Industry experts and CIOs have talked for years about the need to eliminate silos and integrate decentralized devices, software, knowledge and infrastructure into one cohesive strategy. Are we there yet? Not exactly, but we are beginning to see some real progress, and happily, the results are much less terrifying than many had imagined.

For example, there is now widespread agreement that clouds are tying together and giving access to disparate mobile devices, proprietary software platforms and previously incompatible networks — and that’s a giant leap forward. Additionally, and very much related, the debates about social media’s role in the enterprise have calmed down, and the benefits are unfolding. What all of this means is that real transformation is starting to occur — and IT is squarely behind it. Better still, transformation is no longer the “T word” feared and loathed by IT and business alike. Transformation — and its partner, disruption — are seen as necessary conduits to business agility and innovation.

A new book, Social Business by Design (Jossey-Bass, May 2012), by thought leaders Dion Hinchcliffe and Peter Kim of Dachis Group, offers insights about what’s happening. In the book, Hinchcliffe, (who wrote for Smart Enterprise Exchange last year about social business and agile methodology), not only tells businesses to rethink the modern organization in light of social media, but along with Kim offers ways to go about it. The authors explain how to choose and implement a social business strategy and maximize its impact. Several impressive examples, such as SAP, Procter & Gamble, MillerCoors, Bloomberg, HBO, Ford and IBM, are included to illustrate successful strategies.

Equally impressive to me is the fact that Dachis Group as a whole “gets” that although the benefits are crystallizing, becoming a truly social business isn’t an easy transition — especially for those with legacy systems and mindsets in place.

Dachis consultant, Tom Bennett, recently wrote in his blog that: “No matter what the ultimate definition of Social Business becomes, it is a major shift from the current way many organizations work … One can’t simply dismiss everyone and start over.” Adopting social media models is “as much about a change in behavior, skills and activities,” as technologies. Bennett goes on to say that transformation will require the right mix of strategy, design and leadership in order to succeed.

For its part, McKinsey also is offering its perspective on “Demystifying social media.” A new report, mainly geared toward consumer marketing, explains how non-marketing executives can harness social media to drive business and generate revenue. Clearly, as McKinsey states, social media is no longer an experiment. In a related video — “Making sense of social media” — consumers share their experiences, and McKinsey partners provide advice on how companies can build brand loyalty and manage the organizational challenges.

Another compelling discussion about business transformation is taking place at Saugatuck Technology. Researchers there note that the real potential for business innovation lies in the synergy and “combinations among mobile, social, data analytics, integration and collaboration, all playing off each other and exchanging value in their interactions.”

The heavy lifting, according to Saugatuck, will come in the form of a Master Architecture that has to take shape, enabling what the firm calls the Boundary-free Enterprise™ — “with solutions that free the mobile knowledge worker and executive from their desks and build on the cloud, as well as other capabilities,” such as social/collaboration, data analytics and integration.

Figure 1 - Emerging Master Architecture ©

Others have coined terms for collaboration platforms before, but I’m intrigued by the vision of a boundary-free enterprise that uses “time- and location-independent computing capabilities — Cloud, Mobile, Social and Data Analytics (CMSA) plus integration” — to function efficiently and collaboratively. Like Dachis, Saugatuck also acknowledges that much work has to be done, particularly in the area of integration — “the glue that links capabilities together and joins them to on-premises data assets in data centers where mission-critical money systems still operate behind highly-secure firewalls.” Saugatuck’s founder and CEO Bill McNee will talk about these concepts at the upcoming All About the Cloud conference, co-produced by the Software & Information Industry Association (SIIA) and OpSource May 8-10, San Francisco.

In coming months, Smart Enterprise Exchange will be featuring more details about many of these research efforts, as well as other tools and approaches that enable business innovation. Meanwhile, share your tales of terror-free transformation and how your enterprise is becoming more innovative as it becomes a more social business. How are you closing the gaps between silos at your enterprise? Is transformation back?

Paula Klein

Editor and Community Manager

Smart Enterprise Exchange

Over the years, return on investment has been the economic litmus test for most business spending — and IT in particular: For CIOs, a purchase either can show hard-dollar payback or it can’t. ROI was also the bottom line that brought IT under scrutiny of finance departments and auditors.

Certainly, the “go, no-go” rules loosened up a bit when productivity, competitive advantage and other “soft-dollar” results were considered. These intangibles were always difficult to measure with standard calculations such as net present value (NPV) or total cost of ownership (TCO), but they remained the exceptions — one-off purchases or solutions for individual departments or users.

Today, many old metrics and processes seem to be fading, and exceptions are now the rule. Many believe that with the proliferation of social media, consumer devices and cloud computing, for example, new ways to determine ROI — if such approaches even exist — are needed. And some are even claiming that ROI is not only the wrong metric to use, but that it doesn’t exist in reference to social media. Can this be true? If so, how can sound purchasing decisions be made?

We have discussed the economics of cloud and virtualization on Smart Enterprise Exchange in the past. As I wrote previously, “Most conclude that there is no one-size-fits-all ROI calculator that tells you when to go to a cloud model and how much you will save or pay. The most definitive answer about lower costs seems to be that you probably will see savings; but as with warning labels on medicine bottles, results will vary with the situation.”

My advice at the time was: “Conduct your typical due diligence by analyzing contracts, negotiating with providers and starting small.” But I am starting to realize that this type of traditional approach just may not work in the more amorphous world of social media.

Marcio Salles, who blogs about social media with a Brazilian perspective, recently included a great infographic in his blog on Smart Enterprise Exchange. Provided by MDG Advertising, the graphic addressed the ROI of social media for marketing purposes. In sum, it acknowledges that this is a “contentious” topic and offers several ways to measure effectiveness. Among these: going beyond click counts to include revenue generated, reduced returns, conversion rates, and positive brand mentions or feedback, among others.

Still, the company says that many factors such as closing business deals, encouraging new partnerships, quicker information retrieval (which translates to lower costs) and particularly, recruiting new talent, are “intangibles.” Among specific platforms mentioned, Facebook and Twitter were rated highly, and YouTube holds out the most promise. But how can their use be monetized?

Dozens of other recent blogs and consultants have raised the issue of social media ROI, too, and lots of discussion has ensued. Sean Jackson, Chief Financial Officer of Copyblogger Media, and Sonia Simone, Chief Marketing Officer, treat the subject in a lighthearted blog here but also raise some good points. Specifically, they conclude that revenue should not be a success factor for social marketing efforts. “The real measurement of return lies in the profits created from your culture of marketing.” Another social media executive offered some alternative metrics here, while a marketing strategist says not to worry about ROI — just move ahead with your plans.

But I suspect that marketing has different requirements than IT does. Would CIOs get buy-in for large-scale projects based on this advice? Typically, large global enterprises — especially those in regulated industries or with strict guidelines from their boards — need strong business cases for new investments. Has that mindset changed with social media? Must it change?

I believe that the landscape is evolving, but slowly. Uncertain financial returns are still inhibiting social media rollouts, according to many sources, including a recent InSites Consulting research report from the U.K. And even those who last year created social media ROI calculators are going back to the drawing board to make revisions.

CIOs can’t afford to stall and haggle over every purchase and every departmental request, and I agree that “calculating the ROI of social networks is not rocket science,” as this blog states. Nevertheless, sound decisions are key to good leadership and investment decisions should be based on more than popular trends or gut feelings. That’s the point of view Peter DeLisi takes in an upcoming new blog on Smart Enterprise Exchange next month.

Let’s keep this conversation going. What are your experiences in this rapidly changing market sector? Are your corporate purchasing requirements keeping pace with new media? Are RFPs and ROI finally a thing of the past?

Paula Klein

Editor and Community Manager

Smart Enterprise Exchange

Additional resources/ related blogs:

• A Framework for Social Analytics, Altimeter Group http://www.altimetergroup.com/2011/08/research-report-a-framework-for-social-analytics.html
• Social Media ROI http://mashable.com/2011/11/15/social-media-roi-measure/
• Social Media and B-to-B Marketing http://directmarketing.thomsonlocal.com/Win/News-Archive/Marketing-News/?storyId=84622
• Social Media Marketing Use Growing http://www.brafton.com/news/even-with-social-media-marketing-use-growing-implementations-just-beginning

Agility — like innovation, productivity and cost-savings — is a must-have at businesses today. If you’re not agile, you’ll succumb to the competition. End of story.         

But achieving agility is an ongoing story, and tactics vary company to company and task to task. Although I dislike the overused word “enabler,” IT definitely enables business agility and even has a starring role to play. At the same time, agility itself enables a business to reach its end goals — faster transactions, better productivity and lower costs. Agility results when business operates more efficiently, and therefore, there is no single solution — whether it’s cloud or virtualization or consumer devices — to attain it in an instant. Agility doesn’t come in a box or over the Web; it’s a combination of approaches measured in many ways.

Many business experts offer theories and examples of how to become an agile business. Mark W.S. Chun, Director of the  Center for Applied Research  and Associate Professor of Information Systems at the Graziadio School of Business and Management at  Pepperdine University in Los Angeles, told me recently that his latest research indicates that, contrary to many beliefs, public-sector IT efforts — particularly in Asia — are often more innovative and agile than those in the private-sector. While lower funding and transient management teams are usually business inhibitors, Chun says that when you’re small and scrappy, you take risks and adopt new ideas quickly — before the next administration, budget cuts or political shift occurs. That may be why mobile technologies and cloud services are being widely embraced by governments and their agencies, he says.

Smart Enterprise magazine will be examining “IT at the Speed of Business” in the latest issue. It includes a profile of Josh Morton, Sprint’s VP of IT Enterprise Services, who must empower its dispersed enterprise to respond faster and with greater agility than ever before. A major re-platforming of the IT infrastructure and a new mobile strategy are under way to meet demands.

At Avis Europe, reexamination of its business processes was a first step toward making effective use of resources and reducing costs to become more agile. Avis deployed CA Clarity™ Project and Portfolio Management (PPM) to manage risk and for visibility of IT service and resource costs.

In the best cases, agility is simply a way of doing business — and it starts at the top level of the organization. In this interview in the MIT Sloan Review, Christian Rynning-Tønnesen, CEO of Statkraft, says: “The ability to create strategies and adapt to changing conditions quickly is critical for maintaining a competitive edge.” Rather than slowing down the company with regulations, costs and overhead, Statkraft is pursuing sustainability to keep it ahead of competitors and its marketplace. “In just two decades Statkraft has grown from a state-owned, Norwegian-focused power supplier to one of the world’s largest renewable power producers,” according to the article.

Look for more articles and blogs about IT-driven agility — including outsourcing trends and the role of Enterprise Architects in making businesses more nimble — in the coming month on Smart Enterprise Exchange. Then let us know some of the ways your IT department is moving rapidly to meet business needs.

Paula Klein

Editor and Community Manager

Smart Enterprise Exchange

Will your business lower costs by using cloud services? That seems to be a key bottom-line question that CIOs — and their bosses — want to know. Why then is it so hard to get a simple answer?

Writer Doug Bartholomew reports in his article, Costing out the Cloud, that, “understanding cloud economics is sort of like going for a swim in a hidden lake” — you never know the depth before you take the plunge.

While that sounded true, I was left wondering why. How can a model designed to ease complexity be so complicated to price out — especially when nearly every department from HR to sales is jumping into the cloud computing pool?

When I investigated further, I found lots of research, analyses and case studies that I will share with you here. Most concluded that there is no one-size-fits-all ROI calculator that tells you when to go to a cloud model and how much you will save or pay; the most definitive answer about lower costs seems to be you probably will see savings; but as with warning labels on medicine bottles, results will vary with the situation.

Cost savings may be one of the prime reasons companies are flocking to the cloud, but as Steve Phillips, VP and CIO at Avnet, told us: It is “only part of the story. At Avnet, it’s more about adding new functionality more quickly and affordably than we could do it on our own,” he says.

Some analysts are comparing cloud economics to the outsourcing of a decade ago. In an Accenture report, “Cloud and the Future of Business: From Costs to Innovation,” issued earlier this year, the consultancy — which also provides IT outsourcing services — says that shifting computing and storage capabilities into the cloud offers economies of scale in terms of IT support, energy consumption and speed.

However, it also says that cloud computing is unlikely to result in huge transformational shifts “if it is understood solely in terms of cost savings arising from data centre consolidation and virtualization.” Indeed, just as business found that “the most effective forms of long-term outsourcing tend to have a perspective that is diametrically opposed to concerns about cost-minimization,” cloud computing has to be considered from a broad perspective as well.

Accenture’s conclusion? “Long-term cost benefit modeling for cloud computing is immature and demands much further attention.” So that puts you back where you started from.

James Staten, VP and Principal Analyst at Forrester, has also studied cloud economics, and asks in a recent blog: “Is your cloud strategy centered on saving money or fueling revenue growth?” Where you land on this question, he says, “could determine a lot about your experience level with cloud services and what guidance you should be giving to your application developers and infrastructure and operations teams.”

According to Staten, “the majority of CIOs would vote for the savings, seeing cloud computing as an evolution of outsourcing and hosting that can drive down capital and operations expenses. In some cases this is correct, but in many the opposite will result. Using the cloud wrong may raise your costs.”

Staten offers other insights in another blog about which applications to move to the cloud. He advises that: “For enterprises to make the most of a public cloud platform, they need to ensure that their applications match the economic model presented by public clouds. Otherwise, the cloud may actually cost you more.”

I also recommend reading a comprehensive white paper, “The Economics of the Cloud,” issued late last year by Microsoft. It offers models and criteria to use as a framework when making decisions about cloud economics. It is a very in-depth analysis of cloud cost considerations and includes discussion of infrastructure, data center and utilization; multi-tenancy options; support and maintenance costs; capital versus operational budget expenditures; private versus public cloud costs, and new application development costs.

It also notes that the emergence of cloud services is different from previous outsourcing and virtualization efforts and is “fundamentally shifting the economics of IT … cloud architectures facilitate elastic consumption, self-service, and pay-as-you-go pricing.”

The report cites four areas that may yield economies of scale and cost savings:

• Cost of electrical power

• Infrastructure labor cost

• Buying power

• Elimination of capital expenditure

So, what are the takeaways for budget-conscious CIOs and their business-unit partners from these experts? In my view, it’s to jump in and test the waters, but carefully. Conduct your typical due diligence by analyzing contracts, negotiating with providers and starting small. Know what type of cloud is optimal for each applications before you sign on. Are you looking at pay-as-you-go public clouds to offload peak capacity from your servers, or for a small, dedicated application hosted in a private cloud for one business group? The total cost of ownership (TCO) will be very different for each.

I’d like to know more about how you approach cloud economics at your enterprise. Does the pace of business allow for thorough cost analysis for each application? Are you saving money? Please share your experience and tactics by commenting on this blog and also take our poll here to compare your strategies with your peers.

Paula Klein

Editor and Community Manager

Smart Enterprise Exchange

When we decided to host a videocast on the topic of the Public Cloud: A CIO Perspective, a few people thought we had made a mistake in the title. "Don't you mean private cloud?" they asked. After all, that's the area where most of the current service hosting activity is right now. Are CIOs really thinking about hosting critical apps on the Internet?

That’s one of the questions we posed to our panel of experts — Timothy Chou, Dan Greller and Dave Hansen, during our webcast on November 11 — and I think the responses were very candid, surprising and thoughtful.

I knew that Tim — who headed up Oracle’s On-Demand business for many years and then became a book author, Stanford University lecturer and board member of several startup companies — was an avid cloud proponent. But I was more surprised when Dan, Managing Director at financial services firm, Legg Mason Technology Services, was on board with public hosting as well. Add to that, Dave Hansen’s perspective as former CIO and now General Manager, Management Products & Solutions and Security Customer Solutions, CA Technologies,  and there was a broad spectrum of backgrounds represented, all supporting the idea and citing lots of specifics. See what you think as they state their case in the video and in their answers to audience questions here.

The panelists agreed that we are in the very early stages in terms of hosted service adoption and it’s clearly being led by SaaS applications. Dan said Legg Mason is moving ahead with CRM and ITIL tools in the cloud and is investigating e-mail hosting as well. He says infrastructure-as-a-service (IaaS) is limited to nonproduction environments at the company so far, and platform-as-a-service (PaaS) is not yet an active area for the company. Read Dan's responses to audience questions here.

Tim noted that cloud hosting — what he calls "compute and storage services" — began with business applications only about three years ago. In terms of PaaS, “We are in year one,” he says.

Despite the early stage of the market, however, the benefits of agility, innovation, lower support and maintenance costs and fewer resources were cited by all three panelists. And even the bugaboo, security, was described as “an issue but not a showstopper” by Dan Greller, who noted, “We’ve been using ADP [for payroll processing] for decades.”

The call to action for CIOs was to learn all you can about your current computing costs as well as your business needs and start hosting some apps. I can’t recap a one-hour discussion in full, but here’s a quick summary of key quotes and action items:

• Dan Greller: Consider the case for cloud hosting in terms of outsourcing and distributed computing of the past. Use the same practices of due diligence to vet service providers and to negotiate contracts as you have in the past.

• Dave Hansen: You can also automate your portfolio of SLAs electronically to monitor and measure in real time. That will allow you to implement SaaS faster.

• Tim Chou: “Customers and IT for too long abdicated software to their vendors. The tech guys had no idea about the specific industry sector you are in.” Now it’s time to get back into the picture, he says. Ask your vendors — and your in-house developers — to provide apps as a service; customers can now build software in new ways that are not detached from the domain expertise of a business. Moreover, he says, too many companies have no idea how much they pay for computing and software ... as a result, "equipment is often unused, underused and out-of-date," he added. 
  

Still not convinced about the need for public cloud computing? Register and watch the full video and see if your concerns — regarding multi-tenancy, hybrid clouds or change management — have been addressed by these industry experts. If not, start a discussion of your own or send a question to me at editor@smartenterpriseexchange.com, and I will have the panel address your concerns.

  It’s probably easy for resourceful CIOs to think big thoughts and to generate ideas about how social media, cloud service models and collaboration will change the enterprise and its partnerships. Much more arduous is actually executing on these goals; the daily efforts needed to lead change, drive growth, and see results on business efficiency and competitive advantage.
       That’s why Smart Enterprise Exchange strives to bring you both strategic thinking and tactical advice. This month, contributor Bob Violino writes about an unexpected and perhaps a pivotal impact of cloud computing: It is redefining how global supply chains operate. “More specifically,” he writes, “it is transforming how IT interacts within the organization and with external business partners.”
        Jeffrey Kaplan, Managing Director at THINKStrategies Inc., a Wellesley, Mass., consulting firm, describes it this way: “The cloud and SaaS [software as a service] are basically fulfilling the promise of extranets of the dot-com era.” The most obvious example, he says, involves “supply chains, because of the fundamental capabilities that cloud providers offer in terms of the ubiquitous access.”
       But how can CIOs carry out this promise in their own businesses? We offer several examples. For OfficeMax Inc.’s Executive Vice President, Supply Chain, Reuben Slone, the cloud is used in a transportation portal that lets global suppliers better track product shipments and share information about orders and deliveries.
       And MEDecision Inc., a Wayne, Pa., provider of collaborative healthcare management solutions, uses cloud services so that member providers can perform real-time interactions with health-plan administrators.
       Last month, David Buckholtz, Vice President and Division CIO for Enterprise and Corporate Technology at Sony Pictures Entertainment in Culver City, Calif., discussed his gradual efforts at using platform as a service.
       As these examples illustrate, implementing emerging technology takes planning and small steps, but the results can be transformational to the business. Do you agree? Add your comments to the articles or start a new discussion.
       We — and our sister publication, Smart Enterprise magazine —  will offer further case studies and analysis of this topic in the next several months, in addition to global thought leadership and professional development advice.
       Building a strong community of IT executives has been the main goal of this website since we began three years ago, and your participation in helping us to do that is invaluable. You may have noticed our new home page design when you logged on. And beginning this month, selected content across the Smart Enterprise Exchange site will become accessible to nonmembers. The broader reach should allow for more access to a wider range of IT resources for all while still providing exclusive access to new articles, the member directory, blogs, discussions and groups.
       We hope you continue to benefit from the community associations and from the experiences of your peers. Please let us know your challenges and successes with emerging technology execution, too.
      
       Paula Klein
       Editor and Community Manager