ITaaS Opportunity & VMS CKN 040616 · Actionable Global SMB Market Intelligence, GTM Strategy & Implementation Models - 19+ Year History - AMI Tracking Surveys Cover Countries Driving

Source: AMI-‐Partners (www.ami-‐partners.com) 2014 AMI-‐Partners All spending figures are expressed in U.S. dollars.Source: AMI-‐Partners (www.ami-‐partners.com) 2014 AMI-‐Partners All spending figures are expressed in U.S. dollars.

ITaaS Driven Opportunity & Market ImplicationsDriven by SDN & NFV

AMI-Partners, New YorkCisco

April 6, 2016

Source: AMI-‐Partners (www.ami-‐partners.com) 2014 AMI-‐Partners All spending figures are expressed in U.S. dollars.Source: AMI-‐Partners (www.ami-‐partners.com) 2014 AMI-‐Partners All spending figures are expressed in U.S. dollars. Cisco Confidential 2© 2014-2015 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 2© 2014-2015 Cisco and/or its affiliates. All rights reserved.

About AMI-Partners

Actionable Global SMB Market Intelligence, GTM Strategy & Implementation Models- 19+ Year History -

AMI Tracking Surveys Cover Countries Driving over 90% of WW SMB and LB IT/Telecom Spending

(SB = 1-99 Employees, MB = 100-999 Employees, LB = 1,000+ Employees)

WW Deep End User TrackingMindset, Buying Behavior, Decision Criteria, RTM, ICT Adoption/Usage/Plans, Cloud Migration, Bundles, Brands

WW Channel Partner TrackingSolutions, Skill Sets, Customer Base, Business Models, Vendor Programs, Capacity Planning, Benchmarking Tools, KPIs, ROI Engines, Cloud Transformation

Global IT/Telecom Market Sizing Model100+ ICT Categories50+ countries;/Sub-regional/City level19 Verticals, 8 employee segmentsRTM Overlay

Actionable Market Segmentation Model & Predictive Database Analytics

GTM - Campaigns/Lead Gen/Partner Recruitment; Competitive Benchmarking; Best of Breed; KPI

Strong Global Presence Across Americas, Europe & APAC

AMI-Partners’ R&D Investments: Global Primary Research (Surveys) Coverage Map Touches All Major Countries


Objectives and Methodology

Objectives• Measure perceived benefits of SDN/NFV enabled ITaaS

among SMBs and LBs globally

• Size and forecast any shifts in cloud services TAM as a result of new ITaaS technology

• Track changes in Routes-To-Market, particularly impact on Service Providers, and Go-To-Market implications

Methodology• Enterprise Survey – design and field survey to SMLBs across

11 countries in 6 regions: N=351/ ~60 per region

• Service Provider Interviews – conduct interviews with ServiceProviders across 11 countries in 6 regions N=25• Mix of IT and Business Decision Makers

• Draw upon existing AMI forecasts, surveys, reports and documents to augment field research

North America: USA, Canada LATAM: Mexico, Brazil MEA: Saudi Arabia, South Africa APJC: Japan, Australia WE: UK, Germany CEE: Poland


Today’s Discussion – 3 Parts

IT and Cloud Services Today

VMS Driven Market

Expansion

IT and Cloud Services Today

Cloud VPN

Managed Security

Other Services

Other Services

Other Services

1. IT and Cloud Services Today

2. Market ExpansionWith VMS

3. Drill Down on Cloud VPN and Other

Services

AMI’s Existing Knowledgebase -Original sizing/forecast, pre-ITaaS

Study

Quantitative + Qualitative Study with SMBs, LEs and SPs – New

forecast post-study

AMI Quant Drill Down Supported By Industry Research


75 Million+ Global Small, Medium, & Large Businesses

75.578.6

2014 2019

’14 - ’19 SMLB Firms

(Millions)0.3% 1.0%

15.0%

83.8%

201475.5 Million SMLB Firms

500 + employees

100 to 499 employees

10 to 99 employees

1 to 10 employees

10%

21%

16%33%

16%

4% North America (NA)

Latin America (LATAM)

Middle East & Africa (MEA)

Asia Pacific (APJ)

Western Europe (WE)

Central & Eastern Europe (CEE)

Source: AMI Global Model and Country Census


SMLB Addressable ITaaSCloud1 is 5% growing to 10% of total ICT2 spend

$1,405

$1,732

$72

$159

$63

$81

$90

$224

$6

$12

2014 2019

Cloud VPN

Initial ITaaS Cloud Scope/Focus

Web Hosting

Other Cloud

All On-Premise

CAGR

16.0%

4.3%

Notes:1Excluding web hosting. With web hosting, Cloud spend is 10% growing to 14% of total ICT spend

2Excludes public sector(govt. & education) & consumer. ONLY commercial & larger enterprises

$1.6 T

$2.2 T

14%

10%

Various SaaS apps., managed PCs/printers/mobile devices, etc.

19.9%

5.3%17.4%

$153 B

$305 B

E.g. IaaS storage, server, managed security, etc.


WW Cloud Penetration Levels: Low Enough To Continue Driving Growth over Next 5 Years

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2014 2015 2016 2017 2018 2019

(In 0

00s)

All Businesses

PC Businesses

IaaS Security BusinessesIaaS Server BusinessesUC BusinessesOn-Prem Server Businesses


NA LATAM MEA APJC WE CEE

Basic Services* 0-‐15% 0-‐5% 5-‐25% 2-‐29% 0-‐8% 0-‐10%

Advanced Services** 0-‐8% 0-‐12% 2-‐14% 9-‐43% 0-‐12% 0-‐16%

Total Planning 1service or More 52% 33% 61% 78% 43% 63%

Online Services Adoption Plans – Next 12 Months – By RegionAcross regions, a significant proportion of businesses plan to adopt at least one service in the next 12 months

* Includes online backup, storage, video conferencing, collaboration, VOIP, etc.** Includes remotely managed storage, networking, WAN acceleration, DaaS, managed security, etc.


WW Online Services Growth by Region

$4 $10$40

$67$41

$101

$4

$11

$10

$23

$53

$94

2014 2019

North America(NA)

Latin America (LATAM)

Middle East Africa (MEA)

Asia Pacific(APJ)

Western Europe (WE)

Central & Eastern Europe (CEE)

$153 B

$305 B

CurrentCAGR

15%

21%

20%

11%

12%

19%

17%

Cloud Spending Inclusive of:

• Hosted Server, Online Backup, and Storage (IaaS)

• Desktop as a Service (DaaS) and Platform as a Service (PaaS)

• Video Conferencing & Hosted Voice over IP (VoiP)

• Online Collaboration, Email, and Hosted Productivity

• Remotely Managed IT Services (RMITS)

• Website Hosting


WW Routes-to-Market Mix

15% 12%

0.04% 0.04%1% 1%

24% 27%

3% 3%13% 15%

27% 27%

17% 15%

2014 2019 (Original Forecast)

Telcos/Cable

Hosters

MSPs

System Integrators

CPs (Resellers, ISVs, etc)

DMR

Retail

Vendor Direct

$153 B $305 Be.g. Verizon selling Verizon Video Conferencing OR

Verizon Selling Office 365

e.g. Rackspace selling own hosted servers OR Rackspace selling Salesforce seats/ licenses

e.g. Managed Service Provider selling own remote security monitoring OR Symantec Endpoint Seat

e.g. Accenture selling own IT consulting services OR bulk procuring PCs, software licenses, etc

e.g. Channel Partner selling its own installation hours OR vendor hardware/software/services

e.g. Tiger Direct or EBay selling PCs, software licenses, storage appliances, etc

e.g. Best Buy selling its own installation services OR vendor hardware/software/services

e.g. Symantec selling own endpoint security, Microsoft selling Office 365, or HP selling HP servers/ PCs

Developing alternate channels is essential to successfully selling into and expanding business markets. True 2-tier channelsare driving over 40% of the business.

40%

45%


SDN/NFV Impact


SDN/NFV Benefits Highly Desired Across All Regions


Simple and easy service ordering and self-‐

provisioning

Automated service and network provisioning,

account management and configuration

Ongoing service capacity scale up or down as needed

Consumption/Usage Based Billing (flexibility to be billed

for what you use)

Turn Service on/off on demand

32%

28%

40%

18%

33%

35%

25%

38%

42%

40%

Highly Desirable Somewhat Desirable

29%

26%

40%

33%

48%

24%

26%

17%

21%

21%

39%

41%

48%

34%

36%

28%

20%

22%

22%

31%

52%

48%

36%

34%

45%

34%

31%

47%

50%

40%

28%

28%

40%

30%

43%

32%

25%

20%

28%

22%

27%

20%

29%

33%

31%

27%

18%

24%

10%

27%

Multiple benefits recognized across the globe – Nearly 9 out of 10 SMLBs found at least one benefit desirable. APJC has high interest in SDN/NFV. Being able to easily MONITOR and CONTROL/MODIFY in a TRANSPARENT fashion is highly compelling.


Reactions to SDN/NFV Benefits Are Highly Positive


Adopt additional online IT services beyond

those currently used or planned

Expand services currently used within the company to more

users

*We will recommend usage of such services

to peers and colleagues across the industry

49% 51% 44% 54%42% 41%

56%71%

59%70% 69% 63%

78% 82%64% 57% 60%

71%

Having CONTROL reduces RISK, leading to a change in consumption behavior - reduces resistance/caution and generates positive sentiment.Benefits will likely lead to market expansion above and beyond moderate/low adoption intentions observed earlier. Potential to unlock late majority and grow the market exponentially with appropriate marketing mix, including pricing adjustments.

*Key Influencers in Buying Journey


SDN/NFV Benefits Drive Shifts in Purchase Channel Preference


Switch from current providers to specific service

providers that offer such benefits

47% 47%

34%

68%

31%

44%

A significant proportion of SMLBs will shift to Service Providers that offer benefits associated with SDN/NFV enabled services



Online Backup as a Service

Online Storage as a Service

Video Conferencing

Online Collaboration

Computing/Hosted Server as a Service

Online Productivity

Remotely Managed Mobile Device/BYOD

Hosted VoIP

Offsite Hosted Email

Remotely Managed Server

Remotely Managed Networking

Web hosting

Remotely Managed Security

Discounting Further Increases Preference for Service Providers

% of Firms who answered 4, “Very Likely” + 3, “Likely” Scale of 1 to 4, where 4 = Very Likely and 1 = Unlikely% Of prefer other types of service providers for each services

40%

39%

38%

32%

29%

28%

26%

25%

24%

19%

19%

19%

16%

Basic Online IT Services

40%

50%

50%

43%

40%

17%

50%

43%

53%

44%

57%

58%

38%

67%

44%

80%

67%

56%

63%

27%

64%

43%

45%

43%

43%

47%

54%

60%

31%

45%

53%

61%

59%

70%

64%

57%

50%

63%

40%

17%

20%

18%

25%

33%

25%

40%

25%

14%

28%

9%

33%

42%

40%

40%

29%

29%

56%

33%

19%

31%

40%

39%

47%

Pricing these services competitively can drive buyers towards SPs, more so outside of NA and WE

% that would switch to SPs IF services were discounted by ~10%



RMITS Storage

RMITS Wireless LAN

RMITS VPN

RMITS LAN

RMITS WAN Acceleration

RMITS Antivirus

RMITS Email Security/Anti-‐Spam

RMITS WAN

Desktop As a Service

RMITS Web Security

RMITS Firewall

Platform As A Service

RMITS IPS/IDS

Bandwidth/Network/SLA on Demand

Discounting Further Increases Preference for Service Providers

64%

40%

29%

25%

25%

23%

23%

22%

20%

19%

17%

Advanced Online IT Services

43%

50%

38%

44%

40%

40%

67%

64%

56%

57%

33%

67%

46%

58%

62%

57%

50%

50%

50%

53%

65%

50%

50%

54%

40%

56%

44%

38%

42%

22%

43%

50%

27%

50%

47%

29%

45%

50%

25%

67%

25%

60%

40%

40%

50%

40%

18%

29%

25%

38%

33%

71%

33%

67%

55%

38%

25%

33%

33%

33%

33%

40%

57%

25%

42%

57%

25%

40%

Pricing these services competitively can drive buyers towards SPs, more so outside of NA and WE

% of Firms who answered 4, “Very Likely” + 3, “Likely” Scale of 1 to 4, where 5 = Very Likely and 1 = Unlikely% Of prefer other types of service providers for each services

% that would switch to SPs IF services were discounted by ~10%


Multiple Forces at Work

1. Enhanced Usability à Deeper Deployment

2. Enhanced Usability à Word of Mouth

3. Enhanced Usability à Switching

4. Competitive Pricing à Switching


WW Service Provider (SP) Uplift Driven from bothMarket Expansion AND Solution Switching

$140 $153 $166 $180 $194$215

$236

$0$0

$4

$14

$31

$50

$69

$0$0

$9

$15

$25

$36

$47

2013 2014 2015 2016 2017 2018 2019

In $

Bill

ions

New Users Adopt SP Solution (Market Uplift)

Previous Non-SP Users Switch to SP Solution

Maintain Solution With Current Provider

$140 B$153 B

$179 B$209 B

$250 B

$301 B

$351 B (up from $305 B)23% of Market

Switches from

Non-SP to SP Solution

15% Market Increase –Net New


WW Market Expansion by Size Segment

$54

$127 $146$39

$74$85

$60

$104

$120

2014 2019 2019 (New Forecast)

Large Bus(1,000 + emp)

Medium Bus(100 to 999 emp)

Small Bus(1 to 99 emp)

$153 B

$305 B

UpliftNew

CAGR$351 B 15%

15%

15%

16%

18%

17%

22%

15%

Drive adoption among SMBs. Established SP Footprint among Large Businesses


WW Market Expansion by ICT Solution

$14$53 $61

$3

$9 $9

$26

$43$51

$11

$35$35

$36

$83$103

$63

$81

$91

2014 2019 2019 (New Forecast)

Web Hosting

Remotely Managed IT Services (RMITS)

Online Collaboration, Productivity, & Email

Video Conferencing & VoiP

DaaS & PaaS

Hosted Server, Online Backup & Storage (IaaS)

$153 B

$305 B

UpliftNew

CAGR$351 B

15%

1%

19%

2%

12%

25%

14%

18%

26%

14%

28%

8%

24%

34%



Purchased multiple services as a bundle

at one time

Purchased individual (unbundled) services

at different times

Purchased individual (unbundled) services

at the same time

Purchase Behavior for Service Bundles

62%

68%

48%

64%

71%

34%

42%

48%

11%

66%

74%

31%

47%

48%

27%

45%

55%

24%

Services are purchased both bundled and individually in equal measure.


Emerging Bundling PreferencesDistinct Bundles in NA and APJC. Lead with service listed at top of bundle

NA APJC

Hosted Email

Webhosting

Remotely Managed Email Security/Anti-

Spam

Remotely Managed Web Security

Remotely Managed Antivirus

Remotely Managed Email Security/Anti-Spam

Remotely Managed Firewall

Remotely Managed LAN

Remotely Managed WLAN

Remotely Managed WAN

Remotely Managed WAN Acceleration

Remotely Managed Email Security/Anti-

Spam

Web Hosting

Video Conferencing

Remotely Managed Server

Remotely Managed WAN

Remotely Managed LAN

Hosted Email

Desktop As A Service

Video Conferencing

Computing As A Service

1. Email Centric 2. Security Centric3. Managed Services

Centric 2. Managed Services Centric

1. Productivity Centric

~13% ~9% ~9% ~17%~45%

Proportion of Firms Interested in Bundle


13%2%

8%

77%

PREVIOUS SP Rev ForecastBy Routes-to-Market

Vendor Direct

Retail

DMR

CPs (Resellers, ISVs, etc)

System Integrators

MSPs

Hosters

SP Direct

$153 B $351 B

OriginalForecast

NewForecast

83% 85%

54%

17% 15%

46%

2014 2019 2019 (N)

Revenues Accrued to Service Provider (SP)

Revenues Accrued to Non-SP/ OTT Provider

(e.g. TWC Hosted Server, AT&T Video Conference, Verizon E-mail)

(e.g. AWS Hosted Server, Cisco WebEx, Microsoft Office 365)

WW SP Uplift Driven from Selling bothDirectly and Indirectly (Other Channels)

32%

4%

19%

46%

NEW SP Rev ForecastBy Routes-to-Market

$305 B


VPN Drill Down


Ø Nascent SDN/NFV-‐driven Hosted Network VPN technology is projected to grow significantly through 2019. This growth will come fromØSwitching from MPLS: Businesses who use MPLS VPN will switch to Hosted Network VPN for superior functionality, user experience and lower priceØNew Adoption: Continued VPN adoption driven by SMBs opting for Cloud VPN solutions

Impact of ITaaS on the VPN Market – A Deeper Dive

$12.7 $16.7 $15.2

$26.4

$37.5$32.4

$0.4

$1.3$7.6

$5.5

$11.1 $14.9

2014 2019 2019 (New Forecast)

Site to Cloud VPN

Cloud VPN

MPLS VPN

IP VPN (Non-MPLS) and P2P VPN

$45 B

$67 B

UpliftNew

CAGR

$70 B5.3%

502%

-14%

9.3%

80.0%

4.2%

33% 21.9%

-9% 3.6%

Mix of Market Expansion and Switching


$3.2

$0.6

$2.5

MPLS VPN at Risk

Lost MPLS revenue recovered by Cloud VPN + additional Cloud VPN services upsell. Net Revenue Loss: $1.3B

MPLS revenue at Risk under ITaaS scenario

1.

2.

New Cloud VPN adoption expands market by additional $2.5 B

3.

$6.3 B

$5.1 B

Market Expansion, Upsell and Switching to Cloud VPN will Offset MPLS Revenue Losses

Revenue per customer will drop as customers switch from MPLS to Cloud VPN. However, switchers will purchase incremental VPN services

Forecasted Cloud VPN

Market Expansion

Additional Cloud VPN

Services Purchased

Cloud VPN Dollars Gained

Total Cloud VPN

Migrating Existing Customers And Targeting Net New Customers Will Be Key


Enhance Wins With SMB Target Marketing

• Behavioral profiles• Scored leads• Buyer personas• Pain points/talking points

Successful campaigns and improved marketing ROI with AMI’s SMB Cloud Segmentation Model

Source: AMI-Partners SMB segmentation based on annual WW quantitative tracking surveys

How Can SPs Get their Fair Share of the ITaaS Opportunity?

Cisco’s Virtual Managed Services (VMS)

Cisco Virtual Managed ServicesCloud VPN and Cloud MPLS Packages

Customers

Flexible CPE

Cisco ISREthernet NID

Self-Service Portal Service Provider Cloud

Cisco® Virtual Managed Services Platform

Service Catalog Orchestration Engine

Open APIs

StorageNetwork Compute

vFirewall vWSA vIPS

Cisco Evolved Programmable Network

vRouter

Secure BroadbandSecure WAN

IPsec / MPLS

Sources: Markets and Markets, AMI, Cisco BTA 2015

§ Global managed network services § $70 billion USD (2019) 13% CAGR

§ Telco cloud managed VPN services§ Remote VPN, basic, full, and premium§ Self-service telco cloud VPN portal§ Converged IP and optical - Native IPv6§ All network elements virtualized

§ Improved customer experience§ Services operational in under 48 hours

DT CloudVPN Portal



vRouter vFW vWeb vIPS


DT Cloud

Cloud VPNPremium

RemoteVPN

Cloud VPN

Accelerating Cloud and Business Services Growth

Deutsche Telekom

Sources: IHS, MarketsandMarkets, 2015

§ AJPC cloud managed services § $13 billion USD (2018) 17% CAGR

§ Unified cloud and managed network services

§ SaaS delivery through Cisco Intercloud Services

§ Self-service cloud services marketplace

§ On-demand custom service requirements

§ Improved customer experience

Telstra Symphony Portal

Telstra Cloud Services Platform




Telstra Cloud

BusinessApplications

Cloud VPN

HCS

Security

IaaS

Equinix

Microsoft Amazon

Dimension data

BTDeutsche Telekom

IntercloudEcosystem

Telstra

Building a Cloud Services Platform

Accelerating Cloud Services DeliveryNuvola Italiana

Sources: Markets and Markets, HIS, Cisco BTA 2015

§ EMEAR Cloud Managed Services § $24 billion USD (2018) -- 13% CAGR

§ Telco virtualized managed services§ Self-service telco cloud VPN portal§ Improved customer experience





Telecom Italia Cloud

Cloud VPNPremium

RemoteVPN

Cloud VPN

Telecom Italia

Virtual Managed Services: Business Outcomes

Sources: ACG Research, Cisco® BTA, Cisco SPTG 2015

ACG Research Business Case Study

Customer Site

NID/CPE

§ Focused on medium-sized businesses with an average of 10 sites and 500 employees§ Two types of Virtual Managed Services

§ Cloud VPN Services§ Cloud Security Services

Regional Data Center

Cloud VPN Services

§ IPSEC, SSL VPN§ Routing and firewall

Cloud Security Services

§ Firewall, IPS§ Email, web security

Service Provider Business Outcomes

~ 76% OpEx Savings~ 220% ROI

• Service Intent is done through Modeling Languages that Abstract out the “How” and “Where”

• The Service is looked at summarily across the implementation domains.

• The Orchestrator has both a Service and Device component. Each independent of the other. Answers the “How”.

• The Orchestrator is able to Instantiate a Service Across the Infrastructure. Answer the “Where”.

VMS Architecture FundamentalsModel Driven Architectural Approach

Prem Access WAN Compute

CPE

ISRx86

MetroVNF

Service Chaining

ME36xx 9KCRS3rd Party

CSRvASA3rd party VNF

Service Intention

Service Instantiatio

n

Infrastructure

X-Domain Orchestration

Service DefinitionService DefinitionService Definition

RouterVNF

3rd party CPE3rd Party

Service Velocity;; Achieved When Changes in Infrastructure do Not Require a Change in Service Models.

Device Model Service Topology Configuration

DCI/PE (A9K, MX, …)

MPLS VPNCPE (ISR, U-CPE, …)

VNF (vR, vFW, …)

Cloud VPN

GETVPN

LISP VPN

Cloud Svcs

CPE Provision

Day 0/1/2/3

Day 0/1/2/3

NetConf/CLI

Service IntentModel Driven Design

BYOD

vSecurity

vSecurity

YANG

Infrastructure

YANG

YANG

Why Model Driven Service Orchestration

YANG

Device Model

NED

Service Models

X-Domain Service Models

Industry leading capability in NG SP device management

Common mechanism for native interface to any HW / SW system

Abstraction of capabilities and

services supported in a device or system via

NED/YANG

Construct services independent of infrastructure – reduce workflow in SP infra

Construct services independent of

infrastructure – reduce workflow in SP infra

How Can Cisco Assist you? ITaaS Regional Opportunity, Revenue Uplift, and TCO Analysis

Ideation

Engaging with you on VMS opportunity and long term market impact :ITaaS TAM• Global • Regional• Country

Preliminary Service Creation/Validation

Engaging with CxO, Strategy, Senior Product Development & Management for VMS Use Case and impact on exiting businessCloud VPN, IWAN, MSS TAM• Global • Regional• CountryHigh touch top down business analysis

Service Creation

Engaging SP Product management for TCO, ROI analysis:• Virtualized Services - VMS

Business Case Modeling Tool

• Orchestration Business Case – Value of NSO Automation in Legacy Services

A Suite of Tools support your Evolution to a Virtualized Software Defined Architecture And Services

ITaaS & Other Assets

Contact your account representative to get more details on the following assets:• Global & Regional ITaaS and Cloud VPN Opportunity Summary Slides• Global ITaaS White Papers • VMS TCO Model –• Orchestration & Automation TCO Model – For Legacy and Virtualized Services

• Global and Regional Cloud VPN White Papers• New Service Providers Opportunities - Monetization and Optimization Index(MOI)

#CiscoMOI Monetization.Cisco.com

Online assets:

CONTACT US @ [email protected] MORE

Cisco Virtual Managed ServicesCloud Intelligent WAN (IWAN) Packages

Self-Service Portal Service Provider CloudCisco® Virtual Managed Services Platform


Open APIs


vRouter WAAS AVC PfR


Secure WAN

Secure Broadband

Public Cloud

Private Cloud

InternetInternet

MPLS

Customers

CPE

CPE

Cisco Virtual Managed ServicesCloud Security Packages

Customers

Flexible CPE

Cisco ISR Ethernet NID

Self-Service Portal

Secure WAN

Service Provider Cloud



Open APIs


vRouter vFirewall vWSA vIPS


ITaaS Opportunity & VMS CKN 040616 · Actionable Global SMB Market Intelligence, GTM Strategy & Implementation Models - 19+ Year History - AMI Tracking Surveys Cover Countries Driving

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