Demystifying the cloud: New economics of cloud computing

1. Demystifying the cloud:New economics of cloud computing Bruce E. Otte IBM Cloud Computing Marketing December 1, 2009

2. The world is getting smarter – more instrumented, interconnected, intelligent. 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 Cloud Computing

3. 300 Power and cooling costs Management and admin costs 250 New system spend 200 150 100 50 $0B 1997 1999 2001 2004 1996 1998 2000 2002 2003 2005 2006 2007 2008 2009 2010 A crisis of complexity. The need for progress is clear. Global Annual Server Spending (IDC) Uncontrolled management and energy costs Steady CAPEX spend To make progress, delivery organizations must address the server, storage and network operating cost problem, not just CAPEX Source: IBM Corporate Strategy analysis of IDC data Cloud Computing

4. 86% Business Intelligence and Analytics 80% 77% Virtualization 76% 73% Risk Management and Compliance 70% 71% Mobility Solutions 66% 73% Customer and Partner Collaboration 64% 71% Self-Service Portals 63% CIOs’ visions of enhancing competitiveness include business oriented elements Six Most Important Visionary Plan Elements Interviewed CIOs could select as many as they wanted Low growth markets High growth markets Source: IBM Global CIO Study 2009; n = 2345 Cloud Computing

5. Renovate & innovate • How do we address the immediate pressure to cut costs, reduce risk and complexity? • How do we Innovate to take advantage of new opportunities? How can we do both at the same time? • We focus on delivering services in new ways - lowering cost while increasing speed and flexibility! Cloud Computing

6. Cloud: Consumption & Delivery Models Optimized by Workload “Cloud” is: Cloud enables: • A new consumption and delivery model inspired by consumer Internet services. • Self-service • Sourcing options • Economies-of-scale Cloud Services Cloud Computing Model Multiple Types of Clouds will co-exist: “Cloud” represents: • The Industrializationof Deliveryfor IT supported Services • Private, Public and Hybrid • Workload and/or Programming Model Specific Cloud Computing

7. Is cloud computing really new? Yes, and no. • Cloud computing is a new consumption and delivery model inspired by consumer Internet services. Cloud computing exhibits the following 5 key characteristics: • On-demand self-service • Ubiquitous network access • Location independent resource pooling • Rapid elasticity • Pay per use • While the technology is not new, the end user focus of self-service, self-management leveraging these technologies is new. Usage Tracking Web 2.0 Business Services IT Services End User Focused Service Automation & SOA Virtualization Cloud Computing

8. Today there are three primary delivery models that companies are implementing for cloud Enterprise Traditional Enterprise IT Public Clouds Private Cloud Hybrid Cloud Private Cloud IT activities/functions are provided “as a service,” over an intranet, within the enterprise and behind the firewall • Key features include: • Scalability • Automatic/rapid provisioning • Chargeback ability • Widespread virtualization Hybrid Cloud Internal and external service delivery methods are integrated, with activities/functions allocated to based on security requirements, criticality, architecture and other established policies. Public Cloud IT activities/functions are provided “as a service,” over the Internet • Key features: • Scalability • Automatic/rapid provisioning • Standardized offerings • Consumption-based pricing. • Multi-tenancy Source: IBM Market Insights, Cloud Computing Research, July 2009. Cloud Computing

9. Cost savings and faster time to value are the leading reasons why companies consider cloud To what degree would each of these factors induce you to acquire public cloud services? • Pay only for what we use Hardware savings Reduce costs 77% Software licenses savings Lower labor and IT • support costs Lower outside maintenance costs • Take advantage of latest functionality • Faster time to value 72% Speed deployment • Simplify updating/upgrading • Scale IT resources to meet needs Improve system reliability • Improve reliability 50% Improve system availability Respondents could rate multiple drivers items Source: IBM Market Insights, Cloud Computing Research, July 2009. n=1,090 Cloud Computing

10. Elements that Drive Cloud Efficiency and Economics Infrastructure Leverage Virtualization of Hardware Drives lower capital requirements Virtualized environments only get benefits of scale if they are highly utilized Utilization of Infrastructure Clients who can “serve themselves” require less support and get services Self Service Labor Leverage Automation of Management Take repeatable tasks and automate More complexity = less automation possible = people needed Standardization of Workloads Cloud Computing

11. Managing Cloud Adoption • Cloud economics can be compelling • Small companies will adopt as reliable, easy-to-use services are available • Scale economics are within reach of many enterprises • Client migration will be work load driven • Trade-off is value vs. risk of migration • Workload characteristics are critical • New workloads will emerge as cloud makes them affordable (eg pervasive analytics, Smart Healthcare) Cloud Computing

12. Enterprise Benefits from Cloud Computing Capability From To Cloud accelerates business value across a wide variety of domains. Legacy environments Cloud enabled enterprise Cloud Computing

13. Clients cite "push factors" for and "barriers" against cloud adoption for each workload type Barriers Higher propensity for cloud • Data privacy or regulatory and compliance issues • High level of Internal control required • Accessibility and reliability are a concern • Cost is not a concern • Fluctuating demand • Highly standardized applications • Modular, independent applications • Unacceptably high costs Lower propensity for cloud Push factors Source: IBM Market Insights, Cloud Computing Research, July 2009. n=1,090 Cloud Computing

14. IBM Best Practices: Align the DR approach with the environment and virtualize • Align DR to match environment • Update DR in line with changes in production • Provide choices to match customers considerations • Virtualizing the DR environment, along with the production servers and storage, can dramatically improve recovery times as measured in both recovery time objectives (RTOs), and recovery point objectives (RPOs). Customer Example: A large defense contractor client was interested in the Resilient Cloud Validation program to combat the very real fear in the industry that clouds should only run applications that you can actually do without for a couple of days. Since their end-user clients are all DOD, they needed to be able to prove to them that the proposed Cloud services could provide the same level of reliability that traditional data center centric service offerings provide. The Resilient Cloud Validation program demonstrates to their clients and to the press that they are running a true cloud service that can be trusted. Cloud Computing

15. Infrastructure BusinessServices Desktop and Devices Development and Test Analytics Collaboration So what is IBM’s approach?IT needs to become smarter about… • … delivering“services” and service management • Standardized processes • Service management systems provide visibility, control and automation • Lower operational costs and higher productivity • … optimizingworkloads • Rate and degree of standardization of IT and business services • Complex transaction and information management processes • Rapid return-on-investment and productivity gains • … deploymentchoices • New models are emerging for the enterprise • Self-service, economies-of-scale, and flexible sourcing options • New choices of deployment – define these new models Cloud Computing

16. Focus on Managing Services End to End Service Management Architectural and process level integration that delivers business aligned Visibility, Control and Automation of all Data Center Elements • Modular, Self-contained, Scalable Workload Delivery Platform • Legacy Environment : • NON – IBM Solutions • Requiring workload connectivity • Modular, Self-contained, Scalable Workload Delivery Platform Service Management Service Management Service Management WORKLOAD A WORKLOAD B WORKLOAD C + + + + MobilityInfrastructure Facilities Infrastructure Production Infrastructure TechnologyInfrastructure Communications Infrastructure Cloud Computing IBM CONFIDENTIAL

17. Analytics Data mining, text mining, or other analytics Data warehouses or data marts Transactional databases Business Services CRM or Sales Force Automation e-mail ERP applications Industry-specific applications Collaboration Audio/video/web conferencing Unified communications VoIP infrastructure Desktop and devices Desktop Service/help desk Development and test Development environment Test environment Infrastructure Application servers Application streaming Business continuity/disaster recovery Data archiving Data backup Data center network capacity Security Servers Storage Training infrastructure WAN capacity Analytics Infrastructure Desktop and Devices BusinessServices Development and Test Collaboration Clients told us their implementation strategies — public or private Cloud, present or future — for 25 specific workloads Source: IBM Market Insights, Cloud Computing Research, July 2009. Cloud Computing

18. Smart Business Services – cloud services delivered. Standardized serviceson the IBM cloud – Public Cloud. Private cloud services,built and/or run by IBM – Private Cloud. Smart Business Systems – purpose-built infrastructure. Integrated Service Delivery Platform IBM has introduced 3 choices to deploy workloads – providing you the choice to meet your business needs! Infrastructure BusinessServices Desktop and Devices Development and Test Analytics Collaboration Cloud Computing

19. New deployment choices aligned to workloads. Analytics Collaboration Development and Test Desktop and Devices Infrastructure Compute Infrastructure Storage Business Services IBM Smart Business Desktop on the IBM Cloud Smart Business on the IBM Cloud Standardized services on the IBM Cloud NEW - IBM LotusLive w/ iNotes IBM Smart Business Dev & Test on the IBM Cloud (Beta) IBM Smart Business End User Support-IBM Service Assist IBM Compute on Demand IBM Information Protection Services IBM BPM Blueworks (Design tools) IBM Smart Business Expense Reporting on the IBM Cloud Smart Business Cloud Private cloud services, behind your firewall, built and/or managed by IBM IBM Smart Analytics Cloud Lotus Foundation IBM Smart Business Test Cloud IBM Smart Business Desktop Cloud IBM Smart Business Storage Cloud Smart Business Systems Pre-integrated, workload optimized systems IBM Smart Analytics System IBM CloudBurst IBM Information Archive IBM Smart Business for SMB (backed by the IBM cloud) Existing New - Oct Cloud Computing

20. IBM services & technology in support of Cloud Computing To help customers get started and deploy more effectively • Services in support of cloud computing • IBM Infrastructure Strategy and Planning for Cloud Computing (GTS) • IBM Strategy & Change Services for Cloud Adoption (GBS) • IBM Strategy & Change Services for Cloud Providers (GBS) • IBM Testing Services for Cloud (GBS) • IBM Networking Strategy & Optimization – network application optimization for cloud computing (GTS - ICS) • IBM Data Center strategy (GTS – S&F) • IBM Data Center FamilyTM Solutions – data center design services (GTS – S&F) • IBM Vulnerability Management (GTS - ISS) • IBM Managed Email and Web Security (GTS – ISS) • Security Consulting Services in support of Cloud Computing (GTS – ISS) • Resiliency Validation for Cloud Computing (GTS – BCRS) • Technologies designed for cloud computing • IBM Solution Edition for Cloud Computing (System z) • IBM WebSphere CloudBurst Appliance (WebSphere) • IBM WebSphere Application Server Hypervisor (WebSphere) • Service Management Center for Cloud Computing (Tivoli) • Software Delivery Services for Cloud Computing (Rational) • Telelogic Systems Architect – Rational Transformation Workbench (Rational) • Developerworks (IBM SWG) • SOA Sandbox (IBM SWG) Cloud Computing

21. Large Hotel Chain Leverages iNotes • Hundreds of thousands of employees working in >60 countries • Knowledge Workers are small % of the total workforce (~5%) • High % of under-served employees, many of whom were using free email accounts to conduct business. Underserved Employee Types: • Customer Service Reps • Hotel Managers • Front Desk Staff • Catering • Housekeeping • Maintenance Underserved Employee Needs: • Web-based Email • Small storage requirement • Infrequent usage patterns • Access to Corporate Addresses • Access to all-company notices • Easy communication within each locale 15,000 previously un-served users enabled with a Boundary Worker email account for 3+ years. Reps are no longer using Yahoo accounts to interact with customers. Per user costs are a fraction of those of the Knowledge Workers. https://www.lotuslive.com/fr/compare Cloud Computing

22. Smart Business Desktop Cloud – Pike County, Kentucky, USADelivers a modern education to its students without incurring modern costs with help from IBM Business Challenge • 27 school buildings with computer labs • Outdated systems won’t run current applications • Budget cuts reduce capital fund by 80% “We no longer worry about what hardware is in the school as much. We also no longer worry about the applications or processes that the schools are using because they are the same for everyone.” — Maritta Horne, CIO Pike County Schools Solution • IBM Desktop Cloud leveraging x86 and VMWare • Reuse existing computers as thin clients • Capital investment only in central data center Benefits • Cost of solution 40% less than replacing desktops • Reused existing equipment • Improve learning for students • Lower application licensing costs Solution components: • IBM Smart Business Desktop Cloud Cloud Computing 22

23. North Carolina State University Making a breakthrough in improving access to academic computing resources Business ChallengeNC State has more than 31,000 students and nearly 8,000 faculty and staff. Growing demand for academic computing resources meant the school needed to fundamentally change the way it managed these resources in order to deliver the service levels that its key user populations required. SolutionIBM adapted high-performance computing into a virtualization model enabling NC State to deliver more resource support across the university at lower cost. The new “cloud computing” model for provisioning technology offers the school a quantum improvement in access, efficiency and convenience over the traditional computer labs it had relied on. Benefits • Projected savingsin software licensing costs of up to 75 percent • 150 percent increase in students served per application license • Increased flexibility to shift computing capacity between instructional, research and administrative needs “Our goal was to rethink the way we met the academic computing needs…By collaborating with IBM, we are now better able to deliver on that mission.” – Mladen Vouk, Department Head Computer Science NC State University Cloud Computing

24. UNIFEM/USNC, Women’s International Non-ProfitImproves fundraising initiatives using LotusLive and Cloud Computing • The Business • UNIFEM is a non-profit organization dedicated to ending violence, poverty and inequality for women. The Challenge • Improve efficiency of distributed fund raising teams • Connect 28 volunteers from different chapters across 8 states to national organization and to each other • Reduce volunteer time spent on administration to increase time spent on fundraising Solution • Use Files to create central repository to store and share documents (e.g., sponsor contracts, planning documents, fundraising forms) • Use Activities to: • Plan and coordinate events (e.g., walkathons) • Ensure 24 hr access to current materials for events • Capture and share meeting notes, photos, talking points Benefits • Reduced 10% of weekly hours spent on coordination and administration for volunteers • Little training needed for volunteers, they could just use it • Worked across multiple environments/firewalls • Eliminated version control problems “Before we started using LotusLive Engage, I would constantly get emails and phone calls asking for information, so I spent a lot of time responding to those requests. Now people know to go to LotusLive. In fact, I personally saved two hours a week, which is 10% of the time I spend volunteering for UNIFEM.” Younghee Overly, Unifem, North Carolina Chapter President; Member, National Annual Walk Committee www.lotuslive.com Cloud Computing

25. IBM Information Protection Services on the IBM cloud Cloud-based technologies protect your information with professionally managed business continuity and resiliency services The United States Golf Association depends on IBM cloud services, both the Email Management Express for email recovery and Remote Data Protection to back up their servers. Jessica Carroll, managing director of IT for the nonprofit governing body of golf, says her existing backup and disaster-recovery plans were well designed for business conditions five years ago. But they were no longer adequate for today's world in which companies can't afford to be down for even brief periods of time. She looked for a better option and found a cloud-based business resiliency service from IBM. "IBM's reputation and the services it was offering were enterprise class," Carroll says. "I knew right away this was the way to go. The product was so strong." Cloud Computing

26. Managed Service Provides Reliable Data Protection IBM IPS on the IBM cloud –remote data protection • Automatically backed up via your existing network through the cloud to our security-rich, offsite data centers or onsite to your own data center. • Fully managed solution can reduce backup costs by up to 40%. • Skilled IBM storage specialists worldwide who provide 24x7 monitoring and management. • Quickly implement a best practices–based data protection strategy. Customer Example: One of Houston's largest and fastest-growing human services agencies Serves over 200,000 citizens in Texas. Depends on IBM cloud services to back-up server and PC data Tom Comella, chief information officer, Neighborhood Centers Inc. "IBM cloud services were critical in our community recovery efforts following Hurricane Ike. The benefits of cloud services reach far beyond disaster recovery. Better data protection -- demonstrating that we are good stewards of information -- has become a selling point for us in willing contracts." Cloud Computing

27. IBM Cloudburst VNTT: Telco Services Cloud for Businesses Goal: • Become a leading Telco provider of IT cloud services • Support a powerful eco system for innovation • Incubator for new business models • Transform how IT is consumed in Vietnam Pain Points: • Efficiently provide resources & services to surrounding companies Benefits: • Accelerates time to market - rapid access to applications services and virtual resources • Provides business flexibility and lower costs with a “pay per use” model to its clients • Rapidly established a cloud based data center Vietnam Technology & Telecommunications - State owned telecom joint venture “IBM’s Blue Cloud solution is the key connection between the two success factors of business model innovation and strong technological infrastructure” - Nguyen Minh Tan, General Director, VNTT http://w3.ibm.com/news/w3news/top_stories/2009/06/vn_wins_vnttoncloud.html Cloud Computing

28. Platform/Application/Service: A Mobile Cloud for BoP Applications Government officials enters district, state and national level information • Kiosk-operator gathers local information • from various sources: • Makes phone calls to get train schedule • Gets movie list for today • Gets blackout timings from electricity office • Gets weather information through internet • Gets visitor list (doctors, etc.) by officials from panchayat Kiosk-operator uploads information through a phone Spoken Web Govt. Voice sites organized in a distributed nation-wide cloud Villagers call the VoiceSite to get local as well as district, state and national level information. Service delivery to villagers through (mobile) phones by a voice interface 28 Cloud Computing Mobile Cloud IBM Confidential 3/11/2014

29. Client Client Managed Remotely Application/Service Cloud: B2B Collaboration for an Asian Department Store Challenge: • Thousands of suppliers need efficient operation & effective collaboration with a department store Solution: • A retail B2B solution on a low cost, scalable & secure platform ( >2000 suppliers so far) • Cloud platform with scalability, security, process monitoring dashboard, data transmission • ISV’s Retail B2B app for biz info exchange, order & inv. mgmt, sales data analysis Business benefits: • Enables suppliers to operate business independently w/ lower cost w/o IT operations • Provides dept store with common order and inventory mgmt across suppliers • Allows ISVs to join w/ core knowledge in the app w/o worrying about scalability and security Clients 2000 of Retail Group’s suppliers Client Rel’n Owner Large Int’l Retail Group Ind Service Vendor E-Future Operator/Composer IBM Client Cloud Platform Cloud Computing

30. IBM Computing On Demand Benchmark Centers Common Location Project IT transformation includes Cloud Computing within IBM. Yielding a cumulative benefit to IBM in excess of $4B IBM Technology Adoption Program (TAP)Saving IBM over $2.5M per year (Case Study on IBM TAP) Self-service, on demand IT delivery solutionfor 3,000 IBM researchers across 8 countries (Case Study on IBM Research Cloud) Enterprise class utility computing solution for clients Systems platform testing for Enterprise Clients, SMBs, & ISVs Cloud computing solution for IBM Learning Centers in Europe (Case Study on IBM Learning Cloud ) Cloud Computing

31. video • IBM and Dubuque IA partnership Cloud Computing

32. Getting started with cloud computing IBM can help you… • Develop cloud strategy and roadmap • Assess cloud deployment models, service options and workloads • ROI Analysis • Choose initial project • Condition existing infrastructure for cloud • Virtualize and automate existing systems • Add service management, service catalog  Plan and Prepare • Start with an isolated private cloud deployment • Architect and implement low-risk workloads such as test and development for cloud • Standardize applications and systems • Deploy self-service portal  Pilot and Deploy • Roll out cloud across the enterprise • Enable additional workloads on private cloud • Add new users • Use trusted public cloud services to supplement business and IT workloads  Extend and Evolve Cloud Computing

33. In Summary … there is opportunity in the shift to a smarter planet. • Growth of instrumentation, interconnection and intelligence in the world will drive the emergence of IT and business services ... and the requirement for service management systems. • New IT consumption and delivery models are very compelling for some workloads today – and will position your enterprise for the future. • IBM offers new choices to: • Reduce infrastructure and operational costs. • Accelerate service deployment and return on investment. • Deliver consistent, secure services. Cloud Computing

34. Cloud Computing