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7 Posts authored by: Tony Navarrete
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I'm guessing that this blog's title is going to generate a really high hit rate compared to my other blog postings. Some of you are probably reading this hoping for a clever (politically incorrect) punch line to the question I pose. And another group of you (colleagues, mostly) are hoping to read the scandal blog before it (and I) get censured.   I know the first group is going to be disappointed and I sure hope the second group is, too!

 

So let me get right to answering my question: Why is running a public cloud like prostitution? Well it isn't. There's nothing there. As a service provider, you have nothing to fear. At least, you hope so.   At least, that's what the folks who run Craig's List thought. If you search through the Internet (I'll leave this exercise to the reader) you'll find that several months ago the Craig's List folks got into trouble because along with all the postings for free baby cribs, cheap horse manure and reasonably priced collectable beanie babies, a number of their users were selling, well, themselves.

 

As a cloud service provider you probably won't have to worry about that exact scenario but you do need to think about what customers are doing and how that affects you and your reputation.   And the great thing is that if you take a holistic approach when building out the automation and compliance processes this "best practice" solution provides three benefits. First, you’ll generate efficiencies (and therefore greater profits) for your company. Second, you’ll go a long way towards protecting your reputation as a service provider. And, third, you'll be in a position to provide huge value-add that customers will be willing to pay premiums for. In fact, that level of provable compliance may be the key factor in whether a customer chooses your public cloud service as an option.

 

One particular example where implementing a cloud offering that holistically blends automation with compliance results in a win-win scenario for you and your customers is compliance with the Payment Card Industry (PCI) Data Security Standard (DSS). PCI DSS is intended to protect payment cardholder data (think credit card data) and covers all aspects of how cardholder data is stored, processed, or transmitted. While enterprise customers may have developed sound approaches to meeting PCI compliance standards in more traditional computing models, once everything gets vritualized and dynamically assigned, it's a lot more complicated. Trying to figure out how to stay compliant in a cloud environment can be very daunting to enterprise customers. Service providers that offer potential customers this kind of compliance across the dynamically allocated environment are offering customers a huge benefit and it's a compelling differentiator.  

 

Taking a holistic approach and incorporating compliance into your architecture and offerings should be a fundamental part of your business plan. Make it a differentiator and a reason to lower potential customers' concerns about what might be appropriate to move to a public cloud environment.

 

While maintaining environments that meet compliance regulations is an attractive benefit to customers, so is the resulting lowered auditing overhead that this could represent for them.   A recent ComputerWorld Resources article titled "Top 5 IT Budget Killers" listed storage expansion as #1, hardware sprawl as #3, and compliance as #5.   Imagine how compelling that would be to enterprise customers, particularly smaller IT organizations where trying to keep up with all the compliance requirements can be overwhelming.

 

There are two downsides to not baking in good compliance practices and offerings in your cloud environment. First, your customers' compliance auditing requirements are surely going to expand into your environment, so you'll be participating in their auditing practices, anyway. You can participate efficiently or you can do it the hard way. The second implication is unwanted press if one of your customers isn't quite up to compliance requirements. Do you want to run the risk that some of your other customers will get nervous about your ability to provide a safe computing environment?   "What else hasn't come to light?" they’ll be thinking. Is this incident indicative of other problems? Why isn't this service provider making sure I don't hurt myself? See my previous blog titled "Public Clouds and the Darwin Awards" for my thoughts on that.

 

Oh, and just a reminder. If you email me your credit card number, expiration date and credit card security code, I'll happily agree to, well ...

 

These are my latest thoughts on the business side of cloud. I'm dying to hear what your thoughts are. Leave a comment. Share a thought. Or catch me on twitter at @tonynavarrete or #bmccloud.

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In my most recent blog I wrote that IT Cost Transparency is a good for IT. (IT Cost Transparency is a Selfish Pursuit). In this blog, I'll highlight why that transparency is a benefit to your customers, which in turn becomes a benefit to IT.

 

When IT costs are a black box, customers don't have a sense of what things cost and therefore can't make informed decisions.  In fact, when customers don't have that visibility, two things happen.  First, customers end up with an unrealistic sense of IT costs.  Second, customers don't necessarily make optimal capacity demands related to services. 

 

When customers can't see the financial implications of choices they end up with a "split personality in terms of costs". On the one hand, they feel that all IT decisions are "free" while, simultaneously feeling that IT is too expensive.  Imagine that the menu at your local restaurant had no prices but they sent you a monthly bill.  After the fact you might figure out that those out-of-season entrees were pretty expensive.  Without the information you need to make informed decisions, at best you’ll feel IT costs are bewildering but more likely than not, you’ll feel that the cost are too high. Yet, that's exactly what many IT shops do each quarter.

 

The second result of this lack of transparency is that customers aren't going to make optimal choices about service and resource consumption as a whole.  Most people are reasonable and treat the company's money as if it were their own. But it's hard to do that when you can't see the financial or the resource implications.  It's a lot like making airline reservations via the corporate travel site.  Most people are pretty diligent about making choices that best balance their travel needs and convenience against being a good corporate citizen.  And, at the very least, you know your manager is going to come looking for you if you choose the $3,000 ticket between Boston and San Francisco.  But at least you purposefully made that decision.

 

In a previous life (like 20 years ago, not 300) I experienced firsthand the power of IT Cost Transparency. At that time, Stanford University owned the largest mainframe IBM made.  The university had two large peak usage cycles: September (start of the fiscal calendar as well as when all the students arrived) and December (last minute alumni donations coinciding with fall quarter grading).  The rest of the year, there was plenty of mainframe capacity.  (Sounds like a perfect opportunity to exploit cloud…).  That particular year, Stanford wasn't going to "make it". Expected demand was going to outpace our capacity and buying a new mainframe was off the table.  One of our strategies to get through peak capacity demands was to implement "showbacks".  Each time an administrative user logged off an administrative system, we'd show them how much they were costing the university.  We never actually billed anyone.  We just showed them how much of the university's money they'd spent.  We did a lot of things to make sure we squeezed through those peak periods, but the single biggest impact was to help users understand the implications of their choices.  (Like asking them if they really wanted to search for all the undergrads named "Steve".) 

 

A more personal example of the power of cost transparency is the introduction of smart meters by our local utility company.  My wife loves this.  She's the alpha geek in our family and has spent a lot of time on the smart meter website studying the comparative energy efficiency and cost implications of our various appliances.  Her most significant discovery is how much power our appliances waste in "stand by" mode.  Like our swanky toaster oven.   Or our coffee maker. Or my Xbox, our TVs, stereo, phone chargers, electric kettle, elliptical exercise machine, electric toothbrushes, etc.  My wife is very willing to sacrifice our convenience for the cost savings and "good global citizen" benefits of using power more wisely.   Thanks to the transparency we get from the smart meter, we're keeping all those appliance unplugged when not in active use.  We're doing our small part to lower California's need to build more power plants.  And we've lowered our monthly utility bills (microscopically). 

 

These more informed decisions clearly lead to better decisions. Customers feel more in control of their decisions.  In turn IT benefits.  Customers gain more confidence that IT knows what they’re doing and customers make more realistic consumption demands, therefore reducing the need for IT to plan for or build more capacity than they really need to meet inflated customer demands.

 

I'm sure you can think of lots of other benefits that come out of providing cost transparency to your customers.  While you compile your own list, I'll keep myself busy by repeatedly pushing the "start" button on our toaster.  I'm sure that any moment now our kitchen appliances will start working again.

 

These are my latest thoughts on the business side of cloud. I'm dying to hear what your thoughts are. Leave a comment. Share a thought. Or catch me on twitter at @tonynavarrete or #bmccloud.

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Chances are that there's at least one organization in your company that is a complete enigma to you. You have no idea what the group really does, why they have so many staff, why they all haven't been outsourced long ago, and why the company spends so much money on that group. And most annoyingly, why aren't you ever invited to their group parties? If someone were to ask you, "How many people work in department XYZ?" your response would be, "About half."

Okay, so go on, tell me. Who is that group? Marketing? Human Resources? Sales? Accounting?

Well, guess what? If I asked that question of almost any other person in your company, the answer would almost certainly be: IT.

Why do people feel that way about IT? One of the reasons is that IT is a big black hole in terms of what it's doing and why it costs so much. And IT costs a lot. For many companies, 10% of their total corporate annual spend goes to IT. That's a big number for most companies.

So, how do we change this perception of IT? One big step is through "IT Cost Transparency". That's another phrase that you see being bandied around lately. What does that mean and why should you care? Aren't your hands already full with ITIL, Cloud and BSM? In this two part blog I'll write about the benefits of cost transparency. Today I'll focus on the benefits to the IT organization.

So, here's why IT should selfishly be pursuing IT Cost Transparency. (I care about this enough to capitalize each letter!) You don't want to be outsourced. Not only is that bad for you, personally, it's potentially a bad thing for the company.

At its core, IT Cost Transparency refers to the growing need for IT leaders to accurately plan, track, manage and EXPLAIN the costs of IT. Even more importantly, IT needs to be able to leverage that information as the basis for informed decision making (like understanding whether it makes more financial sense to build an internal cloud vs. leveraging a public cloud and understanding which services and components provide the fastest ROI when moved to cloud-based computing).

IT Cost Transparency spans several different aspects of IT, not just figuring out the cost of servers. Here are a few of the dimensions covered by this area:

  • Service costing and management - being able to model, plan and accurately adjust the components necessary to provide business services to the lines of business as well as the underlying technical services used to support those services. Having this information ultimately lets you implement chargebacks, which we'll cover in the next blog.
  • Asset lifecycle management - all those servers and software cost real money, and you shouldn't be going "P to V" (physical servers to virtual servers) until you've clarified the financial implications of your current servers (you still have to pay for the new servers, so you will likely want to virtualize the older ones first).
  • Supplier management - according to IT industry analysts, roughly 70% of every dollar IT spends goes out the door to a vendor (Telcos, contractors and consultants as well as vendors like BMC, Microsoft, Dell, HP, SAP, etc.). How do you optimize and manage that supplier spend? Given that this is such a big part of IT's spend, what are you doing to manage that vendor spend? Are you paying for shelf-ware? Or over-buying user licenses or capacity?
  • Demand and portfolio management - what are the financial implications of taking on new projects? Can you really afford to support new systems you're planning to build? What are the ongoing implications of new application and staffing costs?

As you can see from this list, IT Cost Transparency isn't necessarily about cost savings -- though that's a good potential outcome. Ideally, cost transparency should help IT understand where its spending money and enable more educated, sound decisions about how and where you spend your IT dollars. The result may be that you're not reducing IT spend, but you should be getting higher business value for those same dollars.

 

Another key aspect of IT Cost Transparency is to communicate this information to your customers in their language, so they understand what's going on. Essentially, "turn a light on in that black box" so customers see what they're getting for their money. Without that transparency, everything is suspect in the customers' eyes. Transparency also goes a long way towards understanding and partnership with the business. It allows customers to make educated decisions about IT consumption, even though it might be painful to be compared more openly to alternatives such as outsourcers or public cloud providers.

 

The trick, once you start to communicate this information, is to be sure that IT is actually providing value to the business!

 

Next time, I'll write about the benefits that customers get out of cost transparency (which, in turn, benefits IT.)

 

In the meantime, if you don't mind my asking, “How many people work in your organization?"

 

These are my latest thoughts on the business side of cloud. I'm dying to hear what your thoughts are. Leave a comment. Share a thought. Or catch me on twitter at @tonynavarrete or #bmccloud.

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My colleague Lilac Schoenbeck has been writing about various analogies for the cloud and ways to explain the value and power of cloud-based computing.    I'm hopeful that you're finding those analogies useful.  But, you may find that your colleagues, particularly your business colleagues, need something more tangible.

 

How about a whole new strategy?  Imagine running around in front of your colleagues like a headless chicken, throwing pieces of paper at them and telling them, "We need that extra capacity now!"  All the while everyone's laughing. 

 

Building on the success of our ITIL airport simulation class, we've rolled out a fun, hands-on cloud simulation event where your job is make your airline the most profitable while competing against the computer and a big clicking clock.  Oh, and while you're having fun --particularly if you've got a real-life business person sitting in the Data Center Ops role -- everyone develops an understanding of cloud planning and service delivery considerations.

 

This four hour session (I'm so glad we decided against a 3 hour tour) is intended for IT professional and business leaders looking for a high level understanding of cloud as well as for IT professionals in the earliest stages of cloud planning.

 

To find out more about upcoming simulation events scheduled around the world, look for the cool cloud simulation banner on www.bmc.com (this week only) or visit the cloud simulation overview page.

 

At the risk of using the word "fun" one more time, I participated in a simulation event recently and it really was [fill in synonym for "fun" here].  And in case you're wondering who won during our session, all I can say is, "The Tokyo team rocks!"  … Even though I "lost" a server because I mistook a change order for my napkin and threw it away.

 

These are my latest thoughts on the business side of cloud. I'm dying to hear what your thoughts are. Leave a comment. Share a thought. Or catch me on twitter at @tonynavarrete or #bmccloud.

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One of the wonders of the Internet is that it allows purely anonymous people to appoint themselves judges of something called "The Darwin Awards". If for some reason you don't really use the Internet, let me explain what this is. It's an unofficial list of people who "Died in the stupidest manner, thereby removing themselves from the gene pool." This year's finalists include the man who stood on a wheelchair in order to clean the bird feeder on his 23rd floor apartment balcony. And the man who tried to troubleshoot the odd sound his truck was making by having a friend drive the truck at high speed while he hung underneath the truck to investigate.

 

And this is related to cloud-based computing, how?

 

In each case, a "reasonable" person was attempting to solve a problem following what he thought was a reasonable approach. They just thought they knew more than they did. And the consequences weren't pretty.

 

And that's where cloud-based computing and the Darwin awards come together. With all the hype around cloud, lots of IT organizations are rushing to implement cloud. Even though they don’t really know what it is or how to go about doing it properly. But many IT organizations feel pressure to "show value" by showing their customers that "IT is looking after you - look we've implemented cloud."

 

And this is a place where cloud service providers can really help to make a difference in their customers' lives. By guiding and reorienting customers in the right direction and toward the right choices so they don't hurt themselves. In particular, here are a few areas where IT shops "go awry" (envision them hanging from the underside of that truck):

 

  • Servers without appropriate security and governance requirements. Some categories of users are going to be anxious to provision public-cloud based servers as a quick alternative to enterprise IT. Often, this will be for more informal use of a server, such as for short-term development purposes. Surely, individual users requesting those servers can skip the monitoring and compliance options, can't they? This is an example where public service providers could help customers establish tailored self-service mechanisms so that individual users are guided to appropriate choices.
  • Confusion around virtualization vs. cloud-based computing. A number of IT shops confuse virtualizing their current servers in their current configurations with really exploiting the ability to leverage the benefits of cloud. If you simply go from the same mess o' physical servers to the same mess o' virtual servers, you're way undercutting potential efficiency savings. Helping IT shops to think through the right migration process is a huge value add.

Big box stores are a good real-life example of providing (or not providing) this kind of value-add. There are three different big chain home improvement stores near me. When I know what I want (or think I do) I can get in and get out fast. And often times, their prices are cheaper than specialty stores. That's awesome. But sometimes, that can be, well, not so good. Sometimes, I *think* I know what I'm doing. In those situations, getting in and out without talking to someone who really understands the big picture (and the detailed implications) is a mistake. I've not realized it, but I've traded personal efficiency *at that moment* against long term efficiency. Or safety. I'm glad to say that over the years I've learned that for some things, I need to ask a professional for advice. Did you know, for example, that even though they are much nicer to look at, shiny tiles are NOT recommended for the shower floor?

 

There are, of course, a zillion different kinds of mistakes IT shops will perpetrate while implementing a cloud-based approach to computing. A lot of them will be organizational ones or internal expectations or process kinds of mistakes where service providers can't really help. But it would be great for service providers to step in and provide that value-add when they can. The trick is for service providers to figure out a way to proactively help customers. Sadly, there's a high correlation between those of us who don’t feel the need to stop for driving directions with those of us who don't feel the need to stop and ask if a welding torch really can be dual purposed as a barbecue lighter.

 

In the meantime, I'd appreciate it if you'd slow down. I see a speed bump coming up and I'm not sure how much longer I can grip the axle.

 

These are my latest thoughts on the business side of cloud. I'm dying to hear what your thoughts are. Leave a comment. Share a thought. Or catch me on twitter at @tonynavarrete or #bmccloud.

Differentiate or Die

Posted by Tony Navarrete Jan 25, 2011
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Inertia is a great thing. It's what makes me watch 30 minutes of a TV show I don’t really like (but don't hate enough to change the channel). And it's been a big reason why IT customers, particularly service providers' customers, don't move. Too much pain for the gain. But as cloud technologies evolve and make it easier for customer a customer to "pick up his ball and go home", how do you make sure you're still in business a few years from now?

 

For IT customers, one of the great promises of Cloud is that provisioning components necessary to meet their IT needs will be seamless, transparent and make it irrelevant where those components live and who's managing them. One of the results of this commoditization is that this gives IT customers greater freedom to choose a service provider. We've certainly already seen a lot of examples of enterprise IT customers taking advantage of Amazon cloud services rather than leveraging corporate IT services because the customer can virtually (pun intended) snap their fingers and get servers provisioned in a fraction of the time that corporate IT takes.

 

And as IT customers start flexing this cloud benefit, the nature of "competition" for IT customers will change pretty fundamentally. In fact, it really already has. And this is true for both enterprise IT as well as for service providers. Where enterprise IT once had a monopoly, it now finds itself competing with service providers in a way that it hadn't been before. Cloud makes it easy for IT customers to bypass enterprise IT and even eliminate IT's role as the middle man in technology decisions. For public cloud service providers, Cloud is enabling them to reach a broader audience of potential customers. That's great that their sphere of potential customers is broader, but that also means that there’s more competition. And, interestingly, just as enterprise IT will need to do a better job of competing against public cloud providers, service providers will need to think about how private clouds change the needs of the traditional customer base.

 

From an Economics point of view, it's the kind of free market environment that makes my wife (an economist by training) drool because it enables customers to vote with their dollars, driving price competition and rewarding those sellers that provide the best overall bang for the buck.

 

So the challenge becomes, for both private cloud and public cloud providers: "How do I distinguish myself from my competitors?" given that potential customers will inevitably do Internet comparison shopping?

 

There are several ways to do this, and they fundamentally roll up into two dimensions: dollars and service.

 

Dollars.

When I say dollars, I'm not just talking about price, though that's a key thing. Obviously, if you offer your services at a really good price compared to your competitors, that’s a great thing - assuming that you've priced your services in a way that you're actually bringing in more dollars than are going out the door! But what if you can't compete with an Amazon on price, then what?

  • Don't underestimate HOW you talk about dollars. Cost transparency is really important. Make it easy for your customers to understand what the likely costs will be, what the implications are of choosing different options, and what the costs were based on their consumption.
  • Think about how you help customers make the most cost effective decisions. Sure, you can make more money if customers are over-provisioning, but coming across as an involved consultant, helping them make efficient buying decisions will increase your credibility and reputation as a place to go.

 

Service.

  • Differentiate your service by the kinds of services you offer and the quality of the services you offer. If you're an enterprise, what do you bring to the table in terms of culture and expertise that's unique to you? How do you "celebrate" that differentiation? Customers are willing to pay more if they see the value in the price difference.
  • If you're a service provider, what domain expertise or capacity do you bring that sets you apart from the rest?
  • Define and communicate your offerings in ways that are comprehensible to your customers. Make the bundles logical and reasonable. While it's tempting to provider totally ala cart offerings, customers are looking for you to have done some of the hard work of bundling things for them. Dell Computers is a great example of this. The main way most customers buy Dell computers is by choosing from pre-defined models that are pretty much ready to go. You can always tweak it, but you're not starting off at the most basic level of choosing a mother board, then RAM and DRAM and hoping that you didn't somehow forget to order the appropriate power supply.

 

Ultimately, this all comes down to realizing that there is going to be competition for your customers and you need to be sure that you're not lost in the cloud hoopla. If you don't find ways to make yourself compelling, your may find out the hard way that customer loyalty ain't what it used to be.

 

These are my latest thoughts on the business side of cloud. I'm dying to hear what your thoughts are. Leave a comment. Share a thought. Or catch me on twitter at @tonynavarrete or #bmccloud.

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Hi. I'm Tony Navarrete -- the newest member of the BMC team dedicated to helping IT organizations and service providers make the most of the exciting new possibilities that Cloud brings to the table for technologists as well as to customers. I bring a slightly different perspective to the game that I think will nicely complement my colleagues' approaches and viewpoints.

 

I've spent the past seven years focused on IT business management as a domain - that's all about developing the information and processes IT leaders need to make planning and strategic decisions. In particular, I've spent a lot of time thinking about project and portfolio management, staffing and resourcing, vendor management, financial planning and budgeting, and IT governance. Most recently I've been very focused on service costing and IT cost transparency.

 

I've also got lots of real-world IT experience (and scars) to help ground my thinking. I spent more than 15 years in large IT organizations and I've held director positions in several IT areas, including customer support, networking, and the CIO's office.

 

Look for me to focus on the financial, planning and governance aspects of building and leveraging cloud with a slant towards business alignment, IT cost transparency and governance. I’ll be spending a lot of my time working with service providers but I think IT organizations who are considering building internal clouds or simply being a consumer of public clouds will find a lot of value in seeing what we share with service providers.

 

And, for what it's worth, I'm a Stanford alum, so if you see a periodic jab at Cal (UC Berkeley), you’ll know why.

 

I'm looking forward to sharing my thoughts about the business side of cloud - and I'm dying to hear what your thoughts are. Leave a comment. Share a thought. Or catch me on twitter at @tonynavarrete or #bmccloud.

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