September 13, 2011 11:43 PM
Posted by: Matt Heusser
Last time we took at look at HP’s situation through a different lens – the lens of management consulting.
Today I’d like to take a different approach; on based on history.
But first, a story.
A Long Time Ago
There was a very large, international company. Once known for being innovative and shining, the company grew large and slow. Over time, the company’s personal computer business grew from wildly profitable to essentially a loss-leader, a sort of “yeah we also do that” thrown in so that the company could sell more expensive, high-end servers. Finally, the company developed an operating system that was technically superior, yet came too late to market. After a brief, painful struggle, the company abandoned it’s shiny new operating system
What company am I writing about?
September 7, 2011 9:40 PM
Posted by: Matt Heusser
It’s certainly been an interesting few months.
First HP Fires Mark Hurd; choosing to hire Leo Apotheker, an executive with an all-software background. ( Shortly thereafter, Apotheker makes a bid to purchase Autonomy Software for 10 billion dollars while looking for buyers for it’s PC business.
Meanwhile the company shuts down it’s touchpad division forty-nine days after it’s release.
To paraphrase one recent Wall Street Journal staff writer, you couldn’t come up with a better plan to ruin the company and take it out of business if someone paid you.
Yes, clearly, something is rotten in Denmark. Yet somehow I doubt that these people are all actually insane, trying to destroy the very company they are charged with protecting. It’s much more likely that something else is going on, some system of forces beyond our perception, that makes each individual move seem like a good choice, even as the company slowly lurches toward the brink.
If we take the approach of trying to understand the decision, we have a chance of learning something, perhaps things we can apply at our own little companies.
First, let’s talk about HP’s strategy.
Most of us know that the really big companies aren’t structured like Ford in the 1920′s. Instead of one big chain-of-command, conglomerates are more like a portfolio. Instead of owning stock, the headquarters unit owns entire companies, providing services for them like HR, and computing and the web site.
Structured this way, the biggest part of the CEO’s job is managing the portfolio — selling some business units, buying others, and finding ways to get them to work together. There are lots of ways to figure out what to buy and sell, but perhaps the most popular is the Strategy Matrix made famous by the Boston Consulting Group:
The BCG Strategy Matrix
Holding this handy-dandy cheat sheet, a CEO can split his business units up into cash cows (making money but not growing), dogs (losing money and not growing), question marks (not growing but the market is) and stars (owning a lot of an increasing market.)
From there, the decision is simple: Sell your dogs, harvest the cash cows (and sell the husks when harvest is over), purchase stars, and figure out ways to make the question marks perform … or ditch ‘em.
Let’s think about the classic business units HP works in: Servers are the cash cows, laptops are the dogs, the TouchPad was a question mark, and enterprise software and services are the new stars. (For that matter, Apotheker actually knows how to manage software groups. That’s got to be a plus.)
From this point of view, all of HP’s recent moves make sense. Instead of getting embroiled in an expensive advertisement and price war they could not win, they pulled the plug on the TouchPad early.
If Apotheker has any regrets, it’s likely that he didn’t pull the touchpad earlier, but, c’mon, the guy was new, the plans were advanced, and HP is a big company, so changes of direction happen slowly.
This matrix is simple and it’s easy to follow. Nearly anyone of modest intelligence could use it to analyze HP and come up with a strategy for managing the portfolio. After all, it’s sort of like a game of dice, where some of the dice are rigged, and, based on your throws, you get to decide which dice to invest in, right?
The only problem is that it doesn’t work.
A Portfolio is Not a Game of Craps
Framed this way, the role of the CEO is to acquire and merge all day long, selling off bad investments and purchasing more of the good.
Done without insight or vision, the strategy works just like it would in the stock market: You end up paying too much for the companies you buy (because they are “hot”) and selling your dogs for a big loss, because they are “not.”
More than that, the mergers and aquisitions have transaction costs; real human lives that are laid off, real businesses that are disrupted.
It also turns out that while executives are in merger meetings, looking busy, the one thing they are not doing is running a business — giving the competition time to catch up, and sometimes pass you.
Have you noticed that Apple Computer doesn’t do a lot of these mergers, acquisitions, spinoffs and layoffs? They are too busy running the business.
In the end, the matrix can be used to make effective choices, if the decision makers understand the history of the market, it’s system of forces, and where things are headed enough to make accurate predictions.
I will give the folks at HP one thing: At least as far as products are concerned, they know that whatever they were doing before wasn’t working, and more of it likely won’t help. So they have decided to try something new.
It looks, to me, like they are trying to pull an IBM.
More to come.
August 30, 2011 10:35 PM
Posted by: Matt Heusser
, project management
So I saw Dick Cheney, former Vice President of the United States, on USA Today this morning.
He wanted to talk about his new book, “In My Time.”
One statement Cheney made during the interview flabbergasted me: He claimed the the interrogation techniques used by the Federal Government during the Bush Administration were both safe and effective.
Really? Effective you say?
Come on folks. Does anyone else remember the claim that Iraq was somehow linked to the terrorists of 9/11? Or the claim that we had to go into Iraq because Saddam Hussein had weapons of mass destruction?
How about the claim that Al Qaeda had series of complex, secret underground fortresses? (Follow the link; it is the secretary of defense explaining the fortresses to the American people on national television.)
None of that turned out to be true.
We got that information from people we were pressuring for information!
And we call our interrogation techniques effective? Really?
From here to there
When I look at the story of this recent involvement in foreign affairs, it seems so familiar. As if I’ve heard the story before.
Then I remember: I have heard it before.
Replace “American” with “conquistador” and “hidden fortresses” with “seven cities of gold”, and you’ve got essentially the same story: A technologically superior people from across the sea became convinced that the less-tech-savvy people have something they want, and they are willing to use advanced interrogation techniques to get the answers.
After hours, days, or weeks of saying ‘no, there are no seven cities of gold’, tired, beaten and exhausted, the people of the other civilization eventually give up and say “oh, fine. Okay. The cities are three days ride to the east. Will you leave us alone now, please?”
That said: this post is not about Dick Cheney; it is about you.
I am not setting to attack a man who served his country as best he could. In fact, quite the opposite: the most charitable interpretation may just be that Mr. Cheney made a certain type of classic mistake. That is, to be so certain you are correct, that the quest for information subtly becomes a quest for data to re-enforce your bias.
You may be going through it right now on a smaller level.
A more personal scenario
If, for example, you’ve never worked on a project that a deadline plucked out of thin air, then had a project schedule reverse-engineered to fit it, well, consider yourself fortunate.
If you’ve never worked near a boss, eager to please senior executives, who made up numerical targets for sales, or website adoption, then wanted you to make the plan to actually hit those numbers, again, consider yourself fortunate.
If you’ve never felt the subtle, or not-so-subtle pressure to hide mistakes, to slide messes under the rug, or to paint a better picture than reality, well … that’s good.
If you can manage to make your entire career without it, well, I’m curious if your company is hiring.
Yes, these problems are worse when they involve the clash of entire civilizations. They are worse when people are desperate for food, water, or shelter. When we have the benefit of “just” squabbling over the annual raises, bonuses, promotions and stock options, things do seem a bit more civilized. (We do have our stories about Enron and Worldcom, though.)
Fifty years ago, in a little-known graduation speech at King’s College, the author and professor C.S. Lewis had this to say about the subject:
To nine out of ten of you the choice which could lead to scoundrelism will come, when it does come, in no very dramatic colors. Obviously bad men, obviously threatening or bribing, will almost certainly not appear. Over a drink, or a cup of coffee, disguised as triviality and sandwiched between two jokes, from the lips of a man, or woman, whom you have recently been getting to know rather better and whom you hope to know better still—just at the moment when you are most anxious not to appear crude, or naïf or a prig—the hint will come. It will be the hint of something which the public, the ignorant, romantic public, would never understand: something which even the outsiders in your own profession are apt to make a fuss about: but something, says your new friend, which “we”—and at the word “we” you try not to blush for mere pleasure—something “we always do.”
And you will be drawn in, if you are drawn in, not by desire for gain or ease, but simply because at that moment, when the cup was so near your lips, you cannot bear to be thrust back again into the cold outer world. It would be so terrible to see the other man’s face—that genial, confidential, delightfully sophisticated face—turn suddenly cold and contemptuous, to know that you had been tried for the Inner Ring and rejected. And then, if you are drawn in, next week it will be something a little further from the rules, and next year something further still, but all in the jolliest, friendliest spirit. It may end in a crash, a scandal, and penal servitude; it may end in millions, a peerage and giving the prizes at your old school. But you will be a scoundrel.
That is how it works in the IT shop.
How the conflict emerges
There are plenty of books about how to lubricate interaction between humans. There are books about how to tell jokes, change the subject, compliment the other guy’s shoes; there a books about how to start the discussion from agreement and how to convince the other guy that your idea was his.
I know, because I read all those books, because I kept getting feedback that I was hard to work with. There is, indeed, some wisdom in those books.
Eventually I realized the problem wasn’t my social skills; it was that I was being ordered to compromise on what I viewed as moral grounds and refused to do it.
Of course I was hard to work with.
I was the guy who said no.
There is more to come, but, for now: Here’s one way to deal with this issue
The Big Secret
The big secret, of course, is the secret.
The boss has a secret agenda to hit the date (to get a bonus), or to hire his contractor (to get the kickback), or to hide the number of failures in production.
You’re not the one with the problem. You get to sleep at night.
The boss is the one with the problem.
The way to win the game is simple: You need to make it clear that, if the boss doesn’t come clean with this information you will.
It is that simple.
Along the way, you’ll need to create opportunities for the boss to save face, to slowly change the official story, to have the change in direction be his idea.
All of this is possible, it’s even easy. All you have to do is remember one thing:
When someone else has an integrity problem in the office, and they want you to fix it, someone does have a problem.
You get to decide if that someone will be you.
One final piece of encouragement: This is America. You’re not going to starve. Neither will your children. Worst case, you have to downsize your life a little for awhile while you figure things out.
I know, I know, when the boss looks at you funny and you are trying to decide if you can afford that vacation in the catskills, it can be a tough decision.
Forget the vacation.
Think about what your children will think of you the day you retire.
Think about what you’ll think of yourself.
More to come.
August 30, 2011 12:05 AM
Posted by: Matt Heusser
I’ve been writing about trends in IT Staff — how the traditional role of the full-time staff is giving way to staff augmentation and services outsourcing, and how the more tech savvy crowd is supporting themselves.
Meanwhile, economic trends aren’t in our favor.
Yes, most developed nations are struggling with low employment numbers, but it’s the why of those numbers that is most ominous. Many large organizations have been choosing to grow through mergers and acquisitions for years.
Why is that so ominous?
Yes, some companies try to merge in order to gain customer lists and cross-sell, or to enter to new markets. However, in many, if not most cases, one of the compelling factors is cost savings.
If the two companies merge, they will suddenly have redundant HR departments, redundant Purchasing departments, redundant finance departments, marketing departments … and IT departments.
Hence the term “made redundant”.
On the one hand we have business forces squeezing out the IT department, and on the other, well … business forces squeezing out the IT department.
Eight years ago, I wrote a little article called “After the Coming Bust” for a website called, ironically enough, AngryCoder.com.
As the saying goes: Friend, the party is over. The long run is here: It’s time to get sober.
It’s time to talk about you.
* Get really close to your customer. If you work at a large business, you probably service end customer — people who want the printers, and the email, and the Sharepoint server to just work. The IT literature in the 1980′s and 1990′s was all about insulating the department from those pesky people; by having a helpdesk that took the calls and routing them. By separating ourselves from the customer, we became a ‘service’, the kind of thing one pays for … and switches when things aren’t going well. If you want to keep your job, don’t abstract yourself from the end customer – connect with the end customer. Be “Bob, the guy who solves my problem.”
* Work for the outsourcer. If you can’t beat ‘em, join ‘em. ISPs, Hosting Providers, and Domain Registrars need people too. HP, IBM, Microsoft, Amazon, Yahoo, and other top-flight companies all have data centers, and data centers need IT staff. Or work for a smaller, local company offering IT services to comparable-sized companies. Once you figure out how it’s done you can …
* Provide your own managed services. Three of the people in my small circle provide independent IT services. Instead of working as part of one company, they have three to thirty clients, all of whom only really need part-time IT Services. One good place to look is startup companies that don’t develop software, just coming off an incubator or just becoming big enough that they need formal help. Between setting up the website, managing the social media, connecting gmail and google docs to domain they’ve purchased, and supporting any devices that get flaky, you might just find a niche. (And yes, you can fill in end-user support too.)
* Chase the niche. It may sounds as if IT jobs are “going away”, and some are, but the reality is much more complex than that. Large organizations, like banks, insurance companies, and government and military organizations have inertia. Even if some new online, cheap Software-As-A-Service alternative for payroll magically appears, the State of California would need to extract it’s payroll data in order to convert, and it would be cheap (at least this year) to keep the DBAs, sysadmins, developers, and testers in place on the existing system than to covert — at least this year. Those same forces will be around next year too.
* Do Project Work. The economy may be ‘hollowing out‘, and companies may be outsourcing and cutting staff. But have you noticed that there is still work to be done? Somebody has to keep WebSphere running, and somebody needs to figure out the disaster recovery plan, and somebody has to figure out the backup plan for sharepoint, and routinely apply security patches to the web server. Some of these things can be defined and done part time; others will be project work. Companies will continue to need this work done, and smart companies may develop a network for freelancers they turn to in order to get these goals accomplished.
In the end, all of these approaches have one thing in common: In the next ten years, we in the IT field have got to get closer to our customers, or else we risk becoming irrelevant.
I’m putting my money where my pen is: Four months ago, I went independent, and now I contract directly with companies to solve their problems, not to respond to tickets from a queue.
What about you?
August 3, 2011 9:25 PM
Posted by: Matt Heusser
We’ve been dancing around the idea IT staffing, discussing both augmenting with contractors when demand gets high, as well as outsourcing with a model like IS Lite.
Let’s talk a bit more about IS Lite.
Yes, last time I criticized the idea as it was typically practiced. That’s not a criticism of the idea; it’s one of implementation.
The idea with IS Lite isn’t to shift to managing a bunch of contractors for IT services. It’s to identify the services that can be provided by the free market, and find partners to provide those services.
With IT Lite, you don’t pay a contractor and a license for MS Exchange; you find a company willing to service and support email. And internet. And your login service. And your print service. Helpdesk. And Hardware.
No, again, don’t look at me like that. I’m not saying the company should sign some huge outsourcing agreement with a big vendor, layoff the IT staff, then have the vendor hire the same people back at half the pay — though that has been done before.
No, I’m talking about real services that can actually be outsourced.
That means the services will either need to be very horizontal (“the internet”, “website hosting” and “basic IT support” come to mind), your business better be very simple technologically speaking, or the partner is going to have to get to know you very well. That might be good for the vendor, but to the hiring company, that might end up looking a whole lot like “vendor lock-in”, which is a fancy way to say that the sourcing partner can hold your company hostage.
This is not kids stuff. It’s easy to get wrong, hard to get right, and very well might have a direct impact on your career in lots of ways.
But before I take a look at your career, let’s digress.
Personal IT Verses Corporate IT
Consider, for a moment, just how wildly different personal IT is from corporate IT.
In the personal world, if you want an app, if it’s email or a spreadsheet, word processor, invoicing application, billing application, bookeeping or blogging, you can probably go get a free application right now. At least, it’ll be free for thirty days or so. Then, bam, you’ve got the software, delivered as a service.
If you don’t like facebook, you can go try GooglePlus. If you don’t like GooglePlus, switch to twitter, or flikr, or whatever.
I work with one team that did just that. The company had a standard for project management online – It came from Microsoft and it’s title was SomethingPoint. The team decided to sign up for PivotalTracker, which is free for the first sixty days, try it for a month, then ask for the four dollars per person-month to use the application.
Now imagine you have to work in “IT” in such an organization, or maybe one where the CEO brings in his shiny new iPad, and if IT won’t support, IT is the one with a problem.
Fight this, and you become irrelevant amazingly quickly.
In fact, some of the Software As A Service vendors have given up on selling to corporate IT entirely, selling directly to the end customer with budget.
Lines like “face it, corporate IT is dead” may be a bit dramatic, but think of it another way: The SAAS vendors are selling services, in the same vein as IT Lite.
Let’s go beyond pivotal tracker. Think about the Gen-Y journalist brining in his own iPad to work, who uses his own blogging service, google for email and google docs or Socialtext for collaboration, with basecamp for project management. How can IT serve that kid?
We’d better find some way to do it. Because there will be more of him.
To survive, we folks who consider ourselves corporate IT need to either provide some different services, or go work for services companies, or find ways to stich together existing services and sell convenience, or else, perhaps, re-invent our role in some other way.
More to come.
July 25, 2011 11:25 PM
Posted by: Matt Heusser
Last time we looked at trends in staffing, and found that they fluctuate. This causes a problem with hiring, because, well, it takes time to ramp people up, and laying them off is expensive. As a result, companies that rely on IT with only full-time employees tend to find themselves occasionally understaffed, occasionally overstaffed, or some of both.
One classic answer to this is to use contractors and other temporary help.
No, don’t look at me like that.
Consider Shotz, the Milwaukee Brewery where Laverne and Shirley worked in 1973. At Shotz, the work itself was broken down into repeatable jobs you can learn in an hour. If the pace of orders picked up, the company might hire more employees … but if the pace of orders was cyclical, the hire/layoff cycle would become very expensive, in terms of unemployment insurance, severance packages, and damaged relations between the employees, management, and the community.
No, better to hire some temps. After all, temporary workers can take two-thirds the pay of full-time employees, cost no benefits, no vacation time, and can be let go at will, without any stigma or implied social contract.
Of course, it’s all tradeoffs — you might argue that such a model is bad for society. But it doesn’t have to be. Shotz might try hard to find a temporary workforce that is perfectly amenable to this; say, for example, new high school graduates trying to decide if college is right for them, mothers who are considering returning to work, but just a little bit on the fence, starving artists and musicians who are trying to decide who they want to be when they grow up. Some of these folks might decide to leave the work force in three months; I expect all of them would be grateful for the opportunity to try and decide later, without stigma either way.
I hope you might agree, for a certain type of job of Shlotz, this kind of hiring practice could be done in a way to benefit the workers and the company. (With low unemployment, it could also be a manipulative scare tactic. I’m not talking about that.)
The question is: Does it work for IT?
Whether it works or not, people have been willing to try; perhaps the best example of this is a strategy developed by Gartner known as IS Lite, or sometimes IT Lite.
IS Lite: What is it?
The basic idea of “IS Lite” was that IS performed three essential functions:
* Driving Innovation
* Delivering Solutions
* Managing Services and Sourcing Relations
In the future, IT would perform only the ‘middlin’ bits of the functions, as some functions would be absorbed by outsourcers, and some by the business units. This idea was ‘captured’ by a drawing something like this:
That said, my experience with IS Lite has been less than stellar.
The right side of the equation, I can understand. Once you have IT set the technology policies, you need content for your websites, product descriptions, graphic designs … the kind of thing done by marketing, sales, and other things traditionally considered “the business.”
Having IT provide the utility, the “Grid”, that independent business units can tap in to — like I said, I get it.
But then you have the left hand side of the equation, and we are back to Laverne and Shirley.
The classic model to do outsourcing, the one we discussed in Part I, is a bit of a staff augmentation model. When your company has needs, you hire temporary workers, which you take away again when the needs go away.
The problem is, predicting those needs is hard to do. Once you can predict the needs, you’ll have to hire staff — and unlike the factory worker in the brewhouse, the job can’t be learned in an hour. So you have to interview.
And interview, and interview. Because, sadly, the folks who are most available, who most desperately want a job, that are willing to take temporary wages … those folks generally don’t have the kind of high-end skills you need to get new projects rolling.
‘Quick’ staff augmentation might work to deal with increased demand on a helpdesk, but for a linux server farm? Forgetaboutit. Your worker is going to need to know plans, policies, procedures, passwords, and, likely, a host of custom systems and commands. (One company I worked with did the math, and came to the conclusion that, once you count search, interview, and training time, anything less than a twelve week contract simply wasn’t worth pursuing.)
The companies I know that have pursued something like a staff-aug IT like generally end up with a professional staff of liason-people — the “systems analysts” who exist to create clear, unambiguous requirements for the outsourced help, and to manage the project. In my experience, the ratio of systems analyst is often as high as one-to-one — that is, you could simply staff the project will full-time employees actually doing the work. And it gets worse.
In these kinds of organizations, when someone is retained in such a staff augmentation role, the relationship isn’t so much temp as it is contractor. In theory, contractors are paid more than employees — one bonus for not getting vacation or time off, another for not getting insurance, and a third bonus for, well, being disposable. That’s all well and good — the problem comes when the company extends the contract for years, then pays a small army of liaison people that wouldn’t need to exist if the contractor were just an employee.
The good news is, this isn’t the only way to do outsourcing — and it certainly isn’t the only way to deal with the problem of fluctuating needs for staff.
More to come.
July 19, 2011 10:40 PM
Posted by: Matt Heusser
I’d like to start a new, short series on IT staffing, looking at the issues from a slightly different angle.
We’ll start with the typical IT shop. It may be the kind that Nicholas Carr suggested will go away, but right now, it’s likely the most familiar to you and me.
Let’s look at the staffing needs of that IT shop over time. If it’s a healthy organization, the staffing needs look something like this:
Yes, I know, it looks all over the map, but that’s okay. The up-and-down motion you see above corresponds to a natural cycle of projects — starting off with a few key people making planning, then leading to a ramp-up in staff to do the work. As the go-live approaches, the technical staff begin to slowly trail off, until, eventually, we only have a few people left to keep the lights on. Then some executive gets a new idea, and the cycle begins anew.
To simplify just a bit, if we try to fit the curve to a line, we find something like this:
Of course, this assumes one project at a time. Most larger organizations have multiple projects, dozens of projects, hundreds of projects at a time, each with an ebb and flow. The company may have a portfolio management organization, or PMO, who’s only job is to keep straight the staffing and skills needs, and try to keep the company running at 100% capacity.
That said, no matter how hard they try, I find organizations have this kind of natural ebb and flow.
Until they understand the flow, in my experience, companies tend to think about hiring in one of two ways. They can either peg hiring to the minimal needs, or to the maximal needs.
Hiring to the minimum
Hiring to the min, or ‘below the line’, means drawing a line at the bottom of the demand curve. This guarantees you’ll never have excess capacity. It’s also cheap — at least, cheap in the short run. Companies that hire this way simply can not accomplish the goals they set, thus the products are late and buggy, the customers unhappy, the sales goals unmet … so next year, there won’t be money for additional staff.
We can all guess how this turns out.
The obvious alternative to hiring below the line is to hire above it. Believe it or not, some companies actually do this.
Hiring to maximum demand
The blue in the picture above is waste — or at least, undirected team capacity. While some companies like Google embrace ideas like 20% time, the fact is that much blue will make many a CEO wince.
There are some rare companies at a place in the growth cycle where they are constrained by people, but by money; where the company can throw a hundred thousand dollars at people and get two hundred thousand back from the marketplace. So this strategy might just work for Google in 2008, Groupon in 2009, or AirBnB in 2010.
For the rest of us, though, it seems unlikely.
The Third Way
The “classic” HR solution to this problem is staff permanent employees to the bottom line, but fill in the red with contractors, temps, staffing agencies, and ‘partner’ organizations. Now we could talk about the true cost of ramp-up for contractors, but, for now, let’s assume that strategy works.
Do you want to be a red person or a blue person?
It may sound like a silly question, but there’s a method here.
Think on it: The blue people (for lack of a better term), are the people above the sliced line. They will be creating new systems, setting up servers, creating policies, adding new capacity, teaching to fish. These people are, to borrow a phrase, the pioneers.
To blue people, projects are “new every morning”, and, to be clear, risk and change are just a part of life.
The red people — the ones below the minimal staffing line — are operational people. They come in, know what they have to do, do it well, and expect a paycheck and some permanence. The red people are farmers, creating accounts, resetting up passwords, troubleshooting, doing predictable, well-defined work.
Note that I’m not talking about personal politics, or the details of your organization. Yes, it is possible that your boss likes you because you are willing to dive into new technologies, and that gives you job security.
Instead, I’m talking about the personality types that will tend to fit into different roles if companies take this approach.
And mind you, they are taking this approach.
If you know which type you’d rather been, you can steer your career in that direction.
If you don’t steer, you’ll likely end up wherever someone else, some levels of the chain above, decides you ought to be.
As Socrates said “The unexamined life is not worth living.”
Take the wheel.
More to come.
July 13, 2011 10:48 PM
Posted by: Matt Heusser
, cloud adoption
, Enterprise Cloud Adoption
Note: This is an interlude. I want to talk more about the future of the IT profession, but I just checked my account summary from Amazon.com, and I feel sort of like Adam Savage from Mythbusters, when he accidentally carried some razor blades on a plane and no one noticed.
You see, I thought I was on a new tier, called the Free Usage Tier, that gets you 750 hours of CPU time a month along with 30 GB of data transfer per month, all for the first year. My back-of-the-envelope math says there are 24*31, or, at most, 744 hours in a month. In other words, unless you have the demand to spool up multiple machines, there is really no possible way to get dinged. So, while they want your credit card, there really is no financial risk.
But, like I said … then I got the bill.
I mean, yes, my editor told me that he done his own exploration, and forgot to turn something off, and got a small ding on his credit card, but that just a good warning for me. I would be extra careful to turn everything off, and warned everyone else to do the same.
And I was.
I ended up taking a small hit anyway, $8.41 for the month of June. It seemed odd, but that’s no big deal. I went back in, turned off an inactive server that I could have sworn I killed off in the past, and let Amazon have a couple of discount combo meals, on me.
Just to be sure, I checked again today. Guess what?
Another $1.82 of charges so far for the month of July. $1.81 is labelled “Electric Compute Cloud”, and one cent is for bandwidth. What’s that about?
Taking a closer look, I see two things:
(A) It’s 61 hours of fees on a WINDOWS machine — capital W Windows.
(B) The one penny is a ‘regional data fee.’
The windows machine fee I can sort of understand; it turns out the personal AWS license only covers Linux Machines. This makes sense to me, as Microsoft likely back-bills Amazon for the operating system, whereas Linux is free like water.
Also notice the sixty-one hours of charges.
After I got the previous bill, I immediately turned off my single EC2 instance … but that immediately was some time after I got the email, which, likely, was some time after the time cutoff for the fee. If that total was around two and a half days, well, that’s sixty-one hours.
I have no idea what the one cent is for. I have no visibility into it; I can’t explain it, don’t know how I could have predicted it. More than that, I can’t even talk to a human and ask — at least not without upgrading to a premium plan. For now, I paid the penny, sent a cancellation notice, and intend to check vigorously and often for new charges!
Now imagine that the bill is not for a proof-of-concept demonstration of the cloud, but instead an actual enterprise service.
How do you know how much it will cost? How do you budget? How you do you prevent hidden fees?
Suddenly the pain point of heavy load has shifted.
In the old days
We had a different risk. The classic example of the old days was the IBM commercial, a team launches a website with Champagne and Caviar. The team howls with glee as the ticker shows more hits — and keeps howling as the ticker goes crazy. Slowly, eventually, the howls die off as the team realizes the site is too popular; it will quickly become overloaded and crash.
With tools like EC2, the crash won’t come to your site.
Instead, it will be to your checkbook.
Yes, there are tools that are coming to address this, even services like the one discussed on this Amazon EC2 Forum post.
But doesn’t it seem strange to have to set up your own scripts to monitor momentary charges, and warn on the event of a spike, or to have to pay yet another party to monitor cloud usage? I mean, if your utility bills suddenly spike, they should call you, right?
The cloud is young. We’ve got new risks, and plenty of work to do.
Speaking of work to do …
Next time: More on the future of the IT profession, and how we can thrive.
July 7, 2011 12:42 AM
Posted by: Matt Heusser
In May of 2003, then the editor-at-large for the Harvard Business Review, published an important paper in the Harvard Business review titled IT Doesn’t Matter.
Notice I said important — the paper is all of even pages long, so it won’t take too long to read, and it costs of of six dollars and fifty cents to download as a PDF from Amazon.com for a digital download. The Amazon PDF also includes seventeen pages of commentary.
If you haven’t read it, go buy it and read it now. If you have heard of it but haven’t read it, go buy it now.
I’m serious. It’s all of six bucks. I can wait.
… time passes …
The basic premise of Carr’s article was that IT services were turning into commodities; that it would be harder and harder to wrangle competitive advantage by throwing money at technology. In fact, if you follow Carr’s logic, it might even make sense to find the work that can be done the same by anyone, and outsource that work to a strategic partner who could work for many customers and offer economies of scale. (That’s fancy talk for “cheap ‘cuz he has a lot of customers.”)
I dare say I’m a little more familiar with this than most folks, because when I was finishing up my master’s program at good ol’ Grand Valley State University, our advisor decide to make that very article the theme of capstone for our entire cohort. In other words, about fifteen of us, group in twos and threes, all had to write papers to respond to Carr’s article.
Some folks chose to write about technologies they believed could still offer advantage — there was a paper on six sigma, one on Enterprise Application Integration, and one on Mobile IT that I could actually find, mostly because the name “Mobile IT Matters” is a play on words.
Then there was our paper, “The Outsourcing Equation.” (That one you can download free.)
In our paper, we took the opposite position to many people in our class; that in some cases, IT is not a strategic asset and should be outsourced. Our paper provided a value chain, from simple repeatable work (basic IT helpdesk) to moderately complex work like systems maintenance, to high-value work like developing the software your company will sell directly.
We argued to outsource what you can, but keep the functions that give you competitive advantage. Then our paper provided advice on how to figure out where to draw the line.
Back to Nicholas Carr.
His article was important, but I must say, it didn’t drive much change. Or, at least, the change wasn’t super-visible. People grumbled and disagreed, but the article came out in May of 2003, and we were just starting to pick up the economic cycle. Yes, outsourcing was picking up, but every practical conversation I had about outsourcing was driven by promised or expected savings in cost, usually by a difference in the hourly cost of labor.
The big thing I noticed, at the time, was that even if you could outsource some things, you’d still need a datacenter, still need air conditioning and cables, boxes and power. On this, Carr’s electrical analogy falls down; there was no grid.
Thing again … maybe he was just early.
Consider the typical small IT shop, for a decent-sized manufacturing company today. Sure, they need a website, but they probably rent one from GoDaddy. They might need accounting software, but Intuit offers quickbooks for what, twenty-five bucks a month?
No server, no license, no data center, just buy a cable modem and pay-per-month.
They need project management software, and there’s BaseCamp. Want to stich together an e-commerce site? There’s Amazon and PayPal, or E-bay, or … take your pick.
Suddenly, eight years later, you can stitch together a bunch of services. Oh, you might have to manage a dozen logins at a time and have problems when people are hired or quit, but they are surmountable problems.
Software As A Service can step in to provide the power grid for IT.
At the same time, there are those millennials. Those kids are tech savvy. They’ll go ahead and sign up forthe freemium version for the product, get it working, then ask for budget thirty days later.
So you’ve got the services to work remotely, and the employees with the tech skills to set things up without IT.
What’s the poor IT manager to do?
More to come.