You can forgive many CIOs for not exactly jumping on the cloud-based computing and shared service bandwagon. After all, “the cloud” only recently started moving to the right of the technology adoption lifecycle – at least, in the enterprise world. Successful case studies were few and far between. In many cases, the perceived risks and costs exceeded the benefits. Many midmarket organizations — and IT departments in particular — were feeling the pain of the Great Recession. Many simply did not have the financial means to move away from tried-but-true on-premise solutions that, while clunky, usually worked well enough. Until recently, there just wasn’t enough motivation for most organizations to make the jump to the cloud.

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This week I was able to attend the DSCC 2011 conference near my home in Las Vegas, NV. (Any reason to hit the tables, right?) Along with a number of other bloggers and media types, I spoke with Bernard Charlès, President and Chief Executive Officer of Dassault Systems. According to its website, DS is “a world leader in Product Lifecycle Management (PLM). [It] provides solutions that enable businesses of every size and sector around the globe to design, simulate, and experience tomorrow’s products with [its] partners, from suppliers to consumers.

Disclaimer: I attended the conference for free and was granted media access. 

Right now, DS’s applications are traditional (read: on-premise or client-server based.) DS’s software and applications are admittedly too bulky and complex. As presently constituted, DS’s products are not sufficiently simple to install, maintain, and use. Moreover, they are not sufficiently open to encourage third-party innovation. As a result, potential partners are unlikely to develop apps for the company’s products. This is both a short- and long-term challenge.

Charlès’ candor was refreshing and atypical of many of his contemporaries. To his credit, Charlès realizes that this is not tenable–and he’s taking steps to ameliorate things. Maintaining his organization’s status quo is certainly not conducive to building a true platform, something about which I asked him point-blank. The company is already working on deploying its apps in the cloud.

Emulating the Right Model

Charlès spoke highly of the Force.com model. Ideally, DS will create a platform that will allow others to easily create their own intellectual property (IP). And this shouldn’t be a discrete event; partners should be incentivized keep the innovation coming.

Of course, you don’t “get to the cloud” or create a platform overnight. Further, building a robust ecosystem takes time–and current clients rightfully expect a cogent game plan. Charlès notes that, in the future, DS will offer a number of different options for DS’ clients:

1. On-premise software–i.e., a continuation of its current infrastructure for clients unwilling to go to the cloud.
2. Running its software on a public cloud
3. Providing a virtualized environment for predefined set of companies (multi-tenant)
4. Offering a country-specific cloud

Simon Says

In the enterprise space, any software vendor faces a major challenge: it has to strike the right balance between leading and following. Many of DS’s clients are large, conservative organizations. As such, they tend frown upon their software vendors telling them about major changes in direction, architecture, and licensing without giving them sufficient time to prepare.

This should be interesting to watch. Charlès clearly gets it; he understands the power of the cloud, ecosystems, and platforms. For a number of reasons, however, many companies have historically struggled reconfiguring their applications and architectures. Microsoft readily comes to mind. There’s no cloud “switch” on any application, much less complex ones that support manufacturing, retail, and other large enterprises.

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Benioff discusses vendor lock-in, a term that describes organizations that continue to use big, expensive, and complicated applications because they want to, not because they have to. Think databases, ERP, CRM, and other involved technologies.

In the era of the cloud, lock-in is largely minimized. It’s much easier for a company to get away from an app, system, or tool that’s not working for a number of reasons. For one, the switching costs tend to be smaller–if not non-existent. Also, contracts tend to be much shorter, maybe even non-existent. Data migration tools have evolved a great deal over the last two decades.

The end result? Now more than ever it’s easier for people to try out different tools. Mobility, the cloud, Freemium, web services, and open source mean that it’s easier than ever to avoid vendor lock-in.

So, what does this mean? Especially in the technology world, your product has to work well and immediately. Alternatives to just about everything abound. Few busy consumers and small business owners want to fiddle with settings just to get basic functionality to work. Technology should just work. Period. Does yours?

This is post sponsored by the Enterprise CIO Forum and HP.

Did you notice that HootSuite was down last week? Did you want to edit an entry on Reddit but could not? Well, you weren’t alone. Amazon recently experienced major problems with its Elastic Compute Cloud service, affecting many sites across a wide variety of industries. This sparked a debate over the future of cloud computing.

Here are my two cents on the matter: Yes, the outages represented a mild inconvenience to me and many others. What’s more, they were much worse for the many small businesses that rely upon Amazon to run the crux of their businesses. However, many cloud naysayers were waiting for something like this to happen to justify their nephophobia (fear of clouds) and general aversion to change.

Many software vendors and old school organizations have been slow to embrace cloud computing because of often misplaced security, reliability, and control issues. They have spent millions of dollars configuring their on-premises CRM and ERP systems. While their infrastructures are not optimal, they have little incentive to rock the boat. Many want clouds to simply go away so they can protect their fiefdoms.

A Different Framework

It’s often instructive to think about cloud computing in terms of means and ends. CIOs should not be entertaining the notion of moving to the cloud for the sake of doing so–and brag to their colleagues about it. Rather, clouds should be viewed as a cost-effective way of easily giving employees, partners, customers, and suppliers ubiquitous access to data and applications.

Alternatively, one can think of cloud computing as–at least conceptually–just another type of outsourcing, much like manufacturing or customer service, a point that has been made by others. In a post entitled “Cloud sourcing: just like sugar, rubber, and steel“, John Dodge writes:

The cloud relinquishes the on-premises control that minimizes risks–and averts nightmare ‘bet-the-business’ scenarios.

But think about it: the most regulated enterprises–healthcare providers and payers, banks and trading firms, government agencies come right to mind–that figure out how to safely and reliability use the cloud will have an enormous competitive advantage. Ask yourself: do you want to lead or follow? That’s the choice and that some enterprises would instantly respond “follow” is not always a bad thing.

I suspect that the first company to outsource its manufacturing and customer service was considered insane. Now, it’s de riguer. Why wouldn’t you at least consider doing these things? Technology has flattened the world, to paraphrase Tom Friedman.

Philosophy and the Ubiquity of Risk

Cloud naysayers and nephophobes either minimize or neglect to mention that hosting their own applications is hardly risk-free. Forget excessive costs for a moment. I have always experienced system downtime and issues when applications were hosted internally by my employers and clients. Patches and updates would need to be applied to ERP and CRM systems, forcing everyone out of “the system” on regular bases.

Philosophically, the internal hosting of applications and databases forces every company to be in the IT business. At the risk of disparaging many organizations, how many do IT exceptionally well? Based at least upon my own personal experience, I’d put that number far lower than fifty percent.

Simon Says

I’d ask all of the nephophobes out there the following questions:

• Are you going to move all of your manufacturing back from China because of a shipping delay and a few cultural issues?
• Are you bringing customer service back in-house because of language issues?
• Or, are the benefits of outsourcing these aspects of your business well worth their costs and occasional headaches?

Lamentably, those opposed to cloud computing will always find reasons to avoid it. To quote Upton Sinclair, “It’s difficult to get a man to understand something if his salary depends on his not understanding it.”

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This is post sponsored by the Enterprise CIO Forum and HP.

This is post sponsored by the Enterprise CIO Forum and HP.

So, you’ve been reading all about emerging enterprise technologies. Maybe your organization has already modernized its applications, as many recently claim. You even went to a conference in which Enterprise 2.0 was all the rage. Your competition claims to be throwing all of its data and systems into the cloud. In this series of posts, I’ll discuss considerations for organizations that are beging to move beyond:

• traditional client-server architecture
• antiquated “intranets”
• long-term vendor contracts and expensive annual support agreements

Consideration 1: Do your new technologies add, replace, or subtract from existing ones?

While the economy appears to be improving, we’re not out of the woods. Translation from a technology standpoint: any new initiative more than likely has come with a built-in cost justification.

Many organizations make a fundamental mistake when going in new technology directions: they tack additional applications and infrastructure on to existing ones. As a result, savings that look so promising during the RFP process never materializes.

Consider one of my clients. Emboldened by the promise of lower IT costs, near-constant access to data, and the desire to be doing something cutting edge, it began several cloud computing initiatives. The organization was far too big and complicated to do everything at once–without causing chaos. As a result, it started small with phased approach, cutting over a few applications at a time.

Fast forward to the end of the year. As IT looked at its budget for 2011, those supposed savings from cloud computing appeared to be missing for one simple reason: total IT costs in 2010 exceeded those in 2009. Why? Enabling certain applications in the cloud by working with new vendors and technologies were not line items on balance sheets in 2009. In effect, cloud-based applications just “added to” total IT costs and the CIO was mistakenly left with the impression that the savings for this exciting new technology were smoke and mirrors. The CIO put the kibosh on 2011 cloud computing endeavors.

Simon Says

Have a long-term plan when embracing any new technology. Rarely will savings be dramatic in one year at a large organization tied to long-term vendor contracts and ways of doing things. (Note, however, that “big bang” savings may in fact be difficult to achieve based upon company size.  For example, many smaller companies can more easily embrace emerging technologies for a wide variety of reasons. In fact, I detail one such company–a law firm–in my new book, The New Small.)

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This is post sponsored by the Enterprise CIO Forum and HP.

Check out some of my videos.

AT&T Science and Technology Author Series

I recently appeared on the AT&T Science and Technology Author series. I talk about my forthcoming book, The New Small and emerging technologies used by some very dynamic companies.

Discussion with Ivana Taylor of DIY Marketers

My friend Ivana Taylor of DIY Marketers and I had a short discussion about the book.

Interview with Ivana Taylor of DIY Marketers from Phil Simon on Vimeo.

As my recent phone problems have reminded me, few large companies can consistently do things right. Comcast and Verizon have ceaselessly irritated me over the last few weeks with astonishingly frustrating policies, antediluvian information systems, bad data, and ostensibly indifferent attitudes towards customers. These companies have a hard enough time providing just a few products and services.

I started thinking to myself, is it possible for one company to do everything? I had that in my mind as I read an interesting interview in Fortune with Amazon.com CEO Jeff Bezos. The company has been expanding its offerings and has come a long ways from its days as a dot-com poster child. These days, Amazon is offering a great deal more than just books, CDs, DVDs, and physical goods. It’s no longer just a “B2C” company; its recent forays into cloud computing and Infrastructure-as-a-Service (IaaS) mean that it has become a “B2B” company. And it has no intentions of stopping.

From the interview:

Fortune: Speaking of picking up new skills to address consumer needs–you’ve addressed some customer needs by making substantial forays into cloud computing with S3, Elastic Compute Cloud, and the Relational Database Service. What’s next for cloud?

Bezos: One of the things you’re seeing is that companies without any legacy are no longer building any data centers. They’ve already stopped. So that’s a testament to how powerful this model is. That the only people still building these data centers are the people that are temporarily corralled into that model because of their legacy. That model is more expensive, less flexible. It’s not just more expensive, but it’s also capital expenditures instead of pay-as-you-go variable costs like it would be if you were using Amazon web services.

Mixed Feelings

I have mixed feelings about this. Part of me thinks that companies with extra compute power and resources might as well sell them. On the other hand, I wonder if Amazon will one day stray from the values that have allowed it to get to this point: specifically, amazing customer service. Based on what Amazon is doing, can it concurrently and effectively be a:

• consumer retail company
• publishing company
• film production company
• grocer
• reseller of web services

And that’s not it. I was absolutely amazed to read about the number of irons that Amazon has in the fire. In a way, I suppose, this is similar to the Google model of trying 10 ideas, hoping that one will pan out. It seems to me, though, that Google doesn’t try to tackle so many different types of problems so far outside of its core competency.

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Cloud-based business intelligence (BI) and Software as a Service (SaaS) BI technologies offer users the potential for faster deployments, increased flexibility, and reduced costs compared with traditional on-premise BI software. But cloud BI, SaaS BI tools and cloud-based data warehousing also raise numerous issues for organizations to consider, including possible performance, scalability, and data security concerns.

In this interview with Craig Stedman of TechTarget, I discuss the maturity and possible uses of cloud BI tools and data warehouses. I also talk about the benefits and challenges of cloud business intelligence. Finally, I offer project management tips, including advice on as well as the questions that companies weighing the cloud approach should ask themselves as well as SaaS BI vendors.

To listen to the podcast, click here.