Business Ramifications of Various IT Infrastructure Models

1. Business Ramifications of VariousIT Infrastructure Models Lee Williams, CEO Digital Connections, Inc. Prepared for the Financial Executives IT Committee September 16, 2010

2. The Real Chain • Decision (Yours) • Choice (Yours) • Consequences (Not necessarily yours)

3. What we want to do is fill in the unknown blanks FIRST

4. Getting our Ducks in a Row

5. Table of Contents • Introduction and Purpose • Bibliography • List of Figures • Opening Gambit • The First Great Divide • Advantages and Disadvantages of the Public CITI models • Factors Reviewed in the Public • CITI Model and the IS2 Model • Remote CITI Models • SaaS (Software-as-a-Service) • PaaS (Platform-as-a-Service) • IaaS (Infrastructure-as-a-Service)

6. Table of Contents • The IS2 Models (InfraStructure Structure) • The In House Model • The IMO Model • The Outsourcing Model • Risks, Security, and Other Gotchas • Practical Applications for the CITI and IS2 Models • About IT Transformation • Conclusion

7. Table of Contents • Appendices (all in Excel 2010 Format) • CITI Financial Cost Model • CITI Financial Contingencies & Considerations • CITI Operational & General Notes • CITI Risks & Security Concerns • CITI Transformation Notes • IS2 Financial Cost Model • IS2 Financial Contingencies & Considerations • IS2 Operational & General Notes • IS2 Risks & Security Concerns • IS2 Transformation Notes • Works Cited

8. Partial Sample - Appendices Spreadsheets(10 tabs with approximately 175 entries)

9. How Much Can We Improve? • It depends on how effective and efficient current structure is • It depends on the level of service to your users • It depends on the condition of your infrastructure (including security and redundancy) • It depends on how ethical you are

10. Things to Avoid

11. Some Things I Would Want to Avoid • Underutilized resources – human, hardware and software resources • Spending money with no real benefit, or worse yet, investing with worse operational performance • “Time and time again I have seen huge, massively expensive, mission-critical applications sit on equally huge and massively expensive storage infrastructures that are essentially idling under low load. Meanwhile, elsewhere in the data center, a collection of cheap tertiary applications are burning their storage resources to a crisp with loads many times that of the critical systems.”₁ 1 Matt Prigge, “The Real Cost of Lying about IT Infrastructure Costs,” InfoWorld, April 19, 2010.

12. But in GENERAL…

13. You PROBABLY can… • Reduce your TOTAL IT costs from 10% to 40%. • Improve all of your production operational IT up times and improve processing speeds by 2% to 5%. • With the average office worker on a PC 800 hours per year, that’s 16 to 40 hours per year of productivity as well as reduced frustration

14. But you will have to…

15. Before You Transform • Have an open mind. IT doesn’t have to be done the way you do it today. • Understand your business processes and how IT affects them. • Understand your current costs – all of them. • Prioritize well. • Proceed slowly and cautiously.

16. But Doesn’t My IT Staff Do This? • Probably NOT. And here are a few of the reasons why: • 1) They may not fully understand the business logic. First Test – Name the top 5 IT platforms that affect the business. Second Test 2 – Does your reliability, security and redundancy reflect it? • 2) They may not be knowledgeable of what and how improvements can be made. IT is a very swiftly changing environment. • 3) If they add certain technological improvements they will only be forced to handle more… problems, requests, additions, etc. – on your already “tight” budget? • 4) It may be perceived that a good change for the company affects them in a negative way.

17. IT Infrastructure is not an end-game, it is a continually evolving process. One thing is for certain – you will never arrive; rather, you will just be traveling towards the destination. This is why the ability to transition the IT infrastructure is so important.

18. What are IT Clouds?

19. What are “IT Clouds”? • Don’t get caught up in the jargon, terminology • Clouds give a user the ability to access and use information across a network • Clouds come in two main varieties – Public & Private • Clouds, whether public or private, provide scalability and elasticity • Clouds have varying degrees of security and redundancy, thus varying degrees of risk

20. (CITI – Private ) Higher Business Entity Control SW (yours) SW (yours) IaaS IaaS Delivery (yours) Delivery (theirs) (CITI – Public ) SW (your tools- You develop, customize) SW (their tools – you develop, customize) PaaS PaaS Lower Business Entity Control SW (yours) Delivery (yours) SW (theirs) Delivery (theirs) SaaS SaaS SW Software Infrastructure Staff The Six Models of CITI Infrastructure HW

21. The Three IS2 Models Higher Business Entity Control In House + SW Vendors IMO SW Help Desk NOC Lower Business Entity Control SW Out Sourcing Help Desk NOC SW Software Infrastructure Staff Infrastructure HW IS2 Infrastructures X

22. Nine Factors Reviewed in Each Model • Illustration • Description • Advantages • Disadvantages • Financial Ramifications • Examples of Providers • Similar Models • Negotiation Points • Considerations

23. (CITI – Private ) Higher Business Entity Control SW In House Vendors + SW (yours) IaaS (CITI – Public ) SW (their tools – you develop, customize) PaaS SW IMO Help Desk NOC SW (theirs) Lower Business Entity Control SW Out Sourcing SaaS Help Desk NOC SW Software Infrastructure Staff Infrastructure HW IS2 Infrastructures X

24. SaaS Public Private SW (Theirs) SW – Yours and you can modify Examples: Application on your server to your workers over the network. To gain scale – virtualize. Examples: Salesforce.com (CRM) NetSuite (business software) Rackspace

25. PaaS Public Private SW (Theirs but you can develop) SW – Yours but you can develop Examples: Company IT Personnel Vendor Provided Programmers (Any language required) To gain scale - virtualize Examples: Google - App Engine (Python, Django) Salesforce.com – Force.com (Java)

26. IaaS Public Private SW (Yours but maybe theirs on their platform) SW – Yours on your platform Examples: Your applications riding on your platform delivered to your workers via your network. To gain scale - virtualize Examples: Rackspace; GoGrid Microsoft – Azure Amazon – EC2 (Elastic Cloud Computing)

28. Some Cloud Risks • Security of proprietary information • Security of customer information • Meeting regulatory security requirements • Legal issues – Massachusetts’ security requirements, viability issues, litigation of information issues • Performance • Vendor Lock In.

29. Survey of 547 Business Technology Professionals(Survey Results from Information Week Analytics, November 9, 2009)

30. The Three IS2 Models • IS2 Stands for InfraStructure Structure • From your perspective, it only applies to Private Clouds or Your IT Network • Like Public Clouds, there are many derivations of these three models

31. In House Vendors SW

32. In House – The Good, the Bad, and the Ugly • The Good – You have total control. • The Bad – You have no scale advantages other than virtualization. High cost model. Limited staff. • The Ugly – You have no personnel scale advantages, and may have no technical help desk, no NOC, not have the best IT prioritization, and may be involved in day-to-day IT issues. Worse yet, you may be held “hostage”. You may not have “enforceable” Service Level Agreements.

33. IMO IMO Provider SW

34. IMOs – The Good, the Bad, and the Ugly • The Good – You have personnel scale advantages, technical help desk, NOC, improve IT prioritization. You should not be involved in day-to-day IT issues nor are you held “hostage”. You have enforceable SLAs. Synchronizes IT costs to budget. You own the IT assets. • The Bad – You don’t have total control over personnel. May not have the discipline for process. Doesn’t scale. Hardware & Software applications. You own the IT assets. • The Ugly – It may be threatening to current IT personnel.

35. Outsourcing Outsourcer SW

36. Outsource – The Good, the Bad, and the Ugly • The Good – You have personnel and asset scale advantages, technical help desk, NOC, improve IT prioritization. You should not be involved in day-to-day IT issues nor are you held “hostage”. You have enforceable SLAs. Synchronizes IT spend to budget, additional metrics. You may or may not own the IT assets. • The Bad – You don’t have total control over personnel, nor software, hardware or refresh. May not have the discipline for process. May not scale hardware and software. You may or may not own the IT assets. • The Ugly – It may be threatening to current IT personnel. Very difficult to disengage if it were the wrong choice.

37. Approach & Process • How does your IT align itself with your business? What is it that you need or don’t need and what are your business priorities? What is critical and what is not? Does IT give you the information you need to operate and optimize the business? What would be your current costs to align? • Identify and segregate your costs – by hardware, software, personnel, benefits & expenses (training), IT test equipment or vehicles, licenses, maintenance, outside vendors. What is your monthly IT cost per user by category? Estimate what one hour of downtime to a business user costs. How many total business end user business hours do you incur? If you can’t calculate, estimate your SLAs (responsiveness).

38. Approach & Process • What is the health (reliable, secure, redundant) of your IT infrastructure? What would be the cost to make it healthy? Be sure to include operational costs (e.g. maintenance) as well as capital costs. • Now you have a “total and segregated baseline”. You now can compare both Public and Private Cloud offerings as well as IS2 models.

39. Approach & Process • As you compare various models to your baseline: • Does it align itself with your business model? • What exact costs go away? • What exact costs remain? • What affects do you have on end user responsiveness (SLAs)? • What are the affects to reliability, security, and redundancy? • Is the model transitional? How hard will it be to change the model? • Go slow. Be cautious. Do your homework! Appendix to the paper contains about 175 questions & notes!

40. A Few Very General Examples • SaaS (public) may be advantageous when: 1) the application meets your exact needs. 2) You have a “temporary” or “peak load” situation. (Beware of “SaaS sprawl”, latency, security, legal and ownership issues.) • PaaS (public) may be advantageous when: 1) You have in house programming capabilities and the application can be made to meet your exact needs. (Beware of the platform you use. You’re stuck with it. See SaaS above.) • IaaS (public) may be advantageous if all the applications meet your needs and you want no part of IT. (Beware of latency, security, legal, and ownership issues. Also, if they go down – you go down.)

41. A Few Very General Examples • In House – Advantageous if you need total control. Virtualize your servers to gain scale. (Beware that your costs may be high and responsiveness may be poor as well as reliability, security, and redundancy issues. Plus, beware of failure – VM Ware is not for the meek, nor the overconfident.) • IMOs – Advantageous to adding significant scale and providing better service; also very translucent. Can still take advantage of Public Cloud offerings. (Beware that you still own the assets and software.) • Outsource – Advantageous in scale, responsiveness without being in a public cloud. (Beware that you do not own the assets or software, do not control refresh of the assets, and difficult to disengage. Also, if they centralize servers, if they go down – you go down.)

42. Business Ramifications of IT Infrastructure • Thank you • Inquisitions & Answers