IBM argues that service management is key to unlocking cost savings from cloud computing. With service management, organizations can realize labor cost reductions of up to 50% through automation of routine tasks. Service management provides visibility, control, and automation to efficiently deliver cloud services through features like self-service portals, standardized service catalogs, and automated provisioning that can speed delivery times by 98% on average. ROI analyses show that service management can help organizations reduce costs and achieve payback periods of 4-12 months on cloud investments with estimated annual returns of 75-156%.

1. IBM
The Importance of Service
Management in Managing
Cloud Based Services
What Drives the ROI?
Cloud Computing
© 2009 IBM Corporation

2. IBM
Agenda
Pressures on IT today
Cloud Computing lowers costs
improves ROI
Service Management is the key to cost
savings
Options for service management
enabled cloud delivery
Summary
2 © 2009 IBM Corporation

3. IBM
Pressures on IT today…
Conflicting demands in your business; users want
resources, executives want innovation and the CFO
wants lower costs
Concerns about your organization's ability to meet
demand
Inability to complete critical projects on time because
skilled personnel are performing mundane manual
tasks
Need for flexibility in the IT infrastructure to respond
to dynamically changing condition
…Many IT managers are exploring cloud computing to address
these critical challenges
3 © 2009 IBM Corporation

4. IBM
Cloud Computing
Cloud computing is a new service
consumption and delivery model inspired
by consumer Internet services.
On-demand self-service
Ubiquitous network access
Location independent resource pooling
Rapid elasticity
…and cloud computing accelerates cost reduction benefit
4
4 © 2009 IBM Corporation

5. IBM
Major factors driving cloud economics
Labor Leverage
On demand self Improves productivity by
service delivering services faster
Lowers labor costs by
Automated automating routine tasks
management
Infrastructure Leverage
Multiple standard Improves hardware
workloads per utilization
system
Drives lower capital
Virtualization of requirements
Hardware
5 © 2009 IBM Corporation

6. IBM
Cloud computing drives down costs
Internal Private Cloud drives cost savings
Can reduce IT labor cost by 50% in
Unit
cost
configuration, operations, management
and monitoring
Traditional
Can improve capital utilization by 75%, Infrastructure
significantly reducing license costs
Reduce provisioning cycle times from Enterprise
weeks to minutes
Cloud
Scale
Can reduce end user IT support costs Large enterprises can significantly reduce costs for some
by up to 40% workloads compared with traditional IT
Why…
Traditional Infrastructure Internal Private Cloud
• x86 servers – one application per server versus • x86 servers – full virtualization
• 10% average hardware utilization rate • 50% average hardware utilization rate
• Manual operations & maintenance • Service management platform
(IBM projections based on customer work)
6 © 2009 IBM Corporation

7. IBM
Service management enables cloud cost savings
A large portion of the cloud savings are
associated with labor reductions derived
though process automation enabled by a
service management system
Business Objectives
Improve Service Manage Risk Reduce Cost
IBM Service Management
IBM Service Management
Visibility
Visibility Control
Control Automation
Automation
Business Indicators People Information IT Indicators
Business Processes IT Processes
Business Assets Differentiated Business Services IT Assets
7 © 2009 IBM Corporation

8. IBM
ROI analysis example- Banking (large # of servers)
Payback Period (months) 4.85
Total Initial Investment for Test Cloud $1,313,958.33 Cumulative Cost Comparison -- With and without Cloud
Net Present Value (NPV) $6,172,325.64
$30,000,000.00
Estimated ROI over 3 years 469.75%
C u m u la tiv e E x p e n s e s
Estimated avg. annual ROI 156.58% $25,000,000.00
$20,000,000.00
Year 1 Savings by Category
$15,000,000.00
Testing $10,000,000.00
Productivity Hardware
4% 15%
$5,000,000.00
Software
Provisioning -3%
$0.00
Transformation Year-1 Year-2 Year-3
Cost Point
38%
Current IT Model Accumulated Costs Test Cloud Model Accumulated Costs
Sys. Admin.
Cost = Service Management
40%
driven savings
ROI projections from IBM Research Study 2009
8 © 2009 IBM Corporation

9. IBM
ROI analysis example- Manufacturing (SO account - small)
Payback Period (months) 12.18 Cumulative Cost Comparison -- With and without Cloud
Total Initial Investment for Test Cloud $294,583.33
Net Present Value (NPV) $669,678.84 $2,000,000.00
Estimated ROI over 3 years 227.33% $1,800,000.00
C u m u la tiv e E x p e n s e s
Estimated avg. annual ROI 75.78% $1,600,000.00
$1,400,000.00
Year 1 Saving by Category $1,200,000.00
$1,000,000.00
$800,000.00
Hardware $600,000.00
Testing
Productivity
29% $400,000.00
34% $200,000.00
$0.00
Transformation Year-1 Year-2 Year-3
Point
Software -1% Current IT Model Accumulated Costs Test Cloud Model Accumulated Costs
Provisioning
4% = Service Management
Sys. Admin. driven savings
32%
ROI projections from IBM Research Study 2009
9 © 2009 IBM Corporation

10. IBM
ROI analysis example- Banking (medium # of servers)
Payback Period (months) 6.82
Total Initial Investment for Test Cloud $302,958.33 Cumulative Cost Comparison -- With and without Cloud
Net Present Value (NPV) $935,880.13
$5,000,000.00
Estimated ROI over 3 years 308.91% $4,500,000.00
C u m u la tiv e E x p e n s e s
Estimated avg. annual ROI 102.97%
$4,000,000.00
$3,500,000.00
$3,000,000.00
Year 1 Saving by Category $2,500,000.00
$2,000,000.00
Hardware $1,500,000.00
Testing 10%
Productivity Software $1,000,000.00
25% 1% $500,000.00
$0.00
Transformation Year-1 Year-2 Year-3
Point
Current IT Model Accumulated Costs Test Cloud Model Accumulated Costs
Sys. Admin.
Cost
Provisioning
Cost
42% = Service Management
22% driven savings
ROI projections from IBM Research Study 2009
10 © 2009 IBM Corporation

11. IBM
Service Management- the key to unlocking cloud savings
On average, 81%* of Cloud payback is driven by labor savings
enabled by service management
A service management system provides the visibility,
control and automation needed for efficient cloud
delivery in both public and private implementations:
Simplify user interaction with IT
User friendly self-service interface accelerates
time to value
Service catalog enables standards which drive
consistent service delivery
Provisioning enables policies to lower cost
Automated provisioning and de-provisioning
speeds service delivery
Provisioning policies allow release and reuse of
assets
Increase system administrator productivity
Move from management silos to a service
management system
*Average of the three studies referenced in this presentation
which are based on IBM Research study 2009
11 © 2009 IBM Corporation

12. IBM
Service Management: Self-service portal and service
catalog
Allows end users to use IT services
without being an expert in IT
Users can see what
resources are
available, request the
services they need,
when they need
them, for the time
they need them
…Improves customer satisfaction by accelerating service delivery
12 © 2009 IBM Corporation

13. IBM
Deliver Services Faster using Automated Workflows
Wait time for services decreased by an average 98%*
Traditional Infrastructure Cloud with service mgt.
Fill out paper request Automated with self serve portal
Call IT daily to check status Track workflow status online
Hope hardware is available Services when you need them
Provisioning is manual and Provisioning is automated with
inconsistent implemented standards
Fill out required forms Request/track services online
*Based on IBM Research study 2009
13 © 2009 IBM Corporation

14. IBM
Service Management: Service catalog drives standards
Lack of standards leads to problems… here is
a real life client example
A Critical new application is being developed
The Developer looks for system resources and finds
old out-of-date development environment
During production deployment, IT discovers the
application won’t run in the current production OS
To meet project demands, the out-of-date
environment configuration is put in production to
satisfy the critical business need
Versus:
The Service Catalog contains standardized images and
environments that are automatically updated
The Developer gets a “production standard”
environment when needed with an outstanding user
experience via the self serve portal
…standard services avoids unexpected problems
14 © 2009 IBM Corporation

15. IBM
Service Management: Automated provisioning
Library of scenarios available for common provisioning tasks
Resources can be
made available in
minutes versus
weeks
…Speeds delivery of services via easy-to-use provisioning
15 © 2009 IBM Corporation

16. IBM
Provision systems faster, with lower cost and
consistent quality
Lowers provisioning cost by an average 51%*
Traditional Infrastructure Cloud with Service Management
Experts deploy and configure Automation does the work
Many error prone steps to execute Provisioned consistently every time
Long lead time required Available when customer needs it
Manually configure systems Automation does the work
*Based on IBM Research study 2009
16 © 2009 IBM Corporation

17. IBM
Service Management: Leverage automated provisioning
to set policy
Have policies for provisioning new images
Policy action: Before existing image is
provisioned always check and apply new
patches
Instead of having resources sit idle for
months
Policy action: At end of scheduled time:
Take image of environment to allow for
recreation
De-provision resource and return to pool
…consistent policies improves service quality and reduces costs
17 © 2009 IBM Corporation

18. IBM
Stay on top of changing conditions
to control service quality and expenses…
Average administration and support costs reduced 40%*
Measure the performance and availability of
critical virtual server resources, correlate
business events and understand the impact
of problems on the business
Examine how power is consumed across
entire data center (IT infrastructure and
facilities), and model opportunities to
conserve power & save money using the
ability of the cloud to move workloads
Analyze costs, budget, plan, track, allocate
and invoice by department, user and many
additional criteria
Centralized Identity and Access Control
policies provides fast and affordable
adherence to security compliance
*Based on IBM Research study 2009
18 © 2009 IBM Corporation

19. IBM
Move from silos to service management system
Cloud computing with service
Traditional Infrastructure management
Not proactive to problems Integrated management with
No integrated view of security automated remediation
Debate charges with business Manage security end to end
units, guess at utilization Bill, plan & budget based on
actual usage data
19 © 2009 IBM Corporation

20. IBM
Getting started with cloud service management
The choice is yours…
Leverage existing Rapidly deploy a turn-
hardware key test environment
investments and build with little to no
a customized solution customization
Tivoli Service Automation IBM CloudBurst
Manager (introduced in (introduced in May 2009)
November 2008) A purpose built service delivery
Powered by Tivoli process platform that leverages the same
automation engine and associated software components in the Tivoli
products. Services for Service Automation Manager,
customization are also available including a service management
upon request system as well as integrated
purpose built workflows
20 © 2009 IBM Corporation

21. IBM
IBM Tivoli Service Automation Manager
Service management software to deploy and manage IT infrastructure
components for client production platforms and provide end users with
direct access to cloud computing resources
Customer Benefits
Improved Innovation – Dramatically
improve business value and IT’s effect on
Service Service
time-to-market by enabling production Design Subscription
workloads to rapidly and accurately be
deployed on multiple platforms when and Service
where they are needed. Operations
Decrease operational expenses – Service Service
Gain productivity increases in IT labor Delivery Activation
costs through user centric self-service
21 © 2009 IBM Corporation

22. IBM
IBM CloudBurst
Integrated service management offering with network, servers,
storage, quickstart services, and financing as an integrated
offering for client test platforms
Customer Benefits
Improved time to value-
Quickly deliver a private cloud using a
preloaded and integrated system
Improved innovation- Dramatically
improve business value and IT’s
effect on time-to-market by delivering
services faster
Decrease capital expenses –
Maximize capital usage and reduce
added capital expense.
Reduce complexity and risk- With
automation and standardization the
human error factor is minimized. Designed from IBM client engagements
22 © 2009 IBM Corporation

23. IBM
IBM has a broad set of cloud offerings
Analytics Collaboration Development Desktop and Infrastructure Business
and Test Devices (compute / Services
storage)
Smart Business
on the IBM Cloud Smart Business
Standardized services on the Smart Business Desktop on the IBM Information Protection BPM Blueworks
IBM Cloud LotusLive Development & Test Cloud; Smart Services; Computing (design tools GER
on the IBM Cloud Business Self on Demand from MBPS
Enablement Portal
Smart Business Cloud
Private cloud services, behind Smart Analytics
your firewall, built and/or Accelerator Smart Business Smart Business Scale out
managed by IBM Powered by Infosphere TestCloud Desktop Cloud File Services
Smart Business Systems
Pre-integrated, workload Smart Analytics
Smart Business for
optimized systems System IBM CloudBurst IBM CloudBurst SMB (backed by
Powered by Infosphere w/Quickstart Svces w/Quickstart Svces the IBM cloud)
Available Future
23 © 2009 IBM Corporation

24. IBM
Why Cloud with IBM…
IBM Capabilities
Deep business, technical architecture and
infrastructure expertise
Proven tools, assessments and workshops
Best practices from client interactions
Experiences from our own IBM transformation
The broadest systems, storage, software and
services cloud portfolio in the industry
Proven IBM Service Management
Financing options
Business partners
IBM Worldwide Resources
Executive Briefing Centers
Proof of Concepts and Benchmark Centers
Cloud Computing Centers
IBM Research
http://www.ibm.com/ibm/cloud/
24 © 2009 IBM Corporation