Wednesday, December 10, 2008

Cloud Computing Means More Than Cost Savings: New Models Will Transform Business, Say HP and Capgemini

Transcript of BriefingsDirect podcast on cloud computing adoption, low-risk transitional strategies and innovative business opportunities.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod. Learn more. Read the related white paper. Sponsor: Hewlett-Packard.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you're listening to BriefingsDirect. Today, we present a sponsored podcast discussion on vision and strategy for cloud computing.

We'll be talking with executives from Capgemini and Hewlett-Packard (HP) on how they see the value and opportunity unfolding around cloud computing, and so-called private-cloud architectures. Many enterprises and service providers are now grappling with how cloud models and economics will impact them.

The specter of a challenging business climate may well hasten the need to seek IT resources that are supported through greater utility approaches to save money, as well as to reach Internet audiences and gain global Web efficiencies.

There are also a host of innovations around the various cloud models that are now just emerging and that we're only beginning to discover. These amount to being able to do business in new ways and using cloud models to accomplish things that simply could not be done before.

The goal is to take advantage of what cloud models offer, but to do so with low risk and in alignment with enterprise IT dictates and requirements around management, security, governance, and visibility.

Here now to provide an in-depth look how cloud models are changing our world is Andy Mulholland, global chief technology officer at Capgemini. Hi, Andy.

Andy Mulholland: Hi, there. Good to be on the call.

Gardner: We're also joined by Tim Hall, director of services-oriented architecture (SOA) products at HP Software and Solutions. Welcome, Tim.

Tim Hall: Thanks, Dana.

Gardner: And also we have Russ Daniels, vice president and CTO of cloud services strategy at HP. Good to have you with us, Russ.

Russ Daniels: Thanks, happy to be here.

Gardner: Russ, let's start with you. We've heard so much about cloud, grid and utility. There are so many different words in respect to these technologies, and these approaches have been around for quite some time, but we seem to be in a state of building excitement.

More opportunity is being associated with cloud computing. Why don't you help us and our audience understand, first and foremost, what is cloud -- and probably just as important -- what it is not?

Daniels: You can argue about what the technology industry is really good at, but I would say the one thing that we definitely excel at is hype. We can take any term and get very excited about it. We start redefining everything that we were already doing with the expectations associated with that new term. We certainly think of what's been happening with cloud in terms of two things that are going on. We think they are both incredibly important to our customers. They both provide great opportunities, but they are quite distinct.

What most hype is really about a year ago we would have described as utility computing. It's this concept of being able to treat all of your resources as pools that you can flexibly bind to the workloads to match up the demands and priorities of the business in a way that improves the agility of the business and also has a huge contribution to the cost structure.

That's important stuff. There is a lot going on there, but it's focused primarily on being able to improve the ability to deliver the workloads that exist in the business today.

We think there is also another thing going. That's what we focus on, when we talk about the cloud, and it's a new model for constructing software. It's a new design pattern, and it allows you to solve problems that really have been out of reach. You can take business needs, which if you tried to address them in the context of traditional IT design and delivery models, would tend to fail or under deliver.

The cloud allows you to go after those problems, to open new markets for the business, to allow it to reach out to customers that it hasn't been able to get to, to improve its differentiation in the market, and to contribute to the real goals of the business itself. That's what we think is exciting about the cloud.

Gardner: Is there something that the people should not confuse the cloud with, something that the people might be thinking it can do that that is really outside the scale of what we are really talking about?

Complexity won't go away

Daniels: There's this vision that's been painted by some in the industry that we're going to flip a switch in a year or so, and all of the existing data centers will just be shut down. There will be these few hyper-scale providers of compute capacity some place remote to the business, and businesses will just plug a wire into the wall and out will flow compute.

That's an incredibly naïve perspective -- that computing will become as fungible and undifferentiated as electrical power. It's certainly true that we can improve the effectiveness, cost efficiency, speed, and agility of IT by taking advantage of virtualization and automation technologies, but we shouldn't imagine that it means that all of the complexities of the world go away.

What's most important for our customers, when they think about this, is not to think of cloud as being an alternative delivery mechanism for everything that IT does today. It's much more an enabler to do things that IT really can't do successfully today.

Gardner: Let's go to Andy Mulholland at Capgemini. What has changed about the world we live in now that makes this cloud vision so appealing and so seductive?

Mulholland: I agree very strongly with Russ that when something new comes out, the industry does tend to get a little over-excited -- but cloud is more significant, because people are thinking again about what they are going to do over the next couple of years with very tough trading conditions.

On one side, there is this premise that it can help me look at how I manage and reduce my cost. Perhaps more importantly, we should say it the other way around. It enables me to address how I deal with a more variable business pattern and pay for what I need when I need it.

Many of the things a business does today are relatively fixed. The enterprise applications, the enterprise resource planning (ERP) systems, we know what they do. The systems they run on are very predictable in their load. Everything works, and that's to Russ's point about how [the cloud] doesn't change everything.

But, what we have is a growing desire and a growing need to find new things in the front office, about how we run our business more effectively, how we get into markets more effectively, and how we trade better. These tend to be small fast-moving projects. They make a very big difference, and we simply don't want the same time scale in provisioning for them.

Increasingly, probably over the next couple of years, people don't want to spend capital on them. They'll want to pay for them operationally. They represent a new market, a new technique, a new set of standards, and a new set of technologies. All of that comes together in where cloud is going to go and make the difference to businesses.

So, it's an interesting time, when what I want from technology in the business is shifting to more porous, across-the-firewall business on the Web, and at the same time I desire to manage how much I spend, how quickly I spend it, or whether I can attribute cost directly to how much I need when I need it. It's being driven by more care about the financial side.

Gardner: Let's go to Tim Hall. When we talk about this ability to have elastic resources, provisioning IT resources as they are needed, and reducing costs and waste as a result, we are really getting more toward an economic story. What are the root problems that we are trying to solve here? What is it about the way IT is done now that needs cloud?

Hall: There are a bunch of things, Dana. I can't tell you how many customers I've visited in the last 12 to 18 months who have told me they can't install another server in their data center, and the reason is that they are out of power and cooling.

There's been a lot of talk recently about energy efficiency and this trend toward painting the world green. A lot of the new hardware appliances and other things that are coming on the market are consuming lower power, offering better cooling technologies, and have advanced automation capabilities. We can do things with managing those systems.

There's where virtualization technology come to play. We can use these pieces of hardware more efficiently, and all of this is trying to contribute to lowering the complexity of what we've currently got. The two things that you continue to see IT wanting to do are reduce cost and reduce complexity. The ways in which they're doing that come at it from two different dimensions. One is an operational dimension, and the other is from this generation of applications. A technology refresh is happening in both of those areas.

Interest in 'private' cloud

Gardner: Andy, we have heard a quite a bit about private cloud, taking these architectural advantages and not necessarily going through an outsourced provider, but building them out on your own in your organization. What are you seeing in terms of the interest in the private cloud for enterprises among typical customers of Capgemini and HP? How does that differ from what they might want to do with the more public clouds? What's the breakout? How much interest in either public or private?

Mulholland: If you're going to do it internally, it's much more tied up with the way you're running your business and probably around the way you're adopting social software and collaboration tools. I often talk about it in the terms of a distributed business. If we look at what's happening to business today, the old adage was that we will sell more of less, we will reduce the numbers of lines, try to sell more of each line, and that will make us able to optimize the process, and do all the good things we know.

What's happening today in most markets is that businesses are seeing quite the reverse. They are selling less of more. They have to have more products, more variation and better tailoring for niches to win new business, new share, and better revenue -- at better margins.

When you move to that model, one of the challenges is how to support it. If I'm only going to have a few product lines, and I am going to run them for three years, I can train people, build knowledge, and operate in a different way. Instead, what we are seeing is, as I move to the other model, I need a lot more flexibility in the way I find the person who knows how we share and build information, etc.

The whole idea is social software. That means provisioning in a very different way, and that leads people to consider how to do that, particularly in distributed businesses. Is there a more effective way than having hundreds of different instances in different places, hundreds of appliances, or whatever you might think of?

So, in one direction, we see that trend. In the other direction, we see a trend where people want to sell or consume services from other people or sell to other people as businesses. It's a bit like with mashups. Everyone always points to the housing map, but the other one to point to is the number of people who use some version of Google Maps on which to build something. That's making it available to be used. Cloud services can be delivered in that manner, so people on the Internet can consume and buy services from you to blend in with what they want to do as well.

When you look at that argument and you look at what's happening, you start to recognize there are already a number of very well known brands that sell through the Internet and combine their services, which are effectively doing this already. The challenge in this is how it moves from being something that a handful of Web-based businesses are using. How do more businesses learn how to exploit that market and take their share of commercial revenue from that market?

Daniels: Can I just expand a little bit on what Andy said here, because it's probably the most important thing for people to work through? There are really these two things going on, and there is a relationship between them.

One is simply how do I deliver my existing workloads at lower cost by taking advantage of virtualization and automation? I might do that in my own data center, and many of our customers are in fact doing that. As I do that, it also gives me the flexibility to get those same kinds of resources externally, and that could be an advantage through some variable cost perspective.

But, there is this other thing going on that's really critical. It's not simply a matter of how infrastructures are architected. Whether you have an internal utility or external utility, it's much more how you design software and what kinds of problems you are solving.

When we think about the cloud, we don't think it's just a matter of how infrastructure is packaged, but it's really a combination of the impact of service oriented architecture (SOA) starting to break apart applications. We think more about the services to separate out the data from the applications, so that you can get at the data without having to go through complex application integrations.

That's one major piece. There's another piece around taking advantage of Web 2.0 innovations, which includes both how you can create rich user experiences in the context of browsers in these remote execution models, but also significantly it's the social dimension. How can you take advantage of the innovation that's occurred in the consumer space by understanding the importance of bringing people together?

Scaling up, scaling down

Finally, all of that is being enabled by a design pattern that allows these kinds of workloads to scale up, scale down, and be able to handle huge amounts of potential demand, but do it in a very flexible and economic way.

It's the combination of all those things together that allow businesses now to start to use technology to solve problems, to create advantages, and as Andy was saying -- particularly in these uncertain times -- to tackle these problems in a way that lets them move where the opportunities are. It lets them experiment readily and to try things, without finding themselves in huge, long-term commitments when some of those experiments fail.

Gardner: It sounds, Tim, as if cloud computing is getting an advantage from a psychological point of view. It's changing the way people think about IT and application development. It helps us understand how this thinking needs to move into the enterprise. Who at the enterprise level is in charge of making sure that cloud computing happens properly?

Hall: That's exactly where governance comes in. This can't be a free for all. The question is how you organize, govern, and provide guidance for what's available. What has been looked at? How do we handle issues of compliance, especially as you get into some more interesting regulatory requirements?

We're finding that certain data cannot exist outside the borders of a particular country, and so it can't be a free for all. You have to establish a culture of governance and build up processes and procedures within IT. How are you going to tackle the policy complaints issues and some of the consistency checking that are going to need to go on?

One thing Andy mentioned at the top, which is very interesting, is the charge-back model and the variable costs that go along with this. Are you sure you know what those costs are? Do you know where they break in terms of scale? Do you have control over who is gaining access to these resources, so it doesn't become a free for all?

If you have two organizations entering into a trading partner agreement for some kind of cloud-based services, and you're distributing the use of that service more broadly within your organization, who is responsible if somebody is violating the terms of use? As Russ said, it's establishing these policies and procedures and formalizing them in a way that IT can effectively be in control of them to take advantage of these opportunities. I think it's critical.

Mulholland: An interesting point you made there Tim is that you really stress the challenge that says we have a very variable business model. Everybody is getting more and more into the variable business model, and it's very difficult to stay in control. It's very difficult to attribute cost to the various diverse activities, and it's very difficult sometimes to look the auditor in the eye and say you actually knew how all of this worked.

These are new challenges. Let's get back to Russ's point. We've got new challenges here, and what's happening is that it's almost happening ad-hoc. In many companies, they're trying to exploit these things, but they are doing it with a complete lack of structure. By bringing in a cloud model successfully, you're actually introducing some structure to support the very activities that people are increasingly experimenting with in their businesses today.

Gardner: This notion of successfully implementing cloud models certainly seems top of mind for organizations. Russ Daniels, what's the first step? Is this an organizational shift, a mindset shift, technology, all the above? How do you get a handle on making this a successful transition?

Daniels: If you think in these two dimensions, every IT organization struggles with simply delivering on the commitments that they have today, and every organization struggles to free up money to innovate and deliver new business value. When you think about the opportunities to take advantage of infrastructure as a service, it's important to sort through those services that IT is delivering to the business and understand which ones are best suited and are most likely to be able to be moved into those forms to drive down cost.

What we find with our customers is that many workloads are important to the business, but they are not mission critical. In many of these workloads, good-enough delivery is good enough.

There are other workloads that are mission critical. They are the things that when they go down, the business goes down. Those things you have to put a huge amount of focus on and deliver at the highest possible quality. So, distinguishing between those types of workloads, identifying those where good-enough delivery is appropriate, and moving those into virtualized and automated delivery models, positions you to take advantage of external infrastructure capabilities as appropriate. That's one side.

The key challenge

The other side is one I think all of us have always realized. The key challenge for any IT organization is to understand what the business really needs, where the business value is, and how technology can help deliver that. This question of business-IT alignment is always the heart of the problem, and it will be certainly be true in terms of how the business chooses to go after cloud-based opportunities.

We think the cloud is great for connecting. It's great for connecting business to business. It's great for connecting business to its customers. It's great for connecting people to people. It's great for connecting the experiences that people have, as they move through their day and the changing circumstances they find themselves in.

All of that connecting is enabled in the cloud, because the cloud provides a persistence. It's a great place to capture state, because the services exist over long durations, and they have pervasive access, so you can get at that state and the context related to that state. It's those capabilities that make the cloud so great for connecting.

Where is connecting important to your business? That's ultimately a business question, not a technology question. The focus should be on having people who can map from what the business needs to understanding how to exploit this new expressiveness that the cloud brings to solve the most pressing challenges, or to exploit the most exciting opportunities that the business faces.

Gardner: Andy, as organizations on the business side recognize how to take advantage of these connections of doing business differently, vis-à-vis the cloud and other partners, they are going to come back to the IT department and say, "Now enable it."

Is there an advantage for those organizations that already have embraced and embarked on a SOA journey and who have implemented governance and managing services internally? Are they are going to be in a better position when those business people come and ask for them to get cloud oriented?

Mulholland: It's pretty logical, when you follow through what we've been talking about. If you're talking about connecting to and using an environment largely based on services, whether you put a big “S” or a small “s,” i.e., business services, or technology services in SOA, it's pretty obvious that if you have no way internally to relate to that, you're going to have a problem.

The good news about this conversation is that we've talked a lot about the new world and new challenges, and the things people are starting to do, which involves that new world. We carefully separated the idea that the old world is immediately going to jump into this.

The point about that is, if you have been doing new stuff, and you are building new stuff inside the organization, you really ought to have started doing that around SOA. If you're using services correctly internally, then of course, you can cross the firewall and start to use services outside, and blend them together.

The big question is how people think about deploying SOA internally. Some months ago, Russ and I were discussing this. We felt that there was a serious disconnect in people's understanding. For some, it's "Oh, let's try this project with SOA. I'm not actually recognizing it as more than a project, or recognizing it as a significant move inside the business, addressing this new generation of fast moving, fast changing things which are much more in the front office, much more likely to involve the Internet and the Web in some way or other."

Most of the SOA people were thinking about what I called "EAI 2.0." It's just a better way of doing technology integration. Some companies have grasped the idea that it's about doing better business and putting the business costs together in a different way. But, it's still quite a tough issue to address. I'm sure Tim would have some pretty good war stories about how that issue has played out with the things he's seen, as well as some things I have seen in that space.

Gardner: How about that, Tim? How well are organizations that have not necessarily embarked meaningfully on SOA positioned to take advantage of cloud?

Hall: The really interesting point is who is driving the initiative. So some of the things that Andy mentioned are being driven from the bottom up. Folks are looking at this as an integration technology, instead of a complete transformation of how they deliver service orientation or business services more comprehensively and more flexibly to address some of the unique challenges that the business is facing. And of course, they're asking IT to do more with less and better faster.

Four important things

You're not going to do it using the same old technologies that you had in your bag. There are four important things that we're learning about how to do things better as we move forward in the IT landscape. SOA adoption, as a transformational agenda, is a microcosm of some concepts that apply very specifically to cloud and preparing people for cloud adoption.

The four things are, first, once you start to move into these loosely coupled technologies, you have the opportunity to do intermediation, and that intermediation can largely be transparent. What that means is that you have an opportunity to do things like compliance checking for such things as information that shouldn't be leaving the firewall, for example.

The second thing is that you have the opportunity to invest in and capture significant amount of metadata about the things that you are using, be it things that you built or things that you are consuming from a third party. That leads to the ability for you to do more in terms of automation.

The third thing is the notion of formalizing the relationships between the consumers and providers of these capabilities. I think of this as a volume control, if you will, where you do want to capture, at a minimum, the fact that somebody is using some service, be it inside or outside the four walls of your data center. Depending on the relationship you have with that person, you may want more structure. You may want more formalization and structure in that agreement, all the way up to what Andy and Russ mentioned around charge back.

Finally, it's just the whole notion of moving away from capability centric IT and moving more towards service orientation. We shouldn't be worried about fan speed and CPU power. We should be looking at whether we have a capability and how flexible is it for us to deliver that at any sort of scale.

This goes to Russ's comments about how we identify effectively, from the top down, what's really core to the business and what's going to drive and fuel the business activities, versus what is contextual and can be delivered at some level of quality, but simply isn't core to the central focus of the organization.

Gardner: Being involved with social media, I encounter lots of comments. There is plenty of dialog going around, but it seems clear to me that there are still plenty of naysayers out there about cloud, particularly for companies that are considering putting certain applications and services or data up in the cloud.

Time and time again, I hear people saying they will never do that. It's not secure. Russ Daniels, what are some of the boundaries here as to what should or shouldn't be brought into the cloud, at least in a medium or short term, in terms of IT functions and application set?

Daniels There is a set of low-level concerns, when you think about a workload that an enterprise depends upon. There's a set of requirements associated with that workload that includes things like security, which is an obvious one. There's a need for compliance, so can you satisfy your auditors that, in fact, you are managing your proprietary information appropriately. Those kinds of things you can understand as being requirements for any delivery method that you would consider for that workload.

We have to saw through that. Certainly, many of the infrastructures of the service offerings that exist on the market today are relatively simple and can't satisfy many of those demands that enterprises have. That's one of the reasons why you see the uptake for these things frequently happening at the level of the department in an enterprise, where either they don't have the sensitivities, or they lack the awareness of those business risks.

That's one piece of it. There is a different angle, though. The cloud allows us to go after problems that we haven't been successful in addressing before. To be successful doing that, we have to design things. We have to get the design right, as Andy was saying, because service orientation is at the heart of this. It's around how I understand the services that facilitate the goals and objectives of my business. Understanding those services in the context of the business is absolutely critical.

Too much of what's happened in the SOA space has been limited to technical enablement. That's absolutely critical, but isn't sufficient. You have to also understand from the business concerns how to capture the key roles and responsibilities of the business. How do I understand the information that's necessary for those roles to fulfill those responsibilities and where that information needs to be exchanged? That's what I can model as the service. Then, I'm modeling those services in the context of business concerns about implementation.

Getting that picture in your head, and then taking advantage of the cloud, allows you to solve these problems in a way that isn't limited simply to what you can do within your own business. It can be extended across your supply chain. It can be extended across your channels and customers, so you can address more broadly the ecosystem in which you operate. The cloud lets you do that.

Interactions and transactions

Mulholland: Can I pick up on this note? As you can probably tell, we've all worked together on this and share it. One of the keys in this, when we have talked about it with people -- to pick up some of Russ's point -- is the difference between interactions which is a lot of this new market, and transactions which was the old IT market.

When you look at any IT system, it's fundamentally about getting a safe transaction to record what you have done. But, if you think about someone trying to decide what they're going to buy from you, like buying an airline ticket, deciding which flight and how much money they're going to pay and which extras they're going to have, it's a lot of interactions. The speed at which interactions go back and forth isn't that critical if it takes a half second longer.

To get back to Russ's point that he made very clearly, it's something different. State is a big issue in it. Data is not the same issue in the same way, as we are used to seeing with applications. When you start to see it that way, you start to understand why we are using a cloud-based service in this way. It's a perfectly acceptable commercial risk-reward, or whatever word you want to think of in terms of, "Is the service-level agreement (SLA) good enough to choreograph this?" We are trying to just put something different here.

Gardner: Andy, here's a follow up. The cloud naysayers, have they got some things wrong?

Mulholland: I'm not sure they've got things wrong. There's a huge temptation -- I have to avoid it personally, and I am sure everyone else does -- that when you're shown something new, you try and apply it to what you have already, and you try and bend it to fit. Much of what I hear from the naysayers is the assumption that the cloud is about applying it to the current generation of IT, and some of the issues that we touched on earlier.

Actually, it's also about understanding that you have a new set of challenges, a new set of requirements from the business, and therefore, these are not easily addressed in the old way. You need to change what you are doing. It's not so much that they’re wrong, but that they're looking at the wrong thing as the target for where they should be applying the idea of how to use cloud computing.

Daniels Andy hit it exactly right. Frequently, when people think about what they are trying to do, they think in the context of those existing services that they deliver to the business, and many of those are, in fact, transactional. We don't think the cloud is great for “transactionality,” for deep, technical reasons.

In the cloud, you need to be able to scale arbitrarily and you need to be able to do that where you get linear increase in throughput, as you scale out horizontally, which says there is a huge dependency on being able to work concurrently and to work in parallel. Transactional workloads don't lend themselves to that.

It's very difficult to fan out the transactional workloads, because ultimately that item can only be taken out of inventory once, and so you have to bring everything back together. The two-phase commit design pattern isn't very well suited to horizontal scaling. So, the place where the cloud is great is where you're not focused on supporting transactions, but interactions, where you are connecting. It's being able to take state from participants in an extended supply chain and propagate that information up through data feeds, up into a cloud service.

For example, that information might be related to the carbon footprint related to material flowing through an extended supply chain. Each of the participants in an extended supply chain can simply publish a data stream that captures the carbon footprint of the materials that they will be producing. Now, you can run analytics in the cloud, using search-like algorithms, to answer questions about the carbon footprint for some end products. You don't have to do the detailed process integrations. You don't have to provide detailed transactional integrations across the supply chain system to support it.

It's exactly that new expressiveness that allows us to go after problems that we really couldn't have done affordably in the past. Because we couldn't do them that way, we ended up doing things manually and in emergencies. If you think about product traceability, it's the same problem, very difficult to deal with from a technology integration perspective in the traditional ways. As a result, when there's a problem, we have people pawing through information spreadsheets manually and providing the answers too late to be helpful.

Gardner: Given that we're dramatically changing the way we're doing things in order to take advantage of these efficiencies and new capabilities, do we need to create a new hierarchy or metric organizationally?

That is to say, the role of architect now needs to include someone who sees this all through a cloud perspective. Do we need a higher order architect, perhaps at a services level? I guess the question is, how does IT and/or that intersection between business and IT change in order to take advantage of this properly?

Mulholland: I'll have a shot at this. It's something that we've been tracking with some interest, because we focus much more strongly on the business and to how the technology is used. We rely on HP to give us the products to be able to marry up to that business requirement.

If you track backward through this, in 2006, Tim O'Reilly tidied up his views on what Web 2.0 is and how it works. He started to add to it ideas of a business model of how business using it might be different.

About three months after that, Andrew McAfee at Harvard coined the term Enterprise 2.0 in Harvard Business Review Online, and started to build the idea of a business-model innovation. In other words, your business model could be different to present products, deal in markets, do supply chains, and the kind of things Russ was just mentioning.

About three months after that, Forrester Research produced a viewpoint, which said that this should be treated as a different branch of technology, and they called it business technology. Their argument was that, at the time when the mini computers existed around the late 1980s, and PCs and networks were just appearing, the term "information technology (IT)" was first coined to separate off a new cluster of technology that was used in a different way, i.e. around personal computing, centered on information, not on big mini systems, and transactions, and so on.

The term IT was used to describe a change, which if you think it through and remember those times -- and some of us still do -- brought us to the viewpoint that we had a different set of technologies. Applying those technologies led people to coin the term business process re-engineering, let's rethink how it works. We developed a whole new model of client-server, and finally and not least a whole new generation of ways of managing and controlling the business through enterprise resource planning.

The argument that we're extending is this: the topic we're talking about -- the cluster technologies, the role they play in a business, how you build, and deliver, and maintain them -- is a different branch with different skills and activities and therefore it should be called “business technology.” Whether you believe the argument or not is a different question, but it's very interesting that one of the foremost industry analysts actually came up with that proposal about 18 or 20 months ago.

Gardner: It sounds as if we have a transformation that needs to take place at multiple levels within these organizations. Let's focus for a second on for those companies that get it right. They can make the transformation, take advantage of these newer models, extend their boundaries, and be more into interactions, and what that entails. What's in it for them? Let's go first to Tim. For organizations that get this right, what's the payoff?

Hall: Go back to the three basic things that we've been talking about, which are decreased complexity, increased agility, and lower cost. They're the fundamentals of a business. As technologists sometimes we get too enamored with the buzzwords and the hype that Russ Daniels was mentioning at the top. We forget why we are doing this in the first place, and it's very simple. It's to take advantage of and use this business technology as a strategic weapon, while at the same time lowering cost, lowering complexity, and increasing your new business agility.

Gardner: Russ Daniels, same question. For those that get it right, what are the payoffs?

Daniels Tim's list is exactly where the focus is, but I would say again that the cloud allows you to deliver the business results that matter. In other words, it really has to be thought of in the context of IT’s technology for business, and the key business challenges that we see our customers facing today are how to develop new markets? How do they take advantage of the abilities they have and deliver them to new customers? How can they understand better what their customers need, and how can they fit in and connect with them?

The cloud provides great capabilities for that. We think that it's still early, and you can see the promise in things like the recommendation engines that you find at online shopping sites. You're searching for something, and, based on your buying history, your demographics, your search behaviors, and then comparing that to the behaviors of others, the site can provide you with suggestions about other things that might be of interest to you as well. The technology helps identify your intentions and then offers suggestions to help you find things better suited for your needs than what you could have expressed or identified yourself.

That's a wonderful opportunity, and to be able to expand that approach into more and more of the ways that a business connects has huge implications. So, it's an upside opportunity. It's enabled by the agility and by the lower cost, but the key thing is that it allows you to open the markets, to differentiate your offerings, and it allows you to improve profits or gain market share. Those are the things that businesses get.

Gardner: Andy, the last word to you.

Mulholland: Relatively speaking, [cloud computing] is unstoppable. The question is whether you'll crash into it or migrate into it. Why is it unstoppable? Because we're watching a business shift, people have to find ways to compete better in the market. Much of that is around. "How do I add smart services? How do I make products more available? How do I communicate directly and intimately with people, so they know what they want to buy from me?" All of those things are already developing in many businesses today, and people are building solutions to do that, sometimes gracefully, and sometimes not at all gracefully.

In other words, just as we had with the PC, where we basically were driven into it, some companies got there in a very ungraceful way and had to figure out afterward how to sort out the mess. Others did have a strategy, and emerged in a very graceful way. I think we're in the same situation. Users wanting social software have taken us there to run and do things better. We've been taken there by businesses needing to get into new markets.

The challenge for the CIO and the IT department is, "How will I enable that to be a graceful migration," not "How will I wait until it becomes a real issue, and then do something about it?"

Daniels: The opportunity that exists is for those people who break out of their traditional mindset around transactions and really start thinking about what this opportunity is in front of them, and how to use this innovation as a weapon. Those are the ones who are going to see the biggest benefit, because they will be able to take advantage of it more quickly. We've seen this with lots of the technology waves that have come before. Those early movers, who can break out of that traditional mindset -- whatever it was at the time -- to the next technology disruption, are the ones who see the biggest benefit.

Gardner: I'm afraid we have to leave it there. We've been discussing cloud models, impact, direction, and strategy. Andy Mulholland, the global chief technology officer at Capgemini, has joined us. Thanks so much, Andy.

Mulholland: Thank you, too, for inviting me.

Gardner: We were also were joined by Tim Hall, director of SOA products at HP Software and Solutions. Thank you, Tim.

Hall: Thank you, Dana.

Gardner: And also, Russ Daniels, vice president and CTO of cloud services strategy at HP. Thank you, Russ.

Daniels Thanks again.

Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions. You've been listening to a sponsored BriefingsDirect podcast. Thanks for listening, and come back next time.

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Transcript of BriefingsDirect podcast on clouds computing adoption, low-risk transitional strategies and innovative business opportunities. Copyright Interarbor Solutions, LLC, 2005-2008. All rights reserved.