All major software vendors are switching their business model to cloud based delivery. Will this be a win / win situation for vendors and customers or is it just a more effective vendor lock in? In this session we are discussing different aspects to provide a better understanding – for software companies business model to move its customers to their Cloud solution and – for the potential benefits and risk for enterprise customers abandoning their on-premise infrastructure

1. Moving your collaboration infrastructure
to the Cloud.
Stairway to heaven or Highway
to hell
?
Olaf
Boerner
BCC
6.11.2015

2. PLATINUM
&
CHAMPAGNE
SPONSORS
GOLD
SPONSORS
SILVER
SPONSORS
BRONZE
SPONSORS

3. Agenda
• Introduction
• Cloud
layers
• TCO
• IBM
&
MS
Offering
• Why
Cloud
?
• Vendors
Arguments
for
Customers
• Vendors
Arguments
for
Investors
Vendor
strategies
• What
you
need
to
consider
?
• Organizational
issues
• Security
&
Privacy
• Risk
Management

4. About me
• Studied
Business
Administration
and
Computer
Science
• Notes
Consulting
since
1994
• CEO
and
Founder
of
BCC
in
1996
• Working
as
project
manager
senior
architect
with
large
enterprise
customers
• Securing
IBM
Social
Business
infrastructures
• reducing
Total
cost
of
Ownership
of
IBM
Social
Business
Infrastructures
thru
automating
Administration
• IBM
Champion
in
2014
&
2015
• Twitter:
@OlafBoerner

5. Cloud
Service
Models
• CRM,
Email
,
Web
Meetings,
Virtual
Desktops
Software-­‐as-­‐a-­‐Service
• Web
Servers,
Database
Servers,
Runtime
execution
Platform-­‐as-­‐a-­‐Service
• Virtual
machines
,
Servers,
storages
etc.
Infrastructure-­‐as-­‐a-­‐Service

6. TCO
– Total
Cost
of
Ownership
• TCO
is
used
to
calculate
all
relevant
cost
„driver“
for
an
IT
Service
over
a
given
time
frame
-­‐>
Life
cycle
• TCO
can
be
split
in
• Cost
of
Investment
• Software
• Hardware
• Implementation
• Cost
of
Operation
• SW
Maintenance
• HW
Maintenance
• Personal
required
to
run
operations
• Facilities
and
power
• Cost
of
Divestment
• Deinstallation
• “Wrecking”

7. TCO
– Total
Cost
of
Ownership
TCO On
Premise Cloud
Cost of investment Signifcant investment in
Company
asset
3
to 5
years lifecycle
No /
Onboading only
Cost of operation Low to medium
Significant
„shared“
Cloud provider
investments has to be
included
Cost of divestment Low
Low
?
Data Migration
?
Provider
Offboarding

8. IBM
Social
Cloud
Offering
• Public
Cloud
based
on
Softlayer
• IBM
Connections
Cloud
S1
• Complete
package
• „Connections“
• Web
Meeting
• Verse
/
Notes
Mail
• Document
Editors
• Mobile
Apps
• IBM
Connections
Cloud
S2
• „Smaller“
package
• Without
Mail
and
Document
Editors
• IBM
Social
Cloud
Stand-­‐alone
Service
• IBM
SmartCloud Notes

9. IBM
Social
Cloud
Stand-­‐alone
Services
• IBM
Connection
Social
Cloud
• including
file
sharing,
personal
dashboard,
communities,
activities
and
instant
messaging
• IBM
Connection
Chat
Cloud
• Instantly
communicate
with
colleagues
inside
your
organization
with
text
chat,
audio
and
video,
file
transfer,
and
screen
capture.u
• IBM
Connection
Files
Cloud
• 1TB
File
storage,
sync,
and
sharing
in
a
security-­‐rich
environment
across
web,
desktop,
and
mobile
devices.
• profiles
and
contacts,
post
status
updates,
and
view
updates
across
your
network.
• IBM
Connection
Meetings
Cloud
• Web
meetings
with
desktop
and
application
sharing,
chat,
and
polling.
Host
meetings
for
up
to
200
attendees
with
anyone
outside
your
company.
Intra-­‐
company
meetings
require
subscriptions
by
all
internal
participants

10. MS
Cloud
Offerings
• Office
365
Enterprise
1
• Office
online
(web
browser)
• Mail
and
calendar
with
50
GB
per
User
• 1
TB
file
storage
and
sharing
for
each
user
• Skype
• Team
Site
• Vc
• Yammer
• Office
365
Enterprise
3
• E1
plus
• Advanced
E
Mail
• Full
Office
Suite
on
PC/Mac
with
apps
for
tablets
and
phones
• Seach and
Discovery
etc
• http://products.office.com/en-­‐au/business/office-­‐365-­‐enterprise-­‐e3-­‐
business-­‐software

11. Why
moving
to
the
cloud
?
Cloud
benefits
for
customers
What
Analysts
and
vendor
Marketing
are
telling
you
?

12. Common
arguments why
using
the
cloud
• Cost
arguments
• cost
efficient
-­‐ reduce
your
cost
of
ownership
• Leverage
“economies
of
scale”
• No
IT
operation
overhead
• Pay
as
you
use
• Quality
Arguments
• Always
using
the
most
current
software
releases
• Better
business
results
due
to
modern
software
technologies
• Higher
availability
• No
license
asset
management

13. Vendor
Marketing
J
• 1.
Fully
utilized
hardware
• Cloud
can
provide
high
utilization
and
smoothing
of
the
inevitable
peaks
and
troughs
in
workloads.
• Sharing
server
infrastructure
with
other
organizations'
computing
needs
ensure
efficient
use
of
hardware
• 2.
Lower
power
costs
• Due
to
economies
of
scale
and
better
hardware
utilization
• 3.
Lower
people
costs
• Biggest
part
of
TCO
• IT
people
are
expensive;
their
salaries,
benefits,
and
other
employment
costs
usually
outweigh
the
costs
of
hardware
and
software
• 4.
Zero
capital
costs
• Buying
your
hard-­‐ and
software
you're
looking
at
up-­‐front
capital
costs
• 5.
Resilience
without
redundancy
• If
run
your
own
servers,
you
need
to
buy
more
hardware
than
you
need
in
case
of
failure.
• Expensive
to
maximize
uptime.

14. There
ain‘t no
such
thing
as
a
free
lunch
!
(Milton
Friedmann )
Cloud
service
provider
are
no
“magical
non
profit”
companies
Cloud
providers
must
make
profits !
Need
to keep
their current
high
profit
margin !(70-­‐
80%)
Grow /keep
company
market value
/
stock
price
http://csimarket.com/Industry/industry_Profit
ability_Ratios.php?ind=1011

15. Cloud
benefits
for
vendors
What
vendors
are
telling
their
investors
?

16. Currently
“no
real
information”
!
• There
is
no
reliable
information
available
!
• Vendors
do
not
publish
detailed
level
of
information
about
the
Cloud
business
EBIT
margin
!
• Amazon
is
currently
the
only
exception

17. IBM
Q1
/
2015
– Investor
Statement
• revenue
performance
improved
to
flat
from
prior
year
• Did
not
decline
again
!
• Strategic
imperatives
revenue
growth
accelerated
to
more
than
30%
• Cloud
business
grew
over
75%;
exited
the
quarter
with
an
annual
as-­‐a-­‐Service
run
rate
of
$3.8
billion
• Analytics
was
up
more
than
20%,
Social
more
than
40%,
and
Mobile
more
than
4
times
• Remember
IBM
Earning
Strategy
• Invest
in
high
profit
business
which
is
growing
• Sell
or
discontinue
low
profit
or
declining
business

18. MS
Investor
Statement

19. MS
Investor
Statement

20. Microsoft
Cloud
Strategy
• Does
MS
makes
money
converting
EA
customers
to
Office
365
?
• Not
sure
• But
they
are
„financing“
MS
huge
cloud
investments
• Profit
will
come
from
converting
transactional
customers
• Microsoft
is
seeing
following
benefits
• Ensure
continuous
revenue
stream
• Direct
and
tight
relationship
with
customers
• Grow
and
extend
opportunities
with
customers
>
Starting
point
for
Upselling
customer
with
new
addon services

21. IBM
Q1
/
2015
– Investor
Statement
• revenue
performance
improved
to
flat
from
prior
year
• Did
not
decline
again
!
• Strategic
imperatives
revenue
growth
accelerated
to
more
than
30%
• Cloud
business
grew
over
75%;
exited
the
quarter
with
an
annual
as-­‐a-­‐Service
run
rate
of
$3.8
billion
• Analytics
was
up
more
than
20%,
Social
more
than
40%,
and
Mobile
more
than
4
times
• Remember
IBM
Earning
Strategy
• Invest
in
high
profit
business
which
is
growing
• Sell
or
discontinue
low
profit
or
declining
business

22. IBM
subscription
revenue
due
to
automatic
renewal
• 6.1
Automatic
Renewal
of
a
Subscription
Period
• If
Customer's
PoE designates
the
subscription
renewal
as
automatic,
Customer
may
renew
Customer's
expiring
IBM
SaaS Subscription
Period
by
written
authorization
to
renew
(e.g.,
order
form,
order
letter,
purchase
order),
prior
to
the
expiration
date,
in
accordance
with
the
terms
of
the
Agreement.
• IF
IBM
DOES
NOT
RECEIVE
SUCH
AUTHORIZATION
BY
THE
EXPIRATION
DATE,
THE
EXPIRING
IBM
SaaS SUBSCRIPTION
PERIOD
IS
AUTOMATICALLY
RENEWED
FOR
EITHER
A
ONE
YEAR
TERM
OR
THE
SAME
DURATION
AS
THE
ORIGINAL
TERM
UNLESS,
WITHIN
NINETY
(90)
DAYS
OF
THE
EXPIRATION
DATE,
IBM
RECEIVES,
EITHER
DIRECTLY
FROM
CUSTOMER
OR
THROUGH
CUSTOMER'S
RESELLER,
AS
APPLICABLE,
CUSTOMER'S
WRITTEN
NOTIFICATION
THAT
CUSTOMER
DOES
NOT
WANT
TO
RENEW.
OTHERWISE,
CUSTOMER
AGREES
TO
PAY
SUCH
RENEWAL
CHARGES.

23. What
kind
of
business
is
Cloud
or
will
it
be
?
High
volume
High
margin

24. What
kind
of
business
is
„Cloud“
High
volume
low
margin

25. Amazon
– for
AWS
• Amazon
is
the
first vendor
who
published
details
• AWS
Q4
2014
• $5
billionbusiness
• operating
profit
of
$265
million
with
• an
profit
margin
of
19.6
percent
• IBM’s SW
gross margins are just
over 50
percent
• AWS
proves
Cloud
business
is
high
volume
with
low
margin
• AWS
says
• that
Infrastructure
as
Service
will
be
a
Commodity
(low
margin)
• Trying
to
move
up
to
Application
Level

26. Summary
• Cloud
infrastructure
market
will
become
a
commodity
market
• Software
vendors
are
trying
to
convert
“highly
profitable”
but
unstable
software
revenue
stream
to
continuous
subscription
streams
• Software
vendors
are
fighting
for
market
share
and
accepting
decreasing
profit
margins
and
revenue
for
these
“transition”
period
to
become
Cloud
service
providers
• Application service (SaaS)
is the most profitable
business

27. What
you
need
to
consider
?
So
how
will
this
impact
my
cloud
evaluation?
What
are
my
other
options
?

28. What
do
consider
BEFORE
?
(KPMG
Study
2014)

29. What
do
consider
AFTER
?
(KPMG
Study
2014)

30. Security
&
Data
privacy
issues
(not
our
focus
today
J)
• System
Complexity
• A
public
cloud
computing
environment
is
extremely
complex
(e.g.
IBM
SmartCloud on
premise
)
• Shared
Multi
tenant
Environment
• client
organizations
typically
share
components
and
resources
with
other
consumers
that
are
unknown
to
them
• Compliance
• Law
and
Regulations,
Data
Location
,
Electronic
Discovery
• Trust
• Giving
up
direct
control
over
many
aspects
of
security
and
privacy
requires
a
high
level
of
trust
onto
the
cloud
provider
• Access
to
company
Insider
Information
is
expanded
to
cloud
providers
and
subcontractors
• Ensure
rights
to
audit
cloud
provider
!!!

31. Potential
Business
Risk
• Cost
• Loosing
possibility
to
plan
and
manage
your
cost
• Risk
of
increasing
prices
• Availability
• Temporary
Outages
• Prolonged
and
Permanent
Outages
/
Discontinue
of
services
• Incident
Response
• Data
Availability
• Poor
Incident
Analysis
and
Resolution

32. Potential
Business
Risk:
Quality
&
Cost
• Cloud
provider
is
saving
money
by
extending
hardware
lifecycle
and
operate
with
lower
qualified
people
• Cloud
Provider
is
terminating
your
contract
because
your
are
too
demanding
/
expensive
• Using
to
much
bandwith
• Using
to
much
server
load
• Cloud
Provider
is
significantly
changing
his
offerings
or
not
keeping
up
with
competition
• Cloud
Provider
C
is
offering
a
much
„better“
offering
• Your
Cloud
Provider
is
increasing
monthly
prices
or
force
you
to
upgrade
to
more
expensive
service
package
(see
MS
and
IBM
• Cloud
Provider
is
shutting
down
his
offering
• Cloud
Provider
is
going
out
of
business
or
bankrupt
(How
fast
can
you
react)

33. Example
Shutting
Down
Service
Postini
• Postini was
a
startup company
founded
in
1999
• BY
February
2005,
it
was
operating
ten
U.S.
data
centers,
processing
2.5
billion
e-­‐mail
messages
weekly,
and
providing
anti-­‐spam
services
for
more
than
4,200
companies
and
"6
million
end
users
• On
July
9,
2007,
Google
announced
that
it
had
signed
a
definitive
agreement
to
acquire
Postini.[5]
Google
paid
$625
million
in
cash
for
the
acquisition
• August
21,
2012,
Google
announced
it
would
be
shutting
down
all
of
Postini's web
services

34. • The
1TB
limit on
Office
365
users takes effect
immediately.
• You have 12
month to remove your files from
OneDrive
• Consumers
that
are
not
satisfied
by
the
new
storage
plan
can
opt
out
of
Office
365
and
receive
a
pro-­‐rated
refund.
• http://www.computerworld.com/article/3000642/cloud-­‐
storage/microsoft-­‐shrinks-­‐onedrive-­‐storage-­‐limits-­‐for-­‐office-­‐365-­‐
customers.html
Microsoft
shrinks OneDrive storage limits

35. Consider
leasons learned
from
“Outsourcing
Business”
!
• What‘s
difference
to
Cloud
?
• increased
complexity
• No
dedicated
Provider
Manager
• Difficulty
to
maintain
accountability
and
control
over
deployed
applications
or
systems
• What’s
similar
to
Cloud
?
• Steps
that
organizations
need
to
onboard
• Provider
coordination
&
communication
efforts
• Service
Provider
change
!
• Existing
guidelines
for
outsourcing
still
apply
!

36. Risk
Management:
Business
Continuity
Management
?
• Which
risks
do
you
need
to
manage?
• How
can
you
manage
these
risks
?
• Think
about
how
9/11
created
Business
Continuity
Management
!!!
• Data
Backup
&
Migration
• How
do
you
ensure
access
to
your
critical
data
• Where
to
you
store
these
backups
?
• Additional
BackUp /
Cold
StandBy Cloud
Provider
required
?
• Is
„Off
Boarding“
possible
?
• IBM
Domino
is
easy
!
• IBM
Connections
not
sure
?

37. Summary
• There
ain’t no
free
lunch
or
magical
economies
of
scale
providers
must
earn
money
!
• Carefully
select
with
internal
IT
services
you
want
to
use
as
an
cloud
service
• Chat,
WebMeeting are
easy
choices
• “Extranet”
Applications
makes
sense
• Utilize
outsourcing
experience
for
moving
to
Cloud
Services
• Do
not
underestimate
cloud
complexity
• Do
not
underestimate
cost
of
coordination
and
communication
with
cloud
service
provider
• Discuss
and
plan
off
boarding
and
worst
cases
BEFORE
moving
to
cloud
services