BriefingsDirect Insights analysts probe future of online advertising and find transactional lucre lurking

Edited transcript of periodic BriefingsDirect Analyst Insights Edition podcast, recorded May 9, 2008.

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Dana Gardner: Hello, and welcome to the latest BriefingsDirect Analyst Insights Edition, Volume 29, a periodic discussion and dissection of software, services, cloud computing, and 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 distinguished panel this week, and this is the week of May 5, 2008, consists of Joe McKendrick, an independent analyst and prolific service-oriented architecture (SOA) blogger. Welcome back to the show, Joe.

Joe McKendrick: Thanks, Dana, good to be here.

Gardner: We’re also joined by Tony Baer, a principal at onStrategies and also a prolific software blogger. Welcome back, Tony.

Tony Baer: Hey, Dana, top of the morning.

Gardner: And, last on our panel this week, Phil Wainewright, an independent analyst, director of Procullux Ventures, and also a prolific software-as-a-service (SaaS) blogger. Welcome back, Phil. [Update: See Phil's blog on this topic.]

Phil Wainewright: Great to be back, Dana.

Gardner: Well, I think we've had a little bit of activity this week. Let's go through that, before we get into our main topic of the day, and that will be on the economic models that will support cloud computing and software through the wire, SaaS applications. Principally, we're going to be looking at subscription and advertising -- how they mix and how they come together.

But, before we get into a discussion on cloud computing's economic future, let's go around the table. I was at JavaOne in San Fransisco this week, and I understand that, Phil, you were attending a Salesforce.com event in London.

Wainewright: Yes, indeed, their first full Dreamforce event in Europe.

Gardner: Tell us a little bit about what it was like and some of your takeaways.

Wainewright: It was a great to actually have the Salesforce crew in my own timezone, so that I could take all of that on board. We had the usual two-and-a-half-hour Marc Benioff Dreamforce keynotes, and he was the one that got ragged this time, instead of me, so that was nice.

Gardner: He came to see you.

Wainewright: Well, that's right, although to be honest, it was my first Dreamforce, because I had never made it to San Fransisco for the Dreamforce events in the fall, and that's something that Marc has often complained to me about. So, it was good of him to bring the show over to me. I appreciate that, Marc, thanks.

Gardner: Of course, in addition to your importance, this must be also an indicator that the use of Salesforce in Europe and EMEA in general is increasing.

Wainewright: Oh, yes, it is. There were 2,500 people there. So, it was a big show. Some of the independent software vendors (ISVs) who have been putting software on the force.com platform are actually from Europe, most notably CODA, which is a well-established financials application vendor, an ERP vendor.

Unit 4 Agresso recently bought CODA, which was an independent company listed on the UK stock market. CODA decided that to have a SaaS offering, it's going to use force.com. So, the Salesforce guys are really appreciative of CODA, deciding to gamble on them as the platform that they are going to use to enter the SaaS market.

Gardner: Very good. So, we're seeing more of that ecology development, the important tidal wave of developer interest in the model around SaaS. Maybe I mis-characterized that as a tidal wave. How would you characterize it?

Wainewright: Well, I think it's an incoming tide. Whether it's got the speed and force of a tidal wave is another matter.

Gardner: I set you up here Phil, and you didn't go for the bait.

McKendrick: Can't you call it one of the "Four Horsemen of the SaaS Apocalypse" or something like that?

Wainewright: People started talking to me earlier this week about these four vendors, all listed vendors on the stock market, that have got a certain size. Taleo just did an acquisition this week that brings them out to the 200 million-a-year run rate, close to the run rate that Concur has. Taleo is talent management, and Concur is travel and expense management. Then, you have Omniture, which is Web analytics. They expect to do around about 300 million this year. Then, the big Daddy of them all, force.com, is looking to do $1 billion this year.

You are starting to see the leaders emerge now. Thank goodness it's not just Salesforce, but kind of gang of four, to use another foursome analogy, and they are riding the wave. I'm not quite sure what apocalypse it is yet. We might argue that it's an apocalypse for the conventional software vendors. Certainly, SAP seem to be having some trouble getting the SaaS product out of the door. So who knows, maybe this is bad news for the established software business.

Gardner: And, this event came right on the heels of the news last weekend that Microsoft, at least for the time being, is walking away from its bid for Yahoo! And, from comments from Bill Gates and others, it seems that Microsoft might be fully done with that merger or proposition. Was there any talk of that or did any Benioff mention it?

Wainewright: No, he was strangely silent, actually. The president of Google EMEA, was one of the people who came on stage during the Benioff keynotes. So, there was a talk about Salesforce and Google teaming up and working together, but very little about Microsoft.

The thing that interested me about Benioff's presentation, and this is something that I blogged about, was that he is really positioning force.com not as the platform of the future, but as one of the platforms of the Web, and the one that he believes will be the leading platform for enterprise applications. But, he is now starting to talk about a whole forest of different platform-as-a-service (PaaS) vendors and acknowledging other platforms -- like Google App Engine, Amazon Web Services, and even Facebook -- as platforms people use to build functionality in the sky.

That's an interesting change of emphasis. In the past, it was always about. "Salesforce is a platform of the future. Microsoft Windows is the platform of the past. And, we are going to replace Microsoft as everyone's favorite platform."

It's good that he's now talking about the context of the Web being everyone's favorite platform and Salesforce's force.com being just one of the platforms that you can choose to put functionality on the Web.

Gardner: So perhaps we are not going to replace one dominant platform with another, but replace one dominant platform with a diverse portfolio of others.

Wainewright: That's right, and perhaps that change of emphasis is something that Microsoft has not quite taken on board yet, and that's one of the reasons they thought buying Yahoo might be the way to go. Perhaps that's a topic we will get into later in the podcast.

Gardner: Okay. Let's go over to Tony in New York. Did you have any events you went to this week or did you observe some from a far, and do you have any input?

Baer: I have been observing from afar. I have been remote, as they say, but have been devoting most of my attention to JavaOne. I do want to add a thought there about Microsoft or Microhoo and also about Marc Benioff's thoughts on an emerging SaaS ecosystem.

One thing I want to make clear is that when you just have one company in the market, essentially it's one-trick pony. When you have competitors, that validates the market. What Benioff was indirectly saying there is that if SaaS is no longer synonymous with Salesforce, that now validates the SaaS platform. It vindicates his contention that SaaS is a platform, and that the future is "no software."

That's one thought. The other thought, before going on JavaOne, regards Microsoft walking away from Yahoo. My sense is that Yahoo is not going to get any better price for their shares than what Microsoft was going to offer. But, I think it is a blessing in disguise, at least for Microsoft, if not for Yahoo shareholders.

This would have been a horrendous deal for Microsoft. This is not the type of deal that they do best. They do very well in making small, very strategic technology acquisitions. What's gotten lost in the noise here is that Microsoft does have this stake in Facebook, which only happens to be "The most Popular," software development platform in the social computing space.

And, I've got to believe that maybe they are facing a war in ads, but why not work around this, instead of co-opting this, to become or federate with the social application development platform of choice.

Gardner: I think that there are some indications that the bloom is off the rose of social networking, both as a significant revenue generator, as well as an application development platform, at least for one of the social networks to become a development platform. That's from some recent revenue indicators from Google that its relationship with MySpace has not proven to be as monitizable as they expected.

Also, some recent statistic show that the types of applications that have been generated on Facebook are very tenuous, very one-off or fun things that would appeal to teenagers, but not with any significant depth or business value. The amount of activity from developers on Facebook has been slacking off, or at least plateauing, which is not a good indicator.

So I take your point that Microsoft is in the game of social networking, but I am not sure if that's enough to do much for them in terms of overall online activity.

Baer: I'll put this way. For social networks, we are getting into kind of a Gartner-style "trough of disillusionment" there. But, I see this thing fitting more into the mold of the strategic technology buys or technology acquisitions that Microsoft does, because, if you think about it, this has not been tapped.

I totally agree with you. I'm very turned off by the types of applications and sort of frat-partying environment that you have on Facebook. But, I think there's a lot of untapped potential in terms of turning some of these techniques and using them to extend enterprise applications, whether they be on premises, in the cloud, or what have you. So, I could see this as being potentially an extension of the Visual Studio Platform in the .NET framework.

Gardner: That's means Microsoft has to put a lot of lipstick on a pig to turn Facebook into what you're describing, in my humble opinion. Phil, what do you think?

Wainewright: I'm just thinking about advertising and Facebook. People are surprised that for these social networking sites the ads don't work. I remember back in the Web 1.0 boom and the dot-com boom, one of the things that was interesting was the discussion sites were very bad at generating ad revenue, because people didn't click on the ads.

The cost per thousand (CPM) for discussion sites, or for the discussion area of a site, was always a lot lower than other types of sites that were more information heavy. So it's old news about kind of sites where people follow what other people are saying. It's a bad site for advertising, because you are interested in the conversation. You don't go there to click away on something else.

Baer: That's right, and it's not necessarily the metadata of the discussion content that creates some affinity-based relationship between buyer and seller as a result, and, therefore, you get a higher value CPM advertising revenue benefit. It does seem to push it down to a lower common denominator of just page views for the sake of page views.

Wainewright: Yeah, that's right. People start chasing page views without remembering the reason that they are chasing is to generate value for advertises. They think, "We've got lots of page views," but they don't think back to whether those page views are going to deliver value.

Gardner: This actually jettisons us very nicely into the heart of our discussion topic today. We may get back to JavaOne, although there's probably not much to discuss there.

Our topic is what are going to be the revenue models now that we have a fairly good expectations of SaaS, Web services, publicly available APIs, mashups, and increasingly robust cloud community of not only host and providers and infrastructure providers, but ecologies.

I emphasize the plural of development activities that create business value in some form over the wire. This is all well and good for the end user, but in order to support such an ecology, there needs to be revenue commensurate with the cost, perhaps even leaving some margin on the table.

Let's go to you, Joe McKendrick. You've been studying SOA for some time. You've been familiar with data for some time, technologically and functionally, but let's look at the economics of this as we move more toward an online world. Microsoft has indicated this through its Yahoo purchase attempt, desperate as it may have been and now perhaps squashed as it may be.

If you see the future as an online world, do you have any sense of how the money is going to be made, now that we are segueing into this new era?

McKendrick: Good question, Dana. And, in fact, Microsoft has given us another clue. Another memo from Ray Ozzie surfaced a couple of weeks back. You may recall the memo back in 2005, the famous "turn the world upside down" memo that talked about the advertising support of the online model for software. He kind of reinforced that with his latest memo.

It wasn't saying, "We must offer software advertising to support software," but it was more of a discussion about the social mesh, the community, the social networking, a paradigm that's emerging. It's way too early in the game, but I think it's inevitable. We are really seeing it on the consumer side. It's going to be interesting, but I think it's going to leach into the enterprise over the next couple of decades as well. I'm talking years from now, but it's definitely a model that will be sustaining consumer computing. We are seeing that emerging on the social computing side.

Gardner: Well, here's an interesting factoid to throw out and put some context into this discussion of software as a business. Depending on how you slice it and dice it, when we talk about consumer-side software, perhaps in the PC operating system, we're talking about maybe a $100-$150 billion a year business worldwide. Even that might be throwing a little bit much into the kitchen sink, because prices are coming down and the margins are coming down. But, advertising, at least in the United States, is something above $300 billion.

Look at what Google has done with just a small slice of the advertising market -- text ads associated with search and search criteria that they are going to start automating through a similar auction bid process, advertising that goes on banners ads across the Web, beyond just the text ads.

Then, they've got their designs on radio, magazine, and newspaper advertisements, particularity done at the local level. They've got designs on television advertising across both cable and broadcast, but certainly with the television that goes out over the Web. So, Google is looking at a potential of hundreds of billions of dollars of market, where Microsoft's annual revenues are what -- between $40 and $50 billion I believe? We're talking about several significant multiples of potential revenue here when advertising is factored as a full business.

So, just using as the factoid, Phil Wainewright, what do you think about the opportunity for software companies to take more and more of this advertising pie?

Wainewright: Well, we touched on this in our discussion last week, and I really think people have got this completely the wrong way around. To focus on advertising is just so "0.0," to coin a phrase. Advertising exists only because we don't have the Web. Advertising is something the B2B market has to use through magazines, TV shows, or whatever, because they couldn't reach the consumer directly.

Now, the Web enables people to reach potential consumers and business prospects directly, rather than having to go through this advertising. So, the idea that the software industry is going to get funded by advertising has got it completely the wrong way around. Actually, what is going to happen is that business is increasingly going to use software in order to get closer to its consumers and its prospects. It can actually skip having to spend the money on advertising in order to make that connection.

Let me explain how that might work, instead of running adverts on sites that host discussions about bookkeeping services for small companies, for example, or instead of paying for search ads that pop up when people are searching on the Internet for bookkeeping services for small companies. As a small company, if you are using a financial application to run your company and you want some bookkeeping services, a bookkeeping service might pop up as a menu option in the software. You can sign up for and use an outsourced service over the Internet.

Instead of the bookkeeping service actually having to advertise on the search engines, in the publications, the discussion forums, and the social networking sites, they just pay to have their service made available within a software package that relates directly to the service that they are offering.

Therefore, it's not really advertising any more. It's just product placement at a point where the consumer or the business, in this case, actually needs that service.

McKendrick: Phil's got it exactly right. Another good example is mortgage calculator, something that popped up about 10 years ago on the Web. Mortgage calculator is software, and probably before 1998, if you wanted such software you had to go out and buy a package at Staples or Office Depot. Now, you can go to a mortgage company site, for those who are still looking for mortgages, and check out a calculator on site. The software is made available as a value-add. Phil has got it right in terms of their reverse. We have to look at this in a reverse sense.

Baer Joe you are so 2006, I have to say.

Gardner: Now hold on. So, what we were saying is that business activities and consumer activities more and more move online. Not only will we be doing away with the on-premises software business to a significant extent, but we will be doing away with the advertising business to a significant extent. Then, no longer will the entertainment businesses be glossing themselves with adverts to support themselves, but, increasingly, we'll see placement of services in the context of an activity or process, be it for consumer, entertainment, or business, in the same way that we might go to a shopping mall. People pay rent to the mall organizer, which draws people in, to put their wares out on the doorstep in front of the glass pane, in order for people to pick and choose.

So we are moving from an advertising to a placement or even visibility value, and it becomes rent to those who can draw the people in. Does that sound reasonable?

Baer: I'd say so. Look at the Amazon model which isn't necessarily overt advertising, but its affinity. You just bought a book, say, on accounting and they'll say, "By the way, based on your pattern of orders, would you also like to get a book about taxes or something like that?" So, it's basically keeping it in context.

Just a couple of days ago I was reading an interview in one of the business journals with someone who was critiquing TV ads and saying, "You know something? These are so obsolete. I really hate watching this because, basically, when you're watching a program, statistically very small minority of the audience is interested in that particular product at that particular time."

You start looking at migration to digital broadcasting. At some point -- I don't know the exact technology mix involved -- combining that with the Internet, there will be some way of micro casting. There may be a large population segment watching a specific program, but you maybe identified in terms of which demographic you specifically are. It's almost sounding 1984-ish.

McKendrick: Tony, you are so 1984.

Wainewright: Tony, that's right. I think Google actually realizes that and understands that. Therefore what they are aiming to do is get into TV advertising and all these other sectors. These are vendors that enable this kind of personalization of the message, being a conduit between the prospects and the business that's trying to sell to that prospect, and using software automation to enable that.

They are thinking beyond the old model of advertising, and I think that's Microsoft's problem. Microsoft hasn't really understood this, is still thinking about online advertising as a segment, and is not looking beyond the wider opportunity to use the automation on the Web as a way of just bringing buyers and sellers close together.

Gardner: Alright. So advertising has been a blunt instrument. There's an old adage that, "I know I am wasting half of my money on advertising, I just don't know which half." I think it's largely true. What we're really talking about here is a more precise instrument to match buyers and sellers based on affinity, where every single click that they make, almost in real time, gives us a further indicator of what it is that they might be interested in. We are able, at service level, to match needs and wants to availability, and we are able to even adjust the terms of the potential transition in real time as well.

This requires a tremendous amount of cloud compute, to the same levels we have seen in matching search criteria to results and then matching that to advertising. That advertising is then bought through an auction-bid process among those seeking the highest placement.

So if we take that same model and apply it to all sorts of different needs and wants of business, personal, entertainment, and luxury across the board, what do we call it? It's not really advertising.

Here is our chance at the BriefingsDirect Analyst Insights podcast to come up with a name for this thing. Any takers?

Wainewright: I've struggled with it actually, Dana. I have been planning a blogpost about this for probably a year. I saw someone really calling it "featuretisment," which I am not advocating, but it's a possibility. Maybe it's "online merchandising," maybe it is "placement," maybe it is just "promotion," rather than advertising. But, I think we do need a different word, because, if we use the word "advertising," we approach it too much from the old mindsets.

Gardner: Anyone else who has created a word here that sticks in people's mind for next 50 years?

Baer: Here is one that I hopefully don't use, which is "lifestyle enhancement" or "lifestyle augmentation." I hope we don't use that.

Gardner: That sounds like spam mail.

Baer: I want to just shoot that one down immediately.

McKendrick: I want to throw another note in here. When we talk about social computing, the whole Web 2.0 paradigm world, we are talking about the incoming generation. You have the 20-something is coming in, and even younger than that.

These folks are well accustomed to SaaS, online/on-demand software and are accustomed to seeing advertising online. I have a nine year old daughter and her favorite sites are Webkinz in which you buy stuffed animal, get a special password code log in and you can virtually manage your Webkinz online. She loves that and --.

Gardner: Yeah, we've got those.

McKendrick: Yeah, Club Penguin is another one, Disney took that.

Gardner: We've got those.

McKendrick: What's interesting is, 10 years ago, our kids would have had to go out and buy a CD and install a CD locally in the computer. These things are all delivered online to kids. Kids don't want this. My nine-year-old probably doesn't know how to install something from a CD.

Gardner: That's right. My nine-year-old is the same way. Everything is through the browser. If it's not through the browser, he's not interested.

McKendrick: Exactly. Everything is through the browser now. That's what they are expecting. That's what expected now. College students as well.

Gardner: Here's another factoid to throw out there. I was at an IBM event not too long ago and I raised some of these issues with them, saying, "Hey, you have some of the ingredients that are necessary in this new vision, including audience, including installed software, including communications and groupware applications that draw lots of metadata, ad activities in individuals. When we are going to start to see advertisements in IBM services?"

This statement came out loud and clear. Sam Palmisano says he is never going to put advertisements in anything IBM ever does. I thought that was interesting. Maybe, if we bend the advertising concept as we have been doing here, IBM is going to need to change its tune, particularly as more of those revenues from those AS400s and RS6000s started to dwindle, and they go out to cloud computing environments, and the margin they make on a blade server isn't the same.

They need to consider some of these other more interesting business models, particularly in the context of business. We're not talking about a $15 music download or an $8 movie download. We're talking about anywhere from $50,000 to hundreds of thousands of dollars of purchasing that happens very rapidly across the entire B2B economy.

Any thoughts about how IBM, in particular, might be able to move to this, without offending Sam's sensibilities?

Baer: Actually, take a look at the emerging model for downloading films or TV shows, that's probably is a better example. For a certain price you can get it without ads. For free, you get it with ads. I don't know if that directly applies, there maybe some sort of variation of that, which can keep Sam Palmisano's feeling that he can go to sleep at night.

Gardner: Okay, so we think that advertising is in the rear-view mirror. We're going to move to a new era of something different or better, perhaps subscription as a business model, where you, in a sense, rent digital assets. Any thoughts about how the future of advertising and the future of subscription services overlap or relate?

Wainewright: I think they do. The subscription model does take, but I think you will still have indirectly funded applications, particularly for volume markets like the business markets, the small business market, and obviously the consumer market, which is indirectly funded.

The consumer doesn't pay, but it is supported by some kind of either advertising, commissions on product placement, or just the expectation that a certain percentage of free users will upgrade to a paid version, and, therefore, the free-user population is a marketing expense.

We see all of those models already in the SaaS segment. The thing that is going to make this a slow transition is having a set of subscription services, where there are lots of different providers being aggregated, and they're getting some cut off the subscription. These are big billing and settlement challenges.

Actually, the software, the infrastructure software, that can support doing all of that measurement and doing it accurately and dealing with all of the questions: "I want my money back -- how do I get my money back?" These are questions that come up when money changes hands. This is something that still hasn't been worked out properly.

I was interested to see that Salesforce is still at the first stages of working at providing billing and settlement for force.com. In a sense, they are probably behind other players in that space, in terms of having an infrastructure for doing that. I think that could be a brake on this kind of thing taking hold very quickly, simply because the technology doesn't exist yet.

Gardner: Well, it doesn't exist yet at Salesforce.com, but it does exist in some other quarters, where logistics and transportation have been largely made an efficiency function of good software. I am thinking of UPS and FedEx. They have become more and more sophisticated at managing that delivery and vetting of the transactions and working with exception management, in terms of returns or warranty issues. They do it with physical objects. There is no reason they couldn't do it with digital objects across the wire.

Baer: Just to underscore your point, it's not only that they perfected it for their core business, they now are handling increasing portions. A lot of their business is business process outsourcing. So, they're saying, "We don't only deliver the product to your customer, but we will take on large chunks of the fulfillment process or the warranties service repair process." And, they've have got the billing mechanisms down for that.

Gardner: So, the intellectual value of understanding how to manage that process is what ultimately buoys them and makes them now part of a potentially larger virtual ecology, rather than physical.

Wainewright: Hold on! They are doing that as a single company, they are not doing it with all kinds of tiers and partners, who are all contributing their own services and wanting to bill and charge back for those services. So, it's an order of magnitude larger.

Gardner: Perhaps the message to them is that they should be thinking along these lines, taking what assets they have, and extending them into partnerships, APIs, and Web services that can be plugged in through a SOA, and perhaps they get some transactional revenues as a result.

McKendrick: Which should make force.com and UPS natural partners.

Gardner: Natural partners, yes. Now, I mentioned transactions, and it seems to me that one of the common threads between the "son of advertising" -- maybe that's what we'll call it from now on, the "son of advertising," the "progeny of advertising" -- and syndication, sponsorship, and buying things on a subscription basis, is the transaction.

Those vendors who want to be positioned well in front of an activity, the fulfillment of the actual transaction financially, would be in extremely advantageous position. Even if they take a fraction of a percent per transaction, ultimately we are talking about a massive business, one that everyone essentially would have to do some level of business with.

Any thoughts about the transactional hub, and the cloud compute power that would be required to do that?

Baer: StrikeIron kind of hits upon that model. They offer a marketplace of Web services, and part of what they do with that paradigm is that for the software developers -- someone who creates a service and offers it through the StrikeIron service -- they handle the transactions, the micro transactions. You may get a few pennies each time some uses your service. I think their model is going to take off. I think there is lot of potential for the model. We are going to see a lot of micro transactions taking place across the Web in the entire network.

Gardner: That's the one I was thinking of. StrikeIron is saying, "Hey, we can create a small subset business for ourselves, maybe even outsource some of that transactional activity back to something like a Google, and many others will want to stake out positions in a virtual bazaar of services, commerce, and goods, and perhaps back toward some of the integration to a large providers like a Google, which then becomes like a Visa in terms of financial transactions. It's really just matching up, and folks have taken a vig along the way.

Any other thought about the role of Google and what other organizations might be able to step up to the plate in this regard?

Speaker: Amazon Web Services.

Wainewright: I was just going to say that Rearden Commerce is perhaps an example of a vendor that's getting into that opportunity. Rearden this week announced a funding, a $100 million in venture funding, which mainly came from American Express and Chase.

So we see travel booking and the credit card company are teaming up with the transaction providers or the transaction handlers and getting at this nexus of bringing buyers and sellers together in the travel and employee services space. The amount of money that's being invested in Rearden says that people feel that there is quite a lot of potential in that particular vision.

Gardner: Now this company, Rearden, what kind of company is it?

Wainewright: Rearden Commerce provides software that allows you, as a business, to have your employees book their flights, their dining, and their corporate expense activity in a controlled, managed, and largely automated way. At the moment, most of their customers are relatively large customers or are customers of AMEX's travel management services. They charge a license fee at the moment, but I think in their road map, they see a potential to make money just by taking a cut out of the value of the transaction, rather than sending a traditional subscription license.

Baer: Just to go full circle here, I remember just talking to an enterprise vendor back in the 1990s. They were trying to export different mechanisms for pricing, and were talking about what they called at the time "risk sharing." Instead of charging the traditional license fee upfront, they were getting some sort of share of the benefits. Obviously, that never panned out, but today through SaaS, through micro-pricing and transactional pricing, and the acceptance of subscriptions and variable pricing, the time may have come for merging of some variance of that.

Gardner: Right. I think we've recognized that we have the son of advertising, which will be an interesting opportunity and Google is well-positioned.

We have the "son of software" in services, also a place where Google is well-positioned. We also have the "son of financial services." That is the next era that will require the compute ability to manage on a real-time, micro level across multiple variations of transactions and very complex process and event landscapes.

And, once again, Google could rise up and be prominent in that place as well. It seems that the algorithm is what rules the future, and he with the best algorithm that can execute on that algorithm and draw in the most partners is the winner. Any thoughts?

Wainewright: And, therefore, Microsoft, as long as it talks about software, rather than focusing properly on services, is always going to be the loser.

Gardner: You need to focus on being able to develop, control and adjust the algorithms and then execute on all the variables within those algorithms at massive scale, and that becomes ultimately who's got the best compute cloud infrastructure. I'm not sure it's going to be built on Windows.

Baer: The interesting thing about Microsoft is their whole scale has been more penetration, it's never been scale in terms of that we can now conduct scalable processing.

Gardner: Microsoft scales best at the department level, not even the individual level, and they don't have the infrastructure to support the granularity beyond that at this time.

McKendrick: It's getting to the point where the operating system is something that gets in the way. I think people will be happy with just some kind of device, such as a mobile device with a very thin layer and browser accessing everything out on the network.

Baer: And, from that standpoint, the one interesting thing that I saw from JavaOne this week, is the battle over where that rich Internet layer is going to be. Should it be within the Java virtual? Should it be in the flash runtime? You are talking about a couple battles of runtimes. You are not talking about battles of operating systems.

Gardner: I see that as a real mistake. Sun made a fundamental mistake this week. It's trying to position itself as a leader on this presentation level, which is irrelevant for the most part. It's important through some development, but the runtime on the client is a commodity. It's all about the runtime on the compute side, the server side, the cloud side. We would think that an OpenSolaris or a Solaris plus the high performance silicon designs that they've developed would be the real story there.

Wainewright: Dana, I would disagree with you about runtime on the client. I think it's going to be important, but I think it's the topic over another podcast.

Gardner: Alright, we'll do that another time. I think we've provided some good consulting value today to the logistics industry, the FedExs, UPSs: That they should start moving very closely to the digital domain, not the physical domain, and create APIs to create partnerships. We also probably have some good recommendations for the Citigroups, and the other large banking organizations, that they've proven themselves inept at that managing risk in association with mortgage-backed derivatives, but they should start thinking about how to create a compute cloud in algorithmic support infrastructure for the transactional future.

Baer: Phil mentioned Rearden Commerce, and I want to add that all it's components are built on SOA-enabled services. So, there is a good lesson there. If you want to get out in the cloud, SOA paves the path.

Gardner: That's the only technology that we've developed today that perhaps can these mixtures of ecologies and transactional hubs and federated business partnerships and activities.

Baer: It's the only way to go, Dana.

Gardner: Okay, this is Dana Gardner, principal analyst at Interarbor Solutions. You've been listening to a BriefingsDirect Analyst Insights Edition, Volume 29. Our guests have been Joe McKendrick. Thanks, Joe.

McKendrick: Thanks, Dana. It's great to be here.

Gardner: Tony Baer, I appreciate your input.

Baer: Hey, good talking again.

Gardner: And also excellent input from Phil Wainewright. We appreciate your joining us.

Wainewright: Good to be here, Dana.

Gardner: Come back next time, and we'll try to get into some of those issues that we haven't hit on yet. There's a lot more to dig into here. Thanks.

Listen to the podcast.

Transcript of BriefingsDirect podcast on the future of advertsing. Copyright Interarbor Solutions, LLC, 2005-2008. All rights reserved.

Enterprises Seek Ways to Exploit Web Application Mashups and Lightweight Data Presentation Techniques

Transcript of BriefingsDirect podcast on data mashups with IBM and Kapow.

Listen to the podcast here. Sponsor: Kapow Technologies.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Today, a sponsored podcast discussion about the state of choice in the modern enterprise around development and deployment technologies.

These days, developers, architects and even line-of-business managers have many choices. This includes things like Web applications, software-as-a-service (SaaS), Services Oriented Architecture (SOA), RESTful applications, mashups, pure services off the Web, and pure services from within an Intranet or even the extended enterprise. We’re talking about RSS and Atom feeds, and, of course, there is a traditional .NET and Java going on.

We also see people experimenting with Ruby and a lot of use around PHP and scripting. The good news is that there are a lot of choices. The bad news is also that there are a lot of choices.

Some of these activities are taking place outside the purview of IT managers. People are being innovative and creative, which is good, but perhaps not always in the way that IT would like in terms of security and access control. These newer activities may not align with some of the larger activities that IT needs to manage -- which many times these days includes consolidation, unification, and modernization of legacy applications.

To help us weed through some of the agony and ecstasy of the choices facing application development and deployment in the enterprise, we have on the call, Rod Smith. Rod is Vice President of Internet Emerging Technologies at IBM. Welcome to the show, Rod.

Rod Smith: Thank you very much. It’s nice to be here.

Gardner: We also have Stefan Andreasen, the Founder and CTO of Kapow Technologies. Welcome to the show, Stefan.

Stefan Andreasen: Thank you.

Gardner: Let’s go first to Rod. We spoke last spring about these choices and how there are, in effect, myriad cultures that are now involved with development. In past years, development was more in a closed environment, where people were under control … white coats, raised floors, and glass rooms come to mind. But now it’s more like the Wild West. What have you been finding in the field, and do you see this as chaos or opportunity?

Smith: A little of both. In times of innovation you get some definite chaos coming through, but IT, in particular, and line of businesses see this as a big opportunity. Because of SOA and the other technologies you mentioned, information is available, and line of business is very interested in capturing new business opportunities.

Time to market is getting shorter, and getting squeezed all the time. So you’re seeing line of business and IT coming together around what they have to do to drive more innovation and move it up a couple of notches, from a business perspective.

Open standards now are very important to IT. Line of business, with mashups in particular, can use those types of services to get the information and create solutions they couldn’t do in the labs, when the propeller heads and others had to be involved five or 10 years ago.

Gardner: So we have dual or maybe multiple tracks going on. I suppose what’s missing is methodological and technical management. That’s an area where IBM has been involved for some time. Does IBM look at this as an opportunity?

Smith: A big opportunity. And you hit it on the head. The methodology here is very different from the development methodology we’ve been brought up to do. It’s much more collaborative, if you’re line of business, and it’s much more than a set of specifications.

Here is where we’re seeing people talk about building mashups. Usually they have a really good idea that comes to mind or something that they think will help with a new business opportunity.

Often the second question -- and we’ve seen a pattern with this -- is “Where is the data? How do we get to the data? Can IT open it up for us? Do line-of-business people have it in spreadsheets?” Typically, when it’s valuable to the business, they want to catalog it and put it together, so other people can share it. Finally, they do a mashup.

So methodology is one of the things we call a self-service business pattern. It starts with the idea, from a developer standpoint. "I really need to understand the business. I need to understand the time to market and the partnerships, and how information can be exposed." Then, they get down into some of the details. "I've got to do it quickly."

What we are seeing from an opportunity standpoint is that many businesses, when they see an opportunity, want a vendor to respond in 30 days or less, [and do more] within six months down the road. So that’s a challenge, and it is an opportunity. We think about tooling and middleware and services. How can we help the customer?

Gardner: Let’s go to Stefan. When you see these activities in the enterprise around mashups, SOAP, REST, HTML and XML, there’s an opportunity for bridging the chaos, but I suppose there’s also a whole new type of development around situational applications.

That is to say that, an opportunity exists to access content that hadn’t really been brought into an application development activity in the past. Can you tell us a little bit about what you’re seeing in the enterprise and how these new types of development are manifesting themselves?

Andreasen: Let me comment on the chaos thing a little bit. It’s important to understand the history here. At first, central IT worked with all their big systems. Line of business really didn’t have any access to IT or tools themselves, until recently when they got desktop tools like Excel.

This current wave is really driven by line of business getting IT in their own hands. They’ve started using it, and that’s created the chaos, but chaos is created because there is a need.

Now, with the Web 2.0 and the mashup wave, there is an acknowledgement of a big need here, as Rod also said. So it’s necessary to understand why this is happening and why it is something that’s very important.

Gardner: These end-users, power users, these line of business folks, they’ve been using whatever tools have been available to them, even if it’s an Excel spreadsheet. I suppose that gives them some productivity, but it also leaves these assets, data and content, lying around on hard drives in a fairly unmanaged perspective.

Can we knock two birds down with one stone in terms of managing this chaos in terms of the data, but also bring together some interface and application development benefits?

Andreasen: The worst thing would be to shut it down, of course. The best thing that’s happening now is acknowledging that line-of-business people need to do their own thing. We need to give them the tools, environments and infrastructure so they can do it in a controlled way -- in an acceptable, secured way -- so that your laptop with all of your customer data doesn't get stolen at the airport.

When we talk about customer data, we leap back to your earlier question about data. What are line-of-business people working with? Well, they’re working with data, analyzing data, and finding intelligence in that data, drawing conclusions out of the data, or inventing new products with the data. So the center of the universe here for this IT work is really dealing with data.

Gardner: SOA is one of the things that sits in the middle between the traditional IT approaches and IT development and then these newer activities around data, access, and UIs and using Web protocols.

I wonder if you think that that’s where these things meet. Is there a way to use an enterprise service bus (ESB) for checking in and out of provisioned or governed services? Is there a way that mashups and the ERP applications meet up?

Smith: The answer is yes. Without SOA we probably wouldn't have gotten to a place where we can think about mashable content or remixable content.

What you are seeing from customers is the need to take internal information and transform it into XML or RESTful services. There’s a good match between ESB things … [and] thinking about security and other pieces of it, and then building the Rich Internet Application (RIA) type of applications.

The part you touched on before is interesting, too. And I think Stefan would agree with me. One thing we learned as we opened up this content is that it isn't just about IT managing or controlling it. It’s really a partnership now.

One thing Stefan has with Kapow that really got us talking early was the fact that for Stefan’s content they have a freshness style. We found that same thing is very important. The line of business wants to be involved when information is available and published. That’s a very different blending of responsibility than we've seen before on this.

So thinking forward you can imagine that while you are publishing this, you might be putting it into a catalog repository or into services. But it also has to available for line of business now to be able to look at those assets and work with IT on when they should be available to business partners, customers and others.

Gardner: It’s interesting you mentioned the word "publish," and it’s almost as if we are interchanging the words "publishing" and "application development" in the sense that they are munging or overlapping.

Does that fit with what Kapow has been seeing, Stefan, that publishing and syndication are now a function of application development?

Andreasen: There are several sides to this question of which data you need, how to access it, how it is published, etc. One thing you are talking about is line of business publishing their data so other people can use it.

I split data into several groups. One is what I call core data, the data that is generally available to everybody in the company and probably sits in your big systems. It’s something everybody has. It’s probably something that's service-oriented or is going to be very soon.

Then there is the more specialized data that’s sitting out in line of business. There's a tendency now to publish those in standard formats like RSS, RESTful services, etc.

There's is a third group, which I call intelligence data. That's hard to find, but gives you that extra insight, extra intelligence, to let you draw a conclusion which is different from -- and hopefully better than -- your competitors’.

That’s data that’s probably not accessible in any standard way, but will be accessible on the Web in a browser. This is exactly what our product does. It allows you to turn any Web-based data into standard format, so you can access what I call intelligence data in a standard fashion.

Gardner: This is the type of data that had not been brought into use with applications in the past?

Andreasen: That is correct. There is a lot of information that’s out there, both on the public Web and on the private Web, which is really meant to be human-readable information. You can just think about something as simple as going to U.S. Geological Service and looking at fault lines of earthquakes and there isn't any programmatic API to access this data.

This kind of data might be very important. If I am building a factory in an earthquake area, I don’t want to buy a lot that is right on the top of a fault line. So I can turn this data into a standard API, and then use that as part of my intelligence to find the best property for my new factory.

Smith: When we talk of line of business, it’s just not internal information they want. It's external information, and we really are empowering these content developers now. The types of applications that people are putting together are much more like dashboards of information, both internally and externally over the Internet, that businesses use to really drive their business. Before, the access costs were high.

Now the access costs are continuing to drop very low, and people do say, "Let’s go ahead and publish this information, so it can be consumed and remixed by business partners and others,” rather than thinking about just a set of APIs at a low level, like we did in the past with Java.

Gardner: How do we bring these differing orbits into alignment? We've got people who are focused on content and the human knowledge dimension -- recognizing that more and more great information is being made available openly through the Web.

At the same time, we have this group that is API-minded. I guess we need to find a way of bringing an API to those folks who need that sort of interface to work with this data, but we also need for these people to take this data and make it available in such a way that a developer might agree with it or use it.

How does Kapow work between these constituencies and make one amenable to the other? We're looking for a way to bind together traditional IT development with some of these “mashupable” services, be it internal content or data or external services off of the Web.

I wonder what Kapow brings to the table in terms of helping these two different types of data and content to come together -- APIs versus content?

Andreasen: If you want to have automatic access to data or content, you need to be able to access it in a standard way. What is happening now with Web Oriented Architecture (WOA) is that we're focusing on a few standard formats like RESTful services and on feeds like RSS and Atom.

So first you need to be able to access your data that way. This is exactly what we do. Our customers turn data they work with in an application into these standard APIs and feeds, so they can work with them in an automated way.

It hadn’t been so much of a problem earlier, maybe because there wasn’t so much data, and people could basically cut and paste the data. But with the explosion of information out there, there's a realization that having the right data at the right time is getting more and more important. There is a huge need for getting access in an automated way.

How do line-of-business people work with the data? Well, they work with the data in the application interface. What if the application interface today is your browser?

Kapow allows the line-of-business people to automatically access data the way they worked with it in their Web browser.

That’s a very powerful way of accessing data, because you don't have to have an extra level of IT personnel. You don't have to first explain, "Well, this is the data I need. Go find it for me." And then, maybe you get the wrong data. Now, you are actually getting the data that you see the way you want.

Gardner: Another aspect to this is the popularity of social networking and what's known as the "wisdom of crowds" and wikis. A lot of contributions can be brought into play with this sort of gray area between content and publishing, different content feeds, and exposure and access and the traditional IT function.

Wikis have come into play, and they have quite a bit of exposure. Maybe you have a sense of how these worlds can be bridged, using some of what's been known as social networking?

Smith: Software development now is much more of a social networking activity than an engineering activity. At IBM, we have Blog and Wiki Central, where people use wikis to get their thoughts down and collectively bring an idea about.

Also at IBM, we have Innovation Jam, which we hold every year, and which brings in hundreds of thousands of people now. It used to be just IBM, but we’ve opened it up this last year to everyone, friends and family alike, to come up with ideas.

That part is great on the front end. You then can have a much better idea of what the expectations are, and what a user group wants. They're usually very motivated to stay in the loop to give you feedback as you do development.

The big part here is when it comes to doing mashups. It's the idea that you can produce something relatively quickly. With IBM’s QEDWiki, we like the idea that someone could assemble an application, wire it together in the browser, and it has the wiki characteristics. That is, it's stored on the server, it’s versioned as to enterprise characteristics, and it’s sharable.

It’s a key aspect that it has to be immediately deployable and immediately accessible by the folks that you are networking with.

That relates to what Stefan was saying and what you were asking about on how to bridge the two worlds of APIs and content. We're seeing now that as you think about the social networking side, people want the apps built into dashboards.

The more forward-thinking people in IT departments realize that the faster they can put together publishable data content, they can get a deeper understanding in a very short time about what their customers want.

They can then go back and decide the best way to open up that data. Is it through syndication feeds, XML, or programmatic API? Before, IT had to guess usage and how many folks might be touching it, and then build it once and make it scalable.

We’re doing things much more Agile-wise and building it that way, and then, as a flip, building the app that’s probably 80 percent there. Then IT can figure out how they could open up the right interfaces and content to make it available broadly.

Gardner: Stefan, could you give us some examples of user scenarios, where Kapow has been brought in and has helped mitigate some of the issues of access to content and then made it available to traditional development? Is there a way for those folks who are perhaps SOA-minded, to become a bit more open to what some people refer to as Web-Oriented Architecture?

Andreasen: One example that was mentioned in The Wall Street Journal recently in an article on mashups. It was on Audi in Germany. They are using our product to allow line of business to repurpose existing Intranets.

Let’s say that a group of people want to take what’s already there, but tweak it, combine it, and maybe expose it as a mobile application. With our tool, they can now do that in a self-service way, and then, of course, they can share that. What’s important is that they published this mini-mashup into their WebSphere portal and shared it with other people.

Some of them might just be for individual use. One important thing about a mashup is that an individual often creates it. Then it either stops there, because only that individual needs it – or it can also grow into company-wide use and eventually be taken over by central IT, as a great new way to improve performance in the entire company. So that shows one of the benefits.

Other examples have a lot to do with external data -- for example, in pricing comparisons. Let’s say I'm an online retailer and suddenly Amazon enters the market and starts taking a lot of market share, and I really don’t understand why. You can use our product to go out and harvest, let’s say, all the data from digital cameras from Amazon and from your own website.

You can quickly find out that whenever I have the lowest price, my product is out of stock -- and whenever I have a price that's too high, I don’t sell anything. Being able to constantly monitor that and optimize my prices is another example.

Another very interesting piece of information you can get is vendor pricing. You can know your own profit margin. Maybe it’s very low on Nikon cameras. You see that eBay is offering the Nikon cameras below even your cost as the vendor. You know for sure that buyers are getting a better deal with Nikon than you can offer. I call this using data to create intelligence and improve your business.

Gardner: All this real-time, updated content and data on the Web can be brought into many aspects of what enterprises do -- business processes, purchasing, evaluation, and research.

I suppose a small amount of effort from a mashup could end up saving a significant amount of money, because you’re bringing real-time information to those people making decisions.

How about you on your side, Rod? Any examples of how these two worlds -- the peanut butter and chocolate, if you will -- come together for a little better snack?

Smith: I’ll give you a good one. It’s an interesting one we did as a technology preview with Reuters and AccuWeather. Think about this again from the business perspective, where two business folks met at a conference and chit-chatted a bit.

AccuWeather was talking about how they offer different types of services, and the Reuters CTO said, "You know, we have this commodity-shipping dashboard, and folks can watch the cargo go from one place to another. It’s odd that we don’t have any weather information in there.” And the question came up very quickly: "I wonder how hard it would be to mash in some weather information."

We took one of their folks, one of mine, and the person from AccuWeather. They sat down over about three or four hours, figured out the scenario that Reuters was interested in and where the data came from, and they put it together. It took them about two weeks, but altogether 17 hours -- and that’s over a beer.

So it was chocolate and nuts and beer. I was in pretty good shape at that point. The interesting thing came after that. When we showed it to Reuters, they were very thrilled with the idea that you have that re-mixibility of content. They said that weather probably would be interesting, but piracy is a lot more interesting. "And, by the way" -- and this is from the line of business person -- "I know where to get that information."

Gardner: Now when you say "piracy," you mean the high seas and the Jolly Roger flying up on the mast -- that kind of thing?

Smith: That’s it. I didn’t even know it existed anymore. In 2006, there were 6,000 piracy events.

Gardner: Hijackings at sea?

Smith: Yes.

Gardner: Wow!

Smith: I had no idea. It turned out that the information was a syndication feed. So we pulled it in and could put it on a map, so you could look at the different events.

It took about two hours, but that’s that kind of dynamic now. The line-of-business person says, "Boy, if that only took you that much time, then I have a lot of ideas, which I’ve really not talked about before. I always knew that if I mentioned one more feature or function, IT would tell me, it takes six more months to do."

We've seen a huge flip now. Work is commensurate with some results that come quickly. Now we will see more collaboration coming from IT on information and partnerships.

Gardner: This networking-collaboration or social interaction is really what’s crafting the new level of requirements. Instead of getting in line behind 18 six-month projects, 12 to 20 hours can be devoted by people who are perhaps on the periphery of IT.

They're still under the auspices of what’s condoned under IT and make these mashups happen, so that it’s users close to the issues, close to where the creativity can begin that create a requirement, and then binds these two worlds together.

Smith: That’s correct, and what is interesting about it is, if you think about what I just described -- where we mashed in some data with AccuWeather -- if that had been an old SOA project of nine or 18 months, that would have been a significant investment for us, and would have been hard to justify.

Now, if that takes a couple of weeks and hours to do -- even if it fails or doesn’t hit the right spot -- it was a great tool for learning what the other requirements were, and other things that we try as a business.

That’s what a lot of this Web 2.0 and mashups are about -- new avenues for communication, where you can be engaged and you can look at information and how you can put things together. And it has the right costs associated with it -- inexpensive.

If I were going to sum up a lot of Web 2.0 and mashups, the magnitude of drop in “customization cost” is phenomenal.

Gardner: And that spells high return on value, right?

Smith: That’s right.

Gardner: How do you see this panning out in the future? Let’s look in our crystal ball. How do you see this ability of taking intelligence, as you call it, around the content, and then the line-of-business people coming in and making decisions about requirements, and how they want to tune or see the freshness of the content?

What’s going to happen in two or three years, now that we are bringing these things together?

Andreasen: There will be a lot more of what Rod just described. What Rod just mentioned is an early move, and a lot of companies aren't even thinking along these lines yet. Over the next one or two years, more people will realize the opportunity and the possibility here, and start doing it more. Eventually, it’s going to explode.

People will realize that getting the right data and the right content at the right time, and using that to create more intelligence is one thing. The other thing they’ll realize is that by networking with peers and colleagues, they'll get ideas and references to new data. All of these aspects -- the social aspects, the data aspect and the mashup aspect -- will be much more realized. I think it’s going to explode in usage.

Gardner: Any last thoughts, Rod, from where you see these things going?

Smith: Well, as we see in other technologies moving through from an SOA perspective, this is a great deal about cultural change within companies, and the technology barriers are coming down dramatically.

You don’t have to be a Java expert or a C# expert. I'm scary enough to be able to put together or find solutions for my own needs. It’s creating a way that line-of-business people are empowered and they can see business results quickly.

That also helps IT, because if the line of business is happy, then IT can justify the necessary middleware. That’s a fundamental shift. It's no longer an IT world, where they can promise a solution to the line of business 12 to 18 months down the road.

It’s much more of, "Show me something quickly. When I’ve got the results in my hand -- the dashboard -- then you can explain what I need to do for IT investments and other things."

It’s more collaboration at that point, and makes a lot of sense on governance, security, and other things. I can see the value of my app, and I can actually start using that to bring value to my company.

Gardner: I suppose another important aspect culturally is that part of SOA’s value is around reuse. These mashups and using this content in association with other different activities, in a sense promotes the notion of reuse.

You're thinking about, "How can I reuse this mashup? How can I extend this content, either off the Web or internally, into new activities?" That, in a sense, greases the skids toward more SOA, which I think is probably where IT is going to be heading anyway.

Smith: Well, what’s fun about this, and I think Stefan will agree, is that when I go to a customer, I don’t take PowerPoint charts anymore. I look on their website and I see if they have some syndication feeds or some REST interfaces or something.

Then I look around and I see if I can create a mashup of their material with other material that hadn’t been built with before. That’s compelling.

People look and they start to get excited because, as you just said, they see business patterns in that. "If you could do that, could you grab this other information from so-and-so?"

It’s almost like a jam session at that point, where people come up with ideas. That’s where we will see more of these examples. Actually, a lot of our stuff is on YouTube, where we had a retail store that wanted to see their stores on Google Maps and then see the weather, because weather is an important factor in terms of their businesses.

In fact, it’s one of the most important factors. What we didn’t realize is that very simple pattern -- from a technology standpoint it didn’t take much -- held up over and over again. If it wasn’t a store, it was banking location. If it wasn’t banking locations, it was ships. There were combinations in here that you could talk to your businessperson about.

Then you could say to the technologist or a developer, "What do I have to do to help them achieve that?" They don’t have to learn XML, Web objects, or anything else, because you have these SOA interfaces. It helps IT expand that whole nature of SOA into their enterprise.

Andreasen: One thing that's going to happen is that line-of-business people are getting a lot of great ideas. If I am working with business problems, I constantly get ideas about how to solve things. Usually, I just brush it away and say, "Well, it will be cool to have this, but it’s impossible."

They just don’t understand that the time from idea to implementation is dramatically going to go down. When they start realizing this, there is hidden potential out on the edge of the business that will now be cut loose and create a lot of value. It’s going to be extremely interesting to see.

Smith: One of the insights we have from customers is that mashups and this type of technology help them to visualize their SOA investments. You can’t see middleware. Your IT shop tells you what’s good, they tell you they get flexibility, but they want to be shown results -- and mashups help do that.

The second part is people say it completes the "last mile" for SOA. It starts to make a lot of sense for your IT shop to be able to show how the middleware can be used in ways it wasn’t necessarily planned for.

The big comment we hear is, "I want my content to be mashable or re-mixable." We figured out that it’s very much a SOA value. They want things to be used in ways they weren't planned for originally. Show me that aggressive new business opportunity, and you make me a very happy person.

Andreasen: Probably one thing we will see in companies is some resistance from the technologists, from central IT, because they are afraid they will lose control. They are afraid of the security issues etc., but it will probably be like what we've seen with company wikis.

They're coming in the back door in line of business and eventually the companies buy the company-wide wiki. I think we'll see the same thing with mashups. It will be starting out in line of business, and eventually the whole company understands, "Well, we have to have infrastructure that solves this problem in a controlled way."

Some companies have very strict policy today. They don’t even allow their line-of-business pros to write macros in Excel. Those companies are probably the ones that will be the last ones discovering the huge potential in mashups.

I really hope they also start opening their eyes that there are other roles for IT, rather than just the big, central system that run your business.

Gardner: Well, great -- thanks very much for your insights. This has really helped me understand better how these things relate and really what the payoff is. It sounds compelling from the examples that you provided.

To help us understand how enterprises are using Web applications, mashups, and lightweight data presentation, we’ve been chatting today with Rod Smith, Vice President of Internet Emerging Technologies at IBM. I really appreciate your time, Rod.

Smith: Thank you.

Gardner: And Stefan Andreasen, the Founder and CTO of Kapow Technologies. Thanks for joining, Stefan.

Andreasen: It’s been a pleasure, Dana.

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

Listen to the podcast here. Sponsor: Kapow Technologies.

Transcript of BriefingsDirect podcast on data mashups with IBM and Kapow. Copyright Interarbor Solutions, LLC, 2005-2008. All rights reserved.

BriefingsDirect SOA Insights Analysts Examine Microsoft SOA and Evaluate Green IT

Edited transcript of weekly BriefingsDirect[TM] SOA Insights Edition podcast, recorded October 26, 2007.

Listen to the podcast here.

Dana Gardner: Hello, and welcome to the latest BriefingsDirect SOA Insights Edition, Volume 27. A weekly discussion and dissection of Services Oriented Architecture (SOA) related news and events with a panel of industry analysts, experts and guests.

I'm your host and moderator, Dana Gardner, principal analyst at Interarbor Solutions. We’re joined today by a handful of prominent IT analysts who cover SOA and related areas of technology, business, and productivity.

Topics we're going to discuss this week include the SOA & Business Process Conference held by Microsoft in Redmond, Wash., at which Microsoft announced several product roadmaps and some strategy direction around SOA.

We're also going to discuss issues around "Green SOA." How will SOA impact companies, as they attempt to decrease their energy footprint, perhaps become kinder and gentler to the environment and planet earth, and what SOA might bring to the table in terms of a long-term return on investment (ROI), when energy related issues are factored in?

To help us sort through these issues, we’re joined this week by Jim Kobielus. He is a principal analyst at Current Analysis. Welcome back, Jim.

Jim Kobielus: Hi, Dana. Hello, everybody.

Gardner: We're also joined by Neil Macehiter, principal analyst at Macehiter Ward-Dutton in the UK. Thanks for coming along, Neil.

Neil Macehiter: Hi, Dana. Hi, everyone.

Gardner: Joe McKendrick, an independent analyst and blogger. Welcome back to the show, Joe.

Joe McKendrick: Thanks, Dana, glad to be here.

On Microsoft-Oriented Architecture and the SOA Confab ...

Gardner: Let’s dive into our number one topic today. I call it Microsoft Oriented Architecture -- MOA, if you will -- because what we've been hearing so far from Microsoft about SOA relates primarily to their tools and infrastructure. We did hear this week some interesting discussion about modeling, which seems to be a major topic among the discussions held at this conference on Tuesday, Oct. 30.

It's going to be several years out before these products arrive -- we probably won’t even see data until well into 2008 on a number of these products. Part of the logic seems to be that you can write anywhere, have flexibility in your tooling, and then coalesce around a variety of models or modeling approaches to execute through an über or federated modeling approach that Microsoft seems to be developing. That would then execute or deploy services on Microsoft foundational infrastructure.

I'm going to assume that there is also going to be loosely coupled interoperability with services from a variety of different origins and underlying infrastructure environments, but Microsoft seems to be looking strategically at this modeling layer, as to where it wants to bring value even if it’s late to the game.

Let’s start with Jim Kobielus. Tell us a little bit about whether you view Microsoft's moves as expanding on your understanding of their take on SOA, and what do you make of this emphasis on modeling?

Kobielus: First, the SOA universe is heading toward a model-driven paradigm for distributed service development in orchestration, and that’s been clear for a several years now. What Microsoft has discussed this week at its SOA and BPM conference was nothing radically new for the industry or for Microsoft.

Over time, with Visual Studio and the .NET environment, they've been increasingly moving toward a more purely visual paradigm. "Visual" is in the very name of their development tool. Looking at the news this week from Microsoft on the so-called Oslo initiative, they are going to be enhancing a variety of their Visual Studio, BizTalk Server, BizTalk Services, and Microsoft System Center, bringing together the various metadata repositories underlying those products to enable a greater model-driven approach to distributed development.

Gardner: They get into some BizTalk too, right?

Kobielus: Yes, BizTalk Server for premises-based and BizTalk Services, software as a service (SaaS), the channel through which it can deliver BizTalk functionality going forward. I had to pinch myself and ask myself what year this is. Oh, it’s 2007, and Microsoft is finally getting modeling religion. I still remember in 2003-2004 there was a big up swell of industry interest in model-driven architecture (MDA).

Gardner: We've had some standards developed in the industry since then too, right?

Kobielus: I was thinking, okay, that’s great, Microsoft, I have no problem with your model-driven approach. You're two, three, or four years behind the curve in terms of getting religion. That’s okay. It’s still taking a while for the industry to completely mobilize around this.

In order words, rather than developing applications, they develop business models and technology models to varying degrees of depth and then use those models to automatically generate the appropriate code and build the appropriate sources. That’s a given. One thing that confuses me, puzzles me, or maybe just dismays me about Microsoft’s announcement is that there isn't any footprint here for the actual standards that have been developed like OMG’s unified modeling language (UML), for example.

Microsoft, for some reason I still haven’t been able to divine, is also steering clear of UML in terms of their repositories. I'm not getting any sense that there is a UDDI story here or any other standards angle to these converged repositories that they will be rolling out within their various tools. So, it really is a Microsoft Oriented Architecture. They're building proprietary interfaces. I thought they were pretty much behind open standards. Now, unless it’s actually 2003, I have to go and check my calendar.

Gardner: They did mention that they're going to be working on a repository technology for Oslo metadata, which will apparently be built into its infrastructure services and tools. There was no mention of standards, and part of the conceptual framework around SOA is that there has to be a fairly significant amount of standardization in order to make this inclusion of services within a large business process level of activity possible.

Some of the infrastructure, be it repository, ESB, management, or governance, needs to be quite open. So, you're saying you're not sure that you're seeing that level of openness. It reminds us of the CORBA versus COM and DCOM situation. OMG was involved with that and supported the development of CORBA

Let’s go to Neil Macehiter. Do you see this as MOA or do you think that they are going to have to be open, if it’s going to be SOA values?

Macehiter: I don’t see this as exclusively Microsoft-oriented, by any stretch. I’d also question Jim’s comment on there being nothing radically new here. There are a couple of elements to the strategy that Microsoft’s outlined that differentiate it from the model-driven approaches of the past.

The first is that they are actually encompassing management into this modeling framework, and they're planning to support some standards around things like the service modeling language (SML), which will allow the transition from development through to operations. So, this is actually about the model driven life cycle.

The second element where I see some difference is that Microsoft is trying to extend this common model across software that resides on premises and software that resides in the cloud somewhere with services. So, it has a common framework for delivering, as Microsoft refers to it, software plus services. In terms of the standard support with respect to UML, Microsoft has always been lukewarm about UML.

A few years ago, they were talking about using domain specific language (DSL), which underpin elements of Visual Studio that currently exist, as a way of supporting different modeling paradigms. What we will see is the resurgence of DSL as a means of enabling different modeling approaches to be applied here. The comment regarding UDDI is only one element at the repository, because where Microsoft is really trying to drive this is around a repository for models, for an SML model or for the models developed in Visual Studio, which is certainly broader.

Gardner: There really aren’t any standards for unifying modeling or repository for various models.

Macehiter: No, so this smacks of being a very ambitious strategy from Microsoft, which is trying to pull together threads from different elements of the overall IT environment. You've got elements of infrastructure as a service, with things like the BizTalk Services, which has been the domain of large Web platforms. You've got this notion of computer applications in BPM which is something people like IBM, BEA, Software AG, etc. have been promoting.

Microsoft has got a broad vision. We also mustn’t forget that what underpins this is the vision to have this execution framework for models. The models will actually be executed within the .NET framework in the future iteration. That will be based on the Window’s Communication Foundation, which itself sits on top of the WS-* standards and then also on top of Windows Workplace Foundation.

So, that ambitious vision is still some way off, as you mentioned -- beta in 2008, production in 2009. Microsoft is going to have to bring its ISVs and systems integrator (SI) community along to really turn this from being an architecture that's oriented towards Microsoft to something broader.

Gardner: Now, Neil, if Microsoft is, in a sense, leapfrogging the market, trying to project what things are going to be several years out, recognizing that there is going to be a variety of modeling approaches, and that modeling is going to be essential for making SOA inclusive, then they are also going to be federating, but doing that vis-à-vis their frameworks and foundations.

If there is anything in the past that has spurred on industry standards, it's been when Microsoft puts a stake in the ground and says, “We want to be the 'blank,'” which, in this case, would be the place where you would federate models.

Kobielus: I’m glad you mentioned the word "federation" in this context, because I wanted to make a point. I agree with Neil. I’m not totally down on what Microsoft is doing. Clearly, they had to go beyond UML in terms of a modeling language, as you said, because UML doesn’t have the constructs to do deployment and management of distributed services and so forth. I understand that. What disturbs me right now about what Microsoft is doing is that if you look at the last few years, Microsoft has gotten a lot better when they are ahead of standards.

When they're innovating in advance of any standards, they have done a better job of catalyzing a community of partners to build public specs. For example, when Microsoft went ahead of SAML and the Liberty Alliance Federated Identity Standards a few years back, they wanted to do things that weren't being addressed by those groups.

Microsoft put together an alliance around a spec called WS-Federation, which just had sort of hit-and-miss adoption in the market, but there has been a variety of other WS-* standards or specifications that Microsoft has also helped to catalyze the industry around in advance of any formal, de-jure standard. I'd like to see it do the same thing now in the realm of modeling.

Macehiter: My guess is that’s exactly what they’re doing by putting a stake in the ground this early. "This is coming from us. There are going to be a lot of developers out there using our tools that are going to be populating our repositories. If you're sensible, you're going to federate with us and, therefore, let’s get the dialogue going." I think that’s partly why the stake is out there as early as it is.

Gardner: Let’s go to Joe McKendrick, Joe, we've seen instances in the past where – whether they're trailing or leading a particular trend or technology -- Microsoft has such clout and influence in the market that they either can establish de-facto standards or they will spur others to get chummy with one another to diminish the Microsoft threat. Do you expect that Microsoft's saying they're going to get in the modeling federation and repository business will prompt more cooperation and perhaps a faster federated standard approach in the rest of the market?

McKendrick: Definitely more and more competitive responses. Perhaps you’ll see IBM, BEA, Oracle, or whatever other entity propose their own approaches. It's great that Microsoft is talking SOA now. It's only been about a year that they have really been active.

Gardner: They didn’t even want to use the acronym. Did they?

McKendrick: I think what's behind this is that Microsoft has always followed the mass market. Microsoft’s sweet spot is the small- and the medium-business sector. They have a presence in the Fortune 500, but where they’ve been strong is the small to medium businesses, and these are the companies that don’t have the resources to form committees and spend months anguishing over an enterprise architectural approach, planning things out. They may be driven by the development department, but these folks have problems that they need to address immediately. They need a focus and to put some solutions in place to resolve issues with transactions, and so forth.

Gardner: That’s interesting, because for at least 10 years Microsoft has had, what shall we say, comprehensive data center envy. They've seen themselves on a department level. They've been around the edges. They've had tremendous success with the client and productivity applications with some major components, including directory and just general operating system level to support servers, and, of course, their tools and the frameworks.

However, there are still very few Fortune 500 or Global 2000 companies that are pure Microsoft shops. In many respects, enterprise Java, distributed computing, and open-standards approaches have dominated the core environment in architecture for these larger enterprises. If Microsoft is going to get into SOA, they're in a better position to do what we’ve been calling Guerrilla SOA, which is on a project-by-project basis.

If you had a lot of grassroots, small-developer, department-level server-oriented activities that Microsoft infrastructure would perhaps be better positioned to be dominant in, then that’s going to leave them with these islands of services. A federated modeling level or abstraction layer would be very fortuitous for them. Anyone have any thoughts about the comprehensive enterprise-wide SOA approach that we have heard from others vendors, versus what Microsoft might be doing, which might not be comprehensive, but could be in a sense grassroots even within these larger enterprise.

Macehiter: The other vendors in the non-Microsoft world might talk about enterprise-wide SOA initiatives and organizations that are planning to adopt SOA on an enterprise-wide basis, based on their infrastructure. The reality is that the number of organizations that have actually gone that far is still comparatively small, as we continually see with the same case-study customers being reintroduced again and again.

Microsoft will have to adopt an alternative model. For example, I think Microsoft will follow a similar model and explore the base they had around the developer community within organizations with things like Visual Studio.

SQL Server is pretty well deployed in enterprise elements of the application platform, by virtue of their being bundled into the OS already. So, they're quite well-positioned to address these departmental opportunities, and then scale out.

This is where some of the capabilities that we talked about, particularly in combination with things like BizTalk Services, allow organizations to utilize workflow capabilities and identity management capabilities in the cloud to reduce the management overhead. The other potential route for Microsoft is through the ISV community.

Gardner: I suppose one counterpoint to that is that Microsoft is well positioned with it's tools, frameworks, skill set, and entrenched positions to be well exploited for creating services, but when it comes to modeling business processes, we're not really talking about a Visual Studio-level user or developer. Even if the tools are visually oriented, the people or teams that are going to be in a position to construct, amend, develop, and refine these business processes are going to be at a much higher level. They're going to be architects and business analysts. They're going to be different types of persons.

They are going to be people who have a horizontal view of an entire business process across the heterogeneous environments and across organizational boundaries. Microsoft is well positioned within these grassroots elements. I wonder if they can, through a modeling federation layer and benefit, get themselves to the place where they are going to be the tools and repository for these analysts and architect level thinkers.

Kobielus: I think they will, but they need to play all this Oslo technology into their dynamics strategy for the line of business applications. The analysts that operate in the dynamics world are really the business analyst, the business process re-engineering analysts, etc., who could really use this higher layer entity modeling environment that Microsoft is putting there. In other words, the analysts we are discussing are the analysts who work in the realm of the SAP or Oracle applications, or the dynamic applications, not the departmental database application developers.

Macehiter: The other community there would be the SIs, who do a lot of this work on behalf of organizations. As part of the Oslo messaging, Microsoft has talked about this sort of capability being much more model-driven than a high level of abstraction, as a means to allow SOAs to become more like all ISVs, in terms of delivering more complete solutions. That’s another key community, where Microsoft just doesn't compete, in contrast to IBM, which is competing directly with the likes of Accenture and CapGemini. That’s another community that Microsoft will be looking to work very closely with around this.

Gardner: In the past, Microsoft did very well by targeting the hearts and minds of developers. Now, it sounds like they are going to be targeting the hearts and minds of business analysts, architects, and business-process level oriented developers. Therefore, they can position themselves as a neutral third party in the professional services realm. They can try to undermine IBM’s infrastructure and technology approach through this channel benefit of working with the good tooling and ease of deployment at the modeling and business-process construct level with these third-party SIs. Is that it?

McKendrick: As an addendum to what you just said, Microsoft isn't necessarily going to go directly after customers of IBM, BEA, etc. IBM is providing this potential to companies that have been under-served, companies that cannot afford extensive SOA consulting or integration work. It's going after the SMB sector, the Great Plains, the dynamics application that Jim spoke of. Those are SMB application. The big companies will go to SAP.

Gardner: So, Microsoft could have something that would be a package more amenable to a company, of say, 300-to-2,000 seats, maybe even 300-to-1,000.

McKendrick: Exactly, Microsoft is the disrupter in this case. There are other markets where Microsoft is being disrupted by Web 2.0, but in SOA, Microsoft is playing the role of disrupter and I think that’s what their strategy is.

Kobielus: I want to add one last twist here. I agree with everything Joe said. Also, the Oslo strategy, the modeling tools, will become very important in Microsoft’s overall strategy for the master data management (MDM) market they have announced already. A year from now, Microsoft will release their first true MDM product that incorporates, for example, the hierarchy and management and cross-domain catalog, management capabilities from their strategic acquisitions.

What Microsoft really needs to be feature-competitive in the MDM market is a model-driven, visual business-process development and stewardship tool. That way teams of business and technical analysts can work together in a customer data-integration, product information-management, or financial consolidation hub environment to build the complex business logic into complex applications under the heading of MDM. If Microsoft's MDM team knows what they are doing and I assume they do, then they should definitely align with the Oslo initiative, because it will be a critical for Microsoft to compete with IBM and Oracle in this phase.

Gardner: As we've discussed on this show, the whole data side of SOA in creating common views, cleaning and translating, schemas and taxonomies, and MDM is extremely important. You can’t do SOA well, if you don’t have a coherent data services strategy. Microsoft is one of the few vendors that can provide that in addition to many of these other things that we're discussing. So, that’s a point well taken. Now, to Joe’s point about the SMB Market, not only would there be a do-it-yourself, on-premises approach to SOA, but there are also SaaS and wire-based approaches.

We've heard a little bit about a forthcoming protocol -- BizTalk Services 1 -- and that probably will relate to Microsoft's Live and other online-based approaches. The end user, be they an architect and analyst or someone who is going to be crafting business processes, if they're using a strictly Web-based approach, they don’t know or care what’s going on beneath the covers in terms of foundations, frameworks, operating systems, and runtime environments. They are simply looking for ease of acquisition and use productivity-scale reliability.

It strikes me that Microsoft is now working towards what might be more of a Salesforce.com, Google, or Amazon-type environment, where increasingly SOA is off the wire entirely. It really is a matter of how you model and tool those services that becomes a king maker in the market. Any thoughts on how Microsoft is positioning these products for that kind of a play?

Macehiter: Definitely. The software plus services, which is the way that Microsoft articulates this partitioning of capability between on-premise software and services delivered in the cloud, is definitely a key aspect of the Oslo strategy and BizTalk Services. It’s just one element of that.

For example, if an organization needs to do some message flow that crosses between organizations over the firewall, BizTalk Services will provide a capability that allows you to explore that declaratively. You can see that evolving, but that’s more infrastructure services. Clearly, another approach might be a high-level service, an application type service, and this architecture that Microsoft is talking about is attempting to address that as well.

This is definitely a key element of the story, which is about making sure that Microsoft remains relevant in the face of in an increasing shift, particularly in the SMB market, towards services delivered in the cloud. It’s about combining the client, the server and services, and providing models in terms the way you think about the applications you need and in terms of the way you manage and deploy them that can encompass that in a way that doesn’t incur significant effort.

Gardner: Perhaps the common denominator between the on-premises approach -- be it departmental level, enterprise-wide, SMB, through the cloud, or though an ecology of providers -- is at this modeling layer. This is the inflection point where, no matter how you do SOA, you’re going to want to be in a position to do this well, with ease, and across a variety of different approaches. Is that fair?

Macehiter: Yes. That’s why this is a better attempt by Microsoft to change the game and push the boundaries. It’s not just a model-driven development revisited in a NDI and a .NET world. This is broader than that.

Gardner: This is classic Microsoft strategy, leapfrogging and trying to get to what the inflection point or the lock-in point might be, and then rushing to it and taking advantage of its entrenched positions.

McKendrick: Forming the mass market, exactly.

Gardner: Let’s move on to our next subject, now that we’ve put that one to rest. The implications are that Microsoft is not out of the SOA game, that it's interested in playing to win, but, once again, on its own terms based on its classic market and technology strategies.

McKendrick: And reaching out to companies that could not afford SOA or comprehensive SOA, which it's done in the past.

On Green SOA and the IT Energy-Use Factor ...

Gardner: Let’s move on to our new subject, Green SOA. SOA approaches and methodologies bring together abstractions of IT resources, developing higher level productivity through business process, management, organization, and governance. How does that possibly impact Green IT?

It's a very big topic today. In fact, it was the top of the strategic technology areas that Gartner Group identified for 2008. Green IT was named number one, a top-ten strategic technology area. How does SOA impact this? Jim Kobielus, you have been given this a lot of thought. Give us the lay of the land.

Kobielus: Thank you, Dana. Clearly, in our culture the Green theme keeps growing larger in all of our lives, and I'm not going to belabor all the ramifications of Green. In terms of Green, as it relates to SOA, you mentioned just a moment ago, Dana, the whole notion of SOA is based on abstraction, service contracts, and decoupling of the external calling interfaces from the internal implementations of various services. Green smashes through that entire paradigm, because Green is about as concrete as you get.

SOA focuses on maximizing the sharing, reuse, and interoperability of distributed services or resources, application logic, or data across distributed fabrics. When they're designing SOA applications, developers aren't necessarily incentivized, or even have the inclination, to think in terms of the ramifications at the physical layer of these services they're designing and deploying, but Green is all about the physical layer.

In other words, Green is all about how do human beings, as a species, make wise use and stewardship of the earth’s nonrenewable, irreplaceable resources, energy or energy supplies, fossil fuels, and so forth. But also it’s larger than that, obviously. How do we maintain a sustainable culture and existence on this planet in terms of wise use of the other material resources like minerals and the soil etc.?

Gardner: Isn't this all about electricity, when it comes to IT?

Kobielus: Yes, first and foremost, it’s pitched at the energy level. In fact, just this morning in my inbox I got this from IBM: "Join us for the IBM Energy Efficiency Certificate Announcement Teleconference." They're going to talk about energy efficiency in the datacenter and best practices for energy efficiency. That’s obviously very much at the core of the Green theme.

Now, getting to the point of how SOA can contribute to the greening of the world. SOA is the whole notion of consolidation -- consolidation of application logic, consolidation of servers, and consolidation of datacenters. In other words, it essentially reduces the physical footprint of the services and applications that we deploy out to the mesh or the fabric.

Gardner: Aren't those things independent of SOA? I mean, if you're doing datacenter consolidation and modernization, if you are moving from proprietary to standards-based architectures, what that has got to do with SOA?

Kobielus: Well, SOA is predicated on sharing and reuse. Okay, your center has a competency. You have one hunk of application logic that handles order processing in the organization. You standardize on that, and then everybody calls that, invokes that over the network. Over time, if SOA is successful other centers of development or other deployed instances of code that do similar things will be decommissioned to enable maximum reuse of the best-of-breed order-processing technology that’s out there.

As enterprises realize the ROI, the reuse and sharing should naturally lead to greater consolidation at all levels, including in the datacenter. Basically, reducing the footprint of SOA on the physical environment is what consolidation is all about.

Gardner: So, these trends that are going concurrently -- unification, consolidation, and virtualization -- allow you to better exploit those activities and perhaps double down on them in terms of a fewer instances of an application stack, but more opportunity to reuse the logic and the resources more generally. So a highly efficient approach that ultimately will save trees and put less CO₂ in the atmosphere.

Kobielus: I want to go back to Microsoft. Four years ago, in 2003, I went to their analyst summit in Redmond. They presented something they called service definition modeling language (SDML) as proprietary spec and a possible future spec for modeling services and applications at the application layer and physical layer. An application gets developed, it gets orchestrated, it gets distributed across different nodes, and it allows you to find the physical partitioning of that application across various servers. I thought:

That’s kind of interesting. They are making a whack at both trying to model from the application down to the physical layer and think through the physical consequences of application development activities.

Gardner: Another trend in the market is the SaaS approach, where we might acquire more types of services, perhaps on a granular level or wholesale level from Google, Salesforce, Amazon, or Microsoft, in which case they are running their datacenters. We have to assume, because they're on a subscription basis for their economics, that they are going to be highly motivated toward high-utilization, high-efficiency, low-footprint, low-energy consumption.

That will ultimately help the planet, as well, because we wouldn’t have umpteen datacenters in every single company of more than a 150 people. We could start centralizing this almost like a utility would. We would think that these large companies, as they put in these massive datacenters, could have the opportunity for a volume benefit in how they consume and purchase energy.

Gardner: Neil Macehiter, what do you make of this Green-SOA relationship?

Macehiter: We need to step back and look at what we are talking about. You mentioned ROI. If we look at this from a Green ROI perspective, organizations are not going to be looking at SOA as the first step in reducing their Green footprint. It's going to be about server and storage consolidation to reduce the power consumption, provide more efficient cooling, and management approaches to ensure that servers aren’t running when they don’t need to be. That’s going to give them much bigger Green bang for the buck.

Certainly, the ability to reuse and share services is going to have an impact in terms of reducing duplications, but in the broader scheme of things I see that contribution as being comparatively small. The history that we have is largely ignoring the implications of power and heat, until we get to the size of a Google or a Microsoft, where we have to start thinking about putting our datacenters next to large amounts of water, where we can get hydroelectric power.

So, IT has a contribution to make, but there isn't anything explicit in SOA approaches, beyond things like service reuse and sharing that can really contribute. The economies of scale that you get from SaaS in terms of exploiting those services come from more effective use of the datacenter resources. This is those organizations' business, and, given the constraints they operate under, they can’t get datacenters big enough, because then there are no power stations big enough.

Gardner: Your point is well taken. Maybe we're looking at this the wrong way. Maybe we’ve got it backwards. Maybe SOA, in some way, aids and abets Green activities. Maybe it's Green activities, as they consolidate, unify, seek high utilization, and storage, that will aid and abet SOA. As Gartner points out, in their number one strategic technology area for 2008, Green initiatives are going to direct companies in the way that they deploy and use technology towards a situation where they can better avail themselves of SOA principles. Does that sound right, Joe McKendrick?

McKendrick: In an indirect way, it sounds right, but I want to take an even a further step back and look at what we have here. Frankly, the Green IT initiative is misguided and the wrong questions are being asked about Green IT. Let me say that I have been in active environmental causes and I have done consulting work with a company that has worked with utilities and ERP Electric Car Research Institute on energy saving initiatives.

It's great that IT is emphasizing efficient datacenters, but what we need to look at is how much energy IT has saved the world in general? How much power is being saved as a result of IT initiatives? SOA rolls right into this. For example, how many business trips are not being taken now, because of the availability of video conferencing and remote telecommuting, telework and things of that sort? We need studies. I don’t have the data on this and there isn’t any data out there that has really tracked this. In e-commerce, for example, how many stores have not been built because of e-commerce?

Gardner: These are really good points that the overall amount of energy consumption in the world would be much greater and productivity. It's very difficult to put all the cookie crumbs together and precisely measure the inputs and outputs, but that’s not really the point. We're not talking about what we would have saved, if we didn’t have IT for saving. What can we do to refine even further that what which we have to use to create the IT that we have?

Macehiter: The reality is that we can’t offset what we’ve saved in the past against what we are going to conceive in the future. We are at a baseline and it is not about apportioning blame between industries and saying, "Well, IT doesn’t have to do so much, because we’ve done a lot in the past."

McKendrick: But, we are putting demands on IT, Neil. We're putting a lot of demands on IT for additional IT resources.

Macehiter: If you go into a large investment bank, and look at what proportion of their electricity consumption is consumed by IT, I'd hazard a guess that it's a pretty large chunk, alongside facilities.

McKendrick: And probably lots of demands are put on those datacenters, but how much energy is that saving because of additional services being put out to the world, being put out to society?

Gardner: What's your larger point, Joe, that we don’t need to worry too much about making IT more energy efficient because it's already done such a great job compared to the bricks-and-mortar, industrialized past?

McKendrick: The problem is, Dana, we don’t know. There are no studies. I'd love to see studies commissioned. I'd love to see our government or a private foundation fund some studies to find out how much energy IT has been saving us.

Kobielus: I agree with everything you guys are saying, because the issue is not so much reducing IT’s footprint on the environment. It’s reducing our species' overall footprint on the resources. One thing to consider is whether we have more energy-efficient datacenters. Another thing to consider is that, as more functionality gets pushed out to the periphery in terms of PCs and departmental servers, the vast majority of the IT is completely outside the datacenter.

Gardner: Jim, you are really talking about networked IT, so it's really about the Internet, right? The Internet has allowed for a "clicks in e-commerce" and not a "bricks in heavy industries" approach. In that case, we're saying it's good that IT in the Internet has given us the vast economies of scale, productivity, and efficiency, but that also requires a tremendous amount of electricity. So, isn’t this really an argument for safe nuclear and to put small nuclear reactor next to datacenters and perhaps not create CO₂?

Macehiter: Let's not forget that this isn't just about enterprise use of IT. If I look at my desk, as a consumer of IT, I've got a scanner, hard disk, two machines, screen, two wireless routers, and speakers that are all consuming electricity. Ten years ago, I just wouldn’t have had that. So, we have to look broader than the enterprise. We can get into a whole other rat’s nest, if we start into safe nuclear power or having wind farms near our datacenter.

Gardner: It's going to be NOA, that’s Nuclear-Oriented Architecture…

Kobielus: In the Wall Street Journal this morning, there was an article about Daylight Saving Time. This year, in the US, Daylight Saving Time has been moved up by a week at the beginning in March and moved back by a week into November. So, this coming Sunday, we are going to finally let our clocks fall back to so-called Standard Time.

The article said that nobody has really done a study to show whether we are actually saving any energy from Daylight Saving Time? There have been no reliable studies done. So, when the legislatures change these weeks, they're just assuming that, by having more hours of daylight in the evening, we are using less illumination, therefore the net budget or net consumption of energy goes down.

In fact, people have darker mornings, and people tend to have more morning-oriented lives. People in the morning quite often are surfing the Web, and viewing the stuff on their TiVo, etc. So, net net, nobody even knows with Daylight Saving Time whether it's Green friendly, as a concept.

Gardner: Common sense would lead you to believe that you’re just robbing Peter to pay Paul on this one, right? Perhaps there are some lessons to be learned on that same level for IT. We think we're saving footprints in data centers and we are consolidating and unifying, but we are also bringing more people online and they have larger energy-consuming desktop environments or small-office environments that Neil described. If there are 400 million people with small offices and there are a billion people on the Internet, then clearly the growth is far and away outstripping whatever efficiencies we might bring to the table.

McKendrick: The efficiencies gained by IT might be outstripping any concerns about green footprints with datacenters. We need data. We need studies to look at this side of it. The U.S. Congress is talking about studying the energy efficiency of datacenters, and you can imagine some kind of regulations will flow from that.

Kobielus: I'm going to be a cynic and am just going to guess that large, Global 2000 corporations are going to be motivated more by economics than altruism when it comes to the environment. So back to the announcement today, on Nov. 2, about IBM launching an initiative to give corporate customers a way to measure and potentially monetize energy efficient measures in their datacenters.

I think IBM is trying to come up with the currency of sorts, a way to earn energy-efficient certificates that can then apply some kind of an economic incentive and/or metric to this issue. As we discussed earlier, the Green approach to IT might actually augment SOA, because I don’t think SOA leads to Green, but many of the things you do for Green will help people recognize higher value from SOA types of activities.

Gardner: Let's leave it at that. We're out of time. It's been another good discussion. Our two topics today have been the Microsoft SOA conference and abstract relationship between Green IT and SOA. We have been joined with our great thinkers and fantastic contributors here today including Jim Kobielus, principal analyst at Current Analysis. Thanks, Jim.

Kobielus: Thank you, Dana. I enjoyed it as always.

Gardner: Neil Macehiter, principal analyst at Macehiter Ward-Dutton. Thanks, Neil.

Macehiter: Thanks, Dana. Thanks, everyone.

Gardner: And, Joe McKendrick, the independent analyst and blogger extraordinaire. Thanks, Joe.

McKendrick: Thanks, Dana. It was great to be here.

Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions. You’ve been listening to BriefingsDirect SOA Insights Edition, Volume 27. Come back again next time. Thank you.

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Transcript of BriefingsDirect SOA Insights Edition podcast, Vol. 27, on Microsoft SOA and Green IT. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.