Big OpportunityGuidebook on MovingEnterprise Services to the Cloud

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Contents

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How To Use This GuidebookThis document sets a course for achieving one goal: building a successful enterprise cloud solution. You’ll learn in minutes about the opportunities and considerations of adopting Software-as-a-Service (SaaS), the industry’s dominant business model. The knowledge you acquire will also jump-start conversations about growing profits and maximizing the value you provide to your customers.

Click on the right-hand side tabs to navigate through the Enterprise Cloud Guidebook’s content in an order and at a pace that works for you. This guidebook also contains embedded links to webinars and quick videos to help accelerate your learning. Dimension Data and Montclare look forward to your success in the cloud.

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1. Five Minutes To Enterprise Cloud

The cloud industry continues to soar thanks to the innovative minds behind such software companies as MuleSoft, Zuora, Birst, Gainsight, AppFirst, and many others. Executives from these and other leading cloud companies share their insights on Montclare’s video channel, a repository of more than 300 clips covering everything from customer expectations to product release strategies. Browse the titles and zero in on topics to gain the knowledge you need to successfully sell in this market. Visit the Montclare YouTube channel.

Innovation And Inspiration – Watch It Now!

Montclare Channel On YouTube

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What Is The Enterprise Cloud?

Part of the cloud’s primary appeal is easy access and a pay-as-you-go pricing model that works as well inside an enterprise as it does outside in the ge-neral market. This contrasts with the large up-front payments required for traditional software and can allow IT to provide more visibility into internal orga-nizational consumption, regulate usage, and better control budgets and chargebacks.

By not only deploying basic cloud solutions but also thinking of ways that IT can use the SaaS model to reduce internal costs, improve usability of systems, streamline processes, and truly innovate, real value can be delivered to the enterprise.

The cloud continues to take the software industry by storm. A major component of the cloud is SaaS (Software-as-a-Service). New software providers host their products themselves and provide customers access through the Internet. This model challenges the traditional on-premise method by which a provider installs and runs their software in your own data center.

The convenience of low-cost, cloud-based infrastructure services has transformed many fundamentals of business, making it possible for IT to deliver some of the same capabilities to their internal and external customers. For IT professionals, a stream of new cloud capabilities and innovative ideas to provide value to various audiences presents a lucrative opportunity.

This section of the Enterprise Cloud Services Guidebook gives you a quick introduction to overall cloud concepts, the market, and lessons learned by key players.

Introduction

For enterprises that have some valuable legacy sof-tware assets, moving to the cloud is something their customers are asking for in terms of more flexible, responsible, and cost-effective solutions. These companies are finding that requiring potential cus-tomers to purchase, provision, and manage their own infrastructure is proving much less attractive than it was in the past. Issues related to the cloud, such as security and scalability, can now be addres-sed by using such providers as Dimension Data.

For example, a large healthcare company offers a wide range of products, including software to their customers. Increasingly, they were finding that the-se customers were asking for cloud-based software products because they didn’t want to manage the required infrastructure. This change in buyer beha-vior was becoming an obstacle to sales, which is where Dimension Data’s managed cloud solutions can provide a clear solution. By partnering with a cloud provider, the company can quickly bring a pro-duct to market and trust them to manage complexi-ty and industry regulations.

This guidebook will share tips and tricks of the SaaS model that IT can use to its advantage when de-veloping their own Enterprise Cloud strategies. We also share lessons learned, leading companies such as LinkedIn, Workday, and others to develop fast-growing, valuable businesses. These lessons can of-ten be applied to Enterprise Cloud projects to avoid mistakes and deliver more value.

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The benefits to cloud vendors and customers continue to power the subscription economy.

Benefits Of The Enterprise Cloud

Key Market Stats: Public Cloud Spending

Financial Impact

The cloud model continues to emerge as a Wall Street favorite primarily because cloud companies are building stable, recurring revenue streams thanks to developing strong, trusted customer relationships. IT can also take a page out of their playbook by developing user-friendly solutions that solve real problems and then really streamline delivery costs. This ability to deliver modern, high-value capabilities at a lower cost than traditional software-based solutions will not only allow IT to maintain current chargeback levels for their budgets but will also free up valuable capital dollars to innovate in other areas.

These Enterprise Cloud solutions are internally facing self-service solutions and can also be apps that can be deployed to improve customer satisfaction and revenues of existing products. It is in these areas that looking at market-leading SaaS vendors can really provide some relevant experience.

Public Cloud spendingwill grow at a compoundedannual growth rate(CAGR) of 26.4% from2011 to 2016

Source IDC

20112016

26.4%

46%17%all IT

productspend

all ITspending

Source: IDC

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Key Cloud Customer Benefits

Fast time to value by using the software quickly, typically in minutes or a few days at most

Low upfront cost due to no upfront license fees or server infrastructure

Lower upfront cost of ownership (TCO) from a subscription-based payment model

Accounting advantages from expensing software as an operating expense (OpEx) instead of an upfront capital expenditure

“Try before you buy”, since it is easier for SaaS vendors to let prospective customers try the software before committing to a purchase

Free software via SaaS provider’s freemium model, which allows users to delay payment for high functionality until there is actual need for it.

Effortless upgrades, with SaaS vendors managing the upgrade process on their own platform; no customer effort is required.

Mobility Users may access most SaaS services on smartphones and tablets

1

2

3

$$

$$

$

4

5$

6

7

8

Key Cloud Provider Benefits

Lower operating costs from leased compute resources.

Quick customer access to software and revisions, since there is no software installed at the customer site.

Pricing flexibility, by offering a range of capabilities in free, tiered and enterprise subscription models

Usage monitoring to improve roadmapping and yield client-inspired new offerings

Broad acces of software across different types of devices and browsers, for a seamless user experience.

1

2

3

4

5

$$

$

$

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2. Enterprise Cloud Value Proposition

Instant Feedback, Instant Improvements

Vertical or market-specific cloud solutions are tailored for specific functionality, features, analytics, security, and other capabilities. This holistic product approach enables cloud providers to fulfill their customers’ needs and deliver a superior, more intuitive user experience.

Naturally, customer feedback is vital. Cloud companies strive to learn from their customers’ usage patterns, trouble tickets and direct feedback, and which software features make the most sense to build back into their quarterly or monthly product releases. In the same way, IT needs to listen better to its users about what they like, use, and want as they develop new cloud offerings.

One Product Version

A cloud provider’s customers all use the same software, which means they only have to develop and support a single version of the product. This contrasts with traditional software companies or even IT that has to spend a lot of money and resources supporting multiple versions, which might be decades old in some cases. Cloud providers focus only on their current software version. In turn, their development, professional services, support, and training costs are only a fraction of those of traditional software companies.

Agile Development

Once a cloud product launches, user feedback is immediate and ongoing. A cloud provider’s lean, cross-functional team of product managers, architects, developers, and testers deliver a superior user experience and a cost-effective approach for implementing usability, break/fix, and new features.

Providers: Delivering Software The Way Customers Want It

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By employing a cloud platform to help automate gathering of usage data, solicitation of feedback on features, and monitoring consumption activity, companies can reduce the need to have large, expensive teams of developers. This more automated approach can improve cycle time between releases because updates tend to be smaller, incremental, and released more often to create a stable online platform and product.

Annuity Revenue Streams

Most cloud customers pay a monthly or annual subscription. It’s an enticing model due to its consistent revenue stream, providing cloud software providers more transparency into their future revenues. Customers, investors, and the financial markets view subscription revenue as stable and predictable, thereby adding to a cloud company’s valuation.

For IT organizations, a subscription model can make great sense when thinking in terms of monthly chargebacks just as cloud software companies charge for services, users, storage, and other add-on services. IT can also provide an internal price list to their departmental buyers, where they can report on usage and provide higher levels of visibility into real costs as well.

Another way to think of an annuity-costing model is around departmental showbacks. Using this same method of reporting and visibility, IT can easily show departmental budget holders what they are getting for their annual contribution..

Expanded Reach To New Markets

Affordable cloud products mean providers can more cost-effectively expand into new industries and geographies.

For example, IT organizations at large insurance companies have launched apps for their customers that allow them to make payments on-line or file an accident claim. These types of solutions not only

make it easier for their customers to interact with the insurance company, but these applications can also streamline costs and improve overall customer satisfaction. These types of high value solutions can often be a major competitive differentiator when selecting an insurance provider.

Even though cloud solutions are more intuitive, most providers offer free trials that allow prospective buyers to “try before they buy.” This makes a low-touch, e-Commerce sales model better able to expand a company’s global reach without the need for a large staff of dedicated sales representatives in local regions.

Businesses Scale

Cloud companies can grow rapidly because they are built on a technology platform that makes it easy to add and manage large numbers of users. Smart cloud companies also focus on automating end-to-end business processes to develop a quality user experience while scaling the infrastructure at a reasonable cost.

Once a cloud company reaches critical mass, revenues can grow quickly while keeping the cost of serving customers low. This dynamic positions cloud companies for significant revenue and profit growth that attract additional investment.

IT organizations can also benefit from these same elastic scalability capablities and expenses only as needed.

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Customers: The Power Of Choice And Attractive Economics

“Try Before You Buy”

Many cloud providers offer prospects a free trial of their product for up to 30 days. This option allows potential buyers to:

• Determine if the software fulfills their requirements

• Investigate important features • Understand the user experience

They also offer a version with limited functionality for free. Companies such as Salesforce, Adaptive Insights, Zendesk, and New Relic follow these models.

Faster Time To Value

Cloud applications are often easy to install and quick to use, allowing customers to measure their business value more quickly. Quick adoption means shorter time-to-value, so even sophisticated enterprise cloud services can resemble Facebook or consumer apps.

“Pay As You Go”

Cloud pricing allows customers to pay only for the services and features they use and only when they use them. Subscriptions allow buyers to shift their up-front capital expenses (CapEx) to variable operating expenses (OpEx) because there is little or no up-front infrastructure, data center management, or maintenance costs with enterprise cloud services. The subscription fees encompass all of the software’s operational costs.

The cloud model allows small and medium-sized businesses (SMBs) to afford enterprise-class software solutions, opening up new markets no matter their location or where their customers are located.

“Buy Only What You Need”

Traditional software often requires customers to purchase large product suites or extra, unnecessary features. On the other hand, cloud users can choose to turn off features or modules or cancel a subscription they’re not using.

No Upgrades Required

Enterprise cloud companies offer a single version of their software—the most current version. With it comes frequent, seamless updates and patches that ensure stability and security. Larger upgrades and new capabilities are often delivered as part of a global release, usually quarterly.

The cloud delivery model means customers never again have to face the costs and risks of large on-premise software upgrades. The cloud service provider handles all upgrades and maintenance.

Lower Total Cost Of Ownership (TCO)A main driver of the cloud’s popularity is that over three to five years the total cost of ownership can be much lower than licensing traditional on-premise software. The cloud provider also absorbs the cost of:

• Hardware—servers, firewalls, and routers • Related software • Networking and connectivity • Data center space, power, and cooling • Compliance and security• Operations and support staff

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Ease Of Change

It’s relatively easy for a cloud service buyer to change from one vendor to another, which means that a cloud provider must deliver a high level of service; otherwise, it is easy to lose business to another company. The opposite is true when a competing provider fails to deliver value to its customers.

Hybrid Models

Enterprise cloud providers often accommodate implementations that keep sensitive data behind the firewall of the corporate network and keeps less confidential data in the cloud.

Cloud providers ensure high levels of security for their software and any associated customer data. They handle customer concerns about security and demonstrate their compliance with industry regulations, such as HIPAA (healthcare), PCI (credit cards), and Sarbanes-Oxley (corporate governance and accountability).

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3. Today’s Cloud Market Leaders

Some cloud market leaders become household names, while others stumble and fail. What do those paths look like, and what lessons do IT professionals learn when they are building their enterprise cloud offerings? In the webinar “Learning from Market Leaders,” Montclare CEO Kevin Dobbs analyzes the attributes that propel cloud companies toward success. Hear Kevin’s analysis of cloud leaders, including Dropbox, Workday, Salesforce, and others in this 17-minute webinar. Watch the webinar now.

Montclare Webinar: Learning From Market Leaders

Who’s Hot And Why Cloud Leader Profiles

For IT professionals who are considering building high-value cloud solutions for their organization, these cloud leader profiles provide a good background on the challenges and opportunities these companies faced when building these types of solutions.

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The World’s Professional Network With A Unique Business, Platform, and Set Of Features

LinkedIn is the leading business social network and a premier B2B cloud firm. With more than 350 million members, LinkedIn is a highly scalable cloud business that offers recruiting, marketing, and sales solutions.

The majority of LinkedIn members use a free version of the product, but a growing percentage buy additional services, including LinkedIn’s recruiting, marketing, or advertising solutions—key drivers in the company’s dramatic revenue growth over the past five years.

Why is LinkedIn Successful?

LinkedIn’s business growth is the result of multiple revenue streams, a seamless e-Commerce experience, and a robust and flexible platform. Its success is built on:

• A superior and easy-to-use customer user experience

• Freemium and paid models that work seamlessly together

• Automated platforms that require minimal human intervention

• Ability to cost-effectively scale the business

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Cloud Pioneer Continues To Drive Innovation

Salesforce is the original SaaS pioneer. Founded in 1999, the company was the first to offer cloud-based sales force automation (SFA) and customer relationship management (CRM) products. Its product portfolio has grown to include marketing, social media, and customer service.

Salesforce’s success in winning business from on-premise competitors helped prove the value of the cloud model. Today, it’s a global company with more than 100,000 customers. Salesforce was the first cloud company to reach $1 billion in annual recurring revenues. It’s considered the granddaddy of publicly traded B2B cloud firms. Salesforce went public in 2004, and its current annual revenue of $5 billion continues to grow by 30 percent each year.

Why Is Salesforce Successful?

Salesforce has an innovative sales model and a strong partner ecosystem (AppExchange). Salesforce was also an early innovator with its Customers for Life (CFL) program. It recognized the importance of ensuring that its customers adopt its products, renew their subscriptions, and remain successful thus helping to sustain Salesforce’s rapid growth.

Salesforce is also a leader in cloud computing security. It was the first major cloud company to publish a real-time view of its SLA activity at trust.salesforce.com.

The company was also one of the first to offer a Platform-as-a-Service (PaaS)—Force.com, which attracts a strong complement of third-party solutions.

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Extreme Ease Of Use For Enterprise Applications

Workday is the leading provider of cloud-based enterprise resource planning (ERP) application solutions. Its products include human capital management (HCM), payroll, talent management, expense, and financials. The company serves more than 3,600 clients, competing with both Oracle and SAP. It claims its services provide significant savings when compared with legacy ERP systems.

Workday founder Dave Duffield and others came from PeopleSoft with a vision of building a company that offers a superior user experience. Workday started out building HR and financial applications and now offers a broad suite of easy-to-use products for employees, managers, and executives. Workday’s products adhere to the mobile-first development philosophy, meaning that all of the products behave the same way no matter if they are accessed by mobile, tablet, or traditional desktop devices. Workday’s solutions are simple and easy to use, a unique benefit in the enterprise software market.

Why Is Workday Successful?

Workday has succeeded with a philosophy of creating cloud products that make their users’ lives easier and more productive. They developed their own object-oriented platform to speed development while keeping products intuitive and easy to use. The company has achieved 100 percent annual growth over the past five years.

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Cloud Storage Leader Has Revolutionized Collaboration

Two MIT students started Dropbox in 2007 over their frustration of USB drives and the appeal of storing files in the cloud. Dropbox is an amazing cloud growth story. It has more than 300 million customers, including numerous Fortune 500 companies.

Dropbox has a freemium cloud storage business that scales, is secure, and easy to use. For example, Dropbox grew from $40 million in revenues to more than $250 million and from four million customers to 44 million from 2010 to 2011. That same year saw only a 10 percent increase in Dropbox’s staff. Its platform and ability to scale are unique in the cloud business and a factor in Dropbox’s high valuation.

Why Is Dropbox Successful?

Dropbox has a highly simplified, automated, and scalable cloud collaboration platform. Few cloud companies over the last 10 years have experienced this level of growth. Its scalable platform and lean operations mean Dropbox doesn’t have a traditional sales force and relies largely on converting free members to paid members, similar to LinkedIn.

Dropbox’s current focus is individual consumers, small office/home office, and SMB customers. As the company continues to raise additional capital, it’s likely to push into the global enterprise market.

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4. Cloud Market Overview

Global demand for cloud software continues to grow—and fast. This webinar, which is presented by Montclare CEO Kevin Dobbs, takes viewers on a 17-minute tour of leading cloud markets around the world. Kevin highlights growth drivers, the Montclare 250 ranking of leading cloud companies, and key players. Watch the webinar now.

Montclare Webinar: Cloud Market Overview

Cloud Market Growth—A Global Tour

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In 2015, many on-premise ISVs have initiated or accelerated their transition to the cloud. Their strategy has been either a hybrid or a pure cloud implementation to take advantage of the shift to cloud-based solutions.

Market Preferences Drive Growth

The global cloud market will nearly triple from 2012 to 2017, reaching $76 billion. This represents a robust growth rate of 22.1 percent. Cloud will outpace traditional software product delivery, growing nearly five times faster than the market as a whole.

A glimpse at market growth

In 2014, nearly all metrics of the cloud industry were positive: revenues, solution adoption rates, equity investment, M&A activity, the quantity and success of initial public offerings (IPOs), the stock prices of public cloud companies, and the number of on-premise software companies initiating or accelerating their transition to the cloud. In 2015, these measures remain strong accompanied by predictions of accelerated growth.

Subscription revenues are a hallmark of cloud providers, which attract investors to all manner of cloud companies to invest, take public, or purchase. M&A activity is robust, as some traditional software firms decide it’s more effective to purchase existing cloud providers than to develop their own cloud offerings.

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Revenues

Global services firm PwC states in its 2014 list of 100 Global Software Leaders, “Each time PwC ranks the Global 100, we see more signs of the changes shaking up the software industry. First, cloud companies appeared on the list. Then, their revenues started to increase. Now they are steadily climbing their way up the list.”

The Software Equity Group’s Q3 Software Industry Financial Report states: “On-premise software vendors lost market share to cloud providers.” The report also notes that 30 percent of publicly traded SaaS companies saw trailing 12 months (TTM) revenue increases of 40 percent or more, and that median gross profit margins for cloud providers came in at 70 percent.

North AmericaUSA

Canada

GermanySwitzerland

SwedenUK

ItalyIrelandFrance

NetherlandsFinland

BelgiumOther

JapanIndia

ChinaVietnamAustralia

New ZealandKorea

Taiwan

LATA

APAC

Europe

886.7

8.6

BrazilChile

Colombia

197.1 45.3 38.2 24.5 23.6 16.9 9.3 8.9 6.24.35.2

2.71.20.1

447.7 11.3 5.0 1.2 0.9 0.70.60.5

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Cloud Adoption

Corporate IT organizations now enable fast, easy access to the technology and data that departmental users need to do their jobs better. Both internal and external customers look for systems that are easier to use, faster to deploy, and no longer require upgrades. According to Accenture, public cloud spending will grow at a compound annual growth rate (CAGR) of 26.4 percent over the next five years. It will comprise 17 percent of all IT product spend by the end of the forecast period. Cloud platforms and applications will account for 46 percent of all IT spending by 20161.

For years, on-premise software vendors have questioned cloud solutions, citing shortcomings in areas such as data access control and security. But emerging technologies that continue to address such issues means many on-premise vendors have chosen to deploy cloud implementations of their own software.

A surge of cloud software development tools and an increase of expert developers contribute to a proliferation of cloud and hybrid offerings. More providers are offering leased virtualized server space available in the cloud. The result? Price competition that lowers costs for cloud providers. These converging trends present an attractive value proposition to both software vendors and their customers.

(1) “A Cloud Computing Forecast Summary for 2013–2017 from IDC, Gartner and KPMG,” PR Web, November 18, 2013.

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5. Architecting Your Enterprise’s Cloud SolutionSystems architecture establishes a formal description and specification of the application. This is a critical first step in planning for enterprise’s cloud solution.

How Architecture Affects Service Delivery

A myriad of architectural details can impact your cloud service delivery operations. Factors include load variability, data location and flows, encryption at rest and in transit, and application performance requirements. Moreover, service delivery requirements have a major impact on cloud infrastructure design. These may take the

form of informal goals. Or, they may exist in customer service level agreements (SLA). They may also vary by application module and target market.

It’s vital for IT to establish clear cloud solution capabilities to distinguish themselves from similar external cloud providers. This helps attract users to your solution. In terms of service delivery, key capabilities may include application uptime, performance, ability to quickly scale both up and down, and quality of experience. Security requirements and conforming to established corporate standards will also influence service architecture.

ArchitecturalRequirements

Drivers

User SLAsGlobalRequirements

MarketRequirements

StandardsConformance

CompetitivePositioning

RegulatoryRequirements

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Operational Planning

Successful cloud delivery depends on close cooperation between application development and service operations teams. The growth of the DevOps role illustrates the importance of this partnership. It’s not sufficient for application developers to create a specification and simply “throw it over the wall” to the service delivery team. Application design must include support for monitoring, management, and maintenance. Collaboration between design and delivery teams reduces operational costs and makes application development, release, and delivery more efficient and reliable.

Resource Isolation And Multitenancy

Multitenancy is a crucial architecture feature of efficient cloud operations unless prohibited by performance or security constraints. This allows for more efficient utilization of resources and personnel, thereby reducing costs. With multitenancy, customers can potentially share:

• Physical hardware • Virtual machines (VMs) • Networks • Monitoring tools • Databases

While multitenancy has benefits, it introduces security and complexity challenges. Cloud architecture must address these challenges to ensure customer data isolation, high application availability, and avoid any impact to performance due to “noisy neighbors.”

Data Management Planning

Where to locate data is perhaps the most challenging architectural decision. Distributing data close to end users leads to better application performance. It also complies with data sovereignty requirements, but it can add complexity and lead to reporting and data protection challenges.

Distributed data platforms, such as NoSQL platforms, like MongoDB, Apache Cassandra, and others, help to mitigate some of these concerns, but they lack some of the consistency features of traditional relational database management systems. Eventual consistency may be sufficient for social networks, but it won’t work in most transactional environments. Recent developments of New SQL databases, based on Google’s Spanner model, can help bridge this gap.

Regardless of the chosen data management platform, cloud delivery must deal with performance and data protection concerns. Discuss data backup, replication, and recovery early in the design process. Also establish application recovery time objectives (RTOs) and recovery point objectives (RPOs) and incorporate them into your SLAs.

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SoftwareDictates

OperatingSystem

SoftwareIntegration

ComputingPlatform

DataIntegration

ServicesData

Management

Server

Availability Planning

Another critical consideration for application architects is service resiliency. Assess the impact of each component on the overall system. A guiding principle is to avoid any single point of failure (SPOF). While this is simple in theory, implementing it can be challenging. One approach is to use highly specialized fault-tolerant hardware. Such systems can be very expensive and don’t scale. For cloud environments, it’s best to provide horizontal scale using commodity components. The application architect should assume that every component could fail. They should design the system so that no single component failure results in application downtime. This is best described in a paper by Amazon Distinguished Engineer James Hamilton:1

Expect failures. A component may crash or be stopped at any time. Dependent components might fail or be stopped at any time. Network failures will occur. Disks will run out of space. Handle all failures gracefully.

Keep things simple. Complexity breeds problems. Simple things are easier to get right. Avoid unnecessary dependencies. Installation should be simple. Failures on one server should not impact the rest of the data center.

Automate everything. People make mistakes. People need sleep. People forget things. Automated processes are testable, fixable, and therefore ultimately much more reliable. Automate wherever possible.

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Capacity Planning Cloud service delivery infrastructure may need to adapt to rapid shifts in demand. It should scale up and down in near real-time. The scaling requirements are highly dependent upon the type of cloud product. For example, customer e-commerce applications may have large spikes, especially during holiday seasons. Other systems may have more predictable demands and may not require as much scalability.

Cloud architects should analyze anticipated and historical load patterns to identify highly variable versus relatively stable workloads. This may enable the implementation of an “own the base, rent the spike” approach to capacity management. With this model, stable and predictable workloads are run on cost-effective, owned systems. Highly variable workloads can be shifted to a managed service provider or a public cloud and consumed on demand.

System hardware benchmarking is another important aspect of delivery architecture. Designers need to know the performance capabilities of each system component. Incorporating groups of systems into capacity “pods” is a popular way of providing incremental scale to meet growth and provide redundancy. Additionally, newer storage technologies, such as solid-state disks (SSD), can profoundly impact the cloud architecture to help deliver higher performance.

Finally, application architects need to pay particular attention to the design of their wide area network (WAN), which is the glue that holds all other infrastructure together. If it’s undersized or unreliable, performance of the overall system will suffer. Public Internet may not provide the security or quality of service (QoS) needed for robust service delivery. Consider high-capacity, secure, point-to-point backbone links between major locations to carry the bulk of back-end traffic.

Considerations For Delivery Partnerships

A trusted provider offers valuable expertise and the architecture, security, and configuration guidance for constructing your service delivery environment. Cloud infrastructure has many parts. It’s not always possible or practical for a cloud provider to manage everything themselves. Selective use of delivery partners, such as Dimension Data, can greatly simplify your operations. Architectural choices related to security and compliance will influence your choice of service delivery partners.

The application technology platform will have a major impact on operations. The choice of server operating system, storage type, application server, database platform, and coding language don’t just affect developers. They impact operations too. Similarly, the use of cloud technologies, such as OpenStack, CloudStack, Microsoft Azure, Google Cloud Platform and Amazon Web Services (AWS), can greatly impact cloud operations.

Most public cloud providers offer proprietary services, features, and application programming interfaces (APIs) to improve usability. While these can simplify development, they can also lead to cloud vendor lock-in. Service delivery providers differ by their geographic reach and availability, so it’s often better to use services that are similar across multiple platforms. This allows cloud providers to select the best service delivery provider in each geographic area.

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Managed Services Enteprises that are looking to build new cloud-based solutions often view a managed services approach as their first step to the cloud.

Leveraging Existing Assets. For most new cloud projects, enterprise IT may often want to host an existing on-premise, or single tenant solution. The advantage for the enterprise is that this product already exists, a set of customers already use the product, and it is often viewed as a positive roadmap step to the cloud.

Industry Expertise. Another way that the enterprise can add value to their new managed services offerings is the company’s industry expertise. A firm that specializes in healthcare or financial services can wrap their hosted offering with a layer of value-added services.

Operations. Most IT organizations are quite familiar with running internal processes around email and systems but need help to run a 24x7x365 SLA-based operation. This is where a managed services partner can provide the security, compliance, and DevOps expertise to help ensure smooth operations, minimal risk, and lower costs over time.

Next-Generation Platform. Deploying a solid managed services offering on top of a robust cloud infrastructure platform provided by a partner like Dimension Data can satisify the near-term requirements of the market and customers. This managed services platform can also become the company’s cloud infrastructure to build a generation of solutions.

Transition Strategy. A managed services offering is often a key strategy in transitioning the business to the cloud and used to buy time. The effective use of a managed service enables the enterprise to build the longer term, multitenant, native cloud solution they need for the future business. With this extra time, enterprises can do the necessary planning around the proper levels of security, compliance, scalability, and costs. We have found that this strategic and operational planning can ensure that the longer term enterprise cloud offerings have a much greater chance for success.

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6. Cloud SecuritySecuring cloud services is a critical and ongoing endeavor. Legacy client/server systems often restrict access to the software behind the corporate firewall or through Virtual Private Networks (VPNs). In contrast, modern systems offer worldwide access, providing many more points of attack. Therefore, SaaS and cloud-based systems lead to increased security

challenges due to their wider security perimeter. As with systems architecture, securing cloud operations requires a collaborative effort between development and operations teams as well as with service delivery partners.

Prevent Breaches

Harden Systems

Detect Breaches

Remediate Breaches

Protect Data

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Software Attacks SaaS Software DeficienciesSystem Software Vulnerabilities

USB MalwareUSB Data Theft

Social IngeneeringMalicious Employees /Sys Amins

Attacks via APIsUntrustworthy Trusted Access

Spyware / Malware “Laying in Wait”Trojan Horses

Distributed Denial of ServiceDefacing / Taking Control of Site

Physical Access Exploits

Personnel Exploits

Trust Exploits

Advanced Persistant Threats

Site Attacks

TakeControlof Site

BringDownSite

AlterSiteData

GainAccessData

DefaceSite

StealUsername

& Passwords

ControlFinancial

Transactions

Financial& Credit

Card Data

Steal Data

(2) http://en.wikipedia.org/wiki/Secure_by_design (3) http://en.wikipedia.org/wiki/Defense_in_depth_(computing) (4) http://en.wikipedia.org/wiki/Principle_of_least_privilege (5) http://en.wikipedia.org/wiki/Separation_of_duties

Security design involves preventing breaches as much as possible and responding to breaches if, and when, they occur. Guiding design principles include secure by design,2 defense in depth,3

principle of least privilege,4 and separation of duties.5 Using intrusion detection systems and intrusion prevention systems (IDS/IPS) at both network and application layers is also important.

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7. Cloud ComplianceCompliance with regulatory standards is an important and often challenging part of enterprise cloud service delivery. The task is compounded since regulations vary by location, industry, and whether or not a firm is public

IdentifyCompliance

Requirements

1

Ensure SaaSSoftware

Compliance

2

Implement &Document OperationalCompliance Procedures

3

Monitor &Report on

Compliance

4

AuditCompliance

5

or private. Compliance for external facing applications with relevant standards is not optional and must be taken seriously since being unable to meet compliance requirements can threaten the viability of a cloud provider.

Common compliance focus areas include:

• Monitoring and mitigation of security threats • Securing employee endpoint devices • Ensuring data privacy and sovereignty • Safeguarding personally identifiable information • Definition and documentation of financial key

controls

• Recordkeeping and retention requirements • Data protection, including backup and/or

replication • Disaster recovery and business continuity

planning • Periodic third-party auditing

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Internal And External SLAs

Effective cloud applications must meet their customers’ functional requirements and offer quality assurances as specified in their SLA. The SLA should clearly define the customer experience and the overall service quality from the enterprise cloud provider. SLA terms may include internal and external usage guarantees for uptime, performance levels, response times, disaster recovery assurances, privacy, security, and in some cases, specific business results. Monitoring adherence to these benchmarks is a fundamental part of the cloud service delivery process. Many external cloud providers provide a real-time system status, e.g., Salesforce’s website, trust.salesforce.com.

Governmental Compliance

Compliance with governmental regulations can be complex for a cloud provider delivering solutions that are used outside of the enterprise. Lack of compliance can cause an enterprise significant financial damage or expose its executives to prosecution and imprisonment.

For example, public companies based in the United States must comply with the Sarbanes-Oxley Act, which consists of a series of regulations with detailed focus on processing information, roles of people involved in key processes, particularly in segregation of duties, and reporting requirements. Penalties for noncompliance can be severe.6

Besides lawsuits and negative publicity, a corporate officer who does not comply or submits an inaccurate certification is subject to a fine of up to $1 million and 10 years in prison, even if done mistakenly. If a wrong certification was submitted purposely, the fine can be up to $5 million and 20 years in prison.

Enterprise cloud providers can face far greater challenges compared with traditional software companies since they often have operations in multiple countries and regions. Regulations can vary by region and administrative jurisdiction. For example, the European Union (EU) has strict regulations regarding the location of data used in its countries and the protection of its citizens’ privacy.

(6) http://www.sarbanes-oxley-101.com/sarbanes-oxley-faq.htm

Compliance Authority Compliance Area

Customers SLAs

Governmental Compliance

Industry Specific Compliance

Standards Bodies Compliance

Security

Privacy

Data Governance

Procedures

Availability

Disclosures

Compliance Authorities

Many different authorities have compliance requirements. In some areas, these may overlap:

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Data Sovereignty And Government Control

Controlling where data resides is an important consideration for cloud delivery. Many governments have strict regulations related to the transit and storage of their citizens’ Personally Identifiable Information (PII). Countries such as Germany, France, Australia, Saudi Arabia, and China make it difficult to use data center resources outside their borders. They may also require data to be encrypted while at rest and/or in transit. Enterprise cloud providers wishing to attract users in these countries must often operate in multiple international data centers.

More importantly, some governments may subpoena information held by the cloud provider or monitor customer information without notice. For example, the USA PATRIOT Act greatly extended the government’s authority to access and monitor online data. This has led many enterprise cloud operators to encrypt most Internet traffic and restrict the transfer of data and computing resources outside this country’s borders. Many large cloud providers, such as Apple, Microsoft, Google, and Yahoo!, are hardening their data security through encryption and limiting their own ability to access and decrypt their customers’ data. Key management must guarantee that only the end user, not the cloud provider, can decrypt data wherever possible. Encryption keys for high-security applications should be securely destroyed when access is no longer required. End users may also require cloud providers to delete user data within a specified period of time.

Industry-Specific Compliance

Beyond the regulations already outlined, many industries and jurisdictions impose additional requirements. Examples include:

• Payment Card Industry Data Security Standard (PCI DSS) for safeguarding credit card information

• The United States Health Insurance Portability and Accountability Act of 1996 (HIPAA) for healthcare

• The Financial Industry Regulatory Authority (FINRA) for securities transactions sanctioned by the U.S. Securities and Exchange Commission

Failure to comply with these regulations can result in fines, civil actions, and possible loss of authority to operate.

Standards Bodies Compliance

Several standards bodies have created compliance regulations and frameworks, which industry and governmental organizations endorse. For example, the International Standards Organization (ISO) has defined numerous standards, including ISO 27001, which specifies security requirements for IT systems that operate globally. Similarly, the Statement on Standards for Attestation Engagements (SSAE) is a regulation from the American Standards Board (ASB) that includes multiple Service Organization Control (SOC) standards. SSAE-16 SOC 2 defines multiple Trust Service Principles covering security, availability, processing integrity, confidentiality, and privacy. These standards bodies become de facto creators of regulations to which enterprise cloud providers who deliver customer-facing solutions must comply.

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Overlapping Compliance Areas

Each country’s compliance authority focuses on specific regulatory viewpoints when evaluating enterprise cloud solutions. This results in potential regulatory conflict between different countries over compliance rules. For example, the U.S. tries to balance free speech against national security. The EU is concerned with personal privacy. China requires control over information.

Privacy Policies

Historically, software providers have dictated privacy rights of individuals in their “Terms of Service” (TOS) unless covered by a specific regulation generally related to medical or financial data. Conversely, compliance authorities such as HIPAA have extensive regulation in such areas as patient privacy. HIPAA compliance requires rigorous encryption of patient data, restriction of access, and implementation of security processes in cloud software. Privacy regulations are expanding rapidly beyond just medical and financial data. The EU has codified its regulations in the Data Protection Directive 95/46/EC. Companies must give notice when their data is being collected and why. Data collection requires a user’s consent, the access of the data is restricted, and means must be in place to correct inaccurate data. The International Safe Harbor Principals provide a streamlined process for U.S. companies to comply with the EU Data Protection Directive. U.S. cloud companies should take advantage of this simplified, less-risky framework for compliance.

Besides Europe, most countries have regulations for the control of PII. Disclosure of this information can heighten the risk of fraud or the disclosure of private information that many jurisdictions prohibit by law.

Cloud companies should also consider participating in TRUSTe. Companies self-certify that they follow TRUSTe standards to safely collect and use customer data. The TRUSTe certificate indicates that the cloud company complies with its own privacy statement and the TRUSTe’s program requirements. This helps provide a framework for basic privacy assurance. Cloud providers hold extensive customer data, which allows them to better understand and benchmark how their customers use their systems. It’s essential that enterprise cloud service vendors obtain their customers’ permission to use this data to institute procedures specifying how to ensure the anonymity of the data to prevent disclosure of confidential customer information.

Disclosure Of Data Breaches

An increasing requirement of both government regulations and customer demands is for greater operational transparency. Regulators demand the disclosure of security breaches so that other companies can harden their defenses. Cloud customers also want to know about any security breaches that could impact their data.

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8. Enterprise Cloud OperationsEnterprise cloud delivery excellence requires coordination across all aspects of the provider’s business. To be successful, DevOps teams must align the architect and secure and comply phases of systems development with the required resources, processes, and technologies. Operations are continuous and ongoing and require a relentless focus on quality and improvement.

While operations teams vary among companies, common process and focus areas are present in most service delivery organizations. Frameworks such as ITIL, ITSM, and CMMI provide service delivery guidance.

A vital step in service delivery planning is aligning the goals of development and operations; otherwise, they’ll function at cross-purposes. For example, IT or the development team might focus on the rapid introduction of features and expansion to new markets, while the operations team should be focused on maximizing availability and minimizing cost. Establishment of a DevOps team as a bridge between software development and operations can help prevent misalignment and ensure effective service design.

Goals And Functions Of Cloud Operations

Besides the security and compliance goals defined in previous sections, enterprise cloud operations are responsible for delivery of key objectives, including availability, capacity, and efficiency. Both availability and capacity planning were covered earlier in the Architecture section of this guidebook. Including them again here illustrates how architecture and operations form a self-reinforcing feedback loop. Enterprise service delivery planners create the initial systems design. Once implemented, systems administrators measure its actual performance against estimates and then tune the model for future designs.

Availability Management

Internal customers expect the services they fund to be available, but this comes at a cost. Increased availability requires increased investment in systems, tools, and personnel. Most companies provide a standard 99.5 percent availability guarantee to allow for planned systems maintenance. If customers require continuous

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availability, the planned downtime can come at a price. For example, if an hour of downtime results in $25,000 of lost revenue, the difference between 99.5 percent and 99.999 percent availability over one year translates to more

Therefore, minimize unplanned downtime since it’s an even greater threat to internal customer satisfaction. Continuously monitor enterprise cloud applications for any anomalies or disruptions, and establish Dedicated Network Operations Centers (NOCs) and/or Service Operations Centers (SOCs) to monitor application performance in real-time. And create incident response teams with clear procedures based on incident type and severity. The primary goal is to minimize the Mean Time To Restore (MTTR) service. To this end, the establishment and use of service operations knowledge bases and systems “runbooks” is vital. Instrument and monitor components, interfaces, and code to reduce time for troubleshooting and diagnosis.

Capacity Management

Capacity management is a balancing act. Unused capacity is wasteful and costly, while insufficient capacity can result in application crashes or poor application performance. To gauge system capacity, cloud providers should instrument and monitor each operational component,

including servers, storage, networks, databases, web servers, application servers, and related systems. The DevOps team should also configure and run system load and stress testing. These tests should generate different traffic loads and provide measures of user experience from all locations that serve a significant number of users.

Enterprise providers can take this a step further by simulating failures. Netflix created their Chaos Monkey service7 to randomly cause component failures. This helps their operations team to better understand system failure modes and improve the robustness of their application architecture. For even moderately complex systems, this is a great way to understand and mitigate against large-scale outages.

Trend monitoring and forecasting is another key aspect of capacity management. Operations analysts can understand how the various application components behave and interact by instrumenting and collecting consumption data on system resources. For example, operations

than $1 million in lost business. Enterprise cloud providers should analyze these economic trade-offs and establish uptime goals that maximize profitability.

(7) https://github.com/Netflix/SimianArmy/wiki/Chaos-Monkey

SLA% Calculated DailyOutage in Minutes

Calculated MonthlyOutage in Minutes

Calculated MonthlyOutage in Hours

Calculated AnnuallyOutage in Hours

Calculated AnnuallyOutage in Days

99.999%

99.99%

99.95%

99.90%

99.50%

0.0144

0.144

0.72

1.44

7.2

0.432

4.32

21.6

43.2

216

0.0072

0.072

0.36

0.72

3.6

0.0864

0.864

4.32

8.64

43.2

0.0036

0.036

0.18

0.36

1.8

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analysts can use temporal utilization data to develop metrics to indicate how storage increases with transaction volume. This, in turn, allows them to provision additional capacity in advance of anticipated load spikes from season peaks or special events and promotions.

Operational Efficiency

To maximize profitability, enterprise cloud companies must investigate ways to lower their operational costs. Common approaches include eliminating duplication and waste, designing for multitenancy, exploiting economies of scale, and assessing build-versus-buy trade-offs.

As discussed in the Architect section, automate system operations as much as possible. The advantages include lower operating costs, greater scalability, higher reliability, and self-documented process flows due to fewer human errors.

Multitenancy is a must and enables more efficient resource utilization. Virtualization technologies have proven this for more than a decade. As Moore’s Law predicted, performance continues to increase exponentially. Multitenancy means service providers take advantage of these performance increases by sharing resources across more than one user and workload.

Similarly, operations can take advantage of economies of scale by sharing expensive or specialized resources, which includes networking devices, such as core switches, load balancers and firewalls, and enterprise storage arrays and blade servers.

Finally, service delivery teams should often assess build-versus-buy and partnership options. It could make sense to shift a portion of the operation to a managed service provider that offers storage capacity at a better price and an equivalent or better service level. In addition, backing up your data to a large public cloud such as Dimension Data could be less expensive than on-premises data backups. This is similar to the IT outsourcing trend that enterprises have been following for more than 25 years. What’s important is to assess all dependencies and implications. A few side effects to consider include the impact of contracted services on your own SLAs, liability for service nonconformance, and what would happen if the provider went out of business.

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• Build SaaS Software• Select Partners• Build the SaaS Environment • Test the System under Load

• Create, Test and Document Operational Processes

• Leverage Industry Best Practices• Partner For Security and Platform

• Automate Everything• Scale Up & Down Automatically• Question Every Manual Process

• Onboarding• Scaling/Bursting• Resilience• Governance/Compliance

• Monitor• Analyze• Benchmark• Audit

• Identify Problem Areas• Use Analytics for Optimization• Optimize Technology Being Used• Leverage Declining Costs

Build

EstablishProcesses

Automate

Operate

Measure

Optimize

A Roadmap For Operational Excellence

As networking pioneer Bob Metcalf was purportedly fond of saying, “Reliability is never having to say you’re sorry.”1 This serves as a guiding principle for service providers. Operations teams should establish and follow a delivery framework. All administrative, support, and development staff should participate in its development and implementation. And you should review, assess, and optimize continuously.

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9. Successful EnterpriseCloud Business Practices

Energize your sales conversations by learning exactly what makes cloud companies successful. This 30-minute Montclare webinar “Building a Profitable SaaS Business” delivered by Montclare CEO Kevin Dobbs explains cloud business and financial models and how cloud companies become successful. You’ll also hear how Bessemer Ventures’ Top 10 Laws of SaaS can make or break a successful cloud firm. Watch the webinar now.

Montclare Webinar: Building A Profitable SaaS Business

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For enterprise cloud providers, building a high-value cloud business requires a new kind of operating model focused on growth, efficiency, and delivering software to their users as a true value-added service. You can accomplish this with a model that is both user centric and data driven.

Customers embrace cloud software because the business model offers many benefits. It’s crucial for enterprise cloud providers to understand that what’s good for their customer is good for them.

Best-in-class cloud companies understand that making their customers successful is critical to turning a profit. But the most successful companies are equally focused on improving their end-to-end service delivery process and always enhancing the overall customer experience. Cultural Change Is Required

Moving to the cloud model involves a shift to a fast-paced environment and data-driven initiatives and outcomes. The industry considers cloud companies as more scientific in their business approach than traditional software companies.

At the heart of every cloud business is a focus on gathering and interpreting vast amounts of information to improve service delivery and business efficiencies. These insights and achievements impact all operational areas, maintain high customer satisfaction levels, and deliver product and process innovation to drive growth. Ultimately, these results can lead to a high-value cloud service.

This section explains the key drivers of success in operating a cloud service: meeting customer expectations, development approaches, financial metrics and decision-making styles, and their collective impact on value.

The Impact Of Megatrends

A combination of macroeconomic and technological changes has spawned today’s new software business model, one of the most important factors in changing buyer behavior after the last recession. It forced buyers to reevaluate how their software was delivered and how they purchased it. Buyers wanted to incur software as an operating expense (OpEx) through subscription pricing. They wanted to avoid the significant up-front capital expenditure (CapEx) required when buying traditional software licenses, servers, services, and other resources required for deployment.

A lower total cost of ownership (TCO) has emerged as a second megatrend. Customers expect this with cloud solutions since they don’t need to install or manage the software. As Easy As “Like” Another major change in the market is the consumerization of enterprise software. Business and consumer software buyers expect any product to resemble the ease and use of Facebook. Enterprise cloud providers must focus on delivering an outstanding customer experience and rapid time-to-value.

A New Business Model Emerges Usher in the SaaS model. Providers deliver software as a service—a complete, packaged, and hosted solution that includes the software and training, support, services, infrastructure, and best practices. These cloud offerings are sold as a subscription and billed every month, quarter, or year. This also means the customer can easily switch to a competitor, forcing cloud providers to deliver an excellent user experience to maintain loyalty and minimize churn.

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New Development Paradigms and Their Far-Reaching Impact

Enterprise cloud services have moved beyond meeting the needs of just small and medium-sized companies. They now handle the businesses of large and complex global organizations, displacing established incumbents. This feature parity is a result of cloud firms using rapid development methodologies, such as agile versus the traditional waterfall-based development processes. Many cloud providers do monthly builds and offer releases every quarter to quickly fix defects and release new product capabilities over shorter intervals. What’s Different About Running A Cloud Operation?

The traditional software business model requires expertise in building products and service delivery. This approach to operational excellence has produced some of the largest software companies in history.

The subscription model puts substantial pressure on cloud providers to deliver better, faster, and less expensive solutions. In turn, this fosters a culture of extreme efficiency and utmost devotion to customers. The cloud business model won’t work if customers don’t renew their service contracts, so user satisfaction is critical for success.

The result? Many enterprise cloud service providers have deployed a level of professional services, support, and operations dedicated to delivering a superior customer experience.

Relentless Pursuit Of Innovation And Efficiency

Traditional software companies deliver innovative products. Cloud companies must innovate across their entire business model—how solutions are developed, priced, packaged, operations, and used by customers. This, in turn, impacts the efficiencies of their internal operations, support, and even billing. IT organizations can learn many lessons from cloud firms as they develop their enterprise solutions.

A Metrics-Driven Culture The cloud business model means nearly everything can and should be measured. It is no longer enough to simply develop a new technology and then hire salespeople to push it into the market. Cloud companies continuously iterate on their sales and marketing processes to find the most successful ways to achieve revenue.

They review customer usage data to see which features are being adopted and how much they cost to develop. In contrast, traditional software companies spend their time and resources testing their products against every operating system, platform, and hardware variation.

Beyond Monthly Recurring Revenue (MRR), these metrics drive cloud business valuation:

• Customer Maintenance Cost • Customer Lifetime Value • New Customer Numbers • Customer Churn • Growth Rates • Cost of Goods Sold

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Drilling Down On Metrics For Customer Acquisition And Maintenance

What are some of the most important metrics? Customer Acquisition Costs (CAC)—the sales and marketing costs to acquire a customer. Customer Maintenance Costs (CMC)—the end-to-end costs to maintain each customer, starting with product hosting all the way through to customer support. These key performance indicators (KPIs) are a fundamental component of every successful cloud organization’s approach to doing business.

Another important measure of success compares the total expense of both CAC and CMC against the cumulative value of the company’s recurring revenues, typically over five years. The calculation indicates whether or not a cloud business can make any profit.

Getting Burned By Churn

Another critical cloud metric is the percentage of customers that discontinue their service contracts, known as churn. Cloud companies track two variations of churn—the number of subscribers that renew and the dollar value of their renewal.

Churn rates must remain low, typically less than 10 percent, for a cloud business to be successful. That said, churn rates for cloud applications in the small and medium business (SMB) or consumer markets can reach 20 percent to 30 percent or soar as high as 40 percent. These higher churn rates are usually a result of: • Lower switching costs • Inexpensive pricing • Poor customer satisfaction

Customer renewal rates for enterprise-class applications, which usually have higher contract values, are typically above 90 percent. Best-in-class firms that achieve renewal rates over 95 percent can maximize the value. Enterprise customers are also harder to win, which means they are also harder to lose.

Data-Driven Decision-Making

Cloud companies start tracking their metrics for growth and profitability from day one. The entire enterprise cloud team must be aware of these metrics and agree on their definitions. For example:

• What is our definition of a subscriber agreement? • How do we recognize chargebacks or

showbacks? • What does a successful user adoption look like? • What is churn, and how do we track it? • How do we measure customer satisfaction?

Cloud companies that continually review their internal metrics derive the insight they need to drive success and avoid failure.

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10. Enterprise CloudService Growth StrategiesThe enterprise cloud service should be designed to encourage growth and adoption of the software. It’s a complete overhaul of the traditional way of doing business. Cloud providers experience common challenges moving from the traditional to the subscription-based model. The best practices and information below are intended to help enterprises launch and operate successful cloud services and understand the many short- and long-term opportunities. Most of these differences also provide unique user benefits of the cloud.

Common Objections

The most common doubts providers encounter about the cloud are data access and security. Sales reps must convey to prospects that Security Assertion Markup Language (SAML) has allayed many such concerns. Data escrow is another technique. It maintains a copy of critical data with an independent third party. Sales reps must learn these selling points and effectively convey them to prospects that have data concerns, which can arise in both hybrid and pure cloud implementations.

Many prospects voice concern about their service levels—the percentage of time that the infrastructure will be up, running, and available. Enterprise cloud providers must have clear terms of the service level agreement (SLA) their company offers, which may reflect the SLA of their cloud infrastructure provider.

Relationship Building

Growing a cloud service depends on solid customer and user relationships. The barriers to switching from one provider to another can be low, so account teams must know their customers’ common questions, concerns, and requirements. Many cloud firms recognize that communities are a popular and effective way to stay close with users. These communities can also generate product ideas, best practices, and provide user support. Customer communities build strong relationships and improve renewal rates, which are important to the success of cloud companies.

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Building For TheEnterprise Cloud: FAQs The Path To Cloud: How Companies Forge Their Way

Defining The Destination

Is our only delivery model choice pure SaaS? Are there other alternatives?

Companies can move to pure SaaS or remain dedicated to their on-premise products and provide a SaaS solution. Sometimes user requirements often drive the hybrid model where cloud providers must also offer an on-premise option because customers want sensitive data behind their firewall but are comfortable with less sensitive information in the cloud. Security conscious industries such as financial services, pharmaceutical, and government and their customers often prefer an on-premise option.

Many software providers, however, recognize the value of transitioning all of their solutions to the SaaS model but continue to operate an on-premise business but adding no new customers. Crossovers, as they are called, are moving to a subscription-only approach. Adobe is a good example of a crossover company.

Q

A

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UnderstandingThe Implementation

How do businesses prepare to make a product transition from a traditional model to a cloud model?

Develop a comprehensive new product plan and budget. The plan should cover every aspect of the service, including product management, engineering, professional services, and operations. IT management must monitor cloud service plans, progress against milestones and metrics, and ensure that they can course correct if needed.

Most companies ask, “Can we manage this type of new model with our current resources?”

A move to the cloud is as much about people as it is about technology. This often requires injecting fresh team members with solid cloud experience into the mix. Engaging experienced consultants and technology partners, such as Dimension Data, is another way to build your resources.

Companies should use as much cloud technology to run their business as possible. For example, many SaaS firms use Salesforce for their CRM needs, Marketo for marketing, a product like NetSuite for financials, and many other function-specific cloud solutions to create virtual front and back offices.

Q

Q

A

A

Business Model

Strategic Intent

Customer Selection

Value Capture

Deployment Time

Customizability

Integration Difficulty

On-premise focus

Enterprise

• Perpetual License• Services

• Months or years

• Complex customizations

• Difficult to integrate

• License & Subscription Services

• Weeks or months

• Customizations & Configurations

• Moderately complex to integrate

• Subscription

• Days to months

• Configurable

• Packaged Integration

• Packaged Integration

• Subscription

• Minutes > Weeks

• Highly Configurable

Divers: Large on-premise costumer base, market or solution type.

Divers: Existing customer base, new & existing markets or solution type.

Divers: Competition, new markets, products or company value.

Divers: Newer business competition, products or markets.

LT both on- premise & SaaS

Enterprise & SMB

LT move to SaaS

SMB > Enterprise

Exclusively SaaS

SMB > Enterprise

Traditional Hybrid Cross Over SaaS

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Financial Implications

How much will an enterprise cloud model cost to implement?

While it’s impossible to give an exact figure, a new cloud start-up takes about five years to hit breakeven. On average, building a new cloud business takes at least a $25 million investment over five years to reach breakeven. An enterprise cloud business will likely take much less time and investment than developing a stand-alone start-up organization.

What are the other major financial differences?

The Cost of Goods Sold (COGS) or Cost of Service (COS) for a traditional software model is typically 10 percent to 15 percent of total revenues, resulting in impressive gross margins of 85 percent to 90 percent. A cloud company will have COGS at 25 percent to 40 percent of their total revenues because they supply the hosting infrastructure and the operational and support staff. This is why cloud operations must operate very efficiently to generate positive margins.

Profit margins of Cloud versus traditional software companies

Q Q

A A

Gross margins85 -90%

Revenues10-15% COGS

Gross margins60 - 75%

SaaS CompaniesTraditionalSoftware Companies

Revenues25 -40% COGS

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What is the most popular subscription pricing model?

There is no single subscription revenue model, which customers perceive as a major advantage. They choose how they want to pay.

Several popular models are shown below:

Freemium: Customers receive relatively low product functionality for free, with enhanced features available for an additional subscription fee. LinkedIn uses this pricing model. Electronic medical records company PracticeFusion is another freemium success story. It adopted this revenue model after struggling to attract customers to its existing subscription service.

Subscription based on number of users: Dropbox.

Consumptive: Based on the amount of service a customer uses. Dropbox charges based on the amount of storage required, and Amazon Web Services sells charges for how much computing power each customer uses.

Defining Product Capabilities

Can enterprise cloud service offerings deliver the same functionality of on-premise software?

Cloud providers can often deliver functionality on par with on-premise software. Some cloud products even exceed on-premise capabilities. These feature-rich cloud products when combined with their configuration flexibility and infrastructure management offer a very attractive product alternative.

Can enterprise cloud solutions be customized similar to on-premise software?

Customers can configure cloud products to a set of predefined options. Basic configuration options include a unique look and feel, such as displaying a corporate logo or, in some instances, even a unique page layout. Cloud providers may also offer more advanced options—functionality that customers can switch on or off for different users.

Most mature enterprise cloud providers offer an extension architecture that allows systems integrators, service providers, and even customers to build custom capabilities around the core engine. The core is never made available to customers or integrators, but with an extension architecture, external parties can do enough personalization to meet the needs of individual large enterprises and specific vertical industry functions.

Q

Q

Q

Q

A

A

A

A

Q

Q

A

A

What about software development and personnel costs?

Cloud computing and Platform-as-a-Service makes it possible to launch an enterprise cloud offering with just a few developers to build a market-ready product in months, not years. These development start-up costs are a fraction of traditional on-premise products.

Q

Q

A

A

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Q

Q

Q

A

A

A

Q

Q

Q

A

A

A

Impact On The Customer

Has enterprise cloud changed customer expectations?

Cloud innovation has pushed more choices into the marketplace, intensifying the competition. Customers’ affinity for mobile access means they want access to best-in-class services anytime, anywhere. They’ve also committed little or no investment, so switching to a competitor is simple. And once customers sign up, they expect access in days, hours, or even immediately.

What is the typical schedule for new releases?

Most SaaS and cloud firms roll out new releases monthly or quarterly. They use the agile development process instead of the waterfall approach that traditional software companies use for new releases to support this more frequent release of product.

How do I assure customers they will always have access?

Most cloud companies provide a Service Level Agreement (SLA) that guarantees a product’s availability, uptime, security levels of the data center, and how they will respond to a catastrophic outage.

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ConclusionConsider several key strategies when deploying an enterprise cloud solution, including:

• Build a cloud culture—Find experienced leaders and staff to help your organization succeed at enterprise cloud.

• Develop subscription-based products—Avoid re-creating your traditional on-premise products. Think in terms of delivering a whole product solution that’s easy to use and built on top of a multitenant foundation.

• Deliver rapid time-to-value services—Make sure your product includes “Do-It-Yourself” features that configure and are available quickly.

• Enterprise cloud is a different service delivery model—It requires different financials metrics, business processes, and metrics that all need careful monitoring.

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Enterprise CloudReadiness Checklist

YES NO

Have you developed a cloud service delivery plan?

Have you defined clear cloud service criteria or metrics?

Have you developed a finance plan?

Have you appointed a designated leader of the enterprise cloud business/product?

Can your organization explain how it calculates its Cost of Goods Sold (COGS)?

Is the enterprise cloud product built using a multitenant architecture?

Is the software solution delivered as a service?

Have you developed the product using an agile methodology?

Have you developed with a mobile-first approach?

STRATEGY

PRODUCTS

Determine if you’re ready to build your enterprise cloud solution. A “no” answer to any of these questions indicates an area requiring further consideration and development.

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YES NO

Is your company using a third-party service provider, such as Dimension Data, for your enterprise cloud solution?

Have you established an industry-standard Service Level Agreement (SLA)?

Have you implemented a disaster recovery plan?

Does your company have industry-standard certifications, such as SSAE16, HIPAA, PCI, or PII?

Are DevOps-experienced professionals managing your operations?

SERVICE DELIVERY

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Glossary of Cloud TermsACV

API

CAC

Churn

Cloud Computing

CLTV

CMRR

CoLo

Cross-sell

Down-sell

ARR

ASP

Annual Contract Value of a subscription software agreement

Application Programming Interface

Customer Acquisition CostsA measure of sales effectiveness based on how long it takes to pay back sales and marketing investments with customer revenues.

Measure of percentage of cloud customers who do not renew their annual or monthly subscription agreement.

Utility computing method that shares many types of computer resources through virtualization and delivers an elastic computing environment over the Internet.

Customer Lifetime ValueA cloud metric of customer value, usually over a three - to five- year period.

Contracted Monthly Recurring RevenueMonthly subscription revenues from new and existing customers, less revenues, from customers that do not renew their subscriptions.

Co-location facilityCommon term for leasing a physical data center, which the customer will equip with their own computing and communications infrastructure. The service provider, in turn, provides data center facilities, power, internet connectivity and security for a monthly fee.

The sale of software functionality or products added to an existing subscription agreement.

When customers remove functionality, users or capability that, in turn, lowers CMRR.

Annual Recurring Revenue

Application Service ProviderOften associated with a hosted, single-tenant software solution.

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Freemium

Hosted software

On-demand

On-premise

Platform-as-a-Service (PaaS)

Private Cloud

Renewal

SLA

Infrastructure-as-a-Service (IaaS)

ISV

MRR

Multi-tenancy

When a software provider offers basic features to users at no cost and charges a premium for supplemental or advanced features.

Single-tenant software delivered over the Internet from either the software vendor’s own data center or via the data center of a third-party hosting company.

A term often used interchangeably with Cloud.

A traditional method of installing and customizing software on the customer’s computers, which reside inside their data center.

A development platform where the development tool is hosted in the cloud and accessed through a browser. With PaaS, developers can build web applications without installing any tools and then deploy their applications and services - reporting, integration, security - without any specialized systems administration skills.

Employs cloud-computing principles within a customer’s own internal networks. The term implies the use of the same virtualization and highly flexible and scalable methods used in commercial or enterprise data centers.

When a customer agrees to extend an existing software subscription agreement beyond the initial term.

Service Level AgreementThe contractual obligation of the service provider to guarantee a minimum level of system uptime and availability. SLAs also detail response times for service interruptions and penalties for associated outages.

A combination of hosting, hardware, provisioning and basic services needed to run a cloud application delivered on a subscription basis.

Independent Software VendorA software company that can either sell its products via the traditional, on-premise model, the cloud model or a combination of both.

Monthly Recurring Revenues

Software architecture in which a single instance of the software runs on a single server, serving multiple client organizations (tenants) and all managed centrally. Multi-tenancy is different than a multi-instance architecture, in which separate software instances, or hardware systems, are set up for different clients.

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SaaS

Subscription

Up-sell

Software-as-a-ServiceRefers to multi-tenant software delivered over the Internet. Customers consume the product as a service delivered on a subscription basis.

Cloud licensing method in which customers rent their software from the provider on a monthly basis, usually over a one to three year term.

Additional software functionality, users or capacity sold onto an existing subscription agreement.

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Technology is reinventing the modern enterprise. Every core function of the business is being redefined including complex applications for customer engagement, business intelligence and talent management and retention. The rules of technology management are being redesigned, turning IT organizations of the bygone era into core innovation centers. Part of this transformation is the ability to select and migrate production applications and core system to the cloud. The realized promise of cloud, self- provisioning, is simple; but self-management of complex applications and associated business processes is not trivial. To leverage the power of hybrid cloud for the modern enterprise, we think CIOs are looking for a cloud provider that closes the gap on managing the cloud.

We Are Hands-on, So You Can Be Hands-free

Dimension Data Cloud Surround® is a portfolio of service delivery platforms and managed services reflecting our deep heritage in networking, storage, security, advanced automation, end user computing and mobility to deliver enterprise production applications and workloads on the cloud. With Cloud Surround organizations move applications to cloud with confidence, and experience accelerated time to value. Key resources are freed up for new projects to drive growth.

Dimension Data is an experienced cloud service provider with global service delivery capabilities, in 16 global data centers across five continents with local and proven technical expertise. This includes managing OPEX private cloud on the client premises anywhere in the world.

• 25,000 people in more than 50 countries across six continents

• Local language capabilities, with local in-country support services

• Dimension Data employees fulfill local client requirements with management of multi-vendor, multi-cultural environments

Dimension Data Cloud Meets Client Needs, Today and TomorrowEveryday we talk with CIOs that are ready for the next chapter in cloud adoption – moving production applications to the cloud. Some applications are born in the cloud but it’s no surprise that not every application can or should move to the cloud. Many, however, can be “fit to the cloud” like ERP, vertical core business applications and enterprise productivity tools like unified communications, mail, collaboration and video. Dimension Data knows how. We have three guiding principles for Dimension Data Cloud:• Provide the right cloud for every job, with a

choice of how you pay – using capital dollars or consumption driven rate cards - and then manage as much or as little of the cloud as you like.

• Enable IT to take back control of key business functions with a consistent hybrid cloud management platform.

• Ensure an exceptional client experience with 99.999% service level agreements and service credit caps of 100%

For more information, go tohttp://www.dimensiondata.com/trycloudnow.

Welcome ToA World Of Acceleration

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