We conducted forty in-depth interviews and surveyed more than 500 IT executives and to obtain a clear picture of the cloud computing initiatives, strategies and best practices taking hold in enterprises today. "Leaders in the Cloud" delivers unparalleled insight into customer perceptions of cloud computing, current and planned cloud initiatives, adoption drivers, business and technological benefits and challenges, strategies for deployment and best practices for success. The findings look closely at experiences with all types of cloud service models - SaaS, IaaS, and PaaS - and deployment models - public, private, community and hybrid clouds. The unlimited-use license of the 85-page Enterprise Digital Report delivers the research findings via first-hand CIO quotes and more than a dozen charts and figures, and six use cases of specific cloud projects. The study identifies a complete list of the business benefits associated with cloud computing, and presents "Take Action Now" implications for both enterprise customers and cloud vendors. The Enterprise Digital Report includes an additional chapter on the unique market for federal government clouds, six additional cloud use cases and several additional pages of unedited customer comments about cloud computing. The license also includes a copy of the data file with quantitative findings from a survey of more than 500 IT executives about their cloud computing experiences.

1. 0 1 0 1 0 1 0 0 0 1 1 1 0 1
0 1 0 1 1 0 0 1 0 1 0 1 0 0
0 1 0 0 1 1 0 0 0 1 1 0 0 1
0 1 0 0 1 0 0 1 0 0 0 1 1 0
1 0 1 0 1 0 0 0 1 0 0 1 1 1
0 1 0 1 0 1 0 0 1 1 0 0 1 0
1 1 0 0 1 0 1 0 1 0 0 0 1 1
1 0 1 0 1 0 1 1 0 0 1 0 1 0
T
1 0 0 0 1 0 0 1 1 0 0 0 1 1
0 0 1 0 1 0 0 1 0 0 1 0 0 0
R
1 0 1 0 1 0 1 0 0 0 1 0 0 1
LEADERS IN
1 1 0 1 0 1 0 1 0 0 1 1 0 0
O W
1 0 1 1 0 0 1 0 1 0 1 0 0 0
THE CLOUD
1 1 1 0 1 0 1 0 1 1 0 0 1 0
P E
1 0 1 0 0 0 1 0 0 1 1 0 0 0
1 1 0 0 1 0 1 0 0 1 0 0 1 0
E
0 0 1 1 0 1 0 1 0 1 0 0 0 1
Identifying the Business
I
0 0 1 1 1 0 1 0 1 0 1 0 0 1
R
1 0 0 1 0 1 1 0 0 1 0 1 0 1
Value of Cloud Computing
for Customers and Vendors
V
0 0 0 1 1 1 0 1 0 1 0 1 1 0
0 1 0 1 0 1 0 0 0 1 0 0 1 1
E
0 0 0 1 1 0 0 1 0 1 0 0 1 0
0 1 0 0 0 1 1 0 1 0 1 0 1 0
KAMESH PEMMARAJU
M.R. RANGASWAMI
R
0 0 1 0 0 1 1 1 0 1 0 1 0 1
0 0 1 1 0 0 1 0 1 1 0 0 1 0 MARCH 2010
P
1 0 1 0 0 0 1 1 1 0 1 0 1 0
1 1 0 0 1 0 1 0 1 0 0 0 1 0
0 1 1 0 0 0 1 1 0 0 0 1 0 0
1 0 0 1 0 0 0 1 1 0 1 0 1 0
1 0 0 0 1 0 0 1 1 1 0 1 0 1
0 1 0 0 1 1 0 0 1 0 1 1 0 0
1 0 1 0 1 0 0 0 1 1 1 0 1 0
1 0 1 1 0 0 1 0 1 0 1 0 0 0 1 0 0 1 1 0 0 0 1 1 0 0 1 0 1 0 0 1 0 0 1 0 0 0 1
1 0 1 0 1 0 1 0 0 0 1 0 0 1 1 1 0 1 0 1 0 1 0 0 1 1 0 0 1 0 1 1 0 0 1 0 1 0 1
0 0 0 1 1 1 0 1 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 1 0 0 1 1 0 0 0 1 1 0 0 1 0 1 0
0 1 0 0 1 0 0 0 1 1 0 1 0 1 0 1 0 0 0 1 0 0 1 1 1 0 1 0 1 0 1 0 0 1 1 0 0 1 0
1 1 0 0 1 0 1 0 1 0 0 0 1 1 1 0 1 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 1 0 0 1 1 0 0
0 1 1 0 0 1 0 1 0 0 1 0 0 1 0 0 0 1 1 0 1 0 1 0 1 0 0 0 1 0 0 1 1 1 0 1 0 1 0
1 0 0 1 1 0 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 1 1 1 0 1 0 1 0 1 1 0 0 1 0 1 0 1 0
0 0 1 0 0 1 1 0 0 0 1 1 0 0 1 0 1 0 0 1 0 0 1 0 0 0 1 1 0 1 0 1 0 1 0 0 0 1 0
0 1 1 1 0 1 0 1 0 1 0 0 1 1 0 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 1 1 1 0 1 0 1 0 1
1 0 0 1 0 1 0 1 0 0 0 1 0 0 1 1 0 0 0 1 1 0 0 1 0 1 0 0 1 0 0 1 0 0 0 1 1 0 1
0 1 0 1 0 0 0 1 0 0 1 1 1 0 1 0 1 0 1 0 0 1 1 0 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0
1 1 1 0 1 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 1 0 0 1 1 0 0 0 1 1 0 0 1 0 1 0 0 1 0
0 1 0 0 0 1 1 0 1 0 1 0 1 0 0 0 1 0 0 1 1 1 0 1 0 1 0 1 0 0 1 1 0 0 1 0 1 1 0
0 1 0 1 0 1 0 0 0 1 1 1 0 1 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 1 0 0 1 1 0 0 0 1 1
0 0 1 0 1 0 0 1 0 0 1 0 0 0 1 0 1 0 1 0 1 0 0 0 1 0 0 1 1 1 0 1 0 1 0 1 0 0
1 1 0 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 1 1 1 0 1 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 1
0 0 1 1 0 0 0 1 1 0 0 1 0 1 0 0 1 0 0 1 0 0 0 1 1 0 1 0 1 0 1 0 0 0 1 0 0 1 1
1 0 1 0 1 0 1 0 0 1 1 0 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 1 1 1 0 1 0 1 0 1 1 0 0

2. 0 1 0 1 0 1 0 0 0 1 1 1 0 1
0 1 0 1 1 0 0 1 0 1 0 1 0 0
0 1 0 0 1 1 0 0 0 1 1 0 0 1
0 1 0 0 1 0 0 1 0 0 0 1 1 0
1 0 1 0 1 0 0 0 1 0 0 1 1 1
0 1 0 1 0 1 0 0 1 1 0 0 1 0
1 1 0 0 1 0 1 0 1 0 0 0 1 1
CLOUD LEADERS: ACT NOW 1 0 1 0 1 0 1 1 0 0 1 0 1 0
1 0 0 0 1 0 0 1 1 0 0 0 1 1
It is tempting to dismiss cloud computing as another product of the well-oiled 0 0 1 0 1 0 0 1 0 0 1 0 0 0
technology hype machine. But consider these facts: Mega-technology vendors are
1 0 1 0 1 0 1 0 0 0 1 0 0 1
pouring billions of dollars into cloud products. Cloud vendors are realizing record
1 1 0 1 0 1 0 1 0 0 1 1 0 0
growth. Analysts forecast cloud services as a $100 billion-plus opportunity in just
a few short years. Is cloud computing worth all of this excitement? 1 0 1 1 0 0 1 0 1 0 1 0 0 0
1 1 1 0 1 0 1 0 1 1 0 0 1 0
“People are asking the same questions 1 0 1 0 0 0 1 0 0 1 1 0 0 0
about the cloud today that they did 1 1 0 0 1 0 1 0 0 1 0 0 1 0
0 0 1 1 0 1 0 1 0 1 0 0 0 1
about Internet back in 1997.” 0 0 1 1 1 0 1 0 1 0 1 0 0 1
In a word: Yes. 1 0 0 1 0 1 1 0 0 1 0 1 0 1
0 0 0 1 1 1 0 1 0 1 0 1 1 0
Think back to 1997 and the buzz surrounding the Internet. Consumers and com-
0 1 0 1 0 1 0 0 0 1 0 0 1 1
panies were excited about the technology’s potential but worried about security,
privacy, bandwidth, standards and more. In the end, what enabled the Internet to 0 0 0 1 1 0 0 1 0 1 0 0 1 0
transform communication and commerce? 0 1 0 0 0 1 1 0 1 0 1 0 1 0
Business value. Cloud computing will deliver even greater benefits to companies – 0 0 1 0 0 1 1 1 0 1 0 1 0 1
and it will revolutionize enterprise IT in the process. 0 0 1 1 0 0 1 0 1 1 0 0 1 0
Interviews with forty “Leaders in the Cloud” describe cloud computing’s ability to 1 0 1 0 0 0 1 1 1 0 1 0 1 0
increase ROI, decrease TCO, speed development, improve reliability and renovate 1 1 0 0 1 0 1 0 1 0 0 0 1 0
the perception of IT in their companies. 0 1 1 0 0 0 1 1 0 0 0 1 0 0
The result? A more agile, competitive business. 1 0 0 1 0 0 0 1 1 0 1 0 1 0
Realizing multi-fold decreases in cost compared to traditional solutions… Develop- 1 0 0 0 1 0 0 1 1 1 0 1 0 1
ing platforms in 15 minutes… Creating applications over a weekend… Consolidat- 0 1 0 0 1 1 0 0 1 0 1 1 0 0
ing server investments from 13 machines to 1… Reallocating IT budgets from 1 0 1 0 1 0 0 0 1 1 1 0 1 0
80 percent maintenance to 80 percent innovation…
1 0 1 1 0 0 1 0 1 0 1 0 0 0
These are but a few of the real-world examples of bottom-line business benefits 1 0 0 1 1 0 0 0 1 1 0 0 1 0
already being realized by cloud leaders and detailed in the pages of this report.
1 0 0 1 0 0 1 0 0 0 1 1 0 1
The journey to a cloud-based IT reality is only beginning. Gaps in technology and 0 1 0 1 0 0 0 1 0 0 1 1 1 0
vendor offerings remain to be filled. Legitimate concerns exist over security, in-
1 0 1 0 1 0 0 1 1 0 0 1 0 1
tegration and scale. Cultural and organizational challenges remain largely unad-
1 0 0 1 0 1 0 1 0 0 0 1 1 1
dressed.
0 1 0 1 0 1 1 0 0 1 0 1 0 1
The bottom line? “Leaders in the Cloud” proves that the business value of cloud
0 0 0 1 0 0 1 1 0 0 0 1 1 0
computing is real, the road to enterprise cloud adoption is shorter than most
experts think, and both customers and vendors must act now to build the cloud 0 1 0 1 0 0 1 0 0 1 0 0 0 1
solutions that will revolutionize business in the coming decade. 1 0 1 0 1 0 1 0 0 0 1 0 0 1
1 1 0 1 0 1 0 1 0 0 1 1 0 0
1 0 1 1 0 0 1 0 1 0 1 0 0 0
1 1 1 0 1 0 1 0 1 1 0 0 1 0
1 0 1 0 0 0 1 0 0 1 1 0 0 0
1 1 0 0 1 0 1 0 0 1 0 0 1 0
0 0 1 1 0 1 0 1 0 1 0 0 0 1
0 0 1 1 1 0 1 0 1 0 1 0 0 1
1 0 0 1 0 1 1 0 0 1 0 1 0 1

3. 0 1 0 1 0 1 0 0 0 1 1 1 0 1 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 1 0 0 1 1 0 0 0 1
Contents:
1 0 0 1 0 1 0 0 1 0 0 1 0 0 0 1 1 0 1 0 1 0 1 0 0 0 1 0 0 1 1 1 0 1 0 1 0 1
Chapter 1: Executive Summary – The Business Value of Cloud Computing . . . . . . . . . . . . . . . 1
Chapter 2: Take Action Now: Strategic Recommendations for Customers and Vendors . . . . . . . . 6
Chapter 3: Methodology: In-depth Interviews and a Study of IT Executives . . . . . . . . . . . . . . . 9
Chapter 4: What Cloud Computing Means to Customers Today . . . . . . . . . . . . . . . . . . . 10
4.1 What the Cloud Is – and What It Isn’t: The Customer Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Will the Cloud Take Flight Soon? Why This Time is Different . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Are Customers Moving to the Cloud? Current State of Customer Cloud Initiatives and Projects . . 14
4.4 Complexity- and Confusion-as-a-Service: Unwrapping the Maze
of Cloud Options and Customer Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4.1 SaaS vs. PaaS vs. IaaS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4.2 Private vs. Public vs. Hybrid Clouds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4.3 Small and Midsize Businesses vs. Large Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.4.4.Government vs. Commercial Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.4.5 Segmentation by Service and Assurance Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Chapter 5: Understanding the“Why”of Enterprise Adoption: The Business Drivers . . . . . . . . . . 21
5.1 What Moves Customers to the Cloud? Internal Trigger Points and “Must Haves” for Adoption . . . 21
5.2 Is Cost the Primary Driver? Business Case, ROI and TCO Justification . . . . . . . . . . . . . . . . . . . . . . . 22
5.3 What Are Customers Spending in the Cloud? Current and Forecasted Cloud Initiatives. . . . . . . . . . 28
Chapter 6: Cloud Strategy and Road Map for Customers: The Path to an Agile Business . . . . . . . 30
6.1 Strategies for Realizing Global Benefits With Cloud Computing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.2 Classifying and Cloud-Proofing the Application and Data Landscape . . . . . . . . . . . . . . . . . . . . . . . . 31
6.3 Service-Oriented Architecture: The Key to Painless Cloud Migration . . . . . . . . . . . . . . . . . . . . . . . . 33
6.4 Toward Efficient and Nimble Data Centers with Internal Clouds . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.5 Leveraging SaaS and PaaS Where It Makes Sense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.6 The Imminent Emergence of Hybrid Clouds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Chapter 7: Barriers and Roadblocks to Cloud Adoption: Uncovering Real-World Issues and Solutions . 38
7.1 The ‘Sacred Cow’ Issues: Security, Privacy and Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.2 The Need for Regulations and Laws to ‘Catch-Up’ to the Cloud World . . . . . . . . . . . . . . . . . . . . . . 41
7.3 How Important and Useful Is Vendor Certification to Customers? . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.4 Are Standards a Barrier to Innovation or to Customer Adoption? . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.5 Integration Challenges: Tackling the Tough Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.6 The Nuances of Vendor Lock-In: What to Watch Out For . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.7 Impact on the Home Team: Cultural Challenges in the IT Organization . . . . . . . . . . . . . . . . . . . . . . . 45
7.8 Immaturity of Vendor Offerings: Gaps and Issues in Current Technologies and Tools . . . . . . . . . . . . 47
Appendix A: Cloud Computing Case Studies and Best Practices from the Field . . . . . . . . . . . . . . 50
Acknowledgments/About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

4. 0 1 0 1 0 1 0 0 0 1 1 1 0 1 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 1 0 0 1 1 0 0 0
Executive Summary:
1 1 0 0 1 0 1 0 0 1 0 0 1 0 0 0 1 1 0 1 0 1 0 1 0 0 0 1 0 0 1 1 1 0 1 0 1
The Business Value of Cloud Computing
Sand Hill Group’s “Leaders in the Cloud” study examines the cloud computing
initiatives at companies today, the plans for future deployment, the business ben-
efits realized, the challenges encountered and the details on specific use cases of
cloud technology. Based on 40 in-depth interviews and quantitative surveys of more
than 500 IT executives, the study finds that even in its infancy, cloud computing is
already delivering significant value to companies. Consider the following summary
of research findings and the corresponding business benefits of cloud computing:
Strategic Alignment
For decades, IT and business executives have struggled to speak the same lan-
guage, work together and align goals. But in our study, cloud leaders expressed op-
timism that change is on the horizon. CIOs were unanimous in saying the primary
driver for adopting cloud computing is to meet business needs (see page 21). As the
IT organization leverages the cloud to solve each problem with new levels of speed,
flexibility and cost-effectiveness, the business leaders gain renewed respect and
excitement for IT – and for the cloud. Early
inroads by SaaS vendors selling to non-IT ex-
“I have never established a cloud computing
ecutives resulted in security, governance and
strategy that everything needs to go off-premise
maintenance concerns (see page 31). Today,
or move to some type of hosted model. CIOs describe a more collaborative evalua-
The driver behind it all is a business need.” tion of cloud solutions involving both IT and
business leaders with one common motivator:
advancing the goals of the company.
Agility
The “agile business” is the focus of many corporate mission statements today. IT
executives believe cloud technology can help companies reach that goal: “business
agility” was the No. 1 driver of cloud computing adoption, mentioned by 49 percent
of respondents (see page 23). The concept of agility incorporates many of the ideas
detailed on the following pages, including
“We were halfway through the project flexibility, speed and innovation. Enterprise
IT organizations can develop and deploy
and the business decided to dramatically change
cloud solutions quickly and efficiently. The
the requirements of the system. We were able to cloud enables enterprise IT organizations to
respond much more quickly than the original anticipate and respond to the changing needs
on-premise team would have delivered.” of the business more quickly and efficiently
than ever before.
The Bottom Line
The “Leaders in the Cloud” study found companies are achieving significant
bottom-line business benefits from early cloud computing initiatives. Technological
and organizational challenges to adoption remain, however CIOs report the pursuit
of IT-driven business value will only increase their cloud computing commitment
and investment in the near future.
1 LEADERS IN THE CLOUD: Identifying the Business Value of Cloud Computing for Customers and Vendors