Bottom 5 things about this year’s Gartner Symposium

Ryan Nichols

It wasn’t all good news for Enterprise IT coming out of this year’s Gartner Symposium. We’ve already highlighted our “Top 5” ... here’s the “Bottom 5,” and the implications for enterprise CIOs:

1. Continued Confusion over the Private Cloud

Gartner isn’t giving companies clear guidance on the private cloud, and appears to be divided internally on the topic. On the one hand, we’re told to “beware of the limitations of the private cloud, it’s just a stepping stone.” On the other hand, we’re told that “private clouds will win in the enterprise,” and presented misleading math about the economics of the public cloud (see #2).

Let’s make this simple: Building a true cloud service is hard—Amazon, Salesforce, and Google invest billions in getting it right. Here’s the question that every CIO needs to answer: do you want to be in this business? And just because you CAN (due to your scale) doesn’t mean you SHOULD. Remember Economics 101, the law of comparative advantage—invest your resources where you are differentiated, and outsource the rest. Sure, you could drive your cost of storage to nearly zero if you really focused on it. But your organization will be better off if you focus your resources on what you do better than anyone else

2. Bad Math in the Business Case for the Public Cloud

We’ll be the first to admit that building a concrete business case for moving existing IT to the public cloud is not straightforward. For example, it’s entirely possible to move an application to the cloud and not save ANY money if all the on-premise infrastructure is still shared by other applications and the application is not enhanced. Building a business-case driven roadmap requires a careful analysis of what you spend where, and finding “trigger events” where there’s opportunity to expand benefit, defer expense, or drive cost savings.

Gartner knows this—they perform incredibly sophisticated benchmarking and costs analysis for their clients. That’s why its so painful to see them present inaccurate “rules of thumb” to CIOs about when it might make sense to look at the public cloud. Consider email: We were told that cloud-based email was less economical for companies with more than 5000 employees. But there’s no magic size of company above which running your own email makes sense-- we’ve helped Internet Service Providers decide that they wanted to use the public cloud for nearly 100,000 inboxes. There’s any easier way to make it simple—look at the question in point #1. Then use a real business case to drive your roadmap, not rules of thumb based on company size.

3. Vendor FUD around Cloud Computing

It was easy to tell which vendors had a coherent approach to cloud computing by the amount of FUD in their marketing. Culprit #1? Marc Hurd, CEO of HP. He claims to have “gotten boos” from a room full of enterprise executives when bringing up the topic of cloud computing, and told the CIOs at Symposium that “HP would never put anything material outside the firewall.” Where does HP really want to see all the information in the enterprise? “We love it when its printed,” joked Hurd. More ink cartridges. Nice.

4. Defensive behavior & job preservation

Of course, self-interested behavior isn’t limited to vendors. It was equally painful to hear IT leaders sometimes put the interest of their group above the interest of the business. The most aggregious example? One UK CIO who saw the adoption of SaaS solutions by his business units as a “cancer that needs to be eradicated.”

The reality is that the role of the CIO is going to change dramatically over the next couple of years. Those who take stock in the size of their team and their budget will say “you can take my servers out of my cold dead hands” (to quote one session), and will be left managing inefficient, non-strategic infrastructure. Those who are aggressive at adopting cloud alternatives, on the other hand, will be able to focus on the issues most important to their business partners, and get a well-deserved seat at the table setting the direction for their organization.

5. Too much thinking, not enough doing

To Gartner’s credit, every session ended with a page on “what should I do now.” But the recommendations were too often “think,” strategize” and “calculate.” Of course these are all important steps, but what’s missing is the need to “experiment” and “prototype.” One of the key advantages of the cloud is the transparency of what you get - you can start to experimenting in minutes.

Strategy and prototype go hand-in-hand, and should be done in parallel. The best way to see what the cloud can do in your organization is to have someone sign up for a free developer account on a cloud platform and spend the weekend building a prototype…. that insight can be combined with a business case to develop the roadmap to the cloud your organization needs.

Top 5 things about this year’s Gartner Symposium

Ryan Nichols

After spending 5 days talking technology with thousands of CIOs and some of the industry’s most insightful analysts, we thought we’d reflect on the top 5 and bottom 5 things about this year’s Gartner Symposium in Orlando, FL. Here’s our “Top 5” list, and the implications for enterprise CIOs:

1. Clear conversations about the cloud

Cloud was a huge theme at this year’s Symposium, and for good reason-- “cloud” is now the most searched-on term on Gartner.com, passing searches related to “cost” in Q3 of this year. And Gartner shed a fair bit of light on these topics for their CIO clients: Their cloud taxonomy is more nuanced than the standard SaaS/PaaS/IaaS division. David Mitchell Smith did a great walkthrough of the major cloud vendors. Daryl Plummer's notion of a “cloud service broker” makes clear that enterprises need new type of partners to help them migrate to the cloud. David Cearley made all of this concrete with real customer examples (see #2).

So while it is fair to say that the majority of attendees would say “you can take my servers out of my cold dead hands” (to quote Eric Knipp), there’s clearly an early majority that is not just investigating the cloud, but actively including it in their enterprise architecture. The most concrete proof-point? The sea of hands that went up when asked whether they were considering switching to a cloud-based email…. 50% in a room full of enterprise IT decision makers.

2. Demonstrated examples of customer success in the cloud

But talk is cheap, and conversations about the cloud are just the starting point. We were also thrilled to see concrete examples of customer success… especially since so many of the companies highlighted are Appirio customers. Here are some examples of what Gartner had to say about our customers’ success in the cloud:

• Japan Post’s customer management system: “The Force.com system was developed in only three months, with a 13-person team, probably cutting six to 12 months off the development period of conventional development methods. Japan Post attributes this success to the SaaS nature of the solution.”
  


• Web application for a government agency: “Built in only 3 weeks, 40 million consumers expected to access site at peak times, expected to support more than 20 million transactions … 510,000 transactions in the first month”
  


• Author Solutions’ Book Publishing Platform: “Developed application in significantly less time and for lower cost than that estimated for a traditional custom in-house application. Lower ongoing operational costs—50%-75% reduction in time and cost to modify”
  


• JohnsonDiversey on Google Apps: “Rapid rollout and adoption of applications-3 ½ month for complete total project. Total investment pays back in 14 months. Reduced operating cost of email/collaboration environment by 70%. User satisfaction and use up more than 25%.”
  


• Avago on Google Apps: “Migration took two weeks after six months of planning. Avago has called the Google help desk four times, and has 1 person managing 4,100 mailboxes. Google is meeting its 99.9% uptime SLA”
  

Congrats to all these Appirio customers for their success and a thanks for their willingness to share.

3. Real commitment from Google for the enterprise

For the first time, Google laid out a convincing ambition and vision for enterprise IT, laying to rest questions about whether Google is “serious about the enterprise.” Eric Schmidt thinks Enterprise will be the next $1B business for Google (and threw the best party at Symposium to prove it!). Here are some highlights from his interview highlighting why Google’s approach to the enterprise is so unique:

• Disruptive pricing: "We measure users, not revenue. The revenue will follow. I thought our prices were too high for Google Apps, and we considered giving it away. But we decided to offer it for a disruptive price paired with high quality service"
  


• Complete, from hardware to web apps: "In 1 year you'll be able to buy a netbook for your employees that's 1/5 the cost of current laptops, equipped only with a powerful browser"
  


• Re-thinking the fundamentals: "We’re not trying to design the future—we invent it along the way.... In the enterprise, I've been struck by how frustrated people are with the architecture they’d inherited from the previous CIO. These architectures were built 10-15 years ago, and the end user can’t get things done."
  


• Already used in at least ONE large enterprise! "We dogfood everything internally at Google. When it breaks we know about it first, and trust me we’re not very nice about it internally”
  

4. Seeing a mainstream “Conference 2.0”

Web 2.0 conferences have been using social media to enhance the traditional keynote / breakout session format. It was interesting to see this approach work so well at a more traditional technology conference as well. There was a LinkedIn group, a private social network on the conference site, and lots of reminders to follow #gartnersym on twitter. The stream was very active, with fantastic insights from analysts and attendees alike, even several CIOs! We were following ….and of course tweeting (@appirio_ryan). Gartner led the way—contributing the dialogue, retweeting, and giving a public shout-out to insightful contributors to the dialog. And the dialog wasn’t entirely virtual - we left the conference with one promising customer lead and one potential job candidate courtesy of twitter.

5. Acknowledgement of a “New Normal”

The “shock and awe” felt by the enterprise IT community over the last year’s economic conditions is finally being replaced by a some sense of a new normal. Gartner reported that IT spending has fallen 6.8% to 2006 levels, and won’t recover to 2007 levels until 2012. So CIOs are looking for ways to do more with less. But it wasn’t the sessions on cost cutting and virtualization that were the most crowded at this year’s Symposium—it was the sessions on cloud computing.

Learning from the Pioneers - Schumacher Group

Today, we'll be speaking to Doug Menefee. Doug, a Gulf War veteran, has been involved with technology
since the early 1990’s. In 1994, he resigned from the University of Louisiana to become a pioneer in the Internet economy by co-founding Planet Symphony, a website creation and interactive marketing management company. The company gained national attention in 1995 when it staged the first-ever Internet video broadcast of Mardi Gras. Keeping his roots in Louisiana, Menefee remained with The Graham Group, leading the convergence of interactive and traditional media until 2001 when he transitioned back into an entrepreneurial role by co-founding MenefeeINSIGHT and Yadacast. In 2005, Menefee joined Schumacher Group as Chief Information Officer.

Doug has overseenan IT transformation at Schumacher Group and has been an aggressive adopter of cloud computing.

We'll be talking to him about his experiences with the cloud and how it's changed the role of IT within his company.

Could you give us a brief overview of the Schumacher group and your role?

Schumacher is an emergency department management company. We manage emergency departments for hospitals across the US. We have 150+ physician practices across the country. Schumacher is growing very quickly, over 30% annually. When I joined in 2005, we were at 110 contracts and saw nearly 2 million patients a year. We now have over 150 contracts and provide quality health care to almost 3 million patients a year.

As the CIO of Schumacher Group, I'm focused on defining our IT strategy reporting directly to our CEO. Our CEO, Dr. Schumacher, is a strong advocate of IT and views IT as a strategic part of the company, not as a cost center.

What drove you to consider cloud computing?

As you know, I have a background in web application development, so I'm an advocate of the web and the http protocol. Our driver was not so much about being in the cloud but about what meets our business objectives best.

There were really three main drivers for us to consider cloud solutions.

First, our biggest driver was scalability, given our rapid growth. Having to maintain and size a server architecture is hard without knowing what the growth rate is going to be in the future. It's not only hard but capital and resource intensive to predict growth and size resources appropriately. The cloud solves that problem for us.

Second, disaster recovery became a big priority for us. This came to the forefront when we were doing a technology refresh for CRM. During that month, Louisiana got hit back-to-back with hurricanes (Katrina and Rita) and we saw the pain of the CIOs who got hit in the Gulf Coast area. At this point, we saw that cloud applications could offer us much better business continuity capabilities than we had in-house.

Finally, we found that web-delivered applications opened up the opportunity for our team to focus on innovation vs managing server farms.

Today, we have over 50% of our applications in the cloud with the rest in our two datacenters.

Where are you using the cloud in your business and how did this evolve?

Most of the cloud processes are net new to our business. We have found that it's much easier to build on Force.com rather than our on-premise platforms. We've built custom applications for recruiting (physician recruiting), credentialing/pre-qualification, healthcare analytics, and for the logistics of managing 2500 physicians across the nation.

A couple of exceptions. We moved our financials from on-premise Peoplesoft to hosted Peoplesoft (A/R, A/P and G/L). Second, we're in the process of transitioning our HR to Workday. So far, we've moved all our employee data into Workday and we have benefits up and running. Payroll and performance management are slated to go live at the end of 2009.

One of the things that we're maintaining in our datacenter is our enterprise data warehouse. We are considering a cloud BI solution for analytics and dashboards but so far our enterprise data lives on-premise in the Microsoft stack.

How has the cloud changed your role as a CIO?

Where do I start? I have a smaller ops team and a much larger service delivery team. We've shifted more of our focus to innovation and data quality.

I sleep a lot better at night because I only have to worry about 50% of what I used to have to worry about. This is because I have a high level of security and availability. I know availability is a worry for many CIOs moving to the cloud but quite frankly, there are many more outages and internally than externally. When it comes to security, cloud service providers have large teams of experts exclusively focused on security, whereas my small IT team has multiple areas of focus which include security.

The biggest impact is that the cloud has enabled me to be a transformational CIO. I focus on business strategy and processes vs. being a manager of information technology and hardware. This is a fundamentally different approach to the CIO role since it's all about relinquishing control. I don't want to be the bottleneck. The fact is that technology has become more user-friendly so users can take a much more active role in choosing, configuring and using applications. I don't want to restrict this entrepreneurial spirit, but rather orchestrate it. To take the metaphor further, IT is a conductor in front of an orchestra. We're guiding the use technology but not "managing" and "controlling".

What this requires is a new mindset. There are CIOs who are resistant and still want to control everything. You can take that approach but when the business that's next to you starts moving to the cloud and developing apps in 3-4 weeks, they'll start kicking your butt and you'll have to re-evaluate your approach.

What advice do you have for CIOs considering moving their businesses to the
cloud?

1. Surround yourself with web services developers.
2. Don't buy into the cloud hype, but look at your business needs and see what best meets your needs. Make sure you don't disqualify things that are either on-premise or in the cloud. But, even with an open mind, I find that 9 times out of 10, the solution that best fits my needs is cloud-based.
3. Look at the processes that are already running the cloud within your company. Then compare this to what other companies or consumers are running in the cloud. By looking internally and externally you can see where you can expand your cloud usage.
4. To reduce the risk from moving off-premise, take a look at business continuity or business interruption insurance policies. To be honest, this is equally relevant to your internally-run applications.

Larry Ellison takes on the Cloud - Entertaining but far from Accurate

Balakrishna Narasimhan

The blogosphere is abuzz with the news of Larry Ellison's hilarious evisceration of cloud computing at a recent event. As usual, Larry was funny, quotable and spinning the message to suit Oracle's ends. Larry offered up a number of pronouncements about the cloud, which are worth tackling one-by-one.

"Cloud computing is not only the future, it's the present and the entire past of computing"
Our assessment = 66% accurate
Larry is right that cloud computing is the present and the future of computing. We're seeing companies like Flextronics, Dell, Cisco, Japan Post, JohnsonDiversey, Starbucks and many more adopt and enjoy tremendous success with the cloud today. Cloud computing has already come to the enterprise in the form of SaaS applications like salesforce.com and Google apps. In the future, as platforms-as-a-service get broadly adopted, more custom applications will move to the cloud and eventually we'll see a future where companies cloudsource their entire technology foundations. Of course, this will not happen overnight but companies who experience the productivity and business benefits of the cloud want to accelerate rather than slow down the transition. The only ones incented to slow down the transition are vendors like Oracle whose fat 40%+ margins rely on the traditional software delivery and licensing model.

Where Larry is wrong is in saying that cloud computing is the past of computing. This is the tired argument that mainframes are akin to the present-day cloud. Mainframes did not provide a flexible, massively scalable and open platform to run your business. Even firms like Gartner, who rarely go out on a limb, say that cloud computing is the most significant shift in computing since the move to three-tiered architectures.

"Cloud, it's databases, and micro-processors and memory and microprocessors and the internet"
Our assessment = 20% accurate
Larry is right about the cloud relying on traditional computing building blocks and internet standards. Unfortunately, he misses the main components of what makes a cloud a cloud.

I recently attended a presentation with Lydia Leong of Gartner who defined the core attributes of a cloud in a very succinct and clear way. According to Gartner, the key components of a cloud are the following:

1. Service-based: this means that the user of the cloud solution need only worry about the service that is being purchased, not how it is delivered or how it is produced
   
2. Scalable and Elastic: services scale as needed without intervention from the consumer of the services
   
3. Shared: resources are pooled for maximal efficiency
   
4. Metered: users pay for what they use
   
5. Internet-based: delivered over the web using standard interfaces and APIs

So Larry is right that cloud services are delivered over the internet but he misses the point. What makes the cloud transformational is its ability to abstract out the activities that occupy much of CIOs' time today, i.e., managing, provisioning and scaling infrastructure (perhaps Sun servers) or databases (mostly Oracle) and middleware (Oracle or IBM).

"They change a term and they think they've invented new technology. Let's call that cloud, it sure beats innovation."
Our assessment = 0% accurate for true cloud providers, 100% accurate for traditional vendors jumping on the bandwagon
Companies like Saleforce, Amazon and Google have invented fundamentally new technology. Whether it's specialized hardware or massively scalable non-relational data structures or multi-tenant platforms with metadata-driven customization, these companies have introduced fundamentally new technologies and computing paradigms.

In addition to core technology innovations, each of these vendors delivers more innovation to their customers at a fundamentally different rate than traditional software companies. Salesforce delivers 4 major releases every year and Google introduces new features seemingly on a daily basis. Contrast this to the standard 3-5 year release cycles of the legacy vendors. In the past year alone, Salesforce introduced Force.com sites to power public websites, integrations with Facebook and Amazon and the Service cloud. Google introduced Calendar/task gadgets, video conferencing, Outlook synchronization, iPhone integrations and lots more. The best part of many of these innovations is that existing customers get new functionality instantly. No costly upgrades, no license re-negotiation, and no expensive user-training.

However, I have to agree with Larry if he's talking about traditional vendors like his own company. Traditional on-premise vendors have jumped on the cloud bandwagon by introducing confusing notions like private clouds (i.e. datacenters) and relabeling hosted software as cloud software (see below).

"We offer our ERP system in the cloud"
Our assessment = 0% accurate
This was the boldest statement of the day and a perfect example of what Larry decried earlier in his diatribe.

There are three main reasons why hosted software is not cloud computing:
1) Single tenant: Hosting requires individual instances of software, middleware and databases for each customer. There may be some economies of scale at the HW level but that is it. Compare that to Salesforce CRM, where every customer is running on the same version of the software, middleware and database. This has massive implications for cost and scalability since a traditional vendor needs to maintain a new stack for each customer and all a true cloud vendor needs to do is maintain one stack.
2) Slow pace of innovation: Since hosted SW is traditional software with all the attendant complexities, the pace of innovation is a lot slower than in the cloud. Hosted SAP or Oracle will be upgraded every 3-5 years, not every quarter or sooner.
3) Customization: A big part of hosting providers' economies of scale come from the ability to maintain standard environments. Since traditional software is not customized at the metadata-level, standardization implies limited customization for customers. This is quite different than applications like Salesforce CRM that can be customized to meet customer requirements at the metadata-layer without altering the foundations.

Summary
Treat these pronouncements about the cloud for what they are. Entertainment.

The true measure of the impact and relevance of cloud computing isn't what anyone says, but what CIOs are actually doing. 90%+ of enterprises plan to maintain or increase their investments in cloud technologies. Salesforce is growing at 20%+ while Oracle and SAP contracted at double-digit rates. That's the true bottom-line on cloud computing!