Clouds, Stages, and IT Spending

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There is a lot of talk about what is or is not “cloud computing” and whether such a thing as a “private cloud” does or does not exist. In the end I believe there are many forms of cloud. The question examined in this post is “what impact will a move to cloud computing, in stages, have on IT spending?”

Recently Michael Neubarth wrote another fine article. Its title is “Are Private Clouds Hogwash?” For some reason for a number of people the very idea of a “private cloud” is disturbing and disorienting. Neubarth quotes a number of the literati on the subject. Most say cloud computing must be outside the enterprise or clouds require a scale of computing and mutually-balanced workloads that a single enterprise cannot offer. Maybe, though this argument seems to fly in the face of the origins of many cloud providers (Amazon, Salesforce.com, IBM).

The private cloud naysayers do cite a concern that I share. Some people are simply calling their traditional data centers “private clouds” and declaring victory. But, simply employing virtualization, web-based computing and other technologies doesn’t make a cloud. Neubarth quotes P Laudenslager on his blog, “Calling [the use of modern technologies alone] a private cloud is like drinking alone and calling it a private party." You can’t just put lipstick on a data center. There is a required aspect of cloud computing that is by-the-drink, load balanced, on demand, scalable with the financial, service management and administrative practices needed for businesses to rely on such capabilities.

Still, one might well be confused reading the complaints about the term “private cloud” at all versus seeing where major players are placing their bets. IBM, Acadia (the joint effort of EMC, Intel and Cisco), Google, Amazon, Microsoft and others might disagree. Acadia’s stated purpose is to offer private clouds as evolutionary pathways for IT. Many readers of Rock Icons and IT Thought Leadership feel as Judy Collins did when she wrote:

I've looked at clouds from both sides now
From up and down and still somehow
It's cloud's illusions I recall
I really don't know clouds at all

The research firm Saugatuck Technology has a take on Das Kloud that is fairly centered. In their research alert “Cloud IT: Stages of Simultaneous, Disruptive Growth and Change” they describe cloud computing as “The Cloud. IT as a Service. Platform-as-a-Service. Software-as-a-Service. Hosted services. Managed Business Services. These and many other capabilities and offering types comprise what we have labeled “Cloud IT.”

It’s a deliberately inclusive definition. They go on to say that “all aspects of user IT and business operations are rapidly melding into an inextricably interwoven, and inter-dependent, series of capabilities that are delivered and used as one or more services via one or more networks. [Saugatuck] no longer sees easily-definable boundaries between IT and business; just as [they] will soon see the disappearance of boundaries between traditional (on-premise) and Cloud-based business and IT.”

Saugatuck’s point is that user IT and business operations are rapidly becoming intertwined “into an inextricably interwoven, and inter-dependent, series of capabilities that are delivered and used as one or more services via one or more networks.” It’s a practicalist view, not a purist view. They see that the business/IT boundary is blurring as well as traditional, on-premise and off-premise IT. By extension clouds must reach from outside the business into the business.

Saugatuck also sees the use of Das Kloud evolving in four stages within enterprises. The first is the Point and Supplemental Stage where the majority of Cloud IT exists today for users and providers. In this stage cloud infrastructure offerings and use is “filling in gaps, augmenting existing system and process capabilities.”

The second stage is the Developmental Stage. Cloud computing makes a practically limitless scope of software development resources available to users and vendors alike, and very inexpensively. Software developers no longer have to rely on dedicated internal resources to code, test and refine. Resources are available whenever (and wherever) needed, and can be turned on and off as required.

The Internal Growth Stage is the third stage and involves significant development, deployment, and use of Cloud IT within user organizations as part of overall IT strategy and operations and includes private and/or internal clouds.

Saugatuck’s vision has a fourth stage, “Hybrid/Interwoven,” wherein customized combinations of traditional, Internal/Private Cloud, and third-party Cloud IT are delivered and used. Saugatuck ties it all together with this model:

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Working on Step 2

If we take Saugatuck’s estimates and stage descriptions as an example what are the implications for IT spending? Recall the basic concepts behind the IT funding model:

1. Systems built this year must be run and supported over time
2. Left unchecked, the compounding effect of increased operations and support costs inexorably crowd out further new systems spending
3. Because businesses cannot tolerate static systems, because system change and new challenges emerge, constant efficiencies are needed in operations and support costs to make budgetary room for new systems development

As described in Holding the Line on IT $pending, many companies are pursuing Saugatuck’s first stage of Supplemental Point cloud solutions in their campaign to hold down operations and support costs. These often include solutions as storage and processing. In the case of SaaS, many customers have deployed focused “point” solutions focused on key business. Saugatuck says these “solutions differ in concept very little from any early-stage, newly-introduced IT, with the possible exception that they are exceptionally low in cost to acquire.” And that is their point, budget reduction in operations to enable development spending.

The second stage deals with cloud computing and systems development. In an example of Platform as a Service (PaaS) multiple providers are coming to market with entire offerings for systems development in the Das Kloud. IBM and Microsoft are both investing heavily in Cloud-based development platforms environments and services for customers and their ISV and development partners. The Cloud also makes a practically limitless scope of software development resources available to users and vendors alike, and very inexpensively. This pattern will reduce the cost of developing systems and thus may ease the demand to reduce unit costs in operations and support, in the short term.

However, as cloud-based development becomes standard all competitors will have the same capabilities and the old pressures will resume. IF, as some claim, cloud-based development is a productivity enhancer for systems development it will bring systems to production faster. This will increase the pressure on support and operations to reduce costs as their workload will increase without resources to handle it. This will push those organizations farther into the cloud-for-cost-operational-reduction camp.

Saugatuck’s third stage, the Internal Growth Stage, is the significant development, deployment, and use of Cloud IT within user organizations, as part of their overall IT strategy and operations. It is a reaction of the success of the first two. If the Stage I, or Initiation Stage uses of Das Kloud reduces operations costs and eases development then everyone will want to be on those bandwagons. This typically results in a rapid increase or “Contagion” in use of computing and, in this case, a rapid increase in cloud-related spending.

Nolan's 4 Stages of EDP (IT) Growth

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I’m not particularly concerned with whether or not there IS such a thing as a “private cloud.” I think the description is apt enough. It describes how many very large organizations today, and smaller ones in the not-too distant future, will use cloud technologies. I’ll leave the nomenclature battle to others.

I do believe there is a driving requirement to reduce IT support, maintenance and operations unit costs day in and day out, week in and week out, year in and year out. The Cloud appears to offer assistance in making reductions without sacrificing delivery and quality. As and if that proves out expect your business to use much more of it in the near term regardless of the name you put on it.

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Be Careful in the Custom Infrastructure Wasteland

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An interesting article was posted today at CIO Zone. The article was titled “Cray Teams with Microsoft on Cloud Computing.” Apparently Microsoft and Cray plan to work together on cloud computing systems. Cray is a supercomputer company. Microsoft is a well known provider of software for PC’s and servers... I find it interesting in that on first blush these are strange bedfellows and neither is “top of mind” in this market. It appears to me that they’re trying to get into the game.

The two have formed a partnership whereby Cray’s custom engineering group will work with Microsoft Research (italics are mine) to explore and prototype cloud computing infrastructures. They’re focus is to “dramatically lower the total cost of ownership for cloud computing data centers” through the application of “latest breakthroughs in high-density packaging and cooling technologies.” According to Cray this is the engineering group’s first move into the commercial market. Until now they have designed and delivered custom solutions to the specifications of an individual customer.

In previous posts I have referenced the Everett Rogers’ Diffusion of Innovations and Geoffrey Moore’s application of this idea to the marketing of technology solutions in Crossing the Chasm. In those models today’s announcement involves two innovators who are enthusiastic about their technical prowess and the contributions they can offer. They will likely construct some impressive prototypes and go to beta with a few customers (including themselves). Then they will face the challenge of getting material adoption from the market at large.

If history serves the Cray and Microsoft technology enthusiasts and visionaries will have a hard time convincing the wider “pragmatic market” to adopt their solutions. For one thing, as enthusiasts and visionaries they will tend to have a tin-ear to the non-technical buying patterns of the market at large. The pragmatic market wants providers with track records that cover not just the technical but the financial and support aspects of the buying decision as well. They want providers with organizational infrastructure and history. They want reliable, long term partners from that space. This is a new market for the partners.

For another thing, by the time the partnership is ready to go the relative importance of their packaging and cooling technologies will likely diminish. Theirs may always be better than what competitors offer but it will be hard to be so much better that it sways buying decisions in the face of other benefits competitors will bring. In large scale computing like Das Kloud everyone is working on energy conservation. So-called Green Computing makes everyone feel good and saves a lot of money. Other technically advanced and well heeled, long-time players are hard at work on their own efficiencies. Cray’s advantage will have to be substantive to drive very many decisions by customers.

Still, some IT management can’t resist the temptation to use “the new new thing.” In one ancient example a colleague was surprised to find that the IT director, unsatisfied with the IBM operating system that came with his mid-range device, had written his own, “Chief/370.” In another, a major insurance company’s technical services group was unsatisfied with the transfer rates and job control capabilities in the standard labels for data center tapes and wrote their own. They were internally efficient and had no upward compatibility at all and could not share files easily with others.

More recently companies are building their own content management systems or buying “unique and innovative” Enterprise Service Busses. In all of these cases the maintenance and support of the technology becomes an internal, un-leveraged expense versus a shared expense across all users of the technology. Sometimes you don’t even get to an operating solution. Not long ago a major financial services firm planned to rewrite all of their 30 year old core account management systems in a solution so elegant it required proprietary, early-stage processors. Soon enough the runaway project collapsed and hundreds of millions of dollars went wasted. The hardware vendor collapsed too.

Working on Step 2

Previous posts have shown the total cost of ownership relationship between developing systems and the down-stream costs of maintenance, support and operation. If the underlying infrastructure you are using is unique to you or shared by a very few others your total cost of ownership for that portion of your applications portfolio will be high, in some cases prohibitively.

On the other hand, if the only thing you do is employ technologies that are widely installed and thoroughly market tested it is unlikely that you will be able to generate any material competitive advantage from information technology. For most companies it becomes important to not only keep an ear to innovations but to pursue them from time-to-time. How to proceed?

My first suggestion is that you soberly set your context in business terms. Either you work for an aggressive company or you don’t. There is an expectation that managers try new things in some companies. In others managers have less leeway. All companies experience change. Perhaps your company is experiencing more change in the nature of the competitors you are facing, in how people are winning (or losing), in what the future holds. The more aggressive your corporate personality, the more leeway managers have, the more change your industry is facing the more innovative risks you should consider.

Still, when considering risks be hard nosed about it. Malcolm Gladwell published an instructive article in The New Yorker in January describing how true entrepreneurs like Ted Turner, Sam Walton and the hedge fund manager John Paulson, were not actually wild risk takers. Instead, they were thorough, detail-oriented and, once they fully understood an advantage, very aggressive. The people who thought they were risk takers, or crazy, hadn’t done the homework that showed they had a sure thing on their hands.

You may well want to use a burgeoning rules technology or a better business intelligence platform or cloud computing from Cray and Microsoft. Make a thorough analysis of all your options. Know the total cost numbers objectively, deeply and coldly. Do not sugar-coat your internal support costs or the risk that you’ll have to provide more support than the vendor or your internal enthusiasts think. It’s always better to have others in the buying pool with you. Being the only owner of Chief/370 is a disaster. Have some company you can talk openly and bluntly with.

Lastly, give yourself an out. When sitting in design meetings you’ll have discussions about establishing structured interfaces between modules and systems or using an SDK from the vendor (that may well be under design as you’re talking). These are important discussions. A friend often said that “an interface is a freedom creating device. If you obey it you can do whatever you want on your side.” In this sense establish an interface between all other systems and the technology innovation. If the innovator’s solution doesn’t prove out you can move on to another solution. By then the market may well have surpassed the innovator. Unless you like failure do not accept the compromise of speed-to-market for fudging on this out. If the project gets behind or gets costly then adjust the budget and timeline or get out. The minute you customize the solution it’s broken and it’s yours and that’s rarely a good thing.

Social Media Marketing Stands at the Chasm

(Or, "How to Stop Worrying and Learn to Accept the Need for ROI)

Recently I attended a seminar at the Harvard Business School that featured David Meerman Scott, the consultant, speaker and author of the book “The New Rules of Marketing & PR.” Scott spoke about Social Media and business marketing. His was by far the best talk I have been to in quite some time. Scott is a marketing careerist who is an early adopter and proponent of the use of Social Media (YouTube, Twitter, Facebook, LinkedIn, etc.) in marketing. He is experienced, knowledgeable, engaging, and entertaining.

Scott had my attention very early in his talk. He asked the participants, many of whom are the “old guard” of Harvard Business School’s theories of marketing, these four questions:

In the past two months, either privately or professionally, in order to find an answer to a problem, or to research or buy a product, have you:

1. Responded to a direct-mail advertisement?
2. Used magazines, newspapers, TV or radio?
3. Used Google or similar search technology?
4. E-mailed/texted/chatted with a friend, colleague, or family member and received as a response a URL which you then clicked to visit the web site?

As it happens audiences around the world, in many different forms and contexts, answer pretty much the same way. Few of us buy or do research via direct-mail or the traditional media of magazines, newspapers, TV or radio. Everyone uses search technology and web-based interactions to find out what’s available, what’s hot, what works, what’s the best deal, and what to do. Everyone.

Scott’s talk made tangible my already existing instinct that Social Media was the thing to do.

But, many people have not experienced such a revelation and remain unsure of Social Media. Some are quite hostile. A large portion of the populace thinks it’s for geeks and or charlatans…

- Figure 1 -

One way this is expressed is in a question that has gotten under Scott’s skin, “what is the ROI of Social Media?” His reaction to this seemingly innocuous question was the one off-note key of the presentation. He really hates it when someone says “show me the ROI.” Just the day before he had gone on what he calls “a rant” (listen here) about his frustrations with constantly being asked to provide, demonstrate, or describe the path to the ROI for Social Media in business.

The visionaries, like David Meerman Scott are often frustrated by the requests of business to provide a financial justification for two main reasons. The first is “can’t they just see it? Can’t they see the time we’re wasting? We have to go NOW!” The second is centered on the reality that when management isn’t ready to deal with a subject, doesn’t want to invest, they often ask for an analysis such as an ROI, claim that the underlying assumptions are questionable, and effectively say “no.” It’s a deliberate waste of the visionary’s time. Nobody likes to push on a rope, certainly not a visionary.

But this is not new. At each brand-new age in IT the proponents are asked for an ROI and they tell those who hold the purse strings, “you just don’t get it.” They get on their “you’re such a Luddite” horse and dismiss as irrelevant those who would challenge the vision. The question and the frustration with it are as old as time. It happened with distributed processing vs. mainframes, PC’s vs. central IT, the Web versus proprietary networks and is apparently happening, right now, with Social Media for business (and plastic corks for wine...).


Working on Step 2

Eventually proponents of each new technology or process or approach understand that prior to gaining significant investment those who are responsible to shareholders and management need to be shown why the proposal is a good idea and why and how it will produce a beneficial financial return. Eventually the proponents who said “you don’t get it” realize that it is they who don’t get it and we all get down to business.

The song they’re singing is called by Geoffrey Moore, another marketing maven, “Crossing the Chasm”. In his work he argues there is a disconnect between the early adopters of the product (the technology enthusiasts and visionaries) and the early majority (the pragmatists). Moore believes visionaries and pragmatists have very different expectations creating a gap between the market as viewed by what visionaries offer and what pragmatists are willing to buy.

In Crossing the Chasm (and the closely related to the Technology adoption lifecycle) five main segments are recognized; Innovators, Early Adopters, Early Majority, Late Majority and Laggards. Moore’s recommended strategy is to focus on one group at a time: Innovators then Early Adopters and so on, using each group as a base for marketing to the next group. The hardest transition, and the location of the chasm that Social Media faces, is making the transition between visionaries (early adopters) and pragmatists (early majority). If you make it through to the end you have yourself a world-class success.

- Technology Adoption Lifecycle -

Crossing the Chasm is, for want of a better term, about a cultural conflict. Early Adopters are the visionaries who have the insight to match an emerging technology to a strategic business opportunity driven by a dream. As a buying group, visionaries are easy to sell but very hard to please. "You can succeed with the visionaries, and you can thereby get a reputation for being a high flyer with a hot product, but that is not ultimately where the dollars are. Instead, those funds are in the hands of more prudent souls who do not want to be pioneers"

The Early Majority are pragmatists. "They care about the company they are buying from, the quality of the product they are buying, the infrastructure of supporting products and system interfaces, and the reliability of the service they are going to get. Pragamatists tend to be 'vertically' oriented, meaning that they communicate more with others like themselves within their own industry than do technology.

There are four fundamental characteristics of visionaries that alienate pragmatists:

1. Lack of respect for colleagues' experiences.
2. Taking greater interest in technology than in their industry.
3. Failing to recognize the importance of existing product infrastructure.
4. Overall disruptiveness.

It is very difficult to break into a new industry selling to pragmatists, and that’s essentially what Social Media is attempting to do in overall corporate marketing. References and relationships are very important. Pragmatists won't buy from you until you are established, yet you can't get established until they buy from you.

Moore says "Overall, to market to pragmatists, you must be patient. You need to be conversant with the issues that dominate their particular business. You need to show up at the industry-specific conferences and trade shows they attend. You need to be mentioned in articles that run in magazines they read. You need to be installed in other companies in their industry. You need to have developed applications that are specific to their industry (italics mine). You need to have partnerships and alliances with the other vendors who serve their industry. You need to have earned a reputation for quality and service.”

For actual chasm crossing tangible, “relevant to my situation” applications have a huge advantage. They are most likely to be championed by end users. Applications are what an end user sees. If the application fixes a strategic challenge they can be used to generate a business case. Certainly Social Media, with its very low costs of technology, should be able to do this. To accelerate the adoption of Social Media techniques and tactics we must tie them directly to an application, to a business case, in order to gain the end-user sponsorship necessary to succeed.

To cross the chasm, Moore advocates that a company focus on a single market, a beachhead, win domination over a small specific market and use it as a springboard to adjacent extended markets to win. So, if you haven’t dipped your toes in at all, don’t try and apply Social Media everywhere at once. Choose a market or a channel. If you have been working Social Media pay attention to those activities that succeed in Social Media marketing and find the tangible ways they generate business value.

Back to Meerman Scott, don’t make the content about your product. Make it about your customers’ interests. This is not coercive marketing/advertising. For this portion of your content at least expect it to be customer-participatory and contributory and by definition you have to relinquish message control. Get involved in the on-line communities your target market participates in. Create triggers in content that encourage people to share and point them to your virtual doorstep (where you can sell to them ‘cause they’ve opted in).

To convince internal or external investors, those with the purse strings, show a planned deployment of resources and an expectation of the Awareness and Interest you will generate, how you’ll know if you succeed, and what you’ll do if results are good, bad or indifferent. Make them confident you know what you’re doing. They’ll get that and you won’t seem so “reality challenged.”

Let's Get Small

(this post is expanded, in content and images from an article published at IT Business Edge)
After toiling in obscurity, learning the hard way about stand-up comedy and how to play the banjo, Steve Martin started catching on in the 1970’s hitting the big time with a comedy album titled “Let’s Get Small.”




The title and the bit by that name are nominally an absurd twist on the drug culture of the time and the phrase “Let’s get high.” As it turns out there is a theory that Martin was actually prescribing how to manage a portfolio of IT projects. Researches have debunked the theory that Martin was recommending that IT management parade around the office with arrows through their heads and wearing Groucho Marx glasses…

The longer each project is the less likely that you can properly define all its goals much less achieve them much less ensure yourself and your colleagues that the effort was worth it. If you have a long-term goal, a roadmap, that’s fine. Get there in pieces with tangible benefits coming from each step.

This reason is that, no matter what we’re doing, from target sports to planning out a systems initiative, our aim is much better on short shots than it is on long ones. The longer the shot, or project duration, the harder it is to see, understand, explain and focus on the target. Even if you can do those, the longer the project duration, or shot, the harder it is to actually take aim at all much less deliver what you intended.

With a little thinking you can predict how far off your aim is likely to be and, using that information, have a sensible discussion about what should be the limits on individual project duration. To keep the example simple let’s assume that whatever you think is the right thing to do today will, in one year’s time, be off by 20%. There are many reasons, among them: technology will change, vendors will collapse, the economics of your business will change, skill sets will enhance, and new competitors will enter your market forcing new ways to compete.

If you had $3 million to spend and you embark on a large-scale 3 year project, due to compounding year-over-year change your vision will be off by 20% after one year, 36% after two years, and nearly 50% after 3. Few projects are managed that way except for the “we have to replace the core systems” projects. The compound inaccuracy of vision and reality is one of the reasons so many of them result in runaway projects (I’m thinking of three that I’m familiar with right now).

If you took that same $3 million and spent it on a series of $1 million dollar, 1 year projects the visions would miss the targets by 20% each year, but never more than that. Break it down again into 6 month chunks and the maximum mis-alignment is 10%. Go “extreme” and require all projects to deliver value in 3 month chunks and you’re never off by more than 5%:




In terms of protecting the bottom line there is no question that making projects small is the best possible thing to do, to a point. Just going from one-year projects to maximum 6 month projects enhances the value for the dollar by 10%. This is big money especially in tight money times.

This analysis must be tempered by the time, effort, and distraction you receive from repeatedly going back to the drawing board to set new goals. If you chunk up a long-term project one frequently runs the risk of losing funding from phase to phase as “higher priorities” arise or as the ROI on Step 3 is attacked as too weak to fund even though it’s fundamental to Steps 3-6. Then there’s the ego/glory factor. Business and IT managers alike often prefer the big budget projects with the big resume impact they carry.




This is where a plan or a roadmap comes in. Susan Cramm suggests you get the money but spend it right. What she’s on about here is something akin to the Apollo program. There was a goal set out, get to the moon by 12/31/69, but the plan in 1961 only laid out the macro steps and the near-term efforts. On an effort like that, since it had never been done before, they couldn’t plan “beyond their headlights.” Most business projects are not that sophisticated. That said, the underlying business conditions and assumptions are constantly changing and so must project definitions.

Speaking of cramming… Do NOT use this as a license to request 7 months of deliverables and their required effort in 4 months time. This is an exercise in maintaining “alignment.” There are myriad ways people try and take time off a professional job. My personal favorite is “don’t do testing,” which is fine if you want to be highly productive at delivering systems that don’t work. The value of this approach lies only is keeping resources and time for tasks as they must be but re-adjusting your aim on a regular and timely basis.

If you set and execute a long term vision, planned out up front without down-stream adjustment you will miss the mark by a wide margin. Set long term goals but limit your systems definitions, designs and efforts to short-as-possible projects with tangible benefits. At the end of each take a short breath, reset your sights, and do it again. Get small. It’s the way to win.