Use Cloud Computing to Achieve Small Enterprise Savings Info-Tech Research Group

Executive Summary Cloud services are a natural fit for small enterprises. For cloud evaluators and adopters, capital cost savings and rapid application deployment are strongly positive reasons for adopting cloud solutions. Taken together these add up to significantly lower barriers to entry than in-house developed solutions. Small enterprises are taking advantage of lower financial and technical barriers to entry to accomplish what otherwise would be prohibitive. Lowered barriers to entry is not lower overall cost. Enterprises need to be realistic about the kind of savings that can be found in the Cloud. In that other example of disruptive technology, distributed processing, lower costs of adoption were ultimately balanced by higher total cost of ownership (TCO) including costs of management complexity (server sprawl). For small enterprises, adoption is about risk management and risk tolerance. The classic cautions about the cloud are the same for enterprises of all sizes – security of data, mobility of data and workloads from one cloud to another, transparency for regulatory compliance, reliability and availability of service. Where small enterprises differ is in their tolerance of risk and ability to mitigate that risk. In evaluating cloud solutions consider risk tolerance of each candidate application and apply Info-Tech’s three rules of cloud investment. Few expect the cloud to be the home for all application workloads. Consider the enterprises tolerance for the main risk factors of the cloud. For evaluating various cloud-based solutions, Info-Tech’s three rules of cloud investment provide a framework for asking the right questions. Info-Tech Research Group

Though interest is high, the cloud game is just beginning Most enterprises are in early evaluation stages… …more than half have yet to deploy a cloud solution. n=123 n=123 Source: Info-Tech Research Group Source: Info-Tech Research Group Info-Tech Research Group

Source: Info-Tech Research Group Smaller enterprise IT departments are ahead of larger enterprises in deployment of cloud-based storage services n=105 Case Example: This consulting firm specializing in small business is using the Amazon S3 service to deploy a backup/archive storage service for a small business with limited on premise hardware: “ The small businesses I work with are increasingly looking towards the cloud to get Enterprise grade quality and performance without having to pay big business dollars for it. ~ Operations Manager, IT Consulting firm Source: Info-Tech Research Group Why Storage? All enterprises are faced with increasing storage requirements especially longer term storage of unstructured data. Enterprise storage is an expensive proposition (capital cost barrier to deployment). Costs are driven not by disk costs (which continue to trend downward) but by the need to provide resiliency, compliance, and rapid scalability. Meeting these requirements – especially for ever growing backup and archival storage – requires the acquisition of storage arrays that are cost prohibitive for small enterprises on limited IT capital budgets. ” Info-Tech Research Group

Consider four classic caution flags in evaluating cloud services Security and accountability Data is a critical resource. In the cloud data is entrusted to a third party and shared tenancy with other people’s data (including competitors). Legal and regulatory compliance may also require visibility into where data is stored and who has access – difficult in an abstracted cloud environment. Data and application mobility There is no one cloud but rather multiple cloud services. In an ideal world workloads and data would move to the cloud with the best cost/service. This is not currently the case. Availability and reliability Availability and reliability are typically best effort. But best effort may not be good enough for critical application loads. Also the enterprise needs to have continuity plans in place if the service were to cease permanently. Location of data Location of processing and data remain an important consideration. Latency is an issue if the data is located a significant distance from the user. If the data is located in a different country there can also be jurisdictional issues. 1 2 3 4 Info-Tech Research Group 5

Use Info-Tech’s three rules of cloud investment as a framework for evaluating cloud candidates 1 The Three Laws Critical Questions Alignment is Software IT must align with business goals and objectives. Applications are the intersection point between the strategic and operational goals of the enterprise and IT. Are the software business requirements being met? A cloud is abstracted shared infrastructure but it is the application hosted in the cloud that enables the business. If the software is not meeting requirements it does not matter where it lives. This is especially true for SaaS. Evaluate SaaS as application products, not as cloud products. 2 Infrastructure is Capacity Applications in the cloud are provisioned with processing, memory, and storage. The important business measure is cost per unit of capacity as well as the value added cost per unit of capacity of risk mitigation and service levels. How does cost per unit of capacity compare? If the application meets requirements, it now needs to be provisioned with cloud resources. Particularly in IaaS, resources are normally sold on a metered basis. Compare cost per unit between providers. How are service levels ensured and risk mitigated? Start by assessing risk tolerance for the candidate application. What kind of downtime can be tolerated? How sensitive and valuable is the data? Beyond raw capacity, what kind of assurances of security, privacy, and availability does the provider make? Do they have SLAs? What additional premiums per unit of capacity are there for higher levels of assurance? 3 Management is the Differentiator Software that efficiently manages the utility infrastructure for business processes is a key value add. Management software can also provide visibility into the cloud for compliance and performance monitoring purposes. Info-Tech Research Group

Appendix A The survey cited in this storyboard took place in February 2010. We had 123 respondents answer questions about the current state of cloud deployment as well as their future plans for the cloud in their organizations.   Info-Tech Research Group