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KPMG INTERNATIONAL

Embracing the Cloud


Global forces shaping the service provider market
kpmg.com

Cloud Providers Integration


Compliance

ware

Public Collaboration Investment


Providers
Measurement
Web-based
Risk mitigation

Tax odels

Cloud
Speed-to-market

Security Innovation management Customer

Transformation

Migrate

Servers

Cost savings Big Data KPIs Efciency Agility Evaluate Evolution


CRM

Users EvolveEnterpriseGovernance
Change Management

Consistents Applications

Risk

Hybrid

Competitive Advantage Implementation


KPIs Open Standards

Third Party

Deployment Flexibility Private

Global Market

Analytics

2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Contents
Foreword Executive summary Introduction Core challenges mean core opportunities Outcome: business transformed Cases in point Where are we going and what are we spending? Adopting cloud services Has total cost of ownership been evaluated properly? Functionality is essential; it is a question of good enough vs. perfect. Tax in the equation, a relevant variable Who should lead cloud efforts? Conclusion Insights & implications Interviewees Additional reading 1 2 5 6 7 9 16 25 27 30 36 37 40 41 45 46

2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

The impact, opportunity and risk of cloud. Its here. Its now. Find out what your peers are doing today.

2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Foreword
We are pleased to present KPMGs 2011 Global Cloud Survey report. This is the first year that KPMG has conducted a global survey of over 900 executives in 15 countries. The survey examines three distinct perspectives that of senior business unit executives, senior corporate IT executives, and cloud service provider executives. The survey analysis identifies the interplay, including commonalities and dissonance, among these three sets of participants. The objective of this publication is to identify cloud adoption barriers and opportunities as well as provide insight into the forces shaping the cloud market. For many, clouds promise is more than just a shift in IT strategy; it could lead to a fundamental transformation of a companys business model. For providers of cloud services and for companies that are considering moving delivery of their products to the cloud this analysis provides critical insight into how users are approaching their cloud buying and implementation decisions. Undoubtedly, the full story will unfold at different rates across companies around the world, as some move cautiously and others make a bold dash. Based on our experience and the interviews with cloud providers and users, the following recommendations will help cloud providers increase the success of their clients move towards cloud: Educate customers and prospects on the benefits of cloud beyond the economics. The advantages of the cloud model appear to be understood by enterprises, but only at a high level. Organizations need help getting started by translating the cloud into organization-specific competitive advantages. Assist clients in developing new KPIs to measure their investment. Be realistic on cost savings claims; back up examples with proof. Be proactive about the challenges clients will face from rapid and multiple cloud investments and deployments. Ensure, as a cloud provider, you have changed your business model in key areas such as revenue and billing, customer management, risk & compliance, and tax structures. Cloud is opening the door to transform business and drive innovation inside and outside organizations. As the cloud business and technology models continue to evolve, cloud service providers have the opportunity to assist their clients in the development of a comprehensive cloud strategy. We trust you will find this publications insights and guidance of value. Sincerely,

Gary Matuszak Global Chair, Technology, Media & Telecommunications

Tom Lamoureux Global Advisory Leader, Technology

Embracing the Cloud: Global forces shaping the service provider market | 1
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Executive summary
81% of businesses are either planning their initial adoption, are in early or advanced stages of experimentation or have full-on cloud implementations.
Transform your business with the cloud. This drumbeat has punctuated most technology and business conversations over the past few years. Fueled by hype, many cloud advocates can discuss at a high level how they can transform business models, but few have the insights of what companies around the world are actually doing to benefit from the cloud or how to create and deploy a strategy that is truly transformative. Much has been discussed about the business and operational challenges surrounding cloud adoption including security, total cost of ownership, and the intersection with business strategy and operations. As companies in a variety of industries are beginning to address the impact of cloud integration with other applications and data, these companies also face the challenge of organizational redesign and change management, compliance, taxes, and security. KPMG International and Forbes Insight conducted a global survey in 2011 to assess global cloud adoption trends. The survey included more than 900 executives from 15 countries. Respondents represented end-users, executives in IT and business functions, and cloud vendors. From all angles, the responses showed increased readiness to accept and exploit the benefits of cloud. And while the cloud continues to have many definitions, our report highlights where it is going, underscoring that this seemingly simple and flexible solution can create complexity if not managed properly. The real transformative impact of the cloud Cloud is transformative in that it is creating new business opportunities as companies harness its power to efficiently facilitate new revenue, services and businesses. It is breaking down barriers in the supply chain, as well as creating more effective and timely interaction between clients and suppliers. It is delivering speed, agility and cost reduction to IT and other functional areas within the enterprise. The transformative impact of cloud can readily be seen across the enterprise in areas such as HR, CRM, and IT infrastructure. Many early adopters have implemented the cloud in areas that are self-contained, primarily in areas that are not rife with complexity and multiple applications, and that do not require integration with core enterprise applications or infrastructure. Others have pushed forward more broadly in new, start-up or evolving businesses, often with increased speed over their sister organizations burdened with legacy systems. And while there are notable ground-breakers pushing cloud to the edge, the majority has focused on controlled implementations to improve the odds of success. Key findings include: The cloud is commonplace, but its scope varies widely. Over half of the businesses and government enterprises surveyed have already conducted either a full (24%) or partial (35%) cloud implementation of some functions. The vast majority has tested these new technologies and processes, and they are using them on a small scale. Some typical areas of cloud implementation are for email, sales management and other available Software as a Service (SaaS) offerings. The research notes that in 2011, 19% of the respondents indicated spending on cloud represents 10% or more of total IT expenditures with 65% citing 10% or less. Early investment centers on Software as a Service (SaaS). Again, the majority of early adopters are using basic, available tools in the cloud. Of the respondents, 46% of planned implementations are in a SaaS environment. However, significant numbers of end users are also exploring the use of Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) models. Cloud environments have the potential to transform business and operating models. Eighty-seven percent say, at the very least, the coming change will be significant. This view is consistent among companies of all sizes and whether the respondents work within IT functions or business units. It is not a surprise that cloud providers believe that business and corporate IT executives underestimate the degree of change that could result from cloud adoption.

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2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Approximately 45% of the respondents are either not evaluating the tax implications of cloud or dont know if these factors are being evaluated.
The vanguard already resides in the cloud. Right now, 81% of businesses are either planning their initial adoption, are in early or advanced stages of experimentation or have full-on cloud implementations. While the scope may be controlled, and the approach measured, there is indeed activity. Remarkably, respondents at one in 10 businesses say they are already running their core IT services using cloud technology, although this number varies widely by geography. Substantial cost savings are on their way. Cloud user in the business and IT functions, as well as cloud providers believe cloud environments will deliver cost savings. The prevailing wisdom points to economies of scale, meaning the cost of each unit of computing value within a cloud environment will fall dramatically over time. As for business processes, executives believe innovation will lead to streamlining. But an intriguing finding is this: while providers promote up to 30% savings, most business executives would be happy with 10%15% savings. Opportunities exist to overcome barriers to success. Executives are particularly intrigued by potential gains in areas such as speed to solution and widespread accessibility as well as flexibility, scalability, security and advanced technology. Buyers are concerned by risks of provider performance, downtime and data security. Recent headlines exposing compromised data and temporary shutdowns remain front and center for many potential adopters. However, provider input suggests that such fears are overstated and that in reality, the cloud will be a safer, more secure and more reliable IT environment than these customers have ever known. Private clouds will dominate the most critical functions. Many factors drive the decision over public or private cloud. Industries with the strongest adoption of private clouds are financial services, healthcare and diversified industrials (averaging 45% of respondents), with financial services and healthcare facing heavy regulatory and compliance issues that are exacerbated, though not impossible in the cloud. Organizations custom-configured applications and infrastructure also contribute to the need for private cloud solutions versus the standardized solutions among public clouds. Business unit executives and CIOs views diverge when it comes to cloud leadership. IT executives see migration to the cloud as their initiative; and, consequently, they believe that it should be led by the Chief Information Officer. In the minds of business executives, however, the natural leader of cloud-based initiatives should be the CEO. Not surprisingly, post-implementation expectations are similar. Ultimately, responsibilities will likely be shared with relative influence depending on the services in question: businesses will tend to control ownership of applications; IT executives will tend to manage infrastructures. Unless this trend is managed properly, organizations will face new silos and integration challenges. Enter the Chief Integration Officer as the traditional CIOs role expands to break down potential silos and integrate internal and external business needs, systems and partners. Ignoring tax issues raises concern. Approximately 45% of the respondents are either not evaluating the tax implications of cloud or dont know if these factors are being evaluated. Ignoring tax issues has never changed the responsibility of the payer, which makes taxation a critical issue for those wishing to evaluate all implications of the cloud environment.

Embracing the Cloud: Global forces shaping the service provider market | 3
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

4 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Introduction

Whether public, private or hybrid, the factor that most commonly signifies a cloud solution is a users ability to obtain asneeded services from the internet based on flexible volumes of resources.

Web-based beginnings The most common and easily recognizable cloud examples are web-based services for email, Customer Relationship Management (CRM) and web hosting. Many are simple consumer applications, while businesses are considering far more sophisticated systems. For businesses, cloud services are often developed in one of two ways: Private clouds, where the applications, data and necessary infrastructure are dedicated to a single party that retains direct management oversight; and Public clouds, where data and applications of non-related parties may reside on the same servers and are more likely to be primarily managed by a third party. Hybrid clouds, as the name suggests, are combinations of these two methods. Whether public, private or hybrid, the factor that most commonly signifies a cloud solution is a users ability to obtain as-needed services from the internet based on flexible volumes of resources. The cloud marketplace has been evolving for years, as many traditional application services and infrastructure hosting providers migrate to a cloud model. This maturity is creating a viable market for enterprises looking at service delivery options. The flexibility and agility provided by the cloud is appealing, and it can be managed to deploy significant competitive advantage.

Definitions
KPMG used the following definition of the cloud computing for the purposes of this survey. IaaS: (e.g., infrastructure traditionally provided by servers, desktops and network equipment instead delivered over the internet and can be scaled up or down as needed) PaaS: (e.g., software development, storage and hosting are accessed as a service over the internet) SaaS: (e.g., on-demand applications provided through an internet browser, eliminating the need to install, run and maintain programs on internal systems) BPaaS: (e.g., business process outsourcing (BPO) is provisioned using a cloud computing model; bundled with SaaS/PaaS/IaaS and delivered over the internet

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2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Core challenges mean core opportunities

The challenge going forward will be to balance objectives, needs and wants against real capabilities andrisks.

As enterprises first approach the cloud, their tendency is to perceive the work as primarily IT-centric. But in reality, understanding the cloud requires a much broader view. In many situations, the cloud is being driven by an ecosystem of participants. So it becomes vital to think of the evolution of cloud environments in terms of three broad sets of people and principals: service providers, business users and IT users. Another challenge is that size matters. Smaller organizations, with less legacy IT infrastructure and fewer constituents, are able to more rapidly and aggressively invest in deploying cloud capabilities. Any cloud implementations require cooperation, agreement and compromise along with intensive focus and hard work. The challenge going forward will be to balance objectives, needs and wants against real capabilities and risks. As such, coordinating and harmonizing the advancement of the cloud represents a massive undertaking. But the rewards can be significant and transformative. To the cloud: three constituencies
Industry

Service Providers

Geography

Core Challenges Business Users IT Users

Company size

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2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Geography

Outcome: business transformed

Cloud calls for executives to challenge their thinking, to look at old problems in a new light, and to create new opportunities.

Transformation a distinct change in the way business solves problems and gears for growth is coming. The survey of end-users shows that a significant number of companies believe fast-evolving cloud capabilities will heavily impact business models. While cloud-driven cost reductions may hold the most promise (half of survey participants expect as much), the impact on the business model could be much more extensive. Indeed, nearly a third of respondents, 32%, believe the arrival of cloud environments will drive nothing short of a fundamental change in their business models. And nearly four in 10 users (39%) expect cloud will change interactions with customers and suppliers. Only 12 percent of respondents felt cloud would have no impact on their business models. Consequently, 88% feel some kind of business model change will occur. Cloud calls for executives to challenge their thinking, to look at old problems in a new light, and to create new opportunities. KPMG firms have observed several recent examples where organizations are converting historical business models into revenue opportunities through cloud. One example is a company selling goods and services that identifies additional need-based sales opportunities related to a key product. The company is developing a new business model to package and deliver this information to its clients via a new cloud-based model, thereby driving a new revenue stream. Similarexamples are seen worldwide.

Which of the following best describes the impact of cloud on your business model?
It will fundamentally change our business model It will change our interaction with customers and suppliers It will provide management with greater transparency on transactions It will reduce costs It will accelerate time to market No signicant impact Other
0 35% 32% 32%

39%

50%

12%

1% 10 20 30 40 50 60

Multiple responses allowed. Source: KPMG International, 2011, Clarity in the Cloud

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2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Organizations in emerging markets or those that have not invested heavily in legacy models can leapfrog the competition technically by adopting the latest available systems and capabilities via the cloud model.

Cloud, more than any new technology since the internet, is seen as the harbinger of transformation. The findings are consistent regardless of company size (those with annual revenues above and below US$1 billion as well as between IT and non-IT executives). Even companies with a large installed base of software or other elements of enterprise IT anticipate a highly significant degree of change as a result of cloud adoption. Regional differences Executives from Asia are significantly more likely to describe the changes stemming from cloud environmentsas driving a fundamental shift in their business models. For example, organizations in emergingmarkets or those that have not invested heavily in legacy infrastructure can leapfrog the competition technically by adopting the latest available systems and capabilities via the cloud model.

Which of the following best describe the potential impact of cloud on your business model/operations?
It will fundamentally change our business model It will change our interaction with customers and suppliers It will provide management with greater transparency on transactions
32% 28% 30% 39% 40% 49%

43%

30% 32% 33%

27%

37% 50% 49% 57%

It will reduce costs


29% 12% 13% 15% 35% 35%

45%

It will accelerate time to market

44%

No signicant impact
6% 1% 2% <1% 1% 0 10

Other

20 Americas EMA

30 ASPAC

40

50

60

Global average (medium) Multiple responses allowed.

Source: KPMG International, 2011, Clarity in the Cloud

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2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Cases in point

More than the data alone, it is instructive to delve into the people and companies who are working with cloud today. Inthese cases, executives are seeing many benefits as they learn from their cloud implementations. More options in Italy Silvio Sperzani, CIO of ENEL, Italys largest and Europes second largest electric utility, says that cloud environments are moving rapidly, From buzzword to something real. For now, his group is just beginning its analysis of the potential benefits of a cloud environment. Still, Sperzani is already convinced that cloud migration, will lead to a more flexible IT service model and more options in business processes. Preparing new processes throughout Europe Massimo Milanta, CIO at UniCredit, one of Europes most geographically wide reaching banks, with an international presence in approximately 50 markets, believes that cloud environments will have a profound impact on business processes. The cloud, he explains, will provide the means to speed up prototyping of new products or applications for customers. Meanwhile, Milanta sees cloud migration as a means to accelerate the adoption of new, more efficient and effective processes and technologies. Though we realize we have much to do before we can take full advantage of these developments, we are starting to prepare now. We are now fully engaged in the journey from IaaS to PaaS, which we would consider the real cloud, using it as a tool to be quick-to-market and the standardization of environments. Strategic advantage in global advertising At advertising and communications agency JWT India, Sunil Mehta, CIO, believes that the whole point of investing in a cloud environment is to achieve strategic advantage. We want to make certain that we are always in a position to take advantage of any next-generation applications, says Mehta. Achieving a state of continuous transition to the most efficient processes and technologies will be easier within the cloud, he adds. Cost reductions and strategic benefits for financial firms Anil Jaggia, CIO of HDFC Bank, one of Indias largest financial services providers, says that cost reductions from the cloud will be significant. However the strategic benefits are far and away more vital than the cost savings. He adds, Agility being able to quickly and efficiently provision or deprovision; being on the forefront of innovation and being able to transition quickly: these are the objectives worth attaining.

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2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Legacy systems tend to ossify, restricting established businesses and preventing them from pursuing that next new idea.
Pat Howard, IBMPartner and VP Global Services

Enormous innovation for IBM and its clients From a provider standpoint, IBM Partner and Vice President for Global Services Pat Howard believes that, if anything, business and IT executives are underestimating the likely strategic impact of cloud migration. Howard says these new technologies and processes are leading to a period of enormous innovation and competitive disruption. thats coming opens up strategic possibilities that just were never there before, All notes Howard. Legacy systems tend to ossify, restricting established businesses and preventing them from pursuing that next new idea. However, within a cloud environment, Howard believes companies will be able to achieve greater agility for example, by being better able to quickly organize to serve new customers, develop products or deliver services. Overall, says Howard, I dont believe everyone yet fully realizes how much this stimulates innovation; how many opportunities will be presented; how many new challenges will need to be addressed; and how much change is coming. In much the same vein, SAP Senior Vice President Dr. Bernd Welz notes, Cloud migration is shifting all aspects of the competitive landscape across all industries.

How important are strategic factors in driving your organizations adoption of a cloud environment?*
Extremely important Important Neither important nor unimportant Unimportant Extremely unimportant
0 3% 2% 10 Figures may not add up to 100% due to rounding. Source: KPMG International, 2011, Clarity in the Cloud *Strategic factors (e.g., business process transformation, linkage to business partners, speed to market, focus on core competencies) 20 30 40 50 19% 33% 44%

Demand driven supply chain retail A KPMG retail client is using cloud as a supplier network, reducing data latency between and among suppliers. In some cases, the client has reduced lead times on information exchange from 30 days to 1 day, and the suppliers are able to modify the exchange of material accordingly yielding significant benefit for all parties in the process. So as demand changes at the store, all parties can see and act upon the changes. Leveraging the cloud as a community platform can significantly reduce information latency resulting in more product getting to the right place at the right time with less inventory through the supply chain.

10 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Without legacy systems and processes, startup firms and emerging businesses in mature firms can be ready for cloud-based applications and platforms.

Enabling innovation and investments technology KPMG recently worked with a large client to support its emerging, or start-up, businesses. Innovation is one of the fundamental pillars of this companys corporate strategy as it acquires and/or incubates companies that design, develop, and market next-generation products. Historically, each new business worked autonomously to design its own operations processes and to source and deploy enabling technologies. The company found it was spending too much time and money on technology development and deployments when it should have been focused on its go-to-market strategies. Its goal was to design, develop, and implement a common set of operational business processes and an enabling IT architecture that a newbusiness could plug and play. The process and ITarchitecture needed to be flexible and scalable, supportingvarious e-commerce business models with a high degree of re-use of its core processes and functionality. In addition, standardized reporting was needed to enable the corporate entity to understand the performance of each new business its profitability, its growth potential, and its challenges or limitations. The incubator model offers particular advantages for broad cloud deployment. Without legacy systems and processes, the greenfield is immediately ready for deployment of cloud-based applications and platforms. Ready-made applications and architecture will be available for businesses as they enter the market. The scope is broad from the user access, to cross-enterprise applications (sales, marketing, customer services, order management, accounts receivable and payable, inventory management and purchasing), and to identity access. The need for supporting resources is reduced. At the same time, the larger business reporting, compliance and data needs will be met, and relevant information can be fed back into the core financial and operating systems.

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2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

IBM INTERVIEW
Pat Howard Vice President and GBS Global Cloud Leader, IBM
What do you see as the value behind cloud services? The real value is that cloud opens up strategic avenues that werent there before. Across the enterprise, there will be a level of optimization, market responsiveness and agility that businesses just couldnt achieve in the past.

Between SaaS, IaaS, PaaS: where do you see the most potential? I dont partition my thinking as such from the perspective of a business enterprise. The way I view it, cloud services are an enabler around efficient business outcomes. The scripture reads: the era of the cloud will unfold extreme innovation in years to come. Cloud can be a key enabler of new business models that will require changes in corporate governance and can lead to more efficient outcomes where businesses will receive greater value from IT. At this time there is investment in cloud infrastructure and services. In the future, business innovation will drive the investment and the technology acronyms will be a forgotten memory.

The real value is that cloud opens strategic avenues, including levels of optimization, not available before.

What is driving the cloud buying decision? Nothing happens without the economics. But what are the lowest price points on the planet? Cloud can lead to that discovery. Technically, asset utilization and shared service models are understood the value is there. And overall, I think the customer should expect savings. The real value is that cloud opens strategic avenues including levels of optimization not available before. Cloud buying decisions are beginning to take into consideration this new agility to respond to market opportunities. From an optimization perspective, strategically, greater cost efficiency should filter into operations, compressing cycle times to respond to hot new ideas. The economics are the baseline.

12 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Are there industry adoption differences?

Industry dimension is huge! The consumer products industry is a great example. The model hasnt changed in 100 years until now. Consumer hyper-personalization is creating a remarkable tsunami of data. Tracking consumer preferences, merging products and customer databases and integrating social media and related information systems is making Big Data analytics in the cloud a great opportunity. The industry is thinking about data differently and cloud and analytics will enable the industry to capture new opportunities and be more proactive than in the past. In the financial services and insurance industries companies are gaining more efficiencies. The government industry is also adopting cloud services.

Who is driving the cloud buying decision? The buying decision should be based on the specific capability. The CIO should own the decisions related to storage and cloud infrastructure. The decisions related to business functions and governance should be made jointly between the business functions and IT. The functions have been pushing due to the consumerization of IT and they are getting the additional benefits of cloud services. The CIO and IT teams have been more conservative. Business units are challenged with the speed it takes their current IT to do things. Does anyone believe all problems go away with cloud-delivered capability? No. Business capability considerations are critical. The verticalization of business processes within the cloud, such as end-to-end order management processes, has great potential for increased efficiency and agility.

Any other thoughts? The cloud adoption story will unfold at different rates. For some it might be a breakaway, theyll grab the opportunity and dash for the goal line. For others, they will adapt services in increments. There has to be a starting point and this is hard work. Ive been through a couple of cycles and there are many elements to consider such as the creative process, the technical dimensions, and assessment of the impacts on customers, vendors and the sales force. There is a new way to think about IT and the changes in the way IT functions. The absence of a coherent strategy is a problem. Cloud adoption is real and it creates strategic opportunities that have not existed before. I dont believe everyone yet fully realizes the potential of cloud to stimulate innovation or, for that matter, how many new challenges will need to be addressed or how much change is coming. Watch out for the business model innovators with a comprehensive cloud strategy.

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2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

SAP INTERVIEW
Dr. Bernd Welz Senior Vice President SAP OnDemand
Where are you in terms of cloud development? Most of our customers have a hybrid solutions landscape. Our customers need choice. So we have to offer a range of processes, services and infrastructure.

What trends are you seeing in implementation? OnDemand might be the most frequent path to the first meaningful implementation. But we believe the value of a solution is much greater if its an integral part of the whole, and what customers soon learn is that further integration is vital. So we are designing all of our point solutions to make sure they will fit together well with broader installations.

The difference in the overall risk profile of the cloud is like that between flying in an airplane and driving in a car. We feel safer in our cars when we all know, statistically, we are far safer in the airplane.

Who is driving implementation? These point solutions tend to be purchased by the line of business themselves. But larger corporations have very tight IT processes, so at some point, it is vital that the IT group becomes more closely involved.

Are you noticing any differences by industry? Not really. Cloud computing is in fact shifting all aspects of the competitive landscape in so many industries that Id have to say all industries are getting involved.

14 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

How important are reduced costs to cloud adoption?

Cost is one factor. But also, the time it takes to get a solution up-and-running is equally important. Especially for small-to-medium enterprises (SME), recruiting and managing IT takes time. So getting rid of those hassles is important. And one of the beauties of cloud services is that you can start small, then make changes as you go. So instead of large, complex and even risky process initiatives, you can continuously change the solution that you have over time.

What do you see as the key inhibitors to cloud adoption?

Its trust. Any data center at any company can go down from time to time. Now if that was a server of a mid-market company, it wont be in the newspapers you will never hear about it. So theres already risk in running your own servers. But by comparison, the risk of a cloud provider failing materially for any extended period is substantially lower. So the difference in the overall risk profile of the cloud is like that between flying in an airplane and driving in a car. We feel safer in our cars when we all know, statistically, we are far safer in the airplane.

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2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Where are we going and what are we spending?

Heavily regulated industries, such as financial services andhealthcare, demonstrate a stronger likelihood of adopting a private cloud.

As weve seen, signs of growing comfort and familiarity with cloud environments are everywhere. Today, 40% of the businesses surveyed are currently evaluating the cloud (19%) or using/testing the technology (21%). KPMG firms have observed large organizations migrating email, CRM, components of HR, point of sale, hosting, and other applications to a cloud environment. Several are using the cloud to enable new business models to develop in and around existing businesses, resulting in additional revenue streams. More often than not, early migrations are targeted for areas of limited complexity. Another 13% of enterprises are beyond the testing stage and are now transitioning core business processes. Even more striking, one in ten enterprises are already running core IT functions in the cloud. As highlighted in the Executive summary, 81% of businesses are either planning their initial forays (within the next year), are in early or advanced stages of experimentation, or have full cloud implementations in place. And companies with more than US $1 billion in revenues appear to be leading the way.

What is the status of your organizations current use of a cloud environment?


Evaluating
16% 19% 20% 24% 18% 13% 13% 13% 12% 7% 10% 11% 13% 21% 21% 25%

Using/testing aspects

Embraced/transitioning

Running all core IT services on the cloud

Plan to implement in next year


4% 4% 3% 3% 3% 3%

8%

11% 12% 13%

Plan to implement in next 2 years

5%

Plan to implement in 2+ years

4% 8% 8% 10% 11%

Not considering
6%

Dont know
5% 0 Global 5 Americas 10 EMA

11%

14% 15 20 25 30

ASPAC

Figures may not add up to 100% due to rounding. Source: KPMG International, 2011, Clarity in the Cloud

16 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

What is the status of your organizations current use of a cloud environment?


Evaluating Using/testing aspects Embraced/transitioning Running all core IT services on the cloud Plan to implement in next year Plan to implement in next 2 years Plan to implement in 2+ years Not considering Dont know
0
< US$1b 2% 4% 3% 4% 6% 8% 8% 13% 8% 10% 11% 12% 14% 15% 17% 23% 22% 22%

5
> US$1b

10

15

20

25

30

Figures may not add up to 100% due to rounding. Source: KPMG International, 2011, Clarity in the Cloud

Other differences arise among varying geographies. For example, only 7% of companies from the Americas are already running all core applications in the cloud, compared to those 13% from Europe, Middle East and Africa (EMA) and 11% from Asia Pacific. Companies today are starting out with the basics the most fundamental, low risk and firmly established cloud capabilities. A good example is again, JWT India. According to CIO Sunil Mehta, We have been in the cloud now for over one year. The company began with the migration of email management to Microsoft Exchange. At first, says Mehta, People were anxious, and to no small degree frustrated, as the shift required us to make many changes and adjustments. And while operational challenges still remain, says Mehta, overall, we are very pleased with the results and will continue to examine new opportunities in the cloud. Many companies have taken such initial steps and are likely poised for more involved phases of cloud adoption. Conditions are such that IBMs Howard believes that in the coming year or two, Were going to see the adoption curve turn into a hockey stick dramatic growth.

Embracing the Cloud: Global forces shaping the service provider market | 17
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

This view is borne out by the surveys statistics, which show that executives expect their budgets for cloud products and services to grow significantly as a percentage of annual IT expenditures. For example, 17% of enterprises will have more than 20% of their budgets dedicated to cloud-based services by the end of 2012, up from 6% in 2011. Such growth, says Howard, will be driven by many factors, not least of which is the numerous early success stories coming to light. Companies, says Howard, know that their competitors are eyeing this and they realize they cannot afford to get left behind. What is your estimated budget for cloud as a percentage of annual IT expenditures?
0% 12% 35% 610% 1120% More than 20% Dont know
0 5 10 15 6% 17% 16% 17% 20 25 13% 19% 9% 5% 13% 6% 24% 11% 20% 24%

End 2011

End 2012

Figures may not add up to 100% due to rounding. Source: KPMG International, 2011, Clarity in the Cloud

In looking for further clarity on what these numbers mean by region, the following charts indicate that uptake is considered to be higher in Asia Pacific compared with Europe or the Americas. By 2012, Asia Pacific respondents expect to spend 22% of their total IT budgets on cloud, compared to 13% and 18% in Europe and the Americas, respectively. The greatest uncertainty about budget allocated to cloud is in the Americas and Europe, where about 18% of respondents share that uncertainty, compared with 11% in Asia Pacific.

18 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Americas Region: What do you estimate your organization will budget for cloud as a percentage of your annual IT expenditures in each of the next 2 years?
0% 1-2% 3-5% 6-10% 11-20% More than 20% Don't know
0 Americas 2011 5 Americas 2012 10 15 6% 13% 18% 18% 18% 20% 20 25 3% 21% 11% 21% 22% 11% 7% 10%

Figures may not add up to 100% due to rounding. Source: KPMG International, 2011, Clarity in the Cloud

EMA Region: What do you estimate your organization will budget for cloud as a percentage of your annual IT expenditures in each of the next 2 years?
0% 1-2% 3-5% 6-10% 11-20% More than 20% Don't know
0 EMA 2011 5 EMA 2012 10 15 3% 13% 20% 13% 17% 19% 20 25 30 7% 4% 14% 8% 26% 11% 20% 25%

Figures may not add up to 100% due to rounding. Source: KPMG International, 2011, Clarity in the Cloud

Embracing the Cloud: Global forces shaping the service provider market | 19
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

ASPAC region: What do you estimate your organization will budget for cloud as a percentage of your annual IT expenditures in each of the next 2 years?
0% 1-2% 3-5% 6-10% 11-20% More than 20% Don't know
0 ASPAC 2011 5 10 ASPAC 2012 7% 22% 11% 12% 15 20 25 30 14% 18% 6% 3% 14% 7% 26% 13% 21% 24%

Figures may not add up to 100% due to rounding. Source: KPMG International, 2011, Clarity in the Cloud

Global (all respondents): What do you estimate your organization will budget for cloud as a percentage of your annual IT expenditures in each of the next 2 years?
0% 1-2% 3-5% 6-10% 11-20% More than 20% Don't know
0 Global 2011 5 Global 2012 10 15 5% 17% 16% 17% 20 25 13% 19% 8% 5% 13% 6% 24% 11% 20% 24%

Figures may not add up to 100% due to rounding. Source: KPMG International, 2011, Clarity in the Cloud

As for deployment models, respondents currently plan torely most often on a private cloud. This is particularly true of end-users from companies with revenues greater than US$1 billion, in which 47% plan to deploy a private cloud model. There are industryspecific differences in the adoption of private vs. public cloud. Not surprisingly, heavily regulated industries, such as financial services and healthcare, demonstrate a stronger likelihood of adopting a private cloud. Additionally, mature manufacturing firms and retailing firms are opting for private clouds in stronger numbers.

20 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

IT vs. non-IT organizations: What type of cloud environment does your organization use/intend to use?
Private Public Hybrid Community No cloud Dont know
0 IT Non-IT 5% 8% 8% 15% 10 20 30 40 50 17% 15% 30% 30% 33% 33% 46% 39%

Multiple responses allowed. Source: KPMG International, 2011, Clarity in the Cloud

Companies by revenue size: What type of cloud environment does your organization use/intend to use?
41%

Private
30% 31% 30% 33% 34% 34% 16%

39% 47%

Public

Hybrid

Community

15% 17% 7%

No cloud

5% 8% 13%

Dont know
0 All < US$1b 10

11% 16% 20 > US$1b 30 40 50

Multiple responses allowed. Source: KPMG International, 2011, Clarity in the Cloud

Embracing the Cloud: Global forces shaping the service provider market | 21
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

All sectors: What type of cloud environment does your organization use/intend to use?
41% 42% 34% 29% 11% 33% 20% 37% 31% 42% 42% 45% 45% 46% 46%

Private cloud (a closed environment for a single organization hosted by a third party)

44%

46%

Hybrid cloud (a combination of public and private cloud)

22% 22% 28%

30% 31% 31% 30% 31% 25% 37% 34%

42%

Public cloud (a shared environment used by many organizations)


6%

16% 18%

29%

26% 26% 35%

16% 17% 11% 11% 4% 11% 13%

21%

23%

Community cloud (a rules-based environment shared by organizations with similar needs, perspectives or requirements, such as geography, industry, supply chains, etc.)

16% 15%

28%

2%

5%

7% 7% 7% 12%

Cloud is not/will not be used by my organization


3%

6%

8% 9% 8% 14% 8% 10% 19% 22%

5%

Dont know

9% 15% 20

21% 21% 24% 24% 30 40 Financial Services Government Food and Drink Manufacturers Academia 50

11% 0 All Sectors Diversied Industrials/Manufacturing Healthcare and Pharma Energy and Natural Resources 10

Technology Retailers Consumer Goods Manufacturers Communications & Media

Multiple responses allowed. Source: KPMG International, 2011, Clarity in the Cloud

22 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Public clouds lag. For now. Fewer respondents consider either a public cloud or a community cloud a rulesbased environment shared by many organizations and groups. However, this is something that could change over time as trust in public cloud models increases. Outsourced services like payroll and HR have been on a shared server for many years. Eventually, people may become less concerned with a public cloud as they are today. While fewer companies may consider a public cloud, to make an informed choice they may nonetheless need to understand how a public model operates. Many important factors are financial. Buyers considering a private cloud need to ask whether they want to take ownership of the equipment or access the usage in the manner of a public cloud. Ultimately, many wonder what is really gained in deploying a private cloud. Economics are dependent on the individual situation, and pros and cons exist for both. Many will compromise into some form of both models, depending on the application. Examples of how organizations are using the cloud to transform their businesses exist throughout the world. To better define practical usage of the cloud, we offer a few examples. Private vs. public cloud financial services One KPMG client in the financial services industry was facing significant market pressures, regulatory pressures and security issues. The IT organization was trying to help new products get to market quickly with agile processes while facing pressure to reduce costs. The environment was complex and highly heterogeneous, which led to high support and maintenance costs. To evaluate and prepare for the cloud, the company began by determining what type of cloud would best suit their needs. They assessed their readiness for change by looking at governance, process, compliance and technical architecture. They looked at applications, and most importantly, they assessed the people, process and technology critical to operationalizing within the cloud. Based on security and technical factors, they chose a private cloud, and the cost savings justified the move forward.

Embracing the Cloud: Global forces shaping the service provider market | 23
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Outsource IT first, cloud next energy Another KPMG client, a large energy company, had outsourced much of its IT function several years before. The size of that project and the scale of change it required led to a painful process that ultimately did not result in the savings expected. Nonetheless, having reviewed the lessons learned from this experience, company leadership decided it was ready for a large-scale cloud migration. In some respects, this company sees the promise of cloud as being similar to that of outsourcing. Motivated by the ability to focus on its core competencies and on growing the business, this organization has found viable options in the market to handle the capacity of its thousands of servers. The business intends to migrate more than 50% of its infrastructure assets to a cloud environment. The migration is targeting the most modern applications and infrastructure; legacy and old line applications continue to present challenges in a cloud environment. As with the adage: one rock moved tends to uncover an unanticipated issue or problem as the testing of the legacy applications continue. Successful migration of non-core applications to a cloud infrastructure should enable the company to reach its goal, control its costs and help it grow faster.

24 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Adopting cloud services

About half of end-users (46%) say their most likely investments will be in clouddelivered Software as a Service (SaaS). However, at 35% and 34% respectively, Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) also figure prominently in corporate cloud investment.

Which of the following cloud environments will your organization most likely invest in?
46%

SaaS
45% 35%

48%

IaaS
32% 34%

41%

PaaS
33% 9% 9% 10% 14%

35%

My organization does not have plans to invest in a cloud environment

Dont know

10% 16% 0 10 Total Users (n = 805) 20 Users (IT) (n = 237) 30 Users (Business) (n = 568) 40 50

SaaS (Software as a Service): Software and applications to run various business operations over a network. Examples include: salesforce.com, Google Docs, mobile me, Microsoft Ofce Live IaaS (Infrastructure as a Service): Renting shared computing infrastructure, such as servers, storage, processing capacity, database and other peripherals. Examples include: amazon.com, rackspace PaaS (Platform as a Service): A platform that enables developers to write applications to run on the cloud. Examples include: force.com, Google App Engine, Windows Azure Multiple responses allowed. Source: KPMG International, 2011, Clarity in the Cloud

Embracing the Cloud: Global forces shaping the service provider market | 25
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

The chart below highlights regional differences in cloud service model investments. Underscoring Asia Pacifics enthusiasm for the cloud, these results indicate a stronger than average anticipated investment in SaaS, IaaS and PaaS models than expected in the Americas or EMA. Which of the following cloud environments will your organization most likely invest in?
46%

SaaS

47% 38% 55% 35%

IaaS

28% 33% 49% 34%

PaaS

33% 27% 44% 9%

My organization does not have plans to invest in a cloud environment


7%

10% 11%

14%

Dont know
9% 0 Global 10 Americas

16% 16%

20 EMA ASPAC

30

40

50

60

SaaS (Software as a Service): Software and applications to run various business operations over a network. Examples include: salesforce.com, Google Docs, mobile me, Microsoft Ofce Live IaaS (Infrastructure as a Service): Renting shared computing infrastructure, such as servers, storage, processing capacity, databases and other peripherals. Examples include: amazon.com, rackspace PaaS (Platform as a Service): A platform that enables developers to write applications to run on the cloud. Examples include: force.com, Google App Engine, Windows Azure Multiple responses allowed. Source: KPMG International, 2011, Clarity in the Cloud

26 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Has total cost of ownership been evaluated properly?

Three-quarters of respondents go on to say that cost savings/ reductions are essential before they will take any significant steps toward the cloud.

Cost savings are generally a required outcome of cloud migration. Traditional thinking is that cloud has the potential to significantly reduce IT costs as companies are able to shift from large capital expenditures to ongoing operational outlays. Putting many infrastructure and development initiatives in the hands of third parties also has the potential to reduce staff costs. In migrating to the cloud, three-quarters of respondents (77%) say that economic factors are important (40%) or extremely important (37%). That is, these companies will not migrate to a cloud environment without meaningful savings. Worth noting is that equal percentages of IT and non-IT executives, 75% in both instances, maintain this view regarding the importance of cost. Key cloud cost drivers, many hidden Total cost of ownership is a critical aspect of migrating to the cloud. While cost savings, potentially significant, are typically advertised and assumed, extensive, well-documented evidence does not exist to verify that companies have realized such savings. It is critical that buyers closely scrutinize potential and claimed cloud computing savings across the lifecycle of a cloud deployment. In this process, it is imperative to consider factors that may drive cost and risk assessments, such as: Costs of integration into legacy systems Customization and configuration Ongoing user training and retraining and Support costs.

How important are economic factors in driving your organizations adoption of a cloud environment?
Extremely important Important Neither important nor unimportant Unimportant Extremely unimportant
0 3% 2% 10 20 30 40 50 19% 37% 40%

Figures may not add up to 100% due to rounding. Examples of economic factors include: cost savings, shifting capital expenditures to operational expenditures. Source: KPMG International, 2011, Clarity in the Cloud

Embracing the Cloud: Global forces shaping the service provider market | 27
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Providers think the threshold needed for IT savings is significantly higher than users do.

Overhead and complexity of managing multiple cloud deployments Service provider management/relations Security Controls and assurance Organizational process change to adapt to cloud standardization Supply and demand challenges result overestimating computing needs Tax implications Reduced costs says SAPs Dr. Bernd Welz, are a prominent feature of a cloud, based approach. The total cost of ownership of hardware and software, including staffing costs, should be without question, lower within a cloud environment Such . lower costs should in turn translate into lower IT overhead allocations for business units. But other cost benefits are also evident. Consider a start-up or rapidly expanding enterprise. Recruiting and maintaining IT staff takes time and effort and leads to higher ongoing costs, says Welz. Companies must retain enough IT personnel to handle peak periods of effort, resulting in excessive staffing costs. Overall, says Welz, relative to the traditional approach to enterprise IT, companies should expect the cloud to be a lower cost solution . Voicing an even stronger message on economic benefits is IBMs Howard. Nothing happens if the economics arent there, says Howard. But in this case, cloud environments are poised to deliver a step change. Look at the potential improvements in asset utilization and shared services models and you recognize the price point for each unit of IT value delivered is about to plunge. To Howards thinking, I believe corporations [cost reduction] expectations should be right through the ceiling. Expectations gap An intriguing finding of the parallel studies is the gap in expectations between endusers and providers of cloud services. Both end-users and providers were asked: what threshold of savings would be necessary to prompt the shift to a cloud-based environment? Looking at IT costs alone, 45% of end-users say they could be persuaded with savings of merely 1% to 10%. By comparison, providers tend to believe that end-users will demand much more. While only 10% of users say they would need savings of 25% or more, the figure rises to 19% for providers. The realization: this question is about perception, not providers actual costs, and providers may actually be overestimating the degree of savings end-users may demand.Each party needs to take steps to understand pricingrequirements and total costs.

28 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

What percentage reduction in IT or Non-IT costs do you generally believe would be needed?
45% 42% 31% 33%

110% reduction Percentage reduction in IT and Non-IT costs

34%

1125% reduction

28% 37% 31% 10%

More than 25% reduction

15% 19% 17% 12%

Dont know

14% 13% 19% 0 Users Providers 10 IT Costs (n=565) IT Costs (n=91) 20 Non-IT Costs (n=551) Non-IT Costs (n=88) 30 40 50

Figures may not add up to 100% due to rounding. Source: KPMG International, 2011, Clarity in the Cloud

Embracing the Cloud: Global forces shaping the service provider market | 29
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Functionality is essential; it is a question of good enough vs. perfect

It turns out that developers are more interested in agility than they are in getting their environments perfect.

Executives meanwhile insist that cloud environments should score equally high marks on technical and functional capabilities. Eight of ten users (80%) maintain that functional factors such as speed to solution and widespread accessibility are either important (43%) or extremely important (37%). Similarly, 79% say that technical factors such as flexibility, scalability, security, and advanced technology are either important (42%) or extremely important(37%). For cloud-delivered products and services to take hold, says Michael Sylvia, Distinguished Engineer & Director at IBM, end-users have to see the value too. IBM provides cloud-based services both internally and externally. With regard to other IBM business units, Sylvia says cloud services are being very well received. Development and testing Take for example the provisioning of development testing environments for programmers. In the past, software developers would approach the IT team with highly detailed requests specifying a range of programs, releases and other variables. Responding, says Leslie Gordon, Vice President, Office of the CIO at IBM, could take as long as a week and it was labor intensive. Today, however, IBM offers its software developers a cloud-delivered, self-service provisioning tool. Developers dont have as many options, says Gordon, but they can request something thats close enough to what they need and have it in an hour. This rapid level of deployment, however, assumes that contractual constructs are in place and that ideally the user organization is able to adequately manage this level of ondemand consumption. In addition, developers can make their requests any time of the day or night. Moreover, they can pause their work, save their projects and remove them from the server, thereby reducing internal fee allocations and freeing up resources that can be used to support other developers. Self-sourced environments Initially, Gordon and Sylvia believed that the existence of the new provisioning tool might reduce the number of requests for manually configured test environments by as much as 40% or 50%. But in practice, 80% 90% of test environments are now self-sourced through the cloud. As Sylvia explains, it turns out that developers are more interested in agility than they are in getting their environments perfect. Adds Gordon,theyre willing to settle for good enough as opposed to perfect if they can get it fast and that translates into efficiency all around. Functionality is also of critical importance to ENEL Sperzani. And it is for this s reason, the executive maintains, that mission critical processes are not likely to be handed over to a cloud provider. We have a few that are unique to our business and where we are very sophisticated in-house. We are already running these processes at a low cost, explains Sperzani. Still, the executive believes there will be ample opportunity to benefit from cloud service providers in specific niches. There will be a layer within our processes where someone may be better than we are. This is particularly true of

30 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

The role of CIO needs to evolve from Chief Information Officer to Chief Integration Officer, to lead and integrate the business more tightly with enabling technologies and to ensure the interoperability of an increasingly disparate set of applications and infrastructure.

infrastructure. Sperzani continues, Basically, I see this as a possibility to buy infrastructure for varying volumes as a service... Infrastructure tends to be very rigid. I like the idea of something much more flexible. Leading edge technologies SAPs Welz says that access to such leading-edge technical/functional capabilities, is one of the most attractive aspects of the envisaged cloud environs. But for cloud providers, IT is what we do, says Welz. As such, the very business model of cloud providers depends on the delivery of seamless, ultra-efficient, stable and flexible IT services. Moreover, providers can take advantage of scale to continuously invest in and refine their technologies and processes assuming they are profitable, of significant scale, and financially sound enough to withstand a dynamic marketplace because not every cloud provider will survive in the longer term. So to the extent a greater share of IT operations is ceded to specialist providers, organizations can share in scale economies that would not otherwise be available. At UniCredit, Interoperability is key, says CIO Massimo Milanta. UniCredit is in the early stages of assessing the cloud. The executive is already assuming that costs within a cloud framework should be significantly lower than within a traditional IT department. So the real questions for UniCredit, says Milanta, are technical in nature. And the early answers are that, for now, the lions share of the banks current IT footprint is not yet cloud ready. The group could probably migrate a discrete function or two, such as email management, into the cloud right now. But overall, much more would need to be done before any larger, more critical or material systems could be transitioned. Says Milanta, We are just a couple of years into transforming our infrastructure from many platforms to something much more standardized. Once that work is further along, we can take another, closer look. So for us, we are preparing for the cloud, but it will be a long journey.

Embracing the Cloud: Global forces shaping the service provider market | 31
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

KPMG anticipates that the role of the CIO will change significantly as organizations struggle with the dynamic integration needs that cloud models present. A new, or evolved C-position, Chief Integration Officer, will be needed to integrate the business more tightly to technology and to ensure the interoperability of an increasingly disparate set of applications and infrastructure. How important are technology factors in driving your organization's adoption of a cloud environment?
Extremely important Important Neither important nor unimportant Unimportant Extremely unimportant
0 1% 10 20 30 40 50 3% 16% 37% 42%

Examples of technical factors include: exibility, scalability, simplicity, security, advanced technology Figures may not add up to 100% due to rounding. Source: KPMG International, 2011, Clarity in the Cloud

How important are functional factors in driving your organization's adoption of a cloud environment?
Extremely important Important Neither important nor unimportant Unimportant Extremely unimportant
0 1% 10 20 30 40 50 3% 16% 37% 43%

Examples of functional factors include: speed to solution, functional capabilities, everywhere accessibility Source: KPMG International, 2011, Clarity in the Cloud

32 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Security and performance concerns While cloud may promise significant benefits, it also has its risks. Depending on third-party providers raises the stakes for many users, particularly when they are accustomed to overseeing and managing critical issues such as security and performance. Importantly, security is a challenge inside and outside of the cloud. Breaches across the spectrum of providers, organizations and global corporations exist in and out of the cloud. When asked about the top challenges/concerns they faced in adopting a cloud environment, 44% of end-user respondents cited security, and 29% expressed concern about overall cloud performance. One fifth of companies cited concerns over interoperability or integration. Arguably, the interoperability and integration issues will create more challenges over time as organizations look to better leverage internal and external data and information. Other key concerns include IT governance, loss of control over customer data and availability.

What do you believe are the top challenges or concerns your organization faces in adopting a cloud environment?
Security Performance Difculty integrating cloud with existing systems IT governance Loss of control over data with respect to customers Availability Measuring ROI Regulatory compliance Response time Lack of condence in ability of cloud vendors to perform Not sure the promise of a cloud environment can be realized Difculty making a business case for adopting a cloud environment Lack of customization opportunities Dissatisfaction with offerings/pricing by vendors Other
0 2% 10 Multiple responses allowed. Source: KPMG International, 2011, Clarity in the Cloud 20 30 40 50 9% 8% 16% 15% 15% 14% 13% 13% 13% 12% 20% 18% 29% 44%

Embracing the Cloud: Global forces shaping the service provider market | 33
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Security in the cloud presents unique factors to consider ranging from external data storage, to multi-tenancy, use of the internet and the need to integrate back to internal applications. Can you encrypt your data sufficiently to be able to trust a third party managing this critical information? Will your data governance model allow for a cloud migration? Some of the key risks and challenges in adopting cloud
Cloud adoption requires a careful examination of the potential operational risks and challenges in addition to the technology questions. Movement from CapEx to OpEx model impacts existing budgeting, forecasting, and reporting processes CapEx to OpEx model and changes in the character and source of service impacts tax considerations Outdated tax laws and regulations create uncertainty when characterizing the various cloud transactions Cloud ROI and cost/benet analysis are complicated by need for knowledge of existing cost of delivery and future use of service. Data may be stored in cloud (1) without proper customer segregation allowing possible accidental or malicious disclosure to third parties and/or (2) in a legal jurisdiction where the rights of data subject are not protected Loss of governance of critical areas, e.g., vulnerability management, infrastructure hardening, or physical security Weak logical access controls due to cloud vendors IAM immaturity. Cloud adoption introduces rapid change in the organization Cloud sourcing may impact existing organizational roles and could require new skills or make others redundant Business resiliency/disaster recovery needs and plans will change and require updating. Risk of creating independent silos of information perpetuate the problem of data integrity, quality, and insight Business can bypass the IT function to implement technology solutions, posing challenges for IT governance Cloud delivery models dramatically change how IT delivers technology services to support business requirements Cloud adoption opens the four Data Center walls to external IT Services providers, creating new risks. Lack of visibility into the Cloud Service Providers (CSPs) operations inhibits analysis of its compliance with pertinent laws and regulations Complexity of records management/records retention creates challenges Lack of industry standards and certications for cloud providers creates risks. Lack of clarity of ownership responsibilities between cloud vendor and user company No prevalent standards for vendor interoperability Extensive reliance on CSPs.

Financial Management and Tax

Security and Privacy

Operational

Data & Technology

Regulatory and Compliance

Vendor Management

34 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

The risk of a cloud provider failing materially for any extended period is substantially lower (than in-house IT).

Virtually all interviewees maintain that security is paramount. However, as HDFC Banks Jaggia explains, the real issue is whether data is held in a public or private cloud. If we stay in a private cloud with standard security measures and firewalls, and no co-mingling of data, I do not see security as a key issue. Moreover, as long as the cloud is private, I do not believe it will be an issue for regulators, who are otherwise aggressive in policing privacy and related issues in the banking industry. Performance issues the importance of cloud providers avoiding downtime and maintaining agreed-to service levels also figure prominently among both end-user and provider interviewees. However, in the case of both security and performance, providers participating in survey interviews say that such concerns are in some ways overblown. Consider several recent episodes of prominent cloud-providers experiencing significant downtime. As SAPs Welz explained, Any data center at any company can go down from time to time. And if its a server of a mid-market company, it wont be in the newspapers you will never hear about it. Theres risk in running your own servers. By comparison, says Welz, the risk of a cloud provider failing materially for any extended period is substantially lower. So the overall risk profile of a cloud environment versus in-house IT, says Welz, is like that between flying an airplane and driving a car. We feel safe in our cars when we all know, statistically, we are far safer in the airplane. Compliance isnt that important, until it is

Cloud-based services will need to be more firmly established as an accepted, safe and reliable set of business processes.

Responsibility for compliance remains with the customer, not the cloud vendor, so care and discretion are warranted. End-users will need to keep a close watch on the reliability and controls put in to place by the scores of would-be cloud service providers. This vigilance will be especially important for business executives who are accountable for managing the risks of potential security breaches and overall performance. As JWTs Mehta explained, his company is Sarbanes-Oxley-compliant (SOX). So if we are going to allow anyone to host our applications or data, we will need to know if they in turn are SOX-compliant. And our clients will want to know too. So in truth, says Mehta, cloud-based services will need to be more firmly established as accepted, safe and reliable before we proceed with anything of greater significance. As a result, reporting standards are changing. Statement on Accounting Standards 70 (SAS 70) reports do not review and account for the collocation of data, and as such, new Service Organization Control (SOC) reports, specifically SOC 1, SOC 2 and SOC 3 are now focusing on issues prevalent within the cloud, such as collocation. The SOC reports now include a test of security, not available before through SAS 70. Interestingly, in a cloud environment, end-users attempting to audit their transactions and processes may find them co-mingled with others and unable to provide an audit of their transaction as before. Please see the Issues and Implications section at the end of this report for suggestions of topics to cover during the review process of evaluating cloud.

Embracing the Cloud: Global forces shaping the service provider market | 35
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Tax in the equation, a relevant variable

Only respondents in the United States were asked their views on taxes with respect to the cloud. Interestingly, almost 45% of both providers and users either have not considered cloud-related tax issues or dont know if their organizations have done so. KPMG firms experience shows that organizations operating in the cloud should address critical factors such as a migration from capital expenditures to operating expenditures, character and sourcing of income, implications of intercompany charges and the impact of using third parties for services rather than internal employees. These issues are manageable, but they should be addressed to reduce the risk of tax exposure. Importantly, organizations that proactively manage and plan for the tax issues associated with operating in the cloud may unlock significant value for their organization.

Have you considered the impact of cloud migration on your organizations taxes?
16% 16%

Yes, from a tax strategy perspective

8%

14%

21% 18% 24% 21% 22% 24% 23% 21% 20% 20% 21% 20%

Yes, in terms of compliance and reporting

17%

Yes, in terms of strategy, compliance and reporting

31%

No, we have not considered tax separate from other business decisions
17%

25% 26% 23% 26%

Dont know
10% 0 Total Users 5 10 U.S. Total Users

14%

15 U.S. Users (IT)

20

25

30 U.S. Total Providers

35

U.S. Users (Business)

Figures may not add up to 100% due to rounding Source: KPMG International, 2011, Clarity in the Cloud

36 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Who should lead cloud efforts?

It is critical that IT, the business, audit,risk, compliance and tax teamsare consulted when migrating to the cloud.

Traditionally, cloud is seen as an IT issue, but many organizations would like to see adoption driven by corporate strategy, not IT. The transformative impact of cloud will undoubtedly require leadership from the business. Asked which executive should lead efforts toward cloud adoption, about four-in-10 end-user survey respondents cited either the Chief Information Officer (25%) or Chief Technology Officer (14%). Similar percentages chose strategic and operational C-suite executives, including the CEO (23%), COO (11%), and CFO (7%). As might be expected, a respondents opinion on who should lead cloud adoption may depend on the persons current responsibilities. Those involved in technology are more likely to turn to the CIO; those in operations and strategy point to the CEO. This survey did not ask about everyone who should contribute to the cloud conversation. While it inquired about the leaders, it is critical that IT, the business, audit, risk, compliance and tax teams are consulted when migrating to the cloud. It is also important to differentiate between different forms of leadership. A CEO, for example, along with a board of directors and an audit committee, might lead in setting the overall cloud agenda and defining levels of investments, but the CEO should not lead operationally. Clarity around the transformative nature of cloud can come from across the C-suite. Business unit executives may take charge of defining business requirements and benefits, with IT executives defining and managing the technical architecture and leading cloud offerings technical vetting efforts.

In your opinion, who in your organization should lead the process of cloud adoption?
CEO CFO COO CIO CTO Other C-level executive Line of business heads General counsel Other
0 1% 5 10 15 20 25 5% 1% 14% 7% 23%

11%

25%

13%

Source: KPMG International, 2011, Clarity in the Cloud

Embracing the Cloud: Global forces shaping the service provider market | 37
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

In your opinion, who in your organization should lead the process of cloud adoption?
CEO CFO COO CIO CTO Other C-level executive Line of business heads General counsel Other
0 IT 1% 1% 5 Non-IT 10 15 20 25 30 35 4% 5% 0% 1% 15% 12% 17% 13% 5% 8% 9% 12% 33% 22% 14% 26%

Figures may not add up to 100% due to rounding Source: KPMG International, 2011, Clarity in the Cloud

Executive management, IT, and line-of-business executives all need to be involved to ensure successful implementation of the cloud environment. In practice, says Welz, On-demand point solutions tend to be purchased by the lines of business themselves But in other instances, they are approached first . by the CIO. In all cases, however, Welz says that ultimately the two groups must work together. The best solution is integrated. Cloud-based point solutions may be the path to the first meaningful implementation at any given company, But all customers quickly learn that integration across the enterprise is vital. Added IBMs Howard, It doesnt really matter who makes the first move in the end, I dont believe anything of a significant nature is going to happen without CIO sponsorship.

38 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

CIOs always in the mix Post implementation, the CIO and CTO remain the top choices for managing the service level performance of cloud providers. Again, non-IT executives tend to vote significantly more heavily for the CEO than do IT executives (who more heavily favor the CIO and CTO). As for how businesses will evaluate the ongoing performance of their cloudbased environments, the most frequently cited means, at 59%, is cost. However, managers in nearly equal numbers (56%) say they will also look at productivity. As Anand Sankararaman, Senior Vice President IT of HDFC Bank explained, The overall performance efficiency, effectiveness, cycle time, reductions in turnaround time is what will also matter. Business managers will also evaluate their implementations based on the revenues they are able to generate through cloud-based channels as well the scope of geographic access. And according to IBMs Michael Sylvia, You will also likely see usage becoming a more important metric. I know in our case thats something were tracking carefully, the degree to which others are actually using the cloud services were providing.

Who should be responsible for managing service level performance of external cloud providers after a cloud environment has been adopted?
CEO CFO COO CIO CTO Other C-level executive Line of business heads General counsel Other
0 2% 5 10 15 20 25 30 5% 1% 17% 8% 13%

14%

26%

15%

Figures may not add up to 100% due to rounding Source: KPMG International, 2011, Clarity in the Cloud

Embracing the Cloud: Global forces shaping the service provider market | 39
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Conclusion

The era of the cloud is a significant evolution in the provision of IT services and business, opening the door to transform business and drive innovation inside and outside organizations. Undoubtedly, the full story will unfold at different rates at different companies and sectors, as some move cautiously and others make a bold dash. Nonetheless, acquirers of cloud technology and services will likely experience significant transformation of business processes alongside a reduced total cost of ownership across their organization if, and only if, managed properly. As more organizations look to take cloud into their business and IT organization, it is important to weigh the cost savings and other appealing aspects such as flexibility and agility against the critical issues such as risk, compliance, tax and other issues that may have implications for adopting firms. As the cloud business and technology models continue to evolve, cloud service providers have the opportunity to assist their clients in the development of a comprehensive cloud strategy. For insight into more of these critical issues, please see the Issues and Implications section, an executive guide on how to evaluate and think through the implications of cloud.

40 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Insights & implications

Many cloud studies and research reports exist, providing a view into cloud trends and deployments. This research study took input from over 900 executives. KPMG has gained insights not only from this survey, but from our member firms clients who are actually experiencing transformation enabled by cloud. Based on that knowledge, we offer below a Whats Next? guide for executives to help them appropriately measure the opportunities, set against the challenges, of the cloud.
For cloud service and technology providers Underpromise and overdeliver: success stories will add fuel to an already fastgrowing marketplace whereas failures will prove costly. Be realistic on cost savings claims; back up examples with proof. Educate customers and prospects on the benefits of cloud beyond the economics. Optimization and new agility to respond to market opportunities are not widely understood and require a long term strategy including the business and IT. Assess and be proactive about the challenges clients will face from rapid and multiple cloud investments and deployments. Assist in developing an integration roadmap with existing infrastructure and other cloud offers. Plan to continuously address ongoing integration cloud to cloud/cloud to enterprise requirements. Address security and data ownership concerns. Assist clients in developing new KPIs to measure their investment. Measurements may include increased efficiency, reduced cost, improved productivity and higher adoption rates. Ensure, as a cloud provider, you have optimized your business model in key areas such as customer management, risk & compliance, revenue recognition and tax structures especially as you grow your international business.

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2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

For all executives evaluating cloud solutions: Identify gaps in your business performance, competitive, geographic, etc. and determine if the cloud can help fill those gaps. Evaluate collaboration and information exchange needs with providers and clients. Are there elements of your business where information is exchanged that could be migrated to a cloud environment? Could these be converted to newbusiness opportunities and ways to expand revenue? Will the cloud create new efficiencies? Assess the economics of a private vs. public cloud. The economic differences can be significant, based on individual requirements, while the risks, such as security, need to be actively managed. Measure risks vs. rewards as you assess cloud providers claims and capabilities. Understand where the cloud provider internal or external will force organizational process changes, and assess the change management implications and plan. Are there any organizational redesign factors to consider? Does your current operating model support the cloud migration plan? If not, have you properly designed your target operating model? Focus on deciphering and validating cloud computing cost savings claims. Test these claims against total cost of ownership calculations that include compliance, tax and change management implications. As these are unique by organization? (They are often inaccurate when provided by a vendor.) Test the customization needs of your business. The more customization needed, the less likelihood of cloud success. Is the desired customization critical? Define business integration issues, with specific emphasis on data that may now be scattered across the enterprise. Understand how the data architecture must evolve to address the cloud and inter-cloud and inter-enterprise operability. Assess internal staff, current roles and changes needed and how well current skills map to the cloud model being designed or implemented. Consider if a cloud project does not enter the typical capital budgeting and approval process, will it exist outside corporate governance models? What mechanisms are in place to ensure corporate governance is maintained? How will business continuity and disaster recovery factor into your cloud migration strategy? Understand the contracting process. As offerings become more standardized, so goes the contract. Make sure your organization can flex to the providers requirements and you understand what is negotiable. Understand the optimum contract length such that your project provides the flexibility needed to move as the market evolves. Remember to consider Service Level Agreements and how they will be managed. Are the right mechanisms in place with your current vendor management strategy to effectively manage cloud projects? Assess your vendor management risk strategy with a cloud lens. Vendors are also going through a their own transformation to cloud delivery models, delivering significant financial and operational impact. Ensure that your management strategy properly measures the vendors financial ability to restructure its business model.

42 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Determine the assurance reporting needs for your cloud vendor. Requirements that worked for outsourcing, such as the historic SAS 70, may not provide the assurance you need in a cloud environment. Assess the shift of testing an entire process vs. a transaction and whether this is sufficient. Dont forget internal audit, global security and regulatory implications of data privacy, storage, co-location, tax nexus, etc. How do you audit the co-mingled world of cloud? How do you determine that all regulatory requirements are met? Will you give your data encryption key to your vendor? Is your vendor required to disclose a data breach? For IT professionals Work closely with business unit leaders to develop a comprehensive cloud strategy and plan of action. Create the enterprise vision and roadmap for cloud. Identify proof of concept opportunities to leverage. Are your technology platforms an accelerator or inhibitor to your corporate strategy? Educate business unit leaders on the clouds realistic capabilities and potential from an IT perspective. Deploy competent specialists to study the cloud market, its capabilities, offerings and providers. Evaluate the interoperability of cloud solutions against current applications, platforms and infrastructure. Assess their readiness for cloud migration. Ensure the assessment is objective. Re-define the role of the CIO as it evolves from IT provider to Chief Integration Officer, who has the opportunity to drive business models and innovation.

Embracing the Cloud: Global forces shaping the service provider market | 43
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Develop various scenario plans for cloud adoption and deployment across each cloud layer and across different IT and business operating areas. Interpret cloud services and capabilities in the context of having to contract them with third party providers (e.g., ramping capacity up and down may be easier technically than the provider contract allows). Design, develop and deploy operating governance and risk management programs from the IT perspective of cloud computing services. For business professionals Work closely with IT leadership to develop a comprehensive cloud strategy and plan of action to ensure critical integration points are managed and to ensure all opportunities for efficiencies and effectiveness are leveraged. Focus on the business value and potential of cloud over its technical capabilities or merits. At the same time, work with the IT organization to avoid pockets of capabilities that will create disparate data sets to manage. Understand the risks of cloud services deployment without the input and support of the IT group and in context of the prevailing IT architectures (including data and other technical architecture). Assess the implications of deploying more standardized and less customizable applications now that your business process is enabled by a service. Develop various scenarios for cloud adoption and deployment across different business operating areas. Understand if cloud is a mechanism to replace and/or modernize back-office applications. For risk professionals, internal auditors, tax and audit committees Ensure adequately skilled professionals are in place to assess and monitor the risk and controls management aspects of cloud. Embed risk and controls consideration in cloud selection processes. Understand that traditional IT controls may be non-existent in a cloud service provider. Funding, development, and the implementation lifecycle now may all require a new governance model. Understand that users have access to public cloud services, and that policies need to be developed to protect your enterprise. It is unrealistic to think your employees are not accessing these public tools. Involve risk, audit and audit committee groups in cloud services planning and selection processes. Require regular reporting on risk and controls management monitoring in deployed cloud services. Evaluate how information will be secured and confidentiality will be maintained. Determine how cloud computing adoption will affect regulatory and compliance requirements. Establish a formalized assurance program, whether through Internal Audit or independent assurance reporting (SOC reports). Understand the global, regional and local tax implications of the cloud environment.

44 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Interviewees

We would like to thank to the following interviewees for their valuable contributions:

Cloud users Leslie Gordon, Vice President, Office of the CIO, Application & Infrastructure Service Management, IBM Anil Jaggia, CIO, HDFC Bank Sunil Mehta, CIO, JWT India Massimo Milanta, CIO, UniCredit Anand Sankararaman, Senior Vice President - IT of HDFC Bank Silvio Sperzani, CIO, ENEL Michael Sylvia, Distinguished Engineer & Director, IT Architecture, Application & Infrastructure Services Management, IBM

Cloud providers Pat Howard, Vice President and GBS Global Cloud Leader, IBM Dr. Bernd Welz, Senior Vice President, SAP OnDemand, SAP

Embracing the Cloud: Global forces shaping the service provider market | 45
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

About the survey


The KPMG survey was conducted in 15 countries from February to April 2011, and canvassed 806senior executives nearly 50 percent of them from the C-level in companies that use or plan to use Cloud, as well as 123 executives from Cloud service providers. Countries included in thissurvey were: US, Canada, Mexico, France, Germany, Ireland, Italy, Netherlands, Sweden, Switzerland, UK, Australia, China, India and Japan.

Additional reading
KPMG firms have written of the transformative impact of the cloud in several prior publications, of note: The Cloud Changing the Current Business Ecosystem http://www.kpmg.com/IN/en/IssuesAndInsights/ThoughtLeadership/The_Cloud_Changing_the_ Business_Ecosystem.pdf The Cloud Transforms Business http://www.kpmginstitutes.com/financial-reporting-network/insights/2010/business-implicationsof-cloud-mark-goodburn-dec10.aspx From Hype to Future: KPMGs 2010 Cloud Computing Survey http://www.kpmg.com/ES/es/ActualidadyNovedades/ArticulosyPublicaciones/Documents/2010Cloud-Computing-Survey.pdf

46 | Embracing the Cloud: Global forces shaping the service provider market
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Embracing the Cloud: Global forces shaping the service provider market | 47
2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Contact us For further information on this study, and how KPMG firms can help your business with the transition to Cloud, pleasecontact: Gary Matuszak Global Chair, Technology, Media & Telecommunications T: +1 650 404 4858 E: gmatuszak@kpmg.com Tom Lamoureux Global Advisory Leader, Technology T: +1 650 404 5052 E: tlamoureux@kpmg.com Jana Barsten Global Audit Sector Leader, Technology T: +1 650 404 4849 E: jbarsten@kpmg.com Rusty Thomas Global Tax Leader, Technology T: +1 650 404 5008 E: rcthomas@kpmg.com Sean Collins Global Chair, Media and Telecommunications T: +656 597 5080 E: seanacollins@kpmg.com

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. 2011 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. Designed by Evalueserve. Publication name: Embracing the Cloud: Global forces shaping the service provider market Publication number: 111128 Publication date: November 2011

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