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Monthly Archives: May 2013

A New Key Financial Metric for IT’s Cloud Journey

Author: Mark Sarago

Working with numerous customers on their journey to the cloud has exposed the Accelerate team to a number of metrics that are used to determine an organization’s health and overall value to the business. Let’s focus on a new financial metric that is gaining popularity: private cloud versus public cloud cost per workload.

In their seminal paper, The Balanced Scorecard—Measures that Drive Performance, published in the Harvard Business Review, Robert Kaplan and  David Norton introduced the balanced scorecard as a performance measurement framework. It built on traditional financial measures by adding important non-financial performance indicators to the mix. As a result, it gives executives and managers a more balanced view of organizational performance.

The balanced scorecard has proven to be an effective method of communicating an organization’s overall strategy by establishing a balanced set of tangible goals and the framework of measuring progress toward those goals. The balanced scorecard suggests that we view the organization from four separate perspectives, and to develop metrics, collect data, and analyze the data relative to each of the perspectives, which are:

  1. Financial Perspective – To succeed financially, how should we appear to our shareholders?
  2. Internal Business Perspective (Process) – To maximize our business value, at which processes must we excel?
  3. Customer Perspective – To achieve our vision, how must we appear to our customers?
  4. Innovation and Learning Perspective – To achieve our vision, how will we sustain our ability to change and improve?

CIOs quickly saw the legitimacy of the balanced scorecard and have successfully used it when communicating strategy to their team members, and the value of their information technology activities in relation to their organization’s business executives and customers.

Each of the four perspectives is important, but the one that gets the most attention from business executives — and seems to cause the most concern and confusion for CIOs — is the Financial Perspective performance measurement. It can also be said that the Financial Perspective performance measures are the most important for business executives because the primary language of business is conducted in financial terms – How much will it cost? How much will this save over time? What is the financial break-even period? What is the ROI? — and so forth.

CIOs have responded to the Financial Perspective performance measures of their balanced scorecards by tracking financial metrics such as:

  • Actual to Budget: How does actual OpEx spend compare to the original OpEx budget?
  • Forecast Accuracy: Is the accuracy of the OpEx spend forecasts over the past 12 months within plus/minus two percent?
  • Cost-Per-Business-Unit Trend: Is the IT total cost of ownership (TCO) per unit of business output (e.g., airline seat mile flown, mortgage transaction count, automobiles manufactured) increasing or decreasing over time?

With the advent and popularity of cloud concepts and technologies for IT organizations, we now ask:  What would a CIO want to see as a financial metric in the balanced scorecard to represent their organization’s journey to the cloud?

A few organizations I have met with recently, and which have mature metrics tracking and reporting in place, have already answered the question. They measure their IT TCO per workload in their private cloud against the price of hosting the same workload on a public cloud service such as Microsoft’s Azure or Amazon Web Service’s EC2. When doing so, they also add data transfer into the cost, that is, the cost of communicating the data in and out of the service to computational workload costs incurred.

The metric that compares private cloud workload cost versus all-in public cloud workload pricing is extremely valuable to the CIO. If your private cloud workload cost is lower than public cloud workload pricing, you are showing immediate business value through your IT operation. Conversely, if your private cloud costs are too high, business management is certainly justified to ask: Why should we use your service if we can get it cheaper from a public cloud provider?

Some organizations are so confident in calculating the cost of their private cloud costs per workload and the efficiency of their operation that they have started to build in an added twist. These efficient operations are using the difference or spread in costs between private and public solutions as IT operational “profit.” In turn, the “profit” is used to acquire new equipment and software as they refresh their private cloud going forward. These organizations are truly running IT like a business.

If you aren’t familiar with the balanced scorecard for IT, please give it a deeper look. While doing so, also consider including a new metric to the Financial Perspective performance measures, and include the private cloud versus public cloud cost per workload.

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Mark Sarago is a strategist with VMware Accelerate Advisory Services.

VMware AccelerateTM Advisory Services can help you define your IT strategy through balanced transformation plans across people, process and technology. Visit our Web site to learn more about our offerings, or reach out to us today at accelerate@vmware.com for more information.

Would you like to continue this conversation with your C-level executive peers? Join our exclusive CxO Corner Facebook page for access to hundreds of verified CxOs sharing ideas around IT Transformation right now by going to CxO Corner and clicking “ask to join group.”

Moving Beyond Virtualization 101

It All Started with Server Virtualization

Rob Jenkins, Director of VMware Accelerate Advisory Services in EMEA, presented on the journey to virtualized compute — from server consolidation, to automation, to game changing ITaaS — at IDC’s Cloud and Virtualisation event in Dublin this month. At the time, no one predicted the impact server virtualization would have on the IT industry. VMware’s early customers achieved unheard of cost savings and ROIs, leading to unprecedented adoption of this technology by more than 500,000 customers.

You can follow Rob @cloud_rob

Adding Another Aspect of Agility into the CIO’s Toolkit

AUTHOR: Padmaja Vrudhula

Tomorrow VMware announces the launch of the VMware vCloud® Hybrid Service™ — a true hybrid cloud solution connecting and integrating on-site and off-site IT environments through a common management platform with a design that ensures all (new and existing) applications run the same way. This type of a hybrid cloud solution ought to make most IT personnel and leaders take notice for numerous reasons. (To join the live online event, register here.)

Different industries require different types of business agility. For example, a retailer undergoing aggressive expansion may require the ability to quickly set up new store operations. A financial services company pursuing an acquisition strategy needs to be able to assimilate new entities to quickly realize synergies and benefits. An online gaming company may need the ability to quickly set up a platform in anticipation of a wave of new gamers following the release of a new hit game. In the past few years, to accommodate these types of requests, IT has found itself in a de facto service broker role. The increased sophistication of end users coupled with the ubiquity of external cloud service providers has forced internal IT teams to meet the needs of application developers, QA testers, and even production users as quickly as it takes to enter a credit card number. Therefore, how can IT organizations, which still have the dual task of maintaining the physical environment and an existing virtual environment, transform to meet such expectations?

With vCloud Hybrid Service, VMware utilizes many of the same products our customers use to setup, operate, and manage their existing internal cloud(s). Migrating workloads into the VMware hybrid environment takes no additional process, people, or technology work on the part of customers. This design capability is in stark contrast to decisions to consume from other service providers. In those instances, assuming IT had a say in the matter, there is a completely different set of tools, processes, and skills utilized to manage the external cloud environment; further straining already constrained IT resources.

Yet, the more likely scenario for organizations running workloads in an externally hosted environment is that the decision was made by end users, while their IT organization suffers the consequences of supporting them, at costs often not readily apparent to the business. VMware vCloud Hybrid Service will provide a remedy to this scenario by allowing IT to proactively identify criteria for workloads to be migrated into an external environment. This results in several benefits for the overall enterprise: operational cost savings, ability to utilize existing processes (change management, incident management, help desk), leverage existing skill sets, meet customer SLAs, and provide agility to the business. This list is a small fraction of the outcomes of having a proactive approach to consuming external cloud services. Ultimately, IT can add vCloud Hybrid Service into its service toolkit to better execute on the service broker role.

An enterprise CIO I used to work with used the comparison that IT was like the electric company: no one noticed unless the lights went out. It was his way of highlighting the essential nature of technology services. However, in the era of cloud computing, the “new IT” provides a lot more than just “juice.” IT organizations are becoming one element of the competitive advantage companies seek in the marketplace. This is one of the reasons why hybrid cloud is such a key component the CIO’s toolkit. Leveraging a hybrid cloud solution empowers IT organizations to continue to rise to meet the challenges of their business users, eliminate the “cowboy” mentality of end users making IT decisions, and continue to meet the quality standards for day-to-day operations.
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Padmaja Vrudhula is a strategist with VMware Accelerate Advisory Services.

VMware Accelerate™ Advisory Services can help you define your IT strategy through balanced transformation plans across people, process, and technology. Visit our Web site to learn more about our offerings, or reach out to us today at: accelerate@vmware.com for more information.

Would you like to continue this conversation with your C-level executive peers? Join our exclusive CxO Corner Facebook page for access to hundreds of verified CxOs sharing ideas around IT Transformation right now by going to CxO Corner and clicking “ask to join group.”

On-Demand Services –Thoughts from Down Under

AUTHOR: Michael Francis

I’m a principal systems engineer with VMware and have been involved in the development of our cloud operations services. I’m sharing my experiences through a series of blogs pertaining to on-demand services. In this first blog, I reflect on what got us to this point and will follow this up with a discussion on how on-demand services transform both business models as well as the engagement model between enterprise IT and the associated business. In the final entry I’ll recommend how on-demand services can be delivered effectively—where the rubber hits the road!—and I’ll get into some specifics.

On-Demand Services, Part 1 – Remind me of how we get here again…

I have been with VMware for nearly seven years and in the IT industry for 20+ years—and over that time, like others, I have seen many changes. I think the biggest game changers in the past two decades are the smartphone and tablet form factor computers. Both devices have brought a mobility and price point revolution to computing that has enabled access to information to a very broad population from anywhere, at any time. This combination of form factor and ease of access to information through self-service mechanisms almost overnight changed the relationship between enterprise IT and the end user.

Let’s look back—I had a O2 Windows-based mobile that I used for business in the early 2000s, and it was great. I had access to email in a rich interface and integration with my contacts and global address lists anytime I needed them. And, I could communicate with corporate messaging in a small form factor. However, what it didn’t give me was the flexibility to access information like I could with my home PC—I couldn’t easily extend it to run other applications. And unlike my home PC with its mouse-driven interface, this phone forced me to use the keyboard—which was like trying to navigate in Windows for workgroups using only a keyboard.

Then came the next generation of smartphone and the advent of the touchscreen, which was analogous to the introduction of a mouse to our personal computer. The interface was easier to use and navigate and could be so much richer from a features standpoint. But the real power was that I could access a new universe of applications through a single self-service portal. And, the applications were cost-relevant, which meant they were easy to consume and demo in order to select an appropriate set of applications that worked best for my specific needs. It changed the phone from being a fixed-purpose device with keyboard control to a touchscreen-driven, openly flexible device ready to provide me with access to the world at my fingertips, from wherever I was.

For the consumer, it was the simplicity to access a marketplace of application services and then self provision a service that was the point where so many rapidly engaged in this transformation. This ability to self service combined with the size of the marketplace fueled the prolific use of the successful smartphone and tablet platforms. Consumers had a single storefront with access to thousands of application service suppliers.

The on-demand services built into these consumer devices created a broad ecosystem of suppliers eager to be able to showcase their wares. The single application store provided a single location for consumers to shop for services. Do you see the similarities? In the past, the enterprise IT organization was “everything IT” to everyone in the organization—from manufacturer, to distributor to reseller—and the consumer had little choice. Stepping up to meet demand, software as a service (SaaS) providers are the smartphone application builders for enterprise services, and like smartphone applications, more and more consumers seek their services.

So what’s missing from this equation? What’s missing is an equivalent enterprise-class, consumer-relevant application store with access to all IT services. An on-demand services capability within the enterprise to be the storefront to a varied selection of IT services—some sourced internally, some externally.

There’s another aspect to this transformation—and that’s the ease of creation, delivery and price point of these smartphone applications. All of which created a need for an agile application platform offering a low-cost of entry to feed the demand of so many new suppliers entering the market. Further, the swings in consumption of suppliers’ offerings has perpetuated the need from application suppliers to pay for flexible-scaling, consumption-based models for underlying compute capacity.

To sum things up, the on-demand services in our smartphone and tablet devices opened up access to services and information beyond what was previously available, using a single application store interface that made things simple to consume. It moved the power base of information access from enterprise IT into the hands of the consumer. The velocity of uptake of these consumer devices spawned cloud computing, cloud computing service providers and the concept of service consumption-based computing. On-demand services have transformed consumer information access.

I’ll follow up soon on how the introduction of on-demand services into the enterprise can transform business models and the engagement model between enterprise IT and the business.

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Michael Francis is a principal systems engineer at VMware, based in Brisbane.

Would you like to continue this conversation with your C-level executive peers? Join our exclusive CxO Corner Facebook page for access to hundreds of verified CxOs sharing ideas around IT Transformation right now by going to CxO Corner and clicking “ask to join group.”

Is the Software-Defined Data Center a Good Fit for Financial Services?

Author: Mark Sarago

Most of my career as a chief information officer was in the financial services field, including mortgage banking, insurance and auto lending/leasing. Financial services companies, as well as healthcare providers and insurers, have heightened sensitivity to industry compliance rules and customer privacy concerns. As a result, the IT organization often prioritizes its focus on a tight security profile.

Compliance and privacy concerns range from restricting access to customer Personally Identifiable Information (PII), patient healthcare records (HIPAA compliance), and the company financial data or customer equity and bond trading transactions (SEC compliance). Breaches to data security that result in violations of compliance and privacy rules can result multi-million dollar fines or severely tarnishing a well-established brand.

It was not uncommon for my organization’s chief risk officer or chief legal counsel to forcibly mandate that no company or customer data move beyond the “four walls” of our dedicated data centers.

Recently, as a VMware Accelerate Advisory Services strategist working with a global financial institution, I saw this security mandate extend to a prohibition against the use of public cloud services or the use of multi-tenant, co-located data centers for business software application development, quality assurance procedures, and high-volume stress-testing activities—even when the underlying test data was completely fictitious! (click on image to download related case study)

The main concern with using a public cloud is that services are typically provided in multi-tenant environments. Multi-tenancy is the norm because it significantly reduces the operating costs for the public cloud provider. As a result, financial services, healthcare and insurance companies usually bypass pubic cloud solutions in favor of implementing private clouds within wholly owned or dedicated data centers.

The capabilities offered by the software-defined data center (SDDC) are perfect for private clouds, and accordingly, are an appropriate fit for financial services, healthcare and insurance companies that operate dedicated data centers.

SDDC provides software systems and technologies to virtualize networks and storage, as well as servers. SDDC implementations result in reducing overall CapEx and OpEx costs while enhancing automated workload provisioning, pooling resources and application security.

Financial institutions, healthcare and insurance companies that are early adopters of SDDC technologies are focused on implementing the components in dedicated private clouds. I expect this trend to continue as SDDC features become more widely adopted in the near-term future.

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Mark Sarago is a business solutions strategist with VMware Accelerate Advisory Services.

VMware AccelerateTM Advisory Services can help you define your IT strategy through balanced transformation plans across people, process and technology. Visit our Web site to learn more about our offerings, or reach out to us today at: accelerate@vmware.com for more information.

Would you like to continue this conversation with your C-level executive peers? Join our exclusive CxO Corner Facebook page for access to hundreds of verified CxOs sharing ideas around IT Transformation right now by going to CxO Corner and clicking “ask to join group.”

NYSE Technologies’ Capital Markets Community Platform

 

Figure 1: End-to-end solution completely owned and delivered by NYSE Technologies

Jason Hill, VMware’s Head of Strategy and Transformation – Technical Services EMEA, recently presented at Cloud Nation, the Enterprise Architecture Leadership Forum, where he introduced how companies like NYSE Technologies are helping financial services firms achieve business agility through cloud computing, including faster product launch, real-time data management and support for trading in new markets.

In this video, Saurabh Misra, Solutions Consultant, NYSE Technologies, illustrates two use cases of the NYSE Technologies Capital Markets Community Platform. The first use case (in figure 1 above) features a client case study of a US firm looking to extend services to Tokyo with no local footprint.; the second is an investment firm looking to reduce technology costs, gain access to new technologies and reduce time-to-market for new strategies. 

Where Are You on Your Journey to ITaaS?

 

According to an independent research study* by Management Insight Technologies, the path to ITaaS is a three-phase journey. This VMware infographic illustrates that CIOs who are moving their organization forward on the journey are unlocking new forms of value for the business.

 * From an independent study conducted by Management Insight Technologies, the fourth annual study of its kind. Its findings were gathered through a blind market sample spanning several countries, weighted by customer size in each region.