What is Cloud Computing?

1. Bowman Hall Program Director, Cloud Computing Client Engagements IBM Software Group What is Cloud Computing?

2. IT infrastructure is reaching a breaking point. 70¢ per $1 85% idle 1.5x In distributed computing environments, up to 85% of computing capacity sits idle. Explosion of information driving 54% growth in storage shipments every year. 70% on average is spent on maintaining current IT infrastructures versus adding new capabilities. $40 billion 33% Consumer product and retail industries lose about $40 billion annually, or 3.5 percent of their sales, due to supply chain inefficiencies. 33% of consumers notified of a security breach will terminate their relationship with the company they perceive as responsible.

3. As the world gets smarter, demands on IT will grow Intelligent oil field technologies Smart retail Smart energy grids Smart traffic systems Smart food systems Smart healthcare Smart water management Smart supply chains Smart countries Smart weather Smart regions Smart cities

4. Globally, systems and infrastructure are reaching a breaking point. Meanwhile, customer expectations and competitive pressures are increasing. 4 Explosion of data, transactions, and digitally-aware devices strains IT infrastructure and operations. Exponential growth in communications subscribers and services exposes bandwidth limitations. Supply inefficiencies and demand spikes tax energy and utility systems. Clogged and congested roadways impact productivity. Networks, supply chains, and borders face a proliferation of new risks and threats.

5. What is Cloud Computing? A user experience and a business model • Cloud computing is an emerging style of IT delivery in which applications, data, and IT resources are rapidly provisioned and provided as standardized offerings to users over the web in a flexible pricing model. An infrastructure management and services delivery methodology • Cloud computing is a way of managing large numbers of highly virtualized resources such that, from a management perspective, they resemble a single large resource. This can then be used to deliver services with elastic scaling. Service Consumers DatacenterInfrastructure AccessServices Monitor & ManageServices & Resources IT Cloud Component Vendors/Software Publishers Service Catalog, ComponentLibrary CloudAdministrator Publish & UpdateComponents, Service Templates

6. An Effective Cloud Deployment is Built on a Dynamic Infrastructure …. Flexibility CLOUD COMPUTING + = + VIRTUALIZATION STANDARDIZATION AUTOMATION Cost …leveraging virtualization, standardization and automation to free up operational budget for new investment.

7. Cloud Computing Delivery Models Collaboration CRM/ERP/HR Business Processes Industry Applications Software as a Service Middleware Web 2.0 Application Runtime Java Runtime High Volume Transactions Development Tooling Database Platform as a Service Data Center Fabric Servers Networking Storage Shared virtualized, dynamic provisioning Infrastructure as a Service

8. Cloud Computing Deployment Models Flexible Delivery Models • Public … • Service provider owned and managed. • Access by subscription • Delivers select set of standardized business process, application and/or infrastructure services on a flexible price per use basis. • Private … • Privately owned and managed. • Access limited to client and its partner network. • Drives efficiency, standardization and best practices while retaining greater customization and control Cloud Services Cloud Computing Model • Hybrid … • Access to client, partner network, and third party resources .… Customization, efficiency, availability, resiliency, security and privacy .…Standardization, capital preservation, flexibility and time to deploy ORGANIZATION CULTURE GOVERNANCE ...service sourcing and service value

9. Cloud spending to grow six times faster than traditional IT spending Size and Growth • IDC forecasts the cloud computing services market to grow at a CAGR of 27 percent from USD 16.2 billion in 2008 to USD 42 billion in 2012. On the other hand, Gartner expects the worldwide cloud services revenue to cross USD 56.3 billion in 2009 to USD 150 billion by 2013. • IDC estimates the traditional IT spending to grow at a CAGR of 7 percent to USD 494 billion in 2012 from USD 383 billion in 2008. Thus, the forecasted growth rate of cloud spending is six times that of traditional IT spending.

10. A stepwise approach to Cloud Computing Create an IT Transformation Roadmap Define an Architectural Model for Cloud Computing Complete a Workload Analysis Decide the Right Mix of Delivery Models Implement a Cloud Solution

11. Step 1: IT Transformation Roadmap • Rapid deployment of infrastructure and applications • Request-driven service management • Service Catalog • Integrated service lifecycle mgmt • Expose resources “as-a-Service” • Integrated Security infrastructure • Rapid provisioning of IT resources, massive scaling • Dynamic service mgmt • Energy saving via auto workload distribution • Virtualization • Better hardware utilization • Improved IT agility • Server Consolidation • Streamline Operations – manage physical and virtual systems • Lower power consumption

12. Step 2: Architectural Model for Cloud Computing Cloud Service Provider Cloud ServiceConsumer Cloud ServiceDeveloper User Interface API Software-as-a-Service - e.g. Lotus Live Cloud Services … Service User Platform as-as-Service - e.g. Desktop Cloud Managed Environment Infrastructure-as-a-Service - e.g. Compute Cloud Virtualized Infrastructure – Server, Storage, Network Common Cloud Platform BSS Business Support Services Service Delivery Portal API Service Development Portal Offering Mgmt Customer Mgmt Pricing / Rating Consumer Business Manager Developer Order Mgmt Entitlements Subscriber Mgmt Service Provider Portal Accounting & Billing Invoicing Peering & Settlement Contract Mgmt SLA Reporting Service Offering Catalog Consumer Administrator Metering Reporting & Analytics Management Environment OSS Operational Support Services Operational Console Service Delivery Catalog Service Request Mgmt Service Def. & Developm.. Tools Service Automation Mgmt Service Definitions Provisioning Configuration Mgmt Image Lifecycle Mgmt Partner Clouds Monitoring & Event Mgmt Incident, Problem & Change Mgmt Service Level Mgmt Continuity Mgmt, Backup / Restore Asset Mgmt Capacity, Perform. Mgmt Virtualization Mgmt Image Creation Tools Customer In-house IT Service Business Manager Service Operations Manager Security & Resiliency

13. “Loosely Coupled” Architecture “Virtualized Traditional” Architecture “Database Centric” Architecture Step 3: Workload Analysis Higher Gain From External Cloud Collaboration SME ERP/SCM/CRM Numerical [Low Data/Compute] Web Serving Data Warehousing Start Here Data Mining Numerical [High Data Transfer] Virtual Desktop Higher Pain To Cloud Delivery Application Dev’t. & Test Systems Mgmt. File & Print Lower Pain To Cloud Delivery LE - ERP/SCM/CRM LE - Transaction Processing “Content Centric” Architecture “Storage - Analytics” Architecture Lower Gain From External Cloud

14. Step 4: Deciding the Right Mix of Delivery Models Managed Operations Off Premises Shared Public Cloud Services Off Premises Dedicated Delivery Models On Premises Utility Private Cloud Services Traditional IT On Premises Fixed Mixed Variable Financial Models

15. Step 5: Self-service drives Process Standardization End Users Service Portal Service Request Catalog Provisioning Engine • Workflows • Expert Systems • Scripts Optional Service Modules • e.g. Metering/ Usage Billing, Monitoring, etc. Benefits: • Lower cost • Ease-of-use and access • Process transformation Virtualized Cloud Infrastructure

16. IBM Cloud Computing Products & Services Infrastructure (compute / storage) Development and Test Desktop and Devices BusinessServices Analytics Collaboration Smart Business on the IBM Cloud Information Protection Services; Computing on Demand Smart Business Desktop on the IBM Cloud Smart Business Development & Test on the IBM Cloud Standardized services on the IBM Cloud Lotus Live Smart Business Cloud Private cloud services, behind your firewall, built and/or managed by IBM Smart Business Desktop Cloud Scale out File Services Smart Business Test Cloud Smart Business Systems Pre-integrated, workload optimized systems Smart Business for SMB (backed by the IBM cloud) Smart Analytics System Powered by Infosphere IBM CloudBurst w/Quickstart Svcs IBM CloudBurst w/Quickstart Svces Available Future

17. New Development Liberated funding for new development, transformation investment or direct saving Deployment (1-time) Hardware Costs (annualized) Labor Costs ( - 81%) Hardware Costs ( - 89%) IBM Technical Adoption Program (TAP)—ROI Analysis • Reduced Capital Expenditure • Reduced Operations Expenditure • Additional Benefits • Reduced risk, less idle time, more efficient use of energy, acceleration of innovation projects, enhanced customer service Without Cloud With Cloud 100% Strategic Change Capacity Software Costs Power Costs Current IT Spend Labor Costs (Operations and Maintenance) Business Case Results: Annual savings: $3.3M (84%) from $3.9M to $0.6M Payback Period: 73 days Net Present Value (NPV): $7.5M Internal Rate of Return (IRR): 496% Return On Investment (ROI): 1039% Software Costs Hardware, labor & power savings reduced annual cost of operation by 84% Power Costs (- 89%)

18. In Summary… • Enterprise cloud opportunity is early, but real • Economics of private clouds look compelling • Adoption of cloud computing will be driven by workload affinity • IBM offers deployment choices for workloads that matter to you