Focus Experts’ Briefing:

Are You Ready for Cloud Computing?

Focus Research
October 2010

Focus Research © 2010 All Rights Reserved

Introduction

Cloud computing can free up IT resources, allowing businesses to become more agile and focus on core
compentencies while saving money and resources. As with any new technology, questions are bound to arise.
How can cloud computing help your business reduce costs? Should you rent or own your cloud resources? Is
now the right time for my enterprise to consider cloud computing? This Experts’ Briefing leverages the expertise
and experience of Focus Experts and Focus Community members, whose guidance can help gain insight into the
functional, fiscal and practical aspects of adopting cloud computing.

We would like to recognize the contributions of the following Focus Experts to this Experts Briefing:

Jay Allred (http://www.focus.com/profiles/jay-allred/public/) (see page 3)

Andrew Baker (http://www.focus.com/profiles/andrew-baker/public/) (see page 3)

Joshua Beil (http://www.focus.com/profiles/joshua-beil/public/) (see page 4)

Michael Dortch (http://www.focus.com/profiles/michael-dortch/public/) (see page 9)

Jim Haughwout (http://www.focus.com/profiles/jim-haughwout/public/) (see page 5)

Table of Contents

1 Q&A: Is Cloud Computing a Money-Saver or an Extra Expense?. . . . . .p. 3

2 Cloud Computing: Renting vs. Owning vs. Sharing. . . . . . . . . . . . . . . . . . . . . . . .p. 5
3 Is Your Enterprise Ready for Hosted IT Management?. . . . . . . . . . . . . . . . . . .p. 9

Are You Ready for Cloud Computing? Focus Research ©2010 2

1 Q&A: Is Cloud Computing a
Money-Saver or an Extra Expense?

How can cloud-computing help my business reduce costs?

Does it reduce costs? Or does it just add extra expenses?

— Stacey Kona

Best Answers
Moving IT functions to the cloud has to be reviewed functionally and fiscally. One example of a way that cloud-based
computing can save you money is in the realm of hosted email. In most cases it is cheaper to pay a per-user, per-month
fee for hosted email (such as hosted Exchange) rather than spending the money for the computing resources, software
licenses, and IT people needed to deploy and maintain that email server in-house for three to five years. But, before you
move an IT function to the cloud, you must make sure that you do not lose any needed functionality or performance.
Some IT functions are well-suited for the cloud and others may be better in-house. Review the functionality you require
from an IT function to see whether going hosted will solve problems or just create new ones.

The next time you are looking at an IT upgrade, such as an email server, take the time to calculate the cost of deploying it
in-house versus the cost of using a hosted solution. Depending on the size of your company, you may find that the cloud can
save you a decent amount of money and may even give you a more reliable and robust service than you can provide in-house.

— Jay Allred, Focus expert and director of

network engineering at BizCom Web Services, Inc.

Cloud computing provides you with access to resources that are off-premises, rather than in-house. This reduces or
eliminates (in special cases) your reliance on servers, plus all of their associated infrastructure and costs. Additionally, you
can pay for cloud computing resources on a usage basis.

Typically, if you are starting up an environment which needs to host websites or email or ecommerce, you will need XX
number of servers, plus redundancy, plus cooling, plus power, plus bandwidth. Many of these are fixed costs. For instance,
you have to size your data center in advance — it is not something that you try to grow as you go.

Cloud computing has a number of options and categories, but the basic premise is that you pay for what you need as you go.
Thus, your expenses — both capital and operating — would be reduced.

Need more users on an application? Add them when you need them, and pay for them at that time. Need more server
capacity or storage? Add it on the fly, and pay for it as you go/grow. This can help you manage your costs more effectively.

— Andrew Baker, Focus expert and

director of service operations at SWN Communications Inc.

Are You Ready for Cloud Computing? Focus Research ©2010 3

I particularly agree with Andrew in that you “pay for cloud computing resources on a usage basis” which helps to contain
unnecessary IT costs and also makes them variable instead of fixed. Two other comments:

1) A “usage” basis can also mean “user” basis, like in the case with software-as-a-service like Salesforce.com or
Quickbooks.com. You pay per employee.

2) Read the book The Big Switch by Nicholas Carr. It provides a great parallel between the rise of the industrial revolution,
where all factories had their own power plants, to the IT revolution, where enterprise companies have internal data centers.

— Joshua Beil, Focus expert and

director market strategy & research at Parallels, Inc.

As previously mentioned ... it depends. If your IT infrastructure is running smoothly and is relatively new and you have a stable
support structure in place, there’s no reason to change. But when the time comes to make your next move, whether due to
hardware running out of warranty or software falling behind on functionality compared to new solutions available, then you
need to look at everything carefully.

In addition ask questions like:

•  How much does the cloud computing service compare in cost to an on-premise solution, over the next 1-5 years?
•  How easy is it to change my mind and get my data back?
•  How easy is it to transition to the new service, how much downtime will there be?
•  How will our company grow/change in terms of people, offices, work type, and customer/vendor interaction over
the next 5 years ?

What other IT solutions and services are dependent on, or are integrated with the cloud service I am thinking about ? For
example, if Exchange is hosted in the cloud, how does that affect our ability to freely choose a CRM solution ? If the two are
separate, what kind of extra work will everyone have to do to keep both platforms current ?

— Joe Foos, Sales/Marketing, Lanlogic

Read the full conversation:

http://www.focus.com/questions/information-technology/how-can-cloud-computing-help-my-business-reduce-costs/

Are You Ready for Cloud Computing? Focus Research ©2010 4

2 Cloud Computing:
Renting vs. Owning vs. Sharing

Introduction
We all use cloud computing on one scale or another (from marketing via Twitter to owning our own corporate server
clusters). This posting outlines a decision model to help you decide whether you should own, rent or share a cloud to host
each of your computing services.

Analysis
Wait a Minute: I Don’t Use Cloud Computing

Cloud Computing is simply the process in which one group provides computing services to a group of users in a
“turnkey” manner, i.e., in a manner where the end user does not have to worry about how the services are managed,
provided and maintained. In its most basic form, any time you are using computing services that are not hosted on
your workstation, you are effectively accessing a cloud of services (vs. twenty years ago when I had to host most of
the applications I was using on my own workstation.)

Even when we use a basic email service provided by the guys down-stairs we are using a local cloud of our very own.
When we use more universal services like Twitter, we are using a truly global cloud we share with many others. In
essence, today everyone is using one form of a cloud or another. The real decisions are–

•  Who provides the cloud?

•  Do I pay for this?

Three Ways to Obtain Cloud Computing Services

There are three basic ways you can obtain Cloud Computing services for your enterprise:

•  O wn Your Own Cloud. Your enterprise owns the hardware and the software hosted on it. You manage it yourself,
either with staff or direct contractors. You control what is installed in this cloud, when it is installed and how it is
managed. Example: your corporate Microsoft Exchange Server
•  Rent a Cloud. Your enterprise licenses services from a Software-as-a-Service (SaaS) provider. This SaaS provider
manages these services on your behalf but provides a level of dedication through a managed Service Level Agreement
(SLA). Examples: Sales force workflow management from Salesforce.com and Web Analytics from Omniture
•  Share Your Cloud with Others. You sit on an open, freeware service with the rest of the world. You have no
dedicated support or SLAs other than what everyone else gets. Examples: IdeaScale for crowd-sourcing or
WordPress for blogging (when it is provided for free via your hosting provider)

Are You Ready for Cloud Computing? Focus Research ©2010 5

Deciding How to Obtain Cloud Computing Services for Your Enterprise

This is not an “all or nothing” decision, i.e., it is unlikely you will use one model to obtain Cloud Computing for everything
you need. Instead, you will need to examine each of the computing services you need and determine whether to own, rent
or share each. I recommend looking at three attributes of each service to make this decision:

1. Assessing the IMPORTANCE of Each Service to Your Enterprise

Not all services are equal. Some are critically important; others are “nice to have.” I have found it useful to organize your
services into three priority-based buckets using a simple litmus test for each:

Note:
You will find this litmus test dovetails well
with compliance with regulations such as
SOX (Section 404) and SAS-70.

2. Determining Your LEVEL OF ANNUAL INVESTMENT for Each Service

Cloud Computing operates on the Law of Large Numbers, obtaining operational efficiencies of scale through size and passing
these along to customers. As such, the size of your enterprise’s information technology and services (ITS) budget for each
service (not the raw size of your enterprise) is critical to determining what type of cloud you use. If you have a small ITS budget
you may gain more value from renting or sharing a cloud than building and managing it yourself. If you are huge enterprise it
may cost- and risk-prohibitive to ask an external party to scale to support your needs. I organize Level of Investment into four
categories based on the combined total budget (capital and expense for technology, services and staff) for each service:

•  U
 tility (>$10m USD per year). The service is treated as a utility with its own teams, hardware, etc. You are
making it core to your business

•  Infrastructure ($1m to $10m USD per year). The service represents a major infrastructure item for your enterprise. Its
investment is likely made up of multiple line items (for hardware, software, consulting and staff) in your annual budget

•  B
 udget Line Item ($100k to $1m USD per year). The service has its own line item in your budget (an likely has
performance targets to justify the inclusion). However, you are not spending enough to build and maintain a full
infrastructure with its own support team.

•  E
 xpense Item (<$100k USD per year). The service does not likely reach the threshold for capital planning
purposes. You do not have (or cannot afford) full-time staff dedicated to managing the service. This could be a
service used by a SOHO or for a trial, experiment or campaign)

Are You Ready for Cloud Computing? Focus Research ©2009 6

3. Assessing the TARGET OF OPPORTUNITY to Hackers and Competitors.

Simply knowing the importance and size of your service is not enough to make your cloud decision. You also need to
consider the visibility of this service as a target of opportunity. This is important, because visibility directly correlates to risk
of attack from hackers. You may have a small IT budget but be a household name who attracts hackers like flies to honey.
Here is my simply litmus test to determine you Visibility Risk Level:

•  A re there competitors (if you are a public sector agency, read this as “other governments”) ACTIVELY trying to
obtain the information managed by this service? If so, it is a High Visibility Target
•  If Service is not a High Visibility Target, would a 14-year-old get “bragging rights” if he or she hacked this service? (I
recommend asking your children, nephews or nieces this question.) If so, it is a Moderate Visibility Target
•  Everything else is a Low Visibility Target

Now We Have Enough For Some Recommendations

Sit down and list all the services you have that require computing support. For each, specify the following, then look up
each on the table below for a recommendation as to how to source your cloud:

•  What is its priority: Mission Critical, Operational or Non-Essential?

•  What is your Annual Level of Investment
•  What is thee Visibility Threat Level: High, Moderate or Low?

Are You Ready for Cloud Computing? Focus Research ©2009 7

Conclusion
General notes, observations and disclaimers:

•  T
 hese recommendations skew towards not owning anything for which you are not willing to make a major (i.e.,
utility-scale) investment. The rationale is two-fold. First, if IT and computing are not your core business, you should
not tie up investment capital here (save that for the true reason for your existence.) Second, if you are making
small investments you cannot benefit from the law of large numbers (as such, it will be very costly to maintain
24×7, high-availability operations).

•  T
 hese recommendations steer you away from using shareware for mission-critical services (with the exceptions
of campaigns, trials or small operations). The rationale is simple: you get what you pay for. (Do you really want to
place the reliance for the core of large business operations on a freeware application with no SLA?)

•  T
 hese recommendations encourage use of shareware for trials, campaigns and experiences–regardless of service
importance. Why? This makes trial and error inexpensive. Once you find something that works, you will likely turn
up the investment, causing you to upgrade to Rented or Owned services.

Finally, treat this matrix as set of guidelines only. When in doubt, apply common sense and business analysis.

Disclosures and References

Disclaimer: I am CIO at an enterprise social media company, INgage Networks, that provides all of its services using a
Software-as-a-Service model (hosted from our own Virtual Cloud Computing environment.)

— Jim Haughwout, Focus expert and

managing partner at Oulixeus Ltd.

Are You Ready for Cloud Computing? Focus Research ©2009 8

3
Is Your Enterprise Ready for
Hosted IT Management?

Introduction
One of the central promises of software as a service (SaaS) and cloud computing is the ability to minimize the costs and
complexities of IT infrastructures. However, even the most basic IT infrastructure is still sufficiently business-critical to
warrant and deserve comprehensive management. Thus, a growing number of vendors offer solutions designed to extend
the benefits of SaaS- and cloud-based computing to the computing resources management itself. Focus believes that
recent developments in this arena make it worth exploration by companies of almost any size or type.

Analysis
In late 2009, the Focus Community was asked, “Is(n’t) it Time for Hosted IT Service Management?” The tone of user
response ranged from guardedly optimistic to openly critical.

“No. It is not time for the hosted IT service management,” Focus Expert Benjamin Breeland asserted. “Instead, it is time for
those providing services to provide some level of dashboard or performance metrics for those services. [I]f the business
has no method of measuring its current services or has no baseline for the performance of existing services, how does
the business know if the vendor providing service management performs the requested job?”

“The question of whether a hosted solution is right for your IT organization is really dependent upon your needs and
goals (and in some cases your [specific] vertical [market]),” Focus contributor Christina Pappas said. “[T]the cost benefits
are now being recognized due to the removal [of] in-house infrastructure, no-cost non-disruptive upgrades and zero
maintenance and support costs.”

Ms. Pappas added that different vendors are following different paths toward IT management as a service, citing Hewlett-
Packard (HP) and Service-now.com as contrasting examples. “HP is delivering [its hosted IT management] solutions
as an ASP [application service provider] whereas Service-now.com is a [true] SaaS [offering]. While HP customers may
face upgrades in the future and the threat of the application sunsetting…IT organizations [that] have adopted true
SaaS-delivered applications will continue to reap the benefits, not have to worry about unforeseen upgrades or their
application ‘going away’ and not having support.”

Several vendors have made recent moves to address the shortcomings and concerns raised by Focus community
members. In November 2009, BMC Software, long a leader in premise-based IT infrastructure management solutions,
announced an alliance with SaaS and cloud computing pioneer Salesforce.com. The companies plan to co-market and
co-sell BMC’s Service Desk Express solution running on Salesforce.com’s Force.com cloud-based platform beginning in
the second quarter of 2010. Focus believes that this alliance is likely to produce some interesting and useful offerings.
However, Focus also believes that BMC and other vendors of premise-based management solutions will be significantly
challenged to sustain and grow sales of those solutions while making credible forays “into the cloud.”

Service-Now.com, an early provider of IT management as a service, has offered built-in reporting, workflow with escalations and
graphical mapping for some time now. The recent Winter 2010 release of the IT service management (ITSM) SaaS solution
includes interactive dashboards that collate and present performance information about multiple infrastructure elements.

Are You Ready for Cloud Computing? Focus Research ©2009 9

More recently, Viewfinity, a provider of cloud-based tools for IT systems and privileges management solutions, announced
. The company avoids the infrastructure and cost challenges of traditional IT management solutions (and their vendors) by
building its solutions specifically for cloud/SaaS deployment, president Gil Rapaport told Focus in a pre-announcement
briefing. Viewfinity uses virtualization to deliver effective management of underlying infrastructure elements without
disrupting or forcing any change in the user experience, Rapaport added. Focus believes that this approach is critical to
encouraging broad user adoption of any IT management solutions, whether premise- or cloud-based.

Viewfinity Systems Management includes centralized software deployment, asset inventory, remote desktop and power
management, activity recording and the ability to rollback/undo user “personality” components. Trials of this solution are
free for up to 50 PCs, with pricing beginning at $48 per desktop per year otherwise.

Viewfinity Privilege Management uses granular, policy-based regulation of system administrator rights to deliver flexible
blocking (“blacklisting”) and permitting (“whitelisting”), privilege elevation and automated policy management and auditing.
This solution is priced beginning at $28 per desktop per year.

Viewfinity User Migration is designed to centralize, ease and speed migration of PC client systems to Microsoft Windows
7. This solution is free thru Q1 2010, Viewfinity said.

Additionally, the company recently closed $9 billion in series B funding, and announced a new Advisory Board.
Among the members of that body is Greg Butterfield, former CEO of Altiris, another pioneer in systems
management now owned by Symantec.

Conclusion
Focus believes that momentum for hosted IT management solutions is building, as those solutions gain new features and
greater usability. Focus also believes that solutions such as those from Service-now.com, Viewfinity and other vendors
built for SaaS and the cloud “from the ground up” offer the greatest potential business value and flexibility to companies
seeking more management with less infrastructure.

If your company is already using premise-based or early-generation hosted IT management solutions, you and your
colleagues should question your incumbent vendors closely about their cloud/SaaS evolution plans. And if your company
has not yet invested heavily in IT management solutions, you and your colleagues should look closely at modern cloud/
SaaS-based alternatives. Focus believes that such solutions offer the best prospects for maximum manageability of
business-critical IT resources, with minimal cost, complexity and operational disruption.

— Michael Dortch, Focus adviser

and director of research at Focus.com

Are You Ready for Cloud Computing? Focus Research ©2009 10

About Focus Research

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