Tuesday, August 30, 2011

Exploring Business-IT Alignment: A 20-Year Struggle Culminating in the Role and Impact of Business Architecture

Transcript of a BriefingsDirect podcast from The Open Group Conference on defining the role and scope of the business architect.

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 in conjunction with The Open Group Conference recently held in Austin, Texas.

We assembled a distinguished panel to delve into the role and opportunity for business architecture to examine how the definition of business architect has matured, and we'll see why it’s so important for this new role to flourish in today’s dynamic business and IT landscapes. We'll also see how certification and training are helping to shape the business architecture leaders of tomorrow. [Disclosure: The Open Group is a sponsor of Briefings Direct podcasts.]

Here to help better understand the essential impact of business architecture on business success, is Harry Hendrickx, the Chief Technology Officer, CME Industry Unit, HP Enterprise Services and a Certified Global Enterprise Architect. Welcome, Harry.

Harry Hendrickx: Thank you, Dana.

Gardner: We're also here with Dave van Gelder, Global Architect in the Financial Services Strategic Business Unit at Capgemini. Welcome, Dave.

Dave van Gelder: Thank you, Dana.

Gardner: And we're joined by Mieke Mahakena, Label Leader for Architecture in the Training Portfolio at Capgemini Academy and also a Certified Architect. Welcome, Mieke.

Mieke Mahakena: Thank you.

Gardner: Also, Peter Haviland, head of Architecture Services in the Americas for Ernst & Young, is with us. Hello, Peter.

Peter Haviland: Morning, Dana.

Gardner: And last, Kevin Daley, Chief Architect in the Technology and Innovation Group at IBM Global Business Services, is here. Hello, Kevin.

Kevin Daley: Hello, Dana.

Gardner: Let me start by addressing both Harry and Kevin. There’s been a new paper that you are working on refining the definition of business architecture, but I'm interested why this is so important now.

We see that CEOs around the world really are seeking fundamental change. They recognize that we're at an inflection point. Why is that the case? Why is the role of business architect so important now? Let’s start with Harry, please.

Business-IT alignment

Hendrickx: Thank you very much, Dana. Yes, it is a very important question, of course. Why are we putting so much effort in getting business architecture on the scene? Over the past one or two decades, business-IT alignment has been number one on the CIO agenda, and apparently the organizations have increasing difficulty getting business-IT alignment resolved.

There are quite a few people pioneering in business-IT alignment, but apparently there was no urgency yet to recognize this role more specifically.

HP, in the past two years, interviewed CIOs worldwide, and they all indicated that they face quite large and complex transformation processes. They also recognize that business-IT alignment is one of key issues. We think that the business architect really can provide some resolution to get those processes in better shape and more successful.

Gardner: Kevin, your thoughts. Why is it so important right now?

Daley: At IBM, we have a CEO study and a CIO study that come out in alternating years. One of the things that started coming out loud and clear in 2010 was that managing complexity and building operating dexterity required a better understanding across the entire company.

We've started seeing a trend to move not just from business IT alignment, but to business and IT convergence. There's an understanding more and more that information technology, and technology in general, is a core part of the business model now. There's an understanding that now we have a situation where business and IT aren’t so much aligned, because of the fact that IT is part of business.

Where we did interviews and surveys and then compiled them for thousands of CEOs, we came up with three key elements. Amongst those was managing and taking advantage of complexity while building operating dexterity. That’s the key theme.

One of the problems that we're seeing from the CEOs is having for decades separated IT as if it was its own business unit, instead of part of the true sense of the business. It's been an interpretive science. To manage that complexity they needed a means by which to start with the design of where they're going and have have a business strategy.

To manage that complexity they needed a means by which to start with the design of where they're going and have have a business strategy.



How do they take that strategy and transform it into technology and into information management? They needed an ability to have a framework in which to have that substantive discussion between the people who were responsible, such as the CIO who is responsible for technology and the operations and the COOs, who are really about the execution of the overall picture.

What we've seen from our CEOs is a need to start being more integrated. There have been market pressures that they having to respond to. The big economic downturn was a big change for everyone, and they are trying to address it.

They're looking at means that they can start integrating more globally. They can start to increase their cost variability and start becoming more agile in how they operate their business. To do that they need a means by which they can more effectively communicate.

Driving understanding

S
o far, we've been seeing that business architecture is a perfect way to start driving an understanding. It's a place where both people who are used to seeing standard business models like revenue and capability are able to associate that to the different types of architectures and designs that we see coming out of the technology group.

It's giving them a common place to meet and jointly move forward with what they're trying to do in terms of managing the complexity, so they can be more agile and dexterous.

Gardner: Dave van Gelder, it sounds as if what we're trying to do here is at a very high level in the organization. Does a business architect and architecture have to be at a high level to be successful? Where in the org chart do we typically see this role? Is it near the top? Does it matter?

van Gelder: It depends on the maturity of an organization. Within Capgemini nowadays, we talk about business technology. As Kevin said, business and technology are not separate. Technology is part of the total business.

When we started the Business Architecture Working Group in 2006, there was a lot of discussion about two words, business and architecture, and nobody knew exactly what we were talking about. Everybody had a different understanding of those words. In the last years what you have seen is that business architecture is looked at in a different way.

Currently in the Business Architecture Working Group, we see business architecture as something that brings the balance between all the other architectures in the company -- that’s IT architecture, financial architecture, money, people architecture, and a lot of other architectures.

If business architecture is bringing the balance between the different aspects of a company, then business architecture is something that should be handled in the top of the organization, because balance should be created between all the different aspects in the organization.

Gardner: Based on what Dave said it sounds, Mieke, as if we're talking about a federation of architectures. What then is the fundamental problem that the business architect needs to solve? Is this getting into the actual mechanisms or is it about organizing the people around some sort of a vision or strategy?

Mahakena: It's more like making sure that, whatever transformation you're going to implement, you align all those different aspects. As Dave told us, there are a number of aspects in an organization that might need to change, and you can have all those different architectures for those aspects. But, if every aspect goes its own way in changing, then they will never be aligned. Business architecture is meant to align all of those aspects to make sure that you have a balanced, consistent, and coherent set of operations at the end.

Gardner: It sounds as if we're in agreement that this is a high level function, but what is it that people might stumble upon, if they direct this in a wrong direction? What is business architecture not good at? Peter, what should we avoid? What's a misstep in terms of either the level in the organization or the target of the activity?

Many things at once

Haviland: Business architecture is similar to other forms of architecture, in that it tends to try to do many things all at once. The idea of enterprise alignment is definitely the right outcome, but there is enough complexity there to blow steam out of your head for many, many years to come.

Certainly in our experience in implementing these types of functions in organizations, functions that constrain scope very well, also tend to communicate very well around what their status is, what their progress is against milestones, and what outcomes they've achieved, and they tend to articulate those outcomes in terms of real business value.

What business architecture is not very good at are broad-reaching types of goals that don’t have measurable outcomes.

Gardner: So, it's not just let's have a designated business architect and a laurels-wearing individual, but move more toward something that’s very practical and that shows results. That leads to a question about how to professionalize this role.

Anyone could stand up and call themselves a business architect, but what is The Open Group, in particular, doing about actually certifying and moving towards a standardization of some sort? Does anybody have any thoughts about how to make this more rigorous?

Hendrickx: The first question we get asked is, what's the difference between a business consultant and a business architect or a business analyst and a business architect? We also have enterprise architect and technology architects. Is there a reason for being for the business architect?

This is something we did a lot of research on at HP and we delineated the role of the business architect quite clearly from the business consulting and the business analyst aspect.

The business architect's role is distinct, because he combines the organizational strategy with the operations. He identifies the implications of this strategy, as well as that of the technology for the business operations. This is opposed to the business consultant, who is more outwardly looking to the commercial aspects of the organization and what that means for the structure. The business analyst is looking more at not the structure of the operation, but at the solution level.

When we look at the enterprise architect and the solution architect, the business architect focuses more on the complete implications of the strategy and technology trends on the operations, whereas the enterprise architect is more interested in the IT and the implications for the IT strategy and how IT should be deployed. The business architect is much more focused on the complete performance of the business operations.

So, the bottom line of these delineations of the past one-and-a-half years is that there is a reason for being for a business architect. It is a distinct role and it has a real solution for a problem.

Gardner: Thank you, Harry. Anyone else with some thoughts about how to make the certification and standardization of this stick?

Defining the profession

Mahakena: What we've been doing in the Business Forum, after we decided that business architecture has its own reason for existence, we described the business architecture profession -- what's the scope and what should be the outcome of business architecture. Now, we're working on the practice of business architecture by defining a framework, looking at methods, and defining approaches you can use to do business architecture.

Parallel to that, if you know what the profession is and what the practice is, you're able to create the business architecture certification, because those things help you define the required skills and experience a business architect needs. So, we are working on that in the Business Forum.

Daley: Let's look at business architecture from the concept that has existed, combining the thoughts of what Mieke and Harry have already talked about. When we work with clients, for those of us that are in consultancies, we see that there is normally something that’s similar to business architecture, but it's either a shadow organization inside a purely business unit that isn't technology focused, or it is things like the enterprise architects who are having to learn the business concepts around business architect anecdotally, so that they can be successful in their roles.

I'd suggest that we're seeing a need to make it more refined and more explicit, so that we're able to identify the people that fit for this. They have specific things, instead of having general things that we have today. For me, the certification helps provide that certainty as a hiring manager or as somebody who is looking to staff an organization.

It provides that kind of clarity of what they should be doing, giving them specific activities, specific things they do that create value for the company. It takes out of the behind the scenes action and pull something that's critical to success into the front with people who are specifically aligned and educated to do that.

Globalization is creating more and more complexity in the business models that organizations are trying to operate within.



Gardner: Thank you, Kevin. Let's speak a little bit about why the strategic and top-level aspects of this certified individual or office is so important. It seems to me that, on one hand, we have more need for different technology competencies in an organization, but at the same time, we're starting to see consolidation, particularly at the data center level, fewer data centers, more powerful and vast data centers and consolidation across different regions.

How does globalization fit into this? Do we need to think about the fact that if we have fewer data centers but more technology requirements, doesn’t the role of somebody or some group need to come together so that there is a pan organizational or even global type of effect?

Let's start with you Peter. How does the globalization impact the importance of this role?

Haviland: Globalization is creating more and more complexity in the business models that organizations are trying to operate. Over the last couple of decades, with the science and engineering of IT, there has been enormous investment by companies to actually operate, maintain, and improve their IT in their current world.

In many cases, this IT work has outpaced the comparable business efforts inside those organizations, when they actually think about their business, their business models, and their business operating principles.

What we're actually seeing now is that the rigor, the engineering, and the effort that’s put into technical architecture and IT architecture is now being proposed on the business side, with many business management process improvement activities. These tend to be at quite a low level, however, when you compare them to business architecture initiatives at the enterprise level.

Scope and challenge

I
f those architecture initiatives are at the high levels that are needed, you start to consider the scope and challenges that come into play, when you start talking about globalization. So, with the increase in scope and the global way that people are operating across cultures, geographies, and languages, that requires this discipline, which does operate at that high level to start to organize the other areas, but perhaps at a lower level.

Gardner: Harry Hendrickx, thoughts about this issue of increased complexity and yet more consolidation in terms of where IT is housed, managed, and governed?

Hendrickx: There are two aspects that need to be paid more attention to with globalization and more complexity. First, the business architect is, or should be, equipped to look at the organization, not only within the boundaries of an organization, but also the ecosystem of organizations that will mold together and have to be connected to produce the value.

Since these are more formalized contracts or relationship with different organizations connected to each other, there is a dynamic that is hardly seen anymore, that is not transparent anymore. There clearly needs to be some more detailed insights and transparency for each organization, so that people understand what the impact of certain developments or events will be. This can't be done just by logic or just by watching carefully. This really needs some in-depth analysis for which the business architecture is built.

The second part of it is that the due to the complexity, the decision making process has become more complex and there will be more stakeholders involved in the different areas of decision making. The business architect has a clear task and challenge as well. By absorbing the strategy, technology trends, and the different developments and focusing on the applications for operations, he has the opportunity to discuss with the different stakeholders. He has the opportunity to get those stakeholders either mobilized or focused on specific decisions: the deliverables you will provide.

If you start talking to all those other areas in the business, then suddenly people have a completely other way of thinking. Sometimes they use the same words and don't understand each other.



Gardner: We certainly see a lot of important characteristics in this role: global, strategic high level, encompassing business understanding, as well as technology. Dave van Gelder, where do you go to find these kinds of people? Who tends to make a good business architect or is there no real pattern yet established as to who steps up to the plate to be able to manage this type of a job?

van Gelder: To all the complexity already mentioned, I'd want to add something else that we found in the Business Architecture Working Group, which is more research in the whole field. That's the problem of communication. How do people communicate with each other?

If you look in the IT world, most people come from an engineering background. It's hard enough to talk to each other and to be clear to each other about what's possible and how you should go or what you should go for. If you start talking to all those other areas in the business, then suddenly people have a completely other way of thinking. Sometimes they use the same words and don't understand each other.

It’s not easy to have these kinds of people that need very good communication skills next to all the complexity that you have to handle. On the other hand, you need an architect when it's complex. You don't need an architect when it's simple, because everybody can do it. But an architect is just a person. I say if I am a simple person, I can only handle simple things.

What you need are people who can structure. I can only work with things when I can structure it, when the complexity is fairly well-structured. I then have overview of all those complexities, and then I can start communicating with all the parties I have to communicate with.

No real training

At the moment, I don't see any real training or development of these kinds of people that you need. Most of them come with a lot of experience in a lot of fields, and because of that, they have the possibility to talk to all kinds of people and to bring the message.

Gardner: Mieke, at Capgemini Academy, you’ve obviously encouraged and encountered folks moving towards a business architect role. What are your thoughts on what it takes and where they tend to come from?

Mahakena: Let's have a look where they can come from. What you see is that this role of business architect can be a next step in one’s career. For example, a business analyst, who has been creating a lot of experience in all kinds of fields, and he could evolve to watch a business architect. This person needs to get away from the detail and move towards the strategy and a more holistic view.

Another example could be an enterprise architect who already has analytics skills and communication skills. But, enterprise architects are more or less focusing on IT, so they should move more towards the business part and towards strategy and operations.

One could be the business consultant who is now focusing on strategy, also should have those communication skills, and will be able to communicate with stakeholders in high positions in companies. Business consultants have a lot of industry knowledge. So they should need more knowledge about technology and perhaps improve their analytics skills and learn more to how to structure operations.

There are number of existing roles that already have a lot of skills required for business architecture. They just have to enhance skills and get new skills to do this new role.



So, there are number of existing roles that already have a lot of skills required for business architecture. They just have to enhance skills and get new skills to do this new role.

Gardner: We talked about how this is important because of the internal organizational shifts and the need for transformation. We’ve seen how globalization makes this more important, but I’d like to also look a little bit at some of the trends and technology.

We’ve seen a great deal of emphasis on cloud computing, hybrid computing, the role of mobile devices, wirelessly connected devices, sensors, and fabric of information which, of course, leads to massive data, and they need to then analyze that data.

This is just a handful of some of the major technology trends. Kevin Daley, it seems to me that managing these trends and these new capabilities for organizations also undergirds and supports this need. So how do you see the technology impetus for encouraging the role of business architect?

Daley: I'm seeing from my work in the field that we’ve got all these things that are converging. Certainly, you've got all these enabling technologies and things that are emerging that are making it easier to do technology types of things and speeding them up. So, as they start maturing and as organizations start consuming them, what we’re seeing is that there’s a lack of alignment.

Business relevancy

What this trend is really doing is making sure that you have something that is your controlling device that says what is the business relevancy? Are we measuring these peer-to-peer -- measuring something such as massive data and information fabrics compared to something like cloud computing, where you are dispersing the ability to access that more readily. It creates a problem in that you have to make sure that people are aligned on what they're trying to accomplish.

We're seeing that the technologies that are emerging are actually enabling business architecture in a fashion. It provides that unified vision, that holism, that you can start looking at combinations of these technologies, instead of having to look at them as we’ve had to in the past of siloed elements of technologies that have their own implications.

We're using business architecture as a means to provide the information back to the business analyst who is going to look and help. You can provide the business implications, but then you have to analyze what that implication means and make decisions for how much of that you’re willing to accept within your organization.

In the notions around how I investigate risk, how I look at what is going to improve market, and what is the capacity of what I can do, there's a disconnect that business for which architecture is helping provide the filler for to get to the people that are doing these corporate strategies and corporate analysis at a level. That allows them to virtualize the concept of the technology, consume what it means and what that relates to for a business or in terms of its operation and strategy and the technology itself.

We’re seeing this become the means by which you can have that universal understanding that these are the implications, and that those implications can now be layered, so that you can look at them in combination instead of having to deal with each technology trend as if it's a standalone piece.

When you adopt technology, it obviously has a level of maturity it has to reach, but it also has a level of complexity.



We're seeing this as a means by which to provide some clarity around what any adoption would be. When you adopt technology, it obviously has a level of maturity it has to reach, but it also has a level of complexity. It's being able to start taking advantage of more than just one technology trend at the same time and being able to realistically deliver that into their business model.

What I have been seeing is that the technologies are driving the need for business architecture, because they need that framework to make sure that they are talking apples to apples and that they are meaning the same thing, so that we get out of the interpretation that we have had in the past and get into something that’s very tactical and very tactile, and that you can structure and align in the same way, so you understand what the full ramifications are.

Gardner: Peter Haviland, we have these multiple technology developments overlapping. They can be opportunities for businesses, but they can also perhaps be problems, if you don’t manage them.

What are the stakes here for business architecture and for organizations that can master this? It seems to me that they would have a significant advantage. For those that don’t, it could mean a significant cratering of their business potentially. So are we talking about an existential level importance for business architecture? How important is this now?

Haviland: It’s extremely important. What I see is that this is a discipline that’s just crying out for more people and more maturity. You almost need it to become pervasive throughout organizations now.

Feeding technology

The most common story I encounter is simply that organizations spent a lot of time in the past creating their processes and then they spent a lot of time feeding technology solutions to those processes. In recent times, the pace of technology change has moved faster than that previous paradigm.

What you're looking at is at people saying, well, I am the business, there are all of these technology options out there. I cannot find a way forward and so how do I exploit those? That is where the business architecture profession is really being pushed to the front.

That said, there is a slight risk here that it may be considered too much in isolation. I mean, it is an architecture profession, it is a part of architecture, and the value of architecture is to provide that aligned view across the various domains that are important in terms of business, technology, information, security, and those types of elements.

When it comes back to what’s at stake for businesses that are investing in this particular area and for businesses that are trying to reconsider the way that they can operate themselves to support technology, they are moving ahead and they have competitive advantage. Businesses that aren’t doing that tend to be left behind, because the pace of change of technology is going to get faster.

Gardner: We're here at The Open Group Conference. I wonder if any of you could fill us in on what The Open Group is now doing to advance this definition, mature the role, promulgate certification, and hasten the effect and benefits of business architecture in the field. Who can update us briefly on where we stand with The Open Group’s movement on certification and definition?

We have done a huge amount of work, but we're not ready yet. There are still a number of subjects we need to discuss.



Mahakena: All those subjects you mentioned are part of the work of the Business Forum. The Business Forum is working in parallel on all those things. For example, it's defining the profession and defining business architecture, working on methods and frameworks and approaches, and working on certification.

We need to do that in parallel, because all those aspects have to be aligned. We also need alignment in our own work to make sure that the certification, for example, are just the skills you actually need to do the business architecture and to create the outcomes we have defined in the profession and practice part.

We're on our way as a Business Forum and we have done a huge amount of work, but we're not ready yet. There are still a number of subjects we need to discuss, and we need to align everything we have now to make sure that we have a consistent package of deliverables that can be used by the members of The Open Group and anyone outside as well.

That’s where we are at this moment, and we are hoping to deliver a set of documents that will be accepted by The Open Group, by the members, and then they can be shared.

Hendrickx: I want to extend a little bit on where we are, because there has been some investigation in the 28 frameworks, which are very close or are meant to be frameworks for business architects. From this it resulted that none of these really had a complete holistic approach, as the role is identified currently, or at least how the needs have been identified in the marketplace.

Some have gaps

Some are quite close, but quite a few have gaps in one of the areas that should be touched, like strategy, operations, processes, or technology. We currently try to identify and fill that gap. That’s one point.

The other one is that most of the techniques used by the business architect are very well-embedded in academic research and are often and sometimes already used by different roles as well.

I'm thinking of things like the systems approach, and the systems thinkers have quite a few techniques. There are also techniques developed by IBM, HP, and Capgemini on the business architecture, which are well-versed and well-embedded in academic research of the past 20, 30 years. So, it's not just a set of techniques that are built together. These are really based on insights which we have gained over several decades.

Gardner: Very good. I understand that many of these resources and the ability to take part in some of these working groups are all available on the newly redesigned Open Group website. That would be opengroup.org online and easily found from search.

Most of the techniques used by the business architect are very well-embedded in academic research and are often and sometimes already used by different roles as well.



I want to close up by thanking our guests. We've been discussing the burgeoning role of, and the opportunity for, business architecture and its practitioners in a dynamic global business environment.

This podcast is coming to you as a sponsored activity in conjunction with The Open Group Conference in Austin, Texas, the week of July 18, 2011.

So thanks to our guests. We've been joined by Harry Hendrickx, Chief Technology Officer, CME Industry Unit in HP’s Enterprise Services, and also a Certified Global Enterprise Architect. Thank you, Harry.

Hendrickx: Thank you, Dana.

Gardner: And also Dave van Gelder, Global Architect in the Financial Services Strategic Business unit at Capgemini. Thank you, Dave.

van Gelder: Thank you, Dana.

Gardner: We're also here with Mieke Mahakena. She is the Label Leader for Architecture in the Training Portfolio at Capgemini Academy, and also a Certified Architect. Thank you, Mieke.

Mahakena: You are welcome, Dana.

Gardner: Peter Haviland, Head of the Architecture Services for Americas at Ernst & Young has also joined us. Thank you, Peter.

Haviland: Thanks, Dana. Thanks everyone.

Gardner: And lastly, Kevin Daley, Chief Architect in the Technology and Innovation Group at IBM Global Business Services. Thanks so much, Kevin.

Daley: Thank you, Dana. Again, thanks to everyone else also.

Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions. Thanks again for listening, 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 BriefingsDirect podcast from The Open Group Conference on defining the role and scope of the business architect. Copyright Interarbor Solutions, LLC, 2005-2011. All rights reserved.

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VMworld Case Study: City of Pittsburgh's IT Success and the Beneficial Synergy Between Virtualized Servers and Desktops

Transcript of a BriefingsDirect Podcast from the VMworld 2011 Conference on how the City of Pittsburgh has launched a major virtualization effort to serve a variety of city departments.

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

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you from the VMworld 2011 Conference in Las Vegas. We're here in the week of August 29 to explore the latest in cloud computing and virtualization infrastructure developments.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions, and I’ll be your host throughout this series of VMware-sponsored BriefingsDirect discussions. [Disclosure: VMware is a sponsor of BriefingsDirect podcasts.]

Our next VMworld case study interview focuses on the City of Pittsburgh’s Information Systems organization and how they’ve deeply embraced virtualization at the server level and now increasingly at the desktop level. We’ll see how critical city services in Pittsburgh are being supported using VMware View 4.6 and the new 5.0 version and how the beneficial synergy between virtualized servers and desktops is shaping up.

To learn more, please join me now in welcoming Alex Musicante, the System Security Architect in the City Information Systems department in Pittsburgh. Welcome to the show, Alex.

Alex Musicante: Welcome.

Gardner: Your environment is almost 100 percent virtualized on the server side. First, why is there such a holistic embrace, and how has that provided the confidence for you to move now aggressively into the desktop virtualization space as well?

Musicante: The City of Pittsburgh decided to embrace virtualization five years or so ago, and we did this in a development environment with VMware. The confidence was not there for the server virtualization, and we decided it's a good place to offer development to our internal engineers.

From there, we kept building and building, and we decided to put our first production system on there. Without a problem, everything started going. What virtualization had to offer for us was higher availability, higher reliability.

When we were remote, we had full console access. We were able to offer higher reliability on our development than our production. That was what led us to go to production. It's very difficult in this day and age with budgets and all that. We're now doing more with less. In order to be able to accommodate that and be able to handle the increased workload with fewer people, it has been embracing server virtualization, and virtualization in general.

Gardner: And to what level are you at server-side virtualization and how many servers are involved at this point?

Musicante: In server virtualization we currently have 16 hosts, 98 percent virtual. There are about 250 or so virtual machines (VMs) between two data centers; and we are using VMware Site Recovery Manager to replicate or to bring up the replicated site in the event of a disaster or any planned maintenance that we need to perform at one data center versus the other.

Gardner: I’d like to hear more about your desktop virtualization strategy, but let's learn a little bit more about the scope and scale of your mission-critical set of services. How many users? You're supporting the mayor’s office, police, and fire. Tell us a little bit about what your department is doing in the City of Pittsburgh?

3,000 users

Musicante: The City of Pittsburgh’s City Information Systems Department, which I work for, has about 3,000 users that they support. That ranges from all public safety -- Police, Fire, EMS, and Building Inspection -- to the branches of government -- the Mayor’s Office, the City Council, and Controller’s Office as well as other important departments like the Finance Department, Personnel, Human Resources, and Parks and Recreation. That's who we're supporting, and each and every one of them has their own little caveats of technology that they need.

Gardner: You’re also of course concerned about security, performance, disaster recovery, which you’ve already mentioned. How has virtualization helped you not just in cutting cost, but in making these more hardened, more resilient services?

Musicante: In terms of hardening and security, when we took our virtualization approach, we started out by saying that we were going to physical-to-virtual (P2V) and migrate a lot of these machines. As we proceeded and matured in that environment, we decided that we were going to build fresh and build new.

So when we did our server virtualization, we looked at virtualization in general. It became an opportunity for us to evaluate how we were going to harden things, how we were going to secure things, and since now we don’t have to support that many physical servers, we can expand on our current capacity, and hardware.

We’re able to separate things, where servers that were multi-functional servers, database server, file server, web server, all in one, now get to be three different servers, and only allow communications to the specific application and supports what they need.

Storage came about and offered a lot more flexibility and a lot of benefit to the City of Pittsburgh, but it was not without hassle.



Gardner: Any issues around storage? Has that been something that you’ve been able to wreak some efficiencies out as well?

Musicante: Storage was very interesting for the City of Pittsburgh. They were coming from an environment where everything was on direct-attached storage (DAS), and going to a storage area network (SAN) environment, which they had. They had an array with an HP 6000, but they were only using 500 gigabytes at the time. So storage transition was huge in terms of reliability, but as well as cost at the same time.

It was an unexpected thing from the city’s perspective, as they were not in the market for an array where everything is central. It was all individual and unique to each host and physical server. So storage came about and offered a lot more flexibility and a lot of benefit to the City of Pittsburgh, but it was not without hassle.

Gardner: So you’ve gone through that process -- 98 percent is very impressive on your server, and your infrastructure. What prompted you to now take the additional step to use View and move into desktop virtualization?

Musicante: The City of Pittsburgh moved into desktop virtualization with very similar characteristics as we looked at the server virtualization as how can we offer higher reliability and higher support, give us more management from a central standpoint back at our remote offices, and offer them to the clients and given them the same if not a better level service for additional benefits from administrative.

Security provisioning

There were a bunch of reasons, and those are like pushing out software updates without downtime for the users. They just log off and get a new one. It was security provisioning software, keeping all the storage and everything is back in our data center, so nothing leaves the facility.

Those were motivating factors as well as keeping administrative cost down. That was the push, and it actually took off. It took some time, but it's being embraced more than I ever would have thought it would have been.

Gardner: Let's learn a little bit more about the nature of your distribution requirements. Obviously, you've got City Hall. You’ve got some centralization. You’ve got police headquarters and fire headquarters, but you’ve also got a lot of distributed sites around the city. So let us better understand your distribution requirements when you’re going to desktop virtualization?

Musicante: There are 175 remote facilities, and they range from connectivity of facilities that are on dark fiber, with 100, 200, 300, 500 users, to these individual remote offices that are located in the park facility, and they have one or two employees that are coming across the DSL line.

One of the major complaints was the problem with connectivity where people are on DSL. They would load the roaming profile or pull documents or upload files and they would see this huge lag where it took them upwards of 30 minutes to start their day off. They're now able to go into View, sign-in, and they're in. So we pretty much recovered 30 extra minutes for some of these employees on a daily basis.

Currently, we're in a mixed mode. We have two environments which we're trying to expedite to move off of.



Gardner: How are you leveraging the PCoIP bandwidth improvements for the WAN?

Musicante: Very well. With each version it's definitely gotten better. Still from a management side we do maintain an IPSec tunnel to all of our facilities.

So PC-over-IP has been what we’ve been using for our remote facilities, even back in the 3.0 days. When 4.1 PC-over-IP came out, 4.5, 4.6, it's been progressively getting better and has higher availability with more response. When 4.6, matured, they gave us the View Security Server, and even now with 5, it has increased and lowered the actual requirements necessary for traffic. So some of our facilities are not feeling the same same pain that they were prior to.

Gardner: As you’ve been making this transition, it would be good to understand better how you’ve adopted version 5. To what degree are you using version 5 for View on your desktop virtualization installations?

Musicante: Currently, we're in a mixed mode. We have two environments which we're trying to expedite to move off of, but we currently have a 4.6 environment and a 5.0 environment. Right now with our 5.0 environment we are embracing Persona Management for some of our EMS employees.

Gardner: That’s another one of those ancillary benefits that people don’t always appreciate but it’s pretty important.

Everything is identical

Musicante: Absolutely. It wasn’t something that we were expecting, but at the same time, when we go back with 20/20 hindsight, we reevaluated and said that that makes sense. Everything is now identical. We use non-persistent machine. So every time they log in, it's a brand-new machine and it’s configured identically the way we want it. The only factor that’s different for each user is their profile.

Gardner: You know how to resolve them, it’s not starting from scratch.

Musicante: Absolutely not starting from scratch. That’s also one of the beautiful benefits. As we move and as we mature with the product and as the product matures itself, we seem to be taking a very parallel progression between the two -- the City of Pittsburgh and VMware View. Persona Management right now has been doing wonders for that.

Those departments that have migrated over and wanted to take this “experiment” of Persona Management have been pleasantly surprised. Definitely, that’s also a point to bring up. When you hear problems from people, when end-users complain, there’s always something that they target. It was networking at one point. Then it moved on to virtualization and everyone said it was the promised virtualization, whether it was or wasn’t.

With View, it actually stands alone. It an outlier. Our users call and they say, "I would like to be on View. I would like to be on that system." For an end-user come back to us and request that blows our mind. We appreciate it. It means we’ve done something right. And it also has to be attributed back to VMware. They’ve done something right.

Gardner: Now that you’ve gotten your feet wet, and then some, with 5.0, what are some of the other salient benefits?

So every time they log in, it's a brand-new machine and it’s configured identically the way we want it.



Musicante: That’s going to give us extra 5 percent. There is always that server virtualization where you’d only get that 95 percent, although we got past that. There’s that 5 percent that you couldn’t for or you wouldn’t for whatever reason. That’s the same market for the desktop virtualization and 5 percent was for high graphic intensive people. We're able to now start to achieve that and we're looking to try to achieve that.

We've not gone through some of the advanced 3D accelerated graphic things that are now out with 5. We are in the process of testing, but it’s currently in our test labs within our department. It’s also in terms of deriving the benefit. We have all of our infrastructure. We're going to with a more green approach. So we're going with zero client. They're currently Dell FX 100s. So they may take one tenth of the power, but there is very little there.

I know that VMware View 5.0 3D acceleration is going to be there and is going to help out, but those people are going to be using the repurposed machines, taking their machine, putting a stripped down version of 7 and use it from there. So we're trying to achieve that, but it’s multiple facets.

Gardner: When we think about your adoption pattern around virtualization, you took your time, learned through your development environment, walked in, made some progress and then really ramped up on adoption for your server side. You’ve followed a similar pattern now with desktops.

What’s next? Is there an additional synergy between a private cloud implementation, where you can get even better synergy efficiency? Tell me what you think about this fear and moving towards even higher plane of efficiency and productivity on that overall delivery from a central data center environment?

Going toward the cloud

Musicante: It’s really unclear where we're going to go. As far as cloud and where the cloud is taking the City of Pittsburgh and where the City of Pittsburgh is going with cloud, City of Pittsburgh currently is in the process of taking that last two percent of our system that isn’t virtualized, which is Exchange, and we are currently in the process of going towards the cloud. So it’s actually going to be going to Google Apps for government for mail.

As far as cloud within ourselves, the City of Pittsburgh is using its resources that we’ve regained or recouped from all of our consolidation purposes, especially with the government processes and mentality of doing more with less. There is a lot of fellow government agencies that we're now going to be partnering with to provide them infrastructure as a service.

That’s where some of the other product lines come in like vCloud Director, to be able to allow them to still manage their infrastructure to use our resources, and we can now ourselves be a cloud provider, which I have been marketing as Cloud9 because there are nine entities including the City of Pittsburgh -- nine entities that we are going to consolidate.

Gardner: I'm impressed with the fact that you’ve been able to move through this progression, recoup those savings, and then apply it to the innovation that get you yet more productivity and savings that you can further apply. That’s commendable. Any words of advice for folks that are perhaps not as far along as you’ve been on this progression? What 20/20 hindsight and words of wisdom might you supply them?

Musicante: With server virtualization, everyone is involved in it, and that is the easy part. Desktop virtualization, is where we got hit hard and the lessons that will be learned is that end-user’s matter. Every step of the way, you need their input. It’s not just an administrative decision saying this is the right thing. You need to be good at psychology to convince your users that this is what they want, and getting them to the point of seeing that this is the best approach or getting their input.

The only thing that I could say is to involve your users. Get them in the proof of concept from the beginning.



That really makes all the difference in the world. You’ll have the same end result and you’ll get to the same target, to the same place, but you need their input. It was not the same with server virtualization. That was for the administrators. They owned it. It was their territory. These desktops that you're taking from the users, yes, they’ll have a better reliability, better up-time, better everything, and better end-user experience, but they feel that that’s theirs, and rightly so.

The only thing that I could say is to involve your users. Get them in the proof of concept from the beginning. Get their input, what they need, what they want, how they want to access it, and with that it’ll no doubt be a sure success.

Gardner: And if you can do it in such a way that they are asking by brand for the virtualized desktop approach, that sounds like an optimal outcome.

Musicante: Absolutely.

Gardner: We’ve been talking about the beneficial synergy between virtualized servers and desktops and how that’s shaping up in Pittsburgh. Join me in thanking our guest. We’ve been here with Alex Musicante, System Security Architect in the City Information Systems Department there in Pittsburgh. Thank you so much, Alex.

Musicante: Thank you so much. Have a good one.

Gardner: Thanks, and also thanks to our audience for joining this special podcast coming to you from the 2011 VMworld Conference in Las Vegas.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of VMware-sponsored BriefingsDirect discussions. Thanks again for listening, and come back next time.

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

Transcript of a BriefingsDirect Podcast from the VMworld 2011 Conference on how the City of Pittsburgh has launched a major virtualization effort to serve a variety of city departments. Copyright Interarbor Solutions, LLC, 2005-2011. All rights reserved.

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Monday, August 29, 2011

From VMworld, Cosmetics Giant Revlon Harnesses the Power of Private Cloud to Produce Impressive Savings and Cost Avoidance

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

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you from the VMworld 2011 Conference in Las Vegas. We're here in the week of August 29 to explore the latest in cloud computing and virtualization infrastructure developments.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions, and I’ll be your host throughout this series of VMware-sponsored BriefingsDirect discussions.

Today’s consensus is no longer around an "if" for cloud computing, but the "when" and what types of cloud models are best suited for any particular company. The present challenge then is about the proper transitions to leveraging cloud for improved IT and for far better business results. [Disclosure: VMware is a sponsor of BriefingsDirect podcasts.]

Here at VMworld, as part of the main keynote address, one company and its design and implementation of a private cloud rose above the rest. Revlon and its CIO were in the spotlight for such impressive returns on their cloud. In just two years, Revlon has benefited by nearly $70 million from savings due to cost avoidance and reductions.

Here to tell us about how such savings emerged and to describe one of the most efficient enterprise private cloud implementations in the world is David Giambruno, Senior Vice President and CIO at Revlon. Welcome, David.

David Giambruno: Hello. How are you today?

Gardner: I'm great. We’ve heard so much about your private cloud, and I was really impressed, but something that jumped out of me is that you seem to have jumped into this all-in, rather than piecemeal. Is there a reason for doing private cloud completely, rather than piecemeal? What’s the benefit for doing it that way?

Giambruno: I reference us to Southwest Airlines. What I mean by that is their whole business models were around one plane, one plane to service, and getting very good at that.

From a technology standpoint, we look at ourselves as doing oneness. We pick one way and we get very good at. We own that technology, so we can command it. It’s really about the density of our skill sets and our capability around that order to execute for the business.

When you look at that, it drives a degree of simplicity of execution, because at the end of the day, what we're really focused on is delivering IT capability back to the business faster, cheaper, better. That’s essentially what our cloud was planned to do and has delivered.

Gardner: And this is no small undertaking. It's over 530 applications, 15,000 automated moves a month. Give us a sense of what you’ve done with this singular approach to full competency at this particular data center and your approach to private cloud?

Giambruno: It’s not a data center. It’s the globe. That’s important for everyone to understand. Revlon’s cloud covers all of Revlon’s presences globally. It’s not just a single data center. We have a core data center and then we have little data centers around the world that everything replicates between and things move between.

Entire ecosystem

We’ve built this entire ecosystem to deliver our applications. We started this about five years ago with this whole idea of oneness. We re-ITed the planet. We have one DNS and DHCP structure. We have one global directory. We have one SAN globally. We have one desktop image. We have one server image. That simplicity allowed us to use the cloud as a competitive advantage.

We've saved or avoided $70 million in last two years. If you go by a simple timeline, the first 18 months was laying that oneness foundation. We did that in 18 months. The second 18 months was the virtualization of the servers, the network, and the storage systems globally.

At the end of the 18 months, we were done. That was the first three years. We’ve been running this way for the last two years. We're not in the "I think" mode. We're looking now at how we continually extend the capability of our cloud.

Gardner: Our listeners might be familiar with Revlon, your brand, but tell us more about the scope of your operations and the extent to which IT is supporting your business.

Giambruno: Revlon is a global cosmetics, hair color, beauty tools, fragrance, skincare, anti-perspirant/deodorants, and beauty care company. The vision of Revlon is to deliver glamor, excitement, and innovation through high-quality products at affordable prices.

We didn’t spend any additional money, other than our normal capital refresh. The thing that we did was change the way we're spending our money



We are arguably one of the strongest consumer franchises in the world. Our brand is incredibly powerful. We've got offices around the world. Our global headquarters are in New York. Our flagship manufacturing facility is in Oxford, North Carolina, and our consumers are women around the world. Our products are sold in more than 100 countries.

So we are big, as far as our reach and our capability. Essentially, our cloud delivers roughly 95 percent of all Revlon IT services around the world. We've got a couple of systems that aren’t in there yet. They will be shortly, but for all intents and purposes, we operate everything off of our cloud.

Gardner: Let’s go back to how you got to this point and how you're able to enjoy such significant savings. You have a comprehensive virtualized approach of servers, network, applications, and services. Why is that important?

Giambruno: Again, it’s that density of skill sets. Through this whole implementation, we only used about 10 percent professional services. We didn’t spend any additional money, other than our normal capital refresh. The thing that we did was change the way we're spending our money.

We took that leap to do things differently, because at the end of the day -- I always say this just to keep my and my team’s frame of reference -- we make cosmetics and personal care products. We have lots of brands, but it’s the idea of simplicity.

Faster, better, cheaper

We're not a revenue-generating piece of Revlon. How we can add value back to the business is by doing things faster, better, cheaper? If we're not spending that money, we're avoiding spending money, or giving money back, that means it can go into new product development. It can go into R&D. It can go into marketing. All activities focused on driving profitable growth.

Getting technology to facilitate the business and do things faster and more effectively is really important. To me, it’s the most material thing we’ve done - if you look at your projects. We’ve increased the number of projects we complete every year by 300 percent. When you talk about the business alignment, getting what they want done faster, cheaper, better, to me, that’s it.

Gardner: And you're talking about spanning the cycle from full development to implementation. What’s the role that the cloud has played in terms of increasing the ease in which you move from development to operations?

Giambruno: I've got a couple of buckets. We have reliability. Currently, our cloud has been operating at north of six nines uptime, which has allowed me to take resources out of operations, put them into projects and working with the business.

That’s resulted in speed. If you want a server, if there is a demand for new application or testing something, our cycle time for getting a server up is anywhere from 15-20 minutes and there isn’t the associated cost. For us, a server is just a file. If you want one, great, here you go.

One of the greatest things that we monitor is our ratio of physical to logical servers. When we started this, our server ratio was 1:7. We are now 1:34.



And we manage capacity on the top line. So we essentially move that infrastructure barrier and cost. We’ve disconnected it. One of the greatest things that we monitor is our ratio of physical to logical servers. When we started this, when we first went live three-and-a-half or four years ago, our server ratio was 1:7. We are now 1:34. That’s essentially a 500 percent increase in capacity without the cost.

That makes a material difference in the business not having to pay for things. The speed at which we can nail up applications and the accuracy at which we can do it has made a material difference in our ability to deliver projects to the business.

Gardner: In addition to improving this cycle for development flexibility and resources, you've also devoted significant improvements to disaster recovery (DR). Tell me a little bit about why the private cloud has helped you in DR.

Giambruno: One of the things that we’ve learned very quickly was rate of change. When you're on a cloud, every time someone hits a keystroke on a keyboard, that’s a change in your cloud. Our rate of change is anywhere between 20-30 terabytes a week.

We made a conscious decision as we don’t tier anything in DR; we literally copy everything. There are two pieces of things. I'm most impressed with what my team has done.

Cheaper storage

One is if you take that rate of change and attach it to storage growth, you're roughly at $27 million a year. Through a series of technologies that we employ, we turn that $27 million into $400,000 of storage that we actually have to pay for. So, our shareholders get that benefit, because I don’t think anybody else’s shareholders would have that interest in place.

The second thing is that it does allow us to copy everything. Roughly a month ago, we lost our factory in Venezuela to a fire. Fortunately, no one was hurt, but from the time someone made a phone call, two hours and 40 minutes later -- and roughly two hours of the time of finding people, because it was a Sunday afternoon -- we moved the country of Venezuela up into our DR side, had everything running, and we're giving the users virtual desktops so they could keep working. That’s the power.

Gardner: Peace of mind and trust.

Giambruno: And it’s not fake. We’ve done it. Globally, we are minus-15 minutes replication in their stuff. That’s a little longer or little shorter depending where it is and time of the day, but it goes back to the simplicity. We just copy everything so we don’t have to worry about it.

Gardner: Without going too far down in the weeds, WAN acceleration devices have helped you in a large extent with that in terms of managing that amount and the speed.

Giambruno: Exactly. I don’t think you could run an internal cloud, or much less an external cloud, with the rate of change without those. I'm a huge fan of that.

Gardner: All right. Let’s see metrics wise what this gets for you in data reduction. What sort of volumes have you been able to improve?

We keep finding ways to squeak more out, because, again, the less money we can use, the better for the business.



Giambruno: We’ve run about 96 percent data reduction for everything from compression and de-duplication. As we’ve gone through this, we've also learned that with different storage protocols, block versus CIFS, you get better compression. Running at NFS you pick up 15 percent utilization over block.

Everybody has different business cases for why they need either, but we keep finding ways to squeak more out, because, again, the less money we can use, the better for the business. The more efficient and effective we are, the better for the business, and the less they have to spend on this.

Conversely, we keep leveraging those capabilities in extending our cloud. So we can sling a Windows 7 desktop to an iPad, or we're enabling our cloud so people can use resources wherever they are, regardless of the device. That just makes their lives easier and their ability to do business better, so we can support people growing the company.

Gardner: It’s really impressive to me, David that the more value that you derive from you architecture and approach, the more it contributes to other things. For example, what you’ve described is great for DR, but you’re also reducing your racks, restructuring your server licensing, and also getting to improve asset utilization. So it’s sort of a snowball, but in a virtuous way.

The asset is never cold

Giambruno: It’s interesting because in our DR site we run our test and dev. So the asset is never cold. We're actually using the virtual servers while they are not being used for DR to run all our tests and dev. It just contributes to the uptime. The data is already there.

We reuse assets all the time, and as we go forward, we have plans to go active-active. So now end-of-life servers that are coming out for maintenance, we just throw them in DR, because they can just stay there forever. It doesn’t matter to us if one dies a year. So what? It’s really that ability to keep using those assets to extend capabilities.

Gardner: How about the stack? Can you describe some of your products and what they’ve done for you? Are you venturing to some new areas around either management or governance to try to continue to tweak this to get more bang for the buck?

Giambruno: The bang for the buck for us is that we're working really hard on essentially creating an internal marketplace, like the Apple marketplace or the Android marketplace.

We’ve got desktop virtualization, but we see huge value to the business in creating this internal marketplace. We know a user. We know their devices. We know the applications they're supposed to be using. Depending on the device that they connect, we can format the application they are using and its view to that device to deliver them in context.

To some degree, it’s like going from a LAN to a trusted WAN, where we know the device that’s registered to you. We know you as a user so we can deliver very securely your information, and that information never leaves my data center. So you are only ever viewing the information they are working with.

When that device comes out, our cloud will understand context. We'll be able to deliver that application in the context of the person.



Gardner: If I heard you correctly, you're not only allowing the users to exploit more and better devices, perhaps more suited to what they do in terms of a work style or mobility, but you're also now creating an application marketplace. How does that benefit from your cloud infrastructure?

Giambruno: Our cloud can send them anything. The applications are already running on the cloud. Essentially, when that device comes out, our cloud will understand context. We'll be able to deliver that application in the context of the person. You've got a highly secure environment. We're not moving data anywhere. We’ve got control of the device. We understand who the person is, and so we can deliver in context what they are supposed to have access to, regardless of where they are.

If you have an iPad or anything like that, you have an icon on the front. You’ll have a Revlon marketplace. You open that up, and there will be a list of applications that you have access to that are already authorized for you to have access to, and we will start sending you those applications.

Gardner: It sounds like a real boon to productivity.

Giambruno: We have third-party manufacturers. We have third-party logistics. So we're starting to have the ability to leverage our cloud to deliver applications and have our suppliers and partners work with us much closely.

Management dashboard

The third tangent is the management dashboard -- our ability to deliver information to our management teams so they can make good business decisions faster, because this is essentially all about speed. It's the speed of getting information to our management team so they can make the decisions, understand what’s happening, and ask good questions of the organization in order to make a really good decisions. We're a CPG company and it’s a very competitive environment. To me, our cloud is really about using technology as a competitive advantage.

Gardner: We're about out of time. Any advice for folks listening to our podcast today who might not be fully into this full cloud press that you’ve been describing, but once you start realizing that advantage of a virtuous cycle adoption that gets more efficiency, that gets more improvement, and lower cost. So what’s your advice for folks getting started?

Giambruno: I tend to live by "isms" to make very clear pictures, because I had to move own organization through them. Two things: trust or verify, which maps into the second, which is just try. They are very symbiotic.

Trust and verify that you’re delivering the capabilities that the business needs and that you know they need.



As you look at this, just try, and as you go through that, trust and verify that you’re delivering the capabilities that the business needs and that you know they need. As you go along that path, you can build trust and confidence in yourself and your capabilities, your team can build trust and confidence, and you can show that to your business units.

That's like that snowball that you get rolling. Once everybody realizes that it can be done, it’s more of a human experience thing than it is the technology. The technology works, and we’ve been doing this for a couple of years. I couldn’t imagine operating any other way any longer until the next big geometry train comes, but that’s probably another 10 or 15 years.

Gardner: Great. I really enjoyed your presentation up on the stage. We’ve been talking about successful private cloud and virtualization adoption in a managed and secure way. Joining us right after his VMworld keynote address is David Giambruno, Senior Vice President and CIO at Revlon. Thanks so much, David.

Giambruno: Thank you very much.

Gardner: We’ve been joined here for a special podcast coming to you from the 2011 VMworld Conference in Las Vegas. I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of podcast discussions. Thanks again for listening and come back next time.

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

Transcript of a podcast discussion from the VMworld 2011 Conference on how Revlon has leveraged the cloud to obtain $70 million in savings and cost avoidance in only two years. Copyright Interarbor Solutions, LLC, 2005-2011. All rights reserved.

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From VMworld, NYSE Euronext on Hybrid Cloud Vision and Strategy Behind the Capital Markets Community Platform Vertical Cloud

Transcript of a BriefingsDirect podcast from the VMworld 2011 Conference focusing on NYSE Euronext's use of cloud in making a foray into providing customer services in a vertical market.

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

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you from the VMworld 2011 Conference in Las Vegas. We're here in the week of August 29 to explore the latest in cloud computing and virtualization infrastructure developments.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions, and I’ll be your host throughout this series of VMware-sponsored BriefingsDirect discussions. [Disclosure: VMware is a sponsor of BriefingsDirect podcasts.]

When we hear about cloud, especially public clouds, we often encounter one-size-fits-all services. Advanced adapters of cloud delivery models are quickly creating more specialized hybrid clouds for certain industries. And they're looking to them as both major sources of new business, and the means to bring much higher IT efficiency to their clients.

Today, we'll learn about how the NYSE Euronext recently unveiled one such vertical offering, their Capital Markets Community Platform. We’ll see how they built the cloud, which amounts to a Wall Street IT services destination, what it does, and how it’s different from other cloud offerings.

Here to tell us about how specialized clouds are changing the IT game in such vertical industries as finance is Steve Rubinow, Executive Vice-President and Chief Information Officer at NYSE Euronext. Welcome, Steve.

Steve Rubinow: Hello there.

Gardner: I’d like to hear more about how you put your cloud together, but before we do that, you are delivering more than compute power on demand. You have some very specialized services of historical trading data, innovative trading services, and even third-party applications. And you're supporting these both inside your cloud as well as your clients'. So maybe you could help us understand how you came about to define this type of offering. Why have you done it this way?

Rubinow: It’s the convergence of a couple of trends and also things that our customer started to tell us. Like a lot of companies, we started to use cloud technology within our own company to service our own internal needs for the reasons that many people do -- lower cost, more flexibility, more rapid spin up, those kinds of things, and we found, of course, that was very useful to us.

At the same time, we've talked to a lot of our customers via our commercial division, which we call NYSE Technologies. By virtue of all the turbulence that's happened in the world, especially in the financial markets in the last couple of years, a lot of our customers -- big ones, small ones, banks, brokerages, and everyone in between -- said the infrastructure that we traditionally have supported within our own companies, is a new model that we could adapt, given these technologies that are available, and given that we NYSE Technologies wants to provide these services. We asked if we should take a different look at what we are doing and see if we should pursue some of these things.

What it comes down right down to is that many of these companies said that maintaining their own infrastructure is not a competitive advantage for them. It’s really a cost of doing business like telephones and office furniture. It would be better if someone else helped them with it, maybe not 100 percent, but like we propose to do, and everyone wins. They get lower cost and they get to offload a burden that wasn’t particularly strategic to them.

We say we can do it with good service and at a good price, and everybody comes away a winner. So we launched this program this summer, with one offering called Compute on Demand, which has a number of attributes that make it different than your run-of-the-mill public cloud.

Higher Requirements

In the capital markets community, we have some attributes of infrastructure, a higher requirement, that most companies wouldn’t care so much about, but in our industry they are very, very critical. We have a higher level of security than an average company would probably pay attention to.

And reliability, as you can imagine. The markets need to be up all the time when they are supposed to be open. A few seconds makes a big difference. So we want to make sure that we pay extra attention to reliability.

Another thing is performance. Our industry is very performance-sensitive. Many of the executions are measured in micro-seconds. Any customer of ours, including ourselves, are sensitive to make sure that any infrastructure that we would depend on has the ability to make sure that transactions happen. You don’t find that in the run-of-the-mill public cloud because there just isn’t a need for the average company to do that.

For that reason, we thought our private offering, our community cloud, was a good idea. By the way, our customers seem to be nodding their heads a lot to the idea as well.

Gardner: Could I understand a bit more about the architecture? You do have public cloud services, those being hosted by you and delivered to your clients, but you're also having some element of this as your clients choose on-premises. How does that work? What's the split or why have it a hybrid model?

We're a very rich source of market data, as one might imagine. We generate a lot of market data ourselves because of the large marketplace we are.



Rubinow: In the spirit of trying to accommodate all the needs that people will have, for many of the cloud services, you get the most leverage out of them, if you as a customer are situated in the data center with us.

Many customers choose to do that for the simple reason of speed-of-light issues. The longer the network is between Point A and Point B, the longer it takes a message to get across it. In an industry where latency is so important, people want to minimize that distance, and so they co-locate there. Then, they have high-speed access to everything that's available in the data center.

Of course, customers outside the data center certainly can have access to those services as well. We have a dedicated network that we call SFTI, Secure Financial Transaction Infrastructure. That was designed to support high speed, high reliability, and high resiliency, things that you would expect from a prominent financial services network. Our customers come to our data centers over that network, and they can avail themselves of the services that we have there too.

Earlier in the conversation I talked about the attributes of the infrastructure, but there's something that we also have in our data center that our customers make use of. They have for a while, and now even more so, in a more flexible manner via some of these cloud services.

We're a very rich source of market data, as one might imagine. We generate a lot of market data ourselves because of the large marketplace we are. We take data from other marketplaces, consolidate them, and provide feeds of those data to our customers. We want to make sure we do that in a fast, cost-effective, flexible way.

Historical data

We have historical data that lot of our customers would like to take a look at and analyze, rather than having to store the data themselves. We have it all here for them. We have applications like risk management and other services that we intend to offer in the future that customers would be hard-pressed to find somewhere else, or if they could find it somewhere else, they probably won't find it in as efficient a manner. So it makes sense for them to come to us to take a look at it and see how they can take advantage of it here.

Gardner: And so it certainly seems that,with the mission-critical nature of the issues and the requirements that you mentioned that applying a cloud model here, if you can do it there you could probably do it anywhere. Let's learn a little bit more about NYSE for those folks on the podcast that aren't familiar with you. Tell us about your organization, your global nature, and where you expect to deliver these cloud services over time?

Rubinow: The full name of the company is NYSE Euronext, and that reflects the fact that we are a collection of markets not only in the United States but also in Europe. We operate a number of cash and derivative exchanges in Europe as well. So we talk about the whole family being part of NYSE Euronext.

We segment our business into three segments. There is the cash business, which is global. There is the derivatives business, which is global, and those are the things that people would have normally associated our company with, because the thing we've been doing for many years.

The newest piece of our business is the piece that I've referred to earlier and that's our commercial technology business, which we call NYSE Technologies. Through that segment of the business, we offer all these services, whether it be software products we might develop that our customers take advantage of or services as we've already referenced.

Over the years, we've been offering these services to our customers, and then a couple of years ago we decided to do it in a much bigger way, because we realized the need was there.



The genesis of that is that we did a lot of good things for ourselves in terms of high speed, high performance, high transaction volumes, reliability, security, functionality, low cost -- all these things that are necessary to be a major competitor in today's market.

In a small way, over the years, we've been offering these services to our customers, and then a couple of years ago we decided to do it in a much bigger way, because we realized the need was there. Our customers told us that they would take advantage of these services. So we made a bigger effort in that regard. Right now, the commercial part of our business is several hundred million dollars a year in terms of revenue.

We have great expectations to grow that significantly over the next few years, and it's through that that we offer it. Now, our two major hubs, our data centers that we just built. are almost brand spanking new. They are full production facilities. We finished them last year.

One is in northern New Jersey and the other one is outside of London. Most of the space in those data centers are for our customers, not for us. We certainly have a piece of those data centers that we run our core operations from, because they were designed to do that, but we also had in mind all the products and services that we can offer our customers that choose to be in the data center with us. So you'll find that a good number of our customers have taken us up on that, and are co-located with us.

We plan to have additional centers not identical to our prime data centers that we have in London and New Jersey, but in Asia, Europe, and North America, where customers can come, take advantage of services that we offer there and then can connect to the other data centers as need be.

Question of latency

I have to add one note in terms of latency. For people who aren't familiar with our obsession with latency, the true textbook cloud profile means that one could execute cloud-like services. If we had 20 data centers across the world, they could be executed across any of those data centers and transparent to the customer as long as they get done.

In ours latency-sensitive world, we are a little bit constrained with some of the services that we offer. We can't afford to be moving things around from data center to data center, because those network differences, when you're measuring things in micro-seconds, are very noticeable to our customers. So some of our services could be distributed across the world, but some of our services are very tied to a physical location to make sure we get the maximum performance.

To add further to that, one of the cornerstone technologies, as we all know, of cloud computing is virtualization. That gives you a lot of flexibility to make sure that you get maximum utilization of your compute resources.

Some of the services we offer can't use virtualization. They have to be tied to a physical device. It doesn't mean that we can't use a lot of other offerings that VMware provides to help manage that process, but some are tied to physical devices, because virtualization in some cases introduces an overhead. Again, when you're measuring in micro-seconds, it's noticeable. Many other of our services where virtualization is key to what we do to offer the flexibility in cost to our customers.

So we have kind of a mixed bag of unique provisioning that's designed for the low-latency portion of our business, and then more general cloud technologies that we use for everything else in our business. You put the two of them together and we have a unique offering that no one else that we know of in the world offers, because we think we're the first, it’s not among the first, to do this.

You put the two of them together and we have a unique offering that no one else that we know of in the world offers.



Also, we have a very focused target customer base here. It's not for the average company. It's for those customers that demand these kinds of things, and we're determined to make sure they get what they want.

Gardner: Okay, Steve, you've certainly outlined a very impressive capability set and because you're involved with cloud services, whether they're built on virtualization infrastructure or not, it seems to me that you're going to be able to add more services and really judge closely what your customers want and demand, gather their trust, demonstrate your value, and then perhaps be in a position to add even more services over the coming year. So this is a rather big business undertaking for you. This cloud is really an instrument for your business in a major way.

Rubinow: That's right. Sometimes we think the core of our business is trading. That is the core. That's our legacy That's the core of what we do. It's a very important source of our business, and it generates a lot of the things that we've been talking about. Without our core business we wouldn’t have the market data to offer to our customers in a variety of formats.

The technologies that we used to make sure that we were the leader in the marketplace in terms of trading technology and all the infrastructure to support that, that's also what we're offering our customers. What we're trying to do is cover all the bases in the capital markets community, and not only trading services, which of course is the center of what we do and it's core to everything that we do.

All the things that surround that our customers can use to support their traditional trading activities and then other things that they didn't used to look to us to do. These are things like extensive calculations that they would not have asked the NYSE to do, but today they do it, because we provide the infrastructure there for them.

Fulfilling a need

It’s the inner layer of trading technology plus everything on the periphery that we can imagine and offer to our customers that our customers can imagine themselves as fulfilling a need of theirs. We're intent on doing that. If you think of this as a supply-chain approach, we’re trying to cover every base we can in the supply chain to make sure that we can be a primary provider for all of our customers’ needs in the space.

Gardner: It’s a little bit soon, I suppose, to develop metrics of success. As you pointed out, you've been doing this now just for the summer in a full general availability mode. But do you have any sense from your customers? Are they witnessing removal of redundancy? Are they able to remove costs. And do they have some ability to compare and contrast the way they did business as usual and the way that they’re starting to employ more of your services? What are some of the underlying numbers perhaps of how this works economically?

Rubinow: From a metrics standpoint, it's probably too early to provide metrics, but I can tell you, qualitatively speaking, the few customers that we have that were early adopters are happy to get on stage with us and give great testimonials about their experience so far. So that’s a really good leading indicator.

Again, without offering numbers, our pipeline of people wanting these services globally has been filling very nicely. So we know we've hit a responsive chord. We expect that we will fulfill the promises that we’re offering and that our customers will be happy. It’s too early, though, to say, "Here's three case studies that show, our customers are saying how it’s gone, because they haven’t been in it long enough to deliver those metrics.

Gardner: Speaking of being on stage, you yourself have been on stage here at VMworld in Las Vegas and told your story. Maybe you could reiterate a bit or summarize what it is that you’ve done vis-à-vis VMware to enable this capability.

Many of the things needed to be done from scratch, because we didn’t have models to look for that we could copy in a marketplace.



Rubinow: When we were putting together our cloud architecture and thinking about the special needs that we had -- and I keep on saying it’s not run-of-the-mill cloud architecture -- we we’re trying to make sure that we did it in a way that would give us the flexibility, facilities, and cost that we needed. Many of the things needed to be done from scratch, because we didn’t have models to look for that we could copy in a marketplace.

And we also realized that we couldn’t do it ourselves; we have a lot of smart people here, but we don’t have all the smart people we need. So we had to turn to vendors. We were talking to everyone that had a cloud solution. Lots of vendors have lots of solutions. Some are robust, and some are not so robust.

When it came down to it, there were only a couple of vendors that we felt were smart enough, able enough, and real enough to deliver the things to us that we felt we needed to get started. I'm sure we will progress over time, and there will be other people who will include the picture.

Top of the list

But VMware was at the top of that list of technologies that we have been using internally for several years, been very happy with. Based on our historical relationship with VMware and the offerings that VMware have in the traditional VMware space, plus the cloud offerings, things like Cloud Director and other things, that we felt that those were good cornerstone technologies to make sure we have the greatest chance of success with few surprises.

And we needed partners to push the envelope, because we view ourselves as being innovative and groundbreaking, and we want to do things that are first in the industry. In order to do those with better certainty of outcome, you have to have good partners, and I think that’s what we found at VMware.

Gardner: We’re almost out of time but now that you've had this experience with building out this cloud in a fashion where, if you could do it your way, you can probably apply this to many other industries in terms of performance and security.

What did you learn? Is there any 20-20 hindsight or Monday morning quarterback types of insights that you could offer to others who are considering such cloud and/or vertical specialty cloud implementations?

Rubinow: It goes back to the comments I just made in terms of choosing your partners carefully. You can’t afford to have a whole host of partners, dozens of them, because it would get very confusing. There's a lot of hype in the marketplace in terms of what can be done. You need people that have abilities, can deliver them, can service them, and can back them up.

You can’t afford to have a whole host of partners, dozens of them, because it would get very confusing.



Every one of us who’s trying to do something a little bit different than the mainstream, because we have a specific need that we’re trying to service, has to go into it with a careful eye towards who we’re working with.

So I would say to make sure that you ask the right questions. Make sure you kick the tires quite a bit. Make sure that you can count on what you’re going to implement and acquire. It’s like implementing any new technology It’s not unique to cloud.

If you're leading the charge, you still want to be aggressive but it’s a risk management issue You have to be careful what you’re doing internally. You have to be careful who you’re working with. Make sure that you dot your I’s and cross your T’s. Do it as quickly as you can to get to market, but just make sure that you keep your wits about you.

Gardner: Excellent. We’ve been talking about advanced adoption of specialized cloud delivery models and how they’re changing the game for IT in such vertical industries as finance. Also, I imagine that this is really going to be changing your business model So congratulations on that.

Rubinow: Thanks.

Gardner: We’ve been talking with Steve Rubinow, the Executive Vice President and Chief Information Officer at NYSE Euronext. I appreciate your time, Steve.

Rubinow: Thank you.

Gardner: And thanks to our audience for joining this special podcast, coming to you from the 2011 VMworld Conference in Las Vegas.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of podcast discussions. Thanks again for listening, and come back next time.

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

Transcript of a BriefingsDirect podcast from the VMworld 2011 Conference focusing on NYSE Euronext's use of cloud in making a foray into providing customer services in a vertical market. Copyright Interarbor Solutions, LLC, 2005-2011. All rights reserved.

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