An important part of a CIO’s job is understanding which IT functions are best handled by others and which should be kept in-house. But the answer is not always so clear-cut in the outsourcing vs. insourcing dilemma; in fact, it can be a real brainteaser.
“It’s not a bright line,” explained Tom Young, who oversees the infrastructure group at sourcing advisory firm TPI. “Think of it in terms of left brain and right brain, where the analytical left-brain functions get outsourced and the conceptual, big-picture right-brain functions are retained.”
Such as? A company’s security policy and its enterprise architecture are ill-suited for farming out, in Young’s opinion. An IT security policy needs to constantly adapt to new threats and changing regulations. “You might want to have the administration of security done through a third party, but you want policy and oversight set by the company,” he said. And if you farm out enterprise architecture, he added, you’re simply raising a conflict of interest for the provider: “You don’t want to give the person providing the service the keys to the kingdom.” What’s the rule of thumb? Functions that are routine and can be done by a set of rules tend to lend themselves well to third-party providers.
To help its clients solve the outsourcing vs. insourcing conundrum, TPI draws a chart of all the IT functions and subfunctions within each domain that a company might outsource, laying them out from the “transactional and simple to the conceptual and complex,” according to Young. At some point along that continuum, a company draws its line: outsourcing to the left, insourcing to the right. And even then, the rationale sometimes doesn’t become clear until after the CIO has lived with the contract for a while. “You’ll find yourself wanting to adjust those boundaries once you’ve had time and experience with that contract,” he said. “It happens a lot.”
Do you have an outsourcing brainteaser? If your company has solved the outsourcing vs. insourcing puzzle, I’d like to hear the details.
Thinking about heading out to Gartner Inc.’s 29th annual Data Center Conference in Las Vegas next week, I’m reminded of how much data center infrastructure has changed since the mid-1980s, when Comdex expanded across the desert as the PC took hold in corporations. No doubt the conversations then were focused on raised floors and midrange systems, as businesses built out their client/server networks.
Fast-forward to 2010, and the hot topics at next week’s conference will concern consolidation rather than expansion, as the data center’s infrastructure is transformed using virtualization, automation and green technologies to achieve something that never goes out of style: saving money.
Going green is one way to gain efficiencies in the budget and satisfy a universal need for better stewardship of the world’s data centers. Businesses can’t afford to plug in servers that are running at 12% optimization, nor can they ignore the growing evidence from the scientists gathered in Cancun this week that climate change is real. Green technologies, such as air economizers, promise to deliver results for both the bottom line and the Earth, and that’s why IT executives are getting serious about the topic. On SearchCIO.com this week, we explored the need for green data centers. Stay tuned next week for ways to get green.
The need for cost savings is driving another trend: partial outsourcing of the data center infrastructure, according to John Phelps, a research vice president at Gartner and co-chair of this year’s conference. “People who are not running their data center efficiently would save money with outsourcing,” he said. “We tell our customers, ‘take a look at anything where you are not adding business value, and look to outsource that.'” The model can be anything from colocation to “turning over everything,” he said, adding, “the word outsourcing is a mixed value.”
Another growing trend is for IT departments to order all the infrastructure needed for a data center, which then is packaged up and installed in the company’s building or at a co-lo site. These “modular” data centers enable companies to add modules in increments, instead of spending multiple years’ worth of capital expenditure up front. These aren’t your father’s (or my father’s) old shipping containers filled with servers and cables; they’re nifty green pods, complete with racks and hot and cold aisles, that defy convention.
What’s new in your data center? Let me know at firstname.lastname@example.org.
Thanksgiving, Black Friday and Cyber Monday are behind us. Time to bring out the 2011 technology predictions. Hot off the presses from the Gartner research files are the consultancy’s top technology predictions for IT organizations and users for 2011 and beyond. With, I might add, enough eye-opening implications for IT professionals to make Scrooge’s Ghost of Christmas Yet To Come look like an angel of mercy: To wit:
- Automation will eliminate 25% of IT labor hours by 2015.
- 90% of organizations will support corporate applications on personal devices by 2014.
- New revenue generated by IT will determine the compensation of CIOs at large companies by 2015.
The technology prediction that caught my eye, however, was the one dripping with irony. As the Gartner research report notes, most companies have established a social media presence, mostly by broadcasting messages through Twitter feeds and Facebook updates. Well, those robotic attempts at adding a social element to the same old, same old marketing pitches will soon be handled by — social robots, automated software tools that engage customers. According to Gartner, by 2015, 10% of your online “friends” will be nonhuman. Viva la 2011 and beyond!
Here’s the short take on Gartner’s technology predictions:
- By 2015, new revenue generated each year by IT will determine the annual compensation of most new Global 2000 CIOs.
- By 2015, a G-20 nation’s critical infrastructure will be disrupted and damaged by online sabotage.
- By 2015, information-smart businesses will increase recognized IT spending per head by 60%.
- By 2015, tools and automation will eliminate 25% of the labor hours associated with IT services.
- By 2015, 20% of non-IT Global 500 companies will be cloud service providers.
- By 2014, 90% of organizations will support corporate applications on personal devices.
- By 2013, 80% of businesses will support a workforce using tablets.
- By 2015, 10% of your online “friends” will be nonhuman.
For the annotated list of Gartner predictions, go here. And let me know what catches your eye.
Every C-position has its own argot, its own turn of phrase. CEOs are addicted to sports analogies and fighting words. A CIO career requires constant tactical maneuvers, as the CEO might put it, against the three-letter acronyms that drench IT speech and dampen relations with the business.
I thought you might enjoy hearing some of the verbal tics of the CFOs I heard speak at a recent summit of CFOs in Boston. You might be surprised at how alike you sound on a few topics.
In any case, next time you sit down to talk turkey (Happy Thanksgiving!) with your CFO, sprinkling on a few familiar phrases can’t hurt your CIO career.
Runway room, as in: “Some stimulus to the business sector to really start growing jobs and get this economy to turn is really important. That and runway room. Without some runway room, so you can take advantage of the stimulus, you are not really stimulating anything.”
Growth, as in: “We are very much focused on growth.”
“We have always been focused on growth.”
“We try to be entrepreneurial and focus on profitable growth.”
Resource allocation, as in: “One of the most important things a CFO does is resource allocation. Not all investments are created equal.”
“We are much more disciplined about resource allocation.”
Execution, as in: “Execution cures all ills.”
“You can’t worry about the swings; you have to focus on execution.”
Quarter to quarter, as in: “If businesses fall into the trap of being focused quarter to quarter, it is because they have allowed that to happen.”
A penny of EPS (earnings per share), as in: “We don’t think a penny of EPS really matters one way or another if we are investing those dollars with a high ROI.*”
The reality for us…, as in: “The reality for us is that there are a lot of other places in the world that are more investment friendly.”
At the end of the day, as in: “At the end of the day, in business, you make decisions based on confidence.”
*ROI: This is a term your CFO can’t get enough of.
If you have any others, please let me know. I’m making a dictionary.
For more tips on how to talk to your CFO, check out, “Build a strong CIO-CFO alliance in 2011, or put IT strategy at risk.”
Enterprises might not be rushing headlong into the public cloud — indeed, most experts believe the infrastructure of the future will be a hybrid cloud — but savvy CIOs are taking a page from the public cloud subscription model to negotiate software licensing agreements on their terms.
Take George Brenckle, senior vice president and CIO of UMass Memorial Healthcare, the academic partner of UMass Medical School, with three campuses in Worcester, Mass., and four member hospitals in Worcester County. “Health care is a very capital-constrained industry,” he said, and he’s realized that the cloud subscription model might be a better way to balance the books while purchasing new technology.
“If I don’t have the capital to buy a product now, but [a vendor] can offer me a service model and build the infrastructure to do remote support, there’s nothing to stand in the way,” Brenckle said.
That realization came to Brenckle two years ago, but when he asked an independent software vendor (ISV) to consider a subscription model, he “got the blank look,” he told attendees at a recent Society for Information Management meeting. Last month, expecting the same blank look he got two years ago, he repeated the request “and they jumped on it,” he said, and promised to come back with a proposal.
Welcome to the age of “anything goes.” As ISVs modify their licensing models to accommodate the economic downturn, virtual use, cloud computing, and in turn, subscription-based options, negotiating new software licensing agreements has become one of the top issues for IT, experts say. And the licensing-agreement term of choice is subscription-based.
By 2014, 40% to 70% of ISVs will offer a subscription model for business software regardless of whether it resides on a public, private or hybrid cloud, according to a study of 756 IT professionals in the public and private sectors by CDW LLC, a global technology solutions provider based in Vernon Hills, Ill. That’s because it makes sense, not only from an enterprise point of view but also for the vendors, said Nathan Coutinho, virtualization solutions manager at CDW.
“In the last six months, ISVs have begun to offer subscription-based pricing models,” Coutinho said. “At some point, it will only be subscription-based, if I had to guess. It would let the ISVs develop much faster, with a steady stream of revenue because of maintenance.”
An army of technology vendors is scrambling to sell you enterprise social media platforms, as I discovered in my reporting for a pair of stories on SearchCIO.com this week on enterprise collaboration. These platforms aim to add a social element to business applications, either “layered” over the many applications we use for work (Socialtext and IBM’s strategy, for example) or embedded in applications (Salesforce.com Inc.’s Chatter, for example).
Underpinned by a lightweight Web-oriented architecture, enterprise social media platforms aim to get people to work across the proverbial silos of the modern corporation. Twitter-like “activity streams,” jangling with metadata, will not only advertise what you are doing, but also expose your goings-on to others — and others’ application activity to you. Suddenly, for example, a person in the professional services group will be able to retrieve information from the sales group.
The punch line: “What we see is that as companies deploy social software, people who hoard information are at a disadvantage to those who share,” said Ross Mayfield, president and co-founder of Socialtext Inc., the Palo Alto-based maker of business social software.
As president of one of the leading enterprise social software companies in this young business area, Mayfield has reasons not to be a naysayer, of course. But this way of working comes with legitimate security issues, and perhaps social ones as well.
Breaking down silos is fine as long as all the silos are on the same farm: the company. But what prevents similar sharing between enterprising members of different companies? Especially if this information provides advantages to the sharers, relative to their more cloistered comrades?
As a business reporter for many years before I started covering IT, I’m skeptical that this will work, even within the confines of the “You’re OK, I’m OK” culture we give lip service to now.
Social media platforms in the enterprise rewrite the rules of competition — not to mention the divide-and-conquer mentality typical of many managers. And I am not talking just about the ruthless tactics used to squelch an outside competitor; I’m also talking about the ruthless intramural competition that permeates the all-for-one-and-one-for-all teams that are supposed to pull together for the good of the corporation.
Business is bellicose. The CEO of one of the largest Catholic health systems in the country, a nun, pointed out to me once that one needn’t look any further than the war-like language that permeates business discourse — from bullet points to the blatant crushing the competition rallying cries of annual meetings — to see that muscle — not sharing — is the virtue extolled at the top.
Maybe a new generation will rewrite the language of work. I read just this week about one study that found students who tweeted in class did better than those who didn’t. (Are you tweeting me?) But that’s a story for another post.
A little while ago, I asked the CIO of a multinational distributor of electronics equipment what he most needed to read about. His answer? Application monitoring.
It’s an area ripe for development, as I discovered this week while looking into monitoring tools in a virtual environment. These holistic tools use such forward-thinking concepts as behavior learning to anticipate trouble spots in performance. They allow you to measure core elements — for example, storage, network, server and desktop — on into the operating system. The same cannot be said for software applications themselves, whose IT metrics for meaningful performance measurements are limited, experts said.
Another spot where standard IT metrics are lacking is the cloud, according to Henry Mayorga, manager of network technologies at Baron Capital Inc. in New York. “Say you’d like to store a couple terabytes of data on a cloud service,” he said, then asked, “Is the provider going to charge you by measuring data coming out of the pipe, with the network overhead? And when the provider restores data that has been compressed or deduped, will it charge for the compressed or the uncompressed amount?”
Unlike the sealed electric meter on a house — which gives confidence to homeowner and electric company that a reading is true — there are no standard measurements for data in the cloud, Mayorga said. “We need normalized data, good systems of measuring, some way of speaking about a common number across the board,” he said. “There is no such thing for cloud computing.” The only way to measure massive amounts of correlated data — meaningful data — is to approach it from a mathematical point of view.
IT metrics in the cloud may not be adding up, but adoption rates for application transfers to the cloud are. Orange Business Services — a systems integration branch of France Telecom Orange — surveyed 500 multinational corporations in 12 European countries to understand their plans for data center consolidation and virtualization — specifically, which applications are being cloud-enabled.
More than two-thirds (67.6%) of the 500 companies in the survey planned to consolidate their data centers and servers within the next two years. One factor determining the response to a question about loading applications into the cloud was whether a program was off-the-shelf versus those that typically are customized. Microsoft applications, Web conferencing and video conferencing were most likely to become cloud applications, according to respondents, but only 95 of the 500 companies planned to virtualize their call center applications; even fewer planned to virtualize customer relationship management, enterprise resource planning and human resources.
What numbers most interest you? Let me know at email@example.com.
For a story this week on spreadsheet management, I not only learned that the spreadsheet is alive and thriving in the enterprise, but also heard an interesting argument why this pesky application may deserve to survive in the face of enterprise BI, ERP and CRM solutions: To wit, as businesses adapt to ever-changing conditions, it takes time for their vendor-built solutions to catch up to the current reality. Meantime, the not-so-lowly spreadsheet fills the gap, helping business people analyze the viability of new products, for example, or helping federal government, for that matter, keep track of Troubled Asset Relief Program spending. As long as the world keeps changing, I was told, the spreadsheet will survive. (The longstanding joke in this field is a variation on the Nuclear Cher meme: Come the end of the world, only cockroaches and spreadsheets will survive. They deserve each other.)
More surprising to me than the evolutionary adaptability of the spreadsheet was the discovery that many companies are courting daily risk by not having a spreadsheet governance program in place. This is despite well-documented multimillion dollar losses, like the one suffered by C&C Group PLC, the Dublin-based maker of cider. The drinks giant saw shares plummet 15% in 2009 after admitting that, due to a spreadsheet error, it had misstated quarterly revenue and claimed a 3% rise in revenue when in fact, revenue had dropped 8%. Or the $1.2 billion Fannie Mae error caused by a spreadsheet error. Or the spreadsheet typo that caused Fidelity’s Magellan Fund to overstate a share distribution amount by $1.3 billion. Or statistics apparently showing that some 94% of spreadsheets will contain errors. (For a well-curated compilation of the best spreadsheet horror stories, check out the website of the European Spreadsheet Risks Interest Group, or EuSpRiG.)
The question: Does your company have a spreadsheet management or governance program in place? Oh, and who’s in charge of it? (Another stumbling block, it seems.) And by the way, is there an evolutionary computing surprise out there that will put the spreadsheet to rest?
You can reach me at firstname.lastname@example.org.
The idea of a FedEx truck picking up your data for transport to a cloud provider might elicit either chuckles or groans, depending on your point of view. It’s one solution to a bandwidth crunch, but what enterprises really need for enterprise-to-cloud deployments are wide area network (WAN) accelerators, according to Michael Draper, global director for PaaS Operations at Pegasystems Inc., a business process management software provider in Cambridge, Mass.
Draper contacted me this week to elaborate on a remark he made at a recent Society for Information Management meeting about the FedEx “trucknet.” “The enterprise has always been challenged with moving massive amounts of data across the WAN,” he said. “Forget about the cloud. If a company needs to move terabytes of data from point A to point B and a WAN needs to be traversed, then a solution needs to be carefully thought out. Moving the same amount of data across a network that you don’t own or manage becomes even more challenging.” WAN accelerators help companies manage and move massive amounts of data, he said, but today there is a shortage of WAN acceleration products for cloud services.
Nominal amounts of data can be moved easily and securely between the enterprise and a cloud service provider, and businesses routinely place production systems in the cloud that access data securely within the enterprise. The challenge that enterprises have — moving gigabytes or terabytes of data across a WAN — doesn’t go away with the introduction of cloud services, he said.
“[WAN accelerators] is one area that is ripe for new products and services,” Draper said. “If you need to move terabytes of data to the cloud, it could take days. FedEx, being the smart company that it is, picked up on this need and partnered with Amazon Web Services (AWS) to provide companies with a kind of updated sneakernet.
The service, called AWS Import/Export, lets customers ship large amounts of data on portable storage devices to AWS. “It may sound like an old-school solution, but it will work and can be more cost-effective than using the Net,” Draper said. Expect to see a variety of new products and services launched over the next year that will help the enterprise address the challenge of moving large amounts of data in and out of the cloud, he added. “This is definitely a growth area.”
Take a look at my data
Of course, with that much data being moved into the cloud, integration and monitoring tools are becoming even more critical, experts say.
I wrote about a couple of cloud-to-enterprise data integration tools on SearchCIO-midmarket.com a couple of weeks back, and have been paying close attention to new offerings that up the ante with such stylish-sounding technologies as behavior learning and harmonized data.
“Behavior learning tools have the potential to massively improve business service performance and availability” by establishing “normal behavior patterns” in data flowing in from various sources, and detecting deviations before a problem arises, Gartner analyst David Williams said. Another approach is to compare the data elements from multiple sources to establish a “record of truth.”
Advances in monitoring tools are game-changing, experts said, enabling IT to move from being an interrupt-driven organization to one that drives the business (by focusing on the infrastructure). Many of the new monitoring tools provide graphical user interfaces that unlock the essence of enterprise data for regular business users. “It harkens back to the day when the first browser came out and we were able to surf,” an industry executive said. Read about these developments in monitoring tools on SearchCIO.com next week.
I am entertained by a good video as much as anyone, I dare say, especially those made by a close relative in the science field, and any number of YouTube hits as well (for example, Hahaha and David After Dentist). As for getting my news, the latest IT research, company training or, for that matter, my gardening tips, text is my preferred modality. Most of the video content on such matters seems tedious. That means I am old. Video content has moved into the mainstream, according to a slew of studies, and CIOs need to implement video content management systems.
Gartner Inc., which includes video on its Top 10 Strategic Technologies for 2011, argues that it’s just common sense to implement a video content management system and policies now. Most phones have the ability to record video. More consumer sites are using video to plug products. The daily video upload rate on YouTube is mind-boggling. Video is coming to the corporation near you, the analyst company states, and not only from illicit downloaders, but in the form of CXO messaging, focus groups, company blogs, training and those semiannual sales pep rallies. In addition, the growing number of employees in your ranks who are younger than you? They like video — a lot.
“Over the next three years … video will become a commonplace content type and interaction model for most users; and by 2013, more than 25% of the content that workers see in a day will be dominated by pictures, video or audio,” Gartner predicts.
Gartner analyst Carl Claunch put it more vividly last month at the firm’s annual Symposium/ITxpo. “Young people dislike long sequences of text. They don’t want to read it,” he said. “They want short things with combinations of pictures, video and sound. You have to start thinking about your customers and newer employers who communicate that way.”
The shift to video should raise all sorts of questions in your mind: What are your policies for recording video? How is your business intelligence going to be able to search it? How do you index video? Do you produce transcripts? How does including video impact e-discovery? There are many technical and governance issues related to the arrival of video in the corporation.
Here are two more compelling reasons to start thinking about video content management now: Gartner believes that over the next three years, companies that look at video content management now will spend 50% less on storage and supporting infrastructure than companies that do not. And the other? When I mentioned to my closely related videographer, a member of the Millennial generation, that experts were predicting video content would become a mainstream form of corporate communication in the next three to five years, she laughed: “I thought it already was.”