Let’s explore the major enterprise software and solutions trends and innovations that are making news across the global HP ecology of customers, partners and developers.
I’m Dana Gardner, principal analyst at Interarbor Solutions. Join me now in welcoming Andy Isherwood, vice president and general manager of HP Software and Solutions.
Dana Gardner: Clearly a part of doing more for less, which has been, unfortunately, a theme that most people are grappling with these days, has involved the need to run IT more like a business to get more insight into what’s going on from a business requirements and financial expectations perspective.
Tell me a little bit, if you could, about what you’re seeing in terms of how organizations are both dealing with this lack of funds but the need to change the way in which they can deliver the results back to the business?
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I’ve been in IT for quite a long time, and we’ve been talking long and hard about IT being at the core of business, and IT being in the business, but the reality probably hasn’t changed significantly. IT people still operate in their own space, with their own jargon, and don’t really link that well to the business.
Obviously, it’s a huge generalization, but the reality is that, in many organizations, IT is this separate silo, quite often not reporting to the CEO, and therefore quite disconnected from the business drivers.
As we’re seeing more and more CIOs reporting to the CEO and being involved in board meetings, the reality is now changing. People now understand what the core business drivers are. People are being coached heavily, because they might not have come from an IT background. They might have come from the business. They’re better able to link the business drivers of the organization to what IT can actually deliver, but not in IT terms. In terms what is the value to the business and how does it address those business drivers.
The other question that’s linked is, what’s happening with budgets, and, therefore, what are the priorities? Clearly, we are in very uncertain times. A year ago, we moved into a recessionary period. Budgets for ’09 were set, and they were typically significantly less.
All the conversations I’ve had with CIOs are that the capital expenditure is typically being reduced by anything between 0 and 40 percent, and operating expenditures being decreased by up to 10 percent. It’s less, but still pretty significant.
So you’ve ended up with a significantly smaller budget to do stuff, which can cause big problems for organizations. They have a certain amount of infrastructure in day-to-day activities to maintain. This means that they have to spend all their budget on existing projects and keeping the lights on, rather than any innovation. If you can’t innovate, then you can’t deliver value back to the business and you become just an IT function delivering the core value.
IT budgets, if you’re not very careful, are driving the organization to just do the core IT functions, rather than link back into the business and add real value in a period, in which it’s probably the most important thing to do. So, how do we innovate and how do we use the budget more effectively than we do today to allow us not just to keep the lights on, but to do this huge amount of innovation?
If we don’t do it now, we won’t be able to do it in the future, because as demand picks up, it’s just going to be “all hands to the pump” to be able to deliver just the demand that picks up, as we come out of the recession.
It will be interesting, as we go into the new budgeting period for [fiscal year] ’10. Are there enough green shoots of recovery to allow people to have confidence to increase budgets and invest, or are we going to have another year of kind of tight budgets? People are very much at the crossroads of needing to innovate and do things differently, but are constrained by budgets, which is a difficult balance.
Gardner: We also see, as they’re grappling with these organizational transformational issues, similar opportunities in the form of a variety of sourcing options. We’re hearing awful lot about the interest in cloud, questions about cloud computing. People are opening up to this notion of the need to examine what we do internally and find some aspects of that that are better served more economically and just as well outside the organization.
We’re dealing with more than just services, software solutions. We’re now looking at sourcing. That, to me, is a decision beyond just technology.
It’s about transforming how your business works. How are the folks you’re talking to here managing this new dimension of sourcing options?
As you say, people are being given a number of different options. Now that can be good and bad. People have a lot of choice, but they quite often find it difficult to make a decision on the best choice. Other people feel that the choice gives them a lot more scope to do things differently, to manage budgets in a different way, and do things more effectively.
Whether it’s insourced, outsourced, a partner activity, whether it’s on premise or off premise, all of these options give people choices. From an HP standpoint, we have the ability to give people the choice. Our recent acquisition of EDS clearly adds the last pillar of choice, given that we have now an outsourcing business, which is significant.
We can go sell solutions. We can deliver stuff through the cloud and via Software-as-a-Service (SaaS) offerings. We’ve got the complete breadth of offerings to allow people to make those choices.
We’re finding that people want advice around the choices. It’s all well and good to have all these choices equivalent to modes of transport, but people need to be given direction, which we’re trying to do. What I’m hearing from customers is that they want advice on what should they insource, what should they outsource, what should they put in the cloud, and what should they have as a SaaS offering.
That’s a really important job and an important role for someone like an HP, which actually doesn’t have a bias, because we’ve got all the options. If we were only a cloud computing or any outsourcing company, we’d be giving customers one option. Our role as a consultant to not only evaluate what is best for those organizations, but what is good for them financially, is a very important part of the role HP can play and should play.
Sourcing is important. The good news is we’ve got all the options, and the good news is we now have consulting capability to advise people — not tell people, but advise people — on what those options are and what we think is the right strategy for them as an organization.
The pricing pressures and the budget pressures that we talked about earlier may force people to outsource or put stuff into the cloud, which is going to be a different driver in a year’s time, when we’re through recessionary period. The financial situation at the moment is driving a more intense look at those sourcing options and what it does from a financial point of view for that particular organization.
SaaS is a great offering. We’ve been in that business for nine years and we have 700 customers. So, we know that business well. We know that in times, in which capital expenditure is being restrained, they can move to a more operating expense oriented budget, but still be able to innovate, which is a pretty compelling proposition. As we move through, and capital expenditure is freed up, that might change, but at least people have the option.
Gardner: Part and parcel with these options is to assess risk and to understand not only what you might be able to do, but what penalties might be involved. This, to me, is a function of governance — being able to forecast, implement, and then to adjust and amend a few policies and automate that across organizations or across boundaries. So, when we look at this process going forward through the lens of governance, how do you see that unfolding and what does HP bring to the table on that?
The management of all of these sourcing options is a key consideration. Take the example of an organization putting things onto a public cloud. They’re still going to have the same requirements from a governance and management standpoint, but it might be a lot harder than having it in-house.
Management requirements on governance around what data is out there, what performance is like, and what scalability is like, are all considerations and discussions that we help with. It can make the whole world a lot more complex for CIOs. Therefore, the management capability that we have around all of those options becomes even more important.
It’s less important for them to understand and worry about that in-house infrastructure. What they need to do is manage the service that’s being delivered by people outside of their organization. It becomes more of a management of the service, than management of the infrastructure that develops or delivers the service. So, our role is about governance, management and control of the services that are delivered to an organization, rather than the product, power or the storage that’s delivered to a company.
Dana Gardner is president and principal analyst at Interarbor Solutions, which tracks trends, delivers forecasts and interprets the competitive landscape of enterprise applications and software infrastructure markets for clients. He also produces BriefingsDirect sponsored podcasts. Follow Dana Gardner on Twitter. Disclosure: HP sponsored this podcast.