SaaS Archives - Page 5 Of 5

Cloud: The Network Itch | Gaining Altitude in the Cloud

August 30, 2011

During the past several weeks, Everest Group’s ITO team has had multiple debates about the various levers that govern the cloud services industry. The growing consensus has been that service orientations, *aaS (BPaaS, SaaS, PaaS and IaaS), are the strength levers with which the cloud service providers will play. So, for example, a Rackspace (IaaS) will host a Salesforce.com (SaaS) on a Microsoft Azure (PaaS) platform, completing the cloud landscape. Just one glance across the *aaS firmament and the stories appear similar. The cloud portrait seemed complete and nailed to the wall for posterity.

However, a statement by Steve Caniano, VP of AT&T Hosting and Cloud Services – “What is key for us is the ability to leverage the cloud as part of a network service experience – without a network you don’t have a cloud” – took our debates in another direction.

“Without a network you don’t have a cloud”

While the services side of the cloud has dazzled the industry, the infrastructure side – consisting of data centers and network – has seemed dreary. After all, network and storage are considered hygiene requirements for the cloud infrastructure. They also appear to have been relegated to commodities, as both the network and storage markets have experienced intense competitive and pricing pressures. Our feeling is that saying there cannot be a cloud without a network is akin to taunting a Ferrari owner that his or her sports wonder car is no good without Michelin tires. True, the owner may have a momentary nightmare of the beaming red Ferrari’s chassis lying flat on the ground. But it isn’t a real worry, as Bridgestone, Goodyear, and other tire brands are also options. So, can I pat myself on my back and say I nailed this “cloud without a network” debate with this repartee and sign off on this blog?

A growing tribe of telecom firms thinks otherwise. Verizon, CenturyLink and AT&T have all recently made big investments in cloud – acquisitions of Terremark and Savvis are still fresh, and AT&T has put up a US$1 billion corpus fund for its cloud initiative. Additionally, the cloud-focused consolidation happening in the telecom industry has coincided with the growing activity in the cloud services industry. The next generation of networks (4G and 5G) have enticed many new cloud initiatives. Apple’s iCloud is an example.

In the debate that ensued within my team on this topic, a colleague reminded that the whole concept of cloud comes from telecommunications, and that public telephony was the first cloud ever. With this legacy in mind, can we assume that control over network and bandwidths will help telecom companies define the rules of the cloud?

Taking this debate external, is network:

Just a part of the cloud (and the real money lies with systems integration and advisory)?
An enabler of the cloud?
The cloud itself?

We’d love to hear your thoughts on this.

If Governments Can, Why Can’t You? | Gaining Altitude in the Cloud

May 16, 2011

All around the world, governments are increasingly stepping up to the Cloud.

Early last week, the U.S. government’s General Services Administration (GSA) issued a solicitation for cloud-based email, office automation, and records services, in a contract estimated to be worth up to US$2.5 billion over five years. The GSA expects savings of nearly 45 percent from this move.

By the end of this year, the government CIO’s commitment to a “Cloud First” policy is expected to result in closures of up to 137 data centers across the United States. While this is only about 6 percent of the government’s 2,000+ data centers, it’s a great start given the extent of change required.

Across the Atlantic, there are plans to consolidate the U.K. government’s 8,000 data centers into a dozen centers on an internal G-Cloud. The government also recently released an alpha version of a consolidated government portal (alpha.gov.uk) hosted on Amazon’s cloud platform, that aims to centralize access to all government services.

In China, there are plans to build a cloud computing center the “size of a city” within the Heibei province, to primarily serve government departments.

These moves by governments around the globe represent, for perhaps the first time in recent memory, path-breaking leadership in technology transformation. Change is never an easy subject, especially within the public sphere. Yet the extent of potential benefits from a move to the Cloud is making governments take notice and make the plunge.

Private enterprises stand to learn a variety of lessons from these public sector Cloud moves:

a. They set the lead for large private enterprises

The Cloud is already at the forefront of CIO priorities for 2011. However, many enterprises hesitate to take large technological plunges given the extent of change required from legacy environments. Questions often emerge as to whether Cloud strategies are better suited for small-to-medium environments, and for new next generation initiatives. Enterprises also question how the change can be managed across so many different business units with disparate platforms.

The scale of attempted governmental transformation should put such questions to rest. If an entity with over a thousand departments and an US$80 billion IT budget (a.k.a. the US government) can make the shift, why can’t you?

b. They indicate greater tolerance towards risk and security challenges

As recent discussions on this blog indicate, security and compliance concerns constitute two of the biggest impediments to transition to the Cloud. Yet, with risk sensitive departments such as Defense, Homeland Security and the NSA making the move, it’s clear the public sector’s concerns on these risks have been largely alleviated.

As the head of the U.S. Cyber Command General Keith Alexander recently testified in a House sub-committee hearing, “…moving the programs and the data that users need away from the thousands of desktops we now use —each of which has to be individually secured… to a centralized configuration that will give us wider availability of applications and data combined with tighter control over accesses and vulnerabilities and more timely mitigation of the latter…Indeed, no system that human beings use can be made immune to abuse — but we are convinced the controls and tools that will be built into the cloud will ensure that people cannot see any data beyond what they need for their jobs and will be swiftly identified if they make unauthorized attempts…”

c. They herald greater maturity in the supplier ecosystem

Google and Microsoft have sparred publicly over the last few months over the (alleged) respective lack of FISMA certification on Cloud services offered to U.S. government agencies. As the war for public sector Cloud prospects heats up, so will functionality and service provider maturity. For example, Google Apps for Government now includes specialized security functionality: data location and segregation of government data, necessary to ensure greater security and compliance.

In addition, as The Federal Risk and Authorization Management Program (FedRAMP) mechanisms are established later this year to enable government-wide certifications and authorization, more Cloud vendors will step up to meet the bar.

d. They indicate need for concerted CIO-level leadership

Since 2009, when Cloud computing was identified as a Federal IT priority, the U.S. government’s CIO has unveiled a wide range of initiatives: establishing standard definitions; defining Cloud value propositions; launching Cloud store fronts; establishing the “Cloud First” strategy as a keystone of IT strategy; setting clear decision frameworks and timelines; and establishing new Cloud standards. Clearly, Federal Cloud initiatives are leading change across a diverse government organization, much of which has been driven by the CIO’s determined efforts to push through change, despite naysayers and challenges.

Governments’ migration to the Cloud represents a monumental effort in technology change in a large and complex organization. As private enterprises navigate to the Cloud, they have much to learn from the public sector’s lead.

Genpact Acquires Headstrong – End of Pure-Play BPOs? | Sherpas in Blue Shirts

April 6, 2011

Earlier today, Genpact (a global BPO-centric service provider) announced a definitive agreement to acquire Headstrong (an IT services player with a focus on capital markets) for US$550 million. Genpact has scaled ITO capabilities, but more than 85% of its US$1.2 billion+ revenues is still driven by BPO. Moreover, Genpact’s ITO revenues have been flat over the last few years. So I think it is only fair to call them a pure-play BPO – that was until today! With the acquisition of Headstrong, the split between BPO and ITO for Genpact will be closer to 70:30.

Genpact’s topline growth has fallen from 25-35% in 2007-2008 to 7.5-12.5% in 2009-2010. Not bad considering a growing denominator; stable to increasing margins; and a bad economy. But growth is slowing, and I believe this acquisition will be important for Genpact to ensure scalability in the medium to long term. Here is why:

BPO-only services have a strong value proposition for the first 3-5 years of an engagement driven by arbitrage and operational efficiencies and effectiveness – and Genpact has been successful in riding this wave. However, it is often difficult to drive the next wave of value from pure BPO and often this requires integrated IT-BPO capabilities. With a majority of Genpact’s BPO client base entering this end-of-term phase, Headstrong’s capabilities will allow Genpact to present an integrated value proposition. Genpact’s proprietary add-on tools for BPO (remember the acquisitions of Creditek, Avolent and Symphony) and process capabilities (from Six Sigma and Lean expertise to SEP) with Headstrong’s IT capabilities will be a strong combination.
This acquisition will also help Genpact ride the potentially disruptive trends in the areas of cloud, SaaS and BPaaS. Their partnership with NetSuite last year was another step in this direction.
Headstrong’s acquisition is also interesting from an industry expertise perspective. BPO is fast morphing from being a horizontal service to a more industry-specific offering. Even in traditional BPO services like F&A, more and more industry-flavors are being included – be it around revenue cycle management for healthcare providers or meter-to-cash for utilities. Within financial services (one of the largest recipients of global services), our research shows that capital markets BPO is the fastest-growing segment. This is where most of Headstrong’s capabilities reside. Healthcare (another strong area for Headstrong) is another industry poised for strong global services growth in the near term.

There are potential challenges (as with all acquisitions) essentially around the integration of the two organizations. Genpact has been running successful sales and marketing engine focused around BPO. With a significant IT component – will it get distracted from its focus? Its differentiation in the market is around process excellence, and it remains to be seen how successful the go-to-market for an integrated ITO+BPO offering will be. Headstrong’s existing clients will also have questions on Genpact’s vision and strategy for them.

Look around the BPO industry and you’ll not find any major pure-play BPOs left. Consider the leaders on Everest’s PEAK matrix for FAO – Accenture, IBM, Capgemini, Genpact, HP, and Infosys. No pure-play BPO except Genpact (until this morning). What will happen to others in the same bucket (WNS, EXL and the likes)? For the moment WNS will probably take the tag of becoming the largest pure-play BPO – but for how long? Will it acquire or get acquired?

Cloud Services and CFOs’ Triple Hat Role | Gaining Altitude in the Cloud

March 25, 2011

We had the pleasure this week of participating in a CFO Forum hosted by TechAmerica, along with representatives from Microsoft, Softlayer and SOURCE, on the topic of “Navigating the Cloud.” The overall discussion focused on the benefits of the rapidly expanding universe of cloud services, along with key risk, compliance and security considerations for CFOs. During the panel discussion and audience Q&A, it became apparent that CFOs wear three different hats when thinking about the cloud:

CFO as Cloud User – like everyone else, CFOs are potential users of cloud services, primarily via ERP and F&A-related SaaS offerings. Discussion in this area focused on several topics:

Cloud ERP and accounting solutions from vendors like NetSuite and Intacct have been traditionally focused almost exclusively on SMBs. Though still early, enterprise options are emerging from cloud-focused vendors such as Workday. CFOs need to keep on top of the rapidly evolving set of alternatives that exist for the F&A function.
New cloud deployment models are emerging for ERP, such as the ability to run SAP on virtualized private clouds, and availability of select modules through public multi-tenant models. CFOs need to realize that it’s not just SaaS or nothing – new models are being introduced that capture virtualization and private cloud benefits without the perceived risks of moving sensitive financial data to the public cloud.

CFO as Cloud Buyer – the second major relationship CFOs have with the cloud is as a buyer, given the ownership they have over corporate and IT budgeting processes and spend. Points mentioned during the Forum included:

CFOs should give strong consideration to “Cloud First” policies such as one recently announced by Vivek Kundra, CIO of the United States, who is seeking to move 25 percent of the Federal Government’s IT budget to cloud services. The policy doesn’t say that cloud should be adopted whenever available, but rather that it be strongly considered “whenever a secure, reliable, cost-effective cloud option exists.” Sounds like a smart policy for the private sector as well.
CFOs should also work with CIOs and business owners to ensure that a comprehensive assessment has been made of the potential value of migrating to cloud services at the SaaS, IaaS (infrastructure-as-a-service) and PaaS (platform-as-a-service)levels, and that an overall transformation plan exists. Many experiments currently exist, but there is little understanding of where adoption goes after that.

CFO as Fiduciary – the panel also explored the impact of the cloud on CFOs fiduciary responsibilities for the organization.

Duke Skarda, CTO of Softlayer, described the four categories of risk in the cloud that CFOs need to evaluate: compliance, governance, security, and disaster recovery. As with cloud services overall, there’s no one right answer – organizations need to understand their risk posture, requirements, vendor capabilities, and supporting SLAs and contractual agreements. It was also noted that, in some cases, cloud services can actually serve to decrease organizational risk profiles.
CFOs need to understand any potential impacts of applicable compliance or data privacy regulations (especially in Europe) on where and how they can leverage cloud services.
IT policies and controls themselves don’t necessarily change with cloud services, but how they are implemented likely will. CFOs need to ensure IT has taken the right steps to implement appropriate governance and control of cloud services.

Overall, it was a great discussion, with interesting questions and comments from a very engaged CFO audience.

Welcome to “Gaining Altitude in the Cloud” — Another Blog on the Cloud? | Gaining Altitude in the Cloud

March 21, 2011

Does the world really need another blog about the cloud?

Here at Everest Group we believe the answer is a resounding yes.

The “signal to noise” ratio around the cloud is reaching a fever pitch. In fact, the hype alone has driven most enterprises to dip their toe in the water with initial pilots and “experiments.” While moving dev / test environments to the cloud is a good thing, we believe most enterprises should be moving faster and smarter.

What’s missing in the current market conversation about the cloud?

Real, data-driven perspectives on the true ROI and business impact enterprises can expect to see, and in many cases are seeing from the cloud. In what scenarios do IAAS (Infrastructure-as-a-Service) or StaaS (Storage-as-a-Service) offerings make sense in a given enterprise, and from which vendor? Can IAAS and cloud services make sense today even if data center assets are fully depreciated? Can 90 percent of the economic benefits of the cloud be captured via private cloud and virtualization? Or is there more on the table to be gained? While opinions on these topics abound, fact-based analysis is hard to find. And we think the answers might surprise you.

Our goal with “Gaining Altitude in the Cloud” is to create a forum to help enterprise decision-makers, cloud service providers and technology infrastructure vendors better understand the underlying customer economics driving cloud adoption dynamics. Our blog will take a comprehensive view and look across enterprise-class cloud services and major vendors in the areas of:

BPaaS (Business Process as a Service)
SaaS (Software as a Service)
PaaS (Platform as a Service)
IaaS (Infrastructure as a Service)
StaaS (Storage as a Service)

We’ll be featuring best practices, case studies and insights and analysis on how cloud and other next generation IT technologies and services are driving fundamental changes in the economics of IT. By providing customer-centric, vendor-neutral analysis of cloud economics, we hope to inject a much better fact base into the market conversation.

We’re looking forward to the discussion – we hope you are as well!

Announcing our inaugural conference: Everest Group Engage, The Pragmatic Edge: Designing Your Future. Learn more.

Tag: SaaS

How can we engage?

Contact Us