Microsoft Word - Optimizing Cloud Computing_Sept 1.doc

EMA Webinar Transcript:

Optimizing Cloud Computing: Ensure Your Cloud

Investments Work for and not Against You

Webinar Date:

8/17/10

Featured Speakers:

Dennis Drogseth

Richard Stone

John Rowell

Don Green

Abstract:

Cloud computing is the #1 talking point in the industry, and IT leaders are feeling the

pressure from senior management to create and implement a cloud strategy. The promise

of improved business agility, cost savings and superior levels of service, however, has to

be weighed against the reality of maintaining the quality of service delivery in a cloud

environment.

Join EMA VP of Research Dennis Drogseth, OpSource CTO and co-founder John

Rowell, and Compuware Senior Solution Manager Richard Stone for this panel

discussion that will examine how to optimize the benefits of cloud without losing

control. This panel of experts will provide critical real-life data and recommendations,

along with a lively, interactive discussion mapping the challenges of cloud deployments

to tangible IT initiatives.

Additionally, you will learn:

>>How Cloud computing impacts IT’s ability to deliver applications and services without

disrupting critical service level agreements and other business requirements.

>>How IT leaders can mitigate the performance and availability risks associated with

poorly performing cloud-based applications.

>>How to get started with baselining, planning and setting objectives for cloud, and how

to establish effective roles and responsibilities when dealing with siloed environments or

service provider contracts.

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Transcript:

Raleigh Gould

Welcome and thank you for joining us today for Optimizing Cloud Computing: Ensure

Your Investments Work For and Not Against You. My name is Raleigh Gould and I will

be your moderator for today’s event. Our featured speakers are: Dennis Drogseth, Vice

President of Research at Enterprise Management Associates; Don Green, Senior Vice

President of Product Management at Outsource; and Richard Stone, Senior Solution

Manager at Compuware.

Dennis brings 29 years of experience in various aspects of Marketing and Business

Planning for Service Management Solutions. He supports EMA through leadership in

business service management and MBB Systems, Automation Systems, and Service

Centric Financial Optimization. At EMA, Dennis has pioneered research and converging

management strategies such as performance availability and integrated securities.

Don Green has over 20 years of experience growing businesses in the South, Mobil

Applications, and LBS Industries, including expertise developing and marketing on-

demand products to the Enterprise. Prior to Outsource, Don held executive product

marketing and product management roles at Avaya, Kelly Atlas where he developed the

product concept and business model for a new web services technology and out road, a

staff provider of wireless services to business clients.

And lastly, Richard Stone is responsible for Cloud Based Application Performance

Management Solutions at Compuware. Prior to joining Compuware, Richard held Senior

Marketing and Product Management positions at Hewlett-Packard, Compaq, plus a

number of other U.S. and European IT Companies. He has extensive experience in Cloud

Based Solutions and Technologies, and has brought a number of Cloud Based Solutions

to market. These include cross industry solutions such as email, web conferencing, and

sales force automation, and Vertical Market Solutions in industries such as insurance,

retail banking and telecommunications.

Before I hand it over to our first speaker, I did want the audience to know that today’s

session is designed to be interactive and the speakers do plan on answering all questions.

If for some reason we can’t get to your question during the live event, someone will

follow up with you. You can log your question at any time throughout the course of the

presentation using the Q&A functionality located in the right-hand column of you screen.

If you are in full-slide view, simply look for the floating toolbar and select that question

mark icon and you can log your question that way.

Also, today’s event is being recorded. I will be sending out an on-demand version of the

recording as well as a PDS of the speakers' presentation in email. So be on the lookout

for that email from Enterprise Management Associates later this week. And now I am

going to go ahead and turn things over to our first featured speaker, Dennis Drogseth.

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Dennis -

Dennis Drogseth

Thank you, Lolly. So the topic today is Optimizing Clouds to make sure the investments

really work for you and your best interest and your customer’s best interest rather than

against you. We are going to have a little bit of a different type of format than usual. We

are going to have three fairly brief presentations, and then we want the panel type

discussion which I think should be very lively and hopefully informative to all of us,

certainly including me. I’m going to really just try to set the stage briefly with my

presentation here, a little grounding on cloud and what it is, and its driver and benefits

from some of the management requirements.

The role of performance management with experience and we are going through the other

presentations and through our panel, if you like, talking more about role and the party

process and objectives. So, and I am sure some of you are pretty grounded in cloud,

others may not be. Cloud, of course, can be confusing. It can be many things to many

people and it has many different dimensions to it. Just again, for the base lining, the

majority of our respondents, and this is research we did in the first quarter of this year,

among respondents who are global with committed plans or actual cloud deployments, in

fact it was about 65% actual deployment and the other 35% committed plans within 12

months. So, among these respondents you could see a private cloud is pretty much the

meeting idea. The community cloud, which might be more affiliated with a vertical like

health care. For instance; we have a small, population, 36% and then 35% and then

public cloud about 31%.

What is cloud? I will just quickly kind of to go through what EMA has used and since we

have not tried to reinvent the wheel, we have enough wheels that we do have to invent.

We follow the U.S. National Institute for Standards for Technology (NIST), which

defines cloud as a model for enabling convenience on demand network access to a shared

pool of configurable computing resources such as network service storage applications

and services that can be rapidly provisioned with minimal management effort by service

provider interaction. The extra course could be ideal as well. Key aspects, of course, on

the on-demand management that you use it when you need, as you need it, and you

provision it when you don’t. Typically coming through a network in many ways, often

the network is going to go overlook when in reality a cloud really evasive cost abated

office obscured secured network internally.

Resource pooling obviously a big focus, of course, is workload, where you position

workload, resource pool is the key discussion, and many strategies on how you optimize

workloads and affiliate with many different applications and systems before deployment.

Rapid elasticity again, automated capability, mega centers. You really can’t optimize

cloud if you have no system. How you are using it, where are you using it and how much

are you using it? Our typical services; the classically software service, the infrastructure

platform as a service, continue to grow about your feet in perspective. Those can be

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internal delivered by your IT organization or through a service provider. What are people

doing again on weaker action in order highest member of doctors to the lowest? Storage,

total water for critical services often gets a first place mention. One of the more

predominate areas is application test development, production web posting, been around

for a long time and sometimes it is not clear how much that’s truly clouded but on-

demand requirement leveraged the product for structure.

Production database; it is surprising to see it that high. Then a series of applications these

are unique for internal services like payroll and HR, messaging and collaboration,

desktop applications, security services interestingly enough, entry of sales, and last of all,

business critical architectural to the business ERP. That’s surprising that's the slowest

adoption. Looking at gross, remember we are talking about a performance base that is

already committed or deploying cloud. The average job, so to speak, in IT is about a third

for a general population number. But the main point here is that application depending on

cloud or delivered to cloud services will probably double in about two years with a

slightly higher percentage reaching the users versus the number of applications, but still

are pretty significant growth areas. We don’t normally see quite such dramatic statements

about value, and, of course, this is based on what the respondents at least believe.

Remember here, this is only those who have delivered deployment, so it wasn’t just

people speculating.

As you can see, a hefty 76% at least believe they see measurable cost saving to their

organization. There are lots of reasons for that and we are going to look into them.

Probably chief among them are flexibility, versatility, and on-demand requirements. But

what are the barriers? Given the political issues on the two flavors for this, and to be

honest, as we do our own consulting, we see that fairly pervasively as well in almost any

kind of initiative. There are certainly the traditional barriers between the service provider

and the client community that have occurred in the community, whether it is cloud

related or not. And that has to do with the challenges of really seeking a partner in a

cloud adoption model versus someone that fills part of the terrain and is sort of focused

limited in design and contract. Until I am seeing the cloud and I think we will see with

outsource for sure, a much more versatile approach than some of the traditional service

model providers because cloud requires that for a number of reasons.

But even political issues can just as well be within IT, cloud requires a more collaborative

approach, a more cross-debate approach, the kind of thing we in service management

have been arguing for years. But now cloud is helping trigger that a little bit. Some of the

capabilities such as we’ve indicated could be the table for visibility and insight we do try

across infrastructure service independences as example, to help to bridge those problems.

Simply the cost is a new approach it's going to save money eventually, we think. What

does it cost to get ready to make the adoption work? Lack of good tools, good processing,

increased operational cost. Again, I am going to do something differently that may work

in the long term because it may tax you a bit up front.

What about compliance? We hear a lot about security, regulatory issues. And then we

have security at risk, increased capital cost. That definitely should be here to make this

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work. What exactly is required especially to fight the internal cloud? And, number eight

is rising in importance and I believe Richard Stone will talk to this. Performance issues --

we understand the impact of services is growing in importance. Sort of ironic here

because clouds can be a great resource in a more dynamic backup and recovery. But if it

is not planned out well and the potential chaos and lack of visibility should be discussed

again. How do people want to manage cloud? If you're an IT organization, typically like

the 310 management software and then you also want get really good alerts for your

providers. So those are pretty close, but a slight edge to the management software. You

want to get internal reports. This is affiliated with the topic and the software that is going

to be generally helpful. Reports are normally where you are with cloud.

The question involved respect and people did expect to get the traditional people raising

hell so to speak because the services are not working. That is still out there is a visible

example. And then finally, on scheduled daily reports from the cloud provider. We are

going to talk a little more about metrics in the panel. But as kind of a quick lift that our

respondents thought of in terms of from top to bottom in terms of most popular.

Availability always seems to come out on top. In most environments response time is

growing in importance. It should. Then you have a more focused type of metrics in terms

of infrastructure, utilization, which is so important in cloud, if you're going to optimize,

security related issues, component type issues, assistance response time, service

transactions, service response across multiple transactions and client based transactions.

Those last three are most closely related to something we are going to look at in the next

slide which is user experience. In fact rising in importance, both general and critical to

understanding where you are with your cloud deployment.

Performance and availability, which is going to be one of our central discussion points

today, you can see gets very high marks in terms of how much is very important and

important. That’s surprising. Then again it’s significant in terms of one to more clouds

begin to focus more and more on performance. Here we have user experience. This is

from research we did actually last year and you could see an average of about 80%

between different IT organizations, so it is rising in importance. One of the ultimate

baselines for you as you go forward looking at clouding is what are your customers

thinking about your services in the end. Cloud is an enabler and it is not the end point of

the journey; it is going to enable you to get where you want to go in service delivery. So

that wraps it up for me. I am going to turn it over now to Don Green from Outsource.

Don, hopefully we will be hearing from you right now.

Don Green

Great, thank you, Dennis. Yeah, I am going to go over a little bit about Outsource’s

background and then talk about basically the two cloud services we provide. One is

around SaS and another is a new product which is infrastructure and service. So

Outsource was founded in 2002 and by around 2004, we were pretty focused on

delivering SaS applications for other companies. So largely ISV’s, who head and

developed application, and we are looking for someone to deliver that application for

them. Since then we have grown to also offer a cloud service which most people would

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consider a public infrastructure as a service offering. We are privately funded and we

have offices here in Santa Clara; Herndon, Virginia; Dublin, Ireland (where most of our

development is done), and then London and Bangalore. Go on to this second slide here.

So as I mentioned, we started in the SaS space doing mass hosting and so we deliver out

prints in all Adobes on-demand properties. So Acrobat.com, as well as their connect

product and so forth. And we do that for a wide range of customers; ranging from small

startups who initially started as SaS providers all the way to companies like Adobe,

which started to get into the on-demand space and realized that their real value was

developing software and selling and marketing it, and not in the delivery of it. Through

those five or six years of delivering those sorts of services we built up a lot of expertise

around security performance control.

All of the things enterprises were interested in when delivering their applications, and

when we moved into the cloud space about a year ago, we took a lot of those learnings

and moved them into the cloud. So now we have over 400 customers many of those

straight-man coasting SaS providers, a large number that are cloud only, and then we are

seeing more and more that are using both offerings to deliver their services. So as I

mentioned, one of the things that is sort of unique about us coming into the cloud space

was we had a long history of delivering enterprise cloud applications for a number of

ISV’s and enterprises. And we knew that there was going to become a focus on security

controlled performance; all of the things that customers expect today from a mass hosting

provider they would like to have or eventually will require from their cloud providers.

And so we sort of approached our development in our offering differently than I think a

lot of other providers had done and we focused on security initially and so every

customer who comes on gets a private network and they can control the access of that

network in terms of whether or not it is exposed to the internet. And it means that all of

their servers are on their own network and that also guarantees performance levels so we

can guarantee links between servers and so forth. We also put in place a lot of role-based

permissions and so there is an administrator, and sub-administrations, that have different

permissions and so forth. And then on the performance side we do have SOA’s. We do a

lot of tasking management and so forth. And then because of the private networks we are

able to guarantee performance between your servers and so forth. And then we have

started to talk about, we will probably get into this when we get into the more general

discussion, but we have also found that there is a lot of interest from the channel. And so

the ability to do integration is becoming more and more important. So with that I will

turn it over to Richard Stone at Compuware.

Richard Stone

Thank you, Don. And once again thank you very much indeed everybody for joining us

on this Webcast. I am Richard Stone and I am the Cloud Solutions Manager here in

Detroit. Just a little bit about whom Compuware is. Our core competence is an

application performance, monitoring and management. We’ve got a huge customer-

installed base around the world. Forty-six of the Top 50 Fortune 500 companies are

customers of ours. And further more relevant to this conversation here, 12 of the top 20

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U.S. websites are all customers of ours, as well. We do their web-performance

management and monitoring for them. Return to gross like many companies, certainly in

the US, we are now seeing coming out of the recession and we are starting to see a return

to gross. And we will return to that point on the next slide and more generally. Most

relevant to the conversation today, we don’t just measure application performance for

FAS companies.

We are actually a FAS company ourselves. We have a number of business units who

provide FAS-based services to other industries, such as Couvisant (sp), who provides a

FAS-based identity management solution. We premier in the business from both sides,

both from being a provider of application management software and also a user of the

cloud system that we want to manage. I mentioned return to gross just a moment ago. We

are actually seeing a large number of companies now saying now the recession hopefully

is not going to get any worse and things will start getting slightly better. We can’t cut our

way to profitability we now have to return to gross. We have to return to looking at the

top line which means growing the business.

It is very interesting, I would say in the last nine to twelve months, if you had looked at

this particular slide which comes from a conference in London last June, most of the

cloud-continuing drivers would have been around cost. Now how can I reduce my capex,

my opex, and everything else “ex” because that was the name of the game then? There

are two knobs that you can twiddle in business; the revenue knob and the cost knob. And

everybody was really focused on twiddling the cost knob. And what we are seeing now

and what this slide is showing is actually that things are changing and cloud computing is

now seen as an agent of driving top-line revenue. In other words, the business is now

saying, “Wow, the benefits that caused interest; flexibility, agility, return to value. That’s

exactly what we are looking for as we try to reconnect with customers again and draw our

top-line revenue.”

Costs are still there and you can still see the last view there around about cost, but it is no

longer one of the key drivers as folks look at cloud computing. So what this means, of

course, is that your fee against a cloud computing conference. Fees that slide have just

come away from discussions with a business unit saying, “We need to grow the business;

flexibility, agility, quick return to value. And focuses on this one slide. And fires off a

note to the CIP and the VP of IT and says this is the way to go. What is our cloud

strategy?” For the businesses driving it, but it’s still up to IT to say okay we get the

business drivers but we also need to mitigate and manage the risks. And the total amount

of risk here, just very quickly, what a difference a year makes. We have already

mentioned security.

And a year ago, security was it. At Comp Computing the number one reason by far for

not doing it was it was is it insecure. I didn’t know where my data was, whether it was in

this country or another country. I’ve got compliance issues. There were a number of very

good reasons why security issues had to be sold before things started to move ahead on

that front. Then we actually started to see folks implementing cloud solutions everyday.

First in their private clouds, a trial amount and they gradually spread out to the public

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cloud and something quite interesting happened. Before they went into these projects,

they thought they perceived the primary benefit of the cloud would be reduced IT costs,

as we just discussed. And they perceived the biggest issue would be security. Once they

got a couple of implementations under their belt, what they actually found the really big

wins were scalability and agility, the business drivers.

They still saw cost reductions, but that wasn’t really what caught their eye and what

drove further projects. Security was an issue but there were a number of solutions as you

just heard from Don coming into the market now which can help you manage security.

But what they actually found their biggest issues were performance. In other words, how

do they manage the performance of these web-based applications when pretty much the

application is delivered by somebody else along the eco system and also this whole

business of escalating management? How do you move from managing software licenses

to moving service levels? So those were the quiet interesting takeaways. Until we get to

being very aware and basically people saying security is important, of course it’s

important. But really, it’s no harder than in the traditional enterprise, it’s just different.

You just need different security tools. But what is really bubbling to the top, as Dennis

said just a moment ago is performance management. That’s becoming the hot topic and

let me show you why. The right question to ask is not just is the service available. The

right question to ask is, is it fast enough? Now let’s suppose that you have a website or a

cloud-based application of any kind hosted at, for instance, Amazon. I mention Amazon

here because it is a real lively cloud pool. And you measure the available to get from

Amazon. Amazon committed SLA‘s revolves around availability. Most of the large cloud

service provider’s they're SLAs availability. And this particular screen shot here is from a

community website of which Compuware is a primary sponsor of is called

Cloudsolus.net. If you get bored during this webcast, go to cloudsolus.net and you’ll see

there this community portal.

One of the key features is that it will give you real time availability information from the

world-renowned leading cloud service providers, it will also give you performance. So,

you look at this and you go everything is available and the KI users must be happy. The

realities when you look at performance on the other hand, which is the user’s experience

of a call-based application, you see a very different picture. And you see here, it isn’t

Amazon’s fault, it is just the earth isn’t flat. The speed of light does matter. There are all

kinds of gotchas that come out when you start to think about implementing a cloud

solution, not the least of which is, is it going to meet the user’s expectations in order to

meet their business needs? So, with that I will hand things back to Dennis.

Dennis Drogseth

Thank you, Richard. So, we are going to start kind of a panel and also welcome questions

and our team will corner them here which are great. Please continue to submit and I also

say right now, if we do not get to your questions during the webinar, we will supply

afterward with an email for you. Our conversation is. I thought I would like to start

though with a question first for Don. Our first sets of questions require a little bit of

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crystal ball gazing and looking at present as well. In terms of Don, here, from an

optimists perspective, what kind of services are really coming to the top right now and

why do you think there is anything at all that is kind of a surprise? And where do you see

it going, again from an optimist's perspective in term of future, customer priorities?

Don Green

So, I guess part of what’s no big surprise is initially we saw a lot, and continue to see a

lot, of people using it for test and development. And, I think that’s where Amazon, for

instance, first got most of their customers. It is interesting for a couple of reasons. One is

a lot of things are not as demanding in the test and development world in terms of SLA’s

and performance a lot of times and those sort of things. So it is a great service to get

started with in that space.

The second thing is a lot of that’s done outside of the control of the IT Department, so it’s

cheap enough and a lot of services take credit cards and so forth, so developers go off and

start doing this on their own., with or without permission. And so initially with our

customers we saw a lot of that and then it started migrating more towards real

applications people were using in production. The focus there again, not a big surprise,

has been on applications that have a lot of variability. So web performance testing things

that are quarterly so crunching a lot of numbers for financials at the beginning of the

quarter. We have customers doing those sorts of things. And then also things that are

unpredictable. So, customers that, for instance, we have one customer who is big in the

gaming industry and they do know when they come out with a new title or new features

that there is a big spike in use and they often don’t know how big that spike is going to

be. And so things that have a lot of variability have been sort of the next level.

I think we’ll see more and more standard applications moving to the cloud as has been

mentioned here. Initially, there has been a lot of concern around security and a lot of

those concerns are starting to go away as people get more comfortable with this and so

for reasons of time-to-market costs, eliminating capex and all those sort of things, I think

customers will start moving more and more of all types of their applications into the

cloud. The one thing that has been surprising, I guess that is the last question here, is the

amount of interest or the amount of involvement from the channel. We have seen a lot of

system integrators want to get involved with the cloud. I think initially they were

concerned that they would be eliminated so they are finding ways to add value. A lot of

times that means actually spinning up and managing either the infrastructure or the

application for the customer so we are seeing a lot of that. And we are also seeing a lot of

white label interest which isn’t so much of a demand in terms of applications but more, I

think, the realization that larger Telco’s, SI’s and people like that need to have a cloud

solution of some sort to meet their overall customer needs so they have a complete

solution for their customers.

Dennis Drogseth

So you label your solution as an extension of their services. Is that right?

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Don Green

That is correct, right.

Dennis Drogseth

And at what point do they caught by the credit card, the early adopters here. Well they

are part of IT but they are not part of operations. Do you ever get customers who from the

IT side who say, wow, I forget who it is, but, one of my clients likes to talk about random

acts of management. You mean random acts of clouds. Wow, how could you let those

people go off and do that? Or does that ever happen? Are they comfortable with sort of

more partisan, more individualized race to cloud?

Don Green

Well no, I think that is one of the challenges and I know one of the later questions was

around organizational structure and stuff. I think it is becoming more decentralized and

so I think one of the challenges that IT is going to have is maintaining control over that

decentralization and so obviously there is a cost aspect to that. But there is also an aspect

of do you want your enterprise to be using sixteen different cloud providers? Or do you

want to standardize on one provider and those sort of thing. So yeah, we are seeing that

and it’s interesting, as you were talking earlier, it has been driven on the business side.

So, developer and new product guy who want to get something done fast, he can go out

on the cloud and start doing that. When it has to be transitioned over to the operating side

or you know to somebody who has to run this thing on a much larger scale, that’s when

IT sometimes finds out about it or starts getting involved or having issues.

Dennis Drogseth

Yes, I can imagine some of the conversations, too. And that’s natural life for this to

evolve. And I think my feeling is the industry is kind of poised between this early phase

and most operationalized phase and we are kind of waiting to see what will happen. So,

Richard, how about you in terms of your trust and respect? I would assume you are more

squarely in the cap of that, more service oriented, more operationalized you. Perhaps,

more mature IT cloud adoptive. What do you see and what are they prioritizing and any

swings in surprising shocks you see in your customer self?

Richard Stone

Well, we are actually getting involved much earlier on than we would normally do in any

other kind of IT (inaudible 0:36:14). We actually find that customers, well before they

start implementation, are coming to us and saying, Okay give us some best practices here.

Other people made mistakes and we don’t want to make the same mistakes we'll just go

off and make different ones, right?. So they are asking us for best practices. It even goes

back to what Don was just saying, right away back to organizational. We see a lot of

organizations where IT is thinking about doing a cloud based project and don’t even

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realize that actually there are other groups inside the organization who have already gone

out and done it. Like we said, they pay their thirty bucks a month from their American

Express card. They expense it back to the company and presto, they are using cloud

based service that IT knows nothing about. And so IT is saying, first of all, help us get

that under control. Give us the tools to get that under control. And the second thing they

are asking us for, and this has come about a lot since we introduced cloud sleuth at the

beginning of this year.

So cloud sleuth is this web community portal that we're the primary sponsor of and it’s

free which is always nice, free is always good. And what people are able to do is actually

go in there and they’ll see cloud service providers, but more importantly they want to get

advice on how to build applications. Because I think everybody is starting, I wouldn’t say

from scratch, exactly, but the way you build applications using a cloud, especially if they

are competent applications and it is a different mind set and it is a different skill set and

so they want best practices there as well. I’m not sure that is a good pressure or a bad

pressure but it is a pressure there and they are saying to us, Yeah, we get it, but help us

implement our cloud strategy, almost of scratch.

The second thing they are saying really often, Can you really do this? Can you actually

give us visibility in there? They are actually concerned about how can I get visibility.

Amazon is okay. But once you get across Amazon’s doorway, what happens in Amazon

stays in Amazon, for instance. So help us get to grips to how we actually measure that.

And I suppose that different customers have different business forms in their mind. We

go back to Mario’s Report. This is being driven by the business. So the cloud service

providers, one of their key metrics is adoption, having sold, if I sell a self automation

package to a company and I sell then a hundred licenses, what I want to do is make sure

those hundred licenses get used but that hundred grows to hundred fifty, two hundred,

three hundred. In other words, I need to get people adopting it. And a key matrix for

adoption is performance.

The second area is the financial impact it has on the businesses for more general

influencing. There was an interesting article in the Dallas Business Journal last week,

about Pizza Hut and how Pizza Hut has introduced an ordering system right on the

iPhone. This is a cloud based service and that I should have been delighted that one

particular application has driven about seven million dollars of implemental revenue

which is great. The other side of that is that is an example of a very well implemented

application. You can have a less beneficial effect in business if the performance of those

applications isn't up to snuff and you never realize the business benefit. I am sorry if I

rambled there a bit there, Dennis, but best practices help us understand the business

outcome as related to our business.

Dennis Drogseth

That sounds like it makes a lot of sense and we are going to be assimilating a number of

questions coming in from the audience now. I think if I am hearing you right, this is kind

of the question. You are getting involved on your own, and one of the intriguing things

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you mentioned was designing applications for cloud which is a whole discussion in

itself and we could spend a long time on that. And I am not sure the people really know

the answers for that. The switch on the opposite side is the service management person

for me would be designing clouds to support applications which is how do you opt to

building case workloads. This could become a very component concentric discussion as

well. Well, I am going to ask the team a couple of questions and I have a couple in my

pocket. I am going to jump right ahead to both of you and see if one of you in terms of

organizational changes and I guess I will broaden that. The fee of it as it came across was

in IT but IT and the business it supports and the organization it supports, those are the

changing dynamics as well. So I guess I’ll leave it open. How to you see cloud affecting

organizational change in your customer sense effectively? Don, do you want to jump

into that first?

Don Green

Yes, sure, I mentioned a little bit of it and I think both of you followed up with that.

Which is that it’s happening, right. People are taking the initiative. They are going off

and they are developing things. Business units within are even doing their thing. So, to

some extent, it's imperative that IT go out and get in front of this in terms of where they

think strategically the company needs to go on the IT front. In our product, you know we

built in a lot of things sort of understanding how people want to manage their resources in

terms of administrators, and sub-administrators, and giving permissions for who can spin

off what and make changes in the networking and so forth. But, that’s just a capability in

the sense that somebody has to decide who is going to be the admin and who gets

network access and is that going to be pushed down to the individual developer level,

now that clouds services are available and they are cheaper. And then the other thing that

has changed significantly for the transition in terms of going from development in

production.

You know in the past you sort of had this development environment and then you move

into a test, typically, into a production environment. And often those were very different

physical environments and there was a fair amount of time and so forth. We built our

service around the same standards we run in our data center. And so in some sense the

distinction between doing a test in development environment and going to a production

environment is really just whether you are going to open that up to customers and how

large it is going to scale. So there is also changes in terms of process in going from

testing dev to pushing it into production and those sort of issues that companies just need

to just start thinking about and putting some of the organizational pieces in place.

Dennis Drogseth

Richard, I want to get your perspective on that, as well. I guess Don it would be a good

thing to ask you that. Did you ever see a customer who had his organization in place to

drive this and you see it as red flag. And you say, oh my gosh, if it goes to that

organization -- that group is really not the right group to drive the clouding issue.

Page 12 of 17

Don Green

No, maybe Richard would probably be more involved in that. In our cloud service, we are

largely an infrastructure provider. We actively reach out to all our customers, but we

probably have some real ongoing discussions with about a third of our cloud providers.

And in a lot of times that has more to do with what's the road map look like and can I rely

on this and how would I do that kind of thing. We don’t really get involved in the more

consultive role within corporations on how to implement this stuff.

Dennis Drogseth

Now Richard, how about you? Do you see any red flags where you feel my gosh? I made

a few comments myself on this. We are looking at something written in water. Our data

shows that cloud could be led by anything just about from the data center, to the

networking group, to architecture, to service delivery, right on down to storage. Of

course, it depends on who is deploying it. I do believe in the end if you operationalize

and move to a bigger service picture with cloud there are some right and wrong answers.

Let’s have your perspective now, Richard.

Richard Stone

Well, it is very interesting. It has changed dramatically in the last two years. I think at one

time when people thought about cloud as being an IT cost reduction method. People

outside of IT inside the business when, yeah, yeah, whatever, just make sure my email

works, my sales force automation works, and everybody went on their separate ways.

What I think is the dramatic change now that is making everybody sit up and take notice

both on the IT side and the business side is that’s it’s the business who is driving it but it

is an IT implementation. The reality is, if either of those two groups try to do it on their

own, they’ll mess it up.

So, Don made a great example of how business people who've got their credit card and

they sign up for service and then six months down the line they’ve got the auditors

breathing down their necks because they are dealing with their day trades, and they’ve

got all kinds of problems with performance, and who do that phone? They wade through

their big pile of telephone numbers and they phone IT and IT goes I don’t have the

slightest idea of what you are talking about. The only right way for this to happen is for

there to be a cloud champion inside the organization and for that cloud champion to form

a working group which is composed of business leaders and technology leaders. And they

sit down in a room and each understands the others' problems. For the first time, Dennis,

we're really seeing coming to the fore the business impact with IT and the fact that people

now have options.

And I’m seeing customer after customer saying the only successful way to do this is we

have to sit down and talk together, which happens in some organizations but not in

enough. I would say that is the only thing number one requirement is to sit around the

table and talk to the business.

Page 13 of 17

Dennis Drogseth

So I am going to challenge you more on speech propriety. Although I have seen a lot

of speeches of pressure from what I would call true business constituencies meaning

people completely outside of IT. We are not asking developers but maybe somebody who

is concerned about a financial transaction service or outgoing service or somebody in HR.

It’s not my view that there may be pressures from the CEO or pressures from on high for

IT to cut costs, or pressures for these services. But when you see business, Richard,

actually IT professionals in many cases who are most susceptible to get this pressure,

such as application developers. Maybe I am missing something here. So that is my

question to you.

Richard Stone

Yeah, let me clarify. I think this is happening at the highest levels in the organization. If

you look at -- there was another slide from that Mike Self Conference where they were

driving cloud adoptions. I didn’t put it in the deck here because I didn’t want to

PowerPoint people to death. But what it actually shows is there are about six or seven

categories. The top three categories are the business leaders, the executive committee and

CEO, and business unit leaders. The bottom was the CIO and IT. They were the people

least likely driving cloud confusion. In the middle one of the highest ranked people, was

the developers. The developers always want to do something the latest and greatest. The

message from that really yes, it is the business that's driving it and it is being driven at the

highest level. It’s the CEO and VPs of the business who need to be talking to the CIO and

the VP of IT and explaining the business needs and letting it work for them that way.

Does that answer the question, Dennis?

Dennis Drogseth

Yeah, it does.

Don Green

And Dennis, if I could just…

Dennis Drogseth

Yeah, I would like to hear your take. What would your take be? It is interesting because

you brought up earlier in your slides, I guess you called it politics and I don't remember

the other…

Don Green

The human side of issues.

Dennis Drogseth

Page 14 of 17

I think you see a lot of that in the organization, right. The IT guys see this as losing

control. Or, the fact that somebody can bring up their own servers in five minutes literally

versus getting them involved and talking a long period of time and so forth. So, I think

there is a big element of that as well, which is IT Departments in some sense, feel

threatened by this. Business people see it as an opportunity.

Don Green

There are also when you look at things, there are central IT organizations and then there

are IT groups that are very closely tied to larger business and sometimes those will tend

to their business but anyway but the problem is if you're a central group; and you want to

manager your services, you have challenges from pretty much all fronts in terms of

putting this all together. I am going to ask you a completely a different kind of question,

for both of you, that is once you go through some cloud adoption, how do you know you

are successful? What constitutes success? How do you measure success? And I know

there are multiple flavors of clouds but what would be your recommendation in terms of

metrics or barometers or, you know. Is it ROI? Is it business impact? Is it a mixture of the

above? What today in 2010 makes sense for measuring success with cloud? Richard, you

want to take it first?

Richard Stone

I think at the end of the day the only real metric that matters is business impact. You

know, I said before, I think more and more cloud is going to be used to drive revenue as

opposed to save money. You know you are going to save money but that is not the real

business driver. So I think the right and proper way is to be able to link back your IT

business initiative back to business impact. And that’s the sort of area that we would

stress with customers when they are dealing with performance problems. Performance

problems isn't just irritating to people, it may be to some people because they have no

choice, but the customers, it doesn’t just irritate them, it makes them go somewhere else.

So, the only right metric in my view here, Dennis, that they have got to measure the

business impact of any IT project, whether it’s cloud or not. What is the business impact?

Have we achieved our business objections?

Dennis Drogseth

Yeah, to follow a little bit on that and to go back to an earlier comment about the cloud in

general. I think that business impact has gone from below the line to above the line.

Right? So a year ago if you asked somebody what that business impact is going to be, it

is all the financial metrics; capex, opex and so forth. And now I think it is much more

capturing new customers, the flexibility so that you can respond to needs. The time to

market in terms of bringing up a new offering. The things that are going to impact the

revenue side rather than just the cost savings side.

Richard Stone

Page 15 of 17

Very interesting point, if I can just jump in for a minute, Dennis. What Don just said. If

you are about cost reduction in IT, you really don’t need anybody else apart your

financial people to tell you you've achieved that objection. It’s funny you say 10% on

capex and 12% on opex. You don’t need the business. But in order to prove that once you

go above the line to start looking at driving revenue, there is no way that IT can measure

that without having a true business partnership with the business units. That’s what is

driving this change in behavior.

Dennis Drogseth

That is good with or without cloud. I am going to take one last questions. We are just a

few minutes before wrap up. Consider this a kind of follow on. This is interesting and I

would be curious in terms of your own clients what you see. This questions coming in is

in terms of cost savings. Do you believe that and let’s extend that beyond cost savings to

benefits to general. The cloud will work for state governments. Have you seen a state

environment rally around cloud successfully?

Don Green

That is not a big focus of ours, but I know there have been a lot of initiatives at the

federal government level. Specifically to coordinate between all the different government

agencies and to try to have a common front on cloud services because they do think there

is a huge potential cost savings there.

Dennis Drogseth

It is not one of the demographics that you get the highest bars for, but we have also seen a

lot of adoption in the public sector environment and I see no reason why not. Cost

savings if one value, but really once you understand the business model and states have

their own business model, what does cloud bring you? It brings you versatility. It brings

you faster time to deliver a service. It brings you potentially greater resiliency. We have

another question that came in on disaster recovery that we know could be a big value for

certain environments. So, while this certainly could play to, of course, state governments

break down to quiet few different kinds of applications; from law enforcement related to

fiscal planning, education relation. There is no reason that cloud can’t address some of

those. I see where we are about at the top of the hour. Richard do you have any last

comments on this or any other questions suitable for 20 or 25 seconds I think.

Richard Stone

No, just once again thanks again for staying on this call and also if you get the chance

come and visit cloudsolus.net and it’s a free community and I think you will find a lot of

interesting facts there about performance.

Dennis Drogseth

Page 16 of 17

Don, any last couple of comments for you?

Don Green

No, I just appreciate everybody attending. It’s a new and wild world out there at cloud

computing. It’s a fun time.

Dennis Drogseth

Yeah, it’s wild and probably going to get wilder, but hopefully more effective as well.

Again, I would like to thank you as well. This is Dennis Drogseth and if you do have any

questions that we didn’t answer, we’ll make sure we follow up and I believe we'll make

ourselves available if you have any other questions, we'll talk to you later.

Thank you. Bye-bye now.

Page 17 of 17

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