Cloud Economics

Making Leaders Successful Every Day

The Total Economic Impact™ of Microsoft Windows AzureForrester Research

James StatenVice President and Principal Analyst@Staten7

Sean OwensSenior Consultant

January 8, 2014

© 2013 Forrester Research, Inc. Reproduction Prohibited 3

Agenda

›Understanding Cloud Economics

›Stage 1: Is Cloud Really Cheaper?

›Forrester TEI for Windows Azure

›Stage 2:

›Stage 3: Cloud Optimization

›Recommendations

›Q&A

Scaling out turns on the cloud.

Scaling down turns on cloud economics.

The basics of cloud economics are clear

Elastic scale delivers just-in-time capacity.

Pay-per-use keeps costs low.

Self-service fuels productivity.

Turning cloud economics to your favor is the key

• How quickly can you turn off resources no longer in use?• How small can you get your base footprint?• Are you leveraging caching as much as you can?

Elastic scale: Scaling down is key.

• Discrete component scaling drives efficiency.• Autoscaling cloud services often costs less.• Where traffic goes affects cost.

What you scale matters.

• Some cloud services have off-peak pricing concepts.• Some cloud services have better costs for certain services/uses.

When and where you do things matters.


Agenda

›Understanding Cloud Economics

›Stage 1: Is Cloud Really Cheaper?

›Forrester TEI for Windows Azure

›Stage 2:

›Stage 3: Cloud Optimization

›Recommendations

›Q&A


Introduction to Forrester’s Total Economic Impact (TEI)

›Forrester took a multistep approach:

• Six customers were interviewed

• TEI methodology covers: Costs, Benefits, Risks and Flexibility

• A composite organization was modeled and estimates for it were summarized in the study

• Developed the TEI Study, to be published on Microsoft’s Windows Azure Website

• Be aware of the following:The study is commissioned by Microsoft and delivered by Forrester Consulting. It is not meant to be used as a competitive analysis

Forrester makes no assumptions as to the potential return on investment that other organizations will receive. Forrester strongly advises that readers use their own estimates within the framework provided in the report to determine the appropriateness of an investment in Microsoft Windows Azure.

Microsoft reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study.

The customer names for the interviews were provided by Microsoft. Microsoft did not participate in customer interviews


Source: Forrester’s “The Total Economic Impact Of Microsoft Windows Azure,” October 2013

Interviewed Customer Issues

Forrester worked with Microsoft to analyze the total economic impact that Windows Azure-based solutions have on a number of its customers, who shared these business challenges:

“With every new operating system, we have to add that environment to our development and test farm.”

“We had been spending a lot of time on server updates, security patches and other management tasks.”

“Any time you have to requisition hardware, it will take weeks [to arrive].”


Interviewed Customer Expectations and Results

And customers continued, highlighting expected and realized benefits of Microsoft Windows Azure solutions:

“A lot of companies fail to realize: We get our pick of the best developers because they want to work in the cloud, and turnover is less since moving to Azure.”

“Prior to going to Azure, we had to physically distribute our software, including printing CDs, stuffing envelopes, sending them out, and such. With Windows Azure, we’re able to put our software on the website available for download.”

“We started Windows Azure with four instances. If we built our datacenter on premises, I would have requested 10 or 20 servers.”

“All our coupons had to be individually activated; even with some automation, it would take more than a day, as many groups were involved. With Service Bus, information-sharing across groups is automated, and activating a million coupons takes less than an hour.”



Microsoft Windows Azure TEI Aggregate Results

Through interviews and data aggregation, Forrester concluded the following financial impact Microsoft Windows Azure might have on the composite organization:

ROI: 349%

NPV: $1,105,902



*Based on three-year risk-adjusted figures. Values of costs and benefits are representative of a composite organization constructed from aggregated interviews with Microsoft Windows Azure customers.


Microsoft Windows Azure TEI Aggregate Results

More importantly, the TEI study quantified specific benefits, costs, and metrics for the composite organization across topics that mattered to customers:

Costs

$316 thousand

Benefits

$1.4 million

Initial planning and implementation (one-time)

Improved revenue from increased customers and faster time-to-market

Reduced marketing costs from better business responsiveness

Reduced IT management and software development costs

Avoided hardware costs (one-time)

$750,000 $1.25 million$500,000$250,000($250,000)($500,000) $1 million $1.5 million

Annual resource consumption and management costs

Net present value



Microsoft Windows Azure TEI Results from Customer InterviewsAnd in addition to financial benefits, Windows Azure helped enable the following results for the composite organization:

20 serversEstimated avoided purchase and setup costs plus 50 avoided server upgrades, compared to Windows Azure pay-what-you-use.

75%Improvement in marketing campaign process time leading to significant business cost savings.

8 weeksOf reduced development time leading faster time to market

90%Reduction in hours required to manage a Windows Azure hybrid infrastructure.

Three stages of cloud economics

Leverage the tools of cloud economics

• When you do something• For how long you do itTime

• Parts that act independentlyComponentization

• What performs which actions• What economics it bringsService choice

• What doesn’t consume storage• What doesn’t consume bandwidthCaching

• How the code behaves• What the code does and how• Re-architect to activate cloud economics

Code optimization

NVoicePay taps the cloud to expand its market

AP Assist: Enable electronic payments for SMBs

› 90% of B2B invoice payments are still by check.

› Solution: SaaS-based vendor payment• $0.40 per payment; free vendor sign-up

• Tight integration with key SMB systems (i.e., ADP for car

dealers, First Data payment clearing-house) Rich but light client UI — Silverlight

Needed to push new information to customers quickly

• Needed elastic scalability, fast deploy, and iteration Forecasted huge transaction volumes

Traditional hosting was more expensive — wouldn’t achievescale.

• Needed reusable cloud services to speed development Windows Azure AppFabric, storage, security services

• Needed effectively 100% availability for “Payment Dial Tone” The alternative was to build a massively expensive data center.

“Building a mission-critical B2B

payment network would have

been nearly impossible without

the low cost, pay-as-you-go . . .

Windows Azure platform.”

— Karla Friede, CEO, NVoicePay

For more info, check out NVoicePay website (http://nvoicepay.com/wp-content/uploads/2010/10/NVoicePay-MS-Case-Study.pdf).

How is NVoicePay leveraging cloud economics?

›What cloud economics tools are they using?• Time

• Componentization

• Service choice

• Caching

• Code optimization


How NVoicePay activates cloud economics

If it’s running, it’s cutting into profitability.

› Profits are pennies on each $0.40 transaction.

›Mission: Lower the cost of each payment.• Scale only when necessary.

Scale only what needs to be scaled when necessary.

• Chatter can cost you. Traffic flowing out of the cloud costs $$.

Keep this traffic to a minimum using:

› Caching, Batching, Rich-client actions.

• Use cloud services to speed development. Windows Azure AppFabric Service Bus and Access

Control

Windows Azure Blob, Table, and Queue Storage

Windows Azure Connect — secure extra cloud connectivity

Silverlight client takes actions that ease cloud-premise integration.

Key tools used:

Time

Componentization

Service choice

Caching


Recommendations

• How does it generate revenue?• What actions are taken to get that revenue?• What components are involved?• What does the transaction flow cost?

Understand the profitability profile of your cloud service.

• Can you improve its scalability model?• How can its action timing be improved?• What alternative means (services, caching, reusable

components) can be leveraged?

Analyze its performance profile.

• Improve cloud coding practices through architectural adherence.• Architect in how to use the cloud economic tools — not the

specific uses.• Revisit this process often — as the cloud matures quickly.

Bake the lessons learned into your cloud architecture.


Agenda

›Market

›Market

›Overview of Forrester’s TEI Study

›Q&A

Thank youJames [email protected]@Staten7

Sean [email protected] +1 425-835-2036

mailto:[email protected]

mailto:[email protected]

Technology

Cloud Economics