Business impact of cloud computing
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This document discusses the business impact of cloud computing and transforming to an on-demand business model. It identifies several key areas for transformation including costs, business models, billing, integration, capacity planning, and compliance. Specifically, it notes that understanding costs of goods sold is critical, developing the right billing system is important for revenue and customer satisfaction, and balancing capacity and service level agreements is challenging but important for running an on-demand cloud service.
Business impact of cloud computing
- 1. Business Impact of Cloud Computing www.pwc.com David Lemphers Director, Cloud Computing @ PwC e: [email protected] t: http://twitter.com/davidlem
- 2. PwC 2
- 5. PwC Customer’s Want On-Demand Services Cost • Lower upfront costs and start-up capital makes launching new services easier and less risky Choice • Consuming, composing and churning services is easier in the on- demand world Agility • Subscribing to and consuming services as soon as required assists organizations adapt to rapidly changing market/customer requirements 5
- 6. PwC BUT: Traditional Business Is Not Currently Optimized Build Sell Run 6 Provider Customer
- 7. PwC Becoming On-Demand Requires Transformation 7
- 9. PwC So Where Do We Start? 9
- 10. PwC At a High Level Business • Build -> Sell -> Deliver -> Support Service • Provision -> Run -> Manage -> Deprovision Infrastructure • Plan -> Procure -> Deploy -> Commission -> Maintain 10
- 11. PwC Step 1. Costs Start-Up • Facilities (Capital) • Infrastructure (Hardware, Software) • Business Support (Legal, Consulting, etc.) Ongoing • Variable • Utilities (Power, water, network) • Sustained Engineering • Fixed • Facilities (Operational) 11 COGS
- 12. PwC Cost of Goods Sold (COGS) • Understanding and managing COGS is critical to a successful on- demand business • Consumption based pricing translates directly to variable on-going costs • What do you do with fixed/start-up costs? • Perhaps a blended model? (Subscription + Consumption) 12
- 13. PwC Step 2. Business Model • What are you going to be selling? • Compute • Storage • Value-Add Services • How will you charge customers? • Subscription Plan • Consumption Based Pricing • Blended Model • What are your “promises”? • Service Level • Quality of Service • Compliance 13
- 14. PwC Relationship between Costs and Revenue • Ensure your costs are closely aligned to revenue • Revenue Recognition (Upfront Spend versus Trailing Revenue) • Managing variable costs is easy • You just pass these directly onto the customer • Managing start-up/fixed costs is harder • Why? • Because it’s hard to predict your total customer base up-front when preparing your rate card • Front-loading fixed costs can make your initial price point too high • Back-loading fixed costs can result in aggressive losses early if you’re wildly successful at the start • Churning your rate card can severely impact customer satisfaction, retention and adoption 14
- 15. PwC Step 3. Integrate Business Model into Technology Platform Sign-Up • Pricing model and rate card • Discounts and incentives Provisioning • COGS Metering • Compliance Billing • Revenue Customer Support • SLA 15
- 16. PwC Major Areas of Business Transformation 16
- 17. PwC Billing • Billing is the most important part of an on-demand environment • It is also the most frequent and critical interface to the customer • Bill payment • Usage Review • Key focus areas • Accuracy: This requires a massive investment of engineering effort early in the process • Pricing: Applying SLA credits, discounts, peak/off-peak pricing, is non-trivial • Compliance: With Federal, State and Local Tax regulations 17
- 18. PwC Integration Supply Chain • Capacity planning and management Sales and Order Fulfillment • Provisioning, Deprovisioning Operations and Support • SLA, QoS (Dashboards, etc) CRM • Customer Satisfaction • Purchasing Behavior 18
- 19. PwC Capacity Planning • One of the biggest challenges to running an on-demand cloud service • Balancing under utilization and resource exhaustion is tricky • Key focus areas • Deterministic factors • Current resources (# of servers, total ingress/egress bandwidth) • Non-deterministic factors • System load • Impact of SLA • When factoring deterministic and non-deterministic factors into your capacity planning, always remember to account for SLA targets 19
- 20. PwC Compliance Tax • Sales Tax • Income Tax • Varies greatly from state to state, and even at the municipality level Legal • Horizontal Standards (SAS 70, ISO 27001) • Vertical Standards (HIPAA, FISMA) • Location Concerns (Patriot Act and Non-US Customers) 20
- 21. PwC And the list goes on… Business Model Pricing Model Capacity Planning Facilities Management Procurement and Asset Management Business Process Integration Finance Risk Analysis Security Assessment BCP/DRP Support and Operations Policies and Governance Cross-Group Collaboration Change Management People and Change Maintenance and Warranty Compliance Tax Legal Technology Billing Application Migration and Compatibility Hybrid Environments (On-premise + Cloud) 21
- 22. PwC Summary • Cloud Computing and On-Demand Services are exciting and customers want it • Identify key business areas to transform and integrate with • Focus on the go to market blockers first • Develop skills and capabilities around new core competencies like billing, support and operations, compliance 22