PROVEN GOVERNMENT TECHNOLOGY LEADERSHIP

THE SHIFT TO THE CLOUD�

What Municipalities Need to Know� About the Next 5 Years

Derek Locke !General Manager!

IntroductionLets Get off to a Good Start!

www.diamondmunicipal.com!

Lets Talk About Technology Change Clayton Christensen, a Harvard Business School professor, defined “disruption” in The Innovator’s Dilemma. A disruptive technology addresses a market that previously couldn’t be served or it offers a simpler, cheaper or more convenient alternative to an existing product.!

Continuous Innovation - improves the performance of existing products along the dimensions that mainstream customers value.!Does not always result in the downfall of established companies who are able to adapt to and incorporate the innovation successfully!

Dis-continuous (disruptive) Innovation – displaces existing markets, products and will evolve as cheaper, simpler and more convenient alternative, even with inferior quality initially. Usually penetrates lower end of the market first.!

The Innovators Dilemma

Discontinuous Technology DisruptionThe Bricks and Mortar are Coming Down!

Canada post had a $193 Million operating

loss in 2013!

“The  post  office  was  built  on  the  premise  that  it  would  provide  uniform  delivery  to  all  Canadians  and  that  ci:zens  would  support  the  service  by  using  it,  but  Canada  Post  can  no  longer  count  on  that  support.  “  

“The  result  is  1.2  billion  fewer  pieces  of  mail  over  the  last  six  years  and  $800  million  in  lost  revenue.  At  the  same  :me,  Canada  Post  has  had  to  service  1.2  million  new  homes.”  

“Canada  Post  has  more  than  6,400  branches  across  the  country,  more  loca:ons  than  all  of  the  McDonald’s  and  Tim  Horton’s  franchises  combined.”  

  1997 – Netflix founder returns Apollo 13 late. Dismayed by late fees, he starts his own company.!

  1998 – Blockbuster begins practice of paying for early distribution rights to new releases, taking on higher operating costs per store!

  2000 – Blockbuster declines to buy Netflix for $50M !  2001- Blockbuster enters video game rental market (Xbox, Playstation)

which expands top end revenues!  2001-2005 – Continued trend of net losses for Blockbuster despite more

store openings. Competitive pressure continues from Netflix and Redbox as consumers begin to shift towards on-line content and movie rentals.!

  2005 - Blockbuster enlists 7-11 Exec to focus on the “package” that customers leave the store with (sodas, snacks, etc)!

  2010 – Bankruptcy – 5,200 locations at peak!

Blockbuster versus NetflixTechnology Disruption LifeCycle Can be Long!

Technology DisruptionIs the Cloud Continuous or Discontinuous?!

Exponential growth across several fundamental areas:!

  Moore’s Law – power of computing doubles every 18 months!  Broadband – the capacity of the bandwidth of fiber is doubling every

nine months!  Storage Capacity – we are capable of doubling storage for the same

cost each year!  Data Explosion – 90% of the codified data in the world has been

created within the past 2 years.!  Consumerization of IT – Adoption driven by the consumer not the

business (BYOD, etc)!

Some Theorize that these technology changes are moving us towards a “zero marginal cost” based economy!

Why are Things Changing so Fast? Technology Disruption at work!

A Confluence of Technology Change!

Cloud  Compu?ng  Model  

“Enabled”  

Cloud ComputingIs the Cloud Disruptive or Continuous Innovation?

Software, platforms and infrastructure that are sold “as a service” over the internet!

Advantages of Cloud Computing

  24x7 Access from any device!  Faster time to market! Scales by demand with no

wasted capacity! Automatic data protection and

disaster recovery!  Lower cost of ownership, without

extensive upgrades! Subscription based pricing – less

capital outlay upfront! Multi-tenancy provides instant

access to new features & innovations!

Challenges of Cloud Computing The war for our hearts & minds!

How We React to New Technology Geoffrey Moore – “Crossing the Chasm”!

Technology “Hype” Cycles Gartner Group! The  Trough  of  

Disillusionment  

Gartner Group Hype CyclesEmerging Technologies August 2013!

1 Technology Trigger – A potential technology breakthrough kicks things off. Early proof-of-concept stories and media interest trigger significant publicity. Often no usable products exist and commercial viability is unproven.!2 Peak of Inflated Expectations – Early publicity generates over-enthusiasm and unrealistic expectations. There may be some successful applications of a technology, but there are typically more failures. Some companies take action; many do not.!3 Trough of Disillusionment – Interest wanes as experiments and implementations fail to deliver. Producers of the technology shake out or fail. Investments continue only if the surviving providers improve their products to the satisfaction of early adopters. !4 Slope of Enlightenment - More instances of how the technology can benefit the enterprise start to crystallize and become more widely understood. Second- and third-generation products appear from technology providers. More enterprises fund pilots; conservative companies remain cautious.!5 Plateau of Productivity – A technology reaches the “plateau of productivity” as the benefits of it become widely accepted and mainstream adoption commences. The final height of the plateau varies according to whether the technology is broadly applicable or benefits only a niche market. !

Technology Adoption Cycle Defects !

Canada is a Slow Technology Adopter The Economic Crisis that Wasn’t!

*Intense  budgetary  pressures  necessitate  significant  reform  with  public  expenditure  in  Scotland  not  returning  to  2010  levels  in  real  terms  for  at  least  another  decade.  

IDC estimates the entire IT services market in Canada contributed $20-billion to Canada’s GDP in 2013 – with cloud services generating $1-billion or roughly 5% of total IT spending.!

So What Does it All Mean?What to Expect in the Next 5 Years!

  Private Cloud and Hybrid Cloud will be the logical progression during early stage adoption, but the trend will move towards “Public Cloud”!

  Data Protection & Privacy concerns will abate and Government’s will eventually table firm policies and legislation to guide government!

  More “real value” scenarios will become evident that will not be focused on cost savings, but rather material business value and efficiencies!

  Mergers, consolidations, bankruptcies for legacy players and new entrants = instability!

So What Does it All Mean?What to Expect in the Next 5 Years!

  “Pay as you go” will be the new normal in many areas!  Downward pricing pressure will continue as more and

more technologies become commoditized – there will be real $$$ savings here – The concept of a zero marginal cost base economy is valid.!

  The distinction between Proprietary and Open Source will continue to blur and barriers to entry will lessen!

Decision Making in the Cloud Sound Decision Making Criteria!

  Apply common sense – look for tangible business value that enables business gains & efficiencies!

  Balanced Approach to:!  Prescriptive vs Made to Order!  Configuration vs Customization!  Feature/Functionality vs Innovative Technology!  Open Source vs Proprietary!  Big Picture vs Silos (integration needs)!  Resource Planning!

The Transition PeriodThe Age of Mixed Messaging is Here!

CLOUD PROPONENTS!

The cloud has become a powerful and versatile tool for businesses across industries and of every size. Prices are falling and features are expanding, and these developments bode well for the market.!The time for action is now!!

John Reid, CATAAlliance CEO, said, “We are encouraging the Government of Canada to evaluate a G-Cloud first for Canada policy as a way of enabling and commercializing innovation, driving substantial cost savings and stimulating the Small to Medium (SME) business segment & boost our competitive innovation nation rankings.”!

The Transition PeriodThe Age of Mixed Messaging is Here!

“Cloud computing today is like a gifted kid with raw talent and enormous potential in need of nurturing and development. Everywhere I look, I see an adolescent industry with raging hormones”.!

The industry is in an era of early adopters and "most businesses don't want to be stuck changing the diapers of untested technology." !

CLOUD DETRACTORS!

The Cloud is no Place for Mission-Critical Applications. Not in 2013 or the Foreseeable Future.!

Decision Making in the Cloud Simplicity vs Complexity!

The more complex an application, the more difficult is it to translate over to a new technology model!

Decision Making in the Cloud!Real Business Value is Being Achieved!

How Will Legacy Vendors Adapt?Microsoft as a Case Study!

  Move towards Multi-tenancy!  Move towards Web Client with comprehensive UI improvements!  Web Services Architecture!  Move towards Azure as a Cloud platform with Investment in public

cloud data centers (huge $$$ going here)!  Development of APPs with cross platform compatibility (Apple,

Google)!  Focus on Repeatable Business practices – Rapid Start

implementation methodology, Automated configuration, standardized Chart of Accounts and Reporting!

  Revised pricing models based on subscription fees on a per user basis!

Gazing into the Future What Options Will the Government Consider?!

1,186 Suppliers today and 13,000 Services available!

Gazing into the Future Are we entering the age of Ubiquitous Computing?!

Ubiquitous computing is an advanced computing concept where computing is made to appear everywhere and anywhere. In contrast to desktop computing, ubiquitous computing can occur using any device, in any location, and in any format.!

Songdo, South Korea as a case study of the “Smart City”!

Final Thoughts!  Mainstream Cloud adoption will be inevitable it moves through the

technology adoption cycle in 2-5 years!  Legislation and Policy are still lacking from the Canadian

government – but this has to change in time and it will!  Simple, low risk applications work well in the cloud and more

complex, mission critical applications require pragmatism!  Hybrid and Private Cloud will be stepping stones to the real

advantages available in the Public Cloud!  Fundamentals always prevail – it is important to understand the

value of what you are getting and the associated risk profile!  Filter out the noise and make sound business decisions based on

what is best for your municipality!  Lots of Cool stuff Ahead!!