Friday, April 23, 2010

Freed from data center requirements, cloud computing gives start-ups the fast-track to innovate, compete

This quest post comes courtesy of Mike Kavis, is CTO of M-Dot Network, Vice President and Director of Social Technologies for the Center for the Advancement of the Enterprise Architecture Profession (CAEAP ), and a licensed ZapThink architect.

By Mike Kavis

Cloud computing is grabbing a lot of headlines these days. As we have seen with SOA in the past, there is a lot of confusion of what cloud computing is, a lot of resistance to change, and a lot of vendors repackaging their products and calling it cloud-enabled.

While many analysts, vendors, journalists, and big companies argue back and forth about semantics, economic models, and viability of cloud computing, start-ups are innovating and deploying in the cloud at warp speed for a fraction of the cost.

This begs the question, “Can large organizations keep up with the pace of change and innovation that we are seeing from start-ups?”

Innovate or die

Unlike large, well-established companies, start-ups don’t have the time or money to debate the merits of cloud computing. In fact, a start-up will have a hard time getting funded if they choose to build data centers, unless building data centers is their core competency.

Start-ups are looking for two things: Speed to market and keeping the burn rate to a minimum. Cloud computing provides both. Speed to market is accomplished by eliminating long procurement cycles for hardware and software, outsourcing various management and security functions to the cloud service providers, and the automation of scaling up and down resources as needed.

The low burn rate can be achieved by not assuming all of the costs of physical data centers (cooling, rent, labor, etc.), only paying for the resources you use, and freeing up resources to work on core business functions.

I happen to be a CTO of a start-up. For us, without cloud computing, we would not even be in business. We are a retail technology company that aggregates digital coupons from numerous content providers and automatically redeems these coupons in real time at the point of sale when customers shop.

These highly successful companies are so bogged down in legacy systems and have so much invested in on-premise data centers that they just cannot move fast enough.



To provide this service, we need to have highly scalable, reliable, and secure infrastructure in multiple locations across the nation and eventually across the globe. The amount of capital required to build these data centers ourselves and hire the staff to manage them is at least 10 times the amount we are spending to build our 100 percent cloud-based platform. There are a hand full of large companies who own the paper coupon industry.

You would think that they would easily be the leaders in the digital coupon industry. These highly successful companies are so bogged down in legacy systems and have so much invested in on-premise data centers that they just cannot move fast enough and build the new digital solutions cheap enough to compete with a handful of start-ups that are racing to sign up all the retailers for this service.

Oh, the irony of it all! The bigger companies have a ton of talent, well established data centers and best practices, and lots of capital. Yet the cash strapped start-ups are able to innovate faster, cheaper, and produce legacy-free solutions that are designed specifically to address a new opportunity driven by increased mobile usage and a surge in the redemption rates of both web and mobile coupons due to economic pressures.

My story is just one use case where we see start-ups grabbing accounts that used to be a honey pot for larger organizations. Take a look at the innovation coming out of the medical, education, home health services, and social networking areas to name a few and you will see many smaller, newer companies providing superior products and services at lower cost (or free) and quicker to market.

While bigger companies are trying to change their cultures to be more agile, to do “more with less” -- and to better align business and IT -- good start-ups just focus on delivery as a means of survival.

Legacy systems and company culture as anchors

Start-ups get to start with a blank sheet of paper and design solutions to specifically take advantage of cloud computing whether they leverage SaaS, PaaS, or IaaS services or a combination of all three. For large companies, the shift to the cloud is a much tougher undertaking.

First, someone has to sell the concept of cloud computing to senior management to secure funding to undertake a cloud based initiative. Second, most companies have years of legacy systems to deal with. Most, if not all of these systems were never designed to be deployed or to integrate with systems deployed outside of an on-premise data center.

Often the risk/reward for re-engineering existing systems to take advantage of the cloud is not economically feasible and has limited value for the end users. If it is not broke don’t fix it!

Smarter companies will start new products and services in the cloud. This approach makes more sense, but there are still issues like internal resistance to change, skill gaps, outdated processes/best practices, and a host of organizational challenges that can get in the way. Like we witnessed with SOA, organization change management is a critical element for successfully implementing any disruptive technology.

The culture for most start-ups is entrepreneurial by nature. The focus is on speed, low cost, results.



Resistance to change and communication silos can and will kill these types of initiatives. Start-ups don’t have these issues, or at least they shouldn’t. Start-ups define their culture from inception. The culture for most start-ups is entrepreneurial by nature. The focus is on speed, low cost, results.

Large companies also have tons of assets that are depreciating on the books and armies of people trained on how to manage stuff on-site. Many of these companies want the benefits of the cloud without given up control that they are used to having. This often leads them down an ill advised path to build private clouds within their data center.

To make matters worse, some even use the same technology partners that supply their on-premise servers without giving the proper evaluation to the thought leading vendors in this space. When you see people arguing about the economics of the cloud, this is why. The cloud is economically feasible when you do not procure and manage the infrastructure on-site.

With private clouds, you give up much of the benefits of cloud computing in return for control. Hybrid clouds offer the best of both worlds but even hybrids add a layer of complexity and manageability that may drive costs higher than desired.

We see that start-ups are leveraging the public cloud for almost everything. There are a few exceptions where due to customer demands, certain data are kept at the customer site or in a hosted or private cloud, but that is the exception not the norm.

The Zapthink take

Start-ups will continue to innovate and leverage cloud computing as a competitive advantage while large, well-established companies will test the waters with non-mission critical solutions first. Large companies will not be able to deliver at the speed of start-ups due to legacy systems and organizational issues, thus conceding to start-ups for certain business opportunities.

Our advice is that larger companies create a separate cloud team that is not bound by the constraints of the existing organization and let them operate as a start-up. Larger companies should also consider funding external start-ups that are working on products and services that fit into their portfolio.

Finally, large companies should also have their merger and acquisition department actively looking for promising start-ups for strategic partnerships, acquisitions, or even buy to kill type strategies. This strategy allows larger companies to focus on their core business while shifting the risks of failed cloud executions to the start-up companies.

If you’re a Licensed ZapThink Architect and you’d like to contribute a guest ZapFlash, please email info@zapthink.com.

This quest post comes courtesy of Mike Kavis, is CTO of M-Dot Network, Vice President and Director of Social Technologies for the Center for the Advancement of the Enterprise Architecture Profession (CAEAP ), and a licensed ZapThink architect.

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Wednesday, April 21, 2010

With Jigsaw buy, Salesforce.com shows that lead generation is the new advertising

Salesforce.com's buy of Jigsaw is the latest, most indicative market mover in the transition to a lead generation economy.

Twitter's forays into a sponsored tweets business model announced last week at Chirp is another. Yahoo selling its soul to Microsoft for Bing is another. And just about everything that Google does is but another. And everything that Facebook does? Ditto. Apple loves the idea, one download at a time. Amazon? One purchase at a time.

These players are poised to grease the skids leading to a lead generation economy, one that makes conventional and current online advertising no more relevant than rabbit ear antennas for the top of your black and white television.

Only a year into the data-driven decade, and the ways in which user-, buyer- and social-interactions are rapidly being brought to bear on B2C and B2B commerce are piling up -- as never before. The model makes especially good sense for B2B, as these decisions are more often data- and information-driven, not emotionally charged as the advertising-juiced B2C domain so often is. And more and more B2B purchases start and end with an online search.

Adding a powerful ingredient to the mix, Jigsaw has huge data sets and the ability to cleanse and verify who's who on the web. As buyers, sellers, social types and knowledge seekers, people the world over are conducting more and more of their everyday lives and business roles online.

All this leaves trails, crumbs, identities, scraps and gems about who we are, what we do and what we may want -- as individuals, families, businesses, employees. It's a Noah-scale flood of data. And if you take a mere scrap of what you know about someone online from that flood and run it through Jigsaw it will tell you yet more about the person, or verify that what you already have is correct and current.

Incidentally Jigsaw does this with data that is updated very rapidly, often daily or less. This is not those big CD-delivered data sets that are obsolete before they leave the hard drive. The whole arena of business intelligence is the gorilla in the room ... it provides even more and better data and helps decide what value to bring to whom and when.

To flesh out the "who" part, Jigsaw, like a lot of others in the field, are building the up-to-date meta directories of who's who and what's what online. From Marc Benioff's choice, we should assume that Jigsaw fit the right mix of being cloud-based, current, comprehensive and B2B-oriented.

Oh, and don't give me the "I'm a victim" crap about how your identify is being pilfered or your privacy invaded by this data collection and cleansing. The data is being contributed by you, and everybody else all the time, ie, Facebook, ... freely and openly -- just by being online. It's the quid pro quo of the web.

You want the benefits of the Internet, you give up some data about yourself along the way. It's life today. If you want privacy, stay off the Internet. For businesses and enterprise buyers, incidentally, they actually want to be known and to know about others. Such data is undoubtably the lingua franca of modern business. Ask Google how it's keywords sales are going.

And so why would Salesforce.com pay $142 million for Jigsaw's cache and carry and data services?

Because now any business that uses Salesforce's CRM, SFA and SasS/PaaS ecosystem can know a lot more about who's who inside the business processes that they are producing and involved in. That's right ... process. The economy needs to bind services and processes together just as much as buyers and sellers of goods. The common denominator is the users, and their identify data.

So think of Jigsaw as bringing cloud-based ETL from all of your web interactions that feed the leads that enter into your sales and customer resource data bases and interactions. I'm proud and happy to have been successfully experimenting with the knowledge-driven content onramps to the search and social media myself for five years. It's strong, knowledge-based content that precisely attracts and informs the users that begets their participation that begets the data that gets cleansed that nurtures more information sharing that begets the CRM process that leads to a sales cherished by both parties.

Incidentally, if Salesforce.com now straps on a marketing automation service (or ecosystem) to what they have -- cleaning the data all along the way via Jigsaw -- you get a glimpse of the lead generation future. Google could do this any time ... they have all the parts necessary. Indeed, Salesforce.com and Google are on a collision course even more with the Jigsaw buy.

Which brings us to advertising -- the Neanderthal of the ecommerce evolutionary tree. Ads online or off -- search or banner -- are big, dumb, blunt, hairy instruments of joining up buyers and sellers based on ignorance about each other. You want to reach young men with money and a yen for beer and pickup trucks? Spend millions on Superbowl ads. Very efficient.

Trouble is that I also have to watch these ads about beer and trucks, neither of which I need any information on right now. Give me some data I can use in my life and business, please.

I think the future of advertising is dwindling into the role of a cheap sidewalk hawker, and funneling a few unsure souls into a sideshow. Maybe advertising will simply one of many ways that buyers and sellers enter into a more efficient data-driven lead generation process ... Just like the one that Salesforce.com is build, buy and partnering its way to ASAP.

The money now spent on advertising will be moving aggressively to the lead generation portion of the equation, where the ROI is precise and understood by all. Most advertising is bought via the credit default swaps method of tails, I win (the media company), heads, you lose (the advertiser).

The lead generation economy does away with the murky nature of advertising's true value and return. In a lead generation process, you spend X to get Y. All the variables are measured and adjustable -- and it scales up as well as down.

Using readily proffered attention and affinity data, users can get a closer fit to what they actually want in terms of information and opportunity. Sellers can fine-tune the information and offers they direct into the buying process. Over time, this can be a proficient fit right down to a one-to-one relationship, from buying Boeing 787s to a stick of chewing gum.

It's clearly the future: B2B and B2C commerce driven by data-empowered inferences between that buys need, and what sellers have. Only the price needs to be negotiated. Perhaps Salesforce.com will broker that too?

So who will be in the uber hub position, the meta directory and meta facilitator for the lead generation economy future? Media companies want it, technology companies want it, search and social media companies want it. And they all should, it's a trillion dollar business opportunity.

Salesforce.com is clearly in the game. May the best data win.