May 11 Clous Infrastructure Wmaurer

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Cloud Infrastructure aaS with

Traditional Outsourcing Solutions
William Maurer
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The Promise (Hype?) of Cloud

Services: What's Not to Love?
SPEED
Easy IT as easy
as the power from
the plug
LOWER COST
Much lower cost for
acquisition and
implementation
Out-of-the-box ready
Simple to use
Agility and scalability
Pay as you go
Buy direct: No/limited need to get Procurement/IT approval
Re-thinking Data Center Outsourcing

Bi-Modal Is In Your Future
IT Consumerization
Larger Available Market
Digital
Workplace
Revenue Producing Solutions

Service Industrialization
Cost Improvement
Enterprise
suppliers, longterm deals
Sourcing
Small, new
vendors, shortterm deals
Most Important Infrastructure Services

Sourcing Strategy Objectives
n=383
Most important
2nd most important
Reducing costs
21%
3rd most important

11%
Improving competitive position
11%
9%
9%
IT process improvement
10%
10%
9%
Consolidating IT or business process operations

(shared service centers)
8%
Business process improvement
8%
Allowing IT to focus on key business initiatives
10%
8%
5%
Improving IT governance
7%
Overcoming staff shortages
7%
8%
9%
12%
7%
5%
8%
7%
5%
Enabling revenue enhancement
5%
6%
7%
Strategic determinations for use of cloud services
5%
6%
5%
Convergence of IT & operational technologies
5%
Moving Capex to Opex

Shifting mix of sourcing choices (from T&M to
fixed fee to managed services)
4%
4%
5%
3% 3% 4%
7%
4%
10%
Top 3
43%
29%
29%
26%
24%
24%
20%
19%
17%
16%
16%
14%
10%
Q02A. What are your organization's top three most important Infrastructure Services (or any subset of infrastructure) sourcing strategy
objectives?
In 2015,
Cloud
Remains
$100
investment
allocation
a Top Priority for

IT Organizations Globally
2015 Top 10 IT Budget Priorities

Cloud Computing (SaaS, PaaS, IaaS)
27%
Virtualization (Server, Desktop, Storage)
26%
IT Modernization
25%
Mobile Technologies
Needs in New
Services
Delivery:
19%
Enterprise Software Modernization
17%
Benefits Realization
Big Data, Information Management
17%
Life Cycle Solutions
Data Center Consolidation
16%
Speed
Enterprise Software Implementation or

Upgrade
15%
Analytics and Business Intelligence
15%
Customer Experience Management
14%
Note: Darker Shade Indicates Nexus of Forces
Insights
Co-innovation
Gartner's Annual IT Budget Survey

Gartner, February 2014 Number of Respondents = 1,523
78% of Respondents Are IT Managers or More Senior
Key Issues (original in red, suggested by

Victoria below ibn black font)
1. How do cloud services differ from traditional
outsourcing?
2. What organizational and procedural changes
are necessary when adopting cloud services?
3. What are service providers offering that could

ease the transition to cloud services?
Contracting Process Is Different

Traditional Services
Cloud Services
SaaS Service Agreement
ServiceTerms and Agreement

These license terms are an agreement
between the corporation and you.
Please read them
By clicking "I accept" you agree
to the terms of the agreement.
I ACCEPT
I DECLINE
Best Practice
Contract Structure and Content
Strategic
Relationship
Guiding
Principles
Attachment
Services
Fees and
Payment
Terms
10
Term
Term and
and DisentangleTermination
Termination
ment
13
14
Security and
Legal
ConfidenCompliance
tiality
C
Independent
Advisor
Charter
D
Communication
Plan
Retained
Authorities
B
Strategic
Objective
Statement
Contract
Management
Master Service Agreement (MSA)

4
Personnel
Assets and
Third-party
Contracts
Recordkeeping
Audit Rights
11
Represent.
Warranties
Covenant
12
Limitations
of Liability
15
Proprietary
Rights
16
Indemnification
Attachment
17
Insurance
18
Dispute
Resolution
19
Use of
Subcontrac- Miscellaneous
tors
N
SOW
SLA
Price
A
Relationship, Integration Governance
E
Transition/
Transformation
F
G
Demand
Human
Management
Capital
Plan
Management
H
Key
Personnel
I
Contract
Management
J
Process
Ownership
Plan
O
Risk
Analysis
Framework
K
Exit
Plan
L
Innovation
Plan
M
Measurement
Charter
Best Practice Contract Structure

Altered For as a Service Solutions
Strategic
Relationship
Guiding
Principles
B
Strategic
Objective
Statement
Services
and
Payment
Terms
10
Term
Term and
and DisentangleTermination
Termination
ment
13
14
Security and
Legal
Confidentiality Compliance
C
Independent
Advisor
Charter
D
Communication
Plan
6 Fees
Retained
Authorities
Attachment
Contract
Management

4
Assets and
Third-party
Contracts
Personnel
Recordkeeping
Audit Rights
11
Represent.
Warranties
Covenant
12
Limitations
of Liability
15
Proprietary
Rights
16
Indemnification
Attachment
17
Insurance
18
Dispute
Resolution
19
Use of
Subcontract- Miscellaneous
tors
N
SOW
SLA
Price
A
E
Transition/
Transformation
Remains
F
G
Demand
Human
Management
Capital
Plan
Management
H
Key
Personnel
Dictated or Greatly Simplified
I
Contract
Management
J
Process
Ownership
Plan
Not in Cloud Contract
O
Risk
Analysis
Framework
K
Exit
Plan
L
Innovation
Plan
M
Measurement
Charter
Altered State of Contract

This is all that Remains, Some Big Holes
Strategic
Relationship
Guiding
Principles
B
Strategic
Objective
Statement
Services
and
Payment
Terms
10
Term
Term and
and
Termination
Termination
13
Recordkeeping
Audit Rights
11
Represent.
Warranties
Covenant
12
Limitations
of Liability
14
Security and
Legal
Confidentiality Compliance
C
Independent
Advisor
Charter
D
Communication
Plan
6 Fees
Retained
Authorities
Attachment
Contract
Management
15
Proprietary
Rights
16
Indemnification
Attachment
17
Insurance
Dispute
Resolution
18
19
Use of
Subcontract- Miscellaneous
tors
N
SOW
SLA
Price
A
E
Transition/
Transformation
Remains
I
Contract
Management
O
Risk
Analysis
Framework
K
Exit
Plan
L
Innovation
Plan
M
Measurement
Charter
Altered State of Contract

Worse This is all that We Can Negotiate
Strategic
Relationship
Contract
Management

1
10
11
12
Retained
Authorities
Limitations
of Liability
Attachment
B
Strategic
Objective
Statement
Remains
13
14
15
Attachment
16
17
18
Indemnification
19
Chemistry of a Contract 2104

Traditional ITO
22 Articles, 16 Attachments
Master
Service
Agreement
MSA
Guiding
Principles
Services
GP
RA
Retained
Authorities
Term
Termination
Te
9
Security and
Confidentiality
SC
13
Personnel
Sv
2
Fees and
Payment Terms
Pn
Assets and
Third Party
Contracts
3
Record
Keeping
Audit Rights
FP
RR
Da
LL
6
7
Disentangle- Limitations of
ment
Liability
10
11
Legal
Indemnification
Compliance
LC
14
Attachment
ATT
AT
4
Representation
Warranties
Covenant
RW
PR
DR
US
15
16
Dispute
Use of
Miscellaneous
Resolution Subcontractors
17
Definitions
De
20
18
Licensing
Li
21
RI
SO
DM
12
Insurance
Is
Strategic
Objective
Statement
Independent Communication Transition

Advisor
Plan
Transformation
Charter
IC
CP
A
B
C
D
Demand
Human Capital Key Personnel
Contract
Management Management
Management
Plan
Plan
Proprietary
Rights
Id
Relationship,
Integration
Governance
Mc
19
Acceptance
Ac
22
HC
Exit
Plan
Innovation
Plan
EP
IP
K
Equipment
Eq
KP
H
Measurement
Charter
MC
TT
E
Process
Ownership
Plan
CM
SOW, SLA,
OLA, Price,
BHD
PO
J
Risk
Analysis
Framework
SP
RF
Chemistry of a Contract 2104

as a Service Solutions
18 Articles, 10 Attachments
Master
Service
Agreement
MSA
Services
Sv
2
Fees and
Payment Terms
Retained
Authorities
RA
Term
Termination
Te
9
Security and
Confidentiality
SC
Assets and
Third Party
Contracts
13
Record
Keeping
Audit Rights
FP
RR
Da
LL
6
7
Disentangle- Limitations of
ment
Liability
10
11
Legal
Indemnification
Compliance
LC
14
Id
Attachment
ATT
AT
4
Representation
Warranties
Covenant
RW
Relationship,
Integration
Governance
RI
Proprietary
Rights
A
Demand
Management
Plan
PR
DM
Is
EP
12
Insurance
Exit
Plan
15
16
Dispute
Use of
Miscellaneous
Resolution Subcontractors
DR
17
US
18
Communication Transition
Plan
Transformation
Mc
19
CP
D
Contract
Management
Innovation
Plan
IP
TT
CM
Measurement
Charter
SOW, SLA,
OLA, Price,
BHD
Risk
Analysis
Framework
MC
SP
RF
Pricing Is Different
Traditional Service Contract
Service-Level Agreement:
Cloud Service Contract

Service-Level Agreement:
Negotiated
Standard
My needs
Needs
Penaltyof all
Penalties
Weak/no
Reportingcredits
Customized
Price:
Based on
planned usage
Committed per
negotiated terms
Price:
Per as
usage
Pay
you go
Reducing
over
Can
change
time
without
notification
Committed for
three years
SLAs and pricing are not as prescriptive as traditional

service contracts.
Definitions, Pricing Models, Other

Attributes - By Solution
IaaS
PaaS
STaaS
Definitions
22
15
12
Pricing Models
11
Service Levels
Contracts
12
14
15
Lengths
18
17
17
16
Hidden Costs Are Different

Pilots
Data Export
Fees
Initial Setup Costs
Maintenance
and Support
Fees
Reoccurring
Training Fees
Customization or
Integration Fees
On-Premises
License
Conversions
With No
Credit
Sandboxing Fees
Fees for Customers or Business Partners

Calculating the Business

Case Is Different
Ongoing Cost: Per User
Per Month (PUPM)
Cost to Manage Risk
and Quality: Security,
Archiving, Interfaces
Additional Cost of
"Premium Services"
Training IT and
End Users
Cost to Get In and Out: Migration, Data Transfer, Exit Fees
ROI Is Often Further Away Than It Appears

The Offerings and Delivery Models

Are Different
Business Value-Add
Business
Strategy
Consulting
Custom BPO
IT Consulting
Custom Solutions
App. Development
& Integrations
Enterprise
One-to-One
Vertical Business
Process Utility
Horizontal Business
Process Utility
Transaction
Processing
App. Mgmt.
Desktop Management
Network Services
SaaS
Remote Managed
Service
Hosting/
Collocation Infrastructure
Utility
Storage on
Demand
Help Desk Outsourcing
IT Efficiency
Network Utility
Cloud-Based
Business
Process
Services
Cloud-Based
Application
Services
Shared
One-to-Many
Cloud-Based
Application
Infrastructure
Services
Cloud-Based
System
Infrastructure
Services
Current Market Offerings Understand

Your Provider, Pricing and Delivery Options
Business Value-Add
Optimization
Creation
Infrastructure
Utility SAP
Cloud
Computing
One-to-one
One-to-many
delivery
Application as
a Service
Infrastructure
Utility
Value
Data Center
Outsource
Management
* Not a definitive list of companies
IT Efficiency
Cloud
Storage
Access
delivery
The Vendor Relationship Is Different

It's about standardization
and multitenancy, not
about custom terms.
You are not special!
Software or infrastructure
does not change. You
really do "accept"!
Vendor defines the terms.
And they can change at
any time!
It's a "replicated"
relationship, at best!
Vendor (One)
You (of Many)
The Result Is Different

Traditional Services
Cloud Services
But notice
no net!
Key Issues
outsourcing?

Cloud Sourcing Governance and Demand

Management IT's New Critical Competency
1. Define who has the authority to acquire cloud services.
2. Establish governance, authorities and processes for evaluating cloud

services and suppliers.
3. Obtain input and agreement about cloud service requirements for
business and IT.
4. Develop demand management forecasting and planning processes

with the business units.
5. Continuously monitor, analyze, prioritize and forecast cloud
services requirements.
6. Proactively monitor consumption to spot trends in changing

requirements and unplanned utilization.
7. Report and evaluate the patterns of cloud service consumption
against forecasts and to modify contracts and providers as needed.
Change to Adopting Cloud Services:

1) Services Sourcing Strategy
1. Review demand and
innovation processes to
incorporate new models
70%+ of
organizations
update or advance
their sourcing
strategy once a
year or more
frequently*
2. Broaden sourcing
governance to include
business users, Gen Y,
partners and update
sourcing maxims
3. Monitor adoption of cloud
services by your competitors
4. Align sourcing strategies
to the pulse of business and
market dynamics
*IT and Business Process Sourcing Survey, June 2014


2) Services and Providers Selection
1. Move mindset from detailed
technical specifications to
pilot and test
45%+ of
organizations
consider Total Cost
of contracted
services the most
important selection
criteria*

2. Move from complex RFPs to

fast track selection among the
few best qualified offerings
3. Don't fall for today's

low price
4. Focus on TCS, transition
cost, volume baseline, change
and demand management,
Risk
analysis, DR/BC

3) Services and Contract Negotiation
WARNING wrong
changes break model
1. Understand the trade offs

you make with cloud services
2. Understand limitations:
choice versus acceptance:
a) Service options, SLAs, price
Only 17% of cloud

service contracts
are signed as
provided by the
service provider.*
b) Security, disaster recovery,

c) Availability, penalties
3. Understand which Ts&Cs

to negotiate:
a) Renewal price caps
b) Service availability guarantees
c) Audit, compliance
d) Liability, termination


4) Services and Contract Management
1. Your future is hybrid,
despite the term means
nothing specific
Cloud services
make cost more
predictable and
contract easier (65%
of organizations).
The opposite is true
for 46%.*
2. Skill up to managing your

specific combination of
cloud and traditional services
3. Multisourcing
competencies are the
foundation for cloud
sourcing management
4. Required tools, architecture
and technical competencies
vary based on services (IaaS,
PaaS, SaaS, BPaaS)

DC Sourcing Options:
The Decision-Making Tree
USE CASE
Feasibility
Business Factors
DCS
Compass
8. Assets
9. Contract terms
1. Location
10. Financials
5. Size
2. Applications
6. Scope
3. Skills
Data Center Services
Market Map
Options
4. Management
7. Sharing
DCO Decision-making Tree: Identify the

Applicable Sourcing Scenarios
Custom
Factors
Category
Main Factor
USE CASE
Location
In country
USE CASE
Application
Complex
DC consolidation
USE CASE
Skills
Critical issue
Short term
DCS MAP
Managed service
Yes
DCS MAP
Size
>50 and <100
DCS MAP
Scope
<15% DC TCO
>50%
Focus on managed services
DCS MAP
Sharing
Dedicated
BUSINESS
Assets
DC
Provider owned
BUSINESS
Assets
Hardware
Provider owned
BUSINESS
Contractual terms
Customized
BUSINESS
Financial
Cost reduction Main factor
BUSINESS
Financial
Opex
USE CASE
COMBINED
Use case applicable scenarios
DCS MAP
COMBINED
DCS MAP applicable scenarios
BUSINESS
COMBINED
Business applicable scenarios
FINAL
COMBINED
Reconciled scenarios
Sub-factors
Preferred over capex
Source: "Decision Tree for Data Center Services Sourcing Strategies," G00245427
RIM
Co-lo.
Hosting
DCO
IUS
IaaS
Key Issues
outsourcing?

Cloud-Related Service Offerings:

Many Outsourcers Claim It All
Professional services
offerings can speed
successful adoption of
cloud services.
Look for providers

with demonstrable
cloud capabilities.
Public | Private | Hybrid | Community

Cloud Service Providers: An Inherently

Crowded, Complex Ecosystem
Cloud-Enabled BPaaS
Cloud-Enabled IT Outsourcing
Cloud-Enabled System Integration/Solutions
SaaS Aggregation, Customization
SaaS Integration and Governance (iPaaS), SaaS
Cloud-Based Technology Services (IaaS, PaaS, Security, Storage, etc.)
More Comprehensive Services
Cloud Services Roles

Cloud Consultants
Strategists/
Architects
Cloud
Service Providers
Business Process Services
(BPU/aaS)
Aggregator
Customizer
Security aaS
Information
aaS
Integrator
Application Infrastructure
Services (PaaS)
Communications
aaS
Cloud
Service Brokers
Application Services
(SaaS)
System Infrastructure Services

(IaaS)
Recommendations:
10 Steps to Effective Cloud Sourcing
1. Confirm and document your cloud sourcing strategy
Why are you doing this? What results do you expect?
2. Prepare your organization for cloud services

(IT and Business)
3. Investigate the market, clearly understand your options
4. Define the appropriate cloud service offerings

5. Determine the appropriate service level requirements
6. Select the providers and negotiate the terms
7. Integrate cloud services with internal systems and processes
8. Analyze and monitor demand
9. Monitor delivery performance and risk
10. Know when it's time to switch
Recommended Gartner Research

Manage Risk and Unexpected Costs During the
Cloud Sourcing Revolution
F. Ridder, F. Karamouzis (G00211389)
Survey Analysis: Providers of IT and Cloud-Based
Services Must Focus on the Details to Satisfy
Customer Demands
B. Igou, E. Anderson (G00228546)
Forecast: Public Cloud Services, Worldwide, 20102016, 2Q12 Update
E. Anderson and others (G00234814)
Cloud Services Brokerages Challenge Traditional IT
Service Providers for Cloud Services Delivery
T. Bova, D. Plummer (G00233235)
For more information, stop by Gartner Research Zone.
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Have a question for our analyst? Click the Question tab.

2014 Gartner, Inc. and/or its affiliates. All rights reserved.

2014 Gartner, Inc. and/or its affiliates. All rights reserved.

Cloud Infrastructure aaS with

The Promise (Hype?) of Cloud

Re-thinking Data Center Outsourcing

Revenue Producing Solutions

Most Important Infrastructure Services

2nd most important

3rd most important

Improving competitive position

Consolidating IT or business process operations

Business process improvement

Allowing IT to focus on key business initiatives

Overcoming staff shortages

Enabling revenue enhancement

Strategic determinations for use of cloud services

Convergence of IT & operational technologies

Moving Capex to Opex

a Top Priority for

2015 Top 10 IT Budget Priorities

Virtualization (Server, Desktop, Storage)

Enterprise Software Modernization

Big Data, Information Management

Life Cycle Solutions

Data Center Consolidation

Enterprise Software Implementation or

Analytics and Business Intelligence

Customer Experience Management

Note: Darker Shade Indicates Nexus of Forces

Gartner's Annual IT Budget Survey

2014 Gartner, Inc. and/or its affiliates. All rights reserved.

Key Issues (original in red, suggested by

3. What are service providers offering that could

2014 Gartner, Inc. and/or its affiliates. All rights reserved.

Contracting Process Is Different

ServiceTerms and Agreement

2014 Gartner, Inc. and/or its affiliates. All rights reserved.

Master Service Agreement (MSA)

2014 Gartner, Inc. and/or its affiliates. All rights reserved.

Best Practice Contract Structure

Master Service Agreement (MSA)

Dictated or Greatly Simplified

2014 Gartner, Inc. and/or its affiliates. All rights reserved.

Not in Cloud Contract

Altered State of Contract

Master Service Agreement (MSA)

Dictated or Greatly Simplified

2014 Gartner, Inc. and/or its affiliates. All rights reserved.

Not in Cloud Contract

Altered State of Contract

Master Service Agreement (MSA)

Dictated or Greatly Simplified

2014 Gartner, Inc. and/or its affiliates. All rights reserved.

Not in Cloud Contract

Chemistry of a Contract 2104

Independent Communication Transition

Chemistry of a Contract 2104

2014 Gartner, Inc. and/or its affiliates. All rights reserved.

Cloud Service Contract

SLAs and pricing are not as prescriptive as traditional

Definitions, Pricing Models, Other