Thursday, March 22, 2018

Bridging the Educational Divide–How Business Networks Level the Playing Field for Those Most in Need

Transcript of a discussion on how Step Up For Students, a non-profit organization in Florida, has collaborated with SAP Ariba to launch MyScholarShop.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.
Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions and you’re listening to BriefingsDirect. Our next business networks innovation discussion focuses on procurement with a purpose.

We’ll explore how Step Up For Students (SUFS), a non-profit organization in Florida, has collaborated with SAP Ariba to launch MyScholarShop, a digital marketplace for education that bridges the information gap and levels the playing field for those students most in need.

Now assisting some 10,000 K-12 special needs and low-income students, the user-friendly marketplace empowers parents and guardians to find and purchase the best educational services for their children. In doing so, it also helps maximize availability of scholarship funds to enhance their learning.

Joining us to share more about how this first-of-a-kind solution actually works, we welcome Jonathan Beckham, Vice President of Technology Strategy and Innovation at Step Up For Students in Jacksonville, Florida. Welcome, Jonathan.

Jonathan Beckham: Thank you, it’s a pleasure to be here.

Gardner: We’re also here with Mike Maguire, Global Vice President of New Market Development at SAP Ariba. Welcome, Mike.

Mike Maguire: Thank you very much.

Gardner: And we’re here with Katie Swingle, a Florida Gardiner Scholarship Program recipient. Welcome.

Katie Swingle: Thank you, glad to be here.

Gardner: Mike, there’s no doubt that technology has transformed procurement. We’ve gone from an emphasis on efficiency and spend to seeking better user experiences and more analytics capabilities. We’re also entering a new era where we see that businesses are trying to do “good,” in addition to doing “well.”

You had a very personal revelation about this a few years ago. Tell us about why doing well and good can go hand-and-hand?

Maguire: I was thrilled to have the opportunity to work with Jonathan and the SUFS team for both personal and professional reasons. First, I am a parent of a special needs young adult. My wife, Carole, and I have a 19-year-old daughter, Allyson, and we have lived with having no special needs solutions out there that help optimize the spend for such extra things as tuition, educational supplies, and services.

If you go to a hospital for surgery or you need medications, there’s always somebody there to help you with the process. But when you go into this world of tuition reimbursement and educational optimization, there’s no guidance for how that spend should be effectively executed. So now, many years later in my professional life, it is terrific to have the opportunity to use a solution like SAP Ariba SNAP to help SUFS in their mission and open that up to parents through the Ariba supplier network.

Gardner: Tell us how cloud applications and the SAP Ariba business network platform are structured and architected that lends them to this kind of marketplace-plus benefit?

Maguire: Networks and cloud apps at their very core are about connecting people, processes, and information in a way that’s simple and transparent to all those who are involved -- with the outcome of making smart choices. We’ve done this for multinational corporations for years. They end up saving money on their bottom lines by having good information to make smart choices. Now we’re doing the exact same thing to optimize the bottom line for families.

Gardner: Jonathan, at SUFS, you probably faced the same kinds of challenges that many businesses do. They don’t want manual processes. They don’t want to be bogged down with time-consuming approaches. They need to broaden their horizons, to see all available assets, and then analyze things better. But were there particular problems that you were trying to solve when it came to using marketplaces like Ariba’s?

Optimized Opportunities

Beckham: We’re trying to solve a lot of problems by optimizing processes for our families. It’s very important to us that we choose a partner that provides a really great user interface (UI) and user experience (UX). You know, we’re all about not just optimizing our bottom line -- like you think of for traditional corporations -- we’re about optimizing the experience.

Any funds or any resources that we gain, we’re about putting those back into the families, and investing those, and helping them to accelerate their educational path or learning goals. So that was really something that we were looking to do and use this process for.

Gardner: Tell us about your organization and MyScholarShop. Was this something that depended on electronic digital marketplaces at the outset, or was it something you have now greatly enhanced?

Beckham: At SUFS, we provide scholarships for low-income and special needs students in kindergarten through grade 12. As part of that, we administer a program called an educational savings account. That allows parents and students to customize their learning options, to go out and buy instructional materials, to go out and buy curriculum or use tuition fees or technology and as part of that process. It’s largely been a reimbursement process for families. They go out, purchase services -- using their own funds -- and then seek reimbursement.

We were then really searching for a platform -- something to change that model for us. The number one need was to not have to take money out of our families’ pockets. And then number two was to connect them with high-quality providers and suppliers so they can find better options.

Gardner: In a business environment, it’s about matching buyers and sellers -- and then bringing a value-add to that discussion, with collaboration. This powerfully also enhances the ability for people who are looking to find the right place to donate scholarships and to provide educational support. How has the network helped on the seller side, if you will, when it comes to non-profits and charitable organizations? Do they see this as something as beneficial, too?

Suppliers Sought, and Found

Beckham: Absolutely. We’ve had a lot of great conversations with suppliers that have approached us, and with some that we’ve approached directly. There are a lot of terrific products that are out there for students with special needs that we wanted to bring into this network. And some of them are already on the Ariba Network, which was great for us.

But, at the same time, one of the things that we looked for is optimizing our spend. From a reporting standpoint, we wanted insights to help negotiate better pricing. And using the Ariba Network does that for us. So when we engage with suppliers, we know if we can get free shipping, or if we get discounts and better payment terms. Those are all things that we can pass on directly to our families and to the students. We’re a non-profit. We’re not looking to make extra money. We’re looking to reduce the cost, labor, and the processes for our families in our program.

Gardner: Katie, your son, Gregory, is a Florida Gardiner Scholarship Program recipient. Tell us how you came to learn about these services, and how they have been beneficial and impactful for you and your family.

Swingle: As a Gardiner Scholarship recipient, we are under the special needs side of what SUFS does. My son is diagnosed with autism. He has been since he was three years old. So it’s been quite a journey for us, lots of ups and downs.

And what we came to find through our journey was needing the right educational environment. We needed the right educational tools if we were going to make progress. And unfortunately public school was just not the right option at that time, especially in those early years when you’re trying to help them the most.

SUFS is the administrator of our scholarship, and that’s how I became involved with them. So we go and we spend our money on tuition, products, and different therapies for Gregory. We pay for them. And then SUFS -- because he’s a recipient of the scholarship -- reimburses us for those. It’s been absolutely life changing for us.

Once we got Gregory into the right environment, with the school that he is in, with the right therapists, and with the right products -- it felt like everything started to come together. All of the disappointment that we had had over and over and over again over the years was starting to go away, and it was exciting.

I was meeting my son for the first time -- to be quite honest. We had had so many roadblocks, and all of the sudden this child was blossoming. And it was because we had the financial means from SUFS and from the scholarship to put him in the right environment where he could blossom.

And it’s been amazing ever since then. The trajectory for my child’s life has changed. We went from a pretty dire prognosis to …  I don’t know where he’s going to be, but I know it’s going to be great. And we’re just really excited to be a part of this on the ground level.

Gardner: And for those in our audience who might not be that familiar with autism, there can be a great amount of improvement when the right processes, services, and behavioral therapies are brought to bear. For those who don’t understand autism, it is a different way of being “wired,” so to speak, but you can work with that. These young folks can learn new ways to solve many problems that they might not have been able to solve on their own. So, getting those services is huge.

Jonathan, are we just talking about scholarships or you are also allowing families and individuals to find the services? Are we at the point where we’re linking services in the marketplace as well as the funding? How does it work?

Share the Wealth of Data

Beckham: That’s a great question. At SUFS we have an amazing department called the Office of Student Learning, and these are tried-and-true educators who have been in classrooms, and administrators that also work with professional development with teachers throughout the State of Florida.

As part of that, they’re helping us to identify some of these high-quality suppliers that are available. They’re really helping us with the SAP Ariba’s Guided Buying capabilities to curate and customize that platform for our individuals. So, we have great visions that we share with SAP Ariba, and we’re very happy to have a partner that is helping to make recommendations around the products and services.
All of the sudden, this child was blossoming. And it was because we had the financial means from SUFS and from the scholarship to put him in the right environment.

For example, if Katie and her family identify a great therapist, or a great technology tool that can help her son, then why can’t we make those recommendations to other families in similar situations? It becomes a sort Amazon-like buying experience -- you know, where people who purchase one thing may be interested in purchasing other similar things.

Identifying those suppliers that are high quality, whose products and services are working for our families – we can now help make recommendations around those.

Gardner: Mike, as we know from the business world, marketplaces can develop organically -- but they can then go viral. So that the more buyers there are then the more sellers come up, and the more sellers there are, the richer the environment – and the more viable the economics become.

Are we starting to see that with autism support services? Some of the recent studies show that somewhere close to one in 40 boys are autistic, and perhaps one in 190 girls are autistic. We’re talking about a fairly large portion of our society, around the world. So, how does this work as a marketplace? And is it large enough to be sustainable?

Autism-Support Savings

Maguire: I think it absolutely is. When we think about the Ariba Network, we’re about like-minded people and like-minded causes optimizing their goals. And in the area of disabilities that I’ve seen, technology is a godsend for these kids growing up in this generation.

When you think about technologies and connectedness -- which the Ariba Network is all about  -- in the disabled community, the use of such technologies as driverless cars can bring new levels of freedom to this population of differently abled people. As these children become adults, this is just going to open up to complete independence that the prior generations never knew.
Ariba Network is about like-minded causes optimizing their goals. In the area of disabilities, technology is a godsend for these kids growing up in this generation.

Gardner: It seems to me that if this works for an autism marketplace that there are many other flavors or variations on the theme -- whether it’s other sorts of disabilities or learning challenges.

Maguire: An example: I am a board member of the Massachusetts Arc and we spend most of our time working out policy and legislation for independent skills and options for the full spectrum of a lifespan.

When you become 18 and you are out of the school system, you have the same exact requirements to optimize Social Security disability payments. The same exact challenges around an entitlement that a young adult gets at 18 years old, probably with some help from their parents. It goes to their own account because they are young adults.

How do you optimize that spend, right? How do you optimize that for the different things to make for better life skills and tools? I believe that MyScholarShop could be extended well beyond K-12 because there’s a need for a lifetime of spend optimization for intellectually challenged people.

Gardner: Jonathan, this was introduced in January 2018, and your larger implementation is slated for the 2018-2019 school year. What should we expect in the next year or two?

Beckham: The program we’re talking about with Katie is the Gardiner Scholarship Program, and we have about 10,000 students there. It’s about $100 million in scholarships that we utilize. But next year we’re actually looking to bring in the Florida Tax Credit Program as well.

These are lower-income families, and about 100,000 students, and we’re actually at some $630 million in spend this year. As we grow with this program, and we look for high quality suppliers and providers, we look to bring both of those together ultimately so that we can use all of that data, use all those recommendations to help many, many more families.

Gardner: And the scope beyond Florida? Is this going to be a state, regional, or national program, too?

National Expansion

Beckham: We already have a subsidiary in Alabama. We also work with the State of Illinois. We’ve worked with other states in the past, and we absolutely have plans to help provide this service and help expand this nationwide so we can help many, many more students.

Gardner: Mike, any more to offer in terms of how this expands beyond its base?

Maguire: One of the things that expands is the connectedness to the network. And this is going to unleash availabilities and capabilities for not only the people of intellectual needs but for the elderly. I mean, we can talk about this for every piece of the population that has a need for assistance in this space.

Gardner: Katie, any thoughts about where you like to see it go, or how you think be people should be aware of it?

Swingle: SUFS and other organizations are trying to spread the word about educational choice and education savings accounts specifically like mine, the Gardiner or the Florida Tax Scholarship. There are states that don’t have anything at all available to families like this. I’m so blessed to live in Florida, which has been one of the more progressive states to offer this kind of service.

I hope the success of the network gets people talking across the nation. They can then push their legislators to start looking into this. I’m just a Florida mom. But there’s a mom in California or Washington State who has no options, and I hope that she would hear about this and be able to push her legislators to open this up to even more families.

Gardner: Jonathan or Mike, this also strikes me as a really great example of a public-private cooperation -- of leveraging a little bit of what government can offer but also financial support in a marketplace in the private sector. Let’s tease that out a little bit.

Parent-friendly purchasing 

Maguire: I think through this a lot. Traditionally, when a company buys procurement software, it is being justified based upon all the savings of getting rid of maverick spend, that all spend comes under management, and that’s what the Return on Investment (ROI) is based on.

The key piece of that ROI is adoption by end-users. What we’re finding now as we go into the mid-market with good partners like Premikati and SUFS is that you can’t force adoption. But the only way you get the savings in the ROI is if everyone is a procurement services user. And that means you need a good user buying experience that is very natural -- and actually fun.
The end-users are thousands of moms and dads. If their user experience is not much fun, if it's not that easy, it's not going to be used -- and the whole pyramid of results will break down.

We’re now in an environment with SUFS where it’s not about, “Hey, our people in human resources are using the SAP Ariba system,” or, “The sales guy is using the SAP Ariba system.” Their end-users are thousands of moms and dads. And those moms and dads have to have an experience just like they’re buying from home, buying at any website. And if it’s not much fun, if it is not that easy, it’s not going to be used -- and the whole pyramid of results will break down.

Gardner: It’s like Metcalfe's Law, whereby the network is only as powerful as the number of the people on the network. You have to have the right user experience in order for adoption to take off.

Let’s go back to Jonathan to that public-private sector issue. How does this work in terms of local governments and also in the private sector?

Empowered Education 

Beckham: This is the way that we see educational choice throughout the country happening right now. You see a lot of states that don’t have any options out there for the students. You see some that are running them from the government side of things. And then you see some that are very successful like SUFS -- legislated to have an opportunity for these educational choice programs.

But it’s running as a very slim non-profit. We only take 3 percent of our funds to administer our program. We’re a very high Charity Navigator-rated program, so we have an organization that’s really looking to empower our families, empower our students, and use our funds the best way that we can.

And then we’re able to find really high-quality partners like SAP Ariba to help us implement these things. So you put all those things together and I think you have an amazing program that really helps families.

Gardner: Katie, on the practical matter for other parents who might be intrigued, who have a special needs student, how might they start to prepare themselves to get ready? Where would you say, with 20-20 hindsight, that you should begin this process? 

Raise your Voice 

Swingle: Let me start with if you’re a Florida parent, or an Arizona parent, or a parent already in a state where this is starting to move. You need to know what services your child is going to need. If, for example, they are going to need occupational therapy, you’re going to need to read those reviews, and read up a lot on behavior analysis and get some ideas about what your child might need.

As any autism parent who has shopped for products on multiple websites knows, our kids need all kinds of products. You now have an idea of where you can buy those via learning exchanges. You begin having an idea of what your child’s going to need with their funds. And you can really begin getting your keywords -- occupational therapy (OT), Applied Behavioral Analysis (ABA) therapy, and physical therapy. You’re going to be reading reviews on the network about them and see how they might be able to help.

For people who are in states that don’t have options like we do, you need to be writing your state representatives; you need to be telling your story just like I am. Sometimes there’s a little bit of shame, sometimes there’s a little bit of embarrassment. I’ll be honest. My husband still has hard time saying the word “autism.”

We’ve been in this game now for seven years and he still sometimes can’t spit it out. It’s time to spit it out, it’s time to be honest and it’s time to tell your story. Don’t be afraid to tell your story, but the people who need to hear it are your legislators, your local and state representatives need to know about this.

They need to know about states like Florida that use SAP Ariba and MyScholarShop. They need to ask, “Excuse me? I live in California or I live in Colorado, why don’t I have this option? Look at what this woman is getting in Florida; look at what this family has in Arizona. I need this here and why don’t we have this?”

Put the pressure on, and don’t be afraid. You have a voice, you’re a voter, and they are there to represent you. Also give them some enthusiasm, let them meet your child, bring pictures. I brought pictures of my son, I said you know, “Look this is my child, please help me!” And if the legwork has been done by states like Florida and our organizations like SUFS and SAP Ariba, then the legwork is done. Now get your voice up there.

Gardner: What Katie is pointing to is that this is a very repeatable model. Mike, we know that doing well and doing good are very important to a lot of businesses now. How is this not only repeatable but also has extensions to other areas of doing well and good?

Principled Procurement

Maguire: Everyone has a purpose and every organization has a purpose. If you don’t, then you’re just wandering around in the woods. What are the pieces of your organization that you really want to have an ethical and moral stand with?

And that’s why we’ve worked with United Nations, the Global Compact for Fair and Decent Work. We work with Made in a Free World to stamp out human trafficking and people like Verisk MapleCroft and EcoVadis for sustainable and ethical supply chains.

We try to make sure that procurement with a purpose is actually in action at SAP Ariba because we like to oversee what’s actually happening, and we have the capability through the network -- and through the transparency the network brings -- to actually look, see, measure, and make some change.

Gardner: I’m afraid we’ll have to leave it there. You’ve been listening to a BriefingsDirect discussion focused on procurement with a purpose. And we’ve learned how MyScholarShop, a digital marketplace that leverages business networks, is powerfully aligning educational resources with those students most in need.

Please join me in thanking our guests, Jonathan Beckham, Vice President of Technology Strategy and Innovation at Step Up for Students; Mike McGuire, Global Vice President of New Market Development at SAP Ariba, and Katie Swingle, a Florida Gardiner Scholarship Program recipient. Thank you.

I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of SAP Ariba-sponsored BriefingsDirect discussions. Thanks again for listening, and do to come back next time.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.
Transcript of a discussion on how Step Up For Students, a non-profit organization in Florida, has collaborated with SAP Ariba to launch MyScholarShop. Copyright Interarbor Solutions, LLC, 2005-2018. All rights reserved.

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Tuesday, March 20, 2018

Pay-As-You-Go IT Models Provide Cost and Operations Advantages for Northrop Grumman

Transcript of a discussion on how pay-as-you-go models have emerged as an advantageous way to align information technology needs with business imperatives at a global aerospace and defense integrator.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: Hewlett Packard Enterprise.

Dana Gardner: Hello, and welcome to the next edition of the BriefingsDirect Voice of the Customer podcast series. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host and moderator for this ongoing discussion on digital transformation success stories. Stay with us now to learn how agile businesses are fending off disruption -- in favor of innovation.

Our next IT business model innovation interview explores how pay-as-you-go models have emerged as a new way to align information technology (IT) needs with business imperatives. We’ll now learn how global aerospace and defense integrator Northrop Grumman has sought a revolution in business model transformation in how it acquires and manages IT.

Here to help us to explore how cloud computing-like consumption models can be applied more broadly is Ron Foudray, Vice President, Business Development for Technology Services at Northrop Grumman. Welcome, Ron.

Ron Foudray: Thank you for having me. I appreciate it.

Gardner: What trends are driving the need to change how IT is acquired? People have been buying IT for 40 or more years. Why a change now?

Foudray: Our customers, who are primarily in the government sector across the globe, understand the dynamic nature of how IT and technology innovation occurs. It can be a very expensive investment to maintain and manage your own infrastructure as part of that.


In parallel, they see the benefits of where technology is going from a cloud perspective, and how that can drive innovation -- and even affordability. So there is a cultural transformation around how to do more relative to IT and where it’s going.

That gets to the things you were just using in your opening comments as to how do we transform the business model and provide that to our customers, who traditionally haven’t thought about those business models.

Gardner: I suppose this is parallel to some creative financing trends we saw 10 or 15 years ago in other sectors – manufacturing and transportation, for example – where they found more creative ways of sharing and spreading the risk of capital.

As a service or buy?

Foudray: I think it’s a great analogy. You can look at it as if you are going to lease a car instead of buying one. In the future, maybe we don’t buy cars; maybe we just access them via Uber or Lyft, or some other pieces. But it’s that kind of transformation and that kind of model that we need to be willing to embrace -- both culturally and financially -- and learn how we can leverage that.

Gardner: Ron, tell us about Northrop Grumman and why your business is a good fit for these new models.

Foudray: I have been in the aerospace and defense market for 36 years. Northrop Grumman clearly is a market-leading, global security company, and we focus primarily on building manned and unmanned platforms.

We have as part of our portfolio the sensors that go along with those platforms. You may have heard of something called C4ISR, for Command, Control, Computers, Communications, Intelligence, Surveillance and Reconnaissance. It’s those types of sensors and systems that we bring to the table.

In my portfolio, on the technology services side, we are also providing differentiated capabilities for how we support, maintain, upgrade and modernize that infrastructure. That includes the capabilities of how we can provide the services more broadly to our customers. So we focus primarily on five core pillar areas: autonomous systems, strike platforms, logistics, cyber-security, and C4ISR.

Gardner: You are not only in the delivery of these solutions, but you are an integrator for the ecosystem that has to come together to provide them. And, of course, that includes IT.

Foudray: Exactly. In fact, sometimes when I go talk to a customer, it’s like we’re Northrop Grumman Information Technology. They are trying to connect the dots. So, yes, I think of Northrop Grumman not only as the platforms, sensors and systems, but the enterprise IT infrastructure as well..
The edge for our war fighters is anywhere that their systems and sensors are being deployed.

That comes with the digital transformation that’s been ongoing inside of our war-fighting apparatus around the world for some time. And so when you hear about the [transformation] of things in the data center or at the edge -- well, the edge for our war fighters is anywhere that their systems and sensors are being deployed.

We need to be able to do more of that processing, and that storage, in real time, at that closer point-of-need. We therefore need to be driving innovation with enterprise IT on how to connect into and leverage that all back across those systems, sensors, and platforms.

When you put it in that context, the digital interconnectedness that we have -- not just a society -- but in a war fighting sense as well, it becomes more and more clear as to why an integrator, a company like Northrop Grumman, wants to drive enterprise IT innovation and solutions. By doing so, we can drive essentially the three things I think all customers are looking for, which are mission effectiveness, mission efficiency, and affordability.

Gardner: The changes we have seen in IT and software over the past decade -- of Software-as-a-Service (SaaS) and other cloud-driven models -- make a lot of sense. You pay as you consume. You may not own the systems; they are in somebody else's data center, typically referred to as the cloud.

But I’m going to guess that in your business, public cloud isn't where you are going to put your data centers – this is probably more of an on-premises, close to the point of value, if you will, deployment model. So how do you translate SaaS consumption models and economics to an on-premises data center?

Control and compliance in the cloud?

Foudray: You are astute in pointing that out, because government customers traditionally have had a greater need for a level of control and compliance. With those types of data and applications -- whether it's the clearance level of the information or just the type of information that’s being collected -- there is sensitivity.

That said, there are still some types of information -- back office type of things – that may be appropriate for a public cloud that you could commingle with today. But very clearly there is more and more of a push for that on-premises solution set.

When our customers begin thinking about cloud -- and they are modeling their enterprise on a cloud capability -- they tend to use the model of, “Well, how can I get the same affordability outcomes that a public cloud provider is going to be able to offer?” They are amortizing their cost and those elements across all those other customers versus an on-premises solution that is only theirs.
The business model innovation is that consumption-based, on-premises solution that gets more creative on how you look at the residual values.

And so the business model innovation that we are talking about and driving is that consumption-based, on-premises solution that gets more creative on how you look at the residual values. And in our space, there’s a lot of digital data that won't come back into the equation that is not able to realize residual value. It's like when you bring back the leased car, that we talked about earlier, if you go over 30,000 miles, it still has value after your lease period.

In a lot of cases in the government environment, depending on where it lives, those digital fingerprints are going to have to stay on the customers’ side or get destroyed, so you can't assume that into the model.

There are a lot of different variables driving it. That's where the innovation comes in, and defines how you work as an integrator. With partners -- like we see with Hewlett Packard Enterprise (HPE) and others in the marketplace -- we can drive that innovation.

Gardner: In a case where there’s a major government or military organization, they may want to acquire on a pay-per-use basis, but the supply chain that supports that, they might want to be paid upfront on a CapEx basis. How are you able to drive this innovation in end-pricing and in economics for entire solutions that extend back into such supply chains? Or are you stuck in the middle?

Trusted partners essential

Foudray: That hits on a very core part of the challenge, and why having a partner that is going to help you provide the IT infrastructure is so important -- not just in terms of managing that supply chain holistically but in having a trusted partner, and making sure that the integrity and the security of that supply chain is maintained. We haven't talked about the security element yet, but there is a whole cybersecurity piece of that supply chain from an integrity perspective that has to be maintained as well.

The more trust you build up in that partnership, and across those relationships with your downstream suppliers, the better. That trust extends to how they are getting paid and the terms associated with that, with working those terms and conditions and parameters upfront, and of getting those laid in so that the desired expectations are met. Then you must work with your customer to set the right expectations on their terms and conditions to provide them a new consumption-based model. It’s all from an agreement perspective, all very closely aligned.

Gardner: Is there something about newer data center technology that is better tuned to this sort of payment model change? I’m thinking of software-defined data center (SDDC) and the fact that virtualization allows you to rapidly spin-up cloud infrastructure applications. There’s more platform agility than we had several years ago. Does that help in being able to spread the risk because the IT vendors know that they can be fleet and agile with their systems, more than in the past?
Hardware clearly is an enabling feature and function, but software is what's really driving digital transformation ... not just on the technology side, but also on the business side and how it's consumed.

Foudray: We do a lot from a software perspective as a systems integrator in the defense market space. Software is really the key. Hardware clearly is an enabling feature and function that’s driving that, but software is what’s really driving digital transformation. And that element in and of itself is really what’s helping to transform the way that we think about innovation -- not just on the technology side, but also on the business side, and in how it’s consumed.

We are putting a lot of energy into software transformation, as part of the digitization aspect -- not just in terms of how quickly we can provide those drops from an agile development, DevOps, development-security-operations (SecOps) perspective, but in terms of the type of services that are delivered with it, and how you look at it.

Changing the business model in parallel needs to avoid offending engineering principle 101: Never introduce more than one key change at a time. You have to be careful that culturally, depending on the organization that you are interacting with, that you are not trying to drive too much change and adoption patterns at the same time.

But you are right to hit on the software. If I had to pick one element, software is going to be the driver. Next is the culture -- the human behavior, of where someone lives, and what he or she is used to. That’s also going to be transformative.

Gardner: For mainstream enterprises and businesses, what do you get when you do this? What are some of the payoffs in terms of your ability to execute in your business, keep your customers satisfied, and maybe even speed up innovation? What do you get when you do this acquisitions model transformation thing right?

Scale in, scale out, securely

Foudray: First, it’s important to recognize that you don’t lose control, you don’t lose compliance, and you don’t lose those things that traditionally may have caused you not to embrace [these models].

What you get is the ability to leverage innovation from a technology perspective as it happens,
because your provider is going to be able to scale in and scale out technology as needed. You are going to be able to provision more dynamically in such an environment.
You get the ability to leverage innovation from a technology perspective as it happens.

If you have the right partner in your integrator and their provider, you should be able to anticipate and get in front of the changes that drive today’s scalability challenges, so you can get the provisioning and get the resourcing that you need. You are also going to be in a much better predictability state of where you need to be for the financial elements of your system.

There are some other benefits. If you implement it correctly, not only are you going to get the performance that you need, your utilization rates should go way up. That’s because you are not going to be paying for underutilized systems as part of your infrastructure. You will see that added affordability piece.

If you do it right, and if you pick integrators who are also tying in the added dimension of security, which we very much are focused on providing, you are going to get a high level of compliance with the National Institute of Standards and Technology (NIST) Risk Management Framework (RMF). On the US side, there is also the National Defense Authorization Act, which requires organization and agency heads to certify that their enterprise is at a certain level of hygiene. If you have implemented this correctly, you should be able to instrument your environment in such a way that at any given time you know what level of security you are at, from a risk perspective.

There are a lot of benefits you get for cost, schedule, and performance -- all of that tied together in a way that you never would have been able to see from an ecosystem perspective, all at the same time. You may get one or two of those, but not all three. So I think there are some benefits that go along those lines that you are going to be able to see as a customer, whether you are in the defense space or not.

Gardner: Yes, I think we’re going to see these models across more industry ecosystems and supply chains. Clearly vendors like HPE have heard you. They recently announced some very innovative new flex-capacity-types of pricing, and GreenLake-branded ways to acquire technology differently in most markets.

I’m afraid we will have to leave it there. We have been exploring how pay-as-you-go models have emerged as a powerful way to align technology needs with business imperatives. And we have learned how global aerospace and defense integrator Northrop Grumman has sought a revolution in business model transformation in how it acquires and manages IT.

So please join me in thanking our guest, Ron Foudray, Vice President, Business Development for Technology Services at Northrop Grumman.

Foudray: Thank you. I appreciate it.

Gardner: And a big thank you to our audience as well for joining us for this BriefingsDirect Voice of the Customer digital transformation success story. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host for this ongoing series of Hewlett Packard Enterprise-sponsored interviews.

Thanks again for listening. Please pass this content along to your IT community, and do come back next time.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: Hewlett Packard Enterprise.

Transcript of a discussion on how pay-as-you-go models have emerged as an advantageous way to align information technology needs with business imperatives at a global aerospace and defense integrator. Copyright Interarbor Solutions, LLC, 2005-2018. All rights reserved.

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