Business is Accelerating; IT Must Transform

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Business is Accelerating;

IT Must Transform

May 2015

Publication sponsored by:

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Introduction 1

Production Applications Will Require New Infrastructure 1

Survival Roles and IT Organizations 3

Considering Managed Services for Cloud and Digital Business 5

Provider Selection 6

The Journey Begins with a First Step 9

Sponsor Perspective 10

Figure 1: Workload Categories, Core Characteristics, and Key 3 IT Requirements

Figure 2: Managed Services Improve Cloud Workload Management 5 Figure 3: Must-have Managed Services Supporting Cloud-based 6 Production Apps

Figure 4: What Factors Help Make the Provider Decision? 7 Figure 5: Sourcing Managed Services for Cloud 7

________________________________________________ About this Report

Saugatuck Technology Inc. is solely responsible for the content of this report. Unless otherwise cited, all content, including illustrations, research, conclusions, assertions and positions contained in this report were developed by, and are the sole property of, Saugatuck Technology Inc.

The research and analysis presented in this report includes research from ongoing Saugatuck Technology research programs, including our global survey and interview work with user enterprise business and IT leaders, briefings with providers, and analysis of publically-available market information from multiple sources.

The publication of this report was funded by Dimension Data plc.

About Saugatuck Technology

Saugatuck Technology, Inc., provides subscription research and advisory consulting services focused on key market trends and disruptive technologies driving change in business computing. Founded in 1999, Saugatuck is headquartered in Westport, CT with resources in metro Boston, Washington D.C, Silicon Valley, and Wiesbaden, Germany. For more information, please visit www.saugatucktechnology.com or call +1.203.454.3900.

Introduction

“Within the next five years, our CEO and CFO expect the most business growth, and profitability, from digital business. The challenge for our IT organization and infrastructure is that what we have is not what we need.”

CIO, US-based financial services firm

To paraphrase a famous quote: the future of IT is not what it used to be. As businesses evolve to become “Digital Businesses,” IT can no longer depend on the past as a guide for the future. Digital Business encompasses collaborating with partners and customers, engaging customers through social IT,

participating in online/Cloud-enabled markets, utilizing mobile devices for executing and managing the business, and profiting from new offerings of digital services and content. In short, the evolution to Digital Business is forcing IT into uncharted territory, with new types of technologies, applications, and workloads. The future of IT therefore is not a continuation of the past; the future is a break from the past.

Unfortunately for most IT organizations, the evolution is occurring rapidly and is additive to more conventional IT objectives. The timely pursuit of new business opportunities and strategies creates an urgent requirement for a transformed and adaptive blend of IT organization, infrastructure, and services. This research paper builds on Saugatuck Technology research and analysis to examine and explain how these changes affect any company’s IT infrastructure and organization, and how managed services are key to the “survival skills” needed to adapt to and address the requirements of current and future production applications – and to enable competitive business opportunity indefinitely. Production Applications Will Require New Infrastructure

“Currently, we do not have the infrastructure in place that is best for our new application workloads. We know we must transform our infrastructure quickly to avoid constraining our business.”

CFO, large US-based Manufacturing firm

In the face of accelerating business dynamics, possibly best characterized as the evolution to Digital Business (as described above) – is a move to Cloud, potentially including Private Cloud, the right addition to your enterprise’s IT infrastructure? Many IT organizations are learning that Cloud, especially a Private Cloud, can simultaneously:

 Improve utilization of resources and make the infrastructure more cost efficient;

 Accelerate delivery of new applications; and

 Enable IT to be more responsive to increasingly dynamic business requirements.

Cloud-based infrastructure and services become extremely valuable in an environment that is increasingly subject to changing software / application / workload types and importance. And in Saugatuck’s experience, the technical and operational aspects of production applications define the requirements for

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IT infrastructure. Saugatuck’s research on the shift toward Digital Business with large and mid-sized businesses worldwide indicates three categories that

encompass almost all IT applications for the next five years, as follows:  Conventional applications. These applications exhibit “well-behaved”

operational characteristics such as consistent or projectable runtimes and requirements for IT resources (i.e., storage, compute, network). Examples include traditional “back office” and system-of-record types of operations and applications. Since these applications are easily managed, the most effective and efficient way to handle them is to provide dedicated resources for their execution.

The shifts toward new ways of doing business suggest that over time, a shrinking percentage of production applications will be considered Conventional. While many Conventional applications will persist, their relative percentage of enterprise IT and business, and their relative criticality to the enterprise, will steadily diminish. And as that happens, the need for IT infrastructure optimized for these applications will also dwindle.

 Variable applications. More and more of these are being seen with the shift toward more Digital Business. These applications are slightly less “well-behaved” than Conventional applications. Variable applications exhibit somewhat predictable and relatively limited transient demands, peaks and valleys of use / demand, and changing priorities. Examples include online transactional systems or “systems of interaction” with peak loads (such as month-end) of two to five times the typical loads.

Virtualization today is a good means of managing Variable applications effectively and efficiently without wasting resources – but again, as ways of doing business change, Variable applications will also change.

 Dynamic applications. These applications are unruly; they exhibit unpredictable and wide variations in resource requirements. For often-unforeseen reasons, resources required for a Dynamic application may suddenly increase by a factor of 100 or more. Web-serving applications and various types of “systems of engagement” / market-facing

applications are typical of this category. These are new applications and the results of renovating older applications by adding mobile, social, or analytics capabilities.

Saugatuck research indicates that the trend in new and renovated applications is for increasing growth of, and shift toward, more and more Dynamic

applications. Thus, over time, applications and their associated business workloads will become less predictable. The variations in run times and resource requirements will likely be outside IT’s ability to predict with reasonable accuracy. This is because the drivers of these applications will be factors such as local weather conditions and regional stock market fluctuations. The consequence is that traditional IT infrastructures – those built for

Conventional and possibly Variable workloads – must be enhanced to enable and support more Dynamic applications. Responsiveness, including flexibility, is the key requirement that will be increasingly levied upon IT organizations.

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The workload mix – the relative amounts of Conventional, Variable, and Dynamic applications – will shift as the business units strive to pursue opportunities and increase their competitiveness. Thus, the category and operational characteristics of an application workload define the requirements for the optimal infrastructure for that application. The application categories and their associated IT requirements are summarized in Figure 1.

Figure 1: Workload Categories, Core Characteristics, and Key IT Requirements Application Workload

Category Core Characteristics Key IT Requirements

Conventional

 “Well-behaved” with consistent or projectable runtimes and resource requirements

 Examples are traditional “back office” and system-of-record types of

applications

 Server options: traditional rack and blade, integrated, pre-configured

 Static connections for backup or switching controlled manually or through operator action

Variable

 “Fairly Well-behaved” with predictable and/or relatively limited transient peaks and valleys of use/demand

 Examples are online transactional systems, “systems of interaction”

 Server options: traditional rack and blade, pre-configured

 Shared connections between servers and storage or software controlled switching for both backup and for allocation of resources

Dynamic

 “Unruly”; unpredictable wide variations in resource requirements

 Examples are web-serving workloads, “systems of engagement”/ market-facing workloads, management systems utilizing analytics

 Server options: rack and blade; workload size may require high density servers

 Dynamic provisioning of resources entails fully software controlled interconnection of servers, storage, and network

Source: Saugatuck Technology Inc.

We note that, for all of these categories of application workloads, but especially for the Dynamic workloads that are and will be the most influential on business and IT change, Cloud-based infrastructure capabilities – especially Private Cloud – enables the capabilities and support required with the best combinations of cost and flexibility.

Survival Roles and IT Organizations

“The roles of the IT organization don’t have to change, because they’re already obsolete in too many ways. We just need to survive long enough to get better, so we can make the business better.”

CIO/CTO, global diversified media provider

For most IT organizations, evolving to support the transitions of their businesses and their user requirements – including the shift of applications – entails

developing and acquiring skills to perform roles that are critical to the long term survival of the business. Saugatuck calls these the Survival Roles, described as follows:

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1. Identify the requirements of the new IT infrastructure. This Role entails identifying infrastructure requirements (e.g., resource capacities, Category for the application, etc.) for:

 Existing applications;

 Planned or likely enhancements to existing applications;  Planned or desired new applications.

Requirements should be prioritized and a timeline must be developed with the business units to map the urgency of new infrastructure capabilities. 2. Evaluate and select products and providers. This Role must include

identifying a list of evaluation criteria (with relative weightings) for each type of product (e.g., in-house Private Cloud, Hosted Private Cloud) and service (application migration, application operation, etc.). This Role also entails performing the evaluation and selection of the products and services.

3. Negotiate terms and conditions and SLAs. This Role focuses on negotiating acceptable contractual arrangements (including SLAs, penalties, etc.) with providers of new products (e.g., Hosted Private Cloud) and services (e.g., application operation).

4. Plan and execute migration of applications. This Role entails the identification and prioritization of applications to be moved to a new infrastructure. This includes development of a timeline for applications and individual project tasks and checkpoints for each application being moved.

5. Operate and support the new infrastructure. This Role encompasses layers of tasks ranging from a foundation of basic operations of the infrastructure (e.g., ensuring the Private Cloud is operational) up through applying maintenance to the middleware in the Private Cloud, to operating and maintaining the application. This Role can also entail identifying ways to improve the processes of the IT organization. For example, a Private Cloud can potentially eliminate almost all manual actions associated with changing infrastructure resources assigned to an application.

6. Monitor provider SLA and contract compliance. This Role is closely linked to Role 3. Here the mission is to monitor delivery of all contracted offerings and ensure commitments are fulfilled. If commitments are not satisfied then discussions with the provider must ensue and focus on remediation, penalties, corrective actions, etc.

7. Innovate and implement new application solutions. This Role can deliver truly high value to the business. The objective of this Role is to work closely with the business units, such as Marketing, and help devise, design, and implement new applications to enable the business units to pursue tactical and strategic initiatives. An example might be to pursue increased in-store sales by sending targeted offers to customers as they move through sections of the store. Such an application would entail analytics of customer buying behavior and mobility for transmitting the offer to the customer’s cell phone.

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Considering Managed Services for Cloud and Digital Business IT

“For our business to survive, we need new, more, and better IT capabilities. For our IT function, our IT organization, to survive, we need to partner with Cloud providers and other services providers.”

CTO, F500 financial services provider

For most IT organizations, the list of “Survival Skills” is definitely daunting. Most IT executives can attest to the challenges of acquiring or developing new skills. And, the above list includes the additional challenge that most of the line items do not align with the technical skills of most IT staff personnel.

As a result, for many IT organizations the most expedient and cost effective approach is through the use of Managed Services for Survival Roles 1 through 6. This enables IT leaders and organizations to concentrate on Survival Role 7, which enables the IT organization to evolve from managing the IT resources to helping identify and implement new innovative solutions for their users. Arguably, Survival Role 7 will provide the highest long term value and ensure survival of the IT organization and the business. Thus, Saugatuck suggests the use of Managed Services that will enable the IT organization to perform Survival Role 7.

Our research indicates that IT leaders themselves see great value in Managed Services for enabling and improving the ability of the firm, especially as IT infrastructures become more diverse and therefore more costly – and beyond the ability of existing IT resources to enable and support. As shown in Figure 2, reducing this rapidly expanding set of operational expenses is the initial focus of most IT leaders looking to Managed Services, followed closely by their desire to improve focus on core business.

Figure 2: Managed Services Improve Cloud Workload Management

Source: Saugatuck Technology, 2015 global Cloud Infrastructure Survey, n=327

The message is clear that companies looking at managed services for

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often difficult to align with the business long-term, as staffing and budgets dictated too much of their agility and performance.

Provider Selection

“Provider selection is at least as important as solution selection.” Saugatuck Technology Inc.

Saugatuck’s work indicates that the move toward Digital Business is well underway. Given that such a move requires flexible and adaptive infrastructure that is both scalable and cost-effective, we can also confirm that there will be more need for more Cloud-based infrastructure alternatives, which in turn will require more skill and managed services.

So what should we look for, and from whom? Three aspects: Types of services offered; provider attributes; type of provider.

First: What types of services are most valued by IT leaders seeking and moving to Cloud-based infrastructure that enables improved business ability and competitive success? Figure 3 sums up what CIOs told us in our 2015 global survey.

Figure 3: Must-have Managed Services Supporting Cloud-based Production Apps

The gradual shift from left to right indicates that the relative importance of each capability can vary significantly according to the needs of each firm considering what services to acquire from any provider. Therefore, the list should be used primarily as a checklist against which to list and qualify a firm’s Managed Services requirements. That qualified list will then provide a relative weighting of the importance of each capability, which can then be applied to help identify and select qualified providers.

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Second: What criteria should be used in helping to select specific providers? As with any such decision, the criteria to use depends on the acquiring firm’s plans, requirements, practices, policies, and more. Figure 4 sums up the key criteria that IT leaders tell Saugatuck they prefer to use to identify and select providers, listed in descending order of value, and grouped by color in terms of relative importance. Figure 4: What Factors Help Make the Provider Decision?

Each provider’s pricing must be consistent with others’ in order to get in the door; this differs little from traditional IT buying. The preference for suites is explainable by firms wanting/needing as many aspects of systems to work as cost-effectively, integratively, and securely together as possible, and which tends to be less expensive in the long run. Contract terms and provider reputation rank similarly. Again, the relative value or importance will vary according to each company’s own situation.

Figure 5: Sourcing Managed Services for Cloud

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Figure 5 sums up buyer preferences for sourcing of Managed Services for Cloud listed in descending order of ranking.

Finally, what type(s) of providers should be considered? In Saugatuck’s research, we find that those providers with “brand name” recognition,

reputation, and position are the most sought-after, followed by providers of IT infrastructure. Ideally, some combination of both will be the optimal choice for most companies seeking combinations of Cloud-based infrastructure and managed services to enable and support them.

In sum, Saugatuck suggests the following factors to consider when evaluating offerings and providers for the increasingly-important combination of Cloud-based infrastructure and the resulting “Survival Roles” for the IT organization:

 Expertise and experience in managing “production” applications and infrastructures. This typically results from experience in hosting or in operating hosted Private Cloud offerings.

 Expertise and experience in managing applications based on key enterprise business software, such as SAP. This typically entails partnerships with and/or certifications from the business management software providers in question.

 Expertise and experience with major Cloud capabilities. Your ideal provider may either be a Cloud provider, partner with Cloud providers, and/or both. Look for those with experience in Cloud platforms, business marketplaces, and/or SaaS and PaaS offerings.

 Breadth of offerings. A single provider supplying several Managed Services can be more efficient (and, less costly) than coordinating services from multiple providers.

 Partner ecosystem. Look for providers with vibrant and growing relationship networks spanning systems integrators, VARs, developers, ISVs, and others working to enable the most value from any range of Managed Services.

 Reputation in the subject geography(ies) and industry(ies). Local market knowledge and expertise is increasingly important as more and more critical systems, applications, and data are shifted to Cloud-based infrastructure and managed by outside parties.

 Training and education. Do not overlook the importance of providers that can supply training for in-house IT staff in managing and optimizing infrastructure use with each type of workload. This will greatly improve your company’s ability to enable and support future, currently unforeseen changes as it progresses through the early stages to more completely-conceived and executed digital business efforts.

The Journey Begins with a First Step

“Digital Business engagement is no longer optional. If a business hasn’t made the transition to the digital world yet, they are probably on death’s door.” - CIO, global media firm

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There is no question that a shift toward Digital Business is reshaping enterprise application workloads, which in turn drives both needs for, and benefits from, new and more capable IT infrastructure types. And that shift is driving the simultaneous need for more skills that are increasingly best sourced to providers of Managed Services.

The evolving mix of applications will clearly affect the underlying IT infrastructures. Saugatuck’s position is that it is time to stop thinking about infrastructure as finite and relatively static. It is time to think of resources, services and skills readily adaptable to varying mixes of applications. Going forward, we must plan for IT that is contextual, and dynamically variable. Understanding how company IT requirements are changing is crucial to building compelling analyses and business case(s) for upgrading infrastructure, and for evolving the IT organization into one that can enable business

competitiveness indefinitely.

Bluntly, such a transition is beyond the abilities of any single IT organization. Even the biggest players in IT partner for infrastructure, services and skills in order to build and then take advantage of competitive possibilities. Shouldn’t your firm do the same?

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SPONSOR PERSPECTIVE

Technology is reinventing the modern enterprise. Every core function of the business is being redefined including complex applications for customer engagement, business intelligence and talent management and retention. The rules of technology management are being redesigned, turning IT organizations of the bygone era into core innovation centers. Part of this transformation is the ability to select and migrate production applications and core system to the cloud. The realized promise of cloud, self- provisioning, is simple; but self-management of complex applications and associated business processes is not trivial. To leverage the power of hybrid cloud for the modern enterprise, we think CIOs are looking for a cloud provider that closes the gap on managing the cloud.

We are hands-on, so you can be hands-free

Dimension Data Cloud Surround® is a portfolio of service delivery platforms and managed services reflecting our deep heritage in networking, storage, security, advanced automation, end user computing and mobility to deliver enterprise production applications and workloads on the cloud. With Cloud Surround organizations move applications to cloud with confidence, and experience accelerated time to value. Key resources are freed up for new projects to drive growth. Dimension Data is an experienced cloud service provider with global service delivery capabilities, in 16 global data centers across five continents with local and proven technical expertise. This includes managing OPEX private cloud on the client premises anywhere in the world.

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25,000 people in more than 50 countries across six continents

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Local language capabilities, with local in-country support services

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Dimension Data employees fulfill local client requirements with management of multi-vendor,

multi-cultural environments

Dimension Data Cloud Meets Client Needs, Today and Tomorrow

Everyday we talk with CIOs that are ready for the next chapter in cloud adoption – moving production applications to the cloud. Some applications are born in the cloud but it’s no surprise that not every application can or should move to the cloud. Many, however, can be “fit to the cloud” like ERP, vertical core business applications and enterprise productivity tools like unified communications, mail, collaboration and video. Dimension Data knows how.

We have three guiding principles for Dimension Data Cloud:

Provide the right cloud for every job, with a choice of how you pay – using capital dollars or consumption driven rate cards - and then manage as much or as little of the cloud as you like.

Enable IT to take back control of key business functions with a consistent hybrid cloud management platform.

Ensure an exceptional client experience with 99.999% service level agreements and service credit caps of 100%

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Our Mission is to help our clients make better business decisions and create new business value through trusted and objective insights into the key market trends and emerging technologies driving real change.

Over the last few years, this has included a major focus on the emergent new master architecture, that includes not only Cloud applications and infrastructure, but mobile, social, advanced analytic and sensor technologies. More recently, the firm has also focuse

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Business is Accelerating; IT Must Transform