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State of the Cloud A perspective on cloud infrastructure services, Neev Technologies July 9, 2012

Most businesses are not ready for the cloud! 1 in 5 customers approach us for a bare-minimum infrastructure setup on the cloud with budgets of less than $10K per annum towards infrastructure & maintenance. But, are they really right in going with the cloud? What real benefit of the cloud can a business derive from one or two low-cost instances? Realistically, can they gain anything at all from trafficbased infrastructure shaping or pay-per-use pricing? On the contrary, the very nature of the cloud poses a real disadvantage. Having been built out of low cost, commodity hardware and with no SLA on individual instances, the premise of the cloud is that applications are architected to withstand individual instance failures. Unless a business has a spend of at least $10K or more per annum, there is no advantage to be gained; putting enormous pressure on support & maintenance that does not justify costs. Typically the businesses with infra requirements in line with this budget (>$10K) are the ones that require additional servers to handle higher traffic during campaigns and those that really take advantage of being able to increase or decrease the size of servers dynamically. Without minimum expenditure, the economic efficiency of the cloud does not kick in. Most of our audience today, especially the typical startup is looking at an AWS spend of no more than $5000 per annum. This prompts for a minimum qualifying budget of $10K per annum on infrastructure & maintenance.

'Marketing speak' and real numbers The recent ads by Precision says 'Saving 22 crores' and '18:1 server consolidation ratio' !! 'Marketing speak'? Either that or we have the wrong market. For example, how many of our customers have 18 servers to begin with? Also, consider: to save 22 crores (assuming an average of 40% cost savings), the total cost of infrastructure must be at least 55 crores - that is $11million (that is around 1.1% of AWS' expected revenue in FY12). Does any single company manage that much of AWS? Here are the customers we have engaged so far with that have big AWS spend (> $25K per annum) – not including maintenance cost!! • Apalya • FFTY • Tubifi • KEH There are few companies that spend more than INR 12L every year on servers (again not including maintenance cost). One may buy at least 8 physical servers every year (@INR 1.5L per server including the cost of power & cooling). For many large companies, the cost on servers is a very small percentage of the total IT spend.

And the savings offered by the cloud is a percentage of that small percentage. In either case, they will continue to maintain IT support staff and internal servers and cooling and power backups. Finally, studies suggest that scalability & agility are bigger drivers of the cloud than cost & capex savings. Security continues to be the biggest concern. (8) We need to target growing companies! But first...

The real size of the market A. $150 Billion: The size of the Cloud Computing Market by 2013. (3) So, how does it sum-up? • SaaS, PaaS & IaaS - all counted under 'cloud'. IaaS being the least of all. eg. gets counted and is a big percentage • Building “cloud apps” is counted under 'cloud' - nearly everything architected for the cloud. • Virtualized Savvis and Verizon data centers are counted as cloud (2) • The shift from MS apps to Google Apps is counted under cloud (6) • Dropbox & Apple's iCloud (7) B. $1 Billion - The expected AWS revenue in 2012 as per IDC. (4) .... and by the way they are still getting there! 0.01% of this market is 100k AWS billing a year! And we have those! To get to 0.1% of the market is finding who is spending at least $25K per annum on AWS and finding 40 such customers.

Where lies the money

Verticals where it maybe useful to target: • Education sector incl. elearning • Retail sector incl. e-comm • Moving legacy apps to the cloud • Verticals with field force incl. healthcare • Media companies incl. blogs, sports sites and popular sites • Audio / Video incl. startups, new biz • Enterprise apps - structure of some enterprise apps is changing – eg. HR apps and supplychain apps will move to the cloud. • Analytics companies incl. Big data • Mobile apps will be a big driver of the cloud. - combining cloud apps & mobile apps into single offerings • For more – (5) Targetting large enterprises will mean getting into / tying up with implementors of SAP, Oracle, etc. Finally, BRIC countries are expected to lead IT spending this year by more than half(4)

What we do & whats coming A. Cloud Readiness Assessment Are you really ready to take advantage of the cloud? How you can take advantage of the cloud? What is the economic advantage? What are the components of the cloud that can be utilized? Today, much of this is pro-bono consultancy but it will evolve into a paid service (much like a BA phase) as choices get mature and complex. B. Cloud Services Brokerage (CSB) Growth of Cloud services brokerage & the necessity of cloud-centric design are two of the big trends that Gartner predicts for the coming years (9). Cloud services brokerage becomes a requirement for adoption. “As cloud computing adoption proliferates, so does the need for consumption assistance. A cloud services brokerage (CSB) is a service provider that plays an intermediary role in cloud computing.” says Gartner CSB is like a value added service, where a cloud service broker not only mediates between the cloud service provider and the consumer but also customizes the service by aggregating, integrating, and enhancing the services promising it to be more secure, cost- effective, and trustworthy. It helps the customer choose the platforms that best suit its needs, deploy and integrate applications across multiple clouds, and/or enable the customer to move between cloud platforms.

C. Cloud Centric Design To fully exploit the potential of a cloud model, applications need to be designed with the unique characteristics, limitations and opportunities of a cloud model in mind. Gartner advises businesses to look beyond the migration of the organisation’s workloads to the creation of cloud-optimised applications that fully exploit the potential of the cloud to deliver global-class applications. (9)

References 1. 2. 3. 4. 5. 6. 7. 8. 9.

State of the cloud