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

Dick Benton, principle consultant at GlassHouse Technologies, has written a 2 part article on the trials and tribulations of which Cloud to use entitled; “Cloud Thunder: The Biggest Bang for the Buck, Part 1”. I thought we would deal with the first part, IaaS, and examine his analysis of INTERNAL versus EXTERNAL Infrastructure as a Service (“IaaS”). His article has a bit for everyone, the IT manager, the Finance department, and the contract draftsman. As you all know, I get a little “weak in the knees” with the technical stuff and so I will defer to the techies on those issues. But Benton has some good insight on which “Cloud” to choose and solid advice on how to get there.

Benton starts off by commiserating with the IT Manager because the virtualized world of Cloud Computing does offer many alternatives to reduce cost while at the same time increasing service. He breaks down his discussion in part 1 on IaaS to the benefits and possible disadvantages of Internal IaaS as opposed to External IaaS.

In order to chose the Internal IaaS model, Benton notes that the x86 platform must be virtualized and ITIL (“Information Technology infrastructure Library”) service model has been adopted (See: “weak in the knees” comment above). I’ll leave the previous comment for the techies to determine. The benefits of the Internal IaaS model are:

·         Availability

·         Performance

·         Security

·         Quick provisioning

·         Just as Quick De-provisioning

·         Ease of billing to identify unit cost (Giga-bytes of storage or Giga-hertz of power)

·         Automation improves Service Levels

With IaaS comes ITIL best practices which require automated self-provisioning. For the finance department the billing should have the ability to determine unit costs. And with all the above benefits, Benton still stresses that, “The biggest impediment to the introduction of IaaS under IT is that the service provider is the requirement for some form of portal/Web-based self-provisioning capability.”

Outsourcing IaaS (i.e. External IaaS) has its distinct advantages as well. But, of course, as we have discussed in the past security remains the paramount disadvantage. Your data is stored off-site and the infrastructure is shared with many other entities and dynamically managed as your data is moved from server to server. Benton points out three other necessary issues to consider:

·         Back-out strategy. If your provider does not live up to the service levels promised, how do you get your data back?

·         Scalability. Is this built into your contract? Premiums charged and can the Provider deliver in your time frame?

·         Hybrid approach. Useful when using Internal IaaS and there is extra capacity needed in an overload situation for a special project.

Benton discusses SaaS and PaaS in the second part of his article.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Dick Benton, principle consultant at GlassHouse Technologies, has written a 2 part article on the trials and tribulations of which Cloud to use entitled; “Cloud Thunder: The Biggest Bang for the Buck, Part 1”. I thought we would deal with the first part, IaaS, and examine his analysis of INTERNAL versus EXTERNAL Infrastructure as a Service (“IaaS”). His article has a bit for everyone, the IT manager, the Finance department, and the contract draftsman. As you all know, I get a little “weak in the knees” with the technical stuff and so I will defer to the techies on those issues. But Benton has some good insight on which “Cloud” to choose and solid advice on how to get there.

Benton starts off by commiserating with the IT Manager because the virtualized world of Cloud Computing does offer many alternatives to reduce cost while at the same time increasing service. He breaks down his discussion in part 1 on IaaS to the benefits and possible disadvantages of Internal IaaS as opposed to External IaaS.

In order to chose the Internal IaaS model, Benton notes that the x86 platform must be virtualized and ITIL (“Information Technology infrastructure Library”) service model has been adopted (See: “weak in the knees” comment above). I’ll leave the previous comment for the techies to determine. The benefits of the Internal IaaS model are:

• Availability
• Performance
• Security
• Quick provisioning
• Just as Quick De-provisioning
• Ease of billing to identify unit cost (Giga-bytes of storage or Giga-hertz of power)
• Automation improves Service Levels

With IaaS comes ITIL best practices which require automated self-provisioning. For the finance department the billing should have the ability to determine unit costs. And with all the above benefits, Benton still stresses that, “The biggest impediment to the introduction of IaaS under IT is that the service provider is the requirement for some form of portal/Web-based self-provisioning capability.”

Outsourcing IaaS (i.e. External IaaS) has its distinct advantages as well. But, of course, as we have discussed in the past security remains the paramount disadvantage. Your data is stored off-site and the infrastructure is shared with many other entities and dynamically managed as your data is moved from server to server. Benton points out three other necessary issues to consider:

• Back-out strategy. If your provider does not live up to the service levels promised, how do you get your data back?
• Scalability. Is this built into your contract? Premiums charged and can the Provider deliver in your time frame?
• Hybrid approach. Useful when using Internal IaaS and there is extra capacity needed in an overload situation for a special project.

Benton discusses SaaS and PaaS in the second part of his article.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

Stephanie Overby has written an article for CIO.com entitled “The Truth About Obama’s “Tax on Outsourcing” in an attempt to clear up all the questions that were raised when the President attacked the Tax Code for creating loopholes if a company creates a job overseas. Overby freely admits that she can’t clear up all the mistaken beliefs because the White House may not have been as clear about its objectives as was needed. In addition to identifying the five (5) misconceptions that are circulating, she also provides some necessary definitions of terms which help the reader to better understand the issues and the real targets of any proposed legislation. Those five areas in question are as follows:

        I.            Is “Outsourcing” the same as “Offshoring”?

a.       Outsourcing means contracting to any third party. This could be to a third party within the US.

b.      Offshoring means a NON-US location.

c.       The distinction to be made is: work being done at the US company’s own foreign facility called a “Captive Center”, versus offshore work being done by a third party, in essence offshore outsourcing.

      II.            Will the tax apply to “Offshore Outsourcing”?

a.       This was the point that was not made clear initially by the administration. Overby helps us out and states that the Obama plan will only apply to US companies with “Captive Centers”.

b.      So this will affect the IT Vendors such as IBM Global Services and Accenture AND ALSO Non-IT Vendor companies that maintain a presence abroad.

    III.            Will India’s IT Services Industry suffer the most from the proposed taxation?

a.       No. IT Vendors such as Wipro and Tata will not be affected. The tax is aimed at US Multi-National companies conducting operations in foreign lands.

    IV.            Will this taxation create more US jobs?

a.       Unlikely.

b.      There has been no indication that US companies would lessen their foreign presence due to the tax. In fact “most multi-nationals set up shop overseas to access cheaper labor or new markets”.

c.       Such a tax could cause MORE offshoring to offset any increase in taxation. In fact US IT Vendors may chose to relocate entirely overseas.

      V.            Is this protectionist tax policy certain to pass into law?

a.      Daniel Masur, an outsourcing attorney and partner in the Washington, D.C. office of Mayer Brown states, "It would be viewed by the rest of the world as protectionist and would trigger a wave of retaliatory legislation, and it would be bad for American business."

b.      Masur continues and states, “However, given Congress's propensity in recent months to write major legislation over a weekend and Congress's preoccupation with populist sound bites, such a provision could be buried in the next stimulus or budget bill".

• Email This
• Print
• Comments
• Trackbacks
• Share Link

• There has been a plethora of news stories regarding the future of outsourcing and IT jobs. In my research I came across a Blog that is maintained by the Staff at the Ubikwiti website. The Blog entitled Stemming the Outsourcing of IT Jobs cites freelance writer Rachael King for BusinessWeek.com. King reports that speaking to Ohio workers President Barak Obama stated, “We’re not looking to create just any kind of jobs here; we’re looking to create good jobs that pay well and can’t be shipped overseas.” The Blog posting on the Ubikwiti website goes on to make some interesting claims, such as:
• 140,000 more jobs will be moved offshore by 2010 (Hackett Group December 2008 report).
• 25% of all IT jobs at the largest global corporations will be outsourced by 2010.
• The posting then touts some of the spending items in the current stimulus package:
• $20 Billion for health information technology and the building of its infrastructure.
• $6 Billion to improve broadband internet access.
• $11 Billion for modernizing the power grid.

The above statement by Barak Obama and the planned spending as stated above, with the intended purpose of creating jobs here at home that cannot be “shipped overseas”, does not comport very well with his newest appointment to his National Economic Council. David Sirota reports in his Blog Article, More to Promote Outsourcing Than Anyone Else In America, on an Op-Ed piece by Ron Hira, a professor at Rochester Institute of Technology and a progressive.  President Obama has appointed Diana Farrell of McKinsey & Co. to his inner circle of economic advisors. As Hira states, “Farrell's firm made millions of dollars consulting with companies, advising them to accelerate their offshoring.  And she publicly made the rounds to convince policymakers and the public that offshoring was good for them and the country.” She is also the co-author of a study entitled Offshoring: Is it a Win-Win Game?, which Hira claims did more to mislead the American public on the impact of offshoring than any other debate.

The inconsistency of the above has to give one pause. On one hand Obama states he does not want to ship jobs overseas and on the other hand he appoints, arguably, one of the most pro-outsourcing executives in this country to a top economic post. Now we throw into the mix an article in Financial 24 entitled Outsourcing Gets Crimped by Recession and its report of the troubles in India and the outsourcing field is wide open. Financial 24 reports on the convergence of several factors that may bust the Indian market for outsourcing. These factors converging at once are:

·         The global recession – no more needs to be said on this one

·         The Mumbai Terror Attacks of November 2008. This caused great concern regarding India’s ability to provide adequate security, especially for US Companies.

·         The financial scandal of India's fourth-largest outsourcing provider, Satyam. There are many questions whether there is enough regulatory oversight of India-based outsourcing providers.

In light of the serious situation facing the Indian outsourcing market, here is a list of the next emerging outsourcing destinations:

1. Cebu City, Philippines
2. Shanghai, China
3. Beijing, China
4. Ho Chi Minh City, Vietnam
5. Krakow, Poland
6. Kolkata, India
7. Cairo, Egypt
8. Sao Paulo, Brazil,
9. Buenos Aires, Argentina
10. Shenzen, China
11. Hanoi, Vietnam
12. Chandigarh, India
13. Curituba, Brazil
14. Prague, Czech Republic
15. Pasig City, Philippines
16. Dalian, China
17. Coimbatore, India
18. Santiago, Chile
19. Colombo, Sri Lanka
20. Johannesburg, South Africa

"20 emerging outsourcing destinations" by Sriram Vadlamani.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As a practicing attorney involved in contract drafting and negotiation, I know the value of checklists. As I am sure my fellow legal colleagues can relate, one of the things we dread is a client who asks “Did you consider …?” or, “What about …?” If our only response is something like, “Let me check that contract again and get back to you”, we’re in trouble. Contract drafting is an attempt to anticipate as many reasonable consequences as possible. When I was lecturing in Contract Law, I would tell my students that contract drafting anticipates litigation (i.e. if you do or do not act in the following manner, then the liability shall be as follows). Robert Bell has created an IT outsourcing checklist in his article 31 Risk in Offshore IT Outsourcing Contracts: Or Buying Promises.  I cannot vouch for its completeness, but I thought it a good idea to post it here as a tool to be used in your decision making process. In order to reprint this checklist, I must follow the “Reprint Guidelines” and publish the entire article, which follows:

• Email This
• Print
• Comments (1)
• Trackbacks (3)
• Share Link