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6 Posts tagged with the economics tag

Robotics Revisited in Editor's Notes

Posted by Paula Klein Mar 11, 2014

What a difference a year makes. Last year at this time we were writing about robots as a long-term play. Something you had to watch and consider, but maybe not on your immediate radar. We asked: Should robots be in your strategic plan for 2013? Now, in 2014, the answer is a decisive yes!


Last year I wrote:

“The signs are all pointing to mainstream business use of robotics in the very near future. Gartner analyst Jackie Fenn told Smart Enterprise Exchange that “IT staffs should expect employees or business units to introduce robots into the enterprise, so robots should also be a part of your consumerization plans and initiatives.”


Are you prepared for the swift progress that’s taking place? Beyond the much-touted autonomous cars and vacuum cleaners — and even Amazon’s widely reported use of package-delivery drones — mainstream manufacturing businesses, such as Toyota and Tesla, are using industrial robots for parts assembly and other tasks, and additional industry sectors are jumping in as well. The TechNavio research firm recently forecast that the global service robotics market will grow at a compound annual rate of 19.05 percent from 2012 to 2016. One of the key drivers is the increasing demand of professional robots for medical applications, according to the report.


Medical Applications

As an example, a business unit of the Henry Ford Health System in February announced it will invest in and partner with the Quality of Life Technology (QoLT) Center to develop new digital health and robotic solutions to improve patient outcomes and transitional care after hospitalization. Carnegie Mellon University’s Robotics Institute will be a key R&D partner working on this initiative to develop “assistive robotics” that pair humans and with robotic aides. [Photo shows robotic surgery at Henry Ford Hospital].maze-WEB-21.jpg


Separately, Google is also reportedly acquiring robotic technology and talent, and is working with Foxconn on new robotics and software for manufacturing and assembly.


What does it all mean for IT leaders? As I also wrote previously, technology and the economy are at a crossroads on the issue of automation. CIOs — as both technology and business leaders — must encourage and support robotic efforts to keep their businesses competitive. At the same time, the U.S. government must addresses potential job loss and economic impacts. As Gartner’s Fenn noted: "CIOs and IT managers should consider mobile robots as a way to automate tasks, ... engage users and extend human capabilities.”


When the book Race Against the Machine was first published in 2011, it sparked conversation and debate about what automation can achieve and how it will affect jobs and the economy. This year, Erik Brynjolfsson and Andrew McAfee’s new, highly acclaimed book, The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies, is taking the discussion even further.


Considering the Challenges

It’s not the gee-whiz factor of Google cars or intelligent robots that’s generating the most attention. It’s what the authors call the “thorny challenges” and choices we face as a result of digital disruption, such as job displacement, economic shifts and deep-rooted cultural and social change. CIOs should be leading these discussions along with conversations about automation technology and its impact on the business.


Some of the disruption may come from business process automation (BPA), not robotics, and might seem more mundane. For example, everyday processes such as expense reporting, invoicing and employment reviews are among the areas where organizations are using digital technology to move away from paper and manual processes, CompTIA’s Trends in Workforce Automation and Communications study finds. That’s why business process automation is making inroads with smaller businesses, as reported here. Three-fourths of small firms (fewer than 100 employees) surveyed by CompTIA have seen a significant or moderate increase in their use of BPA technology over the past two years


And the impact is far from mundane. “Technology is no longer functioning in a simple support role, but is increasingly used to meet business objectives and drive differentiation,” Seth Robinson, director of technology analysis at CompTIA, reports. “Companies with aggressive technology adoption mindsets are able to advance to process-level issues and create competitive advantage.”


What is your mindset regarding robotics? Are you convinced yet that robotics should be the next digital technology included in your 2014 IT plan—and beyond? What initiatives are you involved with?



Paula Klein

Editor and Community Manager

Smart Enterprise Exchange


Platform economics and two-sided markets may sound like arcane concepts — straight out of an MBA course textbook. Yet, when I read up on these ideas and heard business and IT leaders discuss the topic at a recent event, they made perfect sense. Essentially, it’s about how new, open, online markets are disrupting and transforming businesses and industries in totally unprecedented ways. Value is created by an ecosystem of customer and partner interaction and complementary products, not from one single side of the market: the more participants, the greater the value.


We’re already aware of many “platform” pioneers such as Google, Amazon and iTunes that upended long-standing business models. But perhaps we haven’t thought about how radical these markets were when first introduced. I can remember the term disintermediation being used to describe how digital disruptors — say, online retail or on-demand entertainment — were taking business away from traditional brick-and-mortar stores and services.


Next-generation Content and Commerce

But now, the concept and the technology have leap-frogged those early models completely. Not only are cloud services, consumer devices, open software and “smart” devices ubiquitous, they are changing the rules — and the game itself. Just consider the changes that may take place now that Amazon founder Jeff Bezos owns the venerable Washington Post: It could, as Henry Blodget at Business Insider is quoted as saying, become “a laboratory for the next generation of integrated content and commerce.”


Marshall Van Alstyne, a professor at Boston University and MIT, has studied market disruption for many years. He writes that:

Platform businesses match and benefit from two-sided networks. Airbnb matches people with spare rooms to people with travel plans. YouTube matches content creators to content consumers. eBay matches buyers to sellers. oDesk matches tasks to talent, just as Apple iTunes matches users to apps and listeners to music...


Ever-cheaper information and connectivity have revealed demand-interdependent or “two-sided” network effects that are turning old concepts upside down. For instance, we intuitively understand that a product with network effects gets more valuable as more users use it: Think about telephones, faxes and email gaining critical mass and creating S-shaped growth. But two-sided network effects are different. Here, a product or service gets more valuable to one group of users the more another group uses it. Consider that a single Internet searcher gets more value as others produce more Web content, just as a single content producer gets more value as the audience of searchers grows.


Forging Ahead Without a Map

What does this all mean for your business? Our current issue of Smart Enterprise magazine gives you multiple examples — from Pinterest to Tesco to Rackspace — of businesses and industries not only reinventing themselves in the digital economy, but thriving. Can your enterprise say the same?

As Bezos wrote in a letter to his new employees:


There will, of course, be change at The Post over the coming years. That’s essential and would have happened with or without new ownership. The Internet is transforming almost every element of the news business . . . and enabling new kinds of competition . . . . There is no map, and charting a path ahead will not be easy. We will need to invent, which means we will need to experiment.

How are you benefiting from new digital opportunities and platform economics? Are your customers also your partners? Let us know how your are reinventing your business.



Paula Klein

Editor and Community Manager

Smart Enterprise Exchange




As a business executive, every year can be viewed as frantic, stressful and demanding. Add to that mix 2011’s global economic uncertainties, persistent unemployment and heightened pricing pressuring in every industrial sector — and the stress mounts.


Yet I believe that IT executives faced greater challenges than most this year, making it possibly the most disruptive one yet. Not only were they dealing with the same external pressures as their peers, but also with unprecedented pressures from within their enterprises. Never before have so many stakeholders, with so many demands, questioned everything they do. Answer correctly and you’re a hero; fall short and you may be out. It clearly wasn’t a year for traditionalists or for holding onto the past. Forget old formulas and fixes; this is a new era of IT — the Era of Now, as Peter Hinssen describes it.


As executive coach Dina Lichtman wrote earlier this year, “... businesses have forever changed ... [and] CIOs face a unique challenge in dealing with these massive disruptions.”


Seen this before, you say? Not really. When PCs came into the enterprise, they didn’t threaten to displace every corporate app and demand access to corporate assets from the far corners of the world. But that’s what consumerization of IT and mobile devices are doing. Customers have as much say in which social media platform a business chooses as the enterprise architect. When in the past have CIOs been told to sanction “bring your own device” (BYOD) technology and to embrace leaderless leadership?


Similarly, when businesses sent back-office processes offshore years ago, it meant job losses and reengineering, but it didn’t cause the upheaval in data centers and among individual business units that cloud computing models seem to be producing. The pent-up demand for services, coupled with resentment against IT’s sluggish responses, are widespread. As former CIO Joe Puglisi acknowledged in his blog, “the breadth and scale of the offerings” are unlike those of the past.


How can CIOs even contemplate innovation in this environment? It’s difficult. Even the giants in health care, such as Kaiser Permanente, are still taking relatively small steps to develop fresh IT solutions to age-old problems.


At Smart Enterprise Exchange and Smart Enterprise magazine this year we have tried to offer strategies, resources and tactics for IT executives facing these real-world challenges every day. Those who are ahead of the pack, such as the CIOs and IT teams at Sprint Nextel, Volvo and JetBlue, aren’t magicians, nor do they have unlimited resources. They do have lots of flexibility, real desire for change, and good relationships with both top management and the business units they serve. They are taking risks and accepting what CA Technologies CIO Greg Valdez calls the IT leadership challenge to change and adapt. We’ve also offered enterprise architects their own forum to exchange ideas, strategies and tactics in the Smart Architect group.


My final suggestion for the year, then, is this: Rest, relax and enjoy the holidays. Recharge and reflect. Then, get ready for more disruption ahead: Consumer driven IT, cloud migration and mobile madness will continue full speed ahead. One tool you’ll have on your side is the Smart Enterprise Exchange community to offer guidance and assistance at the speed of business.


Health, peace and joy to all,


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:




We all get so immersed in our busy professional lives that we often forget to reflect on the big picture and human side of information technology and its role in global society. I was reminded of this when I recently spoke with Jiten Patel, whom I had the pleasure of working with when he was CIO at the microfinance organization, FINCA.


Like you, Jiten works in IT-driven organizations and deals with the complexities of delivering secure consumer technologies and cloud computing services to internal and external stakeholders. In particular, his lens is open to the worldwide view — especially, developing nations. In his current role as CEO of MicroPlanet Technologies, Jiten provides cloud services to microfinance institutions that, in turn, make microloans in Latin America, Asia and Africa.


For some of us, it’s difficult to connect the dots between high-technology platforms such as cloud computing and the poverty, lack of infrastructure and instability that many of the world’s populations face. We frequently hear about the boom in cell phone use in developing nations and the growth of high-tech industries such as call centers, often outsourced from U.S. businesses. But the realities of unreliable electricity, lack of Internet connectivity and insufficient skills are far more common. As Jiten writes in his blog on Smart Enterprise Exchange this month, information and communication technology (ICT) holds out promise and opportunities for these nations despite huge challenges. I encourage you to comment on his blog and to get involved as you can. You can also join a group on this site to discuss issues with your peers in London, India or Mexico Or on the topics of cloud computing, green IT or Web 2.0.




All you need to do is scan the headlines to see stories about ICT’s role in economic growth in countries from South   Africa to Kenya; Brazil to the Philippines. Brazil this month announced that it is offering 75,000 scholarships for secondary students to study science and engineering — fields that lag significantly behind the study of humanities. Right now, Brazil has a shortage of qualified applicants for the high-tech industries that are growing most quickly. This contrasts with other fast-developing nations, such as India and the Philippines, where graduate choices are heavily skewed toward computing, science and engineering.


If you’d like a more academic explanation of global economics, several upcoming new business books may provide helpful background and food for thought. The basic principle of Western capitalism is the subject of two upcoming business books — each with a different conclusion. Based on previews of the book Capitalism at Risk: Rethinking the Role of Business, co-authors and Harvard Business School professors Joseph Bower, Herman Leonard and Lynn Paine, argue that while governments must play a role, businesses should take the lead in sustaining market capitalism. Due out in October, the book explains how business “must serve both as innovator and activist, developing corporate strategies that effect change at the community, national and international levels.”


By contrast, Standing on the Sun: How the Explosion of Capitalism Abroad Will Change Business Everywhere, due out next February, contends that new economic models will unfold as the emerging economies of the world — primarily, Brazil, India, China and others — surge forward. The co-authors, Christopher Meyer and Julia Kirby, ask: “As these fast-growing, low-income economies mature, will they adopt the practices of the old guard or will they make their own way, and create the next prevailing version of capitalism?”


Finally, in India Inside: The Emerging Innovation Challenge to the West, due out in November, leading management experts Nirmalya Kumar and Phanish Puranam describe the quiet, but dramatic rise in innovation occurring in India — from B2B products and R&D outsourcing to process and management innovation. The authors maintain that “for certain kinds of innovation, the long-held monopoly of the developed world is over.”


So, as some of you wind down the last days of summer holidays, or perhaps as you travel the globe, observe the rise of technology and weigh its implications for future economies. Then consider: What role will you and your enterprise play on this global stage?



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

Paula Klein

Paula Klein

Member since: May 14, 2009

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