An Introduction to Cloud Computing Benefits

Tony Pearson – IBM Senior Managing Consultant
18 March 2010

An Introduction to Cloud Computing

© 2010 IBM Corporation

Introduction to Cloud Computing

Agenda

Why is everyone excited
about Cloud Computing?
How did we get here?
What exactly is Cloud
Computing?
Who is leading the Cloud
Computing revolution?
Where is this all going?

2 © 2010 IBM Corporation


Agenda

Business Benefits
Computing?


Why the CxO is interested in cloud computing?

• Innovation for competitive advantage
• Faster, broader, more uncertain change
• Strategic alignment
CEO
•Improved growth &
profitability • Flexible, adaptable,
Cloud computing
extendable systems
•Governance, risk & is a key catalyst
compliance CFO for these
CIO • Reliability
•Transparency, visibility changes • User adoption &
& control empowerment



Capacity versus Usage
Usage/Demand
Traditional IT approach waste
Computing power

waste

Provisioning delay

dissatisfaction

time
• Not enough capacity – dissatisfaction
• More capacity than needed – waste



Capacity versus Usage
Usage/Demand
Traditional IT approach
Computing power

Cloud services

time
• Not enough capacity – dissatisfaction
• More capacity than needed – waste
• Capacity matches need – just right


So what’s different about Cloud?

Capability From To

Server/Storage Cloud is a synergistic fusion which
10-20% accelerates business value across a 70-90%
Utilization
wide variety of domains.
Self service None Unlimited
Test
Weeks Minutes
Provisioning
Change Days/Hours
Months
Management
Release Minutes
Weeks
Management
Fixed cost Granular
Metering/Billing
model
Payback period Months
Years
for new services

Legacy Cloud enabled
environments enterprise


Preliminary TCO Analysis
Traditional Data Center Cloud Computing Services

Compares traditional model vs. Cloud Computing service
Includes acquisition, management, power/cooling, floor space
Also includes network circuit cost, with full redundancy
Circuit costs are offset by economies of scale, reduced operational costs
Initial modeling shows 43% savings over 4 years, and 73% in year 1

Source: IBM


ROI Analysis – Internal IBM Project for 100,000 users

Reduced Capital Expenditure
New
New Reduced Operations Expenditure
100% Development
Development
Liberated
Liberated
funding for new Additional Benefits
funding for new
Software Costs development, Strategic Reduced risk, less idle time, more efficient
development,
transformation Change use of energy, acceleration of innovation
transformation
investment or Capacity projects, enhanced customer service
investment or
direct saving
direct saving
Power Costs

Current Deployment (1-time)
Deployment (1-time)
IT Labor Costs
Spend (Operations and Business Case Results:
Maintenance) Software Costs Annual savings: $3.3M (84%)
from $3.9M to $0.6M
Power Costs Hardware,
labor &
(- 89%)
power
Payback Period: 73 days
Hardware
Hardware Labor Costs
Labor Costs savings Net Present Value (NPV): $7.5M
Costs
Costs (( -- 81%)
81%) reduced Internal Rate of Return (IRR): 496%
((annualized)) annual cost
annualized Hardware Costs
Hardware Costs
Return On Investment (ROI): 1039%
of operation
(( -- 89%)
89%) by 84%

Source: IBM


Avoid the “Heavy Lifting” involved with running a Data Center

Traditional
on-premises IT
Approach

Cloud-Based
Infrastructure

Source: IBM software available in the Cloud with Amazon Web Services, April 2009


Agenda

History of Cloud
Computing?


History of Cloud Computing – Time-Sharing

“ If computers of the kind I have advocated become
the computers of the future, then computing may
someday be organized as a public utility just as the
telephone system is a public utility... The computer utility
could become the basis of a new and important industry.
„
Cloud Computing
—John McCarthy, MIT Centennial in 1961

Application Service Provider

Grid Computing

Time-Sharing

In the 1960s and 70s, several
companies provided time-sharing services as
service bureaus, including IBM, GE, and
Bolt, Beranek, and Newman (BBN).


Telephone System as Public Utility

In the beginning,
telephone companies had
to manually connect callers
with recipients


History of Cloud Computing – Grid Computing

Grid computing is the combination of
geographically distributed computer systems,
interconnected by a network, applied to a common
task, usually to a scientific, technical or business
problem that requires a great number of computer
processing cycles or the need to process large Cloud Computing
amounts of data.


Grid Computing

Time-Sharing



Networks connected many locations together

Telephone companies switched
to a grid of network switches to
automate what human
switchboard operators once did


History of Cloud Computing – Application Service Provider

An Application Service Provider (ASP) is a
company that offers individuals or companies access
over the Internet to applications and related services
that would otherwise have to be located in their own
computers.
Cloud Computing


Grid Computing

Time-Sharing

Subscription fees were often monthly,
by the number of employees or users



Cloud – The Symbol for all networks, including the Internet

Networks were cumbersome to
draw, so engineers represented
them as an oval, amoeba, or
cloud shape.

The cloud shape was adopted as
the symbol for all networks,
including the Internet


Cloud Computing – A Disruptive New Paradigm?
“Clouds will transform the information technology (IT) industry…
profoundly change the way people work and companies operate.”

2009
Cloud computing is a pay-per-use model for enabling
network access to a pool of computing resources that can
be provisioned and released rapidly with minimal Cloud Computing
management effort or service
provider interaction.

Grid Computing

Time-Sharing
Pay-per-use

Network access Pool of Resources

Rapid Elasticity Self-service

18 Source: National Institute of Standards and Technology (NIST) © 2010 IBM Corporation


Agenda

Computing?
Enabling Technologies


Cloud Computing - Explained



“People do not want quarter-
inch drills. They want
quarter-inch holes.”
Professor Emeritus Theodore Levitt, Harvard Business School



An Analogy – Transportation Alternatives

Traditional Approach: Buy a car,
drive it yourself, have a place to park it,
take care of maintenance and insurance.

Rental with or withouth Chauffer:
Rent a car by the day or week. Drive
it yourself, or hire a chauffer to drive
the car for you.

Transportation as a Service: Hop in
the back seat of a taxi andtell driver where
you would like to go. Pay by the mile.



An Analogy – Transportation as Someone Else’s Problem

Traditional Weekly Rental Taxi

You Decide where to go You Decide where to go You Decide where to go

You Drive
You Drive (or hire someone) Someone else
Parking / Storage Weekly Parking Drives
Parking / Storage
You Purchase Vehicle Someone else Purchases Vehicle,
Ongoing Maintenance purchases Vehicle Ongoing Maintenance
Ongoing Maintenance



The Many Shades of Cloud Computing

Use Application Use Application Use Application
Traditional IT Datacenters

Traditional Outsourcing
Build or Buy Build or Buy
Build App
App App

Platform Platform Platform

Hardware Hardware Hardware

Facilities Facilities Facilities

Infrastructure Platform as a Software as a
as a Service (IaaS) Service (PaaS) Service (SaaS)



Understanding Cloud Computing



The Many Shades of Cloud Computing – IaaS

You Manage:
Use Application You manage the operating system platform
and application software
Build or Buy
App
Virtual Machine (VM)
Platform Server – Storage - Network

Hardware They Manage:
IaaS provider manages the data center building
Facilities facilities, owns and configures all of the
computer servers, storage and networks,
providing clients “Virtual Machines”
Infrastructure
as a Service (IaaS)


Server Virtualization

Traditional Approach:
• Single Operating System (OS)
• One application (multiple apps might
conflict with each other)
• Hardware resources underutilized

Server Virtualization Approach:
• Encapsulate OS+Application into a
“Virtual Machine” (VM) image
• Partition physical machine to
support multiple VMs
• Isolate each VM from each other
for multi-tenancy
• Better utilization of underlying
physical hardware

Source: VMware


Hypervisor Example: VMware ESX
Virtual Machine (VM)

Guest Operating System

Virtual Resources

Hypervisor

Host or “Host Machine”

Physical Resources
Source: VMware


Server Farms With a Hypervisor, you
typically have 5 to 20
virtual machines per host

VMware – Market Leader
for Intel/AMD x86 hosts

XEN --- Open Source,
available commercially as
Citrix XenServer

PowerVM – Hypervisor for
POWER-based servers

Hyper-V – Contender from
Microsoft

KVM – part of the Linux
operating system
Source: VMware


The Many Shades of Cloud Computing -- PaaS

You Manage:
Use Application You manage the application software,
pre-packaged software and/or applications
Build or Buy your company develops internally
App

Platform Platform Stack
LAMP - .NET – J2EE

Hardware They Manage:
PaaS provider manages the Operating
Facilities Systems, Databases, Web servers and
programming languages needed to provide
clients a “Platform Stack” to run applications
Platform as a
Service (PaaS)


Three Popular “Platform Stacks”

LAMP .NET J2EE

PHP ASP.net Java

IBM DB2,
MySQL SQL Server
Oracle

Internet
WebLogic,
Apache Information
WebSphere
Services (IIS)

UNIX (AIX, z/OS,
Linux Windows HP-UX, Solaris)


The Many Shades of Cloud Computing -- SaaS

You Manage:
Use Application You manage employee access to
applications and data
Build App
Login Credentials
Platform userid/password

They Manage:
Hardware SaaS provider develops, tests and manages the
application software, providing login credentials
Facilities to clients and balancing the number of users on
each virtual machine
Software as a
Service (SaaS)


Cloud Providers do not need to be Vertically Integrated

A team of application
designers and
Client software engineers
A team of system,
database and backup
administrators Software as a
Service (SaaS)

Platform as a A team of server,
Service (PaaS) storage and network
administrators

Infrastructure as a
Service (IaaS)



Cloud Economics are Real
Infrastructure, Labor, and Re-Engineering IT Business and Delivery Processes
Drive Cloud Economics

Virtualization of
Infrastructure

Drives lower capital
Hardware
Leverage

requirements

Virtualized environments get
Utilization of benefits of scale when they
Infrastructure are highly utilized

Clients who can “serve
Self Service themselves” require less support
and get services
Leverage

Automation of Take repeatable tasks and
Labor

Management automate

Less complexity =
Standardization of
more automation possible =
Workloads fewer people needed
34


Cloud Computing Alternatives

Private cloud… Public cloud…
•Privately owned and Service provider owned and
managed. Public Cloud
managed.
•Access limited to client and
its partner network. •Access by subscription.
•Drives efficiency, •Delivers select set of
standardization and best
Private Cloud standardized business
practices while retaining process, application and/or
greater customization and infrastructure services on a
control pay-per-usage basis.

Hybrid cloud …
•The combination of
public and private
.…Security, privacy models for the greatest .…Standardization, capital
customization & control efficiencies and broadest preservation, flexibility and
workload support. time to deploy

Cloud solutions can be implemented behind client firewall in managed or
un-managed configurations and as a hosted offering.

35


Standardization and optimization by workload enables economies
of scale.
Unit
cost

Traditional
Infrastructure

Private
Service Cloud
Provider
Public
Cloud
Scale

Enterprises can significantly reduce costs for
some workloads compared with traditional IT

36 Source: IBM On a Smarter Planet – New ideas for Smarter IT © 2010 IBM Corporation


Agenda

Computing?
The Major Players


Is Cloud Computing a Revolution?

Source: http://www.andybudd.com/presentations/dcontruct05/


Cloud Computing enables innovative business models by providing
IT services from a dynamic infrastructure faster, simpler and cheaper
Clients Business Value:
New combinations of services
create differentiating value at
INNOVATIVE BUSINESS MODELS
lower cost in less time

Cloud Services delivered from
a Dynamic Infrastructure:
Cloud Computing

Open standards-based
Cloud Common components and
Services processes
Flexible scaling
Dynamic Request driven provisioning
Infrastructure



Software as a Service (SaaS) Providers

AthenaHealth Microsoft
– Physician billing, practice management – Office, Sharepoint, Exchange Online
and Electronic Health Records

NetSuite
Google
– Business accounting software, ERP,
– Gmail, GoogleDocs for spreadsheet, CRM and ecommerce
documents and presentations

IBM LotusLive™ RightNow Technologies
– Web, social, and call center support
– Web conferencing, collaboration and
Lotus Notes e-mail
Salesforce.com
– Customer Relationship Management
Intuit
(CRM) for sales professionals
– Small Business Web Design, Invoice,
Payroll and Tax services



Infrastructure and Platform Service Providers – Major Players



Amazon Web Services (AWS)
Elastic Compute Cloud (EC2)
Amazon SimpleDB 8.5¢ per hour – Linux
IBM DB2,Informix 12¢ per hour – Windows
Oracle, MySQL
SQL Server
No cost transfers
Simple Queue Service (SQS) between EC2 and S3
1¢ per 10,000 Send/Receive

Simple Storage Service (S3)
15¢ per GB/month

Data Transfer In PUT (submit form)
10¢ per GB 1¢ per 1,000 requests

Data Transfer Out Clients GET (show web page)
15¢ per GB 1¢ per 10,000 requests
Source: aws.amazon.com/


IBM’s Five co-existing cloud delivery models
Private Cloud Shared Private Cloud Public Cloud

Customer/IBM owned IBM owned and IBM owned and
Enterprise owned Enterprise owned; and IBM operated operated operated
1 and operated 2 IBM operated 3 (single tenant) 4 (multi-tenant) 5 (multi-tenant)

Enterprise Enterprise Enterprise Enterprise A User User User
Data Center Data Center
Enterprise B A B C
Private Managed User User
Enterprise C
Cloud Private D …
Cloud
IBM Operated

Hosted Shared
Private Cloud Public Cloud
Private Cloud

Hosting Center
Hosting Center Cloud Cloud

Cloud Services Cloud Services
delivered privately to delivered publicly to
Enterprises / virtual end users / secure,
separation of tenants enterprise-class
Customer owns and pays for infrastructure IBM owns infrastructure and customer has
and has unlimited exclusive access shared access and pays by usage


IBM Cloud Services and Systems Portfolio

Analytics Collaboration Development Desktop and Infrastructure Infrastructure Business
and test devices compute storage services

IBM Cloud IBM Lotus
Live
Smart
Business
IBM Smart
Business
IBM
Computing
IBM
Information
BPM
BlueWorks
Standardized services Development Desktop Cloud on Demand Protection (design tools)
on the IBM cloud
IBM Lotus® and Test on Smart Business Services Smart business
iNotes® the IBM End User expense
Cloud (beta) IBM
Support Smart reporting on the
Business IBM cloud

Customized IBM Smart IBM Lotus® IBM Smart IBM Smart Storage
Cloud
Solutions Analytics
Cloud
Foundations Business
Test Cloud
Business
Desktop
Private cloud services, Cloud IBM Grid
behind your firewall, built Medical Archive
and/or managed by IBM Solution
(GMAS)

IBM Smart IBM IBM Smart Business
Analytics CloudBurst Information for Small or
Integrated System ™ family Archive Midsize
Systems Business
Preintegrated, workload- (backed by the
IBM Scale-
optimized systems IBM Cloud)
Out NAS



Cloud Component Suppliers -- “The Arms Dealers”



Cloud Computing – Consumers

A quantum improvement in access, efficiency
and convenience. Projected savings in software
licensing costs of up to 75 percent. 150 percent
North Carolina State University increase in students served.

Cloud computing helped reduce the data center
footprint by 50 percent, energy costs by 30
percent. Recover from any failure within 4 hours,
Ocean containerized shipping including complete data center fail-over.

Kantana consolidated their fragmented islands
of information into a global, infinitely scalable,
heterogeneous grid, operating the most resilient,
high performance environment that meets most
Kantana Animation Studios challenging business needs.

46 Source: IBM © 2010 IBM Corporation


Agenda

Computing?
Future predictions


Cloud Economics

CLOUD COMPUTING

VIRTUALIZATION
+ STANDARDIZATION
+ AUTOMATION
= Cost
Flexibility

…leveraging virtualization, standardization and automation
to free up operational budget for new investment.



Cloud Prediction from Sun CTO Greg Papadopoulos

A "neutron star collapse of data centers"
– It won't make sense for businesses to build
their own data centers.
Hosting providers will bring "brutal efficiency" for
utilization, power, security, service levels, and idea-
to-deploy time.
– A half dozen very large cloud infrastructure
providers and a hundred or so regional
providers
Look more like the banking world
– Customers will trust service providers with their
private data as they do banks with their money.



Co-existing delivery models are emerging…

Service Consumers

Services Services Services

Service Integration Service Integration Service Integration

Traditional Public
Private Cloud
Enterprise IT Clouds

Enterprise Hybrid Clouds

Mission Critical Virtual Desktop Variable Storage
Packaged Apps Test/Development Software as a Service
High Compliancy/Security Data Mining/Analytics Archive/Disaster Recovery
Proprietary Platforms Service/Help Desk Web Hosting/Conferencing



Cloud Computing can be seen as a threat or opportunity for the CIO.

Some CIOs worry that Cloud will bring about disruptive change to IT Operations

Line-of-business units going to “public cloud providers” for IT instead
Disintermediation of the traditional IT team
As some have said, it is “Client / Server all over again”

CIOs need to embrace the change, not resist it

Understand the benefits of cloud, as well as its drawbacks
Understand the public cloud providers capabilities and include these services in IT
offerings as it makes sense

With an IT strategy that embraces Cloud, CIOs can better satisfy their customers

Improves visibility of IT use, more responsive, simpler, cheaper
Requires an overall strategic vision with pragmatic, evolutionary approach
Increases range of services, applications, and capabilities available to clients



Getting Started in Cloud Computing

Try out Public Cloud Computing Today!
– SaaS provide free trial memberships
– IaaS/PaaS offer hourly rates with no
long-term commitment, free uploads,
test/development images, and other
promotions

Build your own Private or Hybrid Cloud!
– Free trial versions of Hypervisors
– Ubuntu Linux has KVM and XEN, full LAMP
stack, and Eucalyptus cloud management
software – FREE!
– Consider Hardware-Assisted servers
• Intel VT
• AMD-V


Learning Points – Cloud Computing

Cloud computing is a new IT consumption
and delivery model based on standard
network protocols and interfaces

Resource pooling, virtualization and
automation allows for economies of scale

Rapid elasticity and pay-per-use billing can
offer workload-optimized systems with low
barrier of entry and reduced cycle time

Business leaders, governments, and non-
profits can all benefit from Cloud Computing



Questions and Answers (Q&A)



Thank you!

For more information, please visit:
ibm.com/cloud

Tony Pearson’s blog:
http://bit.ly/1YyMNg


Trademarks and Disclaimers
© IBM Corporation 1994-2010. All rights reserved.
References in this document to IBM products or services do not imply that IBM intends to make them available in every country.

Permission granted to The Institute of Management Accountants (IMA®) to provide copies of this presentation to its members.

IBM, the IBM logo, Dynamic Infrastructure, and ibm.com are registered trademarks, and other company, product or service names may be trademarks or service marks of
International Business Machines Corporation in the United States, other countries, or both. A current list of IBM trademarks is available on the Web at
http://www.ibm.com/legal/copytrade.shtml.
Intel, Intel logo, Intel Inside, Intel Inside logo, Intel Centrino, Intel Centrino logo, Celeron, Intel Xeon, Intel SpeedStep, Itanium, and Pentium are trademarks or registered
trademarks of Intel Corporation or its subsidiaries in the United States and other countries.
Linux is a registered trademark of Linus Torvalds in the United States, other countries, or both.
Microsoft, Windows, Windows NT, and the Windows logo are trademarks of Microsoft Corporation in the United States, other countries, or both.
UNIX is a registered trademark of The Open Group in the United States and other countries.
Java and all Java-based trademarks are trademarks of Sun Microsystems, Inc. in the United States, other countries, or both.
Other company, product, or service names may be trademarks or service marks of others.

Information is provided "AS IS" without warranty of any kind.

The customer examples described are presented as illustrations of how those customers have used IBM products and the results they may have achieved. Actual
environmental costs and performance characteristics may vary by customer.

Information concerning non-IBM products was obtained from a supplier of these products, published announcement material, or other publicly available sources and does
not constitute an endorsement of such products by IBM. Sources for non-IBM list prices and performance numbers are taken from publicly available information,
including vendor announcements and vendor worldwide homepages. IBM has not tested these products and cannot confirm the accuracy of performance, capability, or
any other claims related to non-IBM products. Questions on the capability of non-IBM products should be addressed to the supplier of those products.

All statements regarding IBM future direction and intent are subject to change or withdrawal without notice, and represent goals and objectives only.

Some information addresses anticipated future capabilities. Such information is not intended as a definitive statement of a commitment to specific levels of performance,
function or delivery schedules with respect to any future products. Such commitments are only made in IBM product announcements. The information is presented here
to communicate IBM's current investment and development activities as a good faith effort to help with our customers' future planning.

Performance is based on measurements and projections using standard IBM benchmarks in a controlled environment. The actual throughput or performance that any
user will experience will vary depending upon considerations such as the amount of multiprogramming in the user's job stream, the I/O configuration, the storage
configuration, and the workload processed. Therefore, no assurance can be given that an individual user will achieve throughput or performance improvements
equivalent to the ratios stated here.

Photographs shown may be engineering prototypes. Changes may be incorporated in production models.


An Introduction to Cloud Computing Benefits

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