Recommended Strategies for the CIO Considering Cloud Computing

 

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.

 

 

The Mobile Revolution Is Upon Us

 

Well folks, I’m out of breath. I was minding my own business just cruising the net for interesting stories and then all of a sudden I stumbled upon a treasure trove of fundamental information. It all began when I came across an article by Michelle Megna entitled What’s Behind the iPhone Success Story? and read in the first sentence that Apple sold 3.8 million iPhones in the last quarter (that’s three months for the non-accountants) for a $1.5 billion boost to sales revenue during the worst recession we’ve had in approximately 70 years. I was interested to read Megna’s reporting of the reasons behind this success story – 1) the too numerous to list apps, 2) the interconnectivity with the Mac for ease of data transfer, 3) the consumer preference of the iPhone to the Netbook. You’ll have to read further down into the article before you come across the astounding sales numbers for RIM’s Blackberry devices for the comparable time period. And so the story ends – or so I thought.

So I’m in this smartphone / mobility state of mind when I come across Andrew Dod’s article entitled Strategic Considerations for “Going Mobile”. Dod’s article takes this topic into the stratosphere with countless references to vital information. He begins by calling our attention to the old days and another revolution, 1994 that is and modems firing at 14.4 bps. Companies quickly realized that the paradigm had shifted and they needed to be a part of the internet and figure out how to compete and make money.   With over 4 billion mobile devices in existence today the same questions asked in 1994 are being asked again:

·         How do we get our business on mobile?

·         How can we easily create and distribute content on mobile?

·         How do we integrate mobile into our business operations?

·         How do we ensure effective adoption of our mobile applications?

·         How do we extend and grow our business on mobile?

 

Dod cautions us that mobile is not just for marketing but can help the enterprise achieve its core business objectives. With the excess of mobile devices out there Dod declares that content should be upper most in the mind of the business strategist to address the“significant variations in operating systems, screen sizes, display resolution, processing speed, memory, and performance.” Dod lays out the three major types of content, each with its own unique character and requirements to fit into the business strategy:

·         Text messaging SMS (short message service) delivers simple content but is limited in how much it can deliver - only 160 characters.

 

·         Mobile Web (WAP): This is where your smartphone uses WAP (wireless application protocol) to access Web sites. The WAP browser is simplified for your handheld device but is fully interactive. Use of the WAP browser is different from a PC browser. Web sites usually display clumsily on the smaller mobile screens. It is better to deliver tailored offerings with a limited portion of the content and functionality available at the full Web site.

 

·         Mobile Applications: Since mobile devices support numerous platforms, rich media applications have become available enabling a much more vibrant user experience with video and audio. This allows for content developed specifically for the mobile device. Dod suggests that the smart business treats the mobile medium as its own medium, rather than an off-shoot of online.

Dod’s emphasis throughout his article is the importance of content when delivering it to a mobile device. He has devised a list of what he calls the ten C’s of mobile strategies. It is really quite ingenious. I could not do it justice in this blog posting and so I highly recommend his article to all my readers.

Continuing on with this treasure trove of information, many of my readers may remember my Blog posting last August 4, 2008 entitled Mobile Computing: A Unified Platform Is Essential As Technologies Converge regarding Jim Hemmer’s “Mobile Bang Theory”. Just to refresh your recollection Hemmer’s theory simply states that one action from a mobile device can be the catalyst for many other internal, as well as external, business reactions yielding significant ROI. Well Hemmer is back with a follow up to his Mobile Bang Theory entitled The Mobile Bang Theory – Part II: Let the ROI Sparks Fly. He sees the global economic meltdown as an aid in bringing cost containment more into focus for the enterprise and thus putting mobility projects on the top of the “to do” list for IT managers.

Hemmer’s take on the current mobile revolution is quite fascinating. He really sees a BIG PICTURE when he describes the inherent benefits of mobility. His vision combines multiple systems and devices and networks and processes and people and the end result is faster ROI. He emphasizes this faster ROI by explaining that the global recession provides opportunities in the sales cycle to impress your customers. He takes this lesson from the former president of Scandinavian Airlines, Jan Carlzon, who turned the company around during a deep recession. As Carlzon explained each customer interaction was a “moment of truth” for the company to impress the customer. Hemmer takes the moment of truth approach and refines it to fit today’s economic environment. These moments of truth become “Trigger Points” where the sale can be won or lost based on the timely and relevant use of data that can be brought to bear via mobile devices.

To be sure, mobility is not solely for the sales cycle. Hemmer’s article is full of other real examples of the use and benefits to the enterprise deploying the latest mobility devices and applications. He presents examples of mobility’s use for field service operations and also the productivity gains for IT Management itself as data can be retrieved real time to provide visibility into the operations. Jim Hemmer’s article is a nice companion piece to Andrew Dod’s article. And as Andrew Dod stated in his article:

“Mobile is here, now, and only going to dwarf the first Internet wave due to its ubiquity, essentialness, convenience, and proximity to nearly all we do.”

 

 

How To Protect Maintenance Revenues During the Recession

The recession is upon us and from all reports it looks as though it is going to be a long one. I will leave to others to discuss and argue if the current proposed stimulus package is indeed a real stimulus package or just a spending bill that will do little to nothing in the short term. In my practice I am beginning to receive an inordinate number of requests from software licensee’s to either cancel maintenance or reduce user counts in an effort to lessen the annual expense. Chris Dowse and Ben Galison have written a very important Op-Ed piece for SandHill.com entitled Software’s Clear and Present Danger. They begin their article with a no nonsense approach to the subject of maintenance revenues:

“… the software industry’s cash cow, maintenance and support revenue provides high margins that are the funding engine for new product research and development. The maintenance revenue stream is also used as a basis for company valuations in mergers and acquisitions and financing arrangements.”

Dowse and Galison have identified three major reasons placing downward pressure on the maintenance stream:

1.       The customer’s perception of value has affected pricing, the basis for the maintenance calculation.

2.       The recession has caused customers to postpone purchases and upgrades.

3.       End User Monitoring (“EUM”) has created a new view into usage and so under-used applications are being targeted as a drain on ROI.

The approach that Dowse and Galison suggest as a remedy to the threat on the maintenance stream might seem simplistic at first blush. They suggest the Independent Software Vendor (“ISV”) become more customer-centric and strive to have a successful adoption of the software suite as opposed to the traditional implementation services. I suggest you read further and examine their three step approach and follow it in the sequence they suggest. It may be a bit of a paradigm shift for some ISVs, but at the very least it will take a lot of effort. I will try to summarize the three step approach, but please read their whole article to get the full impact. The three step approach is as follows:

1.       Create a Positive Customer Experience: This enhances customer loyalty which is the first step in protecting the maintenance stream. However, more importantly, Support and Services must concentrate on an effective adoption of the applications. A significantly improved customer interaction of the delivered applications can have a direct and positive impact on the customer’s ROI. This should also eliminate the fragmentation that occurs when their customer information gets locked in silos. An effective adoption of the software suite should enable delivery of this customer information across the enterprise. The ISV must encourage cross-functional dialog and empower their employees to identify their Customer problems.

2.       Understand Customer Usage: This has to be a proactive approach, hence my comment above that “at the very least it will take a lot of effort”. The ISV must strive to understand usage patterns and barriers to adoption. This is where the ISV should take advantage of the new EUM technology and use it to get past the reasons for downward pressure on maintenance. Once usage rates are indentified the ISV should intervene with perhaps more training or services. This activity could lead to new products and services to increase usage and eventually ROI.

3.       Deliver Business Value, Not Just Technical Service: Customers want and will pay for services that will lead to effective adoption. Traditional implementation services do not go far enough. Placing the focus on user adoption yields tremendous benefits. Dowse and Galison state it best: “Effective user adoption increases customer switching costs, enables value-based pricing that prevents price erosion, produces visible ROI for customer success stories to drive other sales, and provides a platform for upselling and cross-selling.” Another by-product of this approach is a lower amount of the lower margin traditional implementation services required.   The ISV’s service profitability should go up.

For another perspective on this topic see my November 24, 2008 post in this Blog: How to increase revenue in an Economic Downturn.