Author: MarvinNewell

Differentiated Commodities? | Gaining Altitude in the Cloud

In stark contrast to the emerging differentiation among service providers’ strategic intent that Peter Bendor-Samuel recently blogged about, the marketplace still often perceives providers’ offerings to be very similar, except for price. Unfortunately, this commodity-like feel at the point of buying may be hiding meaningful differentiation that is emerging across most sectors, i.e., surprisingly diverse products and pricing beneath the broad commodity characterization.

To give this idea some context, we all consider crude oil a commodity, right? But a quick search reveals over 30 “grades” of this commodity from a wide variety of locations, with prices ranging from US$92/bbl to over US$120/bbl in early April. A price range of over 25 percent doesn’t sound very commodity-like to me. The effort to get oil out of the ground, process it into usable end products, and distribute them to market clearly drive very different value equations for the different grades and locations.

Crude Oil Prices

Back to the global services industry, the emerging cloud IT infrastructure services are the latest service to receive the commodity label. Certainly an hour of computing or storage capability is a commodity, right? Truth is, while these services are often being painted with the same brush as crude oil, this “commodity” market is developing with deceptive complexity, variety, and value richness. For example, just looking at the product portfolio that Amazon is offering for its Elastic Compute Cloud (EC2) suggests that its underlying, unyielding standard offering actually supports a wide variety of services that provide customers different value – illustrated, of course, by a range of prices.†

Amazon Web Services EC2 On-Demand Instances

There are indeed meaningful differences in this commodity as users determine which specific offering fits their needs. Amazon Web Services (AWS) continues to expand its portfolio of “commodities” to meet even more use cases with reserved capacity, dedicated capacity, virtual private cloud capabilities, etc. Amazon even has a robust spot market (that surely sounds like a commodity):

Spot Instance Pricing History

Source: AWS for Asia (Singapore) for a representative week.

Despite a perception of undifferentiated offerings, IT services (and global services in general) are anything but commodities. Service providers need to recognize that standard offerings do NOT mean undifferentiated, and they need to do a much better job of communicating their offerings’ real differences. And service recipients and buyers need to either ensure that the offering they are consuming fits their needs, or, if choices don’t exist to fit those needs, realize that adapting to adopt requires careful thought and active management to avoid disappointment. Just like today’s offshoring for application development and maintenance – while the offering “looks” the same, different pricing and widely different outcomes drive satisfaction and value in a distinctly differentiated way.

† Including free. Amazon Web Services (AWS) offers new AWS customers with a bundle of services free each month of their first year:

  • 750 hours of ECS running Linux/Unix Micro instance usage
  • 750 hours of Elastic Load Balancing plus 15 GM data processing
  • 10 GB of Amazon Elastic Block Storage (EBS) plus 1 million IOs, 1GB snapshot storage, 10,000 snapshot Get Requests and 1,000 snapshot Put Requests
  • 15 GB of bandwidth in and 15 GB of bandwidth out aggregated across all AWS services

Improv Performances and the Cloud: Metaphorically the Same | Sherpas in Blue Shirts

Remember “Whose Line is it Anyway?” the hilarious U.S. comedy improv television program hosted by Drew Carey, or its sister show in the United Kingdom? Many of its sketches went something like this:

An audience member shouts, “You’re the on-air team for a local television news program!” Using that one directive as the starting point, the first actor decides to be the sportscaster and jumps out of his seat and pretends to reenact the slam-dunk winning shot from the previous night’s basketball game. Picking up a cue from him that they are broadcasting live at 3 a.m., the second actor, who takes on the role of the news anchor, becomes increasingly intoxicated during the program, drinking alcohol from her imaginary coffee cup to continue her bender from the previous night. And the third actor becomes the weatherman, a Broadway singer wannabe who breaks out into a rendition of “The Sun Will Come Out Tomorrow,” while giving the extended forecast. The by-now highly inebriated news anchor tries to throw her coffee cup at him, but instead falls out of her chair, while the sportscaster jumps over the pretend anchor’s desk and catches the “fly ball” coffee cup.

How did they spontaneously come up with that funny stuff to achieve their goal of entertaining their audience? They used an improvisational technique, “Yes, And…,” wherein the starting point is an underlying structure or rule – in this case, the audience member’s proclamation of “on-air team for local television news program” – and from which each highly skilled actor then works together, adding new pieces of information to progress the scene and deliver the always-enjoyable end-result.

What does this have to do with the cloud?

Think about it this way. Improv sketches operate on two basic rules: there’s the underlying framework to which the actors must adhere – per the above example, “on-air local news team” – and the “Yes, And…” principle. The improv actors and the cloud are analogous in that cloud users must accept the offering and its underlying framework as is, then add to it with their own plug-in elements, the “Yes, And…”.  And the television audience is analogous to cloud users. The ways in which different users may use the cloud are limitless – just as the sketch example above could instead have been “passengers stuck on a subway”, “truckers in a late night diner”, you name it – but the underlying framework is always the same. Additionally, both improv and the cloud are essentially fail-safe. In improv, if one actor runs out of steam, another immediately jumps in to move the sketch forward. Similarly, cloud offerings have built-in SLAs and redundancy measures so users never have to worry about things like data back-up or server outages. It’s all seamless and transparent, as the fall-over is architected into the solution. And in the end, the audience members and the cloud users end up with a satisfying experience, and a consistent and predictable outcome which meets their objectives.

We recently spoke with the CIO of a major multinational manufacturing company who was apprehensive about the prospect of cloud adoption in her company. Her chief concern was that her company’s business units and functions would have access to high-quality cloud technologies via channels outside the traditional IT environment, which in turn could lead to lack of quality and resilience, risk and security issues, etc.

But when we started talking about cloud computing using the improv metaphor, she finally had an “ah ha” moment. We helped her understand that the cloud can safely deliver on all the attributes about which she was concerned, albeit without the overt top-down rules traditionally provided by CIO organizations. Instead, the cloud works due to a loosely scripted yet robust underlying set of rules bolstered by each of the participants’ ability to bring their expertise – the “Yes, And…” – to bear on a safe, secure, consistent, repeatable, and beneficial outcome.

What’s your cloud computing “Yes, And…”?

An important point to consider: given their unyielding standards, both improv and the cloud are only as good as their foundation. If you want world-class comedy, you must assemble world-class comedians. If you want enterprise-class cloud, you need to find a cloud rooted in enterprise-class principles.

Can Global Services Learn Lessons from Soccer? | Sherpas in Blue Shirts

Many were surprised when Qatar won the bid for the 2022 World Cup. A great deal of intrigue surrounded the selection process, and cries of foul play continued before, during and after the recent announcement. How could a location with essentially no facilities, requiring technological breakthroughs to ensure neither athletes nor spectators literally roast at the venues, possibly be successful?

Interestingly, the parallels to what is occurring in the global services industry are striking. New entrants and new solutions with lots of vision (versus substance) are pulling upsets. Buyers seeking to fulfill their global services needs are pursuing agendas with unconventional objectives, and are willing to use selection processes filled with ambiguous criteria. Service providers with interests in preserving legacy approaches may be blindsided by new players with creative solutions (e.g., cloud-based offerings) that literally change the rules of the game, including completely differing pricing, contracting, and service delivery models. Ultimately, providers that cling to the legacy are exposed to the same fate as the U.S.’ World Cup bid – a safe, reliable solution on paper that fails to compete with unconventional approaches and visions of breakthroughs that promise value beyond the obvious.

Is the soccer world at risk of a failure in Qatar? Possibly. But the options created in the preceding decade are likely to create value in new areas that the safe path via the U.S. would never have even contemplated. Are global services users pursuing non-traditional solutions, taking on heretofore unforeseen risks? Possibly. But – as with the international soccer federation – not at least starting down the path may be an even more costly risk for the future. Similarly, service providers that refuse to believe that those “playing by different rules” can win are likely to find themselves increasingly absent from the winner’s circle.

Let’s all just hope that not everyone starts showing up with vuvuzelas at the next bidders’ conference!

Truth or Dare: Congress to Clouds | Sherpas in Blue Shirts

The recent news about anti-outsourcing legislation in the U.S. Congress struck me as a classic “truth or dare” situation. Even the press reports focused more on the political grandstanding (ironically, the “truth”) rather than the substance of the proposed laws (the “dare”).

The rhetoric got me thinking about other truth or dare phenomena that are occurring throughout the current environment. The case that seems to pop up most often these days is cloud computing.

If you listen to service provider pitches about cloud computing and cloud-enabled services, you’ll get promises that sound like the most populist politician – “a chicken in every pot” anyone? Nearly free compute and storage, painless installation, non-existent switching costs, and many more benefits. And if you’re a CIO, not having your head in the cloud(s) is a sure way to get your medium- to long-term plans challenged…sounds like a “dare” to me.

The “truth” also seems to be quite elusive. A friend several weeks ago told me about a large enterprise that was exploring options to do more with less in its IT area. A name brand provider was enthralling the CIO and her staff with a description of an ideal world not too different from the “dare” outlined above. The CIO bought in completely, and asked the provider when she could start. The provider literally froze in its tracks, then sheepishly admitted it couldn’t do what it was talking about. Rather, it was sharing a vision of the capability it planned to have mid-next year, and only a small fraction of the promise could be purchased and used today.

It became clear that the CIO was getting severe pressure from her boss and user community to get moving on efforts to take advantage of the low cost, high value cloud computing solutions about which they were hearing so much. This level of heightened expectations presents a distinct challenge for IT decision makers. The “dare” implicit in providers’ promises can only be ignored by CIOs at their own peril. The “truth” requires diligent, thoughtful solutioning and supplier selection so there is little to no gap with the “dare.”

The real solutions I’m seeing in the market suggest a growing array of uses for which the cloud makes sense. Constant monitoring is an imperative to keep up with the rapidly advancing market. The impact in many of these areas can be very compelling…”obviously less expensive” solutions that provide greater flexibility and control than ever before possible. CIOs can’t turn their backs on the “dare,” or they’re likely to find they’ve lost their way.

By the way, this entry was written both literally and figuratively in the cloud. After a first draft on the back of an envelope on a crowded flight, I used Google Docs and cloud-based email to send it. When you step back and think about it, it really is an amazing capability with remarkable price/performance…”truth or dare?”

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