Identifying successful business models to drive monetization of your cloud service capgemini mark skilton v1

Identifying successful business models to drive monetization of your cloud service

Mark SkiltonCloudExpo2011 WestNovember 2011

| Infrastructure Services

Agenda

Identify how to target growth markets and value propositions for cloud business models

Introduce a monetization strategies framework for targeting successful ROI from cloud computing

Identify real examples of business models to take existing traditional and cloud services towards improved business performance and cash-flow

2


SOME THEORY ON CLOUD ECOSYSTEMS

3


On-demand characteristics

Communities,Markets &Channels

IncrementalDemand

Homogeneous/HeterogeneousPlatforms &Business Environments

12

11

10

9

8

7

6

5

4

3

2

1

IndividualDemand

AggregateDemand

TimeService use, user churn

Consumer/ BuyerCommunity size

Numberof Vertices (Nodes)

Number ofUser Relationships

Number of channels / access to serviceNumber of interacting relationships (demand/supply behavior)

evaporation

expansion


Value Propositions – on-demand characteristics

Faster

Better

CheaperCost and timeTo provision

1:5 to 10

1:300 to 500

TCA

Provisioning, de-provisioning

1:5 to 10 1:300 to 500

VirtualizationTCO - sourcing

1:10 to 201:30 to+ 50

Examples


Some definitions - Cloud EcosystemsAre made up of communities, consumers, buyers, vendors, providers and intermediaries (brokers, aggregators, orchestrators, carriers..)

These can be describes as nodes (vertices), resources, relationships and various interactions

Process automation

Business Network

Market Channels

Affiliate, businessNetwork

Hosting

Versus

Cloud

Cloud is not justhosting

Mash-ups

On-demand processes How to create

BusinessFunctions in Cloud

Aggregators / brokersof cloud-on-demand

Source: CIEL


Value Dynamics in Cloud Ecosystems

There are groups of Users that consume Similar Value Propositions

We see architecture as a design of topologies inCloud Networks and interactions.

This is related to the Community networkeffects and the propertiesof dynamic consumptionpatterns

Value proposition

ConsumedValue

Faster

Better

Cheaper

DeliveryValue

Triskelionmatrices

Cluster

CommunityConsumptionPatternVertices, variables

Value footprint


Creation of Value networks in Cloud Ecosystems

F = Faster, B = Better, C = Cheaper

FF

FF

F

F

Group Cluster seekingFaster Value Proposition

C

C

C

Group Cluster seekingCheaper Value Proposition

F,CF,C

F,C

F,C

C,BC,B

C,B

C,BC,B

C,B

Group Cluster seekingFaster, Cheaper Value Proposition

Group Cluster seekingCheaper, Better Value Proposition

e.g. SaaS

e.g. IaaS


Cloud EcosystemsCompetition in this context has a different meaning because you are considering focus between different communities and demand and supply densities.

The gateways and channels become key distribution model issuesThe multiplexing of resources become a key deployment availability issue

We see this everyday in our lives ; Traveling through a city fromone district to another.This is a fractal property ofecosystems . Small scale andlarge scale. Physical and virtual resources and relationships change in cloud ecosystems

Demand and Supply Densities

interrelationshipsCommunity 1

clusters

Community 2

Ecosystem boundaries

CommonDemand andSupplyPatternCharacteristics

Feedback loops

Diversity factors

Behavior Science


Value dynamics in Ecosystems

Clusters of common services with similar Value Proposition Characteristics

These are 3 dimensionalin the ecosystem space

Topological sizeOf these can be used represent clusters ofConsumers

Ecosystem “Triskelion”


Topology of ecosystem shapes

Real world systems often exhibit pattern behavior

Topology of triskelion latticetransformations

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1225879/?page=10

Adapted from Toplogical mechanisms involved in the formation of clathrin proteins

Evolution of Clusters in ecosystems Multi-clusters

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1225879/?page=10


Prototype Experimental Design of Ecosystem Dashboards - Cloud Triskelions

Topological representation of Value to metrics focus

Semiotic representations of Cloud Ecosystems

Faster

Cheaper

Time

Cost

Lowerpercentile

Upperpercentile

Performance

Metrics – ROI Value Proposition

Better Current Value

Community Size &Dynamics

Market Value

Upperpercentile

Use of 3D Visualization representation


ECONOMIC MONETIZATION

13


How do we measure Value Proposition ?

Business and Operating Metrics

Choice of Metrics drives

Monetization Strategies

How we developRevenue /

Valuefrom the offer

Deliverypatterns

Consumptionpatterns

How we Measure Specific

performance and Value

Value proposition

Macro and MicroEconomic Positioning

Understand whatmarkets are we in ?

Growth Marketsand economics


Targeting growth markets

Properties of On-Demand Market Enterprise Demand profiles

SmallCompaniesSMBs

Largecompanies

SmallDemandSizes

LargeDemandSizes

Core InfrastructureServices

Value AddedServices

AgileRapid

StructuralStoic

CommunitySizepotential

Supplysizepotential

Augmentedservices

StructuralCloudservices

InstitutionalUtility servicesMarket

Dynamics

Buyer/Consumer

“Consulting”“reseller”

“Provisioningengines”

“brokers”

Buyer/Consumer

Vendor/Provider

Tend to be Micro Macro strategy focused


Market on-demand Profiles- macro-economic view

Market Enterprise Demand

SmallCompaniesSMBs

Largecompanies

MarketDynamics

New Markets

Existing Markets

Rapid growth

Tech killrefresh

Incremental Change

Disruptive Jump Change

Offer transition to on-demand

Step change through on-demandchannel exploitation


Targeting growth marketsMicro-economic view

Open Source

ApplianceFaster, BetterFaster, Cheaper

ManagedHosting

Cloud burst ManagedCloud

Faster, CheaperCheaper, better

Cheaper, faster,Better, Cheaper

Cheaper, betterBetter, Cheaper

Cheaper, faster,Better combinations

Proprietary

Cheaper, faster,Better combinations


Some definitions – Individual Agents

18

Our focus on this session is on Vendors and Provider on-demand Monetization strategies (how to make money)Vendor

Provider

Buyer

Consumer

Broker

Orchestrator

Carrier

Aggregator


BUSINESS MODEL – INDIVIDUAL AGENTS

19

Vendor ProviderP & L Center

Cost Center

Product ManagerVP of SalesVP of StrategyPortfolio ManagerProduct Marketing ManagerCFO..

CIOCTODelivery ManagerOperations ManagerControllerProgram Manager..

Definition of proposeand actual Saleof Cloud Products

Delivery & supportof Cloud Services

Cloud Products Cloud Products

Vendor

ProviderProvider

P&L

Cost CenterCost Center

In-house Providers in a Vendor Business

External Providers to a Vendor Business

Vendor P&L

ProviderProvider

Cost CenterCost Center

buyer buyer Buyer relationship

e.g. Buyer (internal Cross charge) relationship

e.g. Consumer(internal group cost) relationship

KeyProvider Roles

KeyVendor Roles


CLOUD DELIVERY MODELS

20

CIEL Framework symbolsF

VendorVendor

Provider

Provider

Multiple VendorCloud Product

External Hosted ProviderVendor Cloud Product

Own Vendor HostedCloud Product

Vendor

Vendor

Single VendorCloud Product

Vendor

Vendor

Shared Pool Service

Singleor multiple

Buyer/Vendor

Provider

VendorProvider Single

or multiple

Provider

e.g. Facilitator,reseller agency e.g. Broker e.g. Aggregator

e.g. Managed Complete CloudService

e.g. CommunityCloud

Co-location

Provider

Buyer

Vendor

Singleor multiple

e.g. DedicatedCapacity CloudService

Provider

Vendor

Vendor Provider

Singleor multiple

Multiple Vendor-ProviderMarket

e.g. Orchestratorreseller

= a real business entity

Are there different management of cost modelsfor Operations Directors ?

Delivery Model Metrics = Outcome metrics + key Operating metrics stagesQoS


CLOUD DEPLOYMENT MODELS

21

Each of these delivery models will aim to serve a one to many demand pattern butcould be either open shared or closed, dedicated deployments

SecurePrivate Cloud

DedicatedPrivate Cloud

Multi-tenantPrivate Cloud

Multi-tenantPublic Cloud

Open Source Cloud Hybrid Cloud

Highly sensitivemission critical systems

Secure marketplace & portalservices , B2B, B2C

Shared secure marketplace & portalservices B2C

Non-criticalPublic services

Monitor, run and secure the cloud service

Open source can be hosting public and privateenvironments and subject to OCI CC license agreements

Hybrid cloud is a combination ofprivate and public cloudsAnd legacy. It can be a bridge toother cloud services or as aplatform for managed cloud services

Channelstrategies

Deliverystrategies


SOME DEFINITIONS – STRATEGY FRAMEWORK

22

Value Proposition – is the offer value defined by the customer

Monetization Strategy is capabilities that generate revenue in a market (internal market, external market to the enterprise)

Performance metrics are used to measure how the value is delivered and expectations met

Investor expectations include margin, ROI and capability

OfferCloud Product and/or Service

Value Proposition

MonetizationStrategies

PerformanceMetrics

Operating Model

InvestorExpectations


BUSINESS OFFER PLANNING LIFECYCLES

23

ProductPortfolio

OperatingPortfolio

Investment Portfolio

StrategicPortfolio

New ProductDevelopment

Business Case

MarketsAnalysis

DecisionAnalysis

MetricsAnalysis

Decision trees,process fit

Benchmarking

Market projectionsInvestment decisions

How well Products meetBusiness expectations ?

OfferStrategy

What canbe delivered ?

What isrequired ?

Demand

Supply


CLOUD PRODUCT & SERVICES – ON-DEMAND MONETIZATION STRATEGIES

24

Micro economics Macro economics

Identifying factors that affect pricing and volume availability and performance in specific markets

Identifying factors that affect overall performance, structure and behavioracross and within markets.

Operating demand and supply, bundlingcapabilities

Market channel,business processand supply chaincapabilities

Capital funding,contract, IPmethodscapabilities

Demand and supplybetween individual agents

consumers, buyers, vendors, providers and other firms in the industry

Total economic environment

Local, national, regional and global economies

Trading domainsand financerules

Incomeand Output

Consumptionand ConsumerBehavior


ON-DEMAND MONETIZATION STRATEGIES- MICRO ECONOMIC

25

Types of Monetization

Strategies

OperationalMonetizationStrategies

Operating demand and supply, bundlingcapabilities

Market channel,business processand supply chaincapabilities

Capital funding,contract, IPmethodscapabilities

That can enable monetization of on-demand cloud products and services

Focus on CloudOffer overallperformance

These monetization strategiesare levers that you can pull or push inside your own company as ways to generate revenue and profitability.

There are also other monetization strategies that consider the environment and ecosystems that you are operating in. These strategies recognize the behaviors and influences of networks and connected spaces

Ts & CsMonetizationStrategies

GrowthMonetizationStrategies


CASE STUDY 1 – MICRO-ECONOMICSPUBLISHED USE CASE : MODERNIZATION

26

ModernizationCloud Service

CrowdInnovation

Sourcing

MobileDevice

Fat (Client) DeviceLight

(Client)Device

Cloud ServiceProvider

LegacySystems

Migrationservice

Consumer/buyer

Company

VirtualWorkflow

Workflow

Modernize Business ProcessesModernize Applications

Modernize Infrastructure

CatalogCloud Infrastructure

CloudApplications

T

S

B

E

Environments

Process Governance

Search and UI

Shop and/or Build

Market agent access and dynamics ?

End to end Service Management ?

Data Management ? Vertical integration ? Horizontal integration ? Business Processes ? In-house, external ? Competitor agent

behaviors? Efficiency , cost

effectiveness ?

Case study Source: The Open Group


ON-DEMAND MONETIZATION STRATEGIES- MACRO ECONOMIC

27

Monetization Strategy is capabilities that generate revenue in a market (internal market, external market to the enterprise)

Types of Monetization

Strategies

CommunityMonetizationStrategies

ChannelMonetizationStrategies

Industry StandardizationMonetizationStrategies

Community identity, feedbackConnectionscapabilities

Structureof channelsto markets,Channel mixCapabilities

Access specialization,reward, consistencyand interoperability

That can enable monetization of on-demand cloud products and services


These monetization strategiesare more focused on macro behaviors and scale of monopolies between participants and geographic locations.These exist in physical and virtual spaces in digital networks.


CASE STUDY 2 – MACRO ECONOMICSPUBLISHED USE CASE: BUSINESS ACTIVITY

REPORTING Communities ? Channels ? Mix of products &

services attractiveness? Interactivity ? Portability &

Interoperability ? Emerging & growth

markets ? Differentiators ? Barriers ? Process abstraction,

flexibility , agility, workloads

28

CompositeReport Builder

Report Service“Shop”

CompositeReport Buinder

CloudAggregate

Report Store

Operations Stakeholders

Finance Stakeholders

GeneralInquries

Monetize the

service

Interaction based on common reporting

views

Reporting via direct API services or

throughaggregation

T

S

B

E

Cross-Company Organizational

Units

Business ActivityReporting Cloud

Service

StakeholderCommunity

ExternalInternet inquiries

GovernanceGroup

Feedback

Feedback

Resources,Servers,Storage

Case study Source: The Open Group


ON-DEMAND MONETIZATION FRAMEWORK

29

On-demand Monetization Strategies

Differentiators and competitiveness of on-demand offers need to considerboth micro and macro economic strategies. Defining sustainable pricingand market channels needs to be aware of how the macro environment worksin on-line digital domains and digital markets

Macro-economic Micro-economic


Micro-economicOn-demand Monetization Strategies

Operational Monetization strategies1. Fractionalization

o Divide resources for optimal loadingo Portfolio cost optimization / savings

2. High Productivityo Leverage resourceso Higher operating margin

3. High Volumeo Mass consumptiono Exploit price-demand curves

4. High Yieldo Complementary usage of resourceso Thin provisioning

5. Nicheo Scare resources / skills / knowledgeo Knowledge leverage

6. Crowdsourcingo User sourced and developed resources,

ideas, knowledge, skillso Co-innovation, collaboration

7. Litigationo Patent leverageo Trolling, market positioning

Growth Monetization strategies1. Horizontal Market expansion

o Geo, size, industryo Cross-selling, annuity selling

2. Vertical Market expansiono Supply chain, stakeholderso Cross-selling, annuity selling

3. Horizontal Service Expansiono Within one Business Process & IT stacko Aggregation

4. Vertical Service Expansiono Adjacent Business Processes with similar

requirementso Aggregation

Terms and Conditions Monetization strategies

1. Innovative billingo Creative pricing, advertising and chargingo Financial engineering

2. Financingo Capex sourcingo Risk allocation


Macro-economicOn-Demand Monetization Strategies

Community Monetization strategies1. Community

o Boundary creation, management and containment

o Group behavior, membership, values, brand

2. Reward / Feedback o Incentives and feedback reinforcement

experienceo Preference targeting

Channel Monetization strategies1. Channel mix

o Resource / market awareness balanceo Portfolio mix

2. Gateway ownershipo Access methodso Addressable market

Industry standardization Monetization strategies

1. Standardizationo Access specializationo Product / service grouping consistency

2. Propagationo Market Portability and interoperabilityo Governance domain controls


CLOUD PRODUCTS & SERVICES - METRICS

32

Types of CloudMetrics

Operational Growth Ts & Cs

Cloud VendorMetrics

P & LPerformance

CostPerformance

Cloud ProviderMetrics


Focus on Cloudproduct revenuegrowth, P&L andcompetitive, valuefor money factors

Focus on CloudDelivery performance, quality of service, Operating cost,Sourcing mix (deliveryPortfolio) and Operating InvestmentBudget decisions tomaintain and build competitive,value for money factors

OperationalEffectiveness& Efficiency,Bundling Metrics

Sourcing

Pricing & SLAEffectiveness(external) –Buy / Build

Delivery QoS Cost

Sourcing MixTimelinessSLA/OLAFlexibilityMetrics

Cost of QualityDemand Mix(short/long termdemand flow)Marketand Processservice Metrics

Sum

mar

y

Operatingefficiencymetrics

PricingandContractual, risk/security/Compliance value;IP and CopyrightMetrics

Automation & New/MaintenanceInvestment mixmetrics

Security &Compliance

Cost of security

Cost of Compliance

Value ofCompliance

Cloud BuyerMetrics

Cloud ConsumerMetrics

Maturity of your organization ? Maturity of your partnerships, advisors ?


CASESTUDIES

33


CASE STUDY 1 – CLOUD VENDORBUSINESS ACTIVITY REPORTING PRODUCTS &

SERVICES

34

CompositeReport Builder

Report Service“Shop”

CompositeReport Buinder

CloudAggregate

Report Store

Operations Stakeholders

Finance Stakeholders

GeneralInquries

Monetize the

service

Interaction based on common reporting

views

Reporting via direct API services or

throughaggregation

T

S

B

E

Cross-Company Organizational

Units

Business ActivityReporting Cloud

Service

StakeholderCommunity

ExternalInternet inquiries

GovernanceGroup

Feedback

Feedback

Resources,Servers,Storage

Buyer/Consumer Value Proposition – primary/secondary

• Better, Faster (specialist reporting)• Faster, Cheaper (standard reporting)

Micro-economic monetization strategy

• Primary Operating Monetization strategyHigh Productivity

• Secondary Operating Monetization strategyHigh Volume

• Growth Monetization strategyHorizontal Service integration

Vertical Market integration

Macro-economic monetization strategy

• CommunitiesCompany Platform users

External Partner crowd sourcing

• ChannelsPublic Cloud sourcing

• StandardsIndustry nice specialization

Technology OS specialization ..


CASE STUDY 2 – CLOUD BROKER / PROVIDER : MODERNIZATION SERVICE

35

ModernizationCloud Service

CrowdInnovation

Sourcing

MobileDevice

Fat (Client) DeviceLight

(Client)Device

Cloud ServiceProvider

LegacySystems

Migrationservice

Consumer/buyer

Company

VirtualWorkflow

Workflow

Modernize Business ProcessesModernize Applications

Modernize Infrastructure

CatalogCloud Infrastructure

CloudApplications

T

S

B

E

Environments

Process Governance

Search and UI

Shop and/or Build

Buyer/Consumer Value Proposition- primary / secondary

• Faster, Better• Faster, Cheaper

Micro-economic monetization strategy

• Primary Operating Monetization strategyFractionalization

• Secondary Operating Monetization strategyNiche

• Growth Monetization strategyVertical Service integration

Macro-economic monetization strategy

• CommunitiesCompany Platform users

External Partner crowd sourcing

• ChannelsPublic Cloud sourcing

• StandardsIndustry nice specialization

Technology OS specialization ..


CASE STUDY 3 : MULTI-NATIONAL PHARMACEUTICAL COMPANY

36

Client - Needs

• Target shared services – Medical trials web service. Currently many trials and systems – wanted a consistentgroup brand and shared service.

• SMBs attacking their core markets. Small competitors could use 3rd party cloud them selves to develop Medical services and sell, deliver direct into markets held by Client.

Client had invested millions in IT infrastructure to vertically integrate to these markets but this was increasingly no-longer was a differentiator.

• Business by-passing own central and divisional IT departments.Business unit IT departments and business people directly sourcing and provisioning IT from 3rd party cloud vendors as a service.

• Inflight Cloud Pilots.With strategic technology and strategy partners and own Client IT Department.Strategic Pilots – various virtualization technologies, benchmarking and public/private cloud options.

Solutions - Needs

Selecting the right Cloud Deployment for Workloads

Assessments and Advisory Support

Single Consistent Cloud Vision and Roadmap

ROI Score cards

Risk Assessment Reference ModelsPortfolio Workloadplanning

Vision Operating Model

Roadmap

Private Cloud Pilots, support Cloud Services

FDA / IndustryCertification &Compliance

OrganizationalChange Management

ChannelServiceStrategies

DemandPatterns

SupplyPatternsAnalysis

Security , PerformanceReliability


CASE STUDY 3 : MULTI-NATIONAL PHARMACEUTICAL COMPANY

37

Barriers / Levers

Differentiators

Buyer /Consumer ROI Metrics


CONCLUSIONS

38


CLOUD MONETIZATION FRAMEWORKON-DEMAND PRODUCTS & SERVICES

39

Micro-economics monetization strategies

Macro-economics monetization strategies

Select yourValue Proposition

Select yourSelect your

1

2 3

Select yourBusiness Operating Metrics

5

Contractual/ non-contractualMetrics

1 /4

Target Growth Markets Macro-economicValue Propositions

Micro-economicValue Propositions

Differentiation

Faster, better, cheaper

Buyers / Consumers Vendors / Providers

Select your

CatalogNon-

Catalog

Off the menuOn the menu


MAKING CLOUD WORK - STANDARDS AND RESOLUTIONS - STILL EVOLVING

40

Matching capabilities

Buyer / Consumer LifecyclesVendor / Provider Lifecycles

CatalogNon-

Catalog

Off the menuOn the menu

Metrics

Value Proposition

MonetizationStrategies

Negotiating ServiceProvision

Purchasing processesSolution Development processes

Ecosystem choices , standards

Level of Maturity,standards, automation

Assurance, security


UNDERSTANDING CLOUD ECOSYSTEMS

41

Design

Affiliates

Affiliates ...

Distribution

Market

Market

Sources

Government / Federal rules – e.g.

Sales Tax

Process automation

S

C

T

B

Business Network

Market Channels


Virtual Organization

Social Organization

Super Information

Process automation

Metadata and Cloud Products and Services

Cloud Ecosystem

Industry,Business &SocialNetworks

Physical &VirtualBusiness

New channels, mix

Standards, Devices, Augmentation

Time SustainabilityPlace Feedback


VirtualBusiness

Your opinion

New channels, mix

Design

Affiliates

Affiliates ...

Distribution

Market

Market

Sources

Government / Federal rules – e.g.

Sales Tax

Process automation

S

C

T

B

Business Network

Market Channels


Virtual Organization

Social Organization

Super Information

Process automation

Metadata and Cloud Products and Services

Cloud Ecosystem

A modern economy

42

Markets and communities

Cyber attacks Knowledge Innovation Green sustainability National and global

infrastructures National interests Personal interests …


THANK YOU

43


SUMMARY

Identify how to target growth markets and value propositions for cloud business models

Introduce a monetization strategies framework for targeting successful ROI from cloud computing

Identify real examples of business models to take existing traditional and cloud services towards improved business performance and cash-flow

44


SYNOPSIS Many businesses today are faced with the challenge of getting effective ROI from cloud computing. The cloud changes the

way investment and consumption models work and has upended many traditional hosting and purchasing methods towards self service and on demand business services. It was also become a real issue in the wider picture of growth in international competitive marketplaces, governmental legislation and citizen security.

This session will identify real examples of how customers and providers of cloud services can target better growth and ROI from cloud computing by positioning and defining their operating model and value strategy. Specific issues and techniques described in the session will include methods to visualize and identify what types of business models are effective in growing cloud computing sales and demand in growth and traditional markets. This will draw upon new modeling techniques for ecosystems and a new taxonomy for classifying key decisions for cloud business models. The session will then introduce ways to define value propositions for cloud services in those target markets and customers and provide a new portfolio planning framework to select and drive monetization strategies for effective ROI cash flow. Throughout the session there will be references to real examples of cloud business models to support the guidelines for successful cloud service business models. The work is based on actual first-hand company experience and practical developments from The Open Group Cloud Computing Work Group led by Mark Skilton and Penelope Everall Gordon.

Session Takeaways• Identifies how to target growth markets and value propositions for cloud business models• Introduces a monetization strategies framework for targeting successful ROI from cloud computing• Identifies real examples of business models to take existing traditional and cloud services towards improved business performance and

cash-flow

The views are of the author and not of the current, previous or future employers.

http://cloudcomputingexpo.com/event/session/1333

http://cloudcomputingexpo.com/event/session/1333

Identifying successful business models to drive monetization of your cloud service capgemini mark skilton v1

Technology

cloud cloud

cloud services

value value proposition

cloud ecosystems demand

cloud ecosystems f

cheaper value proposition

better value proposition

revenue value