $5,670 $5,670 Purchase price of 20 total servers ($85,056) multiplied by 20%, divided by useful life of 3 years

Hardware Maintenance $18,372 $18,372 Purchase price of server and network hardware ($102,067) multipled by 18% annual maintenance fee

Operating System $19,993 $19,993 Purchase price of OS (@ $2,999 per server) multiplied by 20 servers divided by useful life of 3 years

Co-Location Expense $48,944 Assumes 133 rack units (U); initial non-recurring cost of $24 per U and monthly recurring cost of $30 per U

Remote Hands Support $300 Assumes 10% annual server failure rate, 1 repair hour per failure, and a repair rate of $150 per hour

Power and Cooling $7,402 Assumes power/cooling for 20 servers, with a data center PUE of 2.5 and electricity price of $0.09 per kW hour

Administration $0 Assumes 1 FTE per 50 servers at an annual salary of $105,000 per year

Data Center Construction $6,445 Assumes $23,000 per kW of redundant IT power and $300 per sq ft of space divided by useful life of 15 years

Data Transfer $219 Monthly upload of 283 GB, at $0.00 per GB; monthly download of 152 GB, at average price of $0.12 per GB

Data Transfer $1,297 Assumes peak monthly transfer of 1.4 mbps charged at $80 per Mb per month

Data Transfer $405 Assumes peak monthly data transfer of 1.4 mbps charged at $25 per Mb per month

$48,155 $122,929 $86,640

• AWS was 60% less than the cost of a comparable co-location option and 45% less than a comparable in-house option even though AWS included a fully operationally hot-site

• Requirements included ERP & Construction Software, MS Exchange, MS Office, 1 M+ directory files, Test & QA Environments, Complete operational Hot Site

• Data transfer assumes full utilization of Remote Desktop Services

IaaS Can Significantly Improve IT Best Practice Capabilities

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SaaS – Software as a ServiceCloud Computing – A CFO Briefing

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Applications are Rapidly Being Made Available in the Cloud

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Availability of SaaS is rapidly expanding.

CRM is well established. Business Intelligence is the fastest growing

sector.

CAGR is 20%+

66% of all SW vendors are working to provide SaaS solutions.

Reasons Driving SaaS Adoption

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Organizations are looking to SaaS solutions for lower TCO, simplicity,

regional deployments & to overcome IT resource constraints.

SaaS developers are still struggling with technical challenges surrounding multi-

tenant architecture, third party integration & large client

customization.

More and more SaaS solutions are making Gartner’s Magic Quadrant

SaaS – Software as a Service

• SaaS offerings should definitely be considered when evaluating new business solutions• Lower risk – minimizes up-front investment

• Lower TCO and faster time to market

• Vendor responsible for maintenance and upgrades

• Often reduces unnecessary complexity while increasing productivity

• Availability of highly specific solutions

• SaaS Business Intelligence and Corporate Performance Management solutions can provide significant payback

• There is still a great deal of variability across SaaS solution providers – caution is required

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PaaS – Platform as a ServiceCloud Computing – A CFO Briefing

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PaaS – Platform as a Service

• PaaS allows businesses to build and run web-based, custom applications in an on-demand fashion.

• Developers have access to specific tools and libraries & can control software deployment & configuration.

• PaaS services include networks, servers, and storage with unlimited computing power.

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PaaS may be the least understood of the Cloud Computing options, but it provides the greatest opportunity for innovation & the launch of new companies.

PaaS provides developers with a robust set of highly productive tools, designed for the challenges of SaaS, that were historically out of reach for most IT organizations.

“Work that took five full-time engineers over the course of three years to build on .NET, took just three months and two engineers (with PaaS)”.- Izak Joubert, CTO of NES Financial

CIO ConcernsCloud Computing – A CFO Briefing

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Cloud Computing Concerns

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Due diligence is required before any Cloud Computing Service is acquired.

The industry, while evolving, continues to address these concerns,

especially security.

For many IT organizations, Cloud Computing may be safer, more reliable and cost effective than

traditional applications

Cloud Computing - Summary

• Cloud Computing can offer significant cost saving, productivity, and time to market advantages.

• The industry is rapidly growing and new solutions are being added almost daily.

• Cloud Computing is not a panacea, it still requires discipline, careful evaluation and management to achieve the expected benefits.

• Working with experienced professionals is the best way to achieve results.

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Thank youCloud Computing – A CFO Briefing

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