1. Business Impact of
Cloud Computing
www.pwc.com
David Lemphers
Director, Cloud Computing @ PwC
e: david.lemphers@us.pwc.com
t: http://twitter.com/davidlem

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Sorry In Advance!
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What’s Going On?
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Customer’s Want On-Demand Services
Cost
• Lower upfront costs and start-up capital makes launching new
services easier and less risky
Choice
• Consuming, composing and churning services is easier in the on-
demand world
Agility
• Subscribing to and consuming services as soon as required assists
organizations adapt to rapidly changing market/customer
requirements
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BUT: Traditional Business Is Not Currently
Optimized
Build Sell Run
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Provider Customer

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Becoming On-Demand Requires Transformation
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And Great Tech!
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Manage
Provision

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So Where Do We Start?
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At a High Level
Business
• Build -> Sell -> Deliver -> Support
Service
• Provision -> Run -> Manage -> Deprovision
Infrastructure
• Plan -> Procure -> Deploy -> Commission -> Maintain
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Step 1. Costs
Start-Up
• Facilities (Capital)
• Infrastructure (Hardware, Software)
• Business Support (Legal, Consulting, etc.)
Ongoing
• Variable
• Utilities (Power, water, network)
• Sustained Engineering
• Fixed
• Facilities (Operational)
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COGS

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Cost of Goods Sold (COGS)
• Understanding and managing COGS is critical to a successful on-
demand business
• Consumption based pricing translates directly to variable on-going
costs
• What do you do with fixed/start-up costs?
• Perhaps a blended model? (Subscription + Consumption)
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Step 2. Business Model
• What are you going to be selling?
• Compute
• Storage
• Value-Add Services
• How will you charge customers?
• Subscription Plan
• Consumption Based Pricing
• Blended Model
• What are your “promises”?
• Service Level
• Quality of Service
• Compliance
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Relationship between Costs and Revenue
• Ensure your costs are closely aligned to revenue
• Revenue Recognition (Upfront Spend versus Trailing Revenue)
• Managing variable costs is easy
• You just pass these directly onto the customer
• Managing start-up/fixed costs is harder
• Why?
• Because it’s hard to predict your total customer base up-front when
preparing your rate card
• Front-loading fixed costs can make your initial price point too high
• Back-loading fixed costs can result in aggressive losses early if you’re
wildly successful at the start
• Churning your rate card can severely impact customer satisfaction,
retention and adoption
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Step 3. Integrate Business Model into Technology
Platform
Sign-Up
• Pricing model and rate card
• Discounts and incentives
Provisioning
• COGS
Metering
• Compliance
Billing
• Revenue
Customer Support
• SLA
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Major Areas of Business Transformation
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Billing
• Billing is the most important part of an on-demand environment
• It is also the most frequent and critical interface to the customer
• Bill payment
• Usage Review
• Key focus areas
• Accuracy: This requires a massive investment of engineering effort
early in the process
• Pricing: Applying SLA credits, discounts, peak/off-peak pricing, is
non-trivial
• Compliance: With Federal, State and Local Tax regulations
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Integration
Supply Chain
• Capacity planning and management
Sales and Order Fulfillment
• Provisioning, Deprovisioning
Operations and Support
• SLA, QoS (Dashboards, etc)
CRM
• Customer Satisfaction
• Purchasing Behavior
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Capacity Planning
• One of the biggest challenges to running an on-demand cloud service
• Balancing under utilization and resource exhaustion is tricky
• Key focus areas
• Deterministic factors
• Current resources (# of servers, total ingress/egress bandwidth)
• Non-deterministic factors
• System load
• Impact of SLA
• When factoring deterministic and non-deterministic factors into
your capacity planning, always remember to account for SLA
targets
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Compliance
Tax
• Sales Tax
• Income Tax
• Varies greatly from state to state, and even at the municipality level
Legal
• Horizontal Standards (SAS 70, ISO 27001)
• Vertical Standards (HIPAA, FISMA)
• Location Concerns (Patriot Act and Non-US Customers)
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And the list goes on…
Business Model
Pricing Model
Capacity Planning
Facilities Management
Procurement and
Asset Management
Business Process
Integration
Finance
Risk Analysis
Security Assessment
BCP/DRP
Support and
Operations
Policies and
Governance
Cross-Group
Collaboration
Change Management
People and Change
Maintenance and
Warranty
Compliance
Tax
Legal
Technology
Billing
Application Migration
and Compatibility
Hybrid Environments
(On-premise + Cloud)
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Summary
• Cloud Computing and On-Demand Services are exciting and
customers want it
• Identify key business areas to transform and integrate with
• Focus on the go to market blockers first
• Develop skills and capabilities around new core competencies like
billing, support and operations, compliance
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Let’s Talk!
Thoughts?
Questions?
Comments?
Insights?
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