Archive for the ‘cloud computing’ Tag

Banking goes digital

The banking industry is changing, whether it likes it or not. In the past, the business was driven by capital-deployed, risk-management competencies and branch coverage. The financial meltdown of 2008, however, changed much of that. The sector now features low growth, increased regulations and leverage limits. To make matters more complex the emergence of digital technologies is transforming the way customers want to deal with banks and opening up market opportunities for aggressive and focused competitors. Increasingly, banks will need to address this “new normal“ by enabling their customers with “any time, any place” digital capabilities and capitalizing on Big Data insights that come from mining the reams of daily customer and operational interactions.

Despite the rise of transformational technologies, bankers in 2014 run their businesses pretty much as they did in 2008. Most of the executives we speak with continue to hope that traditional profit drivers — high fees, exchange-rate volatility and a growing economy — reassert themselves. However, hope is not a strategy especially when consumer behaviour has fundamentally changed.

The arrival of mobile computing, social media, digital payments, and web-based, face-to-face communications like Skype have radically changed the way people buy products and interact with organizations. Not surprisingly, these technologies have created opportunities for disrupters to enter the sector with low-cost, focused offerings unencumbered by legacy business models. In the United States, for example, Walmart has introduced reloadable pre-paid offerings that act like checking accounts. PayPal and Bitcoin are now enabling payments outside the banking system. Covestor links individual investors with portfolio managers who meet their investment needs.

It is bewildering how slow many financial institutions have been in adopting digital technologies and exploiting Big Data, compared to other industries. For example, while music stores, electronics stores, and other retailers have reduced or even eliminated physical distribution, large banks have expanded it. Many blue-chip firms like Cisco, Walmart and IBM already employ Big Data and mobile strategies to deliver new services, streamline their operations and reduce cost. If banks want to compete better and protect their franchise, they need to act more like mobile and digitally driven competitors like Apple, Google and Facebook — who not incidentally command much higher market capitalizations.

TD recently identified digital transformation as a corporate priority, and built capabilities back from the customer’s needs and desired online experience. “When we’re working on new online or mobile banking features, we put ourselves in the customer’s shoes to see things from their perspective, says Rizwan Khalfan, senior vice-president, digital channels, TD Bank Group. “We know customers are quick to adopt new ways to bank that make managing their finances simpler. It’s not just about paying a bill on your mobile, it’s about creating a great customer experience across all our distribution channels.”

Prudent bankers are starting small, testing extensively and then boldly scaling. Khalfan says, “When we launched the ability to deposit cheques using your mobile phone in the U.S., we spent time perfecting the little features that will make it an overall better experience. We know it’s hard to hold your phone and take a photo by pressing a small button, so on our app, customers can press any part of the screen to take a photo of the cheque and the photo won’t be taken until the camera has focused properly. We’ll be leveraging those learnings when we roll out that capability in Canada later on this year.”

Across the pond, British bank Barclays is taking a bold approach to digital transformation. Its strategy is to use technology to get closer to customers and simplify their lives. In order to become the “Go-To Bank” for consumers, the firm rapidly launched some breakthrough services like Pingit (Euorpe’s first mobile payment app) and CloudIT (a cloud-based service that allows consumers to store documents and photos online). When launching Pingit, Barclay’s dispensed with their traditional multi-year business case. Mike Walters, head of UK Corporate Payments, was recently quoted in The Economist as saying: “The rate of change in mobile app technology is so fast that the best thing for us is to be aware of our customer trends, and then be fast to execute.”

Without a sustained top-down commitment, change won’t come easy or quickly. Traditional business and IT models, low digital literacy among many executives and a risk-averse culture will slow down digital adoption in some areas. Yet, bankers don’t have a choice if they want to protect their franchise and find new avenues of growth. They would be would be wise to heed the words of well-known British philosopher Allan Watts: “The only way to make sense out of change is to plunge into it, move with it, and join the dance.”

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

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Cloud computing comes of age

Despite having come of age in just a few short years, not everyone is convinced cloud computing is IT’s silver bullet.

At a recent IT industry event, Apple co-founder Steve Wozniak intimated, “I want to feel that I own things. A lot of people feel, ‘Oh, everything is really on my computer,’ but I say the more we transfer everything onto the web, onto the cloud, the less we’re going to have control over it.”

Others point to possible technical issues.  According to ElectronicDesign.com, the Cloud could be vulnerable to network traffic jams given the anticipated growth of Big Data.  The digital universe is forecasted to double every two years (or approximately 41% per year), with much of this data expected to reside in a cloud.   This growth is significantly faster than the network connections’ bandwidth, which grew just 11% in 2012.

Businesses may unwittingly increase their business risk when they move to the cloud unless they are satisfied with data ownership rights, the conditions by which data can be released (e.g., by government subpoena) and the responsibility for liabilities arising from a third party’s use of the information. Since many cloud players are new, what happens when the critical data is trapped in a company that fails or suffers a major technical failure?

Finally, some companies will have their own challenges around integrating different systems, optimizing internal workflows or reaching target ROI that may make change painful.

Yet for each of these potential pitfalls, there are numerous advantages to using the Cloud Computing. Its ecosystem and technology has matured to the point where it can now transform the way most organizations purchase and use IT resources. Firms that are able to leverage Cloud 2.0 will benefit from a 15-33% reduction in IT costs, as well as faster, more flexible business performance.

A brave, new world

Many companies are beginning to realize earlier concerns related to the Cloud’s security, culture and uptime were exaggerated.  Large amounts of sensitive data have resided in the cloud for years without major security breaches.  Early adopters have worked through the organizational hiccups and established cloud-enabling management systems.  Finally, cloud models have shown they can beat the uptime records of large internal IT systems by a wide margin.

Just as important, cloud vendors are beginning to reap the benefits of billions of dollars in product and infrastructure investment. For example, evolving open standards around security and infrastructure management have allayed security concerns, driven interoperability and lowered switching costs.  The cloud can now support critical and non-critical tasks across the entire organization, whether it is a small business or a global enterprise.

Companies now have proven options to leverage the cloud.  They can choose between: accessing public clouds like Amazon, Microsoft or IBM to quicken time to value and scalability; running their own private clouds to guarantee control and security or; deploying a hybrid public/private cloud model that gives firms the best of both worlds.

Finally, all the pieces needed to deploy a complete technology and service solution by one vendor is now available. As an example, two recent IBM moves — a $2-billion purchase of cloud-service vendor SoftLayer, and the launch of a $200-million Cloud Leadership Data Centre (CLDC) in Barrie, Ont. — enhances the company’s cloud infrastructure, network and security capabilities enabling it to better target growing markets, such as mobile, gaming and analytics. “You only need to look at the accelerated level of investment,” says Aldo Gallone, director of Cloud Computing for IBM Canada, “to know that the Cloud is now mainstream.”

Rebooting growth

A maturing cloud market is expected to lead to higher adoption. Gartner predicts the 2013 worldwide market for cloud computing to grow $18.5 to $131-billion.  A study by 451 Research reported more than 60% of IT leaders expect their year-over-year cloud-enterprise spending to increase in both 2013 and 2014.

Organizations that can work through the remaining hurdles of cloud computing will benefit from Cloud 2.0’s promise of significantly lower IT costs as well as improved business continuity, agility and IT scalability. Those firms that keep their head in the sand run the risk of diminished market performance and financial results.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Do you have too much IT?

These are heady times for technophiles.  New technologies like mobile computing, data analytics, social networking, and cloud computing has propelled IT back to the top of corporate agendas.  However, in the rush to exploit new applications, many companies can easily over indulge in IT with negative repercussions on cost, ROI and organizational performance.

In today’s competitive economy, IT exuberance is understandable.  Managers want to use breakthrough technologies to serve customers better, improve performance and ring out more cost savings from operations.  At the same time, nobody wants to go through the carnage of the early 2000s when firms threw away $130B in IT spending between 2000-2002 (source:  Morgan Stanley). Furthermore, CEOs can no longer ignore the high cost of IT in their search for bottom line savings.  In some firms, the IT budget is now approaching 12-15% of total corporate spending.

Managers are faced with a dilemma:  how do you take advantage of new technologies (if they are any good) without overspending and distracting the business?  Based on our research and client experience, we recommend the following maxims:

1.  IT must follow business strategy not the other way around – Typically, many managers look to get the latest applications, functionality and hardware before they understand how it would fit into the corporate strategy and workflows, or because they succumb to common phenomena like ‘feature creep’ or ‘keeping up with the Joneses.’  As a result, much of the IT purchased does not end up being deployed or effectively utilized.  There are a variety of reasons for this, including:  uneven management attention, insufficient employee training or poorly articulated requirements.

When strategy and goals dictates what resources are needed and when, less IT is inevitably purchased and more is utilized.  To make this happen, firms should tweak their cultures in two ways.  First, business sponsors should take the responsibility for better understanding existing IT assets and capabilities.  They should jointly propose with IT technical solutions that align to business needs and corporate strategy.  Second, the IT department must adopt an ‘inside-out’ approach to recommending technology.  To do this, they must be congruent with business goals, strategy and plans before seeking out the ideal IT solution.

2.  The organization is the focus – The role of IT is to support the organization, not the other way around.  It is common for impatient managers to throw IT resources at what appears to be a business problem, when in fact it is the workflows, structure and policies that are the issue.   Leaders need to first make sure the organization’s roles & responsibilities, decision rights and processes are optimized before considering new IT resources.

In addition, firms need to recognize that IT is an aid to judgment not a replacement for it.  A case in point is data analytics.  The potential of new DA technologies to better segment customers or identify operational improvements is hard to resist.  However, managers need to tread carefully to ensure their organizations have the capabilities, skills and focus to fully leverage the power of DA or implement its insights.

3.  IT simplicity should be the goal – Not surprisingly, the typical IT department is a mish mash of hardware, applications, operating systems, vendors and skills.  This complexity breeds more complexity when managers start to add capabilities while continuing to support legacy systems.   No wonder IT spending can quickly, quietly and unexpectedly spiral out of control.

Standardizing the computing platform across a company or business unit is one answer.  Many companies like Cisco and Zara have gained significant productivity improvements and enterprise-wide IT savings by standardizing on a limited number of platforms, applications and vendors.  In fact, firms can generate savings through scale economies and experience effects even when the individual asset is not the least expensive or the most capable.

Another way of getting more IT for less money is to move your computing into the cloud.  While valid security and technical concerns remain, there are enough case studies and organizational best practices to justify moving many IT operations and applications, particularly non-core activities.

4. Re-exert transparency and control – Mismanaged IT spending is a pervasive problem in large organizations, particularly where there are weak controls and spend opacity. We’ve seen companies with strict headcount ceilings simultaneously give free rein to junior IT managers to purchase hardware, software licenses and consulting services at their leisure.  A hospital we work with allows researchers to buy new hardware for every new project regardless of the presence of hundreds of under-utilized servers and licenses lying around.   In our experience, rogue purchases can account for up to 25% of an IT budget.

To counter this, management needs to apply the same spending rules and discipline to IT as they do with other functional groups and expense categories.  Furthermore, centralized purchase and finance departments should have more knowledge and visibility into existing IT assets and vendors in order to encourage the sharing of assets across business units and departments.

Many companies will flourish despite a minimalist approach to IT but to a large extent because of it.  A ‘less is more’ IT strategy can lead to lower spending, reduced business complexity and higher employee engagement. Achieving this is as much about strategic alignment and organizational optimization as it is about technology selection and resourcing.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Organizing for cloud computing

Many organizations we work with are diving head first into the latest IT game changer, cloud computing.  While a comprehensive technical and financial analysis is usually undertaken, few companies thoroughly consider the organizational implications of this strategic move. They do this at their own peril.  We have seen cloud computing implementations go astray when the wrong structures, processes and practices compromised the right technical solution.  Managers would be wise to consider whether their organizations are cloud-supportive before re-architecting their infrastructures.

In a traditional IT model, technicians, hardware and software are tied to specific geographies, departments and business units.  In most cases, this model fails to maximize operational flexibility and IT asset utilization.  A CC architecture, on the other hand, centralizes and virtualizes IT resources, making them available to all users when needed as needed. The result is greater operational agility, lower costs and higher IT scalability.  This fundamental change in the way IT is treated has major implications on a firm’s organizational system and culture.  For example, who controls virtualized IT resources and priorities in an ‘on demand’ environment? How do companies execute projects when assets and capabilities are decoupled from a physical location? And, what work practices are better suited for a more transactional and fluid CC environment? 

If they are to maximize the benefits of CC, business leaders must rethink how their enterprises are organized and run. Based on our consulting experience, we know the following areas are a good place to start:

Focus on tasks, not structure

CC’s rapid IT provisioning enables companies to be more flexible and agile, for example, in deploying new applications faster or responding quicker to market needs. However, many firms have rigid structures and processes that were developed in the era of static IT resourcing.  This traditional model is too limiting to effectively exploit the benefits of CC.  To be cloud-ready, managers should experiment with other organizational approaches that are more synergistic with the way CC works.   For example, an adaptive, SWOT-team structure and working style can more quickly respond to new priorities and deploy the resources and expertise needed to deliver on the business need.  The film industry is a good example of this kind of adaptive system; a wide variety of people and capabilities come together quickly at different points in the production process to execute on a creative concept and plan.  At completion, the people and resources go back to a central business unit or are dispersed onto other projects. 

Form follows function

In a traditional IT model, resources are usually structurally (if not mentally) “siloed” and linked to specific functions via non-standard workflows (i.e. processes)  Putting IT resources in the cloud decouples them from the constraints of a physical location, allowing them to be managed more centrally and deployed virtually.  As such, CC can help bring about the formation of a true Shared Service Organization, a structure that delivers key business benefits. For example, a capable SSO is essential to enabling the adaptive business system mentioned above – assuming good workflows are in place. However, Gary Tyreman, CEO of Univa, a leading supplier of Cloud Computing solutions, cautions that “to realize value, an organization must integrate its cloud-powered IT services into existing workflows.  Where those workflows are broken or non-existent, they need to be fixed and defined.”  Secondly, a SSO brings significant value including lower administrative costs, increased management control & standardization, and the possibility for greater organizational learning.  Finally, having a SSO allows IT managers to focus more on pushing the business forward as opposed to hoarding resources and building fiefdoms.

Collaboration breaks down barriers

The common business environment – hierarchical roles, non-standard processes, and department-based metrics – encourages employee practices that are ill-suited to the dynamic nature of CC. To best leverage the cloud’s capabilities, employees need to change how they work.  To begin with, the leadership must foster increased collaboration and alignment within the firm as well as with external vendors.  Examples of the changes required, include:  better aligning IT teams and vendors to overall business objectives (versus more parochial departmental goals); encouraging end-to-end project collaboration (versus point-in-process support); and placing greater importance on team and individual skills enhancement (to drive best practice adoption).  To make these changes stick, leaders will first need to get two things right in their management system.  One, project accountability should live with the business sponsor. Two, responsibility and authority must reside with the SSO leadership.

According to Tyreman, “For most companies, moving to the cloud is more an organizational challenge than a technical problem.”  Fully tapping CC’s potential will require enterprises to recast their structures, processes and management systems where appropriate. Though this may not be easy, it need not be scary. Companies that are open-minded, practical, and flexible will create the right organizational environment to fully leverage the Cloud.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Cloud Computing disrupts software pricing

The delivery of software is not the only thing being impacted by the rise of Cloud Computing.   Moving to the Cloud is also disrupting the traditional software pricing model with the potential to dramatically change customer behavior and impact market dynamics. In the future, CC leadership will be as much about getting the pricing model right as it will be about technical excellence.

The ubiquitous cloud

With CC, software applications are delivered as a subscription-based service over the Web much like a utility delivers power over a grid.  This scheme allows a user to purchase only what they need, when they need it, for as long as they need it.  Not surprisingly, customers are embracing this powerful value proposition.  Forrester Research estimates that over 33% of companies now get some of their software delivered as a service.  The market for Cloud-based services is growing over 20% per year.

Next to provisioning, the biggest impact of CC is how software is priced. Fading fast are the days when general-purpose software packages were sold in boxes with a one-time, perpetual software license fee plus expensive maintenance and upgrade charges.   Instead, Cloud-based services are sold through a subscription-based model – customers buy only those applications they need for particular tasks. Not surprisingly, this new paradigm has repercussions on the profitability, revenue and competitive position of every firm that sells digital products. 

Watch your back

According to Saikat Chaudhuri, a Wharton School of Business professor, “The disruption comes when bundles such as Microsoft Office don’t make sense anymore. Instead of big suites, lightweight applications will become the norm.” Today, customers are wary of big software upgrades that carry expensive hardware and operating costs.  Furthermore, they want applications that could be more easily and cheaply ported over to new environments like mobile computing where their users are.

Cloud-based disruption is everywhere.  Google is taking aim at Microsoft’s Office franchise with web-based services.  Cloud providers like Salesforce.com, NetSuite, and SuccessFactors are aiming to poach business customers from SAP and Oracle. Zynga, which publishes popular free games primarily on Facebook, is a threat to traditional game powerhouse Electronic Arts (EA). In this world, dedicated cloud companies with no legacy box revenues have the upper hand as they do not need to worry about cannibalizing their core business. 

If you can’t beat them…

Not surprisingly, traditional software providers are trying to maintain their market position and revenues by launching their own subscription pricing schemes and buying other cloud offerings.  It’s more preferable – though not easy – to cannibalize your own business in a controlled manner than let someone else do it to you.  Pragmatic vendors will also realize that it pays play offense as well as defense. For one thing, subscription-based offerings enable unique business-building opportunities such as the ability to run quick and cost effective product trial and cross sell programs. 

Growing CC penetration could also mean higher industry revenues for some markets.  A few years ago, we did a pricing study for an enterprise software vendor looking to deploy a cloud service in one of their largest product categories.  Management was concerned that total category revenues would fall after the new service was launched.  Our analysis found that adding subscription-based pricing did not lead to a fall in their business.  In fact, it led to modest revenue gains due to increases in lifetime customer value. More importantly, margins improved as a result of lower distribution and customer acquisition costs.

A brave new world

Industry experience suggests that market revenues and profitability will flourish in a CC-intensive world.  According to Wharton Professor Kevin Werbach, business is “…likely to grow, as recurring revenues and micro transactions replace big up-front payments. Look at the Apple App Store…. That represents billions of dollars in revenues for mobile software, which simply didn’t exist before.”  Professor Chaudhuri goes on to add that “As software is broken down into smaller parts, the [lower unit] pricing can stimulate demand.” As an example, the popularity of iTunes’ 99 cent song downloads may have hurt large music labels but not the plethora of independent artists who now enjoy more distribution than ever before.  For the software industry, market profitability will likely remain the same, but more players could share in the rewards.

A CC model also affords many opportunities to leverage pricing innovation.  Similar to an airline or utility, firms could institute variable pricing based on customer demand. For instance, a company could charge more for applications during demand spikes and less in off-peak hours. As in other industries, software vendors will use different models to generate the same profit, if not more, based on lower prices and a broader customer base.

CC represents a seismic shift in the software industry.  While its implications will take a couple of years to fully play out, the impact on pricing strategy and marketing is already being felt today. Pricing leaders take note: the time for strategic thinking and experimentation is nigh.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Peering into the cloud

Over the past 18 months, I have spent a great deal of time talking with CIOs about their Cloud Computing plans.  Despite the potential value, many firms have taken a cautious approach to deploying applications in the cloud.  And, it’s not for lack of interest or intent.  The current economic and regulatory climate has squeezed IT budgets and heightened sensitivity around business and brand risks.  Furthermore, CC continues to evolve, driven as much by hype and technology as it is by user needs and perceptions. Companies will successfully leverage CC if they can align their IT strategies to their corporate priorities, understand and adopt relevant CC best practices and overcome organizational barriers.

CC is a relatively new computing model whereby application software and its business data resides in remote data centers that organizations access via the Web. There are 3 different types of Clouds: 1) Public clouds – the data centers are run by third parties who co-locate applications of multiple companies; 2) Private clouds – the data centers are run and operated for the sole use of an enterprise and; 3) Hybrid cloud – firms utilize the combination of public and private clouds that best satisfies their computing, user and spending requirements.

To fully leverage CC’s potential, IT managers will benefit from a better understanding of how companies are leveraging the cloud, what kind of financial returns are they seeing and what the organizational implications of these changes would be.

The following insights were gleaned from my consulting work around developing CC strategy and business cases.   Where applicable, I will reference a recent global study published by Tata Consulting Services, a major IT services firm. 

1.  CC penetration has been modest. 

According to Tata, cloud applications make up only 19% of all applications of the average $1B U.S.enterprise. Financial services, IT and manufacturing firms are leading the adoption curve while health care, chemical and metals & mining companies are the bottom 3 sectors.  A typical CC project begins as a line of business pilot, often implemented through a specialized CC vendor – as opposed to their strategic IT partner.  This approach can be implemented relatively quick, helps demonstrate technical performance, determines ROI and garners learnings for larger enterprise-wide roll outs. 

2.  Adoption rates are being driven by customer-focused applications.

Based on our research, marketing, sales and service applications are capturing at least 50% of CC investments.  This partially reflects the corporate importance recently placed on revenue-focused strategies as well as the availability of customer-centered and proven cloud offerings such as salesforce.com and Amazon.  

Many firms continue to have security and privacy concerns about moving applications that handle sensitive data to the cloud.  According to Tata, the applications least frequently shifted from on-premises computers to the cloud were those that maintained employee data (e.g., payroll), handled legal issues (e.g., legal management systems), focused on product performance (e.g., pricing and testing), and processed key customer information (e.g., customer loyalty and e-commerce transactions). 

3.  Leveraging the cloud can deliver measurable and real value.

In our client work, we have seen modest cloud deployments – properly designed, planned and funded – deliver significant short term business results.  For example, new product and services time to market has been accelerated an average of 4.5 months versus the baseline, leading to quicker investment payouts.  From a cost savings perspective, some firms have seen IT utilization rates soar over 500% when they moved some applications to the cloud.  In other cases, 2 companies saved a total of $2.8M over 12 months by deferring or avoiding expensive software licenses and hardware purchases.

Many CIOs remain skeptical around attainable ROI, tracing to a number of factors.  For example, it is difficult to accurately forecast savings and revenue gains without other CC comparables.  In addition, some CIOs still recall the longer than expected payouts from earlier major CRM and ERP investments. 

4.  Other factors, in addition to cost reduction, are driving early adoption. 

Although most cloud vendors emphasize cost savings as the primary benefit, other aspects of the value proposition are attracting early adopters.  These include: more closely tying standardized IT resources and applications to business needs; enabling quicker IT scalability; accelerating the launch of IT-dependent products and services and; enhancing business continuity.

5.  Many companies are cautious about deploying many applications to a public cloud.  On the other hand, private clouds still have much appeal. 

Lingering concerns remain about a public cloud’s security, privacy and total long term cost.  The Tata survey found that less than 20% of U.S.firms would consider putting their most critical applications in public clouds. However, 66% of U.S.companies would consider putting core applications into more secure (and possibly more expensive) private clouds. In both scenarios, we have found that many IT managers are challenged to separate the reality (e.g., strengths, gaps) of CC from industry hype.  Until the industry matures, this disconnect will continue to hinder adoption rates.

6.  Organizational dynamics are a major barrier to higher cloud penetration. 

A transformational IT paradigm such as CC is bound to trigger internal debates around governance (e.g., what are the new rules, policies?), control (e.g., who internally is in charge?) and IT resourcing  (e.g., which functions or business units get priority?) These challenges – and not technical requirements – pose the greatest barrier to higher CC adoption in the short term.

For more information on our services and work, please visit the Quanta Consulting web site.

New IT, a diamond or a lemon?

When it comes to deploying new technologies in areas like social media, mobile enablement and cloud computing, CIOs face a bewildering array of hardware and software choices. Moreover, management dynamics can further complicate matters. For example, IT professionals often fall into the trap of chasing the latest technology fad, over-designing for the application or over-committing to their internal stakeholders. All of these issues will ratchet up complexity, making it hard to separate the good technology – for your company – from the bad stuff.

The cost of choosing the wrong combination of hardware, software and services can be high in terms of wasted investment, greater project risk and longer time to business value. How do managers determine whether a new technology is suitable for their requirements? Our firm helps IT departments make these important decisions through the use of a common-sense yet rigorous 6-step vetting process:

  1. Is there a commonly accepted nomenclature for the technology? Immature or early stage technologies often feature a disparate set of names and descriptions. A new technology is not sufficiently advanced if the industry can’t align around agreed upon terms and definitions.
  2. Have standards emerged? New technologies do not coalesce around standards quickly, as vendors jockey to gain market penetration for their products.  A lack of standards will pose challenges for prospective buyers who want to compare vendors on performance and features, as well as integrate the new technology into their existing IT infrastructure.
  3. Is there competition? The presence of multiple providers validates that a new technology is evolving into an established category.  Having more than one vendor allows managers to evaluate different solutions, set reference prices to minimize cost and avoid single vendor lock-in. 
  4. Is there clarity around functionality and attributes? A lack of clarity in marketing materials or specifications is evidence that an early stage technology is immature or has been over-sold.   Managers should not purchase any new technology unless they are very clear about its functionality, features and value. If you don’t truly understand what the technology is supposed to do, chances are your technical and business users won’t either.
  5. Are there customers?  Having existing (and paying) customers using the technology is crucial to providing your company with use cases as well as ensuring the vendor offers sufficient support and ongoing product development.  Be wary if vendors can not provide a client list.  It is also important to understand whether an ecosystem – customers, consultants, 3rd party developers and community – has evolved to support development and implementation.
  6. What have other user’s experienced? CIOs should be concerned if the new technology has no verifiable and ROI-driven success (deployment and production) stories.  Failures matter as much as successes as they will help you set realistic expectations and understand technical gaps.

There are no guarantees that a new technology will not turn out to a lemon.  However, insisting that vendors answer some simple questions can significantly reduce the performance, implementation and financial risks.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Are you ready for Cloud Computing?

Over the past few years, few technologies have been hyped as Cloud Computing.  According to the pundits and early adopters, CC is transforming the face of corporate IT at the same time as delivering compelling business value.  Simply put, CC is a suite of enterprise-level technologies that enables organizations to draw their computing power and data from a separate and centrally managed pool of compute resources including servers and software licenses. CC has a compelling basket of benefits for firms of all sizes in all industries.  Company’s can significantly reduce IT operating costs and increase server utilization.  Additionally, CC can enable a more agile and scalable computing infrastructure that better aligns IT to business requirements, including reducing new product time to market.  Importantly, CC allows firms to focus on its core mission of delivering goods and servicing customers while outsourcing a big chunk of their IT (read: fixed costs and headaches) to experts.   

Currently, there are many business functions delivered through a cloud, from CRM (salesforce.com) to messaging and collaboration (Google Apps) and high performance computing (Amazon Web Services). Not surprisingly, all the IT heavyweights including IBM, HP, and Microsoft have committed billions of dollars to marketing a plethora of products and services.    No wonder Gartner, an IT research consultancy, named CC the second most important technology focus area for 2010. 

Yet, CC has received a couple of black eyes recently arising from security breaches at Amazon and Sony that impacted millions of users.  And, there remain important challenges to fully exploiting CC’s potential.  Not all first generation initiatives have met expectations.

Given its young age, it is not surprising that CC carries a variety of definitions and connotations.  For the sake of clarity, I use the US Department of Commerce’s National Institute of Standards and Testing definition.  NIST defines 5 characteristics of cloud computing:

  • On-demand, self-service computing – allows business units to secure the resources they need without going through internal IT for servers and licenses;
  • Broad network access – enables application to be deployed in ways the business operates such as mobile and multi-device;
  • Rapid resource elasticity – provides for quick resource scalability or downsizing depending on computing needs;
  • Compute resource pooling – enables computing resources to be pooled to serve multiple consumers;
  • Measured service – allows IT usage to be measured like a utility and charged back to users according to demand.

How do managers determine whether this technology is right for their business?  Our firm has developed a quick and dirty checklist to test a company’s cloud readiness: 

  1. Are your revenue-driving business applications hampered by inadequate computing power?
  2. Would significantly quicker resource availability enable you to reduce time to value with new products and key operational initiatives? 
  3. Are your operating units and managers always fighting for more IT resources?  
  4. Is your business environment characterized by unexpected surges in demand? 
  5. Is IT redundancy an important risk mitigation strategy? 
  6. Do new or short duration business projects have difficulty “making the cut” for IT priority? 
  7. Are server, software license and data center costs rapidly out-pacing profit growth? 
  8. Are you frustrated with the flexibility and responsiveness of your enterprise IT infrastructure?

If you answered yes to only 4 of the above questions, your business is being seriously impacted by IT constraints and higher than necessary operating, hardware and software costs.  A compelling business case for CC exists and a pilot program should be investigated as soon as possible.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Getting Cloud Computing right

Few technologies have received as much hype in the past couple of years as Cloud Computing. Virtually every major IT provider such as Amazon, Google, HP, Intel and IBM is now aggressively promoting their new CC services. Despite the excitement, business adoption has been slow for mission-critical production applications within traditional large IT buyers like financial services, healthcare and manufacturing.

Simply defined, CC is a range of enterprise-level technologies that enable organizations to draw their computing power and data from a centrally managed internal or external pool of compute resources including servers and software licenses.  Acting like an electrical utility, a Cloud can supply users (Companies, operating units and individuals) computing resources as needed, when needed.  In an ideal situation, CC enables organizations to reduce or defer the purchase cost of expensive hardware and software assets, accelerate application performance at peak load periods and drive up overall IT utilization – which for most firms languishes at around 25% of potential capacity.  Importantly, CC also enables companies to move to a more flexible, scalable and efficient IT pay per usage model also known as Software-as-a-Service (SaaS).

CC and its predecessor Grid computing have been around for over 20 years.  If the Cloud is going to move beyond niche applications into the mainstream of business computing, it will need to overcome some important adoption challenges, as follows: 

Standards confusion

Although slowly emerging, there are still a plethora of competing standards that inhibit a quick and low risk adoption of CC.  For example, there are competing standards in the critical areas of IT infrastructure components, security, identity and system interfaces.  CIOs need to ensure their CC adoption plans and technologies are readily aligned with standards as they are set, even if they do not represent the best technology at this moment.  One simple step would be to follow the Open Data Center Alliance, an independent consortium comprised of leading global IT managers who seek to provide a unified vision for long-term data center requirements.

Organizational challenges

CC adoption continues to be stymied by (often hidden) organizational barriers such as who controls IT resources and how is IT linked to business priorities.  Furthermore, ongoing concerns around computing resource availability, external cloud viability and data privacy often make CC a difficult to sell to the business unit owners.  Because of its revolutionary nature, organizations must treat CC like it would any other transformational project.  This requires using change management methodologies, right sizing the organizational structure to reflect new mandates & roles and using pilot projects to build internal support and generate key learnings.  Gary Tyreman, CEO of Univa a leading Cloud Computing provider, says:  “While Cloud looks like an easy way out, one needs to begin by connecting the project to a strategic imperative, orderly define a starting point, identify low hanging fruit and create the white space for the team to make this happen.”

Market confusion

Given its short history, its no surprise that there is considerable market uncertainly and bewilderment over what is CC, how are solutions best deployed and who really can deliver on its promise.  In fact, almost every IT provider of consequence now promotes a CC and SaaS capability. This market clutter has created an adoption barrier for many firms. Despite this clutter, there are more than enough success stories for firm’s study.  “There is now a compelling business case for the Cloud and enough proven case studies across many industries to speed implementation and reduce business risk,” says Tyreman.    

Lack of IT transparency

Many CIOs lack sufficient visibility into their IT infrastructure and operating units to understand which business applications and cost centers represent the best opportunities to deploy CC.  One of the most important first steps to moving to the Cloud is to understand what IT assets firms have, how they are used and where is the cost (hardware, software and operating). 

Given its transformational value and record to date, CC is on the cusp of crossing the adoption chasm in 2011.  Although they need to do their homework, CIO’s should look deeper into how CC can reduce their cost and improve business performance.

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IT Innovation is Coming to Health Care

Over the next few years, the Canadian health care system will be one of the places to witness rapid IT adoption and the emergence of unique business models.  Fact is, our system will have no choice but to change. Many factors are combining to create a petri dish for innovation: an ageing population will increase the demand for health care; tight spending will continue to limit the availability of services; the emergence of an electronic medical record (EMR) capability (the Ontario eHealth fiasco notwithstanding); and growing standardization and interoperability between systems, thanks to emerging middleware solutions.  Moreover, President Obama’s $40B healthcare IT stimulus is likely to catalyze the adoption of EMR and new operating models in the US health care system.

Canadian decision makers may want to consider one of these innovative strategies:

1.          Satisfy the American demand for medical tourism – According to Deloitte, up to 750,000 Americans travel yearly for medical tourism.  Although difficult to measure, the global medical tourism market is $1.0B-$2.5B, growing at approximately 25%-50% per year. Canada is an ideal destination for these consumers.  We combine many natural advantages (proximity, language, similar medical standards) with “best in class” medical expertise in a wide variety of areas. Though there will be many political and bureaucratic hurdles, I’m sure there are creative ways to address this potential while maintaining the essence of our system.

2.          Commercialize their intellectual property – We have world class medical technology, services, people and infrastructure but lack the urgency and comfort (with a few exceptions) needed to generate revenue from them.  Our hospitals and research organizations will need to adopt a more aggressive, market-driven approach as well as attract the business skills and partnerships needed to commercialize these opportunities.

3.          Create on-demand IT service models – There are emerging private sector models that could be leveraged for healthcare.  For example, large healthcare organization could generate revenue by marketing on-demand medical software services over the internet to smaller healthcare institutions using a Cloud Computing strategy.  As well, with a Grid Computing model, multiple hospitals could aggregate their computing resources to boost overall processing power, reduce cost and generate revenue by selling surplus compute cycles to other research-based firms.  Naturally, there will be many challenges to deploying any of these models including privacy and security concerns as well as cultural and organizational impediments.

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