Software Licensing & Master Service Agreements : Chicago Software Licensing Lawyer & Attorney : Sam Conforti Law Firm : Master Service Agreements, Negotiations, Outsourcing : Cook County, Illinois

As I have discussed in several articles in this Blog, the concern over security has been a huge hurdle for most enterprises when considering whether to adopt Cloud Computing. There also is the simply reticence to change. David Needle discusses this in his article in ServerWatch entitled HP Pushes ‘Instant On’ Vision of Enterprise Cloud Services and explores an ingenious response to the resistance to change developed by HP. Perhaps the best way to describe this new development in Cloud Computing is to call it a hybrid approach. HP also offers the consulting services that will assist the enterprise to implement and manage these services. Needle’s article is peppered with quotes from Sandeep Johri, vice president of enterprise strategy and industry solutions at HP, and from a company spokesman. I think the fastest and most direct way to describe this approach and the services to implement it is to read exactly what they say about it. Here are some select quotes and you can make the determination if this could be the game-changer for the adoption of Cloud Computing:

“Part of our vision is about transforming old applications, not necessarily to the cloud, but to make them more available using new frameworks that can be accessed as a service.”

“We think the cloud needs to be more than the standard definition of on-demand services.  An enterprise needs a level of security commitments and service quality commitments, among other attributes we believe are necessary.”

"The cloud can be something you use to augment other parts of your business.  For example, for some of our airline customers we do 'ticketing as a service.' Those companies get billed on a per passenger basis and they don't get billed for servers -- the backend infrastructure is all handled by HP.

"From an instant-on perspective, an airline might just want the ticketing aspect, which we let them get right away without buying new infrastructure, but they may also want to keep a lot of other IT functions in house, and this program lets them do that."

"We do medical claims processing for 20 states in the U.S. and we get paid on a per claim basis. We process over a $100 billion in claims every year," he said. "We don't call it software as a service, but that's effectively what it is.”

And on the hybrid delivery services that implement this approach:

"This offering provides clients with a patent-pending, model-driven framework to introduce hybrid delivery concepts into their existing environments.”

"The optimal architecture for the enterprise is a hybrid architecture, not everything is moving to the cloud or staying in-house.  At the end of the day, IT needs to deliver services and some of those are best delivered in-house in a traditional single-tenancy environment, some in the cloud and some outsourced. We believe HP can bring optimization across multiple dimensions.”

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As many of you know, SandHill.com is the online resource created for enterprise software executives. Kamesh Pemmaraju heads cloud research for the SandHill Group and writes a weekly report on the latest happenings influencing the cloud computing community. His latest report entitled Top 5 Cloud Strategies for CIOs is based on a survey of 511 software executives. The survey deals with these executive’s perceptions of cloud computing, their initiatives, implementation issues, and any perceived benefits. His report presents the top 5 strategies CIOs should follow when considering cloud computing. I will present a brief synopsis of those findings here as follows:

1.       Treat this decision like any other business decision:  Pemmaraju simply means to look at all the alternatives and do a traditional compare and contracts analysis. Look at the ROI and weigh the risks.

2.       The cloud is coming – Embrace it: Pemmaraju quotes one executive, “The cloud will come - it's happening now even if it is coming with a lot of hype and a lot of buzzwords. It's a very logical transition - like we are going from individual car craftsmanship into the era of the industrialization of IT services.” A large amount of the survey respondents have already started trials and pilot projects to jump start the learning curve for their personnel.

3.       A sandbox spurs innovation: Create an innovation sandbox in the cloud. The drag on spending due to maintenance is lifted. This new found freedom allows IT departments to redirect efforts from infrastructure constraints to more creative ways to run the business model.

4.       Cloud computing is a furtherance of Outsourcing trend: With this in mind, Pemmaraju presents a short checklist when evaluating whether to move in this direction:

a.       Perform your due diligence and pick a good cloud computing vendor.

b.      Confirm that support levels are adequate.

c.       Obtain copies of vendor certifications (i.e. SAS 70 etc.)

d.      Is your data retrievable in your desired format?

e.      How is your data isolated and protected from others?

5.       Retrain your IT staff: As one CIO respondent succinctly stated, “The jobs of people who sit there patching thousands of servers each time there is a change—those jobs are going away.” The focus will turn from infrastructure to vendor management, and program management, and business analysis.

Pemmaraju concludes his report with an analysis of the impact open source is having on cloud computing. He states that proprietary licenses are lagging in their offerings for cloud computing and so many cloud platforms are run on top of open source stacks. This will have an effect on hardware sales as most companies will be trying to avoid the big expenditures on infrastructure.

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I recommend an Economist Intelligence Report entitled IT Excellence: Achieving Optimised Business Outcomes.  This whitepaper begins with the premise that “IT departments are increasingly being called upon to define and pursue excellence”.  The consensus seems to be that IT’s role has evolved to one of a business partner that must align itself with the company’s overall business objectives.  The editorial board of the Economist Intelligence Report put together this report based on in-depth interviews conducted with Dow Corning CIO, Abbe Mulders, and Applied Materials CIO, Ron Kifer.  It is interesting to see how both individuals recognize the pervasive nature of IT in their organizations and their commitment to realizing the most from their departments.  Each has an interesting approach.  I’ll briefly summarize below:

Dow Corning:

Mulders has embraced the Six Sigma (defined) statistical approach with its continuous improvement toward defined goals.  Business units within the company collaborate and produce a future strategic plan which includes IT as a full partner.  The senior executives of the functional business units along with senior IT executives hold quarterly meetings to review and adjust priorities.  This collaborative approach allows the participants a view into the infrastructure, allowing for more effective decision-making, investment and execution of their 5 year strategic business plan.  The Six Sigma approach requires some kind of return.  Mulders’ teams focus not only on the progress but also on the quality of those returns and reports an 80% achievment of targets 12 months after an implementation.

Applied Materials:

Applied Materials is a leader in nanomanufacturing technology and produces semiconductor chips, flat panels, solar arrays, and energy-efficient glass.  Ron Kifer’s approach to IT excellence starts with the premise that IT not only enables business strategies, but must take a leadership role in such business processes.  Kifer maintains that in order to compete in the global market each business functional area must be able to support all others.  This is what he calls “cross-functional support”.  He believes the pursuit of IT excellence optimizes the other business functions.  He looks at core competencies to get the most effective results.  He believes he has accomplished this through the outsourcing of major components of his IT infrastructure.  In order to make the most out of this approach Kifer explained that vendor management became a priority for the company and they needed to “reorganise and develop skills in negotiation and management of vendor relations”.

This whitepaper report also includes a Q&A with each CIO.  It’s interesting reading.

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Kathleen Goolsby, a writer for Sandhill.com, has posted a very interesting piece of her interview with C.K. Prahalad entitled C.K. Prahalad on the New Age of Innovation.  Prahalad is a noted author and current Distinguished Professor at the University of Michigan specializing in corporate strategy.  Prahalad’s new book, The New Age of Innovation, is prescient and lays out his vision of a new business model and how IT and the influence of consumers will shape the enterprise’s approach to competitiveness in the future.  Her article is not the typical interview peppered with questions that break up the flow of thought.  She deftly asks the right leading questions and allows the author to expound on his thoughts and ideas.

The interview begins with Prahalad laying out his vision for the future of competitiveness in the coming decade.  He has identified 4 trends that are converging in a way that will change the way we think about value creation. These 4 trends are:

• Connectivity: This is the foundation of the coming shift in the paradigm, be it through PC’s or cell phones.
• The Cost of digitization is declining and so deployment across borders becomes more attainable.
• The convergence of technologies: “Is your cell phone a telephone, a computer, a camera, a watch or all of the above?”
• The emergence of social networks.

Next Prahalad explains that there has been a shift in the balance of power between the company and the consumer.  It is the consumer who has as much, and in some cases, more power than the enterprise.  The enterprise of the future will not need to own the resources, but rather have access to a myriad of resources from around the globe.  Each consumer is unique and each consumer decides his or her content (i.e. “co-creation of a personalized experience”).

“Co-creation means two joint problem-solvers: the company and me. And it is about experience, not about products. So we have a co-created, virtualized experience real value instead of a product-centric real value.”

He explains that this is not a supply chain sequenced approach.  There is no pre-positioning of activities.  The enterprise must have access to many vendors in numerous locations in order to fulfill the unique customer request.

Goolsby asks the author to give concrete examples of how this new business model is working today.  I must admit that Prahalad details some excellent examples.  However, when I read the article I noticed one thing that was conspicuously missing.  His business examples all dealt with services.  His first example describes how a health insurance company is now able to insure people in high-risk categories with chronic conditions that require expensive medication on a continual basis.  His second example dealt with how a fleet management company of helicopters, jets, and other modes of transportation, with numerous customers requiring various services was able to cut its costs.  But what about manufacturing?  Won’t there still be a need for supply chain management with a predetermined sequence or positioning of activities and vendors.  I’m sure that the non-service industries will also be able to benefit from the 4 trends identified above, but I am not exactly sure how they fit into his new business model.

Prahalad goes on to say that enterprises must rethink their approach and realize that IT becomes a strategic asset.  Every company will be able to differentiate itself because now they will be dealing with personalized consumer experiences and not a commoditized product.

Finally, Prahalad puts forth the premise that enterprises will have to become consumer-centric global businesses and our IT systems must move to become citizen-centric public services.  I will tell you this; he had me until I came to this last part about consumer-centric and citizen-centric.  I began to think about “One World Order” and thoughts of all of us wearing that same gray Mao suit.  When he got to the point of stating his vision of “a platform as an ecosystem of large and small companies working together to common shared standards”, he lost me.  For me I began to view his discussion not in terms of IT and innovation, but rather as a quasi-political statement.  Maybe it is the coming election and my mind jumped from business to politics, but it just didn’t sit right with me.
 

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I have reported on several new technologies as they have entered the market, such as SaaS and SOA, and also the newest devices powered by the latest applications.  Jim Hemmer, an experienced CEO in the hi-tech and communications industries, brings this altogether in his cutting-edge Op-Ed for SandHill.com entitled The Mobile Bang Theory.  I highly recommend this article to my readers and it is a must read for the IT managers trying to get a handle on the security and control issues that mobile computing presents.  Hemmer begins his article by announcing the new shift in the archetype and identifying its 3 components:

“a mobile renaissance is afoot as a result of more powerful devices, faster wireless networks and broader use and acceptance of Web services and SOA”

Hemmer’s insight begins by recognizing the catalyst for enterprise mobility.  He labels this the “outside-in demand” phenomenon.  Consumer’s personal use of mobile services on mobile devices has forced enterprises to rethink their approach.  With this new approach come the challenges of providing access to the data and applications so the employee/user can optimize their efficiency.

For the enterprise the competitive advantage comes from the ability of the mobile user being able to enter data once into a mobile device which results in not one response but puts in motion a multitude of real-time business processes.  Hemmer identifies the trends in mobile computing and how the applications perform.  He then provides some real-life examples of how this approach works and the higher returns the innovative enterprises have experienced.

Hemmer’s advice to the IT managers is to develop a mobile strategy that supports multiple devices and multiple solutions.  The old siloed approach does not fit into this model. Its inflexibility is too costly.  He puts it succinctly by stating:

“The real game-changer is to mobilize diverse business processes, applications and data from a variety of internal and external sources — from one unified, cohesive platform.”

 

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