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Building a Cloud Strategy Cloud B ased S ervices – Industry Trends and Implications

Building a Cloud Strategy Cloud B ased S ervices – Industry Trends and Implications. Jitender Singh Director – Cloud Solutions Business October 16 th , 2013. P aaS. SaaS. IaaS. C aaS. Managed Cloud. Private Cloud. Public Cloud. Hybrid Cloud.

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Building a Cloud Strategy Cloud B ased S ervices – Industry Trends and Implications

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  1. Building a Cloud StrategyCloud Based Services – Industry Trends and Implications Jitender Singh Director – Cloud Solutions Business October 16th, 2013

  2. PaaS SaaS IaaS CaaS Managed Cloud Private Cloud Public Cloud Hybrid Cloud

  3. Customers are seeking Creative Business Models Customer Drivers for OPEX Models • Cash Management: • Consume all network, telephony and applications as a service • Use capital in other areas of business • Flexible Delivery Options • Up-scale, down-scale on demand • Hosted, On Premise Managed, Hybrid • Managing and Reducing IT Complexity • Reluctance to hire staff to manage VoIP/UC technology complexity • End-to-end SLA • Total Cost of Ownership • Potential for cost savings, including people, capital & operating cost • Virtualization and shared infrastructure lowers the cost to deliver services • Managing Obsolescence • Refresh as technology evolves • Corporate-wide Standardization • Customer facing differentiation OPEX MODELS Managed Services Assets on premise Owned by Customer Managed by 3rd Party Outsourced (COS) Assets on premise Owned by 3rd Party Managed by 3rd Party Hosted Assets hosted by 3rd Party Owned by 3rd Party Managed by 3rd Party Dedicated (Private) Shared Multitenant (Public) Hybrid (Assets on Premise Apps from cloud) Cloud Services Implication Large Enterprises are not quite sure as to what implications Cloud will have on their business, but are expecting a solution that offers cost savings, control, leverage and security first and scalability, flexibility, standardization and homogeneity in the long-run

  4. Market View Global Cloud Communications Market growing to $27B at 8% CAGR by 2017 Transition to Cloud • The various workplace technology markets will adopt cloud based strategies at different rates • Trend to cloud is being led by hosted apps - i.e. Email, IM, Avaya LiveEngage, Conferencing, CRM, ERP (like SFDC, SAP) and laying the groundwork for hosted voice • Hosted and Managed services - help customers make the transition to an all IP converged collaboration. • Hybrid Solution – Interim step as Enterprises consider migration to Hosted / cloud Note: UCaaS, CCaaS, VaaS forecast includes Professional Services, Maintenance and Solution revenue for Private +Public offered through Managed, Hosted and SaaS Source: 2013 June Avaya Demand Forecast, Avaya Market Assessment $1.4M Avg $3.5M Avg

  5. Top Business Drivers for Cloud – Large Enterprise There are a group of business drivers that combine to make hosted the preferred model and are difficult to sell against without a hosted solution.

  6. Market SegmentationCustomer Needs and Opportunity • Small Businesses • Needs Simplicity and Pricing • Fixed cost, No worry • Help me focus on my business • Make me look bigger and more professional • Never miss a call; (missed call = missed revenue) • Front office capability • Simple productivity apps (e.g. voicemail to email) Elasticity Access Price Agility Security Customization SLA Control • Midmarket • Needs Bundles and Solutions • High functionality and productivity, but make it easy • Multisite, flexible growth (e.g. add new office, grow/shrink usage) • Ideal segment for managed / hosted • Large Enterprises • Needs Integration • Sites, disparate CPE, IT apps, • Security, SLA’s • GLOCAL support from ‘trusted’ partner

  7. Deployment Options for Large Enterprise TCO of Hosted model is 13% lower in 3 year timeframe 3 Year TCO for Large Enterprise (Dollars per User) • On-premise - Initial installation costs of servers/handsets • Managed - Initial installation costs of handsets & management • Hosted - Initial installation costs of handsets & hosting • On-premise - Maintenance of network, servers, handsets requires 77 FTEs • Managed - Maintenance of servers, handsets offset by increased maintenance cost • Hosted - Maintenance of handsets offset by increased subscription cost • On-premise - Cost of initial licenses, support and update • Managed - Cost of initial licenses, and S/W update • Hosted - Cost of subscription & handsets • On-premise - Cost of initial servers, handsets and server maintenance • Managed - Cost of initial servers, handsets and total maintenance • Hosted - Cost of initial gateways

  8. TCO Savings Sensitivity – over 3 years100 Seats SME Vs. 1000 Seats Medium Enterprise 3 year TCO savings for a 100 seat deployment ($ / user) 3 year TCO savings for a 1000 seat deployment ($ / user) Illustrative Only – not per scale % TCO Savings 25% 22% 13% A sweet spot for TCO savings exists potentially between 1,000 and (10,000?) seats 100 1,000 40,000 # Enterprise Seats

  9. Deployment Options for Large Enterprise TCO of Hosted model is similar to On-premise in 5 year timeframe 5 Year TCO for Large Enterprise (Dollars per User) • On-premise - Initial installation costs of servers/handsets • Managed - Initial installation costs of handsets & management • Hosted - Initial installation costs of handsets & hosting • On-premise - Maintenance of network, servers, handsets requires 77 FTEs • Managed - Maintenance of servers, handsets offset by increased maintenance cost • Hosted - Maintenance of handsets offset by increased subscription cost • On-premise - Cost of initial licenses, support and update • Managed - Cost of initial licenses, and S/W update • Hosted - Cost of subscription & handsets • On-premise - Cost of initial servers, handsets and server maintenance • Managed - Cost of initial servers, handsets and total maintenance • Hosted - Cost of initial gateways

  10. ExampleValidates our TCO hypothesis and model • EMEA – 125,000 users (50,000 users would move to hosted) • NAR – 500,000 users (100,000 – 200,000 users would move to hosted) • 8,451 sites in NAR and approx 1,000 sites in EMEA (5% large sites with 1000 users and up) • Current network topology is 1 data center supporting all sites. Customer Scope Top Business Drivers • Flexibility to scale up and down based on usage • Shifting risk to service provider / Managing Technology obsolescence • Moving from Capex to Opex • Standardization • TCO savings (perceived – but not always realized) TCO Profile • Evaluated On-premise, hosted and managed options over 3, 5 and 7 year horizon • Savings from hosted not as large as expected • Hit or miss depending upon the site • Savings from staffing, datacenter operations considered as soft costs • Enterprise has a very lean, highly skilled staff at good rates – potential for retrain and redeploy • Bandwidth costs for hosted not considered significant • Bandwidth costs are a significant cost driver within the enterprise network (e.g. when adding a new site) • Incremental bandwidth costs between private network and CSP do not impact TCO significantly • Savings realized from SIP trunking • Though WAN upgrades at sites offset savings achieved by negating local GW requirements

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