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.
I am here at IBM’s IOD (Information on Demand) conference. The keynote is interesting because of the focus on outcomes. IBM has invested more than $12 billion over the past five years in the information management market. More than $8 billion has come through acquisitions (Cognos, SPSS, etc.) and the rest from organic growth.
The biggest changes that I have seen over the past 20 years or so of watching IBM in the information technology market is the change in focus from the database engine and tools to a focus on a process centric approach to information management. In essence, this means that IBM is building a foundation based on outcomes through the lifecycle of information. Last year IBM called this movement to using information holistically to help companies anticipate the future the Information Agenda. Now, there is an interesting and subtle shift to what IBM is calling information-led transformation. What’s the difference? I think that IBM is actually attempting to turn the information management market upside down. There is no doubt that data and information management is a technical discipline. What IBM is saying is that the focus is on business transformation that is supported by information management technology. It is a subtle difference but really important. It is very easy to get caught up in the details about schemas, data cleansing, etc. But if information doesn’t support key business processes and business strategy needs, it is just a pile of technology.
With the growth of social networks, an ever expanding world of information sources – structured, unstructured, images, video, data feeds, and more, it is more important than ever that these sources of data be managed in context with the business goals. The movement to cloud computing will add a lot more information to the mix. It is going to be a complex journey. One only has to look at complexities of managing information in the healthcare industry to start to understand what the implications for managing costs and lives. Today we cannot easily look across information across individual doctors, hospitals, pharmaceutical companies, pharmacies, patients, medical equipment, digital images, and more. We don’t have consistent definitions of data; nor can we keep track of how effective a treatment might impact individuals with a symptom. Nor do we have the ability today to use information to determine what solutions could be used to reduce medical errors by 5% a year. If healthcare information management were focused on predicting outcomes rather than creating the next report, image what we could accomplish.
So, who could argue that we need a smarter planet. I certainly couldn’t. I am at an IBM software analyst meeting. I have been attending this meeting for many years. The focus, as you might imagine is on the software strategy. But there was something this time that I think is worth talking about. Rather than providing us analysts with a laundry list of products and go to market strategies (yes, they did some of that too), the focus this year is around vertical solutions and markets. But more than that, there is an overarching theme that is about to become the major theme that will envelope IBM over the coming years – Smarter Planet. This initiative is driven by Sam Palmisano not just with his operational good sense, but his ability to provide vision for the company.
In his address to the Council of Foreign Relations in New York City on November 6, 2008, Palmisano proclaimed that the next challenge as our world gets more interconnected, hotter, and challenged for growth we need to leverage a new approach to innovation that is smarter.
This approach according to Palmisano, “This isn’t just a metaphor. I mean infusing intelligence into the way the world literally works – the systems and processes that enable physical goods to be developed, manufactured, bought and sold…services to be delivered…everything from people and money to oil, water, and electronics to move…and billions of people to work and live.”
Good thinking but what does this mean from a technology lens? It is clear that we have an overabundance of technology. What we lack right now is the right way to leverage technology to truly focus on customer benefit from both an agility perspective (being able to change quickly and without too much pain) and the ability to support an increasingly connected world. It is interesting to think about looking at the world this way.
If you think about it, the world is, in fact, a system. To make the concept even further, the world can be viewed as a biological system. The human body itself is an interconnected set of sensors, actions that trigger other actions. The body interacts with other humans, with the physical world as well as the virtual world. We take actions based on the information we are given or intuit from our experiences.
IBM is trying to tap into one of the most important transitions in our world today. And they are not shy about focusing these transformations to their products and services (it is a commercial world, after all).
Here’s a quick view of this idea of the Smarter Planet. If we look at the idea of a Smarter Planet, it starts with the idea that everything is an asset that takes inputs processes them and produces outcomes. Therefore, we can look at this from Smarter Planet from five different perspectives:
• Innovation can transform companies, countries, and governments to lower costs and increase revenue
• Intelligence that provides an ability to learn from the vast amounts of information in the world (I call this anticipation management). In essence, this means managing information, predicting outcomes, leveraging information across partners, suppliers, and customers
• Optimizing, managing, and changing based on the customer experience. Organizations no matter how big or small are looking for ways to transform themselves so they are ready for whatever happens. Companies that focused on this type of change are better able to weather very tough and complicated times.
• Greening of business. You can’t talk about the planet without thinking about the impact of green on everything we do. This includes everything from saving cash by better usage of energy to protecting the climate.
• Leveraging smart people. I think that people makes or breaks this noble goal. Leveraging all these innovative approaches to doing things smarter and more responsibly typically fail if people don’t work together as effective teams. Politics can kill innovation more quickly than anything else.
Now begin to take this concept out of the general view and apply it to specific industries, their problems, and opportunities. That is precisely what makes the idea of the Smarter Planet intriguing. For example, manufacturing itself is being transformed as we speak. Manufacturing has been transformed by technology with sensors and actuators so that the information produced is helping smart companies better control the manufacturing process both in terms of innovation, efficiency, and energy conservation. In retail, companies are leveraging new processes and technology to leapfrog the competition. If a retailer can optimize the way they change inventory based on an early understanding of changing buying habits of customers they can become a leader.
I think it is important that IBM is talking about this idea now. This idea of a Smarter Planet is really tailor made for a time when the natural inclination is to hide until things get better. There is no question that we are in very challenging time. It isn’t the first time that we have found ourselves in this position and it certainly won’t be the last. But in my experience, the companies that take action when everyone else is hiding under the bed to innovate, change, and learn will win. When the world comes back, these companies will be way ahead and everyone else will be playing catchup.
What a difference a year makes. The past year was filled with a lot of interesting innovations and market shifts. For example, Software as a Service went from being something for small companies or departments within large ones to a mainstream option. Real customers are beginning to solve real business problems with service oriented architecture. The latest hype is around Cloud Computing – afterall, the software industry seems to need hype to survive. As we look forward into 2009, it is going to be a very different and difficult year but one that will be full of some surprising twists and turns. Here are my top predictions for the coming year.
One. Software as a Service (SaaS) goes mainstream. It isn’t just for small companies anymore. While this has been happening slowly and steadily, it is rapidly becoming mainstream because with the dramatic cuts in capital budgets companies are going to fulfill their needs with SaaS. While companies like SalesForce.com have been the successful pioneers, the big guys (like IBM, Oracle, Microsoft, and HP) are going to make a major push for dominance and strong partner ecosystems.
Two. Tough economic times favor the big and stable technology companies. Yes, these companies will trim expenses and cut back like everyone else. However, customers will be less willing to bet the farm on emerging startups with cool technology. The only way emerging companies will survive is to do what I call “follow the pain”. In other words, come up with compelling technology that solves really tough problems that others can’t do. They need to fill the white space that the big vendors have not filled yet. The best option for emerging companies is to use this time when people will be hiding under their beds to get aggressive and show value to customers and prospects. It is best to shout when everyone else is quiet. You will be heard!
Three. The Service Oriented Architecture market enters the post hype phase. This is actually good news. We have had in-depth discussions with almost 30 companies for the second edition of SOA for Dummies (coming out December 19th). They are all finding business benefit from the transition. They are all view SOA as a journey – not a project. So, there will be less noise in the market but more good work getting done.
Four. Service Management gets hot. This has long been an important area whether companies were looking at automating data centers or managing process tied to business metrics. So, what is different? Companies are starting to seriously plan a service management strategy tied both to customer experience and satisfaction. They are tying this objective to their physical assets, their IT environment, and their business process across the company. There will be vendor consolidation and a lot of innovation in this area.
Five. The desktop takes a beating in a tough economy. When times get tough companies look for ways to cut back and I expect that the desktop will be an area where companies will delay replacement of existing PCs. They will make do with what they have or they will expand their virtualization implementation.
Six. The Cloud grows more serious. Cloud computing has actually been around since early time sharing days if we are to be honest with each other. However, there is a difference is the emerging technologies like multi-tenancy that make this approach to shared resources different. Just as companies are moving to SaaS because of economic reasons, companies will move to Clouds with the same goal – decreasing capital expenditures. Companies will start to have to gain an understanding of the impact of trusting a third party provider. Performance, scalability, predictability, and security are not guaranteed just because some company offers a cloud. Service management of the cloud will become a key success factors. And there will be plenty of problems to go around next year.
Seven. There will be tech companies that fail in 2009. Not all companies will make it through this financial crisis. Even large companies with cash will be potentially on the failure list. I predict that Sun Microsystems, for example, will fail to remain intact. I expect that company will be broken apart. It could be that the hardware assets could be sold to its partner Fujitsu while pieces of software could be sold off as well. It is hard to see how a company without a well-crafted software strategy and execution model can remain financially viable. Similarly, companies without a focus on the consumer market will have a tough time in the coming year.
Eight. Open Source will soar in this tight market. Open Source companies are in a good position in this type of market—with a caveat. There is a danger for customers to simply adopt an open source solution unless there is a strong commercial support structure behind it. Companies that offer commercial open source will emerge as strong players.
Nine. Software goes vertical. I am not talking about packaged software. I anticipate that more and more companies will begin to package everything based on a solutions focus. Even middleware, data management, security, and process management will be packaged so that customers will spend less time building and more time configuring. This will have an impact in the next decade on the way systems integrators will make (or not make) money.
Ten. Appliances become a software platform of choice for customers. Hardware appliances have been around for a number of years and are growing in acceptance and capability. This trend will accelerate in the coming year. The most common solutions used with appliances include security, storage, and data warehousing. The appliance platform will expand dramatically this coming year. More software solutions will be sold with prepackaged solutions to make the acceptance rate for complex enterprise software easier.
Eleven. Companies will spend money on anticipation management. Companies must be able to use their information resources to understand where things are going. Being able to anticipate trends and customer needs is critical. Therefore, one of the bright spots this coming year will be the need to spend money getting a handle on data. Companies will need to understand not just what happened last year but where they should invest for the future. They cannot do this without understanding their data.
The bottom line is that 2009 will be a complicated year for software. There will be many companies without a compelling solution to customer pain will and should fail. The market favors safe companies. As in any down market, some companies will focus on avoiding any risk and waiting. The smart companies – both providers and users of software will take advantage of the rough market to plan for innovation and success when things improve – and they always do.