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                          Roadmap to Cloud Success:
                          How to Get There?
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1 0 1 0 1 1 0 0 1 0 1 0         “Mastering The Cloud in Eight
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0 0 1 0 0 0 1 1 0 1 0 1 0 1 0 0 0 1 0 0 1 1   Roadmap to Cloud Success:
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0 0 0 1 0 0 1 1 0 0 0 1 1 0 0 1 0 1 0 0 1 0   This paper accompanies Part 5 of the eight-part SAP
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0 0 1 0 0 1 1 0 0 0 1 1 0 0 0 1 0 0 1 0 0 1   You’ve heard about the cloud, but you’re wondering
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0 0 1 1 0 1 0 1 0 1 0 0 0 1 0 0 1 1 1 0 1 0         What’s Really in the Cloud?
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1 0 1 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 1 0 0 1   This white paper was made possible by SAP,

1 0 0 0 1 1 0 0 1 0 1 0 0 1 0 0 1 0 0 0 1 1   a leader in the cloud.

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Cloud Strategy and Roadmap:

The case for cloud computing adoption sounds compelling. But how should
companies make the move? What are the most important steps to get there?
What should their cloud strategy and cloud roadmap look like?

This white paper explains eight steps involved in successfully transitioning
to the cloud, as follows:

   1. Adopt a progressive mindset

   2. Watch, learn, and experiment

   3. Demonstrate quick wins

   4. Develop a business case

   5. Understand the risks

   6. Analyze the current IT portfolio

   7. Create a vision of the end-state

   8. Develop and execute the roadmap




Step 1:
The first step in a cloud computing strategy and roadmap is for your com-
pany—both management and employees—to adopt an open progressive
mindset regarding application of new technologies to gain business benefits.
The move to cloud computing also involves changing mindsets, cultural pat-
terns, process patterns, and colleagues’ hearts so that they willingly adapt to
new approaches and technologies.

Spearheading disruptive change in the organization will be the most dif-
ficult part of the journey.

“Use of the cloud in our industry is an exception rather than the norm. I
 think a lot of companies in more traditional, mature industries like ours are


 has to offer. I would encourage these companies to be open-minded and


 systems.” – CEO, manufacturing company




                                                             Roadmap to Cloud Success: How to Get There?   1
Understanding the cloud’s power and potential is certainly important; but
getting mentally ready to take the plunge can be a stumbling block. The
underlying reasons—perceived or real—are many:




Machiavelli said this about change more than 500 years ago:



 or more uncertain in its success, than to take the lead in the introduction
 of a new order of things.”


A company’s top management should drive change in order to ultimately
generate value for customers and shareholders. Transforming a company’s
business using cloud solutions is not just about technology adoption and
implementation. It also involves broader business and operational changes
in several areas including governance, budgeting, contracting, regulatory
compliance, polices, people, and processes. Therefore, management needs
to educate and convincingly explain to everyone in the company who will
be impacted by the change what the company is doing and why the new
approaches bring value to the company. Success in getting to the cloud
depends on adapting to change.




Step 2: Watch, Learn, and Experiment
Embracing any new technology involves learning. Sand Hill’s 2010 “Leaders
in the Cloud” research study (see Appendix A) found that companies typi-
cally conduct experiments to see how the cloud really works and how it fits
or doesn’t fit into the requirements of the business. Through this process,
companies became familiar with constraints, issues, and benefits of the
technology.

Many surveyed executives described this testing phase as similar to that
of adopting outsourcing services: experiment with nonstrategic projects to
acclimate the company to a new way of doing business, evaluate selected
vendors, and assess business benefits. As their companies experienced
the benefits and understood the technology, their outsourcing initiatives
matured successfully and gained a significant share of projects.




                                                          Roadmap to Cloud Success: How to Get There?   2
Step 3: Demonstrate Quick Wins
Many of the companies participating in the Sand Hill survey set up innova-
tion sandboxes (a.k.a. Skunk Works projects) where their project teams were
allowed to work with the new technology within the context of a specific
business initiative.

Here are some examples of such small, experimental projects that the com-
panies in our study are executing in the cloud:


     business-driven projects on a public Infrastructure-as-a-Service (IaaS)
     cloud such as Amazon. Examples of these projects include a short-
     term marketing campaign, IT resources for offshore developers, and a
     new website for photo sharing.


     cloud such as Force.com or Windows Azure. Because the platform was
     so easy to use and did not require any programming knowledge, one
     CIO of a manufacturing company developed a simple HR application
     in less than a week. He said this would have taken several months for a
     professional technical developer using traditional platforms.


     critical business process. An executive in a media company rolled out
     a cloud-based e-mail system to hundreds of users in less than a month.
     Based on high user satisfaction with this new e-mail system, the com-
     pany decided to roll out the e-mail system to all of its users.

When the companies successfully completed these projects in much shorter
time and with less effort than it would have normally taken, they then
pushed the results up the value chain and funded new pilot projects. The
Sand Hill study found that many companies used the cloud to solve specific
and tactical problems and, for the most part, achieved successful results.

At the next stage of getting to the cloud, however, companies need to
develop a business-case-driven cloud strategy that is fine-tuned by findings
and value gained from the tactical projects. The emphasis needs to shift at
this stage from too much “how” to more of “what” and “why.” Otherwise,
short-term, tactical projects will dominate the transition to a cloud-based IT
reality, which won’t necessarily generate global business value or, even
worse, will end up with vendors driving the company’s agenda.




Step 4:
Companies should consider the following fundamental business drivers
when building a case for cloud computing:

                        Identify how to apply cloud applications and plat-
     forms to the business, enabling better and faster competitiveness.




                                                            Roadmap to Cloud Success: How to Get There?   3
Investigate how cloud solutions can lead
     to improved availability, reliability, and lower total cost of ownership
     (TCO), facilitating investing the savings back into the business.




 executed by line-of-business stakeholders. – CIO, healthcare company


Like any other emerging technology, the fundamental decision to embrace
cloud computing comes down to figuring out how the investment in the
cloud will yield positive returns to the business at an acceptable risk level.
If the company uses a public cloud for solving specific business problems, it
also becomes an outsourcing decision—one where the company also looks
for value in solutions that are less expensive, safer, and better than what it
can create by itself.

In the past few years, public cloud solutions have improved, becoming more
robust and also more compelling in quality, stability, and overall cost-to-
benefit ratio.

Many commodity services (e-mail, backup, archival, collaboration, etc.) are
now available as public cloud services. Commodity services now available
in the cloud also include the following standard business processes:




For each business problem a company seeks to solve, it needs to look at a
cloud solution and compare it with alternative solutions from both return on
investment (ROI) and TCO perspectives.




Step 5: Understand the Risks
Like any new technology that offers credible business value, there are also
risk factors to consider. Risks around security, privacy, and governance
are major concerns for nearly every company. Sand Hill’s “Leaders in the
Cloud” 2010 research study found a broad range of attitudes about security,
privacy, and governance.

Security concerns vary greatly by company—depending on the following
factors:



                                                            Roadmap to Cloud Success: How to Get There?   4
Sand Hill’s survey of IT executives found large enterprises were more
concerned about data privacy, security, and governance issues than smaller
companies (see Exhibit 1). Most of the small and midsize SME IT leaders
were emphatic that a cloud vendor’s security processes must be superior to
any that their own company could provide. The reason: small companies’
cost structures are such that they cannot afford to build secure infrastruc-
tures that match those of large enterprises or the leading cloud vendors.


Exhibit1: Comparison of large and small companies’ concerns
                    about cloud computing

                                                                                                     Small and
                                                                              Large
                                                                                                      Midsize
                                                                            Enterprises
                                                                                                    Enterprises

Data privacy                                                                     63%                     46%

Governance (e.g., policies for control, security,                                53%                     36%
monitoring and services)
Developers/corporate culture                                                     38%                     28%

Lack of practical experience with cloud computing                                33%                     47%

Migration/interoperability                                                       25%                     25%

Lack of standards                                                                23%                     19%

Regulation                                                                       15%                      7%

Lack of development and monitoring of service-level                               5%                     18%
agreements (SLAs)
No barriers                                                                       0%                     11%

Don’t know                                                                        3%                      2%

“Large enterprises” refer to companies with $20 billion or more in revenue. “Small and midsize Enterprises”
 includes companies with less than $500 million in revenue.

Source: Sand Hill Group Cloud Computing Survey 2010




Among many examples of surveyed business executives from SME compa-
nies who were pleased with the security of their cloud vendors is the follow-
ing statement from a SME manufacturing company executive:




  password updates; and we audit usage patterns of our users to monitor
                                                            – CEO, manufacturing company


                                                                                              Roadmap to Cloud Success: How to Get There?   5
However, vendors could fail, as was the case with Amazon’s high-profile
failure in April 2011, which resulted from a configuration error. What
would happen to a customer’s data in that case? Would the provider return
the data, or would it be lost forever? The good news is that companies that
properly understood their cloud vendor’s offering made sure they included
data backups and redundancies in their applications. They also conducted
due diligence to ensure they properly understood the vendor’s offer-
ings, service level agreements (SLAs), and architecture. Such companies
remained unscathed and ran their operations without any interruption
during the Amazon outage.

Many vendors are getting certified to security standards such as SAS 70.
Even if a vendor is certified, the most important question to ask is: does the
certification meet your specific security requirements? As one surveyed
executive stated:



 company dealing with a smaller company and the risk to you is greater


 if you are a small or medium-sized business, your risk is much lower if



                      – Principal consultant, leading security firm




Step 6:
Another important step in the roadmap of getting to the cloud is perform-
ing an inventory of the company’s current IT systems and developing a
logical model of the existing architecture including all relevant systems,
data, applications, processes, functional components, and services. As part
of this exercise, companies should ask the following questions and analyze
the systems from the following perspectives:




                                                            Roadmap to Cloud Success: How to Get There?   6
This analysis not only provides a snapshot of the company’s current state of
IT but also delivers crucial information to help fine-tune its business case
based on the new architecture.

Without doubt, the cloud deployment options in the architecture will drive
down cost inefficiencies and improve agility and scalability, among other
benefits. Analyzing an existing IT portfolio in this manner typically takes no
longer than four to six weeks in a midsized company.




Step 7: Create a Vision of the End-State
Once the company has a clear understanding of the current state of its IT
portfolio, the pain points, and the cost inefficiencies, it can then begin to
map out the vision of moving purposely to the end-state. That end-state will
include a description of which architectural components, data, applications,
systems, services, and processes will move to the cloud in what order, and
how much decoupling will be required to isolate the components. In design-
ing the end-state vision, the company needs to design a reference platform
that leverages cloud technologies for highly scalable automation, low-cost
hardware, middleware, and application servers to connect new and existing
applications.

Such an analysis will consider not just the technology piece but also the
people, process, and the cost aspects including the most important areas
such as budgeting, TCO, service level agreements, governance, and compli-
ance.

The Sand Hill study found that, even if the cost of moving to the end-state
from the current state is $5 million (for example), most small to midsize com-
panies will move ahead with the initiative if the end-state generates cost
savings of more than, say, $10 million per year.




Step 8:
After creating a vision of the end-state, companies then need to determine
which applications and data to move when, and where, before detailing the
specifics around how to move them. It is not necessary or practical to move
everything all at once. Create a roadmap for a long-term perspective (say,
three years) and map out how the architectural components will move over
in a staged manner to a much more effective, efficient architecture. This
roadmap exercise should not take more than a month to map out in a small
or midsized company; this includes a cost and benefit analysis for each stage
of the roadmap.

Typically, companies focus on the low-hanging fruit with the most busi-
ness value and place them on the roadmap first. For example, companies
initially select a relatively less-critical application that is currently not
running cost-efficiently in house. Moving it to an external cloud quickly will



                                                            Roadmap to Cloud Success: How to Get There?   7
create significant business value. As a next step, they then select the less-
valuable and more risky systems that are still worth moving, and place them
at the back end of the roadmap.

Another consideration is to review the project portfolio and identify new
and innovative revenue-generating projects that will benefit from a faster
time-to-market advantage using cloud technologies.

For each of the identified applications, companies need to evaluate the ven-
dor capabilities and the risks associated with the security, data privacy, and
governance with each vendor. Compare different cloud provider offerings.

They also need to evaluate the offering of cloud vendors to ensure that it
meets the security, scalability, reliability, and privacy needs of the enter-
prise and meets established security and compliance (SAS 70, FISMA, ISO/
IEC 27001, PCI, and HIPAA) standards. This evaluation includes:


     business risks, risks that typically may not be covered in standard
     SLAs.


     security procedures (if any) to adapt to the company’s risk, compliance,
     and business metrics.

                                                                                -
     mine workarounds as applicable.

                                                                           -
     tion against the above criteria.




Conclusion
Transitioning to the cloud is similar to a major change initiative and needs
top management support, clear vision, and careful planning. The eight steps
presented here are sequenced in a logical order designed to yield maximum
value. Typically, the more detailed activities of later steps provide addi-
tional information that helps companies fine-tune and refine the results of
previous steps. In this sense, this is an iterative and cyclical process that
companies can apply throughout the IT life cycle.




                                                            Roadmap to Cloud Success: How to Get There?   8
APPENDIX A


During January-February 2011, Sand Hill Group conducted a research study
to gauge software vendors’ cloud outlook for the coming year and beyond.
The study utilized an online survey to gather executives’ impressions on the
direction of the cloud market, their cloud strategies, and customer readi-
ness for adoption.

A total of 100 software CEOs and senior executives responded to the
24-question survey and provided insight about their cloud revenues today
and next year, customer attitudes and readiness, and which products and
services are gaining traction. Thirty-two percent of the respondents identi-
fied themselves with titles of CEO/Presidents, and another 32 percent identi-


The study also identified the long-term trends including which layers of
the cloud stack will take hold in the next three to five years. In addition,
researchers conducted in-depth telephone interviews with some executives
to gain more insight. Participants in the initial survey as well as the follow-
up interviews were guaranteed that their identities would remain confiden-
tial in order to protect the strategic nature of the corporate information
provided.

A broad cross-section of software companies participated in the survey.
Nearly three-quarters of the respondents were from product companies.

The executives represented primarily midsize and small companies. Thirty-
seven percent were from companies with less than $10 million in revenues,
and 28 percent have revenue of at least $10 million but less than $250 mil-
lion. About 18 percent of the respondents were companies with greater than
$1 billion in revenues.

The findings of this study are intended to give software companies direc-
tional insight as they make business decisions. Although efforts were taken
to survey a wide variety of software companies, the study is not necessarily
a representative sample of U.S. software companies.




                                                             Roadmap to Cloud Success: How to Get There?   9
APPENDIX B

Overview of Sand Hill 2010 Cloud Research Study
In 2010, Sand Hill Group released a landmark research study identifying the
business value realized by companies deploying cloud-computing initia-
tives today. A two-phase interview study design uncovered both the in-depth
insight of specific customers and vendor experiences, and a quantitative
market survey provided a snapshot of cloud initiatives and priorities at a
variety of companies. The interviews and survey questioned respondents
about their current cloud initiatives, current and planned use of specific
cloud models, business benefits, organizational and technical challenges,
and details of specific use cases.



In order to gain an understanding of the cloud experience at a variety of
types of companies, Sand Hill conducted a total of 40 one-hour, in-depth
                                                                          -
tects, and technology directors at small, midsize, and large companies. This
group of executives represented a variety of industries, including insurance
and finance, energy, telecom, manufacturing, healthcare, media, and tech-
nology.

To gain insight from leading software vendors, Sand Hill conducted eight
interviews with executive-level individuals who were responsible for cloud
strategy and products within their organizations. Again, a mixture of repre-
sentatives from large and small software companies was included.



As part of the study, Sand Hill Group conducted two Web-based quantitative
surveys in collaboration with McKinsey & Co. and Tech-Web. These surveys
received a total of 511 qualified responses. Most respondents were CEOs,
CIOs, or other senior IT executives at their companies, which ranged in size
from small businesses to global corporations.

The combination of qualitative interviews and quantitative surveys present
first-hand accounts on the current state of cloud computing initiatives from
an impressive cross-section of enterprises. However, the results may not be
reliably projectable across the universe of American businesses. Therefore,
the findings and implications in this report are intended to provide direc-
tional guidance during product development.




                                                           Roadmap to Cloud Success: How to Get There?   10
Sand Hill Group (http://www.sandhill.com) provides strategic management,
investment and marketing services to emerging market leaders. Sand Hill
Group is best known for its work in the $600-billion software and services
market. As founder of the “Enterprise” and “Software” conference series,
Sand Hill Group has been credited with uniting the software business eco-
system of executives, entrepreneurs, investors and professionals. The firm
is also the publisher of SandHill.com, the premier online destination for
strategic information on the software business. The site and its newsletters
are read by thousands of top software industry executives every week. Sand
Hill Group also funds primary research into key technology and business
model trends that impact the software business.




The information contained herein has been obtained from sources believed to be
reliable. Sand Hill Group disclaims all warranties as to the accuracy, completeness or
adequacy of such information. The Sand Hill Group shall have no liability for errors,
omissions or inadequacies in the information contained herein or for interpretations
thereof. The reader assumes sole responsibility for the selection of these materials
to achieve its intended results. The opinions expressed herein are subject to change
without notice. Reproduction of this report in print or electronic form is strictly pro-
hibited without written permission from Sand Hill Group.



                                                                    Roadmap to Cloud Success: How to Get There?   11

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Sap On Cloud

  • 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 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 Roadmap to Cloud Success: How to Get There? 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 “Mastering The Cloud in Eight 1 0 0 0 1 0 0 1 1 0 0 0 Easy Steps: Top Strategies to 1 1 0 0 1 0 1 0 0 1 0 Rocket Your Company’s Growth” 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 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
  • 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 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 Roadmap to Cloud Success: 1 0 1 0 1 0 1 0 0 1 1 0 0 1 0 1 1 0 0 1 0 1 How to Get There? 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 This paper accompanies Part 5 of the eight-part SAP 0 1 0 0 0 1 1 0 1 0 1 0 1 0 0 0 1 0 0 1 1 1 Webinar series: “Mastering The Cloud in 8 Easy 0 1 0 1 0 1 0 0 1 1 0 0 1 0 1 1 0 0 1 0 1 0 Steps: Top Strategies to Rocket Your Company’s Growth.” 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 You’ve heard about the cloud, but you’re wondering what it means to you and your business. Attend this 0 0 0 1 1 0 1 0 1 0 1 0 0 0 1 0 0 1 1 1 0 1 FREE Webinar series to learn everything you need 0 1 0 1 0 0 1 1 0 0 1 0 1 1 0 0 1 0 1 0 1 0 to know to master the cloud and grow your company 0 0 1 1 1 0 1 0 1 0 1 1 0 0 1 0 1 0 1 0 0 0 including: 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 What’s Really in the Cloud? 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 What’s In It for You? 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 How to Get There? 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 Is the Sky the Limit? 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 Click here to register for the Webinars. 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 This white paper was made possible by SAP, 1 0 0 0 1 1 0 0 1 0 1 0 0 1 0 0 1 0 0 0 1 1 a leader in the cloud. 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
  • 3. Cloud Strategy and Roadmap: The case for cloud computing adoption sounds compelling. But how should companies make the move? What are the most important steps to get there? What should their cloud strategy and cloud roadmap look like? This white paper explains eight steps involved in successfully transitioning to the cloud, as follows: 1. Adopt a progressive mindset 2. Watch, learn, and experiment 3. Demonstrate quick wins 4. Develop a business case 5. Understand the risks 6. Analyze the current IT portfolio 7. Create a vision of the end-state 8. Develop and execute the roadmap Step 1: The first step in a cloud computing strategy and roadmap is for your com- pany—both management and employees—to adopt an open progressive mindset regarding application of new technologies to gain business benefits. The move to cloud computing also involves changing mindsets, cultural pat- terns, process patterns, and colleagues’ hearts so that they willingly adapt to new approaches and technologies. Spearheading disruptive change in the organization will be the most dif- ficult part of the journey. “Use of the cloud in our industry is an exception rather than the norm. I think a lot of companies in more traditional, mature industries like ours are has to offer. I would encourage these companies to be open-minded and systems.” – CEO, manufacturing company Roadmap to Cloud Success: How to Get There? 1
  • 4. Understanding the cloud’s power and potential is certainly important; but getting mentally ready to take the plunge can be a stumbling block. The underlying reasons—perceived or real—are many: Machiavelli said this about change more than 500 years ago: or more uncertain in its success, than to take the lead in the introduction of a new order of things.” A company’s top management should drive change in order to ultimately generate value for customers and shareholders. Transforming a company’s business using cloud solutions is not just about technology adoption and implementation. It also involves broader business and operational changes in several areas including governance, budgeting, contracting, regulatory compliance, polices, people, and processes. Therefore, management needs to educate and convincingly explain to everyone in the company who will be impacted by the change what the company is doing and why the new approaches bring value to the company. Success in getting to the cloud depends on adapting to change. Step 2: Watch, Learn, and Experiment Embracing any new technology involves learning. Sand Hill’s 2010 “Leaders in the Cloud” research study (see Appendix A) found that companies typi- cally conduct experiments to see how the cloud really works and how it fits or doesn’t fit into the requirements of the business. Through this process, companies became familiar with constraints, issues, and benefits of the technology. Many surveyed executives described this testing phase as similar to that of adopting outsourcing services: experiment with nonstrategic projects to acclimate the company to a new way of doing business, evaluate selected vendors, and assess business benefits. As their companies experienced the benefits and understood the technology, their outsourcing initiatives matured successfully and gained a significant share of projects. Roadmap to Cloud Success: How to Get There? 2
  • 5. Step 3: Demonstrate Quick Wins Many of the companies participating in the Sand Hill survey set up innova- tion sandboxes (a.k.a. Skunk Works projects) where their project teams were allowed to work with the new technology within the context of a specific business initiative. Here are some examples of such small, experimental projects that the com- panies in our study are executing in the cloud: business-driven projects on a public Infrastructure-as-a-Service (IaaS) cloud such as Amazon. Examples of these projects include a short- term marketing campaign, IT resources for offshore developers, and a new website for photo sharing. cloud such as Force.com or Windows Azure. Because the platform was so easy to use and did not require any programming knowledge, one CIO of a manufacturing company developed a simple HR application in less than a week. He said this would have taken several months for a professional technical developer using traditional platforms. critical business process. An executive in a media company rolled out a cloud-based e-mail system to hundreds of users in less than a month. Based on high user satisfaction with this new e-mail system, the com- pany decided to roll out the e-mail system to all of its users. When the companies successfully completed these projects in much shorter time and with less effort than it would have normally taken, they then pushed the results up the value chain and funded new pilot projects. The Sand Hill study found that many companies used the cloud to solve specific and tactical problems and, for the most part, achieved successful results. At the next stage of getting to the cloud, however, companies need to develop a business-case-driven cloud strategy that is fine-tuned by findings and value gained from the tactical projects. The emphasis needs to shift at this stage from too much “how” to more of “what” and “why.” Otherwise, short-term, tactical projects will dominate the transition to a cloud-based IT reality, which won’t necessarily generate global business value or, even worse, will end up with vendors driving the company’s agenda. Step 4: Companies should consider the following fundamental business drivers when building a case for cloud computing: Identify how to apply cloud applications and plat- forms to the business, enabling better and faster competitiveness. Roadmap to Cloud Success: How to Get There? 3
  • 6. Investigate how cloud solutions can lead to improved availability, reliability, and lower total cost of ownership (TCO), facilitating investing the savings back into the business. executed by line-of-business stakeholders. – CIO, healthcare company Like any other emerging technology, the fundamental decision to embrace cloud computing comes down to figuring out how the investment in the cloud will yield positive returns to the business at an acceptable risk level. If the company uses a public cloud for solving specific business problems, it also becomes an outsourcing decision—one where the company also looks for value in solutions that are less expensive, safer, and better than what it can create by itself. In the past few years, public cloud solutions have improved, becoming more robust and also more compelling in quality, stability, and overall cost-to- benefit ratio. Many commodity services (e-mail, backup, archival, collaboration, etc.) are now available as public cloud services. Commodity services now available in the cloud also include the following standard business processes: For each business problem a company seeks to solve, it needs to look at a cloud solution and compare it with alternative solutions from both return on investment (ROI) and TCO perspectives. Step 5: Understand the Risks Like any new technology that offers credible business value, there are also risk factors to consider. Risks around security, privacy, and governance are major concerns for nearly every company. Sand Hill’s “Leaders in the Cloud” 2010 research study found a broad range of attitudes about security, privacy, and governance. Security concerns vary greatly by company—depending on the following factors: Roadmap to Cloud Success: How to Get There? 4
  • 7. Sand Hill’s survey of IT executives found large enterprises were more concerned about data privacy, security, and governance issues than smaller companies (see Exhibit 1). Most of the small and midsize SME IT leaders were emphatic that a cloud vendor’s security processes must be superior to any that their own company could provide. The reason: small companies’ cost structures are such that they cannot afford to build secure infrastruc- tures that match those of large enterprises or the leading cloud vendors. Exhibit1: Comparison of large and small companies’ concerns about cloud computing Small and Large Midsize Enterprises Enterprises Data privacy 63% 46% Governance (e.g., policies for control, security, 53% 36% monitoring and services) Developers/corporate culture 38% 28% Lack of practical experience with cloud computing 33% 47% Migration/interoperability 25% 25% Lack of standards 23% 19% Regulation 15% 7% Lack of development and monitoring of service-level 5% 18% agreements (SLAs) No barriers 0% 11% Don’t know 3% 2% “Large enterprises” refer to companies with $20 billion or more in revenue. “Small and midsize Enterprises” includes companies with less than $500 million in revenue. Source: Sand Hill Group Cloud Computing Survey 2010 Among many examples of surveyed business executives from SME compa- nies who were pleased with the security of their cloud vendors is the follow- ing statement from a SME manufacturing company executive: password updates; and we audit usage patterns of our users to monitor – CEO, manufacturing company Roadmap to Cloud Success: How to Get There? 5
  • 8. However, vendors could fail, as was the case with Amazon’s high-profile failure in April 2011, which resulted from a configuration error. What would happen to a customer’s data in that case? Would the provider return the data, or would it be lost forever? The good news is that companies that properly understood their cloud vendor’s offering made sure they included data backups and redundancies in their applications. They also conducted due diligence to ensure they properly understood the vendor’s offer- ings, service level agreements (SLAs), and architecture. Such companies remained unscathed and ran their operations without any interruption during the Amazon outage. Many vendors are getting certified to security standards such as SAS 70. Even if a vendor is certified, the most important question to ask is: does the certification meet your specific security requirements? As one surveyed executive stated: company dealing with a smaller company and the risk to you is greater if you are a small or medium-sized business, your risk is much lower if – Principal consultant, leading security firm Step 6: Another important step in the roadmap of getting to the cloud is perform- ing an inventory of the company’s current IT systems and developing a logical model of the existing architecture including all relevant systems, data, applications, processes, functional components, and services. As part of this exercise, companies should ask the following questions and analyze the systems from the following perspectives: Roadmap to Cloud Success: How to Get There? 6
  • 9. This analysis not only provides a snapshot of the company’s current state of IT but also delivers crucial information to help fine-tune its business case based on the new architecture. Without doubt, the cloud deployment options in the architecture will drive down cost inefficiencies and improve agility and scalability, among other benefits. Analyzing an existing IT portfolio in this manner typically takes no longer than four to six weeks in a midsized company. Step 7: Create a Vision of the End-State Once the company has a clear understanding of the current state of its IT portfolio, the pain points, and the cost inefficiencies, it can then begin to map out the vision of moving purposely to the end-state. That end-state will include a description of which architectural components, data, applications, systems, services, and processes will move to the cloud in what order, and how much decoupling will be required to isolate the components. In design- ing the end-state vision, the company needs to design a reference platform that leverages cloud technologies for highly scalable automation, low-cost hardware, middleware, and application servers to connect new and existing applications. Such an analysis will consider not just the technology piece but also the people, process, and the cost aspects including the most important areas such as budgeting, TCO, service level agreements, governance, and compli- ance. The Sand Hill study found that, even if the cost of moving to the end-state from the current state is $5 million (for example), most small to midsize com- panies will move ahead with the initiative if the end-state generates cost savings of more than, say, $10 million per year. Step 8: After creating a vision of the end-state, companies then need to determine which applications and data to move when, and where, before detailing the specifics around how to move them. It is not necessary or practical to move everything all at once. Create a roadmap for a long-term perspective (say, three years) and map out how the architectural components will move over in a staged manner to a much more effective, efficient architecture. This roadmap exercise should not take more than a month to map out in a small or midsized company; this includes a cost and benefit analysis for each stage of the roadmap. Typically, companies focus on the low-hanging fruit with the most busi- ness value and place them on the roadmap first. For example, companies initially select a relatively less-critical application that is currently not running cost-efficiently in house. Moving it to an external cloud quickly will Roadmap to Cloud Success: How to Get There? 7
  • 10. create significant business value. As a next step, they then select the less- valuable and more risky systems that are still worth moving, and place them at the back end of the roadmap. Another consideration is to review the project portfolio and identify new and innovative revenue-generating projects that will benefit from a faster time-to-market advantage using cloud technologies. For each of the identified applications, companies need to evaluate the ven- dor capabilities and the risks associated with the security, data privacy, and governance with each vendor. Compare different cloud provider offerings. They also need to evaluate the offering of cloud vendors to ensure that it meets the security, scalability, reliability, and privacy needs of the enter- prise and meets established security and compliance (SAS 70, FISMA, ISO/ IEC 27001, PCI, and HIPAA) standards. This evaluation includes: business risks, risks that typically may not be covered in standard SLAs. security procedures (if any) to adapt to the company’s risk, compliance, and business metrics. - mine workarounds as applicable. - tion against the above criteria. Conclusion Transitioning to the cloud is similar to a major change initiative and needs top management support, clear vision, and careful planning. The eight steps presented here are sequenced in a logical order designed to yield maximum value. Typically, the more detailed activities of later steps provide addi- tional information that helps companies fine-tune and refine the results of previous steps. In this sense, this is an iterative and cyclical process that companies can apply throughout the IT life cycle. Roadmap to Cloud Success: How to Get There? 8
  • 11. APPENDIX A During January-February 2011, Sand Hill Group conducted a research study to gauge software vendors’ cloud outlook for the coming year and beyond. The study utilized an online survey to gather executives’ impressions on the direction of the cloud market, their cloud strategies, and customer readi- ness for adoption. A total of 100 software CEOs and senior executives responded to the 24-question survey and provided insight about their cloud revenues today and next year, customer attitudes and readiness, and which products and services are gaining traction. Thirty-two percent of the respondents identi- fied themselves with titles of CEO/Presidents, and another 32 percent identi- The study also identified the long-term trends including which layers of the cloud stack will take hold in the next three to five years. In addition, researchers conducted in-depth telephone interviews with some executives to gain more insight. Participants in the initial survey as well as the follow- up interviews were guaranteed that their identities would remain confiden- tial in order to protect the strategic nature of the corporate information provided. A broad cross-section of software companies participated in the survey. Nearly three-quarters of the respondents were from product companies. The executives represented primarily midsize and small companies. Thirty- seven percent were from companies with less than $10 million in revenues, and 28 percent have revenue of at least $10 million but less than $250 mil- lion. About 18 percent of the respondents were companies with greater than $1 billion in revenues. The findings of this study are intended to give software companies direc- tional insight as they make business decisions. Although efforts were taken to survey a wide variety of software companies, the study is not necessarily a representative sample of U.S. software companies. Roadmap to Cloud Success: How to Get There? 9
  • 12. APPENDIX B Overview of Sand Hill 2010 Cloud Research Study In 2010, Sand Hill Group released a landmark research study identifying the business value realized by companies deploying cloud-computing initia- tives today. A two-phase interview study design uncovered both the in-depth insight of specific customers and vendor experiences, and a quantitative market survey provided a snapshot of cloud initiatives and priorities at a variety of companies. The interviews and survey questioned respondents about their current cloud initiatives, current and planned use of specific cloud models, business benefits, organizational and technical challenges, and details of specific use cases. In order to gain an understanding of the cloud experience at a variety of types of companies, Sand Hill conducted a total of 40 one-hour, in-depth - tects, and technology directors at small, midsize, and large companies. This group of executives represented a variety of industries, including insurance and finance, energy, telecom, manufacturing, healthcare, media, and tech- nology. To gain insight from leading software vendors, Sand Hill conducted eight interviews with executive-level individuals who were responsible for cloud strategy and products within their organizations. Again, a mixture of repre- sentatives from large and small software companies was included. As part of the study, Sand Hill Group conducted two Web-based quantitative surveys in collaboration with McKinsey & Co. and Tech-Web. These surveys received a total of 511 qualified responses. Most respondents were CEOs, CIOs, or other senior IT executives at their companies, which ranged in size from small businesses to global corporations. The combination of qualitative interviews and quantitative surveys present first-hand accounts on the current state of cloud computing initiatives from an impressive cross-section of enterprises. However, the results may not be reliably projectable across the universe of American businesses. Therefore, the findings and implications in this report are intended to provide direc- tional guidance during product development. Roadmap to Cloud Success: How to Get There? 10
  • 13. Sand Hill Group (http://www.sandhill.com) provides strategic management, investment and marketing services to emerging market leaders. Sand Hill Group is best known for its work in the $600-billion software and services market. As founder of the “Enterprise” and “Software” conference series, Sand Hill Group has been credited with uniting the software business eco- system of executives, entrepreneurs, investors and professionals. The firm is also the publisher of SandHill.com, the premier online destination for strategic information on the software business. The site and its newsletters are read by thousands of top software industry executives every week. Sand Hill Group also funds primary research into key technology and business model trends that impact the software business. The information contained herein has been obtained from sources believed to be reliable. Sand Hill Group disclaims all warranties as to the accuracy, completeness or adequacy of such information. The Sand Hill Group shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. Reproduction of this report in print or electronic form is strictly pro- hibited without written permission from Sand Hill Group. Roadmap to Cloud Success: How to Get There? 11