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Business Impact of Cloud Computing www.pwc.com David Lemphers Director, Cloud Computing @ PwC e: david.lemphers@us.pwc.com t: http://twitter.com/davidlem
PwC 2
PwC Sorry In Advance! 3
PwC What’s Going On? 4
PwC Customer’s Want On-Demand Services Cost • Lower upfront costs and start-up capital makes launching new services easier and less risky Choice • Consuming, composing and churning services is easier in the on- demand world Agility • Subscribing to and consuming services as soon as required assists organizations adapt to rapidly changing market/customer requirements 5
PwC BUT: Traditional Business Is Not Currently Optimized Build Sell Run 6 Provider Customer
PwC Becoming On-Demand Requires Transformation 7
PwC And Great Tech! 8 Manage Provision
PwC So Where Do We Start? 9
PwC At a High Level Business • Build -> Sell -> Deliver -> Support Service • Provision -> Run -> Manage -> Deprovision Infrastructure • Plan -> Procure -> Deploy -> Commission -> Maintain 10
PwC Step 1. Costs Start-Up • Facilities (Capital) • Infrastructure (Hardware, Software) • Business Support (Legal, Consulting, etc.) Ongoing • Variable • Utilities (Power, water, network) • Sustained Engineering • Fixed • Facilities (Operational) 11 COGS
PwC Cost of Goods Sold (COGS) • Understanding and managing COGS is critical to a successful on- demand business • Consumption based pricing translates directly to variable on-going costs • What do you do with fixed/start-up costs? • Perhaps a blended model? (Subscription + Consumption) 12
PwC Step 2. Business Model • What are you going to be selling? • Compute • Storage • Value-Add Services • How will you charge customers? • Subscription Plan • Consumption Based Pricing • Blended Model • What are your "promises"? • Service Level • Quality of Service • Compliance 13
PwC Relationship between Costs and Revenue • Ensure your costs are closely aligned to revenue • Revenue Recognition (Upfront Spend versus Trailing Revenue) • Managing variable costs is easy • You just pass these directly onto the customer • Managing start-up/fixed costs is harder • Why? • Because it’s hard to predict your total customer base up-front when preparing your rate card • Front-loading fixed costs can make your initial price point too high • Back-loading fixed costs can result in aggressive losses early if you’re wildly successful at the start • Churning your rate card can severely impact customer satisfaction, retention and adoption 14
PwC Step 3. Integrate Business Model into Technology Platform Sign-Up • Pricing model and rate card • Discounts and incentives Provisioning • COGS Metering • Compliance Billing • Revenue Customer Support • SLA 15
PwC Major Areas of Business Transformation 16
PwC Billing • Billing is the most important part of an on-demand environment • It is also the most frequent and critical interface to the customer • Bill payment • Usage Review • Key focus areas • Accuracy: This requires a massive investment of engineering effort early in the process • Pricing: Applying SLA credits, discounts, peak/off-peak pricing, is non-trivial • Compliance: With Federal, State and Local Tax regulations 17
PwC Integration Supply Chain • Capacity planning and management Sales and Order Fulfillment • Provisioning, Deprovisioning Operations and Support • SLA, QoS (Dashboards, etc) CRM • Customer Satisfaction • Purchasing Behavior 18
PwC Capacity Planning • One of the biggest challenges to running an on-demand cloud service • Balancing under utilization and resource exhaustion is tricky • Key focus areas • Deterministic factors • Current resources (# of servers, total ingress/egress bandwidth) • Non-deterministic factors • System load • Impact of SLA • When factoring deterministic and non-deterministic factors into your capacity planning, always remember to account for SLA targets 19
PwC Compliance Tax • Sales Tax • Income Tax • Varies greatly from state to state, and even at the municipality level Legal • Horizontal Standards (SAS 70, ISO 27001) • Vertical Standards (HIPAA, FISMA) • Location Concerns (Patriot Act and Non-US Customers) 20
PwC And the list goes on... Business Model Pricing Model Capacity Planning Facilities Management Procurement and Asset Management Business Process Integration Finance Risk Analysis Security Assessment BCP/DRP Support and Operations Policies and Governance Cross-Group Collaboration Change Management People and Change Maintenance and Warranty Compliance Tax Legal Technology Billing Application Migration and Compatibility Hybrid Environments (On-premise + Cloud) 21
PwC Summary • Cloud Computing and On-Demand Services are exciting and customers want it • Identify key business areas to transform and integrate with • Focus on the go to market blockers first • Develop skills and capabilities around new core competencies like billing, support and operations, compliance 22
PwC Let’s Talk! Thoughts? Questions? Comments? Insights? 23