Tag: cloud computing

Killing the business of complexity

A simpler business environment means lower margins. If you profit from complexity you have a problem

“The cardinal sin of the computing industry is the creation of complexity,” is quote attributed to Oracle founder Larry Ellison and often repeated at the company’s Open World forum which I’m attending at the moment in San Francisco.

For the computer industry that complexity has been a very profitable profitable business with everything from the local computer shop through to the big technology vendors and integrators.

One of the biggest beneficiaries of that complexity were the salespeople, big complex enterprise deals meant big commissions.

With the shift to cloud services and apps, those fat margins and commissions have evaporated, leaving the lucrative old models of business stranded. IBM are probably the greatest victim of this while Microsoft are, once again, showing the company’s ability to evolve in the face of a fundamental market change.

For the salespeople the days of fat commissions are over, with thinner margins it’s not possible to pay big lump sums for winning contracts.

The simplification of the computer industry is changing the fortunes of many IT businesses, but that change isn’t limited to the tech sector or their salespeople as those fundamental changes are rippling into other sectors.

A constant claim by Internet of Things evangelists is that the IoT will squeeze inefficiencies out of businesses and this is exactly what we’re seeing with cloud and mobile based services like Uber and AirBnB.

If you’re in a business that profits from market inefficiencies then it might be time to figure out how to survive in a low margin environment. The challenge facing companies like Oracle is one whole industries are now having to face.

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Rethinking business IT

How is business being reinvented in a world of cloud computing.

Last week at the AWS:Reinvent conference in Las Vegas, I had the opportunity to interview the company’s Global Head of Enterprise Strategy, Stephen Orban about where he and Amazon see the direction of the cloud computing market and how business practices are being reinvented.

Among the things we discussed was Orban’s seven best practices for a company’s journey to the cloud, gleaned from his own experiences in his AWS role of advising clients on adopting and his previous experiences as a technology officer at Dow Jones and Bloomberg.

Orban laid out what he thinks are the keys to success in a company heading to the cloud in his own blog post and during our conversation he expanded on his ideas which also very much reflect the changing role of the CIO or IT manager.

Supporting the C-suite

The first point is the IT department has to understand the business and align technology with the organisation’s objectives.

“Somebody who understands technology who can merge technology with the business needs” will be better able to win the confidence of management says Orban.

Doing that is the key to winning support from the executive suite Orban believes. Once CIOs have that trust from senior management it gives their teams the space to experiment with new ways of delivering value to their companies.

Education 

“The second thing is to provide training and education,” Orban says. “People tend to get a bit anxious of what they don’t know, particularly when it affects their jobs.”

In Orban’s experience, having informed staff makes them more open to change within the business, “with the transformation I went through at Dow Jones, most of what we accomplished was because of the people who’d been there a long term. They had the institutional memory but they were very open minded.”

Foster a Culture of Experimentation

One of the great benefits of cloud computing is how it lowers the costs of experimentation and development, “gone are the days when it cost hundreds of thousands of dollars, even millions, to try something.” Orban says.

Learning what works and fails is essential, he believes. But as long as there is executive support then a tolerance towards unsuccessful experiments will develop in the organisation.

Working with partners

Outside parties are essential to most organisation’s IT systems and Orban believes partner ecosystems have changed with the advent of cloud computing. “There’s a whole new breed of partners that have been going through this,” he says in citing ‘born in the cloud’ software developers and systems integrators who are changing how projects are being delivered.

Build a Center of Excellence

“Creating a center of excellence is, I think, one of the key practices any organisation should invest in. You want a body of people who can institutionalise best practice within an organisation,” observes Orban.

As cloud services take away the complexity of computer systems it becomes an opportunity for organizations to rethink boundaries between the IT department and business operations.

Move to the cloud

Given Orban’s employer it’s not surprising he sees cloud computing as key to a company’s transformation however he admits that few organisations will make the jump straight into cloud services.

“Hybrid will be a part of every enterprise’s journey. Any company who’s been doing IT for any period of time will have existing investments,” he says. “Our view is that we will make it as easy as possible to create that bridge.”

“We do believe in the long run that enterprises will find they become so much more effective over here (in the cloud) they will move in that direction.

A Cloud-First Policy

Once an organisation has its cloud strategy and experimentation culture in place then having a ‘cloud first’ policy, “it reverses the burden of proof away from ‘why would you use the cloud?’ to ‘why wouldn’t you?'”

While Orban is emphasising the Amazon Web Services view of the world where ultimately all business computing will be done on the cloud – preferably their cloud – his views illustrates the change facing businesses as they implement online technologies.

For most, the availability of easily accessible cloud computing services is an opportunity to rethink their business processes and how organisations can deliver the best products quickly to their customers.

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Amazon takes on the world

Amazon’s spreading web services empire is bad news for many IT companies

Yesterday I had my first piece in Diginomica about the threat Amazon Web Service’s new business analytics service creates for ‘old school’ companies such as Oracle and IBM as well as the up and coming firms such as Qlik and Tableau.

Diginomica’s Dennis Howlett followed that piece with one of his own flagging consulting services and systems integrators are under threat from AWS’s new partnership with consulting firm Accenture which also further puts the screws on IBM.

Today, AWS’s announcements of new Internet of Things services threatens a range of businesses creating data connectors and management software for connected devices.

Historically Amazon has been a fierce and brutal competitor and there’s little indication things will be different with the new web services.

Things could be about to get tough for a lot of sectors in the computer industry as Amazon expands its services and territory.

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Xero and the US cloud accounting challenge

Xero starts its serious push into the US cloud accounting market

Last month I wrote a piece for Business Spectator on how competition in the Australian cloud accounting market was hotting up with the re-entry of Intuit and Sage.

One of the divides between vendors was whether online accounting services scale globally with one group – including MYOB and Reckon – saying that deploying services in different jurisdictions added complexity while others believed a global product was necessary to achieve scale.

The most obvious member of the global scale camp was Xero, the company that has pioneered the growth of cloud accounting software. Two years ago we interviewed the company’s founder Rod Drury about his ambitions for the company and the direction of the cloud accounting market.

For Xero though, growing globally isn’t easy. While its most successful market has been in Australia, that country has many similarities with Xero’s native New Zealand and the company has found the UK and US markets tougher.

Renewing Xero’s US push

To deal with a much bigger and diverse market, the company appointed Russ Fujioka, a veteran of Dell, Abode and the various venture capital companies, to lead its revamped operations in the United States and Decoding the New Economy caught up with Russ recently at Xero’s San Francisco office.

For Fujioka, the key to growth in the United States market is the small business sector with the US recording nearly half a million new business registrations across the nation each year.

“You see the M in ‘SMB’? We don’t want to be playing to that market,” says Fujioka in emphasising the Xero’s focus on the small business sector.

Fujioka also sees opportunity in what he calls the ‘pre-accounting’ sector, the roughly 18 million self employed contractors and freelancers who don’t need a full fledged accounting service but need access to basic bookkeeping, invoicing and expense tracking.

Dealing with diversity

While the 28 million US small businesses represent a huge opportunity to Xero, the market also presents challenges with, unlike the New Zealand, Australian and UK markets, hundreds of banks and thousands of different state and local tax regimes.

To deal with the complexity of local tax and employment rules, Xero announced a partnership with Avalara to provide the data feeds for calculating sales taxes and payroll obligations, something that is essential to Xero’s business plans, “payroll is fundamental to our offerings.” Fujioka says.

Also fundamental are accountants and book-keepers where co-opting them as sellers of the service has been part of Xero’s success in Australia and New Zealand with Fujioka seeing a fifty-fifty split between those businesses signing up directly and those going through advisers.

The changing accounting industry

Like the rest of the world, the accounting profession is going through major changes as much of the transactional work becomes automated, Fujioka sees this as an opportunity for companies like Xero to add value to the industry and help individual firms become more akin to system integrators and technology advisers to their clients.

The ultimate aim for Fujioka is to make Xero the site, or app, that every small business starts and ends their day with, “we really want to be that single pane of glass for small business – you start your day with us, you end your day with us and during the day you check your status on your Apple Watch.”

For Xero, the key to global success is cracking the US market. The challenge for them is to capture a new generation of business owners and accountants.

Paul travelled to San Francisco as a guest of Salesforce and Splunk

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Managing the data stream

Managing the data deluge is where Salesforce is focusing its efforts in a competitive market

One of the world’s biggest tech events – if not the biggest of the vendor shows – is Dreamforce, Salesforce’s annual spectacular that this this year attracted a 150,000 attendees to San Francisco’s Moscone Center.

Every year sees the company – which now holds the title of the world’s fourth biggest software company – and its CEO, Marc Benioff, defining the direction of the company in the face of a rapidly changing market. Despite being a pioneer in cloud computing, the company is as vulnerable to disruption as anyone else in a rapidly changing marketplace.

This year, the focus is on analytics and automation along with a strong leaning towards the Internet of Things and app development on the Lightning platform they announced last year.

With the Thunder platform, Salesforce is offering a service that allows businesses to connect devices onto their platform where users can build up rules based business automation. One notable part of this is the integration with Microsoft Office 365, another example of Microsoft’s reaching out to previously hostile companies.

For Automation, Salesforce is building upon its RelateIQ acquisition from last year, now branded as SalesforceIQ. The company says “Relationship Intelligence technology that utilizes advanced data science to analyze company relationships and drive actions.”

The Wave analytics service, which was also announced at last year’s Dreamforce, is a key part of the the business automation and IoT services in providing the insights into the data being collected. In many respect, Wave is going to be the glue that holds most of the products being announced this year.

Complementing the Wave, Thunder and SalesforceIQ products is the Lightning platform, again announced last year, that allows users to use the company’s AppCloud to quickly build business applications.

For Salesforce, the direction being laid out from this Dreamforce conference is in making helping customers deal with the masses of data coming into the enterprise. As Tod Neilsen, the company’s Executive Vice President of the App Cloud says, “we’re look at making the data usuable for spreadsheet users.”

As businesses struggle to manage and understand the masses of data flowing into their organisations, this may well be a powerful selling point for Salesforce.

Paul travelled to Dreamforce 2015 in San Francisco as a guest of Salesforce

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The Age of Rattling the Cage

We’re in a time where when taking risk is the lowest risk in business says VMWare CEO Pat Gelsinger

“It’s no longer the big beating the small, it’s the fast beating the slow,” says Eric Pearson, CIO of the InterContinental Hotels Group.

Pearson was quoted by VMWare CEO Pat Gelsinger in his five imperatives for digital business keynote at the VMWorld 2015 conference being held in San Francisco this week.

The five are an interpretation of the trends in a radically changing business environment where the barriers to entry have fallen dramatically, industries are globalised and the time to market for new products has collapsed.

Put together, Gelsinger believes established businesses have to be more nimble as market and industry forces are going to punish those who are too slow to adapt.

Elephants must learn to dance

Gelsinger’s initial point is the world of business is now asymmetric – incumbents have everything to lose in the face of new businesses where upstarts have nothing to lose.

Part of that asymmetry comes from the world of shared resources, which gives startups and smaller businesses access to tools that were once only available to large organisations.

An obvious example of this are the cloud computing services that is concentrating VMWare’s minds, however another good example of how shared resources will change industries is the self driving car where Gelsinger cites vehicle utilisation will go from 4% to 71%.

Gelsinger points out using a car on a pay for use basis will change the structure of our cities which in turn changes the economics of living in suburbia and the business models built around it.

Standardising the cloud

Cloud computing is at the end of its formative, experimental phase and entering into a professional era where different types of services are going to have to work together.

“We have the private cloud which is focused on IT as we know it today, pulling out costs, slow and complex applications but also has powerful governance and does what I need it to do while meeting compliance purposes,” said Gelsinger. “On the the other side we have the public cloud which is fast and is able to scale effectively but has weak governance.”

In a perverse way, it’s Edward Snowden’s revelations that are driving many businesses to maintain their own private cloud networks due to concerns about foreign powers tapping their information flows and the sovereignty of data.

The consequence of a range of different cloud environments mean they are all going to have to get along with open standards becoming more important as businesses ‘mix and match’ their requirements.

Meeting the security challenge

As the Snowden affair shows, IT Security is difficult, complex and messy and becomes more so as workers start using their mobile devices and data is pushed around the cloud.

Gelsinger sees the online security sector as being the one of the biggest opportunities for startups and one of the fastest growing costs for business, “the only thing growing faster than the spend on security is the cost of security breaches.”

While Gelisinger’s focus is on VMWare’s security proposition, the security mindset is going to have be adopted by all business people. As the Target and Ashley Madison breaches have shown, the damage that can be done by a security lapse can be crippling and is a tangible business risk that senior managements and boards need to be across.

Proactive technology

Artificial intelligence has been through a thirty year gestation and Gelsinger told of his early days as a computer engineer working on AI projects in the late 1980s. Those early days of AI were a failure as the results as the time didn’t live up to the hype.

Gelsinger sees this as the next wave of computing as it moves from being reactive to proactive as systems become able to anticipate actions based on the data they are seeing.

While this has major ramifications for the computer industry, it also promises to change management and the role of many professions.

“This is going to change human experiences,” says Gelsinger however there will be challenges as businesses strike a balance between creepy versus convenience and invasive versus valuable.

Welcome to the age of rattling the cage

Half of the firms on today’s Tech 100 list will be gone within 10 years, was the warning in Gelsinger’s final point and he focused on the need for businesses large and small to break out in order to stay relevant.

“Welcome to the age of rattling the cage,” stated Gelsinger. “A time when taking risk is the lowest risk.”

Paul travelled to VMWorld 2015 in San Francisco as a guest of VMWare

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Dealing with an app driven world

The challenge of dealing with a app driven, mobile workforce isn’t just one for technology companies.

“It isn’t easy to create apps for the real world,” is the opening line of this morning’s VM World conference in San Francisco.

That line encapsulates the challenge facing almost every company, not just tech companies like VMWare, in the face of shifting marketplaces and technologies.

One of the biggest business shifts is the move to mobile technologies. This isn’t just changing marketing and user experiences but also changing companies’ operations as staff increasingly use their own smartphones and tablets to work.

Managing a shifting market

That shift though is not simple, as ZD Net reports Facebook’s move to ‘mobile first’ was a tough path in the words of the company’s senior engineer Adam Wolff.

“I think everyone would say it was worth it, but it was extremely painful,” Wolff admitted, explaining each sub-team was building in their own ways because there was no one to crossover with necessary knowledge.

Facebook has probably been the most successful company is dealing with the mobile shift and their difficulties despite their massive resources show just how difficult it is for companies to change not just their technology, but their business processes and in many cases the entire mindset of the organisation.

Those pain points in transitioning between ways of doing business is where opportunities lie, for VMWare they are seeing IT departments struggling with the development and deployment of apps along with the security risks of staff bringing their own mobile devices.

Happy coincidences

For VMWare, this is a happy coincidence in that their main business of computer virtualisation is as much at risk from the shift to cloud computing and mobile applications as any other business. By offering the tools for companies to manage that shift, they can retain their place in the market.

The threat though is this space has many other contenders – not least Facebook itself with its open source React platform the company developed out of its experiences in developing its mobile product.

One of the strengths VMWare has is being an incumbent, which is why they are pushing their ‘hybrid cloud’ offerings where companies use both their own data centres along with the public cloud providers such as Amazon and Microsoft.

Stuck with sunk costs

For large corporates with huge sunk costs in their own infrastructure and those with security or operational reasons for keeping some of their functions in house that hybrid strategy makes sense as it’s unlikely any board or CIO is going to happily burn their existing systems and process down and go to a ‘pure cloud’ or mobile strategy.

While catering to that market is lucrative for the moment, the longer term risk is that the next wave of large corporations – and today’s high growth businesses – are pure cloud companies.

For the companies catering to the old ways of doing business, for the short term there’s profits to be made in the pain points from an evolving marketplace but in the long term it’s how well businesses are placed for the world the end of that transition that will guarantee their survival.

The process facing software companies like VMWin dealing with as business shifts is a challenge faced by almost all industries, the question is how to adapt to a very changed way of working.

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