The document discusses IT cloud financial management. It begins with an overview of cloud computing models and definitions. It then discusses the need for IT financial management as cloud adoption increases. Key capabilities of IT financial management software are outlined, including budgeting, cost modeling, chargeback, and optimization. Best practices for implementation are provided. Emerging trends indicate the market for IT financial management software will exceed $500 million by 2012.

1. IT Cloud Financial Management
March 2010
Yisrael Dancziger Thomas Mendel
CEO & President Vice President &
Digital Fuel Research Director
Forrester

2. Business Service Management And IT
Financial Management In The Cloud
Dr. Thomas Mendel, Ph.D.
Vice President & Research Director
Forrester Research
March 2010

3. Agenda
• Understanding the cloud
• It’s time for IT financial management
3 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

4. 4 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

5. 5 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

6. Cloud Clarity
6 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

7. What IS cloud computing? Give me three
steps
7 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

8. Understanding vendors cloud portfolios
Cloud computing is:
A standardized IT capability
(services, software, or infrastructure)
delivered via Internet technologies
in a pay-per-use, self-service way.*
Source: Wipro
8 Entire contents © 2010 Forrester Research, Inc. All rights reserved.
*September 9, 2009, “Best Practices: Infrastructure-As-A-Service (IaaS)” Forrester report

9. Step1: What comes as a service?
Cloud service management
I M A I P
N I P N R
F D P F O
R D L O C
A L I R E
S E C M S
T W A A S
R A T T E
U R I I S
C E O O
T N N
U S
R
E
Typical “cloud computing resources” New resources
9 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

10. Step2: What is the level of sharing?
Level of sharing Cloud service management
10 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

11. Forrester’s full cloud taxonomy
Level of
sharing
Public IaaS PaaS SaaS BPaaS PURE
cloud CLOUD
@ global MARKET
provider
Virtual
private Dynamic Integration- Dynamic Dynamic
cloud infrastructure as-a-service apps BPO
@ dedicated
provider
services services services
EXTENDED
CLOUD
Infrastructure Middleware Apps BP MARKET
Private
cloud
virtualization virtualization virtualization virtualization
@ in-house tools tools tools tools
data center
Infrastructure Middleware Applications Business Business
processes value
11 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

12. Forrester’s cloud taxonomy
and example vendors
Level of
sharing
Public IaaS PaaS SaaS BPaaS PURE
cloud Amazon EC2 Force.com Salesforce CRM On Demand CLOUD
@ global Rackspace Rackspace (soon) Oracle- Process as a S.
provider Google AppEngine CRM On Demand Meetingexpectations MARKET
Cordys Google Apps+Voice PayPal
Virtual
private Dynamic Integration- Dynamic Dynamic
cloud infrastructure as-a-service apps BPO
@ dedicated services services services
provider Cable&Wireless
SIS, T-Systems
Boomi.com
Hubspan
Oracle E-Business
Suite On Demand
On demand portion
of BPO, e.g., Wipro
EXTENDED
CLOUD
Private
Infrastructure Middleware Apps BP MARKET
cloud virtualization virtualization virtualization virtualization
@ in-house tools tools tools tools
Oracle VM and Oracle Fusion Middlew. Fujitsu FlexFramefor SAP Tools used in Shared
data center Assembly Builder* vSphere-Spring FluidOps.com
VMware
Service Center
Cisco ITMS Vendors BPM
IBM Cloudburst
Infrastructure Middleware Applications Business Business
processes value
12 Entire contents © 2010 Forrester Research, Inc. All rights reserved.
*Oracle Assembly Builder is part of the ongoing Oracle Fusion Middleware 11g roll-out

13. Forrester’s cloud taxonomy
mapping to vendors’ portfolios
Level of
sharing
Public
IaaS PaaS SaaS BPaaS PURE
cloud CLOUD
@ global
provider $460m $120m $9.0b $100m MARKET
Virtual Dynamic Integration- Dynamic Dynamic
private infrastructure as-a-service apps BPO
cloud
@ dedicated services services services
provider $6b $35m $4.8b $9b EXTENDED
CLOUD
Infrastructure Middleware Apps BP MARKET
Private virtualization virtualization virtualization virtualization
cloud
@ in-house
tools tools tools tools
data center $2.1b $150m $3.3b $2.1b
Infrastructure Middleware Applications Business Business
processes value
13 Entire contents © 2010 Forrester Research, Inc. All rights reserved.
*Emerging service provider, rarely existing today.

14. End user perspective of offerings
Level of
sharing
Public
IaaS PaaS SaaS BPaaS
Human
PURE
CLOUD
cloud Centric
@ global MARKET
provider
IT Service Business
Service
Virtual
private
(pay per use)
Dynamic Integration- Dynamic Dynamic
Markets
cloud
Infrastructur as-a- Apps BPO
(pay per
@ dedicated e Service Services Services
use) EXTENDED
provider
Services CLOUD
InfrastructureMiddleware Apps BP
In-house MARKET
Private
cloud
IT Tools
VirtualizationVirtualizationVirtualization Virtualizatio
process
@ in-house Tools (licensed) Tools
Tools n
chargeing
data center
Tools
Infrastructure Middleware Applications Business Business
processes value
14 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

15. Service cost and performance aggregation
becomes a core skill Service provider
Client company
ecosystem
LoB LoB LoB SP 1 SP 2 SP 3
Internal service aggregation External service aggregation
IT organization SP 4 SP 5 SP 6
• Cost and performance management across end-to-end service delivery
• Coordinated across all stakeholders and constituencies, internal and
external
• Requirements capture and new project initiation
• Balanced responsibility between in-house IT and external service providers
15 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

16. Defining IT financial management
Forrester defines IT financial management as:
The discipline of planning, budgeting, monitoring, and
controlling the use of a firm's total IT budget
(operations/maintenance and new
projects/investments).
IT financial management software provides an
application that allows companies to support and
automate the process of IT financial management.
This is done by applying general cost accounting
principles to IT.
16 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

17. IT financial management – Why now?
IT users and IT departments are experiencing an accelerating need
for IT financial management because:
• Cloud & virtualization are driving additional IT adoption at a rapid rate
• Business units are demanding IT cost visibility and predictability
• Profit pressures demand businesses to manage IT cost vs. business
performance tradeoffs and alternatives like never before
• IT process maturity (e.g. ITIL) has moved many IT organizations from
a chaotic to a stable state so they are now better prepared to add IT
financial discipline
• Data availability and accuracy (through discovery) has improved
greatly
17 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

18. Key capabilities of IT financial
management software
18 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

19. Emerging trends: IT financial
management software
• The IT financial management software market will exceed $500
million annually in 2012.
19 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

20. IT financial management adoption s-curve
Understand IT costs Manage IT costs Manage IT demand
Full
Ongoing corporate Advanced
Basic product integration
cost visibility chargeback
definitions/
Service
Basic
catalogs
integration
Maturity Basic
Of IT chargeback
Financial Change
Process
Management models User
IT budget behaviour
Implementations
review
Service Activity
models Service
based Based
Ad-hoc BU Costing (ABC)
cost visibility costing
projects
Cost
Cost Price
models benchmarks benchmarks
20 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

21. IT financial management – Best practices
• Create a governance structure and revamp your
organization
• Deploy service definitions/service catalogs
• Develop cost and service models
• Optimize delivery through right sourcing
• Invoice customers to rationalize behaviors
21 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

22. Thank you
Dr. Thomas Mendel, Ph.D.
tmendel@forrester.com
http://blogs.forrester.com/vendor_strategy/
www.forrester.com
22 Entire contents © 2010 Forrester Research, Inc. All rights reserved.

23. IT Cloud Financial Management
March 2010
Yisrael Dancziger
CEO & President
Digital Fuel

24. Managing the Cost of Cloud Services

25. Where to Start: Build A Cost Model
Application Cloud Infrastructure Cloud Process Cloud

26. Cost Model Enables You to know:
• Total Service Cost and Usage
• Usage based cost allocation
• Underlying Cost Drivers cost
• Unit Cost
• Calculate key metrics:
– Cost per headcount
– Cost per revenue
– Capex vs Opex
– Many others

27. IT Cloud Cost Model
Managing the Cost of Cloud Services
What can you do with this knowledge?

28. Proactive Cloud Cost Control
• Cost trends at all levels
• Track Actual vs Budget
• Automatic observations
• Root cause
• What if planning

29. Business Unit Cost Visibility and Predictability
• Detailed periodic invoices
– Cost and Usage
• Forecast
• Reforecast
• Compare to alternatives
• What if analysis

30. Cost Value Optimization
• Mix and match,
Compare between:
– Vendor and internal options
– Different service offerings
– Delivery models
– Cost models
• Meter usage, Identify:
– Virtualization candidates
– Consolidation candidates
– Standardization options
– Defer upgrade potentials
– End-of-life potentials

31. Usage based IT Cost Allocation
• Allocations must be:
– Automated
– Consistent and ongoing
– Justifiable
– Audit trail
– Standard
• Pass in “flying colors”:
– Tax audits
– Stock market reporting
– Regulator audits

32. Accurately Plan and Budget – Based on Facts
• Actual Historically based
unit cost:
– For every IT service and cost driver
• Actual Historically based
usage:
– Accurate demand forecasting
• Demand & driver information
– Sophisticated calculator
– Applies the historically calculated
costs, drivers, and usage
– Automatically produce a proposed
IT budget

33. Summary
IT Cost management
enables realization
of cloud benefits!

34. Thank you!
Questions?
Please enter your questions in the Q&A panel
located in the lower right section of your screen
Presented by:
Thomas Mendel Yisrael Dancziger
Forrester Digital Fuel
tmendel@forrester.com ydancziger@digitalfuel.com