Building a Cloud Strategy
Cloud Based Services – Industry Trends and Implications
Jitender Singh
Director – Cloud Solutions Business
October 16th, 2013
PaaS
IaaS
SaaS
CaaS
Managed
Cloud
Private
Cloud
Public
Cloud
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Hybrid
Cloud
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2
Customers are seeking Creative Business Models
Customer Drivers for OPEX Models

Cash Management:
 Consume all network, telephony and applications



Flexible Delivery Options
 Up-scale, down-scale on demand
 Hosted, On Premise Managed, Hybrid
Managing and Reducing IT Complexity
 Reluctance to hire staff to manage VoIP/UC


Managed Services
Outsourced (COS)
Hosted
Assets on premise
Owned by Customer
Assets on premise
Assets hosted by 3rd Party
Owned by 3rd Party
Managed by 3rd Party
Managed by 3rd Party
3rd
Owned by
Party
Managed by 3rd Party
technology complexity
End-to-end SLA
Total Cost of Ownership
 Potential for cost savings, including people, capital

OPEX MODELS
as a service
Use capital in other areas of business
& operating cost
Virtualization and shared infrastructure lowers the
cost to deliver services

Managing Obsolescence
 Refresh as technology evolves

Corporate-wide Standardization

Customer facing differentiation
Implication
Dedicated
(Private)
Shared
Multitenant
(Public)
Hybrid
(Assets on Premise
Apps from cloud)
Cloud Services
Large Enterprises are not quite sure as to what implications Cloud will have on their
business, but are expecting a solution that offers cost savings, control, leverage and
security first and scalability, flexibility, standardization and homogeneity in the long-run
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Market View
Global Cloud Communications Market growing
to $27B at 8% CAGR by 2017
Transition to Cloud
• The various workplace technology
markets will adopt cloud based strategies
at different rates
• Trend to cloud is being led by hosted
apps - i.e. Email, IM, Avaya LiveEngage,
Conferencing, CRM, ERP (like SFDC,
SAP) and laying the groundwork for
hosted voice
• Hosted and Managed services - help
customers make the transition to an all IP
converged collaboration.
• Hybrid Solution – Interim step as
Enterprises consider migration to Hosted
/ cloud
Note:
UCaaS, CCaaS, VaaS forecast includes Professional Services, Maintenance and Solution revenue for
Private +Public offered through Managed, Hosted and SaaS
Source: 2013 June Avaya Demand Forecast, Avaya Market Assessment
$1.4M Avg
$3.5M Avg
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Top Business Drivers for Cloud – Large Enterprise
There are a group of business drivers that combine to make hosted the preferred model and are difficult to sell against
without a hosted solution.
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Market Segmentation
Customer Needs and Opportunity
Small Businesses
•
Needs Simplicity and Pricing
-
Fixed cost, No worry
Help me focus on my business
Make me look bigger and more professional
Never miss a call; (missed call = missed revenue)
Front office capability
Simple productivity apps (e.g. voicemail to email)
Midmarket
•
Access
Price
Agility
Needs Bundles and Solutions
-
High functionality and productivity, but make it easy
Multisite, flexible growth (e.g. add new office,
grow/shrink usage)
Ideal segment for managed / hosted
Large Enterprises
•
Elasticity
Security
Customization
SLA
Needs Integration
•
•
•
Sites, disparate CPE, IT apps,
Security, SLA’s
GLOCAL support from ‘trusted’ partner
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Control
8
Deployment Options for Large Enterprise
TCO of Hosted model is 13% lower in 3 year timeframe
3 Year Dollars
TCO per
foruser
Large Enterprise (Dollars per User)
40000 seats
Spend category
Hardware
Software
Ongoing operational
support
Implement and Deploy
On-premise UC
204
Managed UC
210
561
Data Center Ops/IT Resources
Bandwidth
Key Drivers
216
vs. OnHosted
premise UC
3%
199
389
-3%
227
216
53
26
Training
25
14
12
NWDC facilities
10
10
0
SW License Fees/Subscriptions
138
138
-24%
38
Handsets
203
PBXs/Servers
10
Maintenance
15
-35%
• On-premise - Maintenance of network, servers,
handsets requires 77 FTEs
• Managed - Maintenance of servers, handsets offset
by increased maintenance cost
• Hosted - Maintenance of handsets offset by increased
subscription cost
228%
• On-premise - Cost of initial licenses, support and
update
• Managed - Cost of initial licenses, and S/W update
• Hosted - Cost of subscription & handsets
-99%
• On-premise - Cost of initial servers, handsets and
server maintenance
• Managed - Cost of initial servers, handsets and total
maintenance
• Hosted - Cost of initial gateways
643
-20%
58
19
0
203
0
71%
10
• Managed - Initial installation costs of handsets &
management
• Hosted - Initial installation costs of handsets & hosting
285
Moves/changes
Software Support/Update
vs. On• On-premise - Initial installation costs of
premise UC servers/handsets
177
2
0
Total Cost of Ownership
1,492
1,412
-5%
1,406
-6%
Total NPV of Ownership
947
902
-5%
820
-13%
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TCO Savings Sensitivity – over 3 years
100 Seats SME Vs. 1000 Seats Medium Enterprise
3 year TCO savings for a 100 seat deployment ($ / user)
3 year TCO savings for a 1000 seat deployment ($ / user)
Illustrative Only – not per scale
% TCO Savings
25%
# Seats
100
1,000
40,000
22%
TCO Savings
22%
25%
13%
13%
A sweet spot for TCO savings exists
potentially between 1,000 and (10,000?) seats
100
1,000
40,000
# Enterprise Seats
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Deployment Options for Large Enterprise
TCO of Hosted model is similar to On-premise in 5 year timeframe
5 YearDollars
TCO per
foruser
Large Enterprise (Dollars per User)
40000 seats
Spend category
Hardware
Software
Ongoing operational
support
Implement and Deploy
On-premise UC
204
Managed UC
210
935
Data Center Ops/IT Resources
Bandwidth
Key Drivers
360
vs. OnHosted
premise UC
3%
199
648
-3%
378
360
88
44
Training
25
14
12
NWDC facilities
17
17
0
SW License Fees/Subscriptions
138
138
-24%
63
-35%
1,072
-28%
97
Handsets
203
PBXs/Servers
10
Maintenance
26
32
203
• On-premise - Cost of initial licenses, support and
update
• Managed - Cost of initial licenses, and S/W update
• Hosted - Cost of subscription & handsets
-99%
• On-premise - Cost of initial servers, handsets and
server maintenance
• Managed - Cost of initial servers, handsets and total
maintenance
• Hosted - Cost of initial gateways
0
113%
294
2
• On-premise - Maintenance of network, servers,
handsets requires 77 FTEs
• Managed - Maintenance of servers, handsets offset
by increased maintenance cost
• Hosted - Maintenance of handsets offset by increased
subscription cost
356%
0
10
• On-premise - Initial installation costs of
servers/handsets
• Managed - Initial installation costs of handsets &
management
• Hosted - Initial installation costs of handsets & hosting
476
Moves/changes
Software Support/Update
vs. Onpremise UC
0
Total Cost of Ownership
2,101
1,970
-6%
2,201
5%
Total NPV of Ownership
1,147
1,082
-6%
1,130
-1%
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Example
Validates our TCO hypothesis and model
Customer Scope




EMEA – 125,000 users (50,000 users would move
to hosted)
NAR – 500,000 users (100,000 – 200,000 users
would move to hosted)
8,451 sites in NAR and approx 1,000 sites in EMEA
(5% large sites with 1000 users and up)
Top Business Drivers

Flexibility to scale up and down based on usage

Shifting risk to service provider / Managing
Technology obsolescence

Moving from Capex to Opex

Standardization

TCO savings (perceived – but not always realized)
Current network topology is 1 data center
supporting all sites.
TCO Profile

Evaluated On-premise, hosted and managed options over 3, 5 and 7 year horizon

Savings from hosted not as large as expected


–
Hit or miss depending upon the site
–
Savings from staffing, datacenter operations considered as soft costs
–
Enterprise has a very lean, highly skilled staff at good rates – potential for retrain and redeploy
Bandwidth costs for hosted not considered significant
–
Bandwidth costs are a significant cost driver within the enterprise network (e.g. when adding a new site)
–
Incremental bandwidth costs between private network and CSP do not impact TCO significantly
Savings realized from SIP trunking
–
Though WAN upgrades at sites offset savings achieved by negating local GW requirements
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