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Posts Tagged ‘Pay-as-you-go

Consumerization of Enterprise Software

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Source: http://www.flickr.com/photos/ross/3055802287/

Figure 1: Consumerization of IT

The devastation in traditional Publishing needs precious little mentioning. Just think about a brand like BusinessWeek selling for a meager cash offer in the $2 million to $5 million range, McGraw Hill getting into interactive text books through Inkling or Flipboard delivering “… your personalized social magazine” to your iPad. This devastation might not have gotten the attention that the plight of the ‘big three’ automobile manufacturers got, but in its own way it is as shocking as a visit to the abandoned properties in Detroit is.

As most of my clients do enterprise software, many of my discussions with them is about the consumerization of IT. From a day-to-day perspective this consumerization is primarily about six aspects:

  • Use of less expensive/consumer-focused components as infrastructure
  • ‘Pay as you go’ pricing (through Cloud pricing mechanisms/policies)
  • Use of web application interfaces to monitor IT infrastructure
  • Use of mobile and consumer based devices for accessing IT alerts and interfacing with systems
  • Use of the fast growing number of mobile applications to enhance productivity
  • Application of enterprise social networks and social software in the data center

From a strategic perspective, IT consumerization IMHO is all about the transformation toward “everything as a service” [1]. The virtuous cycle driven by Cloud, Mobile and Social manifests itself at three levels:

  • It obviously affects the IT folks with whom I discuss the subject. Immense changes are already taking place in many IT departments.
  • It affects their company. For example, the company might need to change the business design in order to optimize its supply chain.
  • It affects the clients of their company. Their definition of value changes these days faster than the time it takes the CIO I speak with to say “value.”

© Copyright 2010 Israel Gat

Figure 2: The Virtuous Cycle of Cloud, Mobile and Social

Sometimes I get a push-back from my clients on this topic. The push-back is usually rooted in the immense complexity (and fragility) of the enterprise software systems that had been built over the past ten, twenty or thirty years. The folks who push back on me point out that consumerization of IT will not scale big time until enterprise software gets “consumerized” or at least modernized.

I agree with this good counter-point but only up to a point. I believe two factors are likely to accelerate the pace toward “consumerization” of enterprise software:

  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.

If you are in enterprise software you need to start modernizing your applications today. The reason is the imperative need to mitigate risk prior to reaching the end-point, almost irrespective of how far down the road the end-point might be.  See Llewellyn Falco‘s excellent video clip Rewriting Vs Refactoring for a crisp articulation of the risk involved in rewriting and why starting to refactor now is the best way to mitigate the risk.

Footnotes:

[1] The phrase “Everything as a Service” has been coined by Russ Daniels.

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Cloud Computing Forecasts: “Cloudy” Future for Enterprise IT

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In a comment on The Urgency of Now, Marcel Den Hartog discusses technology assimilation in the face of hype:

But if people are already reluctant to run the things they have, on another platform they already have, on an operating system they are already familiar with (Linux on zSeries), how can you expect them to even look at cloud computing seriously? Every technological advancement requires people to adapt and change. Human nature is that we don’t like that, so it often requires a disaster to change our behavior. Or carefully planned steps to prove and convince people. However, nothing makes IT people more cautious than a hype. And that is how cloud is perceived. When the press, the analysts and the industry start writing about cloud as part of the IT solution, people will want to change. Now that it’s presented as the silver bullet to all IT problems, people are cautious to say the least.

Here is Annie Shum‘s thoughtful reply to Marcel’s comment:

Today, the Cloud era has only just begun. Despite lingering doubts, growing concerns and wide-spread confusion (especially separating media and vendor spun hype from reality), the IT industry generally views Cloud Computing as more appealing than traditional ASP /hosting or outsourcing/off-shoring. To technology-centric startups and nimble entrepreneurs, Cloud Computing enables them to punch above their weight class. By turning up-front CapEx into a more scalable and variable cost structure based on an on-demand pay-as-you-go model, Cloud Computing can provide a temporary, level playing field. Similarly, many budget-constrained and cash-strapped organizations also look to Cloud Computing for immediate (friction-free) access to “unlimited” computing resources. To wit: Cloud Computing may be considered as a utility-based alternative to an on-premises datacenter and allow an organization (notably cash-strapped startups) to “Think like a ‘big guy’. Pay like a ‘little guy’ ”.

Forward-thinking organizations should not lose sight of the vast potential of Cloud Computing that extends well beyond short-term economics. At its core, Cloud Computing is about enabling business agility and connectivity by abstracting computing infrastructure via a new set of flexible service delivery/deployment models. Harvard Business School Professor Andrew McAffee painted a “Cloudy” future for Corporate IT in his August 21, 2009 blog and cited a perceptive 1983 paper by Warren D. Devine, Jr. in the Journal of Economic History called “From Shafts to Wires: Historical Perspective on Electrification”.[1] There are three key take-away messages that resonate with the current Cloud Computing paradigm shift. First: The real impact of the new technology was not apparent right away. Second: The transition to full utilization of the new technology will be long, but inevitable. Third: There will be detractors and skeptics about the new technology throughout the transition. Interestingly, telephone is another groundbreaking disruptive technology that might have faced similar skepticism in the beginning. Legend has it that a Western Union internal memo dated 1876 downplayed the viability of the telephone: “This ‘telephone’ has too many shortcomings to be seriously considered as a means of communications. The device is inherently of no value to us.”

The dominance of Cloud Computing as a computing platform, however, is far from a fait accompli. Nor will it ever be complete, a “one-size fits all” or a “big and overnight switch”. The shape of computing is constantly changing but it is always a blended and gradual transition, analogous to a modern city. While the cityscape continues to change, a complete “rip-and-replace” overhaul is rarely feasible or cost-effective. Instead, city planners generally preserve legacy structures although some of them are retrofitted with standards-based interfaces that enable them to connect to the shared infrastructure of the city. For example, the Paris city planners retrofitted Notre Dame with facilities such as electricity, water, and plumbing. Similarly, despite the passage of the last three computing paradigm shifts – first mainframe, next Client/Server and PCs, and then Web N-tier – they all co-exist and can be expected to continue in the future. Consider the following. Major shares of mission-critical business applications are running today on mainframe servers. Through application modernization, legacy applications – notably Cobol for example – now can operate in a Web 2.0 environment as well as deploy in the Cloud via the Amazon EC2 platform.

Cloud Computing can provide great appeal to a wide swath of organizations spanning startups, SMBs, ISVs, enterprise IT and government agencies. The most commonly cited benefits include the promise of avoiding CapEx and lowering TCO to on-demand elasticity, immediacy and ease of deployment, time to value, location independence and catalyzing innovation. However, there is no magic in the Cloud and it is certainly not a panacea for all IT woes. Some applications are not “Cloud-friendly”. While deploying applications in the Cloud can enable business agility incrementally, such deployment will not change the characteristics of the applications fundamentally to be highly scalable, flexible and automatically responsive to new business requirements. Realistically, one must recognize that the many of the challenging problems – security, data integration and service interoperability in particular – will persist and live on regardless of the computing delivery medium: Cloud, hosted or on-premises.

[1] “The author combed through the contemporaneous business and technology press to learn what ‘experts’ were saying as manufacturing switched over from steam to electrical power, a process that took about 50 years to complete.” – Andrew McAfee, September 21, 2009.

I will go one step further and add quality to Annie’s list of challenging problem. A crappy on-premises application will continue to be crappy in the cloud. An audit of the technical debt should be conducted before “clouding” an application. See Technical Debt on Your Balance Sheet for a recommendation on quantifying the results of the quality audit.