Why did IBM buy Lombardi?

Just as I was about to start figuring out my next six predictions for 2010 I had to stop the presses and focus on IBM’s latest acquisition. IBM just announced this morning that it has purchased Lombardi which focuses on Business Process Management software. Lombardi is one of the independent leaders in the market as well as a strong IBM business partner. The obvious question is why would IBM need yet another business process management platform? After all, IBM has a large portfolio of business process management software — some homegrown and some from various acquisitions such as Filenet, ILOG, and Webify. I think that the answer is actually quite straight forward. Lombardi’s offerings are used extensively in business units, by business management to codify complex processes that are at the heart of streamlining how businesses are able to differentiate themselves. Clearly, IBM has recognized the importance of Lombardi to its customers since it has had a long standing partnership with the company.  I think there are two reasons that this acquisition are significant beyond the need to provide direct support for business management. The ability to use Lombardi’s technology to sell more WebSphere offerings and the connection of business process to IBM’s Smarter Planet initiative are the two issues that stand out in my mind.

Selling more WebSphere products. There is no question that the WebSphere brand within IBM’s Software business unit includes a lot of products such as its registry/repository, applications integration, security, and various middleware offerings. IBM likes to sell its products by focusing on entry points — the immediate problem that the customer is trying to solve. The opportunity to gain direct access to business buyers who start with business process management and then may be see the value of adding new capabilities to that platform.

Supporting the Smarter Planet strategy. Business transformaton often starts by reconstructing process. IBM’s smarter planet strategy is based on the premise that customers want to be able to transform their businesses utilizing sophisticated technology. Therefore, it is important to look at how business innovation can be supported by IBM’s huge hardware, software, and services portfolio. The fact that Lombardi’s technology is the starting point for business units looking at transformational process changes is an important marker in IBM’s evolution as a company.

Bureaucracy gone mad: when process gets in the way of service management

I had two interesting discussions over the past few weeks; one with an IT manager and the other with Rhett Glause and Matt French from Service-Now. Both discussions related to the issue of managing service processes in a complex computing environments.  Let me start with the IT manager. He is charged with taking his organization’s web presence from 1990s architecture into a modern Web 2.0 design that will enable better support for customers and partners.  It is a big effort with lots of interaction with the customer facing departments about what they want and with the IT organization about how this new environment will be supported.  Now, this part isn’t out of the ordinary and this is not what this manager was having problems with.  He was being driven crazy by process. The company he works for is devoted to ITIL (Information Technology Infrastructure Library). ITIL is a set of best practices designed to help companies create environments that have a common way to troubleshoot problems with managing complex services.  They are intended as guidelines – not step-by-step instructions about how to managing service processes. In fact, ITIL best practices mandate that you need to start with your strategy for managing services before you get involved in the details.

The IT manager’s problem is that his company’s IT department was so embroiled in process that it was causing excessive delays in getting to a solution. It has a Configuration Management Database (CMDB) —  a repository for all of the details about an application environment including who can change something; how a service or an application is configured and what the change management process is. This company’s problem is that it has set up a change review board that has to review and approve every change for the new environment.  Therefore, something that should take a few days to develop is taking six month of endless meetings.  In other words, the IT manager’s organization is too caught up in process so that it actually crippling the ability to get the job done.  According to the IT manager, “It’s bureaucracy gone mad! This approach will not help make IT more responsive; it will do the opposite.”

I thought about the discussion in context with a great call I had with Matt French, director of marketing and product strategy and Rhett Glauser, communications manager at Service-Now, an IT service desk software as a service company.  What did they think of my friend’s tale of woe? They agreed that this is a common perspective that they hear from customers.  Many customers are beginning to understand that they have to take a pragmatic view of process.  Their top recommendation was that companies should approach ITIL in a phrased approach.

So, here are some recommendations about how to handle process in context with driving business value:

• Establish a light-weight CMDB by only focusing on configuration items that the organization really needs. If a process isn’t likely to change, it might not be necessary to track that process.  You don’t need a change management process for everything.
• Get IT management to take a step back from relying too heavily on IT processes. Rather management needs to be focused on what is important to business management and then execute in a pragmatic way.
• Every service should have a business owner who can make decisions.
• When a change management process is required make sure that there is a change advisory board. There needs to be one person who has the authority to manage that change in the context of the business drivers. The change management board should expedite process and should not become a bottleneck.

In the end it is about common sense. If IT organizations are going to be effective in managing business requirements they have to look at service management in context with the overall priorities of the business. This was the key message our team was aiming for when we wrote Service Management for Dummies. Service management is increasingly defining not only how we manage IT environments but how we managed businesses. Therefore a streamlined view of process management will be the difference between success and failure.

What are the Unanticipated consequences of the cloud – part II

As I was pointing out yesterday, there are many unintended consequences from any emerging technology platform — the cloud will be no exception. So, here are my next three picks for unintended consequences from the evolution of cloud computing:

4. The cloud will disrupt traditional computing sales models. I think that Larry Ellison is right to rant about Cloud Computing. He is clearly aware that if cloud computing becomes the preferred way for customers to purchase software the traditional model of paying maintenance on applications will change dramatically.  Clearly,  vendors can simply roll in the maintenance stream into the per user per month pricing. However, as I pointed out in Part I, prices will inevitably go down as competition for customers expands. There there will come a time when the vast sums of money collected to maintain software versions will seem a bit old fashioned. In fact, that will be one of the most important unintended consequences and will have a very disruptive effect on the economic models of computing. It has the potential to change the power dynamics of the entire hardware and software industries.The winners will be the customers and smart vendors who figure out how to make money without direct maintenance revenue. Like every other unintended consequence there will be new models emerging that will emerge that will make some really cleaver vendors very successful. But don’t ask me what they are. It is just too early to know.

5. The market for managing cloud services will boom. While service management vendors do pretty well today managing data center based systems, the cloud environment will make these vendors king of the hill.  Think about it like this. You are a company that is moving to the cloud. You have seven different software as a service offerings from seven different vendors. You also have a small private cloud that you use to provision critical customer data. You also use a public cloud for some large scale testing. In addition, any new software development is done with a public cloud and then moved into the private cloud when it is completed. Existing workloads like ERP systems and legacy systems of record remain in the data center. All of these components put together are the enterprise computing environment. So, what is the service level of this composite environment? How do you ensure that you are compliant across these environment? Can you ensure security and performance standards? A new generation of products and maybe a new generation of vendors will rake in a lot of cash solving this one.

6. What will processes look like in the cloud. Like data, processes will have to be decoupled from the applications that they are an integral part of the applications of record. Now I don’t expect that we will rip processes out of every system of record. In fact, static systems such as ERP, HR, etc. will have tightly integrated processes. However, the dynamic processes that need to change as the business changes will have to be designed without these constraints. They will become trusted processes — sort of like business services that are codified but can be reconfigured when the business model changes.  This will probably happen anyway with the emergence of Service Oriented Architectures. However, with the flexibility of cloud environment, this trend will accelerate. The need to have independent process and process models may have the potential of creating a brand new market.

I am happy to add more unintended consequences to my top six. Send me your comments and we can start a part III reflecting your ideas.

What are the unanticipated consequences of Cloud Computing- Part I

Maybe I am just obsessed with cloud computing these days. I guess that after spending more than 18 months researching the topic for our forthcoming book, Cloud Computing for Dummies, I can be excused for my obsession.  Now that I am able to take a step back from the noise of the market, I have been thinking about what this will mean in the next ten years. Consequences of technology adoption are never what we expect. For example, in the late 1970s and early 1980s no one could imagine why anyone would want a personal computer. In fact, the only application people could imagine for a PC was a way to store recipes (I am not making this up). Keep in mind that this was before the first PC-based spreadsheet was designed by Dan Bricklin and Bob Franston(That’s them in the picture) . No one in those days could have predicted that everyone from a CEO to a three year old child would own a personal computer and its use would change the way we conduct business.  (I never did find a recipe storing application).

The same logic can be applied to the Internet. While the Internet has been used 40 years ago by researchers, it was not a commercially viable option until the mid-1990s. In the early days of the Internet it was a sophisticated communications technology with a command line interface. Once the browser came along, businesses tended to use it to share price lists, marketing materials, and job postings. There were certainly message boards but only for the real techies. There were environments such as The Well which was the first online community used primarily by academics and wild-eyed researchers.

In that context, I was thinking about what we might expect to happen with cloud computing? There is a lot to say, so I decided to break this into two parts — each one will have three consequences. Here are today’s top three:

1. Cloud computing will begin to change the way we think of an application. To be truly useful to large groups of individuals and businesses requires economies of scale in terms of massively scaled workloads. The only way to accomplish this is either to cherry pick a few big workloads (like email) or to branch out. That branching out is inevitable and will mean that vendors with cloud offerings with componentize their software offerings into modular services that can be mixed and matched with other services.

2. The prices that vendors will charge for cloud computing services will drop dramatically over the next few years. As prices drop it will become a lot more economically viable to substitute on premise environment for the cloud environment. Today this is not the case; large companies supporting thousands of users in an application environment cannot justify the movement to a cloud platform. What if the costs drop to the point where the economics (with the right workloads) favor cloud based services? When this happens there will be a tipping point that we might not even notice for a few years. But I predict that it will happen. We are already seeing Amazon dropping prices for its EC2 environment based on the competitive threat from Microsoft Azure services announcement.

3. The cloud will change the way we manage data. The traditional way we think about data neatly stored in specific databases to handle a specific business problem will inevitably change.  This won’t be an overnight change but it will happen. Data will increasingly be seen as a reusable resource that can be used in lots of different situations. There will continue to be strategic line of business applications but they will be more systems of record that keep track of the final result of actions that take place dynamically in the cloud. The value of data is not in its tight packaging as we have been used to for decades but it the flexibility to move, transform, and leverage data. The watch word for data in this new model will be Trusted Data in the Cloud.

I would love to know what you think of my top three choices; send me your comments and I will add them to my list for tomorrow.

As we deal with the cloud hype it is too easy to be dismissive and cynical. But we always treat complicated new trends that way — until one day they become the normal way of business and life.

Can we free process and data?

I am still at IBM’s Information on Demand conference here in Las Vegas (not my favorite place..but what can you do). In listening to a lot of discussions around strategy and products I started thinking about one of the key problems that customers are facing around business process and managing increasingly complex data. What companies really want to do is to have the flexibility and freedom to leverage their critical data across applications and situations. They also want to be able to change processes based on changing business models.

This is the core issue that companies will be facing in the coming decade and will be the difference between success and failure for many  businesses.  Here’s an example of what I mean. Let’s take the example of a retailer in a competitive market. Let’s say our retailer had five or six applications: Accounting, Human Resources, supply chain management, a customer support system, and a customer facing e-commerce system. Each of these systems has an underlying database; each one manages this data based on the business process that is the foundation of the best practices that is the value of these packages. Even if each of the packages are the best in their markets there is a core problem since each solution is a silo. Processes that move between these systems tend to fall through the cracks.  This is why we, as customers of such retailers, are often frustrated when we call about a product that wasn’t delivered, doesn’t work, or requires a change only to discover that one department has no ability to know what is happening in another area. For most companies the dream of single view of the customer is aspirational but not practical right now. In reality, it is hard for companies to mess with their existing applications. These solutions are customized for their business environment; they were expensive and complicated to implement — and change is hard. In fact, companies only change when it is more painful to stay with the status quo than it is to change. In a retail scenario, companies change their approach to process and data management when they must change their business model because the current processes will lead to failure. Retailers are currently faced with emerging approaches to selling and managing customer relationships that are challenging traditional selling models.  Look what a company like Amazon.com or Netflex have done to their slower moving competitors.

A number of customers I have spoken with understand this very well. They are looking at ways to separate their core data assets from the underlying applications. Many of these customers are at the forefront of implementing a service oriented architecture (SOA) approach to managing their software assets. They are increasingly understanding that the secret to their future success is the knowledge they have about their customers, their needs and future requirements within their own set of offerings and those from partners. These companies are setting a priority of making this data independent, secure, and accurate. These business leaders are preparing for inevitable change.  At the same time, I have seen these customers creating SOA business services that are, in essence, codified business processes. For example, a business service could be a process that checks the credit of a potential partner or links a new customer request for service to the set of applications that confirms the request, orders the part, and notifies a partner.

So, here is the problem. These customers are implementing this new model of abstracting data and process based on specific projects or business initiatives.  These projects have gotten the attention of the C-team because of the impact on revenue. But, in reality, the real breakthrough will happen when the separation of data and process are the rule, not the exception.

This is going to be the overriding challenge for the next decade because it is so hard. There is inertia to move away from the predictable packaged applications that companies have implemented for more than 30 years. But I suggest that it will be inevitable that companies will begin to understand that if they are going to remain agile and change processes when they anticipate a competitive threat. These same companies will understand that their data is too important to leave it locked inside an application linked tightly to a process.

I don’t have the answers about what the tipping point will be when this starts to become a wide spread strategy. I think that the cloud will became a forcing action that will accelerate this trend. I would love to start a dialog. Send me your thoughts and I promise to post them.