April 18, 2012

1. April 18, 2012 Head in the clouds, feet on the ground Cloud Computing and RIM The Good, the Bad and the Fantasy

2. Technology is the bane and the future of RM

3. Cloud computing is a new model for IT delivery with new terminology Enabled by virtualization and SOA, cloud computing allows services to be rapidly available on a scalable infrastructure. Cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. This cloud model promotes availability and is composed of five essential characteristics, three service models, and four deployment models. • Essential Characteristics: • On-demand self-service • Broad network access • Resource pooling • Rapid elasticity • Measured Service • Service Models: • Cloud Software as a Service (SaaS) • Cloud Platform as a Service (PaaS) • Cloud Infrastructure as a Service (IaaS) • Deployment Models: • Private Cloud • Community Cloud • Public Cloud • Hybrid Cloud Source: The NIST Definition of Cloud Computing. NIST Special Publication 800-145 (Draft). January, 2011. http://csrc.nist.gov/publications/drafts/800-145/Draft-SP-800-145_cloud-definition.pdf

4. Cloud: Simple Example Today’s Data Center Tomorrow’s Cloud ? ? ? ? ? We Have Control It’s located at X. It’s stored in server’s Y, Z. We have backups in place. Our admins control access. Our uptime is sufficient. The auditors are happy. Our security team is engaged. ? Who Has Control? Where is it located? Where is it stored? Who backs it up? Who has access? How resilient is it? How do auditors observe? How does our securityteam engage?

5. Across the cloud service layers there are different attainable benefits and some immediate implications There are key benefits for each type of cloud service but these come with implications that need to be understood and evaluated Software as a Service Platform as a Service Infrastructure as a Service

6. Deployment Models • Private clouds: operated by or for a single organization • Community clouds: operated for groups of organizations with similar service requirements • Public clouds: one general SLA for all; data resides on shared resources. • Hybrid clouds: connect public and private clouds sharing services and data among them.

7. Before we go forward… Let’s back up…

8. Eight major trends will impact IT markets in coming years Cloud6 63% of companies already are using (Cloud) or expect to use it in 2012, up from 49% last year Big Data1 Through 2015, more than 85 percent of Fortune 500 organizations will fail to effectively exploit big data for competitive advantage Growth Markets8 By 2015, IDC expects emerging markets to generate over 33% of all IT spending Analytics2 Through 2015, more than 90% of business leaders contend information is a strategic asset, yet fewer than 10% will quantify its economic value Security7 Through 2016, the financial impact of cybercrime will grow 10 percent per year, due to the continuing discovery of new vulnerabilities Social Business3 By 2014, 20% of business users will replace email as the primary interpersonal communications with social networking Software Hardware Customer Sets Smarter Planet4 Over $100 billion: Global investment in technology to support smart city development by 2020 Business Services Mobile Enterprise5 66% of CIOs ranked mobility as a top investment priority in 2012 Technology Services 8 8/31/2014

9. Social Business spawns a new category - socialytics - integrating analytic capabilities for insights in socially-generated content SW as a Services, pay for use SW for analytics SW for online purchases Top 3 Growth Areas of Social Business Socialytics = BI tools within Social Business $B 20112015 1.1 2.8 1.6 2.8 .1 .1 Evolution of Social Business Adoption will move from Marketing and PR into other enterprise departments such as HR, Finance, R&D, and Legal to drive organizational transformation and productivity. Inhibitors to Adoption Cultural resistance to change, Security, access control, and confidential data management (2011-15 CAGR ) What is Social Business? Organizations that apply Web 2.0 technologies with changes in the organization, culture, or processes to improve business performance. It embraces the experience customers/employees have in social networking to benefit the organization 9 8/31/2014

10. Mobile Enterprise opportunity grows driven by enterprise platforms that support key Customer entry points Mobile Enterprise Landscape • Key Customer Entry Points: • Building Mobile Applications • Connecting to and running backend systems in support of mobile • Managing mobile devices and applications • Securing mobile business • Extending existing business capabilities to mobile devices • Creating new business opportunities 10 8/31/2014

11. Mobile Payments leverage intersecting ecosystems to transform the Payments opportunity Contactless Card NFC Enabled Device Proximity Payments Cash Card Mobile P2P P2P Payments Cash Money Transfer M-Commerce Remote Payments Traditional e-commerce Mobile is evolving as a channel while driving adoption across payment types Global Mobile Payment Transaction Value ($B) $426 67% = CAGR $11 Major stakeholders are making significant acquisitions and launching Joint Ventures Intersecting ecosystems create opportunities to transform payments and maximize commerce efficiency Banks Mobile Operators • Acquired Cybersource in April 2010 for $2B, and Fundamo in 2011 for $110M • Discover, Barclays, ATT, Verizon & T-Mobile form JV to develop mobile payment system • Acquired DataCash in April 2010 for $520M, 54% Premium • Preloads Google Wallet on Sprint phones Technology Providers • AMEX announced next gen digital payments platform Payment Networks • JV with Citi and MasterCard will allow consumers to use Andriod phones to purchase Mobile Payments Convergence • Acquired Point for $1B, alternative payments, NFC commerce • Acquired Social Gold for $70M; virtual economy platform Retailer New Entrants • Partnership with Google and top retailers to deploy Google Wallet • Acquired CashEdge for $465M to offer mobile payments • Partnership with First Data to allow STAR debit cards to link to PayPal • Partners with Mfoundry to power mobile payments 11 8/31/2014

12. Cloud connects devices and applications supporting real-time decision-making, and increases potential grows 23% by 2015 New Cloud solutions link smart devices, applications, and decision-makers real-time Cloud application: Real-time health record update Mobile/ remote monitoring Cloud fundamentally changes IT relationships Patient Record • Growing consumer/service provider IT relationship • ISVs becoming service providers via SaaS & PaaS • Open and multi-lingual PaaS emerging to support agile development • Service Providers and CIOs become service aggregators; consultants help clients select services • ‘Smart’ solutions increasingly span B2C, synchronize mobile to cloud to enterprise to cloud to mobile Patient Doctor IT Vendors expand Cloud solution capabilities 12 8/31/2014

13. In Growth Markets, three game changers will converge with technology trends and transform industries to accelerate growth • Game Changers: • Economic Rebalancing: Major Markets to Growth Markets • Demographic Shift: Middle Class shifts to Growth Markets • Urbanization: Over the next 5 years, China & India will each spend USD 1 Trillion on infrastructure • Industry Transformation: • Banking/Insurance: Mobile Banking, Social Business, Process/ Tech transformation • Government: Better dialogue with citizens • Utilities: Smart Grid adoption in China, India • Healthcare: Maturing systems, care for aging • Transport: Integrated public transportation • Telco: New revenue sources Key Technology Trends: • Cloud: Mobility &Social Business spur demand • Mobility: Growing double digits • Social Business: social networking is strong • Big Data: leverage Smart IT & social data • Security: secure content & threat management 13 8/31/2014

14. Security risks are inherent in each trend, and capabilities must expand to protect a social, mobile, virtual and smarter planet  Mobility:71% of CIOs identified security/privacy as the top concern with adopting Mobility Cloud: Virtualization and bridging the enterprise with the cloud present a profound security challenge Social Business: As ‘social’ is integrated through business processes, focus on control and privacy will increase Smarter Planet: An interconnected and networked world presents unprecedented security risks and privacy challenges Implications • As companies increase innovation, IT leaders will be challenged to define and address the security risks associated with these trends • To take advantage of new market opportunities, while minimizing risks, companies need to proactively incorporate security as a business enabler Technologies that have resulted in an increase in security spend 14 8/31/2014

15. Cloud computing is gaining traction with the public/private sector Many applications of cloud computing are 2-5 years from mainstream adoption.

18. From an RIM perspective – what are the issues? And do they not sound a bit like dealing with Inactive Record Storage vendors of the paper kind? • Private sector focus has been more on the backup and archiving side of IT – not managing records in this environment • Regulatory Compliance – where is my records repository • Security – who has access, data encryption issues, privacy • Data Ownership – migration from one host service to another • Data Segregation – ensuring my dirty socks are not part of you laundry basket • Performance – access, speed and ease of use • Backup and Disaster Recovery – does it exist and is it auditable? And what happens if they “disappear” • Technical standards still evolving • Wild Wild West – lots of vendors but not all will survive – how can I trust anyone? Much less the potential use of third party contractors

19. Three groups of competitors are serving the cloud market: (1) Enterprise IT Vendors, (2) Cloud Service Providers and (3) Application Providers Cloud Service Providers Hosting and internet services vendors leveraging their infrastructure to provide cloud services Enterprise IT Vendors Incumbents providing cloud technologies and services as the next major shift in technology Application Providers Software and services vendors who provide cloud-enabled application solutions

20. 100+ ‘cloud’ related projects are scheduled to be deployed by mid-2012 to leverage common assets and support mission critical efforts CIO Kundra identified16 Federal cloud computing case studies in the “State of Public Sector Cloud Computing” report (05/10) that shows the different benefits, deployments and service models already utilized in Federal As mandated by the ’25 Point Plan’, 78 applications are in the process of migrating to cloud before mid-2012. The majority of the migrations focus on email, website hosting, reporting/content management and collaboration services. About half are scheduled to complete in 12/11, the rest by 6/12. Top* Federal applications migrating to Cloud by June 2012 *shows 46 of 78 identified applications Source: CIO.gov; OMB; FierceGovernmentIT 20 20 20 20 02/14/2012

21. Future cloud spending is forecast to be significant and will be required to reduce costs, support mission goals and meet mandates Potential Spending on Cloud by Agency* Mission driven requirements will need private/hybrid clouds that have tighter security and operating protocols. Expectation is that migrating to cloud will provide significant cost savings and efficiency improvements* At least 25 new ‘cloud’ related projects are forecast to be awarded in 2012; INPUT *Source: Federal Cloud Computing Strategy; 02/08/11 21 21 21 21 02/14/2012

22. Recent surveys indicate adoption of cloud faces strong security challenges and questionable likeliness of achieving cost objectives ‘In your opinion, what is the likelihood that your organization will suffer a security breach as a result of an insecure cloud service provider sometime over the next 12 months?’ Majority feel a cloud security breach is likely or already happened, but almost 40% don’t use FISMA standards (despite being law), and most organizations do not understand the long term costs. Cost and political mandates are cited as the top 2 reasons to move to cloud. Note N=432 To date, which of the following federal security standards has your organization made active use of in planning or implementing cloud services? Please select all that apply. How confident are you that your organization understands the true long-term cost of migrating on-premise applications and data to the cloud environment? N=432 Ponemon Institute - State of Cloud Services in the US Federal Government Sept 05 2011 n=432; Confirmed Federal IT (51%) Non-IT (49%); Managers (36%) and Directors (31%) 22 22 22 22 02/14/2012

23. Budget processes force agencies to solicit funds for cloud services, inhibiting strategic planning and impeding more advanced adoption Agencies must be able to identify and request budget here.. Budget process also impacts the types of applications that can be migrated to the cloud because of inability to strategically plan ..for cloud services that will be utilized here (or later). Source: Deltek Federal Communications and Network Services Market, 2011-2016 What applications or services are MOST suitable for cloud deployment by your organization? Please check only your top three choices. What applications or services are LEAST suitable for cloud deployment by your organization? Please check only your top three choices. Ponemon Institute - State of Cloud Services in the US Federal Government Sept 05 2011 n=432; Confirmed Federal IT (51%) Non-IT (49%); Managers (36%) and Directors (31%) 23 23 23 23 02/14/2012

24. As security remains a top obstacle for cloud, un-funded or conflicting mandates and cultural issues further contribute to the complexity N = 174 Federal IT Professionals Source: MeriTalk 9/26/2011 Gartner Hype Cycle for Government Transformation, 2011 • Top 3 Challenges facing Federal IT professionals*: • 59% - Lack of funding to fulfill mandates • 44% - Conflicting mandates • 41% - Unrealistic goals/mandates Gov’t Cloud Public Cloud Private Cloud *- percentage of responses in MeriTalk survey; 9/26/2011; N=174 Federal IT Professionals 24 24 24 8/31/2014 02/14/2012

25. Clients lack confidence in vendor cloud security, and concerns arise globally around security, efficiency, cost and other touted benefits ‘How confident are you about the overall data protection and security features of your current or prospective cloud service providers?’ Over half of IT respondents are not confident in cloud provider security Ponemon Institute - State of Cloud Services in the US Federal Government Sept 05 2011 n=432; Confirmed Federal IT (51%) Non-IT (49%); Managers (36%) and Directors (31%) Gap Between Expected and Realized Cloud Benefits; Globally* Recognized benefits of cloud are not meeting expectations of global commercial and government adopters that have been investing in ‘cloud’ for much longer periods than the US government. *Not Federal Specific Source: Symantec 2011 State of Cloud Global Survey; n=5300 Reduced OpEx Increased Security Increased Efficiency Increased IT Agility Improved DR Readiness 25 25 25 25 02/14/2012

26. Has conflicting drivers May not live up to the hype Is in it’s infancy Federal Cloud has many strong growth catalysts, as well as robust inhibitors, increasing the need for strong vendor thought-leadership • Unfunded mandates cause dept budget reprioritization • Cloud concept contrary to old Fed paradigm (share) • Security exposure vs. cost reduction is a real dilemma • Only a fraction of gov’t has really started to migrate • Fed virtual desktops will only be ~50% in next 5 years • Fed SOA has matured, but cloud is at least 2-5 years out* • Commercial cloud results ~50% below expectations • Some, not all, Fed cloud pilots show strong results • Majority of cloud security tech is 5-10 years away** Situation Implications • By June 2012, over 100 Federal ‘cloud’ projects are scheduled to be completed • Most cloud activity is still ‘basic’ foundational activities, and questions about future ROI are real • Clear leadership in the Federal IT transformation, not just cloud, is needed from the private sector • Security and ROI questions will impact the overall rate of adoption for cloud, either positively or negatively • 2012 cloud will move beyond ‘low hanging fruit’ of email and applications to analytics and big data management • Transformative capabilities that meet mandates and future goals requires Source: *Gartner ‘Hype Cycle for Government Transformation, 2011’, **‘Hype Cycle for Cloud Security, 2011’ 26 26 26 02/14/2012

28. Watson Answers a Grand Challenge Can we design a computing system that rivals a human’s ability to answer questions posed in natural language, interpreting meaning and context and retrieving, analyzing and understanding vast amounts of information in real-time?

29. Watson versus a human – may know the answers but doesn’t know the questions • A recent study estimated that the global volume of compressed digital information is approaching 600 exabytes • One exabyte is 100,000,000,000,000,000,000 bytes • However the DNA of Paul Fisher can store 300 times more information than all the information that we can store in all our technological devices • Another way of looking at it – Paul’s brain* can compute about the same number of instructions per second as all the world’s computers….combined • *Disclaimer: Paul’s brain is being used as the human example – you could submit your name for Paul’s – but do not try this at home. • Source: Toronto Star – Friday February 11, 2011 Digital deluge reaches high-water mark discussing the findings of an article in Science

30. Selecting a Cloud Vendor – why does this feel familiar? • How long has the company been offering cloud services? • Is the company profitable? If so, for long has the company been profitable? • Does the company provide a reliable and secure service? What compliance and controls are in place for the service? • Does the company provide 24x7 technical support? Are there additional costs associated with the support provided? What is included in the company's technical support? How many support techs are on the support team? • What technologies does the company's Cloud service support? • Does the company have a product roadmap they can share? • What is the service level agreement associated with the service? • Does the company require a long-term contract to sign up for the service? Are there any set-up costs associated with sign up? • Are discounts available for high volume usage? If so, at what volume levels? • Does the company require a minimum monthly spend? • Is there a free trial period offered with the service? • Does the service enable mobile access? Source: THE 1O1 GUIDE TO THE CLOUD -John Negates – CTO, Rackspace Hosting

31. The cloud environment is evolving as it matures – and its recognized relationship with RIM • RIM practices as it relates to cloud environments are evolving and are being published • National Archives of Australia • NARA • ARMA • Consulting firms • Vendors are “bringing” data centres back to the local markets • Government institutions are themselves becoming involved in using cloud technology which means a more focused attention on RIM issues • Clearer recognition by the IT community that where the servers exists is where the issues will arise from privacy and security perspective • Cloud is not for everything electronic – controls and protection need to match the value of the records • It is still very early days – the risks are real but they can be managed

32. So what is the fantasy? • Cloud is coming to an organization near you • Cloud is still a young environment and will take sometime to mature • Current models of billing will change don’t be surprised if it becomes far more complex than the simple renting model of today • Figuring out what to get rid of in a timely and effective manner will become an issue – so understanding what content is actually being hosted in a cloud is a good idea • Key to understand is that it is a tradeoff – flexibility, scalability and cost savings vs Potential challenges diminished control over data and diminished control over the infrastructure that houses and processes that data

33. The End Paul Fisher MLS, CRM, CDIA Managing Consultant IBM Global Business Services pfisher@ca.ibm.com