I was in a long conversation with the CIO of Fortune 500 company recently and invariably the conversation turned towards how much it is becomimg difficult for IT organization to continue to delight the business – the world of business itself is undergoing massive changes while the world of technology is also changing very fast. The IT organization is supposed to be on top of these whirlwind of change and continue to support the current and also be the enabler of change for the future. All this when dollars and cents spent on IT matters more than ever. This week, as I finished by keynote address at PSGTECH and sat for questions, more and more of this began to look clear to me.
Let’s look from the outside – what are the contours of deep change that need to be understood to remain relevant for today and stay competitive. Starting from the dawn of this new century, there has been a deep rooted shift in the sphere of IT innovation. Earlier, the new technology/product/systems that hit the market set their foot mostly at the Fortune 500 companies ( typifying high spend, highly mature, high growth areas of applied IT innovation). Then the medium sized enterprises would try and adapt those systems and the SOHO, Consumer segments would get to use them in time. This flow seems to have reversed noticeably in the last decade. It may not be an overstatement to say that today we see that more cool and modern technology tends to get adopted and popularised at the consumer, SOHO end of the spectrum before moving onto the late adopter class : medium and large enterprises.
It may be too tempting to dismiss such claims as outlandish or not based on limited set of data – but unargualbly the trend is set and widely recogniseable. This can also be seen by some as not a matter of great concern ot the large enterprises. For some inside the large enterprises for decades such things have never nothered them – after all they are the biggest spenders of IT and have traditionally leveraged IT substantially with proven methods of success. For some inside the enterprise, the consumer centric services like social sites games are all mindless distraction and these should find no place inside the large enterprises.
Whats my view on this? Are the large enterprises correct in taking such a “Prim & Propah” view? No – An emphatic and clear “NO”. What’s happening in the Consumer, Social, Mobile space is nothing short of creating a new paradigm of doing business – it’s like as if a new set of DNA strands are coming together to create a new organism per se, Nothing sort of this. Those enterprises that fail to recognize this or choose to not participate in this journey would be missing out a huge chance of business success potential.
Let’s look deeper here: The Twitter, Facebook. Google Plus and Mobile are actually creating a new sort of connected world, wherein new rules of presence, social relationships and collaborations are getting shaped. Needless to say that these new rules would be the drivers/enablers of innovation and competitive success for tomorrow. And that big enterprises would approach that tomorrow faster than they have seen at any point in time in the past would approach The digital natives who are at the forefront of this revolution, would never allow this journey to be slowed/halted. For big and medium enterprises that is following a “Wait & Watch” attitude, they will be failing demonstrably in their abilities to reach out to a new generation of customers/stakeholders, who are beating their drums to a different future. And inside these enterprises, a phenomenal opportunity to redefine ways of working and foster effective collaboration would get lost if large and medium enterprises don’t adopt this quick enough.
Enter the world of connectedness: by Social - from car buying to university selection to travelling to holiday shopping to medical concerns, the world is getting engulfed with social tools and mechanisms. Look deeper, at the heart of the social phenomenon: In one sense, the people who matter, the consumers – they are connecting with one another in an unprecedented manner, creating a vast and efficient network of information that shapes and steers experiences and markets. What do they get out of this: The participants are beneficiaries of a new genre of collective intelligence that informs and guides people in real time in a myriad number of ways. By making available a platform that is universally accessible – which facilitates discussions of the experiences consumers have had with brands, businesses, a new we have created a new world of consumer influence.
The consumer world has adopted this world much faster than expected right from Googling to get an instant answer to points of interest, doing comparative shopping, assessing medical facilities to electronics shopping to university education comparison. One can see a pool of like oriented people sharing their views, out of which any information seeker can draw appropriate inferences. All at a click away, in a realtime basis.
Now lets turn our attention to look at the enterprise in the same perspective.
From the industry supply side, it can be seen that the enterprise software industry can't avoid the glaringly noticeable trend therein. This is an industry - seen as ever-maturing by some and "never maturing" by others - and an ecosystem that is demonstrating growth indicators which are now becoming visible to all observers. A range of data clearly supports the notion of growth: starting from value added by the industry over the last few years - take the number of people that the industry employs, the projected growth rates, the capital outlay for the industry, and so on.
The consumerization of the enterprise is moving ahead at full speed and may become irreversible. While some enterprises are experimenting with this –wherever adoption has happened the surge in interest appears high promising to make the adoption of such technologies faster and deeper within enterprises. The interesting part of the equation is that a number of newcomers are coming with a variety of solutions but enterprises see before them humongous opportunities for differentiation and for fostering competitive advantage in adopting such technologies.
Most of the enterprises are still in a slow adoption mode. Are enterprises looking at moving beyond email as the standard way of communication? Most of the CIO’s/ IT department take a big breath before trying to introduce any new technology inside their enterprise. It’s a classic problem – 75% or more of the enterprise IT spend goes towards supporting investments/assets built in the past aka legacy systems. How does enterprise get to attack this cost structure. What’s the magic wand to make the enterprises adopt technology at the same speed as the consumer world is embracing.
Clearly the answer lay in a combination of vendor lock-in mechanisms and data lock-in mechanisms. Vendor lock-ins are getting manageable with the body of knowledge in how to manage them having improved substantially over time, question that begs an answer is what is data /information lock-in? It’s clearly the system of record. In a number of conversations with CIO’s who want to move ahead and try new technologies the defining question that gets raised is my backbone systems should not be tinkered with while you build a jazzy front office apps using collaborative tools and mechanisms and then the question is how much more can the whole thing put together be more effective.
If you examine closely, the system of records that anchors the enterprise system internally ( which used to help in creating leading edge enterprise solutions) though may look to be working fine may not be necessarily perfect in their composition. So much of maintenance spend has to be committed to make this perform continually, a challenge that lock-ins always bring to the fore. All cost optimizations inside enterprise IT have been traditionally focused on infrastructure, outsourcing etc.
In this flat economy and a maturing IT discipline, the common denominator across the board is that enterprise suffer from a serious commoditization curve effect and to create and sustain a competitive advantage through IT would call for looking at getting their core business processes get architected very differently and in a manner that competition may not find it easy to imitate or catch-up. Such core processes would in areas like customer support, supply chain, channel management etc. Here the IT system needs to be more flexible and adaptive for varied forms of collaboration as against a rigid form of communication. Such a type of arrangement where new forms of collaborations can be enabled to provide high quality enablement for business would be a strong leading edge differentiator for any enterprise.
The underlying factor here is being able to tap new order of productivities not just the glamour of a new tool being brought in and this is precisely the next orbit of progress for IT inside enterprises. Here the role IT plays goes beyond setting up the information backbone to helping in creating intelligent business by business empowerment – starting all the way from the bottom to the top of the organizations, particularly by empowering more and more operational executive better, transcending all the barriers of language, geography just as the consumer world has shown how effective it could be .
Obviously, these mechanisms won’t replace the existing investments but co-reside with focus on collaboration and engagement rather just on plain transactions. This evolution can be seen as part of the progress from paper based communications to email to real time connectivity of minds as against just a process led workflows and system. Mobile devices, video communications, ever increasing bandwidth, multi-lingual support, new forms of enabling technologies like social and in-memory databases all would help the right IT setup for organizations that would put a premium on engagement to deliver better business results.IT Today, in the competitive global business ecosystem cutting across almost all industries, there is an extended value chain that needs to perform efficiently to make business successful and that’s where more and more enablement needs to go – it’s like pouring gas at the tip of the hockey stick curve. We see huge opportunities for the next wave of gains for business with such a focus.
I was about to board my flight at Chicago's O’Hare when the news of Steve Jobs passing away broke. When I landed in San Fran (My United flight did not have Wi-Fi)- my thoughts were with the family, Apple colleagues and the huge number of Steve Jobs and Apple supporters. Innumerable iPads, Macs, iPods inside the aircraft symbolized everything that Apple got out to the world. As I landed in San Francisco, nothing prepared me to see the huge global outpouring of affection for Steve Jobs. Today as I drove past Infinite Loop @ Cupertino, I just couldn’t stop recollecting the fact that From Tokyo and Paris to San Francisco and New York, mourners created impromptu memorials outside Apple stores, from flowers and candles to a dozen green and red apples on Manhattan's Fifth Avenue.
The speed and reach amazed me – not in a way surprising given the reach of the electronic media and social tools but what did surprise me was the fact that in this age where scandals, misdeeds make huge news, for news of Steve’s demise to make such an impression, completely swept me off my foot.
A creative genius, a perfectionist, someone who keeps pushing the boundaries of innovation, keep improving the state of the art in technology and provide flawless value to people and win their hearts and gain walletshare consistently is perhaps an unparalleled phenomenon in the world. That Steve could do this in this century – when choices abound and consumers are so picky and promiscuous is an incredible, unmatched saga of achievement.
Steve and Apple stood for unadulterated class. What to pick and what to ignore. From his legendary presentation skills to the new industry models that he created to the array of products that symbolized the very best of its genre stands testimony to his genius. From converting a consumer product space from a volume play centered around margin outreach, he proved that volume play can be done with very respectable margins and still make each and every consumer feel very proud of their status symbol as consumer of Apple products, While people may debate for ever whether Apple is a media company or an entertainment company or a company playing in the consumer non-durable space etc.. he truly made Apple as a lifestyle for its countless number of consumers around the world. In his recent presentation to the Cupertino city council on Apple new campus plans, he said that the architecture would be of so high standards that all students of architecture around the world would plan a visit to see the campus when it is brought up. I have seen in countless occasions the sort of work culture, full of focus and energy that Steve had brought inside Apple. For several years continually, he defined the norms through his products, the definition of what could be done in the high tech consumer space.
Its Jobs’ vision, and the design of Apple’s products — the touch interface, the easy to navigate non-computer-like operating system, the ease of use — and the well designed and now robust Apple ecosystem, the iPod and the iPhone and the iPad have each played a role in disrupting virtually every form of entertainment – the consumable media, from music to text to video.
Not for nothing people call him the best CEO in the world, which he proudly occupied or for some he is the greatest industrialist that America has produced. In and of itself, Steve proved to be the defining standard here. While the world was broadly aware of the deep set of concerns around Steve’s health for the last few years, not many would have expected the end to happen so soon. For many of his admirers, he could pull that magic out that so famously espoused in his product launch presentations. For several decades, the world will recollect the fact that while fighting these personal setbacks, that Steve and his team could keep rolling out category killers/creating products so consistently, create the volumes, maintain healthy margins (in a very tough business and competitive environment), making Apple in the process the top valued technology company in the world. A truly awe inspiring phenomenon ,indeed. The fighter and winner that he is nothing (except those who could have known his medical condition well enough) could make it look that he himself could fall soon.
Ever since he came back to lead the reigns of Apple, Steve and Apple were synonymous with success, His master set of strategies that helped turn around the prospects of Apple would be part of textbook history for ever. Why is it that in his passing away, there’s so much of feelings all around? Steve Jobs stood for the user in a computing world where missteps and mishaps get tolerated across the board. He single mindedly advocated the cause of users as seen from the range of Apple products that got launched - for a majority of Apple users he through magic worked to get whats in their minds and roll out not only products that meet their needs but provide more than those – teens, moms, father and older generation – virtually all strata of society shared similar adulation for Steve.
The PC industry’s most fascinating grandfather who also brought out the post PC–World into reality is clearly the greatest visionary and creative mind that unfortunately just moved into the shadows. In the last few weeks, ever since Steve announced that he is moving out of the CEO role citing his health concerns, some wrote premature obituaries, citing their personal admiration and the impact that Apple products have made in their lives. Some would like to see him as a combination of Henry Ford, Thomas Edison, Mozart. While some of my choice of technology usage could be different from that of Apple, Steve jobs never ceased to excite and create awe and inspiration in my mind.
That the world could see a 56 year old man in the most technological advanced nation on earth and for somebody who practically had all the global resources at his disposal could lose a fight against cancer( as widely reported), leaves a chilling feeling in the minds and hearts of his followers. There’s anger behind all the praise and sorrow that one man who has done so much to advance the state of the art , who could have given so much had he lived longer could be taken away right in front of our eyes.
Am sure Apple management would continue to take his journey forward, but what stands out is the fact that in this world innovators are always outnumbered and being a successful innovator and a business man is a deadly combination -that’s available only in its rarest forms – symbolized as with Steve Jobs. There is no substitute for Steve – its truly the end of an era. Hopefully this would be part of a continuum, where the new takes over from where where he left and keep running.
Words from Steve Job’s commemorative speech at Stanford rings resplendent with widom,” “Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma — which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.” From Steve Jobs Stanford Commencement Speech, 2005
Steve leaves us with this thought : A true hero in life who could change so much in the world leaves a great thought of substantive force in our minds.- at everyone’s level, given the vision, determination and energy, all of us can make a difference in what we set out to do – small or big. The world will never ever see another Steve Jobs – he is truly unique – one who cared about liberal arts and technology together keeping user needs in mind. It's still difficult for me to see how this great smart computing world would maintain its growth and innovation without a Steve Jobs touch to its advancement. Hope is the answer and as Steve has shown in resurrecting the prospects of Apple, for the determined, it is always possible to achieve. He started his business journey from a garage with a friend. How destiny shaped him & how he shaped his destiny.
As someone said to me in the words of Steve –“iCame, iCreated, iWent. And my legacy will live on.
Cloud may mean different things to different people – It would be better to focus less on technology but devote more energy to cloud business in terms of how, where, and why these could be used to get unique value was the key message in the Cloud Business Summit, which I attended last week at NYC, courtesy of invitation by Bill Mcnee and his team at Saugatuck Technology. In a very intensive set of sessions, significant insights were brought out by impressive set of presenters followed by good amount of discussions. Let’s examine the context.
It’s now clear that in almost all forward looking business organizations, cloud journey is definitely happening/about to happen in most part of their business/technology operations. The reach is going to be ever expanding and the effect is definitely going to be significantly felt – though this can be an open ended journey in terms of learning and accruable benefits . These force enterprises to plan and manage cloud journey as more and more knowledge on realizable benefits begin to accumulate. Let’s examine the context in a little more detail: As there is a widespread interest in adopting cloud for business, varied approaches grounded on different schools of thought begin to sprout. What we see across the board in the context of cloud and business is that cloud can enable new business application architectures, transform business and create new revenue channel opportunities aside from improving process efficiencies while supporting existing business models. New business services can fundamentally redesign the ecosystem across the extended enterprise creating a new measure of performance across the value chain. These sort of heightened impact calls for a very studied and measured approach to embrace the cloud and that’s where the insights and discussions add immense value.
For example, Saugatuck emphasizes on leveraging cloud for creating new business value and enabling new business opportunities – this is where differentiated and lasting value comes out and as such is very important dimension for business to explore. The CIO panel brought out the fact how business and IT working together can be enabled and why this becomes necessary to create value. More importantly, the ability to take the right set of use cases and deliver business value comes only by working together and it becomes imperative for CIO organizations to steer their organizations in such directions.
Xerox brought out details of their cloud journey in areas of SaaS, Expense Management to see significant improvement in business efficiencies and improved business agility. The more significant theme came out on cloud centered approach towards firmware/software updates for their traditional copiers/scanners/printers – this is an illustration of opening up new business opportunities – something only a cloud based solution coud have enabled. Such successful initatitives spur them to do more, makes their ecosystem partners more excited setting the stage for more such things to happen with Xerox and I would think across the industry as well.
Another important message is to have a pull centered view – from the customer to inside the enterprise. Remember taking the customer to the boardroom discussions in the past – here’s a demonstrated way to make this happen with the emergence of cloud. The key is systems thinking – looking at linkages and relationships across the board and identify opportunities for better orchestration across the ecosystem to create larger value.
SAP’s Nicholas Cumins provided his view of the changing business software / application landscape, the need to effectively leverage Cloud with traditional suites, and how these are being addressed in the next generation of enterprise version and SAP’s strategies in offering varied solutions. I think we need to think through the right pattern of fits: what type of differentiated capabilities could be mapped to applications, devices and delivery methods. Fidelity further elaborated on their cloud journey in the summit.
An important aspect of cloud business either gets overemphasized inside enterprises to the point of avoidance or gets completely overlooked : Am referring to risk management, Important discussions around was an eye opener of sorts. Risk here transcends the traditional boundaries of functions like IT, Finance. The right approach would include identifying, characterizing/ classifying, prioritizing, and then governing Cloud Business changes and implementations. This needs to tie in to the sourcing process of the cloud solution – a very involved engagement but one that can deliver very high value to enterprises.
From an enterprise/CIO perspective, for the first time in this century, IT now has the chance to reposition itself and its role in the enterprise. The shackles that tied traditional IT could now be broken open with the emergence of cloud . Leading CIOs have already started to redefine their role and the value of IT resources away from a focus on provisioning and operating technologies and toward applying information and technology to create unique and sustainable business value. IT has always been waiting for the moment to reassign more funding from maintenance to innovation, to enable creating greater value. Cloud provides that window of opportunity to CIO’s and business now. The economics of IT and opportunity to add business value was never this pronounced in the IT world. Let’s examine this: The need to invest now and wait for results ages later don’t necessarily apply here. Cloud enables companies to gain some of the efficiencies of scale without having to scale themselves. The result is freeing up money previously locked into the 70% of IT committed spend for innovation and new solutions. Typically these are the type of value propositions that interests business and this helps business to take more direct role in making such solutions happen – its more just IT baby and business being an uninterested partner. The relationship fundamentally changes and will demand CIOs react and reform IT.
Around the world and across the board, business is desperately looking for ways and means of creating new solutions, particularly for addressing adjacent markets and new geographies. Cloud fits in very well here: in extending the reach of IT and to provide value added services and in creating new solutions leveraging the ecosystem partners. Integrating in the process, growth and innovation with benefits of economics inside enterprises. We have reached a stage where running business with IT help is normal and the differentiation comes only by creating differentiated and sustainable business value and cloud is a nice fit here. Examining cloud from the standpoint of operations would under leverage its true potential but true opportunities manifest themselves in the business context of growth, innovation and strategic pursuits. CIO’s need to find solutions that aligns with their work culture, their appetite for risk, ability to absorb change, governance and their technology maturity. Irrespective of what these may indicate, increasingly in the cloud world, new ways to make things happen always exist. This doesn’t mean that old models of operation give way to something entirely new right from the word “GO”. A neat blend can exist.
The beauty of this cloud business journey is the fact while cloud can make many things happen at different levels, the realization is that this is still evolving, but for those early adopters it is clearly delivering substantial value Cloud IT and Cloud Business can’t be and needn’t be separated - scalable services and sustainable value can happen only when these two work hand in hand. Saugatuck should be complimented to bringing together business leaders, vendors and analysts to look at cloud as business opportunity and not just just as technical solutions.Clearly with cloud, we are seeing the pioneers and business leaders unshackling the traditional bonds and aiming high and reaching there as well. We will actually see more business taking this path.
Reddit, Foursquare, EngineYard and Quora were among the many sites that went down recently due to a rather prolonged outage of Amazon's cloud services. On Thursday April 21, When Amazon Elastic Block Store (EBS) went offline, it took many of its Web and database servers depending on that storage down. With Amazon working aggressively to set this back right, on Sunday April 24, most of the services were restored back . As promised and as would be expected, Amazon has now come out with a detailed explanation describing what went wrong, and explaining why the failure was so widely felt and why it took that much time to restore back all the services. Some say that measured against Amazon’s promised availability, this lengthy outage would mean that Amazon may need to maintain full availability for more than a decade to adhere to their promised availability service level commitments.
Now, let’s examine what happened and how this happened. To start with some basics: Amazon has its facilities spread out around the world. Most users would know that its cloud computing data centers are in five different locations. Virginia, Northern California, Ireland, Singapore, and Tokyo. These centers are so architected that within each of these regions, the cloud services are further separated into what Amazon calls Availability Zone. The availability zones are within themselves self contained with physically and logically separate groups of computers setup therein. Amazon explains that such an arrangement helps customer choose the right level of redundancy as appropriate to their win needs. Such a design with a spectrum of options helps customers choose the right level of robustness also when they for a premium choose to host them in multiple regions. The logic here is that hosting in multiple availability zones within a same region must provide comparable robustness (as in hosting across multiple regions) but would come with a much better economics benefitting the customer.
Amazon offers several services as part of this arrangement. Amongst those services, Elastic Block Store(EBS) is an important service. With EBS, Amazon provides mountable disk volumes to virtual machines using the more well known Elastic Compute Cloud(EC2). This is quite attractive to customers, as Amazon with this service, provides the virtual machines with huge amount of reliable storage – typically this gets used for database hosting and the like. The powerfulness of this feature can be seen by the fact that while this can be used from EC2, another Amazon feature called Amazon Relational Database Service( RDS) also uses this as a data store. As an added feature for its services, Amazon has designed this feature for high availability purposes and replicates data through EBS between multiple systems. Given the volume and variety involved therein, this process is highly automated. In such an arrangement, if for some reason an EBS node loses connection form its replica, instantly an alternate storage within the same zone is made available to maintain connectivity.
As per Amazon, while doing routine maintenance operations in Virgnia operations on April 21, engineers were trying to make a change in network configuration to the zone. As part of the process, traffic to the routers affected apparently got moved into a low capacity network as against getting moved onto a backup. The low capacity network, is meant for handling inter node communication and not large scale replication/data transfer internally between the system and so the additional traffic made the network malfunction. With the primary network brought down for maintenance and the secondary network completely mal-functioning the EBS nodes lost their ability to replicate for want of nodes. This is where the unintended consequence of automation began to rear its ugly head. Every system in this network acted as if they are at risk and began to frenetically look for available nodes with free space for replication. While Amazon tried to restore the primary network, damage has been by then done, with all the available space within the cluster were already used, while some remaining nodes continued their search for nodes with free space available – while such nodes with free space were not available.
With a massive deadlock of nodes trying to find replicas, while there were not nodes with free space, impacted the control system’s performance. The control system performance issue severely impacted execution of new service requests like creating a new volume. A long back up began to get created for the slow control system to act upon and this with time reached catastrophic proportions, with some requests beginning to get returned with fail messages. Now, comes the second but the most crucial part of the outage – unlike other services, the control systems span across the region and not the individual availability zones. The net impact was therefore experienced across different availability zones. Remember the idea of Single Point Of Failure? That was proven here in its full might.
Slowly and deliberately, Amazon began the course correction – by beginning to tend to the control system and by adding more nodes to the cluster. Over time, the backlogs on the control system began to get cleared and this took painful efforts and a lot of time in the process. Outages of public cloud systems have made news in the past but clearly with time, the body of knowledge and maturity levels ought to improve things. Cloud service providers make high availability as the cornerstone of their offerings but this outage would in many ways, put such claims to question. Even while this outage happened with Amazon Virginia operations, there were many users of AWS, who managed to maintain availability of their system. A majority of those installations had fall back in terms of multiple regions, multiple zone coverage. Such moves necessarily bring cost, complexity equation into consideration.
It’s a little odd to see that when the problem of non availability of nodes happened, Amazon almost began to get into a denial –of-service attacks within their environment . Amazon now claims that this aspect of crisis related actions have been set right but one may have to wait till next outage to see what else could give way It may be noted that Amazon cloud services suffered a major outage in 2008 – the failure pattern looks somewhat similar upon diagnosis.Clearly, the systems need to operate differently under different circumstances – while it’s normal for nodes to keep replicating on storage/access concerns, the system ought to exhibit different behavior with a different nature of crisis. With the increasing adoption of public cloud services, certainly the volume, complexity and range of workloads would increase and the systems would get tested under varying circumstances for availability and reliability. All business and IT users would seek answers to such questions as they consider moving their workloads onto the cloud
It is interesting to see how Netflix, a poster user of Amazon cloud services managed to survive this outage. Netflix says,” When we re-designed for the cloud this Amazon failure was exactly the sort of issue that we wanted to be resilient to. Our architecture avoids using EBS as our main data storage service, and the SimpleDB, S3 and Cassandra services that we do depend upon were not affected by the outage”. Netflix admits that their service ran without intervention but with a higher than usual error rate and higher latency than normal through the morning, which is the low traffic time of day for Netflix streaming. Amongst the major engineering decisions that they implemented to avoid such outages includes designing things as stateless applications and maintain multiple redundant hot copies of the data spread across zones. Netflix calls their solution –“ Cloud Solutions for the Cloud” as the claim here is that instead of fork-lifting the existing applications from their data centers to Amazon's and simply using EC2, with their approach they believe that they have fully embraced the cloud paradigm. Essentially, Netflix has automated its zone fail-over and recovery process, hosted its services in multiple regions while reducing its dependence on EBS.
Clearly there are ways to get the best of cloud – except that some of these may have different economics and would call for greater ability to engineer and manage the operations. Amazon may have to increase the level of transparency in terms of their design and the operational metrics need to cover many more areas of operations as against the narrow set of metrics that users get to see now. To sum up , I would hesitate to call AWS as failure of the cloud but this journey into the cloud would call for more preparation and better thought out design to be in place from user’s side.
As enterprises concentrate on growth, they remain vigilant about costs and operational efficiencies – coming out of recession, even in times of high growth and radiant optimism. Such a model of growth provides IT with a lot of fresh opportunities to adapt and innovate . More than ever, this new model of growth mandates IT to raise its strategic importance to the business rather than just be content to focus on delivery of generic business plans. In many ways the tenor of change is set in with such changing context – With the continuing tight budgets, the CIO’s are now getting forced to” think and act different” – one of the critical ways that can be tried is to follow the time tested model of being creative in discarding the past while taking a bold and fresh approach in creating a new future of IT within enterprises.
The classic way of looking into conceptualizing a new IT organization and its contribution to the enterprise starts by thinking aloud typically by asking the question “What If?” Now in the radar of every CIO and IT organization, Cloud happens to be mostly at the top where some expect more than half of new workloads to naturally move to the cloud besides the expectation that a majority of applications and infrastructure inside the enterprises would move to the cloud over the next few years. That forces the hand of enterprises in ensuring quick think through of the future possibilities for IT in terms of alternate models and the cloud.
Let’s face the facts : CIO’s of large organizations have to manage the burden of the past in terms of legacy systems, data and the processes set in there. They come with huge costs in terms of maintenance and in many cases impose restrictions on flexibility and extensibility. More importantly, in many cases, these systems come in the way of contributing to business agility in an increasingly dynamic world of business across industries,
The cloud model is increasingly being adopted by companies looking to lower cost and improve scalability and enhance flexibility. Many different models of cloud adoption abound varied by size, maturity, expectations, nature of the industry etc. But all agree on one need – cloud services need to be well integrated with existing legacy systems. Some are choosing a hybrid approach between online and on-premise services as a low-risk way to test the benefits. To work, these cloud services need to be well integrated with existing legacy systems.
Possibilities include selectively letting go of the past and unlocking resources and in realigning priorities and setting new directions towards creating more space for innovation and greater business value. Some CIO’s see this as an opportunity to look beyond delivery models towards getting strategic advantage to business through sophisticated information and insights. Cloud centric technologies are a big driver in enabling IT to take center stage in support of innovation, business growth and delivered value.
For enterprises and the CIO, this journey is replete with possibilities, challenges where the upside swing could be alluringly high but the downside fall could be steep if not carefully strategized and executed on those strategies well enough. After all, we are living in an era where technology edge is almost equivalent to business edge and this warrants a new approach to business technology architecture and strategy. That’s when Saugatech came with the interview with Mike Wilens, on Fidelity’s cloud journey , I got real interested.
In a very detailed discussion Mike covers a series of topics and brings out the fact that while people talk a lot about lock-in, reliability, and security in the cloud , these are manageable with good engineering and good planning and it’s not really all that scary – cloud is indeed doable and can be a key enabler for business innovation and enterprise agility. The key here is that the cloud is indeed revolutionary in how we think about application delivery and infrastructure.
In discussionspublished as part of cloud leadership strategies, Mike outlines the approach to the cloud, the execution plan and alignment to business needs. Covering all aspects of cloud journey within Fidelity, there are lots of important insights coming out of actual experience. Starting with foundational issues, such as standards, cost avoidance and experimenting with new capabilities in the Cloud, the discussion then extends to centralization versus decentralization. Inside Fidelity, the cloud model is slowly altering the degree of decentralization with a view to lower costs but not compromise on ability to innovate around business needs. The key insight here is dealing with reducing risk and cost while not inhibiting innovation that can lead to top line growth. Moving onto the more interesting aspects of cloud and business the discussions revolve around business innovation, governance frameworks and balancing opportunity and risk. In areas like collaboration and social computing tools, the logic behind determination of what can be used internally and taking into account the regulatory standards, the usage of such tools externally requires very carefully considered solutions. Wilens points out that the standards that are evolving to help public clouds power down the economies of scale are now becoming available for private clouds as well.
Cloud can be a big platform for testing out /piloting new ideas and can be scaled out and scaled up – at any point in time this pilot footprint on cloud should be actively pursued. For example, he believes that migration to mobile devices and the related implications for the presentation layers of any technology infrastructure will be implemented within the cloud based technologies, private or public. Similarly co-opting the startup partners to try out new operational/innovative models and make them scale up on the cloud infuses new dynamics in developing partnerships and new offerings. Fidelity has found that private Cloud portals can deliver to its clients access to financial information, while still maintaining the on-premise, legacy, mainframe record keeping systems. Here comes the reinforcement, that hybrid solutions leveraging the data of on-premise systems will soon become the norm.
The best practices talked about ranges from adopting de-facto cloud standards, for example cloud infrastructure could be coalescing around the LAMP stack. Some other notable insights include: - Creating shared services with a common platform, look and feel - Use of cloud as testing environment - Portioning of clouds – confidential /mission critical data where to keep -on-premise or outside - What volumes of new workloads to be pushed onto the cloud – particularly in long standing industries like financial services where lot of data tend to be in old but reliable platforms
Operating at both ends of the stacks with a robust risk management plan and governance makes cloud an indispensable framework for IT, Innovation and Business Agility. I recommend reading this for demonstrating that with a good strategy and well laid out execution on such strategy, even in a fast moving but highly regulated industry with a lot of legacy system in place, clouds can be successfully and progressively deployed with demonstrable results in providing flexibility and making business agile.
I woke up this morning to see significant developments.
MOSOLOCO – Mobile, Social, Local, Commerce, a term getting popularized by Jason Maynard is really brimming with lot of activities now. We are now seeing that four proximate but distinctive trends are converging to change the way consumers interact, explore, transact and putting pressure on businesses to keep pace and in some cases create entirely new business opportunities.
Amazon is now fully charged to muscle into the Android Ecosystem. Am not just talking about the Amazon Appstore. With the launch of the new Cloud Drive and Cloud Player joining the Amazon Appstore , the strategy is clearly to parade as a full scale service shopping destination for Android device users. With the new Cloud Drive, Amazon in essence has got an update to the Amazon MP3 app for Android, bringing cloud storage into the music buying scheme, and further adds the Cloud Player to Amazon MP3 for streaming the user’s music to any Android device or web computer. This multi device rendering is a key tenet of success for the Kindle platform and Amazon is clearly focused on building on this strength. I know that one other formidable cloud giant has all got everything ready to roll out – may be they were waiting to launch it in the developer’s conference in May. Now Look at what all Amazon can do with their superior personalization and ecommerce capabilities – the value of the platform is beginning to unfold here. Amazon is essentially taking a step forward in the consumerization of Amazon web services.
Tracking another development, CapLinked, a social platform for private investing, announces exponential growth of its platform with over $1 billion now available in potential investment activity. The company claims to have seen an exponential increase in user base sincee Jan 1 2011, with a total of 5500 dealmakers, investors and entrepreneurs now on the platform. This news comes on the heels of CapLinked’s angel funding totaling $900k, led by PayPal alums Peter Thiel, Dave McClure, Joe Lonsdale and Aman Verjee as well as David Anderson of 7th Rig.This rapid growth shows confirms the power of platform and communities - essentially in this case investors and businesses need a common platform to connect – and it is happening now on CapLinked, the LinkedIn-meets-Salesforce for private investing,” says Eric Jackson, CEO of CapLinked and former PayPal Vice President. He adds that In addition, the new CRM tools will help identify potential deals, share information and get the right deals done faster.
Caplinked sees the trillion dollar a year private investing still using old, inefficient technology and points out to the fact most of these enterprises have been stuck in the email-and-spreadsheet mindset for too long. This gives them an opportunity to focus on bringing innovation in the form of social, cloud based, secure software to the world of private investment. The objective is to get investors, advisors, and companies the tools they need to better manage making connections and handling deal flow, due diligence, closings, and company reporting. Both the entrepreneur and investor are brought together in the same platform. For entrepreneurs raising capital, the tool makes it easier to be transparent and share information. That makes it easier to get money in the door, and keep investors happy for follow on investments. For investors, this helps track their investments in one place, and have an idea of what is going on with their companies. Added to that, this is not a pay-to-play service, the claim here is that by letting entrepreneurs access the social graph, the value increases and so to get more strong social signals, the service strives to keep this platform free for entrepreneurs to raise capital.
We will actually see more and more innovation and success stories in the MOSOLOCO world.
Far too often, am asked the question – Won’t cloud disrupt the outsourcing vendors in a big way. My answer is Yes & No. Yes. The cloud will definitely impact those outsourcing vendors who just wait and watch or do superficial adjustments to the emergence of cloud. For those outsourcing vendors (just like in the case of all the players in the software ecosystem), trying to understand the impact of the cloud and proactively embracing the cloud, the impact is going to positively felt. Let’s examines this further. It’s clear: The cloud’s impact on outsourcing over the next five years will be profound because “it will significantly influence the demand made on the nature of services and the type of expertise built by service players as seen in the industry today. On an As-Is scenario, one of the key changes would be that the demand on labor will go down – as cloud could cut down need for support processes while enabling near real-time data processing across the value chain for business”. At the same time, the disruptive cloud technology can enable whole host of new business opportunities centered on new business and technology and support execution models hitherto just dreamt of.
Zoom forward: The beauty of the cloud technologies is such that overtime, it would be seen that cloud technologies will enable IT service providers to deliver end-to-end services regardless of the various platforms, applications, and technologies involved. Extend the thought – one can easily see that within enterprises the classification of core/non-core would begin to diminish overtime as cloud enables Enterprise IT to act as a hybrid environment of on-premise, private cloud, and public cloud services. The cloud-based services will change outsourcing contract methodologies. “Buyers will move away from long-term contracts where the return on investment depended on continuous improvement, and move to shorter-term contracts with more flexibility to quickly buy new services. In respect of some business functions, the complexities involved in structuring a deal centered around cloud would encompass requirements like providers promising to take over customer infrastructure and run it from their shared centers to minimize multiple cloud vendor management for customers”. Cloud-based services will also cause an evolution and huge change in the way outsourcing providers price their services.
There are various types of cloud-related services that outsourcers will typically provide: • Consulting around integrating enterprise IT with private and public clouds to create a hybrid environment • Organization change management & risk management • Implementing and managing private clouds to consolidate and optimize infrastructure • Developing custom applications for the emerging cloud software platforms • Developing new applications that integrate collaboration, communication, and cloud platforms • Migrating enterprise applications to the cloud and the related testing, certification, and governance for risk and compliance • Offering many commonly used functions as –a –service • Governance mechanisms, regulation compliance • Making Business –IT alignment realized over time.
In its fully evolved state, service providers will take on the role of a trusted partner to integrate cloud services of multiple service providers with Enterprise IT. Outsourcing providers are going to move up the value chain, offering consulting and information management services — not in the actual delivery of IT but in how buyers should provision and organize their systems and business process workflows.
Services providers that focus on providing services at the lower levels of the infrastructure and platform stack will need to become more agile and nimble to new technologies and faster technology cycles. They will have to provision new services as quickly as their cloud computing alternatives. The ease with which users can access social technologies, mobile devices and SaaS technologies will mean that IT and outsourcing partners will be bypassed, leaving a myriad of contract support challenges. Inevitably, outsourcers will have to support new technologies and do so in a far more rapid manner. This will lead to tactical responses by outsourcing providers for example leveraging service catalogs to provide a range of computing alternatives and service options to business users (including dedicated, shared and cloud services at different prices and service alternatives). But the real change is one of drastic business model change from hierarchical command structures to a modularized, configurable set of services that can be provisioned to clients in a rapid fashion.
Cloud Computing challenges services providers to sell beyond IT - . Service providers that own the IT budget do not have the relationships to effectively sell many of the cloud enabled business services that are emerging, as they require IT, business and executive relationships – and of course process knowledge. “Upwardly mobile” services providers capable of selling at the process layer will become aggregators of on-premise and Cloud IT technologies within hybrid environments.
If a service provider’s revenue is dependent on increased resource consumption as defined by resource units (e.g., managing more servers) any move to the Cloud most likely will result in a net reduction in resource consumption as infrastructure is consolidated, automated and virtualized. Overall, I think Cloud Computing is about to bring a lot of changes to the traditional Outsourcing world with a few challenges such as security which is slated to have crossed the tipping point and is poised to put customers at greater risk at the cost of low-cost cloud alternatives that today present themselves as the new-world outsourcing parties. Nevertheless it will accelerate offshoring / outsourcing, in my opinion because: - It will drive the traditional outsourcing parties to adopt faster nimble methods
- Contract cycles and agreements will have to be revisited as niche core cloud service players will go after the buyers as contract renewal approaches.
- Fixed Contracts will come under fire as demand of variable contracts will increase. Traditional vendors will have a problem as their models are based of one-time fixed with incremental charges while with hardware/software costs dropping dramatically customers will end up paying more
Cloud computing is surprisingly incremental – software provides a potential risk, hardware provides a potential risk but platform as a service offerings and ability to tap huge new markets tilt the scale. We believe cloud models, like SaaS, will take more years to go mainstream in a true sense of the term, ie, relative to the size of the overall software market. This implies that while SaaS has already displaced traditional software in some categories (eg, CRM), a widespread shift will only be gradual. This provides a window of opportunity for IT-services vendors. Newer offerings like platform BPO adds to the service provider pie. Platform BPO can be described in many ways. For example, it can be considered a SaaS model implemented across a business process, or something akin to “process as a service”.
In effect, platform BPO is about: - Automating a business process to ensure lower dependence on manpower resources; - Hosting that process on shared infrastructure (of the vendor or rented by the vendor) rather than on the customer’s premises; - Pricing the offering on a transaction-based model rather than on a cost centric - people deployed model; - Sharing of the core platform across many customers (multi-tenant) rather than proprietary to a single customer. Platform BPO is, thus, a new way to deliver processes that have already been around, and it is much influenced by the emerging cloud-computing concept.
Three years from now I would say a good number of enterprises will have their strategies in place for how they plan to use the cloud. The smaller the enterprise the greater the potential exploitation of a third-party cloud will happen. The larger customers will likely use cloud-like technologies, but internally private clouds. Our customers are unlikely to use any public platforms except for what they would deem as commodity activities, such as payroll, F&A, HR, etc (not core strategies). How does that impact companies like us? Large enterprise market, our predominant market space, is likely to adopt cloud technologies internally, and try to charge back their internal clients/departments on a cloud-like billing pattern. Therefore, they would like to reduce the complexity of what they have to take advantage of the variable costs from a costing perspective. In a three-year timeframe that will be a substantial transformation for a lot of companies, which translates into opportunities for people like us.
On a three to five-year perspective, most of the enterprises will be transitioning to a cloud-based delivery strategy for tech and services. Not likely too big, as big a transformation as ERP, CRM, etc as it will be technology-driven transformation on the inside. Business benefits that the end user will see will be greater efficiency, from infrastructure, hardware perspective. There will be a better sharing of resources. What we are seeing in a lot of pilots is speed. Change and speed will be much better in a cloud environment.
And that provides an opportunity for outsourcing service providers when it comes to cloud integration, cloud enablement of existing applications or creating new applications all together on the cloud.
As long as the outsourcing partners’ providers continue to be innovative, and adapt themselves to the market conditions, there should be no room to get worried. After all, the outsourcing service providers do carry with us the knowledge of the applications, ecosystem and architecture for the customers we operate with. Value gets created only by assisting the end client in their business process. In its true sense, value is not just created by cloud infrastructure providers, as they are only going to commoditize the data centre service.
So, overall, well run offshore headquartered firms shall see net positive opportunities with large enterprises embracing the cloud.
Thomas Friedman makes the case that Value creation is becoming so complex that no single firm can master it without closely collaborating with a wide set of partners. John Hagel brings this up :” We are shifting from a world where the key source of strategic advantage was in protecting and extracting value from a given set of knowledge stocks — the sum total of what we know at any point in time, which is now depreciating at an accelerating pace — into a world in which the focus of value creation is effective participation in knowledge flows, which are constantly being renewed”. All these thoughts presuppose or recognize the role that information technology plays in making this shift happen. Extending the thought, once can see that from an infrastructural perspective, externalization of data and processes, for example through cloud computing, can create a secure foundation for collaboration that will eventually be indispensable. This flow and collaboration – critical components in the shift becomes so important that it is worth dwelling a little more into this theme.
With the global competitive forces getting more and more powerful one case that business around the world are keen to get more agile and more lean. With dependence in IT increasing with time, solutions centered on IT get more significant. With cloud as an enabler to such a change, one can see many things are coming together to make benefits get realized. As business tends to focus on getting the easy to do business with tag, the ease of provisioning extranets makes the organization more agile as it establishes lightweight, short term partnerships and outsources granular services to external providers. When information and goods flow across borders and enterprises, the concern of rising transactional cost is bound to arise. With well designed cloud solutions , transaction costs can be actually managed better. And by reducing the transaction costs of contractual collaboration the company can effectively leverage external resources without engaging in full scale mergers and acquisitions or setting up joint ventures.
How to engineer a seamless and reliable experience that can not only absorb changes in the external environment but also function as a critical enabler of such change? Look carefully and we can see that at the operational level , an increasing number of data sources are becoming available in the form of web services, truly interoperable and are easy to integrate. Enterprises move really aggressively to make gains on this count – some of them are able to leverage these effectively have an advantage over their competition. The real advantage comes by being able to extract context sensitive, pattern based business intelligence by combining the data sources with their internal information and that of their partners.
This in essence sets the stage of preparing to not only take advantage of emerging technology to stay competitive but also potentially help a set of enterprises to create new standards of competing and thereby create competitive advantage through differentiation. Talking of differentiation, form the perspective of business enabled through the cloud it can be seen that the increased service orientation of cloud squarely uplifts the importance of identifying and analyzing competitive differentiation. Once core functions are established inside enterprises likely centered around core competencies the next question to seek is : determining whether they lead to a business benefit and the larger question therein is whether they are indeed unique and whether the uniqueness is sustainable in the fast changing world?
In such critical turns and decisions, enterprises need to take a far more involvement in activities that may look too mundane and operational. For example, it is a perfectly valid question to ask and keep asking at regular intervals as to how much of IT should be delivered by internal sources. As the technology and technology enabled markets and business services mature, many viable and economical solutions become available for enterprises to consider. And if standardized services (preferably configurable) are available on the market on a more economical footing, then it is obligatory on the part of enterprises to investigate whether it would be possible to leverage them. There may also be alternate forms of delivering the services. Let’s see from an IT perspective - in such a scenario, very effective solutions delivered over the cloud are becoming more and more commonplace. For example, self service portals can reduce human involvement overhead and can thereby lower the costs of basic services. Add ability to configure and integrate – the potential multiplies. Such decisions help enterprises move resources to focus on efforts inside the enterprise that could yield far better returns and may help enterprises become more lean and efficient and in some cases can make them more innovative as well.
Then where does it leave genuinely core processes that are supposed to provide differentiation by design? Where these processes begin to get intertwined with undifferentiated tasks, the effectiveness definitely goes down. Many of the generic IT solutions with customized overlays clearly fall into this category. Such a scenarios also provides enterprises to examine objectively if it would be possible to isolate the generic functions and have them sourced from the most effective and efficient source. Obviously there may not be standard answers for every conceivable scenario but enterprises can think through and decide on embracing appropriate choices.
Now comes the question of horizontal scalability – can the core competencies be looked as a platform to provide a base for a broad range of solutions? Can most of the solutions be plausibly monetized? Too often we see that the competitive advantage can begin to help in gaining business in related areas as well – there cloud solutions can provide can help in providing quick entry and act as a simulation media before eventually becoming a core infrastructure for leverage in steady state on scale up. Similarly IP that can be enabled through cloud can facilitate embracing new business models for cross domain/ cross enterprise usage. Obviously these things don’t happen just by chance – every such possibility needs to be thought through and details worked out in a rigorous manner. When competencies get stretched to serve a more broad base of services, it would invariably call for a realignment of resources and focus inside enterprises. Enterprises then get sucked into taking decisions on designing organization structures ranging from divisions to horizontals.
With market shifts happening more frequently – the dynamism with which enterprises monitor and prepare for them increase more rapidly. Too often, today we see that corporate strategies are reflecting upon changes across all stakeholders – competition, suppliers, customers besides geographies and market segments. This is a more complex game but technology and cloud by extension can provide more strategic enabling support. Such changes can foist huge demands on enterprises –some of them could be very direct and some of them could bring in an indirect but overbearing expectations on the business. The utility model is not just limited to computing CPU cycles and counts the saving. Its actually about making a range of services available on demand – information consulting, data streams, business processes, real time collaboration etc. The reality is that almost all the industries would have a need to consume such services as they begin to navigate the effects of changes that are happening in their industries and in some case extend such services when they act the role as providers. The lesser recognized part of the equation viz. the indirect impact : this can be more powerful and with a larger reach. How? In this complex web of business, enterprises which don’t provide such services may have to engage in transactions with others that do provide such services. Now one will have run as fast as the ecosystem to at least hold on to the current competitive position ( in some cases –in fast changing industries, one will have to run faster to hold on to the position). So the moral here is : no enterprise is likely to be immune from this sort of change and this is going to create a series of cascading changes across the business landscape.
The fact remains cloud provides a very huge canvas. By its huge capabilities and reach , the cloud can effectively change the business dynamics along with the progressions that it creates and this can simply dominate careful setups laid inside enterprises. By attacking the cost structure of IT operations and being seen as business friendly, it can find more support in its absorption. And, the truly disruptive phenomenon that cloud is - shall influence this business ecosystem more rapidly and with greater reach : net result – cloud could become the harbinger of change that will accelerate the changes in the partner landscape in this interconnected world.
Was on a long flight to Asia, when conversation with the co-passenger began to get centered around cloud computing and what could be its impact that an educated executive ought to know. I have seen the various definitions of cloud computing that include elements of the varied description of the term, yet they typically do not address every single aspect that is associated with cloud computing. The definitions vary from being seen as IT as a service independent of location by IT resources to massive scalable IT capabilities provided as service across the internet to multiple customers to infrastructure hosting of customer applications and billed by consumption.
My intent here is not to add confusion with yet another attempt at fine tuning the various definitions that are currently available. Each and every thought strand provides a good job at giving an idea of what is involved. Nothing of importance suggests to me that there is any particular value in having an authentic/authoritative/cardinal definition. The attributes provide a more meaningful way to provide a near close authentic touch : off premise, elasticity, pay-as-you go billing, virtualization, service delivery, universal access, centralized and distributed management, multi- tenancy etc.
For me, the way I see it, the innovation of the internet from a technical perspective lies in identifying the confluence of several technical trends , look forward and visualizing how these can combine with improving cost factors, a changing environment and evolving societal needs can combine to create a virtuous cycle that generate an ever increasing economies of scale and benefits from network effects. Look carefully. One can see that cloud computing is similar in nature while admittedly its difficult to isolate a single grain of technology strand triggering the cloud’s advent and progress. A number of incremental improvements in various areas ( notable among those fine grained metering, flexible billing, virtualization, broadband, SOA, service management) have all come together recently. Combined together they enable new business models that can dramatically affect cost and cash flow patterns and are therefore of direct great interest to the business . In the backdrop of economic changes affecting the business environment and a investment overhang of IT , cloud and the opportunities it presents look very significant to business.
If we examine further, the combined effect has reached a critical threshold by achieving sufficient scale to dramatically reduce prices, thus leading to a virtuous cycle of benefits (cost reduction for customers, profits for providers), exponential growth and ramifications that may reverberate across many of our lives, including technology, business, economic, social & political dimensions. As cloud computing establishes itself as primarily a service delivery channel, its likely to have a significant impact on the IT industry ( by maximizing service interconnectivity), by stimulating requirements that support it.
The Capex Vs Opex discussion is well known and I won’t repeat it here but would like to point out that the reduction in fixed costs also allows the company to become much more agile and aggressive in pursuing new revenue streams. Since resources can be elastically scaled up and down they can take advantage of unanticipated high demand but without being burdened with the excess costs when the market softens. The outsourcing of IT infrastructure reduces the responsibilities and help organizations focus in the area of delivering true value of IT. The shift can help IT to focus from Plan-Build-Run onto Source-Integrate- Manage mode of functioning.
Another form of business impact may be that the high level of service standardization that cloud computing brings may blur the traditional market segmentation. The conventional distinction that separates small and medium businesses from enterprises, based on their levels of customization & requirement for sales and service support may fade in favour of richer set of options & combinations of service offerings. Let’s zoom out and come back. In some ways, cloud computing is only a small part of a much larger trend that is taking over the business world. The transition to services centered economy is gaining momentum over the decades - the critical constraint had been on collaboration - if we do a root cause analysis we can find that the constraint is rooted on trans- enterprise barriers and a cohesive well geared technical infrastructure.
The difficulty rests on the fact that unlike in a tangible product, it is very difficult for one to break services into its elemental components that come together to provide a seamless efficient service. The transaction costs that are associated with identification, contracting, monitoring and collection were far too high to justify bringing different entities together. A s we progress towards an ecosystem where everything –as-a-service becomes a defined norm, the gamut expands to include a lot of business as well. From Human resources management to finance to logistics to manufacturing all can be potentially handled by a strategic partner. And cloud here can play a critical enabling role of providing an infrastructure that acts as a critical component of this transformation.
Regardless of whether a company seeks to adopt cloud computing, the technology may have a significant impact on the competitive landscape of many industries. Some enterprises may be forced to look at cloud computing simple keep pace with external efficiencies in their ecosystem. And for some, it could be the case that their core business is being eroded by the arrival of newer agile competitors. As a result, I think that it very likely that there will be a market shift as some companies leverage the benefits of cloud computing better than others. These may trigger a reshuffling of the competitive landscape, an event that may harbor high risks and huge opportunities. More on this theme later
Over the weekend, I finished reading the recently released Microsoft paper on the “Economics of the cloud”. As I head to Denver today for participating in the defragpanel on the impact of cloud computing in the enterprise irregulars track, I just wanted to share some thoughts on the theme which I want to discuss while at the conference both on and off the stage.
The Microsoft paper starts by connecting the dots between technology, economics, and disruption:
Economics are a powerful force in shaping industry transformations. Today‘s discussions on the cloud focus a great deal on technical complexities and adoption hurdles. While we acknowledge that such concerns exist and are important, historically, underlying economics have a much stronger impact on the direction and speed of disruptions, as technological challenges are resolved or overcome through the rapid innovation we‘ve grown accustomed to….
The pressures on IT & the engulfing sense of change in the IT landscape are hard to overlook. The pressures would mean more business begin to seriously look at SaaS, re-negotiating license terms, focusing on rapid adoption of virtualization etc. As part of this and beyond, internal IT would be forced more and more to show more bang for the buck and it is my view that organizations would begin to look more and more to question committed costs and begin to aggressively look at attacking them more systematically – earlier sporadic efforts marked their endeavors. This could also unlock additional resources that could potentially go towards funding new initiatives. There are enough number of enterprises going this route and their service partners are also in some cases prodding them to go this way.The emergence of cloud services is again fundamentally shifting the economics of IT. Cloud technology standardizes and pools IT resources and automates many of the maintenance tasks done manually today. Cloud architectures facilitate elastic consumption, self-service, and pay-as-you-go pricing.
The paper starts by highlighting that the basis for the economic advantage in the cloudosphere is the economy of scale available to cloud computing data centers. The paper identifies three areas of scale advantage:
1. Supply-side savings: Owing to scale, Cloud data centers have lower costs per server.
2. Demand-side aggregation: By aggregation, cloud can support an intermix of tenants and therefore directly contributing to higher server utilization rates ( this would be definitely higher than what can be achieved with single-tenant data centers).
3. Multi-tenancy efficiency: Hosting multiple tenants brings administrative cost overheads, and lowers server cost per tenant and by extension cost per data center user goes down.
On the demand side of things, the story is complementary and drives similar conclusions. By aggregating volume of compute usage, cloud service providers enable users to smooth out peaks and valleys. The contention here is that by pumping up large server volumes, corresponding increase in utilization can be achieved and this has the effect of reducing operational costs. Now extend this scenario : cloud service providers can potentially run a number of data centers while administratively support them through centralized NOCs, with the results the costs can get further spread across.
The paper notes,"public clouds are in a relatively early stage of development, so naturally critical areas like reliability and security will continue to improve. Data already suggests that public cloud email is more reliable than most on-premises implementations". In concluding the section on economies of scale, the white paper goes on to state that economies of scale are so significant that the TCO calculated server wise of a 100K server data center is 80% lower than that of a 1K server data center. While there are legitimate opportunities for a set of customers to pursue private cloud in certain periods of time in their cloud journey, strong indicators suggest that over time the cloud efforts would begin to coalesce around the public cloud given significant computing economic advantages – these need to be to be recognized, and in the process of this journey, vital concerns regarding security and reliability will get addressed (gradually melt away) thus feeding the momentum into the public cloud journey.
Clearly economics will begin to weigh its hand if the cost advantage of public cloud over the private ones are of the order of 10X as the paper seems to suggest . The paper also suggests that any SMB would be crazy to factor on-premise or private cloud into their future strategy when these options are going to cost up to 40x more than public cloud alternatives. I would love to see the complete data points on which the benefits have been quantified and inferences drawn - this will be very useful in advancing the body of knowledge and state of practice of cloud adoption inside enterprises. Lets examine from an organization standpoint : As I wrote earlier, setting up private cloud is a motherhood statement at best( in many organizational surveys, one can find setting private clouds is not in the CIO’s top three priorities – if anything virtualization finds a place-) to make this happen in a credible way means re-examining most parts of IT functioning and business –IT relationship inside enterprises. IT teams while conceptualizing private clouds are happy to retain existing architectural designs, happily propose a clasical DMZ/Perimeterized model for providing security and enabling access, too often leveraging a highly virtualized infrastructure. More often than not, it’s enabling virtualization, automation and self service and color it as private cloud. Do recognize the implicit differences in constructing a private cloud and a public cloud. Comfort with the status quo with some adjustments versus an opportunity to rethink architecture, security, privacy,compliance needs in a way summarizes the nature of thought process and expected results between the private and public clouds. Speaking more directly, public clouds present the opportunity for enterprises to review and achieve specific requirements in the areas like agility, flexibility and efficiency at optimal effort Versus a skewed , boxed implementation of private cloud setup. Taking advantage of the public cloud benefits would far outweigh the advantages of getting boxed inside with private clouds.
Most elements of the bedrock gets affected – the processes, culture, metrics, performance, funding, service levels etc. Well thought out frameworks, roadmaps need to be put in place to make this transition successful. These frameworks need to cater not only to setting up internal cloud but eventually help in embracing the public cloud over the years- not an easy task as it appears. A few of those organizations that master this transition may also look at making business out of these – so it’s a journey – that needs to be travelled onto embracing public clouds. Some business may take a staged approach and call it by private cloud, internal cloud or whatever but eventually the road may lead into public clouds!
Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld "All views expressed are my personal views are not related in any way to my employer"
