Tuesday, April 25, 2006

Is there any Value in that Upgrade?

We've all been there. An aggressive sales person is pitching the latest version upgrade, espousing the latest features and benefits. But the customer is more than happy to maintain their current system as there is nothing wrong with it, and they don’t see the value of the upgrade. How can the sales representative overcome the laissez-faire attitude of the customer?

Enter business value selling - There may be true value to performing the upgrade, but the sales person has not quantified this importance to the customer. Instead of listing all of the cool features and functions the upgrade will provide - after all, that new feature will not pay for the upgrade - the sales professional needs to prove if there is any true business value to the features and upgrade, relative to the current version, and relative to the migration and upgrade costs.

Show me the Money

Here are some items that the sales professional may want to quantify in order to prove upgrade value, going from more direct (hard) benefits to indirect (soft) benefit potential:

1) Can the new system provide lower total cost of ownership (TCO)? – Many times, the latest upgrades are easier to maintain than prior versions, have tools for improved manageability, are faster and require less hardware, or are licensed differently leading to lower support and administrative costs. For TCO to be lower, look for savings in:

> Less server hardware required to host the application
> Lower database size or less instances
> Less development / test staff for application customization / integration
> Less application software annual maintenance and support fees
> Lower application / database administration and support costs
> Lower IT operations and support staff managing the infrastructure
> Avoidance of consulting and professional services / mission critical support fees
> Lower bandwidth consumption

2) Can the new system provide streamlined business processes? – With system upgrades new capabilities are provided, helping to streamline and automate additional business processes or share data to optimize the process. Additional improvements in business processes may yield the following benefits:
> Task avoidance
> Process fees and expenses
> Reduced errors
> Improved transactions

3) Can the new system provide improved availability and service levels? – Often, system upgrades can provide higher availability and service levels – as applications mature they become higher performance and more reliable (most of the time). Benefits include:
> Less downtime
> Less performance tuning
> Improved user productivity via higher performance
> Improved transactions via higher performance

4) Can the new system provide higher agility? – With some system upgrades, the development and deployment team can do more with less resources, and faster. Potential Value: Value of deploying new applications / business process improvements sooner.

The Bottom-Line

If the sales representative cannot aggressively demonstrate the personal value an organization can bank on from the upgrade, the sales person will be shown the door.

If they can prove the business value of the upgrade, they might not get the deal right away, but they have proven that they care about the customers' business, and are sure to have the upgrade become a priority in the near future.

Is there real business value behind the hype of SOA?

Each year Gartner surveys CIOs on their top priorities and invariably for the past 5 years Business / IT alignment has been in the top 5. The good news is that IT executives realize that collaborating with business leaders is vital to company success; the bad news is that alignment has been a top priority for the past eight years, as progress remains elusive, and the issue has not been resolved.

Introduce Service Oriented Architecture, or SOA, with promises to change the way that IT and business work together, creating a services-centric application and IT infrastructure. At the core of SOA is an understanding by all stakeholders of specific business process steps in order that the services be aligned and applied to automate these steps, and providing an infrastructure that is virtualized – assembled flexibly to support changing business demands, growth and innovation. SOA is so important, with so much potential, that three of the largest solution providers, IBM, SAP and Oracle have bet the bank on SOA. But, is SOA just another vendor initiative to sell more hardware, software and services, or truly an industry changing construct? In other words, is their real business value behind the hype?

SOA Delivers IT and Business Alignment

Service oriented architecture (SOA) is being sold as a flexible way to configure all IT assets, both those that currently exist, as well as new assets a business creates, so that each is available as a service - developed, configured, allocated and changed based on driving more business process improvements and meeting changing business demands. As a company moves from alignment to integration and eventually synchronization, SOA provides the foundation for rapid, dynamic adaptation to the changing business conditions. Over time, companies that can rapidly adapt to change and drive rapid business optimization stand the best chance for survival against the competition and can take advantage of market changes not only to survive, but to take the lead.

Compare and contrast this to the past, where application and infrastructure investments created monolithic islands, with applications developed and deployed to support a specific business function or need – like a single, isolated payroll application or order entry application. The IT group works with the business to identify a specific business process issue, then procures, develops or customizes the software to solve the issue, deploying the solution on dedicated server and storage hardware. Later, the business realizes that these islands needed to communicate and interact with each other, leading to large integration projects. Not to mention that the moment the original applications are modified, vendor enhancements, upgrades and support are all in jeopardy. And in the end, many organizations realize that much of the dedicated capital investment in hardware and purchased software has been under-utilized, highly customized and inflexible to change.

With SOA, the organization begins by trying to better understand business processes, mapping out various process steps and then service enabling the applications and integrations in support of these steps. The roots of SOA can be traced back to the TQM movement in the late ‘80s with the wave of Business Process Engineering, then Re-Engineering and many a consulting organization thrived on mapping and improving a company’s processes. At that time, the technology available for allowing for true process automation, in a closed loop approach, were just not available. Additionally the Internet was not part of a global network that today provides a foundation for application, program to program communication and standards based information exchange. Today, with advanced tools that extend from dynamic modeling to process automation and finally to governance, simple web-service enablement allows for application components to provide a service, automating steps and delivering data and processing to other applications, and as the library of service enabled applications grows, each service can be reused to optimize other business processes.

As a Company builds an SOA strategy, applications are built of self-contained piece parts, or “components”, and ensure independence from back-end hardware and operating systems. This allows for another benefit of SOA, a virtualized service oriented infrastructure where applications can be hosted in a shared hardware environment optimized based on workload demand. This shared environment helps the business improve utilization versus traditional islands of individual application servers and storage resources, and helps the business change the allocation quickly allocating more resources to particular applications based on demand growth. As more and more standards emerge in the technology field and as more solution opportunities present “open source” alternatives, the growth for “reusability” and fast access to components should skyrocket.

For a real world example of an early SOA success story, Visa had issues with their credit dispute process, a manual effort that required cardholder disputes by member banks for its almost 500 million cardholders to be processed via a paper driven system.[1] Automating the process for member banks was difficult due to a lack of integrated back-end and legacy systems. Using SOA, the process was modeled and service enabled, allowing direct communication between member banks and the back-end systems, empowering transaction research, dispute case search and retrieval and requests for copies of original paper receipts. This single process automation, built with the IBM SOA architecture and components, claims $52million a year in direct operating costs, and $300 million in ancillary savings, as well as upside business benefits in partner relations. Even more, new projects have been able to re-use services from this project, helping to reduce development time, risks and improve velocity to market.

The Visa example is a good indication of how investments are currently being made by most organizations – a grass roots implementation of SOA on a particular business process / issue, and then growing the deployment to other processes by proving the value to the organization per project and via organic growth. Today, SOA implementations are most often skunk-works projects with little or no official sanctioning, an effort to demonstrate and build grass roots support for SOA. Few are executive driven, with visionary leadership who realize the business value of such initiatives, and are mandating business process analysis and web service enablement on all new projects / and reengineering of legacy applications and infrastructures.

SOA drives IT savings for quick payback

So how can a typical organization expect to benefit from SOA? Most organizations demand that investments have a quick payback. One of the easiest ways to justify SOA is too look for near term savings. These are typically realized by IT, helping to improve application integration and streamline development:

Application Integration Savings – when application integration is performed today, each application is typically integrated point to point using customized integrations – each requiring development and re-testing. With SOA, web services create a service oriented interface to each application, helping to save 30-40% on each integration point. As well, SOA solutions typically include integration brokers: a middleware application that moves integration development from point to point, where each application to be integrated needs to have software customized, to a hub and spoke configuration, reducing integration points substantially. For example an application project deployment requires 4 applications to be integrated. With a traditional point to point solution there are 6 unique integration points and projects, but with the integration broker hub and spoke architecture of SOA, this can be reduced to only 4 integration points and projects.

Re-use of applications - with web service enablement, applications can be divided into specific services and tasks, and these services reused by other applications. For example, an application to retrieve and report on employee data from the corporate HR database can be used as a service by identity management systems, employee portals and other applications, rather than redeveloping the code or embedding it in each of these applications. The direct benefits are immediate avoidance of development and test labor costs. As the organization moves more applications to SOA, re-use benefits grow. Short term savings are typically 5-10%, growing to 40% or more for an enterprise wide deployment.

Reduce project risks – success rates for application development have been steadily improving, however 15% of all projects still are cancelled prior to deployment, and another 35% fail in regards to meeting schedule, budget or feature/function requirements. Via reduced complexity of integrations and application re-use project risk can be reduced, yielding more project success. And this grows over time as more applications are service enabled and reused by other applications.

Improve application quality – by reducing application integration complexity and driving reuse, application quality is also improved. This leads to less issues with deployed applications, reducing the triage costs on reported issues, and leading to improved customer service levels and satisfaction.

Deployment savings – SOA architectures help to isolate the platform dependency of applications, and often include packaging and deployment software to streamline application deployment to any server asset for flexible business workload and demand management, and streamline the deployment and update processes.

Improve asset utilization and consolidation – As discussed SOA is not just web services, or just application focused. Most strategies and toolkits include service oriented infrastructures, where applications are supported by middleware to optimize performance, and can be run in a virtualized hardware environment, optimized by workload demands – the right application on the right server at the right time. This can help to improve utilization on the current islands of application servers from 40-60% levels to 80% utilization or more. This creates better utilization of capital investments in servers and storage, and improves consolidation, helping to reduce server administration and support labor.



Substantial business benefits add up for SOA in the long run

These IT savings are relatively easy to quantify and are realized early in the SOA investment, but the more substantial benefits of SOA are the business benefits – helping to automate and streamline business processes, and providing new applications and faster responsiveness to changing business needs. Here are a few of the business benefits organizations can bank on in the longer term from SOA:

Automate or streamline business processes: Various business processes in the organization can be automated and streamlined through software applications and by having access to data. With SOA, organizations first model each process, mapping out process steps, critical paths, inefficiencies, bottlenecks, exceptions and information integration points. The business processes once understood are automated with web service enabled applications, connected to data sources, other applications and application steps to drive specific business benefits:

* Improve productivity – by streamlining the business process, automation can help reduce the number of tasks that need to be performed (eliminating process steps), reduce the time it takes to perform remaining tasks, or providing the means for lower skilled/paid workers to perform higher level tasks.

* Reduce exceptions and costs of exceptions – when a process has an exception the exception needs to be mitigated and resolved with labor resources, and there are often additional business losses or costs involved, such as shipping charges on returns, reissue check charges or larger impacts such as lost customer costs. By optimizing each process using SOA, process exception rates and costs can often be substantially reduced.

Empower organization with new revenue generating applications for users, customers and partners – with an SOA enabled business, access to new applications, data and services can be made available to more stakeholders, providing capabilities, automation and insight not before available to internal users, partners and customers. This can help to reduce operating costs and drive loyalty.

Improve velocity to deployment of applications – with SOA, via process mapping, integration streamlining and application reuse, development projects can be completed faster, reducing the time it takes to conceive, design, develop, test and deploy new applications. This improved velocity helps to deliver promised application benefits such as business process improvement or revenue generating applications, faster to the organization. The quantifiable benefits are an acceleration in operating efficiency benefits or revenue/profit from the accelerated applications.

Improve business agility – with SOA, the business cannot only execute on current plans quicker, but adapt to unexpected market, partner, customer, merger and acquisition driven changes. A virtualized infrastructure and service enabled applications makes it easier to reconfigure applications and processes, and reuse assets when changes occur. The flexibility can drive the organization to embrace change proactively as a strategy – for example helping to make it more acquisition capable – or reactively respond better, making changes irrelevant to maintaining cost advantages and meeting revenue forecasts. Although harder to quantify than other benefits, the organization can review historical changes and what it took regarding labor and time to reconfigure the infrastructure in support of the changes. With SOA, reducing the labor of reconfiguration can help reduce IT and business operating costs, while improving velocity helps the organization realize the revenue and other benefits of the change quicker.

SOA: Moving Beyond the Hype to Real ROI

With all of the coverage on SOA recently it may be easy to categorize the initiative as pure hype. However, the benefits are tangible and substantial. Those who have taken even minor steps on the road to implementing SOA are reaping immediate IT cost reductions and incremental business benefits that easily prove the return on investment. Moreover, the enterprise wide implementation of service enabled applications and a service oriented virtualized infrastructure is a fundamental and permanent change in the way IT and the business invest in technology and work together.

There are many “on-ramps” to getting started with an SOA implementation. Although there are some short- term IT benefits through which the initial programs can be justified, it is important to remember that SOA is a long-term commitment if a business truly wants to get to the synchronization of Business and IT. The ultimate goal is “Optimization” versus short term cost reductions or efficiency improvements.

Companies that realize this fundamental change and implement SOA will be provided with substantial IT / business alignment, unmatched operating capabilities and enhanced agility. It is recommended that companies quantify the benefits that SOA can deliver short and long term. With this quantification, the team can prove to stakeholders the need to drive several near term projects and organize an enterprise vision for future investments around the business benefits of SOA.

[1] Taking on Web services with resolve; Beth Schultz, Network World, 31/03/2005

What is a good benchmark for network management staffing?

For benchmarking of resources, we typically try to ballpark the number of network devices each resource can handle as follows:

* high complexity network devices - 15 to 20 per staff member

* medium complexity network device – 60 to 75 per staff member

* low complexity network device - 250 to 300 per staff member


Where

* high complexity devices include enterprise switches and IP PBX switches,

* medium complexity assets include LAN wired and wireless routers, and

* low complexity assets include hubs and similar low end devices.

For larger organizations, those with more than $1B in revenue, economies of scale can help reduce staff needed by 10-20%. For smaller organizations, less than $30M in revenue an additional 10-20% resources should be planned.

For companies with superior IT capability and maturity – above average application of people, processes and technology to help reduce IT costs and improve IT productivity, a 10-20% lower staff headcount is not atypical. Simplification of the network through standardization and consolidation are key to achieving this lower staff headcount ratio. Conversely, an organization with lower than average capability and maturity can expect 10-20% additional staff.

Is there a benefit to route analytics / mapping tools?

Surprisingly routing issues are the most frequent culprit regarding network failures and issues. These problems result in support calls to the service desk, and generate performance and service level issues. As a result, the network team jumps through hoops to try and locate the source of the issues and resolve the problem as quickly as possible.

Route analytics tools can help network administrators trace the cause of issues, measure end-to-end service levels and performance, discover routing anomalies, predict the results of configuration changes and provide performance baselines for applications and services. This can help the team more quickly identify and resolve issues, or even prevent them before they occur. This can help companies save 10-15% of total network management labor costs, reallocating the resources to more strategic projects, while also improving service levels and performance.