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Zero infrastructure:

A technology operating
model for the cloud-
centric era

Miami Munich New York San Francisco

Bryan Herd Florian Strmer Florian Groene Danielle Phaneuf

Director, PwC US Director, PwC Germany Principal, PwC US Director, PwC US
+1-305-375-7393 +49-89-54525-568 +1-212-551-6458 +1-415-653-3518
bryan.herde florian.stuermer florian.groene danielle.phaneuf

Strategy& 2
Executive summary

The cloud, especially the public cloud, is now officially beyond hype. Supply options are real, as is enterprise buyer spend.

Increasingly, chief experience officers (CXOs) are using the cloud to solve the most important business and technology
challenges across all functions of the business, from speed and agility to innovation and cost advantage.

The cloud is becoming the core paradigm for delivering business technology, with an aspirational promise of zero
infrastructure anything-as-a-service.

To deliver on this promise, tech operating models will need to evolve and grow a new set of cloud-centric capabilities that
are very different from the old ways of IT:
A new, consultative approach to cloud demand and business relationship management
A retooled architecture, engineering, and operations capability, embracing such concepts as cloud orchestration tool sets, continuous
integration and deployment, and development operations (DevOps)
Strong controls for cloud consumption, performance, and vendor/partner management

Where to start, and where to focus, will depend on your industry. The journey will look different for players whose technology
is the product vs. less tech-centered mid-cap and large enterprises.

We offer a blueprint for a cloud-centric operating model, and a road map for how to get there.

Strategy& 3
After years of hype, public cloud services are now
reaching scale with dramatic growth ahead

Total IT spend Spend for public services

(in US$ billions; CAGR) (CAGR 201317)

$630 PaaS
+22% 107 +27%
49 IaaS 13%
29% Observations
+4% 523
What we see today is only a
Public cloud
Rest of IT
glimpse of what lies ahead
Public cloud services are
2013 2017
dramatically outpacing general
IT spend (22% vs. 4% CAGR)

Companies adopt service models,

going as far as striving for a zero
infrastructure footprint
Cloud revenue shares Cloud revenues
(as % of total revenue) (in US$ billions, annualized run rate) IT suppliers are rapidly adopting
their business models to compete
with new players

29% 28%
Note: Numbers are analyst estimates
17% 2013 6 6 and are not exactly comparable.
8% 8% 6% 2017 (forecast)
Source: IDC; Forrester; Gartner;
Oracle IBM SAP Adobe Amazon Microsoft Oracle; Strategy& analysis

Strategy& 4
Cloud models have benefits beyond costs, but a number
of perceived and real inhibitors slow adoption
Expected benefits of Key inhibitors of cloud adoption
cloud operating models (% of respondents who mentioned)

Costs: Declining infrastructure costs (Moores law), competitive Security 46%

environment, pay-per-use model, opex for capex

Scalability/elasticity of supply: Resources scale based on user IT management complexity 46%

demand, transparent resource utilization
Vendor lock-in 35%
Manageability: Self-service and automation, SaaS/PaaS replace
complex legacy solutions Compliance 30%

Agility: Faster time-to-market

Cost 28%
Mobility: Aligned with new customer behavior, supporting
mobile workforces Interoperability 27%

Privacy 26%

Reliability 22%

Technology complexity 21%

Source: North Bridge (2013);

Strategy& analysis

Strategy& 5
The move to the cloud is creating a disruption
comparable to the shift from mainframe to client/
server architecture

Evolution of the digital technology agenda

Today Tomorrow
Custom-developed applications and stand-alone platforms Standard, cloud-based, integrated SaaS/PaaS solutions focus on
requiring onerous maintenance schedules configuration vs. code

Siloed development and operations functions managing lengthy release Continuous software delivery with accelerated time-to-market enabled
cycles by collaborative DevOps

Long lead times to provision IT components and code deployments On-demand provisioning of IT infrastructure services

Dedicated, high-touch infrastructure (data centers, server, storage, Zero infrastructure: low-touch, flexible, and scalable compute
mainframe) estate and store capacity

Focus on development and supporting operations IT for IT Orchestrator of services, focused on business enablement
IT for business
Device-driven, static-capacity end-user IT and supporting business
services Software-defined, auto-scalable end-user IT and supporting business
Big IT/CIO controlling the IT spend and resourcing
Shared funding and resourcing among IT, business, and partners

Source: Strategy&

Strategy& 6
Senior executives looking to adopt a cloud strategy
face substantial business and IT challenges

Business challenges IT challenges

Leveraging digital to gain agility Shortage of talent/skills to

and faster time-to-market operate the new model

Acquiring talent to manage Inefficient IT cost

product innovation management
Digital agenda
Attaining economies of Exposure to new risk
scale due to shadow IT and security challenges

Digitizing customer engagement to Legacy systems that make

drive evolving technology needs changes cost prohibitive

Source: Strategy& analysis

Strategy& 7
Transitioning to the cloud requires a mix of new and
enhanced traditional operating model capabilities
Holistic view: Components of an ideal cloud-centric operating model

Cloud Cloud supply management

Cloud demand Cloud architecture Cloud Cloud vendor Cloud
demand management and engineering operations management supply

CMO: sales and marketing Cloud solution Cloud-first Multi-cloud/hybrid Strategic cloud Public cloud solution
CPO: product value chain evangelism and architecture design cloud operations solution sourcing vendors
consulting (zero infrastructure Vendor relations and Private/hybrid cloud solution
Other CxOs: analytics, aspiration)
financial reporting, HR Portfolio assessment innovation exchange vendors
benefits administration, etc. focused on cloud SLA and vendor Ancillary cloud management
DevOps discipline and tooling for continuous
adoption planning performance providers
integration, deployment, and multi-cloud
operations management

Cloud cost and consumption management: Disciplined metering, tuning, and reporting for
consumption-based cost charge-back model

Workforce/talent management: Continuous talent pool mix and skill set development to
support cloud-focused organization

Cloud security and risk management: Cloud risk vs. benefits assessments, security policy
setting, and audits

Cloud transition management: Coordination and program management of initiatives to move

to/adopt cloud platforms

Source: Strategy& analysis

Strategy& 8
Demand for cloud services is largely driven by needs
of stakeholders outside the IT domain
Key stakeholder strategic objectives Digital agenda implications

Faster time-to-market and increased agility Enable advanced analytics through cloud-based
Innovative sales and marketing powered by solutions
cloud solutions Digitize customer engagement platforms
Enhanced user and customer experience

Innovative service and/or product design Digitize technology service stack for product
component customization based on rapidly customization
CPO evolving customer needs Define architecture standards for product
Product value chain digitization and development

Cloud-first target architecture blueprint Define architecture standards for corporate

DevOps service management model IT platforms
CIO supporting hybrid cloud platforms Digitize infrastructure to achieve a zero
Strict security and risk management infrastructure footprint
Build cloud security capability

Cost control and allocation Establish cloud consumption and cost control
Capex to opex shift for increased operational mechanism
Cloud demand
CxO agility and economies of scale Develop strong-form vendor management
Back-office process automation Digitize back-end and support processes and
functions Source: Strategy& analysis

Strategy& 9
Cloud IT architecture is constantly evolving, standards
are rare, and new technologies keep rolling out
Trends in cloud architecture stack technologies

Service assurance Service billing and
Service catalog
and SLA management consumption control

Technology stack
Release management tool kit
Code repository, software configuration management, build/deploy coordination across environments

Security controls
Security policies, compliance audits, and risk management
Cloud architecture
and engineering
Orchestration QA orchestration
Automated testing, test case
management Operations monitoring Service metrics Growing list of commercial and
Monitoring, alerts, and backups Consumption and cost metrics open-source solutions provide a range
Orchestration of continuous to ensure quality of service level for metering and reporting of alternatives to manage the cloud
integration and deployment purposes technology stack.
Integration and App container and orchestration can be
deployment pipes managed through a number of platforms.

Resource orchestration
Resource stacks, payload allocations (storage, computer power, network), Fierce competition within public
images (instances and failovers/disaster recovery) cloud space is driving prices down.
Private cloud and on-premise VM
providers are expanding into hybrid
Infrastructure solutions.
Public cloud A Private cloud C
Cloud supply

Public cloud B On-premise virtual machines Source: Strategy& analysis

Strategy& 10
A cloud-centric delivery model requires a new,
more fluid, DevOps-style take on service deployment
and operations
Cloud deployment and operations considerations

Service Service billing

Service catalog assurance and and consumption
SLA management control

Release management tool kit

Security controls

Continuous integration QA orchestration

Multi-cloud service
and deployment (CI/CD) management
Orchestration of Service metrics
Need for simultaneous, continuous Need to ensure user/customer
integration and
frequent deployments experience across distributed
Coordinate multiple cloud
Resource orchestration
platforms with ability to rapidly Coordinate multiple third
scale according to parties that contribute to
build/test/run needs delivering a given service
Public cloud A Private cloud C
Cloud supply
Adopt CI/CD best practice Design end-to-end
On-premise measures at platform and
and corresponding tools Public cloud B
virtual machines
Code repository aggregated service levels
Adapt IT service
Build automation
management discipline to
multi-cloud setting Cloud operations
Automated deployment
Incident/problem flows
SLA/performance Source: Strategy& analysis

Strategy& 11
Organizations can set the path toward a zero
infrastructure footprint by employing a four-step asset
reduction process
Four steps toward a zero infrastructure footprint

Decommission: Move to the cloud: Virtualize: Consolidate:

Kill Ship Shrink Merge
Reduce Migrate eligible Shrink remaining Reduce remaining
infrastructure on-premise hosted physical asset physical
estate by applications and estate through infrastructure
identifying and services to virtualization of footprint through
eliminating cloud-based servers and consolidation of
underutilized solutions storage assets within and
assets across data centers

Performance and utilization should be consistent boundary conditions across the steps Cloud operations

Source: Strategy& analysis

Strategy& 12
The cloud service supplier landscape is diverse,
and maturity varies across technology and domains
Cloud supplier landscape and maturity

Enterprise Collaboration Content E-commerce/ Examples:

software and productivity management CRM payments High supplier diversity
IBM Atlassian Adobe CQ5 Oracle Service Demandware Will continue to grow
Oracle Google for Work HP Autonomy Cloud Hybris Software as more applications
SuccessFactors Jive OpenText Salesforce IBM Sterling move to the cloud
Workday Kaltura SDL SugarCRM Commerce
Office 365 Intershop Interoperability is a
ON24 Oracle Commerce challenge


Private cloud App containers Big data and Examples:

Security stacks/solutions and middleware analytics Emerging standards
Alert Logic Cisco Docker Adobe Analytics (e.g., Docker,
Integralis IBM Amazon Web Services OpenStack)
SAVVIS Microsoft Azure Google App Engine Cloudera
Hortonworks Need to integrate and
Silver Sky OpenStack IBM Bluemix bridge private and
VMware Microsoft Azure public offerings
TIBCO SAS Analytics

Cloud supply

Network (Enterprise) storage Computing Examples:

Brocade Amazon Web Services S3 Amazon Web Services EC2 Growth will be driven Maturity of product offering:
Cisco Box Google App Engine by volume/unit cost High
HP Dropbox Microsoft Azure advantages Medium
Juniper Egnyte SoftLayer Growing maturity of Low
OpenFlow Google Cloud offerings
VMware Microsoft Azure
Diminishing relevance of
risk/security concerns Source: Strategy& analysis

Strategy& 13
Sourcing cloud services through a central VMO function
allows organizations to leverage scale and expertise

Cloud-centric vendor management

Performance management Strategic sourcing

Vendor SLA performance Rapidly growing and
management to ensure highly diverse supplier
efficient use of services (e.g., landscape requires
cost control based on Vendor guard-rails for cloud
consumption and level of management strategy (e.g., security
service) compliance, architecture
gate checks)

Contract management Transactional

Coordinate contracting of purchasing
cloud services to ensure that Focus on transparency of
economies of scale are cloud service procurement
leveraged across demand by streamlining process
channels based on established
sourcing standards Cloud vendor management

Source: Strategy& analysis

Strategy& 14
A number of cost models providing varying levels of
cost transparency are available to organizations

Cost transparency
model options Benefits Whats required to get there?

1. Consumption-based Accurate level of cost allocation A defined services catalog with associated cost drivers to allocate IT
cost allocation based on per-unit metric costs in business-relevant terms that reflect the services provided
Good, granular data and supporting systems to track and manage
cost allocations
2. Product-level cost More granular level of cost
A change in organizational behavior to adopt consumption-based billing
transparency transparency to inform business
and charge-back model
group product strategy
Ability to conduct product support Embedded financial acumen across roles within the organization (i.e.,
cost-benefit analysis to identify service managers) to actively manage and fine-tune consumption-based
ways to positively impact P/L costs

Active communication of the allocation process by IT, business units,

and finance to the organization to ensure alignment with existing planning
3. Service portfolio Provides service offering cost
and budgeting processes
menu card transparency to better inform sales

4. Cost charge-back Instills accountability for support

mechanism costs within business groups by

level of Cloud cost and consumption
transparency Example management

Source: Strategy& analysis

Strategy& 15
Implementing a cloud-first organization requires a
service-oriented transformation in the talent and
delivery model
Today Tomorrow

IT for IT
Partners IT Partners
Functional Service
IT orientation orientation

Analog Digital Business

mind-set mind-set

Knowledge and skills in todays workforce Knowledge and skills in tomorrows workforce
Traditional development methodologies Fit-for-purpose development methodology
Custom-developed applications agile, DevOps

Heavy engineering and technical focus Configuration and integration of SaaS

apps/platforms Workforce/talent management
Infrastructure and application management skills
Finance and business acumen/business
Managing resources and staff augmentation consultation Source: Strategy& analysis
Information and service management skills
Strong-form vendor management tracking

Strategy& 16
to identify and retain the right skills for tomorrows

Digital keystone skills

Enterprise and Project and Business Quality Vendor Prototyping User experience Security
technology program requirements assurance management design
architecture management management

Workforce/talent management

Source: Strategy& analysis

Strategy& 17
Organizations must adapt to stay competitive as
the benefits of cloud adoption continue to outweigh
security risks

Security as primary inhibitor of cloud

adoption reinforced by well-publicized recent
breaches General opinion trending in favor of wider
acceptance of benefit vs. risk of cloud
Prevailing opinion that third-party services adoption
are always riskier than doing it yourself
In certain cases, stricter security levels can be
Lack of standards leads to vendor lock-in achieved through cloud solutions
and interoperability problems
Regulatory requirements dictate adoption of
Complex system landscape will be replaced cloud solutions in some industries (e.g., HIPAA
by complex service landscape compliance)
Keeping pace with the competition and
disruptive technologies makes cloud
transition inevitable

Establish cloud security capability to manage the risks of cloud adoption, avoid collecting and
processing un-curated data in the cloud, and develop a response plan in the event of a breach

Cloud security and risk management

Source: Strategy& analysis

Strategy& 18
A cloud transformation entails establishing a business
case, strategy, operating model, and target-state

0. 1. 2. 3. 4. 5.
Baseline Value assessment Strategy and Cloud Readiness and Target-state service and
assessment and business case road map development operating model maturity assessment architecture development
Baseline Determine the Enable organizations to Define the processes, Assess cloud adoption Define cloud functionality to
infrastructure and business value of the develop a unified cloud organization structure, readiness based on meet business objectives,
application portfolio cloud solution chosen strategy that aligns roles, skills, and infrastructure, develop architecture to
estate to determine by an enterprise and business vision, values, governance required to governance, and achieve these
feasibility of the evaluate it through the and objectives with a effectively operate in a process maturity functionalities, and design
organizations cloud lenses of cost, cloud solution cloud environment capabilities to manage
adoption aspirations usability, functionality, cloud services
and agility

Cloud transition management

Source: Strategy& analysis

Strategy& 19
An organizations cloud transition play depends
on its tech affinity and size

Three archetypes of cloud plays

Basic: Lower-tech mid-caps Midsized non-tech companies

should selectively adopt cloud to
Lack of capability to create solutions matching capabilities of cloud offerings
improve cost profile and innovate
Difficult to recruit experts to implement cloud services
IT not seen as a key business enabler

Expert: Tech vanguards Cloud adoption is mandatory for

tech-affiliated companies in order to
Aggressively adopting cloud models
stay agile and competitive from an
Modern, virtualized application portfolio innovation and cost profile
Young, highly skilled IT personnel perspective

Expert: Complex blue chips Large corporations should at the

minimum adopt cloud to reduce
Cloud required for reducing complexity, improving agility and innovation
complexity of their business support
Large legacy portfolio, heterogeneous and highly specific application portfolio functions Source: Strategy& analysis

Strategy& 20
Each organization should decide how far it
needs to push the operating model choices

Low relevance High relevance

Cloud demand management

Cloud architecture and engineering

Cloud operations

Cloud vendor management

Cloud cost and consumption management

Lower-tech mid-caps
Complex blue chips
Workforce/talent management Tech vanguards

Cloud security and risk management Source: Strategy& analysis

Strategy& 21
We offer a full range of cloud-centric services to
help clients move to an IT platform of the future

Strategy to execution

1. 2. 3. 4. 5. 6.
Cloud Cloud Cloud Cloud Cloud Cloud
strategy architecture operations business transformation governance
services services services services services services
Value assessment Service and Service optimization Risks, controls, Program management Governance model
Strategy and road architecture Service management and compliance Stakeholder Operating model
map development development optimization Implementation awareness and Financial management
Application assurance alignment
Business case Organization and talent and charge-back
readiness and Controls design review
development optimization Regulatory compliance Organizational change Supplier management
migration planning assessment management
Readiness and Public cloud brokerage
maturity assessment Vendor analysis and Integrated security Private cloud
selection compliance
Third-party assurance
Public cloud
integration Taxation
Permanent establishment
Federal research credits
State data center credits
and incentives
Sales and use tax
equipment exemptions
VAT implication analysis
Source: Strategy& analysis

Strategy& 22
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