If You’re Not Leveraging or Considering AI in Some Fashion, You’re Already Behind.

It’s been said that data is the new gold. If you believe this critical concept like I do, then you should believe that artificial intelligence (AI), and machine learning in particular, will have a tremendous impact on the way we work. Though not new, machine learning is the next step in the evolution of data analytics and every company should already be looking at where they can take advantage of this transformational technology. If you aren’t doing that already, you’re behind.

Data Analytics too often is about looking backwards at what happened, while machine learning is about looking at the same historical data but with an eye into the future. It uses patterns in the data to help provide insight and recommendations and it can help automate tasks where historical patterns are a good prediction of the future. Machine learning is just one application of artificial intelligence, but it’s the most accessible and relevant as it applies to most enterprises. There is a lot of debate about how robots powered by AI might replace our jobs, but we’re still too early in the AI evolution to be worried about full scale replacement. Many firms are already taking advantage, augmenting their employees work and freeing up time for more knowledge based activities. It’s a long way before large sets of jobs are replaced, but AI can and should be used to augment and improve processes, while also enabling personalization into how each employee or consumer works or shops.

Machine learning also opens up the world of prescriptive analytics, which takes predictions a step further by suggesting actions based upon the predicted event. Just because you know something will happen doesn’t mean you’ll take the most meaningful action. Scale also becomes more attainable with AI. The augmented work, insights and predictions open a world of doing much more with less.

If you’re still figuring out how to get started, then don’t worry. Foundationally, it’s much easier today to start than it was just one year ago. The cloud has accelerated machine learning adoption and accessibility and it’s a perfect environment for machine learning. You can get a lot of compute for specific periods of time for model training, while the number and quality of the model’s available increases daily. All the major cloud vendors now make it easier to tap into their models no matter where your data resides, while also providing open API’s for integrating the results into usable forms. There are also a multitude of vendors available that can help you start with a small project as you begin your learning exercise. Like other new technologies, it’s smart to start small in the form of testing, learning, trying and discovering.

When looking at where to begin, think about what business problems could be solved by automating a routine task. Look at problems where understanding historical trends can improve decision making. As you approach the project, keep the Agile methodology in mind; identify the business problem, pick a short-term win that can be accomplished in 4-6 weeks. Take the Minimal Viable Product (MVP) approach and don’t try boiling the ocean on this. You need to try it, learn, iterate, and go through it again.

Some examples of where to look are:

·       Repetitive tasks – Are there tasks that staff perform that are routine that also generate transactions or other data sets? Do you get requests that are repetitive and where history is a good indicator of how to process these requests? Is there data movement between systems that are routine?

·       Providing insights – Are there key processes that are event based, where you might improve the outcome the next time if you had historical data that provided insights into the quality of your decisions?

·       Reducing Noise – Operationally, do you have notifications that generate more data than you’re able to easily sift through? Machine learning can help you get through the noise and clutter.

·       Improving the user experience – Are there processes in your operations where your employees are required to go through multiple steps to get help or generate requests? There are many use cases where machine learning can help employees get what they need quicker, easier, and cheaper.

·       Personalization – Leveraging user preferences and habits, the user and employee experience can be personalized to provide a better and engaged experience. What temperature do you like it in your workspace? Which conference room do you tend to use (or what is the most convenient). What food do you like the most, giving you alerts when it’s available in a nearby café?

·       What’s in your data? – Look at where you have a lot of data. Just looking at the systems or devices that are generating a lot of data can give you ideas for where to look. The more data you have to train and test the model is important, so start with what drives your current data analytic requirements and you’ll likely get ideas from there.

One last note about your data. I’ve written many times about data quality and the importance of data governance, and the topic of machine learning is a great example of why that’s critical. Hopefully you have a good data governance program in place and your data is somewhat clean. Data quality will be key to a successful AI pilot. Having said that, you also don’t need perfection to start. Just by starting an AI project will give you insights into your data and hopefully get you on a journey of organizing and improving the quality once you understand what you really have.

If you haven’t thought about starting an AI program, then you better start soon. I bet your competitors are already on the journey and you’ll soon be left behind.

CRE Tech 4.0 – Trends Here to Stay

tech-image

Having participated in a few Commercial Real Estate (CRE) technology conferences recently,  there are a few themes that tend to stand out.  From an investing perspective, a big topic is the CRE Tech 4.0 story, which highlights the latest wave of CRE tech investing, while keeping a wary eye on the past.  In line with the large amount of investing in the general tech industry, the CRE tech investment levels have skyrocketed over the last few years.  But with a littered past of few survivors from the previous cycles, the question whether this will be different. I believe so, though the exit path options remain limited.

Let’s first cover some of the topics that have stood out this year:

  • Artificial Intelligence – The hottest topic is around artificial intelligence and its use in the real estate industry.  Some of the concepts applicable to CRE are robotics  and driver-less cars but there are many more.  The AI investment theme across all industries is getting a lot of capital coming to it, and rightly so.
    • Robotics – Earlier this year at Realcomm, a great deal of attention was on robots.  They were found not only in the exhibit area, but they were around many of the session rooms and throughout the halls.  I hadn’t paid too much attention to them in the past, but seeing them move around impressively well got me thinking about their potential. Robots are currently being used for 1st level security monitoring at some buildings.  There’s already been the consumer home vacuum available for years, so there’s definitely a place for cleaning.  Recently, I’ve also heard more buzz about utilizing robotics in the construction process, where their value is quickly identified for automation of the repeatable parts of the process.
    • Driverless cars and their effect on real estate in general is also generating a lot of attention.  The reality is that they’re already here, so it’s no longer an if or when.  Just recently, Uber announced it had bought the self driving truck startup Otto and created a partnership with Volvo.  That was already two major announcements.  But Uber also announced that they’ll begin letting customers in downtown Pittsburgh request self driving cars in the very near future.  Shortly after that was announced, NuTonomy beat Uber to the punch by officially launching in Singapore the first self-driving car service. It was no longer fantasy and had begun.  Although there will be an actual driver behind the wheel as a precaution, these are amazing first steps in what will be a tremendous real estate disruption.  If self-driving cars were to become the norm, what will that do to all the parking lots in urban areas?  What about commuting patterns? Will people now be more acceptable of longer commutes, and will this push up rents in suburbs?  Assisted living and multi-family communities will also be impacted as the elderly take advantage of this new freedom and communities may rely less on car ownership.  Industrial hubs will change as driving patterns shift with autonomous driving trucks. That’s just the tip of the iceberg and major disruption is ahead.
  • Interactive and 3D Software – This isn’t brand new to CRE, but the tools are still in the infancy, with Virtual Reality a part of the solution in many cases.  Floored was one of the first to demonstrate the value, rolling out an innovative view of unleased space, giving potential tenants a way to create and visualize the space with various layouts, material finishes and colors.  You can also view it in an Occulus Rift, getting a more immersed view of the same space.  Others are pushing into the local design process and the back and forth of updated drawings, while some  (ECCO) are looking at interactive software to help find buildings in a community that appeals to selective clients.
  • IOT – The Internet of Things (IOT) has been around even longer, but because of the fragmentation of the solutions available today across the end-to-end process (sensors, data collection and aggregation devices, monitoring and interaction points), along with the short-sighted ownership mindset, and the varying levels of user sophistication, there is still a lot of untapped potential. Today, energy monitoring and management is the biggest use, but asset inventory, reactive maintenance alerts, better preventative maintenance schedules, enhanced employee experiences, and occupancy cost forecasting highlight just some of the other areas ripe for change.
  • Data Analytics – new startups are coming up that not only focus on faster data storage and retrieval, but also more on how to make the information actionable, meaningful, and usable in the hands of the business user.  I see industry specific alternatives cropping up that let you hit the ground running from an industry domain perspective.  A pre-set understanding of buildings, as an example, is a big jump over starting from scratch.
  • Blockchain – It’s still early, but the blockchain is being tested and adopted in the financial industry. There is also a place for it in the real estate industry.  Think about the titling process or the end to end transnational process. There are huge inefficiencies built into today’s model and anything that removes barriers adds value to all parties.  Unfortunately, this is one of those situations where you need traction before you can really make great leaps forward (you can’t do it yourself – you need to include others to solve the real problem).  Additionally, all those legacy records need to be accounted for.  Still, having seen first hand how long the commercial buy/sell process takes, there is a need in real estate and a potential remedy available for reduced speed and greater efficiency.  Note that the technology itself also has an unfounded stigma attached to it as many people equate the blockchain to bitcoin. The bitcoin was just the first major use of the blockchain distributed ledger, but the scenarios spelled out here don’t face the same issues.

Getting back to the CRE Tech 4.0 theme, CB Insights reported that an amazing $4.8 billion dollars has been invested in CRE tech since January, 2014. That’s barely a blip on the radar within the broader technology  investing world, but it’s a monumental leap for the CRE industry.  Having been through a few of these cycles in the startup world, it’s easy to be skeptical about the chances this time around, but I do believe there is more staying power with the current set of CRE startups.  After the last cycle where many firms disappeared, the CRE technology buyers moved over to platforms like Salesforce to build out some of the leasing, fundraising, investor management, and other related customer related solutions.

But the nature of technology in this cycle is much different.  It’s much easier and less capital intensive to start a company today.  Fully leveraging the cloud and the lower cost of capital that comes with it, makes it quicker and more efficient to attack a particular problem than in the past.  That’s exactly what VTS and Hightower did. The two poster children of this latest cycle were both able to quickly address a need that was screaming for help.  Companies realized that they didn’t need to just rely on Excel, and the User Interfaces and simple approaches were leaps and bounds ahead of the current options.  Add in the dozens of other startups that have sprouted up with shoestring capital budgets and you get a real ecosystem of quality companies that are addressing true needs.

The real question is what will happen to these companies in 3- 5 years?  Will they survive a downturn in the economy?  You can count on one hand the number of CRE startups that have gone IPO, so the founders need to either be content in staying private or merge with others if they want to continue their growth trajectories.  The IPO route is unlikely, so we’ll more likely see a wave of consolidations as this growth cycle matures and the founders look to either cash out or further scale their business opportunities. In either case, with an abundance of quality companies gaining attention, the advances in CRE tech are here to stay and we’re all better off for it.

 

Moving to the Cloud is Critical for IT Effectiveness

As a technology leader in Silicon Valley, I always wonder whether we take the innovative cloud approaches here for granted, yet the real value of the cloud is so compelling I still find it hard to understand why there is still resistance anywhere.  I’m constantly reminded that there are many CIO’s who are still slow to adopt the cloud or not taking advantage of its huge potential. Yes, regulatory hurdles can’t be taken lightly, nor is it a straight forward endeavor for very large companies with a lot of legacy applications.  However, this doesn’t mean that CIO’s should use those challenges as reasons to not move to the cloud as much as possible.  Take Office 365 for example.  At this point, no CIO should feel that hosting their own exchange server adds anything to their business bottom line.  Eliminating non-core IT activities like hosting your own email service needs to to be a primary goal for CIO’s as we focus on activities that directly help grow the business.  Moving to the cloud is critical for true IT effectiveness as it brings a business focus to the IT organization, provides business agility, increases security, reduces organizational upgrade costs, and enables innovation.

Business Focus – Moving to the cloud gets the IT organization out of managing the infrastructure needed to run and manage the business technology.  On the application side, going with a SaaS first mantra reduces the development and customization efforts of the IT organization.  The SaaS industry is mature enough today that many of your application needs are available in some form.  Yes, you can’t just move off your legacy application overnight, but with a SaaS first approach, you replace the legacy applications as they reach their end of life. You might end up going with a platform that does require some configuration and modifications, but the efforts involved are much less than doing the development yourself.  Managing the code and the related upgrades are eliminated or greatly reduced.  Additionally, the hardware required to run these applications no longer become your worry and the time savings lets your team focus on activities that directly impact the business strategy.   On the pure infrastructure side, what business value is there is owning and maintaining your own hardware?  Yes, most organizations are highly virtualized now, but moving to an IaaS driven model is much more than just having a virtualized environment.

Increased Agility – In today’s fast paced world where new disruptive competitors are quickly popping up everywhere (thanks to the cloud, btw), increasing your agility capabilities is critical, and the cloud goes a long way in achieving that strategic objective. Every start-up I come across runs their business in the cloud (mostly AWS), so why does it work for them and not for the enterprise?  Whether it’s M&A activities, calendar based spikes in customer interactions, or even steady growth, you’ll never be able to respond to big strategic business shifts as easily as you could by leveraging the cloud.

Greater Security – There is a lot of buzz about the potential security risks of using the cloud, but the cloud in fact increases your security capabilities.  This doesn’t mean you ignore where you data sits or you don’t ensure employees treat your data with security in mind, but the capabilities in place for securing this information in the cloud is typically greater than what you could do yourself.  I’ll never be able to afford (nor find) the talent needed to secure my infrastructure as well as many of the cloud vendors can.  Security and reliability is the foundation for their business and they have the resources to stay on top of it in ways you could never do.  Most of the significant security breaches these days are with companies that run their own data center.

Reducing Organizational Upgrade Costs – In a true SaaS environment, the periodic (typically semi-annual) upgrades require significantly less effort and testing.  They’re done with very little fanfare and with very little impact on the customer.  Contrast that with on-prem software that requires not only the oversight and testing of the software, but also the infrastructure.  For internally developed and customized applications, it’s even worse.  The upgrades can be extremely time and resource consuming, extracting a huge cost to the organization.

Enabling Innovation – The time and effort required to stand up and implement most cloud applications is a fraction of that for onprem or customized apps.  Additionally, the functionality and availability of new and innovative business solutions popping up daily is a huge innovation enabler.  The use of cloud apps and infrastructure greatly increase innovation when fostered and embraced.

Notice one thing that’s not on the list? Cost! Cost should not be top reason for moving to the cloud as an apples-apples cost comparison is only relevant when considering the factors above, plus other intangibles.  Don’t get sucked into the cost trap.

If you’ve been slow to adopt the cloud, it’s time to move and increase your IT effectiveness.

How Leveraging the Cloud Can Enhance Your Security Risk Profile

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It’s a given that cloud adoption is growing heavily, but I continue to hear how security is a concern or roadblock for some. Yes, the ever increasing stories of cyber attacks have ensured security remains a top priority for CIO’s, as it should be, but I’m always amazed at how security in the cloud is looked upon as a major hurdle or obstacle.  Moving your apps to the cloud does take a new way of thinking about security but it shouldn’t hold you back.  Leveraging the cloud, particularly SaaS applications, actually enhances your security risk profile.

It’s a myth that using SaaS apps or putting information in the cloud is inherently less secure than keeping everything on premise.  The data needs to be secured no matter where it lives and keeping it on-prem does not make it more secure.  What is true is that it’s different, and as long as you understand the differences, your company’s risk profile is much better off.

One great reason to use the cloud is that you’re outsourcing the development and hosting of your applications, enabling you to focus on more core, business value activities.  This also includes security, if done right. Leveraging the cloud gives you access to a great pool of resources, whether it’s with your cloud vendor or in combination with other cloud vendors.  This is because the skills and resources available with most cloud vendors are much greater than what you can muster yourself.  It’s the lifeblood of their existence and the teams and time devoted to overseeing security is far greater than what most companies can do cost effectively on their own.  This doesn’t mean that cloud vendors can’t get hacked as well.  They can.  Even though most of the highly publicized security breaches have actually been to on-premise environments, cloud vendors have been hacked. There are no guarantees but the same goes with your on-premise environment too.

However, using the cloud doesn’t mean you ignore the security concerns and just leave it to the vendors.  To fully leverage the cloud for improved security, you need to understand what truly needs to be secured, understand your vendors’ policies and procedures, implement a few tools, and ensure your users are trained and aware of how they can help prevent security attacks.  This is not an exhaustive list by any means and I just touch on a few of them below, but these items will put you in a better position going forward.

Data Classification:  First, you need to understand what information you really need to protect.  Not every piece of data your company produces is sensitive or confidential, so classifying your data as to what is truly sensitive, private or regulatory impacted is step 1.  Understanding where this data then resides (likely more than one place) is then required so you know what to focus your extra efforts on.

Implement Two Factor Authentication (TFA) . TFA is one of the best tools available to ensure outsiders aren’t accessing your applications via insecure or stolen passwords. Many of the leading Identity Management tools have this capability and there are other stand alone options available too.  End users are much more accustomed to this with their banking or other apps, and it does raise the security strength of your apps.

Internal User Training – Internal users are the biggest hole in an enterprise and ensuring the end users know the security best practices is an easy and inexpensive tool.  More companies are instituting security training as a requirement for all employees.  This is even more important with a SaaS / browser based application environment.

Understand Your Vendor Practices  Just because you’re offloading your application development and hosting to your SaaS provider doesn’t mean you absolve yourself of any oversight or due diligence up front. You still need to understand your vendors capabilities and keep ongoing oversight of your SaaS vendors.

As a buyer of SaaS applications, here are items that you should understand and investigate. Again, It’s not a exhaustive list, nor will you find consistency with the approaches or capabilities, but you still need to familiarize yourself with the following:

  • Encryption (in transit and at rest)
  • Internal Controls
  • Backups / redundant data centers
  • How quickly are your vendors patching critical vulnerabilities?
  • How does the vendor QA its product?
  • How do they test DR/Contingency?
  • Do they have best practices with continuous delivery?
  • What are their change management practices?
  • How do they handle PII or sensitive data?
  • Employee profiling/security training and programs/phishing programs
  • What is their monitoring and notification process?
  • Do they have data centers in countries that require specific data residency requirements (if applicable)
  • SSO Support
  • Dedicated CISO
  • Automated testing
  • Peer reviews on coding

These are all capabilities that any software provider should ideally have, so the more you investigate and push, the better you’ll be for it in the end.

There are also many new approaches coming out of startups, from leveraging micro services to machine learning, so you should also pay attention to emerging technologies. Keeping abreast of the new and emerging companies should be a CIO core competency, but it’s even more important today with security and the cloud.  Putting your applications and data in the cloud provides a great deal of business value, in what can be a more secure environment.  You just to need to understand the differences.

The CIO as a Consultant, Evangelist and Innovator

big bangThe evolving nature of the CIO’s role is a hot topic these days as technology becomes an essential part of every business.   This evolution is required as many CIO’s had traditionally been focused on operational issues and risk avoidance, along with a smattering of growth enabling projects. While risk is still very important with an increase in cyber security and with operational issues abundant, the cloud provides plenty of services for helping manage both risk and standard operations. This frees up today’s CIO to focus on more strategic and innovative projects.  So, what does this really mean for today’s CIO, their role, and the skills required to be successful?

Last year, I gave a lecture at an Executive Development Program, where I presented on the CIO of the future.  In reality, it was really about what the CIO should be today, not in the future.  Specifically, I said that some of the skills and roles required for today’s CIO were:

  • An evangelist for innovation and agility
  • Acting as a consultant to the other business groups
  • Being a business enabler
  • A social champion
  • Having the ability to make the complex seem simple.

There were others, but these are what stand out to me as I reflect upon what is really needed today to be a successful CIO.

At the top of the list is that the CIO needs to be an evangelist for innovation and agility.  Innovation and agility are front and center and required in today’s fast moving business climate, and the CIO needs to be right there leading the charge.  This doesn’t mean that the CIO is going at this alone as that won’t be successful.  That’s where the evangelist side comes in.  Coming up with new digital business opportunities, championing new projects, leading by example, and evangelizing change are all part of what a CIO needs to be doing day in and day out.  Change doesn’t happen overnight so persistence is definitely needed.  Driving transformation within IT is critical as the IT department should  be ground zero for change and agility, but these themes need to become pervasive throughout the organization for true change to happen.  Moving the culture away from accepting the status quo needs to be pushed throughout the company.  That’s where today’s CIO can shine.

When talking about the new roles a CIO needs to play, being a consultant to the other business groups is one of the most important.  One of the biggest knocks on corporate IT in the past was the culture of saying no.  This was typically the case when everything had to come into a centralized world and the IT department had to control all software, whether internally created or externally purchased.  There was usually more demand than IT could handle, causing the word no to come out more often than it should have.  Long, drawn out projects became the norm, resulting in the rise of rogue IT where the business went off and procured software on their own.  In today’s fast moving world where enterprise class SaaS applications can be purchased with a credit card, this centralized control-center IT world is no longer necessary and an inhibitor to innovation and agility.

Today, the CIO needs to accept that there are great cloud technologies available and the business no longer needs to go through IT if they don’t see any value provided.  This is where the CIO needs to be the consultant to the other business groups.  The CIO shouldn’t be saying no, but instead be working closely with the business to consult on how an application will integrate with other systems, provide expertise on due diligence, contracts, security, and vendor capabilities, and advise on how the application can be quickly implemented without unnecessary bureaucracy or risk.

All of the above then empowers the CIO to be a business enabler.  Not only should the CIO be consulting on integrating cloud apps, they should also be looking for other innovative ways for the business to grow.  They should be speaking with customers to get a better understanding of what the customer really wants and how they might better interact with the company.  A good CIO can then use their experience to help champion new digital ways of engaging with the customer, enabling business growth.  The CIO holds a unique position in a company as they get a view into every business group and all the critical processes, both internally and externally facing.  If they really understand their business, and if they’re aware of the digital technologies available, they should have the ability to truly identify where the potentials exist to enable new business opportunities.  This digital mindset should also be internally focused, improving employee satisfaction and productivity. The CIO should be thinking about this every day.

To be truly effective though, today’s CIO needs to be social.  This means they’re creating relationships with other business leaders, while at the same time pushing a social culture within the company and with their customers.  They should be active on Twitter, LinkedIn, Vine, Google+, and other social media channels, and interacting with peers inside and outside their industry.  Championing internal social tools is important. I’ve seen firsthand how internal social adoption can be a cultural challenge, but it helps tremendously to be able to demonstrate experience using social media and how these tools can be used successfully internally to improve productivity.  You can’t champion change without being a first-hand social CIO.

Lastly, a successful CIO needs to be able to make the complex sound simple.  They need to be able to simplify the complex world of business technology and explain what’s happening to business leaders in simple terms.  Not using acronyms and speaking in the language of the business is critical (see my post on The CIO Golden Rule-Talking in the Language of the Business).  If you can’t easily explain to a CEO how the cloud enables business agility without any technical speak, as an example, then you won’t be successful nor listened to when championing new digital business ideas.

If your focus or current skill set isn’t strong in any of these areas, think about how you get there.  Success in today’s quickly evolving world demands it.

The Next Gen CIO’s are Leading Today

I had an opportunity to speak about The Next Generation CIO at the Constellation Connected Enterprise conference a few weeks back, and the topic brought to light the theme of what really makes a CIO an effective business leader both today and in the future.  In my view, the skills required for the next generation CIO aren’t much different than what’s required today.  In line with what I presented previously on the subject, one must possess business savvy, leadership, relationship building, and social skills, have the ability to act as a consultant and integrator to the business, embrace the cloud and Shadow IT, and understand the power of data and mobile.  It’s also knowing that it’s all about the business and not the technology, a crucial skill for success.  All of the skills needed in the future are already present today in those CIO’s who are on the leading edge.  Therefore, if you’re currently embracing these trends and skills, then you’re already a Next Gen Leader.

A CIO, both today and in the future, needs to be a business leader, always focusing on how IT can be leveraged in growing and improving business capabilities.  This means the CIO needs to understand the business just as well as the other executives, while always speaking the language of the business.   That’s the Golden Rule I wrote about earlier this year, and if a CIO isn’t doing this when speaking with the other executives, then they’ll just be viewed as the “IT guy” and not a business leader.  Everything IT does needs to be focused on adding business value. It should not be about the technology, and that point is what has given the CIO a bad name in the past.  Truly understanding how technology can best be leveraged for business improvement is a requirement, but the CIO of the past didn’t always get that point.  Translating technology capabilities into new business and customer engagement opportunities is what sets the “Next Gen CIO” apart from the others.

The Next Gen CIO is a consultant to the business and an integrator, and should be embracing Shadow IT.  Embracing Shadow IT means you don’t require everything to come through a central IT funnel, but CIO’s and their teams can still add tremendous business value to these decisions with contract expertise, integration direction, security oversight, and vendor partnering among other things. This is where the consultant role also comes into play.  There is a great deal of innovation happening today that addresses specific business problems, and many times those in the business are the first to discover these new tools and approaches.  They have the most knowledge on value, so letting the business champion and drive discovery is a great approach that helps IT from having to say no. What does need to happen though is that IT needs to be included in the discussion, particularly on the points mentioned above.  Without it, the risk of having insecure applications, bad and expensive contracts, and data silos increases exponentially.

Lastly, a CIO needs to understand the power of data and mobile, and leverage the cloud as much as possible.   My team has been cloud all-in for many years, and the business benefits go way beyond pure costs.  The speed in which we gain access to new product functionality, while significantly reducing our in-house development staff has been transformational.  On the infrastructure side, we’re almost out of the data center business and are relying on the mass scale and capabilities of others to meet our needs.  Unless your company is in the hardware business, moving your infrastructure to the cloud, whether pure public or hosted private, is a requirement now and in the future. In addition to the cloud, a Next Gen CIO recognizes the demands, and capabilities of mobility and data. Using data to make critical business decisions is not a new concept by any means, but the availability of new data sources  in the digital and Internet of Things world, and the amount of unstructured data being consumed has made this more critical and complex.  When talking about transformation, digital business, and new business capabilities, leveraging data and the insights it brings is even more important.  Helping the business take advantage of this data trove is a capability that will make IT critical for business success.

New skills are definitely required in the future but I believe that future is already here for many CIO’s that already have these skills.  Are you one of them?

Cloud’s Biggest Benefit is Agility and Adding Business Value

Between the recent IT conferences and some interesting twitter chats, I continue to hear discussions on the top cloud benefits.  Cost savings in particular has come up a few times.  But, is cost savings really a top cloud benefit?

Using the cloud is really about agility and adding business value. It allows IT organizations to focus their attention on doing things that help grow revenue, increase customer engagement, and open up new product channels. IT can spend less time managing commodity infrastructure and maintaining in-house developed code for non-core programs. They can leverage other resources in monitoring and security; resources that many SMB firms just don’t have access to.  That’s critical.

Getting to specifics, my top benefits that come from using the cloud are as follows:

  • Agility – Being nimble and agile should be the mantra of all IT organizations today.  Getting away from long and drawn out development efforts and implementations is expected today and critical for businesses who are fighting to develop market share and grow their company.  Being able to quickly respond to changing business needs is a must  and that’s what the cloud provides.  Firing up new infrastructure in minutes or securing a new, focused SaaS app are fantastic business enablers and exactly what every forward-looking CIO should be focused on.
  • Scalability – Acquisitions, mergers and high business growth trajectories are forcing IT organizations to quickly grow their capabilities and reach.  Typically, you don’t have a lot of time when a merger, acquisition, or some other critical event is upon you, so setting up a quality model for quickly scaling is essential.  Even with some time, the effort involved to scale adequately is time and resource intensive.  Again, this is exactly what the cloud offers.  Additional infrastructure is the obvious and easy scenario, but cloud apps that support business services are just as important.
  • Time to market – For companies bringing out new products or rushing to gain market share, IT has unique challenges in responding.  The cloud is made for this with the ability to quickly deploy new software, configurations or the infrastructure required to be first to market.  In industries that depend on this for their survival, the cloud is a business priority.   How long would it take to develop a new application for a new product line if you weren’t leveraging the cloud in some manner?  Platform as a Service products are great for this.
  • Access to broad and deep skill sets – Particularly for SMB’s, the cloud provides unheard of access to a trove of smart and focused people who have skills that are hard and expensive to source and access on your own.  I like to use security as a good example of this benefit.  Many say the cloud is less secure than on-prem infrastructure, but I argue the opposite.  Just because you wrote it or have it in your own data-center doesn’t mean you’re doing a better job than a cloud vendor.  While it’s sure not a guarantee that a cloud company will do a better job, they typically have a much larger staff with a better focus on security than you do.  Their business depends on it and they have the resources to quickly respond to ever-changing threats.  What’s required for a CIO is to understand these differences, do the right due diligence on a new cloud vendor, and maintain an ongoing relationship with the vendor to ensure you know how they’re managing security.  It’s not something you look at once and forget, but managing vendors becomes a critical competency.  It’s still easier and more efficient than managing and finding (and keeping) a team of developers and ops guys who really know security.
  • Access to quality, pre-developed software – Developing software programs that address very little core, company specific business processes are a big mis-management of internal resources.  There are an amazing number of high quality applications that are already developed that address most of your business needs, and the number and quality is growing daily.  This isn’t just for commodity applications like email, but there are a lot of industry specific SaaS vendors that provide applications that no IT organization can match.  The platforms available are worth it alone.   A cloud product is also constantly growing with critical features and they’re more in-tune with new software designs and usability trends than you can be.  As cloud vendors continuously update their products, you’re immediately getting access to these new features and capabilities.
  • Speed of upgrades – This is one of my personal favorites.  It’s not always seamless for some of the less mature or new SaaS vendors, but the speed of upgrades and the reduced requirements on internal organizational resources is transformational in my mind.  I have seen plenty of organizations spend a countless amount of time and energy in analyzing, testing, and deploying upgrades to large on-prem applications.  The effort spent on these upgrades are a tremendous drain and they take the focus away from helping grow revenue or providing top notch customer service.

Notice that “cost” is not on my above list?  I’m not saying that long term, the cloud can’t be cheaper, or that it enables you to spend money in a different and more efficient manner (Operational vs. Capital), but those benefits don’t make my top 6.  In fact, the cloud can be more expensive on a pure license perspective in the long run, but there is a lot more to this equation than licenses.  Reductions in your ongoing IT resource needs and the savings I mentioned earlier on organizational resources, all go to the bottom line and are savings over time.  I just don’t focus on that as agility and business value is what I’m concentrating on.

10 Considerations for Your Cloud Contracts – CIO View

Having signed two more cloud contracts this month, it feels like a good time to share what I consider to be my top 10 considerations in negotiating a cloud vendor contract. As I was writing this, I had a hard time culling the list down to just 10. I’ve learned a lot over the years and have scars to prove it. There will be different views on this depending on whether you’re talking about SaaS, IaaS or one of the other horizontals in the space (PaaS, DRaaS,..), , but these 10 are generally applicable. So, here it goes:

1. Limit price increases – There is a lot of debate on whether or not moving to the cloud is actually cheaper than on-prem applications, and my answer is that “it depends”. There are many factors that must be considered (personnel time, upgrades, etc..), but license cost is a big one. What is a fact though, is that the longer the time horizon, the more expensive the cloud alternative can become. You’re paying a constant expense stream which can blow-up any ROI analysis over time. Other than negotiating the lowest initial price you can get, the best way to limit the cost over time is to reduce the pace and amount of future price increases. There are a few ways to approach this; the first being to go for as long a stretch as possible before the first and subsequent price increases. Most vendors will give you price breaks for longer contract terms. You might think this a risky approach as you’re committing yourself to a longer contract, but I’m assuming you’ve done your due diligence and are confident you’ve picked the right vendor. Even if things don’t work out as planned, which you absolutely need to consider, you’ll not likely be in a position to actually move off completely for 2-3 years. If negotiated right, the price increases will be tied to the contract length. The second part of this is to then ensure that each increase is as low as possible. I once negotiated a 0% first anniversary increase on a 3 year contract, basically holding my per user price flat for 6 years. I also negotiated a 5 year term with a 30 day out clause. No increase for 5 years and I can leave at any time. So my long-term contract risk is……..nothing. Try it; you never know what you can get.

2. Access to Data, Integrations and SSO – Some vendors are charging different prices depending on the availability of integration connectors or API’s, while others don’t charge extra for this capability. Even if you’re not starting out with a lot of integrations on day 1, you have to be prepared for the high likelihood of needing to get data in or out early on. Even SSO connections can sometimes cost extra to set up, or not be supported at all. If your cloud vendor is relatively new and doesn’t have published SSO connectors, make sure you include this capability in the contract at no charge. It’s in the vendor’s best interest to get this done and will help them in future contracts, so there is no reason for them not to include this. Integration and connectors are key for most successful cloud implementations, and a must for many, so it is frustrating that some vendors are charging extra for these. I get the tiered, a la carte approach that helps with revenue, but I think this is one area to focus on in your contract negotiations.

3. Flexibility on your license growth – On the software and platform side, the number of users will be a key factor in the ongoing cost. Having a good understanding upfront of your one and three-year growth scenarios will help you lock in lower prices on future growth. If you’ve hit a wall on the initial price, negotiating favorable discount tiers can help in the long run. The focus should be on having a low ceiling on your initial tier.

4. Exit strategy for data and access to data if the vendor fails – One difference in having your data in the cloud is the amount of control you have over it. So what happens if the vendor does go bankrupt? What if you do decide to move off to a competitor? A vendor failing isn’t a big concern for many of the top-tier providers, but it is something you need to think through and account for. I’m lumping this into your exit strategy for getting data out as it’s a similar issue. You need to understand how you’ll get access to the data and what your options are for getting copies. Ensure that you have some time to get your data out after your contract ends, in addition to language that ensures assistance from the vendor. Once you implement and once you get data integration up and settled, you’re already a step ahead in this process.

5. Development/Sandbox environments – If you’ll be making configuration changes to your SaaS app, or rolling out new apps or pages under a platform model, it’s important to understand the availability of sandbox or dev environments. The need is really no different than on-prem apps, but the type, freshness, availability and size of the data available are important, and can vary or be an extra price. Some vendors will apply this increase to all your licenses, so pay close attention to this and push hard to get as much included for free as possible.

6. Security – This is a very broad topic, so I’ll narrow it down to encryption and masking. Is data encrypted at rest? Is confidential data masked to those who don’t have proper access? For products that rely heavily on built-in uploading/downloading (storage and synch solutions), is the data encrypted during transmission? These are key considerations in comparing vendors, and you’ll find a wide variety of options available. Don’t assume that the biggest vendors are the most secure or encrypt your data at rest. It’s not as common as you would think. Data masking is also important for internal controls to ensure PII or confidential data is not visible. Not every vendor has this capability as standard.

7. Data Center Location – If you’re a U.S company doing business solely in the U.S., then your data center location will likely be in a region close to where you do business, if you’re dealing with one of the larger SaaS providers. For some of the smaller ones, you may not have much choice in the matter. For SaaS products, I have generally found the location to be not much of an issue within the U.S. It becomes much more complicated if you’re a non-US company or you do business or have offices in other countries as two issues then arise. First, latency in accessing your data becomes something you need to worry about so ensure you understand where your key users are for the app in question, in relation to where the vendor has its data centers. The second issue is around data residency and the various legal restrictions on where your data can be stored. This has always been something to consider, especially in the EU. However, the U.S. government data snooping scandal has changed the dialogue on this and made it a critical item to consider and deal with. It’s a topic that deserves its own write-up, so I won’t dive into the specifics here, but it needs to be on your consideration list.

8. Disaster Recovery Capabilities – Having applications in the cloud means you don’t need to deal with backups and disaster recovery yourself, but it doesn’t mean you don’t need to worry about it. Understanding your vendor’s approach and processes is important. Do they backup to facilities in other geographic locations? How long do they keep backups for? What are their RPO and RTO’s? Don’t ignore this just because you won’t be managing it on a daily basis.

9. SLA’s and Support – Up-time or issue resolution SLA’s are very important, but don’t expect a lot of flexibility in this area. The larger the company, the less likely you’ll get any movement. The top-tier vendors typically exceed their SLA’s but most will not budge from relatively low up-time percentages in the contract. Issue resolution response times vary widely, with many charging extra for quicker response. As a consumer of the service, I hate that model. They want to tell me my default is 2 business days for support unless I pay more. Really?

10. Storage and growth – The amount of storage is becoming a much smaller issue than it used to be, but it’s something you still need to understand and account for. If storage is a key part of the product, then you’ll likely be getting 1TB, or an “unlimited” amount of storage per user. However, some vendors still charge for storage. As with the growth of license counts, you need to understand your initial and future requirements so your future storage needs are accounted for up front. You’ll never have the same leverage as you do in the initial contract negotiations, so go overboard on growth requirements up front to be safe.

These are just some of the key items to consider. I know you’ll have others you feel strongly about, so feel free to chime in here or on twitter.

User-Centric IT

I went to an interesting CEO/CIO gathering a few weeks back where the concept of User-Centric IT was presented by some of the leading cloud providers.  The concept, pushed and marketed by Box, Marketo, Skyhigh, Jive, Okta, Zendesk, and GoodData, professes that enterprise software should first and foremost focus on the needs of the end-user.   To be more specific, the principles of User-Centric IT are:

  1. User-Centric IT serves the business by empowering people.
  2. User-Centric IT adapts to the way people work, not the other way around.
  3. People, information and knowledge must connect in real-time.
  4. Mobility is a work-style preference, not a device.
  5. Security should be inherent and transparent to the user experience.

In my view, User-Centric IT is real and is part of the changing expectations of enterprise users due to the rise of the Consumerization of IT, and the pervasiveness of the cloud.  The principles of empowerment, mobility, and real-time connections are all standard in consumer technologies today.  It’s these expectations that are driving enterprise IT to change its focus to how the user works.  Work is now a thing and not a place.  No longer are applications just about functionality, with UI design an afterthought.  Employees are using great, user-centric tools at home and they expect the same easy to use tools while working.  The same concept is driving BYOD where users have choices in the devices they use, opting for the more consumer oriented devices.  User-Centric IT uses these same principles in empowering users to be more productive, while wrapping it all up with the security enterprises require out of their applications.

These principles are also what’s great about the cloud and why legacy apps and on-prem software face an uphill battle.  As I come across more and more industry vertical, cloud based options these days, it’s wonderful to see how each new company has taken usability to a higher level.  Of course, the social and mobile trends taking over many enterprises are the other forces driving this concept. Can’t argue with that.

The various vendors who have joined forces in marketing this principle all have products that come at the issue from different angles, whether it be enterprise collaboration, security, identity, marketing or analytics.  What they all have in common is a goal towards user enablement and mobility.  Now, some will argue that this concept is just pure marketing with no real substance.  There is definitely a marketing bent to it no doubt,  but the underlying core message does resonate with those of us who believe these trends are real.  Whether you just call it the Consumerization of IT or something else, you can’t argue with principles.  As a real believer of the how the cloud is quickening the pace of innovation in businesses and the inherent value it creates, peeling back the marketing layer uncovers real trends.

At the event, there was a lot of discussion about the challenges this brings to CIO’s.  Some were concerned about cloud sprawl, while others are dealing with deeply entrenched legacy apps that can’t just be switched or upgraded overnight.  There was also a discussion on User-Led IT vs. User-Centric IT.  User-Led is where integration, security, data  quality, and governance is given little value, focusing purely on the best looking and quickest to implement.  User-Centric IT takes this up a level, valuing the needs of the employee, but layering on the real security, integration and data quality requirements enterprises need.   These are real issues and real concerns, but it shouldn’t stop the conversation.  I believe that the CIO’s that are truly innovating and driving cloud adoption today, with an eye on social and mobile, are already using these principles for transformation and innovation.  As the cloud becomes even more entrenched as the go-to strategy for companies, concepts like User-Centric IT will be become more commonplace.

Here is a link to the User-Centric IT website