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Posts Tagged ‘IT

The Supply Side of the Consumerization of Enterprise Software

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Source: http://www.flickr.com/photos/bertboerland/2944895894/

In my recent post about the consumerization of enterprise software I discussed two factors that are likely to accelerate the pace toward such consumerization:

  1. Any department/business unit that can get a service in entirety from an outside source is likely to do so without worrying about enterprise software and/or data center considerations. This is already happening in Marketing. As other functions start doing so, more and more links in the value chain of enterprise software will be “consumerized.” In other words, these services will be carried out without the involvement of the IT department.
  2. Once the switch-over costs from legacy code to state-of-the-art code are less than the steady state costs (to maintain and update legacy code), the “consumerization” of enterprise software is going to happen with ferocious urgency.

In this post I would like to add a third factor – the buying pattern. My contention is that the buying pattern for micro-apps will spread to enterprise application. Potential demand for buying in this way is huge. Supply for buying enterprise software as micros-apps is not quite there yet, but it would take only one smart vendor to start transforming the traditional pattern how enterprise software is chunked, offered and sold.

Think about your recent experience downloading an application to your smart mobile phone. You did not go through a six-month evaluation period; you did not do a comprehensive competitive analysis; you did not check how well the seller does customer support in Sumatra. You simply paid something like $7.99 and downloaded the application. You are more than happy if it fulfills your needs in a reasonable manner. If it does not, you simply buy another application with the functionality you desire. Maybe you are a little more cautious now and ask a friend or send an inquiry to your Twitter followers before you pick the new application. Whatever you might choose to do, the fundamental facts are: A) you can afford to lose $7.99; and, B) your time is more precious than the sunk cost of the application. You simply move on.

This buying pattern is not something that you are going to forget when you step into your office in the morning. It makes perfect sense to you and it would be good for your company. You would rather concentrate on your business than on the tricky language of clause number 734 in the contract that your department’s attorney prepared for licensing yet another piece of enterprise software.

The ‘$7.99 experience’ you and zillion other folks like you had over the past week or the past month makes enterprise software vendors extremely vulnerable. The “high-touch; high-margin; high-commitment” [1] business design is not sustainable once the purchase model changes.  The expensive machinery of professional services, system engineering and customer support is not affordable at the face of competition that constructs modular chunks of enterprise software and sells them at a price the customer can afford to write off (if they do not perform to satisfaction). Maybe the ceiling in the enterprise to ‘forget about this application and move on’ is no higher than $1,000 (instead of ‘no higher than $7.99’ for the private citizen), but a smart vendor can still make a lot of money on selling at one thousand dollars a pop to the enterprise.

The growing gap between “this lovely application on my iPhone” and the “headache of licensing traditional enterprise software” is an immense incentive for up-and-coming software vendors to use the ‘$7.99 experience’ as the heart of a new business design. This new business design can be simply summarized as “low-touch; low-margin; low commitment” [2]. And, yes, it is very disruptive to the incumbents…

My hunch is that the IT Service Management (ITSM) industry will be the first to crumble. The premise of “service delivery” sounds a little hollow in a cloud computing world characterized by “everything as a service” [3]. Would a buyer be really willing to pay for “service for the service” from a vendor who does not actually provide the underlying service?! It sounds like paying a Fidelity or a Vanguard investment manager to manage a portfolio of their own mutual funds for you…

All it takes for this shift to start – in ITSM or in another part of enterprise software –  is one successful vendor.

Footnotes:

[1] I am indebted to Annie Shum for this phrase.

[2] Ibid.

[3] I am indebted to Russ Daniels for this phrase.

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Outline of the Technical Debt Seminar at the Cutter Summit

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Pictured above are speakers of the forthcoming Cutter Summit. Between the seventeen of us we will cover a broad spectrum of IT topics such as Agile, Enterprise Architecture, Business Strategy, Cloud Computing, Collaboration, Governance and Security. Inter-disciplinary seminars, panels and case studies will weave all those threads together to give participants a clear view of the unfolding transformation in IT and of the new way(s) companies are starting to utilize IT. Click here for a details.

As Jim Highsmith and I continue to develop our joint seminar on technical debt for the summit, I would like to give readers of this blog a sense of where we are and ask for feedback. Right now we are considering the following building blocks for the seminar:

  • The Nature of Technical Debt
  • Technical Debt Metrics
  • Monetizing Technical Debt
  • Constructing Roadmaps for Paying Back Technical Debt
  • Risk Assessment and Mitigation
  • A Simple Software Governance Framework
  • Schedule in the Simple Governance Framework
  • Enlightened Governance
  • Baking in Quality One Build at a Time
  • How Often Should the Project Team Regroup?
  • Multi-Level Governance
  • Extending  Technical Debt Techniques to Devops
  • Use of Technical Debt Techniques in Agile Portfolio Management
  • The Start Afresh Option
  • Technical Debt as an Integral Part of a Value Delivery Culture

In the course of going through a subset of these building blocks, we will cover the latest and greatest from the October issue of the Cutter IT Journal on technical debt, present two case studies, and conduct a few group exercises.

As If Another Proof Point Was Needed

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Annie Shum’s interview earlier this week gave readers of this blog a multi-dimensional view of imminent changes in IT. If you needed independent validation, it came yesterday through EMC’s Chuck Hollis words in the national solution provider GreenPages Technology Solutions’ 14th annual summit:

Vice President Global Marketing CTO Chuck Hollis Monday said the changes resulting from the storage giant’s own no-holds barred journey to the private cloud led to a decline in IT employee job satisfaction…

Hollis said the internal IT satisfaction drop came in the second phase of the EMC cloud revolution focused squarely on mission critical applications. That second phase — which EMC is in the midst of now — has sparked major changes in IT jobs as the company has replaced IT management, security staff and backend IT staff.

“During this phase, this is where org (organizational) chart issues started to come in,” Hollis said. “People’s jobs started to change. Younger people in the organization were being promoted over older people.”

As if another proof point to add to Annie‘s rigorous data was needed…

Written by israelgat

August 4, 2010 at 7:30 am

The Urgency of Now – Guest Post by Annie Shum

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Failure to learn, failure to anticipate, and failure to adapt are the three generic causes of military disasters. Each one of these three failures is bad enough. In combination, they can be catastrophic. Germany swiftly defeated and conquered France in 1940 due to the utter failure of the French army to grasp the nature of future war, to conceive the probable action of the German forces and to adequately react to the German initiative once it unfolded through the Ardennes. The patterns leading to the catastrophe suffered by the French are similar in some ways to the eco-meltdowns described by Jared Diamond in Collapse: How Societies Choose to Succeed or Fail.

In this guest post, colleague and friend Annie Shum poses disturbing questions with respect to our willingness and ability as IT professionals to learn, anticipate and adapt to the imperatives of Cloud Computing. Between shockingly low (15%) server capacity utilization on the one hand, and dramatic changes in the needs of the business on the other hand, companies who continue to use industrial-era IT models are at peril. Annie weaves theses and other related threads together, and makes a resounding call-to-action to re-think IT.

It is remarkable that Annie’s analysis herein of the root causes of a possible meltdown in IT identifies worrisome patterns similar to those that the Agile movement has pointed out to with respect to arcane methods of software development. The very same core problems that afflict software development manifest themselves in the IT paradigm as well as in the corresponding business design. Painful and wasteful that this repeated manifestation is, it actually creates the opportunity to manage software, IT, and the business in unison. To do so, we need to embrace a data-driven version of the economics of IT, to grasp the true nature of Cloud Computing without the hype that currently surrounds it, and to adapt software development, IT operations and business design accordingly. As the title of this post states, we need to start carrying out these three tasks now.

Here is Annie:

The Urgency of Now: The Edge of Chaos and A “Strategic Inflection Point” for IT

“It was the worst of times. It may be the best of times.” – IBM

Consider the following table. It contains a list of statistics pertaining to the enterprise datacenter index compiled by Peter Mell and Tim Grance, NIST. Overall, the statistics are sobering, perhaps even alarming, and do not bode well for the long-term sustainability of traditional on-premises datacenters. Prudent IT organizations – whether big or small, stalwart or startup – should consider this as a wake-up call. In particular, out of the almost twelve million servers in US datacenters today, the typical server capacity utilization is only around fifteen percent. Although not explicitly shown in this table, the average utilization of the mainframe z/OS servers is typically over eighty percent. However, mainframe z/OS server utilization is only a minor component of the overall average server utilization.

Statistics Enterprise Datacenter Index
11,800,000 Servers in US datacenters
15% Typical server capacity utilization
$800,000,000,000/year Purchasing & maintaining enterprise software
80% Software costs spent on maintenance: the “80-20” ratio
100x Power consumption/sq ft compared to office building
4x Increase in server power consumption, 2001 to 2006
2x Increase in number of servers, 2001 to 2006
$21,300,000 Datacenter construction cost, 9000 sq ft
$1,000,000/year Annual cost to power the datacenter
1.5% Portion of national power generation
50% Potential power reduction from green technologies
2% Portion of global carbon emissions

 

Over the years, organizations have accepted such skewed levels of server inefficiency and escalating maintenance costs of IT infrastructure as the norm. Even as organizations continue to express concerns, many seem resigned to the status quo tacitly: akin to what Bob Evans of InfoWeek described as “insurmountable laws of physics.” Looking ahead, however, the status quo may no longer be a viable option for most organizations. Due to soaring electricity/power costs compounded by the recent global financial meltdown with a near collapse of the financial system that triggered a prolonged (and for now, apparently indefinite) credit crunch, these are unparalleled strident and chaotic times for businesses. Pressured by business decision-makers who are under a heightened level of anxiety, enterprise IT is now confronting a transformative dilemma whether to preserve the status quo or to re-think IT.

On one hand, the current global recessionary down cycle is a particularly powerful (albeit rooted in fear) and instinctive deterrent to challenging the status quo. For risk-adverse organizations, it is only understandable why status quo, fundamental flaws notwithstanding, may trump disruptive change during these challenging times. On the other hand, forward-thinking decision-makers may make the bold but disruptive (radical) choice to view status quo as the fundamental problem: acknowledge the growing “urgency of now” by resolving to overcome and correct the entrenched shortcomings of enterprise IT.

“You never want a serious crisis to go to waste”. That quote (or its many variations) has been attributed alike to economists and politicians. The same could be said for IT. Indeed a growing number of IT industry observers believe the profound impact of the on-going economic crisis could offer a rare window of opportunity for organizations to rethink traditional capital-intensive, command-control, on-premises IT operations and invest in new and more flexible self-service IT delivery/deployment models. Think of this defining moment as what Andy Grove, co-founder of Intel, described as the “strategic inflection point”.  He was referring to the point in the dynamic when the fundamentals of a business are about to change and “that change can mean an opportunity to rise to new heights.” Nonetheless, the choices will be hard decisions because the options are stark: either counter-intuitively invest in a down cycle by focusing on a more sustainable but disruptive trajectory or hunker down and risk irreversible shrinking business. 

As one considers how to address the challenges of today’s enterprise IT, perhaps the following two observations should be taken into account. First, despite the quantum leap in technology advancements, generally the basic design and delivery models of existing IT applications/services are variations of traditionally insular, back-office automation business tools. Second, the organizational structure and business models of most companies are deeply rooted in models of yesteryear, in many instances dating back to the Industrial Revolution. In theory, adhering to the traditional organizational model of top-down command-control can maximize predictability, efficiency and order. Heretofore, this has been the modus operandi for most organizations that Umair Haque succinctly characterized as “ industrial-era companies that make industrial-era stuff — and play by industrial-era rules.” In today’s exponential times, however, the velocity of change and the rapidly growing need of interconnecting to other organizations and automating value chains inevitably lead to an increase in uncertainty and disorder.  Strategically, forward-thinking organizations should consider seeking alternative models to address the interdependent and shifting new world order.  

In their book, “Presence – Human Purpose and the Field of the Future”, authors Peter Senge, Otto Schramer, Joe Jaworski and Betty Sue Flower observe that many of the practices of the Industrial Age appear to be largely unaffected by the changing reality of today’s society and continue to expand in today’s business organizations. They conclude with this advice:  “As long as our thinking is governed by industrial ‘machine age’ metaphors such as control, predictability, and faster is better, we will continue to re-create organizations as we have had – for the last 100 years – despite their increasing disharmony with the world and the science of the 21st century.”  Likewise, the traditional top-down command-control modus operandi of enterprise IT today does not reflect adequately and hence likely is unable to accommodate fully the transformational shift of business from silo organizations to “all thing’s digital all the time”, hyper-interconnected and hyper-interdependent ecosystems.

Extending a True Epiphany

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In Agile Software Development with Scrum, Ken Schwaber describes a true epiphany he experienced as a result of his 1995 meetings with DuPont’s process control experts:

They [DuPont’s process control experts] inspected the system development processes that I brought them. I have rarely provided a group with so much laughter. They were amazed and appalled that my industry, system development, was trying to do its work using a completely inappropriate process control model. They said system development had so much complexity and unpredictability that it had to be managed by a process control model they referred to as “empirical.” They said it was nothing new, and all complex processes that were not completely understood required the empirical model…

… I realized why everyone in my industry had such problems building systems. I realized why the industry was in such trouble and had such poor reputation. We were wasting our time trying to control our work by thinking we had an assembly line when the only proper control was frequent and first-hand inspection, followed by immediate adjustments…

Based on this insight, I have since formulated with others the Scrum process for developing complex products, particularly software systems.

Fast forward to November 2009. During a lovely dinner in Boulder with Dean Leffingwell, we got into the subject of connecting Agile with ITIL. This conversation really registered with me. I actually recalled how years ago Ray Paquet characterized IT as a “continuous manufacturing” process. If you accept Ray’s premise, the chain {DuPont –> Scrum –> IT} is quite intriguing.

Re-reading Software Evolution recently, I was struck by the observation Tom Mens makes in the Introduction:

… due to the fact that the activity of software evolution is a continuous feedback process, the chosen process model itself is likely to be subject to evolution.

I can’t help wondering whether Tom’s observation applies to IT. If so, what are the implications with respect to IT operations and system management?!

Opinions please!

Predicting the Year Ahead

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Cutter Consortium has published predictions for 2010 by about a dozen of its experts. My own prediction, which examines the crash of 1929, the burst of the “dot-com bubble” in 2000 and the financial collapse in 2008, is actually quite bullish:

I expect 2010 to be the first year of a prolonged golden age. Serious as the various problems we all are wrestling with after the 2008-2009 macro-economic crisis are, they should be viewed as systemic to the way a new generation of revolutionary infrastructure gets assimilated in economy and society.

In addition to the techno-economic view expressed in the Cutter prediction, here are my Agile themes for 2010:

  • Agile moves “downstream” into Release Management.
  • Agile breaks out of Development into IT (and beyond) in the form of Agile Infrastructure and Agile Business Service Management.
  • SOA and Agile start to be linked in enterprise architecture and software/hardware/SaaS organizations.
  • Kanban starts an early adoption cycle similar to Scrum in 2006.

Acknowledgements: I am thankful to my colleagues Walter Bodwell, Sebastian HassingerErik Huddleston, Michael Cote and Annie Shum who influenced my thinking during 2009 and contributed either directly and indirectly to the themes listed above.

The Case for Agile Business Service Management

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BSM Review has just published my article The Case for Agile Business Service Management. Here is a key para from the article:

During turbulent times such as the past year, Agile business service management enables the business to become more competitive by speeding up the pace of delivery of new functionality and accommodating changes in business requirements as part of standard operating procedures. Like a computer chess program that extends clever tactics into the strategic realm [The New Yorker 2005], it compensates for the lack of prolonged periods of techno-economic stability through business Agility, substituting speed, flexibility and momentum for traditional long range planning. It is particularly noteworthy that Agile business service management applies equally well to companies pursuing adaptive strategies as to those betting on shaping strategies [Hagel et al 2008].

As indicated in a previous post, the article outlines the research agenda I will be pursuing. Specifically:

  • How is agile BSM implemented and delivered? …measured?
  • What are the benefits of agile BSM to the business objectives of development? …ops? …test?
  • Who carriers responsibility for agile BSM delivery and implementation?
  • Who benefits from agile BSM delivery & implementation?
  • How are these benefits applied?
  • When is Agile BSM expected to be understood and accepted by the business entities?
  • Where is agile BSM likely to be wholeheartedly implemented first?
  • What is the impact of Agile BSM on ISV’s (as distinct from IT “shops”)?

Listeners to Live Recording of Four Principles, Four Culture, One Mirror are well aware of my view of scaling downstream – it is the most tricky of the three dimensions of Agile scaling (up, out, downstream). IMHO Agile BSM is the first step toward effective scaling downstream.