FuseSource Gains New Autonomy to Focus on OSS Infrastructure Model, Apache Community Innovation, Cloud Opportunities

Transcript of a sponsored podcast discussion on the status and direction of FuseSource, which is being given its own corporate identity today by Progress Software.

Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Sponsor: FuseSource.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you're listening to BriefingsDirect.

Today, we present a sponsored podcast discussion on the rapid growth, increased relevance, and new market direction for major open source middleware and integration software under the Apache license.

We'll learn how the FUSE family of software is now under the FuseSource name and has gained new autonomy as its own corporate identity. We'll also look at where FuseSource projects are headed in the near future. [NOTE: Larry Alston also recently joined FuseSource as president.]

Part of the IONA Technologies acquisition by Progress Software in 2008, FuseSource has now become its own company, owned by Progress, but now more autonomous, to aggressively pursue its open source business model and to leverage the community development process strengths.

Even as the IT mega vendors are consolidating more elements of IT infrastructure, and in some cases, buying up open-source projects and companies, the role and power of open source for enterprise and service providers alike has never been more popular or successful. Virtualization, cloud computing, mobile computing, and services orientation are all supporting more interest and increased mainstream use of open-source infrastructure.

Please join me in welcoming ours guests. We're here now to discuss how FuseSource is evolving to meet the need for open source infrastructure with Debbie Moynihan, Director of Marketing for FuseSource. Welcome to the show, Debbie.

Debbie Moynihan: Hi, Dana. Thank you. It's great to be here.

Gardner: We're also here with Rob Davies, Director of Engineering for FuseSource. Welcome to the show, Rob.

Rob Davies: Hi, Dana. Good to speak to you today.

Gardner: Debbie, tell me about some of the trends. As I said, we're seeing some of the most aggressive use of open source and IT infrastructure. We're seeing great success in terms of total cost, efficiency, and agility. Why is that happening now, and where do you see the demand trends headed to in the next several years?

Cost reduction

Moynihan: As we all know, over the past couple of years, there has been a lot of focus on cost reduction, and that resulted in a lot of people looking at open source who maybe wouldn’t have looked at open source in the past.

The other thing that’s really happened with open source is that some of the early adopters -- we have had customers for many years -- started out with a single project and now has standardized on FuseSource products across the entire organizations. So there are many more proof-points of large global organizations rolling out open source in mission-critical production environments. Those two factors have driven a lot of people to think about open source and start adopting open source over the past couple of years.

Then, the whole cloud trend came along. When you think about scaling in the cloud, open source is perfect for that. You don’t have to think about the licensing cost as you scale up. So, there are a lot of trends that have been happening and that have really been really helpful. We're very happy about them helping push open source into the mainstream.

From a FuseSource perspective, we've been seeing over 100 percent growth each year in our business, and that’s part of the reason for some of the things we're going to talk about today.

Gardner: How about the popularity of the Apache license? We see controversy, in some cases, a lack of clarity and understanding about where some other licenses are going, but Apache seems to be pretty solid and pretty accepted.

Moynihan: We really like the Apache license. There's a lot of confusion around open source licensing. There are many different licenses. There is a lot of fine print. A lot of people don’t want to think about it, and a lot of legal departments get concerned about the gray areas. The Apache license is very easy to understand and it's very permissive in what you can do with software that’s licensed under the Apache license.

Essentially, you can make any modifications you want to the software and you don’t necessarily have to contribute back to the community. It's nice, if you can contribute back, but from a business perspective, if you want to use any of the components, it's what's considered a non-viral license. So, you're pretty free to do what you want, as long as you give credit back to those who wrote the initial code.

Gardner: Rob, we've seen a lot of popularity for open source in operating systems -- server operating systems, in particular -- but why has the use of open source for infrastructure, say for integration and middleware, become so popular? Why do you think that’s going to continue with such things as cloud?

Davies: There has been a trend over the last few years, and Debbie alluded to this, with companies looking to open source and kicking the tires around. In fact, I recently spoke to a large customer of ours in the telco space. They had this remit. Any open source that came in, they wouldn’t put into mission-critical situations, until they kicked the tires for a good while -- at least a couple of years.

Because there has been this push for more open source projects following open standards, people are now more willing to have a go using open source software.

Snowball effect

We've been around in this space for a while, but the earlier adopters who were just trying out in distinct groups are now rolling this out into broader production. Because of that, there is this snowball effect. People see that larger organizations are actually using open source for their infrastructure and their integration. That gives them more confidence to do the same.

In fact, if you look at the numbers of some of our larger customers, they are using Apache ServiceMix and Apache ActiveMQ to support many thousands of business transactions, and this is business-critical stuff. That alone is enough to give people more confidence that open source is the right way to go.

Gardner: Debbie, tell us a little bit about the FuseSource move toward more autonomy. This clearly is an opportunity, but it’s a different opportunity than a purely commercial license and software model. Tell us what’s going on with Progress Software and FuseSource.

Moynihan: We're really excited as a team. Progress is launching a new company called FuseSource that will be completely focused on the open source business model. The FuseSource team has been an independent business unit, since IONA was acquired by Progress Software. We have been fairly independent within the company, but separated as our own company we'll be able to be completely independent in terms of how we do our marketing, sales, support, services, and engineering.

When you're part of a large organization, there are certain processes that everyone is supposed to follow. Within Progress, we are doing things slightly differently (or very differently depending on the area) because the needs of the open source market are different. So being our own company we'll have that independence to do everything that makes sense for the open-source users, and I'm pretty excited about that.

Being our own company we'll have that independence to do everything that makes sense for the open-source users, and I'm pretty excited about that.

Gardner: So, here we are in the middle of October, and this is pretty much now a done deal. Tell me about the history of FuseSource and what led up to this movement.

Moynihan: Rob, who is on the call, can maybe talk about the early days. He was actually a founder of a startup company and that was really the genesis of that is now FuseSource. So Rob, why don’t you start out and I can chime in if needed.

Davies: The notion is of having open source infrastructure start with a group of developers and founders in open source projects. It worked for commercial license based infrastructure product companies before. We -- the other individuals are James Strachan, Hiram Chirino, and Guillaume Nodet -- realized that the best way to deliver open source for infrastructure was to develop open source at Apache.

We decided that open source is the best thing to do, because it opens up the software for engineers to look at, use, and enhance. We felt like that was a very good way to grow a community around the projects we wanted to do.

We started this company called LogicBlaze, which was acquired three years ago by IONA. At that time, we decided to sell to IONA because we wanted to piggyback on their expertise of doing large infrastructure rollouts. IONA, the FUSE brand, and the FUSE product line then really came into the forefront.

Get the message out

Debbie Moynihan, who was the director of open source at IONA, was working on another project at the time called Celtix, which morphed into Apache CXF. We decided to collaborate on this effort to get this message out about using really good infrastructure based on Apache open source projects and get that into the marketplace.

Then, when IONA was acquired by Progress, Progress initially liked the idea, or liked the fact that it’s disruptive. They invested in the group: we added more employees, more sales people, more people in marketing, etc. We have been involved in that for the last two years.

But, it has gotten to a point where we realized that to operate it in its most effective way it has to be outside of Progress to a degree, because it is so different in the go-to-market strategy and what we deliver to customers compared to the rest of what Progress is doing with the one-product solution.

Moynihan: Also, from a business prospective, Progress’ go-to-market is, as Rob said, offering solutions at the business level, whereas open source has traditionally been looked at by developers and project managers more from a technical perspective and more from an open source advocate perspective.

That’s growing over time, as we have talked about earlier. Open source is becoming more and more mainstream, but our approaches to marketing and sales are different in the FuseSource team and are much more community oriented and grassroots than the way that corporate marketing is done at Progress Software.

Our model is that there is no license cost. It’s a subscription support model.

Gardner: Let’s face it, the business models are quite different. The way in which you develop revenue is more through support and maintenance and not on the upfront costs and implementations. Maybe you could explain why the business models being separate makes more sense.

Moynihan: Absolutely. From a practical perspective, the business model is very different. In traditional enterprise software sales, there is a license fee which is typically a large upfront license cost relative to the entire cost over the lifetime of that software. Then, you have your annual maintenance charges and your services, training, and things like that.

From an open source perspective, typically upfront, there is no license cost. Our model is that there is no license cost. It’s a subscription support model, where there is a monthly fee, but the way that it is accounted for and the way that it works with the customer is very different. That's one of the reasons we split out our business. The way that we work with the customers and the way they consume the software are very different. It’s a month-to-month subscription support charge, but no license charge.

Gardner: It’s interesting to me that Progress with FuseSource recognizes that there is that little bit of apples and oranges going on, and perhaps keeping them separate is in the best interest of the users and the community. But, we're seeing the opposite in other companies, where people are looking to fold open source projects and products into a larger family or stable of commercial products.

Do you think that we are going to see that trail off in the market? I guess the question is: what about these mega vendors and the direction of how an open source model and a commercial model should or shouldn’t overlap or exist together?

Very difficult

Moynihan: There are a lot of opinions out there on whether or not open source can be successful in a hybrid model within a single mega vendor. My view is that it’s very difficult, especially because the business model is different. If you're a company and you're out there selling a large portfolio of products, where only a small amount of it is open source, you have a team of people trying to sell, market, and grow business around that portfolio. They're going to focus on the license product.

They're going to have a tendency to focus on those products that are going to drive revenue in the short-term, from a business perspective. It has nothing to do with whose model is better.

I'm very happy that Progress has decided to separate out FuseSource. We already had our own sales team, but now we can be completely focused on working with our customers to help them adopt open source, and when it makes sense, they can work with us to get support and to get training.

It’s a very consultative partnering model. In the early days we really like to provide everything someone needs to get going at no cost. You can come to FuseSource.com and get a lot of documentation, and you can get a lot of training webinars for free. We have weekly webinars that show you how to get going on our products, and that’s nothing that you would see in traditional commercially licensed software.

Gardner: Debbie, tell me about what a customer should expect. If you're a user of FuseSource and if you're in the community, how will this move towards autonomy actually impact you? Will you perhaps not even notice too much?

Overall, it will be really good for our customers. We've talked with them, and they're pretty excited about it. We're all excited about it.

Moynihan: From a customer perspective, this change will have a small but significant impact. We are continuing to do everything that we have been doing, but as I mentioned earlier, we will be able to have even more independence in the way that we do things. So it will all be beneficial to customers.

From an administrative perspective, our email address will change to FuseSource.com and invoices will say FuseSource instead of Progress Software, for example. But, from who they're going to be working with, who their account managers will be, who is developing the software, and who is providing the services and the support, it’s going to be the same people that they have been working with.

We have also launched a new community site at FuseSource.com, which we're pretty excited about. We were planning to do that and we've been working on that for several months. That just provides some additional usability and ability to find things on the site.

Overall, it will be really good for our customers. We've talked with them, and they're pretty excited about it. We're all excited about it.

Gardner: Let's get back to looking at the overall market for infrastructure, open source infrastructure in particular. Rob, tell me a little bit about what's going on in the market?

We're seeing a lot of interest in clouds, private clouds, hybrid clouds. We're certainly also seeing a great deal of emphasis on reducing costs, particularly from the service provider, where they are going down to minute margins in some cases. They really need to make to sure that they're doing this in the most cost-effective manner. Then I have to imagine that if the service providers are able to provide IT-as-a-service at a low cost, the IT enterprises themselves will have to follow suit.

Help me understand the new economics of IT and how open source infrastructure fits into that.

Disruptive in the market

Moynihan: From a market perspective, at a high level, open source is really disruptive in the market in that it's affecting how people are buying software. Generally, we've seen a lot of changes over the past 5 to 10 years anyway, where license costs seem to be coming down with more and more discounting, and people are looking at it.

Historically, software vendors looked at license revenue as the premium part of the business to focus on. More and more they're realizing that a lot of value really does come from the services side. Why? Because that’s where you partner with your customer. That’s where you get to know them. That’s where you help them select the right solutions.

In the open source community, that’s how it works. People come to the community and work with the developers directly. It eliminates a lot of the cost involved in large, complex software organizations, where you might have to wait to schedule time of the product manager, who then would have to spend time with the engineers understanding what's happening with the products, so that he could then relay it to the account team, and then they would meet with the customer.

Open source just breaks down a lot of barriers and eliminates a lot of the costs involved in getting the best software to the users. Why? Because people are talking directly to the developers in the community. The developers are getting the feedback directly.

While we do have some level of product management for open source, a lot of it is based around packaging, delivery, licensing, and these types of things, because our engineers are hearing directly from customers on a moment-by-moment basis. They're seeing the feedback in the community, getting out there, and partnering with our customers. So, from an economic perspective, the model is different.

You pay as you go. You scale as you go. And you don’t have that upfront capital expenditure cost.

Just from the overall "how it works" from a buy-in perspective for the customer, it's very different. It's very attractive in these times that we are having right now, because upfront you don’t have the capital expenditure costs. You can get going. You can go to an open source community site, download the software, and try it out.

We've actually seen people get to proof of concept before they have even spoken with us. We've seen people build our stuff into a product as an application provider, as an OEM, and then come to us. That will tell you how easy it is for people to consume and use open source without having to spend a lot trying to select or figure it out, before they even can try it out.You can try it before you buy it, and when you go to buy, you pay as you go.

That’s also the reason people like cloud. You pay as you go. You scale as you go. And you don’t have that upfront capital expenditure cost. For new projects, it can be really hard to get money right now. All these benefits are why we're seeing so much growth in FuseSource.

Gardner: Are there some salient examples that demonstrate what you've been talking about? I'll throw this out to either one of you. Some of your customers might be good examples of how this can work, both from an economic, technical, and innovation freedom perspective as well.

Moynihan: I'll mention a couple of examples. They are kind of similar and something that we are seeing more and more. Sabre Holdings delivers a lot of applications for various airlines. They have a lot of partners, travel agencies, and airlines. Also, the Federal Aviation Administration (FAA). Those are two of our customers.

In both of those cases, they started looking at open source at the project level, but eventually came to standardize on open source for their common integration infrastructure, and to recommend it - not just within their own organizations - but in both of those cases, to their partners.

Integration is easy

That’s the really nice thing about open source. Integration within your own company is easy. You can have any crazy interface and you'll figure out how to do it. But when you partner, you can't tell your partner how to build their interfaces. But, you can have a common integration platform and say, "Can you transform your stuff so it can connect to this platform?"

With open source, they don't have to have a license for that. So, it's quite nice. They can get going, try it out, and see how it works without requiring their partners to pay any cost. From an economic perspective, they could try it out, get going, look at some proof concepts, test it out, and then rolled it out for a standardized infrastructure internally for some major projects. Then, work with partners to roll it out further.

Gardner: To your point Rob, we've heard a call for more standards in the market around cloud, such as common operating environments and standards for interoperability. In lieu of having those structured standards develop rapidly, we have the open source fallback position. We can't always know what the commercial underpinnings are for services across an ecosystem of cloud consumers or providers, but having a common open-source infrastructure base might very well serve that purpose. Is that what we are finding technically?

Davies: That’s really on the money, Dana. There is this trend as well. When you look at cloud, there are different issues you have to overcome. There is the issue about deploying into the cloud. How do you do that? If you're using a public cloud, there are different mechanisms for deploying stuff. And there are open source projects already in existence to make that easier to do.

This is something we have found internally as well. We deploy a lot of internal software, when we are doing our big scale testing. We make choices about which particular vendors we're going to use. So, we have to abstract the way we are doing things. We did that as an open source project, which we have been using internally.

You have to have choice. You can’t really dictate to use it this way or the other way. You've got to have a whole menu of different options for connecting.

When you get to the point of deploying, it’s how do you actually interface with these things? There is always going to be this continuing trend towards standards for integration. How are you going to integrate? Are you going to use SOAP? Are you going to use RESTful services? Would you like to use messaging, for example, to actually interface into an integration structure?

You have to have choice. You can’t really dictate to use it this way or the other way. You've got to have a whole menu of different options for connecting. This is what we try to provide in our software.

We always try to be agnostic to the technology, as much as how you connect to the infrastructure that we provide. But, we also tend to be as open as we can about the different ways of hooking these disparate systems together. That’s the only way you can really be successful in providing something like integration as a service and a cloud-like environment. You have to be completely open.

Gardner: It sounds as if we've been able to capture the best of both worlds, with FuseSource being based on mature Apache software projects with the model around the FuseSource support, which is several years old and very well demonstrated in the market. But now that you are autonomous, you're also getting the benefits of being a startup, of being innovative, being able to move, being fleet, being able to be agile.

Debbie, is that a fair characterization? By going autonomous with FuseSource, you're getting the best of a mature, established mission-critical enterprise supplier, but also, you're able to move quickly in a rather dramatically changing market.

Best of both worlds

Moynihan: Definitely. We're really excited about it. Definitely being backed by Progress Software provides us the benefit that customers can have that assurance that we're backed by a large organization. But, having FuseSource as standalone company, as you said, gives us that independence around decision making and really being like a startup.

Sometimes, we get ideas, we want to make it happen, and we can make it happen. We can make it happen, the same day or the next day. We'll be able to move as quickly as we want. And, we'll be able to have our own processes in any functional area that we need to best meet the needs of the open source users.

Gardner: Rob, from a technical perspective, how do you view this best-of-both-worlds benefit?

Davies: From a technical perspective, it’s really good for us. The shackles are off. There’s a lot of suddenly reinvigorating that seems to move forward. We've got a lot of really good ideas that we want to push out and roll out over the coming year, particularly enhancing of the products we already have, but also moving onto new areas.

There's a big excitement, like you would expect when you have got a startup. It just feels like a startup mentality. People are very passionate about what they're doing inside FuseSource.

Because those shackles have been taken away, it means that we can actually start innovating more in the direction we really want to drive our software too. It’s really good.

It's even more so, now that we have become autonomous of Progress. Not that working inside Progress was a bad thing, but we were constrained by some of the rigors and procedures that you have to go through when you are part of a larger organization. Because those shackles have been taken away, it means that we can actually start innovating more in the direction we really want to drive our software too. It’s really good.

Gardner: Well, great. How can people learn more about FuseSource? You said earlier Debbie that you have a website that’s been refreshed. Are there some URLs or directions that you would point people to in order to learn more?

Moynihan: Yes, I would point people to FuseSource.com. They can always contact us directly as well. Rob and I would be happy to speak with anyone that has questions. You can send an email to info@fusesource.com and we would love to talk with anyone that has any questions or wants to hear more about it. FuseSource.com is the place to get information on the web. We have a Twitter account, twitter.com/fusenews, that you can follow as well.

Gardner: I want to thank you both. We have been discussing how a newly autonomous FuseSource is evolving to meet the need for open source infrastructure in a rapidly changing marketplace, and of course in an environment where cost and low risk are all very much top of mind.

So, thanks again to Debbie Moynihan, Director of Marketing for FuseSource. Thanks, Debbie.

Moynihan: Thank you, Dana.

Gardner: And also, Rob Davies, Director of Engineering for FuseSource. Appreciate your joining us, Rob.

Davies: No problem. Good to speak to you, Dana.

Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions. You've been listening to a sponsored BriefingsDirect podcast. Thanks for listening, and come back next time.

Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Sponsor: FuseSource.

Transcript of a sponsored podcast discussion on the status and direction of FuseSource, which is being given its own corporate identity by Progress Software. Copyright Interarbor Solutions, LLC, 2005-2010. All rights reserved.

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BriefingsDirect Insights Analysts Examine HP-Oracle Exadata Release, Extreme BI, Virtualization and Cloud Computing Trends

Edited transcript of BriefingsDirect Analyst Insights Edition podcast, Vol. 30, on Exadata, extreme BI and cloud computing, recorded Sept. 26, 2008 from Oracle OpenWorld in San Francisco.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod. Learn more. Sponsors: Active Endpoints, Hewlett-Packard.

Special offer: Download a free, supported 30-day trial of Active Endpoint's ActiveVOS at www.activevos.com/insight.

Dana Gardner: Hello, and welcome to the latest BriefingsDirect Analyst Insights Edition, Vol. 30. This periodic discussion and dissection of IT infrastructure related news and events, with a panel of industry analysts and guests, comes to you with the help of our sponsors, charter sponsor Active Endpoints, maker of the ActiveVOS visual orchestration system, and also Hewlett-Packard via the HP Live! Podcast Series.

I'm your Host and moderator Dana Gardner, principal analyst at Interarbor Solutions. Our panel this week consists of Joe McKendrick, an independent analyst and prolific blogger on SOA and BI topics. Hi, Joe!

Joe McKendrick: Hi, Dana, glad to be here.

Gardner: We are also joined by Brad Shimmin, a principal analyst at Current Analysis. Hey, Brad!

Brad Shimmin: Hi, Dana, thanks for having me.

Gardner: Jim Kobielus joins us. He's a blogger and senior analyst at Forrester Research. Hello, Jim!

Jim Kobielus: Hey, Dana, and Hi, everybody!

Gardner: And Dave Linthicum, blogger, independent consultant, joins us this week. Thanks for coming, Dave.

Dave Linthicum: Thanks, Dana, thanks for having me back.

Gardner: We are going to be talking about the news of the week of Sept. 22, 2008. We'll be looking at the HP-Oracle announcements and other news made here at Oracle OpenWorld. We'll be talking about cloud computing and the notion of "on-premises" or "private clouds," and how data portability might actually work among and between different clouds -- both "public," if you will, and "private." We'll look at recent virtualization news from VMware, HP, Red Hat and Citrix.

An Exadata 'Shocker' ...

Let's start our show this week with Jim Kobielus. Jim, you and I are both here at the Oracle OpenWorld. We had an unusual announcement around optimization between hardware and software from Oracle, which has traditionally been a software-only company.

Oracle and HP introduced two Exadata products. I wonder if you could fill in our audience on what Oracle did this week.

Kobielus: Yes, this week Oracle announced the release, in partnership with HP, of a very high-end data warehousing appliance. They may not use the word "appliance," but that's in fact what it is. It's a configured and optimized bundle of hardware and software, with database storage, so it meets very high-end data warehousing requirements. It's called the HP Oracle Database Machine.

It encompasses and includes the HP Oracle Exadata Storage Server, which is a grid storage level server. One of the key differentiators on that storage approach is that it puts the query processing in the storage subsystem. As a result, it can greatly speed up the processing of very complex analytics. What Oracle and HP have essentially done is take a page from the Netezza book, because that is, of course, the feature of the Netezza performance system. [Netezza] has an appliance that they accelerate your data models through by putting this whole processing back close to storage. But the HP Oracle release does much more than simply taking the page out of that Netezza book.

What they did essentially is they also shot across Teradata's bow, because this is Oracle's petabytes-scale, data warehousing-solution platform. The HP Oracle Database Machine that they demonstrated at the show definitely screams. And it can scale -- Oracle says that it can scale with almost no limits, and that remains to be seen.

But it can definitely go to a much higher scale in terms of capacity than the current Oracle Optimized Warehouses that they have already begun to ship with HP and a variety of other hardware partners. The Oracle Optimized Warehouses max out at several hundred terabytes. And, as I said, the HP Oracle Database Machine can go well beyond that.

This is a shot both across Teradata's bow and across Netezza's. And Oracle Chairman and CEO Larry Ellison from the stage directly honed in on both of those competitors by name.

It was classic Ellison, a very well put together presentation. But quite frankly when you begin to analyze the various claims he made, they don't all hold up. Or rather, he is presenting a lot of the Oracle-specific differentiation. Yet they were very impressive.

Gardner: This is a significant departure for Oracle and HP on several different levels. On one hand, we have a combined hardware-software product from two different vendors. We also have a new parallelization process, with their architectural design, where the database and the storage are very close. The processing can take advantage of massively parallel processing. We also have the fat pipes in the form of InfiniBand connections.

So we have an architectural departure. We have a hardware-software departure, and we also have this interesting alliance between HP and Oracle, making and selling a product together. How does this all strike you, Brad Shimmin?

Shimmin: Well, I was shocked, shocked, absolutely simply shocked. This is because historically Oracle has strayed so far away from the appliance market. It's been surprising to me on a number of occasions when I have spoken with them about acquisitions. Actually they made one acquisition earlier this year, they acquired a company that had an appliance that was very successful, and they chose to simply kill it outright because they “did not want to play in the space.”

With that said, I am glad to see this happening. I really am, and I think that HP is a good partner with them because I don't feel that the two companies really bumped into one another in terms of Oracle's core constituency. So I think it's a good play all around, and I am glad to see Oracle finally getting into this. Now if only they would release parts of their middleware as an appliance, I would be very happy.

Kobielus: And, in fact, Brad, Larry Ellison indicated that they seem to have some plans for that. They really resisted details -- but they seem to have some plans to "appliance-ize," if that's the word, more and more the Oracle Fusion Middleware stack.

Shimmin: There are other quite prominent middleware stack players that are moving to appliances, as well. I can't mention their names but the use of appliances seems to be of great interest to more vendors.

Gardner: I have also been picking up on this interest in the appliance business. IBM has been into this with DataPower SOA Appliances for a while now, but IBM has not really extended use of appliances out as widely as I was expecting. I have also heard that TIBCO may be building an appliance for complex event processing (CEP). So, yes, I think we are going to see more of this.

Brad, I want to go back for one second to the HP-Oracle relationship. It almost seems now that Oracle has anointed HP at some level as a preferred hardware supplier on storage, if not also other aspects of hardware. What does that mean for EMC and some of the other storage hardware providers? They are no longer on an independent or third-party-friendly level with Oracle, right?

Shimmin: Absolutely. I think that all of those relationships will come under strain from this. There is no question about that. And it seems to me that this makes Oracle look a lot more like both IBM and Sun Microsystems and EMC, in terms of having some sort of competency in hardware. So I think there are going be a lot of far-ranging ripples from this relationship that will change the way the market functions.

Gardner: And how is all of this going to come to market? If you want to buy the Exadata warehouse you actually have to go through the Oracle sales force. Oracle is going to support it, and sell it, price it, and then HP is going to service the hardware. So in essence, HP is the supplier to Oracle, and Oracle is the principal vendor. Does that mean anything anybody out there?

Kobielus: It means that Oracle is taking much more of a marketing lead on the HP Oracle Database Machine than they have with any of the Oracle Optimized Warehouses. So Oracle is very much staking its data warehousing go-to-market strategy on this new product, and on this partnership with HP. That said, HP is providing all of the technical support on the new products. So it's not like Oracle is really becoming a hardware vendor, rather they are going to become very much a software vendor, but has staked their future on delivering the software on this one particular hardware partner's platform.

Gardner: Actually it allows Oracle to operate at a solutions level and so take quite a bit more of the margin across that total data warehouse solution, right? And that undercuts the data array providers significantly.

Okay, so let's talk about what we do this thing. We heard that the 1 terabyte-sized data sets and higher start to hit performance issues. And that then prevents companies from adding more queries on their warehouses, and also reduces the amount of additional data that they want to put into their warehouses.

So we could have hit a wall somewhere around 1 terabyte databases. This approach, this architecture in the Exadata hardware-software optimization claims to blow that away, that it can deal with the largest sets, of 10 terabytes and up, with very high performance. What does this mean for business intelligence (BI) analytics? What does this mean for bringing more types of data and content into the warehouse? What are the business outcome benefits?

Joe McKendrick, what are your thoughts on the BI perspective on this market development?

McKendrick: Well, it certainly moves the business intelligence arena forward. Looking at what the rationale is for having an appliance in this market -- versus what's has been happening for the previous decade with data warehousing -- it really says a lot about what's needed in the market.

Data warehouses, when you get into the multiple terabyte range, are simply too complex and have high cost of ownership. That's made BI a fairly expensive proposition for companies going this route, and the cost is tied into the maintenance, the updates for the warehouse software, the organizational effort, and the input required to make a large data warehouse go.

Now there is a trend emerging. I am sure Oracle has an eye on this as well. It's toward open source. We are seeing more open source in data warehouses too. This is open source at the warehouse level itself, at the database level itself. [Sun Microsystem's] MySQL for example has been pointing in this direction, PostgreSQL as well. [And there's Ingres.]

Gardner: Well, that's another distinct issue. Now with Oracle and HP cooperating, why shouldn't we expect Sun to come out with something quite similar, but with MySQL as the database, and their [Sparc/UltraSparc] processing, and their rack, cooling and InfiniBand, and of course, their storage?

McKendrick: I wouldn't be surprised, I wouldn't be surprised one bit if we see some kind of response from Sun fairly soon because Sun still makes its money from hardware.

Gardner: Right, now if Sun does that then IBM will certainly come out with something around DB2. We should expect that, right?

McKendrick: Yes, yes, definitely. And I think there is an emphasis on simplifying data warehousing, making data warehousing simple for the masses. Microsoft, love them or hate them, has been doing a lot of work in this area by increasing the simplicity of its data warehouse and making it available at more of a commodity level for the small to medium size business space.

I think we're going to see more in the open source data warehousing space, and Oracle is looking at that as well.

Gardner: Let's go to Jim Kobielus. Jim, [using Exadata] we can start taking 10 terabyte data sets and delivering analytics in near real-time and deliver query results out to various business applications on huge scale. We can also start looking at this as cloud infrastructure -- where we are going to be providing data as a service, BI as a service even. And then we have Sun, IBM, and perhaps Hitachi, and all these other guys that are jumping in with their own data warehouse appliances, and they start beating each other up on price, and the price comes down in the market. Are we then entering an era of affordable extreme BI?

Kobielus: For sure. Well, extreme BI, that's really BI and data warehousing with very large data sets, with very demanding real-time loading scenarios, with very extensive concurrent usage and so forth. We are already in that era. If you look at what's going on -- and actual deployment, enterprise deployments -- like 10 terabytes, those are in fact much of the data warehousing solutions in the market. That's the joy of data warehousing, enterprise departments are between 5 and 15 terabytes. They are being handled quite well through a lot of symmetric multi-processing (SMP). So these are around in the market.

Now our data warehousing and BI environments are in the hundreds of terabytes, and up to the petabytes range and beyond. A lot of these are in the cloud already. I can't name names yet. There are a few things right now that I can't show. But well-known Web 2.0 service providers are already above the petabytes scale in terms of the amount of data that's persisted, and in terms of their needs and their ability to do continuous concurrent loads into those humongous data warehouses in real-time. In these extreme data warehousing environments you may have millions upon millions of queries hitting that data warehouse all the time.

Gardner: But aren't we with Exadata taking this from the high-end, roll-your-own, computer-science gee-whiz level down to much more of an off-the-shelf, forklift upgrade level? Aren't we now getting to extreme BI at much more a commodity, or at least something that's much more germane across many more types organization?

Cloud computing gains traction ...

Kobielus: Oh, yeah, for sure. It's getting down into the affordable way to eventually bringing cloud data warehouses down into the range of the main market, as well as for large enterprises. ... The one thing -- one of the other important outcomes from my point of view this week at Oracle OpenWorld -- was the fact that Oracle, now in conjunction with Amazon's Elastic Compute Cloud, has an Oracle cloud -- the existing Amazon cloud can take Oracle database licenses.

They can move those licenses to a cloud, hosted by Amazon EC2. Using tools that Oracle is providing they can move their data to back it up or move databases entirely to be persistent in the cloud, in Amazon's S3 service. So this is very much a lead in. I strongly expect that the other enterprise database vendors over time, maybe in a year or two, we'll also offer similar deployments and flexibility for their data warehousing customers.

Gardner: Okay, let's go to Dave Linthicum on that. Dave, you're familiar with moving data around the cloud. It sounds like people will start getting comfortable with this from a risk and from a reliability/privacy/control issue level. And then it's a no-brainer to start moving fairly massive data sets, or for backups or extend-enterprise sharing or federation of data -- what have you, into cloud infrastructures.

How important from your perspective is what Oracle announced in conjunction with Amazon this week?

Linthicum: I think it's very important. I think that the economics -- that it's much cheaper to do cloud computing than on-premises stuff -- and you can prove that at each and every time, or run into an issue around cultural, and kind of total protection issues within the enterprises ... I think those are falling down as time goes on. Go back in a time machine five years ago, and start talking about running major enterprise applications delivered as SaaS, they would have laughed at you.

Today, everyone is using Salesforce.com, and just a bunch of other SaaS-delivered applications. So enterprises are getting their minds around cloud computing, understanding the concept of it. So moving information into the cloud is not really much of a leap. You already have customer information existing on Salesforce.com, or other SaaS providers out there.

I think that this is one step in the direction that, in essence, we're going back in time a bit, moving back into the time-sharing space. A lot of things are going to be pushed back out into the universe through economy's scale, and also through the value of communities. It just can be a much more cheap and cost effective way of doing it. I think it's going to be a huge push in the next two years.

Gardner: Does it seem reasonable that Oracle would test the waters on this, in terms of market acceptance, with Amazon? Once people get a little more familiar and comfortable with it, then Oracle comes out with its own cloud offerings?

Linthicum: Absolutely, I think that Oracle is going to have a cloud offering, IBM is going to have a cloud offering, Sun is going to have a cloud offering, and it's going to be the big talk in the big industry over the next two or three years. I think they are just going to get out there and fight it out.

I think you are going to have number of startups, too. They are going to have huge cloud offerings as well. They are going to compete with the big guys. And they can -- because it's very simple to put up infrastructure. It's fairly cost effective, and you can get out there and start battling it out with them. Quite frankly, I think, maybe the more agile, smaller companies may win that war.

Virtualization for private clouds ...

Gardner: In other recent news, Brad Shimmin, we have heard quite a bit of virtualization, and cloud compute discussions from VMware, from Citrix, and from HP. We saw some acquisition from Red Hat that brings them into the hypervisor space. Maybe you can help our listeners understand a little bit better the relationship between virtualization, management and platform vendors, and how this whole notion of private or enterprise clouds works.

Shimmin: It depends on the perspective we have, right? It depends on if we are talking about virtualizing the datacenter, virtualizing the desktop (VDI), or moving facets of the datacenter to the cloud. If you are trying to understand how, as we were just talking about, these smaller players are able to use things like Amazon EC2 to get into the market -- or if we are talking about moving the desktop to data center cloud -- what I want to understand as a customer is just what the SLAs and protections are from these provides, whether it's IBM or Amazon. And, by the way, another one we need to mention is Cisco, which will be using the WebEx platform as a SaaS platform and SaaS solution for the enterprise.

The point is that as a customer you don't just want to know what the [performance reliability figures] are, you want to know what sort of wrapper these vendors are putting around their solutions for things like security and policy management enforcements. It's not just the fact that they will be able to secure the data, but it's about being able to control and manage the data, and have visibility into the data; whether it's something that's sitting in some sort of virtualized instance in your own datacenter, or whether it's something that's sitting in some federated system that might be shared between Cisco and Amazon.

Gardner: I found it interesting that these vendors are basically tripping over themselves and rushing out to the market, way before these private clouds have even established themselves. Yet the vendors are declaring that they have the infrastructure and the approach to do it. It sort of reminds me of a platform, or even operating system, land grab -- that getting there first and establishing some of the effective standards and coming up with industry-common implementations gives them an opportunity to at some level or format create the de facto portability means.

This is a layer above virtualization. And virtualization is there to bring all the legacy stuff into play, but what do you do with the new applications? What do you do with the new services? Dave Linthicum, what are your thoughts on a meta-operating system in the cloud? Are we in a kind of a race to be first to that?

Linthicum: I think that's a ways off at this point. I think people are going to put aspects of the infrastructure up in the cloud first. And I think that the platform-as-a-service (PaaS) and the ability to provide a development infrastructure, storage infrastructure, some deployment infrastructure, and things like that -- that is all going to be a bit of mix and match. I think people are going to do little tactical projects to kind of dip their toe in the water to see if it is viable.

However as we go forward, I think that's the destination. If you look at how everything is going, I think everything is going to be pushed up into the cloud. People are basically going to have virtual platforms in the cloud, and that's how they are going to drive it. Just from a cost standpoint, everything we just discussed, the advantages are going to be for those who get there first.

I think that very much like the early adopters of the Web, back in the 1990s, this is going to be the same kind of a land grab, and the same kind of land rush that's going to occur. Ultimately you are going to find 60 percent to 80 percent of the business processes over the next 10 years are going to be outsourced.

Gardner: What about this issue of data, these massive data sets, and bringing some of that up into a cloud? Is it going to be just standards-based interoperability for my data set and your data set to play well with each other? To what level are we hung up by different cloud implementations, and therefore perhaps also different data implementations? Does that need to be solved?

Linthicum: Yes, I think it does. I think that you are going to find that integration does occur in the clouds, just like it does within the enterprise, from enterprise to enterprise. The reality is that people have information up there with different semantics, different data formats, and all of that stuff has to be transferred one to another.

I think that the idea of integration in the cloud, which I have been involved with personally over the last 10 years, may actually start to be used. I think that people are going to have to do transformation around control, filtering, all of these things as information moves between these partitions out in the universe. Ultimately integration is going to be easier. We know lot more than we did 15 years ago when I wrote the book, Enterprise Application Integration. But I think that it's still going to be needed and a necessary thing. So maybe integration in the cloud companies should start pushing forward.

Kobielus: I hear what you're saying. I think that's an important point to put forward, which is that these clouds, these data warehousing clouds -- data warehouses that are external to the firewalls, the multi-tenant environments -- are multi-domain, multi-entity data warehouses with strict separations between the various domains, which are often searching with particular customers. But like a supply chain application in the cloud, it is the probably the best place to put all that data so that companies and suppliers and the customers all have access to common pooled data in a common externally hosted environment.

What that raises then is that the data warehouses in the cloud, really become data federation in the cloud. So all these different data sets, the divergent schema and so forth, need to be normalized to a common semantic layer in the cloud provided by that cloud vendor. So then you are into the data federation vendors that had a huge footprint in the enterprise, those guys then need to provide their capabilities in the cloud for these types of supply chain and B2B applications.

I am talking with a couple companies, like Composite Software and some others, where they have well established data federation to manage virtualization layers. Those guys need to get cracking to put a lot of that into a cloud environment to enable this level of data integration and federation in that cloud environment going forward, and make it scalable.

Gardner: Well I think we will have to leave it there. We have been discussing announcements from Oracle OpenWorld, other news in the virtualization space, and how these relate to the future of "extreme BI," as well as what cloud infrastructures might look like from a variety of vendors in the future. I want to thank our panel for joining us for BriefingsDirect Analyst Insights Edition, Vol. 30.

I also want to thank our charter sponsor for supporting our podcast, Active Endpoints, maker of the ActiveVOS visual orchestration system, and Hewlett-Packard via the HP Live! Podcast Series. This is Dana Gardner, principal analyst at Interarbor Solutions, thanks for listening, and come back next time.

Special offer: Download a free, supported 30-day trial of Active Endpoint's ActiveVOS at www.activevos.com/insight.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod. Learn more. Sponsors: Active Endpoints, Hewlett-Packard.

Transcript of BriefingsDirect podcast on Exadata, extreme BI and cloud computing. Copyright Interarbor Solutions, LLC, 2005-2008. All rights reserved.

HP Information Management Maven Rod Walker Describes How BI Helps Business Leaders Innovate

Transcript of BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe Conference in Las Vegas, Nevada the week of June 16, 2008.

Listen to the podcast here. Sponsor: Hewlett-Packard.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to a special BriefingsDirect podcast recorded live at the Hewlett-Packard Software Universe Conference in Las Vegas. We are here in the week of June 16, 2008. This sponsored HP Software Universe live podcast is distributed by BriefingsDirect Network.

We now welcome to the show Rod Walker, the vice president for Information Management in Hewlett Packard's Consulting and Integration (C&I) group. Welcome to the show, Rod.

Rod Walker: Thank you very much, Dana. It's a pleasure to be here.

Gardner: We are going to talk about some of the high-level business values that are being derived in the field from business intelligence (BI), data warehousing, data integration and generating quality data from the vast storm of information content data that's available to companies. This is, I suppose, a real competitive issue. This is what companies use to develop strategy, and to help them figure out where to take their businesses.

First off, let's tell our listeners a little about the information management practice, and a little bit about your background.

Walker: Thank you. I have been in the IT business, consulting business, for 37 years at this point. I came to Hewlett-Packard a year-and-a-half ago with the acquisition of Knightsbridge Solutions. They are one of the pre-eminent consulting firms in the BI and data warehousing space, and I was the CEO at Knightsbridge.

Gardner: All right. First, help us understand the problem out there. What's the issue? Is it that there is just too much data, that it's not good data, there is redundant data, all the above?

Walker: It's all the above and more. What we have is Global 2000, Fortune 500 companies that are struggling with all kinds of different issues, whether it's increasing market share, increasing the wallet share with their customers, dealing with compliance issues, competitive issues, or growing their business on a global basis, instead of regional basis.

They've all got different kinds of things that they are doing, and where we come in is we help them optimize different parts of their business. More and more, companies are becoming more fact based, data driven, and analytically focused, in terms of how they are running their businesses? So, they are using that to competitive advantage, to solve all these different types of business problems.

Gardner: So, no more just calling it from the gut?

Walker: Yeah, this is not shoot from the hip. This is, "How do we use the numbers to get ahead?"

Gardner: And, just having numbers isn't enough. It really is about distilling the numbers and finding the gems of information in there.

Walker: Yeah, and actually what we're seeing is that this type of work has evolved from where it's been a small group of analysts sitting in the back room, running models and making recommendations to management, to the point where you now have tiers of people throughout the organization -- from the CEO down to the individuals who interact with the customers -- and what they all need is better information.

Some of them need it in real time, and all this information needs to be provided from a consistent multi-tiered data infrastructure for the enterprise, so that they all are, in effect, operating off at the same facts, at different levels of details, and different levels of aggregation. But it all needs to be consistent, and the data that is used internally needs to be consistent with the data that's provided externally at the same time.

Gardner: Okay, let's unpack that a little bit in looking at some use-case scenarios. Why don't you tell us a little bit about how certain companies are out there are deriving a high business value from these activities? Can you perhaps give us an example from the health-care sector.

Walker: From the health care sector, one of the hot topics in health care these days -- and it's good for all of us -- is how do you improve patient outcomes? How do you improve the quality of patient care and ultimately the degrees of success in treatment? What we are seeing is that more and more of the providers of health-care services are trying to use their clinical data that they are gathering on a systematic basis -- what was this patient' problem, how did we treat him, and what was the end result?

We have both individual, if you will, hospital chains, trying to gather this information and doing it on their own, as well as various consortiums, who have the advantage of bringing in the clinical data literally from hundreds, if not thousands of hospitals, putting it into a consistent database. Then, what you can do is hunt through that data for best practices.

I can go into one hospital and say, "For this disease, for this treatment regime, what are my patient outcomes? And how do they compare, to the patient outcomes of hundreds of other hospitals?" If I am near the bottom, I've got a problem, and I better go fix it, for the sake of the quality of the care that I am providing and to avoid lawsuits and so forth. On the other hand, if I am in the top three percent, that is a marketing opportunity.

I can turn that back around and go out in the marketplace and say that for cardiac care or diabetes care, whatever the case may be, I am one of the top 10 best in the country. You hear that as consumers. You hear the stuff out there now where people are actually advertising, that they are really good in some aspect of health care.

Gardner: It's more of a marketplace?

Walker: It's absolutely a marketplace and the good news is that it's becoming competitive on the dimensions that we care about. First and foremost, what's the success in treating your illness. This is a hallelujah for all of us, and it's all because the data is becoming collectible, presentable and analyzable -- and people are doing it.

Gardner: And you can analyze that data with a certain a level of anonymity for the patients?

Walker: It has to be.

Gardner: Right.

Walker: It has to be. It's required. So the data is anonymized, and that's fine. For the kind of analysis they need to do, you don't need to know who the patient was, and you don't need any identifying information that would allow you to figure out who the patient is. It's readily anonymized.

Gardner: Right, and the fact that we are here in Las Vegas in a casino, raises a question about analytics. Do you do any analytics for the gaming industry?

Walker: Not yet, although, if you want an example of that, go see the movie "21" or read the book, "Bringing Down the House." There are your analytics for the gaming industry. Of course, it's not the one they want to talk about.

Gardner: All right. Well, speaking of markets, companies are looking for ways of exploiting their IT resources, getting return on their investment from their IT spend, and being able to up-sell and cross-sell the customers that they do have data on is becoming a great way to do that.

Walker: A lot of the work we do with our customers tends to be how they deal with their customers. And there's a lot of different aspects to this. It starts with, and it's kind of basic, just understanding your customer. Many of the big, complex organizations we deal with are still operating as collections of silos. They are typically, product based and geographically based, and both of those things make it difficult for them to really understand all the interactions they have with an individual customer.

They do not know when a customer walks in the door, calls, or goes on their Website, or whatever the case may be, if this is one of my best customers. Just because this person doesn't have a lot of money in a bank account doesn't mean, they don't have big mortgages, run a big company, and have huge certificates of deposit (CDs) or something else. If you just look at what they are doing on this one transaction in that one account, you completely misread who this customer is. So, trying to really understand your customer and who they are is a piece of the puzzle.

Then, the next piece of the puzzle is how do you increase your wallet share with that customer from the standpoint of how do you make sure they are loyal, particularly the ones that you highly value and are very profitable for you? Then, how do you interact with them and say, "Hey, you've got these services. How about this one?"

And, if they are big enough customer, you may make them a special offer or give them a better deal, and maybe you add a little bit to that CD rate that you are going to offer them. Then, the next trick that they run into is, when and how and under what circumstances do you make that offer?

It's one thing to send out a mailing based on some batch review of your customer files overnight, once a month, or once a week, but we are really finding that our customers want to do more and more is, when they are there visiting that Website, when they are in the branch, when they are doing that transaction, you want to really hit them at the point of sale with the offer right then. So, if somebody's made that big deposit, maybe that's the time you want to talk to him about a CD, or market basket question. They are buying a lot of something, well, how about this accessory or this other thing that tends to go with it? Hit him with it right now.

Gardner: And today, I suppose, more and more companies are interfacing with their customers and prospects, through the Web and through applications. We see self-help portals. We see people actually wanting to do business through the Web, but to have the analytics to then offer them the right path throughout that sales process becomes critical.

Walker: And, not only are the paths multiplying, but what we need to do in terms of how we architect these kinds of solutions and systems, is make sure that you can make that specific offer to that customer, no matter which channel he is contacting you through. It could be the call center. It could be the Web. It could be that kiosk. It could be physically walking into a store or a branch.

Gardner: It could be increasingly your cell phone.

Walker: It could be a cell phone, absolutely. So the answer is that it doesn't matter how they have contacted you. You want to have the same analytics, the same class of offer to be presentable through any channel, anytime, anywhere.

Gardner: So, it's so much more than a single view of the customer. It's really an amalgamated view of what that customer probably would want next?

Walker: Absolutely, and this is all based upon analytics. I don't doubt that there are some businesses who will use this not just to up-sell and cross-sell some customers, but maybe in some cases they drive a few of them away at the same time.

Gardner: If not done properly.

Walker: Well, maybe on purpose. Maybe, I don't want to you as a customer.

Gardner: I see. Weed them out.

Walker: Weed them out at the same time.

Gardner: Interesting. Let's move on to another use case. Energy is a big topic these days. People are wondering when the price of oil will start coming down, instead of going up. What can analytics and business intelligence bring to those, who are now out there looking for the increase in the oil supply?

Walker: Well, there are a lot of different kinds of things, as you might imagine, that the energy companies are applying analytics to. We have been involved with them in both the retail sales side in terms of the analytics there -- the energy trading business, in terms of how do you swap and trade crude as well as finished products on a worldwide basis? And we have got involved in some other things, like centralizing well information.

If you look at how an exploration or production company deals with well information, they may go out and sign up for leases, and so they gather a whole bunch of lease information. They've got an exploration unit, that goes out and actually drills the well and collects a lot of information about that well. They've got a production company that collects information around the well as it produces. These are all different functional silos. You've got a legal department that does the negotiations and does the deals. They've got their file cabinets full of paper and information around those wells.

Then, of course, you've got the finance organization that has to take the money that's obtained from selling the products that come out of that well, and then redistribute it back to the owners of the well, and the royalty owners, and to some degree, each of these different business units keeps their own information around the wells, as opposed to there being one master of repository, the data of record, certified data for that well. So, there is an opportunity for them to be much more efficient, and make that data available on a consistent accurate basis to everybody who needs it.

Gardner: A single view of the petroleum.

Walker: A single view of the well, at least.

Gardner: How about one more used case scenario, risk management? How does an organization reduces exposure to risk, perhaps shore up its security, and maybe even be mindful of compliance and regulatory issues, vis-à-vis BI.

Walker: If you take the banking industry, for example, banking is slowly going global. You've got these huge banks operating around the world. They've got all kinds of regulatory compliance issues to deal with, both on an international basis with Basel II, as well as on a country-by-country basis. So, of course, you have to feed accurate information, consistent information to all of the different regulatory bodies.

At the same time, part of that is also managing your operational risk on an worldwide basis, and that could be anything from your currency risk to your interest rate exposure or your customer credit risk. It's one thing to look at your customer credit risk in terms of this subsidiary of that company, but what about the rest of the company, or what about their risk in this country, versus the risk on a global basis?

Do you have that information collected in a way that you can assess all those risks and apply your judgments and make your operational decisions appropriately. That's just one aspect of risk management that we have been involved with, in that case numerous banks, but it can also be things like a credit card fraud, ultimately, in real time, analyzing the transactions as they come in. There are just lots of other risk factors out there on an industry-by-industry basis.

Gardner: You raised the issue about real time. Many times we think about analytics as having data that's been sitting around for a while. It will stay, and we can take some time to go in and look it over, but, I think, increasingly, we are finding enterprises seeking to analyze things a bit more on the fly. How does that relate to what you are doing?

Walker: Well, there are some relatively easy examples of that kind of thing. A couple we just alluded here. One I just mentioned was the credit card fraud aspects of this. There are other people who look at trading opportunities and trading analytics. Whether it's equity markets, energy markets, or whatever kind of markets they trade in, if you can do your analytics just a little bit faster than the next guy, and get your trades in a little bit quicker, that can mean serious money, and we have run into some of those kinds of issues as well.

Then, one of the big emerging areas for real time gets back to this business of customer interaction on a real time basis, if the customer calls the call centers, shows up in the branch, and then goes on the website. You don't want to be looking at yesterday's data, if he's doing all of those things today.

So, you want to see his transactions he has done all at the same time. You want that complete view of the customer. There's another less real-time aspect to this. When you're talking about a complete view of the customer, the other thing we are seeing is, it's not just the transaction information. It's not just the structured information that we gather from all these systems.

There are studies out there that say, 60 percent of the data you have in your organization is actually not structured data at all. It's in documents, e-mails, and other forms of images, audio, and video, whatever the case may be. One of our challenges first is to get people to have a 360-degree view of the customer.

The next thing is to have them have a complete view of the customer. What is everything we have in our organization that we have about that customer? Can I get at it, when I need to get at it, either when I am dealing with the customer real time, or even if it's not real time? The point is that I've got to be able to get all the relevant data, not just the stuff that's easy, because it's in the systems.

Gardner: Very interesting, I think this certainly shows how IT investment has many new and additional forms of payback. We're really just getting into the icing on the cake, right?

Walker: Absolutely, and as the technology continues to evolve, and we get better and better at this, and as our customers go through the maturity process and mature with the technologies and the business issues, they are getting smarter and smarter about what they can accomplish with this. You actually see them progress from using data, to using information, to streamlining the business, and then getting to the point where they really try to innovate, compete, and alter their strategies based on the information they are now able to bring to the table.

Gardner: It really shows how IT can be an competitive advantage in a very significant way.

Walker: Absolutely, and all the trends and demographics in business come back to kind of where we started, which is that it's all about business becoming more analytic data driven, and really trying to optimize, not just their operations, but their market share, and how they compete against their competition. At the same time, how can I just do a better job serving my customers?

Gardner: Great, we have been talking with Rod Walker, he's the vice president for Information Management in Hewlett-Packard's Consulting and Integration Group. I really appreciate your time.

Walker: Delighted to be here, and happy to talk anytime.

Gardner: This comes to you as a sponsored HP Software Universe live podcast recorded at the Venetian Resort in Las Vegas. Look for other podcast from this HP event at hp.com website, under "Software Universe Live Podcasts," as well as, through the BriefingsDirect Network. I would like to thank our producers on today’s show, Fred Bals and Kate Whalen, and also our sponsor Hewlett-Packard.

I'm Dana Gardner, principal analyst at Interarbor Solutions. Thanks for listening, and come back next time for more in-depth podcasts on enterprise software infrastructure and strategies. Bye for now.

Listen to the podcast. Sponsor: Hewlett-Packard.

Transcript of BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe Conference in Las Vegas, Nevada. Copyright Interarbor Solutions, LLC, 2005-2008. All rights reserved.

HP Software's David Gee on Next Generation Data Center Trends and Opportunities

Transcript of BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe Conference in Las Vegas, Nevada the week of June 16, 2008.

Listen to the podcast here. Sponsor: Hewlett-Packard.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to a special BriefingsDirect podcast recorded live at the Hewlett-Packard Software Universe Conference in Las Vegas, Nevada. We are here in the week of June 16, 2008. This sponsored HP Software Universe live podcast is distributed by BriefingsDirect Network.

We now welcome David Gee, vice president of marketing for HP Software. Welcome to the podcast, David.

David Gee:: It's great to be here. Thanks so much for spending the time with us. I appreciate it.

Gardner: Now, you have been the master of ceremonies here at the conference main stage presentations, and, interestingly for me, you have been taking a lot of questions from the audience. How did you come up with this interactive approach to the keynotes?

Gee:: Actually this is the second year we have tried it as one of the objectives, when you have an audience of this size. This is the largest we have ever done, around 3,000 people. When we have a main stage, and want to have interactivity with an audience of that size, we utilize a technology through chat lines.

Some of the presentations and some of the sessions that we had on the main stage utilize this technology. That allows folks in the audience to either text or e-mail questions during the session. Then, we post them on the big screen and the speaker or speakers have an opportunity to answer those. We have used it in a number of sessions. A good example would be with folks like Tom Hogan, who runs the software business, and Mark Hurd, our chairman and CEO, who hosted a joint chat-line session on the first day of the event.

Today, we had an external speaker to focus on the environment Jean-Michel Cousteau, to talk about how the oceans really impact our lives and things that we can be doing to conserve and rejuvenate the world for our children and our grandchildren. So, we've covered, across the entire spectrum from business and technology to some of the more thoughtful topics that are top of mind today.

Gardner: I think it's very effective, mixing social networking into the presentation, which makes it two-way rather than just "the word" coming on down from high. So, congratulations on that.

I want to talk to you today about data center transformation. We've heard a lot over the last several days of what can be done with data centers these days. There are great advances in hardware and blades and cooling systems. We're seeing a great deal of interest in virtualization, and you announced an alignment of your products with the VMware virtualization suite. Tell us a little bit about the opportunity here. How far into data center transformation are we? If we were a baseball game, where do you think we are at this point?

Gee:: I'll preface that with my lack of sophistication and knowledge of baseball, but if we assume it has nine innings, and it doesn't end in a draw at that point, I would say we are probably in the second or third innings. Customers today, companies today, particularly those who have acquired businesses, are divesting businesses, or expanding into new markets are having to deal with integration and consolidation of what they have from a data center standpoint, and it falls into a couple of categories.

One is do you want to drive down the operational cost of what you are doing -- and consolidating and transforming data centers is an element of that certainly -- and the other is to free up resources that are being utilized by basically just keeping the lights on. It's also creating an environment where a business can be more agile and innovate on top of an IT platform or a set of IT platforms. With both of those, drivers are happening concurrently. It's not just a cost discussion.

If you focus purely on a cost discussion, then what you are missing is how to align business with IT specifically and how to generate this environment, where you can really deliver innovative services to the customer and really transform the people and the processes that you are doing inside of your organization.

It's walking and chewing gum, and we are about a third of the way through that. There are lots of enabling technologies that allow us to do that, but it really has to start from a desire from the CEO and the board, who are looking at IT spend as an opportunity to drive efficiency and speed and lower risk from a corporate standpoint, so you can think about the consolidation of data in your organization.

How many versions of the truth does a company have about a particular thing, and, even if you are looking at the elephant, which bit of the elephant are you, in fact, looking at. All of those converged to really drive this desire to transform the data center. The third leg of that stool is the more efficient your data centers are, you can pack them more densely, utilize virtualization, and you can have a later generation of server storage that have a lower power footprint and cooling footprint.

The third element of that is can you lower the overall physical footprint and lower the power bill per se. If you talk to CIOs, and we did some activity with CIOs earlier in the week, how many of them ever see the electric bill? Less than one-third of CIOs today see the electric bill, but that's up from one-sixth a year ago. My guess is that two-thirds, maybe three-quarters of CIOs and IT executives will be seeing the power bill. It's a cost center that you want to drive down, not just from an economic standpoint, but from a social responsibility standpoint as well.

Gardner: I think it's clear to most people that over time they need to modernize, consolidate, and take advantage of new technologies, but there are also some accelerating trends in the market. You've mentioned the energy issue. As the cost go up, there's more impetus from an economic standpoint to go in and re-jigger, re-engineer and re-conceptualize your data centers. What are some of the other trends? It seems also that the amount of data is exploding. What is it? It doubles every 18 months, I believe, according to some studies.

You also have things like service-oriented architecture (SOA) and more reliance on dynamic application and business processes, all of which also will place more demand. So, do you think we're at a point where the need to seriously re-engineer and re-conceptualize a data center is actually accelerating?

Gee:: Almost certainly, and for all the factors that you described, but at the end of the day it has to be driven by a set of business processes that require high levels of service, lower costs, and the flexibility to innovate on those services. If you are opening a new manufacturing plant somewhere else in the world, you are serving customers in new geographies and you are merging with new businesses.

Take the airline industry -- companies like Northwest and Delta, for example, who are going through the early stages of what will probably be consummated in this process. Spend time with the IT leaders from Northwest and they are talking exactly about that. Their impetus is, their spend on IT looks different from Delta's spend on IT. Their sophistication looks different from that of Delta's, and how do you bring the best of both worlds together to give the passenger a better experience?

Can I put kiosks in airports? How much of my interaction with a customer is really being driven electronically and online? The stats are incredible. The growth of how much electronic transaction is taking place, versus having to go talk to or deal with a customer service representative physically in an airport or on the phone, and that level of transaction rises dramatically. You have to have the capability to be able to live with those high levels of service.

Another good example would be, as you go through the airport, if a name is on a watch list and your system for integrating the watch list with the Transportation Security Administration (TSA) -- the folks that manage the security in airports -- goes down, everybody has to be screened, re-screened, and triple-screened. What does that do from profits and loss standpoint and the customer-satisfaction standpoint, to give just one example?

Gardner: So the data centers that may have been created to serve an employee base are now not only doing that, but serving a vastly different and growing customer base and supply chain environment?

Gee:: Yes, more-and-more applications that historically have been internal only you are exposing to your partner community. And, in some cases, your end users and your customers -- and they are finding new ways to interact with you. So across the board the confluence of all of those things is really driving this need for a higher level of quality of service, a lower price point for those services, and flexibility for those services.

Then you can get down underneath and see what impact that has on technologies like SOA, virtualization, or the management of change. How do you put automation into the data center to not just take an economic viewpoint on it, but to reduce errors -- and most outage is ultimately self-inflicted -- so can you apply automation, quality, and performance, pre-production and in production and then post-production for remediation.

Gardner: We are seeing an environment where the impetus and the requirements for doing data centers better are hastening. We are seeing complexity and more requirements in terms of the demand. And we, of course, are looking for cost savings and efficiencies -- all at the same time.

Let's unpack this move toward the next generation data center. According to some of the information that I have seen here at Software Universe, the spend on hardware is projected to be fairly constant and the amount of data is accelerating. What really is the delta in both demand and opportunity over the next five years in the management of these next generation data centers? Explain how that works.

Gee:: In the land of virtualization, where you have a server now doing multiple jobs, the complexity around management actually will explode in a couple of dimensions. One is the physical management of server storage network processes and applications.

The second dimension is this explosion that you've mentioned before around the volume of information, whether it's e-mail, voice, or text. The digitization of content is growing at an exponential rate, and the way companies are going to communicate with customers or employees is exploding exponentially. We can think about voice and data in terms of e-mail and databases, but it's also wikis, blogs, mashups, Facebook, MySpace, all of the above, and then the distribution of that content.

Today, the traditional way to look at that would be on a 12-inch LCD display, but the phone is becoming ubiquitous, and we need to look at the transcoding and being to able to interact and have the information available, as well as the security of that information from a risk-management standpoint on hand-held devices.

Then you have Generation Y coming along. The thought of picking up the phone and talking to somebody to answer a question, get support, transact business with you is completely alien. In fact, even e-mail, to some extent, is completely alien. It's more around SMS, it's around wiki, and it's around IM in particular.

The explosion of interaction, plus the explosion of digitized content, is being created and is creating a management challenge. It falls into a several dimensions. One is, do I manage information and what is the duplication around that information? How much of it is duplicated?

Second, do I have it stored somewhere from a business-continuity standpoint to make sure that I know where it is and who has access to it? The third is, am I storing the right information so that if I am required to recover or extract that from a regulatory standpoint, I can do that? And the fourth is, how do I dispose information?

It's a bit like applications. Most companies never turn off an application. How many companies are thinking about the disposal of information, so that they don't get overwhelmed by it.

Gardner: HP has gone through a dramatic consolidation of data centers from 85 to 6 or 7, I believe, and from something like 12,000 applications down to a few thousand. I've forgot the exact numbers. What have you learned in the process that you've gone through internally about the role of management in terms of the ability to, as you put it earlier, chew gum and walk at the same time?

Gee:: I think the first thing we learned in this process was that we didn't know how many projects were going on and we had one or more of everything. The first thing you have to do is be crystal clear and use the tools available to deal with things like project and portfolio management, identify the projects that are in flight, prioritize those projects accordingly, and re-prioritize them based on business need.

Then, you need to kill things that are either duplicative or low priority, so you can focus on the things that really matter. That then drives application consolidation and retirement, as you mentioned, and also the transformation of how we manage our data centers.

We had 700-plus data marts, which goes to my comment before about how many versions of the truth there are. Even we defined gross margin differently across multiple lines of business. Now, we have a single view of what a gross margin is. We've consolidated those data marts into an enterprise data warehouse and given people the right level of access to be able to conduct that level of business. So it's a multi-faceted piece.

The second thing I would say is, if you are going into that transformation, it's a CEO and board-level decision. It requires the commitment and the support, and unwavering support, because there are going to be roadblocks and bumps along the way, as certain things get turned off and some things become unexpected.

This is the journey we're on and this is why we're going to go do it. We're going to drive down our operational cost of IT. We're going to free up dollars for innovation. During that process, it's going to be bumpy, but here's why and here's what it's going to do to delight our customers in terms of, if you buy a PC, how do you get support for that PC?

Well, guess what, we used to have implementations of support in 85 countries. Now, we are in three, so you should get a much higher quality of support. How are service and storage able to deliver telemetry data effectively, so that we can drive down support costs and provide a high quality of service to our customers? It's across the entire spectrum of any business. Hewlett-Packard just happens to be one of the world's largest tech companies. So, we want to be a showcase for that as well.

Gardner: So far, the cost savings have been pretty substantial. You've gone from four percent of revenue to two percent of revenue devoted to IT operations and capital expense. Is that right?

Gee:: That's correct, but it doesn't come without a cost. We made a couple of commitments early on. One was a massive, multi-billion dollar capital expenditure. You talked about our data-center consolidation. There are three primary sites, all of which are mirrored, so that's six. We built six new data centers and we run them on HP. So, it's a green field, and we now have an evergreen strategy as to what sits in those data centers.

But you have to invest to save or spend to save, and you can't do one without the other. You can't expect to go from four percent to two percent doing what you are currently doing. As to my point about the commitment about the CEO and the board, there is a cap-ex commitment that you have to have to drive what is a longer-term operating expense advantage.

Gardner: Interestingly enough, at this time in the maturity and evolution of IT, we're seeing, through the Information Technology Infrastructure Library (ITIL) and some other endeavors, more of a standardization around the methodologies of how to run your IT department.

It seems to me that we are at this point in the business where we are standardizing on the concept of what at a data center is. We are standardizing quite a bit of what constitutes infrastructure in the right way to support multiple application types, and legacy installed base. And, we are also managing our IT departments on a more methodological advanced mature basis. Does that describe what's going on, if you look at this in total? Is IT really growing up?

Gee:: IT certainly is growing up, because the percentage of revenue that is being spent on IT continues to be a material part of any business' business. I think part two of that is no business is a business without IT. IT has become the business.

If you talk to a company like UPS, for example, the bulk of their competitive advantage is around the logistics capability that is in turn driven by IT. So, the answer to your question is yes. It varies by geography, in terms of the level of sophistication in process-oriented geographies. The US is a pretty good example of that. Western Europe is fairly well advanced with that. They are dealing with it, and they are dealing with transformation of legacy.

If you move the dial to other parts of the world, places like Russia and China, which have less in the way of legacy, and they are adopting the processes from the get-go effectively in green field. So, that creates another set of interesting opportunities.

The third leg of this stool is that we haven't spent much time talking about applications, but gathering the requirements, functionally testing those applications, ensuring that they are delivering performance and quality are required.

Then, the last leg of this stool is the security that you require as you expose these applications to end users on the Web. It's going to be fundamental in ensuring that you are delivering what your customers or your end users are demanding.

Gardner: Very good. We have been talking about the maturity of IT, the next generation data centers, and the need for increased and more sophisticated management to get to the destination -- while still keeping the trains running on time. Joining us has been David Gee:, vice president of marketing for HP Software. Thanks very much for joining us.

Gee:: Thank you so much for your time today.

Gardner: This comes to you as a sponsored HP Software Universe live podcast recorded at the Venetian Resort in Las Vegas. Look for other podcast from this HP event at hp.com website, under "Software Universe Live Podcasts," as well as, through the BriefingsDirect Network. I would like to thank our producers on today’s show, Fred Bals and Kate Whalen, and also our sponsor Hewlett-Packard.

I'm Dana Gardner, principal analyst at Interarbor Solutions. Thanks for listening, and come back next time for more in-depth podcasts on enterprise software infrastructure and strategies. Bye for now.

Listen to the podcast. Sponsor: Hewlett-Packard.

Transcript of BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe Conference in Las Vegas. Copyright Interarbor Solutions, LLC, 2005-2008. All rights reserved.