THE ROAD TO THE ON-DEMAND DATA CENTRE: A USER GUIDE

The road to the on-demand data

centre: a user guide
By Gary Barnett, Neil Ward-Dutton
November 2004

On-demand has become the principal focus for hype in the IT industry in the
new millennium. Setting aside the supply-side hyperbole, there is benefit to be
had. The journey towards an on-demand data centre offers end-user
organisations a framework that will enable them to evolve their IT assets to
achieve cost reduction, infrastructure simplification and improved service
delivery.

On-demand and the on-demand data centre

IBM CEO Sam Palmisano coined the term on-demand in 2003. It describes a vision
of IT resources aligned with the needs of organisations: better integrated, more
flexible and responsive, more manageable, and crucially more cost effective.
Ovum uses the term on-demand data centre to represent the technology foundation
for on-demand business (see our On-demand data centre market analysis for details).
Providing one or more elements of this foundation is the focus of most IT vendors,
and the concept of on-demand has been taken up with enthusiasm across the
industry. Some vendors anxious to differentiate themselves from Big Blue have
chosen different terms, but fundamentally the vision of most of the leading hardware
vendors is surprisingly similar.
This is where things get complicated, because much of the vendor hype surrounding
foundation technology for on-demand business (hereafter, the on-demand data
centre) misses the point. Vendors are promoting the on-demand data centre as a
way to deliver innovation, and are painting a picture of on-demand nirvana that isnt
practical today, and may not even be worthwhile achieving tomorrow.

Why every end-user organisation should start the

journey
The goal of an on-demand data centre is a worthwhile one and, simply put, youre
never going to become an on-demand business if you dont start the journey. More
importantly even if realisation of an on-demand data centre seems a very long way
off, there are significant benefits to be gained by taking the first steps towards it.

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THE ROAD TO THE ON-DEMAND DATA CENTRE: A USER GUIDE

End-user IT has to be leaner, fitter and smarter

Its not good enough to simply complain that the business doesnt understand IT and
that IT doesnt understand the business. You have to do something about it.
The only way that you can even hope to deliver the kind of IT that the business wants
is by transforming your approach to it:

simplification: weve overdosed on technology, now is the time to start switching

things off

consolidation: the cost of managing dozens (in some cases hundreds) of underutilised servers is consuming budget that you should be spending on helping the
business to innovate

flexibility: the more stuff you have littering your IT portfolio the harder it is to
make changes. If youre constantly telling the business we cant deliver that in
the timescale you want or it will cost a lot to link those two applications, you
shouldnt be surprised if the business thinks youre hindering rather than helping

reliability: IT has a poor record of reliability, both in terms of its ability to keep the
basic stuff running and in its ability to deliver things when they are promised.

The on-demand approach is key to delivering the kind of IT that

the business wants
At its heart, the concept of an on-demand business mandates a much more
engineered approach to technology. The on-demand data centre places the
emphasis on simplifying and automating technology infrastructure. If you cannot
achieve this, youre unlikely to achieve the other goals that the business has set for
you.

On-demand data centre myths and red herrings

debunked
As with any new big thing, there are hundreds of claims and promises being made
on behalf of on-demand data centre technology by its proponents.
We need to be as clear about what the on-demand data centre is not as we are
about what it is.

The on-demand data centre is not a new concept

IBM offered clients dynamic provisioning and usage-based pricing back in the days
before most marketing executives were born. It was called timeshare, and allowed a
large number of clients to share the resources of a mainframe computer on a
timeshare or usage-based pricing model.
On-demand data centre technology borrows all of its ideas from existing technologies,
such as systems management tools and clustering technology.

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THE ROAD TO THE ON-DEMAND DATA CENTRE: A USER GUIDE

In fact, the only thing that is new about the on-demand data centre is the marketing,
driven by an upsurge of interest from both the supply and demand side.

The on-demand data centre is not about business innovation

The on-demand data centre does not directly confer on adopters (as some vendors
falsely claim) the ability to deliver business innovation. An on-demand data centre
approach to IT assets is not about doing business better it is about doing it for less.
The defining characteristics of the on-demand data centre approach are that
consumers are concerned about only two things:

how much it will cost

how reliable it will be.

The on-demand data centre is all about paving the way for innovation; it makes it
easier for innovation to happen, but if you think that by implementing an on-demand
IT infrastructure your organisation is suddenly going to become more innovative, then
youre going to be sorely disappointed.

The core of the on-demand data centre is not about hardware

virtualisation or grid computing
While not completely bogus, the enthusiasm of vendors for hardware virtualisation
and grid computing is misplaced. The true cost of owning technology lies in its
ongoing administration and maintenance. As the cost of hardware falls, and CPU
power becomes a pervasive commodity like water, few consumers are going to care
that much if they spill a little.
Although it is wrong to state that the on-demand data centre concept is just about
asset and resource management, the biggest savings will come from the better
management of computing resources rather than the optimal utilisation of those
resources. There is a subtle difference here.

The key to innovation lies in knowing what things change and

what things dont
In truth, very few organisations actually need to be able to transform their business
processes overnight, and suppliers must be careful when talking about innovation
and business process change too much innovation, or innovation for innovations
sake, is very bad. Successful organisations dont radically change direction once a
month, or even once a year.
Its common for supporters of on-demand technology to talk about its ability to deliver
innovation. However, the real secret to success lies not in constant change to all
processes, but constant adjustment to a small set of key processes.

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THE ROAD TO THE ON-DEMAND DATA CENTRE: A USER GUIDE

We have created a model that divides business processes into three classes each
with different rates of change according to the level of differentiation they deliver, as
shown in Figure 1.
Figure 1 Different classes of business processdifferent rates of change
Delivery processes

Assembly processes

Utility processes

Source: Ovum

Core business processes

The lowest sedimentary layer is made up of a set of core business processes which
actually change very little over time. While these core business processes are subject
to refinement and gradual evolution, they do not lie at the heart of a companys
competitive edge theyre things you have to do to be in business (like payroll and
building management), but which dont differentiate you from your competitors. These
are effectively utility processes.
Internal business processes

The next class is made up of those internal business processes that define the
product or the service that the organisation makes or provides. This represents the
offer that the company makes to the market. These processes are usually

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THE ROAD TO THE ON-DEMAND DATA CENTRE: A USER GUIDE

composed by connecting together utility processes and adding new business rules.
We call these assembly processes.
Externally focused processes

The most volatile class of process is that which forms the link between an
organisation and the outside world. These processes need to change rapidly in order
to respond to market demand, enable the company to develop and market new
offerings. We call these delivery processes.

Eighty percent of all business processes belong in the utility

category
While this is a huge generalisation, and is likely to vary significantly depending on the
type of business, most business processes belong in the lowest, and slowestchanging, sedimentary layer. They do not need to be changed at lightning speed. The
secret of success for most organisations lies not in the rate of change they can
support across their entire portfolio of business processes but in their wisdom in
choosing which things to change, and which things to leave as they are.

All of IT can get value from an on-demand data centre approach

No matter what business process is being automated, it depends on infrastructure
technology to provide a home in which the applications that support the business
process can execute.
This infrastructure takes the form of hardware, operating systems, network services
and middleware. All of these things are essential to the operation of the application,
but, like utility business processes, they do not differentiate the organisation except
when they fail. This class of differentiation is akin to your choice of electricity supplier
none of your customers care who generates your electricity, until you have a power
cut.

The role of partners in on-demand

While we believe that most organisations can achieve many of the benefits of ondemand without engaging partners to help them, the concept of outsourcing (or more
accurately sourcing) is intrinsic to the process.
As organisations move closer to on-demand nirvana, it becomes easier to outsource
the delivery and management of different elements of their IT portfolio. Indeed, as you
move beyond acquiring on-demand technology towards the acquisition of on-demand
outcomes, outsourcing becomes increasingly relevant. The focus of end-user IT has
to be on those activities and supporting technologies that provide some degree of
differentiation. The other activities and technologies may be essential but they should
be treated (and sourced) differently. Wherever a technology is performing a utility
service (that is essential but non-differentiating), you should consider alternative
approaches to sourcing it. You might outsource the management of your

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THE ROAD TO THE ON-DEMAND DATA CENTRE: A USER GUIDE

infrastructure, or even its delivery. This enables you to establish clear service levels
and budgets for these services, and frees you up to focus on the things that make a
difference to your immediate customers: the business.

The journey to the on-demand data centre six

stages
Six steps to heaven
We define six categories to identify the degree to which technology is managed as an
on-demand resource, as shown in Figure 2. The first category, which we call ad hoc,
implies little or no formal approach to the management of resources with individual
administrators left largely to their own devices. The sixth category (on-demand)
implies that resources are managed, provisioned and configured completely
automatically.
Figure 2 Six stages of the journey to the on-demand data centre
Order
On-demand
Poor resource usage,
inconsistent management
and administration

Consolidated
Automated

Centralised
Increasing levels of
standardisation and
automation

Structured
Ad hoc
Chaos
Level 1

Level 2

Level 3

Level 4

Level 5

Level 6

Source: Ovum

All organisations fall somewhere on a line between chaotic/ad hoc and ordered/ondemand in terms of the way they manage and utilise technology.
In practice, most organisations have different approaches to different types of
technology, so a single organisation may manage its departmental file servers in an
ad hoc fashion, while applying high levels of automation and discipline to the
management of its Unix servers and mainframe assets.

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THE ROAD TO THE ON-DEMAND DATA CENTRE: A USER GUIDE

As an organisation moves along this line, the following benefits are achieved:

reduced management costs

reduced hardware costs

improved reliability

improved resource utilisation.

Movement between management categories isnt necessarily

linear
While we present the six categories as a hierarchy, because there is a general trend
towards greater automation and consolidation, movement between categories isnt
necessarily linear and outsourcing doesnt become an option only once youve
reached a certain level.

Each category explained

We describe the characteristics of each category in Figure 3.

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THE ROAD TO THE ON-DEMAND DATA CENTRE: A USER GUIDE

Figure 3 Characteristics of each category

Category

Characteristics

1 Ad hoc

Desktops and servers managed and provisioned on an ad hoc basis.

Little or no effort made to standardise.
High cost of maintenance, poor levels of reliability.
Wide variation in server utilisation.

2 Structured

Standard processes adopted.

Desktops and servers administered locally, according to central policy.
More consistent server reliability.
Lower maintenance costs.

3 Centralised

Standard processes adopted and applied centrally.

Many servers are co-located at the centre; distributed servers managed
from the centre.
Consistent server reliability.
More constant server utilisation.

4 Automated

Standard processes adopted and applied using automation technology.

Admin costs significantly reduced.
Server reliability consistently high.
High server utilisation.

5 Consolidated

Number of servers reduced by consolidating workloads.

Hardware and admin costs reduced.
Consistent server reliability.
High server utilisation.

6 On-demand

Standard processes adopted

Fewer servers administered centrally via management tools
according to central policy defined in terms of business requirements.
Optimal server reliability.
Optimal server utilisation.
Optimal cost management.

Source: Ovum

Benefits are subject to diminishing return

While moving an asset from one management category to the next will deliver
improvements, both in terms of cost and service levels, it is worth noting that the
incremental returns diminish as assets move towards the highest category (six), as
shown in Figure 4.

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THE ROAD TO THE ON-DEMAND DATA CENTRE: A USER GUIDE

The benefits of moving from category one to category two are very significant. In
some cases weve seen cost reductions in excess of 50%.
The benefits of moving from category five to category six are likely to be much
slimmer we would expect cost benefits in the order of 510% (which is still
significant if your budget amounts to several million dollars).
Figure 4 Six steps to heaven the law of diminishing returns

Return on moving to next level

30
On-demand
25

Consolidated

20

Automated
Centralised

15
Structured

10
Ad hoc
5

0
Stage of automation

Source: Ovum

But dont take our word (or a vendors) for it

Our estimates are, of necessity, generic. They will not apply to your organisation. You
will need to look carefully at the cost of migration against the likely cost saving that it
will deliver.
We strongly advise that you approach this purely from a costs saved perspective,
and ignore any potential soft benefits that a move to the next level may bring.

Where are end-user organisations on the journey?

Very few end users can claim to have achieved full automation, let alone on-demand
status. Our research indicates that the bulk of organisations fall into the
structured/centralised category, as shown in Figure 5. Thankfully, the number that still
dwells in the mire of ad hoc is falling, but even the best run IT shops have some
machines that fall into that category.

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Figure 5 Six steps to heaven distribution

On-demand

Distribution

Consolidated
Automated
Centralised
Structured
Ad hoc

Stage of automation

Source: Ovum

The stage of automation varies widely by platform class

Figure 5 hides the fact that there is typically a big difference between different
platforms. Figure 6 separates platforms into three classes Intel, Unix and
mainframe.

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Figure 6 Six steps to heaven distribution across different platform types

On-demand

Mainframe

Unix

Consolidated

Distribution

Intel
Automated
Centralised
Structured
Ad hoc

Stage of automation

Source: Ovum

Figure 6 illustrates that Intel-based servers and PCs account for a very significant
proportion of the problem. There are several reasons for this:

they are much more numerous

they dont traditionally belong to the category of enterprise server, and havent
benefited from the decades of management and administration best practice that
the mainframe and its younger cousin the mid-range have

they have not traditionally been under the control of central IT.

A fourth class of technology is just about to add to the management nightmare

We have deliberately omitted a fourth technology type from our analysis, because,
today at least, it isnt present in sufficient numbers to have a major impact. However,
within 24 months mobile devices will present a challenge that organisations will not be
able to ignore, as shown in Figure 7.
Mobile devices are growing virally within end-user IT, but most IT organisations are
hopelessly unprepared for the additional burden in terms of management and
administration that they bring.

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Figure 7 Six steps to heaven distribution of mobile devices

On-demand

Distribution

Consolidated
Automated
Centralised
Structured
Ad hoc

Stage of automation

Source: Ovum

Preparing for the journey

Given that there are clear benefits in moving from one management category to the
next, while your ultimate goal may be to implement an on-demand data centre, your
focus should initially be just on getting to the next step. The following six preparatory
tasks will get you well on the way. These are things that you can do today (they dont
depend on things that have been promised but not yet delivered by vendors), and
they will deliver most of the benefits that your on-demand journey has to offer.
Task 1: find out where you are

Begin by auditing your technology portfolio including all of the machines and
devices that make up your IT portfolio.
Assign each device a number corresponding to the stage of management that is
applied to it.
The business has to be engaged here to help you establish priorities identify which
technologies support the most crucial business processes and concentrate on those
to begin with.

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Task 2: level the playing field

Having audited your technology portfolio, the next step is to try to bring the majority
into line with the current level of best practice within your organisation.
Start with the badly managed hardware and work up.
Task 3: define and enforce best practice

This step has little to do with technology; it has more to do with people. You should
develop a set of best practices/standard procedures and then ensure that they are
applied consistently across the organisation. Note that a best practice is not a best
practice simply because it has been written down or published on the intranet. A best
practice can only ever be best practice if it is put into practice.
At this stage, and the next, it is worth looking at your sourcing options. Having
identified a set of resources that need to be managed in a certain way, it is definitely
worth seeing whether a third party can deliver the quality of service youre looking for
at lower cost than you can deliver internally.
Task 4: look for easy server consolidation opportunities

Identify any straightforward consolidation opportunities (like storage resources, or fileand-print servers). With todays levels of network reliability, and the low cost of
internal networking, it is increasingly difficult to justify departmental or workgroup
servers.
There will be more complex consolidation opportunities, but in many cases some
integration work may be required. At this stage, your focus should be on the quick
wins. The more involved projects should be treated separately and as with task three,
you should consider engaging a third party to help.
Task 5: use automation to lower the cost of maintaining desktops and servers

Having established standards and best practice, and eliminated obviously redundant
servers, the next step is to use automation technology to lower the cost of managing
and maintaining your server and desktop PC portfolio. Software distribution and patch
management technology greatly reduces the cost of keeping an estate up to date,
and also significantly increases the likelihood that updates will actually happen.
This is another point at which sourcing becomes a question worth asking: could a
third-party service provider deliver the levels of service I need at a lower cost than I
could?
Task 6: initiate a review of your business processes

In this step, were calling on you to conduct a review of your business processes
(along with the technologies and applications that support them) in order to establish
which processes are utility services or processes that can readily be outsourced,
and which are differentiating ones over which you want to retain control.

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Moving on
If you can move a significant proportion, if not all, of your IT asset portfolio to the ondemand management category, your journey will be more or less complete.
Once you have reached this level of management automation, a number of choices
will be open to you. You can consider taking a homegrown approach to on-demand,
by managing all of your resources internally. Alternatively you can elect to outsource
components of your infrastructure on an on-demand basis.
The secret is focus

The only way you will deliver the simplification, cost reduction and flexibility that the
business is crying out for is by being completely focused.
It is not enough just to know the route to on-demand you have to follow it.

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