The day of the 10-year outsourcing deal, cooked up in the
backroom boardroom and conferred to a sole provider on the promise of 10% — make that 20% — savings on Day 1, is over, at least for the rich and famous. (It actually died about the same time Lehman Brothers did.)
Less glibly: That outsourcing model is no longer viable for large enterprises with complex IT environments that are determined to leverage utility computing (cloud, Software as a Service), exploit cutting-edge technology and unload routine IT services to gain a competitive advantage. To achieve that kind of smart IT service delivery, enterprises — especially their CIOs — need to be dealing with multiple suppliers.
Of course, the devil is in the details: How do you actually do this? That was the burning question at a news briefing yesterday morning with HP Enterprise Services before the company’s announcement of a new offering. The HP Multi-Supplier Integration Service, or MSI, aims “to help enterprises and governments gain control of multivendor service environments, improving overall IT performance and quality while optimizing costs.”
You can’t beat that offer. The question is, can you afford it?
Getting this outsourcing model right is really hard. As HP correctly notes, these models “challenge IT leadership to ensure efficient workflow, timely problem resolution and adequate service-level performance.” In other words, these deals require the foresight of a Steve Jobs, the ruthlessness of a Larry Ellison and the wisdom — and wealth (we’ll get to that later) — of Solomon. When I asked Peter Yates, chief technology officer for HP Enterprise Services, to explain the mechanisms HP will use to wrangle this IT herd of disparate and even competing interests, he, not surprisingly, demurred. That’s HP’s “secret sauce,” he said.
What Yates did note, however, is that central to success in this outsourcing model is making suppliers “play nice together.” How do you get disparate and even competing suppliers to play nice together for the good of the customer? The terms need to be spelled out right up front, in the RFP. And — here’s the money question — the deal has to be so big and so good that the suppliers are willing to agree to those terms, he said. Vendor loyalty takes on a whole new meaning.
“It’s the new ‘stickiness’,” said Rob Taylor, vice president of data center services for HP Enterprise Services. He and Yates also said that this model and their integration services are aimed squarely at very large enterprises with lots of resources, including IT resources. A smaller company with fewer resources might want to stick with that sole-provider model, Yates said.
As I learned in my recent reporting on CIO Linda Jojo’s multivendor outsourcing deal, getting it to work right, with an end-to-end service-level agreement, is rare. It’s hard to govern. There needs to be a detailed strategy for managing all those moving parts, including: knowing when to move what to the cloud, what to keep close to the internal-IT vest, which suppliers to go with, and when a supplier absolutely needs to be fired and replaced by someone better-suited to the job. I have no doubt that the brainiacs at HP can help CIOs do a better job at this (after you’ve hammered them on conflict-of-interest issues). But you’d better be very ambitious and working for somebody with deep pockets.
When it comes to virtualization licensing terms, what is it going to take for some independent software vendors (ISVs) to stop dragging their feet?
When I asked IT executives at the recent Gartner Catalyst conference in San Diego about the biggest challenges of desktop virtualization deployments, most of them said that dealing with “some” ISVs remains a real pain.
In fact, some IT executives are removing some ISVs’ software applications from their desktop and application virtualization plans because they fear the ISVs will change licensing terms.
As one executive put it, “It’s not so much a challenge to get them to understand what we’re doing; it’s that their licensing is a moving target.” As more businesses adopt a virtualization model (which removes reliance on a given piece of hardware and allows multiple users to access the same software), some ISVs apparently view the trend as a threat to profits. “So, what might be OK today, six months later or a year, [the ISV] may say it’s changing our terms,” this executive said.
Some ISVs just don’t want to acknowledge that their customers are moving to a multi-tenant computing environment, but this lack of acknowledgement could lose them a lot of customers. Of course, not all ISVs fit this bill. For the most part, ISVs are working hard to accommodate virtualized applications and desktops, IT executives say.
This isn’t the first time we’ve written about the virtualization licensing-terms dilemma, and given the attitude of some ISVs, it likely won’t be the last. To recap some of the advice from one of those virtualization licensing stories, here are two tips on negotiating licensing terms, courtesy of licensing expert Paul DeGroot, formerly with research firm Directions on Microsoft:
Negotiate software licenses based on named users. The cost of licensing software in a virtual environment based on processors can add up fast. Data volume for many businesses is going up, and in turn, the number of processors they need to license is rising too, while the number of users is remaining the same or even decreasing.
Look to retrofit existing software licensing terms for a virtual environment. Some vendors offer amendments to existing licensing agreements to account for running software on a virtual machine. IBM has a Sub-capacity licensing program in which customers can sign a contractual amendment that accounts for server licenses on a concurrent basis rather than on a named basis.
Let us know what you think of this blog post; email Christina Torode, News Director.
In our SearchCIO.com tip sheet this week on outsourcing strategies for emerging tech, outsourcing adviser Andy Sealock explains how contracting for new technology is different from procuring traditional IT services. He passed along seven points that his clients at Pace Harmon LLC take into consideration when they’re writing a contract for new IT. Here are two Sealock suggestions for steps you can take in conjunction with the contract to strengthen your outsourcing strategy:
- Take an equity stake in the supplier: “An equity stake changes the dynamic of the relationship,” Sealock said. For one, it allows you to stipulate a certain number of seats on the supplier’s board. In any deal for emerging tech, keeping tabs on your project is critical to its success. “Putting members on their board is about as deep an embedding as you can get,” he said. Second, if the supplier is a startup, your equity stake will be useful.
- Offer co-branding and marketing alliances: Letting a developing tech company put its logo or trademark on your product or on your marketing materials can be extremely valuable (given your wider distribution channels). That in turn helps realize your main aim in the negotiations, Sealock said — namely, to motivate this new tech company to sink its scarce resources into the areas that benefit you most.
Check this blog soon for Sealock’s latest thoughts on calculating total cost of ownership (TCO) on outsourcing deals. Hint: They involve getting engineers to think like finance people and finance people to think like engineers. Guess which group is harder to morph?
There was an interesting side conversation during the Q&A portion of a session on enterprise mobility at last week’s Gartner Catalyst Conference.
Someone asked the panel what they thought about privacy on mobile devices. What if sharing information on mobile apps gets to the point where your insurance provider knows too much about you, for example?
As we reported in a past story on enterprises’ mobile app plans, some health care providers and pharmaceutical companies are considering apps that would tell patients when to take their medication.
One audience member pondered this question: What if a health care provider decides to sell that type of information, and the next thing you know, your insurance provider shuts off your prescription because you aren’t taking the pills as scheduled?
That’s a scary scenario, but given just how much information we are willing to share over mobile devices and on social media networks, it’s not an impossibility.
But as panel moderator and Gartner analyst Paul DeBeasi said, “Only old people care about privacy,” repeating something his teenage son had said to him. His response had been that his son would care when he’s older. (What had bothered DeBeasi more than the generation gap around privacy was the possibility that information is probably being collected about people that they don’t even know about.)
But is it true that older generations are more cautious and younger generations have no privacy boundaries? The panel thought so.
“Let’s face it, younger generations are more than willing to share personal information — they want to share personal information, said panel member Randy Nunez, advanced networks and mobility director at Ford Motor Co. “And until they run into situations of ‘How does my insurance company know what my medical practices are’, until [privacy issues] start impacting them personally, there’s going to be a lot we give up in terms of privacy and security.”
Does that mean that enterprises also will have to give up a lot in terms of privacy and security? Or will the right controls around an enterprise mobility strategy put a stop to “over-sharing?” Then again, how do you balance controls when personal information is mingled with corporate data on a mobile device? And what happens when you ask employees to buy their own devices?
Let us know what you think about this blog post; email Christina Torode, News Director.
I did a profile this week on CIO Rick Roy’s push to plot an enterprise mobility strategy for CUNA Mutual Group. I was impressed by a number of things: his data-driven approach to gathering requirements; his engagement of the top brass; his anticipation of the cultural implications of this radical change; and, not to go unmentioned, the 18 personas (personae?) his team developed for modeling the mobile computing requirements of CUNA Mutual’s 4,000 field and corporate employees.
Here’s the part of Roy’s enterprise mobility strategy story that’s ringing in my ears today: “When you’re in the corporate world,” he told me, “I think it’s easy to get comfortable with what you have. Yet the reality is, the speed of innovation, the velocity of change that we’re seeing and the acceleration of that velocity is just so enormous.”
So enormous. Lately I’ve been thinking a lot about the velocity of change. (Just this week, for example, pondering why American citizens were not storming the Capitol to protest the ineptitude of elected officials, I chalked it up to the velocity of change. We can’t get it together fast enough to affect a situation spiraling out of control.)
But back to CIOs and mobility. For Rick Roy, the velocity of change in the mobile world forced him and his team to look beyond the central tenet of a well-run IT environment of the last decade — standardization — to a flexible delivery model that could keep pace with mobile demands.
The mobility world is whirling ahead so fast that CIOs can’t catch their breath long enough to take advantage of the technology. If the guy I talked to yesterday is correct, you can inhale. Enterprise mobility is about to reach — a tipping point!
“I think we’re going to hit a point of stability pretty soon,” said Brian Reed, chief marketing officer (and YouTube presence) at mobility management vendor BoxTone.
By this fall, Reed says, the Android will stabilize, offering security levels on par with those in the BlackBerry and the Apple iOS, or be well on its way there. CIOs will be able to use the same mobile policy for every device running these top three operating systems, making it easier to “say yes” to mobile devices. That will take some of the fury out of the mobile tornado tearing through the enterprise, or as Reed put it, ease the “big squeeze” CIOs are now feeling from the rank and file (on the one side) demanding to use their personal devices for work, and from line-of-business people (on the other side) screaming for mobile apps. The very next thing — as in, the next six months — CIOs should do to buy some time on enterprise mobility is to get “some quick wins” around apps.
“The easiest way to do that? Look at the app portfolio you already have and see if you have any mobilized, and go ahead and say yes. In fact, get out in front of it, and say, ‘We’ve done research and found that Salesforce [or whatever field-force automation tool you use or whatever retail point-of-sale software you use] is already mobilized and we are going to deploy that and manage it for you,'” Reed said.
In 2021, cloud computing is simply computing, corporate office parks are senior housing facilities and the IT organization of the future has been absorbed by the business.
Oh, and Apple has lost its proprietary hold on mobile application development — in court, no less — giving every company out there the ability to build its own app store — and sell those apps.
These were some of the predictions made by Gartner analysts Chris Howard and Jack Santos during the kickoff of the Gartner Catalyst show this week in San Diego. Howard and Santos made them in jest during an end-of-day skit — Santos playing dual roles as an IT staffer and a business user of the future — but some of these predictions are taking shape in the here and now, they said.
To back up a bit, the IT organization of the future will undergo drastic shifts in the following order, according to Gartner:
Internal IT becomes an internal cloud. This shift is inevitable, given the demand from enterprise employees and customers for an on-demand service experience. It will require IT to emulate or “start to think like” external cloud providers. IT will have to figure out chargeback and self-service provisioning; above all, it will have to start to develop a services catalog. IT also will have to figure out how to get the most out of a shared services model in such areas as capacity management in a virtualized environment. In terms of security, IT will need to nail down identity management, among many other security responsibilities.
IT becomes a services broker of its own services and those provided by third parties — namely cloud providers. This puts IT into the position of showing the business which applications and data make sense in-house or with a cloud provider, and how to vet the providers on behalf of the business.
Key to this is IT’s ability to grill cloud providers on their services capabilities, one critical criteria being security. For example, does your cloud provider wipe out your data before it houses another customer’s data on the same equipment? This is a question that IT is likely to ask, versus a business user, Gartner said.
As a services broker, IT will decide which apps are cloud-ready or not. It’s not a matter of service denial when it comes to cloud providers, Gartner said, but of helping the business make the right choices. Above all, the IT organization of the future will continue to vet outsourcing partners.
Critical questions include these: Does the provider let you know if and when access attempts are made on your data that they house? Does the cloud provider allow you to perform security audits on it? What are the migration path options to another provider? Who will build the back-end connections from your data in the cloud to other applications in your organization or to data housed by another cloud provider?
In a few years, the cloud will no longer referred to as the cloud, because it’s just the way IT services are provisioned. Cloud computing, or rather, hybrid computing is the new term to reflect that many enterprises will build an internal or private cloud that integrates and shares services with public cloud providers.
The hybrid approach will prevail, given that enterprises will not let certain data or applications live on a public cloud, for many reasons including regulatory compliance. Enterprises recognize the need to move commodity services and apps, as well as infrastructure, to the public realm to cut costs and gain scalability and agility.
IT will become a function of the business. Gartner’s Howard described the days when the IT function was considered so separate from the business that it was housed in a different office. Not so now: Already IT is being looked on as another service or function within the business. “Math was once considered a department,” Gartner’s Santos said. “Send that to the math department, because only a few people could do the math. Now, IT isn’t something [like math] that only a few people can do. Business people think [IT] is part of their job.”
Here are a few other takeaways about the IT organization of the future:
- Code-writing will become less important, and infrastructure and application integration more important within the enterprise and with external providers.
- Enterprises may start to emulate the business models developing in other countries in which a business function or even an entire business can be built for a specific purpose in a virtualized or cloud environment, then torn down once the project or purpose is complete.
- Albeit obvious, less business will be done in the office, given the ability for the “anywhere” computing that the cloud and virtualization enable. “There will be no there anymore,” Gartner’s Santos said. “The office is a virtual concept.”
- Application portfolios, as well as how and why applications are developed, will be led by your customers and their mobile, on-demand, “anywhere” needs.
- Enterprise IT will struggle with managing the blurred lines between corporate and personal personas, as well as the data and devices tied to those personas.
I am just scratching the surface as far as predictions being made here at Gartner Catalyst. In the coming weeks, the hybrid IT concept, IT as a services broker and developing a fraud prevention program will be among the topics we explore.
Let us know what you think about this blog post; email Christina Torode, News Director.
There are a few annual events I adore even though I’ll never ever go to any of them: Burning Man, SXSW, TED, and this time of year, Comic-Con. When you’re hyper-focused on IT innovation, you sometimes miss good stuff disguised as frivolity.
As we speak, San Diego is being overrun by 125,000 nerds, many dressed like superheroes, video game characters, zombies, stuffed animals, space aliens or manga hotties. All are ostensibly clamoring to witness the next big thing in comics, movies, TV and Web video. To be clear, these are not the cowering, bashful nerds from back in high school. These are angry, hipster nerds drunk with nerd power and full of nerdy attitude. They’re intolerant of boredom, enraged by sameness. They want all of the tools and technologies at their disposal employed to deliver new diversions in the wildest, weirdest way possible.
Which is why they all go to Comic-Con, then complain incessantly about Comic-Con. There are plenty of IT folks in attendance in San Diego this week, but not in an official capacity. Unless you’re the CIO of Marvel Comics or Hasbro, you may never have even heard of Comic-Con. But you should have. We in the enterprise technology arena could learn a few things from our geeky brothers in arms.
The Comic-Con faithful support those dedicated to their interests. But they instinctively know something fundamental about creativity and the artistic pursuits. Wherever thousands gather in its name, creativity has fled. Real creativity is born of rejection — rejection of the current, the popular, the safe, the known. It’s why some of the best stuff at Comic-Con happens in tents in a park down the street from the convention itself. There are always at least as many people boycotting Comic-Con as attending it.
I make this observation while sitting in another hotel conference room listening to another garish, noisy, colorful presentation on another current, popular technology choice. In today’s case, it happens to be cloud computing, but it could easily be mobility or virtualization or social networking or BI. How many of these sessions have we all endured? Endured them, even as we had a nagging sense that the really good stuff was probably being discussed by a small, rebellious group huddled in a tent down the road. Why do we put up with it — silently for the most part?
Where’s our awkward hipster’s sense of outrage?
If there’s one lesson from Comic-Con for IT leaders it’s this: It’s time for them to let their snarky geek flag fly. Comic-Con is all about creativity and its continuous pursuit. That’s not so different from what we’re after in our quest for technological innovation. Innovation is, after all, another flavor of creativity. Innovation and creativity are brothers from the same mother. Innovation is creativity with more moving parts and a better credit score.
And innovation, like creativity, tends to wither when we all gather in one place around what is popular and current and safe and known. As my hero, Hunter S. Thompson, once said: “When the going gets weird, the weird turn pro.”
In enterprise technology, every day is Comic-Con. What we need are more angry nerds.
State Street Corp. announced this week that it is cutting 530 of its “non-client-facing” IT employees over the next 18 to 20 months, and shifting an additional 320 similar IT workers to outsourcing vendors IBM and Wipro Technologies. Application maintenance services are going to Wipro, while IBM will provide infrastructure support. The layoffs, which amount to 21% of State Street’s 4,000 IT employees worldwide, are part of a “multi-year business operations and IT transformation program,” to increase the efficiency of IT operations and focus more on innovation, bank officials stated — but I sort of knew that.
We recently spoke with State Street CIO Chris Perretta about his technology transformation at State Street, running a podcast just last week about the launch of a private cloud and his IT team’s laser focus on such innovations as Big Data processing. Perretta told me he has an organization now that “makes sense” to him, referring to the important role his chief architect and chief scientist play in finding IT trends that feed a “pipeline of innovation.”
Reaching Perretta this morning by phone, I asked him how many of the 850 lost or reassigned IT jobs were due to IT transformation. Before he uttered a word, the bank’s public relations specialist offered, “all of them, really.” Perretta was more reflective. Days like this remind IT people like him just how fast technology moves, and “our jobs have to reflect that,” he said. In addition, State Street has always pressured employees “to do those tasks which differentiate us with our customers.” The technology jobs being eliminated or moved off to vendors are “incredibly crucial to us,” he noted, but are more efficiently done by vendors invested in those technologies. State Street “gets to leverage” that vendor know-how and dedicate its IT people to things that are “out there on the technology edge.”
“So, for instance, our people designed our cloud; our people designed even the implementation of the hardware that we’re running. And it is our people who are designing our most innovative applications,” Perretta said. “Those are the jobs that we want to grow and keep within our employees. That’s the intellectual property we want to develop.”
The reassignment and loss of IT jobs are the consequences of a new operating model, Perretta said, and are driven by such new technologies as State Street’s private cloud and by IT’s move to Lean development principles. Automation eliminates some jobs. Outsourcing allows the bank to shift fixed costs to variable costs, a powerful advantage with technology changing so fast. “Sometimes that involves dislocation, and that’s unfortunate,” he said, but State Street has always watched the cost line. “And we want to make sure that what we do spend is spent in a way that makes a difference, so there you have it.” Whether these same forces will result in more IT layoffs, or how much money he saves by this shakeup, he declined to say.
Of course, State Street is not the only company shedding IT jobs. The federal government said today that it is closing 800, or 40%, of its data centers, a move that would save billions of dollars. The federal government’s outgoing CIO Vivek Kundra told The New York Times that the consolidation was “part of a broader strategy to embrace more efficient, Internet-era computing,” in particular, cloud computing. No word yet of layoffs.
Technology changes us. Perretta said he just bought an old typewriter and put it on his desk — the old manual kind, to remind him of that change in just his own lifetime. That’s the reality of the IT field, and because IT is integral to most business now, that’s the reality of many, many other fields as well — and the reason, in part, for a jobless recovery and why unemployment remains high, especially for the “non-client-facing.” Good luck to you.
There will be cases when mobile app development is necessary, but many of your enterprise business needs are going to be addressed by off-the-shelf or even free mobile apps.
At least that’s what mobile app expert Bill French believes, and he backs up his opinion with some solid examples.
“Why bother [developing your own mobile apps] when there are 74 options for a given business function?” asked French, founder of the iPad CTO news portal.
In the business intelligence (BI) space, for example, you don’t need a native application to display business data — and what enterprise isn’t trying to figure out how to deliver data to mobile devices?
“There are solutions like Geckoboard and the Klipfolio dashboard, in beta, that leverage open Web standards to deliver BI visualizations that are comparable to native apps. And if you absolutely must have the snappier performance or heightened security of a native app, RoamBI is an ideal solution that leverages integration services with many enterprise services and even Google Docs at very reasonable prices that small businesses can afford,” he said.
So, existing mobile business applications — or tools that allow a company to integrate the mobile form factor with off-the-shelf software — will cover many enterprise needs, but there will be just as many cases when they don’t.
Some industry needs are just too specific, and many off-the-shelf mobile apps are not developed with specific enterprise security, data privacy and compliance needs in mind.
Still, French makes a good argument for not breaking the bank on mobile app development, even in a complex area like BI.
Let us know what you think about this blog post; email Christina Torode, News Director.
“We like to call it our innovation pipeline, but that sounds rather presumptuous,” CIO Christopher Perretta confesses, pausing for a split second. “But it is!” he crows.
Perretta is CIO at State Street Corp., the Boston-based financial services giant. I spoke with him recently about his construction and launch of a private cloud (our conversation is preserved as a podcast running this week on SearchCIO.com). After explaining the hows and whys of this two-year effort, he talked about another building challenge for CIOs: designing an IT organization that can leverage technologies like cloud computing and large-scale data analytics on an “industrial scale” to deliver business value.
To that end, Perretta has scoured his organization for people who “can think in an architectural way … in what I’ll call large-scale abstractions,” he says. While these people can get “down and dirty with the detail,” they also can connect IT architecture to “a real, live business result.” At the helm of this function is a chief architect, Perretta says, someone with 30 years’ experience who “knows the business inside out” and whose job is not to manage projects, but identify and pilot ideas that make sense for State Street. Out in front of this guy is a chief scientist whose job it is to look even further into the future for interesting technologies.
The presumptive result, Perretta explains, will be an IT organization that can spot technology trends three to five years out, assess the current state of the market, pilot the technologies that make sense for State Street and — with a lot of hard work, if his implementation of a private cloud is any evidence — figure out how to make these technologies operational in a very large organization. “We have a model now that makes sense to me. It is structured, but it is not bureaucratic, he says. “But there is a pipeline of ideas that focuses the organization,” he adds, “much more than if everybody is off thinking about things to do.” An innovation pipeline, in other words.