Many enterprises and service providers are now grappling with how cloud models and economics will impact them. The specter of a challenging business climate may well hasten the need to seek IT resources that are supported through greater cloud computing approaches — to save money, as well as to better reach global audiences and gain Web-scale efficiencies.
The goal is to take advantage of what cloud models offer, but to do so with low risk and in alignment with enterprise IT dictates and requirements around management, security, governance and visibility. There are a host of innovations around the various cloud models that are now just emerging and that we’re only beginning to discover. These amount to being able to do business in new ways by using cloud models to accomplish things that simply could not be done before.
To better understand the value and opportunity unfolding around cloud computing, I recently interviewed Andy Mulholland, global chief technology officer at Capgemini; Tim Hall, director of services-oriented architecture (SOA) products at HP Software and Solutions; and Russ Daniels, vice president and CTO of cloud services strategy at HP.
Listen to the full podcast (48:58 minutes).
A new white paper, “Capgemini: The Cloud and SOA: Creating an Architecture for Today and for the Future,” on some of these very same issues has been published by Capgemini. It is available free (registration required) via download here.
Furthermore, Capgamini’s Mulholland will be delivering several presentations on these challenges and opportunities at the HP Software Universe conference in Vienna this week at a time when Amazon’s Web services are quickly gaining traction in Europe.
Here are some excerpts from the podcast:
Russ Daniels: When we talk about the cloud … it’s a new model for constructing software. It’s a new design pattern, and it allows you to solve problems that really have been out of reach. You can take business needs, which if you tried to address them in the context of traditional IT design and delivery models, would tend to fail or under deliver.
The cloud allows you to go after those problems, to open new markets for the business, to allow it to reach out to customers that it hasn’t been able to get to, to improve its differentiation in the market, and to contribute to the real goals of the business itself. That’s what we think is exciting about the cloud.
Andy Mulholland: There is this premise that [cloud computing] can help me look at how I manage and reduce my cost. Perhaps more importantly, we should say it the other way around. It enables me to address how I deal with a more variable business pattern and pay for what I need when I need it.
Many of the things a business does today are relatively fixed. … But what we have is a growing desire and a growing need to find new things in the front office, about how we run our business more effectively, how we get into markets more effectively, and how we trade better. These tend to be small, fast-moving projects. They make a very big difference, and we simply don’t want the same time scale in provisioning for them.
Increasingly, probably over the next couple of years, people don’t want to spend capital on them. They’ll want to pay for them operationally. They represent a new market, a new technique, a new set of standards, and a new set of technologies. All of that comes together in where cloud is going to go and make the difference to businesses.
… You start to recognize there are already a number of very well known brands that sell through the Internet and combine their services. … The challenge in this is how it moves from being something that a handful of Web-based businesses are using. How do more businesses learn how to exploit that market and take their share of commercial revenue from that market?
Daniels: When we think about the cloud, we don’t think it’s just a matter of how infrastructure is packaged, but it’s really a combination of the impact of service oriented architecture (SOA) starting to break apart applications. We think more about the services to separate out the data from the applications, so that you can get at the data without having to go through complex application integrations.
There’s another piece around taking advantage of Web 2.0 innovations, which includes both how you can create rich user experiences in the context of browsers in these remote execution models, but also significantly it’s the social dimension. How can you take advantage of the innovation that’s occurred in the consumer space by understanding the importance of bringing people together?
Mulholland: In many companies, they’re trying to exploit these things, but they are doing it with a complete lack of structure. By bringing in a cloud model successfully, you’re actually introducing some structure to support the very activities that people are increasingly experimenting with in their businesses today.
If you have been doing new stuff, and you are building new stuff inside the organization, you really ought to have started doing that around SOA. If you’re using services correctly internally, then of course, you can cross the firewall and start to use services outside, and blend them together.
Tim Hall: Folks are looking at this as an integration technology, instead of a complete transformation of how they deliver service orientation or business services more comprehensively and more flexibly to address some of the unique challenges that the business is facing. … SOA adoption, as a transformational agenda, is a microcosm of some concepts that apply very specifically to cloud and preparing people for cloud adoption.
Daniels: What we find with our customers is that many workloads are important to the business, but they are not mission critical. In many of these workloads, good-enough delivery is good enough. … Distinguishing between those types of workloads, identifying those where good-enough delivery is appropriate, and moving those into virtualized and automated delivery models, positions you to take advantage of external infrastructure capabilities as appropriate.
The key challenge for any IT organization is to understand what the business really needs, where the business value is, and how technology can help deliver that. This question of business-IT alignment is always the heart of the problem, and it will be certainly be true in terms of how the business chooses to go after cloud-based opportunities.
We think the cloud is great for connecting. It’s great for connecting business to business. It’s great for connecting business to its customers. … Where is connecting important to your business? That’s ultimately a business question, not a technology question. The focus should be on having people who can map from what the business needs to understanding how to exploit this new expressiveness that the cloud brings to solve the most pressing challenges, or to exploit the most exciting opportunities that the business faces.
Mulholland: [It comes down to] the difference between interactions, which is a lot of this new market, and transactions, which was the old IT market. When you look at any IT system, it’s fundamentally about getting a safe transaction to record what you have done. But, if you think about someone trying to decide what they’re going to buy from you, like buying an airline ticket, deciding which flight and how much money they’re going to pay and which extras they’re going to have, it’s a lot of interactions.
Daniels: We don’t think the cloud is great for “transactionality,” for deep, technical reasons. … The place where the cloud is great is where you’re not focused on supporting transactions, but interactions, where you are connecting. It’s being able to take state from participants in an extended supply chain and propagate that information up through data feeds, up into a cloud service.
For example, that information might be related to the carbon footprint related to material flowing through an extended supply chain. Each of the participants in an extended supply chain can simply publish a data stream that captures the carbon footprint of the materials that they will be producing. Now, you can run analytics in the cloud, using search-like algorithms, to answer questions about the carbon footprint for some end products. You don’t have to do the detailed process integrations. You don’t have to provide detailed transactional integrations across the supply chain system to support it.
It’s exactly that new expressiveness that allows us to go after problems that we really couldn’t have done affordably in the past. Because we couldn’t do them that way, we ended up doing things manually and in emergencies. If you think about product traceability, it’s the same problem, very difficult to deal with from a technology integration perspective in the traditional ways. As a result, when there’s a problem, we have people pawing through information spreadsheets manually and providing the answers too late to be helpful.
The cloud allows you to deliver the business results that matter. In other words, it really has to be thought of in the context of IT’s technology for business, and the key business challenges that we see our customers facing today are how to develop new markets? How do they take advantage of the abilities they have and deliver them to new customers? How can they understand better what their customers need, and how can they fit in and connect with them?
The cloud provides great capabilities for that. We think that it’s still early, and you can see the promise in things like the recommendation engines that you find at online shopping sites. You’re searching for something, and, based on your buying history, your demographics, your search behaviors, and then comparing that to the behaviors of others, the site can provide you with suggestions about other things that might be of interest to you as well. The technology helps identify your intentions and then offers suggestions to help you find things better suited for your needs than what you could have expressed or identified yourself.
That’s a wonderful opportunity, and to be able to expand that approach into more and more of the ways that a business connects has huge implications.
Mulholland: Relatively speaking, [cloud computing] is unstoppable. The question is whether you’ll crash into it or migrate into it. Why is it unstoppable? Because we’re watching a business shift, people have to find ways to compete better in the market. Much of that is around. “How do I add smart services? How do I make products more available? How do I communicate directly and intimately with people, so they know what they want to buy from me?” All of those things are already developing in many businesses today, and people are building solutions to do that, sometimes gracefully, and sometimes not at all gracefully.
In other words, just as we had with the PC, where we basically were driven into it, some companies got there in a very ungraceful way and had to figure out afterward how to sort out the mess. Others did have a strategy, and emerged in a very graceful way. I think we’re in the same situation. Users wanting social software have taken us there to run and do things better. We’ve been taken there by businesses needing to get into new markets.
Dana Gardner is president and principal analyst at Interarbor Solutions, which tracks trends, delivers forecasts and interprets the competitive landscape of enterprise applications and software infrastructure markets for clients. He also produces BriefingsDirect sponsored podcasts. Disclosure: HP sponsored this podcast.
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I think this interview article provides very valuable information about how SaaS can benefit enterprises. One of the things that struck chord with the way I look at it is that of the economics of using SaaS. A small business (or a big one for that matter) has to be vigilant on the fixed cost that they are incurring for the business. The reason being that they can ONLY start making profit once they have sold enough to cover their fixed costs (also called break even). The higher the fixed cost, higher the number of units/customer transactions to become profitable. Not that much of concern is the variable cost, because if you don’t sell you don’t incur it. SaaS converts your IT investments from fixed to variable cost and here lies the biggest impact for the enterprise.
One of the problems that the small SaaS application providers encounter is how to manage the billing and customers for providing the service. A lot of energy (read R&D spending) goes into developing the billing and mediation software. While researching, I came across a company called eVapt who have done an incredible job of developing the software that can integrate with your legacy CRM solutions and enable you to not only speed up roll out of SaaS but also to predict which customers would make renew contracts and helps a lot in contract and customer management. With the help of such softwares, I AM sure SaaS will gain a fast popularity and break the myths about compromising with the organization security.
-Prabhat