Market Confidence in Cloud Soars, Especially Among Providers, Says North Bridge Survey

Transcript of a BriefingsDirect podcast on the state of cloud computing and its future outlook based on a recent survey of buyers and sellers.

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

Dana Gardner

Today, we present a special podcast discussion that draws on a new survey about cloud computing and explores the business growth opportunities for buyers and consumers of cloud services alike.

First we'll hear the results of this multi-year annual survey on the cloud market and then explore some of the implications for where the growth opportunities are and where the inhibitors for the growth may be.

Here to share his insights into where the cloud business has been and where it’s going, we're very pleased to welcome Michael Skok, Partner at North Bridge Venture Partners.

For more details on the survey, go to:

 http://www.zdnet.com/blog/btl/the-future-of-cloud-computing-9-trends-for-2012/80511

Before joining North Bridge in 2002 to seek out great entrepreneurs and lead innovative software investments, Michael had himself been an entrepreneur and CEO in the software business for 21 years.

We'll hear the results of this multi-year annual survey on the cloud market.

He founded, led, and attracted more than $100 million in venture backing to his investments in multiple successful software companies. As a VC himself, Michael has invested in many entrepreneurs who have built more than a $1 billion of value, focusing on large market-changing technologies and disruptive business models such as software as a service (SaaS), cloud computing, open source, and mobile.

Current representative investments include Acquia, Akiban, Apperian, Demandware (NYSE:DWRE), and Unidesk, as well as Actifio and Revolution Analytics.

Michael's passion for innovation and entrepreneurship is also fueling his work mentoring and developing the next generation of entrepreneurs. For example, he is currently developing and leading workshops such as the "Startup Secrets" series with the Harvard i Lab. You can follow him at www.mjskok.com and @mjskok.

I'm very happy to welcome you to the show, Michael.

Michael Skok: Great to be here.

Cloud hype curve

Gardner: I'm very intrigued by any survey on the cloud market nowadays, so let’s start at a fairly high level. I'd say we're probably now in about the third year of a fairly steep cloud-hype curve. Is there anything to indicate from your survey and your experience lately that there is a waning interest or enthusiasm for cloud? Are we past the peak? Are we still in a period of where people are still building up their enthusiasm for clouds?

Skok: That’s a great question, Dana, and it falls into two parts. Obviously, there's an increasing interest in understanding cloud, but as cloud has captured so much attention, there is also a respectful, significant actually, interest in understanding what the real applications and potential for it are. People are trying to get beyond the hype, at this stage, to understand the practical applications and opportunities.

Gardner: Is it fair to say that confidence is up because the perceived risks are down, or are we still working through how confident people are and whether there are significant risks here?

Skok: Maybe the best way to answer that is to give you some specific data from the survey, and rather than have my commentary, it will give you the market’s viewpoint on this. That’s one of the key reasons we run the survey -- to try to understand what vendors and customers believe are some of the key issues, both driving and inhibiting the cloud.

So I'll jump in and give you some of the inhibitors first to answer your question on risk, for example, and then perhaps we can talk about some of the drivers. Does that sound good?

Gardner: Yeah.

Skok: On the inhibitors, one of the things that’s interesting this year is that, if you look back to 2011, 10 percent of the survey respondents would have said that the cloud is just too risky, and they gave many reasons last year. This year, we're down to 3 percent. So that’s a significant drop.

Michael Skok

Now, I'd argue that 3 percent says that you're at a point where people are beginning to understand cloud better, because the issues that they are raising are things like data sovereignty and the Patriot Act. Those are very real issues that are unlikely to just disappear, and they are beyond just cloud. They have to do with the reality of how people have to run their businesses.

The good news is that 12 percent feel that the cloud still needs to mature. That's not so significant number, but it’s down from 26 percent in 2011. So again, people are starting to feel that the cloud is obviously meeting more of their needs.

When you look at the issues behind those 12 percent who are looking for greater maturity, there are things that again you would expect to see in an early-stage market -- things like security and compliance, and that’s very typical.

If you looked at any major trend that comes into the marketplace, if you looked at the initial early days of the web and eCommerce, people said things like, "We'll never put our credit cards on the web." Now, not only do we put our credit cards on the web, but we allow people to do Internet banking and take photos of the checks as a means to make deposits from their cellphones.

So things have come a long way, and that’s just the time-scale that it takes. It’s typically several years before things mature and get people confident in these kinds of applications.

Encouraged by results

So I'm encouraged by those results. The next obvious thing that comes out of the survey is how many people are still experimenting. About a third are experimenting, 34 percent to be precise, with concepts in the cloud, driving applications, and using the cloud in some innovative ways.

For example, you see companies like Bank of America, who do trials using the cloud, and if they are successful, they use the cloud’s elasticity to quickly expand their trials. If they're not, they just throw them away. That’s a great example of how the cloud is specifically enabling people to do trials and get to market faster and be more effective.

And the other side of the coin, the great news this year is the rapid growth in confidence overall in the marketplace. If you had asked how many people had complete confidence in 2011, you would have gotten an answer about 13 percent, and this year it was fully 50 percent.

So we're not quite at a tipping point, because you have to double-click on that 50 percent. You have to understand the split between vendors and customers, and vendors were over half. In fact, 56 percent of them have complete confidence in the cloud. So you're seeing net new development in cloud from independent software vendors (ISVs), absolutely the tipping point. You see very few companies starting up today that aren’t building in a cloud.

If you look at the customers, they're not quite at that same level of confidence.

But if you look at the customers, they're not quite at that same level of confidence. Just over a third, 37 percent in fact, have complete confidence. More of them are experimenting and waiting for it to mature, as we were just talking about, and some of them still feel it’s too risky.

So it’s a long answer to your question. I hope it gives you some substance backed up by the survey to get a sense of this, and I am happy to answer any questions behind that.

Gardner: It’s interesting that those who are in the cloud ecosystem themselves are very confident, and you'd think that they would have the most to lose. They're making their investments, but the longer tail toward the consumer side is still catching up to that.

It certainly seems optimistic for the market in general that those in the know -- those that are using these to build business -- that they themselves will be providing cloud services and are so confident.

Skok: It turns out that there’s an interesting representation of players in the survey here, in that we have got both vendors and users responding. There were over 785 in total, mostly C-suite, but more than a third of it are customers.

Of the vendors that are represented, we're covering everything from Amazon to Citrix, to some of the mid-tier players like Rackspace, Red Hat, and others, and also up-and-coming and emerging players, for example, Eucalyptus and Acquia.

Bridge the gap

So it’s a very good breadth of players to drill one level beneath this, and we did that. We tried to understand what’s going to bridge the gap between vendor’s confidence and user’s confidence and we heard five specific things.

Number one, people want more complete value propositions. A lot of what’s being sold at the moment is technology and what people really want is the second key thing, which is clear business benefits. And they want that in the form of case studies, which is the third thing that would help people.

The fourth thing is more proof of specific opportunities that are being addressed in their industry, the vertical specific applications if you will. The bottom line, the fifth thing, is that people want greater return-on-investment (ROI) case studies to be presented to them so that they can put that forward as they champion this on an economic basis.

So to answer your question in summary, Dana, what we'll see is this gap between the confidence in the cloud the vendors are seeing and what users are seeing it is going to get bridged, as we become more able to deliver on the benefits with specific examples that drop right to the bottom line.

Gardner: Just to allow our audience to evaluate the data that we're presenting, tell us a little bit about the survey -- how it was sponsored, when it took place. You've told us already about the participants being C-suite level folks in both the sell and buy side, but tell us a bit more, just so we have a better sense of the quality of this data?

The beauty of the survey is that it represents a broad swath, about 40 of the key vendors.

Skok: Sure and by the way, the full results of the survey, as you may have already pointed out, are available on our site at mjskok.com. Just look under the "Industry for Cloud," and you'll see "Future Cloud."

This year’s survey is an opportunity to get a level set as to what’s going on in the industry, where are we, and to understand what’s going on in the key drivers and inhibitors, because everybody in the ecosystem is trying to understand how to better address the tsunami that’s rolling over the industry in cloud computing.

So the beauty of the survey is that it represents a broad swath, about 40 of the key vendors, both driving and enabling cloud, and also key buyers and C-suite members who are trying to evaluate and deploy cloud.

The idea behind the survey obviously is to enable both sides to get a better understanding of how to take actionable steps toward implementing what might be the next generation of IT. Pretty much everybody recognizes cloud as the platform on which not just applications and solutions are going to get built, but IT is going to transform to the next generation of providing itself as a service in an effective form.

Gardner: When were the results gathered?

Skok: The results were gathered in the summer of 2012, and they're continuously updated.

Independent survey

For example, we're in constant conversations with these vendors and also with the CIOs to continue to keep them fresh. But while we sponsor it, 40 collaborators are driving it. Again, the details of that are on the web, but the point is that it’s an independent survey so that no one vendor is driving it, it’s a collaboration of the industry as a whole to ensure that it's an independent survey.

Gardner: One of the things that jumped out at me, as you were trying to define what we could start to call loosely "killer applications of the cloud," where this is going to get traction, clearly one of the areas was platform as a service (PaaS). So let’s address that. Then, there's also big data -- fast data, analytics in the cloud. How prominent were they in the survey in terms of the priorities or the endgame for these two types of uses?

Skok: That’s a great question. You only skipped one, so I'll cover it briefly. The most surprising thing is just how much SaaS has gained in the survey since last year.

We also worked with Goldman Sachs, to give credit to them, and some of the information is also pulled from the industry as a whole. We found that 67 percent of the survey respondents are already deploying SaaS applications, and the value that people are seeing is in the application solving real business problems.

Respondents were saying that 75 percent of them thought that they would be building software with PaaS in the next five years, which is a big jump.

Of course, SaaS is built on PaaS and infrastructure as a service (IaaS) too. The important thing that you are pointing out is that there was a significant jump of interest in PaaS this year. In fact, looking forward to the future, the respondents were saying that 75 percent of them thought that they would be building software with PaaS in the next five years, which is a big jump.

We have a viewpoint on that, and I'll come back at it in a second, but what’s interesting here is that people recognize that they're going to be building applications. Why would they build them in anything other than in a cloud-based manner? That’s what’s so interesting here.

Now, I'll come back to that, because there’s some interesting controversy around how PaaS will play out and that came out of the survey too. But to talk a little bit about what you were describing as key application areas, big data was certainly one of them. It was top of the list on what people thought would be changed by cloud. As far as which application categories would be disrupted most, big data was at the top of the list.

Beneath that, were others that wouldn't surprise you, for example, customer relationship management (CRM). With Salesforce having led that charge, it’s not surprising that people see that continue to be a key area.

What was exciting to me was that number three was eCommerce. In our own portfolio, for example, we saw one of my investments, Demandware, go public this year and that was real evidence to me that you're going to be able to build confidence in mission-critical applications.

eCommerce applications, like Demandware, are the front door representing major vendors and brands, and people can track the nature of their business literally second by second and measure how much revenue would be lost if eCommerce applications were down.

Mature and strong

So the fact that major retailers and brands now bet billion of dollars on eCommerce as a service gives you a sense that people feel like the technology is in place and mature, strong, and reliable enough for them to back it with their brand and have it at their front door. That was very interesting.

Gardner: Just to expand on that a bit, in addition to retail and consumer side eCommerce, we saw SAP acquire Ariba. So there is obviously some interest in the B2B side as well.

Skok: Exactly. The B2B side is very early, and there is tremendous potential there too. We think that’s relatively untapped and that there's great white space there. You're quite right.

Gardner: So continuing down your list.

Skok: The list obviously is long, but what we did was to look forward and try to understand some of the key areas that are driving cloud and some of the opportunities. I'll cover what we talked about as the future cloud formations and the potential opportunities for applications. Would that be helpful?

Gardner: Yes, please.

Skok: They fall into what we call five cloud formations, and we're specific in talking about formations, as opposed to cloud-washed opportunities. What we mean by that is that you've seen a lot of vendors try to bring out just another level of their application and host it in some shape or form and deliver it via the cloud. That’s really not what we're talking about here.

We think the future is in applications that have been built specifically for the cloud.

Those kinds of things that aren’t true multi-tenant applications that are born in the cloud, and we think they're not the real future here. We think the future is in applications that have been built specifically for the cloud and enable you to do things that you wouldn’t find possible should you not have had the cloud available to you.

The formations we talk about first are media and entertainment. People have gotten used to that with iTunes and their music and Netflix to get their movies online. That was a major revolution and it started initially with web ordering where Netflix was delivering physical DVDs. As the pipes got fatter, we could just physically deliver over the web, and you're seeing more and more of those opportunities.

If you look at gaming, it has also all gone online, and people are taking it for granted. That’s actually a lot of what drove the cloud initially. This media and entertainment formation is very real, here to stay, and we think has tremendous opportunity, especially as the mobile platform expands too.

The second key area is what we call social and collaboration. The social and collaborative cloud is very much understood by people who use Facebook in the consumer world. What's interesting is that it has moved into the enterprise with applications important to supply chain management that are enabling things like tighter inventory control.

Also, there's collaboration all the way down to the customer, so that people can get better service and support, and in many instances self-service, which has a great cost savings and ROI payback.

Easier to collaborate

You're seeing that now start to play out. People are getting used to the fact that it's so much easier to collaborate in the cloud than it is to try to send people on-premise applications to work with, when you want to collaborate with them. We'll see a great expansion of that going forward, too.

The third key area, which I would describe as almost a platform shift, is identified as mobile and that includes location data, too. Mobile, if you think about it, is not possible without the cloud. Again, it goes to a real, true cloud application.

These devices that we carry with us, smart as they are, are nothing without the connections back to the cloud, to be able to do everything from synchronizing our contacts, calendars, and email, to much more important and significant things, such as to connect back to business processes and provide such key information as price lists and contracts for the people in the field to be able to do their job in situ.

That’s a really important shift, and the incredible rise, it's unparalleled, of new devices like the iPad, which has been the fastest growing device ever, in both consumer and enterprise, are giving rise to new demands and new services.

eCommerce has really become something that people take for granted that they can do over the web.

What's perhaps obvious when you think about it, but less obvious in this context, is how much location data is being generated from that. We'll talk about that in terms of the big data formation in a second, but location data is providing new opportunities for new applications. That links nicely to the fourth key cloud formation that we think about. That's commerce and that includes payments.

eCommerce, as we were just talking about, has really become something that people take for granted that they can do over the web. It's not just Amazon anymore, as you said, it's even B2B commerce, for example, that companies are taking a lot of the supply chain, collapsing it, and taking out cost.

That’s being enabled by the cloud. As mobile payments and the payment system in general become more accessible by the cloud, which is more of a political challenge than it is a technical one, that will become a very interesting opportunity for new applications that will be spawned and connected back to the cloud.

All of those applications, as I started to hint at with location data, are generating a huge amount of data, and that’s giving rise to the big data cloud. Big data is interesting on two fronts. It's interesting because with every click and step we take we're creating information that is being collected in the cloud, in a form that you can consider part of the big-data opportunity.

What's interesting on the second side of the coin is that the cloud itself provides the kind of scale, indeed economy of scale, for crunching that data, analyzing it, and providing insight from it.

The fact that you can spin out an analysis of anything from the human genome to a click stream in the cloud, and then provide insight, in some cases in real time, to drive applications wherever they may be and reach them with things like your mobile devices, is really changing the game.

Cloud formations

So these five cloud formations: media and entertainment, social collaboration, mobile and location, eCommerce and payments, big data and analytics, are where we think cloud is dramatically changing the scope of the landscape.

When you look at them, what's really exciting here is what's happening at the intersection. I'd be happy to give you an example of that, if it's useful to you.

Gardner: What's very fascinating to me, Michael, is not just these impressive arenas that you have described on their own, but how they intersect and in many ways multiply each other -- being mobile, having the big data to crunch, relating that data into a commerce activity, and bringing that back out through collaboration or social activities. It's really the whole greater than the sum of the parts here. Please explain a bit where you think that is going or where the survey tells you it's going?

Skok: You said it very well. The sum is greater than the parts here, and you've obviously picked right up on it. We could give you many examples, but I'll take one that’s simple, so that everybody can relate to it.

It used to be that if you thought about going to see a movie, you would have to go and check your local listings, but obviously people are way beyond that today. We can go right online and if it's not available to you at Netflix, you can quickly check to see where it is available on your local cinema from your cellphone geo tag where you are and it can quickly tell you that the closest place to go to see the movie.

Of course, you can use commerce in the cloud to buy it on something like Fandango. Then what's interesting is that you can choose at that time to check out what your friends think of the movie, see the collaboration that’s been going on of reviews from people that you know, and decide whether it's that movie or something else you should see.

At the application level, the big game changer is going to be what I call social commerce.

So you're using all of the things we are just talking about, media and entertainment, social collaboration, mobile and location, commerce and payment, to do all of that.

What gets to be exciting is all that data that’s being generated, if you go and see the movie, or if you rate it yourself, it gets fed back to you in things like recommendations for the next movie you might want to see, or if you take your kids, the kind of merchandizing that follows up with offers to you, and payments that can drive you to make further additional purchases.

And that’s just a simple example. There are many others I can think of that are, exactly as you say, the whole being much greater than the sum of these individual client formations. It's really quite game changing.

Gardner: So who are the beneficiaries? Clearly there is a business to be had providing cloud services and in integrating process benefits across some of these domains. You can sell hardware and software. You can build new business models by either giving consumers things they couldn't get before or making what they had done before far more efficient and productive. But where is the margin?

This gets to the business of cloud. We see Amazon being very aggressive on price, maybe racing to the bottom on some of the commodity services for IaaS for example. And we certainly expect a lot of competition between the likes of Google and Microsoft for cloud and PaaS types of services. Salesforce of course is in there.

But where is the point in all of this where you could say, "Here is another Apple with the iPad. Here is the margin. Here is the place where the business is as revolutionary as the productive benefits of cloud activities?"

Three examples

Skok: Very good question. I'm going to give you three examples at the different levels: so one at the application level, one at the PaaS level, and then one at the infrastructure level. I hope that will be helpful.

At the application level, the big game changer is going to be what I call social commerce. It's the intersection of two of those cloud formations, if not three of them, which is social connections and recommendations, connected with eCommerce, and potentially mobile within there too.

You're going to see there is tremendous opportunity, because what people most rely on when they are actually buying things is their friends and trusted recommendations, and we're very early in that. Surely, people have begun to recognize the power of the like button, but we haven’t yet seen that translate into commerce. We're early in Facebook trying to realize that.

The other extreme, the eCommerce companies, are taking off doing what we call omni-channel commerce, connecting everything from bricks and mortar, and are also recognizing the power of being able to do that as people are out and about with the mobile devices and gaining data on, for example, local offers and so forth.

The next great opportunity is going to come in the combination between social and commerce, and it might involve mobile and local as well. We haven’t seen the next great company emerge from that, but we're certainly seeing many opportunities. At the application level, that’s probably a good example.

People are looking for more analytics, and more of the capabilities that are going to be specifically taking advantage of cloud scale.

To deliver on all of that, one of the things we're taking for granted is that the infrastructure is going to be in place to do all that. A part of the survey that we always take time to ensure we cover is to understand the things that people are actually spending money on right now.

If we look at the intersection between vendors and users, and in the survey it's a slide called "Rainmakers," at the bottom of the infrastructure stack there's still a tremendous amount to do to enable the kinds of applications that you and I are talking about here.

Some things are very basic, the things like single sign-on on authentication to enable this collaboration across the supply chain. More specifically, in mission-critical businesses, it's things like backup, archiving, and business continuity to ensure that all this information is being stored and managed on a significantly scalable basis.

When we looked at all that, the thing that stood out, which is not going to surprise you probably, given that we talked about big data, is that people expect one of their greatest areas of spend to be analytics.

So at the infrastructure level, I think we are going to see some of the things that I talked about that are basic, like next generation of single sign-on. But the big thing that came out was that people are looking for more analytics, and more of the capabilities that are going to be specifically taking advantage of cloud scale.

Insights in real time

Whether that’s using things like Hadoop or next generation NoSQL or NewSQL, our capability is to get those kind of insights in real-time. In the end, the more data that’s being generated, the more we're going to have to step up the scale of analytics to provide insight in an effective time scale.

Those two would exemplify the application opportunities and the infrastructure opportunities. In the middle, as we talked about earlier, there’s a great deal of interest in PaaS, and it's less clear to me what the opportunity is for a specific breakout.

I'll say both what the survey revealed and what it didn’t reveal, which is interesting. We talked about how it revealed that there is a strong interest in PaaS, but when we dig in with vendors, what we see is that the vendors are actually at the bottom of the stack. The IaaS vendors, people like Amazon, VMware, and others, are actually trying to add more capabilities to their IaaS platform, to enable them to feel more like a PaaS.

If you look at Amazon, they've added numerous new services to make themselves more platform like, and they have become the de facto standard there. So they are moving from the bottom upward.

But you also see the SaaS vendors, exemplified by Salesforce.com, introducing their PaaS, like Force.com, to extend the use of their infrastructure or their applications to be more platform like too. There's a pretty big squeeze from the top and the bottom that’s making it difficult to see what will be the white space for a PaaS vendor.

People have historically very rarely made money out of tools. I don't think it will be any different in the cloud.

The honest truth is that I can describe the first two, what the opportunities for the SaaS and IaaS are, but it's not clear to me where the white space is in PaaS, and it feels like it's getting squeezed, if that makes sense.

Gardner: So to sum up, perhaps there is a significant business to be had up and down the spectrum, infrastructure, hardware-software, facilities, management, building out the applications, but perhaps one of the larger two opportunities that's yet to be solidified or clear is in the analytics and in PaaS.

Now, in the past, development was often a tricky market to make money in -- tools, frameworks, IDEs, but in many cases there was a deferment involved. You might break even or even lose money on some of those areas in order to capitalize on the deployment side or even gain lock-in for those applications on a platform, and that's where you would have a very good business.

I think what we're seeing with cloud is something a bit different. When it comes to lock-in, and you have had experience of course in open source software, what are some of the good things and some of the more risky things when it comes to this desire, as we've seen in the past, to lock people in to either a platform, a service, a standard, or even a toolset?

Skok: You're on the money on a number of different fronts. First of all, as you say, people have historically very rarely made money out of tools. I don't think it will be any different in the cloud. The interesting piece in the cloud is you have the runtime potential to make money, but even then, it's an economy of scale game, so it's not a place that's easy for startups to play.

Platform lock-in

The second key point you're making is that people traditionally have looked at it as a means to get lock-in to a platform, and that is the exact thing that people are worried about in this cloud revolution too. The third biggest item of what's inhibiting cloud adoption in the survey is lock-in, and the fourth was interoperability. They were both very high on the ranking.

What people are worried about there is very simple. If we double-click on it, they're looking for three things to avoid lock-in. They want to avoid data lock-in, they want to avoid programmatic lock-in with application programming interfaces (APIs), and they want to avoid being locked into proprietary services or features that can't be transparently supported on other platforms.

That's a real challenge for the PaaS players at this point, because the giant here is Amazon, and they've got a series of de-facto standards. There are some companies like Eucalyptus who have been very smart and are reverse engineering or making sure they are compatible with those standards.

But those that are trying to compete on new grounds are certainly going to have to struggle with gaining critical mass and then answer the question about how they'll provide that interoperability on those three layers we just talked about, to get over that inhibitor of an adoption that people are worried about around lock-in.

People will have open access to the source to modify, adopt, and even change to create their own abstraction layers.

Gardner: So perhaps there's a de-facto standard around Amazon, but being challenged by OpenStack and CloudStack as well. Is there any inference in the survey as to whether the OpenStack and CloudStack approaches would mitigate a de-facto standard evolving rapidly, and how do you view that?

Skok: I'm going to slightly branch outside of the survey and mention that for several years, we've run an equivalent industry survey on open source. It's very widely adopted now, but when we started several years ago, it was early.

We've seen that cloud has very much become a part of open source, not just because a lot of cloud is built on open source, but because, as you say, people are looking at open source as a means to answer this lock-in. It answers one of the key areas, which is certainly programmatic, an API type lock-in.

People will have open access to the source to modify, adopt, and even change to create their own abstraction layers, but that will potentially enable this kind of interoperability.

Things like OpenStack, CloudStack, OpenShift, and other platforms are potentially an answer to that. The challenge there is that they're relatively young and early in their adoption. While they've got significant backing, you have yet to see broad deployment of them yet.

I'm hopeful that open source will provide some of the answer to vendor lock-in. It's certainly being proposed that way and it's being supported that way. If you talk to a certain segment of the user population, they would tell you that it's exactly what they're relying on, but in reality, we're too early to call that one.

Making good money

Gardner: One observation from me would be that the folks that are in a position to make good money on infrastructure, hardware or software facilities, and management, seem to be a natural affinity environment with the OpenStack, CloudStack approach, but those higher up the food chain in cloud that have more of a pure-services business model might be interested in having the de facto standard land in their particular data center. It will be interesting to see how that pans out.

Tell us once again, Michael, how people can get more information on your survey. Where could they go to get the nitty-gritty?

Skok: They can just go to mjskok.com under Industry, Future of Cloud Computing, and the full survey is available from that site on a slideshow for people to click through. Also, it's being covered in many different places by many of the vendors who have supported it. There's a lot of information being disseminated by the collaborators. You have full access to it.

Just to answer your question, because it's too good a question, who has what interest to go where? It's best exemplified by Oracle. Oracle took a long time to enter the cloud market. Of course, they have benefit all the way from hardware out to the applications because of the acquisition of Sun.

That's how they're pushing their cloud approach as a series of applications that are totally integrated from hardware, all the way through to software. That's certainly going to suit some class of buyers.

If you look at major waves like this, it's always a while before people can afford to have best of breed at various different layers.

But if you look at major waves like this, it's always a while before people can afford to have best of breed at various different layers. If you started building application, as we did in some of our investments like Demandware eight or nine years ago, there was no IaaS, there was no real depth of Amazon and no service-level agreements (SLAs) that you could have built a mission-critical eCommerce application on.

That is evolving, and the more stable and capable the IaaS and PaaS players become, new applications will be to take advantage of those, and new vendors will potentially be able to take advantage of best of breed. That's what's interesting about the surveys, but it's all about verifying and tagging the state of the industry to see where we are and benchmark how the future is going to play out.

Gardner: Perhaps what we're seeing is a flip from best of breed being a technology to best of breed being a service or ecosystem approach. And if you can perhaps sweeten the offer of moving your best of breed mentality in that direction by not locking people in, or at least giving them an option to have interoperability, or mobility of their services, then that might be an irresistible offer that the market can't refuse. We just don't know who is going to make it, right?

Skok: That's exactly right. That's perfectly said. A good example to highlight how this is still playing out is Zynga, who reverse burst to their own zCloud because the economies of scale made it worth their while to do that.

If you look forward, people are even talking about cloud brokerages. I think it's too early to do that. Forrester had some thoughts about that and was talking about cloud brokers like travel agents. I think we are a ways off from that.

But in the ultimate scenario, exactly as you were talking about it, you might see a place where you have best of breed, cloud services, and all kinds of cloud formations that we were talking about.

Best of breed

Applications will effectively be an amalgamation of the best-of-breed cloud services and cloud formations that will enable new classes of applications that have interoperability, or at the bare minimum of things like data that's passed up and down supply chains or along applications streams. The consumer is the ultimate benefactor, because they're getting those, not only at best of breed, but hopefully at the lowest cost and at highest value.

Gardner: Then, perhaps it would be embedded services across those best of breed processes that would include widespread analytics, mobility, and location services, so those become more sweeteners to the offer. There would be a race to who can put together the best banquets of services under the best interoperability terms and licensing terms. So again, it could be a very interesting next five years.

I assume that over the next several years, you're going to be continuing to do this survey each summer and therefore get the gravitas that we have seen with your open-source survey.

Skok: Indeed. There's been unbelievable response to it. In fact, just to give you a sense of it, the open-source survey took a number of years to gain the kind of momentum that it's now enjoying in its seventh year here.

This survey gained such incredible popularity that within the first couple of years, it already has as much support from the industry as the entire open-source survey does.

This survey gained such incredible popularity that within the first couple of years, it already has as much support from the industry as the entire open-source survey does. And we have got tremendous demand to continue doing it, from both vendors and customers alike.

We're continuing to use it to keep dialogue between vendors and customers and enhance the industry’s ability to respond to what they see as the future. So  with your support, we will continue to do it.

Gardner: I look forward to periodically dropping in and learning more about the survey results and, of course, some of the insights and inferences that we can draw.

Skok: Thanks.

Gardner: You've been listening to a special BriefingsDirect podcast discussion on the cloud-computing market and how a recent survey at North Bridge Venture Partners helps define the business growth opportunities for buyers and consumers of cloud services alike.

I want to extend a huge thank you to our special guest, Michael Skok, a partner at North Bridge Venture Partners. You can follow him at www.mjskok.com and @mjskok. Thank you so much, Michael.

Skok: Pleasure. Great being with you here, Dana.

Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions. Thanks to you also our audience for joining us, and don't forget to come back next time.

Listen to the podcast. Find it on iTunes. Download the transcript. Access the survey.

Transcript of a BriefingsDirect podcast on the state of cloud computing and its future outlook based on a recent survey of buyers and sellers. Copyright Interarbor Solutions, LLC, 2005-2012. All rights reserved.

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• IDC Cloud Computing Survey Shows Hybrid Model Increasingly Attractive
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For Dell’s Quest Software, BYOD Puts Users First and with IT’s Blessing

Transcript of a BriefingsDirect podcast on how Quest Software, a Dell company, leverages BYOD and VDI interanally to improve user productivity, application support, and security.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: Quest Software.

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

Dana Gardner

Today, we present a sponsored podcast discussion on the growing acceptance of bring your own device (BYOD) at enterprises. We will examine why the users’ personal use, ownership and maintenance of the computing and mobile devices of their choosing is making more sense for more organizations. We'll learn about how and why through the example of a company, Quest Software, that has begun supporting BYOD -- even with the full blessing of IT.

We'll see how this has had benefits far beyond just the users’ sense of empowerment, in terms of meaningful IT advancements in centralized applications, control and support, virtual desktop infrastructure (VDI) use, better disaster recovery (DR) practices, better data protection and more.

Here to share insights into how BYOD can work well at Quest Software, and even into their new corporate owner Dell, we are joined by Carol Fawcett, the CIO of Dell Software and the former long-term CIO of Quest Software. Welcome, Carol. [Disclosure: Quest Software is a sponsor of BriefingsDirect podcasts.]

Carol Fawcett: Thank you, Dana.

Gardner: Good to have you with us. I'm really intrigued with this BYOD thing. Just a year or two ago, people were saying, "What?" and scratching their heads, saying, "Are you kidding? You're going to let your users choose their device?" But as this has been put into place and some of the implications have been thought through, it seems to be an interesting possible benefit set.

So let me start with where you began. What were the challenges, or what were the forces or trends at work, too, that got you all at Dell Software involved with BYOD?

Fawcett: Great question, Dana. I don’t think that we actually started down the path of a BYOD project, because as many listening will know, this started years ago. We started a project where we said we wanted to enable our users to access applications and data on a select set of devices, which for us started with the obvious, the iPad. Then came the Android smartphones, and the list continued on.

Carol Fawcett

This list will continue to grow as time goes on and new devices are brought in. The good news is that there are product offerings now in the marketplace that are helping with that demand and helping IT departments everywhere.

So instead of looking at it as BYOD, it’s now turned into a BYO-x phenomena that the C-level started. And as everyone in an organization saw them bringing different devices into meetings, of course, they all wanted to jump on the bandwagon. Slowly but surely, the wave began, and that's how we got where we are today.

Gardner: This is interesting. There is a sort of direction from the user side, which is to say, they probably like the choice and they had some personal preferences, or they've been able to be more productive in their personal lives using certain technologies.

Then there has also been this direction from the enterprise, which is to say, they like the idea of centralizing, controlling apps and data. And then delivering those out to devices (like with VDI) can be a way of encouraging this control. It’s almost like a confluence of two forces -- VDI and BYOD -- that make a whole greater than the sum of the parts. And we don’t see that very often in IT.

Pull it together

Fawcett: It’s one where you have to pull the needs and the demands of an IT organization together with what the users want to go to, and that’s just what we're seeing out there everywhere in the industry. You definitely have to pull it together, try to satisfy the IT governance and the policies that we set up, and balance that against what the users are saying: "I have to have this in order to get my job done."

Gardner: As we learn more about how you've done this there, let’s also explain to our listeners that Dell recently acquired Quest Software, and you were at Quest before that. So tell me a little bit about how the confluence of these two companies also comes to bear on this issue of BYOD?

Fawcett: Absolutely. Let’s start with Quest Software. Where our sweet spot was, and still is, was that we are the IT management software provider that offers a broad selection of software solutions to simplify and solve the most common -- and most challenging -- IT problems for all areas of an IT environment -- from infrastructure, to applications, front-end to back-end, physical or virtual, or even out in the cloud, for that matter.

Dell was looking for a company whose tools could and would complement and expand their own software product offerings in the four strategic areas that they were focused on, which Quest obviously aligned with. Those were systems management, security, business intelligence (BI) and applications.

So you can really see why the partnership between Quest and Dell is such a great partnership and offers so much to the industry.

It's about individuals that are using different devices accessing a set of applications inside your data center or under your control.

Gardner: Let’s go back to how this came about and learn some lessons from your example, sort of a use case perspective, on BYOD use. If I were a CIO at another firm and I wanted to learn something from your experience about moving to the support of multiple devices, what’s something that you might offer in terms of what to think about early on, or some 20/20 hindsight insights that you have?

Fawcett: As you approach the subject you have to really level-set with the team that this is not about devices that an individual will want to use, but instead it's about individuals that are using different devices accessing a set of applications inside your data center or under your control.

This individual, obviously, should have only one set of access rights across all the environments, based on what that person's role is within the company. The different devices that they use should really be an afterthought. Regardless of the device, their access rights need to remain consistent.

If I'm on a desktop, a laptop, or I bring in a tablet, or if I'm using my phone to get email, it shouldn't matter. I should have that same, consistent UI and the same, consistent security rights to get where I need to go to do my job.

Don't get me wrong -- and we know this; we hear it at every conference we go to -- IT will struggle with the management of the many devices, no doubt. The only thing I can really suggest there is something we did.

Different devices

We took that gigantic list that's out there and we said, "Where are we going to offer different devices?" We're going to pick maybe 10 or 20 different devices, the most common ones that people are bringing in, to support going forward, with the hope that you will be able to satisfy about 80 percent of the employed population.

It does, however, all go to the user experience. You have to keep coming back to that, making sure they have the ability to get to the right data and the right applications, with the correct security rights for their job.

Gardner: It sounds as if some of the basic principles and benefits of VDI come to play here. That is to say, the provisioning, the control, the access management. So there is, I guess, a fortuitous intersection of where VDI was entering into more and more organizations -- particularly those that want to control for security or regulatory purposes or intellectual property (IP) control, that sort of thing -- with this idea of multiple devices, multiple panes of glass, full mobility.

Did that play a role there, too? Were you already going down a VDI track or trajectory and this helped you get to BYOD quicker and better?

Fawcett: We started down the VDI path. In fact, many companies did years ago, when we started to do more with offshore resources. We wanted to have offshore resources, we wanted to give them desktops, but we wanted to make sure they were secure. That was the first introduction of where VDI makes a lot of sense, where you want to secure data, have folks doing coding, but knowing they can’t take code with them. That’s the way it started.

We are a technology company, so some of our policies may be more relaxed than the policies of companies outside our realm.

But then you start to find other use cases for VDI that really start to benefit the rest of the user community. VDI is one of those things that started a while back and now has slowly grown into this BYOD solution.

Gardner: Did you know how much BYOD was going on there? How did you find out and how would it become something you could control?

Fawcett: That’s the question of the hour. I'd love to be able to say that we knew exactly how many people were bringing in what kinds of devices, but the reality is, we are a technology company, so some of our policies may be more relaxed than the policies of companies outside our realm.

For example, in a bank or in the government, you can pretty much lock down an environment, and every employee coming in knows it's going to be locked down because of who they are and who they work for.

Our organization is made up of technologists located around the world. You know some of them are looking for ways around the fences. It’s just built into their nature. It's almost like a competition for them, "Can I figure this out?" Now add in the remote and traveling users and you can see how this expands the challenge as time goes on.

Story of adoption

Gardner: Let’s hear a little bit about the story of adoption. You decided that this Pandora's box was already open, no going back. BYOD is apparently here to stay, and we've had some head start with VDI models and processes. Tell me how this panned out and what were some of the major problems that you found that you needed to solve.

Fawcett: As I mentioned before, for us, it was not about the devices. We tried to turn that around, and it was kind of handy, because the whole consumerization of IT started to come into the industry more and more. So we started to piggyback on that.

Think about it. A device is simply a means of accessing the apps and the data. Our vision instead turned into trying to figure out a way to provide employees with a world-class overall user experience, from beginning to end, encouraging the culture of openness and innovation.

In the end, our goal is to offer our end-users that ability to use a flexible set of tools and toolsets with a familiar interface that allows for secure access anywhere, anytime. We want them to be comfortable with those tools, as this will make them obviously more productive at doing their jobs.

Gardner: Back to that interface issue. There is also this intersection of technology, with HTML5 being prominent. Did you have to make some choices about native support for apps across some of these major platforms and popular devices? Or did you say, "Let’s try to come out with the technological approach that can suit more than going native, try to do write once and deploy anywhere or be consumed anywhere?" How did that kind of pan out?

The good news is that these applications are staying up with the industry and we're serving them up.

Fawcett: We pretty much have a standard set of packaged applications. So it wasn't like we were going to start rewriting any of those applications, or even the front-end. The good news is that these applications are staying up with the industry and we're serving them up, so multiple device types can access the data and still provide that consistent UI to the end-user.

But you still have to go back too and ask what makes sense. What kind of device makes sense, for example, in an AP data entry department? Do you really think you are ever going to see -- and maybe one day, who knows, we will -- but do you ever think you will see a data entry clerk using a tablet to do rapid data entry? Probably not. They're pretty tied to the 10-key. They like the feel of the keyboard itself.

So you kind of sit back. What everyone is beginning to accept is that there are different devices for different types of roles inside an organization. That's pretty much the path that we've continued down as well.

At Quest, we have some wonderful tools that help us understand this environment and help us recognize who is bringing in devices and how they're being used. We're getting a better sense of what's in our environment so that we can start answering these.

Gardner: Let's look at this through the lens of IT. You decided that you're going to support BYOD with the blessing of IT. What does this get for you? Are there some additional benefits other than empowering the end-user or giving them choice? What’s there for you in terms of better support for your centralized operations, applications, data, and then some of those backup and support functions that we all should be doing regularly?

Regular backups

Fawcett: One thing that really helps out IT is the thing you just mentioned, which is making sure that laptops are being backed up on a regular basis. We know today, and I'm sure many of us on this podcast are thinking, "How many of us actually back up our laptops on a regular basis?"

Those who do it are saying, "Well, doesn’t everyone do that?" But you could guess that inside of a large organization, probably the majority are not responsible enough to do it, because it’s just not in the forefront of their minds.

When you talk about VDI and having a desktop in the data center, it's a guaranteed thing, because it's in the data center. Everything in the data center is backed up. That's one real positive -- making sure that the data is secured. Obviously, when it comes to DR, we could quickly recover an environment. So that's a great thing for IT. And I think that, in general, the end-users would love that as well, as they get into this world more often.

Gardner: Looking a little bit to the future, more organizations are adopting software-as-a-service (SaaS) applications for non-core business type applications. We're seeing more interest in cloud, consuming applications from a public cloud environment or the hybrid environment, whether it's public or private. Is there something about your support of applications as centralized to multiple devices that will enable you to exploit SaaS, cloud and hybrid services to a greater extent?

Fawcett: Most definitely. It goes back to the tools that you're using to assess, manage, and govern and then support the end-users. IT has to make sure they have those tools in order to make sure they're supporting the end-users regardless of where their data lives.

It's a given that inside your data center you have virtualized as much as possible.

Certainly, the cloud and the SaaS environments are adding extra buzz in the industry. We're very interested in how to capitalize on that. How do we make sure that we're looking at elastic computing, and where can it benefit us? Everybody is scrambling to understand this new technology trend better and how it can help an IT organization.

But it does go back to the tools that an IT organization has in order to match those three things that we should always be doing, which is assessing what the users and the environment need, managing it, making sure it's secure, and then making sure again that we're able to support those end-users to their fullest and the way they expect to be supported.

Gardner: My thinking just a couple of years ago was that BYOD was going to be the exception, not the rule. You would support some sort of a fringe category or two of your workers with this capability, perhaps those out on the road, more often than not.

But now, as I hear you, it sounds that the direction that most IT is going to go in, hybrid services, delivering and consumption and management, and a more centralized control over data, IP, and management of apps and delivering desktops themselves as services, are all going to be making BYOD, or at least the blocking and tackling that you would need to do anyway, something that comes together in such a way that this might become more the norm than the exception. Do you think that’s what’s happening?

Fawcett: Absolutely. It's like when virtualization was first there. There was a wave of “how much could you virtualize inside your data center?” Fast forward, and now it's a given. It's a given that inside your data center you have virtualized as much as possible, so that you can ensure that your data center is being used the most it can be and the most efficiently.

The way it's going to be

This is the same way this is going to be. Just talk to your kids. Try to find a child walking down the street and isn't texting or who doesn't have a tablet and can probably manage it better than their parents.

I'm not talking about just young children but generations to come. I'm talking about the kids who are coming in now, in their 20s and 30s. it's a given that they want to use whatever device they choose in the corporate world, just like they do at home. It's a right. It's no longer considered a luxury.

From that view, it will be up with the internal IT teams to ensure they have the access to everything they need, with the right security in place to protect them, as well as protect the company. That's why when you think about some of the tools that we've been using here, you really want to make sure you bring in some of those tools, so that you can, in fact, assess, manage and support the end-users to the best of their ability, for not only the end-user, but also for the company.

Gardner: To that point about tools, I assume that you all drink your own champagne.

Fawcett: Absolutely.

Gardner: Was there anything in particular in the Quest Software portfolio that you think gave you an on-ramp, perhaps a better return on investment (ROI), and even overall better control and management, as you move toward this BYOD, support of many panes of glass, centralized IT management direction?

Fawcett: Absolutely. Yes, we are drinking the champagne, and it all goes back to the beginning, where you asked me, how I knew how much BYOD was actually in our environment? That's where we started using one of the first phenomenal tools that we have, which is called MessageStats. This is a great tool that reaches out and helps us track the trending within the organization at a macro and micro level. We know which devices and OS versions are being used, by whom, and at what time.

It provided a critical insight as to which virtual desktop technologies provide the best fit for each user, based on their needs.

In fact, I asked my team just recently, when we first started talking, "Can you pull a list on all the devices that I use, that are registered to me?" So I saw my own list of the devices and I was shocked to see how they actually are tracked, right down to the level of when was the first time I ever connected the device to the network, last successful sync, last policy update, what kind of device was it.

It was so granular, and quite frankly, it was so very Big Brother-like, it kind of scared me. But again, you can't make a solution for what you don't understand. So assessing with MessageStats is the only way to go.

Then once we understood it, we said, "Now that the process is moving, let's figure out what type of device is right for what type of user." And this is where we turned to vWorkspace, which enabled us to determine which of the users and scenarios are best suited for the virtual desktops in the data center.

In addition, it provided a critical insight as to which virtual desktop technologies provide the best fit for each user, based on their needs. So vWorkspace allows us to not only put a desktop in the data center, but it lets us do things like application streaming and publishing. It really enables us to have that broad spectrum of functionality with just that one tool.

Once we were up and running, we stepped into the management and governance aspect of the project. This can probably be one of the most problematic areas, when you think about the pure nature of BYOD. Multiple devices for a given user, each acting very differently, and if not managed, could destroy any governance policy put in place.

Understanding the individual

This is where we truly must raise the issue up from the device to the individual, understanding that role of that person and understanding what security rights, regardless of the device they need to have in place. And this is where Quest’s One Identity Management came into play.

It gave the IT team the ability to rely on one point of control for an individual and all their devices. This is the product we count on to pass the audits, and most importantly, to ensure that our employees have that right level of access needed to get their job done.

The final key point on this is that it takes IT out of the mix and automates that very cumbersome process of provisioning, moving employees amongst departments, and then finally de-provisioning, when that employee leaves.

This is a very powerful product that makes it so that in our environment, once an employee is entered into the HR system, through automation, it automatically provisions them, gives them the rights to applications, sets them up inside of those applications -- all without IT involved in that process. So no more passing help-desk tickets.

One other piece that I wanted to touch on is a product called Webthority that we have been using, not only for our internal users, but also during the M and A process. This is a great product, because it provides a portal for the employees to come into. Once again, it's secured via that same network log-on that they use when they walk in the door in the morning.

This is anywhere, any device. It's simply a portal. They come in, they use their network log on, and bam, they're shown all the applications that they have visibility into and access to. They can go in, without having to log on again, almost like a single sign-on effect, which allows them to access the applications via two-factor authentication as well. It's a great product that helps out in many ways.

Remember, the key to any IT success is through the happiness and satisfaction of the customers.

And then that final aspect of an environment is, of course, the support and monitoring. Remember, the key to any IT success is through the happiness and satisfaction of the customers. We recognize that supporting and monitoring their experience and performance is most important, especially when you talk about VDI, which is what you and I have been talking so much about.

Our job is to ensure that the end-users are getting the same type of performance that they would on a standalone PC or if their desktop was in the data center. Because without that consistently great performance, your end-users will fight giving up their desktops every time.

For this, we turned to monitoring that user experience with Foglight for Virtual Desktops. Being able to quickly determine which users are impacted by performance problems helps us to proactively take action for those users, before the users feel the pain.

Understanding the trends in the virtual environment -- how many people are connecting at any given time, what applications are they using, etc. -- helps us determine when we might need to add additional servers to that server farm, and to meet the load. Or we can even look at a desktop or an end-user and say, "You know what? I don't think these folks should be virtualized at all. Perhaps they should go back to being physical" -- for whatever reason.


Empirical data

You can't correct what you don't know and you need that empirical data to make an educated move. Foglight gives us that data, ensuring we are consistently improving the environment for the end-users. It's a great set of products that touch on all three phases of an environment or a team that's trying to solve this BYOD issue.

Gardner: It really strikes me too that this isn't really about devices, but it's about the data center, the tools, the management, the governance, all of which are probably things that are good IT best practices anyway. It almost sounds as if BYOD is forcing discipline, governance, automation; some of the basics of good, advanced and modern IT. Is that sort of what you are seeing, is BYOD a catalyst to better data-center management?

Fawcett: It can definitely be used that way, because it does all go back to how an individual in a given role gets access to the applications they need to get their job done. It shouldn't matter which device they are using. It's all about which application access they should have to get their job done.

Gardner: Of course when you put in the best practices, when you have the backups and you have the scheduling and the automation, this all will end up being an economic benefit as well, because you won't suffer terrible outages, you won't have issues of discovery for data when you need it and how you need it.

Of course, you can start to look at your total cost for your data center and tweak and manage for energy, facilities, capacity and utilization. It sounds as if not only is BYOD a catalyst for better data center practices, but it could be some significant means of reducing your total cost of operation.

It's all about containing the IT budget through best practices and automation.

Fawcett: Absolutely. We've always looked at containing IT budgets as a means to an end. When you sit back and think about it, the only way to do that is through simplification, standardization and automation.

If you don't have that last piece, that automation piece, and you're simply throwing heads to solve an issue, your IT expenses are going to go through the roof. And you're going to have unhappy customers in the end, because processes are going to be overcomplicated. It's all about containing the IT budget through best practices and automation.

Gardner: Well, great. I'm afraid we are about out of time. You've been listening to a sponsored BriefingsDirect podcast discussion on users’ personal use, ownership and even maintenance of their own computing and mobile devices, and how that's actually making more sense, for more organizations, for more reasons.

We have seen how this has benefits far beyond just the users’ sense of empowerment; we're seeing that there are benefits to IT advancements along the lines of centralized application support, data support, VDI implementations, better DR, data protection and even more.

We've been talking about how BYOD impacts organizations, in particular Quest Software, a Dell company, and we have been learning this from Carol Fawcett, the CIO at Dell Software. Thanks so much.

Fawcett: Thank you.

Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions. Thanks also to you, our audience, for joining us. We hope you enjoyed this, and we hope too that you come back next time.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: Quest Software.

Transcript of a BriefingsDirect podcast on how Quest Software, a Dell company, leverages BYOD and VDI interanally to improve user productivity, application support, and security. Copyright Interarbor Solutions, LLC, 2005-2012. All rights reserved.

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Thomas Duryea’s Journey to the Cloud: Part One

Transcript of a BriefingsDirect podcast on how one Australian IT integrator has escalated cloud infrastructure development to provide a portfolio of new public cloud services.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: VMware.

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

Dana Gardner

Today, we present a sponsored podcast discussion on how leading Australian IT services provider Thomas Duryea Consulting has made a successful journey to cloud computing. We'll learn why a cloud-of-clouds approach is providing new types of IT services to Thomas Duryea’s many Asia-Pacific region customers.

Our discussion kicks off a three-part series on how Thomas Duryea (TD) designed, built, and commercialized a vast cloud infrastructure. The first part of our series addresses the rationale and business opportunity for TD to create their cloud-services portfolio built on VMware. [Disclosure: VMware is a sponsor of BriefingsDirect podcasts.]

Stay with us now to learn more about implementing the best cloud technology to deliver and commercialize an adaptive and reliable cloud services ecosystem. Here to share their story on this journey, we're joined by Adam Beavis, General Manager of Cloud Services at Thomas Duryea in Melbourne, Australia. Welcome Adam.

Adam Beavis: Thank you. Pleasure to be here.

Gardner: Why cloud services for your consulting and business customers now? Have they been asking for it? Has the market shifted in some way that led you to begin this journey?

Beavis: Certainly, the customers are the big driver while we are moving into cloud services. Being a traditional IT integrator, we've been very successful showing a lot of data-center solutions to our customers, but more and more we're seeing customers finding it harder to get CAPEX and new projects and they are really starting to look at the cloud alternative.

Gardner: Why then have you looked at moving toward cloud services as a commercial offering, rather than going yourself to a public cloud and then availing yourself of their services? Why build it yourself?

Beavis: We reviewed all the possibilities and looked at moving to some of the larger cloud providers, but we've got a strong skill set, a strong heritage, and good relationships with our customers, and they forced our hand in many ways to move down that path.

They were concerned about telcos looking after some of their cloud services. They really wanted to maintain the relationship that they had with us. So we reviewed it and understood that, because of the skill sets we have and the experience in this area, it would work both commercially and then relationship-wise. The best move for us was to leverage the existing relationships we have with the vendors and build out our own cloud.

Gardner: So who are these eager customers? Could you describe them? Do they fall into a particular category, like a small to medium-size business (SMB) type of clientele? Is it a vertical industry? Where is the sweet spot in the market?

No sweet spot

Beavis: That’s probably the one thing that surprised me the most. As we've been out talking to customers and selling the cloud, there really is no sweet spot. Organizations that you talk to will be doing it for different reasons. Some of them might be doing it for environmental insurance reasons, because having their data center in their building is costing them money, and there are now viable opportunity to move it out.

Adam Beavis

But if I were to identify one or two, the first one would be independent software vendors (ISVs). Cloud solutions are bringing to ISVs something they've looked for for a long time, and that’s the ability to run test and development environments. Once they've done that, they can host their applications out of a service provider and not have to worry about the underlying infrastructure, which is something, as a application developer, they're not interested in.

So we're seeing them, and we're working with quite a few. One, an Oracle partner, will actually run their tests in their environments in a cloud, and then be able to deliver those services back to some of their customers. In other cases they'll run up the development in their cloud and then import that to an on-premise cloud afterward.

The other area is with SMBs. We're certainly seeing them, for a financial reasons, want to shift to cloud. It's the same old story of OPEX versus CAPEX, reduced budgets, and trying to do more with less.

The cloud is now in a position where it can offer that to SMB customers. So we're seeing great opportunities appear, where not only are we taking their infrastructure into the cloud, but also adding on top of that managed-service capability, where we will be managing all the way up to the application.

We see us being able to provide it to anyone, from a small reseller to an ISV, someone who develops their own applications.

Gardner: Based on this mixture of different types of uses, it sounds like you're going to be able to grow your offerings right along with what this market demands. Perhaps some of those ISVs might be looking for a platform-as-a-service (PaaS) direction, others more of a managed services, just for specific applications. Was that important for you to have that sort of Swiss Army knife for cloud advancement?

Beavis: Exactly right, Dana. Each one is addressing a different pain point. For example, some of them are coming to us for disaster recovery (DR) as a service, because the cost of renewing their DR site or managing or putting that second site out is too expensive. Others, as you said, are just looking for a platform to develop applications on. So the whole PaaS concept is something near and dear to us on our roadmap.

Each one continues to evolve, and it's usually the customers that start to drive you as a cloud provider to look at your own service catalog. That’s probably something that’s quite exciting -- how quickly you need to evolve as a service provider. Because it's still quite a new area for a lot of people, and customers do ask for varying things that they expect the cloud to be or what a cloud is. We're constantly evolving and looking at new offerings to add into our service catalog.

Gardner: In my introduction I mentioned a cloud-of-clouds ecosystem. Does that make sense? Is that the sort of goal that you are ultimately going to reach with your journey?

Beavis: It definitely is. We see it being more than just one offering in our eyes. We see us being able to provide it to anyone, from a small reseller to an ISV, someone who develops their own applications. Or, it's someone who works specifically with applications and they're not just interested anymore in running their own infrastructure on their site or caring for it. They just want to provide that platform for their developers to be able to work hassle-free.

Gardner: So this means that you've got to come up with an infrastructure that can support many different type of uses, grow, scale, and increase adaptability to the market. What were some of the requirements, when you started looking at the vendors that you were going to partner with to create this cloud offering?

Understanding customers' needs

Beavis: The first thing that was important for us was, as you said, understanding our customers’ needs initially and then matching that to what they required. Once we had that, those words you mentioned, scale and everything, had to come into play. Also the cost to build these things certainly doesn’t come cheap. So we had to make sure we could use the existing resources we had.

We really went in the end with the VMware product, because we have existing skill sets in that area. We knew we would have a lot of support, with their being a tier-1 vendor and us being a tier-1 partner for them. We needed someone that could provide us with that support from both a services perspective, sales, marketing, and really come on the journey with us to build that cloud.

And then obviously our other vendors underneath, like EMC, who are also incredibly supportive of us, integrate very well with those products, and Cisco as well.

It had to be something that we could rapidly build, I won't say out of the box, because it’s a lot that goes around building a cloud, but something that we knew had a strong roadmap and was familiar to all our customers as well.

The move to cloud is something that is new to them, it's stressful, and they're wondering how to do it. In Australia, 99 percent of customers have some sort of VMware in their data center. To be able to move to a platform that they were familiar with and had used in the past makes a big difference, rather than saying, "You're moving to cloud, and here is a whole new platform, interface, and something that you've never seen before."

Needless to say, we're very good partners with some of the other providers as well. We did review them all, but it was a maturity thing and also a vision thing.

The story of the hybrid cloud was something we sat down and saw had a lot of legs: The opportunity for people to stick their toe in the water and get used to being in the cloud environment. And VMware’s hybrid cloud model, connecting your on-premise into the public cloud, was also a big win for us. That’s really a very strong go-to-market for us.

Gardner: As a systems integrator for some time, you're very familiar with the other virtualization offerings in the market. Was there anything in particular that led you away from them and more toward VMware?

Beavis: Not really. It was definitely a maturity thing. We remember when Paul Maritz got on stage four years ago and defined the cloud operating system. The whole industry followed after that. VMware led in this path. So being a market leader certainly helped.

Needless to say, we're very good partners with some of the other providers as well. We did review them all, but it was a maturity thing and also a vision thing. The vision of a software-defined datacenter really came into play as we were building Cloud 2.0 and that was a big winner for us. That vision that they have now around that is certainly something that we believe in as well.

Gardner: Of course, they've announced new and important additions to their vCloud Suite, and a lot of that seems to focus on folks like yourself who need to create clouds as a business to be able to measure, meter, build, manage access, privacy, and security issues. Was there anything about the vCloud Suite that attractive you in terms of being able to run the cloud as a business itself?

Product integration

Beavis: The fact it was packing stuff as a suite was a big one for us. The integration of the products now is something that’s happening a lot more rapidly, and as a provider, that’s what we like to see. The concept of needing different modules for billings, operations, even going back 12 months ago, made it quite difficult.

In the last 12 months with the Suite, it has come a long way. We've used the component around Chargeback, vCenter Operations Management, and Capacity Management. The concept now of software-defined security, firewalls, and networking, has become very, very exciting for us, to be able to all of a sudden manage that through a single console, rather than having many different point solutions doing different things. As a service provider that’s committed to that VMware product, we find it very, very important.

Gardner: Margins can be a little tricky with this business. As you say, you had a lot of investment in this. How do you know when you are succeeding? Is there a benchmark that you set for yourself that would say, "We know we're doing this well when "blank?" Or is this a bit more of a crawl, walk, run approach to this overall cloud business?

Beavis: Obviously that comes with a lot of the backend work we're doing. We take a lot of time. It’s probably the most important part. Before we even go and build the cloud, it’s getting all that right. You know your direction. You know what your forecast needs to be. You know what numbers you need to hit. We certainly have numbers and targets in mind.

That’s from a financial perspective, but also customers are coming into the cloud, because just like physical to virtual, people will come, initially, just with small environment and then they'll continue to grow.

If you provide good service within your cloud, and they see that risk reduced, cost reduced, and it’s more comfortable, they will continue to move workloads into your cloud

If you provide good service within your cloud, and they see that risk reduced, cost reduced, and it’s more comfortable, they will continue to move workloads into your cloud, which obviously increases your bottom line.

Initially it’s not just, "Let’s go out and sell as much as we can to one or two customers, whatever it might be." It’s really getting as many logos into the cloud as we can, and then really work on those relationships, building up that trust, and then over time start to migrate more and more workloads into the cloud.

Gardner: Adam, help us understand for those listening who might want to start exploring your services, when do these become available? When are you announcing them, and is there any roadmap that you might be able to tease us with a little bit about what might be coming in the future?

Beavis: We've got Cloud 1.0 running at the moment, which is a cloud where we provide cloud services to customers. We have the automation level that we are putting in Cloud 2.0. Our backup services, where people no longer have to worry about tapes and things on site, backup as a service where they can just point to our data center and backup files, is available now.

Also DR as a service is probably our biggest number one seller cloud service at the moment, where people who don’t want to run those second sites, can just deploy or move those workloads over into our data center, and we can manage their DR for them.

New cloud suite

But there's a big one we're talking about. We're on stage at vForum next Wednesday, November 14, here in Australia, launching our new cloud suite built on VMware vCloud Director 5.1.

Then on the roadmap, the areas that are starting to pop up now are things like desktop as a service. We're exploring quite heavily with big data on the table, business intelligence as a service, and the ability for us to do something with all that data that we're collecting from our customers. When we talk about IT as a service, that's lifting us up to that next level again.

As I said earlier, it's continuously changing and new ideas evolve, and that’s the great thing working with an innovative company. There are always plenty of people around driving new concepts and new ideas into the cloud business.

Gardner: It's very exciting, and we look forward to learn more. We've been talking about how leading Australian IT services provider Thomas Duryea Consulting has made a successful journey to cloud computing.

It's continuously changing and new ideas evolve, and that’s the great thing working with an innovative company.

Our discussion today kicks off a three-part series on how TD designed, built, and commercialized an adaptive and reliable cloud services ecosystem. The next part of our series will delve more deeply into the how and what, rather than focusing, as we did today, on more of the business rationale for this cloud infrastructure journey.

With that, I'd like to thank our guest for being here on BriefingsDirect today, Adam Beavis, General Manager of Cloud Services at Thomas Duryea Consulting in Melbourne, Australia. Thanks so much, Adam.

Beavis: Thank you, Dana. Absolute pleasure.

Gardner: And I'd like to thank our audience for joining and listening and invite them to come back next time.

This is Dana Gardner, your host and moderator, Principal Analyst at Interarbor Solutions. Thanks so much again for joining. Bye for now.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: VMware.

Transcript of a BriefingsDirect podcast on how one Australian IT integrator has escalated cloud infrastructure development to provide a portfolio of new public cloud services. Copyright Interarbor Solutions, LLC, 2005-2012. All rights reserved.

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Collaboration-Enhanced Procurement and AP Automation Maximize Productivity and Profit Gains in Networked Economy, Says Ariba's Drew Hofler

Transcript of a BriefingsDirect podcast on how efficiencies of cloud computing in procurement and accounts payable are giving companies better agility and spend management.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: Ariba.

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

Dana Gardner

Today, we present a sponsored podcast discussion on how businesses are exploiting open collaboration advances in procurement and finance to produce new types of productivity benefits.

We'll hear from an executive at Ariba and an industry analyst on how more data integration, and process efficiencies of cloud computing help companies to better manage their finances in tighter collaboration with procurement and supply chain activities.

To learn more about how these new trends are driving innovation into the accounts payable (AP) automation and spend management fields, please join me now in welcoming our guests.

We're here with Drew Hofler, Senior Solutions Marketing Manager of Financial Solutions at Ariba, an SAP company. Welcome, Drew. [Disclosure: Ariba is a sponsor of BriefingsDirect podcasts.]

Drew Hofler: Thank you, Dana.

Gardner: We are also here with Vishal Patel, Research Director and Vice President of Client Services at Ardent Partners in New York. Welcome, Vishal.

Vishal Patel: Thank you.

Gardner: Vishal, let's start with you. Today’s landscape for AP and collaborating across business is driving some new processes, new approaches, and you have some new research. Tell us why you did the research now and what some of your major findings were.

Patel: We completed this E-Payables 2012 research study in June of this year. It was comprised of approximately 220 AP, finance, and procurement professionals. Our intent was to get a sense of the current state of AP operations, the usage of AP solutions, and to capture some of the key strategies, processes, and performances that these organizations are able to achieve. Also, to determine how best-in-class companies are leveraging AP automation.

Gardner: And what's changed? What's new now or different from say two or three years ago?

Patel: Traditionally, we saw AP as having a very tactical focus. We asked the survey participants, "What do you think AP can do for you?" The responses ranged from payroll and reviewing invoices to responding to supplier inquiries. But in 2012, we're beginning to see a little bit of a shift more toward strategic activities and the introduction of automation in the process.

Vishal Patel

If we compare procurement and AP, AP traditionally is lagging behind procurement in terms of transformation and improvement of performance in their groups. AP is currently at the point where it's trying to improve efficiency and trying to focus staff members on more strategic activities, instead of responding to supplier inquiries.

That's the general trend we've been seeing, and also just being able to connect the various processes within the procure-to-pay cycle.

New efficiencies

Gardner: Drew Hofler, we've seen an emphasis over the past several years, particularly in a tough economy, on seeking out new efficiencies. We've seen that in procurement and supply chain. Is this now AP's day in the sun, so speak, to get efficient?

Hofler: I would say that it is. It's probably, the last bastion of paper processing in most organizations right now, typically seen, as Vishal mentioned, in the past as a back office tactical organization. They're seeing now that there are benefits that can be had by automating -- and not just automating the process and getting rid of paper -- but automating that on a network platform.

Drew Hofler

That allows visibility into key strategic data that drive decision-making throughout the organization and across their firewall to their suppliers as well. These are things like visibility into shipments, when they're coming in, visibility into line-item invoice data on the procurement side, so that they can do better analysis of their spend.

It's driving more strategic procurement on the supplier’s visibility into invoice status and payment timing, so they can manage their working capital and even access opportunities for getting paid early in exchange for discounts.

All of this stuff flows out of automation, and I think companies are really seeing how AP can now drive some of these strategic activities. So, I think it is their time in the sun.

Gardner: When we actually have an automation across the spectrum of these different activities, it seems to me that we're not going to be just collecting data and be able to proactively seek out new efficiencies or processes. It allows us to have more of an ad hoc, real-time benefit of being adept and even proactive. How is that important now, when you look at this entire spectrum of economic activity?

Hofler: That’s extremely important. Everybody needs to be nimble right now. The big deal is being able to adjust to the circumstances that are just crazy right now. It's having visibility into where you're spending specifically and when you're getting paid. Also, visibility into automating the invoice cycle and the AP process so that now you can do something with that with an early paid invoice that is approved maybe 45 days before it's due.

This opens up working-capital opportunities, where companies are offering early pay discounts to their suppliers. Suppliers who don't have the same access to cash flow that they had pre-2008 are accessing that, saying thank you, and are willingly giving up a discount so that they are lowering their days sales outstanding (DSO).

Buying organizations are getting something for their cash that they're certainly not getting with that cash sitting in bank accounts earning zero percent right now. Both sides are winning, and all of that's really made possible by automation.

Gardner: Vishal, this notion of being nimble, is that something that came up in your recent research and how important is that for companies to once again push the needle on efficiency?

Impact of AP

Patel: It's very important, especially when you start thinking about the impact that AP can have on other parts of the organization like procurement and finance. When you look at the P2P process, it's one transaction that all of these different stakeholders are connected to. But all the stakeholders are not connected to each other necessarily, and that's where automation comes in. That's when you get the added value of collaboration between the P2P cycle.

Gardner: And to this notion that interest rates are so low -- and we're told that they're going to remain that way for perhaps a couple of years -- making your capital work for you has become quite important. What is this new automation at the AP level bringing in terms of freeing up capital and giving companies just another tool, another arrow in their quiver, to get better productivity?

Patel: If you think about the manual environment where you're receiving paper invoices, paper purchase orders (POs). It's a difficult, really tedious work to get the right level of information at the right time, and then make decisions about how to most appropriately utilize cash.

One of the interesting things we found the research was that when we asked the survey participants what some of the biggest drivers are for the AP groups, the top one was improving processing efficiency, which is as expected, and it's been the same way for the last several years.

But the following two were the ones that were surprising. Number two and number three on the list were improving cash and working capital and improving days payable outstanding (DPO). Previously, we wouldn’t even have seen those on the list, but these are much higher on the list in 2012.

Any organization that can have visibility into their opportunities, into their process, and control over that process benefits from this.

Gardner: Drew, we recognize that large companies that are moving lots of goods that have a lot of capital involved are deeply incentivised to do this, but what about smaller organizations? Is this now something that is attainable by them, and are they starting to see benefits there too?

Hofler: Absolutely. Any organization that can have visibility into their opportunities, into their process, and control over that process benefits from this. Smaller organizations on the buyer side are most definitely seeing the value of this. Lots of smaller organizations on the invoice sending and payment receiving side, what we would traditionally call the supplier side, the seller side, are seeing huge benefits from this.

For example, one of the suppliers on the Ariba network company called Mediafly, invoices with a very large entertainment company. They're a small company, they're a startup, and they're in growth mode. They have a full visibility into when they're paid and their CFO has told us that it's just like gold being able to see that.

So Mediafly has visibility into not only when their invoice is going to get paid, so that they can forecast on that, but also the ability to accelerate that payment on demand. They can literally click a button and get paid when they want.

They have told us that that has allowed them to hire, to accelerate their production of their products by hiring new developers, so that they can actually get a product out the door. They told us an example where they were able to get a new product out the door before they had planned, and they were scheduled to get paid on that original invoice.

Accelerated growth

And so it accelerated their growth. They've been able to avoid using credit lines because they have access to this through this kind of networked economy effect. They're able to see what's going on, and have the capability to make a strategic decision to accelerate cash, and it has really helped them as a small company.

Gardner: So visibility, predictability, understanding each part of the process, knowing scientifically or practically what's going to happen, how does collaboration fit into this Vishal? Where is that now adding another element of benefit?

Patel: In general within organizations, collaboration is a theme nowadays, with the workforce being quite diversified in terms of location. People are relying on collaborative efforts to help improve performance overall across the enterprise. And I think that's no different between procurement, AP, and treasury. Their collaborative efforts are going to improve each of their processes and the visibility they all have into the procure-to-pay process.

For example, procurement because of e-invoicing and supplier networks and just the visibility that AP is providing procurement, can improve their monitoring and measurement of supplier performance with invoice accuracy, how the're doing on payments, this helps them understand the total cost of working with a supplier.

That's one example of how procurement and AP can work together. But with treasury being able to understand what invoices are coming due, when they're coming due, when is the best time to make a payment, AP is able to deliver this kind of information in an accurate and real-time way, and that enhances their collaboration as well.

Their collaborative efforts are going to improve each of their processes and the visibility they all have into the procure-to-pay process.

Gardner: Drew, of course we're seeing lots of advancements in the field around cloud computing, mobile devices, and social networks, where people are becoming more accustomed to having an input and saying what's going on along the way. Technically, how is collaboration being driven into what Ariba is doing specifically around this AP automation?

Hofler: It all revolves around visibility into information, and as you said, access to make decisions based on that from across silos inside of organizations. For example, one of our customers, Maxim Healthcare, had very little visibility into procurement, across AP, and into their suppliers. All three of these stakeholders had very little visibility into what was happening, once a PO went out the door and once an invoice came in. There were spot processes that happened, but they were in a black box.

They had no way to enforce compliance to contracts. So an invoice comes in but it's not connected to the original document which is essentially a contract that enforces, say, volume discounts on widgets or whatever it might be. By automating the P2P process, by bringing all of these things into a kind of a network solution, the various stakeholders are able to see what's going on.

From the procurement side, they can see the line items on the invoice, so they can do better spend management and better analysis on their spend.

From a contract compliance perspective, the AP department can automatically connect the data in the invoice to that contract, to ensure that they're actually paying what they should be paying, and not too much.

Increased visibility

And from a supplier perspective, they benefit both from being able to see their invoice approval status, and when they're planning on getting paid. They're also able to access early payment, as I mentioned. One of the interesting benefits of this to Maxim was actually an increase in their DPO, a working-capital metric.

Procurement and AP typically may not have an impact on working-capital metrics that's usually a treasury and finance function. But when they had full visibility into their invoices and their payment terms, Maxim found that they were actually able to pay suppliers on time, rather than the practice of paying them early, because they just didn't have visibility into when they were supposed to pay them.

For a lot of my customers, we find that when we look at their vendor master, they often will have a lot of immediate terms with suppliers that they didn't realize they had, and their DPO was low as a result. So just getting visibility into all that gives them the ability to enforce the terms that they already have, and the net of that is to increase their DPO as Maxim saw.

Gardner: Now of course, we're in the networked economy. We've been talking about this in the context of an individual enterprise or a small business, but when more visibility data and accessed information along with collaboration is perhaps exploited at an industry or vertical level, there are some other benefits.

So does collaboration go beyond just what we're doing as an internal process? What about getting more data about what's going on in the whole industry and applying that to some of these business activities and decisions?

That's definitely huge and I would agree that it's right over the horizon.

Patel: Absolutely. When you have trading partners on a network and a whole cluster of them in a specific industry, there’s tons and tons of data that can be collected on invoicing, payments, purchase orders, spending habits, spending behaviors, and certain commodities.

There is a whole host of data that's collected, that's maybe the next phase of where the supplier networks go and how they make use of information. To date, I think it's still a matter of getting the scale and getting the network to a size where that information is available and makes sense. That's probably the next phase of it.

Gardner: Drew, a similar question. This notion of taking the data and analysis add another abstraction level into an industry or vertical. This seems to me to be really something that can add lower costs and higher productivity to a much larger set of participants?

Hofler: I would definitely agree with that Dana. It's really the promise of the network, as Vishal pointed too. As you get the network effect and you get the massive amounts of data, there is just a tremendous amount of data flowing through on a daily basis on the Ariba network.

That's one of the things that's very exciting about our recent acquisition by SAP. There’s a big data program called HANA that they're developing and pushing. That's going to blow out the market. The amount of data that we can bring into that, and then slice and dice to the various different uses that's required to get intelligence into some of the things that Vishal was talking about. That's definitely huge and I would agree that it's right over the horizon.

Metrics of success

Gardner: As we start to think about closing out, I'd like to try to identify some more metrics of success. You've talked about Maxim Healthcare. Do you have any other examples of companies that have been doing this and what sort of benefits have they've been able to enjoy and share?

Hofler: Most of the companies that come onto the Ariba network to do invoice automation, we call it Smart Invoicing, are able to set up certain parameters so that by the time an invoice gets to them, it's very clean. The suppliers give an immediate feedback on things that need to be fixed, as the invoice is being submitted, and then they get it very clean.

The result of that is that we have many customers who have 95 percent, 98 percent straight-through processing. Invoice comes through, it goes straight into their back end system and it's scheduled for payment and they're ready to go.

One of our customers, Ecolab Inc., has employed this. They had a couple of big problems, for example, where they had no visibility into their shipment information from the supplier on the front end of the process and their suppliers again had no visibility into payment on the back end of the process.

There are benefits to thinking more long term about the entire process.

A very interesting thing happened. When they weren't able to get visibility into shipment, they couldn't invoice their customer until they knew they had received the shipment that was going to be part of what they are invoicing their customer for from their supplier.

That led to an extended DSO, which is not a positive. By getting visibility into this, they were able to invoice on shipment and lower their DSO. Traditionally procurement and AP would not play in terms of DSO, but now they're able to contribute to the more strategic level of the company by impacting DSO in a positive way.

Additionally, they had risk in their supply chain from their suppliers not knowing when they were going to get paid, and sometimes threatening to and carrying through withholding shipment until they received payment on a particular thing. Now, their suppliers can see exactly when they're going to get paid and that has increased satisfaction and lowered the risk for them as well.

Just by automating the process and approving invoices in time, Ecolab increased their capture of contracted early-pay discounts from somewhere around 25 percent or 30 percent that they were able to capture before, to upwards of 95 percent. So that's a huge benefit to them as well.

Gardner: Vishal, in closing out, how do organizations get started on this? What are some typical steps that they should take in order to avail themselves of some of these benefits that we've been discussing?

Patel: One of the key things is, when looking at an automation initiative in the procure-to-pay process, to think about the process holistically, instead of focusing on automating one part, one process in AP or in procurement. There are benefits to thinking more long term about the entire process, how it's going to integrate, what technologies are going to be used for each part of the process, and whether that's all done at once or over phases.

Best practices

Gardner: Drew any thoughts from your perspective on getting started, best practices, or even where to get more information?

Hofler: Absolutely, for more information, very easily come to ariba.com and look at all of our solution pieces. For getting started, I would agree with Vishal. In the networked economy, it's all about sharing information across silos, across stakeholders, and doing so in an automated fashion.

There are a lot of pieces to that and a lot of steps and processes along the way, where that information can be captured and shared across these parties.

In the networked economy, it's all about sharing information across silos, across stakeholders, and doing so in an automated fashion.

A lot of people take it all at once in P2P process. Other people will automate POs and then invoice automation and then early payment discounting. I say look at where your communication breaks down internally over these processes, and let's target that first with some automation that can bring visibility into that.

Gardner: We've been discussing how businesses are exploiting collaboration and automation advances and procurement and accounts payable to produce new types of productivity benefits. I'd like to thank our guests, Drew Hofler, Senior Solutions Marketing Manager of Financial Solutions for Ariba, now an SAP company. Thank you, Drew.

Hofler: Thank you.

Gardner: And Vishal Patel, Research Director and Vice President of Client Services at Ardent Partners. Thank you, Vishal.

Patel: Thank you, Dana.

Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions. You've been listening to a sponsored BriefingsDirect podcast. Thanks to our audience for joining, and don't forget to come back next time.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: Ariba.

Transcript of a BriefingsDirect podcast on how efficiencies of cloud computing in procurement and accounts payable are giving companies better agility and spend management. Copyright Interarbor Solutions, LLC, 2005-2012. All rights reserved.

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