Cloud r eview egr 2012-4-o-0774

EGR-2012-4-O-0774

Enterprise Cloud Quarterly Review
Q3 2012

October 2012

Contents of this edition

Cloud market up close

Deals that ruled the cloud

Cloud offerings

Partnership, alliances, and M&A

Everest Group featured article

Enterprise Cloud Quarterly Review Q3 2012
What’s inside

Newer cloud offerings continue to overwhelm the For more information on this report
market. Buyers are apprehensive of so many please contact the analysts:
platforms, applications, and technologies. Chirajeet Sengupta, Practice Director
chirajeet.sengupta@everestgrp.com
Public cloud providers, such as Amazon Web Abhishek Singh, Senior Analyst
Services (AWS), are providing further cost reduction abhishek.singh@everestgrp.com
mechanisms to buyers by allowing them to sell
Soumit Banerjee, Senior Analyst
excess reserved capacity to other AWS customers. soumit.banerjee@everestgrp.com
This positions AWS as a provider genuinely
Interested in reducing buyers’ costs. Yugal Joshi, Senior Analyst
yugal.joshi@everestgrp.com

Global technology service providers, such as CSC, S. Sivaram, Analyst
HP, IBM, Sungard, T-Systems, and Fujitsu, signed sivaram.s@everestgrp.com
multiple cloud engagements in Q3 2012. In cloud
offerings, telecom providers, such as Telstra, Colt, and BT, expanded their portfolio.
Many providers, such as IBM, EMC, Fujitsu, Infosys, Rackspace, and VMware, invested
in datacenters, delivery locations, marketing, and IP creation for cloud services.

Enterprise application providers, such as Oracle, SAP, and Microsoft, and IT
management providers, such as BMC and CA, continued to create newer cloud
offerings. Most of these offerings focus on the North American and European market.
New age providers, such as NetSuite, Navisite, and Joyent, signed large number of
clients.

– The Cloud Vista Team

Proprietary & Confidential. © 2012, Everest Global, Inc. 2

Enterprise Cloud Market Up Close

Cloud market events analysis
From the frontline
100% = 155
Accenture recognized as
Key hiring Cloud Partner of the Year by
M&A (4%) Microsoft
Investments 1%
7%
 Recognition for helping the
Partnerships/ 14% 41% Offerings U.S. clients in deploying
alliances hybrid, on-premise, public,
and private cloud solutions
33%  This depicts Accenture’s
Deals breadth of services across
Microsoft cloud offerings

Q3 2012: Top Market Developments Xerox-ACS acquires WDS

 MNC IT providers launched the maximum number of offerings  WDS, a provider of technical
(~40%). Public cloud, telecom, and hosting providers contributed support to telecom providers,
over 30% of the entire offerings in the enterprise cloud market leverages a cloud platform
 SaaS vendors constituted ~50% of the deals in this quarter. GlobalMine
Telecom and hosting providers too had a deal share of over 10%  The cloud platform was a key
driver of this acquisition that
Too many offerings are confusing the buyers. They believe will assist Xerox to globally
Verdict a lot of “cloud-washing”, coupled with aggressive sales increase its support footprint
pitch, is making cloud adoption decisions further
complicated. However, novel offerings also depict AWS launches market place
increasing demand and newer opportunities for providers.
 Will allow buyers to sell their
Frequency of occurrence of cloud layer in market updates EC2 reserved instances to
other AWS customers
57%  This gives customers
flexibility to further reduce
their costs by selling
32% overbooked instances

“”
Analyst corner
9% 7%
Cloud market continues to
BPaaS SaaS PaaS IaaS evolve with significant newer
offerings. Enterprise buyers are
Verdict Infrastructure services continue to dominate the cloud realizing the gains and are even
ecosystem. Software-as-a-Service (SaaS), the mainstay of
willing to experiment with
cloud buyers and providers, is not witnessing any
significant reduction in demand.
different kinds of cloud service
providers.


Deals that Ruled the Cloud

Cloud deals split by geography and industry
100% = 51 N = 48
Technology and electronics 23%
South America
Professional services 10%
APAC
2% Media & entertainment 10%
12% Retail & CPG 10%
BFSI 8%
Manufacturing 8%
27% Transportation & travel 8%
59%
Europe Public sector 6%
Energy & utilities 6%
North America Healthcare and lifescience 4%
Telecommunications 2%
Natural resources 2%

Savvis to provide cloud-based infrastructure to Posadas Updates from providers
 Savvis will offer its symphony dedicated private cloud,
Terms hosting, storage, and security services through its Dallas CSC to help Alstom transform its
datacenter global datacenters
 CSC will leverage its BizCloud
 Posada leveraged Burstorm as a provider for cloud
implementation strategy and storage services to reduce
costs and enhance services
Verdict Major driver for this adoption was a requirement for flexible and  Services to be delivered from
scalable infrastructure. Though consumption-based pricing was client’s and CSC’s datacenters
also attractive, Posada was more focused on agility and reliability.
Joyent platform helps Telefonica
DreamWorks Animation to leverage HP cloud services launch cloud services
 Cloud service to focus on instant
 Client to integrate HP’s cloud services with Panzura’s cloud servers for Internet applications in
Terms storage platform. It will help to provide a consistent global Spain
low-cost storage platform  Joyent platform is the basis of
 DreamWorks was already using HP’s IBRIX storage. It these offerings. It will provide an
created a massively-scalable storage accessed in a public ability to create and consume
cloud model virtual servers, RAM, and storage
Verdict This is a technology decision and does not appear to include on-demand in a pay-per-use
significant services from providers. However, this also indicates model
client’s willingness to integrate cloud providers.
“”
Analyst corner
Analyst corner
Fujitsu builds private cloud for BANDAI NAMCO

 Buyer looking for moving mission critical systems, such as Cloud infrastructure and SaaS
Terms SAP, to the cloud. Fujitsu to develop a shared platform constituted ~80% of the deals.
along with client’s IT for SAP and operating systems Moreover, even cloud enablers
 The platform will provide consistent application services witnessed good traction contributing
across group companies ~15% of the deals. Enterprise
This highly-complex mission-critical cloud platform will not only buyers are still engaging with the
Verdict optimize operations but also enhance collaboration across group existing, traditional providers, they
companies. This shows the real potential of cloud model to create are open to experimenting with new
truly global infrastructure for business applications. age players.


Cloud Offerings Update

Cloud offerings split by provider type Cloud offerings split by target industry
100% = 64 N = 59

Offshore IT Multi-industry 80%
Hosting
Telecommunications 5%
Public cloud8% 2%
8% Electronics and hi-tech 3%
Telecom 8% 39% MNC IT
Technology 2%
8%
OEM/hardware Public sector 2%

28% BFSI 2%
ISV Others 7%

British Telecom launches cloud-based datacenters in Latin America Buyer focus – cloud offerings

 The two services, BT Cloud Compute and BT Private
Offering Compute, to be offered from four datacenters in Argentina, 100% = 62
Brazil, Colombia, and Mexico
 These are typical IaaS offerings allowing the clients to End-user
Enterprise
consume pay-per-use on demand infrastructure assets SMB 5%
A generic IaaS offering that provides raw compute and 16%
Verdict
consolidation service. There is a very limited element of IT 47%
services that are required to create a working environment.
32%
Infosys creates Cloud Ecosystem Hub Multi-segment
 Infosys partnered with 30 cloud and technology providers.
Offering The hub will assist enterprises in comparing services of
cloud providers across 20 parameters
 It will help in rapid adoption of hybrid services. Its brokerage
“” Analyst corner
feature allows visibility across the entire cloud ecosystem
for an enterprise
Most cloud offerings are industry
Buyers require a solution that provides insights into enterprise- agnostic and indicate early level of
Verdict wide cloud adoption through a single console. With almost all the cloud adoption.
known cloud infrastructure providers supporting Infosys hub, it
can significantly assist the clients in cloud adoption.
High number (~40%) of offerings
Type of cloud offerings introduced Partner focus in cloud offerings were not delivered in a cloud model
and acted as enablers. This
100% = 59 100% = 64 indicates the value of solutions that
Services assist the clients cloud adoption.
8%
5% Application With
In cloud applications offerings, 33%
partner
were for managing the IT
Infra- 37%
department and only 3% were for
structure office users. Cloud providers
58% 92% Without focused on creating offerings
partner without leveraging partner network.


Partnerships, Alliances, and M&A

Drivers and type of partnerships/alliances Size of partners
100% = 21 100% = 21 100% = 21

Access to Different
markets Industry industry
Others
Access peer-
10% Telecom 14% 10%
to assets similar
14% 5%
Local IT 5% 14%
48%
OEM/ 10% 57% ISV 52%
Industry
Access to
28% hardware 10% 24% peer-
IP
Create smaller
new IP MNC IT Industry
peer-larger

Key partnerships, alliances, and M&A Partnerships/alliances and M&A

1 TCS partners with Savvis for cloud-enabled BaNCS solution Colt acquires ThinkGrid
 TCS BaNCS suite for banking industry will be available in a cloud-  ThinkGrid offers a cloud-based
based model in North America, hosted on Savvis’ infrastructure platform for channels
 As financial institutions seek more managed services, yet controlled  Its turnkey management platform
cloud-based engagements, this solution will assist them in this will allow channel partners to
journey leverage the Colt platform to offer
Verdict Indicates growing appetite of offshore-centric technology service cloud services
providers. Enables TCS to serve mid-market and small banks without
concerns of data leaving the boundaries of the country. CA and Logicalis extend
partnership for cloud
2 T-Systems and VMware partner for vCloud datacenter services
 Will allow the existing clients of VMware vCloud to move their  Logicalis, a long time customer
workloads to T-Systems cloud infrastructure and partner of CA, will allow
 The global service will be delivered through T-System datacenters in clients to buy CA’s Automation
Europe. It will also provide consulting, integration, and other related Suite through its cloud toolbox
services for vCloud adoption offering
 The partner will provide
Verdict This further demonstrated the growing adoption of hybrid cloud
consulting, integration, and
model. Buyers that are already familiar with VMware environment will
find a similar ecosystem in T-Systems datacenters, and therefore,
customization services for clients
can move their workloads.
“” Analyst corner
3 Rackspace to acquire Mailgun for cloud email integration
 Mailgun is a startup that provides APIs to developers to integrate
cloud-based email services in websites and applications Over 50% of partnership and
 A small acquisition that helps Rackspace further enhance its open- alliances were done by ISVs and
cloud philosophy and helps buyers in integrating their cloud services MNC IT providers. Even telecom
This acquisition is not a game changer but a good-to-have offering. and offshore IT players entered into
Verdict
Buyers are asking for email integration in their applications and multiple partnerships and alliances
websites. Some of the developers in Mailgun were lead developers signifying their willingness to
for Google’s Gmail project. expand their cloud service portfolio.


Everest Group Featured Article

How are Buyers Evaluating Cloud Service Providers

Different service providers approach cloud in their own unique way. On one end of the spectrum were new-age
service providers, such as Amazon Web Services (AWS), these providers pushed ahead with their public cloud
concept. On the other end, some traditional service providers simply brushed aside the hysteria associated with
cloud. In that vein, quotes such as the following ensured that cloud got media coverage even outside the technology
space, inciting (ironically) even wider interest on this topic.

When Larry Ellison explained that Oracle’s cloud strategy is focused internally on developing cloud solutions (and
deviating from its usual acquisition strategy), the debate came full circle, demonstrating that service providers have
indeed moved beyond rhetoric on cloud. Cloud-based strategies (go-to-market, solutions, pricing models, IP, etc.)
are in place and buyers are increasingly engaging service providers on cloud. For example, as per service
providers’ responses to a recent Everest Group survey, cloud-based services now constitute 5 to 15 percent of the
scope of infrastructure deals being signed.

As a result, the time is now ripe to shift the discussion from cloud providers to cloud services buyers. As enterprises
contemplate moving a larger share of their IT spend to the cloud, their efforts invariably focus on the following two
considerations:
a) Evaluating the opportunity cost (total cost of ownership or TCO) of cloud adoption
b) Evaluating the cloud capabilities of service providers

While TCO evaluation models are still maturing and are currently situation dependent, provider capabilities and
standards have matured enough for buyers to benefit from research data. IT buyers’ incremental approach to cloud
adoption has led service providers to reinforce their legacies, and develop and/or acquire cloud solutions around
them. Most of the cloud deals we have analyzed were existing service agreements, wherein a cloud service
component was introduced either as a value-add from the service provider or as per a specific request from the
buyer.

Based on our interactions with a wide range of buyers, it is clear that cloud will increasingly constitute a major
portion of large enterprise deals in the next five years. The following illustration summarizes those discussions:
Everest Group has embarked on an initiative to help buyers answer the above questions in order to assist them in
achieving their overall sourcing goals.

Common questions of buyers

What are the relevant criteria to How to shortlist cloud service Once shortlisted, how to
be used for evaluating a cloud providers that satisfy the engage with cloud service
service provider? selection criteria? provider?

Criteria Shortlist Engage
 Key criteria fall under 5 broad  Typically 3 types of cloud  Typically cloud engagement
categories we term as TIPSS service provider suffice models tend to be different
 TIPSS stand for Technology, – Existing relationships  Buyers may have to tweak
Integration, Pricing, Security, – New enterprise class sourcing strategies and reskill
and Services providers some professionals
– New-age cloud providers


About Everest Group
Everest Group is an advisor to business leaders on the next generation of global services with a worldwide
reputation for helping Global 1000 firms dramatically improve their performance by optimizing their back- and
middle-office business services. With a fact-based approach driving outcomes, Everest Group counsels
organizations with complex challenges related to the use and delivery of global services in their pursuits to balance
short-term needs with long-term goals. Through its practical consulting, original research, and industry resource
services, Everest Group helps clients maximize value from delivery strategies, talent and sourcing models,
technologies, and management approaches. Established in 1991, Everest Group serves users of global services,
providers of services, country organizations, and private equity firms in six continents across all industry categories.
For more information, please visit www.everestgrp.com and research.everestgrp.com.

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This report is also a part of the For more information on this report please contact the analysts:
Cloud Vista annual
Chirajeet Sengupta, Practice Director
subscription plan that offers chirajeet.sengupta@everestgrp.com
continuous market intelligence
that allows service providers and Abhishek Singh, Senior Analyst
buyers to base decisions on abhishek.singh@everestgrp.com
market realities
Soumit Banerjee, Senior Analyst
Cloud Vista includes: soumit.banerjee@everestgrp.com
 Cloud deal analysis
Yugal Joshi, Senior Analyst
 Quarterly cloud market update
yugal.joshi@everestgrp.com
 Service provider cloud strategy
assessment S. Sivaram, Analyst
 Thematic cloud research sivaram.s@everestgrp.com

To subscribe to Cloud Vista, please get in touch with us at info@everestgrp.com


Cloud r eview egr 2012-4-o-0774

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