| Constellation Research

IBM bankrolls a new $100M #CX unit. Will it work?

Yesterday, IBM announced expansion plans for its Interactive Experience professional services practice. The numbers align a bit too perfectly: 10 new labs, $100M investment, and 1,000 new roles.

IBMiX

While the numbers sound great, here’s what matters:

Access to technology. Brands need to connect with customers along all points of the buying/loyalty loop, same as it ever was. But today, engagement is impossibly inefficient without the help of technology. On the front lines, high tech enables high touch experiences. We could always assume that IBM services had access to the firm’s leading-edge research and this announcement includes specifics regarding influence analysis, intelligent customer profiles, and customer identity resolution, in addition to behavioral pricing, life event detection, and psycholinguistics analytics.
Global scale. In addition to four Experience Labs in North America, IBM adds 10 locations that provide presence on all continents with the exception of Africa and Antarctica. This allows the firm to match the operating needs of multinational clients, in addition to collecting local insights that can be transferred to broader programs. For example, consider the social media ecosystem in China, which has influenced the roadmaps of Silicon Valley-based platforms (and vice versa).
Ability to sign talent. Finding great talent that can pair campaign creativity with quantitative analysis is difficult, and constrained supply drives higher prices. IBM can afford to poach talent from other firms, as evidenced by its hires from Accenture, Wunderman, SapientNitro, DigitasLBi, CapGemini, and Ogilvy. IBM is the professional services equivalent of the New York Yankees.

But I wouldn’t consider the game over yet by any means. In fact, some of these strengths come with significant challenges:

Legacy branding. International Business Machines has a world renown legacy in enterprise hardware and the current software organization is also well-known. These groups capture the public’s attention with innovations like Watson and support of the US Open, which can lead to consulting business. However, internal corporate relationships could lead buyers to lean towards other firms that may not carry a perception of bias towards proprietary technology solutions.
You don’t have to be the biggest to be the best. Consider the change that technology has driven in the agency landscape; the traditional agencies with roots in the mad men era have been increasingly displaced by smaller shops that are nimble and can react to shifts in current culture. IBM claims to be a “new breed of service provider” but it must be careful that the positioning doesn’t become a Napoleonic mistake of creating competition on too many fronts. Moreover, IBM needs to operationalize knowledge from its global network without letting its sheer size get in the way of learning.
Fast enough? IBM isn’t alone in seeing the marketing opportunity around digital customer experience. Two years ago, Deloitte acquired Ubermind to create Deloitte Digital. Last year, Accenture acquired Fjord and formed Accenture Interactive. Good help is hard to find in this market, which is why SIs are buying digital shops to get in the game quickly. IBM has been hiring talent from the right places, but this one-at-a-time approach may not be a fast enough ramp, leaving money on the table for competitors.

IBM sees the market opportunity in customer experience and appears committed to winning in the market. There are a couple of elements in this announcement that take me back to 2008 as I launched my last company — “a new service provider that’s agency + consultancy” and a multi-million dollar funding commitment — and the emerging opportunity seems to be wide open. If nothing else, IBM is signalling to potential clients and hires that they’re open for business as the “social business” era fades into the next generation of digital transformation.

The post IBM bankrolls a new $100M #CX unit. Will it work? appeared first on Being: Peter Kim.

Marketing Transformation Next-Generation Customer Experience New C-Suite Data to Decisions Innovation & Product-led Growth Revenue & Growth Effectiveness Future of Work Tech Optimization IBM Leadership Chief Customer Officer Chief Financial Officer Chief Marketing Officer

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Market Move - SAP acquires Fieldglass – off into the contingent workforce – early move or reaction?

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…...

On March 26^th SAP announced the intention to acquire Fieldglass, a leading vendor in the contingent workforce management software category. We take a look at the news release and then take a stab at the background of the acquisition and consider the implications on the marketplace.

So let’s start with a news analysis of the acquisition, the press release can be found here:

WALLDORF, Germany - SAP AG (NYSE: SAP) today announced plans to acquire Fieldglass, the leading technology provider for procuring and managing contingent labor and services. The addition of Fieldglass’ cloud-based Vendor Management System (VMS) solution meets the growing demand among employers to manage flexible workforces that can be quickly engaged and on-boarded to support rapidly changing business and customer needs. Combined with the collaborative, network-based procurement capabilities of Ariba and the human resources expertise of SuccessFactors, the acquisition uniquely positions SAP to deliver a platform for businesses to manage their entire workforce — both temporary and permanent staff — from initial recruiting and on-boarding to ongoing development, performance management, retention and retirement.

Contingent labor and statement-of-work services is a US$3.3 trillion, high-growth market according to industry analyst estimates. Companies are rapidly moving to more variable operating models that enable them to quickly dial up and down infrastructure, talent and expertise to accommodate changes in market dynamics, business needs and special projects. Contingent workforces are expected to grow by nearly 30 percent over the next three years, according to research by Ardent Partners.

MyPOV – The move to more project oriented work with both internal and external people is one of the major trends that enterprises are facing today. SAP is well positioned to take advantage of this trend with both its SuccessFactors and Ariba products. To a certain point the acquisition also helps SAP to move the conversation on recruiting away from traditional recruiting for employees – to overall recruiting of people – even as they may be ending up as employees or contractors.

The combination of Fieldglass’ market-leading VMS solution with SAP promises to transform workforce management by enabling a flexible and comprehensive approach to managing the entire workforce and life cycle, going beyond the traditional focus on the employee record that characterizes many systems today. Together, SAP and Fieldglass will provide companies with the software, collaboration tools and networks needed to engage permanent and temporary staff out of the gate — and on the fly — in new and innovative ways to ensure they have the right people in the right roles at the right times.

MyPOV – The paragraph hits the nail on the head – problemo numero uno of contingent workforces is that traditional HR systems are designed to accommodate employed people only. And that creates both data and process problems managing external project people. Could it be that SAP is addressing one of a design weakness of its traditional on premise R/3 HR system? SuccessFactors never really had to address the problem for most of its architecture life span, since it was never designed to be a core HR system, where the employee record (that better would be a person – we prefer as you probably have noticed people) resides. So how well does the new cloud based HR core system – EmployeeCentral address the challenges around the employee record? We will find out.

“The acquisition of Fieldglass creates a compelling advantage for SAP customers as they access, attract and manage talent via the networked economy,” said Bill McDermott and Jim Hagemann Snabe, co-CEOs and members of the Executive Board of SAP AG. “This move reaffirms SAP as the undisputed leader of integrated human resources and procurement in the cloud for businesses of all sizes and industries. Combining Fieldglass with SAP is a significant milestone in our strategy to help businesses simplify everything.”

“With the acquisition of Fieldglass we are taking an incredible step forward to further expand SAP's leadership in a public cloud offering for the enterprise,” said Dr. Vishal Sikka, member of the Executive Board of SAP AG, Products & Innovation. “With the power of SAP HANA, SAP Fiori and the Ariba Business Network combined, we can quickly extend the value to our joint customers.”

MyPOV – We are used to statements of the SAP co-CEOs – but having three members of the executive board in a press release is a novum – or at least happens very seldom. But it underlines how important the acquisition must be for SAP. The interesting tidbit from the co-CEO statement is the emphasis on the combination of HCM with Procurement. We have said for a long time that SAP has a higher ground in the enterprise software game with Ariba – maybe SAP is playing hand that better now. And we expected the ERP vendors to point out that HCM needs not only good integration with Finance (we hear that from Workday almost daily recently) – but as well into the automation areas of CRM, SCM and purchasing.

In regards to Sikka’s statement it’s key to mention that Fieldglass did not build on HANA and / or Fiori. Au contraire – a quick due diligence check on open technical jobs at Fieldglass is searching for Java / MS SQL and VMwareskills. Any further short search on what Fieldglass has built its offering and which cloud infrastructure it operates on - was futile. So it looks like SAP is faced with significant integration and potentially re-platform work. If you factor in, that the company is now on the verge of moving SuccessFactors to HANA – 2 years after the acquisition – it shows that these efforts can take some time. On the flipside HANA is a much more advanced product today, and then there are many ways of integrating cloud solutions. It will be interesting which path and what phases SAP will choose.

Headquartered in Chicago, Illinois, with approximately 350 employees, Fieldglass’ cloud-based solution is used in more than 100 countries and 16 languages. Fieldglass was also recognized by Forrester Research, Inc. in The Forrester Wave™: VMS, Q1 2014 as the highest-scoring VMS provider in Contingent Workforce Management/Vendor Management System (CWM/VMS) functionality and market presence. In 2013, Fieldglass marked its eighth consecutive year of profitability, adding 2 million new users in markets worldwide. The company's majority investor is Madison Dearborn Partners, a private equity investment firm based in Chicago.

“Joining with SAP will allow us to dramatically accelerate our global growth plans and pace of innovation at the unique intersection of the human capital and procurement sectors,” said Jai Shekhawat, CEO and co-founder, Fieldglass. “SAP’s innovations in cloud, in-memory and mobile technology are transforming workforce management. We look forward to extending our leadership position, increasing our sales and delivery capacity and introducing our winning strategy to new markets.” […]

My POV – Sounds like Shekhawat knows already that a lot of interesting technology is coming the Fieldglass way – citing HANA and mobile. The question for the sales leaders is going to be how you can expand on the leading Fieldglass position – which was already pretty global. And selling contingent workforces automation is tricky – as the buying center is all over the place. We do not only see Chief People Officers and Chief Procurement Officers, but line of business executives starting to hire contingent workforce members. And with Ariba SAP has already a buyer network that measures in the multiple millions of users– it would be good to see if SAP can make the procurement of contingent workforce services truly self-service – and with some bravado – even transform it into a viral process.

Implications, Implications

So let’s look at what this acquisition does to the market place and its participants. Needless to say when a leading vendor like Fieldglass gets acquired – it has deep ramifications on the market dynamics.

Implications for SAP customers

This is good news for SAP customers who already use Ariba. With the expected integration of Fieldglass into Ariba the procurement of contingent workforces should be simplified significantly while retaining a common buyer experience, common budgeting, processes and reporting. It also isolates whatever HR system these customers are running from the implications of operating with a contingent workforce. It may well create SaaS by accident scenarios – as mySAP HCM customers may see themselves using SuccessFactors for the contingent workforce. They may be willing to start dabbling into cloud that way. SAP has the assets now to create compelling user experiences with Fiori and a compelling BI technology with BW7.4 on HANA (so this may also be an argument to get a BW install to HANA). And it will also be ‘HANA by accident’ – as it’s close to 100% certain that anything new that SAP will create for contingent workforces will be HANA based.

Implications for Fieldglass customers

Very good news if SAP is your backend, what used to be a 3^rdparty vendor integration is now becoming a vendor owned integration. That this does not always need to be off to a rosy start was seen with the SuccessFactors to SAP integration (by now addressed better).

For non SAP customers it’s important to secure the support for existing interfaces and partnerships. And these customers need to consider if they want to bring the SAP technology stack in the house (well not really as it will be in the cloud) – most prominently HANA – and with that the SAP datacenter landscape. Both customer groups need to overlay the Fieldglass data center presence with SAP’s quickly, with all implication for legislative and technical aspects. As always with acquisitions – customers should secure all critical items in contracts as soon as possible.

Implications for SAP

This puts more work on already busy product teams at SAP. That Fieldglass seems to be operating on Java and MS SQL Server may be good news – as most SaaS vendors segregate client databases physically (due to the known performance challenges of MS SQL Server) – which makes them much more palatable to be moved to HANA quickly and easily (or in other words no tenant striping of the database). As for the business logic – we will have to see SAP’s plans. And let’s hope that the product strategists have been wise and left some spare room in the tank to accommodate the additional work on integration and new product offerings. Sapphire is most likely going to be a good benchmark to assess any roadmap impact both for the product as well as the technology teams.

Implications for SAP competitors

For SAP’s most prominent HCM competitors there is less potential urgency on the architecture side – as both Oracle Fusion HCM and Workday have been built with necessary flexibility around the employee record and related processes, all courtesy of having been designed less than 10 years ago, well aware of the contingent workforce architecture and system challenges. But on the market side a leading vendor has gone and Fieldglass supported interfaces into both Workday and Oracle. We will have to see if and how motivated SAP will be to maintain these interfaces. In any case this is a sales opportunity for Oracle and Workday to target Fieldglass customers for their respective contingent workforce offerings.

And needless to say it will be interesting what other strong players in the category like Beeline, Peoplefluent and IBM (Emptoris acquisition) will do going forward.

MyPOV

A good acquisition by SAP, it always disrupts the markets when a leading vendor gets acquired. SAP will need to plot out the integration plans quickly, so it can preserve as much as possible of the Fieldglass install base. We see this as the first step of the established ERP vendors to elaborate the value proposition of HCM and other areas of automation beyond Finance (where the messaging is at par with Workday). SAP leveraging the leading position of the Ariba user base and combining contingent workforce procurement with traditional procurement is a smart move that creates value for existing and future customers.

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And more on overall SAP strategy

News Analysis – SAP and Accenture partner – more of the old or something new? Read here.
Now that SAP is a tech company – it wants to be cloud company – read here.
SAP’s startup program keep rolling – read here.
Why SAP acquired KXEN? Getting serious about Analytics – read here.
SAP steamlines organization further – the Danes are leaving – read here.
Reading between the lines… SAP Q2 Earnings – cloudy with potential structural changes – read here.
SAP wants to be a technology company, really – read here
Why SAP acquired hybris software – read here.
SAP gets serious about the cloud – organizationally – read here.
Taking stock – what SAP answered and it didn’t answer this Sapphire [2013] – read here.
Act III & Final Day – A tale of two conference – Sapphire & SuiteWorld13 – read here.
The middle day – 2 keynotes and press releases – Sapphire & SuiteWorld – read here.
A tale of 2 keynotes and press releases – Sapphire & SuiteWorld – read here.
What I would like SAP to address this Sapphire – read here.
Why 3rd party maintenance is key to SAP’s and Oracle’s success – read here.
Why SAP acquired Camillion – read here.
Why SAP acquired SmartOps – read here.
Next in your mall – SAP and Oracle? Read here.

And more about SAP technology:

Launch Report - When BW 7.4 meets HANA it is like 2 + 2 = 5 - but is 5 enough - read here
Event Report - BI 2014 and HANA 2014 takeaways - it is all about HANA and Lumira - but is that enough? Read here.
News Analysis – SAP slices and dices into more Cloud, and of course more HANA – read here.
SAP gets serious about open source and courts developers – about time – read here.
My top 3 takeaways from the SAP TechEd keynote – read here.
SAP discovers elasticity for HANA – kind of – read here.
Can HANA Cloud be elastic? Tough – read here.
SAP’s Cloud plans get more cloudy – read here.
HANA Enterprise Cloud helps SAP discover the cloud (benefits) – read here.

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Rimini Street Expands to Japan

Constellation Research

J. Bruce Daley is a former vice president and principal analyst at Constellation Research, Inc.  , Title: Big Ideas Age Before Beauty Before there can be a wholesale conversion to the Cloud legacy applications must be converted. This will take decades and not every vendor has taken this obstacle into account when projecting growth. Professional Services Firms Need a Recurring Revenue Model The services business has a lot of advantages but one big disadvantage in that you are always going out of business. Some organizations are using the Cloud to offer clients new ways to spend money than just time-and-materials or fixed price projects. ...

Third party support provider Rimini Street has launched local operations and expanded its capabilities to deliver software support in Japan. The Company has signed several new clients in Japan since beginning local operations, and had been serving Japanese multinational organizations on a global basis for years. Rimini Street estimates that the enterprise software maintenance market in Japan surpasses ¥120 billion per annum for SAP and Oracle products.

The Company recently appointed a new executive team for Nihon Rimini Street and is hiring a significant number of local support, development and tax, legal and regulatory research personnel. The Nihon Rimini Street executive leadership team includes:

Mr. Kazuya Ohta. Ohta-san joined Nihon Rimini Street from Sabre Decision Technologies International and reports to Mr. Andrew Powell, Rimini Street's managing director for Asia-Pacific and the Middle East.

Mr. Hisamichi Nagamori. A 15-year veteran of the IT industry, and has been appointed vice president of sales for Nihon Rimini Street. Nagamori-san joined Nihon Rimini Street from IBM Japan.

Mr. Tomonori Oku. Another 15-year veteran of the IT Industry, and has been appointed vice president of service delivery for Nihon Rimini Street. Oku-san joined Nihon Rimini Street from Qunie, a subsidiary of NTT Data.

“Our significant investment to expand operations locally into the Japanese market was accelerated by strong demand from local Japanese organizations ,” said Ohta-san.

Rimini Street enables its clients to run their current software releases without any required upgrades for at least 10 years and provides support for customizations and Japanese tax, legal and regulatory updates.

“Rimini Street is committed to meeting and exceeding the high standards expected by our Japanese clients. ” said Mr. Seth Ravin, Rimini Street CEO. “We are the first and only independent software maintenance provider to achieve ISO 9001:2008 certification for quality and ISO 27001 certification for information security.”

Internationally the company can be contacted directly at +1 702-839-9671.

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Spinnaker Support Expands To India

Constellation Research

In an expansion was driven by the company’s continued growth, Spinnaker Support, a provider of Siebel, SAP and JD Edwards third-party maintenance and services, has opened a technology center in Mumbai, India. Staff within this office will act as second-line support for the front-line operations staff located in the United States, United Kingdom, and Singapore.

The effort to open the Spinnaker Support Global Technology Center (GTC) began after a significant growth in new customers, increased interest in its tax and regulatory compliance services offering, and a surge of interest in Southeast Asia all combining to trigger the need for an additional facility and resources.

The Spinnaker Support GTC is located in the Powai section of Mumbai. The office will be led by Maurice D'Souza, a seasoned IT executive whose business acumen spans sales and marketing, operations management, business strategy, strategic alliances, and people management. D’Souza brings extensive experience to his role having spent 25 years with SYSTIME (now KPIT), a global IT consulting and product engineering company.

“I am extremely pleased to announce our expansion into India. This direction has been on the corporate roadmap for a couple of years,” said Matt Stava, CEO and Managing Principal of Spinnaker Support.

Headquartered in Denver, Colorado, Spinnaker Support provides services from offices located in Cape Town, Denver, London, Mumbai, and Singapore. Current clients include Fortune 1000 and mid-sized enterprises from the Americas, Europe, Asia-Pacific, and South Africa operating in industries such as Manufacturing, Healthcare, Government, Retail, Food and Beverage, and Finance.

For more information about careers please call +1-877-476-0576, go to the careers page of the site, or email [email protected].

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Constellation Office Hours: Box IPO, HANA, Cisco InterCloud, Oracle Sales Cloud

Get inside the minds of Constellation analysts during Constellation Office Hours. Office Hours are casual conversations amongst Constellation analysts during which they discuss the latest developments in enterprise technology. At the conclusion of office hours analysts answer questions from the audience. This month, Holger Mueller, Alan Lepofsky, and J. Bruce Daley discussed:

Box IPO
Cisco Intercloud
Cisco & Chrome partnership for UC
HANA
Lumira
Oracle Sales Cloud

Constellation Office Hours screen shot

1:35 - Constellation News: Peter Kim joins Constellation.

2:06 - New Research:

5:28 - Events we're attending

Industry News
6:27 - Alan Lepofsky: Box IPO, Cisco and Google partner for UC

9:15 - Holger Mueller: Box IPO, BW on HANA and Lumira, Google Cloud, Cisco Intercloud,

13:40 - J. Bruce Daley: Oracle Sales Cloud v8

Big Ideas for Research
15:40 - Alan Lepofsky: It's not about age, it's about digital proficiency. A new framework for planning digital transformation.

17:40 - Holger Mueller: HCM and engagement strategies. Focusing on vertical; not horizontal career paths. PaaS.

20:00 - J. Bruce Daley: Oracle Sales Cloud as part of larger mobility study. Standardization across mobile platforms must occur, but it won't be on HTML5

Join us for Office Hours in April: http://constellationr.com/content/constellation-office-hours-april

Data to Decisions Future of Work Marketing Transformation Matrix Commerce New C-Suite Next-Generation Customer Experience Tech Optimization Digital Safety, Privacy & Cybersecurity Innovation & Product-led Growth box cisco systems SAP Oracle ML Machine Learning LLMs Agentic AI Generative AI AI Analytics Automation business Marketing SaaS PaaS IaaS Digital Transformation Disruptive Technology Enterprise IT Enterprise Acceleration Enterprise Software Next Gen Apps IoT Blockchain CRM ERP finance Healthcare Customer Service Content Management Collaboration Chief Customer Officer Chief Executive Officer Chief Financial Officer Chief Information Officer Chief Marketing Officer Chief People Officer Chief Procurement Officer Chief Supply Chain Officer Chief Technology Officer Chief Information Security Officer Chief Data Officer

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Effectively Manage Your Social & Mobile Workforce

A major business transformation is brewing in the enterprise today. Enterprise mobility, business velocity, geographically dispersed, multi-device and multi-generational workforce are converging to deliver the promise of responsive organizations. Organizations that miss this paradigm shift will face dire consequences. How can you effectively manage this shift, ensure that it will be sustainable and reap the benefits of being a responsive organization? In this session you’ll learn how to apply practical steps and effective techniques to maximize SharePoint for your multi-device and multi-generational workforce

Related Resources:

Session resources: http://1drv.ms/NGDyKw
Microsoft BYOD Resource: http://spgur.us/1qg7oo6
How to Build a Consumerization of IT Strategy http://spgur.us/1g6s5hI
Remote SharePoint Access with Perimeter http://www.avepoint.com/perimeter

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Event Report - AWS Summit in SFO - AWS keeps doing what it has been working since 8 years...

Holger Mueller

Vice President and Principal Analyst
Constellation Research

We had the opportunity to attend the AWS Summit in San Francisco today, a well-attended event. Not surprisingly Amazon Web Services (AWS) can pull a lot of interest in the Bay Area, and most of the crowd was knowledgeable and using AWS products. It also became clear, that AWS Summits are more educational events for Amazon – not necessarily product announcement events – these are more likely to happen aat is reserved to re:Invent.

So acknowledging that – and given the different nature of other cloud events this week – the event may have been disappointing at first – but then it had considerable punch, too. Here are my top 3 takeaways:

Breadth and Depth are the message – Through the keynote I kept picking up how Jassy keep pointing to the experience, track record and success of AWS – here are all the themes we picked up:

- AWS is turning 8 – definitively the older sibling to some of the toddlers [adding for clarification – Google] and newborns [Cisco] of this week.

- AWS is the market leader – The Gartner magic quadrant and customer logo slides transported that message.

- AWS is secure – Look at all our government security certificates (here is the latest from the US DoD).

- AWS ships product – WorkSpaces available to all customers.

- AWS keeps innovating – On track to beat the number of enhancements of 2013 already now. And AWS keeps bringing out new instance types for lower cost and better enabling next generation apps (HS1 and R3 instances).

- AWS is most comprehensive – The almost 5 minute build up walking through the AWS tech stack served that message. And smart to put people services – with training – on top of it all.

- AWS stays price competitive – AWS reduce prices the 42nd time – not a one-time move.

- AWS works well with your private cloud – More options to peer your private could with VPC.

Enterprise is the battle, private cloud is the target – Needless to say that AWS showed good examples on the startup side using their products. Flipboard was certainly a great showcase for rapidly demanding massive scale and AWS enabling that.

But in my view the coupe was certainly to have Infor CEO Charles Philips on stage. Most of the audience was not familiar with Infor and for many attendees if was even a questionable choice (Infor who?) – but I am sure back on the web decision makers were listening up: When the 3rd largest ERP vendor pulls a NetFlix [to speak AWS crowd language] that is certainly remarkable. Basically Infor is running its next generation applications, CloudSuite on AWS. It’s already using Redshift for analytics. But now critical enterprise resource data and processes will run on AWS. A huge departure from test, development and trial systems we have seen before. The SaaS by accident phenomena is now becoming real for enterprise processes running on AWS. But it makes sense as Philips pointed out – by average enterprise software systems are only utilized around 20%, perfect showcase for the cloud.

The other key message for the CIOs out there, was that AWS is getting more and more friendly to co-exist with the private and hybrid cloud. With many AWS competitors playing both on the private and public side it is clear that AWS does not want to give up that space all too easily and it was good to see how the private cloud segment gained in length from re:Invent. Of course price reductions are a favorable argument, too – not sure how many CIOs had to revisit their cost assumptions for their private cloud operations and plans. But I don’t think it was a few. When cost can no longer be a justification for private cloud, it will be for sure security concerns that will be raised – but AWS did a good job addressing these better, too.

Price matters – Of course AWS lowered prices, it’s 42nd price reduction. And they are and were pretty substantial. But by now they are expected. Back at re:Invent an excited attendee crowd burst into applause – not so much today in San Francisco. How substantial they are and if AWS can keep its cost leadership position is unclear right now, we will see the analysis of that in the next days. But it was good enough to let existing AWS clients stay where they are and it certainly ensures AWS is a very attractive platform to build and run software on.

MyPOV

The cloud wars are only to start and AWS as the market leader is playing a smart game. Ignore what the competition has done the same week – hold the course. Do what you have been doing – innovate (AppStream, WorkSpaces and Kinesis were mentioned), deliver to the public (WorkSpaces is available to all customers) and reduce prices. Just stress a little more how established and what a safe choice AWS is – something Jassy and AWS certainly have pulled off today. An 8 year track record certainly helps. And signing up Infor is a huge confidence point for enterprise IT – and the backdoor to get in the enterprise.

And even as Jassy did not mention any competition – a good move in my view – I am pretty sure that the retailer DNA of Amazon has a keen eye on what the competition does.

For customers this is all great news. Compute resources have never been so cheap and they can expect for them to get cheaper. The revolution is now happening around long term procurement of these resources. Decision makers should take a hard look at compute procurement, as consumption based models have gotten dramatically more attractive in just… the last 24 hours. It will be hard for the vendors that sell compute resources on premises to react quickly on this. Too much margin is at play, if you are purchasing compute resource now – question that margin not once, but at least twice.

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Because of actual events - check out my take on Google Cloud Platform live here.

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More about AWS:

AWS moves the yardstick - Day 2 reinvent takeaways - read here.
AWS powers on, into new markets - Day 1 reinvent takeaways - read here.
The Cloud is growing up - three signs in the News - read here.
Amazon AWS powers on - read here.

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Launch Report - When BW 7.4 meets HANA it is like 2 + 2 = 5 - but is 5 enough?

Holger Mueller

Vice President and Principal Analyst
Constellation Research

I was invited to attend the BI / HANA 2014 event organized by WisPubs in Orlando this week. I have blogged on my keynote takeaways from yesterday here, today the conference continued with a separate BW 7.4 launch event.

As usual it’s good to remember how we got here…

A brief history of BW

Reporting has always been a challenge for enterprise application vendors. And when SAP was busy building R/3 in the early 90ies of last century, speed to build out a functionally complete ERP package was of the essence. Reporting was implemented in a similar way like in R/2 – which meant the company missed the data ware house trend. No one was unhappier about it than SAP co-founder Hasso Plattner, who frustrated about a combination of lack of understanding and progress hired an outsider (than a disruptive talent decision for SAP) with Klaus Kreplin. And Kreplin and his team delivered a solid data warehouse, originally called BiW (dropped later for not confusing it with another, but minor other German software company) in very short time. Not surprisingly SAP came to realize that being the largest business application vendor, it was not enough to just deliver a data warehouse, but customers expected extractions and content in the data warehouse. So SAP created the BW content releases. Then followed a long phase of different front end tools, the Business Objects acquisition happened and customers took up BW – to the tune of around 14000 today.

Enters HANA

Meanwhile, on the roots of the BW text search engine TREX, the PTime acquisition and the Sybase acquisition HANA was created, and with that some confusion started. Customers were using BW – but hearing from SAP that the traditional separation of OLTP and OLAP was history. Some predicted the end of BW. Of course that did not happen, too many customers, luckily don’t go away overnight, as well as a resilient and large ecosystem of partners.

And as we all know by now – HANA is the platform on which SAP has embarked in a massive journey of re-inventing itself. Consequently, BW also has to run on HANA and that was achieved with BW 7.3 – which in the aftermath was more of a ‘proof it works’ release. For the first time SAP let its ecosystem try and play with a key revenue product, with the BW 7.3 on HANA trial, with very good success. But after technology adoption, the interesting thing is what happens next, and that is what we can start evaluating with BW 7.4 on HANA.

Why it’s 2 + 2 = 5!

Let’s look at greatest drivers for enterprise synergy of the combining the two products:

Speed (from HANA) – No question HANA contributes speed to traditional BW implementations. Traditional BW – like all data warehouses – needed some attentive hand holding to remain a responsive system that users could use. Not impossible, but the watch had to be 24x7. Getting speed without having to design a classic star schema design is another advantage.
Simplification (from HANA) – The simplification of being able to run OLAP and OLTP on the same system, in columnar format has been described much before. But also a key data warehouse process, operated in the ETL layer – has pretty much gone. All data is there – normalized, with no need for transport and massaging.
Content (from BW) – Remember the BW history, the first versions were technically great – but lacked content. BW has more enterprise content than most enterprises can and want to digest – so HANA instantly gains significant content.
Governance (from BW) – Another lesson for all data warehouses – skipped for brevity above – is that you can’t surface the insight to just anyone in the enterprise. SAP spend a lot of time in the early 2000s learning that and building appropriately for it – and now it’s practically a gift to HANA.

So where does the synergy – the 5 come from? Well, it’s the combination of above that enables faster insights, build on a modern application architecture (yes you can use it on an iPad) and that allows enterprise decision makers get to data faster and hopefully with that find the insights to make the right decisions.

But is 5 enough?

Getting a 5 from a 2 plus 2 equation – 25% headroom is a good result. Especially with BW 7.4 being the first release beyond 7.3, which as mentioned before was focused mainly on ‘getting there’. But 5 can only be enough if the insights are packaged in the right way, that a business user can digest them. And SAP has made a good acquisition with KXEN, but the road to packaged analytical applications, consumable by the business end users – remains a long one. To be fair SAP has only started. And 5 can only be enough if sufficient relevant information is available to make the right decision – needless to say that in 2014 it begs the question on how SAP will address the NoSQL / Hadoop challenge. [Added] And the indication on the latter is, that SAP is moving into a co-existence scenario between data in HANA and data in Hadoop in BW 7.4,, allowing the combination via the smart data access functionality.

MyPOV

SAP has delivered a promising ‘first’ functional release with BW 7.4 on HANA. It is good progress – but more needs to happen in the next releases to be able to feed (true) analytical insights to business end users – cutting out data scientist engagement on a project level. Of course there is plenty of ‘bread and butter’ BI to have that BW addresses well, but the quest needs to be for the ‘holy’ grail – end user consumable analytical applications, that are good enough to foster insights, without much or any IT and data scientist involvement.

To be fair – no one has gotten there (yet). It’s probably going to be a score of 8 or 9 that is required. So for now, 5 is a good start.

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News Analysis – Google gets serious about the cloud

Holger Mueller

Vice President and Principal Analyst
Constellation Research

Google had its widely anticipated cloud event in San Francisco, and it for sure did not disappoint. Developer focus, tools and significant price reductions were expected. Probably the biggest surprise was the temporary downtime of the life stream. In a twist of irony Google was demonstrating the live migration of a ‘hot’ VM while streaming HD video shortly before that event. Streaming recovered well for the rest of the event – if anything it shows that even Google’s cloud is earthly and that there was massive interest to watch the event.

So let’s dissect Urs Hölzle’s blog post – which pretty much serves as a Google press release:

[…]Industry-leading, simplified pricing
The original promise of cloud computing was simple: virtualize hardware, pay only for what you use, with no upfront capital expenditures and lower prices than on-premise solutions. But pricing hasn’t followed Moore's Law: over the past five years, hardware costs improved by 20-30% annually but public cloud prices fell at just 8% per year.

MyPOV – This is a new mantra for cloud pricing. While it was only pay for what you use – down to minute or even second – Google is looking at the underlying mechanism that makes all computing more affordable, Moore’s Law. And kudos to Google for calling out the profit accumulation most providers have been entertaining to a certain point, as cloud price reduction have not been keeping step with the cost reduction seen in hardware. In an industry already feeling the cost pinch by Amazon’s retail DNA – it is now Google calling out that the existing cost reduction drive may not even have been aggressive enough. And we knew already that Google is serious as it dropped its consumer pricing for 100 GB of storage below a Google Cloud use of the same amount of storage – till today. We’ll look into the commercial dynamics how we think Google enables this price reduction later.

We think cloud pricing should track Moore’s Law, so we’re simplifying and reducing prices for our various on-demand, pay-as-you-go services by 30-85%:

Compute Engine reduced by 32% across all sizes, regions, and classes.
App Engine pricing is drastically simplified. We've lowered pricing for instance-hours by 37.5%, dedicated memcache by 50% and Datastore writes by 33%. In addition, many services, including SNI SSL and PageSpeed are now offered to all applications at no extra cost.
Cloud Storage is now priced at a consistent 2.6 cents per GB. That’s roughly 68% less for most customers.
Google BigQuery on-demand prices reduced by 85%.

MyPOV – Google is showing the application of Moore’s Law and significantly reducing prices. The good folks up in Seattle will check if this is factual – but it looks to me as the biggest price reduction we have seen in the public cloud. Where AWS follows its retail DNA of smallish cost reduction – mimicking the always sale strategy seen with some brick and mortar retailers – Google is giving away one year of cost savings. And that’s the most interesting insight here – as any beyond 30% price reduction shows that Google may have pocketed some extra profits, too. And there is nothing negative with it by the way – be price competitive and have a good margin to protect yourself against upcoming price wars – is a very viable and probably the only public cloud vendor price and business strategy. Some colleagues have already pointed out that Google is now the most cost effective cloud provider for the highly demanded high memory instance category. If Google keeps that cost leadership, it will create a very viable alternative to Amazon in regards of next generation, computing intensive in memory applications category. And needless to say – the storage reductions make Google more attractive to enterprises building and using the cloud than it costs end users to use it. It has to be like that to foster and grease an ISV ecosystem.

Sustained-Use discounts
In addition to lower on-demand prices, you’ll save even more money with Sustained-Use Discounts for steady-state workloads. Discounts start automatically when you use a VM for over 25% of the month. When you use a VM for an entire month, you save an additional 30% over the new on-demand prices, for a total reduction of 53% over our original prices.

MyPOV – This is probably the most innovative move by Google on the commercial side of the public cloud since a long time - if not ever. The key benefit of cloud in regards of elasticity of load becomes a disadvantage when the load stabilizes so much, that an originally elastic loud becomes a static load. Ultimately that’s a good sign for software vendors, as they want to grow their business and hand in hand with that comes a more stable load profile. In technical reality that load profile – always assuming a neatly scaling application architecture - realizes itself in VMs becoming static, meaning they run 24x7. And the commercial consequence is, that this VM becomes more expensive than a non VM load. There are numerous cases of software vendors starting out in the public cloud, but once loads have stabilized, moved their load to an on premise, dedicated data center environment. Google (and all other public cloud vendors) don’t want to see that – so major credit to Google for making this commercially less attractive to do. And to a certain point it is fair – less needs to happen at a cloud provider when VMs become dedicated, so passing along some of these cost savings to customers for the ‘loyalty’ is actually good business sense. Setting the usage threshold at 25% and the maximum saving to an additional 30 percentage points will be parameters I’d say we will see more action on in the future. And I leave it to some tech pundits to speculate on the underlying Google architecture – what are the savings Google sees and how much of it passes along with the 30 percentage points.

Finally it confirms Google’s commitment to the VM – there are (at least for now) no ambitions or plans visible for anything in the bear metal field. And clearly Google is not interested in reserving instances for a multi year deal. Enterprises like these options though – as they give them cost certainty. But Google will rightly argue that an enterprise can gain similar certainty with a 3 year sustained usage. With the upside (in contrast to Amazon) that price reductions (Moore’s Law anyone) will take the cost down through the three years. An argument I expect enterprises will be open to – after some explaining.

With our new pricing and sustained use discounts, you get the best performance at the lowest price in the industry. No upfront payments, no lock-in, and no need to predict future use.

MyPOV – The key emphasis has to be on – no need to predict the future use. As Churchill said, predictions are always tricky, especially concerning the future [freely quoted]. And many cloud users see themselves in that situation at the beginning of the billing cycle – how many dedicated instances will we need for the next month. Google takes away that challenge, which will be greatly appreciated. It also moves the value proposition from ‘pay by the glass’ closer to ‘all you can eat’. Someone will do the math and keep load on a VM for some minutes or even hours longer in order to lock-in the full discount. An easier decision to make than predicting what you need.

Making developers more productive in the cloud
We’re also introducing features that make development more productive:

Build, test, and release in the cloud, with minimal setup or changes to your workflow. Simply commit a change with git and we’ll run a clean build and all unit tests.
Aggregated logs across all your instances, with filtering and search tools.
Detailed stack traces for bugs, with one-click access to the exact version of the code that caused the issue. You can even make small code changes right in the browser.

We’re working on even more features to ensure that our platform is the most productive place for developers. Stay tuned.

MyPOV – Needless to say that making developers more productive is a main draw to specific clouds. And Google has picked an attractive set of firsts round DevOps / DeBug functions to get the attention of the development community. Having seen a lot of troubled software products, the automated unit tests are a valuable feature. Probably it is also a self preservation mechanism for Google – as noting too crazy can happen through the code. But it is also good to see that Google extends the same services, that its internal developers have, to their cloud customers.

Introducing Managed Virtual Machines
You shouldn't have to choose between the flexibility of VMs and the auto-management and scaling provided by App Engine. Managed VMs let you run any binary inside a VM and turn it into a part of your App Engine app with just a few lines of code. App Engine will automatically manage these VMs for you.

MyPOV – Well this should be really called ‘AppEngine managed VMs’. With this Google addresses a long term critique and weakness of Google AppEngine that you could not break out of it. And as much as that is intended from a stability perspective – it limits the scope of the apps that can build on AppEngine. Now developers can access C libraries, and local (Google calls them native) resources. But the AppEngine is in charge as it enables and controls the managed VM.

Expanded Compute Engine operating system support
We now support Windows Server 2008 R2 on Compute Engine in limited preview and Red Hat Enterprise Linux and SUSE Linux Enterprise Server are now available to everyone.

MyPOV – This is a huge win for Google that before operated only on the two more exotic Linux variants. Now decision makers not only have access to the two most popular Linux versions with RHEL and SUSE – but also Windows Server 2008. Both will face less concern by corporate IT decision makers, as well as mainstream minded CTOs at application vendors. Lastly given the managed VM capability – a number of local resource options that developers are familiar with and rely on – become available for AppEngine.

Real-Time Big Data
BigQuery lets you run interactive SQL queries against datasets of any size in seconds using a fully managed service, with no setup and no configuration. Starting today, with BigQuery Streaming, you can ingest 100,000 records per second per table with near-instant updates, so you can analyze massive data streams in real time. Yet, BigQuery is very affordable: on-demand queries now only cost $5 per TB and 5 GB/sec reserved query capacity starts at $20,000/month, 75% lower than other providers. […]

MyPOV – An aggressive move by Google in the BigData field – the other providers being the usual suspects. They key takeaway though is, that Google wants a piece of the fast growing pie of BigData apps being built for the cloud.

Overall POV

A truly landmark point for the cloud, with Google laying down the cards. Reports say that Hölzle and team only switched focus to public cloud in January this year – if true a lot has been done in little time and the competition is warned. We will have to see if Hölzle’s team will be able to neglect the current largest customer – Google – for the next quarters, but the ambitions and hints during the events are there.

Historically – in statements made by Marissa Mayer (when still at Google) – Google has been the only cloud provider that openly stated, that access capacity should be given back to other developers (thanks for colleague @ReneBuest to remind me recently). All other cloud providers have – despite my probing – never admitted to it. And maybe Google won’t anymore either – but its good business practice. If a cloud provider has a very elastic cloud, why not commercialize excess capacity at very attractive, cost rates. If the bulk of the load is higher margin, you are still running a formidable business (check Google’s latest earnings). And as long as you grow your cloud capacity faster than public cloud demand is –well then that spare capacity is unlikely to see bottle necks, given the scale on which Google operates.

Over at Rightscale Hassan Hosseini has done a detailed level comparison between Google and Amazon. Google comes mostly out on top. It’s interesting that on the most price attractive scenario – a three year sustained usage of Google and a 3 year commitment for Amazon, AWS comes out slightly ahead. But of course with the 3 year commitment. It’s interesting as the 3 year commitment comes the closest to a cloud user to own their hardware – so it’s probably the closest price to the real cost to operate a cloud infrastructure.

All in all it is very good news for the overall cloud adoption. Enterprises will benefit from better and more cost effective software, application vendors will have more options where to move load, and developers have a cloud provider that has cache and cares for them. On the flipside Google’s approach is a developer centric cloud – many more things need to happen for Google to move traditional load such as existing commercial databases and enterprise applications to the cloud. Hoping for all these applications to be rebuild on the technologies available in Google cloud – will not be viable medium term strategy. But for now this is a great step by Google, we are eager to measure the stride length of the next one – same cadence, short or longer. For sure the startup audience is listening.

Here is the first of many videos of the event:

Lastly – this is the week of the cloud – yesterday Cisco announced its Intercloud, tomorrow Amazon has a cloud event, and on Thursday Microsoft has an announced press conference. I am sure the price strategists in Seattle and Redmond are crunching some numbers.

-------------

More on Google:

A tale of two clouds - Google and HP - read here
Why Google acquired Talaria - efficiency matters - read here

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Calling for a uniform approach to card fraud

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…...

Abstract

The credit card payments system is a paragon of standardisation. No other industry has such a strong history of driving and adopting uniform technologies, infrastructure and business processes. No matter where you keep a bank account, you can use a globally branded credit card to go shopping in almost every corner of the world. Seamless convenience is underpinned by the universal Four Party settlement model, and a long-standing card standard that works the same with ATMs and merchant terminals everywhere.

So with this determination to facilitate trustworthy and supremely convenient spending everywhere, it's astonishing that the industry is still yet to standardise Internet payments. Most of the world has settled on the EMV standard for in-store transactions, but online we use a wide range of confusing and largely ineffective security measures. As a result, Card Not Present (CNP) fraud is growing unchecked. This article argues that all card payments should be properly secured using standardised hardware. In particular, CNP transactions should use the very same EMV chip and cryptography as do card present payments.

This blog is an edited extract from an article of the same name, first published in the Journal of Internet Banking and Commerce, December 2012, vol. 17, no.3.

Skimming and Carding

With "carding", criminals replicate stolen customer data on blank cards and use those card copies in regular merchant terminals. "Skimming" is one way of stealing card data, by running a card through a copying device when the customer isn't looking (but it's actually more common for card data to be stolen in bulk from compromised merchant and processor databases).

A magnetic stripe card stores the customer's details as a string of ones and zeroes, and presents them to a POS terminal or ATM in the clear. It's child's play for criminals to scan the bits and copy them to a blank card.

The industry responded to skimming and carding with EMV (aka Chip-and-PIN). EMV replaces the magnetic storage with an integrated circuit, but more importantly, it secures the data transmitted from card to terminal. EMV works by first digitally signing those ones and zeros in the chip, and then verifying the signature at the terminal. The signing uses a Private Key unique to the cardholder and held safely inside the chip where it cannot be tampered with by fraudsters. It is not feasible to replicate the digital signature without having access to the inner workings of the chip, and thus EMV cards resist carding.

Online Card Fraud

Conventional Card Not Present (CNP) transactions are vulnerable because, a lot like the old mag stripe cards, they rest on clear text cardholder data. On its own, a merchant server cannot tell the difference between the original card data and a copy, just as a terminal cannot tell an original mag stripe card from a criminal's copy.

Despite the simplicity of the root problem, the past decade has seen a bewildering patchwork of flimsy and expensive online payments fixes. Various One Time Passwords have come and gone, from scratchy cards to electronic key fobs. Temporary SMS codes have been popular but were recently declared unsafe by the Communications Alliance in Australia, a policy body representing the major mobile carriers.

"3D Insecure"

Meanwhile, extraordinary resources have been squandered on the novel "3D Secure" scheme (MasterCard "SecureCode" and "Verified by Visa"). 3D Secure take-up is piecemeal; it's widely derided by merchants and customers alike. It is often blocked by browsers; and it throws up odd looking messages that can appear like a phishing attack or other malfunction. Moreover, it upsets the underlying Four Party settlements architecture, slowing transactions to a crawl and introducing untold legal complexities.

So why doesn't the card payments industry go back to its roots, preserve its global Four Party settlement architecture and standards, and tackle the real issue?

Kill two birds with one chip

We could stop most online fraud by using the same chip technologies we deployed to kill off skimming.

It is technically simple to reproduce the familiar card-present user experience in a standard computer. It would just take the will of the financial services industry to make payments by smartcard standard. There are plenty of smartcard reader solutions on the market and indeed, many notebooks feature built-in readers. Demand for readers has grown steadily over the years, driven by the increasing normal use of smartcards for e-health and online voting in Eastern Europe and Asia.

And with dual interface and contactless smartcards, the interface options open right up. Most mobile devices now feature NFC or "Near Field Communications", a special purpose device-to-device networking capability, which until now has mostly been used to emulate a payment card. But NFC tablets and smartphones can switch into reader emulation mode, so as to act as a smartcard terminal. Other researchers have recently demonstrated how to read a smartcard via NFC to authenticate the cardholder to a mobile device.

As an alternative, the SIM or other "Secure Element" of most mobile devices could be used to digitally sign card transactions directly, in place of the card. That's essentially how NFC payment apps works for Card Present transactions - but nobody has yet made the leap to use smart phone hardware security for Card Not Present.

Conclusion: Hardware security

All serious payments systems use hardware security. The classic examples include SIM cards, EMV, the Hardware Security Modules mandated by regulators in all ATMs, and the Secure Elements of NFC devices. With well designed hardware security, we gain a lasting upper hand in the criminal arms race.

The Internet and mobile channels will one day overtake the traditional physical payments medium. Indeed, commentators already like to say that the "digital economy" is simply the economy. Therefore, let us stop struggling with stopgap Internet security measures, and let us stop pretending that PCI-DSS audits will stop organised crime stealing card numbers by the million. Instead, we should kill two birds with one stone, and use chip technology to secure both card present and CNP transactions, to deliver the same high standards of usability and security in all channels.

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Calling for a uniform approach to card fraud