Edited transcript of BriefingsDirect[TM] podcast on developer productivity with host Dana Gardner, recorded Nov. 29, 2006.
Listen to the podcast here. Podcast sponsor: 6th Sense Analytics.
Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Today, a sponsored podcast discussion about developer productivity. Interestingly enough, some 9.5 million developers around the world are toiling away, and their bosses -- either individually or collectively -- have rather small insight and limited information about what they do and how they do it.
We see requirements go in one end. We see code come out the other end. And there’s often a great veil, cloud, or fog over what detailed activities develop the solutions and the processes that create good code. To discuss this need for greater insight, analytics, and data around developer productivity -- joining us for the first time -- we have Greg Burnell. He is the chairman, co-founder and CEO of 6th Sense Analytics. Hi, Greg.
Greg Burnell: Thanks Dana, glad to be here.
Gardner: I’ve painted a portrait here about lack of insight. You’ve been in this business for going on 20 years. Tell us a little bit about the history of how development came about. Even though we’ve had tremendous productivity benefits and improvements, it’s still somewhat of a "dark art," if you will. Give us some context on the history of how we got to where we are today?
Burnell: I might even roll back to some of your opening comments, Dana. You characterized it from a management perspective. I'd suggest, too, that individual developers don’t have a lot of insight into the day-to-day conduct of their position. All stakeholders in the lifecycle have an equal visibility problem.
Application development is a knowledge-worker-centric thing. You’ve got very bright, very talented people, but they work in an isolated format, and in many instances there aren't a lot of tangible, visible outcomes to their work. We’ve always kept our hands off of application development. We’ve felt like it’s an area that we don’t want to manage too heavily or monitor -- or even measure, which is an absolutely forbidden concept.
We've lived in this world for many, many years, introducing tools, technologies and processes to try to help people do this better. The fact is that while software drives a lot of the growth and innovation throughout the world we do a very inadequate job of bringing visibility to this whole process. I think it’s because people work in such an insulated manner, and they feel that it’s not possible to measure it. We’re on a mission to change that.
Gardner: I suppose that the insight needs to happen on an individual basis for what the individual developer is up to, but also in a context of a collaborative environment -- with teams in one locale, and increasingly teams distributed all over the world.
Burnell: Absolutely. There are a couple of phenomena. You talked about globally distributed development. We all think we’re aware of the global nature of work that occurs today. Application development and IT support resources are being managed all over the world, but I think the challenge is that application teams have never really focused on providing the same data and visibility to all people in the process. I wrote something yesterday and said if the data isn’t available and accessible to all the people that are part of it, then it really doesn’t have any meaning.
Data that the individual doesn’t see is relatively useless, and data that individuals have -- but that never really makes its way to the manager in an aggregated way -- doesn’t have a lot of value. What we’re trying to do is bring to everyone the same level of visibility, so people can talk about the same things and understand themselves all in the context of the execution of the development project.
Gardner: This seems to be a long time in coming. I mentioned that there are 9.5 million developers around the world. That number's growing. Even the definition of a developer is growing -- business analysts can now be considered developers, given the level of tools and how processes are being brought together.
There have been tremendous insights brought to other types of activities. We’ve applied sciences and statistics, economics and theory to a lot of different activities in the last 10 or 15 years. Why do you think it is that development, while important in growing part of the economy, has not been looked at through a scientific lens?
Burnell: It’s a great question. I’m not sure I can answer why it hasn’t happened, to be honest with you.
I can tell you a couple of trends that we saw, that we think lent itself to the creation of a company and an opportunity like 6th Sense. In years past, there was just an enormous number of vendors out there providing application tooling -- tools for infrastructure to build software.
One thing that happened in the last decade is that there’s been a lot of consolidation in that industry. Also you have companies like Serena, IBM, Rational, Compuware, and Borland. They’ve kind of assembled what we call an SDLC, a Software Development Life Cycle -- all of the tooling for the end-to-end lifecycle app-dev project.
So, these consolidations help, because now you just don’t have a ridiculous number of technologies from which you try to cobble together the whole best-of-breed solution. You go out and buy some type of a lifecycle from somebody. The other thing that’s happened is that people have had to plug their own tools together. In order to do that they’ve had to build these robust connectors or APIs -- ways in which these tools can work together.
That migration and consolidation in the industry and the creation of all of this open infrastructure are what created the opportunity for 6th Sense. That’s why we can participate with those tools. We have access to those toolings, and we don’t have to worry about supporting 10,000 tools. We have to worry about supporting probably in the neighborhood of 100 to 200 tools, which is much more doable.
That transition in the industry has really created opportunity to do it in the way we do it. There have been other attempts, manual processes. I don’t think that people are reluctant to do it. I think they’ve tried to do it in many ways, but they’ve always found that, when push comes to shove, and the project delivery’s in jeopardy or the schedule is slipping, that the first thing that gets thrown out the widow is any type of management oversight. With the technology we put together, we’re unobtrusive. We don’t take away from the process. We empower the process, and I think that’s important.
Gardner: I see. Previously, many tools were involved, and it was difficult to get into each one and have insight into the individual idiosyncrasies that could then be relayed back to give a general view of productivity, habits, and work. At the same time, there was a great deal of dynamics and change in the marketplace, so the tool that was popular three years ago might not be very popular now.
It might not have made business sense for someone to go in and make an investment to have insight into a tool that actually might fall from favor in a fairly short amount of time. I bring this up, because as a hosted service, 6th Sense Analytics takes advantage of this software-as-a-service (SaaS) trend that also gives you insight into activities, but without being really embedded into the technology. Is that right?
Burnell: Absolutely. The software-as-a-service model reflects the fact that people are building software all over the place, and teams are distributed all over the place. Organizations have come to an awareness that they don’t want to continue to build out this IT infrastructure for no value received, when they can go to a vendor. We have security. We have all the permissioning and all the facility skill. We have a level of security equivalent to what they have in their IT shops. They’re looking using the software-as-a-service model, because it has a much lower cost infrastructure.
The other day, I was reading an article that was saying, “Is Eclipse the IDE Killer?” Eclipse is a phenomenon in our industry. It walked in and now dominates development at the IDE level. Few people saw that coming, and all of a sudden here it is. IBM certainly saw it, and that’s a huge trend that we get to leverage.
The two major tools in the industry are Microsoft Visual Studio and Eclipse, and everybody else is a distant number two in those spaces. Software-as-a-service is an interesting opportunity for organizations to have through the web, and through all the of the infrastructure that is in place from a high-speed perspective. Now, we can really distribute applications very quickly, and we can evolve our application very rapidly to benefit all of our customers at the same time.
Gardner: I suppose the development process has also been sort of a whipping boy, if you will. People like to point to low success rates when it comes to completion time and when it comes to full quality and requirements criteria that were set out. So, people often come away with this impression that development is a haphazard and losing-proposition of some kind.
I think that this propels the notion of development as a cost center -- rather than an innovation center -- and is really problematic. Part of the reason for that is just a lack of transparency into what’s going on. Before we get into the notion, can you tell us how your solution works? Help me better understand why development remains with sort of a tarnish to it. From what you’ve done to date with these analytics, do you really think that when we get in there that a different story emerges?
Burnell: We’re very optimistic about application development. I want to be very clear about that. We believe a lot of the perception of failure is because expectations were set incorrectly. If the expectation’s wrong or overly optimistic -- or even overly negative, to be honest with you -- the outcome is never going to meet the expectation. If you build a car, and your expectation was it’s going to have four wheels and it shows up with three, it’s very clear that it didn’t meet your expectation. With application software it’s not so easy to focus on one particular attribute of it.
One of the things we believe is that we’re going to start helping people to understand a level of effort and to set expectations in a more discrete manner. They’ll have a better idea that they’ve applied this level of effort and the outcomes that they have. They’ll have a better opportunity to view themselves successfully in the context of the outcome. If you start off on the wrong road, or if you start off too optimistically, you’re never going to get back on track.
This is a highly unstructured process involving knowledge workers. These are very bright, very talented, very creative people, and you’re trying to corral this energy and create something. It’s a unique management challenge, and requires unique approaches.
That’s why we’ve always approached it from the perspective that if we can be part of the process and not sit external to it like a process tool or a portfolio management tool -- if we can resonate with the process as it unfolds -- then we have a better opportunity for people to understand where they are relative to where they’re going. They have a better opportunity to set an expectation, based upon this effort to produce an outcome. So when they’re done, they can sit down and make a much better assessment of how they’ve done against their expectation. And, they can revise accordingly for the next time.
Gardner: Let’s help our readers out there understand what it is that we’re discussing, we’ve talked a little bit about the “why,” and what the problem set is and the issues. This is BriefingsDirect. I’m the analyst. You tell me, Greg, what is it that you bring to the table as a hosted service that gives insight into developer behavior?
Burnell: What we’re trying to do is say that software development can be measured. The singular or the collective effort of a development team can have associated with it: measurement, metrics, and analytics that the team, the individual, the project, the executive can rely upon. What we’ve done, as we talked about earlier, is create a technology that resides with the development technologies that you use: IDEs, SCM systems, defect trackers, test tools, requirement management systems. These are tools that you use inside of the development process.
As you utilize these tools it’s kind of like a hammer in construction. You have to use a hammer to build a house. In order to build software, you have to use technologies to do it. We sit there with these technologies -- plugins, addins, whatever kind of technology is most appropriate for the tool -- and as you take advantage of these tools, we simply collect data about the process, and then we give it back to you.
I like to say we don’t impart the process -- we reveal the process. We show you what you’ve done.
One of the neat things that’s important to know is that when a knowledge worker is most successful and there’s a concept called flow. I don’t think we’ll get to that in this call, but when knowledge workers are highly successful and highly focused on the task at hand, time becomes an irrelevant concept to them. They want to achieve the objective. One of the things we’re trying to do is to help people understand the relationship of time and effort to outcome, and in order to do that you have to be transparent behind the scenes, and you can’t take away from their efforts.
We plug in with these technologies -- Eclipse, Visual Studio, as I mentioned earlier -- and as the developers use these tools we collect data and we send it back to our host, the centralized server. We run it through an exciting analytics engine that takes this raw data and translates it into a picture of what has occurred in the software development process. Through a Web 2.0-style Web interface, utilizing Ajax and the like, we serve back to all the stake-holders in the process a very rich analytics engine for them to get a multidimensional view of the application-development process.
Gardner: Is this qualitative or quantitative? Determinations can be made, but are they specific, team-wide, or project-wide? Are they specific to a day? Can you give me some sense of what the data shows?
Burnell: There’s a lot of quantitative measurement. The base unit of measurement is called “active time.” It’s our unique offering. “Active time” is the amount of time you’re actively developing software.
We take that “active time,” that base unit of measurement, and we can roll it up. We know things like what your process is, your mix of edit time, view time, debug time, test time, and design time. We know that by your use of the tools, by the functions that you’re using inside the tool.
That’s very quantitative, but that’s also qualitative, because it reflects back on your process. We understand the tools and the technologies that you’re taking advantage of. We know the amount of time spent on tasks. At the end of the day, instead of just trying to sit down and say “I spent four hours on this and three hours on this,” we answer those questions for you.
It’s a rich set of both qualitative and quantitative metrics, and certainly the quantitative aspects of it are important. We measure the same way yesterday, today, and tomorrow. That’s important. We now have the opportunity, when change is imparted and we’ve changed either a process or a tool or a person, to sense that, because we understand what the dynamic is in the next day. We see it measured the same way and we can now start seeing the outcomes.
One of the things with software development is that we make a lot of changes as we go through the process. People come up with great ideas, read new books, and buy new tools, but no one has an idea whether they, in fact, improved the process or if they’ve had a beneficial effect from that. We think that we'll be able to help bring a lot of visibility to that.
Gardner: So, you’re leveling the playing field, not only within an individual activity, but perhaps across a multitude of activities. You can draw industry-wide inferences and perhaps start saying which tools are shelfware, what aspects of development are hang-ups that need to be focused on. That might bring knowledge to other vendors as to where they should devote their energy. This could be not only an individual, project, or even a company-wide benefit, but also an industry-wide benefit.
Burnell: That’s the other reason that we do it as a software-as-a-service solution, Dana. We gain the approval of our users to participate in our community of data. We do have that kind of visibility. We understand what the utilization of Eclipse is on a global basis for an installed community. We become a representative. Instead of looking at surveys and samples and calling a CIO, I know in my organization that 68.8 percent of the time spent in the last year was spent inside of Eclipse. I know that answer. I also know what my breakdown of my other tooling is.
You can look at it on a global basis. Application development is global, so you not only can look inside of your organization, but you should look outside of your organization and see what’s happening in the industry at large that you should be aware of and attuned to in your own track. Are you taking advantage of the things that are out there right now? We’re going to provide a lot of visibility to that.
This is all about decision making, and having the right things at your fingertips to make the critical decisions to ensure a successful outcome. The only thing anybody wants is software that’s on time, on budget, and meets the expectation. We’re going after those same challenges. That’s all we want to accomplish too. We’re going to help people get there faster and help people get there with a higher degree of confidence that they’re getting done what they need to get done.
Gardner: Those industry-wide metrics are extremely interesting to me. I think we’ve been fairly underserved, even in the analyst business, by the quality of the data we can get. We do surveys. We don’t know exactly who’s taking them, and how honest they are about the responses. People who are the busiest, the most productive, will be the least likely to take the survey. So, to me it’s very exciting to be able to get that visibility.
Let’s move into where this is going to be most relevant. You’ve mentioned offshoring and global issues quite a bit. Talk about lack of transparency and visibility. When I send off a set of requirements across the globe, and things come back from a variety of sources, how could I start measuring so that I know if I’m doing the right thing as a business person? What will your solution bring to the table that will help address this lack of insight into what’s going on in these offshore projects?
Burnell: My co-founder, Todd Olson, really is the architect of the solution we’re discussing. He said early on that the one commonality across application development worldwide is the desktop. People are working with the same tools. People are using Eclipse worldwide. They’re using Visual Studio worldwide.
So, we can basically isolate ourselves from all the cultural differences, the management differences, and the process differences. We can just eliminate those, and we can measure things the same way. What that means is that whether a person is managing a distributed team, an outsource situation or a captive situation doesn’t matter. They know that they’re looking at data that’s highly comparable between the locations. It speaks the same language. That’s the great thing about it.
The challenge with globalization is that you physically can’t be there all the time. So, you need to find ways to measure things. It goes well beyond just collaboration tools, meetings and phone calls. You’ve got to have some measurement that you rely upon. That gives you confidence that people are applying effort to the places that you want effort applied to, that the teams are conducting themselves in the manner that you wish them to. That’s what we do.
We basically give a high-degree of confidence that you can look at this information that we provide and ensure that your teams are all working together in the manner in which they’re supposed to. You can ensure that people are buying into the goals and the objectives, and they’re putting their time against it. That’s a key thing. People outsource for cost. I don’t want to take a radical view of outsourcing, but they do it for cost reasons. It’s not because they just have this desire to go global. They go out and try to find out lower-cost-basis resource. That does not diminish the talent and the genius of the educational systems and the people on a worldwide basis. They’re unbelievable.
We found that out after the fact, though. We went there for the cost and then we found out, hey, they’re very good. They’re extraordinary, actually. So now we said, let’s manage this as an opportunity. And, you have to have a measurement approach that is consistent and independent of all the other variables that exist in a global environment.
Gardner: So, we’ve got some value here: small teams, big teams, industry wide. We can address some of the issues about globalization. How about verticals? Are there specific sweet spots in the development world -- the type of applications, the type of environment -- perhaps it’s ones where the time-to-value or time-to-market is a really important element. Where’s the sweet spot for this stuff first?
Burnell: Anybody who makes their living from software should be worried about this. People who make their living on time to market, quality, and cost concerns should be all over this today. We’re going to tell them that you can now measure it, but beyond that, we really think that this is an opportunity for anyone to get a better grip on the overall process.
Organizations of all sizes are outsourcing now. Most boards of directors are looking at their companies and asking, “What’s your outsourcing strategy?” They just assume that there is some intrinsic benefit to outsourcing. We’re not so sure that’s true, but that’s not really the point. If your life depends upon your execution of your software process, this should be something that you would look at very closely. Beyond that, if you still have a need to manage a big team, manage people all over the world, manage across borders and times zones and language, this is also another thing you should be concerned about.
The interesting thing is, Dana, I’ve got eight or 10 people sitting in my development shop right now. We’re a relatively modest size organization from the development team point of view. I will tell you that as CEO of this company I have better visibility into the execution of my IT development resources than any other CEO on the planet. I know what we’re doing, and that’s an empowering position for any executive to be in from a decision-making perspective.
Gardner: You’ve got a development dashboard as a business person.
Burnell: I’ve got more than a dashboard -- I can see the alignment of the objectives that we set in our managements meetings to the execution of my development activities on a weekly and monthly basis. I know where my technologies are. I know where I need to go buy technologies.
If you’d called me up a year ago and said “Greg, you’re going to be spending 48 percent of your time building JavaScript,” I’d have told you that you were crazy. But that’s what we do here. I didn’t realize, and we didn’t realize going into this, the amount of investment we would have in the Web-side technologies like Java Scripting and Ajax.
We need tooling to support that. And I have to tell you, there’s not a lot out there. Now, we’re now talking to other people to build the tools. Instead of being reactive, we’re basically being proactive, looking for technologies that line up with our development requirements. And that’s a new place to be.
Gardner: Because you’re a hosted service, explain how the cost works. Do you charge per developer seat, per organization, per line of code? What’s the way that you can charge for this?
Burnell: It’s on a subscription basis, and we do it per subscriber; individual subscribers. Certainly, we understand enterprise pricing and the dynamics of organizations. As people come to us, we’re willing to sit down and look at the organization, because we believe this is the technology that needs to be implemented for all people in the process. It is a per-user basis at this time, but in any of our discussions with large corporate clients, we’re looking at the organization, the needs of the organization, and we can put a annual pricing in place for those organizations, if needed.
Gardner: Now let’s extrapolate a little bit and look into the future. If you can help define what that "flow" is -- when people are at their most productive and when they’ve used the tools that have been made available to them; when they’ve used their own creative juices -- you've found the efficiencies that they need to work smart, not necessarily work hard.
If you can quantify and qualify that for development, it seems to me that you could perhaps define that flow and apply your metrics and ability to gather information to make inferences about other creative activities. Help me understand that. Is this pie in the sky or do you think there’s something there?
Burnell: There is the old adage that you know who your good developers are. When we start showing you what the good developers do, what the most efficient developers do, you can now start looking at them and start prototyping activities and events and technologies against people that produce outcomes, and try to understand them a lot better.
To answer the second part of your question, this really is a platform for collection of data related to the knowledge-work process that involves a desktop technology. It even goes outside of application development. If you are managing a process, and the worker is using technology to do it, you can call it a human-based process.
I’m not really crazy about that term, because last time I checked, there aren’t any animals involved in the process. Nonetheless, a human being is sitting there interacting with a desktop technology to produce an outcome. So, we can extend it beyond software development, and we can look at other processes. What we’re talking about is trying to understand the dynamics of human interaction to a desktop technology to produce an outcome.
You mentioned manufacturing earlier. If Henry Ford didn’t figure out the assembly line, we’d still be building one-off cars at a $100,000 apiece. We have the same opportunity to really dig into and understand these human processes related to technology, and start evolving on a much faster basis our productivity and our output.
Gardner: That’s very interesting, Greg. Thanks for sharing all that. We’ve been talking about development productivity and a new approach from 6th Sense Analytics to gather data and provide analytics into how developers are the most productive, and how people can help them further that trend toward greater productivity.
Joining us for the call has been Greg Burnell, he's the chairman, co-founder and CEO of 6th Sense Analytics. And 6th Sense has also been the sponsor of this podcast. We appreciate their support. Thanks for joining, Greg.
Burnell: Dana, it’s my pleasure, and it’s great to talk you.
Listen to the podcast here.
Podcast sponsor: 6th Sense Analytics.
Transcript of Dana Gardner’s BriefingsDirect podcast on developer productivity metrics. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
Friday, January 12, 2007
Wednesday, January 10, 2007
Transcript of BriefingsDirect Podcast on DRM and Business Trends for Internet Media
Edited transcript of BriefingsDirect[TM] podcast on DRM and business services for Internet media with host Dana Gardner, recorded Dec. 15, 2006. Podcast sponsor: Akamai Technologies Inc.
Listen to the podcast here. See more Akamai podcasts.
Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Today, a discussion with Tim Napoleon of Akamai Technologies. He’s their Media and Entertainment Product Line Director, and we’re going to discuss a very interesting topic: Digital rights management (DRM), the collection of use metrics, and the business model around media and entertainment on the Internet today.
A great deal is being discussed about who controls what when it comes to content, particularly when you’re distributing it openly and freely on the Web, when you’re exploring new distribution models, and when you’re using new technologies. Tim is joining us for a second BriefingsDirect podcast. Tim, tell us a little about the state of Web commerce, and why DRM is such an important topic today?
Tim Napoleon: Digital rights management is doing well. It’s alive and healthy. There was a general concern a few years back that the consumers wouldn’t adapt to paper-media-type experience online, and I think the ubiquitous nature of the iPod has proved that wrong. There are a lot of other great devices that are coming out, or have come out, with really solid content protection schemes in place that the studios are comfortable with.
It’s everything from TiVo’s broadband platform, to the Zune player from Microsoft, to several other soon-to-be-announced platforms that are getting people excited again about what is possible to do with digital content in a real business-model fashion.
Gardner: One of the things I’ve heard from listeners, users of content, is “Wow, there seems to be so many of these DRM approaches, do we need a different one for every media company, for every modality? Shouldn’t there be some standards?” What is the state of standardization, or at least some de facto industry accepted approaches, with DRM?
Napoleon: If you’re a business development officer at a content-owner studio, you probably have a very clear agenda. You want a platform that has almost no royalty to it and you want something that’s ubiquitous, so you can sell as many units to consumers as possible. If you’re a technologist or if you’re a company that’s based upon getting royalties for your technology platform, you probably want to try to create such a great technology platform that you can charge a royalty for it and potentially have some strategic effect of lock-in on that platform.
If you’re a consumer, basically you want your favorite artist, music, title, in whatever format that you want it, wherever you want it, whether that’s on your TV, your PC or your iPod. There has been a willingness we’ve seen from consumers to pay for the same media across multiple platforms. It’s not uncommon for someone to buy the DVD as well as the iTunes download, as well as to go to the Website and watch the episode online.
All these different vehicles and delivery mechanisms aren’t necessarily taking money out of the studio’s pocket. They’re actually creating an additive effect. We’re seeing an overall trend. As you make this media more convenient and more usable, consumers are in a consumption pattern, and if consumption is going up, they’re using more of this media.
Right now, studios are trying to figure out what platforms have enough scale and enough users to make it worthwhile for them to have their content on that platform, but there’s definitely still room for that one global standard for content protection.
Gardner: Just for the sake of all of our listeners, when we talk about digital rights management, we’re talking about something such as iTunes, which many people might be familiar with. You can buy a song from the iTunes Store and you can use that through iTunes on as many as five different devices, and then it’s shut off. That’s the management part of digital rights management.
The goal here is to preserve the copyright, the protection, and the ownership of media or artistic production, from the perspective of the artist or the distributor -- but at the same time to give users a bit more flexibility in terms of how they can enjoy media. Do you have anything else to offer that’s a general definition of DRM in today’s working environment?
Napoleon: Sure, if you go back to the business sense of DRM -- why do we even need to control content? Studios have very complex business processes when they develop content. For example, with a movie, it’s not uncommon for a studio to pre-sell the international rights to fund the development of that movie. They go to each different region and pre-sell that right to have the future revenue from that movie to different finance companies around the world. Then, they might keep the rights from the North America release.
When go onto the Internet with that movie title, you don’t own the rights to all these different geographies. There’s the need for the studio to make their business arrangements and the contracts map the use pattern of the Internet. There are some nice technologies from Microsoft and others that facilitate this business transaction for the studio. The great news is they’ve gotten a lot better, so the consumers are willing to put up with the little extra overhead that’s required.
Gardner: Consumers might not even appreciate the level of complexity when we’re dealing with multiple geographies, multiple legal systems, different approaches that are culturally accepted for how people absorb or use technology-driven media. Tell us a little about how an applications and media-management and -optimization provider like Akamai is addressing some of this complexity?
Napoleon: First, everybody knows Akamai for scale. Now you’re starting to see major live events like World Cup and others come online. That’s one of the first very good use-cases of meeting DRM services that scale. Akamai has one of the largest, if not the largest, license delivery services in the world. So when people go to watch a DRM-encoded stream, then you receive credentials to watch that stream.
The Akamai License Delivery Service is a global, secure distribution platform for those licenses. It also packages tools that usually allows the rights owner to assign what rights they want to give -- or not give -- to the end customers, based upon some different parameters.
Lastly, there are some advanced services that Akamai can wrap around that. For example, in sports, geography is very important. Different teams have the ability to have their games play and not play in different areas on the Web. We have geo-restrictions built in to our platforms so that we can protect the content owner and make sure that rights for certain areas only play streams in certain areas. It’s a very key feature for sports.
Gardner: That’s the equivalent of blacking out a game for electronic viewing when there are still plenty of empty seats at the stadium. Is that what you’re getting at?
Napoleon: Yes, absolutely. For example, ESPN may own the North American rights to a football game, but another company may own the UK rights. There might be a UK website that wants to put a live event up, but they don’t have the rights to it in the North American market.
Previously, they couldn’t do it, because they couldn’t guarantee that people from around the world wouldn’t come to their site and watch it. Now, we have the ability to allow them to put up a lot more content, because they can enforce all the policy around it.
Gardner: So, before the media companies and the producers of content -- for example, in this case the sports franchise or even a league or a foundation of some kind -- open the floodgates and let their content out they need to make sure that they can adhere to the licenses they’ve already got in place, the contracts that they’ve already set up with the various media outlets or even stadium owners and local business owners that are there.
Then, they also have to think about what they want in terms of a business model, by taking this out to the Web and the Internet. So for them to get the content to the end users, there has to be a system in place to manage all of this complicated provisioning. I guess you can think of it as service level agreement management, right?
Napoleon: Absolutely. As you can imagine, just describing that at a high level is complicated. When you actually go to implement it, it can be even more complicated. You can have all sorts of questions about your business model, but it’s nice to know that with Akamai at least the technology hurdles aren’t going to be as high. Its going to be much easier to get the technology implemented. You can focus all your resource on that mouthful of business challenges that you’re going to have getting your content aligned.
Gardner: In order for end users to enjoy this ability to access content through their Internet protocol, packet-driven pipe -- that might be their broadband connection -- a lot has to happen behind the scenes in order for the people who produce and distribute content to feel comfortable about it. And you’re trying to bring that to the table.
Napoleon: My sound byte there is: How long does it take to do a live event on the Web? Well, it takes about 10 years and 10 minutes. It takes you about 10 years to learn everything you need to know to do it, and about 10 minutes to actually do it. The learning curve is definitely something that Akamai can assist with when you want to monetize and bring your content online.
Gardner: Tell us a little bit about the business models that this enables. Once we’ve crossed this threshold of putting in a technological capability to allow companies to adhere to the contracts and their service-level agreements (SLAs), what is possible in terms of new types of subscription? We see what Apple’s been doing with video recently. We see what Google is doing with YouTube and distributing more content. Now that we’ve got the technology to manage sort of the old model, what’s on the horizon for new models of media distribution, entertainment, and business?
Napoleon: Maybe we should just rewind a little bit and talk about one of the biggest challenges that studios have had since their inception, and that’s physical distribution. If you look back at Warner Brothers, when they rolled out Atari, they over-estimated their popularity; what Atari would be at the time when they released the product. They ended up with all these consoles coming back from retailers, and they ultimately had to sell off some very valuable online cable properties to pay for that inventory.
Studios have heart palpitations when they have to know how many DVDs to press, or how much physical inventory to create. With online and a scaleable system -- that’s variable capacity from Akamai -- you can scale it all up to billions of users, if you need to. You don’t have the physical cost of pressing a disk or having to forecast inventory. You never run out of it. A consumer never goes to store that doesn’t have the title they want to rent. The opposite benefit is that you don’t have a warehouse full of disks on your balance sheet account.
You’ve got just the right amount of inventory. It’s probably the one business issue that this solves better than anything for the studios -- having the ability to get into the hands of consumers hot content, and also capture a fragment of the market with maybe just a little bit of content. In the past, the distribution pipeline for projects that might not be mainstream didn’t find a voice.
People often call us the long tail of content, but really it’s having unlimited inventory and the ability to really let the consumers self-select from a very large library and filter that down to exactly what they’re interested in, and then order it. That’s just making people order and buy more media.
The Internet is also enabling a larger audience to view more titles. Some of them are okay with watching media via advertising instead of having to pay for it. One of the hottest trends right now is the ad market, and being able to put ad insertion and other things around your content to generate ad revenue. We’re seeing properties like Fox and NBC and other U.S. broadcasters roll out full-length television shows on the Web that are ad-supported. The feedback from advertisers and consumers has been that these are extremely popular, and the trend is definitely going to continue and accelerate.
Gardner: We’ve got a nice problem-solution set here. That's because users get to watch the content they want. They can take advantage of the long tail -- if your tastes are eclectic, you can find what you like; it doesn’t have to be mainstream. The providers of the content like these solutions because they can manage inventory. They don’t have to predict physical numbers of units to get distributed and then either come up short or over-deliver, which is a waste of money for them. So, it’s in their best interest to distribute via the Internet. And in doing so, we can now start injecting advertising into these content properties.
Now, help me understand this. Are we putting the same ad across a 100,000 audience-wide distributions, or can we target the long-tail effect and its advertising capabilities? Can you actually decide that someone’s interest in a certain type of content and so they might align through their interests with whatever an advertiser wants to provide to them?
Napoleon: It goes into a marketplace of content. What you’re seeing is that publishers now are facilitating their audience. In the case of channels like speedtv.com, you have this very focused property on cars. Not only can you put all your own original programming on that about cars, you can also look out to other content owners who have auto enthusiast-type material, and bring that all together into a very focused portal for auto fans.
Now that you have an audience that’s self-selecting into auto, and it’s the right demographic and the right type of consumer for car parts or new cars, you can charge them a much higher ad rate. We refer to ad rates of CPMs, or cost per thousand. Once you have a focused target audience like that, the ad rates go up. Instead of seeing all this general mainstream programming, you’re starting to see a lot of these more-focused and more-niche sites really accelerate and take off, because -- in a sense -- on the Internet there’s unlimited broadcast time. You could have as much programming as you need to get a large enough audience. You don’t have to worry that you only have eight hours in a day to broadcast television.
Gardner: You’ve injected another thing in here. I guess we could call it user-generated content. If there are some great bloggers or video bloggers out there who are creating really compelling content on a certain subject, then whatever the organization is that’s creating a community approach around that subject could bring that in, as well as professionally produce new media. That creates this notion of a channel, just like we would think of with cable television.
You’ve got Animal Planet, Discovery, Biography and so forth on cable. Now we can get much more discrete -- down to car enthusiasts or home and gardening -- or even something as nichey as a business topic like jet engine maintenance. Putting the content together creates a much more valuable audience for a specific advertising community. People are matching buyers and sellers, and because they’re better matched, it’s less a waste of time for the viewers because they’re getting advertising that might actually be relevant to their interest and needs. Advertisers are getting a much more efficient approach, because they can direct ads specifically at those who are most interested in that information.
So, the theory is great. However, as we discussed earlier, complexity is layer upon layer here. How does a network services and business services provider like Akamai help create this sense of buyer and seller community that’s really aligned well?
Napoleon: I think the first step in any of this is reporting and tracking. You’ve got to see what your audience is today and what type of media consumption you’re seeing across your content.
Gardner: This won’t work without metrics.
Napoleon: Exactly. Media is one of the most metrics-driven businesses out there. Getting the stats and getting the things digestible, so you really understand where you’re at, is step one. Akamai has world-class reporting that facilitates that.
Step two is bringing in relationships, and this goes into the concept of syndication. We talked about some of the technologies there, rights control, as well as a nice easy interface for users to get content in and out of your portfolio. Akamai offers ubiquity in the media space and interoperability. Our systems work with most media companies out there, and they use them. There is a familiarity with it, and it’s a common language.
Lastly, there’s the innovation curve. Akamai really strives to study the business, and learn the best practices and tips and tricks, and then share those. If you go to our site, there’s some great podcasts from this guy named Dana Gardner on there, as well as a lot of white papers, sample source codes, all kinds of things that facilitate building out these applications. And, we’ve got a rather large professional services organization. If you don’t want to learn how to fish, we can do the fishing for you, and just build out these business systems for you.
Gardner: It seems to me, because of what you said about unlimited inventory and much more efficient management and alignment of advertisers and information seekers, that the Internet is perhaps the only place to be in five or 10 years for content. Broadcast is waning, even when it goes to HD.
I expect that the number of people who are accessing this stuff through an antenna on their roof is going to be relatively small, and the level of service they get is going to be rather kludgey. It’s going to be an obtuse approach to media. Whereas if you go to the Internet, it’s even better than cable. It’s where you can bring all of these services and efficiencies together, where you get the benefit of a long tail. You get the blockbuster movie the week it comes out, and you can access it in your home. Am I going overboard in painting what could be a very interesting future in a couple of years?
Napoleon: You’re painting a rosy picture, but we have a long way to go. Today our stance is that we’re additive to all the different technologies out there. If you’re a traditional broadcaster, and you have television and radio stations -- those are incredibly valuable assets today. There are still a lot of people who like to just turn on the TV and watch professional programmers program for them. In the sense of television programming, I don’t see that changing in the near-term. If anything, I think the Internet has invigorated and created an innovation curve.
If you’re a television broadcaster, it’s kind of like having a new competitor that might get you a little bit fired up. You’re seeing that in the network lineup this year. There’s just some great programming, from “Lost” to “Heroes.” Television has definitely stepped up the game, and right now they’re one of the platforms that has enough distribution to afford creating these really highly visual, big-star type shows. The Internet is absolutely dependent right now on the television revenue to fund and produce original content.
We’re providing a great mechanism for additional distribution right now, but there’s no way that the current monetization system of the Internet is big enough on its own to facilitate shows by the J.J. Abrams of the world. So, I don’t think that we should ever look at it as "us-versus-them." Hopefully, it’s a "we" and the "we" is better than all the other platforms are today.
Gardner: It’s an interesting environment from my perspective. The Internet is the big opportunity for the future. And if someone likes to have to professional programmers pick-out their programming, they can access that through the Internet as well. It’s just that the Internet offers additional granularity, mixing and matching, and better metrics.
On the other hand, as you point out, the amount of revenue that’s derived through the Internet with media is still quite small, a fraction of what you get through traditional media distribution channels. Therefore, we’re at this very interesting juncture, where we need to maintain both systems, one for the future and the other for, in a sense, the monetization that allows that future to come about.
Napoleon: Absolutely. We’ve learned so many valuable lessons from working with traditional broadcasters. I don’t think you ever want to throw everything out and reinvent the entire industry. There’s lots of great best practices that have come out of broadcasting over the last 100 years. We want to make to sure that we learn the best of those, and we incorporate them into the Internet. That is what's so fun about working in the Internet space right now. All the rules aren’t defined. We don’t have all the standards baked. We don’t have everything completely done.
This core group of interactive teams at all these different organizations -- and even individuals -- are right now creating what’s going to be the future. That’s exciting, and that’s why we see a lot of the college guys coming into this space. The thing I’m most excited about is the talent that the interactive space is recruiting. So many people want to work at the Yahoos, the Googles, the Microsofts, the Akamais. We’re getting the best of the best to come and work for us. That’s what’s fun about this industry right now.
Gardner: Definitely an exciting time. Now, we talked a little bit how there could be a greater CPM payoff by matching up advertisers and knowledge or entertainment seekers, but what about pay-per-view? Isn’t there an opportunity for me as an Internet viewer to say, “Listen, I’m willing to spend $8 or $10 on a movie. I’m going to spend that going down to the theater this week anyway. I would like to buy a new run, new release movie.” Is there a way for you all to facilitate a pay-per-view approach through the Internet, as well as taking advantage of some of these more precise advertising and metrics-driven approaches?
Napoleon: That’s the way I like to do it, personally. I’m speaking about my own personal experience. I watched all my shows via iTunes this year. I found that I’ve not watched as much TV, but I’m watching the shows I want. I just don’t have to watch all the commercials. That’s my preferred choice -- just spend a little bit more money, and then not have to watch as much advertising.
I like that approach, but it’s somewhat expensive. So I can see that a consumer who doesn’t want to spend $2 for something he can get for free based on ad-support on television might not want to do that model. But there’s definitely intelligence from consumers that they know that they can now buy media. There are some great payment mechanisms out there that make it almost transparent to purchase media.
I think that has lowered the bar for people to participate. You’re seeing a lot more of that revenue coming into the space. We had some new stats from comScore today. I think Apple’s online digital revenues from iTunes are up over 80% year-to-date. So, it’s definitely taken off.
Gardner: That would include, of course, this ability to buy trailers and short animation clips and television shows, and I would think, increasingly, full-run movies.
Napoleon: Your hard drive gets full fast in this modern world.
Gardner: Does every distributor, whether it’s Apple or Time Warner or Paramount, want to come up with their own pay-per-view technology platform and infrastructure, or is this something that’s going to become a component on the network and a de facto industry standard approach?
Napoleon: Studios came in early on with Movielink. That was a collaborative effort among the studios. They saw the need to have an aggregated content library. No one content producer has enough content to provide a full suite of entertainment choices for a consumer. So the aggregators, like the Comcasts and the iTunes of the world are very important to the consumer experience, because people really don’t want to have a relationship with 30 different sites to get the content they’re interested in. They appreciate the fact of a really solid aggregator to get them everything that they’re interested in at one place.
There are also technologies that are replacing the aggregator. If you look at RSS readers and tools like that, consumers are now controlling their own aggregation in bringing together media experiences. It’s very easy to be entertained by podcasts. So you can go and subscribe to a bunch of podcasts via RSS, and that can be your way of programming your content. I think we’re still up in the air in what the ultimate model there is. I think you’re going to have studios doing some things directly.
You’re going to have them definitely syndicating and participating with affiliates and different regional people that can regionalize the content. There’s still is the need for regionalization and language. Then, lastly, you're going to see different types of models emerge that we’re probably not even aware of yet. Social networking was a great example of that. People adding to content by creating derivatives of it, mash ups and things like that on the social networking site.
It’s still completely up in the air, and there’s going to be hundreds of startups this year to try new ideas and new concepts around it.
Gardner: So once again we’re in a very interesting period, a dynamic period. There are all these great notions and visions about where media can go and how the Internet can provide a platform and a distribution approach for that. There’s also some parallels to the past. Some business models that have been very lucrative are now under some threat, certainly under a cloud of change. I suppose right now we’re at the point of creating the foundations for some of these unknown approaches.
One of those foundation bricks is DRM, another is metrics, another is the ability to align advertisers with highly qualified viewers. What else is there? What other major bricks need to go into this foundation, before we can move forward on some of these visions?
Napoleon: My challenge to everybody in the industry is to make sure it works. Consumers want to try something, free samples, if you will. They’re going on the Web to try something. If they don’t have a perfect experience, it’s easy for them to go back to television, to go back to these other forms in media that do work very well. So, our challenge with Akamai -- and what we want to try to deliver -- is that perfect experience. When you click on the video, it should come up instantly in place, with all the business and tracking and the reporting working flawlessly.
Right now, what we’re trying to focus on is just flawless execution and making sure it all works and works well. So whatever part in the value-chain that you are coming at this from, you’re having a good experience. That’s what Akamai is about. It’s about the end experience, and the goal is perfect, flawless video every time.
Gardner: So another major brick is simply the technology and the network integrity to provide a pleasing, repetitive, dependable experience -- regardless of the type of media that’s coming down the pipe.
Napoleon: Absolutely.
Gardner: Okay, thanks. This has been a sponsored BriefingsDirect podcast. We’ve been talking with Tim Napoleon, the Media and Entertainment Product Line Director for Akamai Technologies.
Thank you for listening. I think it’s been an interesting discussion that’s sort of opened my eyes a bit more to the possibilities -- but more importantly it's opened my eyes to the level of complexity that needs to be managed before we can get even realize what we have today, never mind reaching this vision of where we could be in the several years. Anything else to offer on this subject, Tim?
Napoleon: I think there are some great resources at Akamai.com. I will invite you to look at our expert section there and then please email us. Let us know future podcasts what we can do and what type of information would be helpful.
Gardner: Great. Thanks once again for listening and thanks to you, Tim and Akamai for sponsoring this podcast.
Napoleon: Thanks, Dana.
Listen to the podcast here.
Podcast sponsor: Akamai Technologies, Inc. See more Akamai podcasts.
Transcript of Dana Gardner’s BriefingsDirect podcast on Internet media trends. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
Listen to the podcast here. See more Akamai podcasts.
Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Today, a discussion with Tim Napoleon of Akamai Technologies. He’s their Media and Entertainment Product Line Director, and we’re going to discuss a very interesting topic: Digital rights management (DRM), the collection of use metrics, and the business model around media and entertainment on the Internet today.
A great deal is being discussed about who controls what when it comes to content, particularly when you’re distributing it openly and freely on the Web, when you’re exploring new distribution models, and when you’re using new technologies. Tim is joining us for a second BriefingsDirect podcast. Tim, tell us a little about the state of Web commerce, and why DRM is such an important topic today?
Tim Napoleon: Digital rights management is doing well. It’s alive and healthy. There was a general concern a few years back that the consumers wouldn’t adapt to paper-media-type experience online, and I think the ubiquitous nature of the iPod has proved that wrong. There are a lot of other great devices that are coming out, or have come out, with really solid content protection schemes in place that the studios are comfortable with.
It’s everything from TiVo’s broadband platform, to the Zune player from Microsoft, to several other soon-to-be-announced platforms that are getting people excited again about what is possible to do with digital content in a real business-model fashion.
Gardner: One of the things I’ve heard from listeners, users of content, is “Wow, there seems to be so many of these DRM approaches, do we need a different one for every media company, for every modality? Shouldn’t there be some standards?” What is the state of standardization, or at least some de facto industry accepted approaches, with DRM?
Napoleon: If you’re a business development officer at a content-owner studio, you probably have a very clear agenda. You want a platform that has almost no royalty to it and you want something that’s ubiquitous, so you can sell as many units to consumers as possible. If you’re a technologist or if you’re a company that’s based upon getting royalties for your technology platform, you probably want to try to create such a great technology platform that you can charge a royalty for it and potentially have some strategic effect of lock-in on that platform.
If you’re a consumer, basically you want your favorite artist, music, title, in whatever format that you want it, wherever you want it, whether that’s on your TV, your PC or your iPod. There has been a willingness we’ve seen from consumers to pay for the same media across multiple platforms. It’s not uncommon for someone to buy the DVD as well as the iTunes download, as well as to go to the Website and watch the episode online.
All these different vehicles and delivery mechanisms aren’t necessarily taking money out of the studio’s pocket. They’re actually creating an additive effect. We’re seeing an overall trend. As you make this media more convenient and more usable, consumers are in a consumption pattern, and if consumption is going up, they’re using more of this media.
Right now, studios are trying to figure out what platforms have enough scale and enough users to make it worthwhile for them to have their content on that platform, but there’s definitely still room for that one global standard for content protection.
Gardner: Just for the sake of all of our listeners, when we talk about digital rights management, we’re talking about something such as iTunes, which many people might be familiar with. You can buy a song from the iTunes Store and you can use that through iTunes on as many as five different devices, and then it’s shut off. That’s the management part of digital rights management.
The goal here is to preserve the copyright, the protection, and the ownership of media or artistic production, from the perspective of the artist or the distributor -- but at the same time to give users a bit more flexibility in terms of how they can enjoy media. Do you have anything else to offer that’s a general definition of DRM in today’s working environment?
Napoleon: Sure, if you go back to the business sense of DRM -- why do we even need to control content? Studios have very complex business processes when they develop content. For example, with a movie, it’s not uncommon for a studio to pre-sell the international rights to fund the development of that movie. They go to each different region and pre-sell that right to have the future revenue from that movie to different finance companies around the world. Then, they might keep the rights from the North America release.
When go onto the Internet with that movie title, you don’t own the rights to all these different geographies. There’s the need for the studio to make their business arrangements and the contracts map the use pattern of the Internet. There are some nice technologies from Microsoft and others that facilitate this business transaction for the studio. The great news is they’ve gotten a lot better, so the consumers are willing to put up with the little extra overhead that’s required.
Gardner: Consumers might not even appreciate the level of complexity when we’re dealing with multiple geographies, multiple legal systems, different approaches that are culturally accepted for how people absorb or use technology-driven media. Tell us a little about how an applications and media-management and -optimization provider like Akamai is addressing some of this complexity?
Napoleon: First, everybody knows Akamai for scale. Now you’re starting to see major live events like World Cup and others come online. That’s one of the first very good use-cases of meeting DRM services that scale. Akamai has one of the largest, if not the largest, license delivery services in the world. So when people go to watch a DRM-encoded stream, then you receive credentials to watch that stream.
The Akamai License Delivery Service is a global, secure distribution platform for those licenses. It also packages tools that usually allows the rights owner to assign what rights they want to give -- or not give -- to the end customers, based upon some different parameters.
Lastly, there are some advanced services that Akamai can wrap around that. For example, in sports, geography is very important. Different teams have the ability to have their games play and not play in different areas on the Web. We have geo-restrictions built in to our platforms so that we can protect the content owner and make sure that rights for certain areas only play streams in certain areas. It’s a very key feature for sports.
Gardner: That’s the equivalent of blacking out a game for electronic viewing when there are still plenty of empty seats at the stadium. Is that what you’re getting at?
Napoleon: Yes, absolutely. For example, ESPN may own the North American rights to a football game, but another company may own the UK rights. There might be a UK website that wants to put a live event up, but they don’t have the rights to it in the North American market.
Previously, they couldn’t do it, because they couldn’t guarantee that people from around the world wouldn’t come to their site and watch it. Now, we have the ability to allow them to put up a lot more content, because they can enforce all the policy around it.
Gardner: So, before the media companies and the producers of content -- for example, in this case the sports franchise or even a league or a foundation of some kind -- open the floodgates and let their content out they need to make sure that they can adhere to the licenses they’ve already got in place, the contracts that they’ve already set up with the various media outlets or even stadium owners and local business owners that are there.
Then, they also have to think about what they want in terms of a business model, by taking this out to the Web and the Internet. So for them to get the content to the end users, there has to be a system in place to manage all of this complicated provisioning. I guess you can think of it as service level agreement management, right?
Napoleon: Absolutely. As you can imagine, just describing that at a high level is complicated. When you actually go to implement it, it can be even more complicated. You can have all sorts of questions about your business model, but it’s nice to know that with Akamai at least the technology hurdles aren’t going to be as high. Its going to be much easier to get the technology implemented. You can focus all your resource on that mouthful of business challenges that you’re going to have getting your content aligned.
Gardner: In order for end users to enjoy this ability to access content through their Internet protocol, packet-driven pipe -- that might be their broadband connection -- a lot has to happen behind the scenes in order for the people who produce and distribute content to feel comfortable about it. And you’re trying to bring that to the table.
Napoleon: My sound byte there is: How long does it take to do a live event on the Web? Well, it takes about 10 years and 10 minutes. It takes you about 10 years to learn everything you need to know to do it, and about 10 minutes to actually do it. The learning curve is definitely something that Akamai can assist with when you want to monetize and bring your content online.
Gardner: Tell us a little bit about the business models that this enables. Once we’ve crossed this threshold of putting in a technological capability to allow companies to adhere to the contracts and their service-level agreements (SLAs), what is possible in terms of new types of subscription? We see what Apple’s been doing with video recently. We see what Google is doing with YouTube and distributing more content. Now that we’ve got the technology to manage sort of the old model, what’s on the horizon for new models of media distribution, entertainment, and business?
Napoleon: Maybe we should just rewind a little bit and talk about one of the biggest challenges that studios have had since their inception, and that’s physical distribution. If you look back at Warner Brothers, when they rolled out Atari, they over-estimated their popularity; what Atari would be at the time when they released the product. They ended up with all these consoles coming back from retailers, and they ultimately had to sell off some very valuable online cable properties to pay for that inventory.
Studios have heart palpitations when they have to know how many DVDs to press, or how much physical inventory to create. With online and a scaleable system -- that’s variable capacity from Akamai -- you can scale it all up to billions of users, if you need to. You don’t have the physical cost of pressing a disk or having to forecast inventory. You never run out of it. A consumer never goes to store that doesn’t have the title they want to rent. The opposite benefit is that you don’t have a warehouse full of disks on your balance sheet account.
You’ve got just the right amount of inventory. It’s probably the one business issue that this solves better than anything for the studios -- having the ability to get into the hands of consumers hot content, and also capture a fragment of the market with maybe just a little bit of content. In the past, the distribution pipeline for projects that might not be mainstream didn’t find a voice.
People often call us the long tail of content, but really it’s having unlimited inventory and the ability to really let the consumers self-select from a very large library and filter that down to exactly what they’re interested in, and then order it. That’s just making people order and buy more media.
The Internet is also enabling a larger audience to view more titles. Some of them are okay with watching media via advertising instead of having to pay for it. One of the hottest trends right now is the ad market, and being able to put ad insertion and other things around your content to generate ad revenue. We’re seeing properties like Fox and NBC and other U.S. broadcasters roll out full-length television shows on the Web that are ad-supported. The feedback from advertisers and consumers has been that these are extremely popular, and the trend is definitely going to continue and accelerate.
Gardner: We’ve got a nice problem-solution set here. That's because users get to watch the content they want. They can take advantage of the long tail -- if your tastes are eclectic, you can find what you like; it doesn’t have to be mainstream. The providers of the content like these solutions because they can manage inventory. They don’t have to predict physical numbers of units to get distributed and then either come up short or over-deliver, which is a waste of money for them. So, it’s in their best interest to distribute via the Internet. And in doing so, we can now start injecting advertising into these content properties.
Now, help me understand this. Are we putting the same ad across a 100,000 audience-wide distributions, or can we target the long-tail effect and its advertising capabilities? Can you actually decide that someone’s interest in a certain type of content and so they might align through their interests with whatever an advertiser wants to provide to them?
Napoleon: It goes into a marketplace of content. What you’re seeing is that publishers now are facilitating their audience. In the case of channels like speedtv.com, you have this very focused property on cars. Not only can you put all your own original programming on that about cars, you can also look out to other content owners who have auto enthusiast-type material, and bring that all together into a very focused portal for auto fans.
Now that you have an audience that’s self-selecting into auto, and it’s the right demographic and the right type of consumer for car parts or new cars, you can charge them a much higher ad rate. We refer to ad rates of CPMs, or cost per thousand. Once you have a focused target audience like that, the ad rates go up. Instead of seeing all this general mainstream programming, you’re starting to see a lot of these more-focused and more-niche sites really accelerate and take off, because -- in a sense -- on the Internet there’s unlimited broadcast time. You could have as much programming as you need to get a large enough audience. You don’t have to worry that you only have eight hours in a day to broadcast television.
Gardner: You’ve injected another thing in here. I guess we could call it user-generated content. If there are some great bloggers or video bloggers out there who are creating really compelling content on a certain subject, then whatever the organization is that’s creating a community approach around that subject could bring that in, as well as professionally produce new media. That creates this notion of a channel, just like we would think of with cable television.
You’ve got Animal Planet, Discovery, Biography and so forth on cable. Now we can get much more discrete -- down to car enthusiasts or home and gardening -- or even something as nichey as a business topic like jet engine maintenance. Putting the content together creates a much more valuable audience for a specific advertising community. People are matching buyers and sellers, and because they’re better matched, it’s less a waste of time for the viewers because they’re getting advertising that might actually be relevant to their interest and needs. Advertisers are getting a much more efficient approach, because they can direct ads specifically at those who are most interested in that information.
So, the theory is great. However, as we discussed earlier, complexity is layer upon layer here. How does a network services and business services provider like Akamai help create this sense of buyer and seller community that’s really aligned well?
Napoleon: I think the first step in any of this is reporting and tracking. You’ve got to see what your audience is today and what type of media consumption you’re seeing across your content.
Gardner: This won’t work without metrics.
Napoleon: Exactly. Media is one of the most metrics-driven businesses out there. Getting the stats and getting the things digestible, so you really understand where you’re at, is step one. Akamai has world-class reporting that facilitates that.
Step two is bringing in relationships, and this goes into the concept of syndication. We talked about some of the technologies there, rights control, as well as a nice easy interface for users to get content in and out of your portfolio. Akamai offers ubiquity in the media space and interoperability. Our systems work with most media companies out there, and they use them. There is a familiarity with it, and it’s a common language.
Lastly, there’s the innovation curve. Akamai really strives to study the business, and learn the best practices and tips and tricks, and then share those. If you go to our site, there’s some great podcasts from this guy named Dana Gardner on there, as well as a lot of white papers, sample source codes, all kinds of things that facilitate building out these applications. And, we’ve got a rather large professional services organization. If you don’t want to learn how to fish, we can do the fishing for you, and just build out these business systems for you.
Gardner: It seems to me, because of what you said about unlimited inventory and much more efficient management and alignment of advertisers and information seekers, that the Internet is perhaps the only place to be in five or 10 years for content. Broadcast is waning, even when it goes to HD.
I expect that the number of people who are accessing this stuff through an antenna on their roof is going to be relatively small, and the level of service they get is going to be rather kludgey. It’s going to be an obtuse approach to media. Whereas if you go to the Internet, it’s even better than cable. It’s where you can bring all of these services and efficiencies together, where you get the benefit of a long tail. You get the blockbuster movie the week it comes out, and you can access it in your home. Am I going overboard in painting what could be a very interesting future in a couple of years?
Napoleon: You’re painting a rosy picture, but we have a long way to go. Today our stance is that we’re additive to all the different technologies out there. If you’re a traditional broadcaster, and you have television and radio stations -- those are incredibly valuable assets today. There are still a lot of people who like to just turn on the TV and watch professional programmers program for them. In the sense of television programming, I don’t see that changing in the near-term. If anything, I think the Internet has invigorated and created an innovation curve.
If you’re a television broadcaster, it’s kind of like having a new competitor that might get you a little bit fired up. You’re seeing that in the network lineup this year. There’s just some great programming, from “Lost” to “Heroes.” Television has definitely stepped up the game, and right now they’re one of the platforms that has enough distribution to afford creating these really highly visual, big-star type shows. The Internet is absolutely dependent right now on the television revenue to fund and produce original content.
We’re providing a great mechanism for additional distribution right now, but there’s no way that the current monetization system of the Internet is big enough on its own to facilitate shows by the J.J. Abrams of the world. So, I don’t think that we should ever look at it as "us-versus-them." Hopefully, it’s a "we" and the "we" is better than all the other platforms are today.
Gardner: It’s an interesting environment from my perspective. The Internet is the big opportunity for the future. And if someone likes to have to professional programmers pick-out their programming, they can access that through the Internet as well. It’s just that the Internet offers additional granularity, mixing and matching, and better metrics.
On the other hand, as you point out, the amount of revenue that’s derived through the Internet with media is still quite small, a fraction of what you get through traditional media distribution channels. Therefore, we’re at this very interesting juncture, where we need to maintain both systems, one for the future and the other for, in a sense, the monetization that allows that future to come about.
Napoleon: Absolutely. We’ve learned so many valuable lessons from working with traditional broadcasters. I don’t think you ever want to throw everything out and reinvent the entire industry. There’s lots of great best practices that have come out of broadcasting over the last 100 years. We want to make to sure that we learn the best of those, and we incorporate them into the Internet. That is what's so fun about working in the Internet space right now. All the rules aren’t defined. We don’t have all the standards baked. We don’t have everything completely done.
This core group of interactive teams at all these different organizations -- and even individuals -- are right now creating what’s going to be the future. That’s exciting, and that’s why we see a lot of the college guys coming into this space. The thing I’m most excited about is the talent that the interactive space is recruiting. So many people want to work at the Yahoos, the Googles, the Microsofts, the Akamais. We’re getting the best of the best to come and work for us. That’s what’s fun about this industry right now.
Gardner: Definitely an exciting time. Now, we talked a little bit how there could be a greater CPM payoff by matching up advertisers and knowledge or entertainment seekers, but what about pay-per-view? Isn’t there an opportunity for me as an Internet viewer to say, “Listen, I’m willing to spend $8 or $10 on a movie. I’m going to spend that going down to the theater this week anyway. I would like to buy a new run, new release movie.” Is there a way for you all to facilitate a pay-per-view approach through the Internet, as well as taking advantage of some of these more precise advertising and metrics-driven approaches?
Napoleon: That’s the way I like to do it, personally. I’m speaking about my own personal experience. I watched all my shows via iTunes this year. I found that I’ve not watched as much TV, but I’m watching the shows I want. I just don’t have to watch all the commercials. That’s my preferred choice -- just spend a little bit more money, and then not have to watch as much advertising.
I like that approach, but it’s somewhat expensive. So I can see that a consumer who doesn’t want to spend $2 for something he can get for free based on ad-support on television might not want to do that model. But there’s definitely intelligence from consumers that they know that they can now buy media. There are some great payment mechanisms out there that make it almost transparent to purchase media.
I think that has lowered the bar for people to participate. You’re seeing a lot more of that revenue coming into the space. We had some new stats from comScore today. I think Apple’s online digital revenues from iTunes are up over 80% year-to-date. So, it’s definitely taken off.
Gardner: That would include, of course, this ability to buy trailers and short animation clips and television shows, and I would think, increasingly, full-run movies.
Napoleon: Your hard drive gets full fast in this modern world.
Gardner: Does every distributor, whether it’s Apple or Time Warner or Paramount, want to come up with their own pay-per-view technology platform and infrastructure, or is this something that’s going to become a component on the network and a de facto industry standard approach?
Napoleon: Studios came in early on with Movielink. That was a collaborative effort among the studios. They saw the need to have an aggregated content library. No one content producer has enough content to provide a full suite of entertainment choices for a consumer. So the aggregators, like the Comcasts and the iTunes of the world are very important to the consumer experience, because people really don’t want to have a relationship with 30 different sites to get the content they’re interested in. They appreciate the fact of a really solid aggregator to get them everything that they’re interested in at one place.
There are also technologies that are replacing the aggregator. If you look at RSS readers and tools like that, consumers are now controlling their own aggregation in bringing together media experiences. It’s very easy to be entertained by podcasts. So you can go and subscribe to a bunch of podcasts via RSS, and that can be your way of programming your content. I think we’re still up in the air in what the ultimate model there is. I think you’re going to have studios doing some things directly.
You’re going to have them definitely syndicating and participating with affiliates and different regional people that can regionalize the content. There’s still is the need for regionalization and language. Then, lastly, you're going to see different types of models emerge that we’re probably not even aware of yet. Social networking was a great example of that. People adding to content by creating derivatives of it, mash ups and things like that on the social networking site.
It’s still completely up in the air, and there’s going to be hundreds of startups this year to try new ideas and new concepts around it.
Gardner: So once again we’re in a very interesting period, a dynamic period. There are all these great notions and visions about where media can go and how the Internet can provide a platform and a distribution approach for that. There’s also some parallels to the past. Some business models that have been very lucrative are now under some threat, certainly under a cloud of change. I suppose right now we’re at the point of creating the foundations for some of these unknown approaches.
One of those foundation bricks is DRM, another is metrics, another is the ability to align advertisers with highly qualified viewers. What else is there? What other major bricks need to go into this foundation, before we can move forward on some of these visions?
Napoleon: My challenge to everybody in the industry is to make sure it works. Consumers want to try something, free samples, if you will. They’re going on the Web to try something. If they don’t have a perfect experience, it’s easy for them to go back to television, to go back to these other forms in media that do work very well. So, our challenge with Akamai -- and what we want to try to deliver -- is that perfect experience. When you click on the video, it should come up instantly in place, with all the business and tracking and the reporting working flawlessly.
Right now, what we’re trying to focus on is just flawless execution and making sure it all works and works well. So whatever part in the value-chain that you are coming at this from, you’re having a good experience. That’s what Akamai is about. It’s about the end experience, and the goal is perfect, flawless video every time.
Gardner: So another major brick is simply the technology and the network integrity to provide a pleasing, repetitive, dependable experience -- regardless of the type of media that’s coming down the pipe.
Napoleon: Absolutely.
Gardner: Okay, thanks. This has been a sponsored BriefingsDirect podcast. We’ve been talking with Tim Napoleon, the Media and Entertainment Product Line Director for Akamai Technologies.
Thank you for listening. I think it’s been an interesting discussion that’s sort of opened my eyes a bit more to the possibilities -- but more importantly it's opened my eyes to the level of complexity that needs to be managed before we can get even realize what we have today, never mind reaching this vision of where we could be in the several years. Anything else to offer on this subject, Tim?
Napoleon: I think there are some great resources at Akamai.com. I will invite you to look at our expert section there and then please email us. Let us know future podcasts what we can do and what type of information would be helpful.
Gardner: Great. Thanks once again for listening and thanks to you, Tim and Akamai for sponsoring this podcast.
Napoleon: Thanks, Dana.
Listen to the podcast here.
Podcast sponsor: Akamai Technologies, Inc. See more Akamai podcasts.
Transcript of Dana Gardner’s BriefingsDirect podcast on Internet media trends. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
Thursday, January 04, 2007
Transcript of Webinar on SOA Trends with Analyst Dana Gardner and Cape Clear CEO Annrai O'Toole
Edited transcript of SOA trends webinar recorded Nov. 15, 2006.
Listen to a podcast of the webinar here. Sponsor: Cape Clear Software, Inc.
Welcome to a special BriefingsDirect presentation, a podcast created from a recent webinar with Interarbor Solutions Principal Analyst Dana Gardner and Cape Clear Software CEO Annrai O'Toole. This sponsored webinar presents a Services Oriented Architecture (SOA) market perspective by Dana, followed by comments by Annrai, and some questions from the live webinar audience. Today’s topic is how the value provided by SOA may be the best way to demonstrate the business value of SOA investments. Now, let’s listen to the analyst’s perspective.
Dana Gardner: Hello, we’re going to work through a state-of-the-market analysis on SOA at a very important juncture in SOA's evolution. An incredibly important issue right now is whether we are going to win broad acceptance and deep penetration, or whether SOA remains somewhat marginal.
There are a number of things going on in the market that we will look over. Trends and developments in information technology (IT) such as market acceptance and tipping points -- and a sort of social-animal instinct and on how people behave -- become very important. It is no longer just about the technology; it's about what motivates people, particularly in their businesses.
So, let’s take a level-set in changing times. These are very dynamic times. There are so many things going on in addition to SOA that we can’t look at SOA alone; we have to look at it in the context of what’s going on in general with IT and business. Over the last two to four years, we have seen SOA develop as a vision, spawned off the work done with Web services, progeny of object orientation and components, bringing it into a standard environment and, hopefully, into much broader usage across IT -- not just in development but in how people conceive of IT; a transformative type of activity.
We have gone through SOA standards. We have seen companies come up with methodologies, and have had examples of successful, and not so successful, implementations of SOA in the marketplace. Most, if not all, of the large vendors are solidly behind SOA. We’ve seen them use the terminology. Some are talking more about the business results than the SOA nomenclature itself. It is clear from IBM to SAP, to Oracle and Sun, that their products and services are based on SOA principles. We expect that will then follow through into the marketplace. We are also seeing quite a bit of development from the large global systems integrators around SOA practices.
Question for SOA is when, not if
It has been my analysis for several years that this is an extremely big deal, but what has been missing is the agreement generally in the marketplace as to not if, but when, to do this. We have also had a lot of activity in the marketplace around startups merging and rearranging their businesses. If they did not start focused on SOA, they seem to be heading in that direction. And that has led to a period of consolidation. We have seen mergers and acquisitions, partnerships, and ecology developments.
We’ve seen the notion of SOA, and it includes governance, bleed over into how IT actually functions -- and not just how development and deployment strategies are defined. We are really up against the tipping point here. The crucial issue for SOA is how that tipping point manifests itself.
The real force behind SOA is a transformative activity, both for the technologists in the IT department as well as for how IT is conceived, perceived, and used by the businesses. This has been an ongoing issue for many years, if not decades. At this point we have quite a bit of buy-in around SOA from the technologists. What we see mainly, however, is SOA use behind firewalls and within fairly vertical applications, within a defined business process activity.
What's more, many services today are data-centric. My studies show about two-thirds of current in-production SOA services have been data-service layer or data-centric services, and so perhaps as few as one third are being devoted to business logic and transactional activities. This, of course, will vary from company to company, in vertical industry to vertical industry, but the trend is showing a predominance of interest in making data available as a service. That service is then consumed and used in non-SOA activities and in more traditional integration portal Web applications, and Web or thin-client presentation applications.
How will SaaS and SOA emerge together?
So, SOA remains somewhat tactical even at most mainstream enterprises. There is also an important trend line around software as a service (SaaS) providers as they build their applications to be consumed and used as services. They might have a deep impact on how SOA is consumed -- almost on an outsourced basis rather than a homegrown basis -- and we are going to be tracking that carefully.
An inhibitor to the business side of the house in enterprises adopting SOA broadly is a lack of discretionary spending in IT for SOA types of investments. There is a lot of confusion around SOA and its values, and what business terms and issues are the motivators. Therefore SOA remains difficult to define and rationalize in purely economic terms. There are a lot of reasons for that.
The market is going to work toward a better understanding of the rationale behind businesses as they seek investments in this disruptive technology. We will move from monolithic silos of development and deployment infrastructure and sort of break that apart. Then after the decomposition process we can extend and reuse and redeploy -- hopefully with a great deal more efficiency -- these resources as granular components or services.
Follow the money
Though the concept is quite strong, the benefits in terms of numbers and metrics can be rather soft. We could tell people they are going to be more agile, be able to change in the marketplace more quickly, and be able to consolidate and use more singular architectures. Yet these are not numbers you can bring in on a quarterly basis and say, “Here’s what SOA has done for us this quarter in terms of dollars and cents.” Financial rewards are part of a long-term transformative process as well; something we expect will take years, if not decades, to fully play out.
SOA is really a journey without a destination and, as such, it is harder to quantify and qualify in terms of payback. If there is no destination, when does one know one has succeeded? This also affects cross-organizational use and deployment. There is a traditional chicken-and-egg relationship on whether developers move first, or the SaaS operators, or the people who deploy them on-premises, and that’s currently being played out.
For the true payback of SOA to come about, be it in soft terms or hard terms, it does require a horizontal, holistic, and general usage. Politics are also involved here. We have people that have been quite content to remain within a small, isolated arena with their own budget to control, working for several well-known and established taskmasters.
SOA, in a sense, disrupts that. There is no central taskmaster with SOA (and that's why governance is so important). The idea is for more and more folks to have a handle on these services, and then use them in new and innovative ways -- closer to the line of business, closer to the business processes, and extending beyond the confines of the enterprise into a supply chain, for example. So there is naturally some control politics.
Also budgeting issues play a role, which often means control from the top down rather than the bottom up because it is the central command-and-control folks that effectively change budget structure and allocate funds. So that is in process now as well.
There is also the need for collaboration across these groups. Not only do we want to change how budgets might be formed, we want to encourage people to work in a simultaneous fashion rather than in a linear fashion. So the hand-off of an application project really can’t happen over a period of six months to 12 months anymore; it needs to happen simultaneously with development. The whole idea here is to go to the business side of the house and tell them we can work quickly and change the process for you, as you have to adapt to a rapidly changing marketplace.
Make the business case for SOA
Gaining market acceptance for SOA requires a compelling business and economic case, something that we haven’t seen, at least not in a cohesive matter. There isn’t a central SOA defining body; there isn’t a central mouthpiece for SOA or SOA activities. It is been happening on an ad hoc, willy-nilly basis from a number of large and small vendors, as well as integrators and professional service providers. It is happening almost as if we were in a social network, and perhaps we are. This is a global SOA social network effect that we are seeing. It is happening at a time when we can’t just focus on SOA, however.
We need to look at all of the other trends, changes, and, frankly, complexity that CIOs, decision makers, enterprises, and telecommunication carriers are facing. If we look at a laundry list of what is going on right now we are not only looking at SOA issues, but also Web 2.0 (and this new concept of Enterprise 2.0), event driven architecture, complex event processing, SaaS, grid-utility computing, application virtualization, open source software and its impact, business process management, and on and on. People are dealing with convergence issues and mobility issues cutting across different types of devices. We are talking about "fabrics" for interconnected networks.
IT trends are also in flux. These are not just technology issues, but affect how IT is consumed such as through "shared services," where IT departments function more as a business customer within an enterprise. They behave based on market forces internally and the need to fulfill service level agreements locally. A very hot area now is IT governance from regulatory impetus to general organizational business practices, where IT departments are maturing and behaving as would an accounting department or an external field organization.
We are looking at application modernization, with people rationalizing which applications should remain and which should go as part of a datacenter consolidation trend. There is infrastructure virtualization, where we can cut costs on hardware and find new benefits around platforms, and instances of runtime, where we can deploy applications in new and interesting ways.
There is also business continuity to consider. We have natural and man-made disasters and disruptions that need to be addressed and, therefore, redundancy plays an important part, and data centers that are strategically placed outside of places that are perhaps at risk. Furthermore, there are regulatory compliance and intellectual property issues involving what code can be used in which ways. This is all part of a barrage of issues that are affecting CIOs and decision makers simultaneously.
More ROI for SOA
Yet, despite the complexities, despite these numerous trends and changes in the market, aggregate spending growth for IT remains fairly confined. We see large single-digit numbers in many organizations. Even within that confined growth trend we still see 60 percent to 80 percent of the total IT cost going to just maintaining and keeping current infrastructure and applications running, which does not leave much for discretionary SOA spending.
As I mentioned earlier, not many individuals are jumping up and down and singing the SOA song in a mutual chorus. Microsoft, for example, has remained somewhat distant from using SOA as a phrase, although many of the business benefits they project for their infrastructure and applications (particularly the newer ones) do align with SOA methods and business benefits.
We need to energize folks to invest in SOA now. I have addressed this issue by looking at the many-faceted benefits of SOA, both as an opportunity and as an area of fear. There is an opportunity to beat your competition if you can embrace SOA and use some of these other large technical and organizational changes to your benefit; to make IT a weapon you can use to do better than your opponent and, therefore, get better traction in the marketplace.
There is also the fear that your competitor might do that to you. There is an opportunity to exploit new avenues for change by obtaining applications or modernizing applications including SaaS. If your opponent in the marketplace (or the person who might get to the marketplace first) is using SaaS, their costs are lower and their agility might be higher. So, there is a fear of that as well.
This is also a great opportunity to exploit these convergence issues, reach mobile workers, and better deliver data and application and logic to the end users across the organization. SOA benefits also work both internally and externally. They allow you to be an architected organization where the focus is on what you need to do in a market to gain new business and to know where the new business is expected to be in six months; to be an early mover, not a trailing-adopter.
Architecture for competitiveness and risk reduction
SOA architecture is absolutely essential to become a first-mover and to focus strategically on architecture over applications to win business. The relationship between the application and the architecture is something we must focus on.
It is not just the fear and opportunity, but general and broad risk reduction that should energize people about SOA. SOA can empower businesses to reduce their risk of losing value from past IT investments. SOA allows you to continue to reap rewards from your past IT investments; to not necessarily sunset applications, but find new value in them. You can mitigate your risk against not competing with newer companies that don't need to support a costly legacy because you can bring in greenfield and modern application architectures as well. SOA allows you to play with both legacy and new greenfield approaches.
There is also risk reduction and mitigation against the unforeseeable future; against new architectural benefits, IT benefits, or trends that might be here in two-to-three years. SOA has a risk-reduction benefit because it is defensive, it is offensive, it is inclusive, and it works across organizational boundaries.
There is also risk-reduction around data and application logic, and the use of data in applications in new formats. There is reduced risk in the ability to absorb and manage merger and acquisitions, expected or not. I’ve spoken with folks at venders like Oracle that say they probably couldn’t have done the J.D. Edwards and the PeopleSoft activities without Web services and, increasingly, without SOA. If they can do it to move fast and successfully in their markets, their customers need to think the same way.
They need visibility across an entire process chain to reduce risk in terms of actually controlling what is going on within IT. One of the things that we are discussing with IT governance and enterprise service buses (ESBs), and some of the standards and methodologies used, is an ability to gain a holistic total view into a process -- not just a set of technologies; not just a particular server farm or a particular layer within a distributed architecture but across a business process.
"How am I actually doing?" This is a very important element for businesses on a regulatory compliance basis for Sarbanes-Oxley, for example, but also for companies to be fleet. If you don’t know what you are doing or how things are going, you cannot react appropriately.
So, in summary, SOA is really a means, an ongoing journey. It has soft advantages, but I think it has great benefits in terms of risk reduction and of meeting opportunity rather than fearing opportunity. It is a defensive and offensive weapon, both inside and outside of the firewall, and it bridges the past and the future while encouraging organizational transformation -- not just IT transformation but business transformation.
SOA promotes total excellence over subset excellence and fosters change management as a core competency. It also allows for constant process refinement; things do not get locked in and then set into a monolithic and static hierarchy, they are constantly being changed and improved. The ultimate goal is to be able to attain many of these things with overall reduced cost of capital and in the cost of ongoing maintenance and support.
That is the end of my presentation on the state of SOA. It is important now to energize and find ways to make the business case for this because the managers, over time, will play out for those that are early movers. Thank you.
Cape Clear CEO comments
Annrai O'Toole: Thanks very much, Dana. I am going to pick up where Dana left off. Dana has pointed out a few of the topics here, and there are a few things that I would like to add to the mix.
Before we jump in to this, I would just like to stand back and think about SOA in a very broad sense. I have been writing a blog article about this topic as well. It is fair to compare SOA to things that we have seen in the past like client-server and the Internet because they are very similar. Those were terms that the industry applied to a big change. The Internet was very easy for people to understand, because it is very visual and people could get on to a browser and move around.
So, the Internet did not need a whole lot of selling. Client-server needed quite a bit. However, there were a lot of clear business benefits to client-server in particular because it came from a mainframe-dominated world of computing. Client-server essentially offered people a much cheaper hardware infrastructure, and a much cheaper way to get far more powerful applications onto people’s desktops. So it was pretty easy; business users could use those applications to see what it was all about and they received client-server at a high level.
SOA is very similar to client-server. SOA is essentially a set of technologies and a methodology and a philosophy about how we build enterprise applications. SOA is never going to have much meaning for the average consumer in the streets, but it does have a lot of meaning for large enterprises. We are here today to discuss what SOA means to business users and enterprises. As Dana outlined, it is a kind of struggle because we can approach a business user and say, “SOA gives you more agile applications.” They ask, “What precisely does more agile applications mean?”
The term in itself is vague and building any metrics around this is tough. The business users get the notion that they want the applications to change more easily, but it is very difficult to quantify that. If we asked business users and a focus group what they meant by "agile applications," I think we would get many different answers. If you read in the blogosphere about SOA, you read only the articles. Once people get beyond agile applications, they are into reducing integration in half and that is nice. It is definitely very quantifiable.
More meat for the business users
In particular, as Dana exemplified so well, you know there are so many things that IT is grappling with today. I am not going to repeat what Dana spoke about, but the business user and the context of reducing integration costs is important. I don’t think that there are many business users who jump out of bed in the morning and say, “How am I going to reduce IT integration costs?” So I think these are the two main planks about how we justify SOA to a business user today, and I think we are all being pretty candid here, but these are not great.
We need to do a better job on this. If you start reading all the stuff in the blogosphere about SOA, it is really techies talking to techies; it is all about how you adopt SOA and the architectural approaches to adopting SOA. At Cape Clear a lot of our content is focused on IT guys, which is correct, but we in the industry have the onus on us to do a better job of explaining this to business users.
So the bad news is that I do not have a magic answer to this, and the good news is that I have a few things to say that I think are interesting. There are a number of very powerful things that SOA is doing today, and we are involved in some of them. For instance, there is increasing use of software as a service (SaaS). A long-running problem that many business users have had is that they all want greater business applications that give them better insight into their business but they do not want to spend three or four years doing large enterprise resource planning (ERP) implementations.
So SaaS for a lot of cost reasons and efficiencies -- and in use adoption -- is doing really well. There is a new Salesforce.com-breed that has done extremely well there. Just last week we announced our partnership with Workday. They have a whole new take on ERP applications based on the hosted model. They are embedding our software, along with other companies. So there is a whole range of SaaS applications that are turning to SOA to provide the kind of back-end integrations between the SaaS and existing applications that customers already have. SOA is already playing a very important part in pairing the next generation of business applications. And I think many business users understand that.
This next line is not something that I think business users understand yet, but it is incredibly important. A lot of techies know this stuff, but as you begin and you look at what SOA is doing -- it is really blurring the line between the underlying middleware infrastructure and the sets of business applications. The clearest example of this is Oracle Fusion. Oracle is spending a ton of money in increasing the Fusion middleware line and they are not doing it because they want to find new middleware; not really.
Middleware and applications blur
Oracle Fusion is an application strategy, and the only way that Oracle is able to deliver a unified set of applications from all the things they have acquired is by integrating them together around Oracle Fusion. Oracle is very clear about this. If you read all the documentation or the messages that they are sending, Oracle Fusion is an application strategy. That is very important, because the infrastructure (the middleware stuff that we have all been involved with for years and years) is really getting more and more powerful. And so that’s really making this infrastructure into things that people can really build, can easily build applications, on top of.
Dana certainly picked up on this. I think that when you distill all this, what really stands out is that SOA is increasingly about liberating the business process because today many business processes are hard-coated in cement inside big-tent applications like SAP. We have a couple of ex-PeopleSoft people working with us at Cape Clear, and they tell a great story about how they used to do sales pitches against SAP. They went to the customer with a small cup of quick-drying cement and poured it into a mold. By the time they finished the presentation, the cement is set and it has SAP written on it.
They then say, “There you go, that’s the deal with SAP.” It is easy to design, but once you get your business process done, it is embedded in cement. For lots of businesses all over the world, the business process is very difficult to change because the idea is so hard to change. SOA is all about how to use that application in new and more transparent ways that are easier to change and that deliver agility.
I recently had a conversation with a Gartner analyst about how they describe the whole SOA space and the ESB space. They were saying that there were some conversations going on inside Gartner about the fact that they might change the definition for this and bolt the stuff into business processes management (BPM).
At first she recoiled against that saying, but the more you think about SOA, the more you realize that it is just about helping people understand, and making those business processes more transparent and more open to change. We here at Cape Clear see this forcefully with our customers. Just yesterday we announced a business activity monitoring (BAM) solution with the Cape Clear ESB. We are doing this because when people get an ESB installed, it gives them a perfect opportunity for the ESB to power a BAM for the dashboards, so they can understand what is going on in the business process.
We have a great story from one of our customers about repairing an online website. With the BAM solution in, we are looking at the site and we noticed there was a set of faults building up on the credit card validation side. This was tough to track down because of the very obscure problem. The BAM insight showed how the process had been written and, because of that, we were able to point out that they were losing a large number of visitors who were stopped at a certain point because the credit card validation was jamming up.
SOA as new business applications
This example validates having the ability to expose business processes and tell people what is going wrong and how to fix it. If you can show where things are going wrong and how they can increase the top line revenue, it is very easy to sell SOA. Every businessperson can relate to that. So, I just started to pull this together and join some dots here. You come to the conclusion that SOA is a new business application.
I am borrowing from those that have gone before me. The great Scott McNealy line at Sun was that the "Network is the Computer." He was saying that for years. That was a model for the longest time. When he was saying that, they were delivering things like RPC and NFS, and it made sense in those terms. When the Internet arrived it made huge sense and everybody agreed that the network is the computer.
Now, if you join the dots between a new world of easy-to-use host applications then making business processes transparent and being able to see what is going on in real-time in your business is essential. When you start to join the dots between those and other things that SOA is enabling, it starts to give real meaning to this notion that SOA is indeed the new business application. It is not about Web services and WSDL and BPEL, which is for technologists, but the business people need over time to see where they’re going to build applications, and it is around SOA.
As you start to frame it in those terms, we can come up with a language that explains what SOA is all about to business users and we absolutely need to do that. I’m writing this up in a blog article and will hopefully get it posted soon. If you want to join in the conversation and add your two-cents to what you have heard today, we certainly welcome you to do so.
So with that, I’m going to hand it back to the moderator and I am going to take some questions. Thanks very much.
Questions from the audience
Moderator: Thanks, Annrai. Okay, our first question reads, Annrai, you mentioned BAM as an example of an application-level benefit of SOA. What other business application-level benefits may be coming?
O'Toole: That is a good question. First, let me talk about just specifically in relation to how we at Cape Clear think about it, and then maybe more generically. So, one of the topics that’s gained a lot of attraction recently is this whole notion of SOA governance, whatever that means. It is a great term. If you dig into it and if you look at a lot of what the products today are offering in terms of SOA governance, it is about IT governance.
It is essentially a workflow system for IT, to make sure we’ve done the correct designs, to make sure we are going through the right development steps, to make sure we are following the right checklist in terms of deploying things and so on. So, it is a workflow to make sure that IT is doing the right thing.
That’s interesting, but it is not much use for business users. Business users, when they think about SOA governance, they want to have some notion that they can understand the set of services and what they’re doing, and just get more transparency into what IT is actually doing. To that end, we at Cape Clear, we’ve talked a bit about this notion of a SOA wiki. I mean a wiki is a fantastic way of communicating information in a semi-structured way.
A lot of the information that business users want about services is pretty semi-structured; they want to understand what services we are running today, they want to see high level pictures of them, and they want to comment on them and say, “It’ll be really great if you could do this rather than the other ...” They want an easy way to do that. They want to see nice pictures, maybe of business flow diagrams that go behind them. In fact, we see the SOA wiki in Cape Clear terms as a metaphor for how you deliver the next-generation of business tools.
The state of the art today in terms of business-level tools around IT are things like the Rational software from IBM. It is a very good set of tools, but if you look at what they do, they give you things like the Rational Unified Process, which is the UML system. That is not really of use to a business user. I’ll pay anybody handsome money if they can show me a business user that can make sense for a UML diagram.
So, I think there is a big need to take what we’ve done today in SOA and really start to build out the next generation of tools that are in the wiki mode to help business users see the set of services, and business processes, understand the set of policies that are being enforced by the IT organization, and be able to interact with those in a manageable way.
All this information flows into a repository, and can then be pulled out and IT guys can work on it then. But I see SOA going in that direction, and from that moving to the next-generation of business process modeling tools, and so on. There is a long way for the full plate of things, that both Cape Clear and the industry in general, is going to address around giving better business tools to business users.
How to get started with SOA
Moderator: Okay, thanks. I think both of you can comment on this next question. Dana, you can comment first and then Annrai. How does a company with a significant number of legacy applications get started with SOA?
Gardner: Well, the gist or the crux of the issue is where to start on this process. We have seen a preponderance of services around data and I think it is important for people to look at the data within those legacy applications and to liberate it so that it can be applied more broadly to processes, to offer visibility, and give metrics and knowledge about the business -- but outside of the strict confines of the applications and legacy applications.
So one of the first and perhaps best business pay-off activities you can do is to look at the data -- elevate it, cleanse it, and make it available as a service. This is probably something people have been doing within a fairly rigid set of database technologies. A good place to start is to take that data and abstract it to a services level or a layer where the metadata is more important in a process or holistic sense rather than the formats and originating repository.
Once you have liberated the data, you can start looking at liberating logic, exposing more of the applications as components or services, or at least integrating them beyond just a point-to-point basis; liberating them to integrate at a higher abstraction. So, you look at the data, you look at the logic, and it is also a great opportunity to start rationalizing which of those legacy applications are worth maintaining.
You might want to sunset some applications once you have the data out, or once you have taken out some of the logic in the COBOL or whatever code is there. You probably don’t have much documentation and the people who wrote it are long gone. It might make economic sense to retire some of it. If you’re not going to retire it, you might think about what platform makes more sense over a period of time. For example, should I move it to a Linux on Intel or x86 architecture? Should I think about decomposing them into either Web applications or client-server application services? So, look at the topology and what makes sense.
I would have the legacy rationalization process include movement toward SOA along with your movement of what to sunset, what to modernize, what to consolidate, and unify under the newer architectures. By doing that, you are protecting yourself against the risk of spending money needlessly on outdated things that are not contributing to your bottom or top lines -- and at the same time reducing your overall IT cost.
O'Toole: I do not have much to add to that other than our usual dictum which is to start small; define something that is definitely doable, and do it. There is a lot of learning that folks have to do if they get into this world, and they need to just get going somewhere.
How do SOA and Web 2.0 intersect?
Moderator: Okay, thanks. The next question is, How do you see Web 2.0 and SOA coming together? Is that what people mean by Enterprise 2.0? Dana, I think you were talking about this in your presentation.
Gardner: Yes, we’ve seen a lot of activity around social networks that allow collaboration on an ad hoc basis, using things like wikis, podcasts, blogging, transparency and openness -- where the technology is really above and beyond (and totally separate from) traditional applications and platforms.
These things could actually be services that you would take off of the Internet as a Web service from Google or Yahoo or some open source or proprietary company that you might pay for on a subscription basis. We have some of these new tools, and some of the younger folks that are coming into IT that are used to doing this in their high school yearbook or equivalent. So we are looking for these ways of communicating and collaborating, where you blend some of these Web 2.0 capabilities into an SOA opportunity, where you’re looking at automation.
You’re providing more graphical interfaces for people to start reacting to IT as a business user, where the automation of the services is beneath the covers and people are increasingly finding an intercept. How will they do that? Will people think about intercepting with business processes and an automated layer of highly abstracted IT through a traditional tree diagram, or will they think about it more like a discussion and how can I get other people who have an impact on this business process, either inside or outside of my company? How can I bring them into the process? How can we communicate and collaborate?
So, I think that there is a great deal of opportunity for Web 2.0 principles, ideas, and approaches to be applied to SOA, just as SOA is bubbling up. I see this liberating and freeing data and logic into services that can be arranged and re-arranged. Some people are worried that SOA becomes less relevant under Web 2.0; some will just use ad hoc and loosely coupled and some of the client interfaces as the equivalent of SOA. But you still want to have impact on your legacy systems, down into the distributed computing environment, while also taking advantage of these high-abstraction social interaction benefits.
O'Toole: Web 2.0 is fundamentally a consumer Internet technology and Dana’s point is well-made. If you look over the last four or five years, there is been very little change in the enterprise computing landscape. In fact, what we have seen is massive consolidation at the enterprise computing level ... this massive consolidation of big old giants, and I think there are lots of things people mean by Enterprise 2.0.
But one thing everybody would agree on is there is a big change coming at the enterprise computing landscape. The days of very cumbersome, hard-to-use monolithic expensive technology is coming to an end. As Dana mentioned earlier, we are at a tipping point where the whole existing enterprise and software world comes crashing down. It is going to be a big bang.
Moderator: Okay, thanks. The next question is for you, Annrai. What lessons did you take away from your dealings with Workday that speak to the advancements of SOA?
O'Toole: There are a few tactical ones in making SOA work in that 24x7 host environment. This is no walk in the park. It is a very demanding environment, and your stuff needs to be up to the job. The traditional interoperability stuff does not work. A lot of the people using the Workday service are using .NET clients. Everything we have spoken about in terms of adding SOA into operability and out-of-the-box integration all needs to work in production.
Workday is offering two elements: One is hosted applications, initially human resources functionality; and secondly hosted integration. They need to be able to host integrations on behalf of their customers, to talk to ADP and other payroll processes and so on. This whole multi-talented, hosted integration thing is a really interesting idea. And I think that’s come out as how we help a lot of existing enterprises move forward into this new world of SOA.
Key messages for ROI
Moderator: This will be our last question. What have been the key messages specifically around ROI that an IT professional or CIO could take to our CEO about why we should invest in SOA? Dana, maybe you could respond that?
Gardner: Sure, I think CIOs need to stress to their leadership the need to get behind transformation, and that all the complaints about IT will not back away by themselves. A proactive approach to transformation is essential. Once you have decided you want to change the mindset around IT from being a cost-center and an inhibitor and a place for excuses or to develop as quickly as code, then you will make the shift toward being a differentiator -- a place where IT are accountable.
If they can make change happen and become more accountable with both developers and operators working hand-in-hand on a common methodology or understanding -- that's architecture. They also need to take into account the networks and communications folks. It is not just cutting across developers and the operators. We need to bring in all those folks that used to exist down the hall alone with their PBX and their communications protocols and their own set of goobly-gook and acronyms, and allow for those communications to be exposed to services as well.
Then all those services need to be embedded within business process. It is not just about what you do with your PC. It is what you do with your phone, your mobile device, and multi-modality communications -- anything that touches IT. It all blends together.
So the mindset to take to your CEO is transformation. If they were invigorated by business process re-engineering 15 years ago, they should be reinvigorated by SOA and see it not through the lens of yet another technology shift, but really through a larger lens in order to be adaptable and changeable in the marketplace.
Moderator: Great, thank you. That’s all the time we have today. If your question was not answered online, we will be happy to follow up with you after the event.
If you would like to learn more about Cape Clear, please visit our website at www.capeclear.com. You can also register for one of our upcoming SOA forums. Thank you very much, Dana and Annrai, for your time today and thank you all for attending.
You’ve been listening to a sponsored BriefingsDirect Podcast with your host Dana Gardner, principal analyst at Interarbor Solutions. Remember that full transcripts of these podcasts are available at www.briefingsdirect.com. If you would like information on how to sponsor a podcast or to repurpose a webinar into a podcast, contact Interarbor Solutions at 603-528-2435 and at www.interarbor-solutions.com.
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Transcript of Dana Gardner’s BriefingsDirect podcast on the state of SOA. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
Listen to a podcast of the webinar here. Sponsor: Cape Clear Software, Inc.
Welcome to a special BriefingsDirect presentation, a podcast created from a recent webinar with Interarbor Solutions Principal Analyst Dana Gardner and Cape Clear Software CEO Annrai O'Toole. This sponsored webinar presents a Services Oriented Architecture (SOA) market perspective by Dana, followed by comments by Annrai, and some questions from the live webinar audience. Today’s topic is how the value provided by SOA may be the best way to demonstrate the business value of SOA investments. Now, let’s listen to the analyst’s perspective.
Dana Gardner: Hello, we’re going to work through a state-of-the-market analysis on SOA at a very important juncture in SOA's evolution. An incredibly important issue right now is whether we are going to win broad acceptance and deep penetration, or whether SOA remains somewhat marginal.
There are a number of things going on in the market that we will look over. Trends and developments in information technology (IT) such as market acceptance and tipping points -- and a sort of social-animal instinct and on how people behave -- become very important. It is no longer just about the technology; it's about what motivates people, particularly in their businesses.
So, let’s take a level-set in changing times. These are very dynamic times. There are so many things going on in addition to SOA that we can’t look at SOA alone; we have to look at it in the context of what’s going on in general with IT and business. Over the last two to four years, we have seen SOA develop as a vision, spawned off the work done with Web services, progeny of object orientation and components, bringing it into a standard environment and, hopefully, into much broader usage across IT -- not just in development but in how people conceive of IT; a transformative type of activity.
We have gone through SOA standards. We have seen companies come up with methodologies, and have had examples of successful, and not so successful, implementations of SOA in the marketplace. Most, if not all, of the large vendors are solidly behind SOA. We’ve seen them use the terminology. Some are talking more about the business results than the SOA nomenclature itself. It is clear from IBM to SAP, to Oracle and Sun, that their products and services are based on SOA principles. We expect that will then follow through into the marketplace. We are also seeing quite a bit of development from the large global systems integrators around SOA practices.
Question for SOA is when, not if
It has been my analysis for several years that this is an extremely big deal, but what has been missing is the agreement generally in the marketplace as to not if, but when, to do this. We have also had a lot of activity in the marketplace around startups merging and rearranging their businesses. If they did not start focused on SOA, they seem to be heading in that direction. And that has led to a period of consolidation. We have seen mergers and acquisitions, partnerships, and ecology developments.
We’ve seen the notion of SOA, and it includes governance, bleed over into how IT actually functions -- and not just how development and deployment strategies are defined. We are really up against the tipping point here. The crucial issue for SOA is how that tipping point manifests itself.
The real force behind SOA is a transformative activity, both for the technologists in the IT department as well as for how IT is conceived, perceived, and used by the businesses. This has been an ongoing issue for many years, if not decades. At this point we have quite a bit of buy-in around SOA from the technologists. What we see mainly, however, is SOA use behind firewalls and within fairly vertical applications, within a defined business process activity.
What's more, many services today are data-centric. My studies show about two-thirds of current in-production SOA services have been data-service layer or data-centric services, and so perhaps as few as one third are being devoted to business logic and transactional activities. This, of course, will vary from company to company, in vertical industry to vertical industry, but the trend is showing a predominance of interest in making data available as a service. That service is then consumed and used in non-SOA activities and in more traditional integration portal Web applications, and Web or thin-client presentation applications.
How will SaaS and SOA emerge together?
So, SOA remains somewhat tactical even at most mainstream enterprises. There is also an important trend line around software as a service (SaaS) providers as they build their applications to be consumed and used as services. They might have a deep impact on how SOA is consumed -- almost on an outsourced basis rather than a homegrown basis -- and we are going to be tracking that carefully.
An inhibitor to the business side of the house in enterprises adopting SOA broadly is a lack of discretionary spending in IT for SOA types of investments. There is a lot of confusion around SOA and its values, and what business terms and issues are the motivators. Therefore SOA remains difficult to define and rationalize in purely economic terms. There are a lot of reasons for that.
The market is going to work toward a better understanding of the rationale behind businesses as they seek investments in this disruptive technology. We will move from monolithic silos of development and deployment infrastructure and sort of break that apart. Then after the decomposition process we can extend and reuse and redeploy -- hopefully with a great deal more efficiency -- these resources as granular components or services.
Follow the money
Though the concept is quite strong, the benefits in terms of numbers and metrics can be rather soft. We could tell people they are going to be more agile, be able to change in the marketplace more quickly, and be able to consolidate and use more singular architectures. Yet these are not numbers you can bring in on a quarterly basis and say, “Here’s what SOA has done for us this quarter in terms of dollars and cents.” Financial rewards are part of a long-term transformative process as well; something we expect will take years, if not decades, to fully play out.
SOA is really a journey without a destination and, as such, it is harder to quantify and qualify in terms of payback. If there is no destination, when does one know one has succeeded? This also affects cross-organizational use and deployment. There is a traditional chicken-and-egg relationship on whether developers move first, or the SaaS operators, or the people who deploy them on-premises, and that’s currently being played out.
For the true payback of SOA to come about, be it in soft terms or hard terms, it does require a horizontal, holistic, and general usage. Politics are also involved here. We have people that have been quite content to remain within a small, isolated arena with their own budget to control, working for several well-known and established taskmasters.
SOA, in a sense, disrupts that. There is no central taskmaster with SOA (and that's why governance is so important). The idea is for more and more folks to have a handle on these services, and then use them in new and innovative ways -- closer to the line of business, closer to the business processes, and extending beyond the confines of the enterprise into a supply chain, for example. So there is naturally some control politics.
Also budgeting issues play a role, which often means control from the top down rather than the bottom up because it is the central command-and-control folks that effectively change budget structure and allocate funds. So that is in process now as well.
There is also the need for collaboration across these groups. Not only do we want to change how budgets might be formed, we want to encourage people to work in a simultaneous fashion rather than in a linear fashion. So the hand-off of an application project really can’t happen over a period of six months to 12 months anymore; it needs to happen simultaneously with development. The whole idea here is to go to the business side of the house and tell them we can work quickly and change the process for you, as you have to adapt to a rapidly changing marketplace.
Make the business case for SOA
Gaining market acceptance for SOA requires a compelling business and economic case, something that we haven’t seen, at least not in a cohesive matter. There isn’t a central SOA defining body; there isn’t a central mouthpiece for SOA or SOA activities. It is been happening on an ad hoc, willy-nilly basis from a number of large and small vendors, as well as integrators and professional service providers. It is happening almost as if we were in a social network, and perhaps we are. This is a global SOA social network effect that we are seeing. It is happening at a time when we can’t just focus on SOA, however.
We need to look at all of the other trends, changes, and, frankly, complexity that CIOs, decision makers, enterprises, and telecommunication carriers are facing. If we look at a laundry list of what is going on right now we are not only looking at SOA issues, but also Web 2.0 (and this new concept of Enterprise 2.0), event driven architecture, complex event processing, SaaS, grid-utility computing, application virtualization, open source software and its impact, business process management, and on and on. People are dealing with convergence issues and mobility issues cutting across different types of devices. We are talking about "fabrics" for interconnected networks.
IT trends are also in flux. These are not just technology issues, but affect how IT is consumed such as through "shared services," where IT departments function more as a business customer within an enterprise. They behave based on market forces internally and the need to fulfill service level agreements locally. A very hot area now is IT governance from regulatory impetus to general organizational business practices, where IT departments are maturing and behaving as would an accounting department or an external field organization.
We are looking at application modernization, with people rationalizing which applications should remain and which should go as part of a datacenter consolidation trend. There is infrastructure virtualization, where we can cut costs on hardware and find new benefits around platforms, and instances of runtime, where we can deploy applications in new and interesting ways.
There is also business continuity to consider. We have natural and man-made disasters and disruptions that need to be addressed and, therefore, redundancy plays an important part, and data centers that are strategically placed outside of places that are perhaps at risk. Furthermore, there are regulatory compliance and intellectual property issues involving what code can be used in which ways. This is all part of a barrage of issues that are affecting CIOs and decision makers simultaneously.
More ROI for SOA
Yet, despite the complexities, despite these numerous trends and changes in the market, aggregate spending growth for IT remains fairly confined. We see large single-digit numbers in many organizations. Even within that confined growth trend we still see 60 percent to 80 percent of the total IT cost going to just maintaining and keeping current infrastructure and applications running, which does not leave much for discretionary SOA spending.
As I mentioned earlier, not many individuals are jumping up and down and singing the SOA song in a mutual chorus. Microsoft, for example, has remained somewhat distant from using SOA as a phrase, although many of the business benefits they project for their infrastructure and applications (particularly the newer ones) do align with SOA methods and business benefits.
We need to energize folks to invest in SOA now. I have addressed this issue by looking at the many-faceted benefits of SOA, both as an opportunity and as an area of fear. There is an opportunity to beat your competition if you can embrace SOA and use some of these other large technical and organizational changes to your benefit; to make IT a weapon you can use to do better than your opponent and, therefore, get better traction in the marketplace.
There is also the fear that your competitor might do that to you. There is an opportunity to exploit new avenues for change by obtaining applications or modernizing applications including SaaS. If your opponent in the marketplace (or the person who might get to the marketplace first) is using SaaS, their costs are lower and their agility might be higher. So, there is a fear of that as well.
This is also a great opportunity to exploit these convergence issues, reach mobile workers, and better deliver data and application and logic to the end users across the organization. SOA benefits also work both internally and externally. They allow you to be an architected organization where the focus is on what you need to do in a market to gain new business and to know where the new business is expected to be in six months; to be an early mover, not a trailing-adopter.
Architecture for competitiveness and risk reduction
SOA architecture is absolutely essential to become a first-mover and to focus strategically on architecture over applications to win business. The relationship between the application and the architecture is something we must focus on.
It is not just the fear and opportunity, but general and broad risk reduction that should energize people about SOA. SOA can empower businesses to reduce their risk of losing value from past IT investments. SOA allows you to continue to reap rewards from your past IT investments; to not necessarily sunset applications, but find new value in them. You can mitigate your risk against not competing with newer companies that don't need to support a costly legacy because you can bring in greenfield and modern application architectures as well. SOA allows you to play with both legacy and new greenfield approaches.
There is also risk reduction and mitigation against the unforeseeable future; against new architectural benefits, IT benefits, or trends that might be here in two-to-three years. SOA has a risk-reduction benefit because it is defensive, it is offensive, it is inclusive, and it works across organizational boundaries.
There is also risk-reduction around data and application logic, and the use of data in applications in new formats. There is reduced risk in the ability to absorb and manage merger and acquisitions, expected or not. I’ve spoken with folks at venders like Oracle that say they probably couldn’t have done the J.D. Edwards and the PeopleSoft activities without Web services and, increasingly, without SOA. If they can do it to move fast and successfully in their markets, their customers need to think the same way.
They need visibility across an entire process chain to reduce risk in terms of actually controlling what is going on within IT. One of the things that we are discussing with IT governance and enterprise service buses (ESBs), and some of the standards and methodologies used, is an ability to gain a holistic total view into a process -- not just a set of technologies; not just a particular server farm or a particular layer within a distributed architecture but across a business process.
"How am I actually doing?" This is a very important element for businesses on a regulatory compliance basis for Sarbanes-Oxley, for example, but also for companies to be fleet. If you don’t know what you are doing or how things are going, you cannot react appropriately.
So, in summary, SOA is really a means, an ongoing journey. It has soft advantages, but I think it has great benefits in terms of risk reduction and of meeting opportunity rather than fearing opportunity. It is a defensive and offensive weapon, both inside and outside of the firewall, and it bridges the past and the future while encouraging organizational transformation -- not just IT transformation but business transformation.
SOA promotes total excellence over subset excellence and fosters change management as a core competency. It also allows for constant process refinement; things do not get locked in and then set into a monolithic and static hierarchy, they are constantly being changed and improved. The ultimate goal is to be able to attain many of these things with overall reduced cost of capital and in the cost of ongoing maintenance and support.
That is the end of my presentation on the state of SOA. It is important now to energize and find ways to make the business case for this because the managers, over time, will play out for those that are early movers. Thank you.
Cape Clear CEO comments
Annrai O'Toole: Thanks very much, Dana. I am going to pick up where Dana left off. Dana has pointed out a few of the topics here, and there are a few things that I would like to add to the mix.
Before we jump in to this, I would just like to stand back and think about SOA in a very broad sense. I have been writing a blog article about this topic as well. It is fair to compare SOA to things that we have seen in the past like client-server and the Internet because they are very similar. Those were terms that the industry applied to a big change. The Internet was very easy for people to understand, because it is very visual and people could get on to a browser and move around.
So, the Internet did not need a whole lot of selling. Client-server needed quite a bit. However, there were a lot of clear business benefits to client-server in particular because it came from a mainframe-dominated world of computing. Client-server essentially offered people a much cheaper hardware infrastructure, and a much cheaper way to get far more powerful applications onto people’s desktops. So it was pretty easy; business users could use those applications to see what it was all about and they received client-server at a high level.
SOA is very similar to client-server. SOA is essentially a set of technologies and a methodology and a philosophy about how we build enterprise applications. SOA is never going to have much meaning for the average consumer in the streets, but it does have a lot of meaning for large enterprises. We are here today to discuss what SOA means to business users and enterprises. As Dana outlined, it is a kind of struggle because we can approach a business user and say, “SOA gives you more agile applications.” They ask, “What precisely does more agile applications mean?”
The term in itself is vague and building any metrics around this is tough. The business users get the notion that they want the applications to change more easily, but it is very difficult to quantify that. If we asked business users and a focus group what they meant by "agile applications," I think we would get many different answers. If you read in the blogosphere about SOA, you read only the articles. Once people get beyond agile applications, they are into reducing integration in half and that is nice. It is definitely very quantifiable.
More meat for the business users
In particular, as Dana exemplified so well, you know there are so many things that IT is grappling with today. I am not going to repeat what Dana spoke about, but the business user and the context of reducing integration costs is important. I don’t think that there are many business users who jump out of bed in the morning and say, “How am I going to reduce IT integration costs?” So I think these are the two main planks about how we justify SOA to a business user today, and I think we are all being pretty candid here, but these are not great.
We need to do a better job on this. If you start reading all the stuff in the blogosphere about SOA, it is really techies talking to techies; it is all about how you adopt SOA and the architectural approaches to adopting SOA. At Cape Clear a lot of our content is focused on IT guys, which is correct, but we in the industry have the onus on us to do a better job of explaining this to business users.
So the bad news is that I do not have a magic answer to this, and the good news is that I have a few things to say that I think are interesting. There are a number of very powerful things that SOA is doing today, and we are involved in some of them. For instance, there is increasing use of software as a service (SaaS). A long-running problem that many business users have had is that they all want greater business applications that give them better insight into their business but they do not want to spend three or four years doing large enterprise resource planning (ERP) implementations.
So SaaS for a lot of cost reasons and efficiencies -- and in use adoption -- is doing really well. There is a new Salesforce.com-breed that has done extremely well there. Just last week we announced our partnership with Workday. They have a whole new take on ERP applications based on the hosted model. They are embedding our software, along with other companies. So there is a whole range of SaaS applications that are turning to SOA to provide the kind of back-end integrations between the SaaS and existing applications that customers already have. SOA is already playing a very important part in pairing the next generation of business applications. And I think many business users understand that.
This next line is not something that I think business users understand yet, but it is incredibly important. A lot of techies know this stuff, but as you begin and you look at what SOA is doing -- it is really blurring the line between the underlying middleware infrastructure and the sets of business applications. The clearest example of this is Oracle Fusion. Oracle is spending a ton of money in increasing the Fusion middleware line and they are not doing it because they want to find new middleware; not really.
Middleware and applications blur
Oracle Fusion is an application strategy, and the only way that Oracle is able to deliver a unified set of applications from all the things they have acquired is by integrating them together around Oracle Fusion. Oracle is very clear about this. If you read all the documentation or the messages that they are sending, Oracle Fusion is an application strategy. That is very important, because the infrastructure (the middleware stuff that we have all been involved with for years and years) is really getting more and more powerful. And so that’s really making this infrastructure into things that people can really build, can easily build applications, on top of.
Dana certainly picked up on this. I think that when you distill all this, what really stands out is that SOA is increasingly about liberating the business process because today many business processes are hard-coated in cement inside big-tent applications like SAP. We have a couple of ex-PeopleSoft people working with us at Cape Clear, and they tell a great story about how they used to do sales pitches against SAP. They went to the customer with a small cup of quick-drying cement and poured it into a mold. By the time they finished the presentation, the cement is set and it has SAP written on it.
They then say, “There you go, that’s the deal with SAP.” It is easy to design, but once you get your business process done, it is embedded in cement. For lots of businesses all over the world, the business process is very difficult to change because the idea is so hard to change. SOA is all about how to use that application in new and more transparent ways that are easier to change and that deliver agility.
I recently had a conversation with a Gartner analyst about how they describe the whole SOA space and the ESB space. They were saying that there were some conversations going on inside Gartner about the fact that they might change the definition for this and bolt the stuff into business processes management (BPM).
At first she recoiled against that saying, but the more you think about SOA, the more you realize that it is just about helping people understand, and making those business processes more transparent and more open to change. We here at Cape Clear see this forcefully with our customers. Just yesterday we announced a business activity monitoring (BAM) solution with the Cape Clear ESB. We are doing this because when people get an ESB installed, it gives them a perfect opportunity for the ESB to power a BAM for the dashboards, so they can understand what is going on in the business process.
We have a great story from one of our customers about repairing an online website. With the BAM solution in, we are looking at the site and we noticed there was a set of faults building up on the credit card validation side. This was tough to track down because of the very obscure problem. The BAM insight showed how the process had been written and, because of that, we were able to point out that they were losing a large number of visitors who were stopped at a certain point because the credit card validation was jamming up.
SOA as new business applications
This example validates having the ability to expose business processes and tell people what is going wrong and how to fix it. If you can show where things are going wrong and how they can increase the top line revenue, it is very easy to sell SOA. Every businessperson can relate to that. So, I just started to pull this together and join some dots here. You come to the conclusion that SOA is a new business application.
I am borrowing from those that have gone before me. The great Scott McNealy line at Sun was that the "Network is the Computer." He was saying that for years. That was a model for the longest time. When he was saying that, they were delivering things like RPC and NFS, and it made sense in those terms. When the Internet arrived it made huge sense and everybody agreed that the network is the computer.
Now, if you join the dots between a new world of easy-to-use host applications then making business processes transparent and being able to see what is going on in real-time in your business is essential. When you start to join the dots between those and other things that SOA is enabling, it starts to give real meaning to this notion that SOA is indeed the new business application. It is not about Web services and WSDL and BPEL, which is for technologists, but the business people need over time to see where they’re going to build applications, and it is around SOA.
As you start to frame it in those terms, we can come up with a language that explains what SOA is all about to business users and we absolutely need to do that. I’m writing this up in a blog article and will hopefully get it posted soon. If you want to join in the conversation and add your two-cents to what you have heard today, we certainly welcome you to do so.
So with that, I’m going to hand it back to the moderator and I am going to take some questions. Thanks very much.
Questions from the audience
Moderator: Thanks, Annrai. Okay, our first question reads, Annrai, you mentioned BAM as an example of an application-level benefit of SOA. What other business application-level benefits may be coming?
O'Toole: That is a good question. First, let me talk about just specifically in relation to how we at Cape Clear think about it, and then maybe more generically. So, one of the topics that’s gained a lot of attraction recently is this whole notion of SOA governance, whatever that means. It is a great term. If you dig into it and if you look at a lot of what the products today are offering in terms of SOA governance, it is about IT governance.
It is essentially a workflow system for IT, to make sure we’ve done the correct designs, to make sure we are going through the right development steps, to make sure we are following the right checklist in terms of deploying things and so on. So, it is a workflow to make sure that IT is doing the right thing.
That’s interesting, but it is not much use for business users. Business users, when they think about SOA governance, they want to have some notion that they can understand the set of services and what they’re doing, and just get more transparency into what IT is actually doing. To that end, we at Cape Clear, we’ve talked a bit about this notion of a SOA wiki. I mean a wiki is a fantastic way of communicating information in a semi-structured way.
A lot of the information that business users want about services is pretty semi-structured; they want to understand what services we are running today, they want to see high level pictures of them, and they want to comment on them and say, “It’ll be really great if you could do this rather than the other ...” They want an easy way to do that. They want to see nice pictures, maybe of business flow diagrams that go behind them. In fact, we see the SOA wiki in Cape Clear terms as a metaphor for how you deliver the next-generation of business tools.
The state of the art today in terms of business-level tools around IT are things like the Rational software from IBM. It is a very good set of tools, but if you look at what they do, they give you things like the Rational Unified Process, which is the UML system. That is not really of use to a business user. I’ll pay anybody handsome money if they can show me a business user that can make sense for a UML diagram.
So, I think there is a big need to take what we’ve done today in SOA and really start to build out the next generation of tools that are in the wiki mode to help business users see the set of services, and business processes, understand the set of policies that are being enforced by the IT organization, and be able to interact with those in a manageable way.
All this information flows into a repository, and can then be pulled out and IT guys can work on it then. But I see SOA going in that direction, and from that moving to the next-generation of business process modeling tools, and so on. There is a long way for the full plate of things, that both Cape Clear and the industry in general, is going to address around giving better business tools to business users.
How to get started with SOA
Moderator: Okay, thanks. I think both of you can comment on this next question. Dana, you can comment first and then Annrai. How does a company with a significant number of legacy applications get started with SOA?
Gardner: Well, the gist or the crux of the issue is where to start on this process. We have seen a preponderance of services around data and I think it is important for people to look at the data within those legacy applications and to liberate it so that it can be applied more broadly to processes, to offer visibility, and give metrics and knowledge about the business -- but outside of the strict confines of the applications and legacy applications.
So one of the first and perhaps best business pay-off activities you can do is to look at the data -- elevate it, cleanse it, and make it available as a service. This is probably something people have been doing within a fairly rigid set of database technologies. A good place to start is to take that data and abstract it to a services level or a layer where the metadata is more important in a process or holistic sense rather than the formats and originating repository.
Once you have liberated the data, you can start looking at liberating logic, exposing more of the applications as components or services, or at least integrating them beyond just a point-to-point basis; liberating them to integrate at a higher abstraction. So, you look at the data, you look at the logic, and it is also a great opportunity to start rationalizing which of those legacy applications are worth maintaining.
You might want to sunset some applications once you have the data out, or once you have taken out some of the logic in the COBOL or whatever code is there. You probably don’t have much documentation and the people who wrote it are long gone. It might make economic sense to retire some of it. If you’re not going to retire it, you might think about what platform makes more sense over a period of time. For example, should I move it to a Linux on Intel or x86 architecture? Should I think about decomposing them into either Web applications or client-server application services? So, look at the topology and what makes sense.
I would have the legacy rationalization process include movement toward SOA along with your movement of what to sunset, what to modernize, what to consolidate, and unify under the newer architectures. By doing that, you are protecting yourself against the risk of spending money needlessly on outdated things that are not contributing to your bottom or top lines -- and at the same time reducing your overall IT cost.
O'Toole: I do not have much to add to that other than our usual dictum which is to start small; define something that is definitely doable, and do it. There is a lot of learning that folks have to do if they get into this world, and they need to just get going somewhere.
How do SOA and Web 2.0 intersect?
Moderator: Okay, thanks. The next question is, How do you see Web 2.0 and SOA coming together? Is that what people mean by Enterprise 2.0? Dana, I think you were talking about this in your presentation.
Gardner: Yes, we’ve seen a lot of activity around social networks that allow collaboration on an ad hoc basis, using things like wikis, podcasts, blogging, transparency and openness -- where the technology is really above and beyond (and totally separate from) traditional applications and platforms.
These things could actually be services that you would take off of the Internet as a Web service from Google or Yahoo or some open source or proprietary company that you might pay for on a subscription basis. We have some of these new tools, and some of the younger folks that are coming into IT that are used to doing this in their high school yearbook or equivalent. So we are looking for these ways of communicating and collaborating, where you blend some of these Web 2.0 capabilities into an SOA opportunity, where you’re looking at automation.
You’re providing more graphical interfaces for people to start reacting to IT as a business user, where the automation of the services is beneath the covers and people are increasingly finding an intercept. How will they do that? Will people think about intercepting with business processes and an automated layer of highly abstracted IT through a traditional tree diagram, or will they think about it more like a discussion and how can I get other people who have an impact on this business process, either inside or outside of my company? How can I bring them into the process? How can we communicate and collaborate?
So, I think that there is a great deal of opportunity for Web 2.0 principles, ideas, and approaches to be applied to SOA, just as SOA is bubbling up. I see this liberating and freeing data and logic into services that can be arranged and re-arranged. Some people are worried that SOA becomes less relevant under Web 2.0; some will just use ad hoc and loosely coupled and some of the client interfaces as the equivalent of SOA. But you still want to have impact on your legacy systems, down into the distributed computing environment, while also taking advantage of these high-abstraction social interaction benefits.
O'Toole: Web 2.0 is fundamentally a consumer Internet technology and Dana’s point is well-made. If you look over the last four or five years, there is been very little change in the enterprise computing landscape. In fact, what we have seen is massive consolidation at the enterprise computing level ... this massive consolidation of big old giants, and I think there are lots of things people mean by Enterprise 2.0.
But one thing everybody would agree on is there is a big change coming at the enterprise computing landscape. The days of very cumbersome, hard-to-use monolithic expensive technology is coming to an end. As Dana mentioned earlier, we are at a tipping point where the whole existing enterprise and software world comes crashing down. It is going to be a big bang.
Moderator: Okay, thanks. The next question is for you, Annrai. What lessons did you take away from your dealings with Workday that speak to the advancements of SOA?
O'Toole: There are a few tactical ones in making SOA work in that 24x7 host environment. This is no walk in the park. It is a very demanding environment, and your stuff needs to be up to the job. The traditional interoperability stuff does not work. A lot of the people using the Workday service are using .NET clients. Everything we have spoken about in terms of adding SOA into operability and out-of-the-box integration all needs to work in production.
Workday is offering two elements: One is hosted applications, initially human resources functionality; and secondly hosted integration. They need to be able to host integrations on behalf of their customers, to talk to ADP and other payroll processes and so on. This whole multi-talented, hosted integration thing is a really interesting idea. And I think that’s come out as how we help a lot of existing enterprises move forward into this new world of SOA.
Key messages for ROI
Moderator: This will be our last question. What have been the key messages specifically around ROI that an IT professional or CIO could take to our CEO about why we should invest in SOA? Dana, maybe you could respond that?
Gardner: Sure, I think CIOs need to stress to their leadership the need to get behind transformation, and that all the complaints about IT will not back away by themselves. A proactive approach to transformation is essential. Once you have decided you want to change the mindset around IT from being a cost-center and an inhibitor and a place for excuses or to develop as quickly as code, then you will make the shift toward being a differentiator -- a place where IT are accountable.
If they can make change happen and become more accountable with both developers and operators working hand-in-hand on a common methodology or understanding -- that's architecture. They also need to take into account the networks and communications folks. It is not just cutting across developers and the operators. We need to bring in all those folks that used to exist down the hall alone with their PBX and their communications protocols and their own set of goobly-gook and acronyms, and allow for those communications to be exposed to services as well.
Then all those services need to be embedded within business process. It is not just about what you do with your PC. It is what you do with your phone, your mobile device, and multi-modality communications -- anything that touches IT. It all blends together.
So the mindset to take to your CEO is transformation. If they were invigorated by business process re-engineering 15 years ago, they should be reinvigorated by SOA and see it not through the lens of yet another technology shift, but really through a larger lens in order to be adaptable and changeable in the marketplace.
Moderator: Great, thank you. That’s all the time we have today. If your question was not answered online, we will be happy to follow up with you after the event.
If you would like to learn more about Cape Clear, please visit our website at www.capeclear.com. You can also register for one of our upcoming SOA forums. Thank you very much, Dana and Annrai, for your time today and thank you all for attending.
You’ve been listening to a sponsored BriefingsDirect Podcast with your host Dana Gardner, principal analyst at Interarbor Solutions. Remember that full transcripts of these podcasts are available at www.briefingsdirect.com. If you would like information on how to sponsor a podcast or to repurpose a webinar into a podcast, contact Interarbor Solutions at 603-528-2435 and at www.interarbor-solutions.com.
Listen to the podcast here.
Sponsor: Cape Clear Software.
Transcript of Dana Gardner’s BriefingsDirect podcast on the state of SOA. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
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