Monday, June 29, 2009

T-Mobile Ramps Up Quality-Based Business Rewards from Applications Testing Improvements

Transcript of a BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe 2009 Conference in Las Vegas during the week of June 15, 2009.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Sponsor: Hewlett-Packard.

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you on location from the Hewlett-Packard Software Universe 2009 Conference in Las Vegas. We’re here in the week of June 15, 2009 to explore the major enterprise software and solutions trends and innovations that are making news across the global HP ecology of customers, partners and developers.

I'm Dana Gardner, principal analyst at Interarbor Solutions, and I'll be your host throughout this special series of HP Sponsored Software Universe live discussions.

This customer interview is with another HP Software and Solutions Excellence Award winner, T-Mobile USA. Please join me in welcoming Michael Cooper, director of enterprise quality management at T-Mobile. Welcome back, Michael.

Michael Cooper: Good afternoon, Dana.

Gardner: When you're serving over 33 million mobile customers, you have a lot of apps that are or would be things that those customers need. They become pretty mission critical. You also have a lot of internal apps. Your enterprise resource maintenance applications also, of course, are classified as mission critical.

In order to get apps, customized apps, and new apps out the door in good shape, so that you don’t have downtime, the testing and quality assurance process is pretty important. Tell us a little bit about how you wanted to improve that process and what were the problems that you needed to address?

Cooper: You’re absolutely right. The problem that we needed to address was that testing was expensive. It took a lot of time, and, because we were doing it manually, the tests were not always consistent and repeatable. What we wanted to get to was an automated framework and we decided to focus on the business process that was important to our customers.

Gardner: We often hear that people, process, and product are what all come together to make these things repeatable, more efficient, and effective. Of course, being more efficient these days is top of mind. Tell me little bit more about the test methodologies. When you looked for solutions, what were your requirements or criteria?

Cooper: We were looking for something that was easy to use and that was an industry standard. We were looking for something that would give us good traceability. And, we were looking for something that would allow us to automate and be reusable. So we chose the Business Process Testing (BPT) framework.

Gardner: Tell me more about how that works?

Automating business processes

Cooper: We thought about what our real business processes are -- for example, ordering a phone, activating a phone, sending out bills. We organized components that describe these business processes. We extended those by automating them and used them for our regression testing primarily.

Gardner: So, in order to accomplish that, what actual products did you put in place?

Cooper: The actual products we have put in place were BPT, both for manual and automated testing, quality center and it’s all the modules of quality center. We extended that to leverage those scripts for monitoring with Business Availability Center (BAC). In some cases where we had service-orientated architecture (SOA), we actually used Service Tester, and for our performance testing we used Performance Center and LoadRunner.

Gardner: What were some of the results? Did you have any metrics of success that stick out in your mind as worthy of mentioning?

Cooper: The success metrics were really around time savings.

I would focus on defect prevention rather than defect detection. I would automate your test for reusability and consistency. And, I would like to say that HP has been a great partner in this journey.


We saved about 50 percent of each regression cycle each month. We cut the testing time in half. The second thing, and this is probably the most important one, we reduced the post-production defects by 75 percent. The benefit of that is that it reduced our cost of fixing those plus our operations cost.

Gardner: And that also translates into a lot of more satisfied customers, less churn, and that’s the name of the game, right?

Cooper: Exactly.

Gardner: What advice would you offer to others who are also looking to move from manual and siloed, or at least inconsistent approaches, to app testing and who are looking for a more holistic complete, repeatable methodologically consistent approach?

Cooper: I would focus on defect prevention rather than defect detection. I would automate your test for reusability and consistency. And, I would like to say that HP has been a great partner in this journey.

Gardner: You mentioned SOA. One of the tenets of that is repeatability and reuse. Did you find that using scripts across this more consistent environment saved you money, because those scripts could be used again and again and perhaps across multiple application-development activities?

Cooper: You’re absolutely right. Not only did we use them with each release, it allowed us to use it for monitoring as well.

Gardner: Great. We've been talking about moving to more efficient development test, and therefore, better post-production quality applications. We've been discussing that with the winner at the Awards of Excellence competition here, the HP Software and Solutions Awards, and the winner is T-Mobile, USA. Thanks very much. We've been joined by Michael Cooper, director of enterprise quality management. Thanks, Michael.

Cooper: Thank you, Dana.

Gardner: Thanks for joining us for this special BriefingsDirect podcast, coming to you on location from the Hewlett-Packard Software Universe 2009 Conference in Las Vegas.

I'm Dana Gardner, principal analyst at Interarbor Solutions, your host for this series of HP-sponsored Software Universe Live Discussions. Thanks for listening and come back next time.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Sponsor: Hewlett-Packard.

Transcript of a BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe 2009 Conference in Las Vegas during the week of June 15, 2009. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.

Friday, June 26, 2009

IT Financial Management Provides Required Visibility into Operations to Reduce Total IT Costs

Transcript of a BriefingsDirect podcast on how IT departments should look deeply in the mirror to determine and measure their costs and how they bring value to the enterprise.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Learn more. Sponsor: Hewlett-Packard.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to BriefingsDirect.

Today, we present a sponsored podcast discussion on bringing improved financial management capabilities to enterprise IT departments. The global economic downturn has accelerated the need to reduce total IT cost through identification and elimination of wasteful operations and practices. At the same time, IT departments need to better define and implement streamlined processes for operations and also for proving how new projects begin and unfold.

Knowing the true cost and benefits of complex and often sprawling IT portfolios quickly helps improve the financial performance of how to quantify IT operations. Gaining real-time visibility into dynamic IT cost structures provides a powerful tool for reducing cost, while also maintaining and improving overall performance. Holistic visibility across an entire IT portfolio also develops the visual analytics that can help better probe for cost improvements and uncover waste.

Here to help us understand the relationship between IT, financial management, and doing more for less in tough times are two executives from Hewlett-Packard (HP). Please help me welcome Ken Cheney, director of product marketing for IT Financial Management at HP Software and Solutions. Welcome, Ken.

Ken Cheney: Thanks, Dana, I appreciate the opportunity.

Gardner: We’re also joined by John Wills. He’s a practice leader for the Business Intelligence Solutions Group at HP Software and Solutions. Welcome, John.

John Wills: Hi, thank you, Dana.

Gardner: Ken, let’s start with you. We’ve heard for quite sometime that IT needs to run itself more like a business, to do more with less, and provide better visibility for the bean counters. But, now that we’re in a tough economic climate, this is perhaps a more pressing concern. Give me a sense of what’s different about running IT as an organization and a business now versus two years ago.

Cheney: Dana, the economy has definitely changed the game in terms of how IT executives are operating. I and the others within HP are hearing consistently from IT executives that cost-optimization, cost-containment, and cost-reduction initiatives are the top priority being driven from the business down to IT.

IT organizations, as such, have really shifted the focus from one of a lot of new initiatives that are driving innovation to one of dealing with situations such as how to manage merger and acquisition (M&A) processes, how to deleverage existing IT assets, and how to provide better decision-making capabilities in order to effectively control cost.

The landscape has changed in such a way that IT executives are being asked to be much more accountable about how they’re operating their business to drive down the cost of IT significantly. As such, they're having to put in place new processes and tools in order to effectively make those types of decisions.

Gardner: Now, John, tell me about the need for better visibility. It seems that you can’t accomplish what Ken's describing, if you don’t know what you have.

Wills: Right, Dana. That’s absolutely correct. If all of your information

Historical data is a prerequisite for knowing how to go forward and to look at a project’s cost . . .

is scattered around the IT organization and IT functions, and it’s difficult to get your arms around, then you’re exactly right. You certainly can’t do a good job managing going forward.

A lot of that has to do with being able to look back and to have historical data. Historical data is a prerequisite for knowing how to go forward and to look at a project’s cost and where you can optimize cost or take cost down and where you have risk in the organization. So, visibility is absolutely the key.

Gardner: It’s almost ironic that the IT department has been helping other elements of the enterprise do the exact same thing -- to have a better sense of their data and backwards visibility into process and trends. Business intelligence (BI) was something that IT has taken to the business and now has to take back to itself.

Wills: It is ironic, because IT has spent probably the last 15 years taking tools and technologies out into the lines of business, helping people integrate their data, helping lines of business integrate their data, and answering business questions to help optimize, to capture more customers, reduce churn in certain industries, and to optimize cost. Now, it’s time for them to look inward and do that for themselves.

Gardner: When we start to take that inward look, I suppose it’s rather daunting. Ken, tell us a little bit about how one gets started. What is the problem that you need to address in order to start getting this visibility that can then provide the analytics and allow for a better approach to cost containment?

From managed to siloed

Cheney: If you look at the situation IT is in, businesses actually had better management systems in place in the 1980s than the management systems in place today. The visibility and control across the investment lifecycle were there for the business in the 1980s with the likes of enterprise resource planning (ERP) and corporate performance management capabilities. Today, IT operates in a very siloed manner, where the organization does not have a holistic view across all the activities.

In terms of the processes that it’s driving in a consistent manner, they’re often ad hoc. The reporting methods are growing up through these silos and, as such, the data tends to be worked within a manual process and tends to be error-prone. There's a tremendous amount of latency there.

The challenge for IT is how to develop a common set of processes that are driving data in a consistent manner that allows for effective control over the execution of the work going on in IT as well as the decision control, meaning the right kind of information that the executives can take action on.

Gardner: John, in getting to understand what’s going on across these silos in IT, is this a problem that’s about technology, process, people, or all three? What is the stumbling block to automating some of that?

Wills: That’s a great question. It’s really a combination of the three. Just to be a little bit more specific, when you look at any IT organization, you really see a lot of the cost is around people and around labor. But, then there is a set of physical assets -- servers, routers, all the physical assets that's involved in what IT does for the business. There is a financial component that cuts across both of those two major areas of spend.

As Ken said, when you look back in time and see how IT has been maturing as an organization and as a business, you have a functional part of the organization that manages the physical assets, a functional part that manages the people, manages the projects, and manages the operation. Each one of those has been maturing its capability operationally in terms of capturing their data over time.

Industry standards like the Information Technology Infrastructure Library (ITIL)

IT organizations are going to be starting in multiple places to address this problem. The industry is in a good position to address this problem.

have been driving IT organizations to mature. They have an opportunity, as they mature, to take advantage and take it to the next level of extracting that information, and then synthesizing it to make it more useful to drive and manage IT on an ongoing basis.

Gardner: Ken, you can’t just address new technology at this juncture. You can’t just say, "We’re going to change our processes." You can’t just start ripping people out. So, how do you approach this methodologically? Where do you start on all three?

Cheney: IT organizations are going to be starting in multiple places to address this problem. The industry is in a good position to address this problem. Number one, as John mentioned, process standardization has occurred. Organizations are adopting standards like ITIL to help improve the processes. Number two, the technology has actually matured to the point where it’s there for IT organizations to deploy and get the type of financial information they need.

We can automate processes. We can drive the data that they need for effective decision-making. Then, there is also the will there in terms of the pressure to better control cost. IT spend these days composes about 2 to 12 percent of most organizations’ total revenue, a sizable component.

Gardner: I suppose there also has to be a change in thinking here at a certain level. If you're going to start to finding cost and behaving like a business rather than a cost center, you have to make a rationale for each expenditure, both operationally and on a capital expenditure basis. That requires a cultural shift. Can you get into that a little bit?

Speaking the language of business

Cheney: It sure does. IT traditionally has done a very good job communicating with the business in the language of IT. It can tell the business how much a server costs or how much a particular desktop costs. But it has a very difficult time putting the cost of IT in the language of the business -- being able to explain to the business the cost of a particular service that the business unit is consuming.

For example, quote to cash. How much is a particular line of business spending on quote to cash or how much does email cost based on actual usage per employee. These are some of the questions that the business would love to know, because they're trying to drive business initiatives, and these days, the business IT initiative is really part of a business initiative.

In order to effectively asses the value of a particular business initiative, it’s important to know the actual cost of that particular initiative or process that they are supporting. IT needs to step up in order for you to be able to provide that information, so that the business as a whole can make better investment decisions.

Gardner: I suppose business services are increasingly becoming the coin of the realm and defining things such as a processor, number of cores, license per user/seat, and that sort of thing doesn’t really translate into what a business service costs. John, how does BI come onto the scene here and help gather all of the different aspects of the service so that it could be accounted for?

Wills: It all ties together very strongly. Listening to what Ken was saying

That’s one of the keys in helping IT shift from just being a cost center to being an innovator to help drive the business.

about tying to the investment options and providing that visibility ties directly to what you are asking about BI. One of the things that BI can help with at this point is to identify the gaps in the data that’s being captured at an operational level and then tie that to the business decision that you want to make.

So again, Dana, back to one of your earlier questions about whether it's a people, process or technology issue, my answer would be that it's really all of the above. BI comes along and says, "Well, gee, maybe you’re not capturing enough detailed information about business justification on future projects, on future maintenance activity, or on asset acquisition or the depreciation of assets."

BI is going to help you collect that and then aggregate that into the answers to the central question that a CIO or senior IT management may ask. As Ken said, it’s very important that BI, at the end of that chain or sequence of activities, helps communicate that back in terms that business can understand so they can do an apples-to-apples comparison of where they would like IT to satisfy their needs with a given budget at hand. Dana, that goes back to again one of your earlier questions. That’s one of the keys in helping IT shift from just being a cost center to being an innovator to help drive the business.

Gardner: I suppose that as we move from manual processes in IT toward these visualization analytical tools, there's also a cultural shift. A print out might work well in the IT department. If you take that to your decision maker on the business side, they're going to say, "Where's my dashboard? Where are my dials?" What’s the opportunity here to make this into more of a visual benefit in terms of understanding what’s going on in IT and in cost? Why don’t we take that to Ken?

Getting IT's house in order

Cheney: In terms of the opportunity, it’s really around helping IT get its own house in order. We look at the opportunity as being one of helping IT organizations put in place the processes in such a way that they are leveraging best practices, that they're leveraging the automation capabilities that we can bring to the table to make those processes repeatable and reliable, and that we can drive good solid data for good decision-making. At least, that’s the hope.

By doing so, IT organizations will, in effect, cut through a lot of the silo mentality, the manual error-prone processes, and they'll begin operating much more as a business that will get actionable cost information. They can directly look at how they can contribute better to driving better business outcomes. So, the end goal is to provide that capability to let IT partner better with the business.

Gardner: Tell me a little bit more about the solutions and services that you'll be announcing at HP’s Software Universe event?

Cheney: At Software Universe this year, we rolled out a new solution to help customers with IT financial management. For quite some time, we’ve been in the business of doing project portfolio management (PPM) with HP Project Portfolio Management Center, as well as in the business of helping organizations better manage their IT assets with HP Asset Manager.

We have large customer bases that are leveraging those tools. With our

This product effectively allows IT organizations to consolidate their budgets, as well as their costs. It can allocate the cost as appropriate to who they view as actually consuming those particular services that IT is delivering.

customers who are using the PPM product as well as the Asset Management product from HP we can effectively capture the labor cost. If you look at PPM, it really tracks what people are working on, effectively managing the resources and capturing the time and cost associated with what those resources are doing, as well as the non-labor. It's all of the assets out there -- physical, logical, and virtual. We're talking about servers and software so that we can pull that together to understand the total cost of ownership.

We’ve brought together what we’re doing within PPM as well as within Asset Management with a new product called HP Financial Planning and Analysis. This product effectively allows IT organizations to consolidate their budgets, as well as their costs. It can allocate the cost as appropriate to who they view as actually consuming those particular services that IT is delivering.

Then, we provide the analytic reporting capabilities on top of that to allow IT organizations to better communicate with the business, better control, optimize, make decision making around cost. They can effectively drive the decision making right down to the execution of the work that’s occurring within the various processes of IT. That’s a big part of what we are delivering with our IT financial management capability.

Gardner: So, tell us about the products and solutions that are coming into the market?

Cheney: We have a new solution that we’re announcing as part of the HP Financial Planning and Analysis offerings.

Gardner: Does that have several modules, or are there certain elements to it -- or more details on how that is rolling out?

Service-based perspective

Cheney: The HP Financial Planning Analysis product allows organizations to understand costs from a service-based perspective. We're providing a common extract transform load (ETL) capability, so that we can pull information from data sources. We can pull from our PPM product, our asset management product, but we also understand the customers are going to have other data sources out there.

They may have other PPM products they’ve deployed. They may have ERP tools that they're using. They may have Excel spreadsheets that they need to pull information from. We'll use the ETL capabilities to pull that information into a common data warehouse where we can then go through this process of allocating cost and doing the analytics.

Gardner: So, John, going back to that BI comparison. It sounds a lot like what people have been doing with trying to get single view of a customer in terms of application data.

Wills: It really is. It’s a single view, except in this case we're getting single view of cost across many different dimensions. It’s really important, as Ken said, that we really want to formalize the way they're bringing cost data in from all of these Excel spreadsheets and Access databases that sit under somebody’s desk. Somebody keeps the monthly numbers in their own spreadsheets in a different department and they are spread around in all of these different systems. We really want to formalize that.

As to your previous question about visualization, it’s not only about formalizing it and pulling it altogether. It’s about offering very powerful visualization tools to be able to get more value and to be able to see immediately where you could take advantage of cost opportunities in the organization.

Part of Financial Planning and Analysis is Cost Explorer, a very traditional BI capability in terms of visualizing data that’s applied to IT cost, while you search through the data and look at it from many different dimensions, color coding, looking at variants, and having this information pop out of you.

Gardner: It’s one thing to be able to gather, visualize, and put all this

. . . once you are able to actively price your services, you're able to charge back for the consumption of those services.

information in the context of a cost item or a service, but the larger payback comes from actually being able to associate that cost with the user or some organization that’s consuming these services at some level or another. How do we get from the position of visibility and analytics to a chargeback mechanism?

Cheney: Most customers that I talk to these days are very keen on jumping immediately to the charge back and value side of the equation. I like to say, "Let’s start by walking before we run," with the full understanding that the end goal really is being able to show the value that IT is delivering and be able to charge back for the services that are actually being consumed.

Most organizations haven’t even put in place these processes that they need, which is why, when we talk about what we are doing with IT financial management, we want to make sure customers understand that it’s a complete solution, where we view the underlying processes being the end goal of understanding of the value doing charge back. To get to that nirvana of understanding the value of IT, customers need to put in place those processes around capturing labor cost and non-labor assets and effectively managing the IT investment lifecycle end-to-end.

On top of that, by doing the cost aggregation and the analytics that we are doing with the Financial Planning and Analysis offering, you get the cost visibility. Once you understand the cost, you can then go through the process of pricing out what your services are. At that point, once you are able to actively price your services, you're able to charge back for the consumption of those services.

IT underappreciated

Gardner: Over the years, I've heard from a number of IT folks about their frustration at not being appreciated. People don’t understand what goes into being able to provide these services. This perhaps opens up an opportunity or a door for the IT department to explain itself better and perhaps be better appreciated. Does that bear fruit in some of the uses that you’ve come across so far?

Cheney: Absolutely. That is really what we are driving for -- to help IT organizations be much more credible in front of the business, for business to understand what it is that they are actually paying for, and for IT to react much more nimbly to the requests that are coming in from the business.

Wills: You are certainly being more transparent. Put the question of charge back to the side for a moment. Without question, you're able to be more transparent in what the costs are. You're able to use the same terminology, very consistent terminology, that the business understands, which is a huge leap forward for most organizations. When you have that transparency, when you have a common set of terminology in the way that you communicate things, it’s a huge boost for IT to be able to justify how they are spending their budget money.

Gardner: Let me ask an interesting question. Who in IT is responsible for this? Is there a "chief visibility officer," if you will, within the IT department? Who is generally the sign-off on the purchase order for these sorts of products?

Wills: The chief sign-off officer, the chief visibility officer, is the CIO. There is no question. The CIO is the one. It’s really interesting. When we talk to accounts, the one who has the burning issues, the one who is most often in front of the business, justifying what IT does, is the CIO --at the highest level obviously.

That's always interesting, because the CIO has the most immediate pain. Often times, people one or two levels beneath him are grinding through manually pulling data together month after month and sending that data upstairs, so to speak. They don’t have the same levels of interaction with the end customers to have that acute pain, but the CIO is definitely the chief one who sees that on a daily basis. Would you agree, Ken?

Cheney: I would. Many CIOs have created essentially an IT finance arm and they may have a role, such as a CFO for IT or IT finance, which is taking all that information rolling up from those folks that are lower down in the organization and trying to make sense of it. This is a manual, very error-prone process these days. So, for that particular organization charged with making sense of IT finances and associating the actual cost of IT to the services consumed it is a big challenge. As such, it makes the job of the CIO very difficult when it comes to going out and communicating with the business.

Gardner: Let’s see if we can quickly identify some examples. Do you

. . . we found that, on average, that strategic portfolio work that our customers would do could save 2 to15 percent of their total IT budget.

have case studies or customers that you can describe for us who have undertaken some of this, and what have they found? Did they get actual significant savings? Did they see an improvement in their trust and sense of validation before the business or perhaps are they looking more for efficiency and are improving the productivity of their IT departments? Any metrics of success for how these products are being used?

Cheney: In terms of how customers are being successful, we’ve seen customers these days who are very focused on quick results, meaning that when they deploy what we are bringing to the table, they are doing it in a very targeted manner. We recommend that customers actually do that. That they want to make sure they’re tackling this problem in what I call bite-size chunks, where they want to get a win within a few months maximum. We have customers who will start, for example, with a base level of control over their IT processes.

One great starting point would be strategic portfolio management. We recently did a survey of about 200 IT executives and found that 43 percent of those executives said they have no form of portfolio rigor in place today. We did a benchmark study with a group of our customers with an organization called the Gantry Group, a third-party group that does return on investment (ROI) analysis and we found that, on average, that strategic portfolio work that our customers would do could save 2 to15 percent of their total IT budget. That's an area where we can have a very quick impactful win, and it's a good example.

Another area would be asset, inventory, and utilization, where we have customers who will get started just understanding what they have out there in terms of their services and desktop software and getting a grip on that. There are immediate savings to be had with that type of initiative as well.

A look at the future

Gardner: That brings up looking at the future. We've heard a lot about virtual desktop infrastructure (VDI), bringing a lot of what was done locally back to the data center, but with cost issues being top of mind around that. Then, we're also hearing quite a bit about cloud computing. It seems to me that we're going to have to start doing some really serious cost benefit analysis about what is the cost to maintain my current client distribution architecture versus going to a VDI or a desktop-as-a-service (DaaS) approach.

I am also going to need to start comparing and contrasting cloud-based services, applications and/or infrastructure against what it costs and what we're doing internally. Do you see some trends in the field, some future outlook, in terms of what the role of IT is going to move into in terms of being able to do these financial justifications?

Cheney: Absolutely. This is an area that we're seeing customers having to grapple with on a consistent basis, and it’s all about making effective sourcing decisions. In many respects, cloud computing, software as a service (SaaS), and virtualization all present great opportunities to effectively leverage capital. IT organizations really need to look at it through the lens of what the intended business objectives are and how they can best leverage the capital that they have available to invest.

Gardner: John, something further to offer?

Wills: There is a huge inflection point right now. Virtual computing, cloud computing, and some of these trends that we see really point towards the time being now for IT organizations to get their hands around cost at a detailed level and to have a process in place for capturing those cost. The world, going forward, obviously doesn’t get simpler. It only gets more complex. IT organizations are really looked at for using capital wisely. They're really looked at as the decision makers for where to allocate that capital, and some of it’s going to be outside the four walls.

We've seen that on the people side of the business with outsourcing for quite some time. Now, it’s happening with the hardware and software side of the business as well. But these decisions are very strategic for the enterprise overall. The percentage of spend, the IT spend-to-revenue, for a lot of these organizations is very large. So, it’s absolutely critical for the enterprise that they get their hands around a process for capturing cost and analyzing cost, if they're going to be able to adapt and evolve as this market continues to change so rapidly.

Gardner: If an outside provider can walk in and say this application or this infrastructure is going to cost this much per employee per month, that’s pretty concrete. If the business decision maker goes back to the IT department and says, "How much is that going to cost from your perspective," they have got to have an answer, right?

Wills: Right. You'd better have an answer for what your fully loaded costs are across every dimension of your business and you'd better understand things like your direct cost, indirect cost, fixed cost, and variable cost. It’s really about looking into the future and predicting not only risk, but opportunity, advising the board and CEO, and saying, "These are our choices and this is the best use of capital."

Gardner: I was just having a chat about cloud computing with Frank Gillett of Forrester Research a few weeks ago. He was saying that when you take a hard look at these costs, in many cases, doing it on-premises internally is actually quite a bit more attractive than going to the cloud but you have to come up with the numbers to actually justify that.

Wills: You have to be able to justify it. There is also the dimension of

You'd better have an answer for what your fully loaded costs are across every dimension of your business and you'd better understand things like your direct cost, indirect cost, fixed cost, and variable cost.

customer satisfaction. You talk about service-level agreements (SLA), and you must factor that in. So, you start to get into some of the soft aspects of costing things out and looking at opportunity cost, but you have to factor those in as well. It does show some of the complexity here with the problem that’s at hand.

We really believe this is the time for the organizations to seriously get their arms around this.

Gardner: Well, I'm afraid we are about out of time but we have been learning more about how improved financial management capabilities can help reduce total IT cost through identification and elimination of wasteful operation, but also gaining visibility into actual IT cost structures can certainly help our organizations justify themselves to the business, find the right balance in budgets and future projects, and, as we have seen for the future, being in a good position to compare and contrast against virtualization, and cloud computing, and some of the other new opportunities for IT acquisition.

I want to thank our panel for getting deeply into this conversation. It’s really been fun. I also want to thank our sponsor for today’s discussion, HP Software and Solutions, for underwriting its production. We've been joined by Ken Cheney, director of product marketing for IT Financial Management at HP software. Thanks, Ken.

Cheney: Great. Thank you.

Gardner: And also, John Wills, practice Leader for the Business Intelligence Solutions Group at HP software. I appreciate your input, John.

Wills: Thank you, Dana.

Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions. Thanks for listening and come back next time.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Learn more. Sponsor: Hewlett-Packard.

Transcript of a BriefingsDirect podcast on how IT departments should look deeply in the mirror to determine and measure their costs and how they bring value to the enterprise. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.

Sunday, June 21, 2009

In 'Everything as a Service' Era, Quality of Services and Processes Grows Paramount, Says HP's Purohit

Transcript of a BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe 2009 Conference in Las Vegas the week of June 15, 2009.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Sponsor: Hewlett-Packard.

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you on location from the Hewlett-Packard Software Universe 2009 Conference in Las Vegas. We’re here in the week of June 15, 2009 to explore the major enterprise software and solutions trends and innovations that are making news across the global HP ecology of customers, partners and developers.

I'm Dana Gardner, principal analyst at Interarbor Solutions, and I'll be your host throughout this special series of HP Sponsored Software Universe live discussions.

Please now join me in welcoming Robin Purohit, vice president of software products for HP Software and Solutions. Welcome to the show.

Robin Purohit: Thanks, Dana.

Gardner: We’ve heard so much about the external forces that are buffeting the IT department. With the economy, of course, and now with cloud computing, folks are examining a fluid sourcing option future for themselves. This seems to be forcing change. We’re looking at how applications and services are developed, tested, and then deployed. Do you think we’re at a major inflection point in IT?

Purohit: I think there are multiple inflection points, and flexible outsourcing is definitely one of those. Just like the last downturn, severe restrictions on IT budgets force you to rethink things.

One of those things is, what are you really good at, and do you have the skills to do it? Where can you best leverage others outside, whether it’s for a particular service you want them to run for you or for help on doing a certain project for you? How do you make sure that you can do your job really well, and still support the needs of the business while you go and use those partners?

We believe flexible outsourcing is going to really take off, just like it did back in 2001, but this time you’ll have a variety of ways. We can procure those services over the wire on a rateable basis from whatever you want to call them -- cloud providers, software-as-a-service (SaaS) providers, whatever. IT's job will be to make sure all that stuff works inside the business process and services they’re responsible for.

Gardner: We’ve heard this concept of "everything as a service." When we start moving across boundaries and looking at infrastructure, data, and applications, perhaps being separated at some level, a loosely coupled world if you will, the quality of these services goes from "nice to have" to "must have." How do you think the mentality needs to shift in terms of this quality assurance aspect?

Quality is not an option

Purohit: Quality is no longer going to be an option. That’s for sure. I think most customers have started to get that, and they use our quality assurance solutions today to make sure that the production environment is much more rigorous. Do quality better upfront. It's much cheaper to maintain the well-functioning operating environment.

If you think of it as marketplace of services that you're doing internally with maybe many outsource providers, making sure every one of those folks is doing their job well and that it comes together some way, means that you have to have quality in everything you do, quality in everything your partners do, and quality in the end process. Things like service-enabled testing, rather than service-oriented architecture (SOA) is going to become a critical mainstream attribute of quality assurance.

Gardner: What is the role of governance? We’ve heard that word bandied around quite a bit. There is IT governance. There is SOA governance. Perhaps we're going to start to see cloud governance. What’s its role?

Purohit: The role is essentially making sure things work the way you want them to, that you can trust people, or you can put informal service level agreements (SLAs). But, there is nothing like measurement, and what IT governance or cloud governance is going to be about is to make sure that you have a clear view of what your expectations are on both sides.

Then, you have an automatic way of measuring it and tracking against it, so you can course correct or make a decision to either bring it back internally or go to another cloud provider. That’s going to be the great thing about the cloud paradigm -- you’ll have a choice of moving from one outsource provider to another.

Gardner: It may be a cliché, but we hear about "people, process, and products," and the need for all three to be addressed. Looking at the people and the process aspect of that,

As you put in governance, you bring in outside parties -- maybe you’re doing things like cloud capabilities -- you're going to get resistance. You’ve got to train your team to how to embrace those things in the right way.


IT departments, if they’re going to be able to make some of these adjustments we’ve been talking about, perhaps themselves need to adjust. What are we bringing to the table, in order to facilitate a change in how to do business as an IT organization?

Purohit: First of all, I absolutely agree that the most important things to get right are the organizational dynamics. As you put in governance, you bring in outside parties -- maybe you’re doing things like cloud capabilities -- you're going to get resistance. You’ve got to train your team to how to embrace those things in the right way.

What we’re trying to do at HP is step up and bring advisory services to the table across everything that we do to help people think about how they should approach this in their organization, and where they can leverage potentially industry-best practices on the process side, to accelerate the ability for them to get the value out of some of these new initiatives that they are partaking in.

Gardner: Well, people and process have to adjust, and we’re going to apparently bring some tools to allow them to get greater visibility into how they operate -- cost-benefit analysis types of benefits. I also want to plumb a little bit into the products.

At HP, you have quite a wide portfolio. There is test and quality assurance (QA), application lifecycle management, governance as we’ve mentioned, traditional IT management, configuration management databases (CMDBs), and associated tools, project and portfolio management (PPM), asset manager, SOA management, and now IT financial management. Can you help me understand how there is a unifying concept, the glue that ties these together?

Running the business of IT

Purohit: We think that what’s been missing in IT is just thinking about of the way that they construct the systems to run the business. For the last 20 years, IT organizations have been building enterprise resource planning (ERP) systems and business intelligence (BI) systems that help you run the business. Now, wouldn’t it be great if there were a suite of software to run the business of IT?

This is what we call Business Technology Optimization (BTO). It’s all about allowing the CEO and their staffs to plan and strategize, construct and deliver, and operate services for the business in a co-ordinated fashion, and link all the decisions to business needs and checkpoints. They make sure that what they do is actually what the business wanted them to do, and, by the way, that they are spending the right money on the right business priorities. We call that the service life cycle.

Gardner: In addition to our process, people and products, there’s the environment. There's a marketplace. It seems to me that HP is at a certain advantageous point. It has a lot of partners, but, as we move towards fluid sourcing, as we become an "everything as a service" world -- certainly not overnight, but perhaps over time -- the way that these ecologies develop becomes important.

In your keynote address, you mentioned a number of partners -- Accenture, Capgemini, SAP, TIBCO, VMware. How does this work, with what you’ve just described, that HP brings to the table from products. How does that relate to a partner ecology?

Purohit: Okay. Well, the first thing is that our partners in the industry are expecting is for us to lead. What we’ve been working on and reinforcing this last year is that we have a blueprint for how to go do this "ERP for IT" concept -- or BTO.

That’s a good thing for the customer, and the vendors like it because it puts them in a bigger context in terms of what we’re all trying to accomplish to the customers, so we look coherent in someway.

We’ve been bringing our products together to fulfill that, and we’ve been trying to articulate to the industry that this is how IT has to change.

What we’ve been doing is saying, "Well, most customer environments have a plethora of different vendors and consultants that are helping them. So, anytime we can help bring one of those consultants or those vendors into this environment, the customer can get to that vision faster." That’s a good thing for the customer, and the vendors like it because it puts them in a bigger context in terms of what we’re all trying to accomplish to the customers, so we look coherent in some way.

There are things that we're doing with Accenture, for example, in helping on the strategy planning side, whether it’s for IT financial management or data-center transformation. We're doing things with VMware to provide the enabling glue for this datacenter of the future, where things are going to be very dynamically moving around to provide the best quality of service at the best cost.

Gardner: Another slide that you presented, which caught my attention, projects a progression that IT is now perhaps accelerating along. It starts with IT financial management. Some news that you’ve made here at the conference is application modernization, which is, I suppose, bringing more platforms, applications, and data into an environment where they can be used, consumed, and propelled forward as services.

Then, there's next-generation data center, cutting the cost, making that more economical and with higher utilization. Then, there's a closed-loop incident and problem management so that app dev can deploy a continuum that's compressed and improved. Lastly, cloud computing. What would come next on this progression?

The unified concept

Purohit: What’s next is making all of that work in that unified concept we were talking about before. We found in talking to the customers that every one of those things that you just mentioned, and that we articulated, is perfectly in line with where they’re trying to go. So we feel pretty good. We’re on the same page as our customers.

We know that they’re trying to do all of that really well and really fast, because they think it all will lead to significant and sustainable cost transformations, and change how they run the business of IT. But, they want one plan. They don’t want seven plans. If there’s one thing they’re asking us to do more, faster, better, and with all of those ecosystem providers is to show them how they can get from their current state to that ideal future state, and do it in a coherent way.

Gardner: You’ve laid all of this out here at the conference. Several thousand people had a chance to chew it over for a few days. What’s been the response? What have you heard?

Purohit: There are a couple of things that we’re really excited about that. We've just seemed to have hit right to the heart of where our customers are trying to go.

Certainly, the IT financial management announcement was a huge hit. Everybody is under a tremendous cost visibility pressure right now. Everybody is gearing up for the FY10 budgeting cycle already, and they think it’s going to be another brutal one. Being able to come to the table with well-informed, accurate financial information, so they can go fight for what they know is right for the business, is just perfect timing.

The other big theme is automation, automation, automation, automation. Basically, everybody wants to talk about it. They know that’s the way they


When we talk about things like requirements, we talk about the requirements that business people have and what they expect of the application, not the functional requirements.

are going to take cost out really quickly.

The last thing, over half the people here at the user conference are application developers, testers, and architects. So, there's a lot of discussion on Agile development, and how they can work with us to accelerate the way they can get these new Agile processes in place, but doing it in a way that they have a great result, and not just move faster.

Gardner: I suppose it’s important if we have a class of developer -- a class of tester and architect, as you mentioned -- that they act in concert in some way.

Purohit: That’s right, and that’s where our focus has always been -- to get those three constituents working together in the center of excellence concepts. Now, it's increasingly around the lifecycle of the application itself, from design to development to delivery, and most importantly, looking at application life cycle linked to the needs of the business.

When we talk about things like requirements, we talk about the requirements that business people have and what they expect of the application, not the functional requirements. That way, you're going to make sure that all of your energy is focused on the right thing, and to get to the end of the project is actually a success. You don’t have to restart, which is not a good thing, especially right now when budgets are so tight. You can’t afford to be wasting money.

Gardner: No margin for error, right?

Purohit: No margin for error anymore.

Gardner: Well, great. Thanks very much. We've been discussing some of the announcements and the conceptual framework that they fall into here at Software Universe. We’ve been joined by Robin Purohit, vice president of software products for HP Software and Solutions. Thanks so much.

Purohit: Thank you, Dana.

Gardner: Thanks for joining us for this special BriefingsDirect podcast, coming to you on location from the Hewlett-Packard Software Universe 2009 Conference in Las Vegas.

I'm Dana Gardner, principal analyst at Interarbor Solutions, your host for this series of HP-sponsored Software Universe Live Discussions. Thanks for listening and come back next time.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Sponsor: Hewlett-Packard.

Transcript of a BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe 2009 Conference in Las Vegas the week of June 15, 2009. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.

SaaS Delivery of IT Lifecycle and Quality Management Functions Evolves Toward an IT Service-Delivery Solutions Approach

Transcript of a BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe 2009 Conference in Las Vegas the week of June 15, 2009.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Sponsor: Hewlett-Packard.

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you on location from the Hewlett-Packard Software Universe 2009 Conference in Las Vegas. We’re here in the week of June 15, 2009 to explore the major enterprise software and solutions trends and innovations that are making news across the global HP ecology of customers, partners and developers.

I'm Dana Gardner, principal analyst at Interarbor Solutions, and I'll be your host throughout this special series of HP Sponsored Software Universe live discussions.

Please join me in welcoming two executives from Hewlett-Packard's Software and Solutions group. We’re here with Scott Kupor, vice president and general manager of software-as-a-service (SaaS). We’re also here with Anand Eswaran, vice president of professional services. Welcome.

Scott Kupor: Thank you, Dana.

Anand Eswaran: Glad to be here, Dana.

Gardner: We’ve heard a lot here at the conference about various new sourcing options, looking to the future and thinking about how to deliver applications in a different way over time. This whole SaaS phenomenon, if you will, over the past several years has had a lot of people thinking about this for business applications.

But, Scott, in your group, there’s been quite a heritage of using SaaS for delivery of infrastructure and productivity in the development and cycle for application creation in IT departments. Tell us a little bit about where SaaS has been, and perhaps we can get a better sense of where it’s going to go.

Kupor: That's a great point. When people think about SaaS, Salesforce.com is obviously what comes to mind, a really traditional application. At HP for the last nine years, we've been selling IT management applications as a service delivery option. If you think about things like testing, performance management, or project and portfolio management (PPM), for example, those are traditional IT applications that we’ve been selling with this similar delivery model.

Gardner: Now that we can get a better sense that there is interest, and now that cost efficiencies have become top of mind for many organizations, where do you suppose this SaaS model can go next?

Kupor: It’s interesting. What we’ve been hearing from customers today at the conference are two key things. Number one, the cost benefits that initially drove them to SaaS are ever present and incredibly more important in this financial environment. The benefits are really coming to fruition. The second is that we’re starting to see a migration of SaaS from what was traditionally testing services toward other more complex and more customizable IT management applications.

The prime example of that is that we’re hearing a lot of interest from customers around IT service management (ITSM), service desk applications, and service management applications. These are things that have traditionally been the domain of inside-the-firewall deployments. Customers are now getting comfortable with the SaaS model so much so that they’re looking at those applications as well for deployment in a SaaS environment.

Gardner: Of course, when we free up these functional sets as services, that gives us more flexibility in how they’re consumed and delivered. Anand, I wonder if you could help us explain how moving from a SaaS deployment helps professional services, organizations, and folks create a better solution approach to some of the problems that IT departments are facing.

A conscious shift

Eswaran: Absolutely, Dana. That’s been the consistent focus and feedback from all the customers over the past 12 months. We’ve made a very conscious shift from what was inherently deployment of products. The approach right now is transformed into what business outcomes can we achieve for the customer, which is something which we would have been unable to do some time back.

We have changed focus now from deploying a single product set to achieving outcomes like reduction of outages by 40 percent, increasing quality, getting service-level agreements (SLAs) to a certain point, and guaranteeing that level of service. That’s been hugely helpful.

The second thing that has been interesting is the huge focus on intellectual property and best practices that we bring to the table right now. This accelerates time-to-market. That was one of the feedbacks we heard last year at the conference. Over the past 12 months, we put a services R&D organization in place. This has massively changed how intellectual property best practices accelerates time to market for the customers, and we're getting very good feedback this year.

The last thing, which is the end game, is that this all gets us to the point of what customers refer to as "killing the game," getting to a point of being able to offer outcome-based pricing and guaranteeing that outcome, as opposed to the traditional consulting model of billing rates and hours.

Gardner: This strikes me as a little counterintuitive. You think of SaaS and you think of a simple delivery of a functional set.

I don’t think people should believe that moving towards a SaaS model necessarily means that they get a lesser degree of service or that they can’t still leverage their own process, their own IT, or their own systems to create meaningful differentiation for their business.

Professional services would be something you’d do for setting up and deploying, crafting, and requirements ahead of a methodological approach. Scott, help me understand, from your perspective, how SaaS and professional services create a whole greater than a sum of the parts?

Kupor: SaaS ultimately is really a deployment option for customers. They’ve always had the option of in-house deployment. SaaS now gives them the option to deploy that application potentially in a third-party data-center environment. It doesn’t obviate the need for the solutions focus, though, that professional services ultimately can bring.

Remember, all these are complex IT management applications, they have third-party integrations. They have custom code that customers are building on top of it. Those are all areas of domains of expertise for the services organization. Through the work that the two of us are doing together, we can deliver a cost-effective delivery option for customers, but without having to sacrifice the complexity, integration, and customization opportunities that they demand for these applications.

Gardner: Then, looking at this as well from a cost perspective, many organizations have gone to SaaS for business applications, because they don’t sense that those applications differentiate them per se, when it comes to a Salesforce automation or human resources.

You’re not going to change your market position by having a better HR department. You might look to outsource. So, is there a same effect within the IT department? Some of these aspects, perhaps PPM, is something that isn’t going to differentiate that IT department. They might look for someone to do a “better, faster, cheaper.”

Kupor: Particularly in this financial environment, “better, faster, cheaper” is still the predominant thing that customers are looking at. I don’t know if it’s a mis-perception or how best to describe it, but I don’t think people should believe that moving towards a SaaS model necessarily means that they get a lesser degree of service or that they can’t still leverage their own process, their own IT, or their own systems to create meaningful differentiation for their business.

It’s really all about just making sure that those people have the best ability to deliver the application expertise with least amount of cost involved. That’s really the sourcing option people are moving towards.

Gardner: Anand, is there something more that you wanted to add to this perception about the intersection of customization and solutions with a SaaS delivery model?

Customers care about outcomes

Eswaran: I'd go back to what I started with, which is that the customers care about the business outcomes they need to create for themselves. As Scott talked about, SaaS is a very viable delivery option right now. When we talk about capital expenditures (CapEx) versus operating expenses (OpEx) and how you shift expenses, it allows customers to have flexibility around that. But, eventually, customers are looking to solve a business problem. They’re looking to create a defined business outcome, where all of this trends forward, it becomes a service for the customer.

All of what we do at the back end, whether it’s how we leverage SaaS, what products we use, what software we use, what consulting and professional services we use, all of that is going to be transparent to the customer. What they care about is a service, which we will deliver to the customer. SaaS enables us to get to that service, get to that time-to-market much faster.

Gardner: Help me understand where we’ll start to see more SaaS delivery in the context of an IT department?

Kupor: What we’re seeing, and we’ve heard this a lot from our customers today, is that they’re actually interested in looking at how do I, as an IT department, deploy my own applications in a third party cloud environment. You hear a lot of people talking about infrastructure on demand or computing power on demand.

People are looking toward these third-party products as a way to basically take an application they’ve built in-house and deploy them externally in, perhaps, an Amazon environment or a Microsoft environment. Where the interesting opportunity is for us, as a

That’s really what IT’s job is -- to help deploy business applications and govern the integrity, security, the authenticity, and the performance of those applications.

management vendor, is that customers will still need the same level of performance, availability, security, and data integrity, associated with applications that live in a cloud environment as they have come to expect for applications that live inside their corporate firewall.

We’ve been talking to customers a lot about something called Cloud Assure, which is the first service offering that HP has brought to market to help customers solve those management problems for applications they choose to deploy in a cloud-based environment.

Gardner: This almost sounds like cloud consumption and governance as a service. Is that fair?

Kupor: You’re right. At the end of the day, this is about governance. That’s really what IT’s job is -- to help deploy business applications and govern the integrity, security, the authenticity, and the performance of those applications.

If you go back to where we started this discussion, SaaS, cloud, and all these fancy words, really are different types of deployment models for customers. Whether you deploy it in-house, or whether you deploy it in a third-party cloud environment, you still care about that common theme of governance, security, and all the other things that go along with that.

Gardner: Let’s hear a bit about how to get started. If you’re in an IT department, you like some of this, you want to say to your higher-ups, "I’ve got some evidence of why this will work for us," how would you get started?

Robust education services

Eswaran: There are a couple of things. In addition to all the deployment mechanisms we have in our portfolio, we also have a very robust education services arm. One of the things we’re doing is making sure that education services are available to enable customers on not just the products we have and the solutions we can create, but also the different options they have from a delivery perspective.

We also know that travel budgets and travel freezes are a critical component of why customers are not able to send enough people to get educated. We have also created certain leading-edge portfolios within education services. These enable us to deliver instructor-led training, on a virtual basis, to simulate the exact same interaction that customers need to experience.

So, education services and everything we’re doing about it is a very viable option to help them get enabled on all the different delivery models in addition to solution-based and product-based enablement.

Gardner: How about this notion of professional services over time becoming simply a way of picking and choosing among a variety of different services that could be composed, if you will, into a solution. Do you think that’s where we’re headed?

Eswaran: Absolutely, Dana. We come back to the central theme, which you hear and which we firmly believe in. Everything is eventually going to get transformed into a service for the customer, so that they can actually focus on the core business they are in. When you have things transformed into a service, everything we do to offer that service should be transparent to the customer.

It becomes a services-led engagement, but that’s where we clearly differentiate "services" from "service," the singular, which is the eventual outcome the customer needs to create for themselves. That’s why we really partner well between SaaS and Professional Services. We believe that we are on a path of convergence to eventually get to offering business value and a service to a customer.

Gardner: Scott, how do you see this path of convergence shaping up?

Kupor: Yeah, I really agree with everything that Anand said. At the end of the day, we want to figure out for customers, look, what’s the best way to get the outcome you want?

People have used this term “everything-as-a-service.” It’s a common nomenclature these days, but really does describe where we think the industry is going.


In some cases, that may be a deployment option. It might be engaging a professional services to develop a solution, but, at the end of the day, all these things come together. People have used this term “everything-as-a-service.” It’s a common nomenclature these days, but really does describe where we think the industry is going.

Gardner: Well, great, thanks. We’ve gotten a deeper understanding of where SaaS is headed for IT departments. I want to thank our guests. We’ve been talking with Scott Kupor, vice president and general manager of SaaS at HP Software and Solutions Group. We’ve also been joined by Anand Eswaran, vice president of professional services at HP. Thank you both.

Eswaran: Pleasure was mine, Dana.

Kupor: Thanks, Dana.

Gardner: Thanks for joining us for this special BriefingsDirect podcast, coming to you on location from the Hewlett-Packard Software Universe 2009 Conference in Las Vegas.

I'm Dana Gardner, principal analyst at Interarbor Solutions, your host for this series of HP sponsored Software Universe Live Discussions. Thanks for listening, and come back next time.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Sponsor: Hewlett-Packard.

Transcript of a BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe 2009 Conference in Las Vegas the week of June 15, 2009. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.

HP's Andy Isherwood on Running IT Like a Business With an Eye to Transformation of IT's Role

Transcript of a BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe 2009 Conference in Las Vegas the week of June 15, 2009.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Sponsor: Hewlett-Packard.

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you on location from the Hewlett-Packard Software Universe 2009 Conference in Las Vegas. We’re here in the week of June 15, 2009 to explore the major enterprise software and solutions trends and innovations that are making news across the global HP ecology of customers, partners and developers.

I'm Dana Gardner, principal analyst at Interarbor Solutions, and I'll be your host throughout this special series of HP Sponsored Software Universe live discussions.

Join me now in welcoming Andy Isherwood, Vice President and General Manager of HP Software and Solutions. Welcome to BriefingsDirect.

Andy Isherwood: Hello, and welcome to you.

Gardner: Clearly a part of doing more for less, which has been, unfortunately, a theme that most people are grappling with these days, has involved the need to run IT more like a business to get more insight into what’s going on from a business requirements and financial expectations perspective.

Tell me a little bit, if you could, about what you’re seeing in terms of how organizations are both dealing with this lack of funds but the need to change the way in which they can deliver the results back to the business?

Isherwood: I've been in IT for quite a long time, and we’ve been talking long and hard about IT being at the core of business, and IT being in the business, but the reality probably hasn’t changed significantly. IT people still operate in their own space, with their own jargon, and don’t really link that well to the business.

Obviously, it’s a huge generalization, but the reality is that, in many organizations, IT is this separate silo, quite often not reporting to the CEO, and therefore quite disconnected from the business drivers.

As we’re seeing more and more CIOs reporting to the CEO and being involved in board meetings, the reality is now changing. People now understand what the core business drivers are. People are being coached heavily, because they might not have come from an IT background. They might have come from the business. They're better able to link the business drivers of the organization to what IT can actually deliver, but not in IT terms. In terms what is the value to the business and how does it address those business drivers.

The other question that's linked is what’s happening with budgets, and, therefore, what are the priorities. Clearly, we are in very uncertain times. A year ago, we moved into a recessionary period. Budgets for ‘09 were set, and they were typically significantly less.

All the conversations I've had with CIOs are that the capital expenditure is typically being reduced by anything between 0 and 40 percent, and operating expenditures being decreased by up to 10 percent. It's less, but still pretty significant.

So you’ve ended up with a significantly smaller budget to do stuff, which can cause big problems for organizations. They have a certain amount of infrastructure in day-to-day activities to maintain. This means that they have to spend all their budget on existing projects and keeping the lights on, rather than any innovation. If you can’t innovate, then you can’t deliver value back to the business and you become just an IT function delivering the core value.

How to innovate

IT budgets, if you’re not very careful, are driving the organization to just do the core IT functions, rather than link back into the business and add real value in a period, in which it’s probably the most important thing to do. So, how do we innovate and how do we use the budget more effectively than we do today to allow us not just to keep the lights on, but to do this huge amount of innovation?

If we don’t do it now, we won’t be able to do it in the future, because, as demand picks up, it’s just going to be "all hands to the pump" to be able to deliver just the demand that picks up, as we come out of the recession.

It will be interesting, as we go into the new budgeting period for FY '10. Are there enough green shoots of recovery to allow people to have confidence to increase budgets and invest or are we going to have another year of kind of tight budgets? People are very much at the crossroads of needing to innovate and do things differently, but are constrained by budgets, which is a difficult balance.

Gardner: We also see, as they’re grappling with these organizational transformational issues, similar opportunities in the form of a variety of sourcing options. We’re hearing awful lot about the interest in cloud, questions about cloud computing. People are opening up to this notion of the need to examine what we do internally, and find some aspects of that that are better served more economically and just as well outside the organization.

We’re dealing with more than, just services software solutions. We’re now looking at sourcing. That, to me, is a decision beyond just technology.

We can go sell solutions. We can deliver stuff through the cloud and via software-as-a-service (SaaS) offerings. We’ve got the complete breadth of offerings to allow people to make those choices.

It’s about transforming how your business works. How are the folks you’re talking to here managing this new dimension of sourcing options?

Isherwood: As you say, people are being given a number of different options. Now that can be good and bad. People have a lot of choice, but they quite often find it difficult to make a decision on the best choice. Other people feel that the choice gives them a lot more scope to do things differently, to manage budgets in a different way, and do things more effectively.

Whether it’s insourced, outsourced, a partner activity, whether it's on premise or off premise, all of these options give people choices. From an HP standpoint, we have the ability to give people the choice. Our recent acquisition of EDS clearly adds the last pillar of choice, given that we have now an outsourcing business, which is significant.

We can go sell solutions. We can deliver stuff through the cloud and via software-as-a-service (SaaS) offerings. We’ve got the complete breadth of offerings to allow people to make those choices.

We’re finding that people want advice around the choices. It’s all well and good to have all these choices equivalent to modes of transport, but people need to be given direction, which we’re trying to do. What I'm hearing from customers is that they want advice on what should they insource, what should they outsource, what should they put in the cloud, and what should they have as a SaaS offering.

That’s a really important job and an important role for someone like an HP, which actually doesn’t have a bias, because we've got all the options. If we were only a cloud computing or any outsourcing company, we’d be giving customers one option. Our role as a consultant to not only evaluate what is best for those organizations, but what is good for them financially, is a very important part of the role HP can play and should play.

The good news

Sourcing is important. The good news is we’ve got all the options, and the good news is we now have consulting capability to advise people -- not tell people, but advise people -- on what those options are and what we think is the right strategy for them as an organization.

The pricing pressures and the budget pressures that we talked about earlier may force people to outsource or put stuff into the cloud, which is going to be a different driver in a year’s time, when we’re through recessionary period. The financial situation at the moment is driving a more intense look at those sourcing options and what it does from a financial point of view for that particular organization.

SaaS is a great offering. We’ve been in that business for nine years and we have 700 customers. So, we know that business well. We know that in times, in which capital expenditure is being restrained, they can move to a more operating expense oriented budget, but still be able to innovate, which is a pretty compelling proposition. As we move through, and capital expenditure is freed up, that might change, but at least people have the option.

Gardner: Part and parcel with these options is to assess risk and to understand not only what you might be able to do, but what penalties might be involved. This, to me, is a function of governance -- being able to forecast, implement, and then to adjust and amend a

What they need to do is manage the service that’s being delivered by people outside of their organization. It becomes more of a management of the service, than management of the infrastructure that develops or delivers the service.

few policies and automate that across organizations or across boundaries. So, when we look at this process going forward through the lens of governance, how do you see that unfolding and what does HP bring to the table on that?

Isherwood: The management of all of these sourcing options is a key consideration. Take the example of an organization putting things onto a public cloud. They’re still going to have the same requirements from a governance and management standpoint, but it might be a lot harder than having it in-house.

Management requirements on governance around what data is out there, what performance is like, and what scalability is like, are all considerations and discussions that we help with. It can make the whole world a lot more complex for CIOs. Therefore, the management capability that we have around all of those options becomes even more important.

It’s less important for them to understand and worry about that in-house infrastructure. What they need to do is manage the service that’s being delivered by people outside of their organization. It becomes more of a management of the service, than management of the infrastructure that develops or delivers the service. So, our role is about, governance, management, and control of the services that are delivered to an organization, rather than the product, power, or the storage that’s delivered to a company.

Gardner: Great. We’ve been discussing some of the larger issues that are top of mind here at Software Universe. We’ve been joined by Andy Isherwood, vice president and general manager of HP Software and Solutions. Thank you so much.

Isherwood: Thank you very much.

Gardner: Thanks for joining us for this special BriefingsDirect podcast, coming to you on location from the Hewlett-Packard Software Universe 2009 Conference in Las Vegas.

I'm Dana Gardner, principal analyst at Interarbor Solutions, your host for this series of HP-sponsored Software Universe Live Discussions. Thanks for listening, and come back next time.

Listen to the podcast. Download the podcast. Find it on iTunes/iPod and Podcast.com. Sponsor: Hewlett-Packard.

Transcript of a BriefingsDirect podcast recorded at the Hewlett-Packard Software Universe 2009 Conference in Las Vegas the week of June 15, 2009. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.