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Posts Tagged ‘Technological Revolution

I Never Even Spoke with Anyone from the Occupy Wall Street Movement

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Full disclosure part I: a month ago, while on my way to a business meeting, I saw a few OWS folks “camping” in front of the Federal Reserve Bank on Market street in San Francisco. I did not even have the time to take a picture with my iPhone, let alone chat with someone. This is the closest I ever got to touching, or being touched, by anyone in the movement.

So, I do not even know whether folks in the movement will agree or disagree with my simple interpretation of their overarching message:

  1. Our financial system is badly broken.
  2. Rather than letting it continue with business as usual, the Federal Reserve Bank should take over the banking system.
  3. Many of the services provided today by banks can be provided (once the Fed takes over) through devices such as iPhone just as they do in rural India.
  4. Substitutes could and should be developed for the services that can’t be carried out through iPhones or similar devices.
  5. Developing such services is no different from developing alternative sources of energy or health care services.
  6. Once the government puts in the appropriate policies (to encourage development of such services), a ton of entrepreneurs will jump at the opportunity.

I have no doubt that there are zillion details that I am not aware of that need to be figured out. I am a software engineer, not a banker.

But, I believe that at a very high level bullets 1-6 above capture some aspects of the message folks in the Occupy Wall Street movement are trying to get across. Hence, I am really surprised at the question I see cited so often “But what do they really want?!”  IMHO they simply want a major reform of the financial system. The details for so doing are better left to experts.

Full disclosure part II: I have to admit my blood boiled today when I saw the videos from UC Davis. As I said in a tweet an hour or so ago, it starts feeling like the brutality inflicted on the Bonus Army in 1932. Tim O’Reilly goes one step further in his post in which he brings up the loaded topic of Banality of Evil.

So, I might be writing this post with some strong emotions. But, I think the thesis I pose is directionally correct.

You don’t need to take my word for it. Just read Technological Revolutions and Financial Capital by Carlota Perez.

Written by israelgat

November 19, 2011 at 9:53 pm

Velocity 2010 – Where Have All The Business Executives Gone?

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By now I have “touched” and been touched by dozens and dozens of participants in the O’Reilly Velocity conference. I did not meet any business executive (other than various CEOs/CMOs who pitched their companies from the podium).

No doubt, the O’Reilly Velocity conferences (this is the third one) are geek events. Having said that, IMHO these conferences are extremely important to the business executive. If you don’t attend you miss up on four value propositions:

  • Getting a sense of what the future in web operation holds.
  • Grasping what forthcoming advances in web operations mean to your business design. See for example my post Ops Driven Dev from earlier today.
  • Understanding the needs of a growing demographic sector that your business might not be able to access today.
  • Getting to know the kind of developers and sysadmins that probably work in the trenches of your company.

You owe it to yourself to consider attending Velocity 2011 if terms like “sysadmin 2.0”, “darkmode” and “devops” and do not resonate with you. I can’t give you “your money back” guarantee if you are not satisfied with the conference, but I will gladly pick the bar tab when we meet there.

Written by israelgat

June 24, 2010 at 3:02 pm

Harnessing Economies of Scale in Cloud Computing to Realize a Greener Computing Option

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Economies of Scale have been much discussed in The Agile Executive since the recent OpsCamp in Austin, TX. The significant savings on system administration costs  in very large data centers have been called out as a major advantage of Internet-scale Clouds. Unlike various short-lived advantages, the benefits to the Cloud operator, and to the Cloud user when the savings are passed on to him/her, are sustainable.

In this guest post, colleague and friend Annie Shum analyzes the various sources of waste in operations in traditional data centers. Like an Agilist with Lean inclinations who confronts an inefficient Waterfall process, Annie explains how economies of scale apply to the various kinds of waste that are prevalent in today’s small and medium data centers. Furthermore, she connects the dots that lead toward a Green IT option.

Here is Annie:

Harnessing Economies of Scale in Cloud Computing to Realize a Greener Computing Option

Scale Matters: “Over time, however, competitive advantage within categories shifts inexorably toward volume operations architecture.” – Geoffrey Moore, “Dealing with Darwin”

It is a truism that today’s datacenters are systemically inefficient. This is not intended as an indictment of all conventional datacenters. Nor does it imply that today’s datacenters cannot be made more efficient (incrementally) through right sizing and other initiatives, notably consolidation by deploying virtualization technologies and governance by enforcing energy conservation/recycling policies. There are a myriad of inefficiencies, however, that are prevalent in datacenters today.

Many industry observers lament the “staggering complexity” that permeates on-premises datacenters. Over time, most, if not all, enterprise IT datacenters have become amalgamations of disparate heterogeneous resources. Generally, they can be described as incohesive, perhaps even haphazard, accumulations. The datacenter components and configurations often reflect the intersections of organizational politics (LOB reporting structures leading to highly customized/organizational asset acquisitions and configurations), business needs of the moment (shifting corporate strategies and changing business imperatives to gain competitive edge or meet regulatory compliances) and technology limitations (commercial tools available in the marketplace). It should come as no surprise that human interactions and errors are considered a major contributor to the inefficiencies of datacenters: IBM reported that human errors account for seventy percent of the datacenter problems.

The challenge of maximizing energy efficiency begins fundamentally with the historical capital-intensive ownership model for computing assets to enable each organization to operate its own datacenter and to provide “24×7 availability” to its own users.  The enterprise IT staff has been required to support unpredictable future growth, accommodate situational demands and unscheduled but deadline-critical events, meet performance levels within SLAs and comply with regulatory and auditing requirements. Hence, datacenters generally are over-configured and over-provisioned. In addition to highly skewed under-utilization of distributed platform servers, ninety percent of corporate datacenters have excess cooling capacity. Worst of all, according to IBM, about seventy-two percent of cooling bypassed the computing equipment entirely. Further compounding these problems for a typical enterprise datacenter, is the lack of transparency and the inability to control energy consumption properly due to inadequate and often inaccurate instrumentation to quantify energy consumption and waste due to energy lost.

The economics of Cloud Computing can offer a compelling option for more efficient IT: by lowering power consumption for individual organizations and by improving the efficiency of a large number of discrete datacenters. Although the electricity consumption of Cloud Computing is projected to be one to two percent of today’s global electricity use, Cloud service providers can still cultivate sustainable Green I.T. effectively at lower costs by leveraging state-of-the-art super energy efficient massive datacenters, proximity to power generation thereby reducing transmission costs and, above all, harnessing enormous economies of scale. To better understand how Cloud Computing can offer greener computing in the Cloud and how will it help moderate power consumption by datacenters and rein in run-away costs, a good starting place is James Hamilton’s September 2008 study on Internet-Scale Service Efficiency” as summarized in the table below.

Resource Cost in

Medium DC

Cost in

Very Large DC

Network $95 / Mbps / month $13 / Mbps / month 7.1x
Storage $2.20 / GB / month $0.40 / GB / month 5.7x
Administration ≈140 servers/admin >1000 servers/admin 7.1x

Table 1: Internet-Scale Service Efficiency [Source: James Hamilton]

This study concludes that hosted services by Cloud providers with super large datacenters (at least tens of thousands of servers) can achieve enormous economies of scale of five to seven times over smaller scale (thousands of servers) medium deployments.  The significant cost savings is driven primarily by scale. Other key factors include location (low cost real estate and electricity rate, abundant water supply and readily available fiber-optic connectivity), proximity to electricity and power generators, load diversity, and virtualization technologies.

Will this mark the beginning of the end for traditional on-premises datacenters? Can enterprise IT continue to justify new business cases for expanding today’s non-renewable energy powered datacenters? According to the McKinsey article, the costs to launch a large enterprise datacenter have risen sharply from $150M to over $500M over the past five years. The facility operating costs are also increasing at about twenty percent per year. How long will the status quo last for enterprise IT considering the recent trend of Cloud service providers? Major players such as Google, Microsoft as well as the U.S. government itself have invested in or are planning ultra energy-efficient mega-size datacenters (also known as “container hotels”) with massive commoditized containerization and proximity both to power source and less expensive power rates. Bottom line: will the tide turn if the economics (radical cost savings) due to enormous economies of scale become too significant to ignore?

Despite the potential for significant cost savings, it is premature to declare the demise of traditional IT or the end of enterprise datacenters. After all, the rationale for today’s enterprise IT extends well beyond simplistic bottom-line economics – at least for now. To most industry observers, enterprise datacenters are unlikely to disappear although the traditional roles of enterprise IT will be changing. A likely scenario may involve redistributing IT personnel from operating low-level system operational tasks to addressing higher-level functions involving governance, energy management, security and business processes. Such change not only would become more apparent but will likely be precipitated by the rise of hybrid Clouds and the growing interconnection linking SOA, BPM and social computing. Another likely scenario is the rise of the mega datacenters or “container hotels” for Cloud Utility Computing providers. Although the global economic outlook will undoubtedly play a key role in shaping the development plans/timelines of the mega datacenters, they are here to stay. Case in point: by 2012, Intel estimates that it will design and ship about a quarter of the server chips (it sells) to such mega-data centers.

Role of the Agile Leader in Reconfiguring the Business

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Click here for the slide deck from my Agile 2009 presentation. 

Abstract: The presentation applies Agile thinking to critical aspects of strategy and execution at a time of uncertainty and disruption. The essential point is simple and logical: Agile values and principles are indivisible. To succeed, they must be applied not just to R&D, but also to customer and company, simultaneously. This requires reconfiguration of customer relationships, employee policy, software development, and the relationship that binds the three. The resulting paradigm shift could lower the cost of software and produce prosperity similar to the one induced by ultra-cheap oil in the 50’s.

Perspective: In addition to being a ‘think-piece,’ the presentation offers pragmatic recommendations for the Agile champion in three critical areas:

  •  It explains how the Agile champion can cross three chasms that tend to form in the course of large scale Agile rollouts.
  •  It explores how to apply Agile priciples to software deployment and operations.
  • It shows how earned value management can utilize ‘real time’ customer feedback in companies that embrace end-to-end Agility.

Punching Above Your Weight Class

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Authors Hagel, Brown and Davison use an interesting metaphor in a recent Harvard Business Review article on strategy in time of constant change:

Today’s new Digital infrastructure in fact gives relatively small actions and investments an impact disproportionate to their size. To use a boxing metaphor, companies can now punch above their weight class.

Compare the Digital infrastructure with traditional infrastructures such as water canals, railroads or highways. Unlike these classical means of communication and transportation, Software is unique in being integral part of the Digital infrastructure as well as being a major piece of what gets transported over the  infrastructure.  Best I know no other entity ever played such a dual role in as meaningful a manner.

The metaphorical punch Hagel, Brown and Davison use as an illustration for the leverage provided by the Digital infrastructure is particularly intriguing due to to the malleability of software. Delivery methods for products and services over the Digital infrastructure could evolve the way product feature and functions do. If the product continues to evolve after initial delivery, the opportunity presents itself to do Agile in the deep sense recently proposed in The Lean Startup: iterative customer development alongside Agile product development that includes iterating on the delivery method.

Written by israelgat

April 21, 2009 at 8:40 pm

Marauder Strategy for Agile Companies

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Colleague Annie Shum sent me the URL to a recent post by Clayton Christensen in The Huffington Post. In this post Christensen characterizes “disruption” in the following manner:

Disruption is the causal mechanism behind the “creative destruction” that [economist Joseph] Schumpeter saw so pervasively at work in capitalist economies. [Links added by IG]

Christensen’s post is largely about the automobile industry. It, however, ties nicely to an email exchange Jeff Sutherland and I had about Agile as a disruption inside the company vis-a-vis its intentional use as a disruptive methodology in the market. To quote Jeff:

We are starting to see organizations like yours that can use Scrum to disrupt a market. There is a tremendous amount of low hanging fruit out there. Dysfunctional companies that can’t deliver. I’ve been recommending a “Marauder” strategy to the venture group. Find a company who has a large amount of resources. Set them loose like pirates on the ocean and they seek out slow ships and take them out.

Carlota Perez, who has been often cited in this blog (click here, here and here), is a disciple of Schumpeter. I really like the way the “dots” are connected: Schumpeter –> Perez –> Christensen –> Schumpeter. Their theories of disruption and constructive destruction express themselves nicely in the business design proposed by Jeff.

A Note on the Macro-Economic Crisis

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Re-reading Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages by Carlota Perez, I was struck by the following paragraph:

So, once again, the amount of money available to financial capital has grown larger than the set it recognizes as good opportunities. Since it has come to consider normal the huge gains from the successful new industries, it expects to get them from each and every investment and will not be satisfied with less. So rather than go back to funding unsophisticated production, it develops sophisticated instruments to make money out of money. [Italicized  and highlighted by IG]

Perez published the book in 2002. Her words of wisdom seem to be appropriate today even more than they might had been then.

(Click here and here for related discussions of Agile in the context of the current macro-economic crisis.)

Written by israelgat

April 13, 2009 at 12:20 pm