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The World is Changing: Are You Ready to Compete?

Judith Hurwitz,
President and CEO

COO and Founding Partner

Marcia Kaufman,

Sponsored by IBM

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The world is changing: are you ready to compete?

The world is changing and to effectively compete it is imperative that companies leverage innovative technology to differentiate the business from the competition. Technology is no longer the exclusive domain of the IT organization. Rather, successful companies create a strategic partnership between business units and IT. Your first step forward should be to take a step back and understand where you are today and what strategic approach will put you on the right path. Lets take a look at a customer case of one CIO and how he adopted this approach to help lead the business to the future. The CIO of a large insurance company was confronted with a crisis when corporate management instituted a significant change in business strategy to increase growth because of an increasingly competitive environment. Management had decided to both acquire new businesses and change the direction of product strategy. This CIO understood that the existing IT environment was inefficient, expensive, and inflexible and could not withstand the coming business change. He had two choices. He could simply purchase new resources on a project-by-project basis or he could forge a new path. Because the CIO understood the value of creating a roadmap that mirrored the business strategy he chose the second approach. Working with business leaders, the CIO was able to create a plan that would move towards supporting business innovation and break down barriers between business units. In doing so, this CIO was able to help the business to move the focus of technology innovation from the back office to customer facing business processes. When businesses take an approach to create a more optimized IT environment based on business outcomes they are able to change dynamically based on changing customer and partner demands. New social and mobile interaction models are changing the dynamics and the pace of customer interactions. Customers and business partners expect that their suppliers will provide a personalized response to their needs in near real time. These consumers of services expect that their suppliers will understand their unique needs and provide proactive responses. How can IT respond to this changing customer and business landscape? It requires a new way of thinking about the way technology is implemented and a new framework for moving forward. In the past many businesses spent months or years carefully conducting market research studies to ascertain the best strategic direction to support changing customer preferences. Today, businesses cannot afford the lag time. Rather, businesses have to be able to detect changing customer needs in near real time. Being able to interact with customers consistently and change product offerings based on this feedback has created a new business dynamic. This new customer interaction model is still emerging and the transition is happening at an unprecedented rate of speed. For example, few businesses anticipated the growing power of social and mobile platforms. Most significantly, businesses did not anticipate that they would be able to take

When businesses take an approach to create a more optimized IT environment based on business outcomes they are able to change dynamically based on changing customer and partner demands.

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direct action based on rapid analysis of huge amounts of customer interaction data. It is no wonder that insightful CIOs are transforming and optimizing their IT environments so they can deliver the right business outcomes at the right time. The foundation for these new more highly optimized IT environments must combine cloud computing, data management, analytics, and security services that support a dynamic set of backend services. By optimizing computing environments, companies can focus their energy and capital on innovation, experimentation, and responsiveness. These optimized computing environments require that formerly disconnected processes become interconnected across lines of business. Supporting this business process interconnectivity demands the right level of security and legal compliance to ensure that companies maintain customer trust. In this paper, we will provide an overview of the issues and requirements that are necessary to support the foundation for business change. Increasingly, whole industries have been transformed by the ability to manage information from instrumented and intelligent systems. This next generation foundation requires that company management rethink their technology roadmap so that it is designed to support customer expectations not just for the next year, but also for the next decade.

The foundation for these new more highly optimized IT environments must combine cloud computing, data management, analytics, and security services that support a dynamic set of backend services.

Creating the roadmap to redefine the customer experience

The new generation roadmap requires that organizations breakdown the boundaries between business services so that organizations spend less time maintaining ineffective systems and more time innovating. This requires a modular, service oriented approach with systems where workloads are optimized across the entire environment. Security and governance need to be incorporated at all levels of the underlying infrastructure. Once the roadmap is established and the right services are implemented, the overall level of business flexibility will increase. This flexibility has many business benefits: It leads to increased opportunities for experimentation based on more efficient and cost effective access to IT resources (using cloud services for scalability) It enables the organization to leverage the massive amounts of data collected in order to change products and services in near real time It enables the business to expand its interaction with customers through social business outreach It enables the business to change the customer experience quickly without a massive reprogramming effort including supporting emerging mobile platforms It provides a consistent technique for linking to systems of record

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Creating a dynamic computing fabric

A dynamic fabric is an architectural approach to computing that accommodates services that organizations need today and those that will emerge in the future. Each component of the fabric helps the organization to move forward on its roadmap to a more flexible infrastructure. They all need to be knit together within computing fabric to support constantly changing customer expectations. The five components that are essential to create the flexible fabric that is at the heart of the new generation of computing are: Cloud Foundational Services Creating support for social and mobile business Managing big data and analytics across the environment Creating a secure and compliant environment Providing a dynamic set of back end services

A dynamic fabric is an architectural approach to computing that accommodates services that organizations need today and those that will emerge in the future.

Creating Infrastructure Efficiency through Cloud Foundational Services

Cloud computing is a computational model that makes IT resources including hardware, middleware, storage, and applications available as a set of services provisioned in a measured, monitored, and self-service manner. Cloud foundational services need to include infrastructure services such as security and monitoring and platform services such as provisioning and integration services. Because of the flexibility and scalability of the cloud delivery model, it can help businesses experiment with new customer facing initiatives without increasing capital expenditures. This increased flexibility also helps the IT organization to respond more quickly to business initiatives. As a result, business and IT can deepen their partnership and become more focused on meeting customer expectations.
Moving to the cloud delivery model: a real-world view

A CIO of a large services company in a highly regulated industry wanted to transform his organizations data center from one hampered by massive server sprawl into a more efficient and automated IT environment. The CIO began this journey to a more optimized environment by consolidating thousands of servers supporting many different operating systems into a Linux-based virtualized environment. While there were many critical issues the IT organization needed to approach, the initial steps were important. The organization began its journey by streamlining the cumbersome process of procuring new systems to support important business initiatives. With increased automation, IT was able to shrink procurement times from weeks to days. The success of this automation set the IT organization on a productive path of implementing an increasingly effective IT development lifecycle. It became evident that the companys next stage would be to move to cloud computing as a way to further optimize and
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standardize the IT environment to support business change. Because of the foundation put in place five years earlier, the company was able to adopt cloud foundational services that increased the efficiency of IT services and transformed the effectiveness of business processes. The CIOs strategy and plan paid many dividends to the business. The new model dramatically decreased the costs of IT. While the actual IT budget remained flat, efficiencies resulted in improved service quality, faster execution, and lower cost to the business. Now, the business can quickly experiment with innovative new software and service offerings without needing to purchase new software and servers. If the experiment is a success, the business can invest in required infrastructure. However, if the new program is not successful, then the resources used for the experiment can be easily given back. Cloud has enabled the company to use resources more effectively, increase innovation and deliver more of the services that its customers want.
The value of the hybrid model to the computing fabric

The value of this hybrid model is to provide a mechanism to select the right combination of foundational services depending on the business problem being solved.

The move to a private cloud is only part of the roadmap to creating a dynamic computing fabric. As companies begin to understand the value of cloud computing as a core component of their IT infrastructure, they are increasingly looking at the hybrid cloud model. This means that organizations are combining public cloud services with their private cloud services that remain behind the firewall. The value of this hybrid model is to provide a mechanism to select the right combination of foundational services depending on the business problem being solved. The hybrid model enables workloads to be managed efficiently according to their unique requirements. Companies are no longer assuming that all workloads are appropriate for the traditional data center. The traditional data center is the right platform for managing sophisticated systems of record. However, when organizations need flexibility to create and manage more dynamic systems of engagement, these companies are increasingly moving to a private cloud. The private cloud provides the automation, self-service, and scaling of cloud services that are managed behind the firewall to protect the security of critical corporate data. Therefore, the private cloud provides the best of the characteristics of the data center with the flexibility offered by cloud models. At the same time, companies are increasingly leveraging Software as a Service (SaaS) application and services from trusted vendors. These SaaS applications such as ERP and HR applications and data analytics offerings are helping companies to quickly add needed services without implementing that application on premises. No matter what workloads are being managed and what cloud models are deployed, companies must be able to manage this variety of services as though they were a single unified system. Therefore, service management is mandatory in a hybrid cloud environment. Management requirements include the ability to manage the physical systems, the data, and the overall security infrastructure.

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Leveraging social and mobile environments to support dynamic computing models

As customer expectations change, it is imperative that businesses accommodate customers based on how they want to interact with their suppliers. A dynamic computing fabric needs to support many different customer interaction models including mobile devices and social business services. These interaction models are not a separate environment but rather an extension of the overall computing model. Customers expect that their suppliers will provide them with a consistent experience whether they are accessing information from a web browser or a mobile device. The emerging mobile devices provide many more options to service providers. For example, a customer may allow the provider to track their location in order to receive special offers based on where stores or outlets are physically located. At the same time, the customer expects to be able to seamlessly move between a mobile device and a browser. Businesses need to engage with customers at the right time and using the right medium for each individual. Customers are increasingly using mobile commerce applications to make instantaneous buying decisions. In addition, consumers are finding social business applications a highly effective way to communicate their opinions about the quality and value of services and they expect timely responses from their suppliers on these sites. Companies need to be able to monitor what their clients are saying on social business sites in order to assess their level of concern. One of the most important ways that a business can be proactive with customers is to combine information from social business sites with their own operational data. For example, are comments on social business sites coming from important customers? An irate communication on a social business site from an important customer must carry more weight than a remark from someone who has no relationship with the company. Leveraging data from all the modes that customers use to interact with backend services creates a more holistic approach to better manage the consistent customer experience. Businesses need to provide a high level of security and privacy when customers or partners need to have private interactions either over a mobile device or via a social business network. Being able to take action and meet the customers expectations can mean the difference between success and failure.

A dynamic computing fabric needs to support many different customer interaction models including mobile devices and social business services.

Managing Big Data and Analytics across the environment

There was a time when data was managed as part of a static back office environment based on the traditional systems of record. These systems are becoming more efficient and streamlined. At the same time, newer, more dynamic systems of engagement are emerging. Systems of engagement encompass the data that comes from e-commerce systems, sensors, business processes, social business networks, mobile data sources, and third party information sources. Unlike systems of record, data from these systems of engagement are intended to dynamically support customers often in real time or near real time. The emergence of Big Data provides even more

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opportunities for a business to gather patterns that can predict changes or shifts in customer preferences. Customers expect that their suppliers will know who they are and provide rapid feedback or personalized offers based on knowledge of their preferences. Increasingly, the sophistication of data interactions between customer and supplier can transform the customer experience. The most successful suppliers are those who are able to create an intimate and individualized experience. These businesses are able to leverage real time analytics in combination with business process management to transform the way they interact with customers. By reducing latency in the processing and analysis of relevant customer and social business data, the business can anticipate what product that customer will be more likely to buy. This can dynamically change the pace of business and change the relationship between a business and the customer or partner. Responsiveness and the ability to innovate based on data is becoming the path for success.

The most successful suppliers are those who are able to create an intimate and individualized experience.

Creating a secure and compliant environment

The new world we have been discussing offers an increasing level of risk and challenge for organizations. Businesses are increasingly engaged with customers by coalescing data from a multitude of sources. Clients expect that their suppliers will have a comprehensive understanding of their overall relationship with that supplier. Customers anticipate that their suppliers will be able to manage data about their interactions across applications and services. At the same time, these customers need to have their identity protected. A company can suffer damage to their reputation and their business if security is compromised. But how does a business ensure that customers data privacy is protected? With companies managing data across a broad set of services, the problem is compounded. Many businesses are required to comply with governmental compliance regulations at the same time. Not only do these requirements apply to backend transactional systems but to data from portals, sensors, mobile devices and the like. In a world where hardware, networks, storage, applications, and end points are increasingly intertwined, a business has to have a holistic approach to security to protect itself and its customers. The data, the hardware, the operating system, and the cloud environment all have to provide the business with a consistent level of security and compliance without compromise. This includes everything from encryption on devices to sophisticated password protection, federated identity management, end point management, and intrusion detection.

Responsiveness and the ability to innovate based on data is becoming the path for success.

Moving from a static to dynamic IT world

What does it mean to a business to move to a dynamic IT infrastructure? In essence it requires a combination of a different approach to IT and a different way of managing resources. In essence, an organization begins to stop thinking of IT as a back office function. In the dynamic IT world, the customer is at the

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center of the computing environment. Whatever the IT organization does has to be predicated on how those services will help transform the customer experience. Therefore, IT needs to be able to provide a consistent interface to the core business services. Of course, the transactional systems of record must be managed accurately and consistently. However, newer information sources from everything from social business services, mobile or sensor-derived data may be incorporated into the dynamic systems of engagement for a more complete view of the customer. For example, the CIO of a financial services organization was able to consolidate its customer data across business unit silos so that the business could have more accurate customer information. This merged data management approach enabled the company to have a complete view of all the products and services each customer had purchased and thus be able to create a much better customer engagement experience. Unlike its competitors, this company was able to anticipate what a customer would be most likely to buy and create the same positive experience both on the web, on a mobile device or in-person. Creating a dynamic environment that is focused on the customer experience requires that you take a holistic view of all relevant applications and information. You cant work on each new customer-focused initiative as if it is a stand-alone project. Rather the dynamic environment has to be optimized and efficient so that it can support rapidly changing customer needs. This means that systems need to be increasingly virtualized and modularized. Software needs to be constructed as a set of modular services with well defined interfaces that support the ability to change. These services need to be designed so that they can be used consistently across the entire computing environment. This new approach is focused primarily on efficiency, consistency and automation. For example, there needs to be a consistent approach to enabling reuse of critical data resources across different use cases. System duplication can be reduced and made more efficient. The impact of this more streamlined and dynamic approach to IT can be significant in terms of reducing inefficiencies and redundancies which results in reduced costs and reduced efforts. You need to balance the need to increase the flexibility and responsiveness of your environment with the requirement for maintaining integrity and adherence to policies and regulations. There needs to be a security layer adding the right level of control to all of these modular services. With effective planning, this dynamic, modular, secure and streamlined computing environment will support better collaboration between customers, suppliers, and partners.

Creating a dynamic environment that is focused on the customer experience requires that you take a holistic view of all relevant applications and information.

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Conclusion: Getting to Dynamic

There are many pressures on the CIO to turn a reactive IT organization into an agent of change and a partner to business leaders. The successful CIO understands that to satisfy changing business demands requires that you first get your base infrastructure under control so that it can be extended. You need to consider where your business is now and the direction you should be heading. While there are many issues that organizations need to address as they prepare to become dynamic and responsive, there are some core best practices that will help address the requirements for the future. We believe that there are five IT best practices that can make the difference between success and failure.
One. Create a staged plan to streamline IT and remove inefficiencies and silos.

The successful CIO understands that to satisfy changing business demands requires that you first get your base infrastructure under control so that it can be extended.

In many IT organizations, inefficiencies have built up over decades. Therefore, it will take a careful plan and strategy to transform IT to be an efficient engine of change for the business. How do you determine the best starting points? It is often wise to start by collaborating with business leaders to determine where there greatest frustrations are in moving the business forward. By adopting a plan that mirrors business needs, IT will begin to emerge as a partner to the business.
Two. Leverage emerging social business and mobile technologies to drive innovation.

Todays customer expects to control how and when they will engage with their suppliers. They want to express their opinions about service qualityboth good and bad to be shared with a large network. They also want to a seamless and personalized engagement experience regardless of which device or platform they select. As a result, businesses need to leverage the most advanced technologies to create innovative new business practices that anticipate customer needs and build loyalty.
Three. Focus Data Management on the ability to customize and personalize customer interactions.

Businesses are beginning to recognize that analysis of past performance and customer interactions no longer provides sufficient insight to remain competitive. Predictive analytics can help companies anticipate the actions that individual customers may take in the future. Big data analytics can be incredibly powerful when companies can evaluate data from all interactions in real time. This type of real time analysis of huge volumes of data at the right rate of speed can be transformational to business success.
Four. Create a holistic security management strategy that protects your companys integrity.

The dynamic computing fabric brings together the elements of the data center with public and private cloud environments. The traditional boundaries separating what is internal to your system and what is external no longer exists. You need a strategy that provides for consistent monitoring of your environment

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for vulnerabilities across servers, networks, virtual images, endpoints, and other components.
Five. Prepare for the cloud through optimization.

A well-designed cloud roadmap can be an enormous help for companies that want to be prepared for perpetual change. However, cloud computing is a strategy, not a single task. Therefore, many organizations begin their path by pragmatically virtualizing servers as the initial journey to the cloud. Creating an optimized, automated environment will help a company better serve its various constituents including customers, partners, and suppliers. The flexibility provided through cloud-based automation, data integration, service management, and security will prepare companies to meet the future head on and change.

A well-designed cloud roadmap can be an enormous help for companies that want to be prepared for perpetual change.

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About Hurwitz & Associates

Hurwitz & Associates is a consulting, market research and analyst firm that focuses on how technology solutions solve real world business problems. The firms research concentrates on disruptive technologies, such as Cloud Computing, Information Management including Big and Fast Data, Service Oriented Architecture and Web 2.0, Service Management, wireless computing, security and Social and Collaborative Computing. We help our customers understand how these technologies are reshaping the market and how they can apply them to meet business objectives. The team provides direct customer research, competitive analysis, actionable strategic advice, thought leadership, white papers and speeches. Additional information on Hurwitz & Associates can be found at www.hurwitz.com.

Copyright 2012, Hurwitz & Associates All rights reserved. No part of this publication may be reproduced or stored in a retrieval system or transmitted in any form or by any means, without the prior written permission of the copyright holder. Hurwitz & Associates is the sole copyright owner of this publication. All trademarks herein are the property of their respective owners. 175 Highland Avenue, 3rd Floor Needham, MA 02494 Tel: 617-597-1724 www.hurwitz.com