evolution of enterprise computing

Evolution of Enterprise ComputingMarket Scan: What CIOs are really thinking about…

January 2005

W.R. Koss

When the rate of change outside exceeds the rate of change inside, the end is in sight. – Jack Welch

© 2004 Ciena Communications, Inc. Confidential and proprietary.

History of IT on a Slide

» Standards

» Metrics

» Quality

» Control

» High Utilization

» Many choices

» No standards

» Chaos

» Low quality

» Rampant waste

» Complex integration

» Islands of apps

» Islands of platforms

» Best in class tech

» Less choices

» Standards

» Improved mgnt

» Desire SLAs

» Process maturity

» Active management

» Self healing services

» Auto provisioning

» Virtual environment

» Commoditization

Age of Big Iron

Client/Server Internet Era

Age of MaturityAnd Shake Out

Renaissance Era

Today

* Partial Source: Gartner 2002** Partial Source: Mike Keller, CIO Nationwide Ins., 2004

IT Capability

Superfluous

Irrelevant

Enabler

Inhibitor

Low

High

HighLow IT Dependency

CompetitiveAdvantage

CompetitiveDisadvantage


What CIOs are Thinking About in 2005

"It is dangerous to assume that the death of distance, to borrow

Frances Cairncross's description of the effect of new communication technologies, will mean the death of the company. In some cases, the Internet will lead business

organizations to shrink by making it more economical to outsource

more work. In other cases, it will lead them to expand by making it cheaper to bring more tasks

inside.” From In Praise of Walls, MIT Sloan Management Review, Spring 2004

"The trend toward outsourcing key IT systems, and even the processes that run on them, will further accelerate the homogenization trend. As companies look to

business-process-outsourcing (BPO) vendors to carry out many IT-intensive processes, from budgeting to logistics to training to customer service, they will neutralize those processes as potential sources of advantage. The processes

themselves will begin to become part of the shared infrastructure."From

Does IT Matter? Information Technology and the Corrosion of Competitive Advantage

, Harvard Business School Press, 2004

"When a disruptive new technology arrives, the greatest

business opportunities often lie not in creating the disruption but in mending it — in figuring

out a way to use an older, established technology as a bridge to carry customers to the benefits

of the emerging technology."From

Bridging the Breakthrough Gap, Strategy & Business, Winter 2004

"The lesson is clear: Innovate passionately in those places where you can separate yourself from the competition. Where differentiation promises to be

elusive or fleeting, be a cold-blooded imitator. " From Mastering Imitation,

Strategy & Business, Fall 2004

"Information technology is best understood as the latest in a series of broadly adopted technologies that have reshaped industry over the past two centuries - from

the railroad to the telegraph to the electric generator. For a brief period, as they were being built into the infrastructure of commerce, all these technologies

opened opportunities for forward-looking companies to gain real advantages. But as their availability increased and their cost decreased - as they became ubiquitous - they all became commodity inputs. From a strategic standpoint, they

became invisible; they no longer mattered. That is exactly what is happening to information technology today, and the implications for corporate IT management are

profound."From IT Doesn't Matter, Harvard Business Review, 5/2003

* Slide Source: http://www.nicholasgcarr.com/index.shtml


From Before the Bubble to the Future

» Two phases» Each the work of a generation

» Phase 1: Installation (’71-’01)» Building new infrastructure

» Experiment in its use

» Economic promise drives financial speculation (i.e. the Bubble ’96-’01)

» Phase 2: Deployment (’05-?)» Identify the applications that work

» Replicate the existing proofs

» Speculation becomes common sense

» The Bubble funded» More infrastructure than anyone thought

was needed

» More business experiments than rationality can comprehend

» Successful experiments » Point the way...

» Towards absorbing the infrastructure

» Existing proofs become common sense

» Turning Point extended….?» Conventional cost cutting in reaction to

the bubble

» Understand new sources of demand

» Innovation still required

- Turning Point -

* See Technological Revolutions and Financial Capital, by Carlota Perez, 2003See slide #16 for background…


Existing Proofs

» The Inventors»

» Customers access applications that drive intelligent transactions» Virtual markets created, destroyed, created [see, Capitalism, Socialism and Democracy,

Joseph Schumpter, 1942 p.75]

» The Extremists»

» Customized Killer Apps

» Innovative use of IT to redefine business model and create competitive advantage

» Ruthless control of market share

» The Old Regimes» Banks and Telecoms (i.e. AT&T, MCI, Sprint)

» Intense competition and new regulations forcing new deployments of IT infrastructure to remain competitive


The Turning Point Extended?

» Limits of Cost Cutting

» Assumes business practices are fixed

» Architectures are frozen

» Outsourcing option

» Kills competitive innovation

» Kills competitive responsiveness

» Dangerous strategic option

» Puts the company asleep

» Cost Cutting Contradiction

» Freezes the enterprise network and infrastructure

» Real productivity enhancements require:

» Empowered employees

» Process innovation

» Resource sharing/collaboration

» Real time computing

» CIOs must be empowered to instill innovation in the IT infrastructure

Question: Is the excess of the Bubble and extreme cost cutting response causing an extension of the Turning Point?

The turning point from Installation to Deployment is a crucial crossroads, usually a serious recession, involving a recomposition of the whole system, in particular of the regulatory context that enables the resumption of growth and the full fructification of the technological revolution. - Carlota Perez


New Sources of Demand: Enabling Employee Mobility

* Partial Slide Source: Brad Boston, Cisco Systems CIO 2004

Office Anywhere Vision

Plane

Office

Home

Conference Center Coffee Shop Hotel

Train

Car

Train Station

Airport Lounge

Wireless LAN, Cable, FTTxDSL, LRE, Ethernet, CDMA,

UMTS, GPRS, GSM

Cisco Systems IT Stats

• 90% of all orders are from web

• 58% of orders go directly to the CM without Cisco direct touch

• Goal: $1B of rev per employee

• No custom computer clients – all IT programs are browser based and supported via VPN

• Define business process first – then build internet application around process

• Same purchasing process in every country – global virtual firm

• Phone call to Chambers by customer automatically triggers “screen pop” full of information, issues, problems, success, failures customized to customer call

• Business units pay for their IT decisions, minimal if any IT allocation to the business units

• No time spent reconciling data…real time funnel available 24x7 on the click of a mouse


New Sources of Demand:Real Convergence

» Every device in the world will be addressable

» Simplification of the network and the processes supported by the network are required to manage the new complexities

» Connectivity accelerates change, volatility and disruption

» Real Convergence» Transaction systems generate lots of data

» Processors get faster, pipes get fatter

» Accurateness of information is everything

* See It's Alive: The Coming Convergence of Information, Biology, and Business, by Christopher Meyer, Stan Davis, 2003** Partial Slide Source: Brad Boston, Cisco Systems CIO 2004

IP Network

Data

Voice

Video

Storage


Phase II: Elusive Compelling Apps that Matter

» Evolution from easy to difficult» Easy: Remote portal point of sale, ATM, phone, browser…done!» Easy: Customer self-service…done!» Difficult: Intelligent transactions in real time» Difficult: Intelligent infrastructure that is adaptive and self-defending» Very Difficult: Carrying transactions across systems and boundaries to include

L3CAT and SOA» Very Difficult: Network enabled collaboration

» Transforming IT from “push” to “pull”» Collaboration…in real time for design, prioritization and service» Minimal touch…orders to CM without direct touch» Dynamic analytics….SOX compliant with proactive real time price and revenue

optimization

» The Promise: Radical increases in corporate responsiveness, agility and productivity…significant financial improvements. The companies that harness this ability will be the extremists of the second phase.


Strategic Direction of IT Investments

» Easy: Extending the infrastructure

» Hard: Making the infrastructure transparent

» Infrastructure extension is underway» Wireline and wireless broadband deployments are accelerating

» Integration of computing and network infrastructures is underway

» Creating a transparent, integrated IT infrastructure

» IP into the legacy telephony network

» Creating a global, shared computing grid?

» Applications as services?

» Global transparency

» Focus on global collaboration

» Measure and improve productivity

» Automating the financial supply chain

» Collaborative product management

» Transforming data into useable information

» Simplify operations

» Adopt and empower a process methodology

Ford IT Profile

• 6000 IT Professionals

• 3 Major Development Centers in NA, Europe and India

• 7 Data Centers

• 180k Desktops

• 250k+ Network Elements

• 2000+ Terabytes of Storage

Global IT Factoid

• By 2005, 35 billion micro controllers

• 750 million smart sensors

• 1.5 billion mobile information devices

* Partial Slide Source: Marv Adams, Ford CIO 2004


Top IT Priorities

» Improved productivity – Easier to do business with…

» Enhanced mobility – Everyone has the tools when and where needed

» Uncompromising security – Protect customers, IP and the network

» Relentless drive for process – Demand continuous improvement

» Focus on cost – Find and implement ways to improve bottom line

» Evolve from science to technology – Measurable benefits

» Evolve from technology to applications – Easy of use

» Evolve from islands of implementation to networks – Global grid

» Evolve from products to services – On demand!

* Partial Slide Source: Brad Boston, Cisco Systems CIO 2004

An enterprise whose business processes—integrated end-to-end across the company and with key partners, suppliers and customers—can respond with speed to any customer demand, market opportunity or external threat.

- IBM CEO Sam Palmisano


Breaking our Customer Code

…new services, enhanced service delivery, network convergence and business transformation to realize profitability…accelerate service fulfillment, provide superior Quality of Service (QoS), automate resource management, simplify maintenance operations, consolidate functions of multiple network elements, facilitate network convergence, and reduce overall network capacity requirements to support service demands…Service Level Agreement (SLA) penalties, improved asset management, increased employee productivity, and reduction of operational and capital expenditures…drive down network operational and capital expenditures, while adding value to services by enabling service differentiation and improving service operations…delivering a variety of data and TDM services, over a variety of bandwidths and interfaces, with multiple classes of service and at the highest reliability.

» Automate service provider provisioning, inventory, and operations processes

» Provide the highest availability to services » Enable class of service differentiation » Enable architectures that simplify operations and reduce

capacity requirements » Facilitate network convergence » Seamlessly integrate

… non-blocking switching in a single rack…a smaller footprint…non-blocking switching in one-half the rack space… flexibility to groom and switch traffic in granularities…scaleable…scale within the current footprints and power requirements, greatly simplifying day-one facility planning...completely interoperable…supporting a fully integrated switching and transport solution. This integration creates 35% equipment and 70% space and power savings due to the elimination of back to back optical interfaces.

What really interests our customers…?

» Network enabled collaboration

» Continuous improvement

» Intelligent and adaptive infrastructure

» Simple, self defending networks

» A competitive advantage

» Enhancing their value proposition

» Self fulfillment (Luxury brand)

» Insurance against disaster (network failure)

» Peace of mind – ease their fears (SOX)

» Differentiate – Globally competitive

My theory is very simple: The reptilian always wins. I don't care what you're going to tell me intellectually. I don't care. Give me the reptilian. Why? Because the reptilian always wins. - Dr. G.Clotaire Rapaille

http://www.archetypediscoveriesworldwide.com/index1.htm

Word and Value ReferencesService(s) 14 Cost/Profits 7Network 6 Physical Space 5Convergence 3Scaleable 2Value 1Competitive Advantages 0Adaptive Network 0Security 0Intelligent 0Enabling collaboration 0Simple 0Self defending 0Provides competitive advantage 0Enhances value proposition 0Insurance against failure 0Peace of mind 0Luxury 0

Two recent customer opportunities point the way…


“What if…” for Enterprise

» Integrated network architectures at the equipment level from China drive the price of networking products to consumer levels. Is this tech’s equivalent of the Japanese auto invasion of the ‘70s?

» Integrated network architectures at the chip level (i.e. Infinera). Can innovation still command a margin premium?

» Cisco and Microsoft control the enterprise. The telecom service providers defer to their end-users. Result: New entrants are marginalized and locked out of significant future market share in telecoms.

» How will the impact of wireless-wireline-cable-consumer overlap affect the future?


Breakout: Does it Matter?

» What enterprise partners help break the Evil Empire?

» How do we break a tactical culture and uncouple product selection from the business decision?

» Will innovation matter or will telecom equipment go the way of the VCR?

» What innovations can we develop and commercialize that will allow us to utilize an offensive sales strategy in the enterprise market?

» What killer apps can we link to our value propositions to create a competitive edge?

Background Materials


Five Successive Surges

* See Technological Revolutions and Financial Capital, by Carlota Perez, 2003

IRRUPTION FRENZY SYNERGY MATURITY

TURNINGPOINT

IndustrialRevolution

Age of Steamand Railways

Age of SteelHeavy Industry

Age of OilAnd Auto

Age of Infoand Telecom

1771 - 1780 1780s - 1790s 1798 - 18121793-97 1813 - 1829

1830s 1840s 1850 - 18571848-50 1857 - 1873

1875 - 1884 1884 - 1893 1895 - 19071895-07 1908 - 1918

1908 - 1920 1920 - 1929 1943 - 19591929-45 1960 - 1974

1971 - 1987 1987 - 2001 2005 - ?2001-04

BIG BANG CRASH INSTITUTIONAL RECOMPOSITION


Sources of Information

» The New Age (Web Sites)

» The Reading List (Back to Basics)

» Intellectuals, Futurists and Revolutionaries

http://www-306.ibm.com/e-business/ondemand/us/index.html

http://www.nicholasgcarr.com/index.shtml

http://www.sun.com/

Technological Revolutions and Financial Capital, by Carlota Perez, 2003

It's Alive: The Coming Convergence of Information, Biology and Business, by Christopher Meyer, Stan Davis, 2003

http://www.movaris.com/index.htm

Advanced technology not only serves as a repository for all control-related information, it also serves as an excellent mechanism for communicating and enforcing compliance requirements, detecting and escalating issues through resolution, and delivering control information to decision makers.

- Eric Keller, CEO of Movaris

http://www.techstrategypartners.com/leadership.htm

http://www.cassatt.com/

http://www.systinet.com/

http://www.archetypediscoveriesworldwide.com/index1.htm

http://www.carlotaperez.org/

evolution of enterprise computing

Documents

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business organizations

established technology

emerging technology

disruptive new technology

intensive processes

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