Webinar: Modernization Pulls New Value From Legacy and Client-Server Enterprise Applications

Transcript of a BriefingsDirect webinar with David McFarlane and Adam Markey on the economic and productivity advantages from application modernization.

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Announcer: Hello, and welcome to a special BriefingsDirect presentation, a podcast created from a recent Nexaweb Technologies Webinar on application modernization.

The webinar examines how enterprises are gaining economic and productivity advantages from modernizing legacy and older client-server applications. The logic, data, and integration patterns' value within these older applications can be effectively extracted and repurposed using tools and methods, including those from Nexaweb. That means the IT and business value from these assets can be reestablished as Web applications on highly efficient platforms.

We'll learn how Nexaweb has worked with a number of companies to attain new value from legacy and client-server applications, while making those assets more easily deployed as rich, agile Web applications and services. Those services can then be better extended across modern and flexible business processes.

On this podcast, we'll hear from Dana Gardner, principal analyst at Interarbor Solutions, as well as David McFarlane, COO at Nexaweb, and then Adam Markey, solution architect at Nexaweb.

First, welcome our initial presenter, BriefingsDirect's Dana Gardner.

Dana Gardner: We're dealing with an awful lot of applications out there in the IT world. It's always astonishing to me, when I go into enterprises and ask them how many applications they have in production, that in many cases they don't know. In the cases where they do know, they're usually off by about 20 or 30 percent, when they go in and do an audit.

In many cases, we're looking at companies that have been around for a while with 10 or 20 years worth of applications. These can be on mainframe. They can be written in COBOL. They could be still running on Unix platforms. In a perfect world we'd have an opportunity to go in and audit these, sunset some, and re-factor others.

Today, however, many organizations are faced with manpower and labor issues. They've got skill sets that they can't bring in, even if they wanted to, for some of these older applications. There is, of course, a whole new set of applications that might not be considered legacy, but that are several years old now. These are N-tier and Java, distributed applications, .NET, COM, DCOM, a whole stew in many organizations.

What I am asking folks to do, now that we're into a situation where economics are probably more prominent than ever -- not that that's not usually the case in IT -- is to take a look at what applications are constraining their business. Not so much to worry about what the technology is that they are running on or what the skill sets are, but to start factoring what new initiatives they need to do and how can they get their top line and bottom line as robust as possible? How do they get IT to be an enabler and not viewed as a cost center?

This is really where we should start thinking about modernizing and transforming IT -- getting application functionality that is essential, but is in someway handicapping what businesses want to do.

We want to exploit new architectures and bring more applications into association with them. It's not just architectures in terms of technology, but approaches and methodologies like service-oriented architecture (SOA), or what some people call Web-oriented architecture (WOA), looking to take advantage of interfaces and speed of innovation so that organizations can start to improve productivity for their internal constituents, in this case usually employees or partners.

Then, increasingly because of the difficulty in bringing about new business during a period of economic downturn, they're reaching out through the Internet, reaching out through the channels that are more productive, less costly and utilizing applications to focus on new business in new ways.

SOA and mobile devices

Increasingly, as I mentioned, this involves SOA, but it also increasingly involves mobile. We need to go out and reach people through their mobile Internet devices, through their iPhone and their BlackBerry, and a host of other devices at the edge. You need to be able to do that with applications and you need to be able to do it fast.

So, the goal is flexibility in terms of which applications and services need to reach new and older constituencies at less cost and, over time, reduce the number of platforms that you are supporting, sunset some apps, bring them into a new age, a new paradigm, and reduce your operating costs as a result.

Information really is the goal here, even though we are, with a handful of applications, starting to focus on the ones that are going to give us the biggest bang for the buck, recognizing that we need to go in and thoughtfully approach these applications, bring them into use with other Web services and Web applications, and think about mashups and Enterprise 2.0 types of activities. That involves expanding the use of these new methodologies.

One of the things that's interesting about companies that are aggressively using SOA is they also happen to be usually aggressive in using newer development platforms and tools. They're using dynamic languages, Web interfaces, and rich Internet application (RIA) interfaces. This is what's allowing them to take their newer applications and bring them into a services orientation reuse. Some of those services can be flexible and agile.

That's not to say you can't do some of those things with the older applications as well. In many cases, tools are being brought about and third-party inputs, in terms of professional services and guidance, are coming around. I'm recommending to people to respond more quickly, to save operational costs, to get agile and reach out through these new edge devices and/or the Internet, and do it in a fairly short order.

It's amazing to me that for those companies that have moved in this direction, they can get applications out the door in weeks rather than months, and in many cases, you can transform and modernize older applications on aging platforms just as quickly.

We want to move faster. We want to recognize that we need a higher payoff, because we also recognize that the line-of-business people, those folks that are tasked with developing new business or maintaining older business, are in a rush, because things are changing so quickly in the world around us. They often need to go at fast-break or breakneck speed with their business activities. They're going to look at IT to be there for them, and not be a handicap or to tell them that they have to wait in line or that this project is going to be six to eight months.

So, we need to get that higher agility and productivity, not just for IT, but for the business goals. Application modernization is an important aspect of doing this.

How does modernization fit in? It's not something that's going to happen on its own, obviously. There are many other activities, approaches, and priorities that IT folks are dealing with. Modernizing, however, fits in quite well. It can be used as a way to rationalize any expenditure around modernization, when you factor in that you can often cut your operating costs significantly over time.

You can also become greener. You can use less electricity, because you're leveraging newer systems and hardware that are multi core and designed to run with better performance in terms of heat reduction. There are more options around cloud computing and accessing some services or, perhaps, just experimenting with application development and testing on someone else's infrastructure.

By moving towards modernization you also set yourself up to be much more ready for SOA or to exploit those investments you have already made in SOA.

Compliance benefits

There are also compliance benefits for those organizations that are facing payment-card industry (PCI) standards in financial or other regulatory environments, freeing up applications in such a way that you can develop reports, share the data, and integrate the data. These are all benefits to your compliance issues as well.

As I mentioned earlier, by moving into a modernization for older applications, you've got the ability to mash up and take advantage of these newer interfaces, reuse, and extended application.

There is a whole host of rationalizations and reasons to do this from an IT perspective. The benefits are much more involved with these business issues and developer satisfaction, recognizing that if you are going to hire developers, you are going to be limited in the skill sets. You want to find ones that are able to work with the tools and present these applications and services in the interfaces that you have chosen.

Keeping operations at a lower cost, again, is an incentive, and that's something they can take out to their operating and financial officers and get that backing for these investments to move forward on application modernization and transformation.

One of the questions I get is, "How do we get started? We've identified applications. We recognized the business agility benefits. Where do we look among those applications to start getting that bang for the buck, where to get modern first?"

Well, you want to look at applications that are orphans in some respect. They're monolithic. They're on their own -- dedicated server, dedicated hardware, and dedicated stack and runtime environment, just for a single application.

Those are good candidates to say, "How can we take that into a virtualized environment?" Are there stacks that can support that same runtime environment on a virtualized server, reduce your hardware and operating costs as a result? Are they brittle?

Are there applications that people have put a literal and figurative wall around saying, "Don't go near that application. If we do anything to it, it might tank and we don't have the documentation or the people around to get it back into operating condition. It's risky and it's dangerous."

Conventional wisdom will say don't go near it. It's better to say, "Listen, if that's important to our business, if it's holding our business back, that's a great target for going in and finding a way to extract the logic, extract the data and present it as something that's much more flexible and easy to work with."

You can also look for labor issues. As I said, if skills have disappeared, why wait for the proverbial crash and then deal with it? It's better to be a little bit proactive.

We also need to look at what functional areas are going to be supporting agility as these business requirements change. If you're an organization where you've got supply chain issues, you need to find redundancy. You need to find new partners quickly. Perhaps some have gone out of business or no longer able to manufacture or supply certain parts. You need to be fleet and agile.

If there are applications that are holding you back from being able to pick and choose in a marketplace more readily, that's a functional area that's a priority for getting out to a Web interface.

Faster, better, cheaper

People are going to be looking to do things faster, better, cheaper. In many cases those innovative companies that are coming to market now are doing it all through the Web, because they are green-field organizations themselves. They are of, for, and by the Web. If you're going to interact with them and take advantage of the cost, innovation, and productivity benefits they offer, your applications need to interrelate, operate, and take advantage of standards and Web services to play with them.

You also need to take a look at where maintenance costs are high. We've certainly seen a number of cases where by modernizing applications you have reduced your cost on maintenance by 20 or 30 percent, sometimes even more. Again, if this is done in the context of some of these larger initiatives around green and virtualization, the savings can be even more dramatic.

I also want to emphasize -- and I can't say it enough -- those SOA activities shouldn't be there for just the newer apps. The more older apps you bring in, the more return on investment you get for your platform modernization investments, as well as saving on the older platform costs, not to mention those productivity and agility benefits.

We also need to think about the data. In some cases, I have seen organizations where they have applications running and aren't really using the application for other than as an application repository for the data. They have a hard time thinking about what to do with the data. The application is being supported at high cost, and it's a glorified proprietary database, taking up app server and rack space.

If you're looking at applications that are more data centric in their usage, why not extract that data, find what bits of the logic might still be relevant or useful, put that into service orientation, and reduce your cost, while extending that data into new processes and new benefits.

It's also important to look at where the technical quality of an app is low. Many companies are working with applications that were never built very well and never performed particularly well, using old kludgy interfaces. People are not as productive and sometimes resist working with them. These are candidates for where to put your wood behind your arrow when it comes to application modernization.

In beginning the process, we need to look at the architecture targets. We need to think about where you're going to put these applications if you are refactoring them and bringing them into the Web standards process.

It's important to have capacity. We want to have enough architecture, systems, and runtime in place. We should think about hosting or collocation, where you can decrease your cost and the risk of capital expenditure, but at the same time, still have a home for these new apps.

You certainly don't want to overextend and build out platforms without the applications being ready. It's a bit of a balancing act -- making sure you have enough capacity, but at the same time performing these modernization transformation tasks. You certainly don't want to transform apps and not have a good home for them.

Also important is an inventory of these critical apps, based on some of the criteria, we have gone through.

Crawl, walk, run

The nice thing about creating the categorization is that once you've got some processes in place on how to go about this, with one application you can extend that to others. The crawl-walk-run approach makes a great deal of sense, but when you've learned to crawl well, extend and reuse that to walk well, and then scale it from there.

This construction, deconstruction, rationalization process should also be vetted and audited in the sense that you can demonstrate paybacks. We don't want to demonstrate cost centers becoming larger cost centers. We want to show, at each step of the way, how this is beneficial in cost as well as productivity. Then, we need to focus continually on these business requirements, to make a difference and enhance these business processes.

There are some traps. It's easier said than done. It's complicated. You need to extract data carefully. If you start losing logic and access to data that are part of important business processes, then you're going to lose the trust and confidence, and some of your future important cost benefit activities might be in jeopardy.

It's important to understand the code. You don't want to go and start monkeying around with and extracting code, unless you really know what you're doing. If you don't, it's important to get outside help.

There are people who are not doing this for the first time. They've done it many times. They're familiar with certain application types and platforms. It's better to let them come in, than for you to be a guinea pig yourself or take trials and tests as your first step. That's not a good idea when you're starting to deal with critical and important application.

Stick to processes and methods that do work. Don't recreate the wheel, unless you need to, and once you have got a good wheel creation method, repeat and verify.

You need to be rigorous, be systemic, and verify results, as we have said. That's what's going to get you those transformational benefits, rather than piecemeal benefits. You're going to see how application modernization fits into the context of these other activities, You're going to be well on the way to satisfying your constituencies, getting the funding you need, and then seeing more of your budget going to innovation and productivity and not to maintenance and upkeep.

There are a lot of great reasons to modernize, and we have mentioned a number of them. There are backwards and forwards compatibility issues. There are big payoffs in cost and agility, and now it's time to look at some of the examples of how this has been put into place.

Announcer: Thanks Dana. Now, we'll hear from David McFarlane, COO at Nexaweb, on some use-case scenarios for adopting and benefiting from these application modernization opportunities. Here is David McFarlane.

Understanding value

David McFarlane: We're going to go a little bit deeper and actually take a look at a case study of one of our clients, one of our successful implementations, and see the value that came out of it.

To really understand what value is, we have to understand how we're going to quantify it in the first place. We're probably all in IT here, and we're probably all IT heads, but we have to take a step back, take a top-down approach, and understand how we define that value in the business.

As Dana said earlier, application modernization impacts all areas of your business, and the three areas that it really impacts are business, operations, and IT. So, you have to step outside your role. You have to see what value the business would see out of it, what operations would see out of it, and also for yourself in IT, what gains and benefits you would get out of that. When you add them all together, you get the overall value for that application modernization.

Let's take a look at a real case study as an example. Just to set some background, we have a legacy system, a customer relationship management (CRM) call center application for one of our clients. They have about five call centers, with around 50 employees, and they're on a C++ client-server application.

The important thing to note about this is that, in legacy systems, there are usually multiple instances of this application. Since it's a client-server app, we have to remember that it's also deployed and managed on each individual desktop. Each individual employee has their own installation on their desktop, which is sometimes a nightmare to manage for most IT shops.

We took that system and built a modernized system with it. We had a J2EE architecture with desktop browser look and feel, as Dana talked about earlier. You get that real performance out of the installed client-server application, but it's delivered over the Web via zero client install.

You don't have to do anything besides update your Web server, and everybody automatically has the new application, the new look and feel, the new business logic, and access to whatever data you've hooked it up to on the backend.

Also important is the ability of our system that we modernized to be deployed as an open standard. We used J2EE architecture, and that means we're able to integrate with anything that you have on your back end via open Java application programming interfaces (APIs).

There is a vast array of open source products out there waiting to be used, to be integrated, and to modernize systems. There's also a large workforce that will be able to understand a Java application as opposed to a custom C++ application or even a COBOL application. We also consolidated it to one distributed instance, since we can now manage it centrally from one data center.

ROI analysis

When you're doing a modernization, you're probably going to have to do some sort of return on investmment (ROI) analysis to understand exactly what you're going to get out of this application, and that's going to take some time.

If you're coming from an IT perspective, you might have most of the benefits already in your head: "I'll have people using Java instead of COBOL. I'll have all the developers focused on one development language, instead of multiple development languages. I'm going to be able to decrease by deployment time, etc."

But, when justifying something like this, you need to take a step back, and as we said before, look at the factors in these three areas that are most affected by application modernization. As Dana pointed out, it's business operations in IT. So, we go ahead and look at the business.

We have to ask a few questions here: "Who are my users? How long does each transaction take?" Say I'm a call center and it takes few minutes for a user to get through a transaction, if I can cut that to one-and-a-half minutes or even one minute, I'm able to increase productivity significantly.

The next part is operations. How is that productivity increased, but also what does it mean to have a modern application infrastructure? If previously I had to come in to work and sit down at my desktop, because that's the only place that application was installed, maybe I don't even need to come in to work anymore. Maybe I can work from home. Maybe I can work from India, if I want to, as long as I have VPN access into that sort of an application. You can begin to see the operational flexibility that you get out of that.

Then, as we look into the IT benefits that we have here, how long did it take to make a change to my legacy system? One of the biggest benefits that we're seeing is when coming from legacy C++ PowerBuilder applications, where you really have to code each and every aspect of the user interface (UI), the business logic, and the specific data interaction, because we don't have SOA to leverage, and we don't have hooks into services that we've built or are planning to build in our application.

Also, we have to think of what the developer actually had to do to make that change. In older technologies, they might not have a way to prototype the UI and show the business users feedback before they are able to get sign off on what they're going to build. They might have to program each and every element of the user interface, all the way down to writing SQL stored procedures that are application-specific to a database.

Going to a modern architecture, you're going to have services and you're going to have your object-relational management capabilities. You're going to have some great middle-tier applications like Spring and Struts to enhance the development. Obviously, with Nexaweb technologies, you have that ability to create the declarative user interfaces, which speeds up UI development time significantly.

Also we have what hardware and software do the application run on, and what licenses am I paying for? As Dana pointed out earlier, you'll have a significant opportunity for maintenance savings, when you go to a modern architecture.

Productivity gains

We asked all these questions, and we found some significant areas of value in our CRM modernization case. In the business we actually saw a 15 percent gain in end-user productivity, which impacted our clients by about $1.5 million a year. In these times, you're actually able to slim down or trim your workflow if you have a more productive application. In this case, which are the productivities that are able to do more calls quicker, service customers quicker? Ultimately, that ends up in end user satisfaction and dollars saved as well.

Next, you have the operational value. What we had here was a decrease in audit time. We found that their auditors were going around to each individual desktop and seeing exactly which applications were installed on their computer. They had to look at each of the five instances in each call center for auditing, instead of looking at one consolidated instance, with just one database and book of record for all the operation there. So, that saved a lot of auditing time for them, which is really great.

Another thing was that it improved the performance of another help desk. This was a help desk for customer support, but the internal IT help desk actually saw huge improvement. Because the application was centrally managed, all people had to do was go to a Website or click a link to access that application, instead of having to install software. As you know, when you install software, a ton of things can happen. You actually have to do a lot of testing for that software as well. All that has been reduced, and we're saving about $15K there.

When you look at the IT benefits, we have that IT developer productivity gain that we talked about. We eliminated some hardware and software for those five instances and some of that maintenance cost. So, that's and $85K impact. There are the deployment benefits of a RIA, when you're going from deploying applications on 250 computers to zero computers. You're going to see an immediate impact there, and that was around $250K for the time to do that, the software that it took to push that out, and for the support that it needed to run.

Because of the change management benefits from RIAs, the development productivity, and the ability to go from requirements to design, to testing, to production much more quickly than a client-server application, we're able to see a 90 percent gain there, which had a $200K impact.

When you look at it in total, the yearly bottom line improvement was about $2.23 million for this one instance, with one time improvement of $85K for the hardware and the software that we got rid of. It was only a one-time investment of about $800K.

I say "only," but if you look at the business, operational, and the IT impacts together, you get payback in the first full year. If you were only coming from that IT perspective, you would have seen that the payback is actually a little bit longer than a year.

If you add all those numbers up, you get something a little less than $800K, about $700K, I believe. That will be about 14- or 15-month payback instead of about a 5- or 6-month payback. When you're trying to make a case for modernization, this is exactly what your CFO or your CEO needs to know -- how it affects your bottom line from all areas of the business, not just IT.

Let's not forget the intangibles that come with application modernization. It's always about the bottom line. There are some great things that you get out of a modern application infrastructure, and the first thing you get, when you look at the business, is improved response time.

Happier CSRs

The number one thing I could think of is that your customer service representatives (CSRs) are going to be happier, because once they click a button, it's not going to take two seconds to respond like the old application. It's going to be fast. It's going to be rich. You're not going to have any installation issues when you do an upgrade. It's going to be smooth.

You're going to have happier CSRs. Having happier CSRs means that you're going to have improved customer service, and a customer satisfaction level, when people get calls through quicker, and when people talk to happy customer service representative.

Also, when you're doing application modernization, you have a good opportunity to automate manual portions of the business process. You can go in and say, "This person is cutting and pasting something into an Excel spreadsheet, and emailing this to somebody else as a report after they're done." Maybe there's an opportunity there to have that done automatically. So, it saves them time again. That's where you can really find your increased productivity.

When we look at operations, we actually enabled real estate consolidation. I didn't put those numbers in the ROI, because they were probably going to do that anyway, but it was an enabler. Having a technology to go from five call centers to one call center with distributed agents across the country and across the world saves the business a lot of money on the real estate, the power, and the infrastructure needed to have five call centers up and running.

Again, you get the workforce flexibility, because I can work from home, work from India, or come and work from the office. I could do this job from anywhere, if I have access to this application. Obviously, we're able to bring outsourced call centers online on-demand with that.

Then, we move on to IT. As I said before, it's short release cycles with more functionality. When release cycles are shorter, you can incrementally build in more features to your application, make people more productive, and make the application do more in less time, which is obviously what we want to do.

We have a standardized J2EE architecture, which means the people that you're going to look for to maintain the application are going to be out there. There is a huge number of Java developers out there waiting and ready to come in to maintain your application.

We're built on open standards to ensure that the application is ready for the future. There are a lot of RIA technologies that try to lock you in to one runtime and one development methodology. We use open standards as much as we can to push your application out the door as fast as possible, and be as maintainable as possible, and as ready for the future as possible.

Announcer: Thanks, David. Now, we'll hear from Adam Markey, solution architect at Nexaweb, on specific deployment examples of application modernization projects. Here, then, is Adam.

Enterprise-wide value

Adam Markey: As we look at these different customer examples, we really want to see how they've had an impact of value across the enterprise, and see, from a business point of view, the ability to be able to increase market reach, improve user productivity, decrease the time to market, increase customer engagement and loyalty, and sustain, if not build upon, that competitive advantage.

We also want to look at the operations as well and understand how this new architecture has actually realized benefits in terms of a reduced real estate, greater utilization of global workforce, reduction in energy, moving to green architectures, and improving the overall vendor management.

For those closely responsible for the organization and who deliver this capability, we want to look at IT and how this process helps deal with the rapidly changing demographics in the IT skills market. As the baby boomers move on and out of or off the job market, many of the legacy skills that we relied on so heavily through the years are becoming very rare and hard to find within the organization.

We'll take a look at that process efficiency, and generally how we can improve the overall efficiency and cost in terms of licenses and the use of open source. So, let's take a closer look at a few examples to help illustrate that. There's nothing wrong with your screens here. This first example is actually an example of the modernization of a Japanese phone exchange trading platform.

In this case, this was a trading platform built by Enfour, Bank of Tokyo-Mitsubishi (BTM). The challenge that BTM had was that, once they were capable of satisfying their large corporate customers with their on-premises foreign exchange trading platforms, the small- and medium-sized enterprises (SMEs) were quite different in terms of what they required.

They needed a UI and an application that was much simpler for them to adopt. They didn't have the necessary IT infrastructure to be able to establish the complex on-premises systems. They needed something that had no IT barriers to adoption.

What we did for BTM with our partner Hitachi was to help modernize and transform the entire trading platform to the Web. Just to stress, this isn't simply an information portal, this is a fully functioning trading platform. There are over 500 screens. It's integrated to a 120 different data sources with very stringent service-level requirements to the deployment of the application.

We needed to be able to display any fluctuations and exchange right from the Reuters feed in 200 milliseconds or less. We needed to be able to complete a close loop transaction in two seconds or less.

So, this is a fully functioning trading platform. What's it's meant for BTM is that they've been able to dramatically increase the adoption and penetration into the SME market. Fundamentally, these SME or institutional traders don't need any architecture whatsoever, just a browser. There is no client installation. They're able to self-serve, which means they can simply enter the URL, log in, and get started. This has been a tremendous cost reduction and also revenue growth for this product line in penetrating this new market segment.

In the same field of foreign exchange trading, we were able to help a number of Japanese banks take their products and services global. Traditionally, the market had been very service-intensive through a call center. You dialed in and placed your trade with the trader over the phone. By being able to move this entire platform to the Web, we allowed them to go global and go 24/7.

Now, we have over 30,000 institutional traders using this trading platform and application to self-serve through operations, not just in Tokyo, but in Singapore, London, New York, Frankfurt, literally around the world.

New capabilities

Not only has it extended the product line with very little additional operational cost to the banks, but it's also allowed them to provide new capabilities to those customers. One, for example, is the ability to be able to run continuous global book.

In the traditional implementations of trading platforms, each one would be an on-premises installation, which meant that each region would actually have to close their books and close out their operations at the end of their working day. Because it's now managed and provisioned in system, it can actually run globally, and allows them to maintain those books, and maintain common alerts across entities that themselves have a global footprint.

Not only were we getting them to a new market, but we were also allowing them to introduce new functionality. It allowed them to interact more closely with the customers, providing real-time chat facilities, and allowing the traders in Japan to interact directly with a trader as they exhibited certain behavior. It allowed them to offer custom contracts and has significantly increased the close rate of those applications.

So, a big impact in terms of market reach for the banks in Japan is one example. Let's take a look here at how we've been able to dramatically improve user productivity and dramatically reduce the business process time for large organizations.

This is a representation for one of the largest telecommunications groups in Europe. The challenge that they were facing is that they had a request for proposal (RFP) process that was very complicated. They had to be able to provide quotations for countrywide mobile platforms, a very large, complex design process, which was performed through one application, one legacy application as a product configurator.

Then, they would go to another application for doing the parts costing and bill of material assessment, another application for the pricing, and finally, an overall RFP approval process for these large $100 million-plus projects running over 10 years.

The whole process was taking them anywhere up to four weeks. It was fragmented. It was error prone. There were spreadsheets, and the files were flying around the globe, trying to complete this process.

What we were able to do for this organization was to streamline the process and present it as a single-branded Web-based workflow that brought all the different elements together, and, most importantly, ran on top of a SAP NetWeaver infrastructure. In fact, the workflow was designed to have an SAP look and feel.

End users didn't know when they were in or outside of SAP. They didn't care and they didn't need to, because as an end-to-end process, SAP acts as the overall system of record, providing a much higher degree of control, accuracy, and a dramatic reduction in errors.

The great result, from a user productivity point of view, is that they've been able to go from a process that took four weeks to a process that now takes four hours or even less -- a dramatic reduction. More important was the ability to increase the accuracy of these processes.

Desktop-like experience

These Web applications, I should stress, are really a desktop-like experience for the end user. We think of them and talk about them as a desktop in a browser. Everything that you could do as a desktop application with all the user navigation and productivity in very intense data environments, you can do in a browser-based application as deployed in this solution.

Let's take another look at another example where Web architecture and rich Web interfaces allowed us to dramatically improve customer loyalty and customer engagement.

You maybe familiar with the concept of the extended enterprise, whereby more and more organizations need to be able to open up traditionally back-office processes, and back-office systems still managed on the sort of green screen UIs in the bowels of the company. In order to be able to truly engage their customers and improve the process flow, more and more of those systems are being opened up and presented to their customers through rich, engaging Web applications.

This is an example of that. This is a company in the Netherlands called Waterdrinker, which is actually the largest flower distributor in Europe, a very significant business for them. We were helping them to create a Web-based, self-service ordering process that dramatically reduces the dependency on the use of customer service reps. It was similar to the scenario for the foreign-exchange trading platform. We were actually migrating customer interaction to the self-served Web platforms without the need for human intervention and costly CSRs.

But, it's much more than that. We're providing a much richer experience for the user, a much more engaging experience for the user, where they're able to more dynamically navigate through the catalog and determine the optimal order for them with all kinds of what-if calculations and analysis that are provided for them in real time at their own discretion.

The net result has been a significant increase in customer satisfaction, engagement, loyalty, We're yet to see it, because it's still relatively new, but just based on the amount of response reaction and conversion that we have seen through these Web-based interfaces, loyalty benefits will follow soon after. In addition, with a Web-based UI, you're able to easily and effectively customize the user interface with different users and communities.

In this case, they're able to provide a custom UI solution that integrates their catalog ordering process into their partners' processes. They distribute through local partners and local Websites, and they're able to provide this architecture as a white-label capability and then brand it according to the local distributor, delivering a rich branded experience through their partner.

Let's talk generally about competitive advantage. Obviously, all those things that we have talked about and shown with regard to different customers, and Dana has talked about in aggregate, offer all kinds of competitive advantage.

But, there's a certain element to competitive advantage that I would like to emphasize in this transformation process. Organizations, through the years, have basically instantiated and codified their best practices in the workflows within those legacy systems. Those business rules represent years of intelligence and competitive intelligence, and often the point at which you can realize tremendous competitive advantage.

Razor-thin margins

This is never truer than in the razor-thin margins of the consumer packaged goods (CPG) business, where a lot of the margin for a customer can actually be determined through the appropriate inventory, logistics, and pricing management, literally as goods are on route. What we've done for customers like these is to enable them to quickly and effectively extract the business rules that are buried in the legacy systems.

Frankly, nobody knows how they work anymore. They're not really very well documented at best, but we have allowed them to extract those business rules that represent the competitive advantage and consolidate them into a set of corporate-wide rules that can be more effectively managed.

One issue in a traditional legacy environment is that, as you establish business rules in terms of the legacy implementation, each one is monolithic. They start to create their own derivatives, as people program, tweak, and modify. At the end of a 10-year process, the rules barely resemble each other in each of the iterations.

In our transformed architecture, we're able to provide an environment, in which you can centrally manage, control, and modify those business rules and have them consistently and immediately applied across all the necessary touch points. Through this process, we can dramatically reduce human error.

This architecture allows us to provide support tools and business rules in a form that's readily accessible to the end user. You might say, "Wait a minute. It's a Web-based application, and when I'm sitting face to face with my customers, I'm not going to have access to the Web."

As you would expect in these solutions, we're able to architect them, so that the same application can be deployed as a Web application, or used as standalone. A great example of that is Aflac, where we created their premium calculation solution that is basically used across all the customer touch points, 38,000 users. And, 6,000 of those are agents who go door-to-door.

Part of the architecture and part of the challenge was to deliver that insurance calculation solution in such a way that when the agent is sitting across the kitchen table from their customer, they could still perform a level of custom quotation. They could produce the necessary documentation to be able to close the customer there and then as a standalone laptop with a local printer right across the kitchen table. That's all part of bringing those business rules that represent the years of competitive advantage successfully to the Web.

Let's take a look at how some of these capabilities impact the operations themselves. Here, we'll take an example of a call-center application. This was a transformation for the Pepsi bottling group of their customer-equipment tracking system It was a PowerBuilder application, maybe 10 years old, that we successfully moved to the Web.

The real business value in this is that by doing this, by creating a Web-based environment that could be deployed in any call center, we provide the flexibility and the agility for organizations to better utilize those call centers and better utilize that real estate, often consolidating from a large number of call centers to a smaller set of agile call centers, where they can put a lot of different processes through the same infrastructure.

Cost-management advantage

This has tremendous advantages, as you can imagine, in terms of cost management for those customers. We're even able to take that to the next step with the advent of voice-based telephony. It's now possible to engage home-office operators through a voice over Internet protocol (VoIP) infrastructure.

Those operators can not only have the benefit of the call center application as a Web based application accessible through their home broadband, but actually can have the same level of computer telephony integration (CTI) that they would have had, if they sat in the call center, by virtue of a series of VoIP based CTI technology that's available.

This is offering tremendous operating improvements in terms of, for example, real-estate consolidation. Also, looking at operations and the ability to optimize the use of the workforce, we have a situation here where we deploy a very complex laboratory information-management solution for the AmeriPath, now part of Quest Diagnostics. This is part of a pathology services process that requires very experienced technicians to participate.

The joy of being able to deploy this as a Web-based application means that you get great skills mobility, which means that technicians from anywhere, provided they have Web access, can actually participate in a diagnostic process, without the need to move the sensitive Health Insurance Portability and Accountability Act (HIPAA) data. So, HIPAA data that has to be stored in one place, can be made accessible to technicians through any location who can participate then in a process 24/7.

The value to IT is manifold. We'll take a quick look at some of those before we jump into the value equation itself. This is an example with SunGard Shareholder Systems, where they wanted to modernize their commercial product line, a 401k management application. I'm sure they're pretty busy these days.

It was originally deployed as an IBM-Oracle mainframe solution with a C++ front end. We modernized it through a pure Web application, but, from an IT development point of view, the benefits of being in that Web architecture are manifold. First and foremost, they were able to manage this entire development process with one person in the US, and a whole development team offshore in India, dramatically reducing the time and cost.

In this new architecture, the ability to respond to program change requests is tremendously different. We're able to program and change requests in one-tenth of the time and, by virtue of being a Web architecture, actually deploy those in now what are weekly release cycles, instead of six-monthly cycles that you would typically see as a point solution.

As we're running a little long here, I won't go into all of these, but there are many different ways in which the modern architecture really played into creating significant additional IT value.

We provide a process we call Nexaweb Advance, which is an end-to-end transformation process that allows us to dramatically reduce the time, risk, and costs of this overall implementation. It starts with a capture phase that is able to go in and interrogate legacy systems and dramatically reduce the amount of time and effort to document the code that typically is not well documented.

Then it goes through a model transformation process that dramatically reduces the amount of actual code that has to be written. In this example, it was a 65 percent reduction in the amount of code in the three million lines of application. The net result of that is through a typical designer development cycle, we were able to realize 50 percent or more reduction in the development time.

Having done that as a Web based application, there is no kind installation, no on-site provisioning. It's all centrally managed, so dramatic reductions in operating costs recognized by customers. In the example that we shared with you a little bit earlier, where, because we're in a modern object-oriented architecture with all the inheritance benefits that that brings, we're actually able to modify and execute change requests quite often in one-tenth of the time and then deploy them immediately and effectively as Web applications.

Announcer: Thanks, Adam. With that we conclude our podcast. You have been listening to a sponsored BriefingsDirect presentation taken from a recent Nexaweb webinar on application modernization. Please find more information on these solutions at Nexaweb.com. Thanks for listening and come back next time.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Learn more. Sponsor: Nexaweb Technologies.

Transcript of a BriefingsDirect webinar with David McFarlane and Adam Markey on the economic and productivity advantages from application modernization. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.

BriefingsDirect Analysts Discuss Solutions for Bringing Human Interactions into Business Process Workflows

Edited transcript of BriefingsDirect Analyst Insights Edition podcast, Vol. 37 on aligning human interaction with business process management.

Listen to the podcast. Download the podcast. Find it on iTunes and Podcast.com. Learn more. Charter Sponsor: Active Endpoints. Additional underwriting by TIBCO Software.

Special offer: Download a free, supported 30-day trial of Active Endpoint's ActiveVOS at www.activevos.com/insight.

Dana Gardner: Hello, and welcome to the latest BriefingsDirect Analyst Insights Edition, Volume 37.

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 charter sponsor, Active Endpoints, maker of the ActiveVOS, visual orchestration system, as well as with the support of TIBCO Software.

I'm your host and moderator, Dana Gardner, principal analyst at Interarbor Solutions. Our topic this week, the week of Feb. 9, 2009, returns to the essential topic of bringing human activity into alignment with IT supported business processes.

The need to automate and extend complex processes is obvious. What's less obvious, however, is the need to join the physical world of people, their habits, needs, and perceptions with the artificial world of service-oriented architecture (SOA) and business process management (BPM). This will become all the more important, as cloud-based services become more common.

We're going to revisit the topic of BPEL4People, an OASIS specification that we discussed when it first arrived, probably a year-and-a-half ago. We'll also see how it's progressing with someone who has been working with the specification at OASIS since its beginning.

I'd like to welcome our guest this week, Michael Rowley, director of technology and strategy at Active Endpoints. Welcome, Mike.

Michael Rowley: Thank you.

Gardner: I'd also like to introduce our IT analyst guests this week. Our panel consists of regular Jim Kobielus, senior analyst at Forrester Research. Welcome back, Jim.

Jim Kobielus: Thanks, Dana. Hi, everybody.

Gardner: And someone who is beginning to become a regular, JP Morgenthal, independent analyst and IT consultant. Welcome back, JP.

JP Morgenthal: Thanks, Dana. Hi, everyone.

Gardner: Let's go to you first, Mike, as our guest. I've pointed out that Active Endpoints is the sponsor of the show, so I guess we will try to be nice to you, but I can't guarantee it. Tell us a little bit about your background. You were at BEA for some time. You've been involved with Service Component Architecture (SCA) and a few other open standards around OASIS. Give us the bio.

Rowley: I was at BEA for five years. I was involved in a couple of their BPM-related efforts. I led up the BPELJ spec effort there as part of the WebLogic integration team. I was working in the office of the CTO for a while and working on BPEL-related efforts. I also worked on the business process modeling notation (BPMN) 2.0 efforts while I was there.

I worked a little bit with the ALBPM team as well, and a variety of BPM-related work. Then, I've been at Active Endpoints for a little over half a year now. While here, I am working on BPEL4People standards, as well as on the product itself, and on some BPMN related stuff as well.

Gardner: Let's just jump into BPEL4Ppeople. Where do we stand, and is this getting traction to people? Not to be a punster, but do people grok BPEL and BPEL4People?

Good feedback

Rowley: We've had some very good feedback from our users on BPEL4People. People really like the idea of a standard in this area, and in particular, the big insight that's behind BPEL4People, which is that there's a different standard for WS-Human Task. It's basically keeping track of the worklist aspect of a business process versus the control flow that you get in the BPEL4People side of the standard. So, there's BPEL4People as one standard and the WS-Human Task as another closely related standard.

By having this dichotomy you can have your worklist system completely standards based, but not necessarily tied to your workflow system or BPM engine. We've had customers actually use that. We've had at least one customer that's decided to implement their own human task worklist system, rather than using the one that comes out of the box, and know that what they have created is standards compliant.

This is something that we're seeing more and more. Our users like it, and as far as the industry as a whole, the big vendors all seem to be very interested in this. We just recently had a face-to-face and we continue to get really good turnout, not just at these meetings, but there's also substantial effort between meetings. All of the companies involved -- Oracle, IBM, SAP, Microsoft, and TIBCO, as well as Active Endpoints -- seem to be very interested in this. One interesting one is Microsoft. They are also putting in some special effort here.

Gardner: I want to ask you a question, but at two levels. What is the problem that we're trying to solve here? Let's ask that first at the business level and then at the technical level?

Rowley: At the business level, it's pretty straightforward. It's essentially the promise of workflow systems, in which you can automate the way people work with their computers and interact with other people by pulling tasks off of a worklist and then having a central system, the BPM engine, keep track of who should do the next thing, look at the results of what they have done, and based on the data, send things for approval.

It basically captures the business process, the actual functioning of a business, in software in a way that you can change over time. It's flexible, but you can also track things, and that kind of thing is basic.

Gardner: Before you go to the technical issues, one of the things that's really interesting to me on this is that I understand the one-way street of needing to take processes, making that understood, and then finding out who the people are who can implement it. But, is this a two-way street?

Is it possible for the people who are involved with processes in the line of business, in the field, to then say, "Listen, this doesn't quite work?" Sometimes you can't plan things in advance. We have some insight as to what we think the process should be, how to improve it, and how can we then relate that back into what the SOA architecture is delivering." Are we on a two-way street on this?

Rowley: Absolutely. One value of a BPM engine is that you should be able to have a software system, where the overall control flow, what's happening, how the business is being run can be at the very least read by a nontechnical user. They can see that and say, "You know, we're going through too many steps here. We really can skip this step. When the amount of money being dealt with is less than $500, we should take this shortcut."

That's something that at least can be described by a layperson, and it should be conveyed with very little effort to a technical person who will get it or who will make the change to get it so that the shortcut happens. I'm leery about the end user, the nontechnical person, going in and mucking with fundamental control flow, without at least collaborating with somebody who can think about it from more of an IT angle.

Gardner: No. Clearly, we want to have a lifecycle between design, requirements and refinements, but not just throw the keys to the locker room out of the window. What is it technically that we need to overcome in order to solve those problems?

Need for standards

Rowley: I'm going to take this from a standards aspect, because one of the hardest questions is what you standardize and how you divvy up the standards. One thing that has slowed down this whole vision of automating business process is the adoption of standards.

Let's say a business school wants to describe how to do management and how to run your organization. Right now, I don't believe any of them have, as part of the coursework for getting an MBA, something that says, "Here's how you deal with the BPM engine to design and control your organizations."

The reason it isn't at that level of adoption yet is because the standards are new and just being developed. People have to be quite comfortable that, if they're going to invest in a technology that's running their organization, this is not just some proprietary technology.

Gardner: We're at that chicken and egg stage, aren't we, before we can get this really deeply adopted?

Rowley: Yes. I think we're spinning up. We're starting to get the kind of momentum that's necessary, with all the vendors getting on board. Oftentimes, with things like this, if the vendors can all get on the same bandwagon at the same time, the users get it. They see that, "Okay, now this is real. This is not just a standard that is a de jure standard, but it's actually a de facto standard as well."

Gardner: Let's go to Jim Kobielus. Jim, how important is this, and how might this chicken-and-egg conundrum get jump-started?

Kobielus: It's extremely important. One thing that users are challenged with all the time in business is the fact that they are participating in so many workflows, so many business processes. They have to multi-task, and they have to have multiple worklists and to-do lists that they are checking all the time. It's just a bear to keep up with.

It's a real drag on productivity, when you've got tasks coming from all angles at you and you're floundering, trying to find a way to manage them in a systematic way, to roll them up into a single worklist.

BPEL4People, by providing an interoperability framework for worklisting capabilities of human workflow systems, offers the promise of allowing organizations to help users have a single view of all of their tasks and all the workflows in which they are participating. That will be a huge productivity gain for the average information worker, if that ever comes to pass.

That's why I agree with Mike that it's critically important that the leading BPM and workflow vendors get on board with this standard. In many ways, I see BPEL4People as having a similar aim to business intelligence in general. Where business intelligence environments are geared towards providing a single view of all business metrics. BPEL4People is trying to provide a single view of all business processes that either you participate in or which you might manage.

Process steward

A term that I have batted around -- I don't think its really gained any currency -- is the notion of a process steward, somebody whose job it is to define, monitor, track, and optimize business processes to achieve greater productivity and agility for the business.

What Mike was getting at that was really interesting is the fact that you want an environment, a human workflow environment, that not only wraps up all of your tasks in a single worklist, regardless of a back-end execution engine. You also want the ability of not only the end user but especially the process steward, to begin to do what-if analysis in terms of re-engineering. They may have jurisdiction over several processes and have a single dashboard, as it were, looking at the current state and the dependencies of the various workflows they are responsible for.

This is critically important for SOA, where SOA applications for human workflows are at the very core of the application.

Gardner: JP, do you agree with me on this two-way street, where the users, the people who are actually doing the work, feel like they are empowered at some level to contribute back into refinement? It seems to me that otherwise workers tend to say, "Okay, I can't have any say in this process. I don't agree with it. Basically, I do an end run around it. I'm going to find ways to do my work that suits me and my productivity." Then, that value and intelligence is lost and doesn't ever make it back into the automated workflow. How important from your perspective is this two-way street capability?

Morgenthal: I'm going to answer that, but I'd like to take a step back, if I could, to answer the business problem. Interestingly enough, I've been working on and researching this particular problem for the past few months. One interesting aspect from the business side is that this has been looked at for quite a while by the business, but hasn't fully been identified and ferreted out as a niche.

One key term that has been applied here industry wide I found only in the government. They call this "suspense tracking." That's a way of saying that something leaves the process and goes into "ad hoc land." We don't know what happens in there, but we control when it leaves and we control when it comes back.

I've actually extended this concept quite a bit and I am working on getting some papers and reports written around something I am terming "business activity coordination," which is a way to control what's in the black hole.

That's what you're talking about -- controlling what's happening in that black hole. It ties into the fact that humans interact with humans, humans interact with machines, and data is changing everywhere. How do we keep everything on track, how do we keep everything coordinated, when you have a whole bunch of ad-hoc processes hitting this standardized process? That requires some unique features. It requires the ability to aggregate different content types together into a single place.

An example that was mentioned earlier, where you have this thing that happens and somebody does something and then something else. The next step is going to analyze what that step does. The chances are that's related to some sort of content, probably semi-structured or maybe even unstructured content, something like a negotiation over what date something will occur. It's often human based, but when that date locks, something else will trigger, maybe the release of a document, or an invoice, or something out of an automated system.

So, you have these ongoing ad hoc processes that occur in business everyday and are difficult to automate. I've been analyzing solutions to this, and business activity coordination is that overlap, the Venn diagram, if you will, of process-centric and collaborative actions. For a human to contribute back and for a machine to recognize that the dataset has changed, move forward, and take the appropriate actions from a process-centric standpoint, after a collaborative activity is taking place is possible today, but is very difficult. I don't necessarily agree with the statement earlier that we need to have tight control of this. A lot of this can be managed by the users themselves, using common tools.

Solid foundation

One thing I'm looking at is how SharePoint, more specifically Windows SharePoint Services, acts as a solid foundation that allows humans and machines to interact nicely. It comes with a core portal that allows humans to visualize and change the data, but the behavioral connections to actually notify workflows that it's time to go to the next step, based on those human activities, are really critical functions. I don't see them widely available through today's workflow and BPM tools. In fact, those tools fall short, because of their inability to recognize these datasets.

They'll eventually get there. What you see today with regard to workflow and these BPM and workflow management tools is really around enterprise content management. "Jim approved this, so now Sally can go buy her ticket." Well, whoopie do. I could have done that with Ruby code in about ten minutes.

Gardner: It tends to follow a document trail rather than a process trail, right?

Morgenthal: Exactly. So, BPEL4People, from a standards perspective, is a standard route suspense tracking? All I'm controlling is going into the black hole and coming out of the black hole. Neither WS-Human Task nor BPEL4People addresses how I control what's happening inside the black hole.

Rowley: Actually it does. The WS-Human Task does talk about how do you control what's in the black hole -- what happens to a task and what kind of things can happen to a task while its being handled by a user? One of the things about Microsoft involvement in the standards committee is that they have been sharing a lot with us about SharePoint and we have been discussing it. This is all public. The nice thing about OASIS is that everything we do is in public, along with the meeting notes.

The Microsoft people are giving us demonstration of SharePoint, and we can envision as an industry, as a bunch of vendors, a possibility of interoperability with a BPEL4People business process engine like the ActiveVOS server. Maybe somebody doesn't want to use our worklist system and wants to use SharePoint, and some future version of SharePoint will have an implementation of WS-Human Task, or possibly somebody else will do an implementation of WS-Human Task.

Until you get the standard, that vision that JP mentioned about having somebody use SharePoint and having some BPM engine be able to coordinate it, isn't possible. We need these standards to accomplish that.

Gardner: Mike, doesn't governance come into play in this as well? If we want to reach that proper balance between allowing the ad hoc and the worker-level inputs into the system, and controlling risk, security, compliance, and runaway complexity, aren't policies and governance engines designed to try to produce that balance and maintain it?

Morgenthal: Before he answers, Dana, I have one clarification on your question. "Ad hoc" is going to occur, whether you allow it to occur or not. You've got the right question: How can the business attain that governance?

Gardner: Okay.

Rowley: There is governance over a number of things. There's governance that's essentially authorization for individual operations or tasks about how can who change what documents, once its been signed. Who can sign? Who can modify what? That's at the level of an individual task.

Then there's also who can make a formal change to the process, as opposed to ad-hoc changes, where people go in and collaborate out of band, whether you tell them they can or not. But, in the formal process, who is allowed to do that? One nice thing about a BPM is that you have the ability to have authorization decisions over these various aspects of the business process.

Gardner: This strikes me as hugely important, particularly now in our economy. This is really the nub up against which productivity ends up getting hamstrung or caught up. If we're looking to do transformation level-benefits and bring business requirements and outcomes into alignment with IT, this is the real issue and it happens at so many different levels.

I can even see this progressing now towards complex event processing (CEP), where we want to start doing that level of high-scale and high-volume complex events across domains and organizational boundaries. But, again, we're going to bring people into that as well and reflect it both ways. Jim Kobielus, do you agree that this is hugely important and yet probably doesn't get a lot of attention?

Kobielus: The CEP angle?

Need for interactivity

Gardner: No, the overall issue of, if we can get transformational and we can get productivity that helps make the business and financial case for investing in things like SOA and CEP, than the issue of the interactivity between the tactile and the human and the automated and the systems needs to develop further.

Kobielus: That's a big question. Let me just break it down to its components. First, with CEP we're talking about real time. In many ways, it's often regarded as a subset of real-time business intelligence, where you have the consolidation, filtering, and aggregation of events from various sources being fed into a dashboard or to applications in which roles are triggered in real time and stuff happens.

In a broader sense, if you look at what's going on in a workflow environment, it's simply a collection of events, both those events that involve human decision makers and those events that involve automated decision agents and what not.

Looking at the fact that BPEL and BPEL4People are now two OASIS standards that have roughly equal standing is important. It reflects the fact that in an SOA, underlying all the interactions, all the different integration approaches, you have this big bus of events that are happening and firing all over the board. It's important to have a common orchestration and workflow framework within which both the actions of human beings and the actions of other decision agents can be coordinated and tracked in some unified way.

In terms of driving home the SOA value proposition, I'm not so sure that the event-driven architecture is so essential to most SOA projects, Dana, and so it's not clear to me that there is really a strong CEP component here. Fundamentally, when we're talking about workflows, we're talking about more time lags and asynchronous interactions. So, the events angle on it is sort of secondary.

Gardner: Let me take that back to Mike Rowley. I'm looking for a unified theory here that ties together some of what we have been talking about at the people process level with some of this other, larger event bus as Jim described at that more automated level. Are they related, or are they too abstract from one another?

Rowley: No, they're related. It's funny. I bought into everything that Jim was just saying, except for the very end, where he said that it's not really relevant. A workflow system or a business process is essentially an event-based system. CEP is real-time business intelligence. You put those two together and you discover that the events that are in your business process are inherently valuable events.

You need to be able to discover over a wide variety of business processes, a wide variety of documents, or wide variety of sources, and be able to look for averages, aggregations and sums, and the joining over these various things to discover a situation where you need to automatically kickoff new work. New work is a task or a business process.

What you don't want to have is for somebody to have to go in and monitor or discover by hand that something needs to be reacted to. If you have something like what we have with ActiveVOS, which is a CEP engine embedded with your BPM, then the events that are naturally business relevant, that are in your BPM, can be fed into your CEP, and then you can have intelligent reaction to everyday business.

Eventing infrastructure

Kobielus: Exactly, the alerts and notifications are inherent in pretty much, any workflow environment. You're quite right. That's an eventing infrastructure and that's an essential component. I agree with you. I think the worklist can be conceptualized as an event dashboard with events relevant to one decision agent.

Rowley: It's more than just alerts and notifications. Any BPM can look for some threshold and give somebody a notice if some threshold has been exceeded. This is about doing things like joining over event streams or aggregating over event streams, the sorts of things that the general-purpose CEP capabilities are important for.

Gardner: JP, do you agree that we have some commonality here between CEP and its goals and value, and what we are talking about more at the human tactile workflow level?

Morgenthal: From my experience, what I've been looking at with regard to this is what I'm calling "business activity coordination." I think there is important data to be meted out after the fact about how certain processes are running in organizations. When companies talk about waste and reengineering processes, a lot of what they don't understand about processes, the reasons why they never end up changing, is because these ad-hoc areas are not well understood.

Some aspects of CEP could be helpful, if you could tag this stuff going on in that black hole in such a way that you could peer into the black hole. The issue with not being able to see in the black hole is not technical, though. It's human.

Most often, these things are distributed tasks. It's not like a process that's happening inside of accounting, where Sally walks over to Joe and hands him a particular invoice, and says, "Oh look, we could have just made that electronic." It's something leaving this division and going into that division, or it's going from this department to that department to that department. There is no stakeholder to own that process across all those departments, and data gets lost.

You're not going to find that with a CEP, because there are no automation tags at each one of those milestones. It could be useful to postmortem and reengineer after the fact, but somebody has got to gain hold that there is stuff happening in the back hole and automating in the black hole has to get started.

Kobielus: I've got a slightly better and terser answer than the one I gave a moment ago. A concept that's in BPM is business activity monitoring (BAM), essentially a dashboard of process metrics, generally presented to a manager or a steward. In human workflow, what is the equivalent of BAM -- being able to view in real time the running status of a given activity or process?

Gardner: There are also incentives, how you compensate people, reward them, and steer them to behaviors, right?

Morgenthal: On the dashboard, it’s like a remedy, when you have operations and you have trouble tickets, and how quickly are those trouble tickets are being responded to. It doesn't work. I'll tell you a funny example, which everyone out there is going to kick out of. At Sears, when you pick up stuff, after buying something big in the store, they have this monitor with this big flat screen and a list of where you are in the process after you scan your receipt. It shows you how long you're waiting.

What happens is the guy has learned how to overrun the system. He comes out, collects your ticket, and you are still sitting there for 30 minutes, but the clock has stopped on the screen. All of a sudden, behind you, is the thing that says, "We have 99.9 percent response rate. You never wait more than two minutes." Of course not. That guy took my ticket at 1 minute and 53 seconds and let me sit there for 30 minutes until my product came out.

Gardner: I think we're looking out for the best of both worlds. We want the best of what systems automation and documentation and repeat processes can do, but we also need that exception management that only a person can do, and we have all experience of how this can work or not work, particularly in a help desk situation.

Maybe you've have had the experience where you call up a help desk and the person says, "Well, I'd like to help you with that, but my process doesn't allow for it," or "We have no response for that particular situation, so I will have to go back to my supervisor," versus someone who says, "I've got a good process, but I can also work within that process for an exceptional level," and then perhaps bake that back into the process. Back to Mike Rowley.

CEP is core

Kobielus: Actually, Dana, I haven't finished my response, I just want to tie it to CEP. CEP is a core component of BAM quite often, event processing. BAM is basically the dashboard to aggregate events relevant to a given business process. In a human workflow, what is the equivalent of CEP and BAM? To some degree, it's social networks like Facebook, LinkedIn, or whatever, in the sense that I participate as a human being in a process that involves other human beings, who form a community -- my work group or just the workflow in which I'm involved.

How do I get a quick roll up of the status of this process or project or that matter in which I am just one participant? Well, the whole notion of a social network is that I can go there right away and determine what everybody is doing or where everybody else's status is in this overall process. Shouldn't that social network be fed by real time events, so I can know up to the second what Jean is doing, what Joe is doing, what Bob is doing, within the context of this overall workflow in which I am also involved?

So, CEP and BAM relate to social networks, and that's the way that human beings can orient themselves inside these workflows and can coordinate and enable that lateral side-to-side, real-time connection among human beings that's absolutely essential to getting stuff done in the real world. Then, you don't have to rely simply on the clunky asynchronous back-and-forth message passing, that we typically associate with workflows.

Gardner: Mike Rowley, we have a new variable in this, which is the social networking and the ability for people to come up with efficient means for finding a consensus or determining a need or want that hadn't been easily understood before. Is there a way of leveraging what we do within these social networks in a business process environment?

Rowley: Yes. Tying event processing to social networks makes sense, because what you need to have when you're in a social network is visibility, visibility into what's going on in the business and what's going on with other people. BPM is all about providing visibility.

I have a slight quibble in that I would say that some of CEP is really oriented around automatic reaction to some sort of an event condition, rather than a human reaction. If humans are involved in discovering something, looking something up, or watching something, I think of it more as either monitoring or reporting, but that's just a terminology. Either way, events and visibility are really critical.

Gardner: We can certainly go into the whole kumbaya aspect of how this could all be wonderful and help solve the world's ills, but there is the interoperability issue that we need to come back to. As you were mentioning, there are a lot of vendors involved. There is a tendency for businesses to try to take as much of a role as they can with their platforms and tools. But, in order for the larger values that we are discussing to take place, we need to have the higher level of interoperability.

Realistically, Mike, from your perspective in working through OASIS, how well do the vendors recognize the need to give a little ground in order to get a higher value and economic and productivity payback?

Rowley: There seems to be a real priority given to getting this thing done and to getting it to be effective. The technologists involved in this effort understand that if we do this well, everybody will benefit. The whole market will grow tremendously, because people will see that this is an industry wide technology, it’s not a proprietary technology.

Active Endpoints is really at the forefront of having an implementation of BPEL4People in the user's hands, and so we're able to come to the table with very specific feedback on the specs, saying, "We need to make these changes to the coordination protocols," or "We may need to make these changes to the API," because it doesn't work for this, that, or the other reason. What we haven't seen is people pushing back in ways that would imply they just want to do things their own way.

Gardner: With all due respect, I know Active Endpoints is aggressive in this, but a company of your size isn't too likely to sway an entire industry quite yet. What about partnerships? People aren't pushing back, but how many people are putting wind in your sails as well?

Wholehearted adoption

Rowley: That's exactly what they're doing. They're basically adopting it wholeheartedly. We have had, I would say, a disproportionate impact on these specs, primarily because the people involved in them see the technical arguments as being valid. Technical arguments that come from experience tend to be the best ones, and people jump on.

Gardner: How about the professional services, systems integrators, and people like McKinseys who are organizational management focused? Wouldn't this make a great deal of sense for them? If you have a good strategic view as a vendor, you say, "Yes, we'll grow the pie. We'll all benefit. But, there is another whole class of consultant, professional services, and integrator that must clearly see the benefit of this without any need to maintain a position on a product or technology set.

Rowley: Through the standards effort, we haven't seen very much involvement by systems integrators. We have seen integrators that have really appreciated the value of us having a standard and knowledge, knowing that if they invest in learning the technology, they're not stuck if they invest and develop a framework.

Integrators often will have their own framework that they take from one to the other. If they build it on top of BPEL4People and WS-Human Task, they really get substantial investment protection, so that they don't have to be stuck, no matter what vendor they're picking. Right now, in our case, they pick Active Endpoints, because we have the earliest version.

Gardner: The question is JP that we've been hearing how the role of systems integrators and consultants is important in evangelizing and implementing these processes and helping with interoperability across the business as well as the human, as well as the systems. Do you see yourself as an evangelist, and why wouldn't other consultants also jump on the bandwagon?

Morgenthal: Well, I do take that role of helping to get out there to advance the industry. I think a lot of system integrators though are stuck with having to deal with day-to-day issues for clients. Their role is not to help drive new things as much as it is to respond to client need and heavily utilize the model.

Gardner: You've hit on something. Whose role is it? As Jim was saying, BAM makes sense at some level, but whose role is it to come in and orchestrate and manage efficiency and processes across these boundaries?

Morgenthal: Within the organization?

Gardner: Yes.

Morgenthal: It's the management, the internal management. It's their job to own these processes.

Gardner: So it's the operating officer?

Morgenthal: The COO should drive this stuff. I haven't yet seen a COO who takes these things by the hand and actually drives them through.

Gardner: Mike Rowley, who do you sell your Active Endpoints orchestration tools to?

Rowley: Primarily to end users, to enterprises, but we also sell to system integrators sometimes.

Gardner: But who inside of those organizations tends to be the inception point?

Rowley: Department level people who want to get work done. They want to develop an app or series of apps that help their users be productive.

Kobielus: It hasn't changed. I've written two books on workflow over the past 12 years, and workflow solutions are always deployed for tactical needs. The notion that companies are really itching to establish a general-purpose workflow orchestration infrastructure as a core of their SOA, so that they can then leverage out and extend for each new application that comes along isn't how it works in the real world. I think Mike has laid it out there.

As far as the notion that companies are looking to federate their existing investments -- whether Oracle, IBM, SAP, or others workflow environments -- by wrapping them all in a common SOA standards framework and make them interoperable, I don't see any real push in the corporate world to do that.

Morgenthal: One thing I really like about SOA is that it really should be the case that if you have got an overarching SOA mandate in the enterprise, that should enable lower-level, department-level freedom, as long as you fit with providing and consuming services.

BPM doesn't have to be an enterprise-wide decision, because it just gets clogged, too many decision makers have to sign off. If you get something like BPEL4People, it's really oriented around not just workflow in kind of the older workflow systems, but its workflow in a way that fits in a SOA, so that you can fit into that larger initiative without having to get overall approval.

Gardner: We're going to have to leave it there. We are about out of time. We've been discussing the issue of BPEL4People and better workflow productivity, trying to join systems and advances in automation with what works in the field, and somehow coordinating the two on a lifecycle adoption pattern. I'd like to thank our guests. We've been discussing this with Mike Rowley, director of technology and strategy at Active Endpoints. I appreciate your input, Mike.

Rowley: Thank you.

Gardner: We have also been joined by Jim Kobielus, senior analyst at Forrester Research; thank you Jim.

Kobielus: Yeah, thanks Dana, always a pleasure.

Gardner: Lastly, JP Morgenthal, independent analyst and IT consultant. You can be reached at www.jpmorgenthal.com. Is that the right address, JP?

Morgenthal: That's the right address, thank you, Dana.

Gardner: I'm Dana Gardner, principal analyst at Interarbor Solutions. I would like to thank our sponsors for today's podcast, Active Endpoints, maker of the ActiveVOS, Visual Orchestration System, as well as the support of TIBCO Software.

Listen to the podcast. Download the podcast. Find it on iTunes and Podcast.com. Learn more. Charter Sponsor: Active Endpoints. Additional underwriting by TIBCO Software.

Special offer: Download a free, supported 30-day trial of Active Endpoint's ActiveVOS at www.activevos.com/insight.

Edited transcript of BriefingsDirect Analyst Insights Edition podcast, Vol. 37 on aligning human interaction with business process management. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.

Cloud Computing, Enterprise Architecture Align to Make Each More Useful to Other, Say Experts

Transcript of a podcast with industry practitioners and thought leaders at The Open Group's Enterprise Cloud Computing Conference in San Diego.

Listen to the podcast. Download the podcast. Find it on iTunes and Podcast.com. Learn more. Sponsor: The Open Group.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions and you're listening to BriefingsDirect. Today, we welcome our listeners to a sponsored podcast discussion coming to you from The Open Group's Enterprise Cloud Computing Conference in San Diego, February, 2009.

Our topic for this podcast, part of a series on events and major topics at the conference, centers on cloud computing and its intersection with enterprise architecture. You might consider this a discussion about real-world cloud computing, because this subject has been often discussed across a wide variety of topics, with many different claims, and perhaps a large degree of hype.

We're going to be talking with a few folks who will bring cloud and its potential into alignment with what real enterprises do and will be expecting to do, in terms of savings and productivity in the coming years.

Here to help us sort through cloud computing in enterprise architecture, is Lauren States, vice president in IBM's Software Group; Russ Daniels, vice president and CTO Cloud Services Strategy at Hewlett-Packard (HP), and David Linthicum, founder of Blue Mountain Labs. Welcome to you all.

There's an early-adopter benefit in some technologies. I expect that that might be the case with cloud computing as well. But, in order for us to assert where cloud computing makes the most sense, I think it's important to establish what problem we're trying to solve.

Why don't we start with you, Dave? What are the IT problems that cloud computing is designed for, or is being hyped to solve?

Dave Linthicum: Thank you very much, Dana. Cloud computing is really about sharing resources. If you get down to the essence of the value of cloud computing, it's about the ability to leverage resources much more effectively than we did in the past. So, number one, it's really designed to simplify the architectures that we are dealing with.

Most enterprises out there have very complex, convoluted, and inefficient architectures. Cloud provides us with the ability to change those architectures around any business needs, as the business needs change, and expand and contract those architectures as the business needs require.

Gardner: What problem are we solving from your perspective, Russ?

Russ Daniels: Hi, Dana. For most enterprises today, most of what they are really interested in is exactly what was described. It's a question of, "How can I source infrastructure in a way that's more flexible, that allows me to move more quickly, and that allows me potentially to have more variable costs?"

Maybe I can provision internally for my average demand rather than peak demand, and then be able to take advantage of external capacity to handle those peaks more cost effectively.

We think all that's really quite important. There's something else that's going on that people tend to talk about as cloud, which has different implications and takes advantage of some of that same flexible infrastructure, but allows us to go after different problems.

Most enterprises today are trying to figure out, "How can I improve my efficiency? Rather than having capacity dedicated to each of the application workloads that I need to deliver to the business, can I flexibly bind the pools of resources, whether they are in my data center or in somebody else's?"

Gardner: Okay. Let's rephrase the question slightly for you, Lauren. What business problems are we solving with cloud computing?

Agile response

Lauren States: Thank you very much, Dana. I agree with both what Dave and Russ said. I think the business problem that we're trying to solve is how we can make IT respond to business in a more agile way. The opportunity that we have here is to think about, how to industrialize IT and create an IT services supply chain.

The combination of the technologies available today, the approaches that we're using in the underlying architecture, plus our collective experience gives us a chance to use cloud computing to realize the value of IT to an organization. We can stop having these conversations about, what is the additional cost that you are bringing in, why is IT separate, and why is it such a burden, and really integrate IT with business.

Gardner: As I mentioned, we also want to put this in the context of enterprise architecture. For organizations that see some potential in the cloud models that are emerging, are looking at new ways to develop software and source their services, and where they are located, and deployed in their production facilities, there probably also needs to be some preparation. Jumping in too soon might have some downside as well. Given we are in a tough economy, economics is very much top of mind.

When it comes to enterprise architecture, what do you need to do or have in place, in order to put yourself at an advantage or be in a good position to take advantage of cloud? Let's start with you, Dave.

Linthicum: Number one, you need to assess your existing architecture. Cloud computing is not going to be a mechanism to fix architecture. It’s a mechanism as a solution pattern for architecture. So, you need to do a self-assessment as to what's working, and what's not working within your own enterprise, before you start tossing things outside of the firewall onto the platform in the cloud.

Number two, once you do that, you need to have a good data-level understanding, process-level understanding, and a service-level understanding of the domain. Then, try to figure out exactly which processes, services, information are good candidates for cloud computing.

One of the things I found out implementing this within my clients is that not everything is applicable for cloud computing. In fact, 50 percent of the applications that I look at are not good candidates for cloud. You need to consider that in the context of hype.

Gardner: Lauren, from your perspective, what organizational management, technical underpinnings, and foundations might put you on a better position to leverage cloud?

States: Just building on what Dave said, I have a couple of thoughts. First, I completely agree that you have to have an aspirational view of where you are trying to go. And, you have to have a good understanding of your current environment, including simple things like knowing all the things in your environment and their relationship to each other. Lay out the architecture and develop the roadmap and the steps that you need to take to achieve cloud computing.

The other aspect that's really important is the organizational governance and culture part of it, which is true for anything. It's particularly true for us in IT, because sometimes we see the promise of the technology, but we forget about people.

In clients I've been working with, there have been discussions around, "How does this affect operations? Can we change processes? What about the work flows? Will people accept the changes in their jobs? Will the organization be able to absorb the technology? "

Enterprise architecture is robust enough to combine not only the technology but the business processes, the best practices, and methodologies required to make this further journey to take advantage of what technology has to offer.

The right environment

Gardner: Let's flip the question over a little bit at this point and look at what would not be a good environment to start embarking on cloud. Is there something you should not do or, if you are lacking something, perhaps be leery of in using clouds? Russ?

Daniels: It's very easy to start with technology and then try to view the technology itself as a solution. It's probably not the best place to start. It's a whole lot more useful if you start with the business concern. What are you trying to accomplish for the business? Then, select from the various models the best way to meet those kinds of needs.

When you think about the concept of, "I want to be able to get the economies of the cloud -- there is this new model that allows me to deliver compute capacity at much lower cost," we think that it's important to understand where those economics really come from and what underlies them. It's not simply that you can pay for infrastructure on demand, but it has a lot to do with the way the software workload itself is designed.

There's a huge economic value you can get, if the software can take advantage of horizontal scaling -- if you can add compute capacity easily in a commodity environment to be able to meet demand, and then remove the capacity and use it for another purpose when the demand subsides.

This is a real important problem. We know how to do that well for certain workloads. Search is a great example. It scales horizontally very effectively. The reason is that search is pretty tolerant of stale data. If some of the information on some of the nodes is slightly out of date, it doesn't really matter. You'll still get the right answer.

If you look at other types of workloads, high degrees of transactionality are critical. When you take an item out of inventory, you really only get to do that once. When you try to scale those things horizontally, you have real issues with the possibility of a node failure or causing a lock not to be released. That then creates some nasty back-operational process that has to be implemented correctly by your IT organization for everything to work.

It's the balance between what are the problems we are trying to solve and how well this particular architectural patterns match up to those. Every IT organization has to keep that in mind.

Gardner: While there's been quite a bit of hype around cloud, there is also a fair amount of naysaying about it here at the TOGAF 9 launch and the practitioners conference for The Open Group.

I've spoken to several people who really don't have a lot of favorable impressions of cloud. They seem to think that this is a way of dodging the IT department and perhaps bringing more complication and a lack of governance, which could then spin out of control and make things even worse.

So, what are some best practices that we could establish at this early juncture of how to approach cloud and bring it into some alignment not only with the business, but with the existing IT services and infrastructure? I guess this is our architecture question. Dave?

Set the policy

Linthicum: The first thing you need to do is to create, publish, and widely distribute the policy on cloud computing. Someone needs to figure out what it is, the value that it’s going to have for the particular enterprise, and the vision or the strategy or the approach that they need to leverage to get there.

The next thing you do is publish policies around cloud computing. Lots of my clients are building what I call rogue clouds. In other words, without any kind of sponsorship from the IT department, they're going out there to Google App Engine. They're building these huge Python applications and deploying them as a mechanism to solve some kind of a tactical business need that they have.

Well, they didn't factor in maintenance, and right now, they're going back to the IT group asking for forgiveness and trying to incorporate that application into the infrastructure. Of course, they don't do Python in IT. They have security issues around all kinds of things, and the application ends up going away. All that effort was for naught.

You need to work with your corporate infrastructure and you need to work under the domain of corporate governance. You need to understand the common policy and the common strategy that the corporation has and adhere to it. That's how you move to cloud computing.

Gardner: How do we know if companies are doing this right? Are there yet any established milestones or best practices? Clearly, we've seen that with other technology adoptions, we have certain signals that say, "Aha, we're doing something wrong. We need to reevaluate."

Any ideas, Lauren, about how companies would know whether they are doing cloud properly? What should they be getting in return?

States: That's a great question, Dana. Let me just take it from a couple perspectives.

First, we've looked at our own IT transformation within IBM to try to discover what were the activities we did to make sure that we could take out cost and reduce complexity. We feel that looking at the financial aspects helps drive an organization to a common goal.

In our company, we took $4 billion out of our IT infrastructure over the past five years, and that's part of our strategy for our common centralized functions. There's nothing like achieving a specific target to make an organization focus.

Our initial feeling is that you really have to get your arms around virtualization, so you can take out the capital expense and then have the real hard discussions around standardization.

You can reduce the complexity of the application portfolios, reduce the administration and support costs, and take a very serious look at your service management capability, so that you can get at the operations and implement the policies that you described, Dave, and continue to make progress.

I don't think that there's any completely done use-case out there that we can all look to and say, "Oh, that's what it looks like." It's starting to get clearer as we get more experienced. But, as I said, you need a specific target.

Our target was cost. Other organizations have other targets, like shared services or creation of new business models. You can get the whole organization clear and managed to that, and, as in our case, have some of these items be part of the executive compensation structure. Then, you have a better chance of achieving what the business is looking to do.

Gardner: I'm going to take the same question to you, Russ. What should companies be looking for if they do cloud properly? What are the returns?

Key questions

Daniels: This really starts with a couple of key questions. First, why do you have an IT function in your enterprise? Our answer to that is that you need to have someone responsible for the sourcing and delivering of services in a form that is consistent with the businesses needs.

The cloud just represents one more sourcing opportunity. It’s one more way to get services, and you have to think of it in the context of the requirements that the business has for those services. What value do they represent, and then where is the cloud an appropriate way to realize those benefits? Where is it the best answer?

It starts with that. To be able to answer that question is a significant issue for enterprise architecture. It means you have to have a pretty good model of what the enterprise is about -- how does it work, what are the key processes, what are the key concerns? That picture, that design of the enterprise itself, helps you make better choices about the appropriate way to source and deliver services.

There's a particular class of services, needs for the business, that when you try to address them in the traditional application-centric models, many of those projects are too expensive to start or they tend to be so complex that they fail. Those are the ones where it's particularly worthwhile to consider, "Could I do these more effectively, with a higher value to the business and with better results, if I were to shift to a cloud-based approach, rather than a traditional IT delivery model?"

It's really a question of whether there are things that the business needs that, every time we try to do them in the traditional way, they fail, under deliver, were too slow, or don't satisfy the real business needs. Those are the ones where it's worthwhile taking a look and saying, "What if we were to use cloud to do them?"

Gardner: Back to you, Dave. We've heard quite a bit about private clouds or on-premises clouds. On one hand, what's interesting about clouds is that you have a one size fits all. You have a common set of services or a common infrastructure, but lot of companies are interested in customization and differentiation and they also need to integrate with what's been running underneath the hood inside the organizations anyway.

Tell us how in your practice you see the role of a private cloud emerging, and particularly how that offsets this notion of it's all just a big common denominator cloud.

Linthicum: The value of private clouds is you can take what's best of cloud computing and implement it behind your firewall. So, you get around the whole control and security issues that people deal with -- and also the not-invented-here attitude out there.

The difficulty that people are running into right now is trying to figure out how to leverage cloud-computing environments when their existing architectures are so tightly coupled. They're coming to the conclusion that it's very difficult to do that. They can't use Amazon, Google, or other cloud-based services, because the information is so bound to the behaviors inside those systems and the systems are so tightly coupled. It's very difficult to decouple pieces of them and put them in the cloud. So, private clouds are an option for that.

You provide that on infrastructure that's shareable. You can expand it as you need it, and, as Russ mentioned earlier, give as many cycles as you need to particular applications that need them and take away the cycles from the applications that don't. Therefore, you end up with an architecture that's much more effective and efficient.

It also syncs up very well with the notion of service-oriented architecture (SOA) and is additive to an enterprise architecture and not necessarily negatively disruptive.

Gardner: Do you use your traditional enterprise architecture principles and skills when you construct your cloud on-premises or does it require something different?

It's enterprise architecture

Linthicum: You do. At the end of the day, it's enterprise architecture. So you're doing enterprise architecture and you're doing the sub-pattern of SOA. You're using cloud computing, specifically private clouds, as an end-state solution. So, it's nothing more than an instance of a solution in that matter.

That doesn't degrade it as far as having value, but you get to that through requirements, planning, governance, all the things that are around enterprise architecture -- and you get to the end-state. Cloud computing is in the arsenal of the technology you have to solve your problem, and that's how you leverage it.

Gardner: Lauren, in your presentation earlier today, you described some economic benefits that IBM is enjoying, or beginning to enjoy, as a result of some cloud activities. Tell us about the return-on-investment (ROI) equation. How substantial is it, and is it so enticing, particularly in today's tough economy where every dollar counts, that companies should be moving toward this cloud model quickly?

States: The ROI that we've done so far for one of our internal clouds, which is our technology adoption program, providing compute resources and services to our technical community so that they can innovate, has actually had unbelievable ROI -- 83 percent reduction in cost and less than 90-day payback.

We're now calibrating this with other clients who are typically starting with their application test and development workloads, which are good environments because there is a lot of efficiency to be had there. They can experiment with elasticity of capacity, and it's not production, so it doesn't carry the same risk.

Gardner: Let's just unpack those numbers a little bit. Are you talking about an on-premises cloud or grid that IBM has put together? Or is this leveraging outside third parties; a hybrid? What were you able to do those very impressive feats with?

States: This is an on-premises cloud. It’s at our data center in Southbury, Conn. There are three major levers for cost. First was virtualization. They virtualized the infrastructure. So, they cut down their hardware, software, and facilities cost.

They were able to put in significant automation, particularly around self-service request for the resources. We took out quite a bit of labor through automation, and that was what gave the substantial savings -- particularly the labor cost, from roughly 14 or 15 administrators, down to a couple or three. That's where we saved the cost.

Gardner: Russ Daniels, we have heard quite a bit from HP about transformation in IT, modernization, and consolidation. Do you see cloud as yet another facet of the larger topic, which is really IT transformation, and how big a piece of IT transformation will cloud end up being?

Daniels: It's very easy to get so excited about technologies that you forget about the fundamental challenges that every business face around change management, this concept of transformation.

Change management

Ultimately, if you want an organization to do something different than what it does, you have to take on the real work involved in that change management, getting people comfortable with doing things differently, moving out of their current comfort zones or current competencies, and learning new skills and new ways to do things. So, yeah, we think that that's a major component.

When we think about these kinds of applications of taking advantage of what sometimes is called a private cloud, what we tend to think of as an internal infrastructure utility. What we've discovered is that change management concerns -- getting people comfortable that their workloads will be adequately secure, that their needs will be met, when they are being delivered in the shared form -- has been a real challenge.

A lot of times the adoption of these technologies is slowed by the business' concern that they are going to end up at the end of the queue, rather than getting their fair share.

As you think about all of these opportunities, you have to source and deliver these services. It's critical that you build the right economic models and understand the trade-offs effectively.

If you have an internal shared capacity, you still, as a business, are taking on all of the fixed costs associated with the operation. It's different than if some third party is handling those fixed costs and you're only paying variable costs.

It's also true though that many times the least expensive way to do it is to do it for yourself, to do it internally, in the same way that, if you use a car 20 days a year, renting the car can be a real cost saver. If you use a car every day, it's typically better to just go ahead and buy the car, take on the maintenance responsibilities, the insurance cost, etc., yourself, because if you are using the car a lot over the course of that year, the costs amortize much more effectively.

Gardner: How does a cloud approach help organizations change more rapidly? There's some concern there that going to a cloud model, in this case a third-party cloud, might end up being another form of lock-in, and that you might lose agility. Public or private, what is it about a cloud model that makes your company more agile?

Daniels: Our view is that the real benefits, the real significant cost savings that can be gained. If you simply apply virtualization and automation technologies, you can get a significant reduction of cost. Again, self-service delivery can have a huge internal impact. But, a much larger savings can be done, if you can restructure the software itself so that it can be delivered and amortized across a much larger user base.

There is a class of workloads where you can see orders-of-magnitudes decreases in cost, but it requires competencies, and first requires the ownership of the intellectual property. If you depend upon some third-party for the capability, then you can't get those benefits until that third-party goes through the work to realize it for you.

Very simply, the cloud represents new design opportunities, and the reason that enterprise architecture is so fundamental to the success of enterprises is the role that design plays in the success of the enterprise.

The cloud adds a new expressiveness, but imagining that the technology just makes it all better is silly. You really have to think about, what are the problems you're trying to solve, where a design approach exploiting the cloud generates real benefit.

Gardner: The same question to you, Dave Linthicum. Public-private-hybrid: What is it about a cloud model that makes a company more responsive from a business outcomes perspective?

Key to agility

Linthicum: I don't think a cloud model inherently makes them more responsive. It's the fact that they're leveraging all kinds of technology, inclusive of cloud computing, as a mechanism to provide more agility to the enterprise.

In other words, if they're able to do that with external clouds to get applications up and running very quickly, with the security and the performance requirements still in line, design that into their enterprise architecture, and leverage the private clouds to get virtualization and get at resources in a shareable state among the various entities within the organization, they are able to share the cost. Then, they're going to be able to do IT better. That's what it's all about.

What we're looking to do is not necessarily reinvent or displace IT or throw out the old legacy stuff and put in this new cloud stuff. We're looking to provide a layer of good architecture and good technology on the existing things, as well as get back into the architecture and fix things that need to be fixed and provide good IT to address the business.

Gardner: There's an interesting confluence now with the harsh economic environment. We're looking at this cloud phenomenon largely as a cost benefit. Yes, do IT better, but there is a significant cost, better utilization, perhaps flexibility in services, and how even an IT organization runs itself.

Coming down to the end now. Do you agree, Lauren, that what's going to drive cloud into organizations and its use through a variety of models over the next couple of years is largely a function of cost?

States: Yes, cost will be a huge driver in this. Cost is a conversation that is very active in the C suite. The conversations on cloud have re-established some of the conversations with lines of business, because they are curious about how can they take out cost and achieve the agility that they're looking for.

But I'd also be mindful that there is an opportunity for us to drive innovation and economic growth with new business models, new businesses, new service deliveries, and new workloads. This will be something that large organizations look for, but it will unlock IT for many smaller organizations that don't have the resources within their organizations to provide these services to their constituents.

Gardner: Okay. Russ Daniels, same question. In an economic maelstrom, what are the economic drivers for cloud, and is that going to be the primary driver?

Daniels: I've not seen any time in the industry where the conversation between business and IT didn't have a significant cost component. Certainly, when the times become more difficult, that intensifies, but there's never a point at which that isn't an interesting question.

A few years ago, when Mark Hurd came in as our CEO, HP started to go through a very significant reduction in the cost of IT. Economic times were fine, but that was a very important focus.

A great opportunity

Cloud is relevant to that, but, as Lauren was saying, there is a great business opportunity as well. Every IT organization that's having those cost conversations would love to be able to have a value conversation, would love to be able to talk about how technology cannot just help control cost but can generate new business opportunities, open new markets, help the business gain share, improve the region and relationship that it has with its customers, and differentiate from its competitors better.

We think that cloud is really very suitable for many of those kinds of concerns. The ability to understand better what your customers care about and to tailor your offerings to those is something the cloud is particularly well suited to do, and allows the business to have a different conversation with IT, and one that the IT organization yearns for.

Gardner: This is probably a question that would be good for an entire hour-long additional podcast, but Dave Linthicum, on this notion of additional business and revenue, innovative processes that can create new wealth creation, what do you see as the top opportunities and using cloud in that regard, in creating new business?

Linthicum: Consulting companies are benefiting from it right now. They're getting a wealth of new business based on a new paradigm coming in. Lots of people are confused about how the paradigm should be used and they are building methodologies and those sorts of things.

The primary cloud component and the benefit that businesses will get will be the ability to leverage the network effect from the cloud-computing environment. In other words, they'll benefit if they're willing to engage infrastructure that's outside their firewall that they don't control in their host, and use that as a service -- in essence rent it -- and then they're able to see some additional value that the Internet web can bring, such as the social networking things and the ability to get analytical services.

I thought you put it great, saying that ultimately people are going to realize huge cost savings based on the ability to leverage what they have in a much more cost effective way. That's really where things are going right now.

So, I think the consultants are going to make the additional money and I think the hardware and software vendors are going to make some money, even though cloud computing will displace some hardware and software.

People are retooling right now and actually buying stuff, especially cloud providers that are building infrastructure. Then, it will come down to the core benefits that are being built around the private clouds and the public clouds that are being leveraged out there.

Gardner: So, it's perhaps a win-win-win just at the time in the economy when we need that. We'll have a win perhaps in being able to further leverage existing resources and assets and architectural methods and processes, further reduce the overall operating costs as a result of cloud, and at the same time, conjure up new business opportunities and models and ways of driving income across ecologies of players in ways we hadn't before.

That's a fairly auspicious position for cloud computing, and that's perhaps why we are hearing so much about it nowadays.

I want to thank our panelists. We have been joined by Lauren States, vice president in the IBM Software Group; Russ Daniels, vice president and CTO cloud services strategy for Hewlett-Packard; and Dave Linthicum, founder of Blue Mountain Labs.

Our conversation comes to you today through the support of The Open Group from the 21st Enterprise Architecture Practitioners Conference and Enterprise Cloud Computing Conference in San Diego in February, 2009.

I'm Dana Gardner, principal analyst at Interarbor Solutions. Thanks for listening and come back next time.

Listen to the podcast. Download the podcast. Find it on iTunes and Podcast.com. Learn more. Sponsor: The Open Group.

Transcript of a podcast with industry practitioners and thought leaders at The Open Group's Enterprise Cloud Computing Conference in San Diego, February, 2009. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.

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