Tampa Bay Rays hit home run with virtualization that enables tablets with core applications in the field

Listen to the podcast. Find it on iTunes/iPod. Read a full transcript or download a copy. Sponsor: VMware.

Our next VMworld case study interview scouts out how the Tampa Bay Rays, a Major League Baseball team, is using an extensive amount of virtualization on and off the field.

The Rays' IT department has just started bringing more and more of their applications, data, and processes out to the mobile tier using virtualization and thin-client approaches to make the preferred mobile device, the tablet, super powerful for them. And they're extending the value of virtualization into disaster recovery (DR) too.

This story comes as part of a special BriefingsDirect podcast series from the recent VMworld 2011 Conference. The series explores the latest in cloud computing and virtualization infrastructure developments.

To hear more winning statistics about the Rays and their back-end to client virtualization experience, we're joined by Juan Ramirez, Senior Director for Information Technology with the Tampa Bay Rays. The discussion is moderated by Dana Gardner, Principal Analyst at Interarbor Solutions. [Disclosure: VMware is a sponsor of BriefingsDirect podcasts.]

Here are some excerpts:

Gardner: Why has virtualization been good for your organization?

Ramirez: Back in 2007 when we first looked out at virtualization, we had a lot of issues. Our main data center was located at our stadium in Saint Petersburg, Fla. We were actually running out of space. Electricity was a huge problem. We kept hearing from our operations department that our data centers and our equipment were just consuming too much energy.

We had to come up with a new data center. We needed to build something else, because we were just basically outgrowing it. We needed a plan to say, "You know what, this is going to be our new data center. We're going to be there 5 to 10 years," without going back and requesting additional space or consuming more electricity.

That's when everything started. We went from a two-room data center room to basically just using half of that room with virtualization. We started very small -- four hosts to manage our own infrastructure. Now we have 10 hosts in production and growing.

Another dilemma that we had was every time we needed to provision servers, or a new application needed to be introduced, it would have taken weeks, if not a month, for us to procure the proper hardware and software to make this available for different departments. So we needed to cut time on that and make things happen faster. It is a fast business.

Gardner: To what degree have you actually embraced virtualization?

Without VMware and the different products that we deploy, I think today we'd be in a lot of trouble if we wouldn’t have gone that route.

Ramirez: Currently, we're at 95 percent. We had certain goals to start -- about 50 percent -- and gradually every year just adding more and more resources. At 95 percent, you can see that we really value this, and this is the route that our business is going to.

Gardner: What IT does it take to support a major league team?

Ramirez: First of all, coming from a small-market team, we don’t have the luxury to have a large IT department to support the 300 plus users that we currently have. So it’s very important for us to be very proactive and be ahead of the game.

It is a 24×7 operation, especially during the season, which as we all know, is one of the longest in professional sports, with 162 games per year, not counting playoffs. So it is challenging for us, but I believe that we have a great team.

We also have great resources that we've implemented in the last five or six years and we're on top of it. Without VMware and the different products that we deploy, I think today we'd be in a lot of trouble if we wouldn’t have gone that route.

Gardner: Clearly it's working for you. Tell me about how many apps you're supporting. What sort of workloads have you?

Ramirez: From the applications perspective, we have everything from our scanning application, which is homegrown SQL back-end, Windows application front-end, and web-based front-end to our finance departments, Great Plains, Microsoft Great Plains 2010.

We also have our customer relationship management (CRM) system, which runs on a proprietary application from Ticketmaster, to homegrown application. Close to 10-30 applications are used on a daily basis from every department and different aspect, which is incredible.

Our email system, Microsoft Exchange 2010, is 100 percent virtualized. And every new application that comes up in our pipeline is basically virtualized. Going forward, nothing resides in our physical server, which is tremendous for us.

Products enrich the roster

When we started, we wanted to go slow and to make sure that everyone throughout the organization had a good feel for it, a good vibe. Once we earned the trust from the different departments and other department heads, we introduced it, we showed them and we trained them. It was a no-brainer. Everyone was on board. Everyone loved the technology. Just loved the fact that while it previously took weeks and months for them to provision anything from our department, it's now hours, at the most, which is great.

It also helps us big time with disaster recovery (DR). Our second data center is located in our Port Charlotte Spring Training facility. It's easier for us to move workloads, depending on where we're at in the season and the time of the year. We can move a machine from the production main data center to the backup data center and provide those resources over to our different departments.

When we started with DR, it was a very tough decision because we wanted to do everything automated, but management did not see the need for it. So we actually started with manual processes. We started building a data center down in Port Charlotte. We did some migrations and that didn’t work out too well. So we came back to the drawing board and said, we need a tool that can help us automate this process. This has to be 100 percent automated.

We came back to the drawing board and said, we need a tool that can help us automate this process. This has to be 100 percent automated.

Our recovery manager had just come out and we wanted to test it. We actually beta tested it and received some evaluation licenses. We put together a quick product to show administration and management how good the product was and how important it was to us, especially in the location that we are at.

The rest is basically history. We have pretty much 100 percent coverage on everything that is virtualized. We're able to take periodic snaps and move them over to the VR facility, where we do a weekly test of each individual virtual machine (VM).

Gardner: So that must make you sleep a little better during hurricane season?

Ramirez: Absolutely. It used to be nightmare from June to the end of September around here, but not anymore.

Gardner: Let's move into this other innovative area you have been experimenting with, and it's the use VMware View 4.6. You've been involved with moving into thin clients, virtualized desktops, and I understand also using mobile apps on tablets. Tell me why that's been important for you and what you've done.

250 remote users

Ramirez: Throughout the year, we've grown tremendously. We now have close to 250 remote users. All those remote users need to be equipped with very expensive laptops. It's very expensive and very hard to manage.

We're a small IT department. It's very hard to track down 250 users throughout the year. It's very hard to keep older machines up-to-date. When something goes wrong, it gets ugly pretty fast. We needed to get an alternative and come up with a plan where it would be easier to manage, where it would be easier for them to conduct their work.

We started very basic by putting the in VMware View client. First of all, we set up a lab here and asked a few of our key guys to test and give us some feedback. The feedback was overwhelming. We started with five or six guys, and now we probably have close to 65 users using it on a daily basis.

Users have come back and handed in their laptops. Now, they're strictly on iPad or Android tablet, which is tremendous for us. It's easier for my department to manage. It's easier for them to go out there on the field and just use a lightweight device to connect and conduct business with it.

So it's big for us right now. It should be a huge hit in the upcoming year. With our development department, everything that we are projecting is basically basing it on VMware View.

Users have come back and handed in their laptops. Now, they're strictly on iPad or Android tablet, which is tremendous for us.

Gardner: In addition to VMware View, you also seem to be using an iPad app, how did that come about? How does that fit into the equation?

Ramirez: That came as we started adding more users and receiving feedback. I started using it for my daily management show, introduced a few key personnel to it, and they liked the idea. Now, everyone is basically using that app to connect and do most of their work.

We decided to introduce other departments and show them the capability and how easy it is to connect and get their business done without turning on their laptop -- waiting for it to boot, the VPN, the password, and all that stuff that sometimes gets in the way.

Gardner: I understand you have scouts, managers, you have lots of folks out in the field. They're at ballparks. They're watching ballplayers. They're in the field, and can they just download an iPad app and then sign into VMware View. How do they actually connect in, and what are the logistics for really linking your resources and apps out to that field?

Everyone wants a tablet

Ramirez: Everyone in the organization wants a tablet. They come to us, which helps us big time. Normally we do the procurement for them, or if they go out there and buy it, they will just bring it over to us, and by default our installation and process includes that application. It's the first application that they're introduced to.

My department is able to figure the necessary settings on the application and just leave it ready for them and let them know that right now you can just use your iPad application to connect into your resources and conduct, and use most of the applications that you will be using on a daily basis. It's a big plus for us and for the user. They just love the fact that they have a small application, a small tablet, and one application to deal with. Everything else is handled from our end.

Gardner: So this is productivity for you, because you're supporting more users in the way that they want to work, probably with fewer resources when it all comes down to it, when you can consolidate. And then they're getting that added productivity of access to the data and the apps wherever they are, whenever they want to use it. So it's kind of a win-win.

Ramirez: Absolutely. From a management perspective, it’s great, it's awesome, getting apps for a better application and a better system to have deployed.

We've had nightmares throughout the years, lost laptops with very sensitive information. We have to protect users, and there are so many things that goes on on a daily basis. Now if there's an issue, it just takes seconds to correct, and the users just go back in and continue doing their work.

From a management perspective, it’s great, it's awesome, getting apps for a better application and a better system to have deployed.

Gardner: What’s been the return on investment (ROI) for you moving in these directions?

Ramirez: The ROI has been huge. We used to buy 10-15 servers on a yearly basis. Now, we just procure our servers every three or four years. We get hit from left and right with different departments. They have different needs -- we need 10 servers, we need 15 servers. We no longer have to procure those and spend all that money right away. We have resources allocated for it.

So the ROI has been there. As a matter of fact, we did research two years ago and have discovered that on our initial investment for both data centers the return on investment was 24 months, which was probably more than we thought. We didn’t realize how fast we were able to recoup our investment and how much flexibility we had moving forward.

For DR, we were coming from a situation where we had nothing. Everything was in one data center, and if a storm came by, we would basically be out of business. Having a fully automated system in place is huge for us.

Very important

I don’t even know where to start and what number to tag this with, but it is very important to us. It has helped with insurance cost. It has helped with just the ease of everyone knowing that if something happens near our stadium, we have our data and we can still conduct business moving forward.

We are buying fewer laptops. We no longer need all the extra services that with 250 laptops can get very costly. Instead of ordering an $1,800 laptop for a user, which normally lives 12-24 months, now we can just buy an iPad or have the users use their own iPad, and connect. That makes a big saving for us going forward.

We have very big plans to move ahead and try to be 99 percent virtualized. Private cloud is very important. It's high for us. We keep growing, and our needs and demands are huge. So we definitely have a lot of plans.

We have very big plans to move ahead and try to be 99 percent virtualized. Private cloud is very important.

Coming down the line, we're counting big on the upcoming vSphere 5 and SRM 5. That’s going to help us tremendously. It has some features there that are must-have for us.

Again, moving forward, application development and everything will hopefully be based on a thin app and ease of use and administration for our users. VMware View is another big component for us.

Listen to the podcast. Find it on iTunes/iPod. Read a full transcript or download a copy. Sponsor: VMware.

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Case Study: How Cloud Extend for Salesforce Integrates complex sales efforts for PSA Insurance & Financial Services

Listen to the podcast. Find it on iTunes/iPod. Read a full transcript or download a copy. Learn more. Sponsor: Active Endpoints.

The cloud helps make business services more easily available, but what about making those business processes from a variety of service origins part of a cohesive workflow or complex objective? What's still needed is a way for those closest to the work itself to create business process integration, extension, and coordination regardless of the services.

The latest BriefingsDirect discussion examines a case study that shows how account executives for a financial services firm are integrating their sales and fulfillment efforts across Salesforce.com customer relationship management (CRM) resources, as well as a diverse set of expanding cloud and legacy services.

Hear how it's done from the IT Director and the Marketing Director at PSA Insurance & Financial Services as they build greater control and management of diverse and dynamic sales and consulting processes using Cloud Extend for Salesforce, a new solution from Active Endpoints.

These managed processes, built on a range of business development and consulting tasks, bind together critical sales and financial product delivery goals to better support long-term business engagements. The panel to describe this achievement consists of: Andrew Bartels, IT Director for PSA Insurance and Financial Services; Justin Hoffman, Marketing Director for PSA Insurance and Financial Services, and Eric Egertson, Vice President, Business Development and Strategic Accounts at Active Endpoints. The discussion is moderated by Dana Gardner, Principal Analyst at Interarbor Solutions. [Disclosure: Active Endpoints is a sponsor of BriefingsDirect podcasts.]

Here are some excerpts:

Gardner: It seems at PSA you have been thinking about how to do things better, and that you’ve had success with Salesforce.com. What was still missing from the way in which you engage with your clients?

Hoffman: We actually had tried a Salesforce implementation two or so years ago and we found that our adoption was not nearly what we would have hoped it to be. There were several reasons for that. One, we really didn’t customize Salesforce to the degree that we needed to. Two, there wasn't integration with any other systems. And, three, the participation was voluntary. There was some interest, but it was somewhat sporadic, and overall the initiative just petered out.

We did know that that having right CRM for PSA is critical for how we do business and could help us capitalize on some lost opportunities and better manage our existing client base.

We didn’t give up on the effort. We said to ourselves that we needed to get this right the second time. We were open to staying with Salesforce and we were open to looking at other CRMs, but we’ve learned a lot on our first round and we knew that we had to do better the second time.

Gardner: What is it that you really weren’t getting from this that you wish you had?

Hoffman: We were sitting in a room with the whiteboard and said, "What should this thing be. What should this CRM system do for us, our account executives, our sales and service people that are going to be using it?" One of the things that really rung through was that it needed to be easy and unintimidating.

We have some people who are very progressive technology users and they very much embrace it. And we have other portions of the population for whom there is a bit of an intimidation factor.

We have some people who are very progressive technology users and they very much embrace it. And we have other portions of the population for whom there is a bit of an intimidation factor. We knew that if we did it right, we'd have to find a way to wash that away, put things in plain English, make it simple and intuitive for people, and that would help drive adoption.

We're an independent, multi-discipline financial services firm based in Hunt Valley, Maryland. We also have two satellite offices, one in York, Pennsylvania and one in the DC Metro Area, and we do a lot of things for a lot of different people.

On the business side of the house, we provide property and casualty insurance for businesses. We’re also brokers and consultants for employee benefit plans and retirement plans.

For individuals we offer every kind of insurance you could ever need, from homeowners and auto, to life, long-term care, and disability. We also have a private-client division that serves very up-market consumers, those that have multiple homes, exotic cars, special collections, and need very sophisticated insurance programs and advice. Finally, we also offer wealth management services.

Different audiences

We do a whole lot of different things for a whole lot of different audiences. For organizations that are laser-focused, that are in one industry, that serve one specific audience, I’d imagine pretty much everything is easier for them. We need to develop systems, protocols, plans, sales systems, and things of that nature that can work in all these diverse circumstances to support these different clients and support them all well.

Gardner: As IT Director, what is it that you did in terms of trying to fulfill this, and how did you end up being able to get closer to the true vision?

Bartels: As Justin has very eloquently put, we really present a value proposition at PSA, which is a truly integrated set of services. That’s a phrase or a word that you hear a lot, but unfortunately, in my experience, a lot of organizations fail to deliver where the rubber meets the road, which ultimately is the actual transactional systems that they have in place.

What you find is that a lot of those systems are completely segregated, and we at PSA faced that challenge. We obviously have a lot of transactional systems on the back-end to support various business units that present the services to our clients.

Ultimately from Justin’s vision and from the corporation’s vision, we wanted a system that could bring all of this together. We went out and looked at a number of different products knowing all the time that we had Salesforce.com in house, but that we had a troublesome initial roll out. Ultimately, we came to a conclusion that Salesforce was the right product for us, but we really had to roll it out in a different way, shape, or form.

Part of Justin’s vision, though, was that he and Senior Vice President-Business Development Ed Kushlis felt that even though Salesforce is a relatively easy user interface, because of the challenges that some of our users have, they felt it had to be easier. They felt it just had to, as I like to say, lead us down the garden path.

So Justin and Ed brought the idea to me of what we call a "Warm-up Plan," and I'm sure Justin is going to address that more, but the more I looked at this, the more I realized that, given native Salesforce functionality, what they wanted to do wasn’t going to be possible. We weren’t going to be able to do it without a lot of custom code.

In my past experience, when you attempt to custom code, a lot of money is invested upfront to develop a relatively static product.

This was a path that I wasn’t really all that keen to go down, because in my past experience, when you attempt to custom code, a lot of money is invested upfront to develop a relatively static product. In my experience, the idea didn’t stay static. Ultimately, people wanted to change what had been created.

So you’d invested a lot of money to create something that then had to be changed and modified again, and I was very, very against this concept. Justin, would you say we had our moments there?

Hoffman: That’s right. We felt like we really knew what we wanted. A very large portion of what we do is work with the salespeople to coach them, to help them make sure that they stay on top of their opportunities, and really work their leads to fruition.

So we felt so strongly about it, but when we were presenting Andrew with our need, there didn’t seem to be an option that made sense. Once he educated us in what it really meant to bring to life our vision, we started to get our heads around it and to recognize that it wasn’t going to be something that we weren’t going to be able to build one time, invest all of these resources in this code and development, and then never be able to touch it again, never be able to evolve it.

Fluid and flexible

Just knowing us, knowing our organization, the way we're opportunistic, the way markets shift, the way dynamics change, we needed to be fluid and have flexibility. Andrew helped us understand how we were really going to be painting ourselves into corner, if we were to push forward with the custom code route.

Gardner: So Andrew, what’s fulfilled that need for simplicity and ease of use?

Bartels: First, we looked at a product from Salesforce, which was something called Visual Process Manager, which I saw demoed at Dreamforce in San Francisco last year. I was very excited when I initially saw it. After we delved into it, for various reasons, including the maturity of the product and the fact that it wasn’t a true cloud-based product, we soon realized that Visual Process Manager at that time wasn't going to fulfill our needs. We really needed something that was fully integrated into Salesforce.

As an organization, we spent a tremendous amount of time and resources getting our users comfortable with the Salesforce UI. I had obviously invested a lot of time myself in looking at options.

Finally, I'm quite a follower of Twitter. There are a number of people that I follow that I respect. I came across a tweet about something called Cloud Extend. It was literally one tweet by somebody that I follow on Twitter.

I can’t emphasize enough how important driving adoption is when it comes to the implementation of any CRM, never mind Salesforce.

I clicked through and there I was on the Cloud Extend website. As I read about it, I suddenly said -- obviously dealing with a webpage I clicked through to from a tweet -- "You know what, if this does what they said can do, this is exactly what we need in order to achieve the goal of creating warm-up plans" that Justin referred to earlier.

I filled out the web form, and the next day in the office, I called Justin and Ed into my office and said, "You know guys, I’ve got to show you something." I must admit I was almost giddy. I said I don’t want to get ahead of myself yet, but if this product does what I think it does, they’ve nailed it. This is exactly what we at PSA have been looking for to help drive adoption.

I can’t emphasize enough how important driving adoption is when it comes to the implementation of any CRM, never mind Salesforce. At PSA, we're dealing with very successful individuals. We're not dealing with anybody that’s got a broken system, that’s doing something that doesn’t work. Every single one of our associates has been successful in his career. So our objective with rolling out Salesforce was to improve their effectiveness, to make them more productive.

As Justin mentioned earlier, adoption is tough. When I looked at what I saw is the potential of Cloud Extend, as it was defined there, I thought "Wow, this really is going to help us drive adoption across the organization."

Gardner: Eric, how did Cloud Extend for Salesforce come about?

Moving to the cloud

Egertson: Andrew’s comments here really illustrate the benefit of moving to the cloud for business process management (BPM) software like the software that Active Endpoints develops.

Active Endpoints has been developing a commercial-grade process automation platform called ActiveVOS since 2003, and our customers use this process automation platform to develop really high-value applications.

The barrier, though, to broader and faster adoption of products like ActiveVOS is that with on-premise software you have to go through acquiring the licenses and getting the capital expense approved and you also have to go in and interface ActiveVOS to the systems that you want to use in your process automation.

By moving to the cloud, there are two big benefits, and we’ve heard Andrew talk about those so far. One is that you can get started at much lower cost and much faster because you don’t have to provision hardware. You don’t have to acquire licenses through CAPEX expenditures, but probably, even more importantly, Active Endpoints does the interfacing of ActiveVOS to the systems that you want to use for process automation.

So with our product, Cloud Extend for Salesforce, which we formally introduced at Dreamforce at the end of August 2011, we built that product on top of the commercial-grade platform, ActiveVOS, and we pre-integrated it with the Salesforce web services interfaces.

They don’t have to buy licenses, but more importantly, they don’t have to integrate the services to the systems they want to use in their process automation flows.

So people like Andrew and Justin can get started with the product very quickly. They don’t have to worry about any integration or interfacing. They can just start building out their process automation flows, testing them and, as Andrew said, you can quickly change those around. Those interfaces use all open standards.

So they are very reusable, and it gives you a flexible platform, where Andrew and Justin can tweak, change, and modify their process flows. It’s all done in the cloud. They don’t have to buy licenses, but more importantly, they don’t have to integrate the services to the systems they want to use in their process automation flows.

Gardner: When I first saw the demo of this, what jumped out at me was the fact that you don’t know that you're in Cloud Extend. You feel like you're still in Salesforce. What is this visual benefit?

Egertson: Andrew, and Justin can speak to the user experience as well, but the user experience, when using Cloud Extend, is directly integrated into the Salesforce.com UI. As Andrew mentioned, you don’t have to go out of Salesforce at all. As you're working on something in Salesforce, there is a section in the Salesforce screen, where you can choose what type of process flow you want to run as the user. You just click on a button and then you're stepped through a series of screens, all of which appear within a pane within the Salesforce UI.

Direct integration

Developing the process flows is also integrated directly into the Salesforce UI. You go in and, through a set of guidance trees, set up the series of steps that you want to walk a sales rep or producer through. The sales manager, somebody like Justin working hand-in-hand with Andrew, do that directly in the Salesforce user interface.

Hoffman: We believe ease of use to be a huge driver in adoption, being able to just ask questions in plain English, present simple answers for them to choose or select, which then drives the next set of questions that they’re going to be asked.

It just couldn’t be easier. It couldn’t be less intimidating. It washes away any anxiety that people might have or any perception of "This Salesforce thing is a pain to use." The way that you’re able to craft these guides is so straightforward, so easy to use, all that goes away.

I liken it to the concept of the airport kiosk. When you go to check-in, you punch in a few pieces of information and all you’re doing is answering the questions that are presented clearly and simply on the screen. There is actually very complex work that’s being done behind the scenes, but you, as the user, don’t have to have any comfort level with technology, it's just there. There are questions. You answer them, and all the information falls into the right place.

This thing is really easy to use and we’re getting all the information where it needs to be.

That concept is working for us and Salesforce and it just drives the general perception of, "This thing is really easy to use and we’re getting all the information where it needs to be." All of the reporting, all of the workflows, all of the views are populated sufficiently to support how we sell.

These workflow guides are really good about prompting people to take action, giving them options as far as how they’d like to warm up this lead. Use your discretion as a salesperson. Are you going to make a phone call? Then go ahead and here’s some coaching for that phone call. Are you going to send an email? Well, we make it really, really easy to send an HTML email through Salesforce. Are you going to invite them to one of our proprietary events? We make it really easy to do that through our guides.

Guiding, not forcing

But, we don’t tell them how to heir prospecting and we’re not directly reaching out to the prospect without our account executives because they know the relationship. They know the stage it's in. They know the conversations they’ve had with the people. They know their pain points. We’re really guiding them, but we’re not forcing them. We’re not overriding. We’re respecting the fact that these are seasoned sales professionals.

Bartels: The corporate IT departments really have a lot going on. Nobody is sitting around doing nothing. One of the challenges that many organizations confront, when marketing or business development comes to them with an IT need, is where does that fall in the priority queue when it comes to the priorities that are in front of IT?

One of the things was really refreshing about Cloud Extend is that it literally is as simple as point-and-click. I am sure a lot of people listening to this have installed apps from the Salesforce AppExchange. Getting Cloud Extend up and running in your Salesforce Org really is as simple as installing one of those managed packages from the AppExchange. You click through it, and boom, bang, it's done. It was amazing to me that it was as easy as they said it would be, and it truly, truly was.

Cloud Extend, to my amazement, was truly point-and-click. You don’t even have to install a separate application onto a PC.

It's as simple as dropping the Cloud Extend UI into the various object pages that you’re looking to use it in. Something that is really worth mentioning is that Cloud Extend is truly cross-object. You get a lot of apps out there that you can use in leads, but you can't use in accounts, or you can use them in opportunities and you can't use them in leads.

One of the things that was amazing about Cloud Extend is they thought through that. They said, "Look, this workflow engine can be applied to almost any object in Salesforce and we need to make it point-and-click easy to get it in and make it happen." From my point of view, it's the ability to easily deploy an application this powerful straight into the Salesforce Org and then be able to hand it over to the marketing and business development folks and say, "Go wild."

Justin and I have had a conversation backwards and forwards about how much support they would need. The wonderful thing is that when you install Cloud Extend straight into Org, it comes with a set of predefined guides that just work. You can pull up the guide design and say, "Okay, how did they do this?" It literally is point-and-click.

Salesforce likes to sell itself as 80 percent clicks, 20 percent code. I can say that Cloud Extend, to my amazement, was truly point-and-click. You don’t even have to install a separate application onto a PC. The entire experience, both from the user point of view and from the designer point of view, exists within the Salesforce UI. It is simply another app to click and select.

It ties into all your Salesforce profile permissions, and it just works. From an IT point of view, from having to support the myriad of applications that we support, I can't tell you how refreshing it is. I think Justin would agree with me here. If you can design a process on a whiteboard, you can most likely design a process using Cloud Extend and the guide designer within the UI of Salesforce.

Simple deployment

So from our point of view, the fact that we could deploy a workflow tool with the lineage that Cloud Extend has, coming from its roots in Socrates and things like that, and plug it in without deploying a single server or installing a single application was amazing for me and somebody that was responsible for prioritizing the tasks that my team need to focus on.

This was truly eye-opening and I said to Justin that when I see products like this I really realize that the cloud is coming of age. This is the future and this is what the future will look like.

Hoffman: To piggyback on what Andrew is saying here, I'm really excited that I'm going to be able to sit down with, say, our Senior Vice President-Business Development Ed Kushlis and talk through new ideas, changes in markets, and new opportunities. We can sit down with these guides and play with them, and you don’t have to have an IT background. I don’t know anything about code and I don’t have to, all I have to understand is what opportunity we’re seeing in the market and how our people sell.

We can get a good way down the road of building a guide without having to grab Andrew and engage him at least on the front-end. He is someone at the organization whose time is in very high demand. He is not your average IT person and when I say that, he has got a great strategic mind. He has got good business sense, it's true, and there are a lot of different people from the ops side, from the business development side, from the administrative side who are coming to him and asking for his help, his assistance on how we streamline things and how we can be smarter about things at PSA.

So if Ed and I have to get in that queue, well, we have to get in that queue. Alternatively, we can get right in, work on these guides and get ourselves a good way towards creating these new guides that will be dropped into Salesforce. If we can’t get it 100 percent ourselves, we are going to get it pretty darn close. That gives us a lot of freedom and a lot of agility.

At Dreamforce, at the end of August 2011, we'll make Cloud Extend commercially available.

Gardner: Where do you go next with this?

Egertson: At Dreamforce, we made Cloud Extend commercially available. We've been working with PSA in our early access program and, as you’ve heard, they’ve had some success there rolling out the warm-up plans using Cloud Extend. I really liked what Andrew said toward the end of his last comment there, where cloud computing is what enables us to deliver the ease of use that customers always expect, but oftentimes do not receive.

If we had to roll this out all on premise and then have somebody like Andrew assign a development team to make the interfaces work, that’s a big barrier to adoption. That’s a big delay. By delivering this in the cloud, pre-integrated with Salesforce, it all just works. We’re able to get our customers up and running quickly.

Cloud-enabled

All of the Cloud Extend technology is already cloud-enabled. It’s all based on open standards, knows all about web services. It’s multi-tenanted, so that we can host hundreds of customers and all of the data is segregated. It’s mobile-enabled. All of Cloud Extend guides will run on an iPad just as well as on laptop or a desktop and it’s socially enabled.

We work with Salesforce Chatter. We work with Jigsaw, and we can work with LinkedIn. So all of those things are there, as far as where we will take the product. We will continue to develop along the lines of social and mobile, but we also have the capability to pull in other SaaS applications.

Just as we’ve improved the usability and the sophistication of what you can do with Salesforce, we plan to do that for other SaaS applications as well. Cloud Extend for Salesforce is built on a commercial-grade development platform, and we can very easily, almost trivially, port this to other SaaS applications to enable process automation within any SaaS application.

In terms of where we'll take this, we'll keep our eye on the trends in mobile computing and social computing, as well as the plethora of SaaS applications that are out there. We'll be enabling process automation and workflow in those SaaS applications as well.

Even today, as we work with PSA and other Cloud Extend for Salesforce customers, if they need to reach out of Salesforce to another SaaS application or to an on-premises application again because the underlying technology is our ActiveVOS process automation platform, it’s very easy for us to enable that.

You can envision, in the very near future, an ecosystem where Cloud Extend is set up to integrate with an interface to many different SaaS applications.

You can envision, in the very near future, an ecosystem where Cloud Extend is set up to integrate with an interface to many different SaaS applications. With a little consulting work from us, we're able to interface that to on-premise applications, which would be to integrate across cloud applications, from a workflow or process automation perspective.

You would probably always have one SaaS application as your host, say Salesforce, but it would be pulling data from other systems, perhaps NetSuite, if it’s an ERP system, or Workday for HR information. But, the host SaaS application could be one of those other applications that pulls data from Salesforce.

The future, and it’s a near future for us, is that we will enable integration and process automation across SaaS applications in the cloud.

Gardner: Do you have any either anecdotal or quantitative measurement that you can point to?

Sales statistics

Hoffman: It's a little bit early to point to that, but when you talk about the metrics that mean something to us, there’s something that we knew to be intuitively true that I came across in an article, and I’d like to read it to you. These are just some quick stats regarding sales, what it takes, and where actually sales come from. They very much back up the concept of the warm-up plan.

Again, these warm-up plans not only help guide people towards what they are going to do, but they are going to keep people on track. They are going to keep people diligent about their follow-up, so I’ll read them off to you quickly.

About 48 percent of salespeople never follow-up with the prospect, these are not industry specific or PSA specific, they are just general sales stats. So, 48 percent of people never follow-up with the prospect. Only 25 percent make a second contact. Only 12 percent make three contacts. Only 10 percent make more than three contacts.

Now, if you look at where sales come from, only 2 percent of sales are made on the second contact, 5 percent on the third, 10 percent on the fourth, and 80 percent of sales are made between the fifth and twelfth contact.

Knowing that to be true in our guts and then to see these stats that we have just recently come across, it makes us very certain that having these warm-up plans and the other guides that are going to be available to us now are going to be huge difference makers for PSA.

Bartels: From my point of view, I look at the amount of investment of time and resources that we have put into integrating our back-end systems and bringing data that is critical to the whole sales process into Salesforce, any tool, Cloud Extend being one of them, that really allows us to get the maximum return on investment on what we have done with Salesforce is huge. It’s absolutely huge.

Anything that helps and makes that process simpler is going to drive return on investment.

Anybody who's used Salesforce, customized Salesforce, and added custom fields that are specific to their vertical realize very quickly that Salesforce can become a very deep product. Cloud Extend really enables us to ensure that our account executives, even though they may not be technology efficient, are really applying best practices when it comes to utilizing Salesforce and collecting the information that we as an organization know is absolutely critical to collect.

So anything that helps and makes that process simpler is going to drive return on investment, both in Cloud Extend, but most of all in the huge investment that we've put into Salesforce. That’s just a big, big plus for us at PSA.

Listen to the podcast. Find it on iTunes/iPod. Read a full transcript or download a copy. Learn more. Sponsor: Active Endpoints.

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Dynamic discounting gives companies new visibility into cash flow to improve the buying-selling processes

Listen to the podcast. Find it on iTunes/iPod. Read a full transcript or download a copy. Sponsor: Ariba.

Recent trends are driving savvy companies to improve how they manage their supplier and buying processes using dynamic discounting.

The latest BriefingsDirect discussion focuses then on how discount management and dynamic discounting can dramatically improve how enterprises procure by better managing the buying process, improving cash management, and gaining an analytic edge on constantly improving processes through cloud-enabled automation.

To learn more about how buyers and sellers can benefit from such improved business processes around cash management in the procurement phase we interviewed Drew Hofler, Senior Manager, Working Capital Solution at Ariba. The discussion is moderated by Dana Gardner, Principal Analyst at Interarbor Solutions. [Disclosure: Ariba is a sponsor of BriefingsDirect podcasts.]

Here are some excerpts:

Gardner: In a long-term slack economy, finding new business efficiencies is not really an option.

Hofler: We've seen a lot of growth in this area, particularly over the last three or four years with another wave of economic bad news coming up now. In 2008, when the credit crisis first hit and supply chains became dramatically impacted, you had a lot of suppliers who found their access to credit severely curtailed. You had a lot of buyers who were using the opportunity to enhance their cash flow and their cash position by extending terms with suppliers.

So you had kind of a perfect storm of buying organizations pushing out payment terms and supplying organizations not able to fund those longer terms via traditional credit means, because those were being pulled away. So that created a real cash flow crisis within supply chains.

... If you look at that in conjunction with suppliers still having their access to credit curtailed, it's not as bad as it was at the height of 2008, but it still is far from where it was pre-2008 in terms of their access to credit.

Liquidity risk

You have this situation where there is significant liquidity risk in the supply chain due to suppliers who are not in as good a cash position -- smaller and medium sized suppliers typically -- facing a downturn in orders, facing a downturn in the economy, and not having necessarily the cash buffer or access to credit to weather that.

On the other hand, you have buyers who have massive amounts of cash that are sitting in banks, where they are earning next to nothing. In fact, two days after the S&P downgrade, Ben Bernanke and the Fed stated that they'll probably keep rates down at around zero for the next two years, until mid-2013.

... People are looking for everything to make their companies leaner and better and capture all the value that they possibly can.

Dynamic discounting is really a win-win. There is value to both sides [of purchasing relationships], and it's not just one imposing their will on the other in order to make their company better at the expense of the other. There are significant and tangible benefits to both sides when they do this.

Some of them will average around 24 percent annualized return on their cash. Others will average less. It depends on how they want to approach their supply base.

I think that's why we've seen so many companies pick this up. We've had growth rates of 60 percent or so in our buyer customer base. Our customers, shortly after going live, have been seeing growth rates in their opportunity and discount capture with their suppliers of 60-80 percent month over month. Obviously that will stabilize at some point, but I think what that says is that huge growth curve, particularly in the first year or so of doing it, speaks to the fact that there is this latent opportunity out there.

We have customers and some of them will average around 24 percent annualized return on their cash. Others will average less. It depends on how they want to approach their supply base. Many buyers will take the opportunity, when there's an opportunity to earn very significant returns on their cash of 36 percent or more from a certain part of their supply base. Typically, the longer tail, the smaller suppliers, will take advantage of that.

But others, especially more recently, are realizing that they can take a nuanced approach to this and look at their entire supply chain and approach each segment differently.

So if you are a long tail of suppliers that otherwise would take P-Card or do things like that, you can get a large amount of return on your cash. But on the other end of your supply chain, your goal as a buying organization with more strategic suppliers is not so much to wring all the value in terms of return on cash that you can out of them, but to make sure that they are there for you when you need them, to reduce the liquidity risk.

So a lot of buyers are taking the cash that they have, using this product, and offering the opportunity to their more strategic suppliers to gain access to the cash piles that the buying organization has, but at rates that are much lower, that are closer to what they might be able to get out in the marketplace from a bank.

No burden to supplier

Those are more around 6 percent, 4 percent annualized, but still much better than the buying organization gets on their cash sitting in a money market account earning less than a quarter of a percent, or close to zero right now. But they do it in such a way that does not add a burden to their supplier.

I'm seeing buying organizations take a blended, more nuanced approach to using this. The great thing about the tools online is that they have full flexibility to do that, to group their suppliers how they wish, to offer different rates to different suppliers, to control the amount of cash that they make available, and they are really starting to take advantage of that.

When you talk about dynamic discounting, what we like to say is that it enables collaborative cash flow, and that collaboration is really what the cloud, social networking, business social networking, is really all about. It's about communicating, communicating need, and collaborating over solutions.

What I see coming down the line is that, as more and more network or cloud effect takes place, where suppliers who are on the Ariba Network, for example, have multiple buyers participating in this and so they are doing this across different buyers, it becomes more of a norm.

It becomes something that is a normal part of business. I think we're starting to see that normalized, because dynamic discounting is a very fairly young industry still in terms of overall business practices and processes. But we're starting to see it become more of a norm.

When you have that happening over the cloud, when you have that kind of collaboration of information going back and forth, you have more suppliers becoming normal, we'll see buyers learning and having access to aggregated data, trends, and behaviors that show them how to approach this, because they can see how it has worked across industries in the past, and then supplying organizations finding it much more normal.

Social media

I see it tying into the communication methods that are becoming so prevalent in social media and in the cloud, just basically to give suppliers access to the opportunity and open up the opportunity. We've seen such growth when buyers become active and make this available to suppliers, simply because it's tapping into the late need that suppliers didn’t know they had a fix for, that they had a solution for, in terms of accessing this cash.

As that becomes more available and more known through the cloud, through the collaboration, the suppliers hear about it more, they realize they have the access. Just that ability for it to go viral is what's really going to happen more and more, as we go into the future and it kind of snowballs.

In the meantime, you have this big dichotomy, where you have buyers who have lots of cash earning basically nothing on it in the short-term, and their suppliers who don't have the access to that cash and have longer terms extended to them. When they do get credit, there are some pretty restrictive covenants with their banks and they're paying a little bit higher rate than they would otherwise. You have this significant liquidity risk.

All of that is to say that what we're seeing is that buying organizations are starting to realize that they can take advantage of the fact that they have all this cash and suppliers who have this need to essentially become the bank and put that cash to work.

Organizations are starting to realize that they can take advantage of the fact that they have all this cash and suppliers who have this need to essentially become the bank and put that cash to work.

They earn a greater return by paying suppliers early in exchange for a discount -- so they're earning a better return on their cash than it would have sitting in the bank -- but they also remove some risk from their supply chain by injecting liquidity into their supply chain, giving suppliers access to liquidity that they might not have otherwise in a way that, one, is not debt to their supplier, and two, improves their working capital position by lowering their days sales outstanding (DSO), when they get paid early on that receivable.

We are seeing all these things line up to create a perfect opportunity for both buyers and suppliers to collaborate over these cash flow needs that are being created by the economy right now.

Gardner: I suppose the solution then at the high level is fairly clear, but how to implement that becomes the issue. So many organizations have disparate ways of managing these issues, managing their procurement and supply chain, often manual processes still at work.

How do you allow for the suppliers to create an incentive for this improved discounting and improved cash flow for them, and how do they then manage and instantiate this and make it repeatable?

Hofler: It’s a great point, because a lot of organizations in this realm of payment terms, agreements with suppliers, paying suppliers, approving invoices, and all of this type of thing, is still a very manual process in so many organizations.

I have looked at buying organization and analyzed their vendor files and at times found literally hundreds of different payment terms to their suppliers, where a best practice would be to have maybe five to 10 that are pretty standardized, unless there happens to be some great exception. People are just making terms with the folks that they know, buyers knowing the salesperson on the supplier side, and agreeing to specific terms that may have nothing to do with the corporate objectives or strategy.

Getting visibility

In order to reap this opportunity and understand what's happening a company needs to get visibility into what's actually happening. That’s where Ariba’s cloud technology allows companies to pull this through the Ariba Network and gain visibility into what's going on and automate the process greatly.

Once they have that visibility, on the one hand, they realize they can get their terms and their payment under control. A lot of times, a company will have what's supposed to be a standard term, let’s say 45 days, 60 days payment, but a supplier is being paid immediately. Somebody called in to the company and the supplier said, "I can't wait this long for my cash. Can you pay me early?" And the person on other end of the phone changed the payment to "immediate" in the ERP for the buyer.

That’s a cash flow waste right there. You're paying immediately when a buying organization could be holding up their money for 45-60 days, or exchanging that immediate pay for some value in the form of a discount.

We're seeing that companies are getting control of that process through automating it, through sending POs through the Ariba Network to their suppliers, where it's centralized and visible to corporate as a whole, bringing invoices back in to accelerate the approval process, and also bringing it under some control and visibility as well.

That opens up the opportunity that we're talking about in terms of collaborating over cash flow, because what you have are these invoices coming in and being approved in a rapid manner, because they're coming in clean. The Ariba Network assures that invoices come in clean and they're being approved quickly. Now you have invoices that are approved say on the fifth day after receipt, but not due until day 60 after the invoice date. That time gap is where the collaboration can come in.

These invoices are coming in and being approved in a rapid manner, because they're coming in clean.

When it is in the cloud online, the buying organization has visibility to all of their suppliers, being able to offer early payment and being able to use their cash to earn greater returns and offering early payments. But all the suppliers then have visibility into that opportunity as well. And the right party at the supplier company that has visibility into that.

When you think about early payment, discount terms, we think of the classic 2/10, net 30 that’s negotiated into a contract at some point. Think of who is having that conversation? It's typically procurement and the salesperson on the side of the supplier. That salesperson on the side of the supplier really is not all that concerned about cash flow. That’s not their metric. It's not what they're measured against, and they don’t really care.

We find that not too many companies get early payment discounts into a large amount of their spend due to that. But when those invoices have come in and have been made visible through this online portal for suppliers to see, who is it at the supplier that now is looking at that? It's the accounts receivable (AR) side. It's the controller. It's the treasurer. It's finance on the side of the supplier that cares about cash flow, that realizes when they need enhanced cash flow, and has the ability to make a decision over that.

We're seeing a huge increase when we deploy clients between what they had originally captured in contracts in terms of early payment terms, versus what they're now able to capture, once they put this in place with the Ariba Network, where the right audience and their suppliers can come in and see that.

So those things -- automating the process, getting visibility into it, getting your process under control so that everything is done in a timely manner to create the opportunity, and then having an online portal visibility for your supply base to see the opportunity -- are key to accessing it.

Business process management

Gardner: So I think that at a very high level we're talking about better business process management (BPM), but across disparate systems of record, different organizations, and the role that Ariba plays, has the opportunity to cross among or between them, but automate, give them insight and visibility at the same time. So that’s pretty cool.

Now, I know the name of your product that you apply to a lot of this is called Ariba Discount Professional, but I have also heard it referred to as "dynamic discounting." What does that really mean? How does that work?

Hofler: The market term for us is Ariba Discount Pro, but the broader vernacular for the market is dynamic discounting or discount management. Dynamic discounting has two aspects to it. One, it's the dynamic nature of it, giving the supplier the ability and control to say when they want to get paid early, when they need the money, to have this sort of automated online conversation or collaboration with the buyer to agree on early payment terms, on an invoice-by-invoice basis.

The supplier can say they don’t need early payment all the time, but there are definitely business cycles, financial cycles in the quarter, or business cycles and seasonal suppliers, where they may have to purchase a lot of stock for an upcoming season, or they might want to purchase some equipment. Then, they need to accelerate some cash flow in order to do that.

The supplier can dynamically say, "Here's what's available to me, and I'll take that invoice, that invoice, and that invoice on an early payment. I agree to those terms." And boom, it's done. So it's basically like an ATM for them. They can choose which ones they want.

The other aspect of dynamic discounting is the fact that it allows for a fair and prorated discount rate to the supplier from the buyer.

The other aspect of dynamic discounting is the fact that it allows for a fair and prorated discount rate to the supplier from the buyer. Before, in the traditional 2/10, net 30 and 2/15, net 45 that a lot of companies have, the structure is such that if you can approve the invoice and pay by day 15, you take 50 percent discount. If you can't approve it by day 15, then you wait and you pay the full amount of the invoice on day 45.

With dynamic discounting and our Discount Pro product, buyers are able to offer to their suppliers a prorated discount that says, "We can pay you early from the moment this is received or from day 15," whatever fits the buyer’s needs, and then prorate that say 2 percent discount down to 0 percent on the net due date of that invoice.

It's fair to the supplier. If they are getting paid 30 days early, they pay a higher discount. If they are getting paid 15 days early, that discount gets lowered in such a way that is fair to that supplier, and yields a constant and consistent return on cash on an annualized basis to the buying organization.

So for example, the 2/10, net 30, that’s the classic textbook example is a 36.5 percent annualized rate of return. So at 20 days early on day 10, it's a 2 percent discount; at 10 days early, 20 days after the invoice is received, it's a 1 percent discount. Both of those equate to 36.5 percent annualized return on cash for the time period that the cash was deployed.

The buying organization is ensured a consistent return on their cash deployed. The supplier is ensured a fair system control discount based on when they actually receive the cash. So those two pieces, that slope line and proration, as well as the dynamic ability for a supplier to achieve early payment on an invoice-by-invoice basis based on their business need are the things that really define dynamic discounting.

Substantial returns

Gardner: I have to imagine that we're talking about very large organizations, very large procurement sums, and therefore the returns can be quite substantial. It makes sense of course for the buying organization to be able to do the best they can with their cash flow, and getting a discount would do more for them than letting it sit in a low interest-bearing account, as you pointed out.

But what really intrigues me about this, Drew, is for the suppliers, where there is complexity in inventory and there is transportation and logistics issues, it gives them a chance to really analyze some of the timing that works to their advantage and then incentivize based on these discounts as to how that could then benefit them.

There seems to be a huge efficiency, maybe difficult to measure in dollar terms, but a huge efficiency potential for these suppliers when they exercise this dynamic discount.

Hofler: I would agree with that. There is just a whole ton of benefits to the suppliers, because as you say, they have full visibility into when they are going to be paid, how much, and on what, and full control over that.

As I mentioned before, it's like an ATM for them, if they need it, where they have access to this pool of liquidity, depending on the things that come along. If anything like logistics, transportation, or added gas prices spike for a week or two and their cash flow has to increase, well, because of that outlay, they can access this early payment and this cash in a way that's very beneficial for them, because suppliers have some access to some cash flow. It's not completely shut off for them. A lot of suppliers will take credit cards or P-Cards. A lot of them will access lines of credit and things to that effect.

It's often cheaper than they can find financing elsewhere, and it does so in such a way that lowers their DSO, because they're basically turning their assets of a receivable into cash.

But those do two things to them. One, P-Cards are extraordinarily expensive in terms of the exchange rate that they have to pay. And two, lines of credit and that type of thing add debt to their balance sheet basically.

With this type of dynamic discounting, suppliers access this cash flow in a way, depending on what the buyer offer might be or what the buyer might accept in terms of the counteroffer from the supplier, that is typically cheaper than than credit cards. It's often cheaper than they can find financing elsewhere, and it does so in such a way that lowers their DSO, because they're basically turning their assets of a receivable into cash. It lowers their DSO, which is great for their working capital metrics and cash convergence cycle.

And it does so in such a way that adds zero debt to their balance sheet, because it's just transferring one asset into another from a receivable into cash. So definitely a lot of supplier benefit.

Discount Pro is based on the Ariba Network platform. From the buying side, it simply requires the ability to send a message from your ERP -- we call it a payment proposal message -- to the Ariba Network. It requires a connection, and there are a number of ways to do that.

We have standard adapters for most of the large ERPs -- PeopleSoft, Oracle, SAP. We've integrated with JD Edwards, Lawson, and various others. Simply installing this kind of middleware adapter takes the feed of data from the ERP, translates it into the Ariba cXML. You put that in place. It's basically that middleware to communicate that information back and forth from the Ariba Network, and that's essentially it.

There obviously is some work involved in that, but it's so much lower than on-premise type of work that you would have to do. There's much lower cost, and much quicker time -to-benefit for that. From the supplier’s side, being based in the cloud and on the Ariba Network, it literally can be as simple as a three minute process of signing up on the Ariba Network.

Gardner: Do you have some examples of folks that are doing this? What sort of returns it's getting for them? How it's impacting them in terms of productivity benefit as well as pure dollars and cents?

Hofler: We've had a number of organizations, a large retail and sporting goods organization, that came in and increased their discount capture by about 90 percent.

One thing is coming onto the Ariba Network and getting your process under control. As I said before, companies don't necessarily have a lot of their spend under contract discount term, but they do have some. Their procurement folks have negotiated some discounts, early payment discounts, in the contract. A lot of that is not being captured, because the process doesn’t allow them to approve the invoices in time, and that type of thing.

That was the case with this organization. It was capturing about 35 percent of their discounts, and raised that to about 95 percent very quickly. So that's an immediate savings and immediate capture of lost opportunity and value to them. Simply by getting their process under control allowed them to capture millions of dollars of lost savings.

In addition, they saw their capture of savings go from about 5 percent of their suppliers to a penetration of over 20 percent of their suppliers in a short period of time as well.

Seeing the opportunity

I believe it’s because of the things that I mentioned earlier. It was now putting the opportunity in front of the right people at the supplier’s side. When they realized they had the opportunity, they took advantage of it, because as I said, the fundamentals are there in the market, where suppliers are typically hurting for cash and cash flow and opportunities for that, willing to take early payment.

Buyers have lots of cash. When you just bring those two parties together in a way that makes it easy for them to collaborate and meet that need, your participation is going to go up for sure. And that's what we've seen.

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