May 11 Clous Infrastructure Wmaurer

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William Maurer

Cloud Infrastructure aaS with Traditional Outsourcing Solutions


The Promise (Hype?) of CloudServices: What's Not to Love?

Easy IT as easy as the power from the plug

Much lower cost for acquisition and implementation

Simple to use

SPEED

Agility and scalability

Out-of-the-box ready

Pay as you go

Buy direct: No/limited need to get Procurement/IT approval

LOWER COST


Re-thinking Data Center Outsourcing Bi-Modal Is In Your Future

IT Consumerization

Larger Available Market

Enterprise

suppliers, long-

term deals

Sourcing

Small, new

vendors, short-

term deals

Digital Workplace

Revenue Producing Solutions

Service Industrialization

Cost Improvement


3%

4%

5%

5%

5%

7%

7%

5%

8%

8%

10%

11%

21%

3%

5%

4%

6%

6%

7%

5%

12%

8%

10%

10%

9%

11%

4%

4%

7%

5%

7%

5%

8%

7%

9%

8%

9%

9%

10%

Shifting mix of sourcing choices (from T&M tofixed fee to managed services)

Moving Capex to Opex

Convergence of IT & operational technologies

Strategic determinations for use of cloud services

Enabling revenue enhancement

Overcoming staff shortages

Improving IT governance

Allowing IT to focus on key business initiatives

Business process improvement

Consolidating IT or business process operations(shared service centers)

IT process improvement

Improving competitive position

Reducing costs

Most important 2nd most important 3rd most important

Q02A. What are your organization's top three most important Infrastructure Services (or any subset of infrastructure) sourcing strategy objectives?

Most Important Infrastructure Services Sourcing Strategy Objectives

43%

17%

29%

24%

20%

26%

10%

16%

29%

16%

24%

19%

14%

n=383Top 3


$100 investment allocation

2015 Top 10 IT Budget Priorities

In 2015, Cloud Remains a Top Priority for IT Organizations Globally

Gartner's Annual IT Budget Survey

Gartner, February 2014 Number of Respondents = 1,523

78% of Respondents Are IT Managers or More Senior

Benefits Realization

Life Cycle Solutions

Speed

Insights

Co-innovation

Note: Darker Shade Indicates Nexus of Forces

Needs in New Services Delivery:

27%

26%

25%

19%

17%

17%

16%

15%

15%

14%

Cloud Computing (SaaS, PaaS, IaaS)

Virtualization (Server, Desktop, Storage)

IT Modernization

Mobile Technologies

Enterprise Software Modernization

Big Data, Information Management

Data Center Consolidation

Enterprise Software Implementation orUpgrade

Analytics and Business Intelligence

Customer Experience Management


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

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 DECLINEI ACCEPT

Traditional Services


Best Practice Contract Structure and Content

A

Relationship, Integration Governance

Guiding

PrinciplesServices Personnel

Assets and

Third-party

Contracts

Retained

Authorities

Fees and

Payment

Terms

Record-

keeping

Audit Rights

Represent.

Warranties

Covenant

Term and

TerminationDisentangle-

ment

Limitations

of Liability

Proprietary

Rights

Security and

Confiden-

tiality

Legal

Compliance

Indemnifi-

cationInsurance

Dispute

Resolution

Use of

Subcontrac-

tors

Miscellaneous

Master Service Agreement (MSA)

D

Communi-

cation

Plan

E

Transition/

Transfor-

mation

F

Demand

Management

Plan

G

Human

Capital

Management

H

Key

Personnel

K

Exit

Plan

L

Innovation

Plan

M

Measurement

Charter

N

SOW

SLA

Price

O

Risk

Analysis

Framework

C

Independent

Advisor

Charter

B

Strategic

Objective

Statement

J

Process

Ownership

Plan

I

Contract

Management

Attachment Attachment

Strategic

Relationship

Contract

Management

Term and

Termination

1

5

9

13

2

6

10

14

3

7

11

15

4

8

12

16 17 18 19


Remains Dictated or Greatly Simplified Not in Cloud Contract

Best Practice Contract Structure Altered For as a Service Solutions

A


Services Personnel

Assets and

Third-party

Contracts

Fees

and

Payment

Terms

Record-

keeping

Audit Rights

Represent.

Warranties

Covenant

Disentangle-

ment

Limitations

of Liability

Proprietary

Rights


E

Transition/

Transfor-

mation

F

Demand

Management

Plan

G

Human

Capital

Management

H

Key

Personnel

K

Exit

Plan

L

Innovation

Plan

M

Measurement

Charter

N

SOW

SLA

Price

O

Risk

Analysis

Framework

J

Process

Ownership

Plan

I

Contract

Management


Strategic

Relationship

Contract

Management

Guiding

Principles

Retained

Authorities

Term and

TerminationTerm and

Termination

Legal

Compliance

Indemnifi-

cationInsurance

Dispute

Resolution

Use of

Subcontract-

tors

Miscellaneous

17 18 19

Security and

Confidentiality

1

5

9

13

2

6

10

14

3

7

11

15

4

8

12

16

D

Communi-

cation

Plan

C

Independent

Advisor

Charter

B

Strategic

Objective

Statement



Altered State of Contract This is all that Remains, Some Big Holes

A


Services

Fees

and

Payment

Terms

Record-

keeping

Audit Rights

Represent.

Warranties

Covenant

Limitations

of Liability

Proprietary

Rights


E

Transition/

Transfor-

mation

K

Exit

Plan

L

Innovation

Plan

M

Measurement

Charter

N

SOW

SLA

Price

O

Risk

Analysis

Framework

I

Contract

Management


Strategic

Relationship

Contract

Management

Guiding

Principles

Retained

Authorities

Term and

TerminationTerm and

Termination

Legal

Compliance

Indemnifi-

cationInsurance

Dispute

Resolution

Use of

Subcontract-

tors

Miscellaneous

17 18 19

Security and

Confidentiality

1

5

9

13

2

6

10

14

3

7

11

15

8

12

16

D

Communi-

cation

Plan

C

Independent

Advisor

Charter

B

Strategic

Objective

Statement



Altered State of Contract Worse This is all that We Can Negotiate



Strategic

Relationship

Contract

Management

Retained

Authorities

Indemnifi-

cation

17 18 19

1

5

9

13

2

6

10

14

3

7

11

15

8

12

16B

Strategic

Objective

Statement

Limitations

of Liability

11


Master

Service

Agreement

MSAGuiding

Principles

GP 1

Services

Sv 2

Personnel

Pn 3

Assets and

Third Party

Contracts

AT 4Retained

Authorities

RA 5

Fees and Payment Terms

FP 6

Record

Keeping

Audit Rights

RR 7

Representation

Warranties

Covenant

RW 8Term

Termination

Te 9

Disentangle-

ment

Da 10

Limitations of

Liability

LL 11

Proprietary

Rights

PR 12Security and

Confidentiality

SC 13

Legal

Compliance

LC 14

Indemnification

Id 15

Insurance

IsMiscellaneous

Mc19

Dispute

Resolution

DR 17

Use of

Subcontractors

US

16

18

Exit

Plan

EP K

Innovation

Plan

IP L

Measurement

Charter

MCM

SOW, SLA,

OLA, Price,

BHD

SP N

Risk

Analysis

Framework

RF O

Demand

Management

Plan

DM F

Human Capital

Management

Plan

HC G

Key Personnel

KP H

Contract

Management

CM I

Process

Ownership

Plan

PO J

Relationship,

Integration

Governance

RI A

Strategic

Objective

Statement

SO B

Independent

Advisor

Charter

IC C

Communication

Plan

CP D

Transition

Transformation

TT E

Attachment

ATT

Definitions

De

Licensing

Li

Acceptance

Ac20 21 22

Equipment

EqP

Chemistry of a Contract 2104Traditional ITO

22 Articles, 16 Attachments


Master

Service

Agreement

MSAServices

Sv 2

Assets and

Third Party

Contracts

AT 4Retained

Authorities

RA 5

Fees and Payment Terms

FP 6

Record

Keeping

Audit Rights

RR 7

Representation

Warranties

Covenant

RW 8Term

Termination

Te 9

Disentangle-

ment

Da 10

Limitations of

Liability

LL 11

Proprietary

Rights

PR 12Security and

Confidentiality

SC 13

Legal

Compliance

LC 14

Indemnification

Id 15

Insurance

IsMiscellaneous

Mc19

Dispute

Resolution

DR 17

Use of

Subcontractors

US

16

18

Exit

Plan

EP K

Innovation

Plan

IP L

Measurement

Charter

MCM

SOW, SLA,

OLA, Price,

BHD

SP N

Risk

Analysis

Framework

RF O

Demand

Management

Plan

DM F

Contract

Management

CM I

Relationship,

Integration

Governance

RI A

Communication

Plan

CP D

Transition

Transformation

TT E

Attachment

ATT

Chemistry of a Contract 2104as a Service Solutions

18 Articles, 10 Attachments


Cloud Service Contract

Pricing Is Different

Traditional Service Contract

Service-Level Agreement:

Price: Based on planned usage

Committed per negotiated terms

Service-Level Agreement:

Price:

My needs

Penalty

Reporting

Per usage

Reducing over time

Committed for three years

Standard

Needs of all

Weak/no credits

Pay as you go

Can change without notification

SLAs and pricing are not as prescriptive as traditional

service contracts.

Customized

Negotiated

Penalties


Definitions, Pricing Models, Other Attributes - By Solution

IaaS PaaS STaaS

Definitions 22 15 12

Pricing Models 11 8 9

Service Levels 8 6 9

Contracts 12 14 15

Lengths 18 17 17

16


Hidden Costs Are Different

Initial Setup CostsPilots

On-Premises

License

Conversions

With No

Credit

Sandboxing Fees

Reoccurring

Training Fees

Maintenance

and Support

Fees

Fees for Customers or Business Partners

Customization or

Integration Fees

Data Export

Fees


Calculating the BusinessCase Is Different

Ongoing Cost: Per User Per Month (PUPM)

Additional Cost of "Premium Services"Cost to Manage Risk

and Quality: Security, Archiving, Interfaces

Cost to Get In and Out: Migration, Data Transfer, Exit Fees

ROI Is Often Further Away Than It Appears

Training IT and End Users


Hosting/Collocation

Storage on Demand

Network Utility

SaaS

Infrastructure Utility

Cloud-Based System

Infrastructure Services

Cloud-Based Application

Infrastructure Services

Cloud-Based Business ProcessServices

Cloud-Based ApplicationServices

Vertical Business Process Utility

Horizontal Business Process Utility

Remote Managed Service

The Offerings and Delivery ModelsAre Different

Business Value-Add

IT Efficiency

Enterprise

One-to-One

SharedOne-to-Many

Business Strategy

Consulting

Custom BPO

Custom SolutionsIT Consulting

App. Development & Integrations Transaction

Processing

Desktop Management

Network Services

Help Desk Outsourcing

App. Mgmt.

Current Market Offerings Understand Your Provider, Pricing and Delivery Options

AccessManagement

OptimizationBusiness Value-Add

IT Efficiency

Creation

Valu

e

* Not a definitive list of companies

Cloud Computing

Infrastructure Utility SAP

Infrastructure Utility

Data Center Outsource

Application as a Service

Cloud Storage

One-to-one

delivery

One-to-many

delivery


The Vendor Relationship Is Different

It's about standardization and multitenancy, notabout custom terms.You are not special!

Software or infrastructure does not change. Youreally do "accept"!

Vendor defines the terms. And they can change atany time!

It's a "replicated" relationship, at best!

Vendor (One)

You (of Many)


The Result Is Different

Traditional Services Cloud Services

But noticeno net!


Key Issues





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.


70%+ of organizations

update or advance their sourcing

strategy once a year or more frequently*

Change to Adopting Cloud Services: 1) Services Sourcing Strategy

1. Review demand and innovation processes to incorporate new models

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


45%+ of organizations

consider Total Cost of contracted

services the most important selection

criteria*

Change to Adopting Cloud Services: 2) Services and Providers Selection

1. Move mindset from detailed technical specifications to pilot and test

2. Move from complex RFPs to fast track selection among the few best qualified offerings

3. Don't fall for today'slow price

4. Focus on TCS, transition cost, volume baseline, change and demand management, Riskanalysis, DR/BC



Change to Adopting Cloud Services: 3) Services and Contract Negotiation

1. Understand the trade offs you make with cloud services

2. Understand limitations: choice versus acceptance:

a) Service options, SLAs, price

b) Security, disaster recovery,

c) Availability, penalties

3. Understand which Ts&Csto negotiate:

a) Renewal price caps

b) Service availability guarantees

c) Audit, compliance

d) Liability, termination

Only 17% of cloud service contracts are signed as provided by the service provider.*

WARNING wrong changes break model



Cloud services make cost more predictable and

contract easier (65% of organizations).

The opposite is true for 46%.*

Change to Adopting Cloud Services: 4) Services and Contract Management

1. Your future is hybrid, despite the term means nothing specific

2. Skill up to managing your specific combination of cloud and traditional services

3. Multisourcing competencies are the foundation for cloudsourcing management

4. Required tools, architecture and technical competencies vary based on services (IaaS, PaaS, SaaS, BPaaS)



DC Sourcing Options: The Decision-Making Tree

1. Location

2. Applications

3. Skills

USE CASEFeasibility

Options

4. Management

5. Size

6. Scope

7. Sharing

DCS Compass

8. Assets

9. Contract terms

10. Financials

Business Factors

Data Center ServicesMarket Map


DCO Decision-making Tree: Identify the Applicable Sourcing Scenarios

Category Main Factor Sub-factorsCustom

Factors RIM Co-lo. Hosting DCO IUS IaaS

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


Key Issues





Cloud-Related Service Offerings:Many Outsourcers Claim It All

Public | Private | Hybrid | Community

Professional services

offerings can speed

successful adoption of

cloud services.

Look for providers

with demonstrable

cloud capabilities.

More Comprehensive Services

Cloud Service Providers: An InherentlyCrowded, Complex Ecosystem

Cloud-Based Technology Services (IaaS, PaaS, Security, Storage, etc.)

SaaS Integration and Governance (iPaaS), SaaS

SaaS Aggregation, Customization

Cloud-Enabled IT Outsourcing

Cloud-Enabled System Integration/Solutions

Cloud-Enabled BPaaS


Cloud Services Roles

Cloud ConsultantsStrategists/Architects

CloudService Brokers

Application Infrastructure Services (PaaS)

Application Services(SaaS)

System Infrastructure Services(IaaS)

Business Process Services(BPU/aaS)

Co

mm

un

ica

tions

aa

S

Info

rma

tion

aaS

Se

cu

rity a

aS

CloudService Providers

Integrator

Aggregator

Customizer


Recommendations: 10 Steps to Effective Cloud Sourcing

1. Confirm and document your cloud sourcing strategyWhy 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, 2010-2016, 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.

37

Events for Sourcing & Vendor Relationship Professionals

Experience live analyst expertise plus much more at a Gartner event.

Visit gartner.com/events

Sourcing & Strategic Vendor

Relationships Summit 2015

1 - 2 June, London, UK

3 5 November, Grapevine, TX (Dallas area)

Gartner IT Financial, Procurement &

Asset Management Summit 2015

21 - 22 September, London, UK

2 - 4 November, Grapevine, TX (Dallas area)

Outsourcing & IT Management Summit

2015

28 July, Tokyo, Japan

Gartner Symposium/ITxpo: The world's most important

gathering of CIOs and senior IT executives

38

Hundreds of analyst-led sessions, workshops, how-to clinics and more

Role-based tracks designed to address your key priorities and challenges

Immediately actionable take-awaysa clear action plan for the next three, six and 12 months

Mastermind Interview Keynotes with industry leaders

ITxpo exhibit floor with hundreds of top solution providers and exciting startups

October 19 - 22 Sao Paulo, Brazil

October 26 - 29 Gold Coast, Australia

November 2 - 5 Goa, India

November 8 - 12 Barcelona, Spain

May 19 21 Dubai, UAE

September 28 -30 Cape Town, South Africa

October 4 - 8 Orlando, FL

October 14 - 16 Tokyo, Japan

Visit gartner.com/symposium

2015 Gartner, Inc. and/or its affiliates. All rights reserved. 39

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May 11 Clous Infrastructure Wmaurer