WHITE PAPER Turnkey Clouds, Turnkey Profits | March 2011 turnkey clouds, turnkey profits

To meet customer demand and succeed, service providers need to build cloud services that are agile, secure, and profitable. Turnkey Clouds, Turnkey Profits

table of contents

SECTION 1: Challenge 4

The move to cloud must be profitable

SECTION 2: Opportunity 5

Cloud computing opportunity: An inflection point

SECTION 3: Benefits 6

Cloud service providers set to fill the “demand gap”

SECTION 4: 7

Not just any cloud: a sustainable, manageable and secure cloud service

SECTION 5: 8

CA 3Tera Applogic: a cloud services platform to build upon

SECTION 6: 9

Partnership in growth

SECTION 7: 9

Conclusion

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executive summary

Challenge

Cloud computing is changing how service providers and software vendors build and deliver their offerings. Many service providers are already trying to profit from the shift to cloud computing. Others are starting to catch up. The technical challenge for service providers is building a cloud service delivery infrastructure that can provide the agile, reliable, and cost-effective applications and cloud services businesses need.

Opportunity

The cloud computing market is accelerating. So whether service providers are considering offering IaaS, Saas, PaaS, virtual private clouds or services to enterprises that help other ISVs succeed, there are many profitable green field opportunities to be explored.

Benefits

Those service providers that position their business, and their technology, to successfully transition from traditional, on-premise IT systems to cloud computing services will succeed in the months and years ahead. They will be able to capitalize on the tremendous opportunities to expand upon existing sources of revenue, and to seize entirely new ones.

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Section 1: The move to cloud must be profitable

In many ways, cloud computing does not seem very disruptive. Certainly, IT departments have been engaged in outsourcing technology services since the 1990s and Web-based application services have seen their use increase for more than a decade. To be sure, there’s nothing entirely new about application hosting. But make no mistake: cloud computing is both a disruptive technology and a disruptive business model for service providers. The service providers that succeed will be those that best understand how cloud computing changes the market, and that build the most versatile, cost-effective, service delivery platform.

With cloud computing, one of the most noticeable changes is the speed of delivery of IT services. While it may take weeks (even months) for internal IT teams to deliver new server capacity, applications, and other services, organizations turning to cloud services for new workloads find they’re getting what they need made available in days to hours. That’s why enterprises are turning to their internal IT departments less, and increasingly reaching out to service providers to deliver the IT resources they need.

For instance, enterprises are embracing applications delivered as Software-as-a-Service (SaaS), and they are doing so for everything from traditional office productivity applications to Enterprise Resource Planning and everything imaginable in between. Cloud computing disruption isn’t limited to SaaS; it’s also about Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) offerings. More often, organizations want to outsource parts of their own IT infrastructure—storage, hardware, servers, and networking components—so they can focus on more strategic business endeavors. And organizations that seek to extend the benefits of an agile infrastructure provided by IaaS, and want the abstraction of the operating system and application integration, are turning to PaaS providers.

All of this is changing how service providers and Independent Software Vendors (ISVs) deliver their offerings. Many ISVs today need help from service providers to build the infrastructures and platforms to deliver their applications, while other service providers often are acquiring the infrastructure and cloud computing resources and platforms they need rather than building their own. A number of CA Technologies service providers no longer own any of their own hardware or manage their own data centers for their services—it is all outsourced.

As you can see, cloud computing creates opportunities for service providers to expand upon existing sources of revenue, and to seize entirely new ones. However, just because an opportunity exists doesn’t mean success or profitability will come easily. Service providers need to do everything they can to simplify the complexities associated with cloud services—storage, vast component catalogues, security, and even customer usage metering and billing—if margins are to be maximized.

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Section 2: Cloud computing opportunity: an inflection point

Though it may sound like a cliché, the cloud computing market is in a sweet spot for service providers. Currently, the cloud computing market is not so mature that all of the opportunity is taken, and it’s not so early in the market cycle that real sales remain years away. So, whether you are considering offering IaaS, SaaS, Paas, virtual private clouds, or services to enterprises and to help other service providers and ISVs succeed, there are plenty of green field opportunities to be explored.

From April through July 2010, research firm Gartner surveyed 1,587 respondents in 40 countries to understand general IT spending trends and spending on key initiatives such as cloud computing. “The cloud market is evolving rapidly, with 39 percent of survey respondents worldwide indicating they allocated IT budget to cloud computing as a key initiative for their organization,” said Bob Igou, research director at Gartner. “One-third of the spending on cloud computing is a continuation from the previous budget year, a further third is incremental spending that is new to the budget, and 14 percent is spending that was diverted from a different budget category in the previous year.”1

“Overall, these are healthy investment trends for cloud computing,” said Bob Igou, research director at Gartner, in a statement. “This is yet another trend that indicates a shift in spending from traditional IT assets such as assets and a move toward assets that are accessed in the cloud.”

That move is happening rapidly. Consider the SaaS market. According to research firm IDC the SaaS market reached $13.1 billion in revenue in 2009, and IDC expects it will grow to $40.5 billion by 2014 at a compound annual growth rate (CAGR) of 25.3%. IDC expects that by 2012, less than 15% of net-new software firms coming to market will ship a packaged product (CD); by 2014, about 34% of all new business software purchases will be consumed via SaaS, and SaaS delivery will constitute about 14.5% of worldwide software spending across all primary markets.2

According to Yankee Group research cited in CRN, 24 percent of large enterprises with cloud computing experience already have begun using IaaS, while another 37 percent say they’ll be adopting IaaS by end of 2012.3

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Section 3: Cloud service providers set to fill the “demand gap”

IT departments always have struggled to keep up with delivering IT resources as quickly as business demands. That’s certainly true today—perhaps even more so—because at the same time budgets have been significantly restrained, the demand for IT services has been rising. The graphic below illustrates the burden this condition places on IT groups.

Figure 1 In prior business cycles, IT budget closely followed enterprise IT demand. However, in today’s ‘new normal’ enterprises are being asked to do much more with flat technology budgets.

Figure 1: As you can see, there isn’t a sustained reduction in IT demand during tough economic times. In fact, most businesses must leverage technology further. This is because the business needs more agility to meet changing markets. The business needs more productivity to protect thin margins—and the business needs to be ready to capitalize on potential upswings in demand. Navigating the business through a turbulent economy requires fast adjustments in business technology, whether to adapt to changes in customer demand, drive costs out of processes to improve margins, react to competitive threats, comply with new regulatory requirements, or integrate mergers and acquisitions. The business can’t afford to wait days, weeks, or months for new applications or infrastructure resources to be deployed. Unfortunately, with traditional on-premise IT infrastructure, that is exactly the challenge business units face.

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Filling the gap with agile and rapidly-provisioned technology using cloud computing creates substantial opportunity for service providers. Because of this growing alignment gap between what IT departments are able to provide and what the business needs, service providers cannot just continue aiding their traditional IT customer base; they must reach out within the enterprise and sell directly to individual business units. Because cloud computing is largely a bill-as-you-go operational expenditure, cloud service providers find business units often can self-fund cloud initiatives. However, in order to engage these less technical customers effectively, service providers must carefully consider and invest in ways that ensure that the customer experience is turnkey and automated.

The technical challenge for service providers is building the cloud service delivery infrastructure that can provide the agile, reliable, and cost-effective applications and cloud services businesses need.

Section 4: Not just any cloud: a sustainable, manageable, and secure cloud service

Building responsive, sustainable, and profitable cloud services isn’t as straightforward as it may seem at first. Some service providers have tried to build their own cloud infrastructures and management platform by cobbling together blade servers, storage area networks, virtualized servers, and other parts of the infrastructure. What they get, despite the serious investment, is an unwieldy hodgepodge of loosely integrated systems that actually increases the cost of management and maintenance.

Service providers have tried a number of paths to build their cloud infrastructures. Some, who have tried to build their own cloud service infrastructure, found it requires much more scripting, integration, and trial-and-error than they first expected—especially when trying to orchestrate the demands of hundreds if not thousands of separate clients. They’ve also found that they’ve built an unwieldy web of applications and infrastructure that is both unreliable and costly to maintain.

Others have turned to converged hardware and software stacks to build their cloud services platform. Here they find, because this approach is often wedded to specific hardware platforms, that their current data center hardware and software investments can’t be leveraged. They must choose their hardware partner, and stick to it. They also discover that they still have to manage a complex web of many third-party platforms, which further adds to the difficulty and cost.

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Rather than move forward with proprietary hardware stacks, or attempt to build one’s own custom cloud infrastructure, service providers should choose a way that doesn’t require reinventing a cloud architecture, or costly hardware lock-in. With the right cloud platform, customers can choose the services and resources they need, self-customize, provide the appropriate billing options, and be running almost instantaneously. As more services are needed, the customer simply adds them on its own. However, providing customers such self-service systems isn’t simply a matter of writing scripts, because this becomes yet another requirement demanding constant maintenance. Ideally, all services, including underlying infrastructure, servers, and applications, should be delivered from a single agile, scalable, and self-sustaining platform.

Section 5: CA 3Tera AppLogic®: a cloud services platform to build upon

CA 3Tera AppLogic software enables service providers to quickly compose and deploy cloud services that customers need. The software includes a cloud platform, IP SAN, intuitive user interface, full application stacks, and catalogs of infrastructure components. Because the AppLogic platform abstracts, or virtualizes, the application layer from the underlying hardware dependencies, service providers are able to build new services swiftly, with a dramatic reduction in the amount of hardware they must have in place as virtual systems can be de-provisioned and re-provisioned elsewhere with ease.

That’s because the AppLogic software eliminates the need to buy and manage additional storage area networks, firewalls, load balancers, and other costly IT infrastructure gear to expand or support new customers. This translates to swift and more profitable services.

However, cost-effectiveness and business agility aren’t the only concerns. For many organizations, security and regulatory compliance apprehensions are ever-present. Organizations that have proprietary information they need to protect, or are highly regulated, like government, healthcare, and financial services (and the service providers that work with them), need to know that their data and workloads are being managed securely. This is another area where the AppLogic platform can help service providers to excel. Because it is designed with a zero-trust security model, cloud architects visually define their network connections between all application components for each service. With those connections in place, the platform is designed to enforce complete network traffic inspection, packet by packet, on every connection, ensuring that if a network connection is not recognized in the service definition, the appropriate actions can be taken.

The ability to deploy applications and services rapidly, along with its inherent storage management, infrastructure catalogue, security and other features essential to successful cloud management, makes the AppLogic platform a cost-effective solution for service providers to profitably build and manage the cloud services their customers need.

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Section 6: Partnership in growth

For many reasons, picking the right partner is just as important as picking the right cloud technologies. Service providers need to partner with those that have the resources available to continuously invest to improve upon their platform, and to keep pace with rapidly changing cloud technologies. Service providers need both the technical and business support necessary to succeed.

CA Technologies provides what service providers need to get their cloud services business up and running quickly with special installation, training packages, and live support. CA Technologies also helps partners establish themselves through co-marketing initiatives, press opportunities, and sales support.

In addition, program participants gain access to best practice architectures and applications that can be offered rapidly in “as-a-service” offerings. CA Technologies further arms service providers with the tools they need by providing lessons learned from dozens of proven global implementations over years of combined continuous operation.

Section 7: Conclusion

Within the transition from traditional, on-premise IT systems to cloud computing services reside tremendous opportunities for service providers to expand upon existing sources of revenue, and to seize entirely new ones. To succeed, however, service providers need to simplify the management complexities associated with cloud services—storage, component catalogues, security, and customer facing interfaces.

With the CA 3Tera AppLogic cloud platform, service providers gain the flexibility to make the right business decisions and respond to new market opportunities, while increasing the efficiency of their resources and operations. This is possible through the platform’s ability to create, manage, move, and scale compute resources. Just as important, CA 3Tera Applogic is backed by CA Technologies with expertise across all IT environments—from mainframe and distributed, to virtual and cloud. A majority of the Global Fortune 500 rely on CA Technologies to manage their evolving IT ecosystems. For additional information on CA 3Tera AppLogic, go to www.3tera.com.

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CA Technologies is an IT management software and solutions company with expertise across all IT environments—from mainframe and distributed, to virtual and cloud. CA Technologies manages and secures IT environments and enables customers to deliver more flexible IT services. CA Technologies innovative products and services provide the insight and control essential for IT organizations to power business agility. The majority of the Global Fortune 500 rely on CA Technologies to manage their evolving IT ecosystems. For additional information, visit CA Technologies at ca.com.

1 Gartner, press release titled “Gartner Survey Shows Cloud-Computing Services Represents 10 Percent of Spending on External IT Services in 2010,” September 22, 2010. 2 IDC, “Worlwide Software 2010-2014 Forecast: Software Will Never be the Same”, Doc #223628, June 2010. 3 CRN, “IaaS Isn’t Just Cloud Computing Fluff: Survey,” Andrew Hickey, August 25, 2010.

Copyright © 2011 CA. All rights reserved. All trademarks, trade names, service marks and logos referenced herein belong to their respective companies. This document is for your informational purposes only. CA assumes no responsibility for the accuracy or completeness of the information. To the extent permitted by applicable law, CA provides this document “as is” without warranty of any kind, including, without limitation, any implied warranties of merchantability, fitness for a particular purpose, or nonin- fringement. In no event will CA be liable for any loss or damage, direct or indirect, from the use of this document, including, without limitation, lost profits, business interruption, goodwill, or lost data, even if CA is expressly advised in advance of the possibility of such damages. CS0864_0311