Walter Adamson

Lessons for Enterprise from Facebook and its 1 billion users

I was surprised today to see relatively little in the tweetstream in Australia about Facebook's achievement in reaching 1 billion users. I had to search to find comments as they weren't streaming through, and then I also discovered that about half the comments were sceptical or negative, which surprised me.

It's a massive achievement, with big implications for business and enterprise IT. Here are 5 - off the top of my head. They are not very well researched - forgive me - but at least I'm putting out thought-starters about the implications of Facebook's achievement.

1. The power of the smartest combination of technology, technologists, business strategy and execution

It demonstrates how dramatically the smart choice of technology and business models can decimate the competition. We know the story but it's worth repeating that Myspace was bought for $580m in 2005 and reached a peak of about 100m unique visits a month in 2008 and at those times Facebook was deemed to be an also-ran. Facebook's architectural platform strategy together with its computer science and computer engineering prowess a la Google and its incredible ability to execute rocketed it past the competition while at the same time running on a relative shoestring.

And furthermore Facebook has made much of its secret sauce public, through contributing to open source projects and the establishment of its own Open Compute project. That's partly because of its mission, and mostly because it knows that the knowledge alone isn't precious, it's the ability to execute.

Which brings me to my next point, how Facebook has revolutionised the economics of computing.

2. Computing Economics

Facebook's total cost of revenue is about $1b. A large chunk of that goes to running IT infrastructure including "data center operational expenses include facility and server depreciation, equipment rent expenses, energy and bandwidth costs, support and maintenance costs and staff salaries, benefits and share-based compensation".

In Australia the big banks, big telcos, and some other large organisations spend in excess of $1b per annum each on IT to serve a minute fraction of the user base of Facebook.

Can we even calculate how small that fraction is? Let me see, let's say 25m/1,000m = 2.5% right? Now even if you throw in all the reasons that "we're different" and double that 2.5% to 5% then we're seeing 20 times less value for money in Enterprise computing than Facebook can achieve day-in and day-out.

We’ve always been small in terms of number of employees. We have this stat that we throw out all the time here: There is on the order of 1,000 engineers and now on the order of a billion users, so each engineer is responsible for a million users, says Zuckerberg.

In fact, Facebook has reinvented the economics of data centres and computing. Which brings me to my next point - reliability.

3. Facebook's reliability across 1b users is astounding

Australia's major banks all have very public problems in keeping their basic ATM & EFTPOS networks running "Angry customers slam Commonwealth Bank meltdown". In response some have committed huge sums - $300m, $400m - to remediating their systems. The end result for the customer is no difference in anything except that the service will stay up as promised. On the other hand Facebook manages to stay up to high levels of availability and runs all this across public infrastructure - not dedicated expensive networks.

Once again, I am sure that there are all sorts of nuances, all sorts of reasons why "we're different" we're more complicated" etc etc but for all intents and purposes Facebook stays up globally for 1 billion customers while very expensive dedicated enterprise systems in a single country serving a minute fraction of users don't stay up.

If these enterprises knew what the Facebook engineers know than they'd be equipped to deliver a lot better value for money. And furthermore Facebook never intentionally goes off the air for system upgrades, which brings me to my next point.

4. Very clever zero-downtime system upgrades

Facebook has developed a remarkable 100% uptime service while at the same time constantly experimenting, innovating, bug-fixing, updating and upgrading their software. This hasn't fallen out of the sky in to their lap. They've invented most of it, building on the experience of some others like Google. Facebook's proven processes of gradual releases and dark launches should be the envy of large-scale enterprise IT. Their A/B testing processes are phenomenal and they now have the amazing ability to A/B test on just 1% of their active user base and gain feedback from 10 million users!

Read the real account of rolling out Facebook's new Timeline feature

In contrast, to my knowledge all the banks in Australia are still taking their systems off the air at least every week for system upgrades. And remember, these outages are just repairs, not the continuous raft of new features and substantive user service upgrades managed by Facebook with zero downtime.

5. The value of a platform

The essential reason that Facebook crushed MySpace was that Facebook build a platform while MySpace tried to build a closed community system. Facebook's approach is conceptually the same as building a mobile ecosystem of content and apps, as invented and launched by NTT DoCoMo in 1999 and as copied by Apple 7 years later. This is the essence of why cloud computing is so important. Cloud is only trivially about the dial-up of infrastructure and just outsourcing iron. Rather, it's fundamentally about the ability of platforms to interact and mash-up through defined application and data protocols e.g. APIs and the Open Graph.

It's an old story, but a poorly learnt one. In 1999 DoCoMo when set out to make its i-Mode service the most successful internet and app store-enabled mobile system in the world (in which it easily succeeded) it deliberately aimed to make the content providers and app developers as successful as possible. That's why it gave them 90% of the revenue, and why many listed on the Tokyo Stock Exchange and made thousands of millionaire entrepreneurs. Facebook as a platform has spun-off similar success stories.

With a "flick of a switch" Facebook could become the biggest of many things - the biggest virtual currency provider, the biggest bank, the biggest postcard generator, the biggest flowershop, the biggest video streaming company, the biggest news company, the biggest green electricity retailer etc etc.

That's the power of building platforms and not applications. Is it relevant to enterprises? Well I think if Facebook decided to become the world's biggest bank, or just enter a few prime markets as a banker, then we'd have an answer wouldn't we? And then it would be too late.

Summary

Well done Facebook. What a lesson for enterprise IT there is in the taming of complexity, the agility, the reliability, and the power of the platform. It's a combination of technological mastery and business strategy and execution ability and agility which the world of business has not seen before.

And I didn't even touch on Facebook's data mining and personalization and their ability to do data analytics at a huge scale to connect everyone and to build the map of who and what 1 billion people know. WITH FACEBOOK YOU AIN'T SEEN NOTHING YET!!

Related: Facebook's 'Next Billion': A Q&A With Mark Zuckerberg

Counterview? For a "counter view" of why all this isn't going to shake up large Enterprise IT quickly it's worth reading this The Enterprise: I’m Not Sexy And I Know It

Is enterprise software a fools paradise for start-ups, or not?

I was intrigued by two opposing views coming out of TechCrunch Disrupt this week - one saying that start-ups have an “unfair advantage” in the enterprise market and the other that "tech start-ups needed to find new opportunities away from traditional technology".

Yammer founder David Sacks, the holder of the latter view, says that "technology is too mature for entrepreneurs to be trying to upset the big boys".

"Don’t try to disrupt the redwoods", he told an audience at TechCrunch Disrupt in San Francisco.

On the other hand Box co-founder Aaron Levie said in his view, the enterprise market isn’t just getting "sexy" today, but it's actually now a very attractive market for start-ups.

The traditional enterprise vendors, after all, are accustomed to slow innovation cycles that’s just not sustainable now that so many consumer trends have infiltrated the enterprise.

Levie outlined his reasoning:

• start-ups don't have to go through the usual channels, especially with the SaaS model;
• it's easy to trial new products with the web-native freemium model
• mobile/table brings new expectations;
• the consumerization of IT is real;
• for incumbent enterprise companies, the transition to these new business models is very cost intensive.

I'm on the side of Levie. The transformational effects of cloud, mobile and social are huge, and we generally talk about the impact of that on enterprises and how they function. But it will have an equal impact on enterprise software vendors and their ecosystems.

In this world, at the convergence of these massive forces, I think that the traditional enterprise vendors are particularly vulnerable, in the same way that enterprises which don't transform using cloud, mobile, social are also vulnerable.

The cloud is more than real, but there is still a lot of cloud hype and usually about the irrelevant. I think what is missed is that the cloud isn't something we do things ON, it's something we do things IN. Most of the attention goes to infrastructure which is the doing ON stuff. That's important, and Amazon, Google, Microsoft, Oracle, IBM etc are sorting that out. Once the big things starting happening IN, and we get enterprise Mashups that's when the world starts changing.

It's not just "cost intensive" for the incumbents to move to new models, it's intensive and costly with respect to all their legacy attributes including culture, sales models, remuneration, product line cannibalisation, margins, cash flow, support structures etc. All the usual legacy issues which turn successful companies into potential failed companies. 

I think all that is well known, I was just intrigued about the opposing opinions from two smart people. Probably there is something more to David Sack's view that did not come across in the interview.

Walter @adamson
http://xeeme.com/walter
Join me on G+

STOP PRESS: This just published Sept 13, 2012 "It's 'Shocking' That Startups Are Ignoring A $500 Billion Market" by Sequoia Capital partner Jim Goetz.

Enterprise remains an "enormous opportunity" because companies are spending about $500 billion a year with legacy enterprise companies and those budgets are ripe for the plucking. "We believe most will be disrupted in the next decade," he says.

Unparalleled cloud opportunity in Australia - Parallels

The Parallels Australia SMB Cloud Insights survey caught my attention. It's released as a pre-conference marketing promotion but it still contains some useful unbiased results.

The fact that it's benchmarked to similar surveys across the developed world is what makes it most relevant and interesting. It turns out that Australia is a poor cousin when it comes to cloud adoption, particularly in SMBs with 20 to 250 employees. For example, In other developed countries 49% of those report using hosted servers, whereas in Australia the figure is 22%. For smaller Australian businesses the uptake is about 60-70% of the other developed countries.

Of course "hosted servers" aren't really "cloud" - but managing hosted servers is what Parallels sells. The figures can be taken as indicative of the general attitude toward broader cloud services, with hosted servers being used as an example.

I wanted to post a question on the Parallels' blog, but what grabbed my attention was this, which I've never seen before:

WOW! Nifty.I've never seen that before. It helps both parties SEO-wise, to get the cross links, and I think it encourages a response (like mine!).

My questions

1. Parallels concludes that the strongest growth opportunity among Australian SMBs is targeting small businesses with less than 50 employees. What are the signals that would tell a service provider that such a business is getting ready to buy?
   I don't mean cold calling asking the direct question. But what, for example, would be the indirect question and signals - would it be mobile adoption or an application upgrade for example?
2. The larger, up to 250 employee, businesses were the real laggards compared to the rest of the world. They have bigger budgets, but the implied inhibitor is their own IT staff. What are the key inhibitions of the IT staff and how should they be addressed? Knowing that would open up a much bigger set of opportunities.

Is Australia lagging everywhere?

At the same time as Parallels noted Australia lagging in cloud adoption, I saw this report Security Risks Lead To A Third Of Australian Employers Banning Social Media. The biggest trends of our time, which will dramatically effect how business is done, are cloud, social and mobile. So our businesses are behind in cloud and banning social media!

Next we only need employers to come out with a survey saying "Employers declare iPhone a work menace!" and we'd have to start shedding tears. But wait - Australian employers “paralysed” in the face of consumerisation of IT - oh NO!

Unisys Asia Pacific vice president and general manager of IT outsourcing, Lee Ward, said employers were "paralysed" by the BYOT challenge, "over the last 12 months, employers have moved from "blissful ignorance" to "paralysed awareness" in the face of consumerisation of IT", she said.

What does this spell out? Opportunity!

Opportunity opportunity opportunity

For those who understand the business shifts and gains from cloud, mobile and social this spells out an "unparralleled" opportunity to get well ahead of the pack.

I'll be interested to see more details of the final Parallels Australian report, which they are releasing at their APAC Summit.

Where do you think the best opportunities lie, in the less than or more than 50 employee SMBs?

Where do you see the best business opportunities at the convergence of cloud, social and mobile?

See my question on Quora.

Please comment below.

Walter @adamson
http://xeeme.com/walter

Apple's success Dr Deming's legacy - continuous improvement

Innovation guru Clayton Christensen writes that "Jobs made Apple great by ignoring profit", and beyond the headline he actually makes the point that a tunnel vision on profits has been the downfall of many previous industry leaders. He thinks that acceptance, and even pursuit of "disruption", is the core of Apple's sustainability as a highly successful business. But I think there's more to it, especially in the case of Apple.

I agree with (almost) everything Christensen says. And the aspect of Apple he describes is evident in their public comments about the cannibalisation of Mac sales by the iPad.

It's Apple's view of the bigger picture which drives them forward, knowing that Mac sales in some segments will be cannibalized, but in other segments new markets for Mac will open up because of the iPhone and iPad.

I never cease to be appalled at the number of senior executives I meet who say something like "our strategy is very simple - it's to make a profit". Christensen's post is a good reference for them to understand why this may not be in their firm's best interest (that's not to say that the individual's interest and the firm's long-term interest are necessarily aligned!).

Of course there are always certain times when a focus on cash-flow and profitability is paramount. But that's a tactic, or perhaps a short-term strategy, and not a sustaining goal.

The iPod wasn't a device with no existing market

I disagree with one single part of Christensens' analysis, and that points to the big part which I think his post is missing - the role of continuous business improvement. 

The one part I don't agree with is his comment that the iPod was a device for which "a market did not even exist yet".

That's factually wrong. The iPod used a whole lot of technology from others who were already in the market with these devices. Just as with the app store, commercially launched by DoCoMo in Japan in 1999, and "iTunes" launched by KDDI in Japan in 2000 in response to DoCoMo's app store, Apple took the best of a lot of existing ideas and improved them.

The improvements were often small - but they add up.

And sometimes they are innovative enough to be patentable. In fact Apple's patents tell the story - if they invented everything that people commonly attributed to them then Apple would own the patents - and they don't. There is so much fluff and gushing in the blog-sphere and paid media about Apple's inventiveness around the iPhone, for example, which just isn't true. 

Continuous improvement is a key to Apple's success

What they do brilliantly is what Christensen describes, plus their approach to ingrained continuous improvement, as with the iPod and the iPhone (and some might say the iPad - a reinvented "tablet").

Most companies neglect this "ingrained continuous improvement". It's seen as too boring, or too trivial, or tainted by "quality control" or "being too Japanese" or any other reason that suits their desire to do something more spectacular. They go for "creativity" and "innovation departments".

That's why you see many of the most lifeless entities with big investments in Innovation VPs and Departments and creativity training etc - think banks, governments, metro transportation companies. These types of entities have zero continuous improvement and a big bet on "creativity" but are usually sustained, in fact, by some kind of monopolistic or oligopolistic structural position.

In these organisations, the main innovation is "the event". Here's what Cyril Bouquet concludes after a 5 year study of corporate innovation:

Paradoxically, innovation events can even prove damaging if the company does not have a system for acknowledging, assessing, and developing the bright ideas that emerge from them.

Continuous improvement does not exist in a vacuum

If a firm is truly after game-changing innovation, then a different set of rules and pre-conditions apply. But the reality is that 99% of firms can't execute even "incremental innovation" well and that's where the focus, for them, needs to be. There's no doubt that part of Apple, including Steve Jobs, applied game-changing innovation (see below) yet at the same time the bulk of the organisation is focused on continuous improvement.

But wait! There is a twist. That "bulk of the organisation" is not just a hapless bunch of micro-improvers. Well, they could be, but there is a difference in a highly successful organisation - they have a purpose. Not only a purpose but a clarity of purpose, and a consistency of actions.

Where there is strategic clarity and a compelling purpose in an organisation and the entire organization is aligned on achieving something of great social value beyond the tactical, people become incredibly committed to being successful and tend to ignore boundaries and "not invented here" limitations in order to achieve the purpose.

That is part of Apple's secret source in making continuous improvement deliver so much value, and why some say Why Apple Doesn't Need Steve Jobs. Without that secret source continuous improvements are diluted. It's that simple.

It's also true that the secret sauce does need some healthy additives from the leadership team.  Not all that bubbles up from below is going to make business sense at the time, nor can it all be funded. The skill is in how the leadership team can provide a "focus",  how they guide risk assessment to avoid irrelevant innovation, and how they decide what needs to be discontinued (since companies can't do it all). The HOW of those is critical to sustaining the motivation and momentum.

iPhone more about continuous improvement and little about invention

I think ingrained continuous improvement is mostly overlooked, yet it is far a more powerful and sustaining organisational force than "invention". And Apple is a leader in applying it.

For example the iPhone was mostly a result of continuous improvement. It bought together things which others had done, commercially, and reshaped them nicely into a smooth ecosystem. It was "smoother" than those from which it learnt. It didn't even have any exceptional new goals, compared to the DoCoMo app store or the KDDI music service - but it executed better and in the right market.

For example DoCoMo's i-mode (1999) was totally focused on the end-to-end experience and the user interface and they even tuned their network to ensure the handsets performed to delight the users. And they gave content providers 90% of the revenue because they wanted the content providers and their ecosystem to be as economically successful as possible.

The really remarkable innovations with the iPhone, for example, were that (1) it broke out from under the dead hand of the telcos - that was a revolution (a game-changing business model innovation), and (2) the extent of the media deals (or perhaps that was a continuous innovation from the iPod). The hard yards and the strength of the final whole offer were a product of a relentless focus and ingrained culture of continuous improvement. This spans the whole organisation, not just the Innovation Department.

I believe that much of Apple's success can be attributed to this attitude towards continuous improvement across the entire firm, plus the leadership's lack of fear of cannibalization as Christensen says (combined with their other assets and ability to execute).

Continuous improvement as an ingrained culture is old fashioned and unfashionable but Dr. Deming had it right - as Apple proves.

How important is continuous improvement to Apple's success, compared to say "invention"?

Why do so many firms find continuous improvement so hard to ingrain?

Please comment below.

Walter @adamson
http://xeesm.com/walter

PS If you are interested in Cloud, and Clayton Christensen, read What Clayton Christensen Can Teach Us by Cloud expert @bernardgolden

Dangerous delusions - iPad is not just a PC

It's a dangerous path to think that the iPad is just a PC, as numerous sources quoted Steve Balmer as saying at the 2010 D8 Conference. I'm not sure that he actually said exactly that, but that was the most common byline after his session. Holding on to that interpretation is surely delusional and not in Microsoft's best interests?

I think that Balmer actually said something like everything you can do on an iPad you can do on a PC, and it's just about form factor. And in fact just a couple of days ago one of the senior PR gurus at Microsoft echoed those exact words, so I guess that IS the party line:

They [tablets] are each highly optimized to do a great job on a subset of things any PC can also do. Poor Frank Shaw got well and truly hammered in the blogsphere for his post.

Whereas Steve Jobs had described the PC as being "like trucks", Blamer countered by saying shared devices e.g. a PC  in the home are not going away, if only for cost reasons. (You know, Balmer should have said that there are some important things we do on a PC that are just a pain on an iPad - try blogging for example. But in any case his mental model is a liability.)

The mental model matters

So what's the problem in holding on to the mental model that the iPad is just a svelte PC?

For one, the iPad is making massive gains in market share, and creating new markets, and powering Apple to be an extremely serious competitor to Microsoft in some of it's core lines of business. Large corporations are buying large blocks of iPads and Apple cannot keep up with demand. The corporatization of IT is a big deal, and Apple is at the forefront of that wave.

And for another - the market doesn't believe you. Which means you will lose market share, even faster.

• Perth woman offers iPad for romance
• Sign a contract on your new Simonds home, you'll receive a FREE Apple iPad
• Or why not buy a home in the beautiful AMEN Estate in Lekki, Lagos and get TWO free iPads?
• Get a new iPad 2 Free, with EVERY HomeSec Caveat loan

Etc etc etc

Hey, would any of these work if we replaced "iPad" with "PC"?

NO.

That's why the iPad is not just a PC.

What IS the iPad?

It's something different, and Microsoft's challenge is to find out what it is an how different. If they don't start with that attitude then they are likely to never bridge the gap.

By the way I don't actually know what it is. It is all of these things but what else:

• a brand
• a fashion statement
• a geek statement
• a business statement
• a personal statement
• a business tool
• an entertainment tool and portal
• a great way to interact with your children
• a satisfying experience
• fun
• work
• simple
• quick
• sharp
• a personal assistant
• part of Apple
• not part of Microsoft.

What the "whole product" is, which is driving incredible wealth to Apple's bottom line, I don't quite know. Most obviously the iPad whole product is a LOT MORE than the device - which is what I think most of the other tablet makers don't quite get.

What the other tablets are IS just a piece of junk, a boat anchor - HP proved that! Of course Android will make some headway, and that headway depends on everything other than the tablet itself - the table is just a ticket to the game. But what is the game?

The "ecosystem" is a word, and a powerful one, which explains Apple's success. But it is not all. 

If Microsoft have a mental model which is focused on the device a la the PC world, and the concept that they are just remodelling the form factor, then that is surely doomed to failure. Even if they don't quite understand it, as I don't, then they should approach the iPad "whole product" with a mindset that this is something different.

Let''s face it, if you've been dissing your competitor for years, and then failed at everything you've done where they've been beyond successful, then something isn't quite right with how you view what they are doing. (Examples: Zune - total failure; Retail Stores - total failure; Tablets - total failure; Mobile Phones - significant relative failure)

This is a different world and we need to understand it.

To do otherwise is to dance on the head of a pin, while the spoils fall to Apple in bucketloads.

Adjust the mindset - let go

There's no rocket science here. I'm just saying that it takes a "simple" Peter Drucker-ish adjustment to the mindset, and then progress can be made by Microsoft. And good luck to them, sometimes Apple gets on my nerves with their crappy attitudes to customers.

But hey, I'm still "queueing up" for my iPhone 5 !!

So let's see the mental model that the iPad is not just a PC, and see what Microsoft can turn out with it's incredible resources. That would be exciting. Another form-factored PC as a tablet won't be.

What do you think the iPad "whole product" is - the secret sauce?

How should Microsoft think of the iPad in order to challenge it?

I'd like to hear your opinion, please comment below.

Walter @adamson
http://xeesm.com/walter

By the way I thought that the Simonds Home iPad promotion was very clever.  It may actually save them money! When new home buyers sign up, and receive their iPad they can

• "follow your new home being built on MySimonds;
• receive building updates;
• receive information alerts;
• receive one to one service from start to finish; and
• then your new home will be constantly at your fingertips."

Very neat ! And those interactions reduce the workload and costs on Simonds and the iPads pay for themselves many times over, and the customers are thrilled. Clever

Group Think! HP tablet delusions create expensive WebOS boat anchor

HP VP Eric Cador promises TouchPad will beat iPad 2

Eric Cador (@ecador) is, or perhaps was, the senior vice president of the Personal Systems Group in the Europe, Middle East and Africa region (EMEA) for HP.

HP beat their own chest

In May, just 3 months ago, he predicted that the HP tablet would not only beat the iPad but more than just #1 would become #1-plus. Kind of like a hardware vendors equivalent to Google+ I suppose.

I'm not picking on Mr Cador. But he went public and PR with his hapless prediction, spread it far and wide, and even roped in his colleagues with his explanation "We call it number one plus". Well they were suffering group-delusions as a fair few predicted, including my good self.

Does HP's TouchPad have a hope against the iPad? July 1, CRN Australia

My comment at that time: "HP obviously have a vision for the tablet which extends to them matching the Apple, Android and MS ecosystems (meaning in the main developers + music). Personally I don't see it at all, and without that ecosystem a tablet is just another piece of junk - a boat anchor."

Group think surely a culprit

Group think is a common corporate disease, and when you are as stove-piped as HP (as is commonly known) it is even more deadly.

My boat anchor prediction came true and now HP has thrown it overboard, not even 7 weeks after it's launch.

Credit where credit is due

I'll give HP credit for this - the person that so quickly pulled the plug and killed the whole WebOS tablet line of business today did a brave thing, corporately. That is impressive. These kinds of project generate a life of their own, and it is tremendously hard to bring them to heel.

Rather than die a death of a thousand cuts someone stepped up to the plate. The question: is that person most likely to be someone from within the delusional project or from outside it?

The answer is obvious and that's probably the result of some very tough metrics being imposed upon the project from the outside, and the project failing to meet them. The metrics probably came from the Group Finance function.

WebOS is worthless

I notice that there is a lot of discussion about HP selling the WebOS operating system. I'd say the people who believe that WebOS is worth anything are the same people who thought that the HP tablet would be a great success. Sure, according to all the geek accounts it seems like a very well constructed operating system. And where did that get the tablet - directly to failure, don't pass GO!

WebOS IS worth something, a token, to a manufacturer in a niche equipment market. Otherwise, speaking in the context of the global phone and tablet market, it is worthless, literally. It's been proven once, or was that twice given that Palm failed as well. Who would feel the urge to take the risk one more time? Knock yourself out if you'd like to try. I'll make my prediction right here - it will fail again. 

Why? Because it's not about the operating system or the hardware, they are only tickets to the game, not the game.

Perfect storm - the big mobile world re-order

Google's acquisition of Motorola Mobility, Nokia's implosion and its deal with Microsoft, HP's tablet launch disaster, the patent wars, are all signalling a massive shake-up and re-alignment in the mobile world and "non-PC" world. Hang on for the ride, it's going to be tremendously exciting.

Throw into that mix cloud computing, and social business, and collaborative commerce, and you have a perfect storm for massive business reinvention. And many David's will emerge to kill the Goliaths.

What do you think HP did wrong in assessing the success of their tablet?

How will the tablet wars pan out and who will be left standing?

Please comment below.

Walter @adamson
http://xeeme.com/walter

10 Questions when Data Localisation stalls cloud computing

We often see data localisation bought up as an issue - a reason not to adopt cloud computing. There are the black and white cases, the gray and emotional cases, and the government.

The government is the government; they have money and they can spent it how they want and they can go play somewhere else if they don't like you. That's also the bottom line - the more games government play the more it costs the taxpayer, simple as that. That extra cost may well be justified, for the reasons that the government would wish to promote.

As far as data localisation is concerned, some state governments are specifying that all data must be kept within the state, so that it is unambiguously within reach of the state jurisdiction and only the state jurisdiction.

Constraints cost money

That is a costly constraint, unless the major cloud service providers each happen to have a local facility, and can control and restrict the flow of data. Of course it is unlikely that each of the major providers will have a local facility. Which means that any that do have not only an inside run but also a monopolistic chance to grab the government business. The business outcome of this all-in-State requirement can only be a higher cost, and less flexibility, for the government client.

In the rather famous, or notorious, case of the LA Police Department, Google had to set up a separate data environment called GovCloud - only to be used by Government Agencies. But even then it was not specified that all data had to reside in the state. But Google, and Microsoft, have committed to their government cloud environments maintaining all data within the US.

That's obviously a double standard, since in other parts of the world e.g. Australia, cloud providers such as Google and Micrsoft are promoting the safety and compliance of their cloud offer's eminating from outside Australia e.g. Singapore. It's also an acknowledgement of the commerical reality that the cost of marketing and selling around the objections are higher than the cost of building "GovClouds" in the US.

We only want what you are giving US governments and agencies

So it's a fair question - if you Mr Cloud Provider are bowing to US governments and agencies then what we are requiring in terms of local data housing must be a reasonable and logical request isn't it, after all we probably have relatively similar laws which relate to this area?

Yes it's a fair question.

It just comes down the the business case and the ROI for the provider. The decisions about local in-country or in-state cloud centers are purely based on a business case. If a government can commit to spend enough, over a sufficient period of time, then things can be done.

Ironically the burden of that type of commitment is something which real cloud computing is offering customers the chance to avoid. That's an expensive commitment for customers e.g. goverrnments.

Are there other alternatives?

Does all the data really have to housed locally?

Let's examine some options:

• If the state legislation really requires and can only operate on the basis of all data being held withing a state then that's pretty much the end of the story;
• But actually that's unlikely, we already have outsourcing, and those contracts often using out-of-state centers;
• Then the question is which data, what type of data is mandated to be held locally, and why?
• Is it a quesion of access, or one of denying access to other jurisdictions?
• Is it to conform wholly with Privacy legislation, or are there other important regulations which come into play?

Piece by piece, except in the blanket "all data mst be help here" case, the reasons can be broken down and the alternatives assessed. Even in the case of Google and the LAPD, the interpretation of both the LAPD's security requirements and the FBI's requirement that the Google Apps for Government system be compliant with its Criminal Justice Information Services (CJIS) standards was a matter which required extensive review and determination.

So the interpretation of legislation is often not black and white, and it is in these details that the real cloud strategy and data location requirements need to be discovered.

10 Questions to ask

Digging deeper into what is possible in terms of data location requires that we ask some questions:

1. In which jurisdiction will the service provider store the primary data?
2. Which local laws apply to getting access to that data by local authorities, and what type of authorities would have access? (The US Goverment requires that only US citizens with proper clearance and authority have access to GovCloud.)
3. How will we be notified if local authorities seek access or are given access to our data?
4. Under what circumstances will that data be copied, moved to, or shared with other jurisdictions?
5. How will the cloud provider contractually ensure that the privacy and access conditions for the data, in the "external" jurisdiction, are maintained to at least the same level as that required by the customer government?
6. Which specific part of the State legislation require local data, and for what purposes?
7. Are these requirements blanket omnibus requirements, or specific technical aspects of specific legislation?
8. Can any of the restrictive requirements be amended with an acceptable effect on their objectives or intented outcomes?
9. Which other government bodies or agencies require the State to conform with legislation which impacts on the ability to host data out-of-State?
10. What is the cost implication in terms of total contract and lifecycle cost of an in-state data location requirement versus out-of-State or even out-of-Country or "don't care where"?

Those questions will get into the "whys" of data localisation and help sort out the options and costs.

Risk management

It's also worth noting, as in any risk management exercise, that the risks which are identified with out-of-State data can be treated in 5 ways - they can be accepted, rejected, mitigated, transfered or avoided. The options within each of those 5 categories provide the path for action.

In summary, data localisation is both an emotional and a logical issue for cloud service providers to address. Putting aside a "blanket No" then the real issues can be assembled and then broken down into their key components and their risk, cost, and political implications.

That's not always going to be an easy task. In fact in the case of Google and the LAPD these types of issues caused major overruns and change orders to their cloud migration project.

But the issues can be sorted and will reach a sound conclusion which is cost-effective and meets all the jurisdictional goals.

What do you see as the biggest issue in data location for cloud customers?

Have you seen original restrictve requirements loosened after more detailed analysis?

Walter @adamson
http://xeesm.com/walter

Walter Adamson was the Independent Advisor to the IT Strategy Board of the Government of Victoria for several years commencing 2005.

Is an iPad a PC, and how many retailers will fail? - In My Opinion

With this post I've shamelessly copied my colleague Wendy Soucie in having a collection of blog comments, as a post, each week. As Wendy says "one of the ways I participate in the social web is to spend some time each week reading and commenting on blogs and shared content". And she references the Social Media Academy NCP model - Network Size, Contribution, Participation. Wendy and I are both graduates of the Academy and also Founding Partners of the Social Business Consulting Group.

Here are two blog posts which caught my attention and where I commented:

• The reasons retailers will fail, written by Dennis Price, caught my eye in The future is bleak, unless… Dennis discusses research conducted by Lewis & Dart (2011) on what is happening in the retail channel. They predict that 50% of traditional retailers/brand will fail.

What motivated me to comment was because I was struck by the fundamental changes hitting retail - not dissimilar to the mega-trends I try to figure of cloud computing, social business, mobile and collaborative commerce and the impact at the point of intersection on today's businesses. I noted that in my experience the ways business leadership teams react seemed to be the same across many sectors, including, apparently, retail.

 If you're interested in this wave of change then there are many interesting comments.

But undoubtedly the biggest buzz and the highest participation rate was in response to Asymco's post about the PC versus the iPad.

• In Is the tablet computer a new PC or post-PC?" opens with the statement "Steve Ballmer stated and Andy Lees confirmed that Microsoft views iPad and other tablets as “just PCs”".

That really caught my attention as a potentially disasterous mental model for Microsoft around which to wrap their strategies. As I said in my comment: "Hanging on to the belief, the mental model, that the "whole product" of the iPAD is that of a PC sounds extremely dangerous to me, and I'm disappointed in Microsoft."

There's a huge flurry of comments, worth reading.

Because of Nokia's implosion it's a live action case study in management and strategy, and I also tried to leave a comment at Tomi Ahonen's blog where he does the best analysis of this in the business, but after several failed attempts I just could not get my post accepted so I quit. If you're interested in the mobile business, or just plain business strategy, Tomi's posts on Nokia are a must read.

How do you see physical retail competing most successfully with online?

How dangerous is Microsoft's belief that the iPad is just a PC?

What lies behind the disasterous collapse of Nokia, and what is it's best path forward?

I'd like to hear your opinion, please comment below.

Walter @adamson
http://xeesm.com/walter

Missing the mark - Bank 2012 Core Challenges and why they are not

IT News reports that ANZ CIO mulls 2012 challenges, competitors but I'm puzzled that the "challenges" appear so routinely operational. In a world which is uniquely being buffeted by the major mega-trends of cloud, mobile, social enterprise, and unified communication, not to mention consumerization of IT, I would have thought that the challenges would have been far more substantial than just tickets to the game.

In a world where Facebook is better equiped to operate a secure, reliable bank than the Banks are, then a focus on the routine operational tasks - a focus which is predominately inward - is surely not going to deliver the future of banking.

According to the report ANZ CIO Anne Weatherston named "systems availability and security, costs, business alignment, change management" as the 2012 challenges. Really?

I'm puzzled by this report on a number of fronts. No doubt Bank CIOs have challenging jobs. But what really struck me about this list of "2012 challenges" is how operational they are.

THAT is the pot of big challenges? I'm struggling to see what are different in those to the last 20 years, and since they have been the same challenges for the last 20 years why aren't they just a ticket to the game.

I'm not being bold enough to say why aren't they solved, because they do remain a challenge as things evolve. But in another way it could be well expected that they are solved, in the sense that it is just the ongoing day to day management issues which should have processes to cope with new threats and challenges i.e. the risk management and governance should be well and truly solved, and hence these issues are just tickets to the game and not the actually game. Isn't that a reasonable expectation?

I'm further confused about "business alignment". I've seen so many articles in recent years saying that business alignment is all done, furthermore it is an insult to any IT department or CIO to even raise it at a meeting, breakfast or seminar because sure as night follows day they are fully integrated with the business and on top of this passe issue.

Even furthermore they say that even using the phrase implies that IT has been or is "outside" the business, and that is not the case among them. And some articles have expressed their anger at this topic still being on the speaker circuit and consultant agenda. I noticed this because I'm a little less convinced that business alignment is done and dusted. But never-the-less I'm surprised that it's openly on the list of ANZ challenges for 2012. Perhaps I should be pleasantly surprised!

Finally, there's no doubt about the game changing outsiders - the barbarians at the gate. We desperately need more competition, as the Chinese kindly pointed out yesterday.

But I'd be keeping my eye on Facebook far more than Google, and even Paypal. That why I wrote Facebook Credits - 5 things you should know.  Additionally Facebook can keep it's systems running and secure for 750 million, something, with the greatest respect, is beyond the ken of the Australian lead banks. This is not a cheap shot, it's recognition of the fact that our Austalian banks are even struggling just to keep their systems operational let alone create new business.

Finally, I'm surprised that nothing of social business was mentioned. We're right bang at a point where business and IT leaders are struggling to figure out specifically where social media functions belong, both in terms of 1) delivery platform as well as 2) organizational capability. And at this point, organizations are realizing they have to put some serious thought into making organization-wide sense of social media service delivery. This, to me, is a huge challenge and one relevant to bank CIOs and their core enterprise architecture. But this one went AWOL from the 2012 list?

What do you see as the greatest IT challenges for banks in 2012?

Walter @adamson

2 Business Transformation Markers from Apple WWDC 2011

There's news galore about Apple's Worldwide Developer Conference announcements, but amongst the mountain of new feature analysis and reporting I see two transformational items which haven't got much press. The first is related to the "home media center" transformation, and the second to the cloud computing transformation.

Home media center

Windows has a home media centre. It's on a PC, duh! Some reports of Apples new iCloud gushingly headlined this type of summary "Apple pins its hopes on the iCloud as users drift away from computers". That's a poor headline, although that actual article in the Guardian is very good. 

Users aren't drifting away from "computers". We're being more and more surrounded by them, almost embedded with them!

BUT! The universe IS drifting away from the PC as the centre of anything, and especially the home media centre.

That IS a transformation - not technically but business-wise, personally, socially and emotionally. The blurring of personal and business life, and entertainment, is all part of what makes this a real transformation. People interacting with their music, TV, work, and social channels "simultaneously" is not going to revolve around a PC. And guess who is placed best for where it will happen, Apple. Not because they have the devices, but because they have the devices and the ecosystem and the assets.

Which brings me to my next point

Cloud Computing - the transformation accelerates

Apple is reputed to have spent $1 billion on their new data centre in North Carolina to support iCloud.

There is still lots of noise and emotion about cloud computing, and our trusty sales folk are making hay while the sun shines with traditional Fear Uncertainty and Doubt to keep customers from making the big  choice.

But which companies, in the world, can afford to spend what the big cloud providers are spending on their data centres? Microsoft is said to be spending $500 million per centre. Plus they attract the very best people, because they can and because it is leading edge. The world's smartest computing scientists and IT practitioners and operational experts are working for Amazon, Apple, Ebay, Facebook etc. Not for the banks, and the traditional IT vendors. Those "old" sources are good, but not transformational, perhaps with the exception of Microsoft in a perverse way. Microsoft's cloud solutions are very good and they are coping with the cannabilization issue after many years of internal conflict.

All this means is that the transition to the cloud, for 98% of businesses, is just a matter of time. That time period will be largely a matter of emotion, pushed by a build-up of cost and competitive pressures on the laggards.

If you can't afford to spend $500m to $1 billion on your data centre, then you need to ask serious questions about why you are investing any money in "computing" and not planning the path forward to cloud and the necessary communications support. You may need to invest in new access devices, and communications, but you don't need what you had.

The IT world is in transition - business transformation follows

Just these two trends, accelerated by a "consumer" company are enough to show that the whole IT world is heading for massive transition, and the business transformation opportunities are big.

PS I was going to title this post "iOS 5 is irrelevant" but that's a bigger topic I'll leave for another day.

What do you think was the biggest transformation from WWDC?

How do you think the cloud transformation will play out with most businesses?

Walter @adamson