Friday, March 26, 2010

Including startups in your SOA infrastructure: A guide for enterprise architects

This guest post comes courtesy of Ronald Schmelzer, senior analyst at Zapthink.

By Ronald Schmelzer

In a previous ZapFlash, ZapThink opined that Open Source Software could play an important role in your Service-Oriented Architecture (SOA) Infrastructure. Certainly, there were no architectural reasons why it couldn’t.

As we explained in that article, the primary biases against OSS (if there are any) are from the people in the organization who have fear, uncertainty, or doubt about the risks or benefits of OSS.

But of course, that article spoke at a fairly general level. Individual implementations or products might be better than others, or more suited for specific problems than others. This is where Enterprise Architects should spend their time focused – on the specific solutions to specific problems, rather than engaging in religious battles about the merits of entire classes of solutions.

Unfortunately, in addition to the biases against OSS, many companies have developed aversions to solutions from startup companies. Yet, in an environment where we are left with just a handful of incumbent companies remaining in the SOA infrastructure landscape, and these vendors have confusing collections of often conflicting and competitive infrastructure products, it might be a good time to revisit utilizing solutions from niche, best-of-breed, and often startup, solutions in your SOA environment.

However, how do you do so without incurring substantial real or perceived risk? After all, it is the nature of a startup company to change, be acquired, or die. In this environment, EAs need to become wholeheartedly selfish: meet the requirements of the business in an agile manner by reducing the penalty for failure. In such an environment, startup solutions are not only feasible, but very appropriate.

Best of breed in an increasingly suite world

Through a combination of consolidation, maturation, and the pressures of a tough economic environment, the landscape of enterprise IT software players has dwindled to a handful of companies that control the infrastructure for a vast majority of companies.

Just like the auto industry experienced a period of rapid growth and diversity in the early part of the 20thcentury, only to consolidate down to the “Big three” in the United States and a similar number in countries around the world, we are now faced with the reality of a “Big Five” set of vendors in the enterprise IT marketplace, especially in the area of SOA infrastructure.

Agility is a key benefit of SOA, which means that properly designed architectures should not only be implementation-neutral, they should be fairly immune to infrastructural change.



However, consolidation is not always a friend of innovation. Many have argued that the consolidation of the auto industry in the US by the late 1970s resulted in products that were unable to compete with offerings from overseas.

Indeed, it’s in the period after the consolidation that the US manufacturers saw its most precipitous decline in worldwide share of automobiles. Why is this? Is it because large companies can’t innovate? Or is it that the large portfolio or products and services are confusing not only to customers but even to internal managers?

When one company owns Pontiac, Buick, Oldsmobile, Chevrolet, and a myriad of other brands, how can anyone really tell when one product is best suited for a problem or another? These brands compete for dollars not only among customers, but among their own budgets. Much hay has been made of Microsoft’s internal competition and struggles that have hindered its own ability to compete. Why should it be any different for the enterprise IT software companies that have grown primarily through acquisition?

Innovation is incredibly important in an area of continued maturation such as SOA. More importantly, agility is a key benefit of SOA, which means that properly designed architectures should not only be implementation-neutral, they should be fairly immune to infrastructural change.

In this light, vendor selection is less a matter of making sure your infrastructure works and more a matter of picking the right vendor for the job while balancing risk and economic factors. In this light, startup and niche companies offer just as much opportunity, if not more, to advance your architectural efforts than those of large vendors. The only things that differentiate the startups from the large vendors are three core issues: the scope of their offerings, the potential risk of company failure, and the ability to negotiate price to your benefit.

Mitigating the startup risk:
Enterprise software and cloud/SaaS concerns


The biggest risk that many cite in working with startup companies is the risk that they might simply no longer exist. This fear is especially pronounced for companies that must spend a considerable amount of time and money implementing the solutions.

If an enterprise is involved in a multi-year effort to implement a large-scale, highly visible, and important solution for the company, then in many cases startup solutions are ruled out very early in the vendor evaluation process. This is even if the startup company offers a better, more appropriate, and more innovative solution. The real issue here is whether the risk of company failure, real or perceived, should outweigh the loss of solution appropriateness and innovation. Or in other words, does it make sense for companies to implement less-optimal solutions based on what they know today because they fear an unknown event in the future?

Rather than rule out startup solutions out of hand, companies should mitigate vendor failure by incorporating such contingencies in their enterprise architecture. We would argue such vendor mitigation plans should be made for well-established vendors as well, since internal political or budgetary battles might result in the disappearance of even decades-old products.

Companies should require an escrow provision similar to what is provided by licensed enterprise software vendors.



There are two major areas of mitigation for enterprise IT vendor products: products that companies install, manage, and own in their own infrastructure (traditional enterprise software products sold by the license), and those solutions that are run and managed on the vendor’s infrastructure (such as Cloud or Software-as-a-Service [SaaS] offerings).

In the case of licensed enterprise software, it has long been a practice of end-user companies to require that the vendor’s software code be held in escrow such that if the vendor goes out of business, it is transferred to the ownership of the end-user customer. While this is a far from optimal solution (after all, the company has no knowledge or ability to do much with the code), it provides some level of comfort to the buyers that the code at the very least won’t disappear.

More complicated is a mitigation plan for Cloud/SaaS offerings. If a SaaS vendor disappears, what happens to the code? If a Cloud vendor goes under, what happens to the infrastructure? More importantly, what happens to your data? It’s not enough to simply require that the vendor hand over the code for their SaaS implementation; in the event of their failure, you have to also implement all the infrastructure that makes the Cloud work or keeps the SaaS solutions running.

This is because the economic benefit of Cloud computing and SaaS solutions is that you’re not paying the full cost of owning and managing the solution. It is easy to mitigate the data component of the Cloud/SaaS default risk – simply make sure that you maintain a “local” copy of all relevant data.

However, in order to mitigate the loss of application functionality and infrastructure, a company needs to have a backup plan. Enterprise architects need to discover or implement comparable Services run internally or on another Cloud/SaaS service. Or, companies should require an escrow provision similar to what is provided by licensed enterprise software vendors – if the SaaS / Cloud vendor goes belly up, they have to hand over not only the code and data that makes the application work, but also configured infrastructure on which to run it. While the hope is that these escrow provisions will never have to be enacted, they provide the security blanket necessary to give one at least a psychological sense of security.

Negotiation leverage:
It’s on your side with startups


Mitigation and product functionality issues aside, there is another good reason to work with startup vendors: it’s much easier to get your way with smaller companies hungry for your business. Smaller vendors have less layers of corporate infrastructure, and many times you are in direct communication with the individuals responsible for the functionality of your implementation. In this way, it’s easier to get your voice heard on features or bug fixes. Don’t like the way something works or want a new feature? Pick up the phone and talk directly to the product or development managers, or even the CTO. Perhaps you’ll get a fix the same day or within a very short timeframe. Try that with one of the super-vendors.

Smaller companies are more eager to negotiate, especially if you are a large enterprise that could be a marquee name for them.



It’s also easier to negotiate on price. While large vendors might be able to discount or cut the price on one of their offerings so they can make another one sweeter, the realities of large sales forces and commission structures requires them to keep their products at a certain (increasingly higher) price point. Smaller companies are more eager to negotiate, especially if you are a large enterprise that could be a marquee name for them.

Finally, it’s easier to get help with your specific implementation from startup companies. Many enterprise software startup companies know that their products are not plug-and-play and require some additional effort and expense to set them up. As a result, many startups have professional services arms whose goals are not to drive revenue for the company, but rather to support the products in customer installations.

Unless the startup vendor charges for this additional service (and we regularly counsel them not to), you should consider this to be free consulting and professional services help. Use as much of this as possible, and even negotiate more into your contract. It is in yours and the startup’s best interests to make sure you get the value you require from your investment.

The ZapThink take

As you can see from the past few ZapFlashes, ZapThink is very concerned that the rapid consolidation and maturation of the enterprise IT landscape will have a negative outcome on innovation in the marketplace. We believe that the consolidation is resulting in mammoth conglomerates of vendors that will be harder, more confusing, and more expensive to work with. We believe that there is just as much uncertainty around the future of the large vendor’s offerings as there are with startup offerings. In this light, we don’t believe that there’s anything more inherently risky about a startup solution than an established, incumbent vendor solution.

The only thing that has us concerned about the startup landscape is the shortage of new startups. We’ve seen a significant drop-off in new enterprise software venture creation. We are not entirely sure why this is. Is there simply less demand for new enterprise software solutions? Is there less opportunity for new enterprise software startups?

Has the venture capital and finance community lost interest with enterprise software? Or has the area of innovation moved away from enterprise software? We hope none of these things are true. The enterprise still has leagues to go to get closer to the vision of loosely-coupled, agile, heterogeneous systems that can meet the ever-changing needs of business with high governance and low risk. There’s plenty of opportunity here. Startups: do your part innovating in this space. Enterprises: do your part and implement startup companies’ offerings so that innovation does not come screeching to a halt.

This guest post comes courtesy of Ronald Schmelzer, senior analyst at Zapthink.


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Sunday, March 21, 2010

Essential reading on impact of Web and media shift on thinking, socializing, publishing

From today's NYT:
Instead of reading an entire news article, watching an entire television show or listening to an entire speech, growing numbers of people are happy to jump to the summary, the video clip, the sound bite — never mind if context and nuance are lost in the process; never mind if it’s our emotions, more than our sense of reason, that are engaged; never mind if statements haven’t been properly vetted and sourced.
A lot more goodies where this came from. This may be one of the most important topics and issues of our era.

Tuesday, March 16, 2010

Pegasystems doubles-down on winning streak with Chordiant buy

This guest post comes courtesy of Tony Baer’s OnStrategies blog. Tony is a senior analyst at Ovum.

By Tony Baer

We’d be the first to admit our surprise that Pegasystems has thrived as well as it has. Our initial impression of the company about four to five years ago was of an interesting, rather eccentric bunch whose absent-minded professors had great ideas but little business savvy. At the time, the company was marginally profitable

Maybe their professors weren’t that absent-minded and their approach not so pedantic after all, as the company has been on a winning streak for the past 10 quarters, scoring 25 percent growth last year as the rest of the economy (and software industry) tanked.

Tilting against windmills, the company scored big gains among established clients across financial services industries, who used Pega’s process “solution frameworks” covering areas such as loan origination and underwriting, wholesale banking, and retail bank account opening

Pegasystems is on the right side of history, having embraced vertical frameworks. That’s an approach that you also find IBM taking. In business for roughly 25 years, Pega’s sales didn’t take off until it began rolling out a series of templates or frameworks that provided a 60 percent solution, eliminating the need to model commodity processes from scratch.

Either way, Pega’s success belies our observation that vertical templates are the future of enterprise applications — using the framework as a raw template, they will be composed from existing applications and data sources rather than written or implemented as a packaged application from scratch.

Growth last year added $35 million to the company’s cash cushion, leaving it with a nice healthy $200 million in the bank. But cash in a consolidating industry is trash when your rivals are either acquiring or getting acquired left and right. As so the question was, What would Pega do with its cash?

We have the answer


W
e now have the answer: Pega announced yesterday its intent to acquire Chordiant, whose specialty is dissecting, analyzing, and optimizing a company’s experiences with its customers. The deal, at $167 million in cash, actually nets out to about $116 million when you factor Cordiant’s $51 million cash position.

Pega’s solicited offer trumped an abortive unsolicited $105 million offer back in January from CDC, an aspiring Hong Kong-based enterprise applications provider. Chordiant has come down a few notches over time, with business flattening to $75 million last year, down from $115 million a couple years ago. Pega’s $5 per share bid is about 10 percent of the company’s 2000 dot com peak, but a 30 percent premium over its current valuation.

Pega got a good deal, and Wall St. agreed, as shares of both companies rose on the heels of the announcement. It reflects the fact that Chordiant provides Pega two opportunities: 1) Deepen its presence in financial services accounts by going into the front office, and 2) gain a new beachhead in telecom where it currently has bit a single critical mass client. Although telco could broaden Pega’s addressable market the deal wouldn’t work if the solutions weren’t complementary.

Pegasystems offers a highly sophisticated, rules-driven approach to defining, modeling, and executing business processes. It offers roughly 30 industry specific templates, and well over a dozen cross-industry frameworks such as customer process management, control and compliance, procurement and so on.

On paper, it looks like yin and yan. But there are basic architectural differences between the products.

By contrast Chordiant covers what it calls “customer experience management,” which tracks customer interactions and offers predictive analytics for optimizing cross-selling, upselling, or customer retention strategies, or for predicting risk or churn. It also offers vertical templates for financial services, healthcare, and telecom. Chordiant’s predictive analytics have adaptive capabilities where the rules can change based on trends in customer response; if a promotion offer proves not as attractive as initially forecast, the rules can adjust the algorithm to reflect reality

The potential synergy is where Chordiant optimizes customer-facing front office processes while Pega’s BPM frameworks optimize the corresponding back office processes such as loan origination.

On paper, it looks like yin and yan. But there are basic architectural differences between the products, as decision management consultant and author James Taylor has pointed out. Keep in mind that Taylor has traditionally been skeptical of Pega’s approach to embedding rules inside its process engine, rather than loosely coupling the two.

But he makes valid points that Chordiant handles rules differently from Pega, that the potential synergy between the two is great, but that the company need to take care that technical differences do not “derail the technical integration or cause the merged company to merge its operations without merging its products.”

So on paper, Pega has made a sound deal. As the company is not yet experienced in digesting acquisitions of this size, its success in consummating the Chordiant acquisition will become a predictive indicator of the company’s ability to survive and grow in a consolidating market where it will be expected to make more such deals.
This guest post comes courtesy of Tony Baer’s OnStrategies blog. Tony is a senior analyst at Ovum.
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Friday, March 12, 2010

Virtual conference speakers focus on cloud, value to enterprises, how to get started

One of the biggest questions facing companies today is what to make of cloud computing. Does it signal a major shift in how we approach IT -- and the business -- or is it just another ride on the hype wave that will disappear if we just wait it out?

HP tackled this question this month with a series of virtual conferences, "Cloud: Practical Advice for Taking the Next Steps," whose aim was to cut through the fog and to try and point business leaders and IT executives in the value-oriented direction.

A panel of industry analysts, practitioners, and HP experts outlined the value proposition of moving to the cloud, the danger of inaction, and how companies can get started on their cloud journey. [Disclosure: HP is a sponsor of BriefingsDirect podcasts.]

The only choice that’s a really bad choice is to do nothing with cloud computing at this point. Having a strategy and moving forward is very important.



For those who didn't catch the virtual conference live, HP has made the replays available.

Tom Kolopolous, president and founder, of The Delphi Group, opened the series as keynote speaker by stressing the opportunities cloud model provide for innovation, especially during an economic downturn.

Cloud, Kolopoulos said, is a key enabler of innovation. For those who might question the ability to innovate during an economic crisis, Kolopolous had some sage advice: "When you tighten the belt, innovation becomes more of an issue . . . you can’t innovate if your stomach is full. You only innovate when you’re hungry."

Tom Bittman, vice president and distinguished analyst of Gartner echoed similar themes in his closing keynote, in which he stressed that the risk of inaction was the greatest risk enterprises face today: "The only choice that’s a really bad choice is to do nothing with cloud computing at this point. Having a strategy and moving forward is very important."

Other speakers included Ken Hamilton, director of Data Center Synergy and Cloud Computing for HP; Tim van Ash, HP director of Products for SaaS; Archie Reed, who is HP’s Chief Technologist for Cloud Security and the author of several publications, including The Definitive Guide to Identity Management; Jim Reavis, Executive Director of the Cloud Security Alliance and president and founder of the Reavis Consulting Group, Chris Whitener, HP Chief Security Strategist; Duncan Campbell, VP Worldwide Marketing, HP; Chris Rence, a CIO from FICO, and Alan Wain, VP Solutions Infrastructure Practice, HP.

Some highlights:
Koulopoulos: My advice is that number one, don’t look at the cloud simply by looking at what’s available today. Think of it as a long-term trend that you will have to adapt to, and you have to begin that adaptation now. You can’t wait until it’s fully evolved.

Begin moving down that road with non-core applications, applications and services that maybe aren’t as critical to the regulatory aspects of your business, to those aspects that would involve more security concerns, and in that way, you acclimate yourself to the cloud. You begin to understand what it means to work, to live, to run a business in the cloud, and the rest of these issues will resolve themselves, and they’ll resolve themselves for the same reason that they always do -- because of pure economics.

When the cloud becomes important enough that we rest enough our economic value on it, we will invest enough to make sure that the security issues have been addressed, but it’s an evolution. So don’t look at the cloud and say, “Well, it’ll never work because today, here’s what exists.” Look at the cloud and say, “I have to evolve with it.”

Bittman: There really are three major benefits. One is cost, the idea of sharing, the idea of economies of scale definitely can reduce cost. But this one, I think, is often overstated and companies that are looking at cloud computing primarily as a cost benefit are probably missing some of the bigger benefits. Another benefit that is very important is quality of service.

In other words, it's the ability to specify explicitly what your service requirements are through a services-oriented interface to set your service levels high or low, to set your performance requirements high or low, depending on what you need, and base your price based on the service levels you need. That quality of service is something that might be very valuable to a business to adjust over time based on changing business dynamic cloud services.

Another part of that that’s important is the ability to change quickly. That gets to the third benefit which I think is the most important, and that’s agility -- the ability to spin up a new business, to spin up a start-up requirement in an enterprise, the ability to change your service level requirements or to change your scale very quickly.

This not only helps the bottom line in a typical company but it helps the top line. It can help a business grow. It can provide a competitive advantage to be able to react to a business change very, very quickly at the speed of business instead of at the speed of IT.

Reed: Security, just like cloud, is hard to define. It’s a very broad term when we think about. It can be many different things for different people. When you get to cloud security, first off, you’ve got to define which part of the cloud you’re talking about -- which cloud service, which cloud computing model you’re talking about. Then we can talk about which specific security aspects apply to that part of the model.

What we do is look to standards, taxonomies; ways of talking about this that make sense both to the business people as well as the technology people . . . Cloud computing represents phase 2 of the internet where we’re actually leveraging the internet connectivity to create this utility of computing. It changes everything.

Van Ash: HP’s approach with Cloud Assure is really about enabling business confidence in the cloud. It’s about mitigating risk and you talked about risk management earlier. We’re really attacking four key categories. We’re attacking security, performance, availability and service levels, and controlling the ongoing cost. Now, why do we go after those four elements? Well, they’re consistently the top four elements that we see from both analysts and customers alike and they map pretty well to the seven deadly sins that Jim talked about right upfront.

Reavis: Don’t read the research in and of itself and assume you’re going to get all the answers. Use it with partners and consultants that you trust, that you know you can work with. Use it in conjunction with our broader guidance of best practices. Use good risk management practices and with that, you can be pretty confident that you’ll come up with a good strategy for how you should adopt cloud.

Campbell: Number one is to make your services shareable. So yes, that makes sense. It’s very intuitive and a first step in that, of course, is really, to think about it from the point of view of the audience. The audience being your application guys, your testers. Having your services available to them in a shared service environment is really the first step and to be able to provision that in a much more rapid fashion.

Second is to make your services more consumable . . . You want to be able to consume that service very importantly and intuitively like in a monthly type of fashion. You’re paying for what you use. What’s also very important is that not only are you presenting it in a consumable fashion, but then also that resource is then returned to the pool.

Third point is to make those services more valuable. It’s really tied to a very critical and relevant business outcome and also very importantly then how we can improve upon that. These three points really speak to a pragmatic evolutionary approach. It’s not a rip in replace. It’s not like you’re going to turn the switch and jump to a private cloud, but I think these are three great suggestions in terms of how to really make that evolution in a very pragmatic way.

Rence: VMs and the cloud are kind of like candy. They’re easily consumed but that doesn’t mean they’re all being used. That’s where the management tools really come in handy, to make sure that a group that’s leveraging the cloud, what you’ve basically taken and given to them to use – are they truly using it or is it something that they needed but they’re not sure when they’re going to get to it.
For those who didn't catch the virtual conference live, HP is making the replays available.
BriefingsDirect contributor Carlton Vogt provided editorial assistance and research on this post.
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Tuesday, March 9, 2010

TIBCO rolls out Spotfire 3.1 with spotlight on predictive analytics

In a move to mainstream predictive analytics, TIBCO Software today rolled out the latest version of its Spotfire platform.

Dubbed Spotfire 3.1, the latest iteration promises a natural language statistical experience. Spotfire 3.1 aims to help anyone in an organization get fact-based answers to questions that help drive revenue.

The company says its software is not just for analytics gurus but also marketing professionals, business development managers and others who need forward-looking business intelligence in a hurry. [TIBCO Software is a sponsor of BriefingsDirect podcasts.]

"Unlike traditional business intelligence tools, which for the most part aggregate historical trends only, Spotfire 3.1 projects them forward with what-if scenarios," says Mark Lorion, vice president of marketing for TIBCO Spotfire. "Anyone in the company can ask questions on demand and our analytics will provide future predictions based on behind-the-scenes data-driven methods. Users don't have to understand the methods. They just have to ask the questions – and they get answers instantly rather than waiting days like you would with today's business intelligence (BI) tools."

Spotfire 3.1 in action

Let’s say you’re trying to promote a new product in the consumer goods market. Spotfire 3.1 lets you choose input variables based on what you suspect might be driving the advertisement response, such as price, discounts, packaged offers, age of the respondent or length of time as a customer. You would then press a button that asks, "Are these related?"

After you push that button, Spotfire 3.1 works behind the scenes to run predictive models, using analytics and statistics to compile sensitivity analysis and correlations, then return a colorful graph that shows the response rate and which factors are most closely correlated to people clicking on your advertisement.

The software's multiple scale bar charts and combination bar and line plots offer analysis of unstructured, ‘free-dimensional’ data to identify key outliers and trends amongst the data.



While BI gives you historical data, the predictive analytics aspect of Spotfire 3.1 offers insights into what could happen next time you run a similar promotion. It can also help you fine-tune your promotions by targeting the customers that clicked on your ad, or offering different promotions to different audiences – and it does it almost instantly.

Unlike traditional BI or static spreadsheets, Lorion says Spotfire 3.1 also includes conditional coloring and lasso and axis marking that allow for better data analysis of patterns, clusters and correlations among sets of variables. The software's multiple scale bar charts and combination bar and line plots offer analysis of unstructured, "free-dimensional" data to identify key outliers and trends amongst the data.

“IT organization and statistician groups aren’t able to respond quickly enough to the many questions that arise from business users, so they go to their gut,” Lorion says. “Spotfire lets you make fact-based decisions rather than gut-based decisions.”

Predictive analytics challenges

Of course, predictive analytics software is not a new concept, and Lorion admits that the predictions are only as good as the quality and breadth of the available data. But predictive analytics is gaining momentum in the enterprise marketplace.

The economic downturn has been good for the analytics space because customers need to make reductions and predictions – but they need to be smart about it



IBM bought predictive analytics firm SPSS last July for $1.2 billion. And IDC predicts the $1.4 billion market for advanced analytics, of which predictive analytics is a subset, will grow 10 percent annually through 2011. Despite tight IT budgets, Lorion is optimistic about the space and the company’s offering.

“The economic downturn has been good for the analytics space because customers need to make reductions and predictions – but they need to be smart about it,” Lorion says. “Companies don’t want to hire PhDs to make sense of their statistics. But we need to drive awareness of our product and educate the market that the power of predictive analytics isn’t in the hands of only a couple of statisticians.”

Spotfire 3.1 works in tandem with Spotfire Application Data Services to let companies analyze data from various sources, including SAP NetWeaver BI, SAP ERP, Salesforce.com, Siebel eBusiness Applications, and the Oracle E-Business Suite.
BriefingsDirect contributor Jennifer LeClaire provided editorial assistance and research on this post. She can be reached at http://www.linkedin.com/in/jleclaire and http://www.jenniferleclaire.com.
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