Ariba Live Discussion: How Cloud Alters Landscape for eCommerce, Procurement and Supply Chain Management

Transcript of a BriefingsDirect podcast from a live Ariba panel discussion on how cloud-based models offer new benefits and efficiencies to B2B commerce.

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

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast, coming to you on-location from the Ariba LIVE 2010 Conference in Orlando. I'm Dana Gardner, Principal Analyst at Interarbor Solutions.

This podcast is a presentation of a May 25 stage-based panel event on the implications of cloud computing for procurement, supply-chain management, and a host of other business functions. For those of you unable to attend the actual conference, please now listen to this lively and informative panel by a group of noted industry analysts.

Here is the moderator of our discussion, Tim Minahan, Chief Marketing Officer at Ariba.

Tim Minahan: When discussing heady topics like the cloud, procurement, and finance, and looking at the future of business-to-business (B2B) commerce, we thought it important for you to hear from the experts. So, we have assembled a panel of the leading analysts, folks that you turn to to benchmark your performance, uncover best practices, and make IT buying decisions.

I'd like to welcome our panelists now: Mickey North Rizza from AMR Research (a Gartner company), Chris Sawchuk from The Hackett Group, Robert Mahowald from IDC, and Bruce Guptill from Saugatuck Technology. Welcome, all.

Let's spend a little more time introducing ourselves. We'll start down here, ladies first. Mickey North Rizza of AMR Research, tell everyone a little bit about yourself and what areas you cover at AMR.

Mickey North Rizza: Hi, everybody, thanks for attending today. We're looking forward to this panel discussion with you. I cover the sourcing and procurement area from the AMR Research, or what we call the AMR Supply Chain Leader, side of Gartner. I've been there four-and-a-half years, almost five, and prior to that, I spent 23 years in the line of business of sourcing and procurement across many industries. So thanks, Tim, for having me today.

Minahan: Thanks for being here. Robert.

Robert Mahowald: I'm Robert Mahowald from IDC and I'm happy to be here today. I've been at IDC for about 12 years. Before that, I worked for the federal government, doing sourcing of applications and building technology simulations for the Department of Defense.

At IDC, most analysts are functional analysts. They do collaboration, supply chain, or enterprise resource planning (ERP). I am part of a group at IDC that does software business solutions. We look across the board at pricing, licensing, delivery models, and other aspects of operationalizing software for customers.

Minahan: Chris.

Chris Sawchuk: I'm Chris Sawchuk. Good morning. I'm a managing director and Global Procurement Practice Leader at The Hackett Group, a strategic advisory firm. We do a lot of work around research and advisory services, as well as benchmarking of functional performance, not only in procurement, but other areas as well.

Minahan: Bruce, welcome.

Disruptive technology

Bruce Guptill: Thank you, Tim. Good morning, everybody. I'm glad to be here. Saugatuck Technology is a research consultancy that looks only at disruptive technology influence and how it changes the way vendors and user companies do business. I've been with the company for about eight years. Prior to that, I was a VP and research director at Gartner with electronic commerce, benchmarking, looking at the return on IT, and of course total cost of ownership (TCO) -- all the fun financial things.

I go back in the business to a different century, an earlier decade, where I started out in the channel, trying to help people find out how to buy and sell technology and get the most value out of it.

Minahan: The global economy really does seem to be finally emerging from this recession. I know it's a bit slower in Europe, but companies have really taken a lot of costs out of their business. They're taking cost out in the form of reducing infrastructure, letting headcount go, and reducing IT investments. Many CEOs and CIOs have signaled, "We're not going to hire a lot of that back. We're really focused on automating our processes and driving up productivity."

As we enter this "new normal," how do you see operating IT models changing over the next few years? Bruce, maybe we'll start with you.

Guptill: The first thing is to figure out how to handle this cloud thing. It's the single most disruptive influence that we've seen in not just IT, but how IT is bought, used, paid for, and how that affects how everybody does business. So how is it accounted for? Who has responsibility for managing what aspects?

If you have some of it on-premise and some of it out in the cloud, who is responsible? How is it managed? How is that budgeted for?

If you have some of it on-premise and some of it out in the cloud, who is responsible? How is it managed? How is that budgeted for? It changes the way we operate as a business, because it changes the way we spend, the way we buy, and the way we manage. It's very, very disruptive, and policies and practices really haven’t caught up yet to the reality, and we're not getting a breather. The change is accelerating.

Minahan: True, very true. Chris, what are you seeing out there?

Sawchuk: Well, there are a couple of things. I'm going to answer the question from two perspectives and I'm going to share some insights with you from some key issue studies that we've done, both with procurement executives as well as IT executives.

From an IT standpoint, when we look at what has happened to operating budgets over the last year, the IT budget has been cut pretty significantly. As we look further, the expectation is that it will come back slightly. So, there is a real cost control focus from an IT perspective.

The other thing is that we asked these IT executives, "What's top of mind as you are looking out into 2010 and a bit beyond?" They told us two things. Number one, in a most cited area. was that they were going to manage demand and dealing with the demand for IT services within their organizations better.

Second, was driving more agility into the way they actually deliver those services back to the organization. So, from an IT standpoint, it's around continued cost control, demand, and agility.

Declining costs

When you look at it from a procurement standpoint and you look at operating budgets, over the last 15 years, the cost of procurement as a percent of spend, which you can relate to the operating budget, has declined about 23 percent overall. It's even a little bit greater for world class organizations.

More importantly, when you look at these world-class organizations, they actually invest in technology 29 percent more on a per procurement full-time equivalent (FTE) basis. This has actually been one of the drivers of the efficiency gains that they have been able to deliver over the last decade and a half.

Now, when we ask the procurement executives what are they focused on going into 2010 from a technology standpoint, the number one area is just utilizing better the technology investments that they have already made -- digesting them. So, it's a lot of the basics -- cleaning up our master data and just getting more utilization on our eProcurement, eSourcing types of tools in the organization.

But there are a couple of emerging trends that are occurring in the most progressive procurement organizations, in three areas. One is around collaborative technologies. Why is it so difficult to do this in business, when it's so easy with Facebook and all that type of stuff in the non-business type of world? It's not just externally that this applies, but internally as well.

The cloud offers a way to do that a lot more quickly, for less cost, in a way that is still as secure and authenticated as it would be in my IT shop.

Number two, around better management of the knowledge and intelligence across the organization, structured, unstructured, internal, and external types of information.

And lastly, driving more agility into the procurement service delivery model, which includes the technology tools.

Minahan: So, new operating models would be more agile and operate and generate more productivity?

Sawchuk: Absolutely. Yeah.

Minahan: Robert.

Mahowald: We can see that, for the last 10 years or so, we have seen lines of business start to get more acclimated using software-as-a-service (SaaS) services. Some of those lessons are how those services are delivered and filtered back to IT.

Virtualization, automation, and standardization are finding their ways into our IT departments and they're finding ways to do things like reduce the number of physical assets they spend their time counting, and keep them up and running, and rely more and more on external services that can safely provide the functionality that their users require.

And the typical scenario is that, if I am in the line of business and I want to build an application, or I need to have access to an IT service, I've got to go to my IT team. It can often be long and time-consuming to get that thing spun up and tested, kick all the tires, and get it up and running in the environment that is being used.

The cloud offers a way to do that a lot more quickly, for less cost, in a way that is still as secure and authenticated as it would be in my IT shop, and probably done in a way that is much, much more service enabled, for the ultimate constituency I want to serve, my user, the internal user. So, it's a big opportunity.

Minahan: So, looking at alternative delivery models to drive better results at a lower cost. Mickey.

Pent up demand

North Rizza: Basically, what we're seeing is that companies have a lot of pent up demand over the last couple of years. They haven't been able to change some of their business processes and automate them the way they would like to. What they've been doing is standing back, trying to get more out of their ERP systems or basic business processes. They've had to make a lot of cuts and they're not getting everything they need. What we're finding now is that spending is starting to pick up.

We're also finding that companies are looking for alternative deployment models. They're starting to say, "What can I do above and beyond just the technology application? Where else can I look for services and other opportunities that are, one, going to quickly drive value to my line of business buyer, because those are the folks that do the business day in and day out? They're the ones that need to make a difference. And finally, how do I do it quickly, without a lot of disruption, very flexible, and a great investment, but a really quick return on that investment?"

Minahan: So, real value. Chris, let's go back to you. One of the areas that you focus on quite a bit is connecting that physical supply chain to the financial supply chain. So, in aligning procurement and finance, what good examples have you seen where, not only are the functions of procurement in accounts payable (AP) being better aligned, but the concept of developing a strategy around working capital management being applied as well?

Sawchuk: Tim, one of the best ways to answer this question is first to understand that as procurement organizations, we need to evolve our value proposition back to the organizations that we support. And, evolve it past the spend cost savings, our traditional value that we've been delivering, to such things as total cost, shaping the demand, which we have been involved with quite a bit over the last 24 months, and ultimately, value management, and getting ourselves much better aligned with the overall top-line objectives of the enterprise itself.

That traditional value proposition has been challenged over the last several years. We see that spend cost savings as a percent of spend have been declining across the board, with the exception of the last year, where most of us have record returns in terms of our savings back to the organizations. But there is a maturing of the sourcing execution processes. We can’t save ourselves to zero. So, we have to evolve. And, one of the ways we evolve is to augment the value that we're delivering back to organizations, with such things as working capital and getting ourselves to support those types of objectives.

So the question is, are we misaligned or do we feel that we have done everything we can over the last 18-24 months and there’s nothing more to do?

Over the last 18-24 months, most of us have been involved in that kind of thing. We pushed out our terms with the suppliers. We have freed up some cash for our organizations. But, the real question is, did you actually do this in a way and build capabilities in your organizations to sustain those working capital improvements in the long-term?

Why we ask this question and what’s alarming to us is that when we asked CFOs in the broader enterprise, coming into 2010, what was the number one area of focus for them, it was cash. When we asked the same question to the procurement executives and community, it was cost. Cash was number 10. So the question is, are we misaligned or do we feel that we have done everything we can over the last 18-24 months and there’s nothing more to do?

When you look at this, procurement and the data as just being cost focused are fading. We've got to get much more balanced in the way we actually deliver our value, not just cost, but also working capital and other areas as well.

You wanted some examples of what these world-class organizations do around working capital and how they do it well. Number one, they measure it. They bring visibility to it. They put it on their scorecards. They have cash conversions, cycle time matrix, DPO, DIO, etc.

Number two, they manage it and the source-to-settle, purchase-to-pay process.

Number three, they create collaborative communities with procurement, with the business, finance, and treasury, around working capital strategies and objectives.

And, fourth, they actually compensate. We see organizations out there where some of the procurement folks and these folks on these collaborative communities are compensating. Up to one-third of their compensation is based on their achievement of working capital objectives.

Minahan: So, getting better aligned, collaborating better, and then, obviously, that important one of aligning incentives to make sure everyone is growing.

Robert, we talked a little bit before about this new normal, with folks operating leaner and looking at more variable operating models, and this has carried through to IT decisions and how companies are making that. How are companies leveraging the cloud to drive maximum efficiency and effectiveness across all business processes?

Reducing fixed costs

Mahowald: It’s true. If you look at your typical organization and the task of IT portfolio management, all of us, in the last couple of years especially, have been struggling to reduce fixed costs as much as possible, just like we do in our government and in our families. If we could take some of those fixed costs out of our budget and introduce some variables that are based on choices that we can make, that ultimately helps us out as organizations and helps us control our spend.

In many IT organizations, as much as 55 percent of the budget is spent on keeping systems running, and that involves paying for the ongoing license and maintenance and support of software and hardware and all the power pipe cost that it takes to run an IT center.

The ability to reduce some of those costs by outsourcing them in lower-cost subscription models that are operating costs is an enormously helpful transition for many customers. CIOs that we talk to are excited about introducing cloud services and also what we call naked compute services or offsite storage to improve the efficiency of certain applications that are widely used in the organization or offsite development platforms, where they can actually build applications.

It’s a major activity for many IT organizations to build new applications, objects, and customizations on-site. If they can offshore that and not have to pay application licenses or infrastructure cost, that’s a big help to them in lowering their fixed-cost structure. Ultimately, it's a big help to make IT organizations much more lean and responsive to their needs.

Minahan: Let's shift gears a little bit. With all due respect to the technology analysts on the panel, the cloud is not all about technology. It's about a new way of operating. We're seeing more and more organizations embrace what you at Saugatuck call "business process utility." Can you define this term a little bit for us, Bruce, and explain how solutions are helping businesses, not only lower their technology cost, but manage their business process?

Why can’t that be delivered and used as a service, as a utility, cloud-based or otherwise?

Guptill: There are a lot of problems that we have to solve by hiring or by buying and adding to what we have. That’s the traditional way we've done it. If we have a new line of business, if we have new regulatory requirements, if we have new reporting needs, we buy something to address that need. We buy people, technology, or services, or we train somebody to put everything together.

Business process utilities is actually a term that’s been around for quite a while. We started using it internally about six, seven, eight years ago as part of a series of projects to help some of the larger IT providers understand what could we do with this whole idea of what used to be called utility computing and what we now know as the cloud.

Our idea was that if you can take the software and put it in the cloud, and if you can take the hardware and the infrastructure service, the IT, and put it in the cloud and take advantage of that, we have all these vendors -- let's take Ariba for an example -- that have these terrific technologies, applications, and the expertise to use them. Why can’t that be delivered and used as a service, as a utility, cloud-based or otherwise?

Then, we have the business logic, we have the software, the applications, the functionality, and the technology, to make it happen. We can do that as an as-needed, on-demand, or subscription basis. It removes a lot of the fixed cost that we've been talking about. It reduces our reliance on fixed assets or fixed cost for what could be cyclical or temporary needs in terms of functionality. It's basically outsourcing business tasks, business functions, or business processes to the cloud. It's "cloud temping" basically.

Over time, these things start from very simple, straightforward, and standardized capabilities, similar to what SaaS, or infrastructure as a service (IaaS) started as, but we are seeing them start to evolve into more configurable or more customizable capabilities.

Pool of functionality

So that we can now -- it's just starting now, but will be much more over the course of the next four or five years -- take advantage of a large pool of business functionality that we don’t want to buy. It's not just a technology. It's not just a software. But it's the business tasks that we don’t want to buy, we don’t want to train, and we don’t want on our books. We can rent those as we need them, and when the work is done, they retire back to the cloud.

Minahan: It's not just about business application delivery, but business-process transformation. Raise your hands. Who here still gets paid by paper check? That's a type of service. It's great to see that trend going on in the market.

Now, Mickey, you recently conducted a study of companies that are using cloud-based solutions to improve collaboration and efficiency across their supply chain. What were some of the key findings from that study?

North Rizza: We found that 96 percent of those in the study are using cloud-based solutions, but out of that 96 percent, 46 percent are geared into a hybrid cloud solution. And by hybrid we mean that they're actually using cloud technology applications. They're optimizing those against their IT on-premise investments, and further, they're extending the capabilities into cloud services technology. So they're looking at the whole gamut.

When it's executed well and done well, it allows you to execute on your working capital and supplier payment types of strategies.

The second part of that is the next leading area, and that’s 41 percent around a private cloud. The difference there is that they're looking at technology capabilities from the cloud and they're putting that with their ERP or on-premise IT investments, but they're not necessarily extending those capabilities.

So, while we see this as a big area, and companies keep going down this path, one of the things we also find is that it really means a sharper focus on master data management (MDM), your business process, how that’s orchestrated, both inside the enterprise and externally into your trading partners, and understanding your governance structure. We'll see more and more of that come out, as time goes on here.

Minahan: There's that issue of master data management yet again.

Chris, let's shift to you again. Considering what Mickey said and what Bruce said, how are companies considering cloud and network-based solutions to apply to their collaborative finance areas? How are they using it to speed invoicing and payment and even help in their working capital management strategies?

Sawchuk: The first thing, and you've heard a lot of it, is that technology is an enabler. It enables a purchase-to-pay process to be more efficient and more effective, and along with some other practices around process design and then process management. But, when it's executed well and done well, it allows you to execute on your working capital and supplier payment types of strategies.

Faster, easier access

We've been talking about the cloud. How does it help here? First of all, and you've heard a lot about this, cloud gives you much faster, easier, and more economical access to technology solutions. Now that you're connected, you can -- to your point Tim -- speed the transactions across your supply base, etc.

More importantly, it gives you much more predictability in your ability to execute. For example, a lot of us say we moved our terms. We moved our terms from 45 to 60 days. When we do that, the suppliers say, "When we were on 45, you couldn't pay me on time. You moved it to 60. Can you pay me now on time?" It gives you some predictability in the execution. That's important to them.

Number two is, if you negotiate early pay discounts, you have the ability to execute and take advantage of those kinds of things that you have in your commercial agreement.

The cloud also does a couple of things. It certainly brings much more visibility to the overall activities that are occurring across the entire source-to-settle process. But also, once you are connected in this whole cloud environment, it certainly gives you access to intelligent services that exist out there. I'm talking about working capital, things like information about the financial health of your suppliers, their historical performance, the cost of capital, etc.

That kind of collision between outside the cloud and inside the organization is going to change and it could change business pretty dramatically.

Minahan: So getting the paper out, improving the visibility, automating that process, gives you the ability now to make intelligent decisions about how to manage your cash?

Sawchuk: Absolutely.

Minahan: Robert, we heard a little bit about this today. In the personal commerce world, companies like Amazon and eBay have really begun to blur those lines between applications and community. This seems to be continuing into the business world.

IDC has been looking at network-based models and solutions and applications for a while. Where are these models most appropriate -- for internal applications and business processes, for external -- and how do you see companies evolving their use of these network-based models?

Mahowald: It's a good question. We've been seeing blurring for a long time. If we think about what we do as business users, when we go into the office, we sit down at our desk and we have got a combination of IT-delivered applications and services on the one side. Then, we can turn the to other side, go to the web, and get the other things that we need most often -- search, consumer commerce, buying, and all kinds of things that aren't given to us by IT. At some point, cloud forces the way we have always been doing things to collide with the way things perhaps should be done.

We talked about lower cost, leaner IT organizations, because they are able to source outside of the organization, and get lower cost services. We think that kind of collision between outside the cloud and inside the organization is going to change and it could change business pretty dramatically.

Where business happens

Another thing is that, when you've got solutions that are brought in by business users -- maybe it's a salesforce.com or some other SaaS application -- it's important to them, and it's important for them, to get agility and speed to that functionality, but there are going to be many places where you are going to be brought outside of your organization, because that's where business happens.

Whether it's in a commerce cloud or another forum or marketplace for the exchange of products, you will be forced there essentially to do business, to maintain your presence in the game, see that transparency, and have it help your business. We think that's probably the most likely place for that collision to occur.

Minahan: So, possibly you need to collaborate with folks outside your company, predominantly.

Speaking of outside your company, Mickey, in your study around how supply chain organizations are using the cloud, you really had some very interesting findings about perception or perceived benefits versus actual benefits. In fact, what was interesting about it is that folks were achieving greater benefits than they initially expected. Can you discuss some of the major areas where they were getting the most value?

There are going to be many places where you are going to be brought outside of your organization, because that's where business happens.

North Rizza: Absolutely. One of the things we're finding is that companies really want some great benefits from these investments, but because of the last 30 years of not achieving everything that they really set their sights on, they have really stood back and said, "You know what? I'm not going to achieve everything that I need."

When we did our study, we looked across between 12 and 15 categories. We found that those that actually deployed cloud solutions, technologies, and services and put them out there, found anywhere from 5-7 percent difference in greater value, just by deploying, versus those that are thinking about it or trying to get into the mode of, "We want to go down that path and we are thinking about that investment process."

What were the benefits? It's really interesting. The first is that they were able to drive more revenue. Understandably, if we get those cloud-based solutions, we're going to drive more revenue. If you think about that gap from 5-9 percent, that’s huge, on a revenue standpoint.

Two other points: the cost-to-serve model. They're able to look at what their costs are, what are costing to serve from the enterprise, all the way through their trading partners, all the way back out into where the demand cycle begins, from a supply chain perspective. They get more savings, and those two go hand in hand. Then lastly, it's around that business cycle time improvement aspect.

Minahan: So, increasing revenues, reducing operating cost, and speeding the whole process overall. That’s great.

Different reality

Bruce, let's end with you. There's been a lot of talk about the cloud today, and lot of perceptions out there, that it's an all or nothing, it's a rip and replace. This makes companies somewhat nervous, but your research, as you stated before, shows a different reality going on out there, where the folks are looking at cloud-based solutions.

Guptill: If we wrap up what everybody on the panel has been talking about, let me take it from this angle. We've researched, interviewed, and surveyed a little over 7,000 executives worldwide -- finance, procurement, HR, IT, line of business -- over the last six or seven years about what it is that they want to do with cloud IT, whether it's SaaS or IaaS, platform as a service (PaaS) or whatever. In every single case so far, they're using it to add to what they have. It's filling in the gaps. It's enabling better efficiencies, better cost. It's delivering benefits that they could not get earlier cost effectively.

When you think about it, that’s the pattern of IT investment over the last 50- 60 years. It's very, very rare that we replace what we have with whatever new is coming in. There's all this hype about new stuff is coming and it's going to change everything. It's going to get rid of this. We are going to dump that.

Within four to five years, by year end 2015, more than 50 percent of new IT spending will be in the cloud for the first time.

In reality, almost every new IT that comes in, works inside, next to, or on top of what we already have. And as we learn how to use it over time, it may slowly displace some of what we have, but there is a tremendous amount of COBOL still out there, for example.

Minahan: On the green screen.

Guptill: Oh, there are [plenty] working in back rooms. The net of it is that is that we get more benefit. So we have to decide what we want to get from the cloud, versus what we get and what we have on-premise?

Our latest survey research, which we are just in the process of publishing right now, very strongly indicates that within four to five years, by year end 2015, more than 50 percent of new IT spending will be in the cloud for the first time. That’s within four or five years. But, that means that about 50 percent, or a little less than half, is still going to be on-premise, so that stuff is not going away.

So, over time, what's going to happen is that we have a series of decisions to make. What costs are we trying to control? How are we going to change our purchasing, procurement, management, payment, relationship management, and so on?

Then, as our traditional on-premise systems, not all of them, but as each one comes up, as they reach the end of their useful life, what do we do? Because traditionally, we would add to them, we would just build out around them, until they take over the entire data center, or we would outsource. Now, we have a combination. We can put some in the cloud and some on-premise.

Those are the decisions that we're going to have to face, as we go ahead. What goes out there? What stays in here? What goes in between? The stuff has to be made to work together. Who has that responsibility? What's it going to cost? How is that going to be budgeted? And how are we going to manage all this?

Minahan: So, governance is going to become increasingly important. Well, good. We heard a lot of great things today, challenging you to extend your physical supply chain and your management of that, to leverage and improve your financial supply chain, and improve your working capital management.

We heard about the benefits that you can get through improved business processes, efficiency, and lower cost structures to the cloud, and then most importantly, we also just heard that it's not an all or nothing. It's an extension of your existing IT investments.

Gardner: And thanks to Tim Minahan, Chief Marketing Officer at Ariba. You've been listening to a May 25, stage-based panel event on the implications of cloud computing for procurement and supply chain management and other business functions.

Thanks to this panel of analysts for sharing their recent research findings. This discussion comes to you as a special sponsored BriefingsDirect podcast from the Ariba LIVE 2010 Conference in Orlando.

Thanks for listening, and come back next time.

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

Transcript of a BriefingsDirect podcast from a live Ariba panel discussion on how cloud-based models offer new benefits and efficiencies to B2B commerce. Copyright Interarbor Solutions, LLC, 2005-2010. All rights reserved.

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HP's Anton Knolmar Recaps Highlights of Software Universe Conference, Looks to Future

Transcript of a BriefingsDirect podcast with HP's Anton Knolmar on HP announcements and customer reaction from Software Universe conference in Washington, DC.

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

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series, coming to you from the HP Software Universe 2010 Conference in Washington D.C. We're here the week of June 14, 2010, to explore some major enterprise software and solutions trends and innovations making news across HP’s ecosystem of customers, partners, and developers.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions and I'll be your host throughout this series of HP sponsored Software Universe Live discussions.

We're here again with Anton Knolmar, Vice President of Marketing for HP Software & Solutions. Welcome back. How is the show going for you, Anton?

Anton Knolmar: Thank you, Dana. It’s going very well. I'm really excited about having so many customers here. We've been sold out, which is a good sign. Customers are also really interested about sharing their solutions and sharing their information with us. At the end of the day, where we are totally committed is providing value to those customers.

We kicked it off the first day on the main stage, with our new Executive Vice President, Bill Veghte, talking about IT as an inflection point and how, with our solution portfolio, can help our customers provide even greater value for their organizations. That was a good lead-in.

I was even more excited, when we had customers on stage. Delta Air Lines’ Theresa Wise did a fantastic job explaining the challenges they were facing with integrating and acquiring Northwest Airlines, and getting those two companies together using our portfolio.

We got compliments and feedback about Dara Torres and what she was showing on stage here, on how you can compete, independent of what age, if you try to give your best in your personal, private, and business life. This was a good learning experience for all of our customers.

Then, we moved to the next event, our blockbuster product announcement, BSM 9.0, rolling this one out across the world, with different solutions in a single pane of glass, with the automation, and simplification.

It’s not "one solution fits all," and that’s what we are trying to do with our customers as well -- a really customized solution approach.

The feedback we received from our customers is that this is exactly what they've been looking for. And, they are even looking forward to more simplification. The simpler we can make it for them in their complex life, in their complex environment, whatever comes in from cloud, from virtualization, from new technologies, the better they all feel and the better we can serve them.

Gardner: We heard, of course, about the inflection point that you and Bill Veghte referred to -- lots more virtualization, cloud permutations, different types of use, thinking about sourcing, and the the mobility factor. When these come together, it seems to be almost a black hole for some folks. They're a little bit worried about how to deal with it, but they know that they can’t avoid it.

What have you been hearing from the participants in some of the panels and the executive tracks? How are people approaching some of these inflection points?

Knolmar: It wasn't just one customer who had one story to tell. We had to set aside an executive track, where we had a different levels of customers, talking about the problems and how they're facing problems. It’s not "one solution fits all," and that’s what we are trying to do with our customers as well -- a really customized solution approach.

What they're telling us in terms of this broad range of delivery is that it's a huge opportunity for everyone in the cloud. Also, everyone is saying, "We hate the word cloud," but that’s the word everyone uses. The delivery models that are out there at the moment, the new technology, the mobility factor, the growth of the smartphones, the mobile devices, is a big thing, and will be more in the future.

Being future-ready

Our customers are still challenged with their current environment, with their legacy environment. They say, "We still have mainframes to manage and all this new technology is coming in here." What they're trying to do is, and what we are trying to equip them with the current portfolio that we have, is to manage, monitor, and make the best out of the current investments, but also with our solutions portfolio, to be future ready.

So whatever new technology comes out, they're equipped and they can adopt this immediately in their current environment. They should be really happy with what we announced this week to be future ready for their future investments, as well whatever comes up.

Gardner: And, we're here in Washington D.C. with a very large public-sector crowd, as you pointed out earlier, a record-breaking attendance for you. Is there anything in particular from the public sector that you have found here as a takeaway?

Knolmar: A public sector track naturally combines nicely with being in Washington, and I hope we can continue this, even moving a little bit forward for next year. The public sector has similar problems, not too much different from what you hear from our other customers. Naturally there's more governmental, federal interest, in terms of how the budget process works in these areas.

Everyone wants to get the latest technologies deployed and get the best out of them, maximize, be cost efficient, and be effective, as well as serve their business and their lines of business.

But, from the overall topics and overall themes, everyone wants to get the latest technologies deployed and get the best out of them, maximize, be cost-efficient, and be effective, as well as serve their business and their lines of business. We hear similar stories from the public sector customers.

Gardner: As we wrap up Software Universe 2010, where are we going next? Are there some initiatives we should look forward to? It seems that folks are energized. Where can we lead them next in terms of anticipating some new solutions to their problems?

Knolmar: As you said, this was an exciting moment for us, getting our blockbuster out. A new blockbuster is coming, so stay tuned for that. That happens in September. We will also take Software Universe on the road. The next event is happening in Israel in a few weeks. We have a big crowd coming in, 1,500 customers, which is a huge gathering for Israelis.

The other piece is that we have HP TechForum, which is our sister conference, where we get the enterprise business, going on in Las Vegas this week. We're definitely excited. Stay tuned here. We're in Europe, in Barcelona, at the end of November, with our next Software Universe event. Hopefully, we can transmit and tell a bit more stories with you, Dana, from Software Universe, Barcelona. Thank you.

Gardner: Very good. We've been discussing the excitement at Software Universe in Washington and looking forward to some additional rollouts, news, and solutions from the software community at HP.

We've been joined by Anton Knolmar, Vice President of Marketing at HP Software & Solutions. Thanks again for joining.

Knolmar: Thank you.

Gardner: And thanks to our audience for joining this special BriefingsDirect podcast, coming to you from the HP Software Universe 2010 Conference in Washington D.C. Look for other podcasts from this HP event on the hp.com website, as well as via the BriefingsDirect Network.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host for this series of Software Universe Live discussions. Thanks again for listening, and come back next time.

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

Transcript of a BriefingsDirect podcast with HP's Anton Knolmar on HP announcements and customer reaction from Software Universe conference in Washington, DC. Copyright Interarbor Solutions, LLC, 2005-2010. All rights reserved.

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• Delta Air Lines Improves Customer Self-Service Apps Quickly Using Quality Assurance Tools
  
  
• HP's Anand Eswaran on pragmatic new approaches to IT solutions and simplicity for 'everything as a service' era
  

HP's Anand Eswaran Outlines New Pragmatic Approaches to Solutions, Simplicity for Offering 'Everything as a Service'

Transcript of a BriefingsDirect podcast with HP's Anand Eswaran on professional services and a new approach to offering customer support, from HP's latest software conference in Washington, DC.

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

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series, coming to you from the HP Software Universe 2010 Conference in Washington D.C. We're here the week of June 14, 2010, to explore some major enterprise software and solutions trends and innovations making news across HP’s ecosystem of customers, partners, and developers.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions and I'll be your host throughout this series of HP sponsored Software Universe Live discussions.

We're now joined by Anand Eswaran, Vice President of Professional Services for HP Software & Solutions. Welcome back to BriefingsDirect.

Anand Eswaran: Lovely to be back here, Dana.

Gardner: We've heard a lot here at the conference about governance, management solutions, and new products. I'd like to hear a bit more about what you're bringing to the table from the Professional Services and solutions’ point of view.

Eswaran: I'll take the time to talk about what we're doing here, and then we can approach the larger context of where we're going.

This week, we announced the launch of a new portfolio element called Solution Management Services, and I'll refer to it as SMS through this conversation.

Very briefly, what it does is offer the ability for us to support the entire solution for the customer, which is different from the past, where software companies could only support the product. That’s the heart of what it means. But, it’s the first step in a very large industry transformation we are ushering in, and it would be great to have a chat about that.

Gardner: We've certainly heard a lot about hybrid computing and virtualization. We're expecting more mobile devices to come into play in the enterprise. This is creating a rather difficult transition period -- but with an awful lot of potential. Many people are looking at it as a way to increase their productivity and ultimately to cut costs.

So, the question is how to get there. Where do you see professional services fitting in to the hardware, software, and services combination?

Eswaran: Good question, Dana. Let me take a step back on this. If I look at the industry across two dimensions; the first dimension is the software industry in general, not just HP Software. You see organizations constructed in different ways. You have the support organization, which basically supports the product, and you have the consulting organization, which basically deploys the solution.

When a customer is thinking about a solution, they make a buying decision. The next step for them is to deploy the products they buy as a result of that solution, which they committed to from a roadmap standpoint. Once they finish that, they have to operate and maintain the solution they put in place.

The classic problem in the industry is that, when the customer has a problem, after they have deployed the solution, they call the support organization. The support organization, if they determine the problem is actually with the project and the customizations, cannot support it. Then, the customer will be punted back to the consulting organization, whoever they used. In some ways, the industry plays a little bit of ping-pong with the customer, which is a really bad place to be.

Simple and transparent

What we're trying to do is get to the heart of it and say that we cannot introduce our organizational complexity to the customer. We want to make it simple. We want to make it transparent to them.

The second thing is that everybody talks about business outcomes, but if there are multiple organizations responsible for the same business outcome for the customer, then, in my view, nobody is responsible for the business outcome for the customer. That’s the second thing at the heart of the problem we're trying to solve.

Where we're going with this is that we're looking at what we call the concept of services convergence, where we're trying to make sure that we support the full solution for the customer, remove internal organizational complexity, and truly commit to, and take accountability for, the business outcome for the customer.

Specifically what it means is that we've put up an 18-month roadmap to fuse the services and the support organizations into one entity. We basically take care of the customer across the full lifecycle of the solution, build the solution, deploy the solution, and maintain the solution, They they have one entity, one organization, one set of people to go to across the entire lifecycle. That’s what we're doing.

To put it back in the context of what I talked about at the new portfolio launch, SMS is the first step and a bridge to get to eventual services convergence. SMS is a new portfolio with which the consulting organization is offering the ability to support the solution, until we get to one entity as true services in front of the customer. That’s what SMS is. It’s a bridge to get to services convergence.

Our goal is to support the full solution, no matter what percentage of it is not HP Software products.

The cool part is that this is an industry-leading thing. You don’t see services convergence, that’s industry leading. The second is, when we talk about solutions, 5, 10, 15, or 20 percent of the solution may not be HP products. Our goal is to support the full solution, no matter what percentage of it is not HP Software products. So that takes the accountability for truly creating business outcomes for the customer.

Gardner: It strikes me too that we've been talking here at the conference about the evolving nature of IT. It's changing more to services brokering and procurement, using all of the available sourcing options, figuring out what the right mix should be for each particular organization, and then, of course, tracking that over time as to what makes sense.

Is there a relationship between this changing nature of IT that we are forecasting, and this new, simple approach to services that you're discussing?

Eswaran: Absolutely. Just as SMS is the first step toward services convergence, services convergence is the critical step to offering "Everything as a Service" for the customer. If you don’t have the organizations aligned internally, if you don’t have the ability to truly support the full lifecycle for the customer, you can never get to a point of offering Everything as a Service for the customer.

If you look at services as an industry, it hasn't evolved for the last 40 or 50 years. It’s the only industry in technology which has remained fairly static. Outside of a little bit of inflection on labor arbitrage, offshoring, and the entire BPO industry, which emerged in the 1990s, it's not changed.

Moving the needle

Our goal is to move the needle to have the ability to offer Everything as a Service. Anything that is noncompetitive, anything that is not core to the business of an organization, should be a commodity and should be a service. Services convergence allows us to offer Everything as a Service to the customer. That’s where we are heading.

Gardner: As you come with this to the market, are there certain verticals that you're focused on first, or are there certain segments of the market? How do you yourselves manage the wide variety of potential applicability for this?

Eswaran: Great question. As we look at it, we see the biggest value in first treating it as a horizontal. Because this is going to be such an inflection point in how technology is consumed by the customers, we want to get the process, we want to get the outcomes, and we want to get what this means for the customer right the first time.

Once we get there, the obvious next step is to overlay that horizontal process of offering Everything as a Service.

For us, the first phase is a horizontal phase in making all of IT available as a service to the customer. Once we get there, the obvious next step is to overlay that horizontal process of offering Everything as a Service, with vertical and industry taxonomies.

We have a lot of expertise and experience in specific verticals, financial services, healthcare, government, and public sector, like patent and copyrights management. We have a lot of obvious competencies and taxonomies, which we will very quickly overlay into the concept of services convergence and Everything as a Service.

Gardner: We chatted briefly the other day about how the history of management in IT over the past 20 years or so, in many cases, has created islands of management. HP has been in a position of moving beyond those islands, perhaps sooner than the pack. Is that something that now comes as an advantage, now that we're at a more heterogeneous and hybrid form of computing? Is there a historical context that we can now look to to better understand what’s going to come next?

Eswaran: Absolutely. That’s a very insightful question. If you look at the last few years and at the roadmap which HP has built, whether it is software assets, like Mercury, Peregrine, Opsware, and all of it coming together, whether it is the consulting assets, like the acquisition of EDS, which is now called HP Enterprise Services (ES), there was a method to the madness.

A different approach

Let me give you an example to make this really simple. We're talking to a large organization, from a test automation standpoint, across the whole network. If you look at the past, the way services organizations would approach this is labor arbitrage -- 20 people, three years, $X million in cost, and this is what we do for you.

We want to approach it in a very different way. We want to tell the customer, "You have a 5 percent defect level across the entire stack, from databases and networks, all the way up to your application layer. And that’s causing you a spend of $200 million to offer true business outcomes to your customer, the business."

Instead of offering a project to help them mitigate the risk and cost, our offer is different. We are saying, "We'll take a 5 percent defect level and take it to 2.5 percent in 18 months. That will save you north of a $100 million of cost." Our pricing proposal at that point is a percentage of the money we save you. That’s truly getting to the gut of business outcomes for the customer.

It also does one really cool thing. It changes the pattern of approvals that anybody needs to get to go do a project, because we are talking about money and tangible outcomes, which we will bring about for you.

The last five years is the reason we're at the point that we are going to lead the industry in offering Everything as a Service.

That's not going to be possible without the assets we have consolidated from a software, hardware, or ES standpoint. We have thousands of testers as part of the ES acquisition. We have the thought leadership from a product standpoint, which we have consolidated using our software assets. We have the thought leadership from a services standpoint, within the professional services community. All of this comes together and that makes it possible.

So, the last five years is the reason we're at the point that we are going to lead the industry in offering Everything as a Service.

Gardner: I think that heads up the fact that the present course is just not sustainable when you add in these extra variables of outsourcing, about hybrid models, virtualization, mobility, and so forth.

Eswaran: Absolutely. When you talk about inflection points in the history of technology, the Internet probably was the biggest so far. We're probably at something that is going to be as big, in terms of how consumption happens for customers. Everything non-core, everything noncompetitive is a service, is a commodity.

There are many different mechanisms of consumption. Cloud is one of them. It’s going to take a little bit of maturity for customers to evolve to a private cloud, and then eventually consume anything non-core and noncompetitive as part of the public cloud.

We're getting geared, whether it’s infrastructure, data centers, software assets, automation software, or whether it is consulting expertise, to weave all of that together. We've geared up now to be able, as a best practice, to offer multi-source, hybrid delivery, depending on, one, the customer appetite, and two, where we want to lead the industry, not react to the industry.

Gardner: Well, great. Thank you so much. We have been joined by Anand Eswaran, Vice President of Professional Services for HP Software & Solutions.

Eswaran: Thank you, Dana.

Gardner: And thank you to our audience for joining this special BriefingsDirect podcast, coming to you from the HP Software Universe 2010 Conference in Washington D.C. Look for other podcasts from this HP event on the hp.com website, as well as via the BriefingsDirect Network.

I am Dana Gardner, Principal Analyst at Interarbor Solutions, your host for this series of Software Universe Live discussions. Thanks again for listening, and come back next time.

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

Transcript of a BriefingsDirect podcast with HP's Anand Eswaran on professional services and a new approach to offering customer support, from HP's latest software conference in Washington, DC. Copyright Interarbor Solutions, LLC, 2005-2010. All rights reserved.

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• HPs Robin Purohit Unpakcs Business Service Management 9 as Way to Address Complexity in Hybrid Data Centers
  
  
• HP's Bill Veghte on managing complexity amid converging IT 'inflection points'
  

Motorola Shows Dramatic Savings in IT Operations Costs with 'ERP for IT' Tools Based on HP PPM

Transcript of a BriefingsDirect podcast with Motorola's Judy Murrah on cost optimization using PPM, recorded at HP's Software Universe conference in Washington, DC.

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

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series, coming to you from the HP Software Universe 2010 Conference in Washington D.C. We're here the week of June 14, 2010, to explore some major enterprise software and solutions trends and innovations making news across HP’s ecosystem of customers, partners, and developers.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions and I'll be your host throughout this series of HP sponsored Software Universe Live discussions.

We're looking at a compelling case-study today, Motorola, in the area of productivity, cost optimization, and their IT efficiency efforts -- a winner of HP's Excellence Award this year. We're going to hear more about that from Judy Murrah, Senior Director of IT, at Motorola. Welcome to BriefingsDirect.

Judy Murrah: Thank you, Dana. Great to be here.

Gardner: As I said, you've won an Award of Excellence here at the HP Conference. You have also won a CIO Magazine award recently. Tell us a little bit about your role and, why cost optimization has gotten you these accolades?

Murrah: It certainly was a team effort. My role at Motorola IT is in what we call CIO Operations. I'm responsible for our project management office (PMO) portfolio, quality, communications, and other activities that support our IT operations. Cost optimization is on everybody’s mind these days, especially with the economy the way it is, and with many business initiatives out there.

For us, at Motorola, it really was driven by the pace of change that our business needs to take at this point. You don’t really think too much about change and cost optimization being related, but we have had, over time, a very complex IT environment grow. We have thousands of systems in a company that has grown organically and through mergers, acquisitions, and divestitures.

In order to really be part of the business imperatives to move forward in next-generation business processes, it was too complex to make changes. So, we focused on reducing those systems and doing it in a way that was directly aligned to business change and the directions they would like to go into.

Gardner: What are the requirements from the business side? A lot of people are trying to align their IT efforts with more of what the business is looking for. Of course, that’s also a changing game at this point. Many businesses are dynamic in nature. How does the cost optimization fit in, when you're also trying to align IT with business?

Murrah: That’s the place where we started and where we saw the magic unfold. We sat with our business partners, top leadership on both sides -- our CIO and the business presidents and executive teams -- and talked through every business function.

Business competitiveness

We looked at it on a scale of business competitiveness and how important that particular business function is to the business. Then, on the other axis, if you picture the famous 2×2 matrix, we looked at the complexity and cost of that business function.

Just to give you an example, if we talk about engineering as a business function, to Motorola, which is a technology company, that’s a critical competitive differentiator, very important, high on the scale of competitiveness. If we look at the complexity and cost of running that today, in Motorola, we have a lot of systems and it’s a high-cost area.

We did that for every business function we have. We laid it out and then talked through where we would like those functions to move in the future. By mapping it out visually, it helped us to know that some areas were just costing more money than the value they brought to the business. When you see that, you put data on a piece of paper, and you have a visual, it is a very good way to align business and IT around a common goal.

Gardner: Do you have any numbers; perhaps numbers of projects or applications that give us the size of the scale and scope of what you're managing?

Murrah: We have somewhere in the neighborhood of 1,800 systems in the company. We manage about 1,000 projects per year that flow out of these decisions. We have about 1,500 employees in the IT organization and are very heavily outsourced in some of the functions. So, we have another few thousand folks who we consider a part of the team, and that’s who have all made this happen.

Gardner: We've been hearing a lot here at Software Universe about automation and simplicity, when it comes to the management tasks. Many organizations are dealing with huge scales, as you are. How do you view moving toward the visibility and then into automation, and then into some simplicity?

Murrah: You're talking about the IT tools and the management of all this process. The only way we could have managed this is our implementation of one tool and one process, that’s used across the whole Motorola IT environment -- HP’s Project and Portfolio Management Center (PPM). It gives us one place where we contain our "source of truth" for our investment dollars, for the priorities of the business request coming through, and for the things that we've decided to work on.

In that tool, we have every one of our people resources named, as well as what they're working on, and we look at their utilization and movement to the most critical areas. We also manage our project execution to the timelines, schedules, and budgets that we commit to our business partners.

What’s very important then is that all of this underlying data and management process that we use can be presented back to the business in very good dashboards and reporting, so that we all stay on top of where we are and can be proactive on change, if it’s needed.

Gardner: So, the system of record is what’s working for you. We've had this in business, in other areas, around finance and ledger and so forth, for years. It’s just amazing to me sometimes that we are moving to this in IT, maybe 20 or 30 years behind where business was. Is that how it strikes you?

Justifying the investment in IT

Murrah: That's exactly right. I always talk about how IT is sometimes like the cobbler’s children, as the old saying goes. It’s very difficult to justify the investment in IT tools at some points in time, unless you have ones like this, that are showing payback to the business and you use them in a way that everyone is now depending on it. It does become the enterprise resource planning (ERP) system of the IT organization.

Gardner: Do you have any metrics of success? Do you have some sense of any cost savings, either qualitative, quantitative, what did you get from going through this?

Murrah: Well, in the last two years we have reduced our cost structure by about 40 percent. That is a big number to do while the business is operating. We have also, on our large projects that we run through the system, shown about a 150 percent payback or return on investment (ROI) for those. That means that the value of the investment for us was placed in the right places.

We have also, on our large projects that we run through the system, shown about a 150 percent payback or return on investment (ROI) for those. That means that the value of the investment for us was placed in the right places.

We've been able to reduce IT support costs by about 25 percent. Previous to this more consolidated system, we were operating in such silos that there were many people doing the same things. So by consolidating, we eliminated about 25 percent of the wasted work.

Gardner: That’s quite impressive. Now, I know that HP PPM is accessed on-premises and/or as a service. Did you experiment across sourcing options?

Murrah: We did. About a year ago we moved from a hosted environment, internal to Motorola, to the HP software-as-a-service (SaaS) environment. It works like a charm. No issues with performance. We have had great responsiveness from HP. It does help reduce our support cost, somewhere around 40 to 50 percent.

Gardner: Was there any indication that the SaaS model helped in terms of adoption, participation, from the user perspective, did they seem to benefit?

Murrah: Moving from hosted to SaaS didn’t affect usability, adoption, or anything. That really was almost seamless. We were using the same application before and after.

Gardner: Same application, lower cost?

Murrah: That’s right.

Gardner: Can you offer us perhaps some look into the future of what you're planning and managing your ERP for IT, as you termed it. Are there some next steps that will perhaps win you the next award?

Murrah: Yeah, we'll keep our eye on that for the future. I think a couple of areas that we need to work at going forward are more on our application support area. That's bringing the tool to manage resources and activities and support operations, tying it a little more tightly into our financial management, and getting a little more granular on the skills and our ability to move our resources around from place to place.

Gardner: Great. We have been talking about managing complexity and projects with Motorola, which has won an HP Award of Excellence for their efforts. We've been talking to Judy Murrah, Senior Director of IT for Motorola. Thanks so much.

Murrah: Thank you, Dana.

Gardner: And thanks to our audience for joining this special BriefingsDirect podcast, coming to you from the HP Software Universe 2010 Conference in Washington D.C. Look for other podcasts from this HP event on the hp.com website, as well as via the BriefingsDirect Network.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host for this series of Software Universe Live discussions. Thanks again for listening, and come back next time.

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

Transcript of a BriefingsDirect podcast with Motorola's Judy Murrah on cost optimization using PPM, recorded at HP's Software Universe conference in Washington, DC. Copyright Interarbor Solutions, LLC, 2005-2010. All rights reserved.

You may also be interested in:

• HP's Bill Veghte on managing complexity amid converging IT 'inflection points'
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• Delta Air Lines improves customer self-service apps quickly using automated quality assurance tools strategically

HP's Bill Veghte on Managing Complexity Amid Converging IT 'Inflection Points'

Transcript of a BriefingsDirect podcast with HP's Executive Vice President Bill Veghte on managing change in IT as virtualization, cloud and mobility gain importance.

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

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series, coming to you from the HP Software Universe 2010 Conference in Washington D.C. We're here the week of June 14, 2010, to explore some major enterprise software and solutions trends and innovations making news across HP’s ecosystem of customers, partners, and developers.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions and I'll be your host throughout this series of HP sponsored Software Universe Live discussions.

Please join me now in welcoming Bill Veghte, Executive Vice President of the HP Software & Solutions group. Welcome to BriefingsDirect, Bill.

Bill Veghte: Great. Thanks, Dana.

Gardner: We've heard a lot here about how tough things are. We're used to hearing tough economy stories, but now we're hearing about tough management and complexity stories.

We're also hearing about inflection points. Could describe for me what you see right now in the IT business, as an inflection point or points, and how that relates or compares to some of the past game-changing times in the history of IT?

Veghte: Dana, I spend a lot of time out there with CIOs and IT professionals, and we're at two remarkable inflection points in our industry.

The first is in terms of how businesses are delivering IT, and that's on three dimensions. The first is virtualization. There's a lot of not only conversation, but moving workloads of application services to a virtualized environment. Look at the numbers. People say that over 25 percent of x86 server workloads are now virtualized, and that number looks like it's going to accelerate over the next couple of years.

Correspondingly, there's a heck of a lot of conversation around cloud. People wrap a lot up in that word, but many of the customers tell me they think of it as just another way of delivering experiences to their end-customers. And, in cloud there's platform, applications, and private versus public, but it's another choice point for CIOs and IT folks.

The final piece in terms of IT delivery is that there are a heck of a lot of mobile devices, over a billion mobile devices, accessing the Internet. With the advent of smartphones, a very rich viewing and consuming medium, people expect to have that information.

Those things are incredible tools and opportunities, whether you characterize it in a balance sheet, and moving from capital expenditure to operating expense, or whether you characterize it in anytime/anywhere information on your mobile device. But with that, it does bring more choice points and more complexity.

Breadth and depth

The other inflection point that I'd highlight, Dana, is the breadth and depth of data that’s being generated. You and I both know that digital information is doubling globally every 12 to 18 months. In the midst of all the digital photos or whatever, sometimes people lose track of the fact that 85 percent of that data resides in businesses. And the fastest growing part of that is in unstructured data.

Now, the most precious resource is your ability to take that data and translate it into actionable information. The companies and businesses that are able to do that have a real competitive advantage.

You can put that in the context of a specific business operation. If you're a pharmaceutical, how quickly can you bring a drug to market? You can characterize that in a financial services organization. Do you have better, quicker data and market movements?

You can characterize it in an IT . There's an enormous amount of IT information and data, but how do I parse it out to the things that are going to represent a service desk ticket, and can I automate that so I am not putting people in the middle?

When I think about it in a historic context, I'd highlight a couple of things. One is that we're going through the biggest change in IT delivery since client-server, because of the three delivery vehicle changes that I highlighted. That, in turn, is going to generate a very significant refresh in applications and services.

Given the complexity that I just characterized, there's a real opportunity to bring more of a portfolio approach to delivering those solutions to customers.

You don't have the time deadline in the same way that we did with Y2K, but the CIOs and IT and apps folks that I know, as the economy is recovering, are looking at their application and service portfolios and saying, "How am I going to refresh this to take advantage of these new and different delivery vehicles?"

Gardner: How does that relate to HP? You're relatively new to HP. You had a long and distinguished career at Microsoft, and you've been here for a little over a month or so. How do these inflection points and the opportunity that you perceive for HP come together? Perhaps you could fill in on what attracted you to HP.

Veghte: Sure, Dana. As I looked across the marketplace and at this inflection point, there are a couple of things that attracted me to HP. One, I think HP is uniquely positioned in the marketplace, because it has a great portfolio as a company, across not only services, but also hardware and software.

On the software side, there is a remarkable portfolio of assets within HP, across application development and quality to the operations side. Yet, given the complexity that I just characterized, there's a real opportunity to bring more of a portfolio approach to delivering those solutions to customers.

Doing remarkable things

The final piece that I would highlight is that I worked for many years with HP as a partner. Whether it be Todd Bradley, who I worked with around the Windows business, or Mark [Hurd], as the executive sponsor for the HP Partnership, when I was on the Microsoft side, they're a great group of people doing some remarkable things.

If you look at what that executive leadership team has done over the last couple of years with and for HP customers, it’s exciting to think what we can do over the next five or six years.

Gardner: Speaking of HP customers, they sure are here at Software Universe. There are thousands of what we can call hardcore HP folks. What are they telling you? What have you learned? What has surprised you in your interactions in the last few days?

Veghte: It's been a great Software Universe for us. Compared with years past, there is a degree of energy and optimism in customers that's very invigorating. I've been in back-to-back meetings. You walk in, and they are excited about the innovations that we're bringing into market.

We've had a variety of very exciting announcements, such as Business Service Management 9.0. Some of the announcements were around the ability to automate how you take a production environment and apply it into a text script.

I think that they're constructively challenging us to make sure that we have a set of tools that are effectively scaling into the most complex operating environments in IT in the world.

The areas that customers are highlighting are: "You've got a great portfolio. You're heading in the right direction. Keep that pedal down. Take advantage of the fact that you've got not only fantastic best-of-breed capabilities in individual areas, but that you've got this breadth of offerings. I'm going to evaluate you against my entire solution set."

It starts with the strategy. In fact, there was a great customer meeting this morning. The customer said, "Look, I use you in a bunch of different ways, and I think you've got a great product. Now, what I need you to do is step up and make sure that from strategy, to application, to operation you're delivering that cohesion for me. I see good steps, but I want to see you keep doing it."

I think that they're constructively challenging us to make sure that we have a set of tools that are effectively scaling into the most complex operating environments in IT in the world, and making sure that, as the additional complexity in delivery vehicles that I just highlighted come online, that we continue to make sure that we are scaling effectively to deliver for the customers.

For example, at Software Universe 2010, in the Business Service Management case we announced, not only will we be providing a near real-time dynamic view of IT, but we are doing it across virtualized and cloud implementations. I just came from the session, where we were demoing to 3,500 people the ability to display that information on a smartphone across a variety of platforms -- from BlackBerry to iPhone to a Sprint device.

Gardner: It seems like complexity is the common foe here. ... When we talk about virtualized workloads. And when we have a variety of sourcing options -- on-premises, off-premises cloud, private, colo, hosting -- and also complexity, as you point out, in the number of endpoints or different devices.

Perhaps customers are wondering how to stay up with this accelerating pace of complexity. How could we think about the role of IT? What does IT need to be thinking in terms of itself? How should it perceive of itself in the next few years, vis-à-vis this common sense of budding complexity?

Continuing to evolve

Veghte: Well, Dana, the thing I'd go back to is those two inflection points that I highlighted, because I think they're very important, when we think about the fact that the role of IT continues to evolve.

First, as an IT organization, I have more choices in terms of how I am delivering my application service for and with business. I increasingly become a service broker, because I'm looking across my applications and services and deciding with the business what’s the most cost effective and best way of delivering those experiences for the businesses.

Second is, and we've talked about this as an industry for a long time, the continuing blending of business and IT. A customer from a Fortune 5 company was in a meeting with me earlier this week. He's been in the industry for 25 years, a very sharp guy, and in a deep partnership with HP.

He said that this year there are more people from business operations coming to Software Universe than there are from IT operations. He said, the reality is that whether you talk about it in the context of PPM or application and service requirements, those two functions are intermingling. Given the software footprint and portfolio we have, it’s a wonderful opportunity, but that continues to accelerate.

The final piece that I would highlight is not a change, but a continuity. Even as IT has a broader set of choices, and the relationship with the businesses continue to intertwine more and more, they're not off the hook, when it comes to security or compliance or the availability and performance of the solutions that they are responsible for supporting and delivering for the business. So, it’s important to factor that even as we look ahead.

This has been illustrated time and time again. The most successful businesses have figured out how to constructively apply IT to run a business.

Gardner: Seeing this relationship between business and IT shift and change, dealing with complexity across variety of different levels, looking for that right analysis and information in that sea of data, where do you think the management, the definition of management goes?

Are we talking about an expanded definition of management or the role of IT? If you can manage IT, does that mean you can better manage the business? Is there a coming together of managing IT and managing a business?

Veghte: This has been illustrated time and time again. The most successful businesses have figured out how to constructively apply IT to run a business.

IT tools are at such a maturity and the experiences of IT with the customer experience are so intermingled. The CIO at Delta Air Lines was talking yesterday about her utilization of HP technologies and some of the remarkable projects that she's been through. You listen to that talk and you realize that the reservation system, the way I check in, and my experience with Delta Air Lines is commingled with what you and I would characterize as the IT experience.

It was a remarkable story about that interrelationship with the business, as they were not only dealing with the broad adversity of the business climate, but also were trying to merge with Northwest Airlines.

Gardner: Perhaps we could go as far as to say that for many business over time, IT is the business.

Veghte: Dana, the trick in that is that IT means many different things to many people. The thing I would highlight is that IT has the ability to continue to outsource a variety of baseline capabilities. With that outsourcing capability, as an industry, IT providers, are going to be able to provide more and more. And that gives IT the ability to move up the stack in terms of higher value-add applications and services, and then the business runs through and with IT.

Gardner: So, maybe we could expand it to say, managing the services through IT is the business -- or some combination of the service model?

Veghte: You're a smarter analyst than I am. All I know is that the intersection between the two -- and the resulting customer experience -- continues to accelerate. We look forward, as part of HP Software & Solutions, to playing a great role in helping customers deliver those solutions and those experiences.

Gardner: Well, great. Thank you. We've been talking with Bill Veghte, Executive Vice President of HP Software & Solutions. Thank you so much, Bill.

Veghte: Great. Thank you, Dana.

Gardner: And, we want to thank our audience for joining us for this special BriefingsDirect podcast, coming to you from the HP Software Universe 2010 Conference in Washington. Look for other podcasts from this HP event on the hp.com website, as well as via the BriefingsDirect Network.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host for this series of Software Universe Live discussions. Thanks again for listening, and come back next time.

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

Transcript of a BriefingsDirect podcast with HP's Executive Vice President Bill Veghte on managing change in IT as virtualization, cloud and mobility gain importance. Copyright Interarbor Solutions, LLC, 2005-2010. All rights reserved.

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