deal architect

The growing maturity of crowdsourcing

On the New Florence blog, I have tracked the steady growth of crowdsourcing. For the longest time it was about bite size tasks which could be sourced through Amazon Mechanical Turk or contractor sites like eLance.

But you can see the complexity of projects and the range of services keeps growing

MESH01’s development project

Seismic surveys at Shell

Flight operations optimization at Alaska Airlines

Hubs like Zipments for courier services, Instacart for grocery shopping and Homejoy for home cleaning

As we have seen in previous disruptions to labor markets, incumbent models don’t just give up easily. Just like employees tried to sabotage outsourcing attempts, expect to see the equivalent of Parisian taxi drivers protesting the Uber model, but crowdsourcing is clearly moving up the value chain. 

PwC-Booz: The seven year itch

The recent PwC decision to acquire Booz took me back to younger days when I was an reluctant accountant at PW (the C came later after it merged with Coopers). I had little desire to do time in auditing or get a CPA certificate, but that was a requirement back them to qualify for its consulting unit. So, in my boredom, I sent out feelers and landed an interview with Booz Allen and Hamilton (which spun off Booz just a few years ago). I got the impression there my auditing experience had actually negated for them some of  my top of class MBA allure.

So  it is interesting to see PwC make consulting acquisitions, and BAH on the other hand hire tactical, technical talent.

It has actually been happening with regular frequency –the attempt to blend very different strategic and transactional talent. PwC has grown strategic talent organically, used the Sarbanes Oxley cautionary era and post-consulting sale of SAP and other practices to IBM to grow advisory services, and  made other strategy acquisitions like Diamond. BAH on the other hand has done plenty of supply chain and other operational consulting for corporations and more recently plenty of government contracting (brought into plenty of focus by recent alum, Edward Snowden)

But some things have remained the same

a) Independence issues keep popping up

Contrast two firms to see the weight accounting independence has on consulting practices. Accenture, freed of Andersen, not only survived the Enron fallout, but has morphed and thrived. Deloitte, which has kept its accounting and consulting integrated, has by many measures underinvested and has a narrow technology footprint (and a less than stellar implementation success track record).  Expect PwC to be similarly constrained and have to pick markets dictated by its accounting leadership versus those which make business sense

b) The pyramid business model continues

A client vividly described it as the AWACS model. Multiple levels – boots on the ground, helicopters, fighter planes, all coordinated by the big eye in the sky. Clients pay for it all, he said. The truism in the services market is the base of the pyramid keeps expanding, and that’s where clients see the least value.

So, it will be interesting to see how PwC/Booz navigates the turbulent next few years in services. I will be discussing with Phil Fersht at the HfS Blueprint event five disruptive trends that are rocking that sector:

• Explosion in technology categories
• Shifting business models
• Changing talent landscape
• Evolving location risks and perceptions
• From systems of record to systems of advantage

The shock and awe of the public cloud

On a normal weeknight, Netflix accounts for almost a third of all Internet traffic entering North American homes. Look at the graph below and let the enormity of that sink in.

Now consider this. Netflix uses Amazon Web Services as its “data center”. Add on top of that Amazon and its affiliates retail commerce traffic, other companies who use AWS for their processing and storage, and Redshift users for complex analytics, and you see the massive scale that Amazon has built with an estimated $ 6 billion in data center capex the last few years.

Facebook 1+ billion users upload and tag 300 million + photos a day. Apple says more photos are taken on the iPhone than any other camera – and many of them get stored in the iCloud. Google says it answers more than one billion questions from people a day in 181 countries and 146 languages.

As the old adage goes a billion here, a billion there and you are talking real numbers.

And yet many in the enterprise still talk of public clouds as unreliable and unsafe. Many enterprise vendors claim they need to do better than consumer tech then brag about their data centers which are puny and grossly inefficient compared to new ones at Amazon, Google and others at Microsoft, Switch, Rackspace and elsewhere.

Fortunately, the best practices that are coming out of the consumer cloud are starting to be leveraged in the enterprise. Facebook’s Open Computing Initiative which it launched along with its hyper efficient Prineville data center has drawn interest from banks and other high volume users. Microsoft, Google and others are a bit more secretive but increasingly showcase their learnings when it comes to thermodynamics, power normalization and other data center operational issues.

An impressive example of the impact of the public cloud comes from a private cloud being rolled out by Fedex “The Colorado data center is located at an elevation of 6,000 feet, letting FedEx cool the building using the outside air instead of costly air conditioning. The design is modeled on the ultra-efficient, standards-based data centers that Internet giants such as Amazon.com, Facebook and Google have built. And that infrastructure will let FedEx move some computing capacity to public cloud services from the likes of Amazon, Rackspace and Verizon in the not-too-distant future. FedEx is set to convert a data center based on the same private cloud architecture near its Memphis headquarters. “

Admire what consumer clouds have built – then hurry up and apply the concepts to your private clouds and demand similar efficiencies from your hosting providers and other enterprise vendors.

Photo Credit: BusinessWeek

SAP by the numbers

29 million cloud users announced at SapphireNow drew snickers including a snarky comment about “that must include all the pencils ordered on the Ariba cloud” :)

More vexing is the question – does the HANA cloud have enough data center infrastructure? Since SAP is moving away from the almost infinite capacity of the Amazon cloud, it must believe its 7 data centers and capacity of its partners are enough to start off.

It would be nice if SAP shared more details:

• Their square footage and compute/storage capacity
• The Capex that has gone into the data centers (to get a comparable feel to the billions the Amazon, Google and the MS Azure clouds have seen in investment over the last few years)
• The “availability zones” and other resilience SAP has built into its this grid for high availability
• The specialists SAP has hired to architect and build out the centers/certify those of its partners (hopefully some from the highly scaled consumer cloud as at Facebook or Yahoo! or from a demanding cloud infrastructure user like Netflix)
• Given SAP’s emphasis on sustainability, the PUE (Power Usage Effectiveness) of each and the alternative fuels used to power them
• If SAP/partners expect to be as competitive as Amazon in pricing

The Enterprise Cup

Ian “Fresh” Burns of the Oracle Racing Design team did an exhilarating talk over dinner at the Oracle analyst event this week. It was about the long, storied history of America’s Cup going back to Queen Victoria (with slides on the Deed of Gift from 1852), the technology in modern races (think of the Big Data from 250 sensors constantly feeding parameters), the evolution of craft composites and construction and the stamina of the athletes on the teams as they combat everything nature throws at them.

In many ways, his talk was a metaphor for the event, and the company Oracle has become. Larry Ellison and Mark Hurd should be justifiably proud of the many components that makes up the Oracle vessel, and the many athletes they have assembled. 60 Oracle execs presented 40 sessions spread across 6 tracks that covered the gambit of today’s technology spectrum (see extract below)

Anthony Lye can authoritatively talk about customer experience and filtering of social data. Roger Turnham knows more than outsourcing analysts as he deals with 69 Oracle BPO partners. John Fowler is equally comfortable about processors and government regs for data centers around the world. Thomas Kurian can talk middleware and vertical industry trends.

Customers were comfortable naming Oracle names – Steve Miranda, Endeca came up often.  Most attendees I talked to marveled at the quality of the CIO panel at the event. They were balanced in their description of Oracle – but in my short one-on-ones with several of them they came across as demanding, sophisticated customers and Oracle is delivering to them on many fronts. 

The other vibe from the event – one of subdued Oracle confidence. Those of us who have dealt with Oracle for years know it has a hard charging side (and as a reminder the court proceeedings against Google were happening in parallel). I complimented Carol Sato of Oracle Marketing for bringing out the softer side of Oracle over the last few months.  

In the 90s I used to be impressed every trip I made to SAP Walldorf. Every product manager was competent in his/her domain and product. It was a joy to see. I felt the same vibe this week in Redwood Shores. With one big difference – Oracle has a much, much broader and much more contemporary footprint. As my readers know, I am big on Polymaths, and Oracle is getting there as it mixes and matches a variety of competencies in its engineered systems and cloud plans. 

As Burns would say - it is building an awesome AC72 class enterprise.

Photo Credits - above Carol Sato, below Oracle

Is outsourcing success an oxymoron?

Phil Fersht and his team wrote a pretty stern column recently : “Let’s cut to the chase here – “outsourcing”, for most buyers, is like purchasing a wedding dress – a one-time transaction followed by seven years of relationship struggles and future legal wrangles.”

I have been married 22 years and it’s so easy to find failed marriages. My wife and I instead look for the ones that have worked.

Same thing with outsourcing. Even though my new book is not about outsourcing, let me highlight 5 inspirational sections which do relate to successes in outsourcing world.

Apple/Foxconn “Apple has stayed loyal to Foxconn through multiple releases of iPods,iPhones, and iPads in spite of sweatshop accusations, employee suicides, and explosions in its Chinese facilities. Most companies like to diversify between company-owned and outsourced plants, and certainly across geographies. Apple has been willing to take the risk of putting its eggs in the Foxconn basket and taking plenty of jabs from China bashers (although Foxconn has recently been looking at a significant diversification to Brazil)…Over 200 million iOS devices sold to date, most assembled by Foxconn, justify the loyalty”

Boeing/HCL “There were several advantages of having HCL across the board working with all its partners for the 787 development for Boeing. First off, it minimized compatibility issues that come from integration of multiple subsystems. It also made sure that HCL cross-leveraged the knowledge and learning on the 787 program across suppliers to speed up the development process.”

Facebook/Prineville Data center “It has spent two years developing everything that goes inside its data centers—from the servers to the battery cabinets to back up the servers—to be as green and cheap as possible. For example, Facebook uses fewer batteries thanks to its designs, and to illustrate how integrated the whole computer operation is, the house fans and the fans on the servers are coupled together. Motion-sensitive LED lighting is also used inside. The result is a data center with a power usage
effectiveness ratio of 1.07. That compares to an EPA-defined industry
best practice of 1.5..”

Flextronics/Workday “Flextronics would drive the development road map for Workday.In turn, Flextronics would draw upon the years of HR experience the Workday team had to shape and standardize its processes. It was a model software development partnership. The proposal from Workday saved us more than 40 percent over the life of the (global HR) project, with even larger savings in the first year. By going with Workday we were able to reduce our team size by more than 60 percent.”

Cognizant/Internal Staff  “Sukumar,(the CIO) on the other hand, is obsessed with what he calls “social design,” and his quest to deliver 500 percent productivity on Cognizant projects. “Think of avalanches. A snowball starts small, but then gathers mass and gradually turns into a massive avalanche. That is the basic inspiration behind Social Design. What we do individually should (positively) impact hundreds and thousands of others””

Now wait just a minute.

Let me also lay out likely objections to these examples

Foxconn is not an outsourcer Yes, technically it is a contract manufacturer but if with million+ employees it is not an outsourcer, not sure what is

The Boeing 787 was delayed by years. But the use of HCL to test across its supply chain is a big innovation. Also, HCL’s fees involve another innovation – a portion is contingent on the 787’s success.

Facebook is not a data center outsourcer. True, but if it can build a world class data center, should not outsourcers?

Workday is not a systems integrator. Maybe that’s why they only proposed a fraction of staff and effort of the competing SI.

Why do internal efficiencies at Cognizant matter? 500% productivity improvement is impressive no matter where.

What happened to NASSCOM?

For a while, the annual Leadership Forum in Mumbai was the IT equivalent of a pilgrimage to Mecca – you had to go at least once in your career. But, last week’s event came and went without a whimper.

It has been evolving in the vendors who show up. Used to mostly be Indian vendors – this year the sponsors had names like Accenture, Atos, CSC and Steria. The audience is global – Chinese, Irish, New Zealanders networking with customers accustomed to global delivery. Mercifully, there are many more non-stops to India from most places in the world.

What has not evolved much is the content at the event. Each year, the underlying theme is how great outsourcing is, how innovative, without acknowledging that real innovation is happening at places like Amazon and GE and salesforce.com, not in the outsourcing world. Indian politicians pitch how wonderful the country is, but avoiding substantive discussion on infrastructure or inflationary issues.  In that sense, the gathering is incestuous, and risks losing its stature in industry events.

Nasscom could learn from two of its leading members, Cognizant and HCL . Both run events,  Community and Unstructure  that are unafraid to drift in innovative directions. More importantly, they allow customers plenty to time to mingle and relax, without being bombarded by constant selling. It’s tough to stay awake in an outsourcing pitch even when Larry Ellison is coming up next – it certainly is when you are jetlagged and have had a couple of Kingfishers!  

A brave new world of services

I recently saw an SAP announcement around its Next-Gen services and got excited. Turns out it is services around its newer products (SAP HANA platform and business analytics, mobility and on-demand).

That’s certainly one definition of Next-Gen. I was hoping to hear about new delivery models, new providers and new business models. While my next book does not focus specifically on services, I saw many examples from various chapters which suggest tectonic changes coming in the next few years> Here is a selection:

Influenced by Apple:  “The more than 600,000 (as of November 2011 and growing) applications in the Apple App Store range from the sublime to the silly. But the sheer size of the marketplace is a formidable Apple asset. The head of iOS development, Scott Forstall, has commented that Apple has, in the iOS App Store, “created the best economy in software in the history of the planet.”” What’s remarkable here is the majority of the apps come from entrepreneurs and small businesses, not the IBMs or the Deloittes.

Influenced by Facebook: “Dell’s Data Center Solutions business says it will design and build servers based on the Open Compute Project specification. Presumably so will HP’s. Dell owns Perot and HP owns EDS, and those outsourcers currently run data centers for many corporations—and they are nowhere as efficient as what Facebook has built. So, the ripple effect of this on the industry could be tremendous, as even IBM, Accenture, and other outsourcers will be forced to benchmark against the open standards Facebook is sharing.”

Influenced by Cisco: “More impressively, Cognizant has rolled telepresence out to major clients. That helps overcome at least some of the consultant travel costs and other issues (we mentioned earlier in the chapter). Clients were generally skeptical at first, especially if they had previously used traditional videoconferencing, which was characterized by high cost, frequently dropped calls, and video and audio quality that ranged from poor to mediocre. But they have been much more accepting of telepresence, which delivers a vastly superior user experience. Two areas with high payback have been during transition and training. “

Influenced by Boeing: "Under this umbrella agreement with the Boeing Company, HCL worked as the engineering services partner of choice with multiple sub-tier companies on the 787 program. HCL’s services were utilized by these airborne systems suppliers across all the major design elements of the 787 such as common core systems, open systems architecture and e-enabled architecture. “

Influenced by Best Buy: Its after-sales service with over 18,000 employees in its Geek Squad, and investments like the Remote Service Project. The project allows Best Buy to identify backlogs at stores and re-assign the work [to another] store remotely. “we can level out the work across the enterprise, but above all, deliver a great experience for the customer and maximize the up time of the capability of the product that they’ve sourced from us.”

Influenced by Contract Manufacturers: I am constantly surprised to see outsourcers and service providers who have never heard of Foxconn or Flextronics. “Foxconn, the largest electronics contract manufacturer in the world with over a million employees in China, assembles iPads and other devices for Apple” “Given labor dynamics in China, Foxconn is exploring a diversification with sizable investment in Brazil. Even more significantly, it is looking to robots to do simple and routine work such as spraying, welding and assembling. The company currently has 10,000 robots and the number will be increased to 300,000 next year and 1 million in three years.” “Both Flextronics and Jabil also provide a wide range of warranty and repair services for their customer products. Then there other Taiwanese players like Pegatron, a spinoff from Asus and Quanta.”

Influenced by regulators: Gina Staudacher, tax partner at Baker Tilly, commenting about investments in global innovation projects: “When we work with clients to monetize tax credits globally—we utilize a ‘concept through final completion’ approach to consider all potential project costs that may be eligible for R&D credit inclusion from a global perspective. Hence, consulting fees incurred in a foreign country may not be eligible for inclusion in the US R&D tax credit programs, however, such costs and payments may be eligible in the foreign jurisdiction wherein they were performed or where payment was made.”

Note: the book is going through the publisher’s edits and the text above is subject to change.

HCL Unstructure – an eclectic event

You know you are not in Kansas anymore when the morning keynote begins with Malcolm Gladwell and the state of oncology circa 1955, and the evening keynote by President Bill Clinton makes you ponder what astrophysics will teach circa 2055 with new planetary discoveries and neutrinos speedier than light. And sandwiched in between are the CEO of American Electric Power who explains the challenge of balancing newer fossil fuel sources with wind, solar and other alternative fuels, and the CEO of Tibco presents a cameo of his latest book ‘The two second advantage” and many other varied points of view.

You know this is not your typical rubber chicken circuit when the customers you sit down at lunch or share a cocktail with have titles in product engineering, R&D and IT and represent banks, medical devices, aerospace and wide range of other industries.

You know you are not going to be saturated with typical vendor marketing when there are sessions on bartending, magic, disc jockeying and an elaborate Bollywood-style Indian wedding.

I spent 24 hours at HCL’s Unstructure event and came away not too much smarter about their various services (though thanks to Sadagopan, Sandeep Kishore and Rajarshee Dutta, my hosts I met most of its senior leadership) but feeling challenged and refreshed.  And most customers I talked to felt the same and appreciated the low-key selling at the event.

Krishnan Chatterjee, Global Head of Marketing for HCL told me satisfaction scores of customers who had been to at least one of these meets was statistically better than those that had not, and those that were regulars to the event were even happier.

Less selling is more – something I have also noticed at Cognizant events. May be something for software vendors to consider at their events and reduce the demos and executive pitches they fill their agendas with.

Salesforce.com and Model Metrics

One distinctive feature of Salesforce.com from other application vendors (on-premise and SaaS) has been it has smartly encouraged for years now a group of smaller, cloud savvy systems integrators – as different from large outsourcers, Indian firms or resellers. That includes Appirio (in which Salesforce has a minority investment), Astadia, Bluewolf, Model Metrics and others.

So, I wondered if its announced acquisition of Model Metrics was a change in strategy. I asked Narinder Singh, co-founder at Appirio, and as he has blogged “Since early this year, Salesforce has aligned their entire company and all of their considerable marketing might around the social enterprise…..By adding Model’s mobile development and UI capabilities to their team, Salesforce will be able to make the social enterprise vision tangible for customers.”

In other words it extends Salesforce’s push on Chatter and acquisitions like Radian6.

Narinder adds “We are somewhat relieved to know they will be focused on driving the social enterprise and mobility for Salesforce (and therefore with us), instead of being our most worthy competitor.”

While wishing both the Appirio and the Model Metrics teams well, I hope Salesforce  customers continue to have plenty of choice and implementation costs stay close to the ground and not reach for the clouds.