Sean Finnan Discussion Highlights
- CIOs want a new role, rather than being full-time procurement officers
- Some want to in-source everything
- Some want outcome-based outsourcing
- Business analytics requires new system approaches
- Digital natives are joining the IT workforce
- Poorly implemented Cloud Computing could be messy, as Client/Server Computing became
- IBM aims to deliver enterprise-level, standards based Cloud offerings
- Within its North East IOT strongest demand is in the UK
ITCandor was invited to a roundtable discussion with IBM’s Sean Finnan in London this week. Sean joined IBM from HP’s services group, having been part of the EDS acquisition. He is VP and General Manager in IBM’s Global Technology Services business in its North East IOT, with responsibility for Cloud services and Infrastructure consulting amongst other areas. Sean’s ideas are fascinating, as he spends his time talking to CIOs in large organisations about their general aspirations and concerns and their adoption of Cloud Computing.
Our meeting followed an early one six months ago when Sean focused on Innovation, Component Architectures and reality and the hype surrounding Cloud Computing. Since then Sean believes IBM has kept very much on track with a consistent message around Smarter Planet and has elucidated its top-to-bottom Cloud architecture, with strong forward and backward compatibility. We agree with him that IBM is now better than before at telling its story – especially in publishing its Cloud reference architecture.
CIOs Don’t Want To Be Full-Time Procurement Officers
Sean believes it’s a funny time for CIOs, who are becoming dissatisfied with the multi-sourcing model typical of the last 3 years, as it’s turned them into virtually full-time procurement officers. He sees them splitting into two distinct groups as a result. In particular:
- Some want to in-source almost everything, perhaps engaging with IBM’s Infrastructure consulting to help design their new systems; they’re building new data centres – amazing considering the amount of free space available in existing facilities
- There’s a big discussion amongst others about outcome-based outsourcing, driven by the need to address business issues; they’re considering bigger bundles, whether of applications or the adoption of Cloud Computing
- Instead of being procurement officers, CIOS want to address technology-driven business transformation.
Innovation Brings Outcome-Based Pricing
Many organisations are embracing innovation and ‘zero basing’ their operations over relatively short periods. Here IBM’s analytics and ‘big data, fast data’ offerings are proving more relevant that the ‘people, technology and business process’ approaches of the past.
IBM is getting more involved in outcome-based pricing, taking payment for systems from the revenue growth of new systems, using the argument that it’ll ‘help you sell more’. The advantages of IBM’s approach here is dependent on the customer not hanging on to its own architecture. We’ve reported before that IBM is proposing mixed in- and out-sourced support around implementations of a common infrastructure. Sean indicated that trust is a dilemma for CIOs – one reason why the in-sourcing movement is so strong at the moment. He believes some CIOs are correct in believing they can do a better job through building their own architecture.
Common Architecture, But Different Applications At The Industry Sector Level
Rather than in different architectures, industry differences are in applications, according to Sean. There’s lots of commoditisation in IaaS, but – despite the fact they can be plug-in applications in the middleware layer – PaaS are very different between airlines and banks; and even between retail and trading banks. There are differences in posture by company rather than by industry sector, with many companies believing that the competitive advantage IT gives them is better if no one else knows about it. IBM on the other hand believes that the more a company designs around common structures, the more help it can give.
Innovation Is Stronger In Emerging Countries Than In Europe
Although there’s some pull for innovation in Europe, it’s much stronger in emerging ‘growth’ markets. Activities in these countries are being watched from Europe. He speculated that companies like Vodafone are aware of the moves made by Bharti Telecom, which has claims to be adding 2.5 million downloads for its mobile customers in the first month with the support of IBM. The established telecom suppliers in mature markets have infrastructures which ‘soak up cost’. He thinks the ‘six sigma manufacturing procurement’ model in which companies spend 14 months and millions deciding what to do is becoming inappropriate. IBM has an advantage in having built its architectures for IaaS, PaaS, SaaS and BPaaS on Open standards.
In countries such as the UK and France there are lots of legacy systems where the customer spends 70-80% of their budget on ‘keeping the lights on’. While some banks in Europe have revenues in the € trillions, others in Asia are experiencing a doubling or tripling of volumes over relatively short periods. In such cases you can’t just stick servers on the side.
Big changes are possible, although it’s difficult to do lots of problem solving quickly. Sean talked about Rio as a Smarter City reference customer. It built systems to address flooding through its Blue Thunder weather forecasting, realised it need a crisis management system and through lining them together ended up with a city information system. It can now set up a city control centre within 48 hours, allowing it to track, monitor and manage resources in a crisis through the deployment of disaster recovery services.
IBM’s Cloud Has Enterprise Resilience
IBM has a systems approach to its Cloud services, which has taken some time to reach maturity. Sean indicated that its Test and Development SaaS offering is growing, albeit at a slower pace than some predicted. He notes that one recent customer signed up multiple server resources (from an iPad on a train), committing to significant spending without IBM’s sales force knowing ahead of time.
He stressed that IBM’s Cloud is ‘a production thing’, unlike the approaches of some public Cloud suppliers who sometimes take their sites down over the weekend or lose customer data without too much concern. IBM’s vision is to work ‘with legacy systems, rather than on the side of them’.
Generational Issues – Digital Natives And Digital Tourists
We discussed the differences in purchasing and approaches to technology represented by younger people entering user IT departments. Sean used the terms ‘digital natives’ and ‘digital tourists’, which has parallels to the ‘born into technology’ v ‘learnt technology’ descriptions others use. He observes that many digital natives are joining at the layer under the CIO. Their attitudes are different. For instance:
- They don’t mind if the applications they build don’t work first time; when something’s broken they just reboot and start again; failure isn’t a problem – after all anyone who’s spent a lot of time playing computer games is used to failing repetitively
- They often don’t respect the restrictions of existing IT, asking ‘why doesn’t it just show up?’ and ‘why is it so hard?’
Sean fears that badly implemented Cloud Computing – perhaps by these new users – could end up like Client/Server computing in the 1990s, when we had to spend lots of work in stitching workloads together to get them to work at the Enterprise level. People lost interest when they realised they couldn’t get data from a Vax to something else, he cautioned.
CIO And Country Demand For Cloud Computing
CIOs are not yet putting a requirement for Cloud Computing into their RFPs, but the issue is being addressed in many of the conversations they’re having with IBM – especially when talking about infrastructure software or enterprise hardware.
On a country level within the North East IOT, Sean wasn’t allowed to talk in detail, although he reported a number of interesting developments. In particular he noted:
- ‘Tremendous activity’ in the UK and Ireland
- A lot (but at a lower level) in Germany
- He noted that activity was particularly strong in Denmark among the Nordic countries
- Even in Austria IBM has a couple of very major contracts
- There is less activity in Switzerland, where we’ve noted that large companies have become wary of American suppliers
Finally Sean replied to our question about the world economic situation by noting that there’s currently an equal split between those companies who believe an economic disaster is going to happen and those who believe it won’t: the former group knows that, although they don’t know exactly what’s going to happen, they’ll need to respond quickly to the emerging opportunities.
Some Conclusions – IBM’s Cloud Computing Approach Will Be Fully Tested
Sean did a great job of talking about IBM’s Cloud Computing advantages of course. If we’re right that the double-dip recession is coming then IBM will be fully tested. In the 2001-3 downturn data centre outsourcing was the big countervailing business, while in 2008-9 it was consumer devices. IBM took full advantage of the first: in the second it no longer had a PC business, although its decision to focus on profit – as opposed to revenue growth – and its constant investment in R&D set up its currently advantageous position. This time round we believe that Cloud Computing will be key. It will help organisations looking to downsize and shift spending to Op Ex rather than Cap Ex. IBM’s challenge will be to sign up new customers among SMBs. It can’t afford just to sell new services to existing users. As it pursues its opportunities it will need to focus on its own agility and learn from the digital natives.