Cloud Computing, State of The Nation

ADVISORY
The State of the Nation Cloud Computing China

November 2010
2010 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China, is a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in China.
What we see?
Gartner Analysts believe that China IT spend will be USD 216.7 billion in 2010 representing 6.7% of the overall global spend
IT Spend in China during 2010

2010 Spend Computing Hardware Software IT Service Telecoms Total 43 6.2 9.4 158.1 216.7
Figures in Billions of U.S. Dollars
Source: Gartner (2009)
Source: Gartner (January 2010)
Focus: Cloud computing addresses the costs of hardware, software, operational services and telecommunication in one single budgetary number
IDC Predictions on cloud spending in 2008 see a $16.2 billion (US) spend rising to an anticipated $42.3 billion (US) globally
Focus: there is anticipated large growth in the storage market China may have to address information privacy issues in order to take advantage of this.
Cloud Market: Anticipated Grow th
Source: IDC (2008)
160 140 120
Gartner believe global Cloud market is much bigger with a global potential of over $150 billion (US) globally in 2013.
100 80 60 40 20 0 2009 2010 2011 2012 2013

Source: Gartner (2009)
To meet these levels of spending in technology, investment in the cloud is spiking with key initiatives underway for many key players
The Taiwan government plans to spend NT$24billion (US$743Million) over the next five years Microsoft plan to spend part of a US$500million research budget on cloud computing in China US$100 million from RIM in China Mobile and China Telecom
China Mobile will invest an estimated CNY400 billion (US$58 billion) over 3 years in their Big Cloud 3G platform
Alisoft invest CNY100 million (US$13.5 million) in Nanjing centre
Source: Recent press on cloud investment
What people are saying on cloud and impact on china?
The market is accelerating with big players investing in China to deliver and enable cloud services within Chinas boundaries
Infrastructure as a Service
Platform as a Service
Software as a Service
Cloud Enabler
Jiangxi Fujian
What are people saying?
NIST have provided the industry with a non-ratified but generally agreed definition of cloud computing
Essential Characteristics
Broad Network Access

standard access via generic heterogeneous clients
Rapid Elasticity
quick response to new scaling requirements; purchasing based on immediate requirements
Measured Service
abstracted metering at business level delivers an optimised service
On-Demand Self-Service
computing requirements automatically delivered at consumers request
Resource Pooling
dynamic allocation determined by service requirements
Software as a Service (SaaS)

Service Models
consumer accesses and uses the providers applications on a cloud infrastructure supported and maintained by the provider
Platform as a Service (PaaS)

consumer deploys and maintains its own applications on a cloud infrastructure supported and maintained by the provider
Infrastructure as a Service (IaaS)

consumer is able to provision computing components (e.g. networks, storage) that it can use to support its applications and operating environment
Deployment Models
Software developers in China are looking to use SaaS as a route to market
International and Chinese organisations are currently investigating PaaS and IaaS for expansion and cost optimisation
Public
available to the general public and thus to any service provider for any type of service requirements
Private
dedicated service either on the consumers site or hosted by a third party
Community
a shared environment with a group of consumers with similar service requirements
Hybrid
a composition of two or more clouds, public, private and community, that are able to enable data and application portability
Source: NIST Definition of Cloud Computing v15 (2009)
Using the cloud is not without its risks and obstacles but solutions are available in some areas which can seek to overcome these issues
Areas of Concern Business

9 1
Availability of Service
Solutions and improvements

Use multiple providers, reducing risk of loss of service Elasticity reduces the threat of Denial of Service (Essential Characteristic) Standardised APIs for ease of migration and flexible delivery Remove Single Points of Failure from dedicated solutions Deploy encryption at the data level Accommodate National laws via geographical data storage Physical rather than digital for major data transfers Increased bandwidth on LAN and GWAN environments Improved Virtual Machine (VM) support and hardware architecture (reduced I/O) Improved scheduling and provisioning of VMs (Essential Characteristic) Develop truly dynamic and scalable storage systems for all information requirements Develop software development solutions that are customised for cloud computing environments Develop scaling solutions that utilise machine learning to maximise performance enhance with effective use of snapshots Offer reputation guarding services or utilise a private cloud (Deployment Model) Alternative charging strategies but requires governance around usage demonstrable control
Source: Above the Clouds: A Berkley View of Cloud Computing (February 2009)
10
Data Lock-In
3 1 4 5 2 3 6 5 8 7 6 4
Data Confidentiality and Auditability Data Transfer Bottlenecks Performance Unpredictability
Technical
Scalable Storage Bugs in Large Distributed Systems Scaling Quickly
Adoption
Growth
7
8 Solutions exist, although may not always be included in solutions offered Solutions tend to not exist or have a low maturity and adoption; potentially a China specific issue
Reputation Fate Sharing
10
Software Licensing
10
KPMG have found that further areas are impacting the take up of cloud based services
Areas of Concern Business

9 15 11 10 16 17 12 1 4 5 11 3 2 14 6 8 13 7 14
Latency of connections Ease of integration
Solutions and improvements

This is not an obstacle specifically of cloud computing and solutions have been tried and tested; a complexity not an issue
Ability to customise services
Deployment models such as hybrid and private allow for heavy customisation (Deployment Model)
12
Technical
13
Provider Maturity
This is a factor of time and providers are improving services, solutions and infrastructure significantly
Bandwidth improvements can ensure delivery of information but time-sensitive applications may require response times quicker than is physically possible
Adoption
Growth
15
Regulations
Cross border processing and storage of information remains an issue and can only be addressed through combination of business and technology
16 Solutions exist, although may not always be included in solutions offered 17 Solutions tend to not exist or have a low maturity and adoption; potentially a China specific issue
Governance of services
With greater flexibility comes a greater need for understanding the impact of change and a new approach to IT management is needed
Measurement and monitoring
Developing and reporting on quality indicators within a model that can be understood by the business is a challenge although monitoring of cost is achieved (Essential Characteristic)
Source: KPMG Cloud computing: Australian lessons and experiences (2009)
11
Providers are addressing the concerns of consumers to varying degrees with improvements in technology and solutions
Confidentiality & Auditability
Measuring & monitoring
Performance Unpredictability
Bugs in distributed systems
Data Transfer Bottlenecks
Latency of connections
Scalable Storage
Regulations
Reputation fate sharing
Provider maturity Ease of integration
Availability of Service
Governance of service Data Lock in Software licensing Ability to customise Scaling quickly
Source: IDC (2008) and KPMG analysis (2010)
Common concerns amongst consumers

12
China needs to understand the big issues
13
In 2008 Gartner predicted that Cloud Computing was gaining in hype and was 2 - 5 years away from mainstream adoption
Cloud Computing in 2010
In 2010, Cloud Computing is reaching its peak in visibility with many international conferences coming to China
Source: Gartner (July 2008)
14
Providers have been working to meet the expectations of consumers to varying degrees in China
Large network of partners
Address multiple IT issues Complete Solution offering Well established providers
Performance assurances Innovative solutions
Understand Industry needs
Competitive pricing Fallback to onsite delivery
Existing provider relationship Local presence
Source: IDC (2008) and KPMG analysis (2010)
Common expectations amongst consumers

15
Cloud computing is not the only tool available and the benefits it brings should be considered alongside other strategic directions
Combining Outsourcing, Shared Services and Cloud Computing together can provide greater benefits than on their own
Internal adoption and support of Cloud Computing is unlikely to be successful without business alignment
Sweet Spot
Cloud Computing
Achieving improvement by business transformation from within and integrating Cloud technologies
Outsourcing
Achieve efficiencies from economies of scale provided by third parties who themselves are embracing Cloud Computing
Shared Services
Most strategic roadmaps will not be a straight line, but will be affected by the point in time desire to implement all three solutions
16
Major internal shared service centres in China this is a small sample they are talking about cloud
17
Major R&D centres in China use of the cloud to drive greater innovation
MNCs have set up over 1,200 R&D centres in China
18
Service providers in China many are starting to develop cloud solutions and products
There were over 9,000 outsourcing service providers in China by January 2010, whose delivery centres scattered in the Service Outsourcing Model Cities
19
The profound change
China is on the move
Chinese Government has a bold vision of the impact of Cloud Computing Major Chinese entities are putting significant investments into Cloud These massive investments will drive Significant innovation
Look North and dont discount what China will do here in cloud
20
Speaker
Egidio Zarrella Clients and Innovation Partner in Charge KPMG +852 6393 0458
21

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ADVISORY

The State of the Nation Cloud Computing China

IT Spend in China during 2010

Source: Gartner (2009)

Source: Gartner (January 2010)

Cloud Market: Anticipated Grow th

Source: IDC (2008)

160 140 120

100 80 60 40 20 0 2009 2010 2011 2012 2013

Alisoft invest CNY100 million (US$13.5 million) in Nanjing centre

Source: Recent press on cloud investment

What people are saying on cloud and impact on china?

What are people saying?

Broad Network Access

Software as a Service (SaaS)

Platform as a Service (PaaS)

Infrastructure as a Service (IaaS)

Software developers in China are looking to use SaaS as a route to market

Source: NIST Definition of Cloud Computing v15 (2009)

Areas of Concern Business

Solutions and improvements

Data Confidentiality and Auditability Data Transfer Bottlenecks Performance Unpredictability

Scalable Storage Bugs in Large Distributed Systems Scaling Quickly

Reputation Fate Sharing

Areas of Concern Business

Solutions and improvements

Ability to customise services

Measurement and monitoring

Confidentiality & Auditability

Measuring & monitoring

Bugs in distributed systems

Data Transfer Bottlenecks

Reputation fate sharing

Provider maturity Ease of integration

Source: IDC (2008) and KPMG analysis (2010)

Common concerns amongst consumers

China needs to understand the big issues

Cloud Computing in 2010

Source: Gartner (July 2008)

Large network of partners

Address multiple IT issues Complete Solution offering Well established providers

Performance assurances Innovative solutions

Understand Industry needs

Competitive pricing Fallback to onsite delivery

Existing provider relationship Local presence

Source: IDC (2008) and KPMG analysis (2010)

Common expectations amongst consumers

The profound change

China is on the move

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