Open Source Commentary from Navica's CEO,
Bernard Golden
May 2007
In This Issue
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Taking Advantage of the New Economics
of IT
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Help Build the Newsletter
Taking Advantage of the New Economics of
IT
Taking Advantage of the New Economics of IT
Last month’s newsletter was a bit of a screed against
narrow-minded CIOs who are too wrapped up in everyday events
to notice that their world is changing out from under them.
The old days of static infrastructure, one throat to choke
vendor relationships, and IT-as-cost-center delivering predictable
services are gone. This month’s newsletter will address
the same subject, but focus on action: if you’re convinced
you need to change the rules of the IT game as you’ve
been playing it, what do you do?
In a recent blog post at CIO Magazine, I discussed the fact
that 99% of CEOs believe that technology is critical to their
company’s success – but only 32% turn to their
CIO for strategic help. One can’t help but wonder where
the other 67% get their technology strategy advice.
But really, can you blame them? By and large, CIOs have painted
themselves into a corner. They’re locked into a way
of doing business in which 90+ % of their budget is fixed
for the year on January 1, pre-committed to maintenance of
expensive enterprise apps, with enormous amounts of money
pre-committed to headcount. There’s practically no wiggle
room to invest in anything new. And any conversation with
a CEO that starts “I’d like to, but I can’t
afford to …” is not going to make you someone
the CEO goes looking for to discuss innovation.
Far too many CIOs have resigned themselves to strategy irrelevance,
willingly taking their place with the plebes who run HR, facilities,
and the motor pool.
However, it’s obvious that there’s something
wrong with this picture. CEOs understand it: 99% of them recognize
that today’s companies are information processing entities
that happen to deliver an information-based product or service.
I recently ordered something from Amazon under their Prime
program. It didn’t show up in two days, so I looked
at the shipment information. My package had gotten to South
San Francisco (UPS’s nearest depot) and then gotten
misrouted to Anchorage, Alaska. The information about where
the package’s location was a vital piece of what I had
purchased. Part of the reason I use Amazon is because of this
extra information it delivers. Do you think IT is a backwater
for timeservers at Amazon? Or UPS? If a trucking company can
use IT as a differentiator, any company can.
So, what do you do if you’re a CIO that wants to break
the mold? How can you put yourself in a position to contribute
to company strategy, when so much of your budget is fixed?
Obviously, you need to change the rules of the game as it’s
currently being played, but without a change, your role won’t
change either. As one saying wittily puts it: If you’re
not the lead dog, the view never changes.
Clearly, a key action is to get off the fixed budget treadmill.
Only by freeing up money for new initiatives is a CIO going
to be able to deliver innovation and move the conversation
from cost-cutting to further investment. Where do you look
to free up budget?
Well, this is an open source newsletter, so what do you think
one prescription is going to be?
Here are three ways to use open source to break the impasse:
One: Stop looking at open source as a poor relation
to commercial software
Too many CIOs have absorbed a mindset that sees proprietary
packaged software as the only method of technology delivery.
That extends well beyond assuming that all software must come
with a license fee.
This mindset assumes that information about products will
be delivered by a sales rep that cheerfully comes to the company
location to deliver information. Who invests the time to fill
out thick RFPs to assist in the decision-making process. This
mindset assumes that the vendor will bribe invest in analysts
so that an analyst can deliver thick reports establishing
which vendor has “completeness of vision” and
deserves to be in the much-coveted upper right quadrant. This
mindset assumes that the company will invest in huge PR efforts
so that magazines will feature its products in editorial coverage.
When confronted with open source products and the business
practices that accompany them: little advertising, miniscule
analyst efforts, and tiny PR budgets, the holder of this mindset
crosses his arms and says “It doesn’t feel comfortable
to me; I’ll only consider open source when it behaves
like what I’m used to.”
Guess what? That day will never come. All those items that
the mindset assumes are funded by upfront license fees, which
are not part of the open source equation. I know it’s
fashionable to say (lots of open source commercial companies
repeat this tirelessly) that license fees only pay for the
sales effort of proprietary software companues, but it’s
not true. License fees pay for an entire mode of doing business
that isn’t part of open source. And the license fees
permeate the entire relationship, because maintenance costs
are set at a standard 20% of original license fees. All the
behaviors that go into forming those technology deliver assumptions
are financed by license fees, which are missing in open source.
Eergo, waiting for open source vendors to behave just like
proprietary vendors is pointless. You’ll have to get
used to your technology assumptions going unfulfilled.
And why would you want that way of doing business to be part
of your technology world? I just heard a story about a company
that had purchased a site license for Brio. Well, Brio was
swallowed up by Hyperion. If they want to move to Hyperion
products (and, of course, they would; after all, the Brio
products are going to wither into senescence), they have to
pay a huge upgrade fee. And guess what? Hyperion has just
been swallowed up by Oracle. You know where this story is
going – fool me once, shame on you, fool me twice, shame
on me. They’re Sisyphus, endlessly pushing their software
infrastructure up the license fee mountain, reaching a steady
state just in time to see it come crashing down, ready to
be pushed back up the mountain with a new round of licensing.
What’s worse about this Sisyphean struggle is the fact
that being stuck in the license fee struggle means you stay
imprisoned in the fixed budget world you’re trying to
escape from.
The message of step one is to stop seeing open source software
as a second-rate version of commercial software and recognize
it for what it truly is: a way to get out of the endless license
drudgery.
Two: Chip away at your fixed budget infrastructure
When confronted with a new worldview that advocates open
source, CIOs invariably claim that the problem is that they
can’t afford to mess with the existing infrastructure.
Every part of it’s too precious to replace or even change.
Nonsense.
There are endless examples of applications that IT staffs
discover are no longer used, or use mainframe resources to
deliver one report to a single person who never reads it.
It’s just that it’s easier to keep everything
running than to inventory what you’ve got and evaluate
its value to the company. Just like it’s easier to continue
with the Sisyphean licensing struggle than to confront one’s
assumptions about open source software.
There are well-established disciplines of value analysis.
Activity-based Costing (ABC) is one such discipline. With
it you examine a process or product and analyze the full set
of costs that go into delivering the process or product. Based
on that you assess whether the fully-loaded costs can be justified
in light of the benefit received.
Once you identify the low-value applications in your infrastructure,
you can develop a plan to replace them, or, better yet, discard
them entirely. But don’t just replace them with another,
perhaps more modern, licensed application. That doesn’t
get you off the treadmill – it just changes the tune
playing while you sweat. And your aim is to get off the treadmill,
so that you can free up money to focus on innovation. That
means coming up with a replacement that operates on a completely
different cost structure. Like open source.
Three: Develop an open source gap analysis –
and use it
We started with the fact that too many CIOs reject open source
out of hand because it’s so different than what they’re
used to: no hand-holding, no pre-digested thinking, no restrictive
business practices in the guise of free services.
There’s no question open source is different and isn’t
likely to provide all the benefits that accompany license
fees. So what can IT organizations do to obtain these benefits?
Gap analysis is a trendy term that means looking for a problem
and fixing it. Instead of bewailing open source shortcomings,
identify them and develop an action plan to fix those shortcomings
so that you can safely use open source software.
If you need help defining your technology options in a certain
area, hire someone to provide help. Of course, don’t
look to analysts for this – they don’t understand
these issues at the depth you need and their recommendations
are fatally flawed by their vendor-focused business models.
You may need to hire a consulting firm (although you have
to be careful with them as well – vendor-focused business
models abound in this field as well).
Another alternative is to look to your peers. I ran into
a company this week called OpenIT Works. They are a startup
creating CIO communities so that peer learning can take place.
Since nothing is more powerful than a good example, a peer
community can be a great place to look for help in gap analysis
and gap mitigation.
The point is that rejecting open source because it’s
different is no longer an option. If a CIO wants to move out
of the fixed-budget penalty box, new tools need to be used.
And open source is the key tool in the software space.
I was amazed (in a positive way) by a story I read in CIO
Magazine’s open source newsletter about the auction
house Bonhams. The company’s CTO designed an open source-based
architecture from the ground up to enable Bonhams to run its
IT cheaply and flexibly. The story gives some impressive examples
of what Bonhams can do with its computing systems –
using a single system to turn out brochures and post to the
web, keep up with Bonhams high revenue growth, and so on.
Perhaps most impressive: Bonhams IT infrastructure is so cheap
that it can make money on a $10 transaction.
Another reason the CTO chose open source: he wanted to be
able to do things that just aren’t present in commercial
packages – in other words, he wanted to be able to differentiate
his company (innovate, get it?) from its competitors, and
this is impossible if you run the same systems they do.
This company understands the new battleground of business
is technology. I’ll bet when Bonhams is considering
new strategy, this CTO doesn’t hear about it when the
CFO comes into his office and tells him marketing has just
purchased a new system from an outside vendor.
It’s no longer an option for a CIO to dismiss open
source. The critical challenge is to figure out how to surround
open source with the resources to make it right for the organization.
The bottom line
The open source action plan has three steps:
Understand that open source is not second-rate commercial
software. Recognize it for what it is: an economic revolution
in the fundamental building block of today’s economy.
Stop looking at your infrastructure as a fixed, fragile,
unchangeable monolith. Analyze its components in a disciplined
way to identify low-value, high-cost applications. Develop
an action plan to replace them with open source software.
Reinvest the savings in innovative applications that help
your company’s strategy. Force your way into the strategy
discussion by changing IT business-as-usual.
Start figuring out how to efficiently use open source. Identify
its shortcomings (for your organization and the way it goes
about its business) and create solutions to mitigate them.
You may need to invest part of your license fee savings, but
you’ll still have significant budget dollars freed up
to pursue new initiatives.
Help Build the Newsletter
Last month I asked for your help in building the newsletter's
circulation -- and offered a prize for the person who refers
the most new readers. My goal is 10,000 readers by the end
of the year. And I'll need your help.
Remember, the prize is a signed copy of my current book,
Succeeding with Open Source, or my upcoming book, Virtualization
for Dummies (it seems like every time I discuss it with someone,
they ask "You mean a real Dummies
book?", so yes, it's a real Dummies book with the black
and yellow cover).
So far, the leader in referrals is Josh Stein of Draper Fisher
Jurvetson. But there's plenty of time for you to send in referrals
and win the best-established book on enterprise use of open
source software or the forthcoming standard text on virtualization.
So, be sure to forward the newsletter to one (or two!) others
who could profit from it.
A couple of people sent in the excellent suggestion that
I should look for syndication opportunities for the newsletter
to build readership. Accordingly, I struck agreements with
a couple of well-established content providers to include
this newsletter in their publications. Don't worry, however
-- if you subscribe directly you'll see the newsletter at
least a week ahead of everyone else. If you know of other
good syndication opportunities that could leverage this newsletter,
please forward them to me.
In last month's newsletter I wrote about how many IT organizations
are afraid to change anything in their infrastructure because
they feel it's too fragile to tinker with. One reader sent
in this comment:
"My old company was so
afraid of change they wouldn't even ever think of ditching
their Sparc boxes, even though I could see they weren't keeping
up with their workload half the time."
The Sun rep thanks you. ;-)
Navica News
You can hear me speak at these upcoming events:
May 10, 10:00 a.m.: "Open Source Virtualization: Creating
an Action Plan", Red Hat Summit, San Diego, CA
There will be some additional speaking events as well as
some other exciting news in next month's newsletter.
If you are interested in having me speak at your
organization:
Contact me directly via email.
You might be interested in my blog postings on CIO.com:
Open
Source Windows?
Yesterday's
Advantage is Today's Achilles Heel
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