Separating Core from Context Brings High Returns in Legacy Application Transformation

Transcript of the second in a series of sponsored BriefingsDirect podcasts on the rationale and strategies for application transformation.

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

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Gain more insights into "Application Transformation: Getting to the Bottom Line" via a series of HP virtual conferences Nov. 3-5. For more on Application Transformation, and to get real time answers to your questions, register to the virtual conferences for your region:
Register here to attend the Asia Pacific event on Nov. 3.
Register here to attend the EMEA event on Nov. 4.
Register here to attend the Americas event on Nov. 5.

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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 separating core from context, when it comes to legacy enterprise applications and their modernization processes. As enterprises seek to cut their total IT costs, they need to identify what legacy assets are working for them and carrying their own weight, and which ones are merely hitching a high cost -- but largely unnecessary -- ride.

The widening cost-in-productivity division exists between older, hand-coded software assets, supported by aging systems, and replacement technologies on newer, more efficient standards-based systems. Somewhere in the mix, there are core legacy assets distinct from so-called contextal assets. There are peripheral legacy processes and tools that are costly vestiges of bygone architectures. There is legacy wheat and legacy chaff.

Today we need to identify productivity-enhancing resources and learn how to preserve and modernize them -- while also identifying and replacing the baggage or chaff. The goal is to find the most efficient and low-cost means to support them both, through up-to-date data-center architecture and off-the-shelf components and services.

This podcast is the second in a series of three to examine Application Transformation: Getting to the Bottom Line. We will discuss the rationale and likely returns from assessing the true role and character of legacy applications and their actual costs. The podcast, incidentally, runs in conjunction with some Hewlett-Packard (HP) webinars and virtual conferences on the same subject.

Register here to attend the Asia Pacific event on Nov. 3. Register here to attend the EMEA event on Nov. 4. Register here to attend the Americas event on Nov. 5.

With us to delve deeper into the low cost, high reward transformation of legacy enterprise applications is Steve Woods, distinguished software engineer at HP. Hello, Steve.

Steve Woods: Hello. How are you doing?

Gardner: Good. We are also joined by Paul Evans, worldwide marketing lead on Applications Transformation at HP. Hello, Paul.

Paul Evans: Hello, Dana. Thank you.

Gardner: We talked in the earlier podcast in our series, a case study, about transformation and why that's important through the example of a very large education organization in Italy and what they found. We looked at how this can work very strategically and with great economic benefit, but I think now we are trying to get into a bit more of the how.

Tell us a little bit, Paul, about what the stakes are. Why is it so important to do this now?

Evans: In a way, this podcast is about two types of IT assets. You talked before about core and context. That whole approach to classifying business processes and their associated applications was invented by Geoffrey Moore, who wrote Crossing the Chasm, Inside the Tornado, etc.

He came up with this notion of core and context applications. Core being those that provide the true innovation and differentiation for an organization. Those are the ones that keep your customers. Those are the ones that improve the service levels. Those are the ones that generate your money. They are really important, which is why they're called "core."

Lower cost

The "context" applications were not less important, but they are more for productivity. You should be looking to understand how that could be done in terms of lower cost provisioning. When these applications were invented to provide the core capabilities, it was 5, 10, 15, or 20 years ago. What we have to understand is that what was core 10 years ago may not be core anymore. There are ways of effectively doing it at a much different price point.

As Moore points out, organizations should be looking to build "core," because that is the unique intellectual property of the organization, and to then buy "context." They need to understand, how do I get the lowest-cost provision of something that doesn't make a huge difference to my product or service, but I need it anyway.

An human resources system may not be something that you are going to build your business model on, but you need one. You need to be able to service your employees and all the things they need. But, you need to do that at the lowest-cost provision. As time has gone on, this demarcation between core and context has gotten really confused.

As you said, we're putting together a series of events, and Moore will be the keynote speaker on these events. So, we will elucidate more around core and context.

The other speaker at the event is also an inventor, this time from inside HP, Steve Woods. Steve has taken this notion of core and context and has teamed it with some extremely exciting technology and very innovative thinking to develop some unique tools that we use inside the services from HP, which allow us then really to dive into this. That's going to be one of the sessions that we're also going to be delivering on this series of events.

Gardner: Okay, Steve Woods, we can use a lot of different terms here, "core and context," "wheat and chaff." I thought another metaphor would be "baby and bathwater." What happens is that it's difficult to separate the good from the potentially wasteful in the legacy inventory.

I think this has caused people to resist modernizing. They have resisted tinkering with legacy installations in the past. Why are they willing to do it now? Why the heightened interest at this time?

Woods: A good deal of it has to do with the pain that they're going through. We have had customers who had assessments with us before, as much as a year ago, and now they're coming back and saying they want to get started and actually do something. So, a good deal of the interest is caused by the need to drive down costs.

Also, there's the realization that a lot of these tools -- extract, transform, and load (ETL) tools, enterprise application integration (EAI) tools, reporting, and business process management (BPM) -- are proving themselves now. We can't say that there is a risk in going to these tools. They realize that the strength of these tools is that they bring a lot of agility, solve skill sets issues, and make you much more responsive to the business needs of the organization.

Gardner: This definition of core, as Paul said, is changing over time and also varies greatly from organization to organization. Is there no one size fits all approach to this?

Context not code

Woods: I don't think there really is a one size fits all, but as we use our tools to analyze code, we find sometimes as much as 65 percent or more of an application could really not be core. It could just be context.

As we make these discoveries, we find that in the organization there are political battles to be fought. When you identify these elements that are not core and that could be moved out of handwritten code, you're transferring power from the developers -- say, of COBOL -- to the users of the more modern tools, like the BPM tools.

So there is always an issue. What we try to do, when we present our findings, is to be very objective. You can't argue that we found that 65 percent of the application is not doing core. You can then focus the conversation on something more productive. What do we do with this? The worst thing you could possibly do is take a million lines of COBOL that's generating reports and rewrite that in Java or C# hard-written code.

We take the concept of core versus context not just to a possible off-the-shelf application, but at architectural component level. In many cases, we find that this is helpful for them to identify legacy code that could be moved very incrementally to these new architectures.

Gardner: What's been the holdup? What's difficult? You did mention politics, and we will get into that later, but what's been the roadblock from perspective of these tools? Why has that been decreasing in terms of the ability to automate and manage these large projects?

Woods: A typical COBOL application -- this is true of all legacy code, but particularly mainframe legacy code -- can be as much as 5, 10, or 15 million lines of code. I think the sheer idea of the size of the application is an impediment. There is some sort of inertia there. An object at rest tends to stay at rest, and it's been at rest for years, sometimes 30 years.

So, the biggest impediment is the belief that it's just too big and complex to move and it's even too big and complex to understand. Our approach is a very lightweight process, where we go in and answer to a lot of questions, remove a lot of uncertainty, and give them some very powerful visualizations and understanding of the source code and what their options are.

Gardner: So, as we've progressed in terms of the tools, the automation, and the ability to handle large sets of code, the inertia also involves the nontechnical aspects. What do we mean by politics? Are there fiefdoms? Are there territories? Is this strictly a traditional kind of human nature thing? Perhaps you could help us understanding that a bit better.

Doing things efficiently

Woods: Organizations that we go in have not been living in a vacuum, so many of have been doing greenfield development; when they start out to say they need a system that does primarily reporting, or a system that does primarily data integration. In most organizations those fiefdoms, if you will, have grown pretty robust, and they will continue to grow. The realization is that they actually can do those things quite efficiently.

When you go to the legacy side of the house, you start finding that 65 percent of this application is just doing ETL. It's just parsing files and putting them into databases. Why don't you replace that with a tool? The big resistance there is that, if we replace it with a tool, then the people who are maintaining the application right now are either going to have to learn that tool or they're not going to have a job.

So, there's a lot of resistance in the sense that we don't want to lose anymore ground to the target architecture fiefdom, so we are going to not identify this application as having so many elements of context functionality. Our process, in a very objective way, just says that these are the percentages that we're finding. We'll show you the code, you can agree or disagree that's what it is doing, and then let's make decisions based upon those facts.

If we get the facts on the table, particularly visually, then we find that we get a lot of consensus. It may be partial consensus, but it's consensus nonetheless, and we open up the possibilities and different options, rather than just continuing to move through with hand-written code.

If you look at this whole core-context thing, at the moment, organizations are still in survival mode.

Gardner: Paul, you've mentioned in the past that we've moved from the nice-to-have to the must-have, when it comes to legacy applications transformation and modernization. The economy has changed things in many respects, of course, but it seems as if the lean IT goal is no longer something that's a vision. It's really moved up the pecking order or the hierarchy of priorities.

Is this perhaps something that's going to impact this political logjam? Are other organizations and business and financial outcome folks, who are just going to steamroll these political issues?

Evans: Well, I totally think so, and it's happening already. If you look at this whole core-context thing, at the moment, organizations are still in survival mode. Money is still tight in terms of consumer spending. Money is still tight in terms of company spending. Therefore, you're in this position where keeping your customers or trying to get new customers is absolutely fundamental for staying alive. And, you do that by improving service levels, improving your services, and improving your product.

If you stay still and say, "Well, we'll just glide for the next 6 to 12 months and keep our fingers crossed," you're going to be in deep trouble. A lot of people are trying to understand how to use the newer technologies, whether it's things like Web 2.0 or social networking tools, to maintain that customer outreach.

Those of us who went to the business school, marketing school remember -- it takes $10 to get a customer into your store, but it only takes $1 to keep them coming back. People are now worrying about those dollars. How much do we have to spend to keep our customer base?

Therefore, the line-of-business people are now pushing on technology and saying, "You can't back off. You can't not give us what we want. We have to have this ability to innovate and differentiate, because that way we will keep our customers and we will keep this organization alive."

Public and private sectors

That applies equally to the public and private sectors. The public sector organizations have this mandate of improving service, whether it's in healthcare, insurance, tax, or whatever. So all of these commitments are being made and people have to deliver on them, albeit that the money, the IT budget behind it, is shrinking or has shrunk.

So, the challenge here is, "Last year I ran my IT department on my theoretical $100. I spent $80 on keeping things going, and $20 on improving things." That was never enough for the line-of-business manager. They will say, "I want to make a change. I want it now, or I want it next week. I don't want it in six months time. So explain to me how you are going to do that."

That was tough a year ago, but the problem now is that your $100 IT budget is now $80. Now, it's a bit of a challenge, because now all the money you have got you are going to spend on keeping the old stuff alive. I don't think the line-of-business managers, or whoever they are, are going to sit back and say, "That's okay. That's okay. We don't mind." They're going to come and say that they expect you to innovate more.

This goes back to what Steve was talking about, what we talked about, and what Moore will raise in the event, which is to understand what drives your company. Understand the values, the differentiation, and the innovations that you want and put your money on those and then find a way of dramatically reducing the amount of money you spend on the contextual stuff, which is pure productivity.

The point of the tools is that they allow us to see the code. They allow us to understand what's good and bad and to make very clear, rational, and logical decision.

Steve's tools are probably the best thing out there today that highlight to an organization, "You don't need this in handwritten code. You could put this to a low cost package, running on a low cost environment, as opposed to running it in COBOL on a mainframe." That's how people save money and that's how we've seen people get, as we have talked earlier, a return on investment (ROI) of 18 months or less.

So it is possible, it can be done, and it's definitely not as difficult as people think. The point of the tools is that they allow us to see the code. They allow us to understand what's good and bad and to make very clear, rational, and logical decision.

Gardner: Steve Woods, we spoke earlier about how the core assets are going to be variable from organization to organization, but are there some common themes with the contextual services? We certainly see a lot of very low-cost alternatives now creeping up through software as a service (SaaS), cloud-based, outsourced, mix-sourced, co-located, and lots of different options. Is there some common theme now among what is not core that organizations need to consider?

Woods: Absolutely. One of the things that we do find, when we're brought in to look at legacy applications, is that by virtue of the fact that they are still around, the applications have resisted all the waves of innovation that have preceded. Sometimes, they tend to be of a very definite nature.

A number of them tend to be big data hubs. One of the first things we ask is for the architectural topology diagram, if they have it, or we just draw it on a whiteboard,, they tend to be big spiders. There tends to be a central hub database and you see that they start drawing all these different lines to other different systems within the organization.

The things that have been left behind -- this is the good news -- tend to be the very things that are very amenable for moving to modern architecture in a very incremental way. It's not unusual to find 50-65 percent of an application is just doing ETL functionality.

A good thing

The real benefit to that -- and this is particularly true in a tough economy -- is that if I can identify 65 percent of the application that's just doing data integration, and I create or I have already established the data integration center of excellence within the organization, already have those technologies, or implement those technologies, then I can incrementally start moving that functionality over to the new architecture. When I say incrementally, that's a good thing, because that's beneficial in two ways.

It reduces my risk, because I am doing it a step at a time. It also produces a much better ROI, because the return on the incremental improvement is going to be trickling over time, rather than waiting for 18 months or two years for some big bang type of improvement. Identifying this context code can give you a lot of incremental ROI opportunities, and make you a much more solid IT investment decision picture.

Gardner: So, one of these innovations that's taken place for the past several years is the move towards more distributed data, hosting that data on lower-cost storage architectures, and virtualizing behind the database or the storage itself. That can reduce cost dramatically.

Woods: Absolutely. One of the things that we feel is that decentralizing the architecture improves your efficiency and your redundancy. There is much more opportunity for building a solid, maintainable architecture than there would be if you kept a sort of monolithic approach that's typical on the mainframe.

Gardner: Once we've done this exercise, variable as it may be from organization to organization, separating the core from the non-core, what comes next? What's the next step that typically happens as this transformation and modernization of legacy assets unfolds?

So, if you accept the premise of moving context code to componentized architecture, then the next thing you should be looking for is where is the clone code and how is it arranged?

Woods: That's a very good question. It's really important to understand this leap in logic here. If I accept the notion that a majority of the code in a legacy application can be moved to these model driven architectures, such as BPM and ETL tools, the next premise is, "If I go out and buy these tools, a lot of functionality is provided with these tools right out of the box. It's going to give me my monitoring code, my management code, and in many cases, even some of the testing capabilities are sort of baked into the product."

If that's true, then the next leap of logic is that in my 1.5 million lines of COBOL or my five million lines of COBOL there is a lot of code that's irrelevant, because it's performing management, monitoring, logging, tracing, and testing. If that's true, I need to know where it's at.

The way you find where it's at is identifying the duplicate source code, what we call clone code. Because when you find the clone code, in most cases, it's a superset of that code that's no longer relevant, if you are making this transformation from handwritten code to a model-driven architecture.

What I created at HP is a tool, an algorithm, that can go into any language legacy code and find the duplicate code, and not only find it, but visualize it in very compelling ways. That helps us drill down to identify what I call the unintended design. When we find these unintended designs, they lead us to ask very critical questions that are paramount to understanding how to design the transformation strategy.

So, if you accept the premise of moving context code to componentized architecture, then the next thing you should be looking for is where is the clone code and how is it arranged?

Gardner: Do we have any examples of how this has worked in practice? Are there use cases or an actual organization that you are familiar with? What have been some of the results of going through this process? How long did it take? What did they save? What were the business outcomes?

Viewing the application

Woods: We've often worked with financial services companies and insurance companies, and we have just recently worked with one that gave us an application that was around 1.2 or 1.5 million lines of code. They said, "Here is our application," and they gave us the source code. When we looked into the source code, we found that there were actually four applications, if you looked at just the way the code was structured, which was good news, because it gives us a way of breaking down the functionality.

In this one organization, we found that a high percentage of that code was really just taking files, as I said before, unbundling those files, parsing them, and putting them into databases. So they have kind of let that be the tip of the spear. They said, "That's our start point," because they're often asking themselves where to start.

When you take handwritten code and move it to an ETL tool, there's ample industry evidence that a typical ROI over the course of four years can be between 150 percent and 450 percent improvement in efficiencies. That's just the magic of taking all this difficult-to-maintain spaghetti code and moving it to a very visually oriented tool that gives you much more agility and allows you to respond to changes in the business and the business' needs much more quickly and with skill sets that are readily available.

Gardner: You know, Paul, I've heard a little different story from some of the actual suppliers of legacy systems. A lot of times they say that the last thing you want to do is start monkeying around with the code. What you really want to do is pull it off of an old piece of hardware and put it on a new piece of hardware, perhaps with a virtualization layer involved as well. Why is that not the right way to go?

Evans: Now you've put me in an interesting position. I suppose our view is that there are different strategies. We don't profess one strategy to help people transform or modernize their apps. The first thing they have to do is understand them, and that's what Steve's tools do.

The point is that we don't have a preconceived view of what this thing should run on. That's one thing. We're not wedded to one architectural style.

It is possible to take an approach that says that all we need to do is provide more horsepower. Somebody comes along and says, "Hey, transaction rates are dropping. Users are getting upset because an ATM transaction is taking a minute, when it should take 15 seconds. Surely all we need to do is just give the thing more horsepower and the problem goes away."

I would say the problem goes away -- for 12 months, maybe, or if you're lucky 18 -- but you haven't actually fixed the problem. You've just treated the symptoms.

At HP, we're not wedded to one style of computer architecture as the hub of what we do. We look at the customer requirement. Do we have systems that are equal in performance, if not greater, than a mainframe? Yeah, you bet we do. Our Superdome systems are like that. Are they the same price? No, they are considerably less. Do we have blades, PCs, and normal distributed service? Yeah.

The point is that we don't have a preconceived view of what this thing should run on. That's one thing. We're not wedded to one architectural style. We look at the customer's requirements and then we understand what's necessary in terms of the throughput TP rates or whatever it may be.

So, there is obviously an approach that people can say, "Don't jig around." It's very easy to inject fear into this and just say to put more power underneath it, don't touch the code, and life will be wonderful. We're totally against that approach, but it doesn't mean that one of our strategies is not re-hosting. There are organizations whose applications would benefit from that.

We still believe that can be done on relatively inexpensive hardware. We can re-host an application by keeping the business logic the same, keeping the language the same, but moving it from an expensive system to a less expensive system.

Freeing up cash

People use that strategy to free up cash very quickly. It's one of the fastest ROIs we have, and they are beginning to save instantly. They make the decision that says, "We need to put that money back in the bank, because we need to do that to keep our shareholders happy." Or, they can reinvest that into their next modernization project, and then they're on an upward spiral.

There are approaches to everything, which is why we have seven different strategies for modernization to suit the customer's requirement, but I think the view of just putting more horsepower underneath, closing your eyes, and hoping is not the way forward.

Gardner: Steve, do you have anything more to add to that, treating the symptom rather than the real issues?

Woods: As Paul said, if you treat this as a symptom, we refer to that as a short-term strategy, just to save money to reinvest into the business.

The only thing I would really add to that is that the problem is sometimes not nearly as big as it seems. If you look at the analogy of the clone codes that we find, and all the different areas that we can look at the code and say that it may not be as relevant to a transformation process as you think it is.

The subject matter experts and the stakeholders very slowly start to understand that this is actually possible. It's not as big as we thought.

I do this presentation called "Honey I Shrunk the Mainframe." If you start looking at these different aspects between the clone code and what I call the asymmetrical transformation from handwritten code to model driven architecture, you start looking at these different things. You start really seeing it.

We see this, when we go in to do the workshops. The subject matter experts and the stakeholders very slowly start to understand that this is actually possible. It's not as big as we thought. There are ways to transform it that we didn't realize, and we can do this incrementally. We don't have to do it all at once.

Once we start having those conversations, those who might have been arguing for a re-host suddenly realize that rearchitecting is not as difficult as they think, particularly if you do it asymmetrically. Maybe they should reconsider the re-host and consider going to those context-core concept and start moving the context to these well-proven platforms, such as the ETL tools, the reporting tools, and service-oriented architecture (SOA).

Gardner: Steve, tell us a little bit about how other folks can learn more about this, and then give us a sneak peek or preview into what you are going to be discussing at the upcoming virtual event.

Woods: That's one of the things that we have been talking about -- our tools called the Visual Intelligence Tools. It's a shame you can't see me, because I'm gesturing with my hands as I talk, and If I had the visuals in front of me, I would be pointing to them. This is something to really appreciate -- the images that we give to our customers when we do the analysis. You really have to see it with your own eyes.

We are going to be doing a virtual event on November 3, 4, and 5, and during this you will hear some of the same things I've been talking about, but you will hear them as I'm actually using the tools and showing you what's going to happen with those tools, what those images look like, and why they are meaningful to designing a transformation strategy.

Gardner: Very good. We've been learning more about Application Transformation: Getting to the Bottom Line, and we have been able to separate core from context, and appreciate better how that's an intriguing strategy for approaching this legacy modernization problem and begin to enjoy much greater economic and business benefits as a result.

Helping us weave through this has been Steve Woods, distinguished software engineer at HP. Thanks for your input, Steve.

Woods: Thank you.

Gardner: We've also been joined by Paul Evans, worldwide marketing lead on Applications Transformation at HP. Paul, you are becoming a regular on our show.

Evans: Oh, I'm sorry. I hope I am not getting too repetitive.

Gardner: Not at all. Thanks again for your input.

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. Learn more. Sponsor: Hewlett-Packard.

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Gain more insights into "Application Transformation: Getting to the Bottom Line" via a series of HP virtual conferences Nov. 3-5. For more on Application Transformation, and to get real time answers to your questions, register to the virtual conferences for your region:
Register here to attend the Asia Pacific event on Nov. 3.
Register here to attend the EMEA event on Nov. 4.
Register here to attend the Americas event on Nov. 5.

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Transcript of the second in a series of sponsored BriefingsDirect podcasts on the rationale and strategies for application transformation. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.

Doing Nothing Can Be Costliest IT Course When Legacy Systems and Applications Are Involved

Transcript of a BriefingsDirect podcast on the risks and drawbacks of not investing wisely in application modernization and data center transformation.

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

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 high, and sometimes underappreciated, cost for many enterprises of doing nothing about aging, monolithic applications. Not making a choice about legacy mainframe and poorly used applications is, in effect, making a choice not to transform and modernize the applications and their supporting systems.

Not doing anything is a choice to embrace an ongoing cost structure that may well prevent significant new spending for IT innovations. It’s a choice to suspend applications on, perhaps, ossified platforms and make their reuse and integration difficult, complex, and costly.

Doing nothing is a choice that, in a recession, hurts companies in multiple ways, because successful transformation is the lifeblood of near and long-term productivity improvements.

Here to help us better understand the perils of continuing to do nothing about aging legacy and mainframe applications, we’re joined by four IT transformation experts from Hewlett-Packard (HP). Please join me in welcoming our guests. First, Brad Hipps, product marketer for Application Lifecycle Management (ALM) and Applications Portfolio Software at HP. Welcome, Brad.

Brad Hipps: Thank you.

Gardner: Also, John Pickett from Enterprise Storage and Server Marketing at HP. Hello, John.

John Pickett: Hi. Welcome.

Gardner: Paul Evans, worldwide marketing lead on Applications Transformation at HP. Hello, Paul.

Paul Evans: Hello, Dana.

Gardner: And, Steve Woods, application transformation analyst and distinguished software engineer at EDS, now called HP Enterprise Services. Good to have you with us, Steve.

Steve Woods: Thank you, Dana.

Gardner: Let me start off by going to Paul. The recession has had a number of effects on people, as well as budgets, but I wonder what, in particular, the tight cost structures have had on this notion of tolerating mainframe and legacy applications?

Cost hasn't changed

Evans: Dana, what we’re seeing is that the cost of legacy systems and the cost of supporting the mainframe hasn’t changed in 12 months. What has changed is the available cash that companies have to spend on IT, as, over time, that cash amount may have either been frozen or is being reduced. That puts even more pressure on the IT department and the CIO in how to spend that money, where to spend that money, and how to ensure alignment between what the business wants to do and where the technology needs to go.

Given the fact that we knew already that only about 10 percent of an IT budget was spent on innovation before, the problem is that that becomes squeezed and squeezed. Our concern is that there is a cost of doing nothing. People eventually end up spending their whole IT budgets on maintenance and upgrades and virtually nothing on innovation.

At a time when competitiveness is needed more than it was a year ago, there has to be a shift in the way we spend our IT dollars and where we spend our IT dollars. That means looking at the legacy software environments and the underpinning infrastructure. It’s absolutely a necessity.

Gardner: So, clearly, there is a shift in the economic impetus. I want to go to Steve Woods. As an analyst looking at these issues, what’s changed technically in terms of reducing something that may have been a hurdle to overcome for application transformation?

Woods: For years, the biggest hurdle was that most customers would say they didn’t really have to make a decision, because the performance wasn’t there. The performance reliability wasn't there. That is there now. There is really no excuse not to move because of performance reliability issues.

What's still there, and is changing today, is the ability to look at a legacy source code application. We have the tools now to look at the code and visualize it in ways that are very compelling. That’s typically one of the biggest obstacles. If you look at a legacy application and the number of lines of code and number of people that are maintaining it, it’s usually obvious that large portions of the application haven’t really changed much. There's a lot of library code and that sort of thing.

That’s really important. We’ve been straight with our customers that we have the ability to help them understand a large terrain of code that they might be afraid to move forward. Maybe they simply don’t understand it. Maybe the people who originally developed it have moved on, and because nobody really maintains it, they have fear of going in the areas of the system.

Also, what has changed is the growth of architectural components, such as extract transform and load (ETL) tools, data integration tools, and reporting tools. When we look at a large body of, say, 10 million lines of COBOL and we find that three million lines of that code is doing reporting or maybe two million is doing ETL work, we typically suggest they move that asymmetrically to a new platform that does not use handwritten code.

That’s really risk aversion -- doing it very incrementally with low intrusion, and that’s also where the best return on investment (ROI) picture can be portrayed. You can incrementally get your ROI, as you move the reports and the data transformation jobs over to the new platform. So, that’s really what’s changed. These tools have matured so that we have the performance and we also have the tools to help them understand their legacy systems today.

Gardner: Now, one area where economics and technology come together quite well is the hardware. Let’s go to John with regards to virtualization and reducing the cost of storage. How has that changed the penalty increase for doing nothing?

Functionality gap

Pickett: Typically, when we take a look at the high-end of applications that are going to be moving over and sitting on a legacy system, many times they’re sitting on a mainframe platform. With that, one of the things that have changed over the last several years is the functionality gap between what exists in the past 5 or 10 years ago in the mainframe. That gap has not only been closed, but, in some cases, open systems exceed what’s available on the mainframe.

So, just from a functionality standpoint, there is certainly plenty of capability there, but to hit on the cost of doing nothing, and implementing what you currently have today is that it’s not only the high cost of the platform. As a matter of fact, one of our customers who had moved from a high-end mainframe environment onto an Integrity Superdome, calculated that if you were to take their cost savings and to apply that to playing golf at one of the premier golf places in the world, Pebble Beach, you could golf every day with three friends for 42 years, 10 months, and a couple of days.

It’s not only a matter of cost, but it’s also factoring in the power and cooling as well. Certainly, what we’ve seen is that the cost savings that can be applied on the infrastructure side are then applied back into modernizing the application.

Gardner: I suppose the true cost benefits wouldn’t be realized until after some sort of a transformation. Back to Paul Evans. Are there any indications from folks who have done this transformation as to how substantial their savings can be?

Evans: There are many documented cases that HP can provide, and, I think, other vendors can provide as well, In terms of looking at their applications and the underpinning infrastructure, as John was talking about, there are so many documented cases that point people in the direction that there are real cost savings to be made here.

There's also a flip side to this. Some research that McKinsey did earlier in the year took a sample of 100 companies as they went into the recession. They were brand leadership companies. Coming out of the recession, only 60 of those companies were still in a leadership position. Forty percent of those companies just dropped by the wayside. It doesn’t mean they went out of business. Some did. Some got acquired, but others just lost their brand leadership.

That is a huge price to pay. Now, not all of that has to do with application transformation, but we firmly believe that it is so pivotal to improve services and revenue generation opportunities that, in tough times, need to be stronger and stronger.

What we would say to organizations is, "Take a hard look at this, because doing nothing could be absolutely the wrong thing to do. Having a competitive differentiation that you continue to exploit and continue to provide customers with improving level of service is to keep those customers at a tough time, which means they’ll be your customers when you come out of the recession."

Gardner: Let’s go to Brad. I’m also curious on a strategic level about flexibility and agility, are there prices to be paid that we should be considering in terms of lock in, fragility, or applications that don’t easily lend themselves to a wider process.

'Agility' an overused term

Hipps: This term "agility" is the right term to use, but it gets used so often that people tend to forget what it means. The reality of today’s modern organization -- and this is contrasted even from 5, certainly 10 years ago -- is that when we look at applications, they are everywhere. There has been an application explosion.

When I started in the applications business, we were working on a handful of applications that organizations had. That was the extent of the application in the business. It was one part of it, but it was not total. Now, in every modern enterprise, applications really are total -- big, small, medium size. They are all over the place.

When we start talking about application transformation and we assign that trend to agility, what we’re acknowledging is that for the business to make any change today in the way it does business, in any new market initiative, in any competitive threat it wants to respond to, there is going to be an application -- very likely "applications," plural, that are going to need to be either built or changed to support whatever that new initiative is.

The fact of the matter is that changing or creating the applications to support the business initiative becomes the long pole to realizing whatever it is that initiative is. If that’s the case, you begin to say, "Great. What are the things that I can do to shrink that time or shrink that pole that stands between me and getting this initiative realized in the market space?”

From an application transformation perspective, we then take that as a context for everything that’s motivating a business with regard to its application. The decisions that you're going to make to transform your applications should all be pointed at and informed by shrinking the amount of time that takes you to turn around and realize some business initiative.

So, in 500 words or less, that's what we’re seeking with agility. Following pretty closely behind that, you can begin to see why there is a promise in cloud. It saves me a lot of infrastructural headaches. It’s supposed to obviate a lot of the challenges that I have around just standing up the application and getting it ready, let alone having to build the application itself. So I think that is the view of transformation in terms of agility and why we’re seeing things like cloud. These other things really start to point the direction to greater agility.

Gardner: It sounds as if there is a penalty to be paid or a risk to be incurred by being locked

That pool of data technology only gets bigger and bigger the more changes that I have coming in and the more changes that I'm trying to do.

into the past.

Hipps: That’s right, and you then take the reverse of that. You say, "Fine. If I want to keep doing things as is, that means that every day or every month that goes by, I add another application or I make bigger my current application pool using older technologies that I know take me longer to make changes in.

In the most dramatic terms, it only gets worse the longer I wait. That pool of data technology only gets bigger and bigger the more changes that I have coming in and the more changes that I'm trying to do. It’s almost as though I’ve got this ball and chain that I’ve attached to my ankle. I'm just letting that ball part get bigger and bigger. There is a very real agility cost, even setting aside what your competition may be doing.

Gardner: So, the inevitability of transformation goes from a long horizon to a much nearer and dearer issue. Let’s go back to Steve Woods of EDS. What are some misconceptions about starting on this journey? Is this really something that’s going to highly disrupt an organization or are there steps to do it incrementally? What might hold people back that shouldn't?

More than one path

Woods: I think probably one of the biggest misconceptions is when somebody has a large legacy application written in a second-generation language such as COBOL or perhaps PL/1 and they look at the code and imagine the future with still having handwritten code. But, they imagine maybe it’ll be in Java or C# or .Net, and they don’t pick the next step and say, "If I had to look at the system and rebuild it today, would I do it the same way?" That’s what you are doing if you just imagine one path to modernization.

Some of the code they have in their business logic might find their way into some classes in Java and some classes in .Net. What we prefer to do is a functional breakdown on what the code is actually doing functionally and then try to imagine what the options are that we have going forward. Some of that will become handwritten code and some of it will move to those sorts of implementations.

So, we really like to look at what the code is doing and imagine other areas that we could possibly implement those changes in. If we do that, then we have a much better approach to moving them. The worse thing to do -- and a lot of customers have this impression -- is to automatically translate the code from COBOL into Java.

Java and C# are very efficient languages to generate a function point, where there’s a measure of

It’s looking at the code, at what you want to do from a business process standpoint, and looking at the underlying platform.

functionality. Java takes about eight or ten lines of code. In COBOL, it takes about a 100 lines.

Typically, when you translate automatically from COBOL to Java, you still get pretty much the same amount of code. In actuality, you’ve taking the maintenance headache and making it even larger by doing this automated translation. So, we prefer to take a much more thoughtful approach, look at what the options are, and put together an incremental modernization strategy.

Gardner: Paul Evans, this really isn’t so much pulling the plug on the mainframe, which may give people some shivers. They might not know what to expect over a period of decades or what might happen when they pull the plug.

Evans: We don't profess that people unplug mainframes. If they want to, they may plug in an HP system in its place. We’d love them to. But, being very pragmatic, which is what we like to be, it's looking at what Steve was talking about. It’s looking at the code, at what you want to do from a business process standpoint, and looking at the underlying platform.

It's understanding what quality of service you need to deliver and then understand the options available. In even base technologies like this is, with microprocessors, the power that can be delivered these days means we can do all sorts of things at prices, speed, size, power output, and CO2 emissions that we could only dream of a few years ago. This power enables us to do all sorts of things.

The days where there was this walled-off area in a data center, which no other technology could match, are long gone. Now, the emphasis has been on consolidation and virtualization. There is also a big focus on legacy modernization. CIOs and IT directors, or whatever they might be, do understand there’s an awful lot of money spent on maintaining, as Steve said, handwritten legacy code that today run the organization and need to continue to provide these business processes.

Bite-size chunks

There are far faster, cheaper, and better ways to do that, but it has to be something that is planned for. It has to be something that is executed flawlessly. There's a long-term view, but you take bite-sized chunks out of it along the way, so that you get the results you need. You can feed those good results back into the system and then you get an upward spiral of people seeing what is truly possible with today’s technologies.

Gardner: John Pickett, are there any other misconceptions or perhaps under-appreciated points of information from the enterprise storage and server perspective?

Pickett: Typically, when we see a legacy system, what we hear, in a marketing sense, is that the often high-end -- and I’ll just use that as an example -- mainframes could be used as a consolidation factor. What we find is that if you're going to be moving applications or you’re modernizing applications onto an open-system environment to take advantage of the full gamut of tools and open system applications that are out there, you're not going to be doing that on a legacy environment. We see that the more efficient way of going down that path is onto an open-standard server platform.

Also, some of the other misconceptions that we see, again in a marketing sense, are that a mainframe is very efficient. However, if you compare that to a high-end HP system, for example, and just take a look at the heat output -- which we know is very important -- there is more heat. The difference in heat between a mainframe and an Integrity Superdome, for example, is enough to power a two-burner gas grill, a Weber grill. So, there's some significant heat there.

On the energy side, we see that the Superdome consumes 42 percent less energy. So, it's a very

. . . Some of the other misconceptions that we see, again in a marketing sense, are that a mainframe is very efficient.

efficient way of handling the operating-system environment, when you do modernize these applications.

Gardner: Brad Hipps, when we talk about modernizing, we’re not just modernizing applications. It’s really modernizing the architecture. What benefits, perhaps underappreciated ones, come with that move?

Hipps: I tend to think that in application transformation in most ways they’re breaking up and distributing that which was previously self-contained and closed.

Whether you're looking at moving to some sort of mainframe processing to distributed processing, from distributed processing to virtualization, whether you are talking about the application team themselves, which now are some combination of in-house, near-shore, offshore, outsourced sort of a distribution of the teams from sort of the single building to all around the world, certainly the architectures themselves from being these sort of monolithic and fairly brittle things that are now sort of services driven things.

You can look at any one of those trends and you can begin to speak about benefits, whether it’s leveraging a better global cost basis or on the architectural side, the fundamental element we’re trying to do is to say, "Let’s move away from a world in which everything is handcrafted."

Assembly-line model

Let’s get much closer to the assembly-line model, where I have a series of preexisting trustworthy components and I know where they are, I know what they do, and my work now becomes really a matter of assembling those. They can take any variety of shapes on my need because of the components I have created.

We're getting back to this idea of lower cost and increased agility. We can only imagine how certain car manufacturers would be doing, if they were handcrafting every car. We moved to the assembly line for a reason, and software typically has lagged what we see in other engineering disciplines. Here we’re finally going to catch up. We're finally be going to recognize that we can take an assembly line approach in the creation of application, as well, with all the intended benefits.

Gardner: And, when you standardize the architecture, instead of having to make sure there is a skillset located where the systems are, you can perhaps bring the systems to where the different skills are?

Hipps: That’s right. You can begin to divorce your resources from the asset that they are creating, and that’s another huge thing that we see. And, it's true, whether you're talking about a service or a component of an application or whether you're talking about a test asset. Whatever the case may be, we can envision a series of assets that make an application successful. Now, those can be distributed and geographically divorced from the owners.

Gardner: Where this has been a "nice to have" or "something on the back-burner" activity,

The pressure it’s bringing to bear on people is that the time is up when people just continue to spend their dollars on maintaining the applications . . . They can't just continue to pour money after that.

we're starting to see a top priority emerge. I’ve heard of some new Forrester research that has shown that legacy transformation is becoming the number one priority. Paul, can you offer some more insight on that?

Evans: That’s research that we're seeing as well, Dana, and I don’t know why. ... The point is that this may not be what organizations "want" to do.

They turn to the CIO and say, "If we give you $10 million, what is that you'd really like to do." What they're actually saying is this is what they know they've got to do. So, there is a difference between what they like and what they've got to do.

That goes back to when we started in the current economic situation. The pressure it’s bringing to bear on people is that the time is up when people just continue to spend their dollars on maintaining the applications, as Steve and Brad talked about and the infrastructure that John’s talked about. They can't just continue to pour money after that.

There has to be a bright point. Someone has got to say, “Stop. This is crazy. There are better ways to do this.” What the Forrester research is pointing is that if you go around to a worldwide audience and talk to a thousand people in influential positions, they're now saying, "This is what we 'have' to do, not what we 'want' to do. We're going to do this, and we're going to take time out and we're going to do it properly. We're going to take cost out of what we are doing today and it’s not going to come back."

Flipping the ratio

All the things that Steve and Brad have talked about in terms of handwritten code, once we have done it, once we have removed that handwritten code, that code that is too big for what it needs to be in terms to get the job done. Once we have done it once, it’s out and it’s finished with and then we can start looking at economics that are totally different going forward, where we can actually flip this ratio.

Today, we may spend 80 percent or 90 percent of our IT budget on maintenance, and 10 percent on innovation. What we want to do is flip it. We're not going to flip it in a year or maybe even two, but we have got to take steps. If we don’t start taking steps, it will never go away.

Hipps: I've got just one thing to add to that in terms of the aura of inevitability that is coming with the transformation. When you look at IT over the last 30 years, you can see that, fairly consistently, you can pick your time frame, and somewhere in neighborhood of every seven to nine years, there has been sort of an equivalent wave of modernization. The last major one we went through was late '90s or early 2000s, with the combination of Y2K and Web 1.0. So, sure enough, here we are, right on time with the next wave.

What’s interesting is this now number-one priority hasn’t reached the stage of inevitability. I

When you look at IT over the last 30 years, you can see that, fairly consistently, you can pick your time frame, and somewhere in neighborhood of every seven to nine years, there has been sort of an equivalent wave of modernization.

look back and think about what organizations in 2003 were still saying, "No, I refuse the web. I refuse the network world. It’s not going to happen. It’s a passing fancy," and whatever the case maybe. Inasmuch as there were organizations doing that, I suspect they're not around anymore, or they're around much smaller than they were. I do think that’s where we are now.

Cloud is reasonably new, but outsourcing is another component where transformation has been around long enough that most people have been able to look it square the eye and figure out, "You know what. There is real benefit here. Yes, there are some things I need to do on my side to realize that benefit. There is no such thing as a free lunch, but there is a real benefit here and it’s I am going to suffer, if not next year, then three years from now, if I don’t start getting my act together now."

Gardner: John Pickett, are there any messages from the boosters of mainframes that perhaps are no longer factors or are even misleading?

Pickett: There are certainly a couple of those. In the past, the mainframe was thought to be the harbinger of RAS -- reliability, availability, and serviceability. Many of those features exist on open systems today. It’s not something that is dedicated just to the high-end of the mainframe environment. They are out there on systems that are open-system platforms, significantly cheaper. In many cases, the RAS of these systems far exceeds what we’ll see on the mainframe.

That’s just one piece. Other misconceptions and things that you typically saw historically have been on the mainframe side, such as being able to drive a business-based objective or to be able to prioritize resources for different applications or different groups of users. Well, that’s something that has existed for a number of years on the open system side -- things such as backup and recovery and being able to provide very high levels of disaster recovery.

Misleading misconception

A misconception that this is something that can only be done in a mainframe environment, is not only misleading, but also not making the move to an open-system platform, continues to drive IT budget unnecessarily into an infrastructure that could be applied to either the application modernization that we have been talking about here or into the skills -- people resources within the data center.

Gardner: We seem to have a firm handle on the cost benefits over time. Certainly, we have a total cost picture, comparing older systems to the newer systems. Are there more qualitative, or what we might call "soft benefits," in terms of the competitiveness of an organization? Do we have any examples of that?

Evans: What we have to think about is the target audience out there. More and more people have access to technology. We have the generation now coming up that wants it now and wants it off the Web. They are used to using social networking tools that people have become accustomed to. So, it's one of the soft, squidgy areas as people go through this transformation.

I think that we can put hard dollars -- or pounds or euros -- against this for the moment, the inclusion of Web 2.0 or Enterprise 2.0 capabilities into applications. We have customers who are now trying that, some of it inside the firewall and some of it beyond. One, this can provide a much richer experience for the user. Secondly, you begin to address an audience that is used to analyzing these things in their day-to-day life anyway.

Why, when they step into the world of the enterprise, do they have to step back 50 years in terms

More and more people have access to technology. We have the generation now coming up that wants it now and wants it off the Web.

of capability? You just can’t imagine that certain things that people require are being done in batch mode anymore. The real-time enterprises are what people now expect and want.

So, as people go through this transformation, not only can they do all the plethora of things we have talked about in terms of handwritten code, mainframes, structure, and service-oriented architecture (SOA), but they can also start taking steps towards how they can really get these applications in line and embed them within an intimate culture.

If they start to take on board some of the newer concepts around cloud to experiment they have to understand that people aren’t going to just make this big leap of faith. At the end of the day, it's enterprise apps. We make things, apply things and count things -- and people have got to continue to do that. At the same time, they need to take these pragmatic steps to introduce these newer technologies that really can help them not only retain their current customer base, but attract new customers as well.

Gardner: Paul, when organizations go through this transformation, modernize, and go to open systems, does that translate into some sort of a business benefit, in terms of making that business itself more agile, maybe in a mergers and acquisition sense? Would somebody resist buying a company because they've got a big mainframe as an albatross around its neck?

Fit for purpose

Evans: Definitely, to have your IT fit for purpose, is something that is part of the inherent health of the organization. For organizations whose IT is way behind where it is today, it's definitely part of the health check.

To some degree, if you don’t want to get taken over or merged or acquired, maybe you just let your IT sag to where it is today, with mainframes and legacy apps, and nobody would want you. But then, you’re back to where we were earlier. You become one of those 40 percent of the companies that disappear off the face of the planet. So, it’s a sort of a double-edged sword, you make yourself attractive and you could get merged or acquired. On the other hand, you don’t do it and you’re going to go out of business. I still think I prefer the former rather than the latter.

Gardner: Let’s talk more specifically about what HP is bringing to the table. We’ve flushed out this issue quite a bit. Is there a long history at HP of modernization?

Evans: There are two things. There is what we have done internally, within the organization in the company. We’ve had to sort of eat our own dog food, in the sense that there are companies that were merged and companies that were acquired -- HP, Compaq, Digital, EDS, whatever.

It’s just not acceptable anymore to run these as totally separate IT organizations. You have to

When you take a look at the history of what we've been able to do, migrating legacy applications onto an open system platform, we actually have a long history of that.

quickly understand how to get this to be an integrated enterprise. It’s been well documented what we have done internally, in terms of taking massive amount of cash out of our IT operations, and yet, at the same time, innovating and providing a better service, while reducing our applications portfolio from something like 15,000 to 3,000.

So, all of these things going at the same time, and that has been achieved within HP. Now, you could argue that we don't have mainframes, so maybe it’s easier. Maybe that’s true, but, at the same time, modernization has been growing, and now we're right up there in the forefront of what organizations need to do to make themselves cost-effective, agile, and flexible, going forward.

Gardner: John Pickett, what about the issue around standards, neutrality, embracing heterogeneity, community and open source? Are these issues that HP has found some benefits from?

Pickett: Without a doubt. When you take a look at the history of what we've been able to do, migrating legacy applications onto an open system platform, we actually have a long history of that. We continue to not only see success, but we’re seeing acceleration in those areas.

A couple of drivers that we ended up seeing are really making the case for customers, not only the significant cost savings that we have talked about earlier. So, we're talking 50 percent or 70 percent total cost of ownership (TCO) savings driving from a legacy of mainframe environment over to an HP environment.

Additional savings

In addition to that, you also have the power savings. Simply by moving, the amount of energy that saved is enough to light 80 houses for one year. We’ve already talked about the heat and the space savings. It’s about a third of what you’re going to be seeing for a high-end mainframe environment for a similar system from HP with similar capabilities.

Why that’s important is because if customers are running out of data-center room and they’re looking at increasing their compute capacity, but they don’t have room within their data center, it just makes sense to go with a more efficient, more densely packed power system, with less heat and energy than what you’ll see on a legacy environment.

Gardner: Brad Hipps, about this issue about of being able to sell from a fairly neutral perspective, based on a solutions value, does that bring something to the table?

Hipps: We alluded earlier to the issue of lock in. If we’re going to, as we do, fly under the banner of bringing flexibility and agility to an organization, it’s tough to wave that banner without being pretty open in who you’re going to play with and where.

Organizations have a very fine eye for what this is going to mean for me not just six months from now, but two years from now, and what it’s going to mean to successors in line in the organization. They don’t want to be painted into a corner. That’s something that HP is very cognizant of, and has been very good about.

This may be a little bit overly optimistic, but you have to be able to check that box. If you’re going to make a credible argument to any enterprise IT organization, you have to show your openness and you have to check the box that says we’re not going to paint you into a corner.

Gardner: Steve Woods, for those folks who need to get going on this, where do you get started? We mentioned that iterative nature, but there must be perhaps low-hanging fruit, demonstrations of value that then set up a longer record of success.

Woods: Absolutely. What we find with our customers is that there are various levels in the processes of understanding their legacy systems. Often, we find some of them are quite mature and have gone down the road quite a bit. We offer some assessments based upon single applications and also portfolio of applications. We do have a modernization assessment and we do have a portfolio assessment. We also offer a best-shore assessment to ensure that you are using the correct resources.

Often, we find that we walk in, and the customers just don’t know anything about what their

We have the visual intelligence tools that very quickly allow us to see inside the system, see the duplicate source code, and provide them with high level cost estimates.

options are. They haven’t done any sort of analysis thus far. In those cases, we offer what we’re calling a Modernization Opportunity Workshop.

It's a very quick, usually 4-8 hour, on-site, and it takes about four weeks to deliver the entire package. We use some tools that I have created at HP that look at the clone code within the application. It’s very important to understand the pattens of the clone code and have visualizations. We have the visual intelligence tools that very quickly allow us to see inside the system, see the duplicate source code, and provide them with high level cost estimates.

We use a tool called COCOMO and we use Monte Carlo simulation. We’re able very quickly to give them a pretty high-level, 30-page report that indicates the size. Often, size is something that is completely misunderstood. We have been into customers who tell us they have four million lines of code, and we actually count the code as only 400,000 lines of code. So, it’s important to start with a stake in the ground and understand exactly where you’re at with the size.

We also do functionality composition support to understand that. That’s all delivered with very little impact. We know the subject matter experts are very busy, and we try to lessen the impact of doing that. That’s one of the places we can start, when the customer just has some uncertainty and they're not even sure where to start.

Gardner: We’ve been discussing the high penalties that can come with inaction around applications and legacy systems. We’ve been talking about how that factors into the economy and the technological shifts around the open systems and other choices that offer a path to agility and multiple-sourcing options.

I want to thank our panelists today for our discussion about the high costs and risks inherent in doing nothing around legacy systems. We’ve been joined by Brad Hipps, product marketer for Application Lifecycle Management and Applications Portfolio Software at HP. Thank you Brad.

Hipps: Thank you.

Gardner: John Pickett, Enterprise Storage and Server Marketing at HP. Thank you, John.

Pickett: Thank you Dana.

Gardner: Paul Evans, Worldwide Marketing Lead on Applications Transformation at HP. Thank you, Paul.

Evans: Thanks Dana.

Gardner: And Steve Woods, applications transformation analyst and distinguished software engineer at EDS. Thank you Steve.

Woods: Thank 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 podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Learn more. Sponsor: Hewlett Packard.

Transcript of a BriefingsDirect podcast on the risks and drawbacks of not investing wisely in application modernization and data center transformation. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.

Webinar: Modernization Pulls New Value From Legacy and Client-Server Enterprise Applications

Transcript of a BriefingsDirect webinar with David McFarlane and Adam Markey on the economic and productivity advantages from application modernization.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Learn more. Sponsor: Nexaweb Technologies.

Announcer: Hello, and welcome to a special BriefingsDirect presentation, a podcast created from a recent Nexaweb Technologies Webinar on application modernization.

The webinar examines how enterprises are gaining economic and productivity advantages from modernizing legacy and older client-server applications. The logic, data, and integration patterns' value within these older applications can be effectively extracted and repurposed using tools and methods, including those from Nexaweb. That means the IT and business value from these assets can be reestablished as Web applications on highly efficient platforms.

We'll learn how Nexaweb has worked with a number of companies to attain new value from legacy and client-server applications, while making those assets more easily deployed as rich, agile Web applications and services. Those services can then be better extended across modern and flexible business processes.

On this podcast, we'll hear from Dana Gardner, principal analyst at Interarbor Solutions, as well as David McFarlane, COO at Nexaweb, and then Adam Markey, solution architect at Nexaweb.

First, welcome our initial presenter, BriefingsDirect's Dana Gardner.

Dana Gardner: We're dealing with an awful lot of applications out there in the IT world. It's always astonishing to me, when I go into enterprises and ask them how many applications they have in production, that in many cases they don't know. In the cases where they do know, they're usually off by about 20 or 30 percent, when they go in and do an audit.

In many cases, we're looking at companies that have been around for a while with 10 or 20 years worth of applications. These can be on mainframe. They can be written in COBOL. They could be still running on Unix platforms. In a perfect world we'd have an opportunity to go in and audit these, sunset some, and re-factor others.

Today, however, many organizations are faced with manpower and labor issues. They've got skill sets that they can't bring in, even if they wanted to, for some of these older applications. There is, of course, a whole new set of applications that might not be considered legacy, but that are several years old now. These are N-tier and Java, distributed applications, .NET, COM, DCOM, a whole stew in many organizations.

What I am asking folks to do, now that we're into a situation where economics are probably more prominent than ever -- not that that's not usually the case in IT -- is to take a look at what applications are constraining their business. Not so much to worry about what the technology is that they are running on or what the skill sets are, but to start factoring what new initiatives they need to do and how can they get their top line and bottom line as robust as possible? How do they get IT to be an enabler and not viewed as a cost center?

This is really where we should start thinking about modernizing and transforming IT -- getting application functionality that is essential, but is in someway handicapping what businesses want to do.

We want to exploit new architectures and bring more applications into association with them. It's not just architectures in terms of technology, but approaches and methodologies like service-oriented architecture (SOA), or what some people call Web-oriented architecture (WOA), looking to take advantage of interfaces and speed of innovation so that organizations can start to improve productivity for their internal constituents, in this case usually employees or partners.

Then, increasingly because of the difficulty in bringing about new business during a period of economic downturn, they're reaching out through the Internet, reaching out through the channels that are more productive, less costly and utilizing applications to focus on new business in new ways.

SOA and mobile devices

Increasingly, as I mentioned, this involves SOA, but it also increasingly involves mobile. We need to go out and reach people through their mobile Internet devices, through their iPhone and their BlackBerry, and a host of other devices at the edge. You need to be able to do that with applications and you need to be able to do it fast.

So, the goal is flexibility in terms of which applications and services need to reach new and older constituencies at less cost and, over time, reduce the number of platforms that you are supporting, sunset some apps, bring them into a new age, a new paradigm, and reduce your operating costs as a result.

Information really is the goal here, even though we are, with a handful of applications, starting to focus on the ones that are going to give us the biggest bang for the buck, recognizing that we need to go in and thoughtfully approach these applications, bring them into use with other Web services and Web applications, and think about mashups and Enterprise 2.0 types of activities. That involves expanding the use of these new methodologies.

One of the things that's interesting about companies that are aggressively using SOA is they also happen to be usually aggressive in using newer development platforms and tools. They're using dynamic languages, Web interfaces, and rich Internet application (RIA) interfaces. This is what's allowing them to take their newer applications and bring them into a services orientation reuse. Some of those services can be flexible and agile.

That's not to say you can't do some of those things with the older applications as well. In many cases, tools are being brought about and third-party inputs, in terms of professional services and guidance, are coming around. I'm recommending to people to respond more quickly, to save operational costs, to get agile and reach out through these new edge devices and/or the Internet, and do it in a fairly short order.

It's amazing to me that for those companies that have moved in this direction, they can get applications out the door in weeks rather than months, and in many cases, you can transform and modernize older applications on aging platforms just as quickly.

We want to move faster. We want to recognize that we need a higher payoff, because we also recognize that the line-of-business people, those folks that are tasked with developing new business or maintaining older business, are in a rush, because things are changing so quickly in the world around us. They often need to go at fast-break or breakneck speed with their business activities. They're going to look at IT to be there for them, and not be a handicap or to tell them that they have to wait in line or that this project is going to be six to eight months.

So, we need to get that higher agility and productivity, not just for IT, but for the business goals. Application modernization is an important aspect of doing this.

How does modernization fit in? It's not something that's going to happen on its own, obviously. There are many other activities, approaches, and priorities that IT folks are dealing with. Modernizing, however, fits in quite well. It can be used as a way to rationalize any expenditure around modernization, when you factor in that you can often cut your operating costs significantly over time.

You can also become greener. You can use less electricity, because you're leveraging newer systems and hardware that are multi core and designed to run with better performance in terms of heat reduction. There are more options around cloud computing and accessing some services or, perhaps, just experimenting with application development and testing on someone else's infrastructure.

By moving towards modernization you also set yourself up to be much more ready for SOA or to exploit those investments you have already made in SOA.

Compliance benefits

There are also compliance benefits for those organizations that are facing payment-card industry (PCI) standards in financial or other regulatory environments, freeing up applications in such a way that you can develop reports, share the data, and integrate the data. These are all benefits to your compliance issues as well.

As I mentioned earlier, by moving into a modernization for older applications, you've got the ability to mash up and take advantage of these newer interfaces, reuse, and extended application.

There is a whole host of rationalizations and reasons to do this from an IT perspective. The benefits are much more involved with these business issues and developer satisfaction, recognizing that if you are going to hire developers, you are going to be limited in the skill sets. You want to find ones that are able to work with the tools and present these applications and services in the interfaces that you have chosen.

Keeping operations at a lower cost, again, is an incentive, and that's something they can take out to their operating and financial officers and get that backing for these investments to move forward on application modernization and transformation.

One of the questions I get is, "How do we get started? We've identified applications. We recognized the business agility benefits. Where do we look among those applications to start getting that bang for the buck, where to get modern first?"

Well, you want to look at applications that are orphans in some respect. They're monolithic. They're on their own -- dedicated server, dedicated hardware, and dedicated stack and runtime environment, just for a single application.

Those are good candidates to say, "How can we take that into a virtualized environment?" Are there stacks that can support that same runtime environment on a virtualized server, reduce your hardware and operating costs as a result? Are they brittle?

Are there applications that people have put a literal and figurative wall around saying, "Don't go near that application. If we do anything to it, it might tank and we don't have the documentation or the people around to get it back into operating condition. It's risky and it's dangerous."

Conventional wisdom will say don't go near it. It's better to say, "Listen, if that's important to our business, if it's holding our business back, that's a great target for going in and finding a way to extract the logic, extract the data and present it as something that's much more flexible and easy to work with."

You can also look for labor issues. As I said, if skills have disappeared, why wait for the proverbial crash and then deal with it? It's better to be a little bit proactive.

We also need to look at what functional areas are going to be supporting agility as these business requirements change. If you're an organization where you've got supply chain issues, you need to find redundancy. You need to find new partners quickly. Perhaps some have gone out of business or no longer able to manufacture or supply certain parts. You need to be fleet and agile.

If there are applications that are holding you back from being able to pick and choose in a marketplace more readily, that's a functional area that's a priority for getting out to a Web interface.

Faster, better, cheaper

People are going to be looking to do things faster, better, cheaper. In many cases those innovative companies that are coming to market now are doing it all through the Web, because they are green-field organizations themselves. They are of, for, and by the Web. If you're going to interact with them and take advantage of the cost, innovation, and productivity benefits they offer, your applications need to interrelate, operate, and take advantage of standards and Web services to play with them.

You also need to take a look at where maintenance costs are high. We've certainly seen a number of cases where by modernizing applications you have reduced your cost on maintenance by 20 or 30 percent, sometimes even more. Again, if this is done in the context of some of these larger initiatives around green and virtualization, the savings can be even more dramatic.

I also want to emphasize -- and I can't say it enough -- those SOA activities shouldn't be there for just the newer apps. The more older apps you bring in, the more return on investment you get for your platform modernization investments, as well as saving on the older platform costs, not to mention those productivity and agility benefits.

We also need to think about the data. In some cases, I have seen organizations where they have applications running and aren't really using the application for other than as an application repository for the data. They have a hard time thinking about what to do with the data. The application is being supported at high cost, and it's a glorified proprietary database, taking up app server and rack space.

If you're looking at applications that are more data centric in their usage, why not extract that data, find what bits of the logic might still be relevant or useful, put that into service orientation, and reduce your cost, while extending that data into new processes and new benefits.

It's also important to look at where the technical quality of an app is low. Many companies are working with applications that were never built very well and never performed particularly well, using old kludgy interfaces. People are not as productive and sometimes resist working with them. These are candidates for where to put your wood behind your arrow when it comes to application modernization.

In beginning the process, we need to look at the architecture targets. We need to think about where you're going to put these applications if you are refactoring them and bringing them into the Web standards process.

It's important to have capacity. We want to have enough architecture, systems, and runtime in place. We should think about hosting or collocation, where you can decrease your cost and the risk of capital expenditure, but at the same time, still have a home for these new apps.

You certainly don't want to overextend and build out platforms without the applications being ready. It's a bit of a balancing act -- making sure you have enough capacity, but at the same time performing these modernization transformation tasks. You certainly don't want to transform apps and not have a good home for them.

Also important is an inventory of these critical apps, based on some of the criteria, we have gone through.

Crawl, walk, run

The nice thing about creating the categorization is that once you've got some processes in place on how to go about this, with one application you can extend that to others. The crawl-walk-run approach makes a great deal of sense, but when you've learned to crawl well, extend and reuse that to walk well, and then scale it from there.

This construction, deconstruction, rationalization process should also be vetted and audited in the sense that you can demonstrate paybacks. We don't want to demonstrate cost centers becoming larger cost centers. We want to show, at each step of the way, how this is beneficial in cost as well as productivity. Then, we need to focus continually on these business requirements, to make a difference and enhance these business processes.

There are some traps. It's easier said than done. It's complicated. You need to extract data carefully. If you start losing logic and access to data that are part of important business processes, then you're going to lose the trust and confidence, and some of your future important cost benefit activities might be in jeopardy.

It's important to understand the code. You don't want to go and start monkeying around with and extracting code, unless you really know what you're doing. If you don't, it's important to get outside help.

There are people who are not doing this for the first time. They've done it many times. They're familiar with certain application types and platforms. It's better to let them come in, than for you to be a guinea pig yourself or take trials and tests as your first step. That's not a good idea when you're starting to deal with critical and important application.

Stick to processes and methods that do work. Don't recreate the wheel, unless you need to, and once you have got a good wheel creation method, repeat and verify.

You need to be rigorous, be systemic, and verify results, as we have said. That's what's going to get you those transformational benefits, rather than piecemeal benefits. You're going to see how application modernization fits into the context of these other activities, You're going to be well on the way to satisfying your constituencies, getting the funding you need, and then seeing more of your budget going to innovation and productivity and not to maintenance and upkeep.

There are a lot of great reasons to modernize, and we have mentioned a number of them. There are backwards and forwards compatibility issues. There are big payoffs in cost and agility, and now it's time to look at some of the examples of how this has been put into place.

Announcer: Thanks Dana. Now, we'll hear from David McFarlane, COO at Nexaweb, on some use-case scenarios for adopting and benefiting from these application modernization opportunities. Here is David McFarlane.

Understanding value

David McFarlane: We're going to go a little bit deeper and actually take a look at a case study of one of our clients, one of our successful implementations, and see the value that came out of it.

To really understand what value is, we have to understand how we're going to quantify it in the first place. We're probably all in IT here, and we're probably all IT heads, but we have to take a step back, take a top-down approach, and understand how we define that value in the business.

As Dana said earlier, application modernization impacts all areas of your business, and the three areas that it really impacts are business, operations, and IT. So, you have to step outside your role. You have to see what value the business would see out of it, what operations would see out of it, and also for yourself in IT, what gains and benefits you would get out of that. When you add them all together, you get the overall value for that application modernization.

Let's take a look at a real case study as an example. Just to set some background, we have a legacy system, a customer relationship management (CRM) call center application for one of our clients. They have about five call centers, with around 50 employees, and they're on a C++ client-server application.

The important thing to note about this is that, in legacy systems, there are usually multiple instances of this application. Since it's a client-server app, we have to remember that it's also deployed and managed on each individual desktop. Each individual employee has their own installation on their desktop, which is sometimes a nightmare to manage for most IT shops.

We took that system and built a modernized system with it. We had a J2EE architecture with desktop browser look and feel, as Dana talked about earlier. You get that real performance out of the installed client-server application, but it's delivered over the Web via zero client install.

You don't have to do anything besides update your Web server, and everybody automatically has the new application, the new look and feel, the new business logic, and access to whatever data you've hooked it up to on the backend.

Also important is the ability of our system that we modernized to be deployed as an open standard. We used J2EE architecture, and that means we're able to integrate with anything that you have on your back end via open Java application programming interfaces (APIs).

There is a vast array of open source products out there waiting to be used, to be integrated, and to modernize systems. There's also a large workforce that will be able to understand a Java application as opposed to a custom C++ application or even a COBOL application. We also consolidated it to one distributed instance, since we can now manage it centrally from one data center.

ROI analysis

When you're doing a modernization, you're probably going to have to do some sort of return on investmment (ROI) analysis to understand exactly what you're going to get out of this application, and that's going to take some time.

If you're coming from an IT perspective, you might have most of the benefits already in your head: "I'll have people using Java instead of COBOL. I'll have all the developers focused on one development language, instead of multiple development languages. I'm going to be able to decrease by deployment time, etc."

But, when justifying something like this, you need to take a step back, and as we said before, look at the factors in these three areas that are most affected by application modernization. As Dana pointed out, it's business operations in IT. So, we go ahead and look at the business.

We have to ask a few questions here: "Who are my users? How long does each transaction take?" Say I'm a call center and it takes few minutes for a user to get through a transaction, if I can cut that to one-and-a-half minutes or even one minute, I'm able to increase productivity significantly.

The next part is operations. How is that productivity increased, but also what does it mean to have a modern application infrastructure? If previously I had to come in to work and sit down at my desktop, because that's the only place that application was installed, maybe I don't even need to come in to work anymore. Maybe I can work from home. Maybe I can work from India, if I want to, as long as I have VPN access into that sort of an application. You can begin to see the operational flexibility that you get out of that.

Then, as we look into the IT benefits that we have here, how long did it take to make a change to my legacy system? One of the biggest benefits that we're seeing is when coming from legacy C++ PowerBuilder applications, where you really have to code each and every aspect of the user interface (UI), the business logic, and the specific data interaction, because we don't have SOA to leverage, and we don't have hooks into services that we've built or are planning to build in our application.

Also, we have to think of what the developer actually had to do to make that change. In older technologies, they might not have a way to prototype the UI and show the business users feedback before they are able to get sign off on what they're going to build. They might have to program each and every element of the user interface, all the way down to writing SQL stored procedures that are application-specific to a database.

Going to a modern architecture, you're going to have services and you're going to have your object-relational management capabilities. You're going to have some great middle-tier applications like Spring and Struts to enhance the development. Obviously, with Nexaweb technologies, you have that ability to create the declarative user interfaces, which speeds up UI development time significantly.

Also we have what hardware and software do the application run on, and what licenses am I paying for? As Dana pointed out earlier, you'll have a significant opportunity for maintenance savings, when you go to a modern architecture.

Productivity gains

We asked all these questions, and we found some significant areas of value in our CRM modernization case. In the business we actually saw a 15 percent gain in end-user productivity, which impacted our clients by about $1.5 million a year. In these times, you're actually able to slim down or trim your workflow if you have a more productive application. In this case, which are the productivities that are able to do more calls quicker, service customers quicker? Ultimately, that ends up in end user satisfaction and dollars saved as well.

Next, you have the operational value. What we had here was a decrease in audit time. We found that their auditors were going around to each individual desktop and seeing exactly which applications were installed on their computer. They had to look at each of the five instances in each call center for auditing, instead of looking at one consolidated instance, with just one database and book of record for all the operation there. So, that saved a lot of auditing time for them, which is really great.

Another thing was that it improved the performance of another help desk. This was a help desk for customer support, but the internal IT help desk actually saw huge improvement. Because the application was centrally managed, all people had to do was go to a Website or click a link to access that application, instead of having to install software. As you know, when you install software, a ton of things can happen. You actually have to do a lot of testing for that software as well. All that has been reduced, and we're saving about $15K there.

When you look at the IT benefits, we have that IT developer productivity gain that we talked about. We eliminated some hardware and software for those five instances and some of that maintenance cost. So, that's and $85K impact. There are the deployment benefits of a RIA, when you're going from deploying applications on 250 computers to zero computers. You're going to see an immediate impact there, and that was around $250K for the time to do that, the software that it took to push that out, and for the support that it needed to run.

Because of the change management benefits from RIAs, the development productivity, and the ability to go from requirements to design, to testing, to production much more quickly than a client-server application, we're able to see a 90 percent gain there, which had a $200K impact.

When you look at it in total, the yearly bottom line improvement was about $2.23 million for this one instance, with one time improvement of $85K for the hardware and the software that we got rid of. It was only a one-time investment of about $800K.

I say "only," but if you look at the business, operational, and the IT impacts together, you get payback in the first full year. If you were only coming from that IT perspective, you would have seen that the payback is actually a little bit longer than a year.

If you add all those numbers up, you get something a little less than $800K, about $700K, I believe. That will be about 14- or 15-month payback instead of about a 5- or 6-month payback. When you're trying to make a case for modernization, this is exactly what your CFO or your CEO needs to know -- how it affects your bottom line from all areas of the business, not just IT.

Let's not forget the intangibles that come with application modernization. It's always about the bottom line. There are some great things that you get out of a modern application infrastructure, and the first thing you get, when you look at the business, is improved response time.

Happier CSRs

The number one thing I could think of is that your customer service representatives (CSRs) are going to be happier, because once they click a button, it's not going to take two seconds to respond like the old application. It's going to be fast. It's going to be rich. You're not going to have any installation issues when you do an upgrade. It's going to be smooth.

You're going to have happier CSRs. Having happier CSRs means that you're going to have improved customer service, and a customer satisfaction level, when people get calls through quicker, and when people talk to happy customer service representative.

Also, when you're doing application modernization, you have a good opportunity to automate manual portions of the business process. You can go in and say, "This person is cutting and pasting something into an Excel spreadsheet, and emailing this to somebody else as a report after they're done." Maybe there's an opportunity there to have that done automatically. So, it saves them time again. That's where you can really find your increased productivity.

When we look at operations, we actually enabled real estate consolidation. I didn't put those numbers in the ROI, because they were probably going to do that anyway, but it was an enabler. Having a technology to go from five call centers to one call center with distributed agents across the country and across the world saves the business a lot of money on the real estate, the power, and the infrastructure needed to have five call centers up and running.

Again, you get the workforce flexibility, because I can work from home, work from India, or come and work from the office. I could do this job from anywhere, if I have access to this application. Obviously, we're able to bring outsourced call centers online on-demand with that.

Then, we move on to IT. As I said before, it's short release cycles with more functionality. When release cycles are shorter, you can incrementally build in more features to your application, make people more productive, and make the application do more in less time, which is obviously what we want to do.

We have a standardized J2EE architecture, which means the people that you're going to look for to maintain the application are going to be out there. There is a huge number of Java developers out there waiting and ready to come in to maintain your application.

We're built on open standards to ensure that the application is ready for the future. There are a lot of RIA technologies that try to lock you in to one runtime and one development methodology. We use open standards as much as we can to push your application out the door as fast as possible, and be as maintainable as possible, and as ready for the future as possible.

Announcer: Thanks, David. Now, we'll hear from Adam Markey, solution architect at Nexaweb, on specific deployment examples of application modernization projects. Here, then, is Adam.

Enterprise-wide value

Adam Markey: As we look at these different customer examples, we really want to see how they've had an impact of value across the enterprise, and see, from a business point of view, the ability to be able to increase market reach, improve user productivity, decrease the time to market, increase customer engagement and loyalty, and sustain, if not build upon, that competitive advantage.

We also want to look at the operations as well and understand how this new architecture has actually realized benefits in terms of a reduced real estate, greater utilization of global workforce, reduction in energy, moving to green architectures, and improving the overall vendor management.

For those closely responsible for the organization and who deliver this capability, we want to look at IT and how this process helps deal with the rapidly changing demographics in the IT skills market. As the baby boomers move on and out of or off the job market, many of the legacy skills that we relied on so heavily through the years are becoming very rare and hard to find within the organization.

We'll take a look at that process efficiency, and generally how we can improve the overall efficiency and cost in terms of licenses and the use of open source. So, let's take a closer look at a few examples to help illustrate that. There's nothing wrong with your screens here. This first example is actually an example of the modernization of a Japanese phone exchange trading platform.

In this case, this was a trading platform built by Enfour, Bank of Tokyo-Mitsubishi (BTM). The challenge that BTM had was that, once they were capable of satisfying their large corporate customers with their on-premises foreign exchange trading platforms, the small- and medium-sized enterprises (SMEs) were quite different in terms of what they required.

They needed a UI and an application that was much simpler for them to adopt. They didn't have the necessary IT infrastructure to be able to establish the complex on-premises systems. They needed something that had no IT barriers to adoption.

What we did for BTM with our partner Hitachi was to help modernize and transform the entire trading platform to the Web. Just to stress, this isn't simply an information portal, this is a fully functioning trading platform. There are over 500 screens. It's integrated to a 120 different data sources with very stringent service-level requirements to the deployment of the application.

We needed to be able to display any fluctuations and exchange right from the Reuters feed in 200 milliseconds or less. We needed to be able to complete a close loop transaction in two seconds or less.

So, this is a fully functioning trading platform. What's it's meant for BTM is that they've been able to dramatically increase the adoption and penetration into the SME market. Fundamentally, these SME or institutional traders don't need any architecture whatsoever, just a browser. There is no client installation. They're able to self-serve, which means they can simply enter the URL, log in, and get started. This has been a tremendous cost reduction and also revenue growth for this product line in penetrating this new market segment.

In the same field of foreign exchange trading, we were able to help a number of Japanese banks take their products and services global. Traditionally, the market had been very service-intensive through a call center. You dialed in and placed your trade with the trader over the phone. By being able to move this entire platform to the Web, we allowed them to go global and go 24/7.

Now, we have over 30,000 institutional traders using this trading platform and application to self-serve through operations, not just in Tokyo, but in Singapore, London, New York, Frankfurt, literally around the world.

New capabilities

Not only has it extended the product line with very little additional operational cost to the banks, but it's also allowed them to provide new capabilities to those customers. One, for example, is the ability to be able to run continuous global book.

In the traditional implementations of trading platforms, each one would be an on-premises installation, which meant that each region would actually have to close their books and close out their operations at the end of their working day. Because it's now managed and provisioned in system, it can actually run globally, and allows them to maintain those books, and maintain common alerts across entities that themselves have a global footprint.

Not only were we getting them to a new market, but we were also allowing them to introduce new functionality. It allowed them to interact more closely with the customers, providing real-time chat facilities, and allowing the traders in Japan to interact directly with a trader as they exhibited certain behavior. It allowed them to offer custom contracts and has significantly increased the close rate of those applications.

So, a big impact in terms of market reach for the banks in Japan is one example. Let's take a look here at how we've been able to dramatically improve user productivity and dramatically reduce the business process time for large organizations.

This is a representation for one of the largest telecommunications groups in Europe. The challenge that they were facing is that they had a request for proposal (RFP) process that was very complicated. They had to be able to provide quotations for countrywide mobile platforms, a very large, complex design process, which was performed through one application, one legacy application as a product configurator.

Then, they would go to another application for doing the parts costing and bill of material assessment, another application for the pricing, and finally, an overall RFP approval process for these large $100 million-plus projects running over 10 years.

The whole process was taking them anywhere up to four weeks. It was fragmented. It was error prone. There were spreadsheets, and the files were flying around the globe, trying to complete this process.

What we were able to do for this organization was to streamline the process and present it as a single-branded Web-based workflow that brought all the different elements together, and, most importantly, ran on top of a SAP NetWeaver infrastructure. In fact, the workflow was designed to have an SAP look and feel.

End users didn't know when they were in or outside of SAP. They didn't care and they didn't need to, because as an end-to-end process, SAP acts as the overall system of record, providing a much higher degree of control, accuracy, and a dramatic reduction in errors.

The great result, from a user productivity point of view, is that they've been able to go from a process that took four weeks to a process that now takes four hours or even less -- a dramatic reduction. More important was the ability to increase the accuracy of these processes.

Desktop-like experience

These Web applications, I should stress, are really a desktop-like experience for the end user. We think of them and talk about them as a desktop in a browser. Everything that you could do as a desktop application with all the user navigation and productivity in very intense data environments, you can do in a browser-based application as deployed in this solution.

Let's take another look at another example where Web architecture and rich Web interfaces allowed us to dramatically improve customer loyalty and customer engagement.

You maybe familiar with the concept of the extended enterprise, whereby more and more organizations need to be able to open up traditionally back-office processes, and back-office systems still managed on the sort of green screen UIs in the bowels of the company. In order to be able to truly engage their customers and improve the process flow, more and more of those systems are being opened up and presented to their customers through rich, engaging Web applications.

This is an example of that. This is a company in the Netherlands called Waterdrinker, which is actually the largest flower distributor in Europe, a very significant business for them. We were helping them to create a Web-based, self-service ordering process that dramatically reduces the dependency on the use of customer service reps. It was similar to the scenario for the foreign-exchange trading platform. We were actually migrating customer interaction to the self-served Web platforms without the need for human intervention and costly CSRs.

But, it's much more than that. We're providing a much richer experience for the user, a much more engaging experience for the user, where they're able to more dynamically navigate through the catalog and determine the optimal order for them with all kinds of what-if calculations and analysis that are provided for them in real time at their own discretion.

The net result has been a significant increase in customer satisfaction, engagement, loyalty, We're yet to see it, because it's still relatively new, but just based on the amount of response reaction and conversion that we have seen through these Web-based interfaces, loyalty benefits will follow soon after. In addition, with a Web-based UI, you're able to easily and effectively customize the user interface with different users and communities.

In this case, they're able to provide a custom UI solution that integrates their catalog ordering process into their partners' processes. They distribute through local partners and local Websites, and they're able to provide this architecture as a white-label capability and then brand it according to the local distributor, delivering a rich branded experience through their partner.

Let's talk generally about competitive advantage. Obviously, all those things that we have talked about and shown with regard to different customers, and Dana has talked about in aggregate, offer all kinds of competitive advantage.

But, there's a certain element to competitive advantage that I would like to emphasize in this transformation process. Organizations, through the years, have basically instantiated and codified their best practices in the workflows within those legacy systems. Those business rules represent years of intelligence and competitive intelligence, and often the point at which you can realize tremendous competitive advantage.

Razor-thin margins

This is never truer than in the razor-thin margins of the consumer packaged goods (CPG) business, where a lot of the margin for a customer can actually be determined through the appropriate inventory, logistics, and pricing management, literally as goods are on route. What we've done for customers like these is to enable them to quickly and effectively extract the business rules that are buried in the legacy systems.

Frankly, nobody knows how they work anymore. They're not really very well documented at best, but we have allowed them to extract those business rules that represent the competitive advantage and consolidate them into a set of corporate-wide rules that can be more effectively managed.

One issue in a traditional legacy environment is that, as you establish business rules in terms of the legacy implementation, each one is monolithic. They start to create their own derivatives, as people program, tweak, and modify. At the end of a 10-year process, the rules barely resemble each other in each of the iterations.

In our transformed architecture, we're able to provide an environment, in which you can centrally manage, control, and modify those business rules and have them consistently and immediately applied across all the necessary touch points. Through this process, we can dramatically reduce human error.

This architecture allows us to provide support tools and business rules in a form that's readily accessible to the end user. You might say, "Wait a minute. It's a Web-based application, and when I'm sitting face to face with my customers, I'm not going to have access to the Web."

As you would expect in these solutions, we're able to architect them, so that the same application can be deployed as a Web application, or used as standalone. A great example of that is Aflac, where we created their premium calculation solution that is basically used across all the customer touch points, 38,000 users. And, 6,000 of those are agents who go door-to-door.

Part of the architecture and part of the challenge was to deliver that insurance calculation solution in such a way that when the agent is sitting across the kitchen table from their customer, they could still perform a level of custom quotation. They could produce the necessary documentation to be able to close the customer there and then as a standalone laptop with a local printer right across the kitchen table. That's all part of bringing those business rules that represent the years of competitive advantage successfully to the Web.

Let's take a look at how some of these capabilities impact the operations themselves. Here, we'll take an example of a call-center application. This was a transformation for the Pepsi bottling group of their customer-equipment tracking system It was a PowerBuilder application, maybe 10 years old, that we successfully moved to the Web.

The real business value in this is that by doing this, by creating a Web-based environment that could be deployed in any call center, we provide the flexibility and the agility for organizations to better utilize those call centers and better utilize that real estate, often consolidating from a large number of call centers to a smaller set of agile call centers, where they can put a lot of different processes through the same infrastructure.

Cost-management advantage

This has tremendous advantages, as you can imagine, in terms of cost management for those customers. We're even able to take that to the next step with the advent of voice-based telephony. It's now possible to engage home-office operators through a voice over Internet protocol (VoIP) infrastructure.

Those operators can not only have the benefit of the call center application as a Web based application accessible through their home broadband, but actually can have the same level of computer telephony integration (CTI) that they would have had, if they sat in the call center, by virtue of a series of VoIP based CTI technology that's available.

This is offering tremendous operating improvements in terms of, for example, real-estate consolidation. Also, looking at operations and the ability to optimize the use of the workforce, we have a situation here where we deploy a very complex laboratory information-management solution for the AmeriPath, now part of Quest Diagnostics. This is part of a pathology services process that requires very experienced technicians to participate.

The joy of being able to deploy this as a Web-based application means that you get great skills mobility, which means that technicians from anywhere, provided they have Web access, can actually participate in a diagnostic process, without the need to move the sensitive Health Insurance Portability and Accountability Act (HIPAA) data. So, HIPAA data that has to be stored in one place, can be made accessible to technicians through any location who can participate then in a process 24/7.

The value to IT is manifold. We'll take a quick look at some of those before we jump into the value equation itself. This is an example with SunGard Shareholder Systems, where they wanted to modernize their commercial product line, a 401k management application. I'm sure they're pretty busy these days.

It was originally deployed as an IBM-Oracle mainframe solution with a C++ front end. We modernized it through a pure Web application, but, from an IT development point of view, the benefits of being in that Web architecture are manifold. First and foremost, they were able to manage this entire development process with one person in the US, and a whole development team offshore in India, dramatically reducing the time and cost.

In this new architecture, the ability to respond to program change requests is tremendously different. We're able to program and change requests in one-tenth of the time and, by virtue of being a Web architecture, actually deploy those in now what are weekly release cycles, instead of six-monthly cycles that you would typically see as a point solution.

As we're running a little long here, I won't go into all of these, but there are many different ways in which the modern architecture really played into creating significant additional IT value.

We provide a process we call Nexaweb Advance, which is an end-to-end transformation process that allows us to dramatically reduce the time, risk, and costs of this overall implementation. It starts with a capture phase that is able to go in and interrogate legacy systems and dramatically reduce the amount of time and effort to document the code that typically is not well documented.

Then it goes through a model transformation process that dramatically reduces the amount of actual code that has to be written. In this example, it was a 65 percent reduction in the amount of code in the three million lines of application. The net result of that is through a typical designer development cycle, we were able to realize 50 percent or more reduction in the development time.

Having done that as a Web based application, there is no kind installation, no on-site provisioning. It's all centrally managed, so dramatic reductions in operating costs recognized by customers. In the example that we shared with you a little bit earlier, where, because we're in a modern object-oriented architecture with all the inheritance benefits that that brings, we're actually able to modify and execute change requests quite often in one-tenth of the time and then deploy them immediately and effectively as Web applications.

Announcer: Thanks, Adam. With that we conclude our podcast. You have been listening to a sponsored BriefingsDirect presentation taken from a recent Nexaweb webinar on application modernization. Please find more information on these solutions at Nexaweb.com. Thanks for listening and come back next time.

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Transcript of a BriefingsDirect webinar with David McFarlane and Adam Markey on the economic and productivity advantages from application modernization. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.