September 2016, IDC #US41688116

White Paper

Developing a Cloud Strategy for Digital Transformation: Hybrid Cloud and Beyond

Sponsored by: DellEMC

Richard L. Villars

September 2016

IDC OPINION

For organizations undertaking digital transformation at the business level, cloud isn't just about picking

from a specific set of product or service delivery models such as public, private, or hybrid cloud. These

organizations must complete the shift to a predominantly cloud-based IT environment in the next few

years, and one of the most important elements in this shift will be the extending of value for mission-

critical applications (key data sources) through cloud enablement products and services. Developers

and business leaders expect their IT teams to automate the provisioning of tuned IT resources for new

cloud-native, mobile, analytic, and IoT workloads at the right locations while leveraging existing IT and

data assets to extend business value and reduce operational costs.

Achieving these goals will require the selection of a cloud service broker, not just a provider of

hardware (HW), software (SW), or software as a service (SaaS). This facilitator must deliver a portfolio

of integrated HW/SW optimized for cloud enablement and cloud-native development while providing

monitoring, service management, and data control capabilities needed to support multiple

cloud/datacenter options. Most importantly, a cloud facilitation partner must also be in the position to

provide transition financing, so organizations can painlessly and quickly shift their procurement and

budgeting policies and practices to more cloud-attuned models.

Dell Technologies, through its combination of EMC and Dell enterprise products as well as its

Virtustream and Pivotal businesses, is in a strong position to deliver IT solutions that speed the

creation and maintenance of transformational mobile-first and analytic-intense applications while

lowering costs and improving the agility of existing apps. The company also offers an innovative

portfolio of consumption-based procurement/financing options that reduce the barriers to cloud

expansion and enable closer alignment of infrastructure investment with business outcomes.

DIGITAL TRANSFORMATION DRIVES SHIFT TO CLOUD-BASED IT

Enterprises must be ready to engage in a continuous digital transformation process as they adapt to or

drive disruptive changes. This digital transformation involves enterprisewide innovation in one or more

of the following areas: organization (i.e., workforce), omni-experience (i.e., customers), operating

model (i.e., business model/process changes), information (i.e., data exploitation), and leadership.

From a technology perspective, the adoption of cloud-based IT systems and services is the

foundational transition that underpins all of these innovation efforts. The purposes driving

organizations' cloud efforts are to more closely align consumption of IT and resources with business

©2016 IDC #US41688116 2

activities and provide a platform for agile development and enhancement of the new engagement and

analytic-based services underpinning digital transformation.

The Quickening Pace of the Cloud Transition

IDC conducts an annual survey of IT, development, and line-of-business (LOB) leaders around the world

to gauge their pace of cloud adoption. Figure 1 presents the summary of worldwide results concerning

current and planned (two years later) IT budgeting based on procurement and management models

(e.g., on-premises versus off-premises and cloud versus more traditional models).

FIGURE 1

IT Budget Redistribution to Cloud

Q. Please estimate what percentage of your organization's total annual IT budget is allocated to

each of the following procurement/management models.

n = 11,350 worldwide respondents

Note: The data is weighted by GDP and company size.

Source: IDC's CloudView Survey, January 2016

The message from this survey is quite clear. Today, we are already at the stage where switching to a

cloud-based IT strategy is a necessity for survival, not just a strategy for competitive advantage.

Today In 24 months

Noncloud: 57.0%

Cloud: 43.0% (44.2% growth)

Noncloud: 70.2%

Cloud: 29.8% (Public + Private)

Traditional in-house deployment

48.8%

Provider site:43.4%

Customer site:56.6%

Traditional in-house deployment

40.7%

Enterprise private cloud:

7.8%Enterprise private

cloud:10.9%

Traditional outsourced

21.4%

Traditional outsourced

16.3%

Public cloud13.6%

Public cloud10.5% Dedicated

HPC6.1%

On-demand HPC5.5%

Dedicated HPC9.6%

On-demand HPC8.9%

Provider site:48.4% (11.4% growth)

Customer site:51.6%

External cloud: 32.1% (45.8% growth)External cloud: 22.0%

Public cloud, including on-demand hosted private cloud

Private cloud, including enterprise private cloud and dedicated hosted private cloud

Traditional noncloud IT spending

©2016 IDC #US41688116 3

Organizations around the world will need to complete the shift to a predominantly cloud-based IT

environment in the next few years, but one of the most important elements in this shift will be the

extending of value for mission-critical applications (key data sources) through cloud enablement

products and services.

Working Hard to Not Get Lost in the Clouds

Results from IDC's CloudView Survey also make it clear that during this transition, organizations intend to

spread their cloud investments across a multitude of options: some in their own datacenters but

increasingly on a mix of shared and dedicated IT assets in service providers' datacenters. As shown in

Figure 2, organizations are allocating 70.6% of their annual IT budgets across multiple cloud options.

The only significant pool of "single cloud type" consumers is organizations relying exclusively on public

clouds. This pool consists primarily of smaller start-ups that were "born on the cloud."

FIGURE 2

Dominance of Multiple Cloud Deployments

Q. Please estimate what percentage of your organization's total annual IT budget is allocated to

each of the following procurement/management models.

n = 11,350 worldwide respondents

Note: The data is weighted by GDP and company size.

Source: IDC's CloudView Survey, January 2016

Today In 24 months

70.6%Multiple cloud

deployments

91.7%Multiple cloud

deployments

Public cloud

only

Public cloud

only

Hosted private

cloud only

Hosted private

cloud only

Enterprise private

cloud only

Enterprise private

cloud only

16.9%4.8%4.9%

2%

7.5%

2%

©2016 IDC #US41688116 4

Two years from now, the percentage of budget that organizations spread across multiple cloud options

will reach 91.7%. A deeper dive into the public cloud option also reveals that a significant driver of this

increase is the greater use and development of cloud-native PaaS and SaaS offerings in core business

services, not simply a shift in infrastructure spending to IaaS.

Organizations' cloud plans must become more diversified, not more monolithic. The most obvious

conclusion drawn from this analysis is that the future strategy for organizations is hybrid cloud. The

goal for adopting a hybrid cloud solution is to ensure a controlled transition to a cloud model while

maintaining control over data and application security.

When we spoke with CIOs about their existing cloud environments, two shortcomings quickly emerged:

CIOs' current thinking often positions hybrid cloud as either a combination of on-premises

private cloud and off-premises hosted private cloud or a combination of off-premises hosted

private cloud and public cloud. This dichotomy frequently leads to fragmentation in cloud

investment decisions and partner assessments.

CIOs' existing hybrid cloud portfolio (e.g., a mix of private cloud and multiple public cloud IaaS

and SaaS) was not assembled based on a coherent business/IT strategy; rather, it describes a

situation that CIOs need to deal with going forward. The scattershot approach to the cloud

portfolio up to now poses significant talent and asset management challenges.

CIOs and the IT teams must embrace the task of integrating and managing diverse sets of cloud

environments (cloud enabled and cloud native) in many different locations, and they need a partner

that can facilitate the transition to a cloud-based IT environment.

FUTURE OUTLOOK

Developers and business leaders expect their IT teams to automate the provisioning of tuned IT

resources for cloud-native, mobile, analytic, and IoT workloads at the right locations while achieving

maximum reuse of all their IT and data assets as cloud-enabled applications evolve. The development of

a dynamic, diversified cloud-based IT transition strategy that coordinates the use of all cloud options to

achieve specific business purposes will be a key driver of organizations' digital transformation efforts.

Shifting to cloud-based IT isn't just about picking among a specific set of product or service delivery

models such as public, private, or hybrid cloud.

IT organizations must deliver a diversified portfolio of cloud services (on-premises and off-premises),

improve their ability to manage a growing range of cloud-native and cloud-enabled data and

application assets in multiple internal and third-party datacenters, and develop a hybrid IT and

developer operations model. These organizations must also realign their cloud selection and

operations strategies to address a specific set of goals:

Reduce staff and financial resources dedicated to planning, managing, and executing

upgrades, patches, and migrations at the hardware, system software, and application levels.

Achieve a high level of data control and data insight to ensure the secure use of data and

sustained extraction of value from diverse information in cloud-based content repositories.

Develop standardized and modularized systems that can be securely deployed and managed

as a "fleet" of local cloud assets for secure, low-latency delivery of cloud applications to critical

business and customer locations around the world.

©2016 IDC #US41688116 5

Achieving these goals will require the selection of an IT partner that provides products and services

designed to address these goals. These solutions must enable:

Implementation of a consistent management, security, and governance framework across

diversified and distributed application and data assets within cloud systems and critical

noncloud systems

Development and continuous refinement of best practices for cloud portfolio management,

including robust service evaluation, cloud service provider selection, governance, and

performance-monitoring practices

Standardization of infrastructure hardware and software deployed in dedicated cloud

environments to enable agile infrastructure and application development/delivery

Simplified selection of cloud and hosted services with a range of resource tenancy and

management options as well as transition assistance related to financing and network

rationalization

DELL TECHNOLOGIES' APPROACH TO CLOUD: FACILITATING TRANSFORMATION

Dell Technologies is a leading provider of IT solutions for enterprises and cloud service providers.

Following the merger of Dell and EMC, Dell Technologies has a broad portfolio of infrastructure

hardware and software solutions that make it possible for enterprises to create and maintain

transformational mobile-first and analytic-intense applications while lowering costs and improving the

agility of existing apps. Key products in the portfolio include:

A wide range of converged, hyperconverged, and engineered systems designed to enable

high-performance, agile IT infrastructure for noncloud, cloud-enabled, and cloud-native

workloads while reducing operational costs and boosting reliability

A portfolio of broad-range cloud orchestration and management platforms that enable the

adoption of rapid application development and secure integration of existing applications and

data sets with new services

A portfolio of storage and data management solutions that provide a framework for robust data

governance practices (These solutions extend across all cloud options to ensure consistent

service delivery and data control regardless of the range of infrastructure and platform

resources supporting any specific application.)

Dell Technologies also understands that in cloud-based IT, the traditional funding, procurement, and

amortization practices associated with IT hardware and software can be major barriers. In response,

the company has created an innovative portfolio of consumption-based procurement/financing options

that reduce the barriers to cloud expansion while enabling closer alignment of infrastructure

investment with business outcomes (see Figure 3).

©2016 IDC #US41688116 6

FIGURE 3

OpenScale Payment Solutions

Source: Dell Technologies, 2016

CIOs and their IT teams face the daunting task of integrating and managing diverse sets of cloud

environments in many different locations. Dell Technologies has two businesses positioned to

ameliorate these challenges — Virtustream and Pivotal. Virtustream provides a range of professional

managed services and public cloud integration and support that can speed decisions about optimal

cloud enablement for all workloads. Pivotal is focused on the application layer, creating and

developing cloud-native applications and transforming the development process. Dell Technologies'

goal is to deliver a range of cloud service and professional services solutions that enable effective

management of resources and data across all cloud types. Dell Technologies helps organizations

create clearly defined and articulated IT service management policies and practices including standard

configurations, service catalog definitions, and maintenance schedules.

Dell Technologies aims to enable digital transformation by providing a broad range of solutions and

services. As customers mature and progress in their cloud implementations and overall evolution, they

require more than simply a provider of hardware, software, or software as a service and more than just

a reseller of cloud services from a range of providers. They need a consultative partner that provides

monitoring, service management, and data control capabilities needed to support a wide range of

cloud/datacenter options. Such a facilitator must also be in the position to provide transition financing

so that companies can more painlessly and quickly shift their procurement and budgeting policies and

practices to more cloud-attuned models.

©2016 IDC #US41688116 7

Challenges and Opportunities for Dell Technologies

IDC sees a number of challenges and opportunities for Dell Technologies as it continues to expand its

cloud product and services portfolio. These include:

Managing business integration. Dell Technologies is bringing together a very broad range of

infrastructure hardware and software solutions. While having a broad portfolio is important in

the world of cloud-based IT, it can also create confusion and migration challenges for

customers and prospects. Specifically:

Joint portfolios of EMC and Dell

The portfolio of professional/support services and partnerships with companies such as

Pivotal, Virtustream, VMware, Microsoft, and Cisco

To manage the broad array of solutions, Dell Technologies delivers clear road maps on

product directions and partnership plans to ease customers' decision-making process.

A successful transition will put Dell Technologies in a strong position to be a leading long-term

cloud service broker for enterprises around the world.

Addressing multiple customer bases. The shift to cloud-based IT is occurring across all

industries (including service providers themselves) and within companies of all sizes.

Dell Technologies must develop cloud-based IT products and services that address the

specific needs of small and medium-sized businesses (SMBs) as well as large enterprises and

government agencies. The company must also expand its presence in the growing base of

regional and industry-specific clouds that customers will need to exploit in the coming years.

Attacking the cloud marketplace with a portfolio that addresses the entire market from SMBs to

global multinationals as well as client-based markets associated with IoT is an important

opportunity in this time of digital transformation.

FINAL THOUGHTS

Organizations with aggressive digital transformation agendas must make "cloud first" the mantra for

enterprise IT. For CIOs and their IT teams, embracing the tasks of integrating and managing diverse

sets of cloud environments in many different locations is critical. It requires clearly defined and

articulated IT service management policies and practices, including standard configurations, service

catalog definitions, and maintenance schedules.

The most consistent and recurring barriers to the effective use of cloud-enabling and cloud-native

solutions remain security, visibility, governance, and policy control elements. Security and governance

practices and policies must extend across all cloud options to ensure consistent service delivery and data

control regardless of the range of infrastructure and platform resources supporting any specific application.

The IT team must also develop and continuously refine best practices for cloud portfolio management,

including robust service evaluation, partner selection, governance, and performance-monitoring

practices. At that point, the IT team itself will be in a strong position to serve as the cloud services

broker, enabling digital transformation for its line-of-business colleagues.

About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory

services, and events for the information technology, telecommunications and consumer technology

markets. IDC helps IT professionals, business executives, and the investment community make fact-

based decisions on technology purchases and business strategy. More than 1,100 IDC analysts

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achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology

media, research, and events company.

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