Digital Fuel & Forrester Cloud Computing IT Financial Management

IT Cloud Financial Management

March 2010

Yisrael DanczigerCEO & President

Digital Fuel

Thomas MendelVice President &

Research Director

Forrester

Business Service Management And IT Financial Management In The Cloud

Dr. Thomas Mendel, Ph.D.

Vice President & Research Director

Forrester Research

March 2010

3 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

Agenda

• Understanding the cloud

• It’s time for IT financial management


Cloud ClarityCloud Clarity


What IS cloud computing? Give me three steps


Source: Wipro

Understanding vendors cloud portfolios

Cloud computing is:

A standardized IT capability (services, software, or infrastructure) delivered via Internet technologies in a pay-per-use, self-service way.*

*September 9, 2009, “Best Practices: Infrastructure-As-A-Service (IaaS)” Forrester report


Cloud service management

Step1: What comes as a service?

INFRASTRUCTURE

MIDDLEWARE

APPLICATIONS

Typical “cloud computing resources” New resources

INFORMATION

PROCESSES


Cloud service management

Step2: What is the level of sharing?L

evel o

f sh

ari

ng


Infrastructure Middleware Applications

Privatecloud@ in-house data center

Virtual privatecloud@ dedicated provider

Publiccloud@ global provider

Business

value

Level of

sharing

Forrester’s full cloud taxonomy

Businessprocesses

PURECLOUD

MARKET

EXTENDEDCLOUD

MARKETInfrastructurevirtualization

tools

BPvirtualization

tools

Dynamicinfrastructure

services

Integration-as-a-service

IaaS SaaSPaaS BPaaS

Dynamicapps

services

DynamicBPO

services

Middlewarevirtualization

tools

Appsvirtualization

tools


Infrastructure Middleware Applications Business

value

Forrester’s cloud taxonomyand example vendors

Businessprocesses

Level of sharing

Force.comRackspace (soon)Google AppEngine

Cordys

Salesforce CRMOracle-

CRM On DemandGoogle Apps+Voice

On Demand Process as a S.

MeetingexpectationsPayPal

Amazon EC2Rackspace

Infrastructurevirtualization

tools

BPvirtualization

tools


services


IaaS SaaSPaaS

Dynamicapps

services

DynamicBPO

services


tools

Appsvirtualization

tools

BPaaS

Boomi.comHubspan

Oracle E-BusinessSuite On Demand

On demand portionof BPO, e.g., Wipro

Cable&WirelessSIS, T-Systems

Oracle Fusion Middlew.vSphere-Spring

Cisco

Fujitsu FlexFramefor SAP

FluidOps.comITMS Vendors

Tools used in Shared Service Center

BPM

Oracle VM andAssembly Builder*

VMwareIBM Cloudburst

*Oracle Assembly Builder is part of the ongoing Oracle Fusion Middleware 11g roll-out

PURECLOUD

MARKET

EXTENDEDCLOUD

MARKETPrivatecloud@ in-house data center

Virtual privatecloud@ dedicated provider

Publiccloud@ global provider


Infrastructure Middleware Applications

Privatecloud

@ in-house data center

Virtual privatecloud

@ dedicated provider

Publiccloud

@ global provider

Business

value

Forrester’s cloud taxonomymapping to vendors’ portfolios

Businessprocesses

*Emerging service provider, rarely existing today.

Level of sharing

Infrastructurevirtualization

tools

BPvirtualization

tools


services


IaaS SaaSPaaS

Dynamicapps

services

DynamicBPO

services


tools

Appsvirtualization

tools

BPaaS

$6b $4.8b $9b

$2.1b$150m$2.1b

$120m $9.0b $100m

$3.3b

$460m

$35m

PURECLOUD

MARKET

EXTENDEDCLOUD

MARKET


Infrastructure Middleware Applications Business

value

Level of

sharing

End user perspective of offerings

Businessprocesses

PURECLOUD

MARKET

EXTENDEDCLOUD

MARKETInfrastructureVirtualization

Tools

BPVirtualizatio

nTools

DynamicInfrastructur

eServices

Integration-as-a-

Service

IaaS SaaSPaaS BPaaS

DynamicApps

Services

DynamicBPO

Services

MiddlewareVirtualization

Tools

AppsVirtualization

Tools

IT Tools(licensed)

In-house process

chargeing

IT Service(pay per use)

Human Centric

Business Service Markets(pay per

use)

Privatecloud

@ in-house data center

Virtual privatecloud

@ dedicated provider

Publiccloud

@ global provider


Service cost and performance aggregation becomes a core skill

LoB LoB LoB

IT organization

Internal service aggregation External service aggregation

SP 1 SP 2 SP 3

SP 4 SP 5 SP 6

Client companyService provider ecosystem

• Cost and performance management across end-to-end service delivery

• Coordinated across all stakeholders and constituencies, internal and external

• Requirements capture and new project initiation

• Balanced responsibility between in-house IT and external service providers


Defining IT financial management

Forrester defines IT financial management as:

The discipline of planning, budgeting, monitoring, and

controlling the use of a firm's total IT budget

(operations/maintenance and new projects/investments).

IT financial management software provides an application that allows companies to support and automate the process of IT financial management. This is done by applying general cost accounting principles to IT.


IT financial management – Why now?

IT users and IT departments are experiencing an accelerating need for IT financial management because:

• Cloud & virtualization are driving additional IT adoption at a rapid rate

• Business units are demanding IT cost visibility and predictability

• Profit pressures demand businesses to manage IT cost vs. business performance tradeoffs and alternatives like never before

• IT process maturity (e.g. ITIL) has moved many IT organizations from a chaotic to a stable state so they are now better prepared to add IT financial discipline

• Data availability and accuracy (through discovery) has improved greatly


Key capabilities of IT financial management software


Emerging trends: IT financial management software

• The IT financial management software market will exceed $500 million annually in 2012.


IT financial management adoption s-curve

IT budgetreview

Full integration

Activity Based

Costing (ABC)

Processmodels

Service models

Basic product definitions/

Service catalogs

Basic chargeback

Cost models

Understand IT costs Manage IT costs Manage IT demand

Ad-hoc BU cost visibility

projects

Ongoing corporate cost visibility

Costbenchmarks

Pricebenchmarks

Advanced chargeback

Basic integration

Service based costing

ChangeUser

behaviour

Maturity Of IT

Financial Management

Implementations


IT financial management – Best practices

• Create a governance structure and revamp your organization

• Deploy service definitions/service catalogs

• Develop cost and service models

• Optimize delivery through right sourcing

• Invoice customers to rationalize behaviors


Thank you

Dr. Thomas Mendel, Ph.D.

[email protected]

http://blogs.forrester.com/vendor_strategy/

www.forrester.com

IT Cloud Financial Management

March 2010

Yisrael DanczigerCEO & President

Digital Fuel

Managing the Cost of Cloud Services

Where to Start: Build A Cost Model

Application Cloud Infrastructure Cloud Process Cloud

Cost Model Enables You to know:

• Total Service Cost and Usage

• Usage based cost allocation

• Underlying Cost Drivers cost

• Unit Cost

• Calculate key metrics:

– Cost per headcount

– Cost per revenue

– Capex vs Opex

– Many others

Managing the Cost of Cloud ServicesWhat can you do with this knowledge?

IT Cloud Cost Model

Proactive Cloud Cost Control

• Cost trends at all levels

• Track Actual vs Budget

• Automatic observations

• Root cause

• What if planning

Business Unit Cost Visibility and Predictability

• Detailed periodic invoices

– Cost and Usage

• Forecast

• Reforecast

• Compare to alternatives

• What if analysis

Cost Value Optimization

• Mix and match, Compare between:– Vendor and internal options– Different service offerings– Delivery models– Cost models

• Meter usage, Identify:– Virtualization candidates– Consolidation candidates– Standardization options– Defer upgrade potentials– End-of-life potentials

Usage based IT Cost Allocation

• Allocations must be:– Automated– Consistent and ongoing– Justifiable– Audit trail– Standard

• Pass in “flying colors”:– Tax audits– Stock market reporting– Regulator audits

Accurately Plan and Budget – Based on Facts

• Actual Historically based unit cost:– For every IT service and cost driver

• Actual Historically based usage:– Accurate demand forecasting

• Demand & driver information– Sophisticated calculator

– Applies the historically calculatedcosts, drivers, and usage

– Automatically produce a proposed IT budget

Summary

IT Cost management enables realization of cloud benefits!

Thank you!

Questions? Please enter your questions in the Q&A panel

located in the lower right section of your screen

Presented by:

Thomas Mendel Yisrael Dancziger

Forrester Digital Fuel [email protected] [email protected]

Digital Fuel & Forrester Cloud Computing IT Financial Management

Business

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