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Monthly Archives: June 2011

Why VMware is Acquiring Pioneering IT Financial Management Vendor, Digital Fuel

If you’ve heard the recent news that VMware has signed a definitive letter of intent to acquire Digital Fuel you might be asking yourself a simple question: Why? After all, isn’t VMware an infrastructure company? What’s it doing in the ITFM space?

Let me give you a little background and then tell you my perspective on why I think it’s a good move for VMware and our customers (and it’s not just because I’m the VP in charge of our virtualization and cloud management strategy and offerings).

The goal of IT has always been to support the business, to align IT efforts with business priorities, and to deliver maximum business value for IT spend. That hasn’t changed. What has changed is that cloud is making it possible for the first time for IT to truly deliver on that goal. How? Well, one critical way is that cloud now provides an external benchmark for the CIO (and more importantly, his or her business counterparts) to compare the cost and value of internally provided IT services. Whether it’s comparing the cost of a unit of compute capacity for Dev/Test, the cost of provisioning a mailbox for a new employee, or the cost of a CRM solution for your entire sales force, the public cloud provides a rate card that serves as a benchmark against which CIOs are being held to account by CFOs and even CEOs.

But here’s a fun paradox – even as CIOs are increasing their level of virtualization and building out their private cloud capabilities to compete with the agility and cost of public cloud services, it’s getting more and more difficult to understand the true cost of the services they provide. Why? It has to do with the incredibly dynamic nature of virtualization and private cloud. With applications being moved from one VM to another, VMs in turn being moved from one host to another, and capacity and usage being spun up and spun down constantly, the ability to capture and showback the resources and services consumed by your LOBs is incredibly and increasingly difficult.

So how do you defend yourself and the value you deliver in comparison with an external benchmark?  You need the numbers—credible, supportable numbers. Back of the envelope calculations, out of date Excel spreadsheets, and gut feel only get you so far when facing a CFO who says “Here’s what Amazon says they can do it for. Can you do better?”

To answer this question without breaking into a cold sweat requires deep financial visibility into cost structures, the ability to monitor and deliver on SLAs, and a framework for making intelligent sourcing decisions. The fact is, today, most IT organizations I talk to have rudimentary, if any, capabilities in these areas. 

This is why VMware is acquiring Digital Fuel. It’s about providing our customers with the deep visibility and the right measurement tools they need to manage IT in the right way. Specifically, I’m talking about the ability to measure the costs and SLAs associated with a particular IT service whether sourced internally through your private cloud or externally from a cloud or SaaS provider. So you can stand up and have a fact-based, numbers-driven discussion with your CFO or CEO. And the combination of VMware and Digital Fuel is a perfect fit for this. The acquisition brings together our deep insight into the dynamically changing virtual infrastructure which is the very foundation for cloud computing, as well as our growing portfolio of application and end user computing solutions that are re-defining how IT is enabling your business processes. The combination of these solutions with Digital Fuel’s pioneering capabilities gives you the unprecedented ability to manage every aspect of your services from a financial – and business – perspective. 

And it’s not just about managing costs and SLAs. You have to manage your vendors as well.  As you may know, vendors account for a significant part of the average IT budget – about 30%. In the cloud era, where your company’s business processes are driven by a complex combination of in-sourced, outsourced and cloud-sourced services, the SLAs you agree with the business are themselves dependent on those you agree with your vendors. Digital Fuel’s vendor management solution lets you compare different vendors and options to make the most cost-effective business choice. Plus it provides a control mechanism for your vendor agreements – making proactive governance of contractual commitments possible, and tying financial and other penalties to non-performance when necessary.

Sounds pretty good doesn’t it? But wait, there’s more! It’s about tracking the overall costs of delivering your services and driving them down over time while still delivering on agreed service levels. And putting into place some financial rigor around planning, budgeting and portfolio management to ensure your organization is delivering the right services at the right cost to the business going forward.

To net it all out, it’s about having that fact-based discussion with business stakeholders on the value IT provides for the budget it gets. Digital Fuel’s solutions provide the CIO with financial visibility and control, giving him or her the ability – through non-“Geek Speak” reports – to communicate back to business stakeholders in business language (dollars, euros, yen, etc.). This is the kind of dialog IT execs have been dying to have since the early days of the mainframe.

Without financial visibility and control there’s just no way IT can fully mature as an organization, no way the CIO can start running IT like a business. At the end of the day, Digital Fuel’s solutions give our customers the ability to manage IT as a business, measuring, managing and optimizing IT resources for maximum business impact.

Here’s a link to the press release.  Stay tuned for more updates and announcements via blog.

The future of cloud and NYSE Euronext’s capital markets community platform

NYSE Technologies (a unit of NYSE Euronext) announced their new “community platform” cloud computing service today, running on vSphere and vCloud Director from VMware. The target customers for the service are capital markets organizations such as hedge funds and the trading departments of banks, with initial customers including a unit of Goldman Sachs and the hedge fund Millenium Partners.

Customers of the new cloud compute service get credentials for the infrastructure portal (vCloud Director) with access exclusively through NYSE’s SFTI (Secure Financial Transaction Infrastructure), a dedicated, secure and high capacity network. There they can deploy a choice of virtual machine (VM) templates on demand to run their capital markets applications. The service ensures that the VM is automatically “plumbed in” to NYSE’s multicasted real-time market feeds & applications, SFTI network, and high performance EMC VNX storage. The net? Customers can focus on developing proprietary advantage with their applications instead of worrying about the plumbing. Both dedicated and multitenant versions are offered, with tenants being securely segregated using vCloud Director’s Virtual Data Center (VDC) capability.

NYSE’s service is innovative in several ways. NYSE Euronext is primarily known for being a financial exchange as well as a provider of market data, rather than as a cloud provider. So why start offering cloud computing? NYSE saw how it could significantly simplify and improve its customers’ competitiveness in capital markets by providing an integrated service that combined on-demand computing with access to the market (the exchanges), a low-latency secure network and instant access to data feeds. In a reversal of traditional approaches to IT, computing capacity is literally coming to the market and the data — rather than the data and market being piped to the computers.

So, why is this better, and why is NYSE Technologies the right organization to deliver? For hedge funds and other buy-side firms, their value isn’t in integrating compute, storage, networks and security — it’s in analytics, trading strategies, algorithms, application strategies and other proprietary expertise. The NYSE service means those IT organizations no longer have to struggle with integrating data dumps and feeds into their infrastructure and operations. Trade execution speed can be critical, so physical location and proximity to the market matters. NYSE’s experience in operating large scale, mission-critical VMware-based infrastructure — the NYSE and Euronext exchanges — is unquestionable.

The cloud infrastructure involved is anything but commodity: trading applications require high performance, high throughput, strong security and sophisticated network connectivity. It’s the integration of this with all of the other critical infrastructure components, data, markets and other services that delivers the value. So what’s controversial about this? Recently, cloud pundits have trumpeted what seems to be a depressingly grim dystopian view of the future where all computing runs on vast monolithic “no-frills” VM farms at rock-bottom prices. In this world, any differentiation or variation in infrastructure is sacrificed on the altar of lowest possible cost per VM. After all, profitability at huge volume can only come from ruthless standardization.

In contrast, NYSE represents an alternative cloud future: one that contains a vibrant ecosystem of clouds, both internal IT departments and external cloud service providers, with unique understanding and focus on customer needs, married with the ability to deliver through scalable, on-demand and trustworthy IT services. What internal IT organizations and cloud providers like NYSE share is a rejection of the concept of an inflexible cloud monoculture. Instead, they choose to build high performance, secure and scalable infrastructure because it meets critical business needs. They obsessively focus on value delivered to the customer and never confuse that with cost of service.

In some ways, IT infrastructure is like a currency — the only qualification required is that it is accepted as such by its users. Building IT infrastructure that doesn’t meet customer needs leads to irrelevance and adoption of a foreign currency. There’s no one size fits all answer, which is something to consider when crafting your own cloud strategy and selecting cloud providers to compliment your own IT skills and capabilities.