| Constellation Research

Digital Transformation Digest: Amazon Eyes Alexa for Ad Revenue, Microsoft Acquires Avere for High-End Azure Workloads, and More

Managing Editor, Constellation Insights
Constellation

Chris Kanaracus is managing editor of Constellation Insights.  Insights delivers exclusive, daily analysis of breaking news across Constellation’s eight business research themes to Constellation Executive Network members.  Prior to joining Constellation, Kanaracus spent seven years covering the enterprise software industry for IDG News Service, where he frequently broke exclusive stories with a focus on end-customer issues. Kanaracus has also held various managerial and reporting roles at newspapers in New England since 1998. Twitter: @chriskanaracus , Title: Big IdeasConstellation Insights Insights delivers exclusive, daily analysis of breaking news across Constellation’s eight business research themes to Constellation Executive Network members. ...

Amazon eyeing Alexa for digital ads: Some of the world's largest consumer goods companies have had discussions with Amazon about advertising and product placement through the Alexa voice assistant, according to a new report from CNBC. The companies reportedly include Proctor & Gamble and Clorox:

Some of the early discussions have centered on whether companies would pay for higher placement if a user searches for a product such as shampoo on the device, similar to how paid searches work in Google.

The move by Amazon, which right now does very little advertising on the Echo, could mean big things for consumer companies that are fretting their influence on a voice-powered shopping experience.

With Alexa's clout anticipated to rise, brands are worried about being left out of the voice-shopping platform entirely. Advertisers and brands are particularly focused on search placement on Alexa because shoppers are more likely to select a top result on a voice assistant than they are on the web, where it's easy to scroll down or ignore written suggestions.

POV: Right now, Amazon allows advertising on Alexa in a limited manner. For example, a podcast or streaming radio channel can have ads as long as the voice doesn't sound like Alexa, refer to Alexa or mimic its interactive style.

Amazon says it sold tens of millions of Echo devices over the holiday shopping season, and market estimates have it with nearly three-fourths of the voice assistant market overall. The number of third-party Alexa apps is also rising, with the total of Alexa skills reaching 25,000 last month. It's a large and rapidly growing target for advertising, particularly when combined with Amazon's rich trove of user data.

Therefore, it's a safe bet that advertising will soon be more pervasive on Alexa; the question will be how well Amazon manages the user experience and advertising policies going forward. In any case, CMOs should have a plan for voice assistant ads on their radar going into 2018.

This was bound to happen sooner or later, says Constellation VP and principal analyst Cindy Zhou. "If you look at the Amazon dash buttons, they are branded and I do see the potential ad revenue for Amazon with sponsored voice searches," she says. For example, if you say now "Alexa, what deals are available?" it reads off the different products exclusive to voice shopping, Zhou notes. "I imagine Amazon working these into the Alexa offers and providing a preferred position when reading out deals," she adds. "I can see brands bidding to be read first through third as most people lose patience, similar to reading only page one or two of search results."

Microsoft buys Avere to boost high-end Azure workloads: Redmond has made its first acquisition of the new year, and the target is hybrid and high-performance computing workloads for Azure. Microsoft is paying an undisclosed sum for Avere Systems, a Pittsburgh company focused on flash storage and advanced file systems.

Formed in 2008, Avere's products optimize on-premises storage installations while helping efficiently move HPC workloads to the cloud when they make financial and logistical sense. Customers include Sony Pictures, John Hopkins University, the Centers for Disease Control, the Library of Congress and Turner Broadcasting. Its CEO, Ron Bianchini, founded Spinnaker Networks, which was sold to NetApp for $300 million in 2003.

Avere has raised about $86 million in venture funding since its inception. Google participated in the most recent round, but it's unclear whether the acquisition was a competitive process between Microsoft and other players.

POV: It's interesting to note that Avere has existing partnerships with both Amazon Web Services and Google Cloud Platform; it's not clear what will become of those arrangements once the Microsoft deal is closed. Google actually named Avere its cloud platform partner of the year in 2015, and indications are that it's currently ahead of Microsoft in terms of integration with Avere's technology. Avere plays in a fairly crowded space, which suggests its technology stood particularly well to Microsoft, which had many choices.

Overall, Avere looks like a good complement to a previous HPC-related acquisition Microsoft made in August, of Cycle Computing. That company developed CycleCloud, a software platform for orchestrating and managing high-end computing jobs on the cloud. In a blog post, Microsoft noted that HPC is becoming relevant to many more industries in the past as they seek to take advantage of machine learning:

Whether it’s building animations and special effects for the next blockbuster movie or discovering new treatments for life-threatening diseases, the need for high-performance storage and the flexibility to store and process data where it makes the most sense for the business is critically important.

Avere also helps build out Microsoft's hybrid cloud play, which got a big boost last year with the release of Azure Stack, which allows companies to run the Azure software stack in their own datacenters. (Go here for Constellation VP and principal analyst Holger Mueller's take on Azure Stack.)

As for Avere, "the cloud is becoming vertical, and Microsoft buying a media specialist in Avere is a proof point," Mueller says. While Avere is specialized in media and specific file formats, it is a rather late move by Microsoft, given that much of the media and streaming content out there already sits on infrastructure," he adds."

Black hat hacker gifts IoT botnet code to the world: A hacker posted source code over the Christmas holiday for an IoT botnet that takes advantage of a weakness in Huawei routers, raising the specter of a new wave of crippling botnet attacks as the year begins.

Dubbed Satori, the malware is a variant of Mirai, the notorious botnet that took down some of the world's largest websites last year. The hacker posted the code to Pastebin, according to Ankit Anubhav, principal researcher at IoT device security vendor NewSkySecurity.

Check Point had discovered the vulnerability in December and reported it to Huawei, which has issued a fix. But the subsequent release of the code should result in it being exploited by "script kiddies and copy-paste botnet masters," Anubhav wrote.

The real problem is that IoT attacks "are becoming modular day by day," he added. "When an IoT exploit becomes freely available, it hardly takes much time for threat actors to up their arsenal and implement the exploit as one of the attack vectors in their botnet code."

POV: It remains to be seen how much impact Satori has going forward, but in general, the state of IoT device security remains woeful and shows little sign of broad improvement. The holiday season, during which many millions of new Internet-connected devices were purchased, has massively increased the attack surface. That situation and a lack of best security practices around IoT are a recipe for pain, if not disaster.

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Digital Transformation Digest: Amazon and Salesforce's Move Away from Oracle, Adblocker War Heats Up, Tech Conferences to Watch

Chris Kanaracus

Managing Editor, Constellation Insights
Constellation

Holger Mueller

Vice President and Principal Analyst
Constellation Research

Holger Mueller is VP and Principal Analyst for Constellation Research for the fundamental enablers of the cloud, IaaS, PaaS and next generation Applications, with forays up the tech stack into BigData and Analytics, HR Tech, and sometimes SaaS. Holger provides strategy and counsel to key clients, including Chief Information Officers, Chief Technology Officers, Chief Product Officers, Chief HR Officers, investment analysts, venture capitalists, sell-side firms, and technology buyers.  Coverage Areas: Future of Work Tech Optimization & Innovation  Background: Before joining Constellation Research, Mueller was VP of Products for NorthgateArinso, a KKR company. There, he led the transformation of products to the cloud and laid the foundation for new Business Process as a…...

Amazon, Salesforce reportedly moving off Oracle: The Oracle database lies at the core of untold numbers of applications and enterprise IT environments, including those at Amazon and Salesforce. But that reportedly may not be the case for good, as both companies have active efforts underway to move off Oracle to alternatives, according to a report in the Information.

The progress has been fairly significant at Amazon; it has moved its customer master and order master databases to a NoSQL platform, according to the Information's report. Salesforce has been working on an Oracle alternative with the code-name Sayonara, which was first reported by Fortune in mid-2016. It has been rumored for years prior to that report Salesforce was investigating a move onto PostgreSQL.

POV: The report comes at an interesting time for Oracle, which is about to launch the newest version of its database. The update will give the platform the ability to patch itself on the fly; Oracle CTO Larry Ellison has dubbed it a "self-driving" database, playing off the interest in autonomous vehicles. Oracle believes the new version will spark a wave of workload migrations to Oracle's cloud.

Salesforce may be working on an Oracle exit plan, but will be tied to the platform for the next several years. It signed a nine-year contract renewal with Oracle in 2013 that was reportedly worth $300 million; even so, Salesforce CEO Marc Benioff said at the time that it would cut his database costs in half. (Notably, a source told the Information that Salesforce intends to be completely off of Oracle by 2023.)

Ellison hasn't been shy about bragging how Salesforce and Amazon, both fierce competitors of Oracle's, pay millions of dollars to use its software. If either company succeeds in moving substantially away from Oracle's database, it will provide a case study for other large enterprises in how to pull such a task off.

It might be easier for Salesforce to make a move off Oracle, as it can incrementally shift subscribers and instances, says Constellation VP and principal analyst Holger Mueller. But at the same time, the type of features Oracle is promising in the new database version are just what cloud vendors want, since they can reduce or even eliminate labor costs and human error, Mueller adds.

The ad-blocker arms race heats up: The war over online ads, with users and ad-blocking browser extensions on one side, and marketers and publishers on the other, reached new heights in 2017. One of the biggest developments was Google's decision to add a native ad-blocker to its Chrome browser, which has more than 60 percent market share. Google's blocker will go into action on Feb. 15; it will block only ads deemed overly intrusive under a set of standards laid out by the Coalition for Better Ads, an industry group that includes Google, Facebook and other companies that are highly dependent on advertising revenue.

But while Google's move was high-profile, thousands of the world's top websites have been waging a quieter war against ad-blocking technologies, researchers at the University of Iowa have determined. The researchers developed a system that analyzed the top 10,000 websites on Internet traffic monitor Alexa, and found that 30.5 percent of of them employed anti-adblocking code, a much higher percentage—up to 52 times as many—than previous studies uncovered.

POV: The researchers' paper goes on to detail programming methods aimed at thwarting anti-adblockers. Overall, their work raises provocative questions about a pressing issue for not just large Internet companies but all brands, as well as their customers. As the researchers note, the adblocker versus anti-adblocker war will likely escalate as the year unfolds:

It is crucial that adblockers are able to keep up with anti-adblockers. Moreover, the increasing popularity of adblocking has already led to various reform efforts within the online advertising industry to improve ads ...However, to keep up the pressure on publishers and advertisers in the long term, we believe it is crucial that adblockers keep pace with anti-adblockers in the rapidly escalating technological arms race.

Constellation believes that Google's native Chrome adblocker can have the weight and influence needed to spark significant improvements in the quality of Internet advertising. Companies making investments in online ad programs deserve to get a fair shot at a return on them, but not at the sake of user experience and brand integrity.

Tech conference season kicks off—what's on tap: After a quiet period over the holiday break, the tech conference calendar will be busy this month. Here's a look at the top events and what to expect.

CES: First up is the massive Consumer Electronics Show, which starts Jan. 8 in Las Vegas. The show will feature the usual raft of gadget and audiovisual product announcements, but the biggest conversations will be around around smart cities, autonomous vehicle technology, IoT and the arrival of 5G networks.

NRF 2018: The retail industry's biggest and most important conference kicks off Jan. 14 in New York. Expect a heavier-than-ever emphasis on technology during this year's event, particuarly in areas such as AI and robotics, which will have direct impact on the in-store customer experience.

World Economic Forum: The annual gathering of world leaders takes place Jan. 23-26 in Davos, Switzerland, under the theme "Creating a Shared Future in a Fractured World." While not a pure technology conference by any means, Davos is nonetheless an important setting for discussions on the digital economy.

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Constellation's 2017 Enterprise Awards

Chris Kanaracus

Managing Editor, Constellation Insights
Constellation

The team at Constellation Research wishes you all a great holiday season this year. In the interest of recognizing the year's memorable tech industry's events, trends and companies, we present the winners of the second annual Enterprise Awards.

As with last year, the winners and runners-up were chosen via internal voting and debate among the analyst team. Agree with the results? Disagree? Send us your feedback at [email protected] and we'll do a follow-up post.

Best Enterprise Software Startup

Winner: Zoom

Why did it win?: Zoom has been around since 2011 but saw a dramatic uptick in business, doubling its user base to more than 700,000 companies and about 7,000 educational institutions. Moreover, Zoom customers are using the product more frequently: Annualized meeting minutes hosted by Zoom's cloud platform went from 6.9 billion to greater than 20 billion. In a highly competitive market segment, Zoom is gaining serious traction, which tells us it is doing something right. Also this year, Zoom held its first user conference, moved into a key vertical with a new telemedicine offering, built integrations with the likes of Slack and Microsoft Teams, and rolled out features for augmented reality and artificial intelligence. Go here to view Constellation VP and principal analyst Alan Lepofsky's interview with Zoom CEO Eric Yuan.

Runner-Up Winners: Optoro, ProoV, Docker

Why did they win?: Optoro's cloud platform helps retailers salvage the most money they can from returned or unsold items; it's managing to attract Home Depot and other big names in the crowded but increasingly complex world of reverse logistics. ProoV's offering helps CIOs and CTOs run proof-of-concept exercises on new technologies quickly and securely. Docker shot to more than a $2 billion valuation this year while remaining the top name in containers, which are the choice of architecture for next-generation applications.

Best Enterprise Software Vendor

Winner: Oracle

Why did it win?: Oracle's leadership is nothing if not persistent, especially when it comes to pushing toward the cloud in SaaS, PaaS and IaaS. In its most recent quarter, cloud revenue jumped 44 percent year-over-year to $1.5 billion. Certainly, some of the growth has come from Oracle's relentless series of acquisitions, but not all. It is also gaining serious traction in the SaaS back office, with ERP and HCM revenue rising 65 percent year over year. On the marketing front, Oracle has become a serious player with the buildout of its Data Cloud, which delivers access to a vast and rich trove of user information. Up next: Delivering on the promise that customers will start migrating their Oracle database workloads to the cloud en masse with the imminent arrival of Oracle's "self-driving" database.

Runner-up winner: Salesforce

Why did it win?: Salesforce spent 2017 in execution mode, stitching together the many acquisitions it made in 2016. Despite being a fairly mature company, Salesforce is continuing to log growth rates well above 25 percent. This year also saw Salesforce coalesce a strategy around AI and unveil a new version of its gamified Trailhead training system, which looks like it will generate increased stickiness among customers as Salesforce heads toward $20 billion in revenue.

Best Enterprise Services Vendor

Winner: Persistent Systems

Why did it win?: Persistent embodies the idea of a co-innovation partner, rapidly shedding its mere product development services vendor skin. One case in point: Its work with the Biocomplexity Institute at Virginia Tech on an analytics platform for battling infectious disease. Persistent has also shown a knack for hatching innovative partnerships, such as its deal with USAA, a group of U.S. financial services companies, around secure authentication.

Runner-up winner: Infosys

Why did it win?: Infosys had a rocky 2017 on the public relations front due to intense infighting between founder N R Narayana Murthy and the then corporate board. CEO Vishal Sikka abruptly resigned in August, citing a toxic atmosphere. But Infosys managed to find a seasoned and able replacement for Sikka in just a few months, hiring former Capgemini executive Salil Parekh, while retaining its customer base. Parekh's legacy at Infosys has yet to be written but will be interesting to watch.

Best Tech Acquisition

Winner: Intel buys Mobileye for $15.3 billion

Why did it win?: The chipmaker put down a massive bet on Mobileye's autonomous driving technology, paying 60 times its earnings for the Israeli company. In doing so, Intel made a big competitive stride against rivals Qualcomm and NVIDIA in autonomous vehicles, which Goldman Sachs has said could generate nearly $100 billion by 2025. Intel CEO Brian Krzanich made the reason for the acquisition plain—cars are becoming the new server, he said following the deal's announcement.

Runner-up winners: Broadcom-Qualcomm, Amazon-Whole Foods

Why did they win?: Broadcom's $130 billion offer for Qualcomm isn't complete yet and may never be if it can't pass regulatory hurdles, but goes on the list for its sheer scope. Amazon shook up the retail world by buying Whole Foods—as if it wasn't already on notice—and opened up a range of tantalizing possibilities for its supply chain and customer base.

Best Enterprise Partnership

The Partnership on AI: Late last year, Amazon, Facebook, IBM, DeepMind and Microsoft formed the Partnership on AI, a nonprofit consortium that promotes education and interoperability concerning artificial intelligence. Its goals include development of AI best practices, educating the public about AI and how it can benefit society, and to give AI researchers a means for collaboration. The group picked up serious momentum this year, with Apple joining as a founding member in January. Later, the partnership added six board members from six nonprofits, while big names such as eBay, Intel, SAP, Salesforce and Sony joined as for-profit partners.

Why did it win?: AI was one of the year's hottest tech topics and has the potential to reorder modern society. As such, it's important to have well-funded and well-balanced efforts such as the partnership. Constellation looks forward to its work in 2018.

Runner-up winner: Cloud Native Computing Foundation

Why did it win?: The CNCF is another sterling example of the industry finding a way to rapidly come together cooperatively for mutual benefit for both customers and vendors. Since its formation two years ago, there are now 160 CNCF members representing a who's who of enterprise vendors, and the group, which is overseen by the Linux Foundation, has 14 thriving open-source projects under its purview.

Best Enterprise CEO

Winner: Steve Lucas, Marketo

Why did he win?: Sometimes when a company is scooped up by private equity, as Marketo was in late 2016, they largely drop off the radar. Not Marketo, and credit for that must go to Lucas, who in his first year as CEO oversaw a rewrite of Marketo's software, executed key acquisitions and struck a deal with Google to move onto its cloud platform. Lucas has also made a series of personnel changes in the C-suite that have poised Marketo for a strong 2018, and has emerged as an articulate and engaging thought leader on marketing technology.

Runner-up: Andy Jassy, Amazon Web Services

Why did he win?: Jassy is now presiding over an $18 billion business in AWS, one that shipped more than 1,000 new features and services this year (and it seemed like a good half of them came in one big batch at the recent re:Invent conference). Despite its size, AWS is still growing at a torrid pace, with revenue up 40 percent. And AWS's sheer scale serves to tie an anchor to its lead thanks to economies of scale. It doesn't hurt that Jassy can cite a quickly expanding crowd of big-name reference customers, such as GE, who are moving wholesale to AWS.

Best New Category

Digital enterprise platforms: Constellation saw the emergence of digital enterprise platforms as a hot new category in 2017. They are embodied by companies such as Segment.io, C3 and Uptake. While differing in some specifics, all are trying to solve the same problem, that of streaming and orchestrating data with AI powering the whole works. The macro enterprise IT trend is how to move from systems of transactions to systems of engagement, with mass personalization at scale. These are the companies powering that vision.

Runner-up winner: Who would have thought mapping software would get hot again? But it has, thanks to new use cases and the emergence of companies such as Maplarge and Mapbox. Mapping software is being used for augmented and virtual reality, content and commerce.

Biggest Tech Flops of 2017

Unfortunately, the year saw its share of controversies and disasters in tech. Here are our picks of some of the most notorious.

Winner: Equifax data breach

Why did it win?: While there were a number of high-profile data breaches this year, what happened at consumer credit reporting agency Equifax stands out—and not in a good way. The personal information of nearly 150 million U.S. citizens was exposed in the breach, with the data including not only names and addresses but Social Security numbers. A post-mortem assessment found serious security lapses at Equifax, which are even more unconscionable given the nature of its business.

Runner-up winner: Juicero

Why did it win?: Investors thought a $699 wifi-enabled juice press that used proprietary packs of fruit and vegetables, sold by subscription, was a pretty good idea, to the tune of $120 million in funding. Alas, Juicero's fortunes quickly soured after Bloomberg published a story describing how the company's juice packs could simply be squeezed by hand with similar results. Juicero stopped selling the machines and is now shopping its intellectual property. It is unclear who will be interested in it.

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Digital Transformation Digest: DARPA Backs Research Into 'Unhackable' Computer, Walmart's Latest Skunkworks Project

Chris Kanaracus

Managing Editor, Constellation Insights
Constellation

Steve Wilson

Former Vice President and Principal Analyst
Constellation Research

Steve Wilson is former VP and Principal Analyst at Constellation Research, leading the business theme Digital Safety and Privacy. His coverage includes digital identity, data protection, data privacy, cryptography, and trust. His advisory services to CIOs, CISOs, CPOs and IT architects include identity product strategy, security practice benchmarking, Privacy by Design (PbD), privacy engineering and Privacy [or Data Protection] Impact Assessments (PIA, DPIA). Coverage Areas: -  Identity management, frameworks & governance-  Digital identity technologies-  Privacy by Design -  Big Data; “Big Privacy”-  Identity & privacy innovation Previous experience: Wilson has worked in ICT innovation, research, development and analysis for over 25 years. With double…...

DARPA backs research into 'unhackable' computer: The Defense Advanced Research Projects Agency is putting $3.6 million into research focused on the development of an "unhackable" computer. It's a timely investment given the spate of high-profile data breaches and general uptick in cybercrime.

The military agency is giving the research grant to the University of Michigan. Dubbed MORPHEUS, it reflects a $50 million program DARPA launched earlier this year around hardware-based cybersecurity techniques:

"Instead of relying on software Band-Aids to hardware-based security issues, we are aiming to remove those hardware vulnerabilities in ways that will disarm a large proportion of today's software attacks," said Linton Salmon, manager of DARPA's System Security Integrated Through Hardware and Firmware program.

MORPHEUS outlines a new way to design hardware so that information is rapidly and randomly moved and destroyed. The technology works to elude attackers from the critical information they need to construct a successful attack. It could protect both hardware and software.

"We are making the computer an unsolvable puzzle," Austin said. "It's like if you're solving a Rubik's Cube and every time you blink, I rearrange it."

In essence, MORPHEUS is meant to be a bulwark against zero-day exploits, which target vulnerabilities that are previously unknown—except to attackers, of course. Rather than fix vulnerabilities with software patches, the point is to use hardware to eliminate seven key classes of hardware weaknesses, such as buffer errors, permissions and privileges and code injection, the researchers say.

POV: The grant seems a bit light to fund such research on its own, but it's not clear whether the university is relying on other funding sources as well. However, the announcement's framing of the work as outlining "a new way to design hardware" suggests the researchers won't be attempting to fabricate any chips. In addition, one wonders if the researchers are tempting fate by declaring they can successfully create an "unhackable" computer. In any event, DARPA by nature and design is a highly experimental agency that grants money on many ambitious projects that ultimately go nowhere.

The short answer is that "nothing is unhackable," says Constellation VP and principal analyst Steve Wilson.

Moreover, "many of today's security problems are not in fact fundamental in nature, but they relate to runaway complexity, hasty development, poor product development management, especially in software," he adds. "So these problems do not go away with a radical new computing architecture. Most vulnerabilities are not in hardware per se but they are at the edges where overly complicated and unreliable software and firmware interfaces to hardware. The software is too complicated, it's written too quickly, it's cobbled together from third party modules that are not properly tested or even understood. We have mission critical products like medical devices running on commercial grade operating systems. They're so complex they cannot be tested."

Sometimes, even the most basic testing isn't done, Wilson adds, noting that here are medical devices out there with open wifi connectivity and no passwords. The point is that no mathematically perfect new hardware architecture—even if it was "unhackable—is going to make any difference until the whole industry comes to its senses, Wilson says. "We need to rethink software development and software-based products. Before the IoT runs amok. We need discipline, responsible sober development timelines, we need to reject re-usable general purpose commercial modules in mission critical applications. We need testing, testing, testing, code inspection, testing and more code inspection. And we need to stop objecting to the cost of all this, before a car runs out of control and kills people because the operating system had a bug in it."

As for MORPHEUS, Wilson wishes the researchers good luck. "This is important, like pure maths and quantum computing and gravitational wave detectors are important." However, "we must not let the security agenda be distracted by radical new R&D. We urgently need to rethink conventional security and the stack we're stuck with today."

Walmart continues on innovation path: The world's largest employer is finding more potential ways to fend off rival Amazon, with one of the latest reportedly being a skunkworks project centered around cashierless stores. While Walmart hasn't discussed the effort directly, Recode spoke with multiple sources who outlined what's in the making:

Amazon’s Go concept uses a combination of sensors and cameras to track what each store shopper takes off of shelves so it can automatically bill them for their purchase without their having to stop to pay on the way out. The store’s launch has been severely delayed, however, with reports that the technology did not work well when the store was crowded.

Walmart is envisioning a similar system that would potentially eliminate the need for cashiers in stores outfitted with the technology. Walmart has more than two million employees worldwide, many of whom work at checkout.

Dubbed Project Kepler, the effort said to be is headed up by Jet.com co-founder and former CTO Mike Hanrahan. Kepler is an apparent reference to the 17th-century German mathematician, astronomer and astrologer Johannes Kepler, known for developing the laws of planetary motion.

More details about Project Kepler are revealed in job postings for Store No. 8, Walmart's skunkworks unit centered on developing new shopping experiences. Listings include one for a computer vision engineer, several for core services and tooling engineers, and a product manager.

POV: It's not clear when Project Kepler's ideas will surface in Walmart's operations, whether in existing stores or as part of new ones. The fact that Amazon, with its vast technical know-how and resources, is having difficulty launching Go stores, may suggest it will be a while.

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Digital Transformation Digest: Google Chrome Ad Block Plan Looms, China's Red-hot Xunlei Eyes US, EU Cloud Launch, Magic Leap Unveils AR Headset

Chris Kanaracus

Managing Editor, Constellation Insights
Constellation

Alan Lepofsky

Vice President & Principal Analyst
Constellation Research

Alan Lepofsky - VP and Principal Analyst, Constellation Research. With almost two decades of experience in the collaboration software industry, Lepofsky helps organizations improve the way their employees work together to get their jobs done. Lepofsky’s primary research area The Future of Work, focuses on: integrating collaboration and business processes (Purposeful Collaboration), structuring work via Social Task Management, leveraging analytics and digital assistants to work more productively, the strategic impact of mobile computing on business transformation, and measuring workforce culture based on Digital Proficiency instead of age. Twitter: @alanlepoLinkedIn: https://ca.linkedin.com/in/alanlepo     , Title: Big IdeasIntelligent Collaboration: The Intersection of…...

Google's ad-blocking plan for Chrome gets a start date: Beginning on February 15, web ads that don't meet standards set by the industry group Coalition for Better Ads will be blocked inside Google's Chrome browser. The move has been long expected but Google didn't provide a start date until now.

Ads who don't meet the guidelines for more than 30 days will be removed. Website owners can ask for a review and reinstatement of the ads after they address violations, Google said.

Other members of the coalition include Facebook, Unilever and Proctor and Gamble. Ad types that don't pass muster include autoplaying video ads with audio, full-screen scrollover ads and positial ads with countdown clocks.

POV: The stakes for marketers and advertisers are high indeed, given that Chrome has 60 percent of the browser market. At the same time, Google gets almost 90 percent of its revenue through advertising; what it and other coalition members say they're after is a better overall ad experience that will slow the rise of ad-blocker browser extensions such as Ad-block Plus.

Many publishers have begun their own appeal to users, asking them to "whitelist" websites, allowing ads to be displayed, in exchange for viewing content. On one hand, this is a reasonable request for sites that depend on advertising revenue to exist, but on the other, advertisers shouldn't get to run roughshod over the user experience.

What happens starting February 15 will be keen to watch. Advertisers and publishers will have had the better part of a year to prepare for the guidelines, so laggards will argubaly have little room to complain. But Google's role as a chief enforcer of the new rules is pivotal and as of yet, untested.

China's red-hot Xunlei eyes cloud debut in US, EU: One of China's most talked-about tech companies says it intends to open up shop in the United States and Europe in the first half of next year. Xunlei plans to extend its OneCloud service to the major markets in a bid to compete with Amazon Web Services and other providers.

OneCloud has an unusual setup, to say the least. Acting much like a content delivery network, it depends on users who purchase a NAS (network-attached server) from Xunlei. In exchange for authorizing the use of any idle bandwidth and storage, customers can get rewarded with a cryptocurrency called OneCoin, which is mined over Xunlei's network.

In an interview with the Associated Press, Xunlei CEO Lei Chen elaborated on the company's plans:

The model of using customers' bandwidth "will bring us capacity to provide cloud computing at a very low cost, perhaps one-third of the cost of Amazon," Chen said.

He said Xunlei is developing technology aimed at increasing security by analyzing users' data without gathering it in a central location.

"We will use artificial intelligence to process users' own data to help us to service them better, but we don't want to know what artificial intelligence understands about our users," said Chen.

POV: Needless to say, there are some obvious questions to ask about Xunlei's plans. A big one is how US and EU ISPs will react to the notion of customers trading their bandwidth to a third party company, particularly in the wake of net neutrality being overturned, a move that removed key restrictions on how ISPs must treat Internet traffic.

Then there is the question of whether enterprises outside China would want to buy cloud computing capacity that is supported in this manner. A third question is how well OneCloud performs at enterprise scale. Yet another: Will Xunlei simply offer cloud storage and content delivery, or compute as well?

One thing is for sure, and that's that OneCloud is catching on in China. More than 18 million people have ordered the required devices. How many of them are doing so in order to chase down some OneCoin is another matter.

Magic Leap finally unveils its AR headset: The secretive augmented reality startup Magic Leap, which has raised a whopping $1.9 billion from investors—including $500 million from Google—since its 2011 launch, has at last revealed the initial version of its headset.

Magic Leap One will be released sometime next year along with an SDK (software development kit) aimed at what Magic Leap calls "creators." The product consists of a set of lightweight goggles connected by cable to a small, hockey puck-like computing module that can fit in a pocket or on a belt. Its computing power is said to be at the level of a well-equipped laptop computer, although the precise specs and the price haven't been disclosed just yet. (Magic Leap did give Rolling Stone an exclusive first look and hands-on test drive of the device; its report, which is well worth a read, can be found here.)

POV: Magic Leap One's initial draw may initially be with game developers and the like, but assuming it ships and succeeds—long delays with the product's unveiling have prompted a good deal of skepticism along these lines—eventually be pointed at enterprise scenarios.

"This is competition for Microsoft Hololens," says Constellation VP and principal analyst Alan Lepofsky. "They are approaching the design in different ways, with Hololens having all the computing power contained in the headset, where as Magic Leap’s processing power is attached to your belt. While the device is important, the key is content. Microsoft will obviously integrate well with Office apps and content, where as Magic Leap will probably be linked to the Google ecosystem."

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Digital Business Transformation means Digital Project Delivery Transformation The terms and concepts are all too familiar but what really needs to be done, and how?

Andy Mulholland

Vice President and Principal Analyst, Constellation Research
Constellation Research

Andy Mulholland is Vice President and Principal Analyst focusing on cloud business models. Formerly the Global Chief Technology Officer for the Capgemini Group from 2001 to 2011, Mulholland successfully led the organization through a period of mass disruption. Mulholland brings this experience to Constellation’s clients seeking to understand how Digital Business models will be built and deployed in conjunction with existing IT systems. Coverage Areas Consumerization of IT & The New C-Suite: BYOD, Internet of Things, IoT, technology and business use Previous experience: Mulholland co authored four major books that chronicled the change and its impact on Enterprises starting in 2006 with the well-recognised book ‘Mashup Corporations’ with Chris Thomas of Intel. This was followed in…...

We live in the age of surveys, whilst taken individually the results of a survey may be questionable, taken collectively trends are easily identified. One of the most prominent is the accelerating shift taking place in what, and where, Enterprises are choosing to invest in technology. Directly related to this, but much less remarked upon, is the aligned shift in how these new investments are delivered.

Moving from Monolithic Enterprise Applications to Apps dramatically changes the size of the project is a point that is generally well appreciated, but shifting the requirement from relative standardized Business activities into unique competitive differentiators is a wholly different proposition. Much less about writing software and much more about creating truly innovative code and capabilities.

Small projects delivered by new providers are hard to notoriously hard to track by the Industry watch keepers. An alternative way to measure is the ‘missing’ sum in the gap between the reported total expenditure on Enterprise Technology and amount recorded as being spent on ‘traditional IT’. The table below shows the priorities and makes it clear that there is a big shift towards ‘new’ enterprise business requirements that relate more closely to the ‘Digital Business’ agenda. It is instructive to look beyond the obvious values of relative importance of each heading, and consider which of the three groups is driving the activity.

The three individual colored bar graphs shown for each heading can be used to get an impression as to who is driving/funding the action. So while it might be interesting to argue about the relative importance and order it’s the make-up of the support for each initiative that tells the story about the type of project, and of course the delivery skills required.

The Green bar for ‘Strategic’ importance almost certainly relates to Business Management as the sponsor, whilst the ‘Functional’ description indicated by the Blue bar suggest it is more likely to be part of the traditional role of IT. The uncertainty that many managers, both Business and IT, feel over what to do about Digital Business seems to be indicated by the Red of ‘Transformation’ falling half way between the other two choices. However, there are two exceptions, as might be expected when aligned to the actual issue of ‘Transformation of existing Business Processes’ the answer is positive.

More seriously noteworthy, is the ‘Ability to find and retain Talent’ is also seen as a ‘Transformation’ factor, rather than either of the other two factors. This is an important aspect that illustrates people with the right skill are recognized as a critical success factor in transformation whether at a project, or an enterprise level.

Listing the Business Strategic and IT Functionality investments in the manner below both highlights the differences as well as providing an alignment to the business and technology deployment architecture; Systems of Engagement, Systems of Intelligence and Systems of Record.

The IT delivered actions can be seen to be part of the continued battle for improvement in existing activities largely within Systems of Record, the traditional role of IT. In contrast, the Business deployments initiatives relate to Systems of Engagement and Systems of Intelligence and the delivery of direct Competitive capabilities for Digital Business.

Business Deployed Strategic Initiatives	IT Delivered Actions

- Introduce New Digital revenue streams - Improve organizational agility - Improve the customer experience	- Meet compliance requirements - Optimize worker productivity - Increase Cyber security protection - Increase operational effectiveness

Skill Requirements	Skill Requirements

Systems of Engagement	Systems of Record
Systems of Intelligence

New, sometimes Hybrid, skill sets relating to new technologies and business models	Traditional skills and role of IT

These Business led actions to grow Digital revenue streams and improve the customer experience are readily recognizable to be based on increasing interaction or ‘engagement’, but what exactly does that mean in launching a project to actually define and deliver? Who will take the lead, and where do the boundaries lie with the existing installed IT systems?

The Roles for ‘Systems’ in the Enterprise

For the IT department, it’s not easy, or practical, to lead as their core role is, and must remain, to protect the operational integrity of the Enterprise processes and systems; acting as a ‘disruptor’ in deploying solutions that directly challenge their status quo is counter intuitive. Additionally, these new initiatives require a challenging new mix of business, technology and sector skills working in partnership with often younger tech savvy business managers whose own tech skills may be disruptive to established IT staffers.

Creating the necessary truly innovative solutions that are called for by the competitive Transformation of Digital Business in the Enterprise’s markets equally calls for a Transformation in the design and delivery processes.

Solutions for Systems of Engagement and Systems of Intelligence have little in common with the solutions developed for Systems of Record. The new technologies, and more importantly the new business practices are both built differently as well as measuring business value in their deployment outcomes in ways other than the cost centricity of IT Systems of Record.

Small teams working in a collaborative manner to quickly define new possibilities in terms of their business value, delivery risk, and cost require equal innovation in staffing and methods. The intellectual contribution of each individual member, their ability to solve challenges successfully, and actually deliver, are likely to count for more than strict adherence to methodology. Not that this is suggesting an abandonment of tested principles merely a recognition that methodologies may ensure quality delivery, but in so doing can constraint innovation.

All of which may be recognized as a statement of principles, but given the very real shortages of skilled staff seems an unrealizable ideal! But where there is a market requirement there will be new entrants offering their own go to market innovation!

It would be pointless to draw attention to these issues if there was no solution. In conclusion, here are outline profiles of two Enterprises that have recently briefed Constellation Research on their abilities to answer these challenges.

SoftServe https://www.softserveinc.com/

SoftServe has 25 years of experience in the design and build of unique bespoke business solutions, always maintaining a position at the leading edge of Software creation. SoftServe both supports and drives their clients through the entire process from an initial business workshop, develop of the solution design, into creation and deployment. A major additional differentiation comes from their mathematical skills in creating the necessary unique algorithms that can truly competitively differentiate their clients’ solutions.

At a time when digital business calls for genuine innovative competitive differentiation to be rapidly defined, delivered and deployed by small teams with hybrid skills, SoftServe has built a strongly referenced position in a crowded market.

SoftServe states itself to be; ‘A digital authority operating at the cutting edge of technology to deliver the innovation, quality, and speed that its clients’ users expect. Fully aligned to four specific journey states of business maturity, SoftServe reveals, transforms, accelerates, and optimizes the way Fortune 500 and independent software vendors do business across healthcare, retail, media, and financial services industries’.

‘Focused on open innovation – from assessing compelling new ideas, to developing and implementing transformational products and services. Provided as a cohesive and comprehensive approach built on a foundation of empathetic, human-focused experience design talent natured and developed by their own SoftServe University.’

SoftServe is an excellent example of being large enough to be able to bring together the range of skills required through deep technology and business model savvy experience, and nimble enough to deploy through small teams using design experience. A well-focused client delivery model to suit the very different conditions that digital business solutions are demanding.

TopCoder https://www.topcoder.com/

Imagine being able to draw on the talents of over one million technologists to find and put together a perfect team to develop your requirement. Founded in 2001, Topcoder has created a unique marketplace that establishes relationships with and develops the software skills of developers through a competition-based model.

This remarkable pool of talent is applied to requirements by Topcoder’s secure, seamless project management platform, on which the work and deliver are both managed. By quite literally having 24/7 access to a truly global network of designers, developers, and data scientists, Topcoder can deliver innovative, creative solutions — ranging from unique apps, complex websites, to secure, ultra-reliable enterprise-grade software, and beyond.

References range from small to large across every vertical sector ranging from; developing an app to keep astronauts aboard the International Space Station fit; to optimizing an algorithm for DNA sequencing; to building 17 solar energy application MVPs in parallel in just 60 days.

Through Topcoder Challenges, developers have the opportunity to compete in software challenges for real businesses — all on a platform that allows up-and-coming coders to step into the spotlight. This enables them to break into the industry in front of peers, experts in the field, and real-world Fortune 500 clients. Members can compete in all types of development challenges to win prize money and establish their credibility in the market. They can hone their skills and learn new technology while working on real-world projects for some of the biggest businesses in the world.

The unique crowdsourcing model enables Topcoder to both build contact with and individually rank the skills of each member to establish their unique differentiator. Businesses and the larger marketplace can benefit greatly from the first-of-its-kind combination of open source and crowdsourcing across a massive talent pool. Topcoder describes their approach and value proposition as follows:

“At Topcoder, we don’t sell services. We sell outcomes; elegant, intuitive, functional digital solutions — no matter the complexity of your challenge. You pay only for a finished product, not the hours it takes to create it.”

Footnote;

Constellation Research is drawing attention to these companies and their innovative additions to the technology market place as examples and is not making specific recommendations. Buyers should carry out their own due diligence on prospective technology services partners, and technology product vendors.

New C-Suite

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Digital Transformation Digest: Robots on the Rise, Twitter's New Enterprise API, Micro Focus Expands COBOL Business

Chris Kanaracus

Managing Editor, Constellation Insights
Constellation

Rise of the robots: An influential robotics trade association has released its latest industry growth numbers for North America, and the results are impressive. Here are the key details from the Association for Advancing Automation:

For the first nine months of 2017, 27,294 orders of robots valued at approximately $1.473 billion were sold in North America, which is the highest level ever recorded in any other year during the same time period. These figures represent growth of 14% in units and 10% in dollars over the first nine months of 2016. Automotive-related orders are up 11% in units and 10% in dollars, while non-automotive orders are up 20% and 11%, respectively.

For shipments, 25,936 robots valued at $1.496 billion were shipped in North America during the first nine months. These record high quantities represent growth of 18% in units and 13% in dollars over what sold in 2016. Automotive-related shipments also grew 12% in units and 9% in dollars during that time, with non-automotive shipments increasing by 32% and 22% for units and dollars, respectively.

POV: A3 also reports that the North American machine vision market grew 14 percent to $1.94 billion. Overall, the numbers paint an incomplete picture of the global robotics market due to their geographic limitation, but do provide leading indicators of where and in which ways industries are investing in robotics. It's notable to see CPG companies come in third-highest with investments after metals and automotive parts, as is the 20 percent uptick in non-automotive orders. Constellation tracks robotics from both a hardware and software perspective. Go here to read our ShortList of robotic process automation vendors, which concerns the latter.

Twitter releases new enterprise API: Companies looking to engage with customers through Twitter chatbots have a new tool in the form of an enterprise API the social media platform released this week. The new API builds on Twitter's existing Account Activity API, which delivers in real time activities such as tweets, mentions, blocks, likes, mentions, direct messages sent or received, and follows. The standard version supports up to 35 accounts, whereas the enterprise edition allows for large numbers of accounts—Twitter didn't specify how many in its announcement—and managed support.

Twitter is also removing the beta label from a series of direct messages features, such as quick replies, welcome messages and customer feedback cards. Other key additions to direct messages include read receipts and indicators when a chatbot is typing out a response. Finally, Twitter released details of when some older DM features will be deprecated next year.

POV: The announcement shows Twitter can deliver on its developer roadmap and is continuing to figure out what kind of features enterprise developers need. Earlier this year, Twitter released a set of Premium APIs, which addressed a particular pain point: Many developers had been running up against the limits of its free APIs but weren't willing or able to pay for the enterprise versions. Premium APIs offer more features but are priced lower than the enterprise API.

Micro Focus adds open-source COBOL tools: There remains a vast amount of legacy COBOL code out there, running in production systems. Micro Focus has built a substantial business around COBOL support and application rehosting, and just became a bit bigger of a player with the acquisition of COBOL-IT, a Paris-based company that develops open-source COBOL technology. Here's how Micro Focus describes the value proposition:

It is the first COBOL vendor to develop and deliver an open source-based COBOL compiler and run time environment, enabling enterprises to run compiled objects in all Open Systems Unix, Linux, and Windows platforms.

"COBOL-IT adds a unique and exciting dimension to our COBOL product portfolio, and enables us to offer technology support that fully spans the evolving needs of customers as they extend, integrate and modernize their core business applications and data," said Chris Livesey, SVP and GM, Application Modernization and Connectivity at Micro Focus.

POV: It's the first acquisition for Micro Focus since it completed the purchase of software assets from Hewlett-Packard Enterprise in September. While the deal appears to be on the small side, it's fairly strategic for Micro Focus. COBOL-IT had previously positioned itself as the "best alternative" to Micro Focus and mainframe COBOL, claiming savings of up to 80 percent. It's not quite clear how COBOL-IT's tools will fit into Micro Focus's broader application modernization strategy, but the deal does give it a lower-cost option for its price list.

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Digital Transformation Digest: Where Net Neutrality Goes From Here, Ellison Bangs the Database Drum, IoT Botnet Creators Plead Guilty

Chris Kanaracus

Managing Editor, Constellation Insights
Constellation

Net neutrality—where we go from here: The Federal Communications Commission voted as expected to overturn net neutrality rules, prompting a blizzard of media coverage and chatter on social media. Supporters of net neutrality, which compelled ISPs to treat all legal Internet traffic the same, say the rules' absence will lead to higher costs for customers, data throttling and content discrimination. Opponents of the rules contend that net neutrality inhibited free market competition and getting rid of the rules will be better for customers. There are many moving pieces to the net neutrality debate with valid arguments to be made from both sides. Here's a look at some key points to absorb as it enters its next chapter.

The rules change will reclassify Internet traffic as an information service, putting it under the purview of the Federal Trade Commission. This is a good thing, as the FTC has a good track record of defending consumer rights and is a powerful agency in its own right. Consumers will not be left in the wind and rightfully so. The Internet is one area that needs regulations that define the playing field for competition and innovation.
It's possible the rules change won't stand. There are ample lawsuits underway from both consumer advocate groups and state and local lawmakers seeking to get them overturned. A key point of contention lies in federal law stating that agencies such as the FCC cannot make major decision like this one in an "arbitrary" or "capricious" manner. Given that net neutrality rules only went into effect in 2015, a court may be sympathetic to the notion of the FCC's action being in violation of that law. Meanwhile. even if the lawsuits fail, Congress could pass a bill restoring the rules or putting a modified set in place; with the midterm elections coming in 2018, a shift toward a Democratic majority would make this more likely.
In many markets, Internet customers pay according to connection speed. Data caps are becoming increasingly common as well. But not every customer is a streaming video fanatic. Why should the customer who wants a fast connection to read websites, but comes nowhere near their data cap, pay the same amount of money per month as a chronic Netflix binge-watcher? It's a valid question and market competition could lead to more diverse pricing models. It could also lead to ISPs passing more costs onto subscription content providers, who would then likely pass them onto consumers in the form of higher pricing. (Which leads to the last point.)
ISPs have clout and influence over the Internet, that is for sure. But they're increasingly not the only game in town. Google, Microsoft and other large tech vendors are building out their own networks. OneWeb, a startup building a global network powered by more than 600 satellites, looks like it could shake up the game. That being said, there needs to be much greater diversity in the choices consumers have in an ISP. The free market competition envisioned by the FCC commissioners who voted down the rules can't really exist if the current landscape, where many U.S. citizens have only one choice of ISP in their home market, remains the status quo.

Ellison, Hurd bang the database drum: Oracle reported second-quarter earnings this week, with revenue up 6 percent to $9.6 billion and net income up 10 percent to $2.2 billion. The company showed continued progress in cloud sales, with IaaS and PaaS revenue growth lagging that of SaaS. The full numbers are here for those inclined to go through them; as usual, we will focus on key commentary from Oracle executives during the earnings call. The most heated topic regarded Oracle's database and the competitive landscape. Here are the highlights.

Oracle's autonomous database, announced earlier this year, will arrive in January, CTO and executive chairman Larry Ellison confirmed. Taking aim once again at Amazon Web Services, Ellison said that customers who move a workload from AWS's Redshift service to Oracle's database and IaaS, their costs will drop by 80 percent. Oracle will also offer SLAs guaranteeing customers who move from AWS to Oracle that their database bills will be cut at least in half. What wasn't clear from Ellison's remarks is whether the cost savings refer to just to underlying IaaS resources or the cost of database subscriptions as well.
Oracle's database competitors are sticking with its platform with no sign of moving off, Ellison said: "A company you’ve heard of just gave us another $50 million this quarter to buy Oracle database and other Oracle technology. That company is Amazon. They’re not moving off of Oracle. Salesforce isn’t moving off of Oracle. ... Let me tell you someone else who’s not moving off of Oracle: SAP. They had that database called HANA they’d like to move to. SuccessFactors, they’ve been trying to move off of Oracle for five or six years. SAP is running on Oracle. Ariba runs on Oracle. All SAP large customers run on Oracle."
Speaking of customers, many are waiting to upgrade until the autonomous database arrives, Ellison said. Those who do so will be required to purchase certain database options, including Real Application Clusters and multitenant, he added. Oracle is in a good position to retain its dominant market share in database, Ellison contended: "There’s been no big migration anyplace of Oracle databases into anyone’s cloud, including ours. There’s been some, but it’s a relatively very, very small business. This all begins to happen starting in January, where the capabilities of cloud are so much better. The economics in the cloud are so much better than what’s available on premise, that we think our customers are going to move very, very rapidly to the cloud."

"Mirai" IoT botnet co-creators plead guilty: Two men who created the "Mirai" botnet, which used malware to infect thousands of Internet-connected devices to launch massive distributed denial-of-service attacks, have pleaded guilty in U.S. federal court. Paras Jha and Josiah White face up to five years in prison and a $250,000 fine under the plea deals.

Jha, White and a third man, Dalton Norman, also pleaded guilty to involvement in a "clickfraud" scheme wherein the botnet was used to generate website advertising revenue. They face similar sentences in that case.

Mirai's creators released the botnet's source code in 2016, leading to a series of large-scale DDoS attacks, including one on DNS provider Dyn that brought down the likes of Netflix and Twitter.

POV: It's fitting in a way that the DOJ unsealed the plea deals now, just over a week before the Christmas holiday, when untold millions of new consumer IoT devices are opened up and logged into the Internet. Come December 25th, the attack surface for IoT botnets like Mirai will get a whole lot bigger, and there's absolutely no indication that product manufacturers have improved IoT device security to an appreciable degree. The new year will undoubtedly bring more major DDoS attacks via IoT, but the question is whether they will finally be damaging enough to force crucial improvements in IoT device security.

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AI - Enterprise Scale Intelligence with C3 IoT

Andy Mulholland

Vice President and Principal Analyst, Constellation Research
Constellation Research

Business expectations of the deployment of AI, with associated Digital Business technologies, may be higher than the reality of their Technology staff’s current experience to deploy. Pilots, even business successful deployments, are by necessity focused on targeted and contained deliveries. The technologies, methods and experience will all have been chosen to reflect the requirements of the singular project.

The likely outcome, with some additional challenges, will be a dysfunctional Enterprise unable to integrate at an Enterprise level all resources, assets and intelligence in a cohesive manner able to optimize responses to markets and operating conditions. Sadly, as has been too often the case Business Management will be frustrated by the failure of Technology investments to deliver expectations.

Why is this happening again? From the start of Enterprise IT in the mid-eighties, through the succession of Internet, Web, Mobility, Social Tools, and Apps, localized project successes have had a nasty tendency to turn into Enterprise level barriers. Yet eager Business managers and technology leaders are once again embarking on project level deployments, often supported by C Level executives. Why is the apparently accepted Enterprise Business Strategy of Digital Business transformation failing to set an appropriate Enterprise Digital Technology strategy?

Once again there is a Business and IT alignment issue, but this time not occurring in the usual manner. Digital Business operating models focus on ‘unbundling’, or de-centralization, of activities, to support flexibility in what and how they do business. Not unsurprisingly Technology managers believe they should align to this business model by moving to individual project deployment optimization.

It is perfectly understandable, even a necessity at one level, given the new diversity of requirements for ‘Systems of Engagement’, (as distinct from ‘Systems of Record’ provided by current IT systems). However, to make this work there has to be a parallel, and conscious, Digital Business Technology strategy for the use of data from these new systems to develop Enterprise ‘Systems of Intelligence’, (Business Insights from Machine Learning and AI).

The words ‘use of data’ are the key to understanding what is required. This is not a call for an Enterprise Data strategy, or even Big Data analytics, as commonly understood in support of the current IT systems, and associated Business Intelligence analytics. Nor for that matter will the current methods of Enterprise Architecture deliver integrity and integration in this new Digital Business and Technologies environment. A Digital Business and Technology strategy requires three individual elements to be successful, combined and integrated at the Enterprise level;

Enterprise IT Systems of Record (existing Enterprise Applications), create centralized recording of transactions as ‘state-full’ historic data in defined formats arising from an architecture of closely coupled Enterprise Applications; Enterprise scale challenges usually refer to the size of the resulting data bases, together with their management and analytics.

Digital Business Systems of Engagement (Apps from IoT, Mobility, Social tools, etc.), refers to loosely coupled integration of sets of activities on the Edge of the Business producing huge flows of ‘stateless’ data on real events actually happening. This data is the foundation of the new era of Digital Business and has little in common with Systems of Record. The challenge of Scale refers to the data volumes flowing from connected devices, and systems, at levels that overwhelming traditional methods of storage and analytics.

Enterprise Systems of Intelligence use ‘stateless’ data to provide the fundamental properties that enable Digital Business insights, read and react capabilities, and support the introduction of Machine Learning and AI. Digital Business Stateless data has the power to corrupt Enterprise IT State-full data and the role of Systems of Intelligence is to provide a successful integration and processing capability that results in the genuine innovation that Machine Learning and AI brings to Enterprise operations.

The Constellation Research Digital Transformation Survey October 2017 identified that whilst Enterprise CxO management had a clear commitment to enacting a Digital Transformation there is a distinct lack of clarity as to what this actually meant. The reality is that many Enterprises are still struggling to come to terms with successful deployment of IoT driven projects, modernization of their existing IT systems to run on the Cloud, or integration of Social CRM.

These ‘Digital Strategies’, driven by the very real sense of the speed with which market and competitive change is occurring, are creating intense activity and investment. Unfortunately, also a breeding ground for potential internal Digital Disruption of operations that will see Enterprise management struggling to reconnect, and rebuild, their internal operational coherence to face the all too real external Digital Disruption of their markets.

A genuine joint Enterprise Business and Technology strategy is required to ensure Systems of Engagement develop to empower the Enterprise Systems of Intelligence that are the key to Digital Transformation of Enterprise capabilities.

In this, the Digital Technology era, a Cloud Platform would appear to be the immediate answer, but as in so many other aspects of the Digital Transformation some care needs to be taken over the casual use of terminology. The traditional definition of a ‘Platform’ refers to the technology capability to provide a set of common technology functions to simplify the tasks of integration and processing, as such it is the common route chosen by Technology management. Though inherently a technology choice many offer the addition of some Business value, but technology simplification is usually offset by Business requirement constraints.

N.B. Internal Integration Platforms should not be confused with external Business Ecosystems Platforms, though similar care must be exercised in choices. See Constellation blog Open Business Ecosystems or Closed Technology Platforms.

Systems of Intelligence are constantly discovering and creating new innovative business insights by continually refining dynamic, unpredictable, event inputs with historic data. Much of this new insightful value comes from finding in the data flows previously unforeseen, or planned, relationships, a very different processing activity from traditional Systems of Record deployments using data Integration and analytical tools.

This new requirement for a combination of simplified, abstraction, of core technology elements with complex integration, processing, and automation of responses is more closely aligned to the definition of an Software Engine, than a Integration Platform. With the simplification of Software development, often by the use of a Platform in one form or another, over recent years the thoughtful in depth functional specification evoking the requirement for an ‘Engine’ to power a series of complex software elements has sharply decreased.

The following description of a Software Engine fits the requirement for Systems of Intelligence more closely, whereas the requirements for Systems of Engagement integration and connectivity are well suited to Platform technology.

An ‘Engine’ is defined as an application program that coordinates the overall operation of other programs. Systems of Intelligence are the conglomeration of the dynamic environment of Business defined values, and insights, integrated, regardless of technology definitions and formats, into cohesive optimized Enterprise and/or Edge outputs

Perhaps it would be better to think of an Enterprise requiring a Digital Business Engine to successfully operate as an intelligent Digital Enterprise by provide the necessary continuous business ‘agility’ from Systems of Intelligence.

The first wave of Digital Pioneers, or early adopters, have already reached the stage when these issues have become clear, and the need to find a solution has become necessary. Interestingly, many who are the standard business cases references for Digital Transformation have started deployments with C3 IoT.

The following is based on a briefing by C3 IoT to Constellation Research

The C3 IoT Platform™ is a platform as a service (PaaS) for the design, development, deployment, and operation of next-generation AI and IoT applications and business processes. The applications apply advanced machine learning to recommend actions based on real-time analysis of petabyte-scale data sets, dozens of enterprise and extraprise data sources, and telemetry data from tens of millions of endpoints.

C3 IoTprovides a suite of pre-built, cross-industry applications, developed on its platform, that facilitate IoT business transformation for organizations in energy, manufacturing, aerospace, automotive, chemical, pharmaceutical, telecommunications, retail, insurance, healthcare, financial services, and the public sector. C3 IoT cross-industry applications are highly customizable and extensible. Pre-built applications are available for predictive maintenance, sensor health, enterprise energy management, capital asset planning, fraud detection, CRM, and supply network optimization. Customers can also use the C3 IoT Platform to build and deploy their own custom applications.

Operationalizing IoT is much harder than it looks. Many IoT platform development efforts to date – internal development projects as well as industry-giant development projects – are attempts to develop a solution via acquisition of multiple piece parts or from the many independent software components that are collectively known as the open-source Apache Hadoop stack. Despite the marketing claims surrounding these projects, a close examination suggests that there are few examples, if any, of enterprise production-scale, elastic cloud, big data, artificial intelligence, and machine learning IoT applications that have been successfully deployed in any vertical market except for applications addressed with the C3 IoT Platform.

Companies often expect that installing the Apache Hadoop open-source stack will enable them to establish a “data lake” and build from there. However, the investment and skill level required to deliver business value from this approach quickly escalates when developers face hundreds of disparate software components in various stages of maturity, designed and developed by more than 350 different contributors using different programming languages while providing incompatible software interfaces. A loose collection of independent, open-source projects is not a true platform, but rather a set of independent technologies that need to be somehow integrated and maintained by developers. Instead, companies need a comprehensive AI and IoT application development platform. To avoid this increasingly common pitfall, C3 IoT leverages a model-driven architecture approach.

Model-Driven Architecture

The architecture requirements for the Systems of Intelligence that are the key to the digital transformation of enterprises are uniquely addressed through a Model-driven architecture. Model-driven architectures define software systems using platform independent models, which are translated to one or more platform specific implementations. The C3 IoT Platform is a proven model-driven architecture.

This architecture abstracts application and machine learning code from the underlying platform services and provides a domain-specific language (annotations and expressions) to support highly declarative, low-code application development.

The model-driven approach provides an abstraction from the underlying technical services (for example, queuing services, streaming services, ETL services, data encryption, data persistence, authorization, authentication) and simplifies the programming interface required to develop AI and IoT applications to a Type System interface.

The model is used to represent all layers of an application including the data interchange with source systems, application objects and their methods, data aggregates on those objects, complex features representing business and application logic, AI-machine learning algorithms that use these features, and the application user interface. Each of these layers are also accessible as microservices.

The C3 IoT Platform is an example of a proven model-driven AI platform. The C3 IoT Platform allows small teams of five to ten application developers and data scientists to collaboratively develop, test and deploy large-scale production AI applications in one to three months. The platform is proven across 30 large-scale deployments across industries including energy, manufacturing, aerospace and defense, healthcare, financial services, and more. A representative large-scale C3 IoT Platform deployment processes AI inferences at a rate of a million messages per second against a petabyte-sized unified federated cloud data image aggregated from 15 disparate corporate systems and a 40-million sensor network. Global 1000 organizations have successfully used the platform to deploy full-scale production deployments in six months and enterprise-wide digital transformations with more than 20 AI applications in 24- to 36-month timeframes.

Time to market is critical as next-generation computing platforms emerge. C3 IoT is a proven, scalable, production and development environment with dozens of large-scale IoT applications deployed in the market, managing tens of millions of smart, sensor-enabled devices. The time-to-market advantage of a proven, scalable architecture can be leveraged to gain early network effects and competitive differentiation in the next big wave of computing and industrial automation.

C3 Type System – a detailed review provided by C3 IoT

The C3 Type System is a data object-centric abstraction layer that binds the various C3 IoT Platform components, including infrastructure and services. It is both sufficient and necessary for developing and operating complex predictive analytics and IoT applications in the cloud.

The C3 Type System is the medium through which application developers and data scientists access the C3 IoT Platform, C3 Data Lake, C3 Applications, and applications and microservices. Examples of C3 Types include data objects (e.g., customer, product, supplier, contract, or sales opportunity) and their methods, application logic, and machine learning classifiers.

The C3 Type System allows programs, algorithms, and data structures – written in different programming languages, with different computational models, making different assumptions about the underlying infrastructure – to interoperate without knowledge of the underlying physical data models, data federation and storage models, interrelationships, dependencies, or the bindings between the various structural platform or cloud infrastructure services and components (e.g., RDBMS, No SQL, ETL, SPARK, Kafka, SQS, Kinesis, object models, classifiers, data science tools, etc.). The C3 Type System provides RESTful interfaces and programming language bindings to ALL underlying data and functionality.

Leveraging the C3 Type System, application developers and data scientists can focus on delivering immediate value, without the need to learn, integrate, or understand the complexities of the underlying systems. The C3 Type System enables programmers and data scientists to develop and deploy production big data, predictive analytics, and IoT applications in one-tenth the time at one-tenth the cost of alternative technologies.

To improve manageability, Types support multiple object inheritance, allowing objects to inherit characteristics from one or more other objects. For example, a mixed-use building might have characteristics of both a residential and commercial use building.

The Type System, through inherent dataflow capabilities, automatically triggers the appropriate processing of data changes by tracing implicit dependencies between objects, aggregates, analytic features, and machine learning algorithms in a directed acyclic graph.

The Type System is accessible through multiple programming language bindings (i.e. Java, JavaScript, Python, Scala, and R) and Types are automatically accessible through RESTful interfaces allowing interoperability with external systems.

Model-Driven Architecture Abstracts Underlying Platform Services Through a Simple Type Systems Interface

Summary

The C3 IoT Platform (and the associated C3 Type System) is a unique high-productivity, low-code application PaaS for rapidly developing and deploying AI and IoT applications at scale across an enterprise. The C3 IoT Platform has been developed and hardened through numerous large-scale deployments over 9 years at an investment of $300 million. The C3 IoT Platform is proven to support Enterprise Digital Transformations.

Capitalizing on the potential of AI and IoT requires a new kind of technology stack that can handle the volume, velocity, and variety of big data and operationalize machine learning at scale. Existing attempts to build an IoT technology stack from open-source components have failed—due to the complexity of integrating hundreds of software components developed with disparate programming languages and incompatible software interfaces. C3 IoT has successfully developed a comprehensive technology stack from scratch for the design, development, deployment, and operation of next-generation applications and business processes.

Developing AI applications requires less code to be written, and less code to be debugged and maintained, significantly reducing delivery risk and total cost of ownership. Using the C3 IoT Platform, a company’s investment in application code is abstracted from underlying infrastructure and platform services and future proofed against rapidly evolving software technologies avoiding lock-in to those technologies. Further, the C3 Type System provides enterprise leverage – any published code is instantly available to the rest of the organization.

The C3 believe its IoT Platform is the industry’s only IoT platform proven in full-scale production. With hundreds of millions of sensors under management and more than 20 enterprise customers reporting measurable ROI, including improved fraud detection, increased uptime as a result of predictive maintenance, improved energy efficiency, and stronger customer engagement.

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Digital Transformation Digest: Target Buys Shipt for Same-Day Delivery, NVIDIA Trains AI At Construction Site Safety, Microsoft Pushes Azure Cost Envelope Again

Chris Kanaracus

Managing Editor, Constellation Insights
Constellation

Target buys same-day shipping startup: Hoping to both fend off Amazon's challenge and keep pace with rival Walmart, Target is buying same-day delivery platform provider Shipt for $550 million. Target says Shipt will give it same-day delivery at half of its stores by early in the new year, and in every major market by late next year.

Shipt will become a subsidiary of Target but will run independently and still seek deals with other retailers. At first, Target customers can get same-day deliveries of grocery items, home products, electronics and some other categories, with an expansion coming over the next couple of years.

The startup, based in Alabama and San Francisco, has a network of 20,000 personal shoppers who fulfill customer orders in 72 markets. As of right now, Shipt's coverage area is centered in the South, Mid-Atlantic, part of the Midwest and Texas. Memberships are $99 for an annual plan, or $14 for a month-to-month plan. Deliveries are free on orders over $35 and can be completed in less than one hour, according to Shipt's site. Delivery drivers can earn around $25 per hour.

POV: Target's move comes just a few months after it acquired Grand Junction, another delivery-related startup. Grand Junction's platform has a different focus, however. It can be used to coordinate and optimize deliveries performed by a retailer's own employees, as well as connect them to some 700 local contract carriers. Shipt's model has more of a gig economy makeup, but it will be interesting to see how Target blends the two companies' capabilities going forward.

Meanwhile, Target's ambitious-sounding plans for increased Shipt availability sound like a must, given its absence in major markets such as the Northeast and California. While there will be an awareness gap at first, Target's retail footprint, digital channels and loyalty programs could close it rather quickly. Overall, same-day delivery is becoming table stakes for many retailers, and Target is showing willingness to make serious investments in it.

But Target's competitors are hardly standing still. Walmart, which is experimenting with rapid delivery on multiple fronts, recently acquired Parcel, a New York delivery startup with a different twist than either Shipt or Grand Junction. Parcel uses its own employees and leased trucks to make deliveries from a warehouse in Brooklyn to locations around the city. For Walmart, buying Parcel was a way to test out same-day delivery in one of the most difficult markets to maneuver in from a logistics standpoint.

Meanwhile, Amazon unsurprisingly isn't letting off the gas either. On the same day as Target's announcement, Amazon said that free same-day and one-day shipping for its Prime members has been expanded to 8,000 U.S. cities and towns.

NVIDIA, Komatsu eye AI for safer jobsites: Chipmaker NVIDIA, which has moved deeper into software and artificial intelligence in recent years, is working with construction equipment manufacturer Komatsu on technology aimed at making work sites safer places. Here are the key details from their announcement:

The partnership – described at GTC Japan by NVIDIA founder and CEO Jensen Huang – will focus on Komatsu using NVIDIA GPUs to visualize and analyze entire construction sites. The NVIDIA® Jetson AI platform will serve as the brain of heavy machinery deployed on these sites, enabling improved safety and productivity.

NVIDIA GPUs will communicate with drones and cameras in the construction sites, acting as an AI platform for analysis and visualization. SkyCatch will provide drones to gather and map 3D images for visualizing the terrain at the edge. OPTiM, an IoT management-software company, will provide an application to identify individuals and machinery collected from surveillance cameras. Both of these Komatsu partners are also members of NVIDIA’s Inception program for AI startups.

At the center of the collaboration is NVIDIA Jetson, a credit-card sized platform that delivers AI computing at the edge. Working in tandem with NVIDIA cloud technology, Jetson will power cameras mounted on Komatsu’s construction equipment and enable 360-degree views to readily identify people and machines nearby to prevent collisions and other accidents.

NVIDIA and Komatsu will hit at other pain points in the construction industry beyond safety. In Japan, construction workers are in high demand because of its aging population; to that end, Komatsu and NVIDIA's object is also to make job sites more productive.

POV: The project, which builds upon jobsite safety measures Komatsu has been working on since 2015, has many moving pieces. This reflects both its complexity and the breadth of NVIDIA and Komatsu's plans. Construction is just the latest industry move for NVIDIA, which has pushed strongly into autonomous vehicles, healthcare and robotics.

NVIDIA's Jetson developer kit for embedded applications uses the same Kepler GPU core found in supercomputers. GPUs contain thousands of smaller cores that are well-suited for massive parallel processing of deep learning workloads.

NVIDIA has been working on AI for nearly 10 years and has developed a vast set of related libraries and frameworks. This year, it introduced NVIDIA GPU Cloud, a unified software stack that runs on a PC, a more powerful DGX system, or in the cloud.

A related focus has been on education; NVIDA has said it will train 100,000 developers on deep learning this year. The deal with Komatsu represents the type of broad industry use case for AI that can start putting those developers to work sooner than later.

Microsoft pushes Azure cost envelope again: If there is a perennial trend in the IaaS and PaaS industry, it's a steady stream of cost cuts as rivals seek to remain competitive. This week, Microsoft introduced four new capabilities and pricing changes for Azure, with the most prominent being Azure Policy.

The service, now in public preview, allows customers to apply governance over their Azure resources:

Azure Policy allows you to turn on built-in policies or build your own custom policies to enable company-wide governance. For example, you can set your security policy for your production subscription once and apply that policies to multiple subscriptions.

Microsoft is also expanding support for its Cost Management service to Azure Virtual Machine Reserved Instances; cutting prices on Dv3 VMs in some regions, and making its Azure Archive low-cost storage generally available.

POV: None of the announcements on their own are earth-shattering, but they all hold some importance to Azure customers. Moreover, while Microsoft wants to grow Azure workloads and corresponding spend as much as possible, and price cuts are one way to entice more consumption. But keeping a steady focus on factors such as cost optimization and good governance as well drives more value from customers and demands similar efforts by competitors.

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Digital Transformation Digest: Target Buys Shipt for Same-Day Delivery, NVIDIA Trains AI At Construction Site Safety, Microsoft Pushes Azure Cost Envelope Again