deal architect

Hurricane Oracle

Three presentations really stood out during the Oracle Cloud analyst day in NYC this week. Thomas Kurian, President of Product Development spoke with no slides and no props for 45 minutes on different aspects of the Oracle cloud – SaaS, PaaS etc. Steve Miranda and Inderjeet Singh, in contrast, crisply marched through 47 and 59 slides respectively on Oracle’s SaaS and PaaS breadth. As they say, it wasn’t their first rodeo. They have been developing and presenting on Oracle cloud progress for years now. And through the day I kept saying to myself to call this a cloud is to insult it. Oracle has already created a Cat 1 Hurricane.

As Mark Hurd, co-CEO pointed out in his comments the industry is still very early in cloud adoption. Most of the customers who participated in the day talked about point adoption – HCM here, test and dev use of IaaS there. But the adoption should grow and Oracle wants to be their choice when they are ready.  The hurricane will grow stronger and will torment many competitors along the way.

I have long been fascinated with hurricanes – cannot help that living in Florida. And the case study I wrote on the NOAA National Hurricane Center in The New Polymath only accentuated my interest

So, like most hurricanes, I expect this too shall meander. We saw some of that during the analyst day

- As I wrote during Oracle OpenWorld, it has started to downplay going after Amazon and has started to target its IaaS at managed services and hosting within its incumbent application and database customer base. This will ruffle feathers within that partner base but as I wrote then “the opportunity for both the “lift and shift” and “private cloud” strategies Larry talked about, is far bigger than what Amazon is targeting”.

- Oracle continues to self-limit its SaaS growth with its Apps Unlimited support of on-premise PeopleSoft, Siebel, JDE and its own EBS products. For now, their argument is, it’s about “customer choice”, but when that pivot comes, it will lose some customers to vendors like Workday and Salesforce but also turbo charge its own SaaS growth.

- Another reason to move more application customers to the cloud is to seed its newer Data as a Service offerings. Today, the offering revolves around the BlueKai CRM data but Oracle’s vision is to have similar offerings around HCM, SCM and other towers. Today most of that data is locked up in its on-premise apps. Sure you can export and ingest into the cloud, but the permissions and the transport are gating factors.

- The PaaS offering will expose it to newer competitors as Oracle targets identity, security, systems management and a wide range of newer data sources from the IoT, Hadoop and Spark.

Hurricanes also depend on moisture for survival, and why most weaken at landfall. The big question is will customers provide it the moisture to keep growing to a Cat 5 monster? Will they continue to buy suites? They did 2 decades ago, but many are wary after their last experience with ERP systems and vendor consolidation. They found vendor quality inconsistent across products, and yet paid heavily through “lock-in”

How it strengthens, how it meanders, what destruction it causes in the competitive landscape should be fascinating to watch. In fact, I might just volunteer to join the Hurricane Hunters in one of their WC-130Js and fly into the eye of this storm.

The Application Vendor is dead. Long live the Application Vendor!

I have just come back from a round the world trip with frequent reminders of Great Britain's wide influence - Victoria Harbour, Raffles Hotel, Brabourne Stadium, Kipling's Kim in bookstores among others. You could almost visualize the rise and fall of a mighty empire.

The metaphor was apt for a few meetings I had with CIOs during the trip . The common thread from these meetings was the proposition of buying (versus building application software) is just not as compelling as it was two decades ago when I had helped many of them as a Gartner analyst

The TCO of procured software has exceeded even the most pessimistic expectations. Vendors are greedily looking for more via audits and other predatory behavior. Worse, the application vendors have invested little of the maintenance revenues or cloud subscriptions back into applications. They  have invested in tools, databases and data centers and encouraged SIs and smaller partners to build new functionality for which customers had to pay even more.

I sensed disappointment, even anger.  As an CIO mentioned: '

People in Asia have long memories, there are only so many quarters that you can pull a rabbit out of the hat.

The shame is there has never been a better time to be a pure-play application vendor.  Consumer tech vendors are making the capex investment in platforms and infrastructure that enterprise application vendors can leverage as a service. There are industry application niches galore as every vertical market goes through gut wrenching changes. A whole new generation of business processes and applications is needed for the changing man/machine mix in a world of artificial intelligence, robotics, autonomous vehicles and wearables

We are seeing the passing of the torch. The ERP and other application vendors we have known and loved for a while have had their turn. It's time for a new generation of application vendors but they face a group of cynical buyers. They have to behave very differently from the previous generation of application vendors.

The Queen is dead. Long live the Queen!

Mr. Trump, there’s easily another trillion to remove in technology spend

Dear Mr. Trump:

I heard you mention the pharma industry in your recent press conference. Most US citizens would welcome a significant reduction in drug prices, especially since the rest of the world does so much better for the same or equivalent products. I wished you had mentioned another area which could use plenty of scrutiny – corporate technology spend. I see that several large technology vendors have outlined ways in which they can help the economy save a trillion dollars. The problem is they ideally want us to spend MORE to potentially qualify for those supply chain and other savings. I think we should look at that but also pressure the companies to dramatically lower prices of existing products and services. Otherwise it will be the equivalent of pharma companies saying “let us continue with existing pricing for our older products – we promise to do better with future drugs”

You convened a meeting with executives on many technology vendors. That is a good start. I would request you similarly invite CEOs and CIOs of buying organizations – the GMs, the GEs, government agencies and some small to mid sized companies.

They will tell you

a) Software maintenance on old products introduced even 20-30 years ago is way too over priced. Some customers have moved to third party maintenance at half the cost and much better service levels

b) The data centers many of these vendors provide infrastructure support from should have been retired years ago and yet are priced at many times what Amazon and others are able to deliver in the cloud. And yet as we see again and again our security and uptimes should be so much better for the cost.

c) The MPLS and other networks are priced at many times what you and I pay as consumers per megabit of bandwidth. The pricing of global mobile roaming continues to be outrageous even as the service continues to be spotty as I found during a recent trip around the world

d) The outsourcing services are grossly inefficient. Way too much labor (much of it offshore) which could be automated and delivered much better

e) Many technology vendors use threats of audits and other predatory behavior to protect gross margins in the high 90s – that’s not a typo 

f) I could go on but in my book, SAP Nation I identified hundreds of billions in potential savings around just a small segment of the IT spend.

With some focus every large and small enterprise in the US could shave 2 to 10% of their revenues in IT costs.

Think what the average company could do with those savings. They could invest in more R&D and innovation, they could invest in new plant and equipment – generating tens of thousands of highly desirable STEM jobs.

You have heard the vendor side of the technology pitch. Please now listen to the technology buyer.  If we do it right. the economy will get a massive boost even bigger than that from pressure on the pharma sector.

Cross posted at Medium

The changing outsourcing world: Conversation with Malcolm Frank of Cognizant

As he prepares to go to Davos for the annual WEF meeting, I took the opportunity to ask Malcolm Frank, EVP Strategy and Marketing of Cognizant about his thoughts on outsourcing especially in Europe

I think there are three lenses for an answer. First, is what our clients are trying to achieve. Number two is what does this mean for our industries. Number three, how does that manifest itself in Europe.

It's interesting, for when it comes to “digital” as a concept five years ago people were talking about it, but didn't know if it was real. There were a lot of people being dismissive, saying things like: "Oh, is this just the next technology fad? Are you vendors just trying to dial something up in your hype machines?" Smash-cut to where we are today: Senior management team after senior management team, they're all in. They're recognizing that their markets are going digital.

Once they come to this recognition, they need to transform at three levels. One level is the customer touch, the customer interface. You go into places like banking, the threat that is coming from the fintech world. You see these online platforms like Betterment that are getting into wealth management that use to be a very high-end, high-touch sector focused on high net-worth customers. Digital is rapidly democratizing that. You see it in the product world with firms like Nike, Under Armour and Adidas. They used to be high-end cobblers. Now, they think of themselves as health information platforms, and they are all experiencing double-digit growth behind that. This new customer expectation that, "I want to work through virtual channels. I want to have my product become smart." Regardless of industry, this trend is gaining momentum and it’s a big deal. But it’s also reasonably well understood. However, there are two other customer needs that, I think, are less understood but probably even larger markets for firms like ours.

The second one is the digital transformation of the process architecture of these companies. Most of these clients’ existing processes are pre-digital. Claims processing in insurance. Trade settlement in banking. You name it; there are just so many different areas. The point is that most of these processes were structured before digital technology existed. You get these huge office parks in suburbia off of a highway, with seas of cubicles in which humans are pushing paper to each other. It's why, for example, if somebody goes in to get a $15,000 loan to buy a Honda Accord, they have to fill out forms in triplicate and that takes seven days to get an answer. That has the opportunity to be automated and to be digitized. This is intelligent process automation (IPA) or robotic process automation (RPA). Whatever people are starting to term it, this should be a significant growth market in the next few years.

When clients are afraid of being Ubered, this is actually what they are saying. They're not talking about the customer interface. They're talking about this automation of process. Uber was able to digitize taxi dispatch and completely change an industry. That's something we think is really going to take off.

The third, it's sort of obvious but not talked about enough, is the IT backbone. What the CIO has built over time and is responsible for are primarily systems of record to support an industrial business model. Yet, suddenly IT now has to support a real-time digital business model. Just think through of it: If you're Airbus or Boeing or you now have hundreds of sensors on every plane. How do you maintain that whole IOT infrastructure? How do you manage the data that is being thrown across an entire fleet? How do you analyze that data? How does that then integrate back into your systems record? How do you create new systems of engagement based on top of that? And how do you then keep it all secure? There are some big challenges in front of CIOs today.

I think it's a trillion dollar market opportunity of rewiring heritage IT. How do you move things to the cloud? How do you deal with his high data environment? How do you manage the internet of things? How do you keep that whole thing secure?

From a client perspective, that's the challenge they have with these three key areas: 1.) How do I change the customer touch? 2.) How do I get a whole new process infrastructure? and 3.) How do I transform my IT backbone?

So how does this manifest iteslf in Europe? It's interesting. Europeans, at least for our industry, continental Europeans were always a bit reticent when it came to classic outsourcing. However, as things transition to these digital challenges we see strong demand from European firms.

You look at the demographics of European citizens, they are more digital, actually, than many in North America. The customer touch makes sense. Building products that are truly smart and instrumented also makes a lot of sense. I think the only issue, and Kevin Kelly talks about this really eloquently, is that as citizens we collectively are going through this mass social experiment where we are trading in our privacy for convenience, for amusement or for a 10% lower price. That is just something we all jumped into and trusted, all around the world.

With Europeans there is obviously a very rich history where governments have abused privacy horrifically. That's one area of digital where they say “not so fast.” Clearly, we saw that with Right to be Forgotten initative. I think that's just a canary in a coal mine. From a European perspective there's more of an enlightenment and sophistication on such issues and, I think Europeans are, probably, going to be at the vanguard of trying to strike that balance between digitization and privacy. That's certainly a difference that we see.

You also have to consider the nationalism angle. Look at what happened to Microsoft a decade and a half ago. You can just draw a line from those decisions within the EU to what's been going on with more recently with Google, Facebook and the rest.

Now, again, much of this is legitimate per the potential issues of privacy, that we just discussed, combined with the market share some of these firms have quickly established.

However, from a political angle tie it back to this whole issue of nationalism. If you're in the parliament, this is political red meat for you get not just one benefit but two. You can beat up on an American company. Fun to do. You're going to get a lot of support from your constituents. Then it starts to strike to these overriding Trumpian, Brexit, Le Pen issues around nationalism and associated technology overreach, these overlords and who are somehow coming to get you. The politicians can imply, or even explicitly state: ‘You are going to lose your sovereignty as a result.’

I think, unfortunately, we're probably going to see more of that. Some of these investigations you can look at with common sense say “Hey I see their point. There are some legitimate issues that we need to find the right balance around.” Then there are others where I think you could view them through a very cynical eye and think “Were this a German or French software company would we be having this conversation?” Yet, disputes over trade are as old as commerce itself, and as the software industry matures it’s just like any other in this regard.

Davos preview: Thoughts from Malcolm Frank of Cognizant

As he prepares for his annual visit to the WEF event in Davos, Switzerland, I caught up  with Malcolm Frank, EVP, Strategy and Marketing of Cognizant on what he expects to hear.

I hesitate to even provide a preview of Davos, as such predictions can be wildly wrong, but in doing so I look at A.) what is typically discussed at Davos, and B.) what is in the current zeitgeist and then try to glue those two things together.

Regarding the first, the discussions often focus on the intersection of the economy and the rapid changes in technology. For the past several years that has been the conversation.

There has been tension between those two issues, significant tension. People have been trying to make sense of this weird situation of our current high innovation – low growth economy.

We are in a high innovation market. You just look at what is happening with consumer technologies, and the rapid advances in artificial intelligence and machine learning, and it seems like this is a special time of a real technology renaissance.

Yet, you talk to most economists and they are asking “Where’s the beef?” This is a low growth environment, for by most any measure productivity from technology is not flowing through the economy. You look at what's happening with wages, what's happening with GDP and all around the world (with the exceptions of China and India and some of the emerging markets). When you look at the G7, life was certainly better from an economic perspective from 1960 through 1990 than it has been from 1990 through to today. Wage growth and GDP growth were clearly better in that earlier, pre-computer technology era. For the past several years this tension has been a real point of contention at Davos, of just trying to make sense of this low growth, high innovation economy.

I certainly anticipate discussion on that tension is going to continue as we go into this year's Davos, for those two themes, if anything, have only intensified. There's this recognition that growth is even more difficult to grab at a personal level, company level, industry level or at a national level. At the same time, technology, if anything, is getting more interesting and more exciting. I think that conversation is going to continue.

There is a third element that is, obviously, going to get dialed up because of Brexit and Trump, with politics and what's happening with the rising nationalism and how should CEOs start to think about that.

Everybody is still either reeling from or in awe of (or anything in between) of Trump's victory. However, for more thoughtful minds, they're looking beyond the fear mongering. They're looking beyond how the heck did this guy do this, that Mr. Celebrity Apprentice is suddenly president of the U.S. They are drawing a straight line that goes through Putin, Modi, Erdogan, Brexit and then through Trump and, possibly, through Le Pen in France. There is a broad growth of nationalism, and a pull back from globalism. People, in many corners of the globe, are trying to reestablish their identities whatever those may be, and they are looking for a strong man or woman to assist in that process.

If anything, this political trend is a repudiation of Davos, which has stood for an economically and even socially liberal mindset of globalization, free trade, free association, freedom of ideas. Suddenly barriers are going up. People talk about the wall with Trump. I think he was clever, for he wasn’t only talking about an actual wall on the Rio Grande. He was also speaking metaphorically of building these walls and reestablishing a sense of nationalism. I fully expect that investigating the causes, depths and ramifications of this political trend is going to be a significant theme.

The question then to me is how do those three pieces start to relate? I think it's going to be a fascinating Davos because enough time will have passed between the US Presidential election and the event where these ideas can marinate and people can start to figure out what do we do in this new context ... of the economic, the technological and the political.