Friday, October 03, 2008

BriefingsDirect Insights Analysts Examine HP-Oracle Exadata Release, Extreme BI, Virtualization and Cloud Computing Trends

Edited transcript of BriefingsDirect Analyst Insights Edition podcast, Vol. 30, on Exadata, extreme BI and cloud computing, recorded Sept. 26, 2008 from Oracle OpenWorld in San Francisco.

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Dana Gardner: Hello, and welcome to the latest BriefingsDirect Analyst Insights Edition, Vol. 30. This periodic discussion and dissection of IT infrastructure related news and events, with a panel of industry analysts and guests, comes to you with the help of our sponsors, charter sponsor Active Endpoints, maker of the ActiveVOS visual orchestration system, and also Hewlett-Packard via the HP Live! Podcast Series.

I'm your Host and moderator Dana Gardner, principal analyst at Interarbor Solutions. Our panel this week consists of Joe McKendrick, an independent analyst and prolific blogger on SOA and BI topics. Hi, Joe!

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

Gardner: We are also joined by Brad Shimmin, a principal analyst at Current Analysis. Hey, Brad!

Brad Shimmin: Hi, Dana, thanks for having me.

Gardner: Jim Kobielus joins us. He's a blogger and senior analyst at Forrester Research. Hello, Jim!

Jim Kobielus: Hey, Dana, and Hi, everybody!

Gardner: And Dave Linthicum, blogger, independent consultant, joins us this week. Thanks for coming, Dave.

Dave Linthicum: Thanks, Dana, thanks for having me back.

Gardner: We are going to be talking about the news of the week of Sept. 22, 2008. We'll be looking at the HP-Oracle announcements and other news made here at Oracle OpenWorld. We'll be talking about cloud computing and the notion of "on-premises" or "private clouds," and how data portability might actually work among and between different clouds -- both "public," if you will, and "private." We'll look at recent virtualization news from VMware, HP, Red Hat and Citrix.

An Exadata 'Shocker' ...

Let's start our show this week with Jim Kobielus. Jim, you and I are both here at the Oracle OpenWorld. We had an unusual announcement around optimization between hardware and software from Oracle, which has traditionally been a software-only company.

Oracle and HP introduced two Exadata products. I wonder if you could fill in our audience on what Oracle did this week.

Kobielus: Yes, this week Oracle announced the release, in partnership with HP, of a very high-end data warehousing appliance. They may not use the word "appliance," but that's in fact what it is. It's a configured and optimized bundle of hardware and software, with database storage, so it meets very high-end data warehousing requirements. It's called the HP Oracle Database Machine.

It encompasses and includes the HP Oracle Exadata Storage Server, which is a grid storage level server. One of the key differentiators on that storage approach is that it puts the query processing in the storage subsystem. As a result, it can greatly speed up the processing of very complex analytics. What Oracle and HP have essentially done is take a page from the Netezza book, because that is, of course, the feature of the Netezza performance system. [Netezza] has an appliance that they accelerate your data models through by putting this whole processing back close to storage. But the HP Oracle release does much more than simply taking the page out of that Netezza book.

What they did essentially is they also shot across Teradata's bow, because this is Oracle's petabytes-scale, data warehousing-solution platform. The HP Oracle Database Machine that they demonstrated at the show definitely screams. And it can scale -- Oracle says that it can scale with almost no limits, and that remains to be seen.

But it can definitely go to a much higher scale in terms of capacity than the current Oracle Optimized Warehouses that they have already begun to ship with HP and a variety of other hardware partners. The Oracle Optimized Warehouses max out at several hundred terabytes. And, as I said, the HP Oracle Database Machine can go well beyond that.

This is a shot both across Teradata's bow and across Netezza's. And Oracle Chairman and CEO Larry Ellison from the stage directly honed in on both of those competitors by name.

It was classic Ellison, a very well put together presentation. But quite frankly when you begin to analyze the various claims he made, they don't all hold up. Or rather, he is presenting a lot of the Oracle-specific differentiation. Yet they were very impressive.

Gardner: This is a significant departure for Oracle and HP on several different levels. On one hand, we have a combined hardware-software product from two different vendors. We also have a new parallelization process, with their architectural design, where the database and the storage are very close. The processing can take advantage of massively parallel processing. We also have the fat pipes in the form of InfiniBand connections.

So we have an architectural departure. We have a hardware-software departure, and we also have this interesting alliance between HP and Oracle, making and selling a product together. How does this all strike you, Brad Shimmin?

Shimmin: Well, I was shocked, shocked, absolutely simply shocked. This is because historically Oracle has strayed so far away from the appliance market. It's been surprising to me on a number of occasions when I have spoken with them about acquisitions. Actually they made one acquisition earlier this year, they acquired a company that had an appliance that was very successful, and they chose to simply kill it outright because they “did not want to play in the space.”

With that said, I am glad to see this happening. I really am, and I think that HP is a good partner with them because I don't feel that the two companies really bumped into one another in terms of Oracle's core constituency. So I think it's a good play all around, and I am glad to see Oracle finally getting into this. Now if only they would release parts of their middleware as an appliance, I would be very happy.

Kobielus: And, in fact, Brad, Larry Ellison indicated that they seem to have some plans for that. They really resisted details -- but they seem to have some plans to "appliance-ize," if that's the word, more and more the Oracle Fusion Middleware stack.

Shimmin: There are other quite prominent middleware stack players that are moving to appliances, as well. I can't mention their names but the use of appliances seems to be of great interest to more vendors.

Gardner: I have also been picking up on this interest in the appliance business. IBM has been into this with DataPower SOA Appliances for a while now, but IBM has not really extended use of appliances out as widely as I was expecting. I have also heard that TIBCO may be building an appliance for complex event processing (CEP). So, yes, I think we are going to see more of this.

Brad, I want to go back for one second to the HP-Oracle relationship. It almost seems now that Oracle has anointed HP at some level as a preferred hardware supplier on storage, if not also other aspects of hardware. What does that mean for EMC and some of the other storage hardware providers? They are no longer on an independent or third-party-friendly level with Oracle, right?

Shimmin: Absolutely. I think that all of those relationships will come under strain from this. There is no question about that. And it seems to me that this makes Oracle look a lot more like both IBM and Sun Microsystems and EMC, in terms of having some sort of competency in hardware. So I think there are going be a lot of far-ranging ripples from this relationship that will change the way the market functions.

Gardner: And how is all of this going to come to market? If you want to buy the Exadata warehouse you actually have to go through the Oracle sales force. Oracle is going to support it, and sell it, price it, and then HP is going to service the hardware. So in essence, HP is the supplier to Oracle, and Oracle is the principal vendor. Does that mean anything anybody out there?

Kobielus: It means that Oracle is taking much more of a marketing lead on the HP Oracle Database Machine than they have with any of the Oracle Optimized Warehouses. So Oracle is very much staking its data warehousing go-to-market strategy on this new product, and on this partnership with HP. That said, HP is providing all of the technical support on the new products. So it's not like Oracle is really becoming a hardware vendor, rather they are going to become very much a software vendor, but has staked their future on delivering the software on this one particular hardware partner's platform.

Gardner: Actually it allows Oracle to operate at a solutions level and so take quite a bit more of the margin across that total data warehouse solution, right? And that undercuts the data array providers significantly.

Okay, so let's talk about what we do this thing. We heard that the 1 terabyte-sized data sets and higher start to hit performance issues. And that then prevents companies from adding more queries on their warehouses, and also reduces the amount of additional data that they want to put into their warehouses.

So we could have hit a wall somewhere around 1 terabyte databases. This approach, this architecture in the Exadata hardware-software optimization claims to blow that away, that it can deal with the largest sets, of 10 terabytes and up, with very high performance. What does this mean for business intelligence (BI) analytics? What does this mean for bringing more types of data and content into the warehouse? What are the business outcome benefits?

Joe McKendrick, what are your thoughts on the BI perspective on this market development?

McKendrick: Well, it certainly moves the business intelligence arena forward. Looking at what the rationale is for having an appliance in this market -- versus what's has been happening for the previous decade with data warehousing -- it really says a lot about what's needed in the market.

Data warehouses, when you get into the multiple terabyte range, are simply too complex and have high cost of ownership. That's made BI a fairly expensive proposition for companies going this route, and the cost is tied into the maintenance, the updates for the warehouse software, the organizational effort, and the input required to make a large data warehouse go.

Now there is a trend emerging. I am sure Oracle has an eye on this as well. It's toward open source. We are seeing more open source in data warehouses too. This is open source at the warehouse level itself, at the database level itself. [Sun Microsystem's] MySQL for example has been pointing in this direction, PostgreSQL as well. [And there's Ingres.]

Gardner: Well, that's another distinct issue. Now with Oracle and HP cooperating, why shouldn't we expect Sun to come out with something quite similar, but with MySQL as the database, and their [Sparc/UltraSparc] processing, and their rack, cooling and InfiniBand, and of course, their storage?

McKendrick: I wouldn't be surprised, I wouldn't be surprised one bit if we see some kind of response from Sun fairly soon because Sun still makes its money from hardware.

Gardner: Right, now if Sun does that then IBM will certainly come out with something around DB2. We should expect that, right?

McKendrick: Yes, yes, definitely. And I think there is an emphasis on simplifying data warehousing, making data warehousing simple for the masses. Microsoft, love them or hate them, has been doing a lot of work in this area by increasing the simplicity of its data warehouse and making it available at more of a commodity level for the small to medium size business space.

I think we're going to see more in the open source data warehousing space, and Oracle is looking at that as well.

Gardner: Let's go to Jim Kobielus. Jim, [using Exadata] we can start taking 10 terabyte data sets and delivering analytics in near real-time and deliver query results out to various business applications on huge scale. We can also start looking at this as cloud infrastructure -- where we are going to be providing data as a service, BI as a service even. And then we have Sun, IBM, and perhaps Hitachi, and all these other guys that are jumping in with their own data warehouse appliances, and they start beating each other up on price, and the price comes down in the market. Are we then entering an era of affordable extreme BI?

Kobielus: For sure. Well, extreme BI, that's really BI and data warehousing with very large data sets, with very demanding real-time loading scenarios, with very extensive concurrent usage and so forth. We are already in that era. If you look at what's going on -- and actual deployment, enterprise deployments -- like 10 terabytes, those are in fact much of the data warehousing solutions in the market. That's the joy of data warehousing, enterprise departments are between 5 and 15 terabytes. They are being handled quite well through a lot of symmetric multi-processing (SMP). So these are around in the market.

Now our data warehousing and BI environments are in the hundreds of terabytes, and up to the petabytes range and beyond. A lot of these are in the cloud already. I can't name names yet. There are a few things right now that I can't show. But well-known Web 2.0 service providers are already above the petabytes scale in terms of the amount of data that's persisted, and in terms of their needs and their ability to do continuous concurrent loads into those humongous data warehouses in real-time. In these extreme data warehousing environments you may have millions upon millions of queries hitting that data warehouse all the time.

Gardner: But aren't we with Exadata taking this from the high-end, roll-your-own, computer-science gee-whiz level down to much more of an off-the-shelf, forklift upgrade level? Aren't we now getting to extreme BI at much more a commodity, or at least something that's much more germane across many more types organization?

Cloud computing gains traction ...

Kobielus: Oh, yeah, for sure. It's getting down into the affordable way to eventually bringing cloud data warehouses down into the range of the main market, as well as for large enterprises. ... The one thing -- one of the other important outcomes from my point of view this week at Oracle OpenWorld -- was the fact that Oracle, now in conjunction with Amazon's Elastic Compute Cloud, has an Oracle cloud -- the existing Amazon cloud can take Oracle database licenses.

They can move those licenses to a cloud, hosted by Amazon EC2. Using tools that Oracle is providing they can move their data to back it up or move databases entirely to be persistent in the cloud, in Amazon's S3 service. So this is very much a lead in. I strongly expect that the other enterprise database vendors over time, maybe in a year or two, we'll also offer similar deployments and flexibility for their data warehousing customers.

Gardner: Okay, let's go to Dave Linthicum on that. Dave, you're familiar with moving data around the cloud. It sounds like people will start getting comfortable with this from a risk and from a reliability/privacy/control issue level. And then it's a no-brainer to start moving fairly massive data sets, or for backups or extend-enterprise sharing or federation of data -- what have you, into cloud infrastructures.

How important from your perspective is what Oracle announced in conjunction with Amazon this week?

Linthicum: I think it's very important. I think that the economics -- that it's much cheaper to do cloud computing than on-premises stuff -- and you can prove that at each and every time, or run into an issue around cultural, and kind of total protection issues within the enterprises ... I think those are falling down as time goes on. Go back in a time machine five years ago, and start talking about running major enterprise applications delivered as SaaS, they would have laughed at you.

Today, everyone is using, and just a bunch of other SaaS-delivered applications. So enterprises are getting their minds around cloud computing, understanding the concept of it. So moving information into the cloud is not really much of a leap. You already have customer information existing on, or other SaaS providers out there.

I think that this is one step in the direction that, in essence, we're going back in time a bit, moving back into the time-sharing space. A lot of things are going to be pushed back out into the universe through economy's scale, and also through the value of communities. It just can be a much more cheap and cost effective way of doing it. I think it's going to be a huge push in the next two years.

Gardner: Does it seem reasonable that Oracle would test the waters on this, in terms of market acceptance, with Amazon? Once people get a little more familiar and comfortable with it, then Oracle comes out with its own cloud offerings?

Linthicum: Absolutely, I think that Oracle is going to have a cloud offering, IBM is going to have a cloud offering, Sun is going to have a cloud offering, and it's going to be the big talk in the big industry over the next two or three years. I think they are just going to get out there and fight it out.

I think you are going to have number of startups, too. They are going to have huge cloud offerings as well. They are going to compete with the big guys. And they can -- because it's very simple to put up infrastructure. It's fairly cost effective, and you can get out there and start battling it out with them. Quite frankly, I think, maybe the more agile, smaller companies may win that war.

Virtualization for private clouds ...

Gardner: In other recent news, Brad Shimmin, we have heard quite a bit of virtualization, and cloud compute discussions from VMware, from Citrix, and from HP. We saw some acquisition from Red Hat that brings them into the hypervisor space. Maybe you can help our listeners understand a little bit better the relationship between virtualization, management and platform vendors, and how this whole notion of private or enterprise clouds works.

Shimmin: It depends on the perspective we have, right? It depends on if we are talking about virtualizing the datacenter, virtualizing the desktop (VDI), or moving facets of the datacenter to the cloud. If you are trying to understand how, as we were just talking about, these smaller players are able to use things like Amazon EC2 to get into the market -- or if we are talking about moving the desktop to data center cloud -- what I want to understand as a customer is just what the SLAs and protections are from these provides, whether it's IBM or Amazon. And, by the way, another one we need to mention is Cisco, which will be using the WebEx platform as a SaaS platform and SaaS solution for the enterprise.

The point is that as a customer you don't just want to know what the [performance reliability figures] are, you want to know what sort of wrapper these vendors are putting around their solutions for things like security and policy management enforcements. It's not just the fact that they will be able to secure the data, but it's about being able to control and manage the data, and have visibility into the data; whether it's something that's sitting in some sort of virtualized instance in your own datacenter, or whether it's something that's sitting in some federated system that might be shared between Cisco and Amazon.

Gardner: I found it interesting that these vendors are basically tripping over themselves and rushing out to the market, way before these private clouds have even established themselves. Yet the vendors are declaring that they have the infrastructure and the approach to do it. It sort of reminds me of a platform, or even operating system, land grab -- that getting there first and establishing some of the effective standards and coming up with industry-common implementations gives them an opportunity to at some level or format create the de facto portability means.

This is a layer above virtualization. And virtualization is there to bring all the legacy stuff into play, but what do you do with the new applications? What do you do with the new services? Dave Linthicum, what are your thoughts on a meta-operating system in the cloud? Are we in a kind of a race to be first to that?

Linthicum: I think that's a ways off at this point. I think people are going to put aspects of the infrastructure up in the cloud first. And I think that the platform-as-a-service (PaaS) and the ability to provide a development infrastructure, storage infrastructure, some deployment infrastructure, and things like that -- that is all going to be a bit of mix and match. I think people are going to do little tactical projects to kind of dip their toe in the water to see if it is viable.

However as we go forward, I think that's the destination. If you look at how everything is going, I think everything is going to be pushed up into the cloud. People are basically going to have virtual platforms in the cloud, and that's how they are going to drive it. Just from a cost standpoint, everything we just discussed, the advantages are going to be for those who get there first.

I think that very much like the early adopters of the Web, back in the 1990s, this is going to be the same kind of a land grab, and the same kind of land rush that's going to occur. Ultimately you are going to find 60 percent to 80 percent of the business processes over the next 10 years are going to be outsourced.

Gardner: What about this issue of data, these massive data sets, and bringing some of that up into a cloud? Is it going to be just standards-based interoperability for my data set and your data set to play well with each other? To what level are we hung up by different cloud implementations, and therefore perhaps also different data implementations? Does that need to be solved?

Linthicum: Yes, I think it does. I think that you are going to find that integration does occur in the clouds, just like it does within the enterprise, from enterprise to enterprise. The reality is that people have information up there with different semantics, different data formats, and all of that stuff has to be transferred one to another.

I think that the idea of integration in the cloud, which I have been involved with personally over the last 10 years, may actually start to be used. I think that people are going to have to do transformation around control, filtering, all of these things as information moves between these partitions out in the universe. Ultimately integration is going to be easier. We know lot more than we did 15 years ago when I wrote the book, Enterprise Application Integration. But I think that it's still going to be needed and a necessary thing. So maybe integration in the cloud companies should start pushing forward.

Kobielus: I hear what you're saying. I think that's an important point to put forward, which is that these clouds, these data warehousing clouds -- data warehouses that are external to the firewalls, the multi-tenant environments -- are multi-domain, multi-entity data warehouses with strict separations between the various domains, which are often searching with particular customers. But like a supply chain application in the cloud, it is the probably the best place to put all that data so that companies and suppliers and the customers all have access to common pooled data in a common externally hosted environment.

What that raises then is that the data warehouses in the cloud, really become data federation in the cloud. So all these different data sets, the divergent schema and so forth, need to be normalized to a common semantic layer in the cloud provided by that cloud vendor. So then you are into the data federation vendors that had a huge footprint in the enterprise, those guys then need to provide their capabilities in the cloud for these types of supply chain and B2B applications.

I am talking with a couple companies, like Composite Software and some others, where they have well established data federation to manage virtualization layers. Those guys need to get cracking to put a lot of that into a cloud environment to enable this level of data integration and federation in that cloud environment going forward, and make it scalable.

Gardner: Well I think we will have to leave it there. We have been discussing announcements from Oracle OpenWorld, other news in the virtualization space, and how these relate to the future of "extreme BI," as well as what cloud infrastructures might look like from a variety of vendors in the future. I want to thank our panel for joining us for BriefingsDirect Analyst Insights Edition, Vol. 30.

I also want to thank our charter sponsor for supporting our podcast, Active Endpoints, maker of the ActiveVOS visual orchestration system, and Hewlett-Packard via the HP Live! Podcast Series. This is Dana Gardner, principal analyst at Interarbor Solutions, thanks for listening, and come back next time.

Special offer: Download a free, supported 30-day trial of Active Endpoint's ActiveVOS at

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Transcript of BriefingsDirect podcast on Exadata, extreme BI and cloud computing. Copyright Interarbor Solutions, LLC, 2005-2008. All rights reserved.

Thursday, October 02, 2008

Interview: HP’s Paul Evans, Oracle’s Lance Knowlton on Application Modernization and IT Transformation

Transcript of BriefingsDirect podcast recorded at the Oracle OpenWorld Conference in San Francisco the week of Sept. 22, 2008.

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

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you're listening to a special BriefingsDirect podcast recorded at the Oracle OpenWorld conference in San Francisco. We are here the week of Sept. 22, 2008. This HP Live! Podcast is sponsored by Hewlett-Packard (HP), and distributed through the BriefingsDirect Network.

We are here with representatives from both HP and Oracle to discuss how IT infrastructure, systems and software come together in a whole greater than the sum of the parts for many enterprises.

We are going to be discussing services-oriented architecture (SOA), application modernization, next generation data centers and how better results from computing deployments come from tighter integration and cooperation between the platform and software providers.

Joining us to discuss these issues we have Paul Evans, worldwide marketing lead for IT Transformation Solutions at HP. Welcome to the show, Paul.

Paul Evans: Thank you very much.

Gardner: Lance Knowlton, vice president for modernization at Oracle, also joins us. Welcome, Lance.

Lance Knowlton: Thanks for having me.

Gardner: You know here at OpenWorld we have 43,000 people from around the globe, bringing lots of thought leaders together, and it seems that the level of cooperation between HP and Oracle has never been stronger. I wonder if we could start with what's going on between these two large global vendors and how software support and systems come together. Let's go first to Paul. What's going on with this relationship between HP and Oracle?

Evans: Obviously, Oracle and HP have a historical relationship around systems and database. Everyone knows that Oracle is the leader in that space, and that's where the history has been, but as we move forward, the agendas of both HP and Oracle have focused more on the transformation and modernization of environments.

That is built around the desire to deploy new applications, modernize existing applications, or take a fundamental look at the underpinning infrastructure, the support applications.

For some that can be the infrastructure that is the database or the way the operating system just does what the operating system does. But, as we look into the future, the customers that we both have are looking at things like SOA to understand how they are going to architect the solutions going forward. They will incorporate the technologies from HP and Oracle.

Gardner: So this sounds more like a solutions relationship than a supplier relationship.

Evans: Our customers don't buy products. They want solutions to business issues, and that's a very glib term. The word "solution" can be overused by people in marketing, but that's what people want.

You walk into a car show room, and you want to buy a car. You don't want to buy an engine, a set of wheels, or a set of headlights. You are going there for solution for a particular need, whether it's a sports car, a family car, an SUV, or whatever it is you want. Similarly, between companies the size and scale of HP and Oracle, we have the ability to deliver those solutions, both between ourselves, and with the network of partners that we share.

Gardner: I suppose they want an Audi at the price of a Ford Focus. How do we get high performance but at reduced cost, or at least higher value?

Knowlton: Well, in the application modernization space we have seen a number of customers that are faced right now with proprietary legacy systems. These systems are costing them a lot of money, not only in dollars, but also in agility, and the lack of ability to be able to react to business conditions in that particular industry. So when we are modernizing legacy systems out of these proprietary platforms, we are helping to reduce their cost and increase agility, which is a much more beneficial approach than just simply leaving them on the proprietary platforms that they have had.

Gardner: Now this is more than simply modernizing the applications. They also want these applications to play well with the newer applications, be they packaged apps or green-field apps from either ISVs or the custom apps that the organizations are building internally. Help us understand how Oracle and HP work together, not only on the modernization, but more so on the SOA approach.

Knowlton: SOA is an approach where you take existing applications or new applications and create services on top of these applications. This is very important from the sense that you are abstracting these entry points into these systems and you no longer have the dependency of these systems in where they run today.

SOA is not only important in new application development, but also where we're leveraging legacy systems, and bringing these systems together. From this point you are no longer creating point-to-point relationships, but you are actually allowing a higher level of reuse, and many more participants can access these applications.

Gardner: Paul, if I'm in an organization modernizing apps and I am getting better integration on a services orientation, I'm not going to be just looking at my apps to transition and to transform. I'll probably be taking a hard look at the infrastructure as well. So we're talking about a multi-tiered approach here. The benefit being agility, but also lower total cost as we go to these more modern systems and platforms. What's the relationship between application modernization and the next generation data center – the end goal on the journey?

Evans: Well, all organizations are looking to modernize or transform. They all are. They're doing it in different ways, whether it's hardware, software, services, whatever it maybe. Everybody is modernizing something. Nobody is standing still.

The recent business environment we have seen over the last month or two has pointed out that business changes very quickly and people have to respond to that. IT has to also, as it will either lead or follow -- but it is intrinsically involved in that change process.

The customers that Lance and I work with come from different directions. Some come in from, "I have all aged applications that I need to transform. They're costing me a fortune. They are inflexible, and they don't respond to change. The skills of the people to support these applications are becoming limited, so we need to move now and do something."

We have other clients who come from the database environment. They're looking to provide a much stronger, more resilient database environment to look after their information, and provide a much-improved level of customer service. Or, they come in from an infrastructure point of view. "I'm running hardware. It's obsolete. It's aging. It's costing me a fortune. I want to change."

So there's no-one-size-fits-all. What we have done with the relationship between HP and Oracle is that we have studied some of these points, whether database historically, or whether it was two years ago when we started the application modernization initiative with Oracle.

We came at it from the top down, but what we are also looking at is a holistic view around what we call IT Transformation. That allows our clients to join the party from any doorway they want in terms of what they are looking for in a business benefit. That's the really exciting thing between us and Oracle, because you have two organizations with immense capability that bring that capability together to deliver these real-world cost solutions.

Gardner: We're hearing some pretty interesting news this week about deeper relationship between Oracle and HP. We're also seeing an additional partner, Intel, prominent here at the show. Tell me a little bit about the triumvirate, if you will, of Oracle, HP and Intel.

Evans: Well, the combination of what Oracle, HP and Intel can bring, is somewhat immeasurable in terms of the capabilities of three companies. Two years ago, we announced this thing called Application Modernization Initiative (AMI), which was from all three companies.

The intent here was to bring together the capabilities of the three companies and to de-risk the solutions that we could provide by doing the testing off-site in our own labs to make sure the effects what Oracle is producing, versus what HP produces, runs on what Intel produces. So you have three enormous companies with enormous capability taking the time to really ensure that the modernization solutions that we deliver to our customers actually do what they say on the box.

Gardner: Lance, what does that mean for modernization in Oracle's perspective?

Knowlton: When we talked to our customers, there are two key areas that they look at. They are having problems on their legacy. That's their applications and their data. From the applications perspective, these systems are often fragmented and siloed. They've been developed over the past 30 years, and they have been maintained so much that they no longer have the ability to keep pace with the business.

From the data perspective, often times the data is very siloed. It's very hard to leverage in future-state architecture. So for Oracle the interest that we have for HP and Intel with applications modernization is to be able to take this legacy data and legacy applications and bring them forward into a new architecture.

Oracle will often speak about SOA and Java relational databases, but it's not just enough to talk about new standards and new technologies. You have to have a process and a means of bringing those systems forward. That's what AMI brings to the party.

Gardner: In this IT transformation phase, there are different implications for different enterprises. It's happening not in an isolated fashion, but in the context of some other major trends. We have more virtualization. We have storage that has created these abstractions of data. We have the need for skills that is propelling people off of these older systems.

Tell me, Paul, about some of these trends that are underscoring and accelerating IT transformation, and what that means also for HP and Oracle.

Evans: When Lance and I worked in this thing called AMI two years ago, we had our sights firmly set on applications. What is also bubbling up, and I think technology by technology, is this whole concept around the next generation of data center, which a lot of our customers, joint customers, are looking at. Oracle, the world leader in databases, has a real interest in the data center market. From a high technology infrastructure market, we obviously are extremely interested in where people are going.

As we said earlier, there are different priorities. Some people are coming at this from a green IT issue. They want to lower their power in cooling. They want to reduce their floor space that the data center uses, or CO2 emissions.

Other people are coming at this from experimenting with newer technologies like virtualization. How can I improve the servers' utilization by actually using this virtualization technology? Other people come at it from a more straightforward way, which is, "Hey, I have an aging mainframe. I am not going to continue to pay the sort of prices that I have to do for that technology. Therefore, I am going to upgrade."

The next-generation data center is the underpinning to some degree of what we are seeing, whereas the reverse of that is what we see in the applications world. But what we are seeing is these two coming together, and I think that the real joy and benefit, as it were, and passion in this is what Oracle brings, and what HP brings. Then, of course, what we can now blend into that what HP will bring with the EDS acquisition, in terms of the skills and knowledge and industry credibility.

In terms of bringing solutions of a world-class nature, that will exploit the work that Lance and others and I have worked on over the last couple of years, but also those fundamental technologies, which of course are underpinned, by the Intel technology. So it all tends to sort of overlap and come together. As long as we can explain it to our customers in simple joined-up language, then I think we are going to have a lot of fun, and in a great position.

Gardner: How is the market reacting to this? It sounds like a fairly complex approach and, as I say, it's going to vary from enterprise to enterprise, perhaps from department to department. What's going on out there? How are people adjusting to this? Are they tentative; is there an accelerating adoption? What do you see as the trend in that regard?

Knowlton: We see a lot of pent-up demand in this particular area. Paul mentioned legacy skill sets. We have had a couple of our customers over the last month tell us that they are actually bringing back IT staff – these people were greater than 70 years old -- because they simply could no longer maintain their existing legacy applications. We hear this time and time again. There are systems that went down, and that have been maintained over such a long period of time, that they are not able to bring them back up again.

Gardner: At that age you ought to get your options to invest fairly quickly, don't you think?

Knowlton: Exactly, exactly.

Gardner: So in addition to having these skill-sets issues, we are starting to see not only pent-up demand worked at from the legacy perspective, but also we are starting to see people interested in modern architectures. Tell us, Paul, what are you seeing from HP's perspective on readiness -- how to move in a market?

Evans: As I said earlier, everybody wants to modernize. The problem is that people see it to be risky. So we have this situation where 10 percent of the customers that Lance and I go out and talk to are sort of on the move, want to modernize, are getting on with things. Eighty percent of those customers out there are watching the 10 percent to see will they stumble, will they fall, will they actually deliver improved agility, and will the cost be lower?

I think we have enough proof points now that those people are saying now is the time we have to do this. We can't keep holding back. It was like the age-old days where you were going to buy a brand new calculator or mobile phone. If you wait a week the price will go down. Well, yes, the price did go down. The problem is that for that week that you waited, you didn't have the benefit of the technology.

Customers have now gotten to that inflection point that [former Intel Chairman and CEO] Andy Grove used to talk about, which is the point that says, "We have got to move. Our competitors are moving. They are modernizing. They are delivering improved customer satisfaction and service."

Whether you are an airline or a car manufacturer, everybody is using technology to deliver richer customer experience. If you don't modernize, you have no ability to deliver that experience. That's what is driving the market, whether it's a change in applications, whether it's database, whether it's a move to SOA, or the underlying infrastructure. Here at Oracle, everyone is asking us, "What do I do, where do I start, what do I need to do?"

Gardner: Let's look at some examples. The proof of the pudding is in the eating, as they say. Lance, give us some examples perhaps of where 70-year-olds have had to be brought in, and what happens after the modernization and transformation activities?

Knowlton: There is an inherent cost of doing nothing, and, as Paul is alluding to, you can't just simply let these legacy systems stay out there, not treat them truly as an asset, and not have an ongoing plan on how to modernize them. What we have seen several times with our customers is, they have not have had that plan. They let these systems age. They become fragile over time, and now they have to figure out a strategy on how to move them forward. Often times, they feel like that this is a big-bang sort of risk.

Gardner: I know you can't always mention names, but you give me some examples of what's really happened in the field?

Knowlton: We have had one of our customers in the manufacturing area that had a system outage that was planned. They expected the system outage to be just a couple of hours. Unfortunately, they found that they couldn't bring the systems back up. This was a very critical process to the manufacturing, and after seven days they finally got the system back up. So, it was a mission-critical system, and because they didn't understand it, and because they had not modernized that system, they are exposing themselves to a tremendous amount of risk.

Gardner: So they are fairly brittle at this point?

Knowlton: Very brittle.

Gardner: Any additional examples from the HP side, Paul?

Evans: There is always one thing that Lance and I understand every day of the week. Legacy systems still, in general, run the largest organizations, whether that's in a public sector or a private sector worldwide. That's something we have to understand.

Legacy doesn't mean they are old and unused. It means they are old, but actually critical to the operation in any organization. The point is that we have to appreciate that, but in moving people from the legacy world, we are, as it were, playing with, experimenting with, and having to work with the systems that are absolutely fundamental to that company's success or failure.

That's why we have done so much in de-risking the solution, because what we have to demonstrate to these customers is that by moving from the legacy environment to a modernized environment, they are going to get improvement. They are not just going to spend a ton of money with Oracle and HP, and we are going to walk away and leave them. We are not going to do that. What we have got to ensure is that whatever they're using today we can improve on, and give them a fundamental change in the cost structure, but also a fundamental uplift in the agility.

From the example standpoint, one of our clients is an airline. These days, all of us expect to just sit at our PC, wherever it might be, and be able to choose any option we want in terms of what we are going eat on the plane, where we are going to sit, who we are going to sit next to, and are not going to sit next to, and all the rest of it.

One airline we have been working with has not been able to offer some of that capability. They have traditionally run batch mode, in which they get all the bookings in from the travel agents during the day, process them overnight, and the following day everyone knows what flight they are on.

By not being able to offer that real time capability, they have seen sales drop, because people are just not prepared to say that somebody else is going to allocate my seat when I get the airport. I want to sit. I want to print my boarding card. So, that airline is suffering real problems in terms of not being able to do that. Now, they are in that position of being on the back foot, and they have to work twice as hard to regain the position they had in the first place.

Gardner: And, that's not a band-aid solution. That's a fundamental transformation that will bring them into that real-time capability.

Evans: Well, I think the challenge is that they've spent years and years and years bringing up a loyal customer base. It's the old adage. It takes $10 to get somebody into a store, but it only takes $1 to keep them in the store. The point being, if you build up a loyal customer base, as long as you can keep delivering and pleasing them with the customer experience, they will remain loyal customers. The problem is, as soon as you trip, they can be somewhere else.

Gardner: Sure. Expectations are increasingly getting toward that real-time gratification.

Evans: Absolutely.

Gardner: Especially among the younger folks.

Evans: It's the "I want it now, and if I can't get it now, I will go and find somebody else that will give it to me now."

Gardner: We were here talking about of IT transformation, legacy systems, and modernization of applications at Oracle OpenWorld. We have been focusing also on how the services and value of Hewlett-Packard and Oracle come together on that front.

We have been joined by Paul Evans, worldwide marketing lead for IT Transformation Solutions at HP, and also Lance Knowlton, vice president for Modernization at Oracle.

Our conversation today comes to you through a sponsored HP Live! Podcast from the Oracle OpenWorld conference in San Francisco. Look for other podcasts from this live event series at, as well as via the BriefingsDirect Network. I’d like to thank our producers on today's show Fred Bals and Kate Whalen, and of course, our panelists.

This is Dana Gardner, principal analyst at Interarbor Solutions. Thanks for listening, and come back next time for more in-depth podcasts, on enterprise IT topics and solutions. Bye for now.

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

Transcript of BriefingsDirect podcast recorded at the Oracle OpenWorld Conference in San Francisco. Copyright Interarbor Solutions, LLC, 2005-2008. All rights reserved.

Interview: HP's John Santaferraro on Latest BI Modernization and Data Warehousing Strategies

Transcript of BriefingsDirect podcast recorded at the Oracle OpenWorld Conference in San Francisco the week of Sept. 22, 2008.

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

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you're listening to a special BriefingsDirect podcast recorded at the Oracle OpenWorld conference in San Francisco. We are here the week of Sept. 22, 2008. This HP Live! Podcast is sponsored by Hewlett-Packard (HP) and distributed through the BriefingsDirect Network.

We welcome John Santaferraro, director of marketing for HP’s Business Intelligence (BI) portfolio. We're going to be talking about the intersection of BI in the context of not just business value and outcomes, but in the context of Oracle, a major data applications middleware and BI provider, and HP as prominent systems provider, as well as a prominent BI services provider.

We're going to try to figure out how this plays together. Then, we'll look toward the future of BI in the context of some major trends, such as service-oriented architecture (SOA), master data management (MDM), and bringing more automation to the delivery of intelligence from systems and data to those users who need it at the front lines of business. So I want to welcome John Santaferraro to the show.

John Santaferraro: Glad to be here, Dana. Thanks.

Gardner: First, let's set the stage and get a level-set about the Oracle-HP relationship vis-à-vis BI, because we're here at Oracle OpenWorld. Oracle is in the software side of things predominantly. You’ve got both systems and services. Perhaps you could paint a picture of how this fits together.

Santaferraro: It’s been a great and long relationship that we've had with Oracle since they were first building and releasing a database. We had folks in our labs that understood this idea of databases and data warehousing, and they were actually building and architecting our systems in a special way with things like massive I/O, massive memory to address -- the kinds of things you need in a data warehouse and query environment.

Back in those days, we were actually building our systems to handle data warehouse workloads, when everybody else was still focused only on the regular online transaction processing (OLTP) kinds of transactions in the enterprise resource planning (ERP) systems.

Because of that natural connection that we had with what was going in our labs, and what Oracle was doing, we have from the very start built a tight relationship with them from an engineering perspective and a good market perspective. Oracle is very clearly a leader in data warehousing and BI, and we augment that with the systems that we have developed to run in an optimized way with Oracle, as well as some other services that we bring to bear.

We recently bought a company called Knightsbridge, which was known as the go-to company for anybody who was doing data warehousing or BI and who ran into problems that nobody else could solve. Everybody knew that if you went to Knightsbridge, there were people there who could solve those problems. So it’s great to have them at the center of our global BI services organization. This company has taken their methodology and their expertise and has transferred it to folks around the world.

The other great thing about the acquisition of Knightsbridge is that they have real deep expertise in their various vertical markets -- health and life sciences, communications, financial services, retail manufacturing. Because of that, the Oracle-HP relationship is strengthening.

We are more than a systems provider and more than a services provider. We are delivering real solutions to our customers. We can come alongside of anybody, talk to them at the level of the business, and be able to build data warehousing and BI solutions that are mapped to the business, not just technology.

Gardner: I just got back from listening to Thomas Kurian at Oracle describe their full portfolio, and they’ve really put together quite a full lifecycle approach around the gathering, cleansing, and organizing of data, integrating it from disparate sources, managing the scale of huge loads, making this closer to a real-time value. They're also exporting middleware for application integration, creating the BI analytics, and then delivering that back out to those business applications.

It’s quite an impressive portfolio. They've been putting it together for quite some time, and they’re also quite proud of the metrics around the performance, and getting closer to that real-time nirvana. Tell us a little bit about how what Oracle has done from the lifecycle perspective and what you think are important aspects of the services’ side of making organizations readily able to let exploit those technologies.

Santaferraro: What you described is very much a product lifecycle in the data warehouse and BI space. Along with that, you can go in two directions. Along with the product lifecycle, there is actually a system lifecycle as well. Anytime anybody says to me that they can make data warehousing simple, I react, because the truth is that it’s very complex.

The processes you just described are extremely difficult for any company to work with and navigate through. Add to that the whole infrastructure piece of it. The more you move towards “operationalizing” BI, suddenly the more important the infrastructure becomes.

A lot of time we get calls from customers who are trying to deploy data warehousing solutions. They'll be in test and development and are supposed to perform, and they've got users out there who are expecting to click on a button and get all of the information back within a matter of seconds, and they can’t figure out how to make it work.

So they call the HP storage folks and they say, "Hey, we’ve got a storage problem. What’s going on here?" And, the storage folks say, "Well, wait a minute, it's not storage. That sounds like the database." So, they call Oracle, and Oracle says, “Well, that’s not us. It’s not the database. It must be a server problem.” So the customer has to go back to the server guy. We have people that will lose weeks of time in deploying their systems, because the entire lifecycle is extremely complex.

What we really do is look at how can we come alongside of Oracle in our labs and figure out how to build those systems with Oracle, pre-installed, pre-configured, and pre-tested, so that what the customer is getting is ready to go out of the box. It takes the guesswork out of all of this implementation and development that they’ve got to do.

I had one customer who lost a week in production, lost a week in test and dev, went into production and made the same exact little thing. They forgot to turn on a synchronous I/O on their storage system. It’s just a basic little problem, but it cost them another week in production time before they were up and running.

So, we’ve got solutions like HP BladeSystem for Oracle Optimized Warehouse. We have about 50 reference configurations that help take the guesswork out of deploying these.

Gardner: This is really more than just one hand washing the other. This is three hands washing each other. We have the systems integration and specialized software, which is created through products, integration, and technology innovation, and then the opportunity for that third hand of services to come in with methodologies and best practices, for preventing those gotchas.

Santaferraro: Exactly. And then, on the services’ side, here are people who have walked this path before. They’ve done it before. My recommendation to companies who are out there trying to do BI and data warehousing and are hitting difficulties is, “Why not go find somebody who has done it before?”

You really don’t have to do it alone. There are people out there who have walked this path. They’ve done it. They know the gotchas. They have accelerators. They have ways of making it all come together faster. And all of that translates into more business value. If I don’t have to spend as much time in deployment, as much time in all of the testing and trying to figure out what is wrong, then I can be investing my time and my effort in developing real business innovation and real business value.

Gardner: And, of course, in the field there are many different companies that are at different places on the path toward some of these goals. For those that are deeply into BI and recognize the value of getting this lifecycle, elevating the data, getting that good quality data out, and then be able to work with it, what’s the next step?

I’m hearing some buzzwords nowadays about operational BI and even BI modernization. Tell me little bit about what these mean, and are these in fact the next chapters in where companies will be taking this capability?

Santaferraro: Yes, these are definitely the next chapters, and you're seeing right now probably about five percent of companies out there -- the ones who are on the leading or bleeding edge -- already doing Operational BI and BI Modernization.

Operational BI has to do with this idea that I have all of this data in a single place, it’s accessible, and it’s fairly well cleaned. I don’t think anybody has perfectly clean data -- that doesn’t exit -- but once it’s there, what do I do with it?

We're finding that customers want to do two things. One, they want to get that information to everyone across the organization, as well as customers and partners, and they want it to be actionable. So how do I get actionable information in the hands of everyone across my organization who needs it?

The second thing I see is people wanting to do with operational BI is actually take the analytics that are driving their systems, and embed them in the business processes or in the business applications. When a loan comes in to be underwritten, you want to have the right rules that don't put you in a position as a bank where you end up with a bunch of loans that you can't sell in the secondary market, or going into default. Everybody is aware of that problem, right?

How do you take the analytics and discovery that you’ve made and put it right in the applications, so the decision is automatically made by the application or so somebody has it right there. As they are using the business application, they have the information to make the decision right there at their disposal.

Gardner: And is that what you call operational BI?

Santaferraro: Yes.

Gardner: Now, this also raises in my mind a question about the capabilities that a services oriented architecture (SOA) offers -- governance, bringing services like BI as a service into play with applications, but at the right point in time. So it's exercising governance policy; learning from your mistakes, and building on them. How does what you’re describing as operational BI and SOA fit together?

Santaferraro: It’s a great question, because when I hear people talking about SOA, I primarily hear them talking about business services. How do I take these mammoth applications that I’ve built, reduce them into reusable business services, and be able to use them effectively across the organization, instead of replicating them all over. The real opportunity comes when you have these business services in operation and you begin to bring in information services as well. Take customer profitability, for example. That's not really a business service. It’s an information service.

A lot of analysis has to go into the mix for companies to figure out or answer the question, "Who are my most profitable customers?" If you can figure that out, and give every customer a rating, then that information service again becomes a service within a SOA that you can actually use and distribute in a very useful way all across the organization. You can send it to the call center, send it to the sales force, send it to the Web, and send it to the ATM transactions that are happening. So there's a whole opportunity of information services as a part of SOA that haven't even begun to be tapped.

Gardner: It’s sort of the intelligent implementation of BI as a service?

Santaferraro: Absolutely.

Gardner: How does that differ from BI modernization?

Santaferraro: Modernization is built around this whole concept that folks started doing data warehousing 15 to 20 years ago. It’s a fairly old technology; yet it’s still very useful. It’s still something that companies need to do, but a lot of new technology has come in and new kinds of data. We are discovering that data warehousing had great value. It has all the information in a single place. It made information accessible. You could now do analysis.

Gardner: But it was largely structured data.

Santaferraro: Exactly. Now we have other kinds of data coming. What about email? What about document management systems, and all the documents that are being digitized? What about new types of data like RFID? What about GPS data? There are all these new types of data, and we're discovering now that the data warehouse bubbled up.

It's a great value for BI, but not everything has to go into the data warehouse. In fact, we’ve discovered with a lot of our customers that as soon as the data warehouse gets to a terabyte, about 70 percent of the data in that data warehouse never even gets touched or used.

So companies are spending enormous amounts of money to build these massive data warehouses, and a lot of that is not being used. Modernization is about figuring out what data needs to go into the data warehouse and what needs to be delivered through the enterprise service bus (ESB). Are there certain things where you can just embed analytics out at the application layer and do the analytics out there? Are there other types of data that should be just cataloged at the user level?

Gardner: Metadata, for example?

Santaferraro: Yes, and metadata becomes the rich side of definitions around that content, that actually brings it all together for the sake of the user.

Gardner: Regardless of where it resides?

Santaferraro: Exactly, and that becomes active metadata by the way. It’s no longer just this metadata that sits below for the data folks to understand what’s there. It’s active metadata that the users are using to understand the information that they're looking at.

Gardner: I suppose that, over time, that’s going to also include events?

Santaferraro: Absolutely, events and then tie right into the new complex event processing (CEP) systems. One of the opportunities that I’ve not seen tapped into by any software companies is this whole new world of information delivery.

So, if you’re operationalizing BI, if you’ve got a modernized BI infrastructure with data provisioning in place, and it’s not just the data warehouse -- you’re basically trying to get it out to all these users across the enterprise and embed it in business processes. There needs to be the design of a brand new information-delivery system that actually can handle all of these kinds of data to the desktop, to the application, to the hand-held device, or wherever it happens.

Gardner: Without belaboring this point, what sort of technologies are you looking at? Is this syndication, publish-and-subscribe, terminal services? What do you use to get that out there?

Santaferraro: I would say, yes. Because, as I said, I haven’t seen anybody that’s done it yet.

Gardner: Good, a big opportunity there. Okay. We've talked about this modernization of BI. This is happening in the context of other trends, of course, for virtualizing our data centers, and a lot has been done to virtualize storage and data over time.

We're going to be bringing in more kinds of content. We might even be getting content and services off of clouds, other people's public services or perhaps a cooperative private federation among business partners, all of which has to be managed and accurately projected back into the application services and processes that people use. It sounds very interesting, and is a much easier sale to the C-class, the corner office in the organization, because this really helps them in the way they do business.

What can companies do in terms of exploiting these technologies, getting those business outcomes, and, I suppose most importantly, how do they get started? As you say, this is not trivial. It’s complex and needs to be done properly.

Santaferraro: Most companies are started right now in BI and data warehousing. What I hear a lot of customers say is that they either are not getting the value out the investment they are putting into it, or they don’t know if they are. So I think it really makes sense to kind of pause where you're at and bring in some experts to do an assessment.

We do a lot of work with customers. We look at the vision, the strategy, and the planning behind data warehousing and BI, and because of our depth of experience, we can come alongside our customers and help them figure out what’s working and what’s not to put value on where to really invest moving forward, and help drive that forward in an intelligent way. Why not do BI with some intelligence behind it?

That’s one thing. The second thing is that with operational BI on the horizon, we’ve got a lot of folks within our organization who understand the potential of what could be done with BI in a bank? What if you could have customer profitability, customer segmentation services, and offer optimization at every point of sale? So, for the teller, for the ATM service, for the call center, wherever somebody is interacting with a bank, all of that information is right there with them.

What we find is that people have been so caught in the world of reporting and just basic analytics and online analytical processing that takes place in the back room. We think that it also makes sense to move to this next level. Bring in some folks who understand operational BI and let’s dream together and figure out if you could actually have these capabilities, what could you do with your company? How could you transform your relationship with your customers and your suppliers?

It's basic vision strategy and planning, too. Let’s get together and dream about operational BI, and figure out what your company could become? We actually believe that in the next five to seven years that there is going to be a major restructuring of leaders in every single industry. The ones who come out on top are going to be those companies that figure out how to use BI to transform themselves into competitive leaders.

We want to be there with our customers to make that happen for them.

Gardner: And this is not just for them to actually find new markets, but to uncover risks that they wouldn’t have been able to uncover until it was too late. And we’ve seen examples of that -- and perhaps to focus on what the right businesses are to be in and not to be in? So it’s not just how to make things better, it’s also risk mitigation on what to avoid?

Santaferraro: Absolutely.

Gardner: Very good. We’ve been talking about BI and some of the next chapters in BI, particularly in a context of a longstanding partnership between Oracle and HP. We’ve been joined by John Santaferraro, director of marketing for HP’s BI portfolio. Thanks very much, John.

Santaferraro: Thanks a lot, Dana.

Gardner: Our conversation comes to you today through a sponsored HP Live! Podcast from the Oracle OpenWorld conference in San Francisco. Look for other podcasts from this HP Live! event series at, as well as via the BriefingsDirect Network.

I'd like to thank our producers on today's show, Fred Bals and Kate Whalen. I'm Dana Gardner, principal analyst at Interarbor Solutions. Thanks for listening, and come back next time for more in-depth podcasts on enterprise IT topics and solutions. Bye for now.

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

Transcript of BriefingsDirect podcast recorded at the Oracle OpenWorld Conference in San Francisco. Copyright Interarbor Solutions, LLC, 2005-2008. All rights reserved.

Interview: Maria Allen on How HP and EDS Uniquely Combine to Assist Financial Markets Amid Turmoil

Transcript of BriefingsDirect podcast recorded at Oracle OpenWorld conference in San Francisco the week of Sept. 22, 2008.

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

Dana Gardner: Hi, this is Dana Gardner principal analyst at Interarbor Solutions and you're listening to a BriefingsDirect Podcast recorded at the Oracle OpenWorld conference in San Francisco. We're here the week of Sept. 22, 2008. This HP Live! podcast is sponsored by Hewlett-Packard (HP) and distributed via the BriefingsDirect Network.

Today, we welcome Maria Allen, EDS vice president at leader of the Global Financial Services and Products Group at EDS, and HP company.

We 're going to be discussing the financial services sector at a very tumultuous time in its history, look at how HP and EDS together are bringing services to that market, and get a better understanding of how technology and transformation services can help these companies in the financial sector at a crucial time. Welcome to the show, Maria.

Maria Allen: Thank you very much. Glad to be here.

Gardner: The last few weeks and, I suppose, the last year and a half have been very eventful for Wall Street, the City of London and other major financial centers around the world.

The last two weeks have demonstrated some unprecedented volatility and, in some respects, a level of uncertainty not seen in 70 or more years. This is a time when financial companies, banks, investment banks, and insurance companies are finding themselves on the fly and government intervention is taking place at unprecedented levels.

Tell us what EDS and your financial services group do and set the stage about the history in the financial services sector. What has been put in place that allows some companies to weather the storm and react and be agile in this environment better than others?

Allen: Sure. EDS has been focusing on the financial industry for over 40 years. So, we have had quite a bit of exposure and experience. We have actually gone through many of the transformational activities within the industry.

In fact, back in the late 1980s when the Resolution Trust Corporation (RTC) took over a lot of the savings and loans institutions, EDS was actually a partner of the RTC and helped integrate and clean a lot of the portfolios that the RTC had taken over. What we try to do is bring our experience into the financial institutions to enable them to integrate to better manage their business, to have a better control over their cost, and prepare them for better times.

Many of the institutions back in the 1980s, as they are today, were very focused on reducing their cost, so that they would have additional funds to invest to get them to a better financial position. We have used our experience in the technology sector to reduce cost, integrate their systems, use our outsourcing services to better manage the business, and, again, prepare them for better times.

Gardner: Now, of course, these organizations aren't just dealing with today's worries. There are longer-term trends afoot. They're dealing with such issues as Sarbanes-Oxley, Basel II, and the payment card industry (PCI) data standards. Many of these involve important regulatory, security, and risk management issues, and we are probably going to see some more regulatory issues coming down the pike.

How do you work with these companies to put them in a position of dealing with tactical, short-term, and crisis-level issues, and also put in place what they need to adhere to for these longer-term issues around risk and compliance?

Allen: Because of our experience and the fact that we have worked with many financial institutions and banks around the world, we are constantly making sure that we have the right information and the right insight in terms of the regulatory issues that the banks are experiencing. We have worked with many of the banks to ensure that not only their datacenters and their infrastructure, but also their services, have the right key risk indicators that enables them to be compliant with the various regulations.

You mentioned Sarbanes-Oxley, Basel II, all the privacy acts, and MasterCard and Visa requirements to be PCI compliant. EDS is investing quite a bit to ensure that we are not only complying ourselves, but also that our clients meet the compliance requirements of the issuing companies.

There has been a lot of focus in the privacy and security areas. Data management is one of the areas that we have been focused on, but our experience in running the systems for many of the banks throughout the last 40 years has better positioned us to address the needs and the requirements of the regulators and the banks together.

Gardner: Of course, the role of technology has never been more important. Many business sectors look to the financial services arena for some guidance. In many cases, leading adopters are found in the financial sector. Also, they tend to keep their technology. So, there are legacy, integration, and modernization requirements, perhaps larger in number than in any other sector.

Tell us a little bit about how technology transit, service-oriented architecture (SOA), business intelligence (BI), complex event processing (CEP), risk management, and process management come together to help organizations deal with an unprecedented need for visibility and predictability during rough times.

Allen: Using our experience in financial services, we recognize the importance of having data transparency. That is absolutely the key to addressing the requirements that banks have around privacy and ensuring that they have the right key risk indicators to respond to the regulatory requirements.

We've done a lot of work in the area of data management, the integration aspects, and legacy modernization. We have quite a bit of focus in that area to help the financial institutions have better transparency across their silos.

There is still a lot of work to be done. So there is a big opportunity for EDS and HP together to really enable the transformation that the banks have really been focused on. It's difficult for them to stay on track, when they have all these other issues around regulatory compliance and the market turmoil in subprime mortgages and the credit pressures.

There is an opportunity for EDS and HP together to capitalize on the activities in the marketplace, and position ourselves as key players with the financial institutions and the government agencies. That's one of the key areas that we need to be focused on, looking at government agencies, because they are going to need a lot of help. The FDIC, with the banks that are going under that they are taking over, needs data management, and there is a huge opportunity for us to work together around that space.

Gardner: Now, EDS is in many of these government organizations, as well as these financial institutions, both public and privately held ones. This does put you in a unique position, when it comes to government taking over assets, but then having the managers within these organizations manage those assets for the government. Tell us at this early stage how you understand this could work and the unique role that that EDS and HP would play in that?

Allen: Well, that's going to be interesting to see, because there is actually a lot of discussion around that. For example, Freddy Mac and Fannie Mae, and what the federal government is going to do to integrate these two agencies. One of those agencies is a client of EDS. So, we're very well positioned to help the government not only do the integration, but also clean the portfolio to better position the agency to transform itself, because we see transformation going on at the same time.

Five or maybe ten years from now, the financial markets may be very different. It may look very different in the U.S. One of the key areas is going to be the real estate lending, residential lending business. We can capitalize from the relationships that we have, not only with the agencies, but also the banks and other financial institutions that are looking to enhance and position themselves to be a survivor during this transformation in the market.

Gardner: For the edification of our audience, HP purchased EDS recently. The completion went through, and now EDS is a wholly owned company within the HP family of companies. We just wanted to point that out. Given the opportunity in the financial sector, and given that HP has had a long services heritage as well, tell us how HP and EDS together can offer something different than they could have individually just a few months ago?

Allen: It's a big opportunity for EDS to capitalize on the relationships that HP has across the global financial industry marketplace. HP brings a set of customers that is potentially much broader than what EDS has. There are a few very large financial institutions where we both have relationships, but there is a lot of opportunity for us to work together and enable that transformation that's going on in the marketplace for financial services.

I can't wait to get started working with the HP Financial Industry Group. We have some activities scheduled in the next couple weeks to assess and determine how we address some of the activities and opportunities that we see in the market. We are already working together on a very large opportunity in the statement print area. We see a lot of more of that type of large opportunities coming to both of us.

Gardner: In addition to how the two companies come together in terms of their services, offerings, and value, there are also some adjustments in terms of channel and sales. Is there a philosophy of how to approach this market that may differ from some of your competitors, perhaps becoming more of a partner with many of the global systems integrators? How does that shake out in terms of how you actually go to market now that you are together?

Allen: We have an opportunity to definitely integrate some of our business in our channel strategy. However, there is also an opportunity to keep a very open mind as to how we go about the market, because there are some key agility alliance partners that we have who have enabled the growth in our business.

Oracle is one of them. We work very closely with Oracle in the financial industry, because of their breadth of solutions in our industry. HP also has a very strong relationship with Oracle. So, there is a lot of opportunity for us to explore different channel partnerships and different ways to address certain markets.

Gardner: I wonder if you have any sense -- and again, it's a little early -- of how IT spending in the financial services sector will pan out. There are, on one hand, the services and opportunities that you have discussed, but with consolidation, perhaps there is also some slackening in growth in some other areas. Do you have a sense at this point, given the turmoil in the financial services market, of how market growth might be impacted across a variety of the major services and product segments?

Allen: IT spending is an interesting subject that financial institutions always look at. The average spent on IT in the financial industry is about seven percent of revenue.

I have a very different approach to looking at what a financial institution spends across the board. I was look at non-interest expense, because I think it's important to look at the total cost of doing business. If you have a financial institution that's really focused on improving operations and their services, integrating the silos that they have today, and bringing some automation to SOA, then that means that their overall cost is going to be impacted positively.

Their overall non-interest expense hopefully is going to shrink, as they work with companies like EDS and HP together. I see IT cost growing, but for a total benefit, if you will. So, there is an opportunity for us to work together and see how we can impact the total spend within a financial institution.

Gardner: The pie grows, but perhaps as a percentage of revenues for individual companies it decreases.

Allen: Exactly.

Gardner: I wonder if you can share with us any case studies. If you can mention a company, that's great. If not, perhaps you can describe the type of company and project and relationship and give some examples of how EDS Financial Services has created this benefit of employing technology in such a way as that you can get more bang for the buck.

Allen: I can't mention the name of the bank, but it is a European bank, a very large mortgage lender in the U.K. EDS started working with this bank about five years ago. They had the desire to reduce their total cost of mortgage processing. So, EDS took over their operations, both their systems and their back office servicing operations to bring automation and enhance the way they approach the market.

It was very, very successful. We integrated their systems, took over their back office, reduced their total cost of mortgage processing, and were very successful within three years of taking that business over. So, we have had a lot of experience. The back-office processing does have a huge impact in a financial institution's total cost of doing business. Our experience can be applied to many different institutions and many different business operations across the financial institution.

Gardner: Well, great. We've been talking about the financial services sector, and we've been trying to understand in these tumultuous times the benefit of increasing value and lowering cost, but also increasing the need for transformation, integration, and agility, particularly as we are seeing the reformation of companies under different types of ownership, unprecedented types of ownership. And, we've been talking about how EDS and HP have come together as companies, and are going to be going out to this market with a variety of services and support.

We've been discussing this with Maria Allen. She is a vice president at EDS and leads the Global Financial Services and Products Group. We certainly appreciate your time, and your interesting comments on these subjects.

Allen: Thank you, very much.

Gardner: Our conversation today comes to you through a sponsored Hewlett-Packard Live! podcast from the Oracle Open World Conference in San Francisco. Look for other podcast from this HP Live! event series at, as well as via the BriefingsDirect Network.

I like to thank our producers on today's show, Fred Bals and Kate Whalen. I'm Dana Gardner, principal analyst at Interarbor Solutions. Thanks for listening, and come back next time for more in-depth podcasts on enterprise IT topics. Bye for now.

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Transcript of BriefingsDirect podcast recorded at the Oracle OpenWorld Conference in San Francisco. Copyright Interarbor Solutions, LLC, 2005-2008. All rights reserved.