SaaS Delivery of IT Lifecycle and Quality Management Functions Evolves Toward an IT Service-Delivery Solutions Approach

Transcript of a BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe 2009 Conference in Las Vegas the week of June 15, 2009.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Sponsor: Hewlett-Packard.

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you on location from the Hewlett-Packard Software Universe 2009 Conference in Las Vegas. We’re here in the week of June 15, 2009 to explore the major enterprise software and solutions trends and innovations that are making news across the global HP ecology of customers, partners and developers.

I'm Dana Gardner, principal analyst at Interarbor Solutions, and I'll be your host throughout this special series of HP Sponsored Software Universe live discussions.

Please join me in welcoming two executives from Hewlett-Packard's Software and Solutions group. We’re here with Scott Kupor, vice president and general manager of software-as-a-service (SaaS). We’re also here with Anand Eswaran, vice president of professional services. Welcome.

Scott Kupor: Thank you, Dana.

Anand Eswaran: Glad to be here, Dana.

Gardner: We’ve heard a lot here at the conference about various new sourcing options, looking to the future and thinking about how to deliver applications in a different way over time. This whole SaaS phenomenon, if you will, over the past several years has had a lot of people thinking about this for business applications.

But, Scott, in your group, there’s been quite a heritage of using SaaS for delivery of infrastructure and productivity in the development and cycle for application creation in IT departments. Tell us a little bit about where SaaS has been, and perhaps we can get a better sense of where it’s going to go.

Kupor: That's a great point. When people think about SaaS, Salesforce.com is obviously what comes to mind, a really traditional application. At HP for the last nine years, we've been selling IT management applications as a service delivery option. If you think about things like testing, performance management, or project and portfolio management (PPM), for example, those are traditional IT applications that we’ve been selling with this similar delivery model.

Gardner: Now that we can get a better sense that there is interest, and now that cost efficiencies have become top of mind for many organizations, where do you suppose this SaaS model can go next?

Kupor: It’s interesting. What we’ve been hearing from customers today at the conference are two key things. Number one, the cost benefits that initially drove them to SaaS are ever present and incredibly more important in this financial environment. The benefits are really coming to fruition. The second is that we’re starting to see a migration of SaaS from what was traditionally testing services toward other more complex and more customizable IT management applications.

The prime example of that is that we’re hearing a lot of interest from customers around IT service management (ITSM), service desk applications, and service management applications. These are things that have traditionally been the domain of inside-the-firewall deployments. Customers are now getting comfortable with the SaaS model so much so that they’re looking at those applications as well for deployment in a SaaS environment.

Gardner: Of course, when we free up these functional sets as services, that gives us more flexibility in how they’re consumed and delivered. Anand, I wonder if you could help us explain how moving from a SaaS deployment helps professional services, organizations, and folks create a better solution approach to some of the problems that IT departments are facing.

A conscious shift

Eswaran: Absolutely, Dana. That’s been the consistent focus and feedback from all the customers over the past 12 months. We’ve made a very conscious shift from what was inherently deployment of products. The approach right now is transformed into what business outcomes can we achieve for the customer, which is something which we would have been unable to do some time back.

We have changed focus now from deploying a single product set to achieving outcomes like reduction of outages by 40 percent, increasing quality, getting service-level agreements (SLAs) to a certain point, and guaranteeing that level of service. That’s been hugely helpful.

The second thing that has been interesting is the huge focus on intellectual property and best practices that we bring to the table right now. This accelerates time-to-market. That was one of the feedbacks we heard last year at the conference. Over the past 12 months, we put a services R&D organization in place. This has massively changed how intellectual property best practices accelerates time to market for the customers, and we're getting very good feedback this year.

The last thing, which is the end game, is that this all gets us to the point of what customers refer to as "killing the game," getting to a point of being able to offer outcome-based pricing and guaranteeing that outcome, as opposed to the traditional consulting model of billing rates and hours.

Gardner: This strikes me as a little counterintuitive. You think of SaaS and you think of a simple delivery of a functional set.

I don’t think people should believe that moving towards a SaaS model necessarily means that they get a lesser degree of service or that they can’t still leverage their own process, their own IT, or their own systems to create meaningful differentiation for their business.

Professional services would be something you’d do for setting up and deploying, crafting, and requirements ahead of a methodological approach. Scott, help me understand, from your perspective, how SaaS and professional services create a whole greater than a sum of the parts?

Kupor: SaaS ultimately is really a deployment option for customers. They’ve always had the option of in-house deployment. SaaS now gives them the option to deploy that application potentially in a third-party data-center environment. It doesn’t obviate the need for the solutions focus, though, that professional services ultimately can bring.

Remember, all these are complex IT management applications, they have third-party integrations. They have custom code that customers are building on top of it. Those are all areas of domains of expertise for the services organization. Through the work that the two of us are doing together, we can deliver a cost-effective delivery option for customers, but without having to sacrifice the complexity, integration, and customization opportunities that they demand for these applications.

Gardner: Then, looking at this as well from a cost perspective, many organizations have gone to SaaS for business applications, because they don’t sense that those applications differentiate them per se, when it comes to a Salesforce automation or human resources.

You’re not going to change your market position by having a better HR department. You might look to outsource. So, is there a same effect within the IT department? Some of these aspects, perhaps PPM, is something that isn’t going to differentiate that IT department. They might look for someone to do a “better, faster, cheaper.”

Kupor: Particularly in this financial environment, “better, faster, cheaper” is still the predominant thing that customers are looking at. I don’t know if it’s a mis-perception or how best to describe it, but I don’t think people should believe that moving towards a SaaS model necessarily means that they get a lesser degree of service or that they can’t still leverage their own process, their own IT, or their own systems to create meaningful differentiation for their business.

It’s really all about just making sure that those people have the best ability to deliver the application expertise with least amount of cost involved. That’s really the sourcing option people are moving towards.

Gardner: Anand, is there something more that you wanted to add to this perception about the intersection of customization and solutions with a SaaS delivery model?

Customers care about outcomes

Eswaran: I'd go back to what I started with, which is that the customers care about the business outcomes they need to create for themselves. As Scott talked about, SaaS is a very viable delivery option right now. When we talk about capital expenditures (CapEx) versus operating expenses (OpEx) and how you shift expenses, it allows customers to have flexibility around that. But, eventually, customers are looking to solve a business problem. They’re looking to create a defined business outcome, where all of this trends forward, it becomes a service for the customer.

All of what we do at the back end, whether it’s how we leverage SaaS, what products we use, what software we use, what consulting and professional services we use, all of that is going to be transparent to the customer. What they care about is a service, which we will deliver to the customer. SaaS enables us to get to that service, get to that time-to-market much faster.

Gardner: Help me understand where we’ll start to see more SaaS delivery in the context of an IT department?

Kupor: What we’re seeing, and we’ve heard this a lot from our customers today, is that they’re actually interested in looking at how do I, as an IT department, deploy my own applications in a third party cloud environment. You hear a lot of people talking about infrastructure on demand or computing power on demand.

People are looking toward these third-party products as a way to basically take an application they’ve built in-house and deploy them externally in, perhaps, an Amazon environment or a Microsoft environment. Where the interesting opportunity is for us, as a

That’s really what IT’s job is -- to help deploy business applications and govern the integrity, security, the authenticity, and the performance of those applications.

management vendor, is that customers will still need the same level of performance, availability, security, and data integrity, associated with applications that live in a cloud environment as they have come to expect for applications that live inside their corporate firewall.

We’ve been talking to customers a lot about something called Cloud Assure, which is the first service offering that HP has brought to market to help customers solve those management problems for applications they choose to deploy in a cloud-based environment.

Gardner: This almost sounds like cloud consumption and governance as a service. Is that fair?

Kupor: You’re right. At the end of the day, this is about governance. That’s really what IT’s job is -- to help deploy business applications and govern the integrity, security, the authenticity, and the performance of those applications.

If you go back to where we started this discussion, SaaS, cloud, and all these fancy words, really are different types of deployment models for customers. Whether you deploy it in-house, or whether you deploy it in a third-party cloud environment, you still care about that common theme of governance, security, and all the other things that go along with that.

Gardner: Let’s hear a bit about how to get started. If you’re in an IT department, you like some of this, you want to say to your higher-ups, "I’ve got some evidence of why this will work for us," how would you get started?

Robust education services

Eswaran: There are a couple of things. In addition to all the deployment mechanisms we have in our portfolio, we also have a very robust education services arm. One of the things we’re doing is making sure that education services are available to enable customers on not just the products we have and the solutions we can create, but also the different options they have from a delivery perspective.

We also know that travel budgets and travel freezes are a critical component of why customers are not able to send enough people to get educated. We have also created certain leading-edge portfolios within education services. These enable us to deliver instructor-led training, on a virtual basis, to simulate the exact same interaction that customers need to experience.

So, education services and everything we’re doing about it is a very viable option to help them get enabled on all the different delivery models in addition to solution-based and product-based enablement.

Gardner: How about this notion of professional services over time becoming simply a way of picking and choosing among a variety of different services that could be composed, if you will, into a solution. Do you think that’s where we’re headed?

Eswaran: Absolutely, Dana. We come back to the central theme, which you hear and which we firmly believe in. Everything is eventually going to get transformed into a service for the customer, so that they can actually focus on the core business they are in. When you have things transformed into a service, everything we do to offer that service should be transparent to the customer.

It becomes a services-led engagement, but that’s where we clearly differentiate "services" from "service," the singular, which is the eventual outcome the customer needs to create for themselves. That’s why we really partner well between SaaS and Professional Services. We believe that we are on a path of convergence to eventually get to offering business value and a service to a customer.

Gardner: Scott, how do you see this path of convergence shaping up?

Kupor: Yeah, I really agree with everything that Anand said. At the end of the day, we want to figure out for customers, look, what’s the best way to get the outcome you want?

People have used this term “everything-as-a-service.” It’s a common nomenclature these days, but really does describe where we think the industry is going.

In some cases, that may be a deployment option. It might be engaging a professional services to develop a solution, but, at the end of the day, all these things come together. People have used this term “everything-as-a-service.” It’s a common nomenclature these days, but really does describe where we think the industry is going.

Gardner: Well, great, thanks. We’ve gotten a deeper understanding of where SaaS is headed for IT departments. I want to thank our guests. We’ve been talking with Scott Kupor, vice president and general manager of SaaS at HP Software and Solutions Group. We’ve also been joined by Anand Eswaran, vice president of professional services at HP. Thank you both.

Eswaran: Pleasure was mine, Dana.

Kupor: Thanks, Dana.

Gardner: Thanks for joining us for this special BriefingsDirect podcast, coming to you on location from the Hewlett-Packard Software Universe 2009 Conference in Las Vegas.

I'm Dana Gardner, principal analyst at Interarbor Solutions, your host for this series of HP sponsored Software Universe Live Discussions. Thanks for listening, and come back next time.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Sponsor: Hewlett-Packard.

Transcript of a BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe 2009 Conference in Las Vegas the week of June 15, 2009. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.

EDS's David Gee on Spectrum of Cloud and Outsourcing Options Unfolding Before IT Architects

Transcript of a BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe 2009 Conference in Las Vegas the week of June 15, 2009.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Sponsor: Hewlett-Packard.

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you on location from the Hewlett-Packard Software Universe 2009 Conference in Las Vegas. We’re here in the week of June 15, 2009 to explore the major enterprise software and solutions trends and innovations that are making news across the global HP ecology of customers, partners and developers.

I'm Dana Gardner, principal analyst at Interarbor Solutions, and I'll be your host throughout this special series of HP Sponsored Software Universe live discussions.

Please welcome now David Gee, vice president of marketing at EDS, an HP company. Welcome back to BriefingsDirect, David.

David Gee: It’s great to be here. Thanks for having us.

Gardner: I'd like to hear what you’re gathering from the many, I suppose you could call them, hardcore IT folks here at Software Universe. With a recession, this isn’t necessarily a fringe IT crowd. This is a core crowd. From EDS’s perspective, sourcing decisions and visions about cloud computing are dancing in folks’ heads. What are you hearing from the crowd?

Gee: In general, we’re different things. One is absolute recognition of the challenging economic headwind and the impact that’s having on overall IT spend. With that as the backdrop, the decision points come down to a couple of things.

One is how you free up more of your IT spend and spend less on maintenance to drive a transformation or innovation. One of the fastest ways to do that is to flip the knob between capital expenditure and operating expenditure and to look at a third party or an outsourcer for some help and guidance. Maybe they can take off your hands some of the less core activities or, in some cases, core activities, so that they can free up cash flow and drive an innovation agenda. We're still in a harsh economic climate, and that’s proved to be a pretty compelling message, particularly this flip between capital expenditure and operating expenditure.

Gardner: Do you think that, at this point in this cycle, we're looking at IT through a strictly financial lens? Are people not necessarily seeing the forest or are they more involved with the trees at this point?

Gee: There are a couple of interesting sound bytes that you hear. "Flat" is the new "up," in terms of what the opportunities are. We're also seeing a recognition that 6 months is the new 12. How do you get to a faster return on investment (ROI)? Don’t show up with a project that has a 12-, 24-, or 36-month timeframe. What is non-core that maybe an outsourcer can help you do?

For example, one of the things we hear people at Software Universe talking about is performance and quality testing, and do you need all the resources in-house to be able to do that?

Or, if you have peak load, why don’t you use a third party to help you do performance, quality, and security testing and, from a software standpoint, maybe even do that in the cloud. You can either use a third party or have it delivered as a service to you inside of your infrastructure.

Gardner: Maybe we should do a little descriptive analysis in terms of terms. We hear, of course, about outsourcing. It’s been around for many years. Now, we’re hearing a lot more about cloud. Maybe the means to accommodating a cloud in terms of provisioning and the underlying infrastructure and what you might get from a outsourcer might be different, but aren’t they essentially the same thing?

Understanding cloud

Gee: Cloud means a lot of things to different people. Right now, the objective, particularly for large enterprises, is to experiment to understand what the implications are.

Architecturally, it’s very different, particularly as enterprises want to offer services to their end customers. Equally, how does an enterprise deal with or adopt private cloud infrastructure to be able to offer Web services in an architecturally sound, distributed, and scalable way?

First, we can help in a number of different ways from a consulting standpoint, in terms of how to architect around those things. Second, we can build them for our clients and we do that already today in terms of private cloud infrastructure. And, third is to provide maybe just core infrastructure to third parties, and they then build their clouds to offer to the marketplace overall.

There is a spectrum of different things. The inhibitors to cloud are still pretty significant, as they get more and more core to a business process. Email is a pretty good example. There's a lot of new talk in the industry around using third parties as cloud providers for email.

If it’s a mission-critical application and there are regulatory requirements, intellectual property requirements and it’s a core mission critical app,

My experience thus far has been that clients are looking for leadership, some direction, and flexibility.

do you want -- and does it make sense -- to have a third party host that for you as a cloud application? Or, do you go to somebody like EDS, which manages hundreds of thousands of instances of Exchange, for example, on behalf of their clients?

There’s pretty good delineation in my mind that the more core an application is to the functioning of a business today, particularly where the data lives, is a hinge factor on the decision to adopt a cloud service.

Gardner: That probably means that a lot of thinking about cloud makes your job in marketing EDS little easier. Folks are now thinking about the options in that spectrum in front of them, but they might then fall back to wanting to be mission critical and enterprise caliber.

Gee: Yes, and this comes through a sourcing discussion. We have the flexibility and the domain expertise, where we deliver multiple services to multiple clients and multiple business processes to multiple clients in the public sector and financial services and the telecommunication space across the board.

My experience thus far has been that clients are looking for leadership, some direction, and flexibility. Certain things I absolutely want to control and retain within my own firewall. Certain things I'm going to want EDS to help me manage, host, drive down operational cost, and provide some level of innovation -- and to deliver those services as effectively private cloud services to my client base and ultimately to their customers as well.

Gardner: That sort of raises the question in my mind: is EDS a cloud provider?

Creating the model

Gee: No question. In my mind we’re a cloud provider. EDS created the outsourcing industry over 40 years ago. Think about everything that we do today in delivering services to our client base. If you then extend that, those services are effectively cloud-based services, depending on what your definition is. In my mind, we’re absolutely a cloud company.

We’re at the forefront of delivering that in multiple countries, across multiple industries and in some cases, highly mission-critical services for airlines and financial institutions. Do they have a consumer orientation to them? Probably not. In fact, you may not even realize that we're doing that behind the scenes for some of the most well-known brands on the planet.

Gardner: Given that we’re looking at this spectrum of possibilities, there are boundaries that are being crossed in ways that we probably wouldn’t have thought of too long ago. For some of the more conservative thinkers in IT departments, managing those boundaries, which is, I suppose, what you call governance, becomes paramount. EDS has, as you point out, cloud resources, values, and services and HP has governance. Tell me a little bit about how they come together to form something interesting.

Gee: We can actually do a number of different things collectively, now that EDS is part of HP. First and foremost, from an IT leadership standpoint, how do you prioritize what you’re going to do in a harsh economic climate? This would include project and portfolio management (PPM) and matching demand and supply, where demand is always going to be greater than supply of IT resources in this marketplace.

That can be a services led discussion. It could be a software led discussion. And, that capability can also be delivered as software as a service (SaaS) effectively in the cloud. The engagement model is around what you would want sourced in-house. Now, we have this enormous expanded capability to be able to deliver multiple different services in the workspace from a networking and an end-user management standpoint. As I said, service offerings are either number one or number two in every market. So, it’s a pretty interesting place to be right now.

Gardner: Of course, for the foreseeable future, many IT decisions will be viewed through the lens or in the context of the economic conditions and climate. When it comes to factoring a cost-benefit analysis between what you may traditionally have been doing on premises involved low utilization, quite a bit of labor, and manual processes to support those instances of applications and data.

If you wanted to compare that to this new spectrum of options -- outsourcing, cloud, SaaS -- you need to have a pretty good handle on what your true costs are internally. How does that bear on bringing about a rational and therefore lower risk decision process?

Gee: The first data point is about making rational decisions, actually understanding your IT costs. It’s not about the spreadsheet where

We can help you assess what those are upfront to help make an informed decision as to what services makes sense to be outsourced and what other services makes sense to remain inside of your own organization.

you’re putting out the IT budget. It’s "What is the cost of service delivery?" In fact, one of things I’m sure, your listeners have been hearing about this week from an announcement standpoint has been around this concept of IT financial management -- the matching of asset management inside of your organization to service delivery, so you understand the true cost and the profit and loss (P&L) of service delivery.

Once you get underneath that, how much can you automate? You want to do a labor-to-technology arbitrage in some cases. What processes can you automate? Do you want to do those yourself or would you want to go to the world leader in automation of certain IT processes and have them handled by EDS in this instance?

That's kind of a two-step process. We also have a lot of process and domain expertise about understanding the costs of IT delivery. We can help you assess what those are upfront to help make an informed decision as to what services makes sense to be outsourced and what other services makes sense to remain inside of your own organization.

Gardner: This decision process, I believe, will go over several years, perhaps 5 to 10 years, across various industries and requires a professional service approach. There are a lot of partners that you work with traditionally. You have your own internal professional services. How would you characterize the role of a professional services and methodological approach to this decision around the granular services decision?

Ecosystem of partners

Gee: There is a pretty rich ecosystem of partners. If you look at the overall outsourcing marketplace, once you take out the five or six largest players, 70 percent of the market is serviced by "other."

If you think about what the opportunities are for third parties who are working with their client base and their customer base to develop options, the main driver today is around cost reduction, or freeing up dollars for innovation. We have a strong relationship with a number of those partners. It can be global, but also region-by-region and, in many cases, country-by-country, where these make the most sense to go do.

There’s a world of opportunity out there. What we're seeing now, as a part of HP, is a pipeline or a funnel, an access to HP’s installed base. There was a limited overlap between EDS’s customer base and HP’s large customer base. We see that as opportunity for growth and we’ll expand our footprint. We’ll also expand our footprint built on the best intellectual property that’s out there in the market.

My hope would be that this would be built on many things that HP does today, but we’re also helping HP build better products as we scale certain things

Are you going to build an innovative set of capabilities that’s actually going to help your business grow and be aligned with a business objective? At the end of the day, that’s really the value add.

out and have mission critical examples of what’s going on. We'll help improve features and functionality, not just in the software part of our business, but in the hardware and the support services that align with us as well. So, it’s a very healthy connection point.

Gardner: Going back to the decision process for enterprises, where do you start? Do you have a sense of an application, a data set, a particular use case, or a business case? What would be the right low-hanging fruit for stepping into this cloud process?

Gee: There are a couple of different angles to that. One is, how do you deal with the peak load, when you simply don’t have the infrastructure in place or you don’t want to put the infrastructure in place?

QA testing is a pretty good low-hanging fruit, to use your terminology. New applications are coming online, and you’re doing a migration from one version of a large application to the next version of a large application, and the skills and resources aren’t in-house. You can go to a service provider like EDS, for example, to do that or you can have some of that capability delivered to you as SaaS. The two very interlinked.

Another one is to pick key business processes. Service management is another good example. Do I want to have that helpdesk capability and fault resolution in-house or do I go to a third party in the cloud that is dedicated in providing a high quality service at potentially a significantly lower cost with more value to the business?

Again, those dollars get freed up, and what are you going to do with them? Are you going to build an innovative set of capabilities that’s actually going to help your business grow and be aligned with a business objective? At the end of the day, that’s really the value add.

The bottom line

Gardner: Let’s go to a bottom-line question. With the renewed interest, or the building interest, in cloud and what I think would be renewed interest in outsourcing, can we safely say that in two, three, or five years the total cost of IT in large organizations will decrease significantly as a percent of revenue?

Gee: You’re already seeing that. I don’t think there’s any mystery that IT, as a percentage of revenue, will stagnate, as businesses grow. Actually, in dollar terms it might rise a little bit, but as a percentage of revenue, it’ll probably remain flat. If you look at the most recent quarter across the IT industry generically, what you’re seeing is that the PC and server markets have shrunk.

There's no question about it. They've shrunk in dollar terms, year-over-year. The services marketplace is flat or growing at a low single digit, and you’re seeing a shift of dollars or contraction of dollars on the hardware side.

What that will do is create a pent-up demand for a refresh cycle. Historically, that might have been three years, but it’ll go to four or five. It’s going to come, and then the question is do I refresh that infrastructure in-house or do I go with a cloud provider or a outsourcer, for want of a better word, to take that infrastructure on, do the refresh for me, and produce a set of services and a service level that I wouldn’t have been able to do internally.

There's going to be this transformation over the next two to three years and it’s being driven by a contraction in overall spend, but that’s going to have to be made up from a refresh standpoint. Your crystal ball is probably as good as mine, whether that’s a year out or two years out, but it will have to have happen that, at some point, your PC and your service are going to have be refreshed.

Gardner: Well, it certainly seems that there’s a significant amount of important decisions that will be coming to the IT decision makers, and I look forward to tracking that along with you. I want to thank our guest. We’ve been joined by David Gee, vice president of marketing at EDS, an HP company. Thanks so much.

Gee: Dana it was a pleasure to talk to you. Thanks so much.

Gardner: Thanks for joining us for this special BriefingsDirect podcast, coming to you on location from the Hewlett-Packard Software Universe 2009 Conference in Las Vegas.

I'm Dana Gardner, principal analyst at Interarbor Solutions, your host for this series of HP sponsored Software Universe Live Discussions. Thanks for listening, and come back next time.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Sponsor: Hewlett-Packard.

Transcript of a BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe 2009 Conference in Las Vegas the week of June 15, 2009. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.