This presentation is focused on addressing the broad category of Cloud Service Providers. Gartner will provide a overview of how Cloud Service Providers are being defined and how they different from traditional providers of outsourcing or products. And more importantly, what are they offering that is different, new and seeks to solve business problems for the enterprise. This session will provide an overview of these areas and begin the discussion of how do clients develop the business case for certain cloud services offerings. Topics Discussed Gartner analysts discussed with participants the following topics:  What is a cloud service provider and how does it differ from traditional outsourcing providers? How will the approaches to evaluate and select among these providers differ? How does the business case analysis differ?

1. Distinguishing, Evaluating, and
Selecting Cloud Service Providers
Frances Karamouzis
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4. Why Cloud and Alternative Delivery?
A Number of Inconvenient Truths
Explosion of Change
From the Status Quo
• Plan for peak = • Shelfware • 1:10 ratio
more resources ($1 software, $10 services)
• Custom solutions • Delivery process
• Low server
utilization rates • Not user-friendly complacency
• Huge capex • People-based =
• Low agility levels human error
• High energy costs
Hardware Infrastructure Software Services

5. Key Issues
1. What is a cloud service provider and how
does it differ from traditional outsourcing
providers?
2. How will the approaches to evaluate and
select among these providers differ?
3. How does the business case analysis
differ?

6. Framework
Demand Side Supply Side Support or Enabling
Business of Business of Business Side of Business
Process
Sample Process — Prospect to Cash
Application Portfolio
Java, .NET SAP, Oracle, Exchange COBOL
Applications
Layer Composite Applications Packaged Applications Legacy Applications
Message-Oriented Middleware Transaction Middleware Portals
Application Servers Database Management
Web Services Application Components Systems
Data Center
Database Admin. Help Desk
Infrastructure
Network Desktops/Clients
Storage
Security

7. Industry Nomenclature
NIST Additional The consumer accesses,
Categories Gartner configures and/or
Categories extends the service and
builds everything needed
SaaS above the service
Service PaaS
boundary — or just uses
the service.
providers
can be IaaS
Mgmt. and Security
Business Services
service Information Services
consumers Application Services
at the same App. Infrastructure Services
Cloud
time. System Infrastructure Services
Enablers
The provider optimizes everything below the
service boundary, and hides implementation
details & complexity from the consumer.

8. A Look at Just One Slice: Permutations
Abound
Application Services
SaaS
PaaS
Application Infrastructure Services
System Infrastructure Services
IaaS
V-Cloud

9. Aggregation of Cloud
New World Outsourcing Solutions & IT Services
Demand Side Supply Side Support or Enabling
Business of Business of Business Side of Business
Process
Sample Process — Prospect to Cash
Application Portfolio
Java, .NET SAP, Oracle, Exchange COBOL
Applications
Layer Composite Applications Packaged Applications Legacy Applications
Transaction Middleware Portals
Application Servers Database Management
Web Services Application Components Systems
Data Center
Database Admin. Help Desk
Infrastructure
Network Desktops/Clients
Storage
Security

10. Standard Risks + Cloud Impact
Risk Heighten Cloud Impact
Service Structure Transparency, reliability, redundancies,
(Manage and Operate) legal capabilities
Breach detection, traceability, audit
Security and IP availability, remedy and recovery
Governance New competency requirements,
decision-making process, execution
Performance Structure Links to business drivers, compliance
requirements
Metrics
(Reporting and Analytics) Definitions and design structure, baselines
Agility Business shifts, new products or services,
regulatory changes

11. New Cloud-Specific Risks
Risk
Black Hole Effect
(Obscured Structure & Delvery)
Immature Vendor Landscape
Hidden Costs
Data Ownership, Portability & Location
Service Remediation
Configurability

12. Key Issues
1. What is a cloud service provider and how
does it differ from traditional outsourcing
providers?
2. How will the approaches to evaluate and
select among these providers differ?
3. How does the business case analysis
differ?

13. Selecting an IT Service Provider
Define Scoring Determine
Determine Criteria System Weightings
Criteria for Evaluation Scoring Level Weighting Risk
Industry and Process Expertise • Significantly 20 • Key focus on
exceeds the source of
Technology Expertise and requirements risks
Provided Solution 20
• Somewhat exceeds • Highlight all
Critical Success Factors requirements scores less
(cultural fit, contracting practices, • Meets requirements 20 than 7 and
key personnel, time to market) begin risk
• Somewhat below management
Project-Specific (RFP requirements
adherence, price points) 20
• Significantly below
requirements
Vendor Organizational Profile 5
Reference Checks 15
Evaluating and selecting the IT service provider is
only one portion of a multifaceted decision.

14. Selecting Software (ERP Suite)
Business Functionality Support — Depth & Breadth
User-Specific or Enterprise-Specific Processes
Functional Enterprise-Specific Industry Requirements
Core Application Suite and Process Integrity
Process Continuous Innovation, Improvement Business-Oriented Application
Delivery
Strategies
Industry Ability to Support Process Standardization and Global-Scale
Competitiveness
Support for Information Users
Model-Driven Packaged Applications
Ease Embedded Analytics
Support for Information Users
Integration Social Applications
Technology
Mobile
Strategy
Interoperability Modular Independence
SaaS and Cloud Technologies
Channels Business Networks (such as RFID, Multienterprise Processes)
Support for Information Users
Life Cycle Long-Term TCO
Life Span
Strategy Support, Services and Ecosystem

15. Now the Twist… Selecting a Solution-Based
Service (Cloud Aggregated Option)
When clouds roll in, you must
concurrently evaluate and select:
(1) Software
(2) Middleware
(3) Infrastructure
(4) IT Service Options
(5) Delivery Models

16. Evaluation Cycle
Traditional 6 to 12 months Cloud-Enabled
3 to 5 months
Market Analysis 6-12 weeks
RFP 8-16 weeks
Vendor
Evaluation Responses,
6-12 weeks
References
Service
Requirements
8-16 weeks
Terms and
Conditions
4-8 weeks
Due Diligence 4-12 weeks
Contracting
Negotiate 4-12 weeks
Award Contract 2-4 weeks
New
Solution Transition 4-24 weeks

17. Evaluation Cycle
Market Analysis
Vendor
Evaluation
RFP 8-16 weeks
Time Savings
Responses,
6-12 weeks
References
Service
Requirements
8-16 weeks New Steps
Terms and
4-8 weeks
Conditions
More Diligence
Due Diligence 4-12 weeks
Contracting
Negotiate 4-12 weeks Unforgiving!
Award Contract 2-4 weeks
New
Solution Transition 4-24 weeks

18. Critical "Heightened" Steps
Business & Risk "Configured” Due Diligence
Technical Assessment Gap Analysis
Architecture
Strategy • Define • Business • "Comprise" • Proof of
Compressed Assessment Concept
• Technical •
Processes & New • Pilot
Bundling • "Disentangle" Governance
Options Required
• References
• Agility
Scope • Delivery • Baseline • Configuration/ • Private Cloud
Capabilities Customization Option
• IT Service
Options • Hidden Cost Required • SLA and OLA
Analysis • Integration w/ Analysis
• Infrastructure
• Software • Obscurity Business Case Applications, • Audit
Factor Infrastructure,
• Middleware and Data

19. Key Issues
1. What is a cloud service provider and how
does it differ from traditional outsourcing
providers?
2. How will the approaches to evaluate and
select among these providers differ?
3. How does the business case analysis
differ?

20. First Step …
Building the Business Case Analysis
Option 1 Option 2 Option 3
Base Costs Traditional Cloud Hybrid
Options
Infrastructure Traditional
Assets portion
Infrastructure Item 1 Servers, Storage,
Infrastructure Item 2 Network, Desktops
IaaS
Applications
Application Layer Enterprise Apps.
Application Element 1 Databases PaaS
Middleware
Application Element 2 Operating Systems
SaaS
People, Resources for IT Services
Initial Deployment & Bus. Consulting
Ongoing Management IT Consulting Aggregation/
Systems Integration Brokerage
Outsourcing
Hidden Costs

21. Building the Business Case Analysis
Base Cost Analysis
Option 1 Option 2
Base Costs Traditional Cloud
Infrastructure Traditional Not a direct
Assets portion
Infrastructure Item 1
one-to-one
Servers, Storage,
Network, Desktops comparison
Infrastructure Item 2
IaaS
Applications
Application Layer Enterprise Apps.
Application Element 1 Databases PaaS
Middleware
Application Element 2 Operating Systems Imperative:
SaaS
IT Services Total Cost of
People, Resources for
Initial Deployment & Bus. Consulting Sourcing
Ongoing Management IT Consulting Aggregation / Comparison
Systems Integration Brokerage
Outsourcing
Additional Costs

22. Example 1: Wipro: Provisioning of
Infrastructure
Self service portal for automation of server provisioning
Parameters Before After
Server Provision cycle • 46 days • 35 mins
Avg Server Cost • $2000 • $800
Utilization • <10% • 40%
Reprovisioning of Assets • Nil • Reduce capex 30%
Silos • Physical machines and • Removed silos with 500+
application silos virtual machines
License Management • Highly Inefficient • Effective
Network bandwidth • Increased network • 1 NIC cords for 32 servers
bandwidth
Energy Cost • High • Lower
21
3/10/2010

23. Example 2: Cloud E-Mail vs.
On-Premises E-Mail, Circa 2012
On-Premises Cloud
5 to 10 Thousand Scale Tens of Millions
Higher-Touch Ops Model Lights Out
$120/User/Year Cost $24/User/Year
SAN & DAS Storage Type DAS
$25/GB/Year Storage Cost $3.75/GB/Year
500MB Storage Amount 6GB
Yes Tape Backup No
Fat Client Thin

24. Total Cost of Sourcing
Factoring Risk-Adjusted Cost (RAC)
Year 1 Year 2 Year 3 Year N
Base Costs
Technology Assets
(Hardware and
Software)
People, Resources for
Cost Initial Deployment &
Ongoing Management
Additional Costs
Information Security &
Risk Management
Risk
Country Risks
Maturity Risk
Competency Risk
Operations Risk

25. Total Cost of Sourcing
Factoring Risk-Adjusted Cost (RAC)
Base Costs Year 1 Year 2 Year 3 Year N
Technology Assets On- Off- On- Off- On- Off On- Off-
(Hardware and premises premises premises premises premises premises premises premises
Software)
People, Resources for
Initial Deployment &
Ongoing Management Optional
variables:
Additional Costs include or
exclude
Information Security & one-time
Risk Management costs
Country Risks
Maturity Risk
Competency Risk
Operations Risk

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29. Distinguishing, Evaluating, and
Selecting Cloud Service Providers
Frances Karamouzis
Notes accompany this presentation. Please select Notes Page view.
These materials can be reproduced only with written approval from Gartner.
Such approvals must be requested via e-mail: vendor.relations@gartner.com.
Gartner is a registered trademark of Gartner, Inc. or its affiliates.