Everest Group experts will disucss the transformational impact emerging cloud models can have on IT cost and performance in the enterprise. This webinar will focus on the specific enterprise benefits of cloud infrastructure services, including compute, storage and networking.

1. Webinar: Introduction to Enterprise
Cloud Economics
Event hashtag: #cloudecon
Scott Bils Dale Stara
Partner Engagement Director
Next Generation IT Next Generation IT
Everest Group Everest Group
scott.bils@everestgrp.com dale.stara@everestgrp.com
: @everest_cloud
May 24, 2011

2. Today’s Agenda
What Are The Keys to Enterprise
Cloud Economics?
Are Enterprise Cloud Economics
Truly Disruptive?
How Can Enterprises Capture the
Opportunity?
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Proprietary & Confidential. © 2011, Everest Global, Inc.

3. Today’s Focus – IAAS / PAAS
Description Common Services
• End-to-end business • Payroll
Business • Order-to-cash
Process as a process delivered as a
service • Procure-to-pay
Service • Hire-to-retire
(BPaaS)
• Multi-tenant applications • CRM
Software as and business services • HCM
a Service • Email
(SaaS) • Collaboration
Cloud • F&A
Services
• Multi-tenant application • Dev Only
Platform as a development and • Dev + Runtime
Service hosting environments
(PaaS)
• Shared data center, • Compute
Infrastructure- infrastructure hardware (Server / OS)
as-a-Service and software resources • Storage
(IaaS) • Database
• Networking
• Content Delivery
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Proprietary & Confidential. © 2011, Everest Global, Inc.

4. The Cloud Enables New Delivery Models
“Traditional” Model Private – On Prem Private – Off Prem Public Cloud
• Customer Data • Customer Data • Third-party Data • Third-party Data
Center Center Center Center
• Customer-owned • Customer-owned • Dedicated Assets • Vendor Assets
Assets Assets
• Customer or Vendor- • Multi-tenant
• Dedicated HW • Virtualized HW owned
• Virtualized HW
“Hybrid” Cloud
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Proprietary & Confidential. © 2011, Everest Global, Inc.

5. Enterprise Data Center Economics Driven by
High Fixed Costs
DATA CENTER OPERATING COST BREAKDOWN*
2%
70-80% of costs
8%
for the typical data 25%
Variable
center are fixed !!! Costs
14%
7%
15%
23%
75% Fixed
Costs
31%
Labor Hardware Facility Hardware Power Licenses Network Total DC
Costs Maint and Costs Costs
Cooling
* Everest analysis assuming 3,000 server data center, 200:1 server-to-admin ratio 3 year depreciation schedule
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Proprietary & Confidential. © 2011, Everest Global, Inc.

6. High Fixed Costs Make Data Center Utilization
Critical
IMPACT OF UTILIZATION
Illustrative
ON COMPUTE COSTS • Data centers highly
‘leveraged’
• Improvements in
Cost / Compute Hour
utilization drive
disproportionate
improvements in cost
• Same reason why
enterprises ensure
mainframe utilization
Server Utilization
> 90%
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Proprietary & Confidential. © 2011, Everest Global, Inc.

7. Cloud Offers Potential to Drive Utilization
Improvements Within and Across Enterprises
Dedicated Virtualized / Private Cloud Public Cloud
Customer #1 Customer #2
App App App App App App App App App
Operating
System
VM VM VM
Hypervisor Hypervisor
Enterprise Enterprise Cloud Service
Server Server Provider Server
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Proprietary & Confidential. © 2011, Everest Global, Inc.

8. The Critical Question for Cloud and
Enterprise Economics….
If utilization is the key driver Where can Cloud
of enterprise economics… improve utilization???
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Proprietary & Confidential. © 2011, Everest Global, Inc.

9. Today’s Agenda
What Are The Keys to Enterprise
Cloud Economics?
Are Enterprise Cloud Economics
Truly Disruptive?
How Can Enterprises Capture the
Opportunity?
9
Proprietary & Confidential. © 2011, Everest Global, Inc.

10. Virtualization Has Driven a Disruptive Wave of
Enterprise Transformation
Average Enterprise Workload Cost*
$ / GHz hrs
• Disruptive economics
100% for enterprise
35% reduction • Limited difference
between virtualized,
private cloud
65% • 2-3x improvement in
typical server utilization
rates
• But….utilization rates
Virtualized/
Dedicated
Private Cloud
still only ~ 15% !!!!
* Based on average workload mix and profile. Assumes 8:1 virtualization ratio.
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Proprietary & Confidential. © 2011, Everest Global, Inc.

11. Let’s Take a Closer Look at Private Cloud
Utilization
Need to
Server Utilization
‘Size to Peak’
~15%
Inability to
‘Diversify’ Variability
• Workload correlations
• Geography and latency
• Application platforms
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Proprietary & Confidential. © 2011, Everest Global, Inc.

12. Based on Unit Costs, Public Clouds Initially
Appear to be a ‘Yawner’ for Enterprises
Average Enterprise Workload Cost
$ / GHz hrs
100%
60-70%*
65% • Workload unit costs in
‘breakeven’ zone (+/-10%)
• Complex vendor pricing
models limit transparency
• Cloud service providers
living under pricing
Dedicated Virtualized/ Public Cloud ‘umbrella’?
Private
Cloud
* Varies depending on public cloud vendor and offerings. Evaluated vendors included Amazon AWS, MS Azure, Rackspace
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Proprietary & Confidential. © 2011, Everest Global, Inc.

13. What If We Leverage Public Cloud Flexibility?
3
Eliminate
Excess
Capacity!
Private Cloud
Server Utilization
2
Move ‘Peak’
Load to
Public
1
Keep ‘Base’
Load in
Private
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Proprietary & Confidential. © 2011, Everest Global, Inc.

14. Public Cloud Options Unlock Extraordinary
Enterprise Economics
Average Enterprise Workload Cost*
$ / GHz hrs
• 45% potential efficiency gain
• Hybrid economics more
100% disruptive than virtualization!
60-70%**
65%
Peak Load -
Public Cloud
25% Base Load -
Private Cloud
Dedicated Virtualized/ Hybrid Cloud
Public Cloud
Private Cloud
* Based on average workload mix and profile. 15% of total peak workload hours shifted to public cloud ,on demand model. Does not include application
migration costs.
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Proprietary & Confidential. © 2011, Everest Global, Inc.

15. … and Economics Will Improve Further Over
PR
Time
Amazon Driving Pricing Down….
Future Market Dynamics
Will Be More Attractive
• Public cloud capacity
rapidly expanding
• Existing cloud service
providers highly
profitable
• IAAS / PAAS pricing
likely to improve !!!
Source:Cloudscaling, AWS, Everest Analysis
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Proprietary & Confidential. © 2011, Everest Global, Inc.

16. Today’s Agenda
What Are The Keys to Enterprise
Cloud Economics?
What Elements of the Cloud are
Truly Enterprise Disruptive?
When Should Enterprises Start the
Journey?
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Proprietary & Confidential. © 2011, Everest Global, Inc.

17. Unique Customer Requirements and Challenges
Exist around Enterprise Hybrid Models
Hybrid Migration Challenges Customer Needs / Requirements
Enterprise-Class ‘Peak’ Environments Cloud services that fully address
enterprise-class requirements
– Network and network security
– Security
– Performance SLAs
– Business Continuity
– Compliance
Workload Migration and Management
Viable bursting options that maximize
efficiency and minimize latency
– Scale-up (adding capacity to a single VM)
– Scale-out (adding VMs)
Internal Skills and Expertise
Organizational domain experience and
expertise
– Service providers, offerings and technologies
– Cloud solution architecture
– Service configuration, deployment and support
Confidential
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Proprietary & Confidential. © 2011, Everest Global, Inc.

18. Enterprises Don’t Need to Wait for
‘The Silver Bullet’
Continuum of Base / Peak Capabilities
Near-Term Future Target
Virtualized 6-11am
Applications
Workload balancing automation
Manual Scheduled Tool-enabled Dynamic
allocation bursting bursting bursting
Re-platforming complexity & cost
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Proprietary & Confidential. © 2011, Everest Global, Inc.

19. Factors Driving the Hybrid Opportunity
Workload Characteristics  Overall workload fit
- Frequency
- Height
- Duration
Cost to Migrate  Application and platform
Peak migration costs
- App virtualization
Base - App cloud re-platforming costs
- Infrastructure sw / svc costs
Hybrid Cloud
Efficiencies
Willingness to Migrate  Potential enterprise
migration constraints
- Security
- Compliance
- Latency / performance
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Proprietary & Confidential. © 2011, Everest Global, Inc.

20. Assessing Potential Impact of Enterprise
Cloud – Approach
1 Create Workload 2 Assess Cloud 3 Prioritize Workload Migration
Inventory Viability Opportunities
Analytics Workload Migration Matrix
- Data mining Technical Criteria
- Workload variability Public
- Data warehouse
Business Apps - Compute intensity
- CRM - Memory intensity
- Marketing - Bandwidth intensity
Hybrid
- ERP
- SCM
- HCM
Collaboration Private
- Web conferencing Attractiveness
- Unified comms Business Criteria
- VOIP - Data sensitivity
Infrastructure - Business criticality • Prioritize workload opportunities
- App streaming - Auditabilty
- Business continuity /DR - Mobility / Access • Conduct ‘deep dive’ assessments on
- Data archival high potential workloads
- Data backup
• Develop overall migration and
transformation roadmap
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Proprietary & Confidential. © 2011, Everest Global, Inc.

21. Hybrid Economics Example - eBay
Situation
Utilization Profile – Top 8 Workloads
Fixed Cost
• Global marketplace footprint (NA,
Request for Data
Europe, Asia)
• Highly ‘spiky’ compute utilization
• Top 8 workloads supported by 1,900
servers
• ~80% of data center costs fixed Current Traffic
text text text text text text text text
• $80mm annual data center spend Timeline
Hybrid Model Impact
• Time-shifted workloads, consolidated servers, starting to burst to public cloud
• Identified opportunities to reduce overall compute costs by 40% via hybrid models
• Peak bursting would be more cost effective even if public cloud unit costs were 4x
higher than internal unit costs!
Source: Neil Sample, VP of Architecture, eBay
Confidential
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Proprietary & Confidential. © 2011, Everest Global, Inc.

22. In Summary…
Utilization - The Key to Enterprise
Cloud Economics
Hybrid – The Disruptive Driver of
Enterprise Cloud Migration
How Can Enterprises Capture the
Opportunity– Get Started Now!!!
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Proprietary & Confidential. © 2011, Everest Global, Inc.

23. Q&A
 Click the question mark (Q&A) button located on the floating tool bar in
the bottom right of your screen – this will open the Q&A Panel
 Be sure to keep the default set to “send to All Panelist”
 Then, type your question in the rectangular field at the bottom of the
Q&A box and click the send button to submit
Related Content
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− Consulting Practice updates
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• Follow Everest’s Next Generation IT Practice
: @everest_cloud
: Gaining Altitude at (www.everestgrp.com)
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Proprietary & Confidential. © 2011, Everest Global, Inc.

24. For More Information
 Attendees will receive an email with a link to download today’s
webinar presentation. A recording of the webinar will be
available within 24 hours on our website at
www.everestgrp.com/category/webinars
 For more information on cloud infrastructure economics, please
contact :
 Scott Bils, scott.bils@everestgrp.com
 Dale Stara, dale.stara@everestgrp.com
 Cloud Team, cloud@everestgrp.com
 For background information on Everest Group, please visit:
 www.everestgrp.com
 www.everestresearchinstitute.com
 Thank you for attending today’s presentation
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Proprietary & Confidential. © 2011, Everest Global, Inc.