Dynamics of Cloud and Its impact on Engagement - Delivery and Operations - CFO / Commercial Management Workshop

Dynamics of Cloud
and its 3 Impacts on SW Development, IT Operations & B2B Engagement
Hasan Basri AKIRMAK
Mentor at ITU Seed, Cloud Evangelist at Ericsson
https://tr.linkedin.com/in/hasanbasriakirmak

This session was presented in Ericsson
on June 20th 2017.

“The standard B2B operating model was designed to optimize vendor’s “push” of
prepackaged products to customers via large, up-front deals. The goal was usually to
get the maximum amount of product assets transferred from the vendor’s balance sheet
to the customer’s balance sheet in one big order. But today the assumption that a
customer can determine in advance exactly what it needs and then take on all the
responsibility for the level of value that it gets from a complex business product is
becoming less acceptable. Customers need their suppliers to step up and get into the
outcome game. The old B2B model doesn’t make Sense in digitalization. “
[J.B. Wood]
The statement above forecasts that the whole operating model of enterprises, from
marketing to product development and customer support will change. Also many other
industry reports argue that a combination Digital Distribution, Digital Products, Big Data
Analytics along with Software Defined Infrastructure, DevOps and cloud practices will
have disruptive impacts on how we do business in the near future.
In this seminar, we share our opinion why enterprises need to have an aggressive digital
transformation agenda and we must make “cloud first” the mantra for our future business
success.
In the first part of this seminar, we’ll focus on non-technical stakeholders, and we’ll have
an overview of impact of cloud technologies on B2B products and services. What are
the best practices for on-demand, scalable, highly available, reliable software platforms?
How does self-service, elasticity, resource pooling and automation impact the costs and
revenues? How does access to ubiquitous cloud infrastructure and open source big
data tools empower every individual?
In the second part of this seminar, we’ll go into some technical details and give
architectural examples for realizing enterprise grade platforms that scale from 1 to 1M
users on cloud, the way Instagram, Netflix or Uber have created their software. You’ll
also have an understanding of the products and services that are used by
entrepreneurs to bring an innovation from idea to execution using various cloud services
in months. Examples are: Shopify (storefront), ZenDesk (Customer Support), Amazon
(AWS) Cloud (API Gateway, Server-less Computing, Virtual servers, WebScale storage,
Notification Service, O&M Fault and Performance Monitoring & Logging, Infrastructure as
Code, DevOps, Image Processing)
Motivation

Dynamics of Cloud | Creative Commons CC0 - Attribution License | https://www.linkedin.com/in/hasanbasriakirmak | 2017-06-19 | Page 4
The opinions expressed here represent my
own and not those of my employer or any
other trademarks/companies mentioned
herein.
DISCLAIMER
Creative Commons License
Licensees may copy, distribute, display and
perform the work and make derivative works
and remixes based on it only if they give the
author or licensor the credits (attribution).
LICENSE

Credits
The arguments I built in this presentation is based on several thought provoking authors’ work. Here are the major ones from my library.
TechnicalBusiness
Versatile

Credits
The Best Practices explained here and used in the scalable SaaS platform implementation are based on several
advanced Cloud Seminars and whitepapers in Public Domain
AWS ReInvent 2015 Sessions available on YouTube
1. DVO315 Log Monitor Events with AWS CloudWatch, Lambda and Dashboards. Link
2. BDT317 Building a Data Lake on AWS. Link
3. WEB401 Optimizing your Web Server on AWS. Link
4. SEC313 Security by Design. Link
5. DEV203 AWS API Gateway and Lambda. Link
6. DVO303 Scaling Infrastructure Operations AWS Config and AWS CloudTrail. Link
7. ISM402 Cost Optimization at Scale. Link
8. ARC302 Running Lean Architectures: Optimizing for Cost Efficiency. Link
AWS ReInvent 2016 Sessions (Not available on YouTube yet)
1. ARC301 Architecting Next Generation SaaS
2. ENT308 Building a Solid Business Case for Cloud Migration
APN (AWS Partner Network) Webcasts (You need to be an AWS Partner to access this content)
1. SaaS Architecture
2. Amazon EC2 Masterclass Webcast
AWS Whitepapers
1. AWS Well Architected Framework. Link
2. Managing Infrastructure at Scale. Link

CloudNativeLandscape
Source: CNCF, github, CC A 4.0

What to expect from this session
› Part 1
–“From B2B to B4B” – Outcome Based Game & Digital Distribution
–“About Cloud Economics” – TCO Impact & Intangible Benefits
–“Twilio” – Cloud Native Beast
› Part 2
–“Democratizing Enterprise Grade”– An Experiment
–“Technology Primer” – Compute, Storage, Network & Monitoring

“From B2B to B4B”
Outcome Based Game & Digital Distribution

B4B: Business For Business
Outcome Game › Digital products and digital distribution impact:
› “The standard B2B operating model was designed to
optimize vendor’s “push” of prepackaged products to
customers via large, up-front deals. The goal was usually
to get the maximum amount of product assets
transferred from the vendor’s balance sheet to the
customer’s balance sheet in one big order. But today the
assumption that a customer can determine in advance
exactly what it needs and then take on all the
responsibility for the level of value that it gets from a
complex business product is becoming less acceptable.
Customers need their suppliers to step up and get into
the outcome game. The old B2B model doesn’t make
Sense in digitalization “
› [J.B. Wood]
Source:

Digitalization & Cloud
Impacting Every Aspect of the Enterprise. Beyond IT …
Digital Distribution
Digital Products
DigitalizationofIT
Consumerization
ofIT
Ref: Porter’s Generic Value Chain

Where are we going?
Big IT Small IT
Small Cloud Big Cloud

Cloud
Product Development
Maintenance
Licensing/PricingIntegration / SI / Delivery
IT Outsourcing
Networking
Security
StorageCompute
Ripple Effect
Gartner 2016
Marketing & Sales

Cloud Terminology

“Cloud Economics”
TCO Impact

Cloud Economics : Efficiency at scale
Unable to
Serve
Customers
Infrastructure
Cost $
Time
Large
Capital
Expenditure
Opportunity
Cost
Predicted
Demand
Traditional
Hardware
Actual
Demand
Automated
Virtualization
Quantifying:
• Cost Efficiency
• TCO
• Optimisation
• Trade-offs
• Risk
• Reward

IT Labor Costs
TCO the way customers typically see it
Network Costs
Storage Costs
Server Costs Hardware – Server, (+Maintenance)
Software - OS, Virtualization Licenses
(+Maintenance)
Hardware – Storage Disks
Network Hardware – LAN Switches, Load Balancer
Bandwidth costs
Server Admin Virtualization Admin4
1
2
3
Source: AWS Value Argumentation https://www.slideshare.net/AmazonWebServices/cloud-economics-and-calculating-cto-awsome-day-zurich-112016

TCO the way it really is
Hardware – Server, Rack
Chassis PDUs, ToR
Switches (+Maintenance)
Software - OS,
Virtualization Licenses
(+Maintenance)
Facilities Cost
Hardware – Storage Disks,
SAN/FC Switches
Software - Backup
Network Hardware – LAN
Switches, Load Balancer
Bandwidth costs
Software – Network
Monitoring
Server Admin, Virtualization Admin, Storage Admin, Network Admin, Support Team
Diagram doesn’t include every cost item. E.g. software costs can include database, management, middle tier software costs. Facilities cost can include
costs associated with upgrades, maintenance, building security, taxes etc. IT labor costs can include security admin and application admin costs.
Space Power Cooling
Project planning, Advisors, Legal, Contractors, Managed Services, Real-Estate,
Training, Cost of capital
Less-tangibles:
Cost of delays
Risk premium
Competitive abilities
Governance
Etc.
IT Labor Costs
Network Costs
Storage Costs
Server Costs
4
1
2
3
Extras5
Facilities Cost
Space Power Cooling
Facilities Cost
Space Power Cooling

The four pillars of infrastructure cost optimisation
Right sizing Capacity
Commitments
Increase
elasticity
Measure,
monitor, and
improve

Elasticity (turn stuff off)
• Dev/Test (Non-Prod) instances
• Use simple instance start/stop, or tear down/build up altogether
Monday Friday End of Vacation Season
35% saved

The IDC analysis show 41% of
the value of moving to AWS is
in the business productivity
Efficiency Category Efficiency p/app % of Total
Business Productivity 181,669.00$ 41%
IT Staff Productivity 133,389.00$ 30%
IT Infrastructure Cost Reduction 131,073.00$ 29%
Total 446,131.00$ 100%
It is not all about cost…
»

› Compare your current on-premises environment to your FUTURE STATE, RE-
ARCHITECTED cloud environment. NOT a replica of what exists today.
Cloud is more than Lift & Shift of Traditional IT
Business Agility
› Rapid experimentation.
› Faster app development
› Faster business decisions
Source: ReInvent 2016
Workforce Productivity
› Self service culture
› Increased automation
› Attracting & retaining talent
Operational Resilience
› Improved Service Performance
› Less Downtime
› Less bugs
Other (In)tangible Benefits

“Twilio”
Cloud Native Beast
Please watch 8 Min Video of
Jeff LawsonTwilio Co-Founder & CEO
https://youtu.be/r0ejZ_rFoGg

Shopify Services
› eCommerce as a Service.
› Online stores for goods and
services
› Storefront
› Product catalogue
› Payment GW integration
› Track/Respond to Orders
Digital Distribution
And its implication: Consumerization of the Enterprise IT
Shopify in Numbers
› Shopify stores in 175 countries
in the world!
› 380K merchants (35-88% CAGR)
› 290M pproducts added in 2016
› 11K partners
› 100M shoppers (~90% CAGR)
› Peak transactions: $555K USD/minute
› 130Kmerchants used Shopify Mobile
› Over 30,000 merchants integrated
Facebook Messenger
Source: https://www.shopify.com/2016

Customer Support
Zendesk Services
› Web, Mail, Phone Channels
› Community Forum
› Knowledge Base, FAQs
› Services to measure and publish
the QoS / QoE (Customer
Satisfaction Review Score, Average
Response Time, Resolution Time)
Zendesk in Numbers
› Shopify customers in 135 countries
in the world!
› 15K customers
› 70M served customers
› 100M service interactions/year
› Example customers:
Source: https://s2.q4cdn.com/278771905/files/doc_presentations/June2015/ZEN-Investor-Presentation-060115_v001_x764zz.pdf

“Democratizing Enterprise Grade”
Architecting solutions with the four pillars of
security, reliability, performance efficiency, and cost
optimization.

Creating a software system is a lot like
constructing a building. If the foundation is
not solid there might be structural problems
that undermine the integrity and function of
the building.
When architecting technology solutions, do
not neglect the four pillars of security,
reliability, performance efficiency, and cost
optimization. Long Tail
• Automation
• On-demand
Elasticity/Scale
• Maintainability
• Self Service
• Hybrid
• Resource
Security
Availability
Performance
Cost Opt.

Carrier Grade is not exclusive to Telco
An Enterprise Grade Platform Implementation we did!
AWS API
(order fulfilment triggered by e-commerce platform)
AWS CloudFormation
Infrastructure as Code
AWS Lambda
Send login and web address information
to customer
per email using SES
AWS CloudWatch
Infra & Application layer
Fault & Performance Monitoring
AWS CloudTrail
Compliance reporting (Log of all requests
to AWS account and API)
AWS Config
Resource Configuration Management
keeping track of versions of every resource
AWS DynamoDB
Metadata repository (file name, size…)
AWS S3
Storage with 99.999999999% durability
Tenant isolation by buckets
AWS SNS
Email notifications to
Operations Team
about alarms
AWS EC2
Compute service for Open Source Sync Sw
Single tenant for tenant isolation
AWS EBS
NAS Storage service, for EC2 cache
AWS ASG
Replaces EC2 in case
of sys or health check errors
AWS Route 53
DNS Service
Shopify.com
SaaS E-Commerce Platform as sales channel
Zendesk.com
SaaS Customer Support Channel
:
A Marketplace for Partner
Products, Solutions or
SaaS running on AWS
AWS IAM
MFA & Cross Account
Access to Confounders
Bitnami.com
3PP Baseline AMIAWS CloudFront
CDN for Joomla Microsite

“Technology Primer”
Compute, Storage, Network & Monitoring

The Technology Perspective
Hardware – Server, Rack
Chassis PDUs, ToR
Switches (+Maintenance)
Software - OS,
Virtualization Licenses
(+Maintenance)
Hardware – Storage Disks,
SAN/FC Switches
Software - Backup
Network Hardware – LAN
Switches, Load Balancer
Bandwidth
Software – Network
Monitoring
Service Development, IT Ops (Server Admin,
Virtualization Admin, Storage Admin, Network Admin,
Security Admin, App Admin), Support Team
E.g. software costs can include database, management, middle tier software.
Project planning, Advisors, Legal, Contractors,
Managed Services, Real-Estate, Training, Cost of
capital
Dev, Sec, Ops
Labor
Network
Storage
Compute
4
1
2
3
Others5
Source: AWS Value Argumentation
“Software
Defined
Everything”
(a.k.a. “Infrastructure as Code”)

› Instance Types
› VM Images & Marketplace
› By the hour pricing or Spot
Pricing
› Scale Up: Changing instance
type
› Scale Out: Horizontal scaling
› Load Balancing & DNS:
distributing load, and adaptive
performance
› Containers
› Serverless Computing
Basic Compute Concepts
Compute
Compute
Engine
App
Engine
Container
Engine
Container
Registry
Cloud
Functions

Basic Storage Concepts
› DAS: Ephemeral storage
› NAS: VM storage
› Snapshots, backups
› JBOD: Good for big data, DWH, log file
storage wo
› CDN: Cache Static Content
› Compute Instance Types optimized for
Storage:
– Sequential access good for log file, time based storage
– Random Access good for DB, HPC…
› Flash storage: High IOPS
› Spinning disks: Low cost
› IOPS: Key performance factor. Starts from 100
can go up to 20.000 and over with sharding
architectures

Storage Parameters, Storage Tiers
› Kind of access method Block, file, vs object Storage
› Patterns of access Random vs sequential Access
› Throughput required IOPS, SSD vs. HDD
› Frequency of access Online, offline vs archival Storage
› Frequency of update WORM, dynamic
› Availability and durability SLAs 99 vs. 99.999999999%
Basic Storage Concepts
The optimal storage solution for a particular system will vary based on parameters

› Share info
› Extract insight
› Recognize patterns
› Track performance
› Ultimately make better business,
technical and operational decisions.
Big Data: What Can You Do with all this
Data?
Generation
Collection & Storage
Analytics & computation
Collaboration & Sharing

› Service Selection based on
– Pattern & Structure (Cache, SQL vs NoSQL, Search)
– Performance (R/W, Latency, hot vs. cold)
– Scalability (Parallel R/W, Max Capacity)
– Availability (HA, Service Access: 99% till 99.999%)
– Durability (InMem Cache vs 99.999999999%)
– Cost and API
› E.g.
Relational DB, Big Data & Analytics

› e.g., Google starts 2 billion containers
per week)
› That is 3300 container launch/second,
and that statistic was from 2014 (Src:
CNCF)
Development
Agility and Resiliency
› e.g., Twilio did 8000 live deployments in
2016
› That is 21 deployments / day
“Software is a Mindset not a Skillset”

› Self Service culture
– Full visibility and transparency to tenants
› Automation:
– Implement “Infrastructure as Code” via Templates
– Manual Monitoring is not scalable
› Tracking KPIs, measuring SLAs
– Resource Level Monitoring: CPU load, disk IO, network
traffic
– Business level Monitoring: Response times, RTO and
RPO, Costs
› Implementing self healing
› Monitoring Example: Send an alarm when cache is
80%
› Security Example: Sense list of IP’s generating
unsuccessful SSH attempts and Block those IP’s
by adding them to firewall blacklist rules
automatically
Infrastructure Operations
Basic Concepts
Management Tools

TENANT ID ITEM ID
T1 230
T2 3434
SaaS, Multitenancy & Data Partitioning
Tenant 1 Tenant 2
Schema
Schema
Separate storage/DB
for each tenant
Single storage/DB,
multiple URI/schemas
Common DB, single
schema

› Revenue Drivers
– Consider upfront payments
– Contract Length & discounts
– Monthly Recurring Revenues
– Churn effect (Retention Rate > 100%)
› Best Practices
– CAC – Cost of Acquiring Customer
› Digital marketing to help you
– LTV – Customer’s Life Time Value
› Retaining the subscriber
› Add-on sales (new features, or
increase consumption) vs. increase
users
SaaS Business Case – Revenues
Source: http://www.forentrepreneurs.com/saas-sales-compensation-plan/

SaaS Business Case – Costs
› Cost Drivers: Everything as OPEX
– IT infrastructure components
- Server, Storage, Networking
- SW Development Costs: Reliability,
Availability, Security
- Operation Costs
– Support Costs
– Cost of Performance
› Risk Mitigation Costs
› RPO: How much Data can we afford to
lose?
› RTO: How much downtime can we
accept?
Diagram Source: AWSSource: http://www.forentrepreneurs.com/saas-sales-compensation-plan/

Godzilla will visit you one day
Image: IMDB

In the cloud, test how your system fails, and validate your recovery procedures.
For each workload and via software & automation,
consider:
› Backup
› HA (High Availability)
› Scalability
› DR (Disaster Recovery)
› Rightscaling

“What’s Next?”
Containerized Packaging, Microservices,
Massive Orchestration

>Next Big Thing?
CNCF - 2015
Source: CNCF

Source: CNCF

Cloud Democratizes Advanced Technologies.
Technologies that are difficult to implement can
become easier to consume by pushing that
knowledge and complexity into the cloud
vendor's domain.
For example, NoSQL databases, media
transcoding, and machine learning are all
technologies that require expertise that is not
evenly dispersed across the technical
community.
Every service –which once accessible to only
the Fortune 1000 CIO’s can be consumed by
anyone.
Epilogue
Link to article: https://www.linkedin.com/pulse/how-experiment-impact-democratizing-access-cloud-big-hasan-basri

If you found this session useful, please “endorse” me in LinkedIn for areas like:
Business Development, Business Planning, Go-To-Market Strategy, Consulting,
Product Management, Product Strategy, Cloud Computing, Entrepreneurship.
THANK YOU
Hasan Basri AKIRMAK
Differentiate in Information Technology

Dynamics of Cloud and Its impact on Engagement - Delivery and Operations - CFO / Commercial Management Workshop

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