Archive for the 'Business' Category

Cloud Thoughts

Since the days of the first SaaS (Software as a Service) entrants the idea of provisioning computing resources from external hosting providers has clearly become mainstream.  Search for “Cloudsourcing”, “Cloud Computing” or whatever you call it and you’ll see a wealth of information and a wide selection of mature and incumbent offerings.

From a technical and architectural perspective there is much to hold my interest.  Architecturally, the cloud paradigms bring latency and other considerations to the forefront that generally did not figure strongly for in-house architectures.  An architecture that entertains cloud storage, for example, clearly cannot accommodate regular high volume data requests and expect to be responsive.  That does not mean that cloud-based storage should be discounted.  Perhaps a hybrid architecture provides the best business value where large volumes of archived data are hosted in the cloud, with day-to-day operational data retained in-house.  Such a hybrid data services model is put forward by Eugenio Pace and Gianpaolo Carraro in their article “Head in the Cloud, Feet on the Ground” in the October 2008 edition of the Microsoft Architecture Journal.  Their article is definitely worth a read and I’ll be referring to it later on in this post.

The surge in Cloud Computing, like many IT paradigm surges, will incite a gamut of opinions and assessments.  Some will hail Cloud Computing as a revolutionary, game changing force.  Some will see it as yet another distributed computing model.  Like others, I see it as evolutionary, a natural progression of distributed computing capabilities that reflects the evolution of hardware, networks, standards, computing economics, etc.  Cloud Computing is significant and will have a profound impact for the following reasons: provisioning, sustainment, scaling, and cost.  Not having to buy hardware and software, install it, scale it, patch it, cool it, upgrade it, fix it, hire Systems Engineers, etc, is a big deal for many businesses.  Start-ups need not get side tracked mucking around provisioning and sustaining their own hardware and software and can, instead, apply those cycles to what will be their core competencies.  Established businesses may be able to reduce computing costs and improve service levels by leveraging the Cloud.  And therein lies my primary Cloud Computing interest at the moment: making sense of the Cloud from a business value perspective (i.e. understanding the value proposition).  The subject of value, especially for enterprise-class customers, is addressed in the Sand Hill Group article “Capitalizing on the Cloud“.

When to go to the Cloud (the business decision) and how to go to the Cloud (the planning and architectural decisions) are obvious questions that require careful analysis.  No doubt some will rush to the Cloud based on a cursory analysis of costs in a similar way that many rushed to outsource without accounting for the hidden costs.  I recall the outsourcing rush that infected and pained the investment bank I was working for at the time.  Senior execs mandated to IT managers that 25% of IT projects be outsourced.  On paper it all looked too good to be true and it was.  Outsourced developers cost a fraction of the rate of a London-based developer.  Simply engage offshore developers to build the application, reap the savings and collect your big banking bonus.  Anyone familiar with IT outsourcing knows how the story ended for many businesses bitten by the outsourcing bug: the hidden costs of additional management overhead, communication issues, quality issues, etc, quickly negated the labour rate savings and, in many cases, increased costs for many projects.

Making sense of Cloud Computing and its value to your business will require an understanding and analysis of more than just costs and architecture.  On paper, compute time rates, data storage rates, and software usage rates may seem attractive.  Quick calculations may illustrate savings.  But what about regulations that govern data storage (e.g. healthcare regulations, the US Patriot Act)?  Do regulations governing your business require that data be stored within your national boundaries?  If so, are there any Cloud data storage providers that will provide geographically constrained storage to ensure your data is physically stored within your national borders?  Amazon have introduced Availability Zones for their Cloud Compute (EC2) offering that let you specify distinct locations for your compute server instances.  Their Cloud storage offering (S3) will likely follow suite allowing you to confine data storage to specific geographic regions.

In addition to regulatory considerations, there are many other factors that need to be understood before migrating applications to the Cloud.  For mission critical applications that are architectural candidates for the Cloud, an assessment of Cloud providers will require an understanding of how they support high availability and disaster recovery.  High availability considerations not only touch on the Cloud but also on an organization’s Internet connectivity.  High availability requirements for Cloud applications will require redundant Internet connectivity on the organization’s part in addition to the high availability infrastructure provided by the Cloud provider.  When it comes to disaster recovery perhaps the Cloud will provide better value.  Many organizations either don’t have a proper DR plan or have not tested the plan sufficiently, exposing the company to an elevated risk of being unable to survive a disaster scenario.  A solid Cloud provider will have a solid and fully tested DR plan since DR will be (or should be) one of their core competencies.

For a good architectural perspective on Cloud opportunities, I recommend the article “Head in the Cloud, Feet on the Ground” by Eugenio Pace and Gianpaolo Carraro.  The bulk of their article focuses on what they call localized optimization through selective specialization (LOtSS).  LOtSS is concerned with lowering software architecture “transloading” costs; the costs associated with managing the architecture across the enterprise-cloud boundary.  They point out that security, application management, and integration are typical aspects that can incur unacceptable transloading costs.  Organizations that are planning on adopting Cloud Computing will need to account for those transloading costs to effectively gauge the value of Cloud architectures.

The successful adoption of Cloud Computing to align with and support business strategies will obviously need to be backed by a value-focused plan which should include the assessment of architectural transloading costs.  The plan could take the form of an adoption model such as “The Cloud Computing Adoption Model” which is loosely based on the Capability Maturity Model (CMM) with five maturity levels: Virtualization, Cloud Experimentation, Cloud Foundations, Cloud Advancement, and Cloud Actualization.  Planning, adoption models, guidance, road maps, and assessments will be areas of continued and future focus as I work towards more formalization of Cloud Computing approaches and best practices for our customers.

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Microsoft Business Intelligence Conference 2008

microsoft_bi_conf_2008 

Business intelligence (BI) refers to technologies, applications and practices for the collection, integration, analysis, and presentation of business information and sometimes to the information itself.
Wikipedia
BI systems provide historical, current, and predictive views of business operations, most often using data that has been gathered into a data warehouse or a data mart and occasionally working from operational data. Software elements support the use of this information by assisting in the extraction, analysis, and reporting of information.
Wikipedia

I’m wayyyyyyy overdue in getting my blurb published about my attendance at the Microsoft BI Conference.  Thousands have already beat me to it but, nevertheless, below is my summary.

Technology takeaways from the 2008 Microsoft Business Intelligence Conference:

  • Project Gemini.  Microsoft’s “self service” analytical capabilities that add significant data processing and analytical power to the Excel client experience.  Gemini reflects Microsoft’s ongoing efforts to surface integrated BI capabilities to users in a natural manner where users aren’t always aware they’re working with, or doing, BI.  Also part of Gemini is the ability to publish the resulting cube to a “Gemini enabled” SharePoint library for sharing, social-style interaction, and performance and usage analysis.  This is a significant development along the road of mining those important ad-hoc Excel data analysis sheets that breed and spread like bacteria across an organization.  And, with Gemini, they are mined in a very non-intrusive manner.
  • SQL Server Kilimanjaro.  The next release of SQL Server slated for delivery during the first half of 2010.  Kilimanjaro will include Gemini and self-service reporting.  Self-service reporting is all about giving workgroups/teams the ability to self-service their reporting needs and to provision security for their reports.  Sharing report components, “mashing up” reports, and getting notified about changes to shared components, are part of the self-service reporting initiative.
  • Project Madison.  Advanced data warehousing capabilities via the integration of DATAllegro’s technology into SQL Server.  (DATAllegro is a recent Microsoft acquisition.)  Project Madison will allow SQL Server to scale to 100s of terabytes of data with, it is claimed, exceptional data loading and query performance.
  • The Microsoft Master Data Management (MDM) stack.  Microsoft envision an integrated MDM stack to include an MDM application platform and domain-specific MDM solutions provided by partners.  The plan is to ship the MDM platform as part of Microsoft Office SharePoint Server.  A working product is expected for next year’s Business Intelligence Conference.

A couple of non-technology takeaways:

  • Requirements for successful business intelligence and performance management solutions:
    1. A culture of performance.
    2. A culture driven by business value.
    3. A culture of continuous improvement.
    4. Incremental delivery.

    This really isn’t a takeaway at all because it’s just common sense.  Still, many organizations fail to successfully deliver their BI and performance management initiatives (and many other types of IT projects) due to cultural issues.  In many cases blame is heaped on the technology or the technologists.  Inevitably, properly conducted  project retrospectives will highlight that certain leaders, stakeholders and consultants are accountable for not prioritizing their focus on the business climate and business drivers.  Without a wide spread cultural shift in support of change (backed, of course, by sound business cases), most projects will fail.

  • The importance of deploying your performance management solution to your partner ecosystem to support those that contribute to your bottom line.  This speaks to the concept of pervasive performance management which is “enterprise-wide, enterprise deep, and outside-in, and includes unstructured data which is becoming an important component of the BI puzzle“.
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Growth at the Expense of Brand Value

On the subject of coffee parlours, today I read a great diagnosis of the growth-induced erosion of Starbucks’ brand value and, consequentially, the erosion of their growth.  Clearly Starbucks have lessons to learn about balancing growth with brand, but they certainly aren’t new lessons.  What happened?  Read John Quelch’s article “How Starbucks’ Growth Destroyed Brand Value” to find out.  Allen Roberts posted a comment that nicely sums up the value of the brand:

This maintenance of the integrity of the brand as THE vital component of the value proposition to the consumer is basic marketing 101. Starbucks when they started knew this, and practised this as if their life depended on it, as it did!  However, it is the easiest thing to compromise when the driver becomes numbers, and short term financials, as tends to happen after an IPO, as brand integrity and the relationship consumers have with a brand is not easily quantifiable, so is less visible, easily ignored by (often) new management under the pump for results who have not “lived” the brand.

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The Last Mile

I like the coffee from Take 5 Cafe. Beats Starbucks hands down.  I mean, when all that the Starbucks “barista” has to do is press a button to brew a shot … well, I’m sure Starbucks was aiming for infallible consistency while maximizing throughput but they lost the plot when it comes to the ceremony and “romance” of the coffee shop.  Starbucks CEO Howard Schultz admitted as much in a leaked memo:

…when we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency.  At the same time, we overlooked the fact that we would remove much of the romance and theatre that was in play with the use of the La Marzocca machines.  This specific decision became even more damaging when the height of the machines, which are now in thousands of stores, blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista.

The romance and theatre of a serious coffee parlour are core ingredients of the business, not last mile ingredients and Take 5 have got it right compared to Starbucks.  A beautifully crafted espresso machine, a delight to behold, is used by the barista (occasionally a delight to behold) to brew espresso shots.  The sounds of the production are classic espresso machines sounds.  Coffee aromas are untrapped in their portafilters.  European styling. Granite countertops to receive the coffee product.  We have theatre. Delivered, finally, is your coffee order and we’re now at the last mile stage.  To prevent the heat of the coffee from burning your hand and pissing you off so much you decide to sue because, ummmmm, you were never properly taught thermodynamics in high school, a sleeve is used to give you a comfortable, cool, area to hold the cup. Yep, the sleeve is one of those “last mile” items.  Take 5 have screwed up at the last mile by using an ugly plastic sleeve that feels like you’ve grabbed hold of a squid.

plastic_sleeve1

So, it looks and feels like crap.  Does Take 5 really want to have their carefully designed, eye pleasing, coffee cup adorned with such a sleeve?  What are they saving per sleeve over the cardboard variety?  0.5 cents?  1 cent?  Yes, it must be about money because I can’t believe the Take 5 management would vote for the plastic sleeve over the cardboard sleeve if the costs were the same.  Or, maybe I’m wrong, and the plastic crap keeps the heat at bay better than the cardboard sleeves?  If so, then give me the heat.

Headline news: “The Sleeve That Sunk Take 5 Cafe”.  Not going to happen and that’s not what my herniated sleeve yarn is implying.  But, no doubt, businesses loose custom beyond a sustainable level (i.e. they fail) because they’ve overlooked or ignored last mile aspects.

I’m a details guy.  It’s the nature of my job in Information Technology. So “last mile” stuff is always on my radar and I’m continually miffed at how many people and companies don’t understand the importance of hitting the ball out of the park for those last mile items.  Tom Peters wrote a book called “The Pursuit of WOW!” in which he explains how important it is for businesses to have pleasant, clean bathrooms.  If memory serves, I believe he solidly drove home the point that you’re an idiot if you neglect your washrooms as a business owner in a competitive marketplace.  You establish your business, plan your brand, build your brand, take care of all the core pieces, cut the ribbon, unveil the business …. and the “last mile” toilets, well, go down the toilet.  Sure, a majority of new business starts don’t build hole-in-the-ground toilets; unless you’re starting a business in France or China.  But there’s still a noticeable number of establishments that screw up either right out of the gate, or through neglect over time.

Speaking of washrooms, one of the premier examples of a business hitting it out of the park for their washrooms is Cactus Club Cafe.  Talk about the pursuit of toilet WOW.  The washrooms at the Cactus Club on the corner of Broadway and Ash are fantastic. Immaculate, spacious, beautifully designed and decorated, a leather couch, etc … basically a posh studio apartment with modern decor.  People talk about the Cactus Club washrooms as part of the Cactus Club experience; they add value to the Cactus Club brand. Flush with style.

What aspects of your business operate in the last mile zone AND could serve as differentiators in a competitive marketplace?  Find out, focus on them, and improve.

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Rural Sourcing - An Alternative to Outsourcing

Many people in the IT industry have seen the rapid growth of outsourcing as a threat. Reactions cover a wide gamut of feelings but for IT professionals whose roles are subject to outsourcing, fear and anger seem to be the prevailing sentiments; fear of job loss and anger at companies/management for outsourcing. Emotion aside, the viability of the outsourcing business model is typically analyzed from a cost savings perspective. The cost analysis has matured since the arrival of outsourcing and now takes into account many of the “hidden” factors which eroded or eliminated the value of outsourcing. Still, with maturity does not come ease; outsourcing is not something you dabble in and requires a well crafted, long-term strategy to realize savings. Ok, I’m a little off track.

From an economic standpoint, there is a strong argument for outsourcing. A couple of excerpts from Daniel W. Drezner’s article “The Outsourcing Bogeyman” provide compelling evidence in support of the economic benefits:

Catherine Mann of the Institute for International Economics conservatively estimates that the globalization of IT production has boosted U.S. GDP by $230 billion over the past seven years; the globalization of IT services should lead to a similar increase. As the price of IT services declines, sectors that have yet to exploit them to their fullest — such as construction and health care — will begin to do so, thus lowering their cost of production and improving the quality of their output.

and

McKinsey Global Institute has estimated that for every dollar spent on outsourcing to India, the United States reaps between $1.12 and $1.14 in benefits. Thanks to outsourcing, U.S. firms save money and become more profitable, benefiting shareholders and increasing returns on investment. Foreign facilities boost demand for U.S. products, such as computers and telecommunications equipment, necessary for their outsourced function. And U.S. labor can be reallocated to more competitive, better-paying jobs; for example, although 70,000 computer programmers lost their jobs between 1999 and 2003, more than 115,000 computer software engineers found higher-paying jobs during that same period. Outsourcing thus enhances the competitiveness of the U.S. service sector (which accounts for 30 percent of the total value of U.S. exports). Contrary to the belief that the United States is importing massive amounts of services from low-wage countries, in 2002 it ran a $64.8 billion surplus in services.

My understanding of the benefits of outsourcing has improved but I am still concerned that the impact is not without ill effects. What ill effects? I’ll leave that discussion for another time but for now I’ll just say that the impact of globalization and the increasing pace with which we need to adapt to globalization (e.g. outsourcing) may not be best for a balanced society.

Is there an alternative to outsourcing that can yield cost savings while supporting regional economic development? Possibly, and its called rural sourcing. Rural sourcing is defined as follows:

“Sending work to service providers in domestic locations where salaries and operating expenses are lower (such as the Midwest for the United States). An alternative for companies that want to avoid the negative aspects of offshoring.”
http://www.sourcingmag.com/dictionary/Rural_sourcing-158.htm

Ever since I heard about rural sourcing I have been enticed by the business model. On the surface, the cost savings may not appear competitive when contrasted to outsourcing, but when all the “hidden” outsourcing costs are factored in, rural sourcing may provide a serious offering. Will rural sourcing stop outsourcing? No. Can rural sourcing help revitalize regional areas that are in need of an economic boost? Can rural sourcing help retain high-skilled workers while allowing companies to save on labor costs? Yes, according to a rural sourcing company called, not surprisingly, Rural Sourcing Inc. Rural Sourcing claims to offer “…low-cost, high quality information technology services at 30%-50% cost saving while supporting Regional Economic Development“.

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