Tuesday, August 03, 2010

Harvard Medical School Use of Cloud Computing Provides Harbinger for New IT Business Value, Open Group Panel Finds

Transcript of a sponsored podcast discussion from The Open Group's Boston Cloud Practitioners Conference on gaining business paybacks from cloud computing.

Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Sponsor: The Open Group.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you're listening to BriefingsDirect. Today, we present a sponsored podcast discussion on the business impact of cloud computing, coming to you from The Open Group Conference in Boston, the week of July 19, 2010.

We've put together a distinguished panel to explore practical implementations of cloud-computing models, and of moving beyond the hype and into the business paybacks from proper cloud adoption.

We'll tackle such issues as what stands in the way, safe and low-risk cloud computing, and what seems to be inhibiting IT leaders and/or business leaders as they seek to reduce the risk and exposure of their ongoing cloud efforts. We're also going to delve into a compelling example of successful cloud practices at the Harvard Medical School.

Here to help us better understand these best practices and proper precautionary steps on the road to cloud implementations that provide practical business improvements is our panel: Pam Isom, Senior Certified Executive IT Architect at IBM; Mark Skilton, Global Director, Applications Outsourcing at Capgemini; Dr. Marcos Athanasoulis, Director of Research Information Technology for Harvard Medical School, and Henry Peyret, Principal Analyst at Forrester Research.

Let me take my first question to you, Mark Skilton. I enjoyed your presentation earlier. The whole wellspring of interest, I might even say hype, in cloud computing wouldn’t happen if there wasn’t some dissatisfaction with the status quo. From your perspective, now that we have moved a little bit through a hype cycle with cloud computing, what are the resilient dissatisfaction elements of the status quo that are leading to a continued interest in cloud computing?

Mark Skilton: Thanks, Dana. I've answered this question a number of times before. What I typically say to people is that there are probably three areas that are persistent or continuing into the post-initial hype of the cloud -- I'm not saying Cloud 2.0 just yet.

There's the resilience of utility computing, the on-demand storage or the self-service component of computing. We're starting to see utility computing becoming much more common mainstream, so that it’s no longer a fad or an alternative to mainstream. We're seeing that sort of consistency.

To answer your question quickly, we're also seeing software as a service (SaaS), due to the economic conditions, taken quite seriously now, particularly targeted at specific business processes that we spoke of earlier, but also starting to become potentially more mainstream. Clearly, with Salesforce.com and others like that, we are seeing that starting to accelerate.

Different app store

The third one is a different type of app store. We're seeing application stores, particularly through the federal sector and government, to some extent in telecoms, and even in academic circles. We're seeing this idea that you certify into a catalog.

Gardner: Pam Isom, do you see a difference between the interest from the business leaders and the IT leaders, and why would that differ?

Pam Isom: From a business leadership and an IT leadership perspective, based on my customer experiences, I would say that it’s about the same. There is a tendency for IT leaders to want to share their capabilities. Business leaders just want to get the problem resolved -- tell us what you can do to fix our problems. They don’t specifically go out and request cloud, but there's a need for a business performance improvement, which leads to cloud enablement.

As far as what’s driving cloud as a solutions strategy is the need to improve business performance. If we can get solutions that will help drive business performance and business sustainability, the cloud is a good place for that.

Gardner: Henry, from your research and from some of my observations, do you share with me this notion that the business seems to be selling cloud computing to the IT department, and in only some cases the IT department is selling cloud computing to the business? What’s up with that?

Henry Peyret: That’s a good point, and I agree. Sometimes, when the business is trying to sell cloud computing, and IT is not really prepared to do that, they say no. They find tons of reasons to never go to the cloud.

The same also happens on the other side. Sometimes, IT is selling the cloud approach, and the business says, "No, I don’t want to take the risk. I have heard a lot about cloud, and I don’t want to take the risk."

The supposition is not so easy at the moment, but from an enterprise architect (EA) point of view, we should prepare for that. We should prepare to determine what are the elements that can migrate to the cloud, different types of cloud. Then, we should try to evangelize. The EA should be in between business and IT. That’s a good place to make a right choice and mitigate risks and choices.

Gardner: Of course, we've been talking for decades about alignment between IT and business. Do you think that cloud and the concept of cloud provides common ground for IT and business in a way that perhaps we hadn’t seen before? First to you Henry.

Wrong approach

Peyret: I don’t like to talk about IT and business alignment, I think that’s a bad approach. We should be in-sync. That means that every time the business changes, we should be prepared to be in-sync with the same thing.

We see the business changing faster than previously. So being aligned, you're always late, rather than being in-sync. That means that we should be able to anticipate where the competitors are going, and then we should propose several things to help the business at that point. Then, when the business is coming up, we should try to help. That’s where cloud is offering options, scenarios, and other choices to help existing or future problems.

Gardner: Pam, do you have a different outlook on what this common ground, the cloud, can provide?

Isom: You can’t produce cloud solutions in a vacuum. You won’t get any consumers. So, it’s a great venue for cloud providers to work with business stakeholders to explain and explore opportunities for valuable services.

Gardner: Mark, we've heard from several different speakers today that this notion of business process is where the cloud will pay off in the future. Even business process as a service has been raised. Does that provide the common ground? Maybe it’s not so much the delivery model of the cloud, but the fact that you focus on the process rather than systems or even applications?

Skilton: The fact that you are publishing this as a podcast and also there are people in this room probably doing Twitters and things, I think the cloud is already a common ground in a social sense. So, it's slow car crash, just waiting to happen. You've got to manage the situation with that. It’s already here, guys.

I'm very interested to hear from the business customers' perspective how cultural impact and change affects how that might need to accelerate into business adoption.

We're seeing two types of clouds: a social cloud, social networking, and also the business cloud, which is still forming in front of our eyes. It's less clear to know which direction that will go. The cultural and the consumer dynamics will drive that internally.

Gardner: Marcos, please tell us about your use-case and how cloud computing has been adopted at Harvard Medical School. Then, we'll also look to find out whether there was commonality there, or who was selling to whom.

Dr. Marcos Athanasoulis: Thank you. I'm delighted to be here. The business of Harvard Medical School is research, and this is true of course in big pharma and other organizations that are engaged in research. Similar to many industries, there is a culture that requires that for IT to be successful, it has to be meeting the needs of the users.

We have a particularly interesting situation. I call Harvard Medical School the land of a thousand CIOs, because, in essence, we cannot mandate that anyone use central IT services, cloud services, or other things. So that sets a higher standard for us, because people have to want to use it. It has to be cost-effective and it has to meet their business, research objectives.

We set out about five years ago to start thinking about how to provide infrastructure. Over time, we've evolved into creating a cloud that's a private cloud at the medical school.

User participation

erhaps we'll touch on a little later some of the unique characteristics of biomedical research that have some particular constraints on the public cloud. But, we've been able to put in place a cloud that, number one, has user participation. This means that the faculty have and the researchers have skin in the game.

They can use the resources that are made available and subsidized by the school, but if they need additional resources, additional computing power, they're able to buy it. They actually purchase nodes that go into the cloud and they own those nodes, but when those notes are idle, other people's work can run on it. So they buy into the cloud.

These folks are not very trusting of central IT organizations. Many of them want to do their own thing. In order to get them to be convinced that they ought to participate, we told them, "You buy equipment and, if it doesn't work out for you, you can take that equipment and put it under the bench in your lab and set it up how you want." That made them more comfortable. But, not a single time has anyone ever actually come back and said they were going to take back the equipment.

In essence, it's building the trust of the researchers or the business clients, if you're in more of a business environment, getting them engaged in their requirements, and making sure it will meet their needs.

Of course, the real value of the cloud for us is handling the burstiness of research. Various organizations have different levels of "burstiness," meaning sometimes a project might suddenly need thousands of hours of CPU time. It might need additional bursts of storage and things like that. So, you need to have a cloud that can adapt to those needs.

This actually worked out well for us. It was cost effective, we got to utilize a whole range of services within the cloud, and that allowed us to move forward.

Gardner: Was there a common-ground effect, where you provided a certain services, saw adoption patterns, and responded to that? Did you see a dance between the consumers and the providers in cloud that may have been different than previous modes of IT?

Athanasoulis: Dance is a great way of describing it, because you take the first step with your partners, the ones who are early adopters and want to try it out, and then they talk to their colleagues and say, "This actually worked out well for us. It was cost-effective, we got to utilize a whole range of services within the cloud, and that allowed us to move forward."

Skilton: It's interesting about the dance, but I think one of the things I am seeing is an incremental revelation, or do you have to have a critical mass? I'm assuming you must have had some kind of critical number of people to cost-justify the boot of the cloud. In the ideal world, the one to many or just starting off with one or two people and growing incrementally, financially that's not usually possible. How did you get around that?

Athanasoulis: We really started out by saying to the senior business leaders within the school -- the deans and the others -- "To keep Harvard Medical School as the number-one preeminent medical school in the country, we're going to have to invest a little money, because these folks out there are not just going to adopt this, if they can't see that there is already some utility to it."

So we started out with a relatively small cloud initially. Once people saw the value, they began to adopt it more, and it's really starting to have a snowball effect, where we are growing by orders of magnitude.

Gardner: Henry?

Peyret: In the bio business, before the cloud was formed, there was grid. Do you think that was key to bring some credibility to your approach, for some researchers and for some business users?

Personal relationship

Athanasoulis: Absolutely. Personal relationship is a part of what it's about. We had to make sure that we weren't seen as just a black box that they had absolutely no control over. That was step number one.

Then we also had to make sure that it was very much of an iterative process. We would start with one folk's needs and then realize there were certain other needs.

Of course, within the biomedical sphere, as I alluded to earlier, there are some unique things. There are certain types of data, protected health information, that you simply have to make sure is protected.

There are things like the Health Insurance Portability and Accountability Act (HIPAA) that requires that health data is protected in certain ways. A lot of extra concerns come into play within the biomedical area.

Gardner: Hearing this sounds as if that iterative approach, the dance effect, is a strong selling point in taking cloud into an organization that's been used to two- to three-year year upgrade cycles, six- to 12-month cycles for the processing of requirements, development, test, deploy, re-requirements, and so forth. Perhaps, cloud allows for agile development and Scrum benefits but for the rest of us?.

It's a subtle difference, but it's one that is fundamentally changing the way you would offer an incrementalized service as opposed to more of a clunky, project-based, traditional waterfall approach.

This is true not only in the cloud, but it's true across the whole information technology industry. People are moving from the giant project, two- to three-year implementation cycles to, "Let's take a chunk, see how it works, and then iterate and moderate along the way."

Gardner: Mark Skilton?

Skilton: One of the things we're also seeing is how it affects traditional application development life cycles. What's illustrated here is this need to move to more continuous-release or continuous-improvement type of life cycle. This is a transformation for IT, which may be typically more project-cycle based. It's a subtle difference, but it's one that is fundamentally changing the way you would offer an incrementalized service as opposed to more of a clunky, project-based, traditional waterfall approach.

Gardner: Pam Isom, wouldn't that be appealing to both the IT side of the house as well as the business? Is this that common ground we were looking for, that the iterative constant, more streamlined, but persistent approach is better than the fits and starts, for both sides?

Isom: I would think so, based on the experiences that I have had, I would say yes to that.

Gardner: It probably also allows us to bring in more metrics to measure the benefits. We have, of course, heard of soft, qualitative metrics like agility, but if we have this constant, iterative, step-by-step, crawl-walk-run, we might be able to apply metrics to each of those steps, rather than try to come up with a return on investment for a $40 million project.

Henry, do you have any thoughts about whether the metrics or measurement of success in a cloud-iterative approach will be of more use than some of the past approaches?

Key agility concept

Peyret: I am fundamentally against the fact that agility is a soft metric. I published in 2007 the key agility concept that we should use now. It's something that is quantitative, not qualitative. Believe me, we can define now what agility means at the business and the IT level, and then the cloud and additional technologies, including joint development. But, that's not the same part of agility that I am talking about, which can help to provide some agility as a business.

Even IBM endorsed that one or two years ago for demonstrating SOA and that sort of thing. They collected more than 300 key agility indicators for 22 or 27 types of industries. So, that's interesting.

Just to come back to your point, yes, there are some new metrics, and there would be more and more metrics about that. We talked a lot about the aspect of cost and that sort of thing. There is a big shift after Copenhagen. Most of the enterprises now are endorsing the three bottom line approach. They are reporting not only on the finance aspect, but also on risks. If banks had done that before, we would not be in the subprime problem.

And, the third one, which is about sustainable business. Because of sustainable business requirements, we will measure additional metrics, and the cloud should share additional metrics as well. The more we are involved with some cloud systems in your information systems, the more they should share what type of pollution they are providing and what type of consumption they are doing to include that into the three bottom-line metrics that your CEO would require from you.

Gardner: Let's see how this works in practice. Marcos, did you feel that, on the IT side, you had an easier time validating your efforts, demonstrating the value through some of the cloud activities, as compared to earlier modes of delivery?

Come on and try it out. If it doesn’t work for you, so be it, but you also have demonstrated successes that people can point to.

Athanasoulis: Absolutely. It's always easier to show someone something that's already working and say, "Do you want to hop onto this bus" than to say, "We're going to build this great new giant infrastructure, and just trust us, it's going to work great. So, hop on board now, before anyone has even seen it or tried it out." It's having the ability to let people walk before they run. Come on and try it out. If it doesn’t work for you, so be it, but you also have demonstrated successes that people can point to.

Gardner: I imagine this has to be a two-way street. Where is the point in the middle, between the discussion of value on the business side and the IT side, is that something that the CIO does or the architect? Where did you see, in terms of the politics or the organization? Where was that discussion translated?

Athanasoulis: It's complicated, because the discussion happens everywhere, from in the cafeteria, to meetings with faculty, and in one-on-one communications. Obviously, the CIO is instrumental.

The CIO at Harvard Medical School, John Halamka, had the vision to start this. It started with his initial vision and going to bat to move from everyone from doing their own thing and setting up their own infrastructure, to creating a cloud that will actually work for people.

He had the foresight to say, "Let's try this out." He went to his leadership, the dean and others and said, "Yes, we're taking a chance. We're going to spend some money. We're not going to spend a huge amount of money until we prove the model, but we're going to have to put some money in and see how this works." It was a very interesting communication game.

Gardner: Henry, where does the enterprise architect fit into this dance of value between consumption and provider?

Business service catalog

Peyret: The EA should participate to establish and negotiate what I call the business service catalog, something that will be an extension of the ITIL service catalog, which is very IT-based and IT-defined.

Something that is missing currently within ITIL V3 is how to deal with the business to define the service and define also the contract in terms of cost and of service level agreement (SLA). But, it's not only the SLA. It's broader than that. That's something that's missing at the moment. Most of the EAs are not participating in that.

I have built a sort of maturity model, and I discovered that the EA to deliver a project on time, which is the sort of next point for the EA, should work on the definition of business service catalog.

That's what I wanted to ask to Marcos. Is that something that you're dealing with today, trying, at least at the beginning, to define the service at a business level?

Athanasoulis: Yes. Defining the service with the users is the first clear step, and obviously getting the requirements from the users, particularly in an organization like our medical school, where they have choices and they don’t have to use the systems.

We have people who want to just come in and put in systems, buy a rack of stuff and put it under the lab bench, and then they are surprised when the power and cooling isn’t there to meet the requirement.

Various industries have a different IT maturity level. Unfortunately, Harvard Medical School actually is rather at the bottom of that from a user point of view, because most of the people are trained in life sciences and know absolutely nothing about best practices in IT.

So, we have people who write software, but have never heard of source control. And, we have people who want to just come in and put in systems, buy a rack of stuff and put it under the lab bench, and then they are surprised when the power and cooling isn’t there to meet the requirements.

So, having this balance of bringing in an IT specialist, the enterprise architect, to define the requirements in joint-step -- back to the dance with the customers -- was really what allowed us to be successful.

Gardner: While you're a unique organization, it sounds as if you might be a harbinger for the future. You are talking about a marketplace of services that you allow your users to shop from. That strikes me as something that will be a valuable tool for discerning where the traction is, both in terms of the technology capabilities, but where the human behavioral factors kick in, and even group factors and socialization.

Is that marketplace something that you think will become more the norm, and this is open to our panel? Traditionally, IT has been ... "Here are the marching orders, here are the apps, here are the methods, here is the data, here is the processes, now march." If we give people, vis-à-vis cloud approaches, more choice, wouldn’t that build trust, wouldn't that give us a chance to discern where the real interests are? Let’s hear about a marketplace approach from cloud computing, Mark.

A new question

Skilton: In a nutshell, what we are seeing with clients now is that they are over the initial infrastructure as a service (IaaS), platform as a service (PaaS), SaaS, and business process as a service-sort of conversation. They're now asking, "What cloud services do you do?"

What they mean by that is that they need to see your cloud security reference model. They need to see your cloud services model. They need to understand the type of services that you can offer into a portfolio and then the types of service catalogs that you can interact with them.

They then make a decision. Does that need to be on-premise, can it be out in the cloud, or is there something as a hybrid? They're on that page now, and there is a strategic planning process starting to evolve around that. So, yes, I'd concur that we do need to do that.

Gardner: Pam, what about a market basket of services that constitutes processes that aren’t necessarily locked into processes to begin with, but are delivered to the market to let them exercise the choice?

Isom: Based on what I've seen and experienced with customers, the catalog of services would be great. I think we need to be careful about that catalog of services, so that it doesn’t become too standardized.

We need to be careful with the catalog of services that we offer, but I definitely think that it is a new way of thinking, when it comes to the role and capacity of IT.

As I mentioned earlier today in one of my presentations, you want to be careful with that standardization, because you do want to give people some flexibility, but you need to manage that flexibility. So, you need to be careful. We need to be careful with the catalog of services that we offer, but I definitely think that it is a new way of thinking, when it comes to the role and capacity of IT.

It’s a new way of thinking, because along with that comes service management. You can't just think about offering the services. Can you really back up what you offer? So, it does introduce more thinking along those lines.

I want to go back to your question earlier about the iterative approach, and then you asked about the enterprise architect. If we tie those two together, the enterprise architect would be the one who would provide that enterprise view and make sure that anything that we do is thought out from a holistic perspective, even though we may actually start practicing on a smaller scale or for a smaller domain.

A good practice would be to involve the enterprise architect, even though we may start with a specific domain for implementing the cloud, because you've got to keep your eye on the strategic vision of the company.

Gardner: Henry, we started talking about cloud, but then we got into service catalogs. It almost sounds like the service oriented architecture (SOA) route. How do those come together in your thinking?

Peyret: The business service catalog is the next step. We have heard in enterprise architecture about business capabilities. We talked about that business capabilities to help develop business architecture.

A missing link

e have also heard SOA. There is a missing link in between -- the business service catalog. It's a way we will contractualize. I like very much the fact that you said, we are contractualizing, but with flexibility. We should manage that flexibility. We should predict what that flexibility means in terms of impact. Perhaps that service is not valuable for other parts of the company.

That's where I think that EA and the next step for EA will take place. SOA is not an end, and the next step will be the business service catalog, which we will develop to link to the business capabilities.

Gardner: Mark Skilton?

Skilton: I concur with that, and I am also detecting at this conference and some of the work we're doing in The Open Group that there are worries around the risks of achieving the catalog flexibility. I agree. You're absolutely right. The portfolio needs to be put in place, but it also needs another set of service management investment tools to control data distribution, compliance, or access and security control, and things like that.

I detect a worry about whether I can outsource that. Do I need to do something in-house? What do I need to spend money on? Because that's a block, and people need to understand that.

Gardner: Let's go to our harbinger of the future, the Harvard Medical School here in Boston. What did you do to prevent the rewards from outstripping the risk, that is to say spinning out of control?

You don't want to sell something to everyone and then find six months into it that you're way oversubscribed and everyone is bitter and unhappy, because there isn't the capability that they expected.

Athanasoulis: Again, starting small. To build on what my colleague was saying, you want to iterate and you have to have a vision of where you are going.

If you're taking a car trip and you're going to drive from here to Ohio tomorrow, we know where we're going, we have our map, we start to drive, but we might along the way find, that the highway is clogged with traffic. So, we're going to go around over here, or we are going to take a detour.

Perhaps, somewhere along the way you say, "You know what, now that we have been learning more, Ohio isn't really where we wanted to go. We actually want to keep on going. We're heading right out to Colorado, wherever it may be." But, you have to have a vision of where you are going.

Then, to keep things from spinning out of control along the way, it's really important to know the potential factors that might lead to things starting to fall apart or fray at the edges. How do you monitor that you have the right capacity in place? You don't want to sell something to everyone and then find six months into it that you're way oversubscribed and everyone is bitter and unhappy, because there isn't the capability that they expected.

You have to also make sure to check in with folks along the way a lot. Part of my MO of dealing with a wide set of customers is constant contact with them. I'm always checking in because, as IT leaders, we know that you don't usually hear when things are going well. You usually only hear when things are going poorly. And, even then, you don't always hear when things are going poorly. You have to make sure to get that feedback, because people will just drop off and go find some other way to get done what they need to get done.

Gardner: To continue with our dance metaphor, you don't just drop them off at the dance. You have to stay with them.

Athanasoulis: That's right.

Gardner: Let's look a little bit at the public and private divide issue. We have heard public cloud, private cloud. What do you use, and do you make a distinction around public and private cloud?

Now a marketplace

Athanasoulis: I think it makes clear sense. To some degree, as IT leaders, we all know that there is now a marketplace. The public cloud is available to folks. People can get on Amazon EC2. They can get on to these various clouds and they can start to use them. That forces us to have compelling cloud offerings that are more cost effective than what they can go get out in the public sector.

For us, when you set aside the issues of protected health information and HIPAA and other things like that, there’s plenty of research and business processes that don’t have those security concerns. We view the public cloud as an extension of the private cloud to the degree that there is consistency of virtual machine definitions and to the degree that we can make a node on the public cloud look exactly like a node on the private cloud and make the same databases available there.

If someone has the money, they want the capabilities, say 10,000 processor hours or 100,000 processor hours, whatever it might be, between now and this deadline three weeks from now, and they are willing to spend the money, wouldn’t it be great if transparent to them, they just spend up to $100,000, $200,000, whatever their budget is, and let this stuff go from our private cloud out to the public cloud. What a great solution that would be for folks.

Gardner: Mark Skilton, is it the role of the enterprise architect to be the arbiter of public and private? It sounds like in Marcos’s case there is a bit of self-selection and being driven by the users. I think that’s a bit unique to that type of organization. Isn’t there going to be a traffic cop of some sort to then allow for these services to be used, but with the acceptable level of risk, and so doesn’t the role of IT shift from providing IT to brokering IT services?

Skilton: It’s a funny dimension I have come across, where you have the purchasing or the procurement department having procurements and license strategies and license agreements that could be within a particular business or across a number of businesses, and it could be related to a country or a company or a collection of companies or countries.

It’s not the role of the EA to make the choice. That’s the role of IT, responsible to the CIO.

It was an interesting point Marcos made earlier about needing not only a vision, but articulating the vision as a roadmap. What I think you're inferring is almost like a technology and purchasing roadmap.

I often ask how often an enterprise architect bothers to find out what’s in the data center, when they go ahead and do development? There's probably a new style of communication, that maybe not the enterprise architect, but the architecture department, the AMO or the PMO, start to put out a service briefing about what they can do.

Just a very quick story. In Australia, a couple of years ago, I was over in BHP Billiton, a major, massive mining operation. I always remember the CTO there looking me in the eye and saying, "Do we need requirements from users, because all I have to do is put out a catalog and make them buy off that?" He was being candid with the whole process. Perhaps we are not there yet, but instead of this mentality of design to order, we need to move more to assemble to order, or made to stock.

Peyret: Can I answer your first question? I would be provocative about that. For me, it’s not the role of the EA to make the choice. That’s the role of IT, responsible to the CIO, to say yes or no, I would like to deliver that service internally or not internally, that’s part of my service delivery. If you want to be seen as a service delivery within your company, you should act as a business person saying, "Yes, I want to keep that service internally or I want that service to be delivered externally."

Final decision

Yes, the EA can help. Yes, the EA can participate through the gateway that I talked about previously. Yes, the EA can be instrumental to know if it makes sense to have that service at that point and that sort of thing. But, the final decision is not in the EA space.

Gardner: Okay. Coming back full circle to our goal here of uncovering ways to better take, sell, or bring cloud computing to the business side of the house. ... We have talked about that role of broker that Marcos and Mark discussed a bit: procurement, contracts, agreements. These are terms that the business side understands, more so than enterprise service bus (ESB), Agile, and Scrum. Is there a commonality there, where IT becomes something as a business function that the business leaders, those with the purse strings, can better understand?

Isom: Just from my experiences and customer interactions, the IT department should be more focused now on providing information technology as a service. It’s not just a cloud figure of speech. They are truly looking at providing their capabilities as a service and looking at it from an end-to-end perspective.

That includes that service catalog and includes some of the things you were talking about, how to make it easier for consumers to actually consume the services, and also making sure that the services that they do provide will perform, knowing that the business consumers will go somewhere else if we don't. The services are just that available now. You really have to think about that. That shouldn’t be the driving force for us, providing IT as a service, but it should be a consideration.

The IT department should be more focused now on providing information technology as a service. It’s not just a cloud figure of speech.

Gardner: Let’s do a quick series of recommendations from each of our panelists. We'll start with you, Henry. One major recommendation you would make to the IT organization and the enterprise architects about convincing the others in the organization that cloud is a good thing.

Peyret: That’s not exactly the question I wanted to answer, but let me rephrase a little bit in my mind.

Gardner: Give it your best shot.

Peyret: What I wanted to recommend is that you should evangelize your IT person to act as an IT service. What does that mean? That means that you should recommend to them to contractualize their service, to express and establish, through the business service catalog, including some pricing aspects. Within the enterprise, where you have some funding and no problem about funding, you should contractualize. That’s absolutely key to make the adoption of cloud, any type of cloud, easier. That would be more or less transparent.

Gardner: Pam, I am going to rephrase the question. What are some recommendations you can make that both the IT and the business side of the house could agree on, when it comes to either cloud or the effects the cloud provokes in the organization?

Risk mitigation

Isom: I was having a conversation with someone earlier and we were talking about the fact that cloud can be a risk mitigator, and we're going to have some follow on conversation about that. If I think about how cloud can be a mitigator of some risk, I'll just name some of the risk that we discussed. We talked about how we can help mitigate the risk of losses in product, sales and services, because capabilities are now made faster. There is also that infrastructure to try things out. If you don’t like it, try something else, but that infrastructure is more readily adaptable with cloud.

Also, there's the fact that there is the mitigation of the proliferation of licenses and excess inventory that you have with respect to products, software, and things like that. We can help mitigate that with the cloud, with the pooling of licensing and things like that, so you can reach cloud from that respect.

Our discussion was around how to see cloud as a risk mitigator. I won't go into them all, but those are two examples.

Gardner: Great. Mark, same question.

Skilton: There is one lesson for the business side and one lesson for IT. From the business side, I would recommend to go out and look at best practices. Go and look at examples of where SaaS is already being used.

The number of case studies are growing by the month. So, for businesses, go out and learn about what's out there, because it is real. It’s not a cloud.

It constantly amazes me how many blue-chip Fortune 500 companies are already doing this.

From an IT point of view, as we have heard from Marcos, go and learn. Try it, pilot it in your organization. I'll go further and say, practice what you preach. Test it out on one of your own business processes.

From my own experience in my own company, we do use what we preach in the cloud. That way, you learn what it means internally to yourself to transform, and you can take that learning and build on it. You can't get it in a book. You can’t just read it. You have to do it. Those are the two key things.

Gardner: Last words, you Marcos.

Athanasoulis: I will think of four words that begin with P to describe where I would emphasize. One, pilot, as we have already been saying. Two, participation. You have to get buy-in and participation across the entire group. Three, obviously produce results. If you don’t produce results, then it’s not going anywhere. And then, promotion. At the end of the day, you also have to be out there promoting this service, being an advocate and an evangelist for it, and then, once the snowball gets going, there is no stopping it.

Gardner: Well, very good. We've been discussing the practical implications of cloud computing models, of moving beyond the hype and into business paybacks from cloud adoption.

This sponsored podcast discussion is coming to you from The Open Group Conference in Boston. We're here the week of July 19, 2010.

I'd like to thank our panelists: Pam Isom, Senior Certified, Executive IT Architect at IBM; Mark Skilton, Global Director of Applications Outsourcing for Capgemini; Dr. Marcos Athanasoulis, Director of Research Information Technology for the Harvard Medical School, and Henry Peyret, Principal Analyst, Forrester Research.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions. You've been listening to a sponsored BriefingsDirect podcast. Thanks for joining, and come back next time.

Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Sponsor: The Open Group.

Transcript of a sponsored podcast discussion from The Open Group's Boston Cloud Practitioners Conference on gaining business paybacks from cloud computing. Copyright Interarbor Solutions, LLC, 2005-2010. All rights reserved.

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Thursday, July 29, 2010

FACE Initiative Takes Aim at Improved Interoperability and Standards Among Future Military Avionics Platforms

Transcript of a sponsored podcast discussion on the US military's work with The Open Group to develop a computing environment that will smooth cost and schedule issues for new systems.

Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Sponsor: The Open Group.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you're listening to BriefingsDirect. Today, we present a sponsored podcast discussion, coming to you from The Open Group Conference last week in Boston.

We've assembled a panel to explore a new military aircraft systems interoperability consortium and effort, the Future Airborne Capability Environment (FACE), which aims to promote and better support interoperability and standardization among future military avionics platforms across several branches of the U.S. Armed Forces.

We will define FACE, how it came about, and examine the consortium's basic goals under the tutelage of The Open Group.

Here to help better understand the promise and potential for FACE to improve costs, spur upgrades, flexibility, and accelerate the components' development agility is our panel. We are here with David Lounsbury, Vice President for Collaboration Services at The Open Group. Welcome.

David Lounsbury: Hi, Dana. How are you?

Gardner: I'm great. We're also here with Mike Williamson, Deputy Program Manager for Mission Systems with the Navy's Air Combat Electronics Program Office. Welcome to the show.

Mike Williamson: Dana, thanks, it’s good to be here.

Gardner: Mike, tell us a little bit about what FACE is, and the history that led up to it?

Williamson: Sometimes it’s easier to describe a program by saying what it’s not. FACE is not a program. FACE is not a computer. FACE is not a software package. FACE is an environment, and it’s specifically set up as an environment. It was an idea that came about to try to reduce costs, improve interoperability across naval aircraft, and to get capabilities out to the fleet faster and quicker, as best we can.

FACE started out as a Navy program. As we started looking around to see what other services were doing, we found that the Army and the Air Force were also doing similar things and trying to go down that same path.

The Army had a program called Integrated Data Modem (IDM). The Air Force was doing a program called Universal Network Interface (UNI). We got together with them and are now teaming up to put this consortium together and go forward to define standards for what FACE will be.

Gardner: In general terms, what are the problems that we need to solve here?

Cost and schedule

Williamson: The primary problems are cost and schedule. The costs of getting systems to the fleet today are going up. Primarily, it's driven by testing and by the fact that the systems that we have on aircraft today are not open.

As for schedule, it takes a minimum of two years, once a new capability is defined, to get it fielded on our aircraft today. We need to reduce that timeline.

Gardner: For the benefit of our listeners, we're talking about the avionic systems. Can you tell us a little bit more about the actual systems and some of the capabilities that we're addressing with this program?

Williamson: We're really addressing all of the capabilities and all of the systems onboard the aircraft. In the past, we identified a requirement and usually developed a system to meet that requirement.

What we are trying to do with FACE now is to develop a computer environment that’s on the aircraft already. As we define new capabilities and new things that we want to put out into the fleet, we can host software in the computer environment that’s already there, rather than building a brand new box, software, or program for every single capability that we put out there.

Gardner: Dave, I think The Open Group has seen this issue before, right?

Lounsbury: Yeah. It’s very interesting. We've got a number of activities that are on this government-industry boundary, where some of the lessons that industry learned about how open standards can bring agility and help control your cost can benefit military systems like this.

I want to pick up on a thread that you mentioned about schedule, because there’s two sides to that coin. The testing and deployment schedule is a real issue for agility for our forces. The one thing we know is that threats change all of the time, and we need the ability to field new capabilities quickly, both as the mission changes and also as the technology evolves.

We really need that modularity within the necessary structures of testing for things that are going to be used, and be able to get those new capabilities in the cycle quickly and get them out to the war fighters.

Gardner: So how did The Open Group become involved, and what do you expect to be doing vis-à-vis the FACE effort?

Similar areas

Lounsbury: The Open Group has a couple of areas similar to this. We've got our Real-time and Embedded Systems Forum for some of the fundamental standards.

We've been running a consortium called DirectNet, which is very similar to FACE in the sense that it is principally focused on a defense need, but in the context of open systems. Through connections developed there, Mike found us and we talked about what we can do to organize.

Typically, what The Open Group does is provide a structure. Members come in, they bring their business expertise, their subject matter expertise, and operate. What we provide is the framework, where we can have an open consortium that has a balance of interest between the suppliers of components, all government agency programs doing procurement, and the integrators who put it all together. We've got the proven process at The Open Group to make sure that we have that openness that's important for protecting all of the parties.

Gardner: Mike, tell me about milestones and timelines? How far into this effort are we, and what might the fruits of this labor be over time?

Williamson: This idea really started about a year ago in the Navy, within PMA-209, the program office that I represent here, the Combat Electronics Program Office, at the Naval Air Systems Command. We started looking at what we could do and what we needed to do.

What we're going to be doing principally is marshaling, as always, the expertise of the members to address various parts of the problem.

The timeline is very, very tight. We're looking at having some kind of standards defined by first quarter of calendar year 2011 -- next year. By the end of March, we're looking to have defined a set of standards on what the FACE environment will look like, because we have procurements coming out at that time that we intend to have FACE be part of those requests for proposals (RFPs) that are going to be coming out.

Gardner: And for you, Dave, at The Open Group, what do you see as some of the existing efforts that have taken place that you could look to for some guidance? Are there processes, standards, or technologies that will already be available for FACE?

Lounsbury: It's very early, and we're just starting to learn the technical requirements. There are a few that we know that we are going to need. We've talked about the need for operating system kernels that keep the various levels of information to various levels of sensitivity separate. And, there's an active program in our Real-time and Embedded Systems Forum called MILS that's addressing that. I think there will be many that we will discover going forward.

There is also a good background. The Open Group has worked with some other government activities -- the Modular Open Systems Architecture folk. We've got quite a reservoir of expertise there. What we're going to be doing principally is marshaling, as always, the expertise of the members to address various parts of the problem.

Gardner: Let's look to some commonality, Mike, between the commercial world and the efforts for your avionics platforms, this notion of modular and the right balance between components, silos, and an overarching system. Tell us where you expect this to go, not only in terms of your agility, but into better architecture.

Getting beyond

Williamson: One of the things that we have looked at is the fact that commercial industry is doing this. Commercial aviation is already doing a lot of this. We've not been able to do that within naval aviation to date, and primarily that's been driven by safety-of-flight issues, issues within our operability, and issues with how we contract for things. We need to get beyond that.

We're actually using the model of what commercial aviation has done, with open systems, open source software, licensed software, and those kinds of things, to ask how we can bring that into our platforms. We need to have an environment that we can have a library of software applications that can be used across multiple platforms in the same environment.

That solves two problems for us. One, it gets capabilities to the fleet cheaper and faster. And two, it solves the interoperability issues that we have today, where even sometimes when we have the same standards, two different platforms implement the same standards in two different ways and they can't talk to each other. They are not interoperable. Those are the things that we are trying to solve with this.

Lounsbury: I want to pick up on something you mentioned there about following the commercial world, and you articulated a few business drivers in there, like cost, time to market, and things like that. One of the explicit goals of FACE, and we performed a business work group to address these, is to talk about the business-model issues. What does open licensing mean in a government context? What would be appropriate ways of sharing intellectual property rights (IPR) in the run up to this?

These are all things that commercial people are familiar with through years of standards activity, but it's kind of new to some of the players in the government space. So, we're going to make sure that those things are explicitly addressed. It’s not just the technological solution, though that’s the critical part, but the fact that people can actually buy -- and that we will have a marketplace of -- components that can be licensed and reused.

The government is a complex place, and there are lot of programs, so principal growth will be different programs inside the government. But, we do envision that some of the things that will be developed here may be applicable to other systems.

It's early on how we are going to do that, but it’s a very active topic inside the consortium.

Gardner: Do you see an extensibility that this effort with FACE might have some bearing on where you could go in other areas of either the military or government?

Lounsbury: Certainly. Obviously, we started FACE. The Navy came to The Open Group, but once the word got out, the Army and Air Force are on board. So, we've started to branch out into agencies.

The government is a complex place, and there are lot of programs, so principal growth will be different programs inside the government. But, we do envision that some of the things that will be developed here may be applicable to other systems. Part of the vision is, in fact, how does this start to overlap with the commercial avionics practice that Mike mentioned earlier.

Gardner: And, we've got our timeline. We understand that there are going to be some improvements pretty rapidly. Is there anything about the standardization process, Mike, that is perhaps different than you expected? Is there any learning process so far?

Williamson: There have been a lot of things that I've learned, having The Open Group come along and take a lead on all of this and developing the standards. The Navy and the Department of Defense (DoD) aren't real good at developing standards ourselves. We've tried to do it in the past and we've failed miserably with some of the attempts that we have had. Having The Open Group come and join us, and then bringing industry in, was the right thing to do.

Having this consortium with industry, Navy, Army, and Air Force acquisition teams, and fleet participation, has been the right way to go. It’s the only way we can really define the standards and get in place the standards that we really need to get at, with all those inputs coming together.

Gardner: We've been discussing a new military aircraft systems interoperability effort and consortium, the Future Airborne Capability Environment or FACE effort, and how it promises to improve costs, spur upgrades, flexibility, and accelerate avionics components' development agility.

I'd like to thank our guests. We've been joined by David Lounsbury, Vice President of Collaboration Services at The Open Group. Thanks, Dave.

Lounsbury: Thank you, Dana.

Gardner: And, we've been joined by Mike Williamson, Deputy Program Manager for Mission Systems, with the Navy’s Air Combat Electronics Program Office. Thank you.

Williamson: Thank you, Dana.

Gardner: This sponsored podcast discussion is coming to you from The Open Group Conference in Boston the week of July 19, 2010.

This is Dana Gardner, Principal Analyst at Interarbor Solutions. You've been listening to a sponsored BriefingsDirect podcast. Thanks for joining, and come back next time.

Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Sponsor: The Open Group.

Transcript of a sponsored podcast discussion on the US military's work with The Open Group to develop a computing environment that will smooth cost and schedule issues for new systems. Copyright Interarbor Solutions, LLC, 2005-2010. All rights reserved.

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Tuesday, July 27, 2010

Analysts Define Business Value and Imperatives for Cloud-Based B2B Ecommerce

Transcript of a BriefingsDirect podcast on the value of building and exploiting cloud-based communities for advanced ecommerce business processes.

Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Sponsor: Ariba.

Dana Gardner: Hello, and welcome to a special sponsored BriefingsDirect podcast, coming to you on location from the Ariba LIVE 2010 conference in Orlando, Fla. I’m Dana Gardner, Principal Analyst at Interarbor Solutions. We’re here with a group of IT industry analysts and Ariba executives to explore the business implications for ecommerce in the cloud-computing era.

As more services, applications, and data are developed for, and delivered via, cloud models, how do business to business (B2B) commerce and procurement adapt? Or, perhaps we have the cart in front of the horse. Are the new requirements and expectations of modern, global business processes, in fact, driving the demand for IT solutions that can be best delivered via cloud models?

Either way, the promise of cloud aligns very well with the sophistication of modern B2B ecommerce and the pressing need for speed, agility, discovery, efficiency, and adaptability. Ecosystems of services are swiftly organizing around cloud models. How should businesses best respond?

Please join me in welcoming our distinguished panel to help answer these and other top ecommerce and cloud questions. We’re here with Robert Mahowald, Research Vice President at IDC. Welcome to the show.

Robert Mahowald: Thanks very much, Dana.

Gardner: We’re also here with Mickey North Rizza, Research Director at AMR Research, a Gartner company.

Mickey North Rizza: Hi, Dana.

Gardner: Tim Minahan, Chief Marketing Officer at Ariba.

Tim Minahan: Hey, Dana.

Gardner: Also, Chris Sawchuk, Managing Director at The Hackett Group.

Chris Sawchuk: Hi, Dana.

Gardner: Let me go to you first if you wouldn’t mind, Robert. I posed the question as to whether it is the technology that has made cloud computing possible, and now businesses are adapting to that. Or, is it the other way around? Are the business demands, in fact, making cloud computing more attractive? And why?

Mahowald: It’s a little bit of both. Actually, there is a lot more possibility now for collaborative commerce, when business applications have built a scenario where a lot of our data and application functionality exists outside of your organization. In that situation, it becomes far easier to source new partners and customers, leverage and trust data that lives in the cloud, and invite authenticated partners to enter into that kind of exchange.

So, it’s a little bit of both. It’s easy to see the way that the cloud has grown up and become more capable to support some of the business requirements that we have. At the same time, many of our business requirements are changing to adapt to a growing wealth of solutions in the cloud.

Gardner: Okay, Mickey, from your perspective, what’s going on with the IT enablement versus the needs and requirements in the field? As we’ve heard at this conference, wouldn't the notion of boundarylessness, the cross-organizational commerce, perhaps be better adapted to a cloud model?

Looking at the cloud

North Rizza: We’re actually finding companies are spending more time looking at the cloud. What happens is that you have your trading partners specifically around the sale side and the supply side of the organization. If you start looking just across your own businesses and internal stakeholders, you realize they can actually work together, get the information they need, and spend a lot of time on their business process, using just basic technology and automation components.

But, when they start looking at that extended network, into their trading partners, they realize we’re not getting everything we need. We need to pull everything together and we need to do it more quickly than what we’re doing. We can’t wait for on-premise, behind-the-firewall type applications. We need something that’s going to give us both the service and the technology and allow us to work in that trading-partner community in a collaborative environment.

In a recent study we just did, we found that 96 percent of the companies in that study are, or will be, using cloud applications. Within that, we see 46 percent are using hybrid cloud solution. That solution is really around the cloud technology, optimizing across their IT investment and on-premise, typically around enterprise resource planning (ERP), but there are many other instances as well. And then, they're tying that back in to the cloud services, where it’s actually extending the capabilities from their IT standpoint. And, that’s 46 percent out of the 96 percent within that.

The next bucket is 41 percent around the private cloud. That’s really around the aspect of just optimizing across IT with technology only from the cloud application standpoint, not putting those services in. The reality is that we’re actually missing the standpoint that could take it to the next step. We think there are some great opportunities here for companies to move forward.

Gardner: Tim Minahan, you've announced at Ariba LIVE the Ariba Commerce Cloud. Clearly, the technology is allowing new and different things, but I suspect there are some significant business drivers. What do you see as the business drivers enabling these cloud models for not just the IT people, but also the business side of the house?

Minahan: What we're seeing now is that we’ve really entered the state of new normal. We’ve just gone through a major recession. Companies have taken a lot of cost out of their operations. It's cost reduction in the form of laying off employees, and reducing infrastructure cost, including IT cost.

If you look at most of the studies out there, the CEOs, CFOs, and COs, are saying, "We're not hiring that back. We are looking for a new level of productivity, and more agility. To do so we're going to rely much more on external trading partners, which means we're going to need to collaborate with them much more.

"We're also going to look at alternative IT models to help support that collaboration outside of our enterprise, because our ERP investments do very well at automating information and process within the four walls. It stops at the edge of the enterprise and, at the end of the day, we do business. We buy, sell, and manage cash with our external trading partners and we need to automate and streamline those processes as well."

Gardner: Chris Sawchuk, some of your research has pointed up the need for doing things differently. Do you see these cloud models as repaving the cow paths, or are we entering into something that's a bit more transformative in terms of both how IT responds to business and also how business conducts itself?

Sawchuk: There are a couple of things. You said something about the repaving of cow paths. I think we are moving into an era where processes are becoming more and more commoditized. If you look at what's happening with process redesign, we're not where we need to be yet. But, if you look at the needs of where we're going, what the cloud does is provide an environment for more collaboration and more visibility.

Gardner: Let's look at this now from the perspective of how business applications are adapting. We're very much aware the business process has become an emphasis, but how does that change the notion of installing a business application versus subscribing to a service? What is different now between a business application and the business process, and aren't the business processes the more important of the two?

Different services

Mahowald: We're seeing a couple of different kinds of services develop around SaaS services. We're seeing tactical services that enable the application service to be delivered, and then domain services that actually consume the services and bring it to buying companies.

You might think of an accounting service that provides human capital skills on top of the software-as-a-service (SaaS) service. We call that software within a service, and it provides expertise that doesn't exist in the application. It helps some user companies actually offload and outsource that capability. It's a big dynamic and we see the combination of those people skills and the SaaS service coming together in a way that's very impactful for business.

Gardner: Mickey?

North Rizza: Let me just add something else. If you look back at the way business typically has been done, it's been across functions. You see functional areas coming together across an enterprise, and that's typically where the business processes have stopped.

You've also seen the applications come out even from the ERP standpoint in the different pieces that come together to marry that entire ERP system. What you see happen is that every function has a piece of that. You see the various markets that have developed supplier relationship management (SRM), customer relationship management (CRM), and what not, out there in the marketplace.

What's now evolved is that those business processes really go end to end into that trading partner network. What you are finding is that you can use those applications, but you don't necessarily have to use those applications. You can use the services that go with it.

What you're doing is driving value. At the end of the day, all you want to do is deliver a value, and that's what's happening.

The point is that you're actually making some cost-value trade-offs, lowering your overall cost and extending some of this into your partnerships and your trading partner community. What you're doing is driving value. At the end of the day, all you want to do is deliver a value, and that's what's happening.

Gardner: When we saw SaaS becoming popular, it was really taking a business application and putting it up on the Web. But now with cloud, we're thinking about ecosystems, multiple partners, looking at supply chains. So it seems to me, Tim, that the business process ecosystem is perhaps the killer application, if you will, of cloud computing. Why does that fit so well into the procurement function?

Minahan: That's absolutely right, Dana. Robert and Mickey hit on it as well. SaaS was all about a new delivery model for an existing business process. When you move into cloud, when you move into some of these collaborative processes around supply chain, and procurement, and the financial supply chain, it really involves multiple parties. It's really about business process transformation, a business process that's shared among multiple trading partners.

To do that, it’s not just the ability for everyone to share a common technology platform upon which they can collaborate around the process, but rather everyone needs to be digitally connected in a community, so that they can add new trading partners or remove old trading partners, as their needs change.

Finally, the really interesting thing as you blur the lines between applications and community, is the ability to drive capabilities, the ability to drive the right business process. When you register and log on to Amazon to place an order, you don’t think about the buying process. The buying process is already optimized for you end-to-end, from discovery and qualification, through getting feedback from community and expert opinion to make sure you’re making the right buying decision and then being able to actually execute the transaction. That's the same dynamic that's beginning to occur in the business world, as you look about these networked or cloud-based business process models.

Gardner: Another thing we see in the market is that when the social networks gravitate to the cloud, suddenly collaboration takes on almost in accelerated pace, perhaps even a multiplier effect.

The collaboration aspect

North Rizza: What we’re finding from the AMR side of the equation is that we started looking at this from both the suppliers and the customer aspect and putting the clients where they actually sit within this collaboration aspect.

First, many of them are focused just on the transaction. They're looking at the order-to-cash cycle. They understand what the transactions are. They use their ERP system. They understand how the bills get paid.

There’s still paper process. A lot of money is sitting in there on the paper side of the equation, and they really aren’t connecting the dots. What they are recognizing, specifically over the last couple of years, is that they need to do a better job on managing order-to-cash.

They get a couple of things out of that. They actually get acceleration of working capital. They're able to work better with their trading partners and they start connecting the dots to say, "Gee, it isn’t just all about the transaction but also how we are managing that cash, the terms that we have with our particular suppliers and what that trading partner network looks like."

If they start to get that piece underway, they start looking at. "Wow. We’ve got other aspects we’re really doing business." From a sourcing aspect, we’ve got bidding events, auctions, performance, and score cards and we’re exchanging information and looking at 360-degree views.

It's all about, "This is win-win. This is how we’re going to get there. This is how we’re going to change the market."

We’re also sharing demand forecasts. We’re looking at contract manufacturers. We’re understanding the issues around them, and we become much more integrated and much more collaborative to share those pieces of information. So, we start building relationships with our trading partners.

It's not all about just collaborative practices, as we call it, in a transactional value, and "do as I say, not as I do." It's all about, "This is win-win. This is how we’re going to get there. This is how we’re going to change the market. And, this is what we need you to do as part of our extended enterprise and our trading partners to help us get to the next segment."

The reality is that the call-based applications are bringing that extended enterprise to the table, and companies are starting to rethink and refocus around those business processes.

Sawchuk: One benefit that we didn’t touch on during our discussion here is a benefit I call the democratization of collaboration. When you think about the past, it has always been the big companies who could collaborate. They had the tools, they had the investments, they had the dollars.

What you're now had seeing is an environment where anybody can participate. Small, large, etc. all become connected in this world. That just takes things to a different level than what we’ve experienced. Just economically, everyone is now connected across the board in a much more equal and level playing field.

And, there's some of the stuff that Mickey was talking about. We now have the opportunity, the focus on agility, and the focus on where we’re going. It's a much more volatile world. We’ve got to build more agility and more variabilization into our business models, not only our staffing, our people, the way we do business, and our technology tools, but also the more extended value chain. Where we draw the lines between what we do becomes much more transparent and it's easier to make those decisions than we have in the past.

Gardner: When you say democratization, do you mean we can be more inclusive? Are we talking about bringing small and medium businesses (SMBs) or maybe even smaller companies across the board? What do you mean by democratization?

Much more involvement

Sawchuk: It's much more involvement across the board, whether it's the small business, medium businesses, large enterprise, etc. We all now have the ability to collaborate in a new way. We’re moving from sort of the haves and have-nots type of world, from a technology standpoint, to a world where everyone has access. Now, we can all collaborate in this new community-type of environment.

Gardner: Robert, it seems like we’re moving from collaboration to community. How does community, perhaps with some social and discovery aspects, become transformative? This is something that's greater than the sum of the parts that we’ve had in the past?

Mahowald: It's a good point. As Mickey points out, what we really have when we have the element of community injected into commerce is that there is a tremendous amount of transparency. It means that partners know who they can work together with and optimize both sides of the equation, so that it suits the end result very, very well.

It also means that you can source new providers. You can actually change the terms of the contract and some of the ways in which you deal with certain suppliers in a way that's transparent to others, bring them in on the deal, and drive that transparency at a greater value for both organizations.

The idea of a community means that each can bring potentially the best terms, the best offer, and the best product to the table, so that at the end of the day, the buyer gets the most value. That means repeat business, and that helps everybody.

There is a massive movement afoot in the enterprise space that's beginning to blur the line between enterprise applications and the community.

Gardner: Tim Minahan, we have extended enterprise, business processes empowered by community and collaboration. Is there a name for that?

Minahan: There is a massive movement afoot in the enterprise space that's beginning to blur the line between enterprise applications and the community. As Robert and Mickey just said, what got in the way of business-to-business collaboration before was that there was no transparency. There was no efficient way to discover, qualify, and connect with your trading partners, before you could even collaborate with them.

There was a level of un-trust, a higher transaction cost that artificially inflated prices and costs that went around things. The ability to get rid of all the paper, connect digitally with everyone, and then open this up in a community environment, where you can collaborate in a host of different ways and not just around the transaction really is transformative.

As companies begin to look at particularly "extraprise" type applications, the community is going to become more and more important, whether that's the community of you and your trading partners, or a community of you and your peers, that can help you design the better process.

Gardner: Are these self-defining communities? It seems to me that we've broken down silos, and therefore have entered a more human and potentially innovative and creative way to construct relationships. Does that make sense, Chris?

Process enrichment

Sawchuk: Certainly, there's this whole collaboration that's occurring. What's interesting is that they made a comment earlier about the fact that processes become more commoditized over time, and where we really move from is this world of process enablement, which is where technology started, to a world of process enrichment.

When you think about these communities, over time, the communities themselves and the connections become more commoditized. The differentiation is that services and the intelligence is actually built within those communities themselves. The real question is how do you deal with all that, all of the various types of intelligence, because it becomes self-learning types of communities over time.

These clouds learn about the different behaviors. Look at what Google has been doing in terms of learning about the behaviors in the social media world. As you can learn more about that, you can provide that as services back to all the participants within that network.

Gardner: Perhaps the flip-side of that is also the ability to gather metadata about what's going on within the process, who the participants are, what works, and what doesn't work. There seems to be an opportunity to bring a higher level of analytics to bear on these extended processes in a cloud environment than you would be able to get in the traditional enterprise packaged-business applications approach. What do you think of that?

North Rizza: I'd agree with you. In fact, I'll tell you that there are some analysts within the Gartner community who are actually looking at pattern-based recognition strategies and helping companies understand what they're really getting using those analytical tools to understand how they then drive the right trends.

So, when you start looking at that community from a business aspect, power just keeps increasing, increasing, and increasing.

At AMR, we actually look at it from a demand-sensing, a demand shaping ability. So, what's going on? What are we sensing? Where do we need to shape it? If you look at, what you're seeing is the power of many coming together, versus single processes and single entities.

If you just think of the consumer side where you are trying to bring that in and change the way we're doing business, think of eBay. It used be that you go and sell something from your garage outside at a yard sale, or a tag sale depending on where you are.

The secondary aspect now is that I can sell it on eBay and have more individuals bidding on it. Maybe it's important to them, and I might hit those individuals with something that everybody else might have thrown out in the trash. It would only have meaning to a certain group of clientele. And, that particular clientele is going to come together in that community. Hopefully, you just raised the dollar that you're going to get from that.

So, when you start looking at that community from a business aspect, power just keeps increasing, increasing, and increasing.

Sawchuk: What's going to be key over time is think about the lives we live today and the informational overload that we have. As you can rate these communities, there is going to be all kinds of information intelligence created. How do we dissect that and make it smart, relevant, timely, and in bite-sized chunks that we can deal with?

Today, my wife uses Facebook. I don’t. I just don’t have the time. So the question is whether we're going to create all this community, all of this collaboration, all of this information in services, and then be able to dissect that and make it relevant for what we are trying to achieve. It's going to be a key differentiator.

Overload of information

We’ve always been in a time, where we try to get access to more information, more knowledge, and more intelligence. We're quickly moving into a period of time where it's going to be an overload of that kind of information.

Gardner: I suppose that’s one of the tasks of business intelligence (BI) then, to sift through all of the voluminous data and find the real gems. Back to you, Tim. How does BI, from your perspective, have a role to play in these extended commerce cloud activities?

Minahan: There are three aspects of it. If you have the community, you have the network or transactional environment where businesses are actually doing business. So, you have the transactional information in aggregate that can be a bellwether for economic indicators or even around particular commodities -- what folks are doing, whether it's a good time to buy or not a good time to buy. Or, if it is a good time to buy, if you are a seller, how aggressive should you be in that bidding? That’s the transactional information.

Then, there is the community information that you mentioned before. We've used a lot of consumer examples here today, but what makes eBay so great and make these examples earlier is the fact that I am a seller and I have no idea who that buyer is. But, I now gain a degree of confidence, thanks to the community that has rated that buyer.

I know that they pay on time and that they’ve done business with 20 other sellers on there. So, I get a degree of confidence. On top of that, it provides utility that allows me to secure a payment, even if the buyer turns out to be not so good.

The third component, which is important, and which Chris is talking about, is taking that intelligence and putting in context of the business process. The reason we have information overload today, or one of the reasons, is because of the information that’s out there. We’ve aggregated all this information. I'm doing business process over here, and, oh God, I go over there to get that information. It's the ability to aggregate information and put it right within context with other business process.

The reason we have information overload today, or one of the reasons, is because of the information that’s out there.

So, I've gone out and aggregated my spend. I know where my spend leverage is. Guess what! I now have this market intelligence on what's going on, pricing in the season that I'm supplying the market, and what other buyers are experiencing in the market.

It might not be such a good time to go out and source that, so maybe I will go my second largest category of spend and source that first. That’s the type of the analytic that you need, which is in context with the business process.

Gardner: And, that’s where we move to intelligent sourcing, rather than perhaps just accelerated sourcing?

Minahan: Yes.

Gardner: Robert, we've talked about how a vibrant, collaborative environment can be very rich and rewarding. We've talked of how BI in a sea of data can be exploited for analytic insights. And, we've talked about how extended applications as business processes could be very rich.

One of the things we haven’t talked about is how to keep a lid on this. If we have too much collaboration, too much data, too many processes, then the folks who are very comfortable in a locked-down ERP environment might have their way again.

So, how do we prevent falling back into old patterns of being a bit risk-averse, but at the same time, applying the right security, governance, and management that enterprises insist on?

Managing governance

Mahowald: It's a good question. One of the things we're going to see in the next handful of years, and we're already starting to see at the largest organizations that are using SaaS services, is essentially a czar to manage governance across multiple locations.

It's important, as we start to put more-and-more business activities into these communities -- and more-and-more of our data and transactions happen outside the organization on SaaS services -- that we understand exactly what that means for organizations, where customer data and our own data actually resides and how we can find it during an audit in a way that guarantees that we've met our business requirements.

We don’t want to restrict ourselves and say don’t participate in this community. I think it's healthy and it ultimately drives tremendous value for us. What we do want to say is that we have to apply the same kind of governance and rules that help us manage our processes that are now onsite in this new world, where we are participating in communities and SaaS services. The same thing should apply.

Gardner: Mickey, this idea of finding a balance between openness, innovation -- and on the other hand -- control and governance -- are you familiar with any examples of people who are already practicing this balance well?

North Rizza: What we’re finding, to the point that Robert just made, is that the bulk of the companies we work with are spending more time around the governance structure. But, they’re also spending more time around master data management (MDM), understanding what that really means and how those pieces come together.

What are the pieces of information you need to actually do your job, and then what does that job look like?

This comes back to the point that both Tim and Chris had made around what you need to really worry about, what does that mean to the business processes, and what’s important.

Because we’re on this information overload, you have data everywhere. What are the pieces of information you need to actually do your job, and then what does that job look like? What is the business process that you need to do within a certain parameter and timeframe that you need to get done, and where does that go? Where does it stop and start?

And then supply chain: Does it go out into the extended partner network? What do the collaboration aspects look like and what are the rules around that?

So, from the aspects of the types of the companies we’re seeing and supply chain companies we look at that are using these, anywhere from sourcing and procurement, all the way into supply chain execution, supply chain planning -- we see some even in the inventory -- they're having some issues around this. It's really about putting the focus and the emphasis on those areas and understanding what that means as my business changes.

Gardner: Tim, we have more members in the network. It seems to me that Metcalfe’s Law says the network then gets more valuable that way. Is that how you all see it?

New ways to collaborate

Minahan: Yeah. It’s absolutely true. First, going back to earlier comments, you need to connect folks. Then, you need to provide new ways for them to collaborate. In fact, in appropriate network, they will force new ways to collaborate. They’ll discover new ways to not just execute transactions with known trading partners, but discover new trading partners, and leverage the network by the community information to qualify those trading partners, so they can be more secure.

They want to collaborate on new business processes, well beyond the transaction too. Should we establish supply chain financing programs or receivables financing programs, or should we work to out-task a certain portion of the process to someone else in the value chain?

Gardner: Let’s go to the question about getting started, but without getting overloaded and overwhelmed. To you, Robert, what’s your advice to folks as to how to approach this in a manageable way?

Mahowald: If I’m an IT organization, one of the first things I want to understand is my constituency. The organization I want to serve are my internal users. I want to understand what their requirements are and how they may or may not be using staff services now to get the job done, and for what reasons.

I want to build a strategy based on the recognition that substantial number of organizations do have business units that use SaaS services, and I want to find a way to build it into my long-term IT strategy, because at the end of the day my goal was not to be a cost center at the organization. My goal is to be a service center and that’s a transformation I need to build into my business plan.

The bottom line is that if you don’t do it, there isn’t even a ton of money on the table. You’re not able to take out the cost that you want to take out.

Gardner: Mickey, closing thoughts on getting started?

North Rizza: Basically, what we see the best companies doing is that they start to understand what their overall business objectives are. Then, they peel that back and say, "What am I looking at in my different functions across the business and what does that mean, if I want to improve the process and I want to get those end results."

As they starting peeling that back, they soon discover that it’s usually around revenue cost savings. It’s also about improving the business process and reducing cycle time. When you put all those together and you look at a recent study that we just did, you recognize that there are very large gaps between those that have already deployed cloud-based technologies and solutions.

Then, you step back to those that are even considering or using them as part of their overall extended enterprise. What we’re finding is that the gap is so large and its benefits are so great that there is no reason you wouldn’t want to take all that and put it in there.

The bottom line is that if you don’t do it, there isn’t even a ton of money on the table. You’re not able to take out the cost that you want to take out. You can’t get the products in there and teach the individuals the business process and cut down your cycle time that you’re going for. And most importantly, you’re not getting your revenue. You’re leaving it on the table.

Gardner: I’m afraid we have to leave it there. Thanks for joining us for this special sponsored BriefingsDirect podcast. We’re coming to you on-location from the Ariba LIVE 2010 conference in Orlando on May 25, 2010. We’ve been discussing the business implications and multiplier effects for value in using cloud computing to conduct ecommerce.

Please join me in thanking our panel. We’ve been here by Robert Mahowald, Research Vice President at IDC. Thanks.

Mahowald: Thanks very much, Dana.

Gardner: We’ve also been joined by Mickey North Rizza, Research Director at AMR Research, a Gartner company. Thank you.

North Rizza: Thank you.

Gardner: And Tim Minahan, Chief Marketing Officer at Ariba.

Minahan: Thanks, Dana. It’s been a pleasure.

Gardner: And last, Chris Sawchuk, Managing Director at The Hackett Group. Thank you.

Sawchuk: Thanks, Dana.

Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions. Thanks for listening to this BriefingsDirect podcast, and come back next time.

Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Sponsor: Ariba.

Transcript of a BriefingsDirect podcast on the value of building and exploiting cloud-based communities for advanced ecommerce business processes. Copyright Interarbor Solutions, LLC, 2005-2010. All rights reserved.

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