IT Cost Cutting and Revenue Enhancing Projects

In the current economic climate the CIOs and IT managers are constantly pushed to “do more with less”. However, blindly following this mantra can be a recipe for disaster. These days IT budgets are getting squeezed and there are fewer resources to go around however, literally trying to “do more with less” is the wrong approach. The “do more” approach implies that IT operations were not running efficiently and there was a lot of fat that could be trimmed — quite often that is simply not the case. It is not always possible to find a person or a piece of hardware that is sitting idle which can be cut from the budget without impacting something. However, in most IT departments there are still a lot of opportunities to save cost. But the “do more with less” mantra’s approach of actually trying to do more with less maybe flawed! Instead the right slogan should be something along the lines of “work smarter” or “smart utilization of shrinking resources”; not exactly catchy but conveys what is really needed.

When the times are tough IT departments tend to hunker down and act like hibernating bears – they reduce all activity (especially new projects) to a minimum and try to ride out the winter, not recognizing the opportunity that a recession brings. A more productive approach is to rethink your IT strategy, initiate new projects that enhance your competitive advantage, cut those that don’t, and reinvigorate the IT department in better alignment with the business needs and a more efficient cost structure. The economic climate and the renewed focus on cost reduction provides the much needed impetus to push new initiatives through that couldn’t be done before. Corporate strategy guru Richard Rumelt says,

“There are only two paths to substantially higher performance, one is through continued new inventions and the other requires exploiting changes in your environment.”

Inventing something substantial and new is not always easy or even possible but as the luck would have it the winds of change is blowing pretty hard these days both in technology and in the business environment. Cloud computing has emerged as a disruptive technology and is changing the way applications are built and deployed. Virtualization is changing the way IT departments buy hardware and build data centers. There is a renewed focus on enterprise wide information systems and emergence of new software and techniques have made business intelligence affordable and easy to deploy. These are all signs of major changes afoot in the IT industry. On the business side of the equation the current economic climate is reshaping the landscape and a new breed of winners and losers is sure to emerge. What is needed is a vision, strategy, and will to capitalize on these opportunities and turn them into competitive advantage. Recently a health care client of ours spent roughly $1 million on a BI and data strategy initiative and realized $5 million in savings in the first year due to increased operational efficiency.
 
Broadly speaking IT initiatives can be evaluated along two dimensions cost efficiency and competitive advantage. Cost efficiency defines a project’s ability to lower the cost structure and help you run operations more efficiently. Projects along the competitive advantage dimension provide greater insight into your business and/or market trends and help you gain an edge on the competition. Quite often projects along this dimension rely on an early mover’s advantage which overtime may turn into a “me too” as the competitors jump aboard the same bandwagon. The life of such a competitive advantage can be extended by superior execution but overtime it will fade – think supply-chain automation that gave Dell its competitive advantage in early years. Therefore such projects should be approached with a sense of urgency as each passing day erodes the potential for higher profits. In this framework each project can be considered to have a component of each dimension and can be plotted along these dimensions to help you prioritize projects that can turn recession into an opportunity for gaining competitive edge. Here are six initiatives that can help you break the IT hibernation, help you lower your cost structure, and gain an edge on the competition:

• Server virtualization
• Enterprise application & data audit
• Cloud computing
• Business Intelligence (BI)
• Business process automation
• Centralization & automation of IT operations

Figure 1: Categorization of IT Projects 

In the current economic climate no project can go too far without an ROI justification and calculating ROI for an IT project especially something that does not directly produce revenue can be notoriously hard. While calculating ROI for these projects is beyond the scope of this article I hope to return to this issue soon with templates to help you get through the scrutiny of the CFO’s office. For now I will leave you with the thought that ROI can be thought of in terms three components:

• A value statement
• Hard ROI (direct ROI)
• Soft ROI (indirect ROI)

Each one is progressively harder to calculate and requires additional level of rigor and detail but improves the accuracy of calculation. I hope to discuss this subject in more detail in future blog entries.

Cloud Computing Trends: Thinking Ahead (Part 3)

In the first part of this series we discussed the definition of cloud computing and its various flavors. The second part focused on the offerings from three major players: Microsoft, Amazon, and Google. The third and final part discusses the issues and concerns related to the cloud as well as possible future directions.

A company may someday decide to bring the application in-house due to data security or cost related concerns. An ideal solution would allow creation of a “private in-house cloud” just like some product/ASP companies allow option of running a licensed version in-house or as a hosted service. A major rewrite of existing applications in order to run in a cloud is probably also a non-starter for most organizations. Monitoring and diagnosing applications in the cloud is a concern. Developers must be enabled to diagnose and debug in the cloud and not just in a simulation on a local desktop. Anyone who has spent enough time in the trenches coding and supporting complex applications knows that trying to diagnose complex intermittent problems in a production environment by debugging on a simulated environment on a desktop is going to be an uphill battle to say the least. A credible and sophisticated mechanism is needed to support complex applications running in the cloud. The data and meta-data ownership and security may also give companies dealing with sensitive information a pause. The laws and technology are still playing catch-up when it comes to some thorny issues around data collection, distribution rights, liability, etc.

If cloud computing is to truly fulfill its promise the technology has to evolve and the major players have to ensure that a cloud can be treated like a commodity and allow applications to move seamlessly between the clouds, without requiring a major overhaul of the code. At least some of the major players in cloud computing today don’t have a good history of allowing cross-vendor compatibility and are unlikely to jump on this bandwagon anytime soon. They will likely fight any efforts or trends to commoditize cloud computing. However, based on the history of other platform paradigm shifts they would be fighting against the market forces and the desires of their clients. Similar situations in the past have created opportunities for other vendors and startups to offer solutions that bypass the entrenched interests and offer what the market is looking for. It is not too hard to imagine an offering or a service that can abstract away the actual cloud running the application.

New design patterns and techniques may also emerge to make the transition from one cloud vendor to another easier. Not too long ago this role was played by design patterns like the DAO (data access object) and various OR (object relational) layers to reduce the database vendor lock-in. A similar trend could evolve in the cloud based applications.

All of the above is not meant to condemn cloud computing as an immature technology not ready for the prime time. The discussion above is meant to arm the organization with potential pitfalls of a leading edge technology that can still be a great asset under the right circumstances. Even today’s offerings fit the classic definition of a disruptive technology. Any organization that is creating a new application or over hauling an existing one must seriously consider architecting the application for the cloud. The benefits of instant scalability and “pay for only what you use” are too significant to ignore, especially for small to mid size companies. Not having to tie up your cash in servers and infrastructure alone warrants a serious consideration. Also not having to worry about setting up a data center that can handle the load in case your application goes viral is liberating to say the least. Any application with seasonal demand can also greatly benefit. If you are an online retailer the load on your website probably surges to several times it average volume during the holiday shopping season. Having to buy servers to handle the holiday season load which then remains idle during rest of the year can tie up your capital unnecessarily when it could have been used to grow the business. Cloud computing in its current maturity may not make sense to pursue for every enterprise. However, you should get a solid understanding of what cloud computing has to offer and adjust the way you approach IT today. This will position you to more cost effectively capitalize on what it has to offer today and tomorrow.

Cloud Computing Trends: Thinking Ahead (Part 1)

The aim of this three part series is to gain insight into the capabilities of cloud computing, some of the major vendors involved, and assessment of their offerings.  This series will help you assess whether cloud computing makes sense for your organization today and how it can help or hurt you. The first part focuses on defining cloud computing and its various flavors, the second part focuses on offerings from some of the major players, and the third part talks about how it can be used today and possible future directions.

Today cloud computing and its sub-categories do not have precise definitions. Different groups and companies define them in different and overlapping ways. While it is hard to find a single useful definition of the term “cloud computing” it is somewhat easier to dissect some of its better known sub-categories such as:

• SaaS (software as a service)
• PaaS (platform as a service)
• IaaS (infrastructure as a service)
• HaaS (hardware as a service)

Among these categories SaaS is the most well known, since it has been around for a while, and enjoys a well established reputation as a solid way of providing enterprise quality business software and services. Well known examples include: SalesForce.com, Google Apps, SAP, etc. HaaS is the older term used to describe IaaS and is typically considered synonymous with IaaS.  Compared to SaaS, PaaS and IaaS are relatively new, less understood, and less used today. In this series we will mostly focus on PaaS on IaaS as the up and coming forms of cloud computing for the enterprise.

The aim of IaaS is to abstract away the hardware (network, servers, etc.) and allow applications to run virtual instances of servers without ever touching a piece of hardware. PaaS takes the abstraction further eliminates the need to worry about the operating system and other foundational software. If the aim of virtualization is to make a single large computer appear as multiple small dedicated computers, one of the aims of PaaS is to make multiple computers appear as one and make it simple to scale from a single server to many. PaaS aims to abstract away the complexity of the platform and allow your application to automatically scale as the load grows without worrying about adding more servers, disks, or bandwidth. PaaS presents significant benefits for companies that are poised for aggressive organic growth or growth by acquisition.

Cloud Computing: Abstraction Layers

So which category/abstraction level (IaaS, Paas, SaaS) of the cloud is right for you? The answer to this question depends on many factors such as: what kind of applications your organization runs on (proprietary vs. commodity), the development stage of these applications (legacy vs. newly developed), time and cost of deployment (immediate/low, long/high), scalability requirements (low vs. high), and vendor lock-in (low vs. high). PaaS is highly suited for applications that inherently have seasonal or highly variable demand and thus require high degree of scalability.  However, PaaS may require a major rewrite or redesign of the application to fit the vendor’s framework and as a result it may cost more and cause vendor lock-in. IaaS is great if your application’s scalability needs are predictable and can be fully satisfied with a single instance. SaaS has been a tried and true way of getting access to software and services that follow industry standards. If you are looking for a good CRM, HR management, or leads management system, etc. your best bet is to go with a SaaS vendor. The relative strengths and weaknesses of these categories are summarized in the following table.

	App Type Prop. vs. Commodity	Scalability	Vendor Lock-in	Development Stage	Time & Cost (of deployment)
IaaS	Proprietary	Low	Low	Late/Legacy	Low
PaaS	Proprietary	High	High	Early	High
SaaS	Commodity	High	High	NA	Low

Cloud Computing: Category Comparison

Cloud Computing: Where is the Killer App?

As an avid reader, I have read too many articles lately about how the bleak economy was going to drive more IT teams to use cloud computing. The real question: what are the proper applications for Cloud Computing? For the more conservative IT leader, there must be a starting point that isn’t throwing one of your mission-critical applications into the cloud.

One of the best applications of cloud computing that I have seen implemented recently is content management software. One of the challenges with content management is that it is difficult to predict the ultimate storage needs. If the implementation is very successful, the storage needs start small and immediately zoom into hundreds of gigabytes as users learn to store spreadsheets, drawings, video and other key corporate documents. Open source content management software can be deployed quickly on cloud computing servers and the cost of storage will ramp up in line with the actual usage. Instead of guessing what the processor needs and storage will be, the IT leader can simply start the implementation and the cloud computing environment will scale as needed. My suggestion is to combine wiki, content management and Web 2.0 project management tools running in the cloud computing space for your next major software implementation project or large corporate project.

A second “killer” application for cloud computing is software development and testing. One of the headaches and major costs for software development is the infamous need for multiple environments for developing and testing. This need is compounded when your development team is using Agile development methodologies and the testing department is dealing with daily builds. The cloud computing environment provides a low-cost means of quickly “spinning up” a development environment and multiple test environments. This use of the cloud  is especially beneficial for web-based development, and testing load balancing for high traffic web sites. The ability to “move up” on processor speeds, number of processors, memory and storage helps establish real baselines for when the software project moves to actual production versus the traditional SWAG approach. The best part is that once the development is complete, the cloud computing environment can be scaled back to maintenance mode and there isn’t unused hardware waiting for re-deployment.

The third “killer” application is data migration. Typically, an IT leader will need large processing and storage needs for a short term, to rapidly migrate data from an older application to a new one. Before the cloud, companies would rent hardware, use it briefly and ship it back to vendor. The issue was guessing the necessary CPU power and storage needs to meet the time constraints for the dreaded cut-over date. The scalability of the cloud computing environment reduces the hardware cost for data migrations and allows flexibility for quickly adding processors on that all important weekend. There is simply no hardware to dispose of when the migration is complete. Now that is a “killer” application in my humble opinion. By the way, cloud computing would be an excellent choice for re-platforming an application, too, especially if the goal is to make the application scaleable.

In summary, if your IT team has a short term hardware need, then carefully consider cloud computing as a cost effective alternative. In the process, you might discover your “killer app” for cloud computing.

IBM Anounces Certification in Cloud Computing .. Huh?

IBM first announced a competency center in Cloud Computing, then a Certification over the past couple of weeks.  Well, I guess the old Druid Priests of Mainframes should recognize the resurrection of their old God TimeSharing.  Here we are, back and rested from the Breast of Gaia, Greener than Green (Drum Roll Please…….): Cloud Computing!  (Cloud Computing quickly adjusts his costume makeover to hide Ye Olde TimeSharing’s wrinkled roots)  Yes! here I am fresh, new, exciting, Web 2.0, Chrome Ready!  With me are the only guys (Big Smile from IBM!) who can Certify and Consult in My Mysteries…. IBM!

The more things change the more they stay the same, but this pushes the Great Hype Engine to a new high (or low..ha ha ha).  I can understand IBM wanting to jump on the Cloud Computing bandwagon, but are we really ready for a certification?  No one is really sure what is in the Cloud, or how it operates, but IBM is ready to lock it and load it.  Yep, they are Certifiable! (ha ha ha!).  While one can admire the desire to define and take a stand on Cloud Computing; this is one topic that requires a bit more “cook time” before full scale avarice takes hold.

Cloud Computing to too “cloudy” and “amorphous” to define today.  While expertise and advice is required, there needs to be more independent vetting and best-of-breed component level competitions.  Full solution demo platforms need to be put together to elicit ideas and act as pilots.  Case studies need to spring from these efforts as well as early adopters before an organization bets the farm on a Cloud solution.  The existing ERP platforms did not come into being overnight and these solutions have an element of their interdepency and complexity (Rome was not built in a day!).  All of the elements of backup, disaster recoverability, auditability, service level assurance, and security need to be in place before there can be a total buy in to the platform.  The reputation of Cloud Computing does hang in the balance, all that is required is one high visibility failure to set things back for potentially years (especially given the current macro environment).

Above all at this stage, a certain level of independence is required for evaluation and construction of possible solutions.  Evolution mandates independent competition (Nature Red of Tooth and Claw, Cage Fighting, Yes!).  Maturity brings vendor ecosystems and the all consuming Application Stack, but not yet.  More innovation is required, we may not even have heard of the start-up who could win this game.

Reducing IT Costs for New Acquisitions

Over at CIO magazine, Bernard Golden recently published an update on Cloud Computing. In his list of the types of companies that can benefit substantially from computing in the cloud, he left off one situation that can reap tremendous benefits from this approach: newly acquired private equity portfolio companies that are being carved out from larger businesses.

For these companies, cloud computing offers the following benefits:

• Accelerated implementation timeline that dramatically reduces implementation costs
• Significant savings on support costs, which typically represent 60% of the IT budget
• Eliminates the dependency on staffing and retaining IT support staff
• Costs scale with number of users
• Repeatable implementation playbook
• Easily extensible for tuck-in acquisition

One of our senior architects, Martin Sizemore, has laid out the broad strokes of this approach in a short slide show.

It’s an especially attractive M&A technology approach in the middle market, where it can help drive annual IT budgets down under 4% of revenue. While it is most advantageous for creating a new operating platform to accelerate transition services (TSA) migrations, the transition to cloud computing makes sense as a value driver at any point in the asset lifecycle.

From the Cloud to the Bunker, the Cold Splash of Reality

Queue the movie Aliens: “…we’re screwed man, it’s over, it’s over!  They’re going to come in here and they are going to…! Get a grip Hudson!”.  That is what things feel like here at the moment.  We are just welding up the armor around the bunker waiting for the Credit Crisis Aliens to get in and decimate IT with their acid blood and ability to plant parasites in our chests.  I guess we do need to get a grip and figure out what to do to shift gears for a new reality.

Anyone want to travel to the C-Suite (Alien Central) to request budget for Web 2.0, Cloud Computing, Chrome, or Green initiatives? (Just leave your dog tags and gear here soldier, it will make it easier for us to split it up among ourselves).  The whole thing makes me chuckle as I weld another piece of steel up over my door.  The first book I go for in situations like these, given my experience and training, is George Orwell’s “1984″.  Doublethink spin is the order of the day today.  Green Computing, becomes High Energy, Aggressive Server and License Rationalization Savings Initiative.  Cloud Computing becomes Radical Infrastructure Outsourcing and Savings Program.  Web 2.0 becomes Intensive Customer Acquisition and Support Cost Reduction Program by Having Them Do All of The Backoffice Work.  Everyone admit it. You’ve seen names like these before; look at the name of any Congressional Bill, they use the same playbook.

Cynicism aside, the world has changed.  IT needs to focus on providing solid data and tools to aid in planning and budgeting for the company to move forward given the new reality.  Tactical cost savings initiatives need to be put on the table to keep staff occupied in a productive manner.  This is the time to consolidate that server farm, outsource network configuration and maintenance, eliminate under-utilized software, and rationalize/outsource maintenance of the PC hardware base.  Each of these are a steel plate welded on the doors to keep the Aliens at bay.

Continue low-cost planning initiatives in new technology — all things pass and this too shall pass in time.  IT needs to be ready to move forward without skipping a beat and keeping this focus will help morale as well.  New technology is the source of most of the major productivity gains and cost savings of the last 20 years.  So the organization as a whole needs to stay tuned-in to any opportunities coming on the horizon.

Plus, think of the fun watching the trade press and the vendors being chased and harvested by the aliens, it could not happen to a better group.  I cannot wait for the shift in editorial priority and ad focus.  Get your copies of the “Aliens” and “1984″ ready for reference!

Cloud Killer App: Looking for Love in All the Wrong Places

The new darling of the technical media and every product company, Cloud Computing, is searching for it’s Killer Application.  That seems to be the topic of every article and PR announcement.  Every show and seminar proclaims to have previews or insights to this great new Holy Grail. This Grail is the software that will launch the Cloud Computing platform to prominence and make everybody billions.  Really! Whatever they are smoking can I get some too!  What totally scares me is being “one” with Larry Ellison.  How did I ever get in this philosophical state?

During prehistoric times as a college student, a professor of mine returned a paper I submitted with a simple comment; “If this is the solution, what was the problem again?”.  The professor gave me the Stalinistic ”opportunity” to resubmit the paper with either the same or (hint hint) modified solution (wrong choice: Gulag for you).  Believing he was the south-side of a north-bound mule, I knew there was a trick to this situation.  Disassembling the paper logical thread by logical thread revealed he was right; the solution the paper proposed did not map to the original case study problem and an all night typewriter-based re-write was in order ( I hate when that happens!).

Pardon the rambling dementia, but we have the same situation here, Cloud Computing does not necessarily lead to a new Killer Application.  Logically, Cloud Computing will lead to a new range of hardware, not software innovation.   Cloud Computing presents the opportunity not to be enslaved to a classic server based data center or even a PC.  It will supercharge mobile computing via advanced cellphones and drive further mobile gadget innovation.  Cloud Computing drives pervasive computing, that is it’s Killer Application.

Image courtesy of King Megatrip

Data, The Ugly Stepsister of Web 2.0

The basket of technology comprising Web 2.0 is a wonderful thing and worthy of all of the press and commentary it receives, but what really scares me is the state of data in this new world.  Data sits in the basement of this wonderful technology edifice, ugly, dirty, surrounded by squalor, and chained in place.  It is much more fun to just buy the next storage array (disk is cheap, infinite, what power bill?), than it is to grind though it, clean it up, validate it, ensure proper governance and ontology.

What is Web 2.0 for, if not to expose more content? And data is the ultimate content.  Knowing what is hiding in the basement, there are going to be a lot of embarrassed organizations (Lucy, you got some ’splaining to do!).  Imagine how difficult it is going to be to link and synchronize content and data in the Web 2.0 environment.  Imagine explaining the project delays and failures of Web 2.0 initiatives when the beast in the basement gets a grip on them.

Normally, the technology will be blamed.  Nobody wants to admit they store the corporate crown jewels in the local landfill.  Nobody will buy the new products fast enough.  The server farms being built to support Cloud Computing will sit spinning and melting Arctic Ice in vain (Microsoft’s container-based approach is cool).  This could seriously impact the market capitalization of our top tech giants Microsoft, Oracle, Google, Amazon.  Oh no! It could crash the stock market and bring on tech and financial Armageddon given our weakened state!  Even worse, my own career is at stake!  The devil with them, they are all rolling in money, I could starve!

Now that I have my inner chimp back in the box, we need to put together a mitigation strategy to allow for a steady phased improvement of the data situation in tandem with Web 2.0 initiatives.  It is too much to expect anybody to clean up the toxic data dump in one sitting and we can not tag Web 2.0 with the entire bill from years of neglect (just toss it in the basement, no one goes there).  If we do not ask IT to own up to the issue and instead allow projects to fail, senior management, (fade to The Office), will assume the technology is at fault and will not allocate the resources needed to make this key technological transition.

Sun was Right, the Computer is the Network

Sun was right, the computer is the network.  Rather the computer is the Internet, if we believe all of the major Internet players and vendors racing across the plains to stake their claim for the next big gold nugget.  Has any body heard this before?  It hits me like “deja vu” all over again.  I have been to this movie before as Saas, Utility Computing, ASP….TimeSharing, etc. (ugh).  It is really sad when one of the players tries to trademark “cloud” (Dell).

All that being said, the goal is the Holy Grail of both the bedraggled CIO and the proud IT industry.  If Cloud Computing works as envisioned, it would revolutionize application development, deployment, support, and back-up/recovery.  The current installed-base of PCs would become mere appliances,  distributed data centers could be consolidated, software could be designed and maintained at the application level of granularity.  Development platforms, like Microsoft’s Oslo, would allow visual editing and mashing of entire applications residing in the Internet/Cloud, in whole or parts.  Gone is worrying about software stacks, hardware, bandwidth, security, and back-up.  I am in Nirvana, floating on a Cloud (bad pun).

Stepping back from the precipice of sarcasm, there is merit to the concept, approached with a jaundiced eye.  Applications, regardless of industry or user, begin as ideas and unfortunately are easily lost amid the grinding detail of instantiation in software, hardware and bandwidth.  Even the early Cloud platforms provide an opportunity to experiment quickly with innovative ideas.  In a past life a venture capitalist told me; “If I could just complete my bad concepts quickly, I could make a fortune on my one good idea of fourteen!”.  Well, the Cloud would do it, platform, QA, and customers all in one.  As a mere CIO, I could see it as an effective platform for fast geographically distributed, collaborative development or for quick one-off applications (to be brought in-house if proven).

It will be interesting to see this trend move forward and it is certainly worthy of our R&D effort, in any case, because the pay-back is so compelling.  Plus, who knows, maybe Sun was right.