elemental links

What are your ‘Rings of Defense’?

I’d like to attribute this recent ‘catching up on my reading’ to long sunny summer days in my Adirondack chair, but no such luck.  On the few rainless days, Zephyr has commandeered my chair.  Despite these obstacles, I’ve still managed to find time to read, and share some interesting articles.  Today, an article in June’s Fast Company caught my attention.  The article is entitled “Through the Fire” and shares strategies Cisco, Corning, IBM, Intel and Schwab are using to survive in the current economic crisis, and emerge even stronger as the economy rebounds.

Of the profiled companies and strategies, Corning's Rings of Defense clicked with me.  I can see the connection to business architecture, the business of IT, and business IT alignment.  [As readers know, I prefer “business-IT integration”, but I’ll go with the crowd this once.]

Corning’s Rings of Defense (emphasis is mine)

“If anyone should be able to build a shatterproof fortress, it's Corning. But during the telecom crash earlier this decade, the specialty glassmaker for everything from medical devices to consumer electronics to cars saw revenue nosedive from $7 billion to $3 billion in 18 months; Corning almost burned the village trying to save it. "We vowed never to let that happen again," says president and COO Peter Volanakis. Corning's executive team, the same senior managers as during its epic fall, instituted an early-detection system to identify signs of trouble as well as four "operational rings of defense" to help it manage through a crisis in a measured, strategic way.

The first step? A good offense. Corning created its own market-research system, relying not just on its customers but also on its customers' customers, even checking stores to measure demand for the products it helps to create, such as LCD TVs. Corning also stockpiled cash, which enabled it to absorb a $400 million loss in the fourth quarter of 2008 without selling off part of its business, as it had to in 2002 to make a debt payment. And it helped that the company modeled worst-case scenarios and a response to each.

As trouble started brewing last year, Corning implemented its first ring of defense: discretionary spending cuts, reduced production, and hiring limits. As things got rapidly worse through the fall, management quickly implemented the second and third rings: shorter work weeks in Europe and Asia, limiting its use of contractors and temps, and, finally, layoffs. But as hard as it was to trim the staff by 13%, that was a far cry from the telecom crash, when it shed 21,000 of its 43,000 workers. This crisis feels more under control, the actions "more thoughtful," Volanakis says.

Most important, Corning has avoided the last ring, which would include reducing its $630 million annual R&D spending. Its lifeblood is new products, such as those it's aggressively pushing this year -- scratch-free touch-screen glass for cell phones and laptops, smaller next-generation data centers, and a laser-light engine that turns a laptop into a projector. "We're an R&D-based company," Volanakis says. "R&D is the absolute last thing we'd cut."”

So, what stood out to me?  First, the use of scenario planning.  A long standing practice to envision the future and craft responses, which unfortunately many companies neglect to do when things are going well.  Clouded by ‘bubble fever’, perhaps.  From a recent WSJ Article:

“Use of scenario planning rose following the 2001 attacks, to about 70% of executives surveyed by consultants Bain & Co. in 2002, up from 30% in 1999. Since then, Bain's surveys have found fewer executives using the tool, though the consulting firm expects heightened interest this year, because of the recession.

"It's sort of like flood insurance," says Michael Raynor, a corporate-strategy expert at Deloitte Consulting LLP. "Everybody runs out and buys flood insurance the year after the flood."”

The second thing, was the “rings of defense” concept.  The diligent and deliberate articulation of responses, in this case cuts, that provide short-term relief, while protecting the future, in Corning’s case, R&D.  Too often, in bad times, unilateral cuts are made, disregarding long-term implications.

So, my questions for you to consider:

1. Does your organization do scenario planning?  Is this purely a business activity?  Or does IT participate?  Is the practice extended to the business of IT?

2. Has your organization articulated rings of defense?  Is there general knowledge of what business activity should be in the center, protected by the last ring?

3. Has your IT organization articulated its rings of defense?  Do the IT rings, the activities and capabilities being protected, align with the business rings?  Or, do the IT rings subvert the business rings?

Still time to brag about your S-O-A Success --- Contest Deadline Extended until July 20, 2009

By popular demand, the deadline for the SOA Consortium | CIO magazine SOA Case Study contest has been extended until July 20, 2009.  The contest is a great way to recognize your organization, garner industry-wide praise for your hard working project team, and as Dave Linthicum suggests, contribute your knowledge and experience to further industry best practices. 

The entrance requirements and submission are simple.  To qualify, your organization (business or government, any size) must have successfully delivered business or mission value using a SOA approach. That’s it.  No membership, no fees, just brag about your success.

As for the submission itself, we understand your time is in high-demand.  To submit your story, merely answer the following 7 questions:

1. What was the business challenge or problem addressed by the SOA project, and why was SOA selected to address this? (500 words max)

2. When was the project started, how large was the project and how was it funded, and how long did it take to see results? (300 words max)

3. What was the planned and achieved ROI/Business Value (ie, improved agility, innovation, flexibility, optimization, resilience)? (500 words max)

4. How was the SOA Project team organized and what types of business staff were on the team? How was cross-organization collaboration (Business/Technical) achieved? Was a Center of Excellence or Competency Center created? (300 words max)

5. What technology or software was used in the project? What vendors were involved? Was service reuse taken into consideration? What was the most complex technical challenge encountered? (300 words max)

6. What were the most significant lessons learned from the SOA project? (300 words max)

7. How has the challenging economic climate influenced your SOA project? (300 words max)

Need more information?  Learn more about the contest, read about last year’s winners or get the scoop on last year’s judging.  Still more?  Check out what (my fellow) SOA-rati are saying – Dave, Joe, and ZapThink.

Ready to start your submission?  Go here.  Good Luck! 

 

[Disclosure: The SOA Consortium is a client of my firm, Elemental Links.]

Lessons from Googlenomics: Data abundance, Insight Scarcity

“"What's ubiquitous and cheap?" [Google’s Hal] Varian asks. "Data." And what is scarce? The analytic ability to utilize that data.”

The June issue of Wired has an excellent article by Steven Levy, entitled Secret of Googlenomics: Data-Fueled Recipe Brews Profitability.  The article delves into the history and algorithms behind Google’s auction based ad system, highlighting the significance of engineering, mathematics, economics, and data mining in Google’s success.

On the economics front, the article explains Hal Varian’s role as Chief Economist at Google, including why Google needs a chief economist:

“The simplest reason is that the company is an economy unto itself. The ad auction, marinated in that special sauce, is a seething laboratory of fiduciary forensics, with customers ranging from giant multinationals to dorm-room entrepreneurs, all billed by the world's largest micropayment system.

Google depends on economic principles to hone what has become the search engine of choice for more than 60 percent of all Internet surfers, and the company uses auction theory to grease the skids of its own operations. All these calculations require an army of math geeks, algorithms of Ramanujanian complexity, and a sales force more comfortable with whiteboard markers than fairway irons.”

After reading the article, Varian’s economic view of data ubiquity and analytic scarcity really stuck with me.  The quote I opened the post with isn’t directed at software availability or processing power.  It refers to the scarcity of people qualified to churn abundant data into economic value.  

What follows are some excerpts “about harnessing supply and demand”.  The sub-headers and emphasis are mine.

Enter Econometricians

"The people working for me are generally econometricians—sort of a cross between statisticians and economists," says Varian, who moved to Google full-time in 2007 (he's on leave from Berkeley) and leads two teams, one of them focused on analysis.

"Google needs mathematical types that have a rich tool set for looking for signals in noise," says statistician Daryl Pregibon, who joined Google in 2003 after 23 years as a top scientist at Bell Labs and AT&T Labs. "The rough rule of thumb is one statistician for every 100 computer scientists."

Ubiquitous Data

“As the amount of data at the company's disposal grows, the opportunities to exploit it multiply, which ends up further extending the range and scope of the Google economy…

Keywords and click rates are their bread and butter. "We are trying to understand the mechanisms behind the metrics," says Qing Wu, one of Varian's minions. His specialty is forecasting, so now he predicts patterns of queries based on the season, the climate, international holidays, even the time of day. "We have temperature data, weather data, and queries data, so we can do correlation and statistical modeling," Wu says. The results all feed into Google's backend system, helping advertisers devise more-efficient campaigns.”

Continuous Analysis

“To track and test their predictions, Wu and his colleagues use dozens of onscreen dashboards that continuously stream information, a sort of Bloomberg terminal for the Googlesphere. Wu checks obsessively to see whether reality is matching the forecasts: "With a dashboard, you can monitor the queries, the amount of money you make, how many advertisers you have, how many keywords they're bidding on, what the rate of return is for each advertiser."”

Behavioral Based Insights

“Wu calls Google "the barometer of the world." Indeed, studying the clicks is like looking through a window with a panoramic view of everything. You can see the change of seasons—clicks gravitating toward skiing and heavy clothes in winter, bikinis and sunscreen in summer—and you can track who's up and down in pop culture. Most of us remember news events from television or newspapers; Googlers recall them as spikes in their graphs. "One of the big things a few years ago was the SARS epidemic," Tang says. Wu didn't even have to read the papers to know about the financial meltdown—he saw the jump in people Googling for gold. And since prediction and analysis are so crucial to AdWords, every bit of data, no matter how seemingly trivial, has potential value.”

Rise of the Datarati

“Varian believes that a new era is dawning for what you might call the datarati—and it's all about harnessing supply and demand. "What's ubiquitous and cheap?" Varian asks. "Data." And what is scarce? The analytic ability to utilize that data. As a result, he believes that the kind of technical person who once would have wound up working for a hedge fund on Wall Street will now work at a firm whose business hinges on making smart, daring choices—decisions based on surprising results gleaned from algorithmic spelunking and executed with the confidence that comes from really doing the math.”

Now, a few questions I think folks should consider:

1. Who does that math in your organization? 
2. Does your analytics / active information strategy suffer from information processing richness and insight scarcity?
3. Who are, or should be, your datarati? 

McKinsey Quarterly- CTO to CEO: Why we need an annual report for technology

The McKinsey Quarterly just published a good article on how to communicate the business value of IT to the business community.  The article is a “memo” from the CTO to the CEO articulating the “lack of shared understanding” between business and IT, and then proposes a solution, a co-authored annual report for technology:

“The idea is quite simple: you and I would jointly issue an annual report for technology—something analogous to the annual report for investors and the broader market. This document would not only provide a candid overview of our ability to extract business value from technology but also substantiate that analysis with hard metrics. We would share perspectives on the challenges of technology, convey our ideas about its role in our company, celebrate achievements, and articulate our plans and visions for the future.

To show that we are serious about bridging the gap between technology and the business units and to discourage people from seeing the report as an attempt by IT to plead its own case, it’s important that you and I issue the report jointly.”

The report contains several sections, including an executive letter explaining the premise of the report, with summaries of the technology portfolio’s performance, contribution, financial value and future plans.

The article continues with examples of report sections, exhibits and metrics.  Respecting the premium nature of the article, I’m not clipping the text or exhibits, but the key points I gleaned are:

1. make the connections between business areas and technology visible

2. demonstrate how IT contributes to operational and strategic results (not just goals, but results!)

3. identify and quantify IT & technology portfolio capabilities

4. communicate the above in business terms, using clear graphics, metrics and real-world anecdotes.

If you struggle in communicating the value of IT to the business, I recommend reading the article. [Subscription required.]

And yes, I’m fine with paying for good content, namely The Economist, HBR, MIT Sloan, WSJ and (obviously) The McKinsey Quarterly.  Recession or not, budget line items for “brain food” are essential.

Liveblogging Cloud Computing Expo #12 David Snead, P.C. – Virtualization & Legal Concerns

David Snead on Virtualization and Legal implications.  David is a practicing attorney focusing on web infrastructure concerns.  From a legal perspective, David shares that from a legal perspective, virtualization and cloud computing are similar.

Three aspects to be considered:

Software or Operating System

Expectations – your own, that of your users, that of your customers

Contract Review

Goal of session to give information on how to parse legal risk.  Lawyers who say “no legal risk” are misstating the truth. 

What is Virtualization (CC) from lawyer’s perspective, operating system or network distributing things. (Didn’t catch that exactly).  Can look at virtualization as server based, application based or desktop based.

Application virtualization, this is the holy grail.  This is what his clients want.  Want to put applications on Salesforce.com

Server virtualization risk areas: virtualization software, individual operating systems.  For example, do individual have the ability to interfere with other users on the server?  What happens when a user brings down a shared environment.

Application virtualization brings highest risk and reward.  Keys to ask, who is providing the underlying application infrastructure?  Is the application part of an ecosystem?  An application ecosystem?  A platform (infrastructure) ecosystem? 

Concerns: will the infrastructure be up when required?  what happens if it isn’t?  next, your data.  where is it?  is it safe?  can you get it back?  finally, virtualization software.  what is the provider running?  how might that impact you from a risk perspective?

In response to question on fiduciary responsibility, contract law is going to govern 98% of scenarios.  So, understand and comb those contracts!  Need to approach all relationships as though the provider doesn’t have your best interest at heart.  Admittedly, a lawyerly response, but important to say/hear.

Desktop virtualization concern – no surprise – is you want to be in compliance with your Microsoft desktop license agreement.  Also, need to look at security provided, beyond the application layer.

Common issue is understanding virtualization software and understanding if that software will work with type of virtualization – desktop, application or server.  Is software appropriate for task at hand.  Sounds simple, but has seen issues here.  You can’t get out of contract just because application doesn’t work, especially if you didn’t check compatibility.

Different risks for Vmware view of world vs. Parallels (container) view of universe.  In container view, it is easier for one user to destabilize another user.  If that’s a concern, consider the vmware view.

Need to determine if your licenses will work in virtualization environment. 

Warns that anytime a human touches the system, there is a chance to break it.  Need to understand the degree of automation done by the service provider.  (Reminds me of my Joyent briefing earlier, automation is critical)

Understand that the data doesn’t go to “the cloud”.  It goes somewhere.  Understand cloud provider’s warranties, SLA, privacy, skin in the game.  Suggests going out to read Amazon’s terms of service.  Go to company that drinks own Kool-aid.

Also want to understand potential channel conflict.  [Example I just read about in HBR (I think) is Toys-r-Us and Amazon.]  David cites Salesforce & Zoho recent litigation.

Don’t do find/replace contract changes, such as other vendor name/your name or dedicated host/cloud host.

In response to question, avoid CA, UT and most of South in interpreting technology contract law.

End of day, who owns the data?  Especially critical where channel conflict might exist.  Don’t want to accidently give your customer list to a competitor.

360 degree contract review:

Infrastructure: bandwidth, upstream, AUP (SLA)

Virtualization: type, IP protection, end user interaction

End User: customer expectations, ultimate use, expertise

Read the contracts!  Not just data center.  All contracts, current and new.  Don’t forget SLA / expectations of your ultimate end-users.

Don’t forget choice of law and regulatory issues.