Edited transcript of BriefingsDirect Analyst Insights Edition podcast, Vol. 31, on the outlook for IT in the face of the economic downturn, recorded October 10, 2008.
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Dana Gardner: Hello, and welcome to the latest BriefingsDirect Analyst Insights Edition podcast, Volume 31. This periodic discussion and dissection of IT infrastructure related news events with a panel of industry analysts and guests comes to you with the help of our charter sponsor, Active Endpoints, makers of the ActiveVOS visual orchestration system.
I’m your host and moderator Dana Gardner, principal analyst at Interarbor Solutions, and our panel this week consists of Jim Kobielus, senior analyst of Forrester Research. Welcome, Jim.
Jim Kobielus: Hi, Dana. Hi, everybody.
Gardner: Tony Baer, senior analyst at Ovum. Welcome back, Tony.
Tony Baer: Hey, Dana, good to be here again.
Gardner: And, Dave Linthicum, independent consultant with the Linthicum Group. Is that the correct designation these days, Dave?
Dave Linthicum: That's right. Thanks guys, good to be back.
Gardner: Very good. We’re going to talk primarily today about the burning issue of the moment, and hopefully not for the next 10 years, and that's the financial situation of fairly well-defined panic. We‘re not sure why, but there’s certainly a panic at this point in the global markets, and bailouts and other attempts by governments around the world not necessarily helping, so far. We’re coming to you on October 10, 2008.
Hopefully, when you hear this in the next few weeks, things won't seem quite as dire, but we are going to take a pulse of whether this is panic or whether this is a prelude. We’re certainly not going to look at this through the full lens of the economy. We’re not economists, and people will probably think we don't know what we are talking about, but we wouldn't be alone in that category right now.
So, we will focus it on what we do know a little about, and that is the IT sector, the software business, how this will affect IT vendors, users and enterprises.
First, we've heard a couple of different takes on this whole situation. IBM just came out with some fairly encouraging results, 2 percent real top-line growth and 20 percent bottom-line growth. So IBM says, “Not so bad,” HP had similar results and Oracle as well. They’re saying that we’re seeing some bumps in the road, but certainly not a meltdown. On the other hand, companies like SAP and Dell are saying that they’re really feeling it.
For my first question, I want to take this out to Tony Baer. Is this going to be something that drops the tide on all boats in IT? If not, who are the winners and losers likely to be?
Baer: Well, I think the winners are those who are likely to be more diversified into services, services that can help companies harvest more of what they already have. I was actually doing a mental comparison before we got on the call between, for example, IBM and SAP. In other words, why has IBM reported positive results and SAP hasn't. On first blush, they are both global companies, they both have incredible penetration into the Global 2000.
So, part of it is fairly hard to explain, you have to drill down a little bit deeper into the SAP’S acquisition of Business Objects, a two-product company With maybe some exceptions on the Business Objects side, it’s not so much new sales, but essentially maintenance and upgrades to new versions In a tightening economy, putting in a new version of SAP or NetWeaver is probably a discretionary expense.
Just look at IBM, which, besides the fact that it's much more diversified, has services. The fact is that in an economic situation like this, especially where there are a lot of known unknowns, having a services business is a good way of helping clients to discover new economies. And it's also potentially a much more flexible arrangement than having to put in an upgrade of a new version of SAP software.
Gardner: What I think I hear you saying is that companies that are in the services business, and that have primarily revenue through subscription, might fare better than those who are in a product cycle, where licensing and actual product upgrade, in addition to their maintenance, might be in a situation where people will postpone those upgrades.
Baer: Absolutely!
Gardner: Where does that put Microsoft?
Baer: Good question, because they are in a transition. I just had a fairly detailed briefing with them yesterday on their Software Plus Services strategy and that's clearly where they want to go, and they do have some impressive early wins. But it's obviously still not the majority of their business. In the short-term, I think it's going to hurt their business, because clearly take-up of Vista has pretty well-flagged, especially on the corporate side.
Obviously they are trying to cultivate the Software Plus Services side, but that business is still very much in its early in its cycle. In the long run, it will be a good strategy for Microsoft, but they are so early along that it accounts for a pretty slow proportion of their revenue. In the short-term, Microsoft is more vulnerable.
Gardner: I was at a Red Hat conference earlier this week. Their model built very much on subscription and support, not on licensing the software. They give it away essentially. They felt pretty confident too that this wasn't going to be a cliff for them. So, I guess that further substantiates our trend.
Jim Kobielus, how do you see the shaping up for IT vendors? Is there going to be a dichotomy between those who have a recurring revenue model around subscriptions, versus those who have little bit more reliance on software licensing?
Kobielus: By the way, full disclosure, I have a degree in economics from way long ago and I am not going to even try to be dangerous. . . .
Gardner: Well, you might as well, because they don't see that what's going on either, right.
Linthicum: There’s an instant CNN gig out there for you, dude.
Gardner: By the way Jim, you are pretty dangerous, so go right ahead.
Kobielus: Okay, I do see in any economic downturn in the things that get cut from corporate budgets, for example, large capital expenditure (CAPEX) projects. That's going to hurt a number of IT vendors in particular niches, for example the hardware vendors, and where it's a discretionary software upgrade purchase. Those are going to feel the crunch.
Ongoing maintenance of existing systems, existing solutions that will relatively weather the storm. In other words, just to keep on keeping on.
So, the business model that open-source companies like Red Hat have established, and likewise, very mature software vendors like SAP and also Business Objects in the business intelligence (BI) space, they will do relatively okay because a large percentage of their revenue is from maintenance and support.
Those who will get hurt are those vendors who rely on new-product sales, especially new product sales that are very much hardware-centric. And where that comes in now ties in with my core focus areas, BI and data warehousing. We see in the data warehousing arena more of a focus on appliances, the hardware-software bundles that are pre-configured and so forth.
So, all the vendors in the data-warehousing space, pretty much all of them have re-geared their entire go-to-market strategy around hardware optimization of their own with turnkey solutions.
How will this economic crunch shake out the data warehousing appliance industry, really the data warehousing market? In any downturn, users, large corporate IT, look to rationalize and streamline their vendor commitments. In other words, they consolidate to a few very large, very strategic vendors. So, the big guys will get bigger and the small, pure-play data-warehousing appliance vendors will be acquired or will vanish.
Gardner: Is that the flight-to-quality kind of effect, do you think?
Kobielus: “Flight-to-quality,” explain that Dana?
Gardner: Well, you are not sure about where vendors might be and you might want to have one throat to choke, a bit more opportunity to deal with them, and that they can bargain with you because they want you long-term business. They are in a more powerful position and so quality, not unnecessarily the buy side but on the sell side, makes some sense.
Kobielus: Okay, yes, it's very much the phenomenon. They are the dynamic in play here. I think that the larger data-warehousing vendors will do relatively okay, especially those who are well-established and have a substantial amount of maintenance and support revenue themselves. I’m talking about the likes of Teradata and Oracle and IBM and a few others.
But, right now, with the data warehousing and BI vendors, every time I talk to them, I ask them, “Okay, a substantial proportion of your business is in the financial services vertical. How are you feeling? Are you seeing any softness in demand for your solutions?” And pretty much uniformly, they say, “Well, so far so good. We’re not really seeing a huge cut back in orders, or even any substantial delays in placement of orders that were expected,” but everybody is sort of bracing for the worst.
Gardner: Alright, so what I heard from you is that there is certainly a benefit of subscription, but there are also certain niches within IT that are specialized and that are hot right now, like BI and warehousing, that adds such a competitive advantage that they are probably going to continue to invest there.
Let’s look at this not necessarily just through the selling but on the buy side, those people who are in IT shops. Let's go to Dave Linthicum. You have been in the situation of specifying and buying. About 70-80 percent of these budgets are already locked into maintenance, not a lot of discretionary spending. What kind of pressure do you think they are going to feel?
Linthicum: They are going to feel a lot of pressure with anything that can be cut in the short-term. It's really going to be more that there is so much stress in there, instead of just definite cutting, just tactical pulling of expenses. They are looking to morph the way in which they consume IT. I just did a survey yesterday. I basically talked about the economic downturn and their plans to implement strategic technology into their enterprise. And everybody came back with, it's going to increase in interest but decrease in cost.
In other words, people are going to move into more efficient technologies. They are going to look at a little bit more at cloud computing and other ways to save money and start moving aggressively in those directions.
I think IT and some of the IT leadership were just waiting for an excuse to drive in this unfamiliar, risky area. If their budgets are sliced, they still have the responsibility for doing very intense IT business processing, and they are looking for new innovative ways to do that. That's inclusive of cloud computing and services-oriented architecture (SOA).
I don’t know if you looked at the SOA market just in terms of services, but it seems to be exploding right now. I’m not sure about the adoption of technology and the selling of technology. That may be an after effect, after all of these SOAs start taking more strategic positions within these enterprises. It's definitely a game changer right now. I’m not sure if it's positive or negative, but it's changing the game.
Gardner: When we look at how these organizations, these enterprises will move to, as you say risky, unproven, or just innovative new ways. What aspects of IT do you think they are going to be more willing to offload to a cloud first? Clearly, there is going to be too much risk in some areas and acceptable risk in others. Where do you think we are first going to start to see business activities and IT functional sets and applications offloaded -- just because it's so much cheaper to do it that way?
Linthicum: I think it's initially going to be the office-automation technologies, moving to more of the lighter-weight processes, and then moving to more of the heavy-weight processes.
Gardner: Can you be more specific on an application-by-application basis?
Linthicum: Yeah. Instead of having a huge Microsoft infrastructure just for e-mail and calendar-sharing in groupware, and those sorts of things, moving to things that are in the cloud. This is obviously Google, but there is also a ton of other guys that are offering some pretty good technology -- information-sharing using similar infrastructure. They’ll start outsourcing that, versus maintaining all these data centers that are just dealing with e-mail and communication between people within the company.
Gardner: Sure, there are plenty of hosted exchange too. Even if you don’t want to move from Microsoft, you can go off-premises.
Linthicum: You can go off-premises with lots of stuff and the cost is always cheaper, and also it allows you to upgrade and innovate into new technological areas you haven’t driven before.
Next, would be tactical, software-as-a-service (SaaS) applications. Take some of the HR processing, which is driven by some kind of in-house system in the data center, and outsource that to the dozen or so SaaS vendors who are offering HR processing. That's kind of a light-weight business process.
Then, the next generation is even more risky, and I don’t see a ton of guys doing that initially. It involves some of the core business processes, and getting into an SOA kind of an initiative. Re-automating those, but also outsourcing a tremendous number that haven’t been done before for the primary reason of cost saving.
Gardner: I think I’m hearing from Dave here that not only we are now going to make baby steps towards significant innovation, but the economic pressure that's going to come down on CIOs and IT departments forces them more towards that transformational level of change. So, that could include a lot more SOA, a lot more virtualization, internal on-premises cloud infrastructures, and so on.
Jim or Tony, how do you feel about the possibility that more economic pressure is actually a catalyst towards transformation rather than iterative change?
Kobielus: You mentioned my name first so I’ll respond first and I’ll be brief, so Mr. Tony can go right after me. I see definitely the economic downturn is going to expand the footprint, as it were, for the cloud in data warehousing, where data warehouses are becoming ever larger in the hundreds of terabytes and now into the petabyte.
I’m seeing an upsurge in the number of start-ups and data warehousing vendors that now have cloud based offerings. For example Vertica and Oracle now support databases that can run in the Amazon EC2. There are other vendors, like 1010data, that are very much pure plays in the fact that they only operate in the cloud and they are very highly scalable, share nothing, and parallel process.
There are, of course, SaaS-based offerings on a subscription basis. In other words, where there is a capital expenditure crunch or a budget crunch, and users can’t afford to pay the millions of dollars to bring one of these petabyte-scale data warehouses in house, they are going to go outside to the likes of a 1010data or using Amazon EC2 to aggregate, persist these huge datasets.
They can do very complex analyses and also run a greater degree of their data mining and predictive analytics algorithms in that very cloud. It just saves them money, and it's not a huge capital expenditure. It's a pay-as-you-go kind of thing. I think that's going to be the trend and those vendors who are already out there could be the major beneficiaries of this current economic crunch.
Gardner: So, that might mean if you are going to go to market, you want to have a cloud avenue for your go-to-market activities in addition to on-premises, or even say an open-source support model, right?.
Kobielus: Yes, for sure.
Gardner: Tony, what's your take on the possibility of harsh economic times as actually a catalyst towards the increased transformation?
Baer: Well, I am going to pair a couple of words that would otherwise seem like an oxymoron, which is tactical transformation. In times like these, obviously you have changing economic conditions, changing in a very unpredictable manner. On the other hand, the financial crunch and the credit crunch is going to restrict the amount of resources you have at your disposal. So, you’re basically going to look very opportunistically. You are going to look at, let's say, the low-hanging fruit that will give you the greatest gain in savings or a way to respond to the market in a more agile manner.
That will be very much in the way that Dave and Jim mentioned, which is that you will be taking advantage of specific services in the cloud. You won’t necessarily do a global top down or enterprise-architectural SOA transformation, if you haven't done SOA already. But, opportunistically, if you are trying to take advantage of some of these cloud-based services to start doing mining on a more massive scale, at the same time trying to lower your risk, it will require certain applications or data source that you may have. You may need to conduct a transformation, where you will implement, more flexible architectures, data SOA architecture.
But you will do it opportunistically in these tactical areas, where you can take advantage of services in the cloud that give you the advantages of the transformation to solve the problem you need to deal with, and at the same time, minimizing your risk.
Gardner: So, they are going to be looking for innovation without a big CAPEX, and if they can do that at the same time they are shutting down their own high-cost, high-labor applications in data centers that will be particularly attractive.
Baer: Or put it another way, “Capital, what capital?”
Gardner: Remember, not all companies are like banks. They have cash on hand, or they have ability to raise capital in a variety of different ways, rather than just going to a bank. So, we don't need to lump all these different types of enterprises into just the financial crisis problem.
Baer: Agreed. It's not to say that capital is totally shut-off, but the fact is that it's going to be rationed and a lot more carefully. I was just reading the advice that all these VCs are reading, and what they are saying is that if you have capital, find ways of stretching it.
Gardner: Save more cash, hold your cash basically. Speaking of verticals, let's look at this now through the lens of verticals, which verticals will do well and which will not.
My first take on this is that the government vertical is actually going to explode and might even start going down this road towards transformation in a much more significant way. Now, we can't read the tea leaves entirely on the economy, but politically we do start to see quite a momentum around the Democratic ticket and potentially a substantial majority for Democrats in Congress. They have put down platforms that include significant investments in such things as energy, healthcare, and of course they are going to need to transform how the government and the financial sector work together to calm the markets down.
On the other hand some, verticals that don't look good include retail and manufacturing. The auto industry is getting whacked. So, as IT spending is sliced and diced according to vertical, do we get a net-net up, down, or flat, when we look across verticals. I want to take a look at that. Dave Linthicum.
Linthicum: Yeah, it’s great living in Washington DC, let me tell you, because I think no matter where this thing goes, there is going to be full employment. The housing prices have actually crept up.
I think that you’re absolutely right. People are going to look to government to solve some of these issues and bureaucratic changes are going to be built here in different divisions, and people are going to have oversight of the financial industry.
If the Democratic administration comes in, there is going to be more civilian spending, and there is going to be probably a little shift from the spending in the Department of Defense on the military side.
So, this area is going to be explosive yet again, based on some things that are occurring and based on the government taking power in particular industries that they think they can be helpful in taking power. You can argue whether that's a good thing or a bad thing, but you are definitely going to see a lot of job shifts as things shift to that vertical.
The retail space is going to suffer tremendously. They already have very narrow razor-thin margins. I think we are going to see a lot of the larger retailers suffer and perhaps go away. I think healthcare is going to remain fairly static, and I think some of their costs maybe reduced. As they start moving into more of a socialized medicine, if the Democrats take it there, there is going to be some big shifts there.
Believe it or not, even though you are moving into a healthcare-for-everyone kind of an environment, you are going to see that actually cost probably will go up, as a bureaucracy is put in place to maintain and administer that.
Finance is obviously going to be killed for a long time, especially the banking industry. That's going to be an area that isn't going to recover very quickly from what's going on right now, but I think that manufacturing ultimately will recover and we are going to see some good growth in the year 2009-2010.
Gardner: Why do you see manufacturing as doing okay?
Linthicum: Because, the need for products worldwide is down right now, because people don't have the capital or access to the credit to make that happen. However, they are going to continue to have to replace airplanes, factory equipment, those sorts of things. It's just going to be a pent-up demand, and I think that's going to basically get unleashed in 2009-2010.
You’re going to see the large durable goods, large manufacturing kind of systems. People are going to just spend money on that area and that's going to be a worldwide driven thing. It's not going to be just driven from the United States.
Gardner: Great. Jim Kobielus, you mentioned earlier that you saw financial organizations buying data warehousing services and solutions as sort of still growing, if not at the same rate. I'd like to have your take on the financial sector alone Sure, there’s lots of turmoil, lots of contraction, but that doesn't necessarily mean you can shut off your IT systems. Mergers and acquisitions, consolidation sometimes can have a short-to-medium increase in IT requirement.
Kobielus: Right, and one of the things, Dana, that occurred to me is that the financial vertical and the government vertical are becoming overlapped. There is a degree of nationalization already that's taking place. The government is taking back Fannie Mae and Freddie Mac. I think they have taken over AIG, but all around the world, you hear governments, especially in Europe saying, “Hey, we need to re-nationalize or, to some degree, exert tighter control over the financial vertica., I think this is everywhere in the world.
What we’re already seeing is that the government vertical, as they have indicated, will continue to grow, because it's going to exercise much greater oversight and equity positions within the financial vertical. I think the early part of this decade is a prelude to what we’re going to see in even greater abundance in the next 10 years.
After the whole Enron fiasco, with Sarbanes-Oxley and so forth, we saw the growth of this market and this technology called governance, risk management, and compliance (GRC) to exert tighter control over the financials of private enterprise, and bring greater transparency.
I think we are going to see now, the government exert ever tighter GRC reigns over the financial sector, to a degree unprecedented, because we now have government actually owning or controlling a number of the key firms in that space. So, the whole GRC sector is in an embryonic stage. There are a number of vendors like SAP and Oracle who have taken sort of a leading-edge position in that area. That will expand greatly, and we are going to see more of these risk dashboards and controls being implemented in the context of BI and the data warehousing investments that enterprises have already made.
In terms of the horizontals, the GRC sector will come into its own, and it will be primarily the driver. There will be the financials, and then it will be around the world. All governments will enforce the use of this kind of technology.
Gardner: Right, and at a higher abstraction, that really means governance, and as much as internal governance it's perhaps governance from the extended enterprise sense, where there is going to be governance that crosses organizational boundaries. That's not going to be done with folks holding clipboards. That's going to be largely automated.
It’s going to have to be enforced through policies and rules and governance engines, it sounds an awful lot like SOA, but we are not going to apply the infrastructure we have developed for SOA. Just like services, we can apply it across a multitude of different business processes and activities in order to satisfy what you are talking about.
Baer: This reminds of something I heard from Microsoft this week. I was in Seattle at their BI conference, and they were talking about how Microsoft internally is using their own BI tools and stack. They described a number of roles -- like marketing, sales, and finance -- and how they use BI. Then, I asked the person, “Okay, your CEO, Steve Ballmer, obviously uses BI, but does he have a risk dashboard or a compliance dashboard or tools?”
Clearly, Microsoft is under a number of legal and regulatory mandates, compliance and so forth, and the people from Microsoft couldn’t answer that question immediately. They weren't really quite sure what's on Steve's dashboard.
In three years time, every CEO in the world will have a GRC dashboard that tells them on any given day the hoops they need to jump through to satisfy the regulators, I think that's coming fairly soon.
Gardner: Not just regulators, but the market doesn’t want to be caught unaware, as we apparently have been with this meltdown. In the future, they are going to want to know not just what they have to do to comply, but what the unknown risks are in terms of how the markets themselves are behaving.
Let's go to Tony Baer. Tony, what's your take on the opportunity for governance infrastructure to move beyond SOA, and is the new environment for business a growth area for SOA governance infrastructure?
Baer: Yeah, big time. I was talking before about these opportunistic areas. In the case of governance, I don't know if I would call it “opportunistic,” but it is an area in which you do not have an option as to whether you comply or not. Therefore, the only economic way to provide all the information and to do all the audits without having to rip apart all of your existing back-end infrastructure is through a service's layer on top of all that.
Maybe I can come up with a cheap buzzword here, a buzz-line or a tag-line, such as “Son of SOX,” for what's going to become a changing regulatory environment. You’ll need a governance layer that can contend with changes in this moving target.
Obviously, the only feasible way, from an architectural standpoint, to deal with that is do a flexible architecture, and that's essentially what a SOA is.
I very much agree with Dave and with Jim in terms of what are likely to be the growth sectors, but there are a couple of extra points I want to plug in there. This ties in with this question. The financial industry itself will not be a growth sector over the next few years, it will be very much a consolidating sector, but guess what, as you consolidate, you need to invest in consolidation.
Imagine all these huge mergers going on. Wells Fargo just finally got the agreement to acquire Wachovia, but of course there will be a some litigation from Citibank. Also, Bank of America acquired Merrill and there’s the whole reorganization of Wall Street, from investment banks into banking institutions.
The fact is, there is going to be a lot of transformation going on, and it's not transformation to support a growing business. It's transformation to support a changing business. There will be a lot of investment there, in addition to whatever investment will be necessary to deal with the new governance risks in compliance requirements.
Another area -- and I wanted to slip this in because it's nothing intuitive -- but if you look back at past history during economic downturns, and I hate to use the 'D' word but back in the depression, and I hope we are not heading into one, what area boomed during that era? Hollywood, the film industry. People were going out to the movies for cheap thrills.
In today's environment, the equivalent of that is, if you already have an Xbox 360 out there, you are going to be buying more games. Those are cheap thrills. It's going to be cheaper than going out and buying a new HDTV or going out to Six Flags.
Gardner: That's interesting. We haven't talked about one sector, and that is the Entertainment/Web 2.0/Internet. We’ve seen some downturn in advertising, including Internet advertising, but is there an opportunity for buying $3 movie and downloading it, a $2 song, a $3 game. How might our Internet /Media/Entertainment economy fare and will it be sliced and diced between those who depend on advertising and those who are not?
Baer: Very much so. The only downward pressure on this would be downward pressure on households to cut expenses and, if they consider that broadband is a discretionary expense, that would be the ceiling there. My sense though is that today to participate in the modern economy, broadband is becoming a necessity.
Gardner: Yeah, it's a utility. It’s like water, electricity. It's one of the last things that will go, right?
Gardner: My mother is 93, and I finally got her to get broadband. So we won’t give it up.
Kobielus: I have to jump in here and be dangerous one more time. I have another degree in Journalism and I was primarily a student of the mass media. If you look at the depression of the 1930s, historians and people who lived through the period talk about, what kept them company, in the dust bowl or wherever when they didn't have a job. It was the radio, which had been introduced in the previous decade.
Now, if gosh forbid, we have something similar coming up in the teens of this decade, what is the new radio? It's the Web. And so, who are the new entertainers? Well, actually in many ways it will be each other. I mean, through the whole Web 2.0 user-generated content paradigm. If you think about it, that's cheap entertainment, because it's generated for free and there is an unlimited supply of it available over some pipe that you've got coming into your home.
Gardner: I'd like to point out that this podcast is coming to you completely free. Continue.
Kobielus: And we are free to say what we want on this podcast.
Gardner: Does anybody else have some thoughts out there on the impact on Internet and startups? What's the impact with startups? We have seen this slide deck from Sequoia Capital saying “batten down the hatches, no discretionary spending, hoard your cash. Is this the VCs overreacting, because it's their pool of money that's its stake, or aare there actually opportunities beyond what they are saying in these dire predictions?
Linthicum: There are huge opportunities out there. If you saw my column I did in SOA World Magazine, I think this is a great time to do a startup.
Number one, VCs be damned at this point. You don't need their money at all, just some angel investors to invest in some very minute infrastructure. With cloud computing out there and the number of things you can do from a marketing, application developer's, and outsourcing perspective, you can basically get a technology company up and running -- and profitable -- probably for the least real cost we've seen in years. It's a great time for people who are innovative, able, and resourceful to get out there and start technology companies.
There are two types of companies out there right now. There seemed to be the big behemoths that are very slow and cumbersome and strategically challenged, even though they are making a lot of money and grabbing a large share of the market. Then, there are the old maids and basically a lot of small startups that just haven't been able to get acquired to do their exits.
Now is a great time for small innovative new startups to get out there and help create new spaces, such as Web 2.0, and I think there are a number of SOA problems that needs solving as well. I'd love to see some startups get out there and take those problems on.
Gardner: So, unintended consequence of the VCs contracting might be laying off a bunch of engineers and entrepreneurs. They'll go out there and say, “Okay, what am I going to do, sit in my garage and cry or am I going to look for platform-as-a-service (PaaS) providers and cloud providers that will allow me to develop a whole new set of applications on the cheap that I could put on my credit card. Then, I only pay for infrastructure as I need it and as I can create a business model?
Linthicum: Yeah, one of the things I would love to see come out of this whole mess that we are in right now is some of the Sarbanes-Oxley stuff contracting a bit. Quite frankly, a lot of the startups out there are unable to do any kind of exit other than acquisitions. You have no chance to take anything public. It's economically not viable for you to do so, because of the cost of maintaining the regulations around the whole publicly traded company opportunity.
I would love to see the government reopen that market a bit and make it much easier for startups that are profitable, that have a good track record and good technology to get access to the public marketplaces. Right now, they have to keep going back to the venture capital community. In many instances, those guys are strategically challenged. They are not focused on a particular industry, they are basically just focused on investment. That's going to be difficult to going forward.
Gardner: So in the ‘30s, we had the Works Progress Administration (WPA), which got people out there with shovels -- and my grandfather was one of them -- moving stuff around in the city in order to create works. Perhaps with an Internet Public Assistance Program, we can let the government be the seed and even steer them towards solutions of the government’s needs.
Now, the government wants to hire investment bankers to solve the problem that investment bankers created, but perhaps there is an opportunity for technologists to be brought in to solve some of these problems too.
Linthicum: Absolutely. What if a couple of the billions of dollars we are pumping back into the banks just went off to assist organizations and start-up companies around the technology space. I think there would be a huge boom in the area, and it would create jobs and be profitable fairly quickly.
I think some of them would probably go away, but overall, I think that it would have a positive effect on the economy. If you think about 1999, we were doing so well, because of the innovations around the Internet technology and other things that were booming. I think we are able to do that again, but we are just putting so many regulations, so much bureaucracy out there, that it makes it very difficult for the upstarts to get going.
Gardner: One little subset on this media discussion would be the press. Jim Kobielus, press has been under a tremendous amount of pressure lately. How are folks like Sam Zell going to fare on their traditional media, as advertising dries up, going to the Internet, seeing appreciable advertising business uptake there. It seems to me they are in the dead-end situation.
Kobielus: There is an ongoing crunch in the whole media sector that continues to ripple and ripple. It forces people out of being full-time journalists. So, it's not a happy thing. There was a Doonesbury cartoon recently in which Rick Redfern had been forcibly retired from the Washington Post. He was told, “Go and be a blogger!” He said, “Yeah, I will be one of a trillion bloggers out there.” “Well, you have a special differentiation. You are ex-Washington Post.”
Everybody is going to be from the journalism space, and even publishers are going to be “ex-journalists.” They have to find some next stage in their career, and I think a lot of smart people are going to become, as Dave indicates, entrepreneurs, but who will be self-funded from whatever remaining savings they have. It's not going to be a happy thing until the credit crunch eases.
Gardner: We only have a few more minutes. Let's look at some other potentially unintended consequences of all this.
If technology company stocks plummet some more, we might see some interesting things there. Somebody floated the idea that Sun Microsystems might just take its cash and buy itself out when its stock is trading at $5 -- and that was a stock that had a reverse four-way split. So it's down like a buck and change from what it was a few years ago.
Also RIM, still a strong company, a potentially for a takeover, is looking back to the buy side. What sort of interesting unintended consequences might we see among the vendors. Any thoughts?
Kobielus: I have no thoughts. Guys?
Linthicum: Just from your first point, I think you’re going to see some guys who are going to buy themselves off from the market for now, and I can't blame them.
If I were CEO of a publicly traded company, and my stock price was below my market capital, with cash in the bank -- where some of them are -- I’d get off the market quick, because it's a good deal.
Gardner: Absolutely.
Kobielus: I think we've talked in a previous podcast about the upsurge of private investing, of companies going private. I think the difference this time will be that if companies are going to go private, they are going to have to basically bootstrap it. They are not to be able to get a Silver Lake or anybody like that in the short-term.
Gardner: So a takeaway might be, if you can ride this out for two or three years, there is a buying opportunity, even buying yourself.
Kobielus: Right, if you get cheap enough. The other dividend of all that is once you go private, of course, you don't have to worry about all the GRC.
Gardner: One other subject that we haven't talked about is the analysis business. Is this an opportunity for people that need to know more about what's going on, and are folks like us going to be okay? Any thoughts?
Baer: Folks like us. Yeah. I think everybody is becoming an analyst. There is a whole blogosphere. Everybody in the blogosphere, to some degree, is an analyst. So, we’re going to be okay in the sense that we can still do analysis to our hearts delight for free, if we so choose.
In terms making a living on it, I think more-and-more analysts need to be half analyst, half consultant, doing projects for those who will pay us to actually show up and attend to only their needs and help them out with projects and also to make sense of what's going on in the space.
In any good time or bad time, analysts are essentially like reporters or journalists. We not only are in the industry, but we are in a sense above the industry, surveying what's going on and reporting to everybody else what we can see in terms of broad patterns and trends.
So I think there is a greater requirement on analyst to come in and offer reassurances or to tell people, “Okay, this strategy that you have been taking is not going to pan out. You better jump ship and try something different.”
Gardner: So changes are growth engines.
Kobielus: Yeah, and from that standpoint, it basically supplements the fact that there is going to be a decline in the journalist population, essentially a migration towards the extremes, which is on one hand journalism and this is not a development.
I’m very happy to see is that, as the financial base and the business model for journalism businesses is evaporating at this point, you are seeing more-and-more citizen journalists taking up more of the load. People are reading more blogs. They are not buying newspapers.
On the other end, it will create an appetite, and it will create a demand for people who are above the level of citizen blogger to say, “I have some professional credentials, and I can provide you some value-added analysis on your positions, so that you can essentially improve the competitiveness of your business.”
Gardner: Traditional and trade media will contract, which opens up a vacuum that can be filled by the expert-blogger function.
Kobielus: Right, expert blogger, but also the fact is that you get what you pay for. If you are a business and you are trying to improve your chance of surviving the market, you are going to work with key experts, key thought leaders out there, and you will pay for that.
It's not to say this is an infinite market for analysts. The business model for analyst firms is going through some stresses. Especially when you take a look at blogging. A lot of analyst firms have really not adapted to the blogosphere very well, or the more rapid flow of information.
So, even though I think they will continue to be a need for analysis and for paid analysis. The analyst industry or the analyst-firm industry needs to adapt to the new world of faster more instantaneous communications.
Gardner: Well, great. We've had a well-rounded discussion about the situation. We found some bright spots and some counter-cyclical possible growth areas within this sad situation we find ourselves in. But, as we exit I want to go around the panel and on a 1-to-10 scale, with 10 being flush, financial nirvana, and 1 being a dead-pool bankruptcy, where on a scale of 1 to 10 at a median level will the software business be in a year from now, let's start with you, Jim Kobielus.
Kobielus: I give it 5, straight down in the middle. I am trying not to lean towards either the manic or the depressive ends of the spectrum here. I think that some will do quite well and some will not. It's just a matter of taking a deep breath and recognizing that the economy goes through cycles, and the economy occasionally goes through panics -- the banking panics of the early 1900s and the late 1800s. We are sort of in the middle of one right now, which is an interesting phenomenon. I say interesting in the old Chinese sense of may you live through interesting times.
This has been a harsh decade. We started off with a tech-crunch and we are going to end with a tech-crunch, and a financial crunch, and it's going to take some time to sort it through, so just breathe easy.
Gardner: Tony Baer, 1 to 10, software industry.
Baer: Well, I'll give it 4, only because there are different headwinds on this go around. On the positive side, as Dave was mentioning before, the fact is that the barriers to entry are so much lower. So, if you can take advantage of the cloud, you can start in your own garage, and essentially marshal resources for very little cost. Basically, if you can sustain yourself and live close to the ground for the next two or three years, you and many others who are taking advantage of platform-as-a-service will have a whole new generation of solutions that will be ready for the next uptake.
Gardner: Dave Linthicum.
Linthicum: I am going to say 7.5. There are huge opportunities for the innovative and resourceful few out there in the market space. I think that technology shift, moving to higher regulations, you’ve got this “mother of all Sarbanes-Oxley” coming. Everybody is going to need folks in there to re-architect and re-automate and re-cast these businesses.
Then I think if there is going to be some upside in the future. Every cloud has a silver lining and those who are smart out there can certainly find the silver linings in this cloud. I think IT is going to stumble a bit, but a lot of more innovation is going to come into play, and people are going to use the cost-reduction capabilities, become a little bit more modernized and innovative in moving to cloud computing and SOA. All that stuff is going to accelerate tremendously in the next couple of years.
Gardner: I am going to go with 6.5. I agree that this is a transformation period, not just a contraction. I think this is going to necessitate a lot of the things that people have been working towards, but accelerate that, and force them to cut bait on the old stuff that doesn't work and adopt the new stuff that does. So, I’ m fairly bullish on IT, but with a lot of spottiness. There are going to be some pockets of certain failure and the ability in people to move among and between those is what's going to become essential.
I want to thank our panel for a very interesting discussion about the IT sector in this economic maelstrom.
We have been talking with Jim Kobielus, senior analyst of Forrester Research. Thanks, Jim.
Kobielus: Thank you. It was great!
Gardner: Tony Baer, senior analyst at Ovum. Thank you, sir.
Baer: Hey, thanks, Dana!
Gardner: Dave Linthicum, independent consultant with Linthicum Group. Thank you.
Linthicum: Thank you!
Gardner: I also want to thank our sponsor, the charter sponsor for the BriefingsDirect Analyst Insights Edition is Active Endpoints, makers of the ActiveVOS visual orchestration system. I am Dana Gardner, principal analyst at Interarbor Solutions. Thanks for listening, and come back next time.
Listen to the podcast. Download the podcast. Find it on iTunes/iPod. Learn more. Sponsors: Active Endpoints, Hewlett-Packard.
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Transcript of BriefingsDirect podcast on the outlook for IT in the face of the economic downturn. Copyright Interarbor Solutions, LLC, 2005-2008. All rights reserved.
Showing posts with label Linthicum. Show all posts
Showing posts with label Linthicum. Show all posts
Friday, October 17, 2008
Wednesday, August 22, 2007
BriefingsDirect SOA Insights Analysts on Defining SOA and IBM's DataMirror Acquisition
Edited transcript of weekly BriefingsDirect[TM] SOA Insights Edition podcast, recorded
Listen to the podcast here. If you'd like to learn more about BriefingsDirect B2B informational podcasts, or to become a sponsor of this or other B2B podcasts, contact Interarbor Solutions at 603-528-2435.
Dana Gardner: Hello, and welcome to the latest BriefingsDirect SOA Insights Edition, Volume 22, a weekly discussion and dissection of Services Oriented Architecture (SOA) related news and events with a panel of industry analysts and guests. I’m your host and moderator, Dana Gardner, principal analyst at Interarbor Solutions. Our panel this week, and this is the week of
Joe McKendrick: Hi, Dana, glad to be here.
Tony Baer: Hey, Dana.
Neil Ward-Dutton: It's great to be here, Dana. Thanks for having me.
Todd Biske: Good morning, Dana.
Dave Linthicum: Glad to be here, Dana.
Brad Shimmin: Good morning, Dana.
Let's start with the larger topic of the day. What's been coming up in some of the blogs and in some analyst reports is this notion of people overusing the term SOA categorically, and the suggestion that we should go back to the roots and get pure again about SOA. Some are saying that this other business around it being application types, application support, runtimes, and actual products and platforms needs to be muted a little bit.
At the same time, we’re also seeing discussions crop up around such things as platform as a service, particularly around the Salesforce.com ecology and approach, and also integration as a service. I recently did a sponsored podcast with Cape Clear Software on this topic. Then, of course, there's the the long-term discussion around software as a service (SaaS), and the ability to use Web services and a variety of application interfaces and APIs to avail yourself of hosted online applications and services.
So, let’s take this out to the group. Are we confusing topics here? There's this notion of things off the wire, outside of the domain of the enterprise. Should that remain separate and distinct, as a discussion point and as a direction for enterprises, from SOA, which is more of an architectural initiative and philosophy within the confines of their enterprise IT systems.
Let's go to Todd Biske first, because, Todd, you're an enterprise architect and you’re working with clients in the field. How do you come down on this? Is SOA inclusive of all of these "x as a service" or "blank as a service" or are they actually part and parcel of the same direction?
Biske: I really think it should be inclusive of all these external platforms. SOA, in my opinion, is really something that’s driven out of enterprise architecture. To go back to the simplest view, it's about the services. If you are able to get services from outside your firewall, those should be included as part of your SOA. You absolutely need to include the availability of external solutions as contributors to your overall SOA for your enterprise. I know Dave has talked about this a lot as well.
There's a lot of debate as to whether SOA is the whole kitchen sink. There's a Yahoo! mailing group, and they’ve had the same debate going on just recently on not just the technical aspects, but whether SOA should encompass all of the culture change that people are saying is so critical to success with SOA. Are we just muddying the term by trying to lump all of this in together?
If we look at it from what it takes to be successful, if you leave those pieces out and focus strictly on the technologies associated with it, you’re not going to get success. At that point we’re not achieving the goals we set out to do. So, it needs to include all of these concepts and have that factored into your overall enterprise approach.
Linthicum: I agree with Todd. It's inclusive. In fact, look at my career in starting up Grand Central and Bridgewerx and all those companies, where it was all about creating SOA outside the enterprise and delivering it as a service. It's what Salesforce.com is doing with their Apex platform today, what they call Salesforce SOA.
So, it's an architecture, and ultimately lines are blurring between where the enterprise stops and the Internet starts. With mashups, outside-in services, all the stuff Google and Microsoft are working on, and all the services that are being consumed within the enterprise, it definitely is inclusive and it has to be considered in the context of the architecture, enterprise architecture, and architectural patterns like SOA.
Gardner: Tony Baer, do you think that this is begging too much of a typical enterprise IT department to both be managing transition and transformation to SOA internally, and, at the same time, start to work with these off-the-wire elements -- be it platform, integration, or services and applications?
Baer: I’m going to take this to another level, which is the business level. If you look at the way business has evolved, or supply chains have evolved, over the past 20 or 25 years, they're really evolving into an ecosystem that is very partner dependent. When you buy a product that is manufactured by a company or that’s branded by a specific company, chances are it is manufactured by somebody else.
So, SOA and enterprise architecture really need to echo or support the direction in which business is going. More and more enterprises are becoming virtual. As a result, if you're running your internal processes, the chances are you’re going to be interacting pretty intimately with one of your business partner’s external processes.
Baer: It's not just outsourcing. You’re working in coalitions. For example, look at how a car is put together today. There have always been suppliers, but suppliers are now taking higher-level roles. They're actually co-designing. When one of the automakers or OEMs designs a car, chances are they’re designing it with their partners. In the old days, they designed the car and then sent out parts orders to partners.
So, SOA in IT and enterprise architecture really needs to support the way the business is going. Business is becoming more virtual. It includes external processes and partners, and SOA must support that.
Baer: Well, it's cyclical. I remember back around 1990, there was a grand announcement by Kodak, "Well, we’re outsourcing IT, because, guess what, IT is not part of our business." I’m not even going to fast-forward this 20 years. I’m going to fast forward it three years. Kodak realized, "You know something? IT is part of our business." They had to take large parts of those 10-year contracts with IBM and, at that time, Digital and, I believe, EDS, and after about three years those contracts essentially collapsed in. They dropped a number of provisions. Today, Kodak is saying, "We’re a digital business."
It's a cyclical thing. If you outsource without managing it, if you just throw something over the wall, you’re going to get what you paid for.
Ward-Dutton: I thought Tony made some really interesting points there. Certainly, one of the arguments that you could make for a long time about enterprise architecture was that it was locked into a way of thinking that was very last century. It was locked into this evolutionary level of thinking that started around the kind of information-engineering movement that happened in the 1970s and 1980s. It assumed that you were building everything yourself, in long-running waterfall projects, and things didn’t really touch other things. Everything was built in isolation.
That was a big problem for enterprise architecture, because, as Tony pointed out, businesses have been pursuing this kind of virtualization agenda for a long time. Think about EDI and value-added networks (VANs), all that kind of stuff. All of that was designed outside the purview of IT and was done by business teams. The enterprise designers or the architects had no real input into that whatsoever. They were focused on the stuff they build internally for the organization. It's long overdue that architecture practice starts to take a more holistic view of an ecosystem of technology provision.
This thinking is long overdue. SOA, shouldn’t be constrained, as Todd just said, by a particular hosting model, where service is provided from, or indeed a technical choice. It's all about the services and it's all about the architecture, but that shouldn’t be constrained by where that service happens to be delivered or who it happens to be delivered by. You can pursue SOA in an environment where the resources are widely distributed, where responsibility is federated. Indeed, more and more, that’s how people are going have to do it. This is all natural, and as Tony said, really, really needed.
Shimmin: Well, yes to both. IT really has been isolated, and I think we can all look at the cataclysmic failure of the idea of the waterfall method of development, as a pointer to that. You really can’t work in a vacuum, just toss code over the wall, and hope that it runs somewhere. As we were saying with the failures in early investments and outsourcing, I think those were all built in that regard.
Nowadays, when you start to look at what SOA has done to the industry and how it has impacted IT, it has become an enabling notion that allows companies to employ methodologies like the agile development method, that are more kind in how they view the lifecycle of software and where software runs. It's a partnership with the business and perhaps with outsourced parties that might be hosting that software.
SOA, as a collection of standards, technologies, and ideas -- which is how I look at it -- is already playing a very active role in allowing that pendulum to swing back towards platform-as-a-service, integration-as-a-service, SaaS, infrastructure-as-a-service. It's actually enabling those.
If you look at the vendors that we cover all the time you will see that everybody from VAN vendors like GXS, Otics, and
Microsoft is doing the same with their BizTalk Services and with their dynamic CRM, which is tied with BizTalk Services. I think we’re seeing everybody really jumping on this bandwagon.
The best example is one we've already alluded to, Salesforce.com. When I look at them, I see a hosted service that utilizes SOA ideas to facilitate a secured, reliable, manageable, business-savvy domestic environment between your backend systems and their backend systems, which just happen to be on somebody else’s servers.
McKendrick: ISB is something that Microsoft has out there. They calls it BizTalk Services, and it’s now in the community technology preview phase, where they’re offering the functionality of their BizTalk -- essentially their ESB -- on an online basis to companies that don’t necessarily want to invest the time, capital, money, or staff to build their own ESB or SOA.
McKendrick: That’s exactly what they’re hoping to accomplish. You see it happening across the breadth of their product line, with the whole Microsoft Live. You can see them moving to this notion of SaaS, platform-as-a-service. I think they see the handwriting on the wall.
One thing I always say is that Microsoft doesn’t make a move unless it sees a mass market available to pursue. The fact that they’re pursuing the ISB shows that they see it's reaching critical mass in the market. Their natural base is the small- to medium-sized business. It’s not the large corporations that IBM, Oracle, and Sun serve.
McKendrick: Exactly. One model that makes it easy for the business to understand SOA could be an internal SaaS that units of the company are making available to the rest of the enterprise.
What happens is you have this software and it’s something the business can understand. There is a division, maybe at the CIO’s office and maybe somewhere else in the enterprise, that’s deploying these service-oriented applications. The services are available for reuse across the enterprise, across the walls of the enterprise. The enterprise has the option of either picking up these services internally or picking up services externally from another partner. The enterprise becomes both a provider and a consumer of services. It’s two-way outsourcing.
Does anyone else have a reaction to this related area about IT departments shifting in their business models and how that relates to SOA? Todd Biske.
Biske: One of the things that I heard as we went through this conversation, and you hit on it with ITIL and becoming a service provider, is the notion of service management. When we’re looking at why there’s been an outsourcing trend and a backlash against it, a key factor is the degree of service management that’s provided.
It’s one thing to need this capability and go off and find it somewhere, but once you start using that, you realize that there’s this whole degree of transparency that’s needed to understand how that service is being used, where the results are coming from.
In the initial stages of outsourcing there was a lot of people saying, "We want to be a black box and we don’t want to expose any of our dirty laundry, because then our customers may go away." Information needs to be provided to give good service management, as well as to help the customers of those services understand how it’s being used and where they can make incremental improvements on it. It creates a feedback loop.
We can look at virtually anything, whether it’s blogging or podcasting. Before we all got on the call. we were talking about the metrics of how many people are listening to the podcast. By looking at that information we can make things better. We can target audiences or understand exactly who the audience is.
The same thing applies now in the service management domain. I need to have visibility into how the consumers are using the service, where they’re getting good experience, where they’re not, are there trends, and how it’s used. If I’m not getting that information, whether it’s from an internal service provider or from an external service provider, that’s going to start to have an impact over time.
That’s where it leads into culture change -- adopting things like ITIL and understanding service management and what it means to be a service provider. IT is used to building solutions. They put it out there and they go on to the next project. That’s not service management; that’s project management.
It raises the question of whether the complexity starts spinning out of control, but we could combine a couple of these observations today. We’ve talked about governance in terms of comparing it to a government, whether you do a democracy, federalized, local, or state. But, if we consider ITIL Service Bureau, we recognize that one of the best governance mechanisms for the most complex things -- business and the economy in general -- is capitalism, competition, or even more crassly, Darwinism.
Suppose we open up services and allow them to compete for the users and/or the lines of business managers to be able to choose among an external service, an internal service, a shared service, a supply chain service within an ecology. Does anyone think that a capitalistic or Darwinistic approach, if this follows its course, will allow for the best form of governance, which is, "Let the best service at the lowest cost win?"
Ward-Dutton: I say yes and no to that. Competition, or the threat of competition, is sometimes a very, very valuable thing to produce the mix. However, you've got to remember that if you’re talking about free market, one of the side effects of a free market is that an awful lot of companies go bust, and that’s fine. If you’re at the top, looking down, you’re just looking at the performance of a market or an economy overall. It’s fine if companies go bust. If it’s your company, though, that’s not so good.
If you’re looking at IT provisioning in this context, you've got to be careful. You've got to put some regulations in place. You don’t want your own internal IT provider spending a heap of money on stuff that isn’t going to be used, not going out of business, but essentially causing business problems, because they’re wasting a lot of money.
So, you’ve got to have layers of governance, i.e, rules and frameworks about how planning gets done, how priorities are set, what’s important, and what’s not. Those kind of things have to be decided, so that a company knows collectively where it wants to go, what it’s trying to do, and what that means for IT. When you’ve got that in place, then in constrained places you can start to drive competition by saying, "In these places, we want to look for competitive solutions, but it’s not always going to be the right thing to do."
Shimmin: Well, as much as I love socialism I have to say that I’m on the capitalism side of this. I just want to throw out a caveat that if we’re talking about IT departments becoming providers of services, we need to make a distinction between internal provision and external provision, because not every company is a Google that’s going to throw out a Google Maps widget or WSDL, and suddenly everyone is going to be utilizing it, and everyone is going to be happy.
Companies have a better shot at that, however, than doing this internally, because internally you have a lot of federated environments, as we were just saying, with departments acting as their own companies. The whole notion of charging back for services and being accountable for how much you use those services is something that a lot of companies are certainly not willing or prepared to embrace right now. So, the internal adoption of this notion is a long ways off for a lot of companies.
Externally, there are providers and consumers, and the average enterprise is most likely not a provider of services like that. They’re consumers of services from companies, who, as Neil was just saying, hopefully are going to be around for a while. If I'm going to subscribe to one of those services, as a Web service, I want to know a couple of things.
One, I want to know that the company is going to be around a while, because I have an investment in that service, in setting up the interface for it -- for example -- and testing it out, because you don’t just grab a URL WSDL, throw into your designer, and poof, you have a service running. You have to test it and make sure the data models match, etc. So, I want to make sure that my investment is going to be protected.
The second thing is I want to know that the service level agreement (
Linthicum: Absolutely. The SOA architects ultimately need to figure how these services are consumed and how they have value with their internal systems. I would argue, however, that we are getting more experienced at picking outside-in service providers through the whole SaaS notion. However, they deliver it through a visual interface which is, in essence, a Web site, but it’s becoming much more than that.
Salesforce.com, Amazon, eBay, all those guys, are making tons of money now renting their Web services, and the ability to provide the behavior and the value through Web service is going to be a core component. Businesses are probably more advanced than we think they are in integrating those things into the core systems. It’s at a rudimentary level, but ultimately becomes outside-in services, integration with the SOA, and that’s where the architects come into play.
For those that are listening, perhaps they get the sense that creating SOA internally, identifying and cultivating SOA architects, will allow them to, in the future, avail themselves of services across a wider panoply of sources and business models, and ultimately they can become the beneficiary of these market forces. This capitalistic approach towards lower costs, higher productivity, and less waste becomes another economic impetus to pursue SOA. What's your reaction to that, Tony?
Baer: I don’t think there's question that this really follows how companies are running their own businesses right now. It's just not possible to become agile and be competitive if you try and make every thing yourself. So, it will be inevitable that you will, at some point, consume external Web services.
I want to get back to the governance point from before. With all the regulatory compliance mandates that we have to deal with at this point, we have to worry about who is handling financial data. Who is handling customer data? Who is protecting identities?
There's no question that a free market is going to emerge for services, but, at the same time, it's going to have to be accompanied by some very heavy doses of transparent governance. I may need to know, for example, my partner’s mechanism for federated trust and authentication. The short of it is, I don’t think you can stop continental drift in this case. You are going to have a free market of services, but you're also going to need a very transparent governance to support that.
Baer: You have to conduct your own governance. It’s a federated model. It’s not going to be any sort of United Nations agency that's going to be top-down type. There probably will be industry best practices that will be drawn up by industry bodies, but ultimately the enforcement has to be at the enterprise level. You have to decide what protections you need and what you expect from your partners?
Baer: I thought you were going to go towards something more like the Underwriters' Laboratory model, where we have some sort of external certification agency. Actually, you made a good point where you take a company that's very established and say, "Well, we're going to trust Microsoft, because they're too big to try and risk having a bad reputation."
Baer: I would agree with you. I don’t see any new top-down agencies parachuting in. It’s going to be, "I'm going to deal with trusted partners. I expect Microsoft is going to be around for a while. I expect that, considering the type of business they’re in, that they’re going to conduct themselves with the highest standards of good governance."
Gardner: Did we go right back to where we had been, which is five or six major suppliers, and "I'm going to be a IBM shop -- or a Microsoft shop -- or an SAP shop," but it’s going to have to do with the ecology of services and not just the packaged applications or platforms? Is this just going to evolve into another instance of major vendors controlling this. Does anybody have a reaction?
Shimmin: Well, I think it will be the same ecosystem we see now, where you have different tiers in the marketplace. Depending upon how important that service is to your business and your application, and whether or not you can withstand a change in that service, of that service going away or not, having the service availability or not, having the governance or the ability to control the data as you would like, then you might be able willing to go with somebody that's smaller than Microsoft.
Shimmin: I don’t see why not.
Ward-Dutton: You’re getting towards a cooperative model in that kind of environment.
Ward-Dutton: You are, if you're talking about a community banding together to make its own of autonomous decisions about who's to be trusted and how things are going to happen, without any kind of patronage from a benevolent dictatorship like a Microsoft or whatever.
Ward-Dutton: There is space for all sorts of models. I know the B2B exchange thing in the late '90s was over hyped, but Cognizant is still doing some pretty healthy business in the automotive sector, for example. That's not an open-source model, but it is a kind of industry driven, bottom-up collaborative effort. There are all sort of models, a spectrum of commercial models which can work.
It wouldn’t be open source particularly, but a kind of a non-profit community-driven type of approach could be equally valid. I don’t think it’s likely to be one model winning over any other. There are a whole load of things that are likely to have a role to play.
Shimmin: I feel that the open-source vendors are well positioned to get into this space, because you're buying a service, whether it’s support, installation, custom development, etc. It's a service that you're buying from them. You're not buying software. Companies are becoming much more accustomed to that and comfortable with it. Let’s say you have an open-source Mule version that's hosted within the ESB, Mule ESB hosted, maybe New Source is the company that runs the data center somewhere, and they provide SaaS. There's no reason why they can’t, and it would fit well with their model.
If people have transparency on how services are used and consumed, they should also have transparency to share their experiences with those services. If openness and the ability to create community dialog around whether services are being well provisioned or governed, or if costs and benefits are out of alignment, that this might also provide some grease on the skids of competition and efficiency towards the best solution that the community then adopts or shifts.
Any thoughts about how openness in networking, from a sociological point of view across the network, might keep this in some sort of checks and balances?
Biske: It’s part of any kind of capitalistic approach to this. Customer feedback is just part of the market dynamic, and that certainly can make or break somebody. If you're not factoring that in and incorporating what your customers think in leveraging that information, it’s going to come back to haunt you.
I had another comment on the open-source piece as well. There is still going to be plenty of room for smaller companies, closed-source approaches, in these vertical domains. One of the bloggers that I follow has commented that you don’t see a lot of open-source efforts in niche vertical areas, and we're talking about governance and the impact of regulations.
You don’t see people who, in their spare time, are following the new SEC regulations that are coming out and are trying to offer open advice on how to best meet source regulations.
Those who develop software have always had formal jobs and careers based upon it. It’s also been a hobby for lots of people, and has helped the open-source movement. I don’t know too many people who like to follow regulations as a hobby. So, to have this kind of open-source model to handle governance, the broad horizontal domains will continue to see pushes in that.
In these niche areas, where it requires somebody being paid to understand all of those regulations from the various government agencies, that has to go to a proprietary model. One, it’s just not as interesting, and two, it’s not as big as a marketplace. So, you have to get a level of niche expertise and understand who your customers are going to be.
Moving on to our next subject, it's a little less global or universal in scope. The IBM acquisition announcement about DataMirror. Brad Shimmin, tell us a little bit about how you view this announcement and how this will or will not strengthen IBM’s hand in information management?
Shimmin: If you look at this from purely a master-data-management, or just data-management, perspective, it makes sense. It’s something they should have done, and they already have a good deal of energy being extended toward that. So, yes, "yippee-skipee," but what gets me going about it is just thinking about how IBM, and every other vendor that has its toes wiggling in the SOA pool, is really looking to build complex event-stream processing and event-driven architectures on top of their solutions. This allows companies to stop thinking about their processes.
Just as you build the process, you throw it out there. If it maxes the server out, that's a bad thing and you go from there. You have your process running. It has interdependencies upon these other processes, these other servers, these other resources, etc. Over time, there are a number of events that take place relative to that process. Companies want to be able to look at that stream of events in context and over time and be able to make decisions. They also want to have automated actions taken upon those. Something like DataMirror gives IBM the opportunity to do that.
Shimmin: It’s a necessity. Everyone has come to understand that you need to understand the data in the transaction as well. Most of the vendors that we cover in the space either do that or have woken up and smelled the coffee, and are making a lot of efforts in that direction.
McKendrick: Well, that's a tough one to call, Dana, because they are not actively in the data-management space per se. They don’t have the robust data architecture products that IBM, Oracle, Microsoft have. Sybase as well.
I could see HP emphasizing its service aspect in this regard, really getting into this with its service’s space. Sun is a tough call. It’s sometimes tough to keep track of what Sun is trying and trying not to do.
Baer: Well, actually I was doing a study at, of all places, a Telco software company. What struck me was that as part of their SOA strategy they also embraced a very heavily federated data model. If you think about it, it’s the perfect compliment to a SOA strategy, because SOA is built on the idea of a loose coupling of all your processes. If you're really going to realize the promise of that, and you have a lot of different data sources, which is the case in most large organizations today, a federated data strategy, which essentially abstracts the data from its source, is the perfect compliment to realizing the promise of SOA.
I'm not surprised to see that the software business is doing very well, and especially companies that are very heavily involved with managing data in some ways are performing. It's not a big surprise.
Baer: No question. Think about the one key piece that DataMirror brings in there, which is the whole changed-data capture. I can imagine a lot of business scenarios, where that itself could be packaged as a very high in-demand service.
For example, if you're doing any type of market watch or real-time supply-chain tracking, you don't care about all the routine data, when there's no change in the stock or when things are moving on schedule in the supply chain. You want to know when exceptions happen or when things change. I can see this DataMirror capability being packaged into a service that’s not just changed-data capture, but event notification. It fits perfectly in that picture.
Ward-Dutton: How long have I got? 30 seconds?
Ward-Dutton: The role of data is very, very complicated and gives people a lot of headaches. Certainly, this seems to be like a wave-particle duality thing between service and data. If you pursue SOA too simplistically, you just say, "Listen, what's important in the way I design things and architect my environment are services and that's all that matters. That's the primary organizing concept." Then, what happens when you get to data is a whole heap of trouble.
Equally, if you take a very data centric perspective, it can cause problems, when you think about services. When you just think about a service that you're going to reuse in multiple contexts, you have to think quite carefully about implications for the way that data is stored. Clearly, consistently mapping data architecture and SOA architecture is a challenging thing.
What's clear from the adopters I've spoken to, is that you can’t ignore information architecture when you're pursuing an SOA initiative. It’s vital to understand the implications for data architecture and capabilities like federation, changed-data capture, and synchronization of data across boundaries. So, there is a very strong play here.
I wouldn’t go as far as to say that IBM, HP, and Sun are at a disadvantage. I think it was Brad just said, I am not sure, so many people on this call. It’s a cast of stellar participants. Someone was just saying that these guys have never been data-management players, and there are so many things to say about Sun's software strategy, I'm not going to get into it now. HP has managed to survive and is now thriving, but focusing in a completely different area of software delivery. They are much more about management process, quality, and so on, and they are very agnostic in terms of the middleware layer and data layer, and that works very well for them. So, I don’t see why there should be a bigger problem.
I want to thank our participants. It's been another interesting discussion. Joining us today have been, Joe McKendrick, Tony Baer, Neil Ward-Dutton, Todd Biske, Dave Linthicum and Brad Shimmin. Thank you all for joining.
This is Dana Gardner, principal analyst at Interarbor Solutions. You've been listening to Volume 22 of BriefingsDirect, SOA Insights Edition. Thanks and come back again.
Transcript of Dana Gardner’s BriefingsDirect SOA Insights Edition, Vol. 22. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
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