Re-imagining Business Through Integration

Just a commentary in response to a post I found by by Peter Evans-Greenwood on the potential for business re-engineering based on presence-based technologies such as Apple’s iBeacon. While I don’t want to talk about this subject specifically, Peter uses a couple of very clear examples in terms of retail purchasing that illustrate the power of re-imagining desirable outcomes from the consumer’s perspective – as opposed to a technology perspective – and the resulting need to pursue consumer-focused integration of business capabilities to give them what they need.

These themes resonated with me this morning as I gave a talk at the Eurocloud congress recently in which I berated people for not “thinking big” about the potential of cloud in combination with other technologies. At the moment there is so much discussion and argument about whose VM is better or the benefits (or not) of making VMs more ‘enterprisey’ that everyone seems to be missing the ‘moon shot’ opportunity of integrating, simplifying and putting technology platforms into the hands of everyone. This problem only becomes more acute as you broaden your view to all of the other silo arguments raging across other areas of technology evolution. From this perspective Peter’s examples of design-led, consumer-oriented thinking were very similar to the challenge I tried to lay down to congress attendees.

Effectively I believe that the IT challenge of our generation is to package diverse technologies into much higher level platforms that humanise technology and empower less technical people to solve real problems – i.e. to enable them to use modelling and simplified domain languages to scalably and reliably address the huge opportunities that technology can deliver to science, business and society. It’s a shock to many IT people but more often than not it’s actually other people who have the domain knowledge required to change the world – which is why they don’t have the time to learn the technology. From their perspective everything related to traditional IT is a form of tax, a significant driver of risk and delay and at worst an insurmountable barrier to their activities. These problems become more acute as you scale down the size of organisation under consideration – to the point at which the vast majority of smart people are locked out of the ability to bring their expertise to bear in new digital business models.

If we take Peter’s examples of placing the consumer – rather than technology – at the heart of our endeavours then it feels to me as if many seemingly “hot” IT trends fail on this basic test and are simply a reflection of technology-led thinking. Doing isolated things better because we can – e.g. like Peter’s NFC example – is really just a way of increasing the efficiency of something that brings no benefit to the customer and is therefore just pointless when you step back and reflect. In Peter’s example the ‘customer’ from the technology provider’s perspective may have been the cashiers, the people who support payment systems or even the CIO. When you shift to an outside-in perspective, however, the obvious question is why make payment at the cash desk more efficient when there is no need to queue to pay at all?

I know it’s a difficult discussion but in a similar sense businesses rather than IT staff are the true customers of IT and their intent is ultimately to deliver new and valuable outcomes as quickly as possible – they really couldn’t care less whether your infrastructure is virtualised, what middleware is or whether the pointless technical activity required to undertake these tasks is managed by operations staff or developers. While they still have to ‘queue’ unnecessarily to get their outcomes it makes no material difference to their poor experience or the lack of empowerment offered by technology platforms. By stepping back we can see that most of the activity in cloud at the moment is not focused on re-imagining how we integrate and simplify IT to support the rapid achievement of new and customer-led business models but rather on how we provide tools and approaches to increase the efficiency of the people who have traditionally implemented IT. Again, this might make worthless tasks more efficient but effectively it’s like the payment example mentioned by Peter – in the same way that using NFC misses the opportunity for a wholesale rethink of the customer’s payment experience, I feel that most cloud activity (and certainly noise) is focused on achieving efficiency increases within the vast swathes of traditional IT activity which could be wholly eliminated using a design-led, outcome-centric approach.

In this context I believe that the major responsibility of cloud platform providers is to provide a simplified way of creating business solutions that span all of the different technologies, business capabilities and channels that are meaningful to the creation of business models. Essentially we need to enable businesses to ‘compose’ internal and external capabilities into new value webs supporting innovative new business models – all at a higher level of abstraction. I call this concept of rapid business model creation, integration and adaptation composite business. Essentially there should be no need for anyone other than cloud platform providers to understand the complexity of the different underlying technologies necessary to create, deliver and monetise systems that digitally encode business IP for such composite business models.

Realising a business platform for the support of composite business models requires the consideration of two different dimensions of integration and simplification:

1. Firstly composite business platforms need to provide a cohesive experience to their users by integrating and simplifying all of the technologies, processes and tools required to deliver value outcomes via multi-layer business composition; such platforms cannot simply be a loose and low level collection of technologies and middleware that require ongoing integration, configuration and management by technical users.
2. Secondly the platform itself needs to provide high leverage tools that a range of stakeholders can use to quickly capture, deliver, monetise and distribute their business IP as composite business and technology services.  In this context a composite business platform needs to facilitate the simplified creation of solutions that integrate distributed and heterogeneous assets into new value webs – while hiding the technical complexity required to enable it.

In stepping back we need to realise the essentially pointless nature of technology implementation and management as an end in itself and focus on the ways in which we can make it disappear behind tools that simplify the realisation of valuable business outcomes. Such a re-imagining has never been more feasible – we now have a foundation of open networks, open protocols and open technologies that enable the creation of new and higher order platforms for value creation. From my perspective this is the responsibility of platform companies in the emerging business ecosystem and we only have to step back to see the opportunities.

In this context ‘cloud integration’ transforms from being a technical issue to an enabler to the rapid linkage of business and technology assets into new, consumer-centric value webs that can span industry boundaries and deliver new personalised services.

Furthermore while I believe that this shift has the short term potential to improve services from companies and organisations operating within settled industry boundaries, the outstanding business opportunities of our age are to put high leverage cloud platforms into the hands of the maximum number of people to democratise technology and allow organisations to pursue wholesale specialisation and the aggressive re-drawing of existing industry and social boundaries around value. I believe that we truly are on the verge of not just a new information industrial revolution that impacts IT companies but rather a whole new business revolution that will leverage the shift to utility platforms to change the basis of on which businesses compete.  As the technology platform coheres,  enterprises will increasingly be able to specialise, integrate and then focus their joint efforts around value to the end consumer rather than on maximising the utilisation of their own capabilities in pursuit of scale and efficiency (something that represents a ‘punctuated equilibrium’ in evolutionary terms – as I’ll continue to explore in part II of my recent post on this subject). As value webs can be quickly created, evolved and realigned to ‘pull’ everything into the experience required by the consumer, the old model of ‘pushing’ industrially or functionally siloed products and services from large and tightly integrated companies becomes insupportable.

So I would encourage you to read Peter’s post – to see some simple and concrete examples of design thinking in action – and then think about the ‘moonshot’ opportunity of a wholesale re-imagining of technology. With all of the myriad technology advances that we are seeing it has never been easier to create a simplified and reliable platform for the modelling, execution and monetisation of new kinds of business.

Finally, also take the time to really reflect on all of these opportunities in the context of your role and the ways in which you can truly add value in this new environment. If you are working in an enterprise then think hard about whether you really need to control the technology in order to realise business value for your organisation (hint – uh, no). On the other hand if you’re working in an IT company then think about how to hide the technology and enable IT groups to focus purely on business IP capture, management and distribution.

Evolution and the IT Industry – Part I

A few years ago I wrote a (rather long) post about evolution in the context of business and in particular the use of emerging business architecture techniques to increase the chances of successfully navigating its influence.

Prompted by two recent posts on this blog, however – ‘Software Darwinism’ by Malcolm Haslam and ‘The Death and Rebirth of Outsourcing’ by Massimo Cappato – I thought I would simplify my original piece to create a much shorter and more IT-centric two part set of observations on this theme.  I basically wanted to pick up on the concept of evolution raised by Malcolm and use this as a vehicle to explore the potential impact on businesses and IT of the disruption described by Massimo; how have we arrived at the landscape of today and what can we learn from evolutionary processes about the likely impact of the disruption on the businesses paying large amounts of money for ‘artificially alive’ systems.

In part 1 I will introduce some ideas about evolution and discuss the current state of businesses in this context.  In part 2 I will continue the theme to discuss the way in which current disruptions represent a ‘punctuated equilibrium’ that demands rapid business evolution – or creates a high likelihood of extinction.

Evolution as an Algorithm

A fascinating book I once read about ‘complexity economics’ described evolution as an algorithm for exploring very large design spaces.  In this interpretation the ‘evolutionary algorithm’  allows the evaluation of a potentially infinite number of random designs against the selection criteria of a given environment. Those characteristics that are judged as ‘fit’ are amplified – through propagation and combination – while those which are not die out.

In the natural world evolution throws up organisms that have many component traits and success is judged – often brutally – by how well the combination of traits enables an animal to survive in the environment in which it exists.  For instance individuals of a particular colour or camouflage may survive due to their relative invisibility while others are eaten. Furthermore this is an ongoing process – individuals  with desirable traits will be better equipped to survive and the mating of such individuals will combine – and hence amplify – their desirable traits within their offspring.  Over time the propagation and combination of the most effective traits will increase in the population overall and where this happens quickly enough a species will evolve successfully for the environment..

Punctuated Equilibrium

Another interesting aspect of evolutionary systems is that they often exhibit long periods of relative stability until some set of external changes creates a ‘punctuated equilibrium’; that is a change to the environment which brings new selection criteria to the fore.  Such changes can have a devastating effect on species which have evolved successfully within the previous environment and lead to new periods of dominance or success for new or previously less successful species whose traits make them better adapted to the new selection criteria that result from the change.  Such species then continue to evolve towards mastery of their environment while others which are too specialised to adapt simply die out.

A particularly dramatic example of this process was the extinction of the dinosaurs, where a change in the environment lowered temperatures and destroyed the lush foliage they depended upon.  This led them from masters of the world to extinction in a relatively short period – the combination of traits that previously made them highly successful was no longer well aligned to the selection criteria of the new environment.

Markets as Evolutionary Systems

It has been argued that the complexity of markets (in terms of their scale, their breadth of participation and the differing intents of the participants) means that they can effectively be viewed as evolutionary systems.  Markets are essentially an environment in which we participate rather than something that can be clearly understood or designed in advance.  They are effectively a very large design space where the characteristics for success are often not known in advance and must be discovered through experimentation and adaptation.

When we look at businesses in an evolutionary context we can therefore hypothesize that those which converge over time  towards successful combinations of traits – as judged by their stakeholders through a process of interaction and adaptation – will be the ones best adapted  to market needs and thus chosen by consumers.  These traits – whether they are talent strategies, process strategies or technology strategies – are then copied by other businesses, replicating and amplifying successful traits within the economic system.

The Influence of IT

If we focus specifically on IT,  we can see that even today IT systems have a large influence on the quality of the business capabilities that underpin a company’s offerings.  Every business is competing for selection against competitors with other applications – and software is increasingly moving to the core as business becomes ‘digital’; as a result it is clear that IT is a major (and increasing) factor in deciding the ‘fitness’ of any particular business versus another.  In this context we can see that the degree to which IT helps or hinders a business makes a huge difference to the quality of its ‘traits’ – both individually and in aggregation.  IT can therefore be a significant influence on whether a business’s offerings are ‘fit’ when judged by the evolutionary algorithm of the market.

Competition in an Age of Universally Bad IT

Despite the illusion of change over the last 30 years, at the macro level things have actually been relatively static from  a technology perspective.  While we have moved from mainframes to client-server and from client-server to the Web the fundamental roles of business and IT have remained unchanged (i.e. firms exist to minimise the transaction costs of doing business by building scale and such businesses spend a lot of money on owning and operating IT in pursuit of efficiencies and consistency across their large scale operations).  In reality most IT investment has therefore been inward facing and viewed as a cost of doing business (a ‘tax’ as Massimo would describe it) rather than a platform for the delivery of innovation and differentiation from an external perspective.

Under this model we have seen large businesses use their scale to pay for IT products and services that are inaccessible to smaller organisations.  Over time -because the focus has often been on efficiencies and standardisation – many IT estates have tended to converge around similar packaged applications and technology.  This convergence has all but wiped out the flexibility required for business differentiation while simultaneously placing organisations functionally and temporally in lockstep (as a concrete example it is no surprise that all companies are facing huge challenges as a result of mobility or that their challenges are more or less the same).  Together these developments have led to a broadly static business environment in which a smaller number of large companies dominate each market segment, providing mediocre levels of innovation and service while dictating both the shape of industries and the kinds of offerings consumers can expect  from each.

As a result while IT has enabled large scale efficiencies, it has led to the situation outlined by Massimo – a situation in which businesses have huge investment responsibilities, a crushing burden from bloated support and delivery organisations and a limited ability to evolve quickly (if at all).  The irony is that it has done this equally to all organisations who could afford it, however,while simultaneously acting as a competitive barrier by limiting the economies of scale that can be achieved by organisations who could not.  As a result the costs, complexity, inflexibility and balkanisation around industry boundaries – along with a lack of innovation and customer-centricity – have become part of the settled fabric of business.

While this has not been a significant issue for large organisations during an extended period of relative stability, it does however threaten to create significant challenges as a result of any disruption to the status quo.  It is perhaps interesting to think of today’s businesses as the dinosaurs of the modern age – large and perfectly adapted to the warm and plant rich environment in which they exist unchallenged.

A Punctuated Equilibrium for Business?

Over the last few years, however, we have seen the genesis of a major disruption – a disruption that is going to change the evaluation criteria of the market and require the development of wholly different traits to succeed.  As cloud delivery models, large scale mobility and the mass sharing of content in social graphs converge I believe that they herald a ‘punctuated equilibrium’ whose effects on business will be profound.  These are not just technology changes but rather a change to the fundamental environment in which we all work, play and socialise – and a signal that business models and even industry boundaries are up for radical change.

The possibilities that these advances create in tandem are akin to an emerging ice age for large businesses and their technology providers – an age in which businesses must fight for every customer and must mutate their organisations, business models and technology to attain a new definition of ‘fitness’.  The easy days of domination through mass and an abundance of low hanging cash to be grazed are passing.

In part 2 of this post I will therefore talk more about the nature of this punctuated equilibrium and my personal views on the shifts in business and technology models that will be required to survive it.

Your Business Needs to Become a Platform

One of my colleagues recently re-circulated a Google+ post that first did the rounds about two years ago.  I thought I would use it to address a fundamental point about my attitude towards cloud and business.

http://siliconangle.com/furrier/2011/10/12/google-engineer-accidently-shares-his-internal-memo-about-google-platform/

Basically this post was by a Googler who was frustrated by the degree of ‘platform thinking’ present in the company and who wanted to make a point about the need for Google to think in platforms rather than in terms of products and services.  I think that this post deserves to be read again and in particular I would like to make some additional points about the nature of ‘platforms’ in a cloud era.

What is a platform?

Many of us who work in IT have the tendency to use the word ‘platform’ in a relatively narrow way.  Essentially when we say platform we generally mean infrastructure platforms or middleware platforms that form the underlying foundations necessary for the creation of databases, applications and business services. Such platforms are certainly an increasingly critical element of the emerging business ecosystem as technology is simplified, commoditised and moved into the cloud.

On the other hand the above Google+ post – rightly – extends this definition to include the services that your company offers to others.  Essentially  anything that forms a foundation on which others can build higher order value can be considered a platform if it is created and managed with this mindset.  Traditionally platforms have topped out at middleware due to the paucity of opportunities to reuse business capabilities within one organisation, but the cloud is giving us new opportunities to go further due to the ability to share functionality with others.

Your Business as a Platform

The increasing ease with which we can expose, integrate and manage APIs is leading to a new model of “business as a platform”.  Effectively in the same way that computing platforms use APIs as a route to building an ecosystem, so too can businesses expose their services to the Web via APIs in order to participate in ecosystems of their own.  Making business capabilities available beyond the bounds of a single organisation opens up opportunities for them to be leveraged by many organisations, effectively turning them into a platform for others to build upon.  In this sense ‘platforms’ aren’t only about the technology and middleware your organisation needs to use but rather about turning everything your business does into a ‘platform’ for others to leverage – often in unforeseen ways that create completely new kinds of revenue streams.  This seems so very obvious but often comes as a shock to people.  Effectively one of the biggest shifts occurring is the need for businesses to digitize and share their core capabilities in new ways – in this sense IT systems that capture important and differentiating IP are no longer just “operational support” but are in fact becoming the de facto expression of what a business does.  I explored this topic a bit deeper in a recent article.

Most importantly, focusing on exposing your services  to such an extended ecosystem can tell you a lot about which services constitute the real value of your organisation and which ones don’t – the hint is basically in which services you offer to customers and which are only used within your organisation to support these.  By reversing the process of API provision – i.e. looking from the outside in – you can also then think about replacing your non-differentiating services by integrating business APIs provided by others.  By doing this you can build new and dynamic digital supply chains that simultaneously reduce costs, increase adaptability and improve offering quality.

Computing Platform –> Business Platform

At the moment, however, many of these implications are hidden beneath the mountain of infrastructure-oriented obsessions that are dominating cloud debate – in most cases the discussions continue to be about ‘how’ to do things at a technical level without really stopping to consider the broader issue of new business models and the kind of ecosystems that technology simplification could ultimately enable.

As a result when thinking about ‘platforms’ there are two aspects you need to consider:

1. Does my cloud platform enable me to capture, deploy, integrate and deliver my business IP quickly, adaptably and reliably? and
2. Does my cloud platform enable my solutions to become part of a scalable and  higher order “business platform” that can be shared to generate new revenue, new efficiencies and new innovation?

This is why I have always been focused on advocating using modelling, integration and automation to enable our customers and partners to rapidly and flexibly achieve their aims – building, integrating and delivering solutions spanning people, processes and technologies existing  both on and off premise.

Why, What, How (or NIST, WTF)

It’s that time of year again where I realise that I need to resolve to start blogging again.  Luckily this year my inspiration was provided on new years day by a conversation on twitter sparked by Randy Bias over whether NIST is a fail or not (contained in his excellent cloud retrospective post).

I completely agreed with Simon Wardley’s view that as a mechanistic description NIST wholly fails to address the fundamental reasons cloud is important, summarised by these two tweets from the discussion:

“The definition helped to try and identify what is cloud but did nothing to explain why. It was pure mechanistic drivel…”

“… and that’s the real problem. If you think you understand cloud from reading NIST, you’re going to make horrendous mistakes.”

Falling transaction costs, the melting of enterprise boundaries, the shift to service business models and accelerating commoditisation – as examples of the ‘why’ of cloud – are not covered at all and therefore it would be all too easy to take these mechanistic descriptions and implement something that looks like them but which has not been created to address such wider business imperatives.

Without understanding why you need to address the impacts of cloud it is all too easy to re-name your existing stuff or build something that appears the right shape without actually creating something that meets the extraordinary business challenges that cloud is unfolding.  Such efforts invariably become about polishing existing enterprise IT models and not about a re-evaluation of your enterprise business models backed up by new technology architectures to leverage the fundamental disruption in the way business capabilities are supplied and consumed.  This is also my fundamental issue with many private cloud implementations – most have nothing whatsoever to do with ‘cloud’ as a disruption but are merely mechanistic implementations driven by people who don’t understand the why.

Simon (and indeed Randy in his original post) are completely correct to point out that definitions that purport to ‘define’ cloud without providing the context to enable you to understand the ‘why’ (and therefore the potential impacts and necessary business strategy required to respond) are in my view not just a fail but fundamentally dangerous.  For me this danger exists at both the micro and macro levels – at the micro level single organisations will implement stupid solutions due to misplaced confidence and a  lack of understanding of the forces they are facing, while at the macro level vast numbers of organisations will waste 1000s of years of effort and billions in investment building the wrong things or generating hot air discussing pointless virtualisation and infrastructure topics (often considered de facto as “cloud” due to the lack of a sufficiently multifaceted understanding of what cloud actually represents.)

All of this comes back to the need to think about why, what and how and the interplay between them.  Simplistically we can consider that why shapes what you need to deliver and what shapes the scope of your how.  From my experiences in business architecture I can say that most organisations seem mired in the endless management of hows and have lost sight of both what and why – from that perspective being given a set of abstract whats to fulfil by an organisation like NIST would appear to be a good start as it at least allows people to realign their hows to fit the definition and declare “cloud” success.

This is the overwhelming danger, however, and the reason I would agree that the NIST cloud definition is a fail.  In reality “successes” declared as a result of simply aligning to the NIST definitions will be massive failures of strategy without either an independently developed, deep understanding of the broader disruption or a startling case of serendipity.

The reality of cloud is the accelerating disruption of every industry as commoditisation and a shift to service models plays out; simply rebadging your existing IT or meeting your existing challenges with investment in ‘better’ technology will simply not cut it.

This is why NIST is fundamentally a fail from my perspective – not because of the definitions per se but because they present a structure to act without understanding.  Structuring your cloud efforts around a mechanical definition without fundamentally understanding the wider disruption that makes your existing models obsolete will just consume a lot of expense to deliver outcomes with wholly the wrong profiles – leading me to genuinely question whether some organisations who do this could founder.

I guess in some respects people may feel it is unfair to brand the NIST definitions a fail for these reasons and point to the failure of consuming organisations to properly understand the context in which they should be applied – there may be some truth to this rebuke but organisations are often ‘stupid’ (or at least blind to change) as they were designed for a different purpose.  From this perspective providing a definition that can seemingly be satisfied with a polished status quo  – especially given entrenched interests within the IT department and some suppliers – without forcing people to confront the dire consequences could be considered irresponsible.  Given the state of the art, the position of NIST, the ambivalence of many incumbent technology suppliers and the maturity of adopting enterprises, taking such a position seems to me a little like blaming blast damage on a toddler who is given a gun rather than the adult who hands it over.  With great power does indeed come great responsibility, lol.

So the core lesson for me is that people need models and taxonomies that place the elements of cloud into some kind of framework for describing both why and what in order to enable understanding, reasoned separation of business models and discussions about innovation in the how.  It has saddened me over the last few years how few people – like Randy, Simon and Krishnan in their twitter conversation and wider writings – are truly wrestling with the difficult why of cloud vs the slightly larger number of worthies thinking out of context about the what of cloud vs the vast number of rudderless and noisy idiots who have flooded the web with the half-arsed, contextless how of cloud (which inevitably has something to do with virtualisation, sigh).

UPDATE: After my original post I had an interesting debate with Christofer Hoff who had used the same ‘why, what and how’ structure to argue the complete opposite point in a blog post I missed.  I’d recommend reading his “When A FAIL is A WIN” post as well to see the other side of the argument.

My Definition of Cloud

I was asked last year to define my view of cloud in one sentence. Given my broad interpretation of cloud this is what I came up with:

“Cloud enables individuals and institutions to create pull-based business models through the consumption of network-based business and technology services on a needs basis.”

Still think it holds good for me.

Net Neutrality, News International and the Future of Open Information

This might seem slightly left field under the circumstances but the recent shameful revelations about the practices of the News of the World – and more importantly the increasing concerns about the possible distorting influence of News International on UK public life – have led me to think again about my concerns in terms of net neutrality.  Essentially the governments decision not to act on this issue last year left me deeply troubled and in many ways recent events have only crystalised this concern (as I will discuss later in the post).  Before getting to that, however, I’d like to discuss the issues of net neutrality more generally in order to set the scene.

ISPs Are Not the Web

In the link above an article in the Telegraph asks whether the Web should be ‘treated as a utility’.  This question falls into the usual trap of shaping completely the wrong context through a lack of precision.  Whilst the ‘Web’ (as in the myriad of sites available) is obviously not a utility due to its diversity, ISPs (including telecoms, mobile and media companies) clearly should be as they provide a purely infrastructural service that’s analogous to water pipes.  As such they should recognise that they do not have a ‘relationship’ with me, they are not my ‘trusted service provider’ and I don’t want them to ‘manage my experience’ on my behalf.  More broadly, questioning whether the ‘Web is a utility’ displays a lack of precision that often clouds the debate, since access (i.e. unhindered connectivity without any kind of gate keeping for commercial purposes up to the bandwidth allowance I pay for) should be a utility whereas the Web itself is an open ecosystem rich in services that I want to evaluate and configure for myself without interference or hindrance.   They’re different – and that’s the whole point.

Increasing Interference

Essentially the issue is that internet providers are increasingly trying to act as ‘portals’ to the Web and bundle all kinds of content and services with my network connection in order to find new revenue opportunities.  The problem is that having the independence to assist me in finding things I would actually like (irrespective of commercial interests) is a business model that exists in a completely different economic sphere to that of acting as the dumb pipe that enables me to get the bandwidth I need to gain access to such content and services (i.e. relationship business models vs infrastructural business models).  As a result they provide value in totally different ways.

I expect to trust a “relationship business” to be focused on my specific interests and benefits and to recommend the best possible services irrespective of where they come from – to be trusted they have to be independent.  In a financial sense think of MoneySavingExpert.com or perhaps your GP in a more personal scenario.

Conversely I expect an “infrastructure business” to provide me with a reliable utility at the lowest possible cost and otherwise stay out of the way.  Think electricity or water suppliers who have to provide service without discrimination and where the capital requirements are huge and they need to concentrate on efficiency and economies of scale (and so don’t have time for building individual relationships).

Importantly, allowing unfettered growth of ‘vertically integrated’ providers who can mix these two – as we appear to have been doing – is a recipe for disaster.  Building an infrastructure business is generally capitally intensive, hard work and low margin – even though the business model is highly reliable and sustainable for those that succeed.  On the other hand, subverting a privileged position as a gateway to the Web in order to drive customers towards economically attractive content and services (from the provider or selected paying content partners) is substantially easier.  The future danger is that using anti-competitive practices to squeeze a captive group of consumers into increasingly walled gardens to monetise their attention will become an alternative to investment in the network (or at least a lucrative adjunct).  Furthermore if bandwidth issues continue to become proportionally worse due to an explosion in service demand unmatched by network growth these practices could slowly expand to give preference to websites and services that are commercially attractive to the provider rather than to the consumer, leading providers to charge extra for – or even entirely block – competing services.  And they’ll justify this using crazy arguments.

Crazy Infrastructure Providers

To show the absurdity of the attempts of infrastructure providers to start managing my experiences, imagine if electricity providers started to say they were going to prioritise power to Sony televisions over Tesco branded ones (because Sony shared revenue with them) or water suppliers were going to prioritise water for flushing toilets to certain bathroom brands for the same reason.  Perhaps the electricity company would use the excuse that Tesco had contributed to a rise in television sales by providing low cost sets and were therefore acting as ‘parasites’ on ‘their’ network by creating a demand for electricity without paying anything towards the cost of providing it.  And what if electricity providers had the gall to use what should be a source of shame – i.e. the disgraceful fact that they were so incompetent at managing a utility that there had to be rationing and brownouts – to justify shaping such rationing in a way which maximised their own profits – by only allowing power to the televisions manufactured by ‘carefully selected partners’ – rather than the benefits to consumers.  To match the gall of ISPs and mobile providers, however, I guess they would have to go even further and insist that customers take expensive television sets with restricted channel availability as a condition of getting an electricity service at all.

Breaking the Chain

The underlying reality is that a utility provider should have no role in determining the use to which consumers put the commodity they provide – and allowing them to mess with it (at best) only leads to anti-consumer behaviour and a suppression of innovation.  This is the core of the argument about net neutrality – organisations which are effectively utilities should have no right to influence what we do with the capacity we pay for; any other BS about bandwidth or different types of content is a red herring.  While people who use more bandwidth should undoubtedly have to pay more (perhaps a lot more to fairly reflect usage) this has nothing to do with net neutrality – the core argument is that having paid for their bandwidth they should be allowed equal access to all services on the Web without discrimination and not be forced – through various obvious and subtle means – to use only those services that meet with the approval of – or maximise the profits of – their infrastructure provider.  Rather than concentrating on taking the easy option and prioritising profitable content or restricting our choices to bolster their revenue sheets, such companies should be focusing all of their attention on providing their actual utility value proposition and overcoming the issues that they claim force shaping in the first place (i.e. creating sufficient capacity).  At the very time that we need a new digital platform for wealth creation that accelerates knowledge flows and replaces declining and vanished industries, it is ridiculous that we stand by and watch telecoms companies, ISPs and mobile providers preparing to test anti-competitive behaviours for short term gain rather than condemning, cajoling and engaging them in dialogue about how we can work together to help them provide the competitive infrastructure the country desperately needs to generate wealth.

In this context I believe we need a definitive commitment to net neutrality from the government backed by codes of practice to ensure separation of these different businesses.  Essentially companies should be forced to split their businesses into wholly independent organisations concentrating on infrastructure and relationships (i.e. content aggregation) separately to protect consumers; in essence I should be able to subscribe to the best infrastructure provider to get my bandwidth and then when online – and via the open Web – register for the ‘relationship’ or ‘content’ services of BT / Sky / Vodafone / Whoever if I deem that they deliver sufficiently attractive services in these business types.  To be successful such services would need to bring content of specific interest to my attention or else I would be more likely to go to other relationship and content providers.  The essential point is that I should be able to choose these things independently should I _want_ a trusted provider to give me a portal that helps me to navigate the Web or find interesting content (in my case I find them all worthless and annoying).  I shouldn’t have them a) forced upon me as a by-product of needing something else (i.e. a connection) and b) prioritised over things that might actually be better for me.

The Bigger Picture

Bringing this all the way back to my original point, many people question the extent to which net neutrality is really an issue for equal opportunities, democratic society and truly open markets.

I genuinely believe that there is a serious issue at stake here.  Moreover it is one that could have a devastating effect on the future openness of society, the competitiveness of our businesses and the long term health of our nation.

Whilst it may be true that companies like BT, Sky or Virgin would always give equal promotion to their competitors’ content and services (and make it easy for us to access whatever we decided was best without penalty or hindrance) we can never be too vigilant in protecting our rights; should gate keepers start to distort our access – and the incentives to do so could be high in a non-separated model – they would have huge power to shape perception within their ecosystem, subtly denying us basic freedoms to choose and turning us into passive consumers of the most lucrative commercially chosen messages and content.  If we use traditional media as an historical precedent, it is even feasible that such companies could prioritise the political content and messages of the party whose policies best reflect the interests of the provider.  While this may sound alarmist the increasing revelations about News International are demonstrating the distorting influence that powerful media groups can have on decision making by politicians due to their overwhelming ability to influence the opinions of large sections of the population.  In the non-digital sphere, however, people can at least choose other newspapers, radio stations or television channels.  What happens, though, when all of your media is delivered electronically through a single pipe by a provider with an economic interest in driving you towards particular content and services?  At that point it would be like having a road with high embankments that only allowed you to walk to shops that sold a particular newspaper or at least made it very hard for you to do otherwise without considerable effort and expense.  When you consider the oft quoted ‘tyranny of the default’ it is easy to see that even small barriers can make a big difference in shaping people’s behaviours – and the dangers of exclusion and exploitation are particularly prevalent for the most vulnerable.

People who are not technology savvy or do not have the money or knowledge to realise they are being manipulated or to overcome the subtle blocks put up by providers’ “content appliances” and traffic shaping practices will be easy targets, leading to an unacceptable imbalance of power between large providers and a large constituency of consumers.  In the current climate are we really sure that business ethics are a sufficient protection against such potential abuse?

At the same time whilst often positioned as some kind of ‘liberal’ or ‘anti-market’ cause the reality is that net neutrality is a deeply market-oriented concept, creating a level playing field for businesses, a platform for innovation and a barrier to uncompetitive behaviour by large incumbent organisations who could use their power to distort the market through cross-subsidy or outright prioritisation of their other services.  In this sense net neutrality provides powerful protection against market as well as societal manipulation.

Taking Action

There is currently a real danger that we will see increasing fragmentation of the Web and a growth of walled gardens driven by commercial interests (e.g. across electronics companies, social networks, content providers and telecoms companies), cutting people off from other areas of the internet and serving the needs of particular organisations rather than those of consumers and society.  The strength and the power of the Web lies in its diversity and its essentially democratic nature; anyone can create content and services and be on an equal footing with anyone else, creating a platform that supports free speech, debate and wealth creation.  Failing to protect the principles of equal access and guard against the potential manipulation of access by service providers could destroy one of the most vital and liberating platforms for learning, collaboration and wealth creation the world has ever seen.

The current events surrounding News International provide us with an opportunity to step back and think deeply about the ways in which we can foster an open and fair society; my belief is that we should extend this thinking into the realm of the digital world that we will increasingly be inhabiting and not simply stop at dealing with a single newspaper, media group or industry.  If the opportunity has existed for powerful media groups to distort public debate in the age of ‘old media’ then how much greater are the opportunities for them to do so in a digital age where information flow is increasingly consolidated into a single pipe?

Effectively separating commercial interests between the provision of access and the provision of content seems to me a key weapon in creating an open society and market.  To do otherwise merely provides the platforms and incentives within which vertically integrated media companies can pursue the subversion of access as a feasible and attractive strategy.

Net neutrality for me is a core principle in securing freedoms – both social and commercial – by forcing infrastructure providers to respect this split as we increasingly move beyond traditional media and into the digital age.  To stand aside and allow people to prioritise content, manipulate behaviour and disrupt the business of competitors – by not holding ISPs to their infrastructural responsibilities and allowing vertical integration across business types – is a dangerous game that risks the benefits of the Web for individuals, businesses and ultimately society.

Is Social Media Rubbish?

I’ve read a few interesting posts recently relating to Social Media and ‘Enterprise 2.0’.  First up was Peter Evans-Greenwood talking about the myth of social organisations given their incompatibility with current structures and the lack of business cases for many efforts.  From there I followed links out to Martin Linssen and Dennis Howlett – both of whom commented on the current state of Enterprise 2.0 and social business, in particular their lack of clarity (i.e. are they primarily about tools, people or marketing efforts), the often ironic lack of focus on people in favour of technology and the paucity of compelling business cases.  Furthermore they also highlighted the continued migration of traditional vendors from one hot topic to another (e.g. from ECM to Enterprise 2.0 to Social Business) in order to support updated positioning for products, creating confusion and distraction by suggesting that success comes from owning specific tools rather than from particular ways of working.

Most damningly of all I found a link (courtesy of @adamson) to some strong commentry from David Chalke of Quantum Market Research suggesting that:

Social media: ‘Oversold, misused and in decline’

All of these discussions made me think a bit about my own feelings about these topics at the moment.

The first thing to state is that it seems clear to me that in the broadest sense businesses will increasingly exist in extended value webs of customers and partners.  From that perspective ‘business sociability’ – i.e. the ability to take up a specialised position within a complex value web of complementary partners and to collaborate across organisational and geographical boundaries – will be critical.  The strength of an organisation’s network will increasingly define the strength of their capabilities.  Social tools that support people in building useful networks and in collaborating across boundaries – like social networks, micro-blogs, blogs, wikis, forums etc – will be coupled with new architectures and approaches – like SOA, open APIs and cloud computing – as the necessary technical foundations for “opening up” a business and allowing it to participate in wider value creation networks.  As I’ve discussed before, however, tooling will only exist to support talented people undertaking creative processes within the context of broader networks of codified and automated processes.

Whilst therefore having the potential to support increasing participation in extended value webs, develop knowledge and support the work of our most talented people, it’s clear that throwing random combinations of tools at the majority of existing business models without significant analysis of this broader picture is both pointless but also extremely distracting and potentially ultimately very damaging (as failed, ill thought through initiatives can lead to an opportunity for entrenched interests to ignore the broader change for longer).

Most of the organisations I have worked with are failing to see the bigger picture outlined above, however.  For them ‘social tools’ are either all about the way in which they make themselves ‘cooler’ or ‘more relevant’ by ‘engaging’ in social media platforms for marketing or customer support (looking externally) or something vaguely threatening and of marginal interest that undermines organisational structures and leads to staff wasting time outside the restrictions of their job role (looking internally).  To date they seem to be less interested in how these tools relate to a wider transformation to more ‘social’ (i.e.  specialised and interconnected) business models.  As with the SOA inertia I discussed in a previous blog post there is no heartfelt internal urgency for the business model reconfiguration required to really take social thinking to the heart of the organisation.  Like SOA, social tools drive componentisation and specialisation along with networked collaboration and hence the changes required for one are pretty similar to the changes required for the other.  As with SOA it may take the emergence of superior external service providers built from the ground up to be open, social and designed for composition to really start to trigger internal change.

In lieu of reflecting on the deeper and more meaningful trends towards ‘business model sociability’ that are eroding the effectiveness of their existing organisation, then, many are currently trying to bolt ‘sociability’ onto the edge of their current model as simply another channel for PR activity.  Whilst this often goes wrong it can also add terrific value if done honestly or with a clear business purpose.  Mostly it is done with little or no business case – it is after all an imperative to be more social, isn’t it? – and for each accidental success that occurs because a company’s unarticulated business model happens to be right for such channels there are also many failures (because it isn’t).

The reality is that the value of social tools will depend on the primary business model you follow (and increasingly the business model of each individual business capability in your value web, both internal and external – something I discussed in more detail here).

I think my current feeling is therefore that we have a set of circumstances that go kind of like this:

1. There is an emerging business disruption that will drive organisational specialisation around a set of ‘business model types’ but which isn’t yet broadly understood or seen by the majority of people who are busy doing real work;
2. We have a broad set of useful tools that can be used to create enormous value by fostering collaboration amongst groups of people across departmental, organisational and geographic boundaries; and
3. There are a small number of organisations who – often through serendipity – have happened to make a success of using a subset of these tools with particular consumer groups due to the accidental fit of their primary business model with the project and tools selected.

As a result although most people’s reptilian brain instinctively feels that ‘something’ big is happening, instead of:

• focusing on understanding their future business model (1) before
• selecting useful tools to amplify this business model (2) and then
• using them to engage with appropriate groups in a culturally appropriate way (3)

People are actually:

• trying to blindly replicate others serendipitous success (3)
• with whatever tools seems ‘coolest’ or most in use (2) and
• no hope of fundamentally addressing the disruptions to their business model (1)

Effectively most people are therefore coming at the problem from entirely the wrong direction and wasting time, money and – potentially – the good opinion of their customers.

More clearly – rather than looking at their business as a collection of different business models and trying to work out how social tools can help in each different context, companies are all trying to use a single approach based largely on herd behaviour when their business model often has nothing directly to do with the target audience.  Until we separate the kinds of capabilities that require the application of creative or networking talent, understand the business models that underpin them and then analyse the resulting ‘types’ of work (and hence outcomes) to be enabled by tooling we will never gain significant value or leverage from the whole Enterprise 2.0 / social business / whatever field.

Will CIOs Fail on Cloud?

I’ve been reading a lot of content lately that covers three topics:

1. What’s the future of enterprise architecture;
2. How we govern businesses who are increasingly bypassing IT and going directly to the cloud; and
3. Public vs Private clouds and the IT department’s role in creating FUD.

I think that these issues are deeply related and sadly speak of a lack of leadership and business-centricity in many IT departments.  All three areas give CIOs the opportunity to embrace their businesses and move to the heart of strategic thinking but in each case they have not (and are not) grasping these opportunities.  All share two important dimensions – answering fundamental questions about the way in which a business should be shaped and – as an element of that – how IT is supplied.  In both cases many CIOs seem unable to recognise which one is truly important.  Whilst I want to write a longer piece on the implications of these changes for the future of IT, in this post I just wanted to look at the question of whether CIOs will succeed or fail in finding a future within our organisations.

Enterprise Architecture as IT Architecture

Enterprise Architecture was supposed to give us a view of how the business worked.  Executed correctly it was meant to give us the context required to understand the strategic options available to our business and then understand the potential impact of each across various dimensions.  Most EA efforts originated – not unreasonably – within the IT department, however, because as a horizontal function used to thinking systematically they understood the potential first.  Unfortunately many IT departments have failed to address the business context purpose of EA and have become wholly inwardly focused.  Such groups use technology standards and governance as a proxy for really understanding and shaping the business and its supporting systems, leading them to simplified views of their purpose based on technology ‘standardisation’. Many of the technology standards they adopt are often inappropriate for large areas of the business, however, where business capabilities have business models different to those that drove the adoption of the ‘standard’ solution.  The limited scope of their ambition and understanding, however, leads them to push such technologies forward in any case as the ‘strategic solution’ to every problem that looks similar.  In drifting into this role most EA efforts have unfortunately therefore become a problem rather than an enabler; they have become detached from business realities, focused on internal IT issues and taken on the operation of governance processes that mostly result in delays, cost over runs and inappropriate solutions.  Most tragically in doing this they have spurned a tremendous opportunity to investigate and codify the structure and purpose of the enterprise and thereby find a place at the heart of the strategic processes of the business.

As a result of missing this opportunity many CIOs have become confirmed in the role of an operational supplier.  Worse still they are increasingly being seen as a costly and obstructive operational supplier and are therefore constantly under pressure to increase efficiency and reduce cost.  This forces them into a reactive, inward looking position, always looking to cut costs, standardise or begging for investment resources but whose services are still always considered to be decoupled from business value as well as slow, expensive and cumbersome.  Whilst in many ways being in the best position to see opportunities – because of the horizontal role of both themselves and their EA team – they singly fail to take advantage of it because they’re trapped in the wrong conversations by their operational responsibilities.

Enter the Cloud to Cheers from CIOs…. or not.

Despite the failure of IT departments to use the opportunities of EA to help the business gain strategic insights, CIOs have now been offered a golden opportunity to once again take the lead in their organisations.  Cloud computing offers CIOs the opportunity to remove themselves from the operational treadmill and place themselves firmly in the centre of strategic conversations about the future shape of their business.

Cloud is not a technology trend but rather a disruptive change in the way we communicate and consume services.  It will completely reshape organisations and the industries they operate in.  That may sound like hyperbole to some but I genuinely believe it.  History has shown that falling transaction costs make it more cost effective to consume services from partners than to operate them yourself and the pressures of the market will also ensure that these services are much better than those you could build yourself with limited scope.  Furthermore cloud services represent concrete business outcomes that can be aggregated into overall value-webs, moving conversations out of the realm of the bespoke, abstract and technical and into the realm of direct, consumable value outcomes.  Over the coming years every aspect of a business’s operations will be examined, categorised and in many cases outsourced to specialised third parties.  Cloud is the driving force behind these changes by making it inexpensive to connect to other people whilst simultaneously reducing their cost of entry to the market and allowing them to scale at low cost as their business grows.  I repeat – cloud may be viewed as an IT phenomenon currently but the fall out will disrupt every single industry as new specialised companies come rapidly to market with cost and agility profiles that cannot be matched by incumbents.

Many businesses don’t get this yet, however, and while they see the attractiveness of services like Salesforce (indeed are often purchasing them in spite of the CIO) they haven’t yet understood the profound consequences for their organisations in the years ahead.  For CIOs you would think that this is a huge opportunity to take the lead and help their businesses firstly understand and then transform to meet the demands of the new order; essentially someone needs to codify the concrete outcomes required by the organisation (business architecture), source and integrate them together (development and integration) and manage the integrity of the overall value web (business service management).  There is nobody better placed to grasp this opportunity than the CIO, who has an opportunity to lead their companies through a fundamental shift in the purpose and structure of not just IT but also of businesses and their operations.

But. But. But.

The issue is that many CIOs aren’t thinking like this at all.  Many CIOs seem to have come to believe that their job really is operational and therefore see cloud as a threat.  Many CIOs listen to their technologists who fear a loss of control over the way IT is designed and run even though they can’t explicitly relate it to business value.

Enter “private cloud”.  So now the CIO can have their cake and eat it.  They can tell the business that yes cloud is important and – darn it – they’re on top of the whole thing.  But its a big commitment, requires the recruitment of the absolute best technologists in the global industry, will take years to roll out (if it ever gets finished with limited budgets and everything else going on) and will never deliver the instant on, pay as you go model given the retention of a bunch of expensive capital assets and people that can’t be shared.  More importantly it’ll only operate at the – effectively worthless – infrastructure level and won’t provide the business with the opportunity to specialise by consuming world class, multi-tenant services from partners.

It’s Ultimately About Direct Value to the Business, Not Technology

So the business gets fed up with the expense, delay and excuses; they see explicit business value, lower costs, better capability and greater agility on offer externally – and they’re losing ground rapidly against their competitors – and so they go around the CIO and purchase their services directly from cloud suppliers.  Again the CIO has lost the opportunity to lead and has merely been cornered by business and economic reality.  The plain facts are that you can no longer work in isolation from demonstrable business value or put your finger in the cloud dyke to protect your own little private cloud bubble – economically it just won’t work out.  You have to face the fact that you’re not good enough, focused enough or well funded enough to build and operate a large scale cloud platform and that your real value is as a trusted advisor and integrator of services aligned to the business of your organisation.  Worst of all, the CIOs who are currently focused on technology in place of business architecture and sourcing will bring to fruition their own worst fears about losing control and influence – as the business increasingly flows around them they will end up as the dumb guy who missed the – by now obvious – signs about the way in which the cloud was going to affect the business and who showed no leadership.  Most importantly for this discussion the CIO will also be “the guy who runs all that expensive stuff nobody really wants any more with those weird people who talk about the way they used to control things in the old days.  Let’s just keep him out of the way while an external company comes in and helps us to transform our business.” (ironically perhaps the very same consultants and systems integrators who led him down the private cloud route in the first place – and who have been forced to accept their place as advisors and integrators of specialised services from the global market rather than providers and operators of uncompetitive, per-customer technology).

It’s a Combination of Enterprise Architecture and The Cloud That Will Save Those Who Deserve it

Looking at this track record it’s unfortunate that the CIO’s route to salvation requires him to fully embrace enterprise architecture and the cloud.

Essentially every enterprise consists of a number of business capabilities with divergent business models and the first role of the CIO should be to help to visualise these discrete capabilities in order to support higher level thinking about the purpose of the organisation and the best way of delivering each outcome.  Many peripheral business capabilities exist within an organisation merely to support the execution of more business critical core capabilities – such ‘supporting’ capabilities can be outsourced to cloud providers to enable greater specialisation.  It may be that much of the low hanging fruit during the earliest phases of this transformation will be centred around IT applications and services but over time the CIO can facilitate a change in thinking to open the business to the idea of sourcing any kind of business service from external providers in order to integrate successful services and increase the ‘fitness’ of the overall organisation.  Establishing the right to do this first requires the CIO to take a leadership position in early cloud implementations by helping the business deliver in an integrated and compliant way rather than fighting them, losing and further confirming their position outside the strategic tent.  Such an approach can lead to increasing momentum:

1. On the back of early wins and increased standing CIOs can use the story of the coming disruption to help their businesses understand the exciting wider opportunities and consolidate their strategic leadership role.  Positioning the IT department as the ‘integrator’ and ‘manager’ of a business service portfolio spanning internal and external services provides a sustainable context for the future role of the CIO;
2. As part of this role the CIO must take on the documentation of the business architecture and use this as a key strategic asset to provide decision support capabilities to the organisation around business models, specialisation and partnerships;
3. At the same time the CIO should create a process of ‘certification’ based on appropriate criteria to provide an open marketplace of services for capability owners to use.  Informed curation (based on the industry of the company) along with feedback and requests from capability owners for additional applications and services will be a key part of this process and the result should be a portfolio that is open (i.e. not ‘standardised’ and ‘restricted’) but at the same time ‘approved’ to support governance responsibilities;
4. In going through this transition CIOs have the opportunity to become ever more embedded in the strategic processes of the business – working on business architecture, rapid capability realisation and losing low level operational concerns as they move to cloud providers; and
5. Most importantly, all of this can be achieved without spending huge amounts of money on non-differentiating technology or becoming more mired in the operational tar pit.  In contrast merely yielding to the changing role of the IT department leads to a virtuous circle of increasing relevance to business value, lower costs, better service and burgeoning innovation.

The reality is that specialised cloud services are increasingly going to be more competitive than those available within an organisation.  Even more critically, accessing such services allows us to specialise within our own organisations, providing us with the focus required to excel in our chosen areas of expertise.  To unlock the benefits of these synergies, however, enterprises need someone who can help them view their organisation more systematically as a portfolio of business capabilities and facilitate access to external services that can be used to enhance or replace them.  My feeling is that this will either be the CIO – or that the CIO will cease to exist.

The Business Case for Private Cloud

Private Cloud Posts Should Come in Threes

Over the last year I have returned to the subject of ‘private cloud’ on a number of occasions.  Basically I’m trying to share my confusion as I still don’t really ‘get it’.

First of all I discussed some of the common concerns related to cloud that are used to justify a pursuit of ‘private cloud’ models.  In particular I tried to explain why most of these issues distract us from the actual opportunities; for me cloud has always been a driver to rethink the purpose and scope of your business.  In this context I tried to explain why – as a result – public and private clouds are not even vaguely equivalent.

More recently I mused on whether the whole idea of private clouds could lead to the extinction of many businesses who invest heavily in them.  Again, my interest was on whether losing the ability to cede most of your business capabilities to partners due to over-investment in large scale private infrastructures could be harmful.  Perhaps ‘cloud-in-a-box’ needs a government health warning like tobacco.

In this third post I’d like to consider the business case of private cloud to see whether the concept is sufficiently compelling to overcome my other objections.

A Reiteration of My View of Cloud

Before I start I just wanted to reiterate the way I think about the opportunities of cloud as I’m pretty fed up of conversations about infrastructure, virtualisation and ‘hybrid stuff’.  To be honest I think the increase in pointless dialogue at this level has depressed my blog muse and rendered me mute for a while – while I don’t think hypervisors have anything to do with cloud and don’t believe there’s any long term value in so called ‘cloud bursting’ of infrastructure (as an apparently particularly exciting subject in my circle) I’m currently over-run by weight of numbers.

Essentially its easy to disappear down these technology rat holes but for me they all miss the fundamental point.  Cloud isn’t a technology disruption (although it is certainly disrupting the business models of technology companies) but eventually a powerful business disruption.  The cloud enables – and will eventually force – powerful new business models and business architectures.

As a result cloud isn’t about technology or computing per se for me but rather about the way in which technology is changing the economics of working with others.  Cloud is the latest in a line of related technologies that have been driving down the transaction costs of doing business with 3rd parties.  To me cloud represents the integration, commoditisation and consumerisation of these technologies and a fundamental change in the economics of IT and the businesses that depend on it.  I discussed these issues a few years ago using the picture below.

Essentially as collaboration costs move closer and closer to zero so the shape of businesses will change to take advantage of better capabilities and lower costs.  Many of the business capabilities that organisations currently execute will be ceded to others given that doing so will significantly raise the quality and focus of their own capabilities.  At the same time the rest will be scaled massively as they take advantage of the ability to exist in a broader ecosystem.  Business model experimentation will become widespread as the costs of start up (and failure) become tiny and tied to the value created.  Cloud is a key part of enabling these wider shifts by providing the business platforms required to specialise without losing scale and to serve many partners without sacrificing service standardisation.  While we are seeing the start of this process through offerings such as infrastructure-as-a-service and software-as-a-service these are just the tip of the iceberg.  As a very prosaic example many businesses are now working hard to think about how they can extend their reach using business APIs; combine this with improving business architecture practices and the inherent multi-tenancy of the cloud and it is not difficult to imagine a future in which businesses first become a set of internal service providers and then go on to take advantage of the disaggregation opportunity.  In future, businesses will become more specialised, more disaggregated and more connected components within complex value webs.  Essentially every discrete step in a value stream could be fulfilled by a different specialised service provider, with no ‘single organisation’ owning a large percentage of the capabilities being coordinated (as they do today).

As a result of all of these forces my first statement is therefore always that ‘private cloud’ does not really exist; sharing some of the point technologies of early stage cloud platform providers (but at lower scale and without the rapid learning opportunities they have) is not the same as aggressively looking to leverage the fall in transaction costs and availability of new delivery models to radically optimise your business.  Owning your own IT is not really a lever in unlocking the value of a business service based ecosystem but rather represents wasteful expense when the economics of IT have shifted decisively from those based on ownership to those based on access.  IT platforms are now independent economy-of-scale based businesses and not something that needs to be built, managed and supported on a business-by-business basis with all of the waste, diversity, delay and cost that this entails.  Whilst I would never condemn those who have the opportunity to improve their existing estates to generate value I would not accept that investing in internal enhancement would ever truly give you the benefits of cloud.  For this reason I have always disliked the term ‘private cloud’.

In the light of this view of the opportunities of cloud, I would posit that business cases for private cloud could be regarded as lacking some sense even before we look at their merit.  Putting aside the business issues for a moment, however, let’s look at the case from the perspective of technology and how likely it is that you will be able to replicate the above benefits by internal implementation.

What Is a “Cloud”?

One of the confusing issues related to cloud is that it is a broad shift in the value proposition of IT and IT enabled services and not a single thing.  It is a complete realignment of the IT industry and by extension the shape of all industries that use it.  I have a deeper model I don’t want to get into here but essentially we could view cloud as a collection of different kinds of independent businesses, each with their own maturity models:

• Platforms: Along the platform dimension we see increasing complexity and maturity going –> infrastructure-as-a-service, platform-as-a-service, process-platform-as-a-service through to the kind of holistic service delivery platform I blogged about some time ago.  These are all increasingly mature platform value propositions based on technology commoditisation and economies of scale;
• Services: Along the services dimension we see increasing complexity and maturity going –> ASP (single tenant applications in IaaS), software-as-a-service, business-processes-as-a-service through to complete business capabilities offered as a service.  While different services may have different economic models, from a cloud perspective they share the trait that they are essentially about codifying, capturing and delivering specialised IP as a multi-tenant cloud service; and
• Consulting: Along the consulting dimension we see increasing complexity and maturity going –> IT integration and management, cloud application integration and management, business process integration and management through to complex business value web integration and management.  These all exist in the same dimension as they are essentially relationship based services rather than asset based ones.

All of these are independent cloud business types that need to be run and optimised differently.  From a private cloud perspective, however, most people only think about the ‘platform’ case (i.e. only about technology) and think no further than the lowest level of maturity (i.e. IaaS) – even though consulting and integration is actually the most likely business type available for IT departments to transition to (something I alluded to here).  In fact its probably an exaggeration to say that people think about IaaS as most people don’t get beyond virtualisation technology.

Looking at services – which is what businesses are actually interested in, surprisingly – this is probably the biggest of the many elephants in the room with respect to private cloud; if the cloud is about being able to specialise and leverage shared business services from others (whether applications, business process definitions or actual business capabilities) then they – by definition – execute somewhere beyond the walls of the existing organisation (i.e. at the service provider).  So how do these fit with private cloud?  Will you restrict your business to only ever running the old and traditional single-tenant applications you already have?  Will you build a private cloud that has a flavour of every single platform used or operated by specialised service providers?  Will you restrict your business to service providers who are “compatible” with your “platform” irrespective of the business suitability of the service?  Or do you expect every service provider to rewrite their services to run on your superior cloud but still charge you the same for a bespoke service as they charge for their public service?  Whichever one you pick it’s probably going to result in some pain and so you might want to think about it.

Again, for the sake of continuing the journey let’s ignore the issue of services – as it’s an aspect of the business ecosystem problem we’ve already decided we need to ignore to make progress – and concentrate where most people stop thinking.  Let’s have a look at cloud platforms.

Your New Cloud Platform

The first thing to realise is that public cloud platforms are large scale, integrated, automated, optimised and social offerings organised by value to wrap up complex hardware, networks, middleware, development tooling, software, security, provisioning, monetisation, reporting, catalogues, operations, staff, geographies etc etc and deliver them as an apparently simple service.  I’ll say it again – cloud is not just some virtualisation software.  I don’t know why but I just don’t seem able to say that enough.  For some reason people just underestimate all this stuff – they only seem to think about the hypervisor and forget the rest of the complexity that actually takes a hypervisor and a thousand other components and turns them into a well-oiled, automated, highly reliable and cross functional service business operated by trained and motivated staff.

Looking at the companies that have really built and operated such platforms on the internet we can see that there are not a large number due to:

1. The breadth of cross functional expertise required to package and operate a mass of technologies coherently as a cost-effective and integrated service;
2. The scarcity of talent with the breadth of vision and understanding required to deliver such an holistic offering; and
3. The prohibitive capital investment involved in doing so.

Equally importantly these issues all become increasingly pressing as the scope of the value delivered progesses up the platform maturity scale beyond infrastructure and up to the kind of platform required for the realisation and support of complete multi-tenant business capabilities we described at the beginning.

Looking at the companies who are building  public cloud platforms it’s unsurprising that they are not enthusiastically embracing the nightmare of scaling down, repackaging, delivering and then offering support for many on-premise installations of their complex platforms across multiple underfunded IT organisations for no appreciable value.  Rather they are choosing to specialise on delivering these platforms as service offerings to fully optimise the economic model for both themselves and (ironically) their customers.

Whereforeart Thou Private Cloud?

Without the productised expertise of organisations who have delivered a cloud platform, however, who will build your ‘private cloud’?  Ask yourself how they have the knowledge to do so if they haven’t actually implemented and operated all of the complex components as a unified service at high scale and low cost?  Without ‘productised platforms’ built from the ground up to operate with the levels of integration, automation and cost-effectiveness required by the public cloud, most ‘private cloud’ initiatives will just be harried, underfunded and incapable IT organisations trying to build bespoke virtualised infrastructures with old, disparate and disconnected products along with traditional consulting, systems integration and managed services support. Despite enthusiastic ‘cloud washing’ by traditional providers in these spaces such individual combinations of traditional products and practices are not cloud, will probably cost a lot of money to build and support and will likely never be finished before the IT department is marginalised by the business for still delivering uncompetitive services.

Trying to blindly build a ‘cloud’ from the ground up with traditional products, the small number of use cases visible internally and a lack of cross functional expertise and talent – probably with some consulting and systems integration thrown in for good measure to help you on your way – could be considered to sound a little like an expensive, open ended and high risk proposition with the potential to result in a white elephant.  And this is before you concede that it won’t be the only thing you’re doing at the time given that you also have a legacy estate to run and enhance.

Furthermore, go into most IT shops and check out how current most of their hardware and software is and how quickly they are innovating their platforms, processes and roles.  Ask yourself how much time, money and commitment a business invests in enabling its _internal IT department_ to pursue thought leadership, standards efforts and open source projects.  Even once the white elephant lands what’s the likelihood that it will keep pace with specialised cloud platform providers who are constantly improving their shared service as part of their value proposition?

For Whom (does) Your Cloud (set its) Tolls?

Once you have your private cloud budget who will you build it for?  As we discussed at the outset your business will be increasingly ceding business capabilities to specialised partners in order to concentrate on their own differentiating capabilities.  This disaggregation will likely occur along economic lines as I discussed in a previous post, as different business capabilities in your organisation will be looking for different things from their IT provision based on their underlying business model.  Some capabilities will need to be highly adaptable, some highly scalable, some highly secure and some highly cost effective.  While the diversity of the public cloud market will enable different business capabilities within an organisation to choose different platforms and services without sacrificing the benefits of scale, any private cloud will necessarily be conflicted by a wide diversity of needs and therefore probably not be optimal for any.  Most importantly every part of the organisation will probably end up paying for the gold-plated infrastructure required by a subset of the business and which is then forced onto everyone as the ‘standard’ for internal efficiency reasons.

You therefore have to ask yourself:

1. Is it _really_ true that all of your organisation’s business capabilities _really_ need private hosting given their business model and assets?  I suspect not;
2. How will you support all of the many individual service levels and costs required to match the economics of your business’s divergent capabilities? I suspect you can’t and will deliver a mostly inappropriate ‘one size fits all’ platform geared to the most demanding use cases; and
3. How will you make your private infrastructure cost-effective once the majority of capabilities have been outsourced to partners?  The answer is that you probably won’t need to worry about it – I suspect you’ll be out of a job by then after driving the business to bypass your expensive IT provision and go directly to the cloud.

Have We Got Sign-off Yet?

So let’s recap:

1. Private cloud misses the point of the most important disruption related to cloud – that is the opportunity to specialise and participate more fully in valuable new economic ecosystems;
2. Private cloud ignores the fundamental fact that cloud is a ‘service-oriented’ phenomenon – that is the benefits are gained by consuming things, uh as a service;
3. Private cloud implementation represents a distraction from that part of the new IT value chain where IT departments have the most value to add – that is as business-savvy consultants, integrators and managers of services on behalf of their business.

To be fair, however, I will take all of that value destruction off the table given that most people don’t seem to have got there yet.

So let’s recap again just on the platform bit.  It’s certainly the case that internal initiatives targeted at building a ‘private cloud’ are embarking on a hugely complex and multi-disciplinary bespoke platform build wholly unrelated to the core business of the organisation.  Furthermore given that it is an increasing imperative that any business platform supports the secure exposure of an organisation’s business capabilities to the internet they must do this in new ways that are highly secure, standards based, multi-tenant and elastic.  In the context of the above discussion, it could perhaps be suggested that many organisations are therefore attempting to build bespoke ‘clouds’:

1. Without proven and packaged expertise;
2. Without the budget focus that public cloud companies need merely to stay in business;
3. Often lacking both the necessary skills and the capability to recruit them;
4. Under the constant distraction of wider day to day development and operational demands;
5. Without support from their business for the activities required to support ongoing innovation and development;
6. Without a clear strategy for providing multiple levels of service and cost that are aligned to the different business models in play within the company.

In addition whatever you build will be bespoke to you in many technological, operational and business ways as you pick best of breed ‘bits’, integrate them together using your organisations existing standards and create operational procedures that fit into the way your IT organisation works today (as you have to integrate the ‘new ops’ with the ‘old ops’ to be ‘efficient’).  As a result good luck with ever upgrading the whole thing given its patchwork nature and the ‘technical differentiation’ you’ve proudly built in order to realise a worse service than you could have had from a specialised platform provider with no time or cost commitment.

Oh and the costs to operate whatever eventually comes out the other end of the adventure – according to Microsoft at least – could potentially be anywhere between 10 and 80 times higher than those you could get externally right now (and that’s on the tenuous assumption that you get it right first time over the next few years and realise the maximum achievable internal savings – as you usually do no doubt).  To rephrase this we could say that it’s a plan to delay already available benefits for at least three years, possibly for longer if you mess up the first attempt.

I may be in the minority but I’m _still_ not convinced by the business case.

So What Should I Get Sign-off For?

My recommendation would be to just stop already.

And then consider that you are probably not a platform company but rather a consultant and integrator of services that helps your business be better.

So, my advice would be to:

1. Stop (please) thinking (or at least talking) about hypervisors, virtual machines, ‘hybrid clouds’ and ‘cloud bursting’ and realise that there is inherently no business value in infrastructure in and of itself.  Think of IaaS as a tax on delivering value outcomes and try not to let it distract you as people look to make it more complex for no reason (public/private/hybrid/cross hypervisor/VM management/cloud bursting/etc).  It generates so much mental effort for so little business value;
2. Optimise what you already have in house with whatever traditional technologies you think will help – including virtualisation – if there is a solid _short return_ business case for it but do not brand this as ‘private cloud’ and use it to attempt to fend off the public cloud;
3. Model all of your business capabilities and understand the information they manage and the apps that help manage it.  Classify these business capabilities by some appropriate criteria such as criticality, data sensitivity, connectedness etc.  Effectively use Business Architecture to study the structure and characteristics of your business and its capabilities;
4. Develop a staged roadmap to re-procure (via SaaS), redevelop (on PaaS) or redeploy (to IaaS) 80% of apps within the public cloud.  Do this based on the security and risk characteristics of each capability (or even better replace entire business capabilities with external services provided by specialised partners); and
5. Pressure cloud providers to address any lingering issues during this period to pave the way for the remaining 20% (with more sensitive characteristics) in a few years.

Once you’ve arrived at 5) it may even be that a viable ‘private cloud’ model has emerged based on small scale and local deployments of ‘shrink wrapped boxes’ managed remotely by the cloud provider at some more reasonable level above infrastructure.  Even if this turns out to be the case at least you won’t have spent a fortune creating an unsupportable white elephant scaled to support the 80% of IT and business that has already left the building.

Whatever you do, though, try to get people to stop telling me that cloud is about infrastructure (and in particular your choice of hypervisor).  I’d be genuinely grateful.

Why Amazon Dedicated Instances Is No Big Deal… and Why it Really Is

Why It’s No Big Deal

I was interested yesterday in the amount of excitement that Amazon’s announcement of dedicated instances caused.  To me this seems like a sensible move from a public cloud provider in order to counter the widespread belief in large enterprises that they need to be physically as well as logically separate.  This represents a maturation of public cloud offerings in much the way I’ve discussed in the past and demonstrates that public clouds can evolve to provide the kinds of additional security enterprises (currently) perceive that they require.  This can only be a good thing as bit by bit public cloud companies like Amazon are removing the FUD generated by IT departments and traditional IT service companies and commoditising this completely unimportant stuff so that we can all move on and talk about the real business opportunities of the cloud.

Beyond the satisfaction of seeing another ‘roadblock’ item ticked off the list, however, in technical terms this seems like no big deal to me.  Essentially Amazon are offering you the ability to have a compute instance that takes up all of the resources on a single physical machine (whether you need all of those resources or not) and so fits into their existing framework of differently sized compute instances.  From that perspective it doesn’t feel groundbreaking as it merely ‘tweaks’ their existing model to mark a physical machine as ‘full’ (I’m obviously over-simplifying but intentionally so).

For these reasons I don’t subscribe to the idea that this ‘breaks’ the cloud model or is in some way not multi-tenant since there are no upfront costs for hardware, you still pay for what you use and the whole platform infrastructure is still shared.  The only difference is that you can choose to have some of your compute instances marked as requiring the resources of a complete physical machine.  Interestingly this is also my understanding of how Azure works – their compute instances are broken down into subsets of a physical machine; if you take the biggest instance you’ve essentially got that machine to yourself (although I guess that’s a side-effect of design rather than a conscious offering as per Amazon).

Why It Really Is a Big Deal

So technically we can consider this move to be a relatively small deal even though it is perceived by many as a potentially game changing additional capability.

And frankly that’s the big deal.

Most ‘private cloud’ initiatives from enterprise IT or traditional IT service vendors start from the perspective of trying to protect existing models by merely adding virtualisation and management to existing estates.  They are trying to extend an old model of enterprise IT in the vague hope that it will give them the same benefits as public cloud.  The two things are not vaguely equivalent, however, and they are hugely underestimating the differences.  There is no way that such efforts will result in something as sophisticated as Amazon’s public cloud, something that has been built from the bottom up as an optimised, integrated and low cost service that commoditises many complex products, processes and infrastructure into a single platform that caters for general usage.  There’s just too much distraction and baggage (systems wise and business model wise) for such efforts to ever succeed.  It’s not even putting lipstick on a pig but more like fluffing its muddy hair a little and half closing your eyes.

On the other hand Amazon have proven that not only are they able to build a platform that can operate at high scale and low cost for a non-enterprise market but that this new model can also be extended to cater for enterprise needs.  And they can do this competitively because they have done the spade work required to serve a lower cost market.  Adding some features to separate tenants using your ability to manage a commodity platform (for example) is much easier than trying to work out how to strip huge costs from traditional models of ownership.  This is the traditional pattern of disruptive innovation where a competitor seen as unfit for purpose by demanding users builds solutions that are far more capable and cost effective for the low end before leveraging these benefits upwards to oust incumbent suppliers at the upper end of the market.

In evolutionary terms cloud is a point of ‘punctuated equilibrium’ where the criteria for fitness to survive changes rapidly – whereas previously an ability to afford the ownership of complex, bespoke IT was a competitive advantage, it has now become a distinct disadvantage for everything except a small set of differentiating processes that represent core capabilities.  Furthermore in such a rapidly changing environment companies like Amazon who are focused around a key part of the emerging value web (i.e. an infrastructural business model focused on a commoditised IT platform) can rapidly evolve based on the selection criteria of the market, leaving traditional participants trapped and encumbered by outmoded business models.

Today this traditional end of the market is populated by enterprise IT departments, software providers, hardware providers and IT service providers – all of whom will increasingly see huge losses of business when judged for fitness against commoditised public cloud platforms.  Essentially many such participants will literally have no competitive offering as they have been prevented from making the shift by their own evolution of traits specialised for a previous environment.  As a result expect to see even more rabid ‘cloud washing’ and pushing of ‘private clouds’ by such vendors as the literal need for them ebbs away – effectively many of them will need to extend existing business for as long as possible while bringing new cloud platforms to market or deciding to cede this business completely.

Effectively companies who to date have been incapable of changing are being eaten from underneath and must decide whether they try to compete (in which case they need significant business, structural and asset realignment) or retreat into other business types that don’t compete with platforms (so consulting or implementation of vertical business services for instance – for IT departments see here for a suggestion).

Why It’s a Really Big Deal For You

For me this announcement is further proof of my long standing belief that you cannot build a successful cloud platform as an extension of old models and from within a business for whom it is not their core concern.  Rather successful providers must be ruthlessly focused on building a new cloud platform that integrates, optimises and simplifies complex technologies into a low cost service.  As a cloud platform consumer you should therefore think very carefully about the implications of this and consider whether buying that hypervisor software, hardware and services for a private cloud implementation will really get you an Amazon of your very own – or just further baggage for your business to drag along.

UPDATE:  Added link to Amazon announcement at the beginning of the post as… I forgot.