Thursday, August 22, 2013

Combining big data and cloud capabilities for ecommerce matches buyers and sellers like never before

Listen to the podcast. Find it on iTunes. Read a full transcript or download a copy. Sponsor: Ariba, an SAP company.

Social tools, big data and business networks are reshaping e-commerce in such a way that buyers and sellers are linking up in ways not possible even a few years ago.

In one example, Ohio-based LLT Barcode & Label, has found powerful new ways to develop sales and leads inexpensively using Ariba Discovery to better connect with qualified new customers.

To learn how, BriefingsDirect recently sat down with Rachel Spasser, Senior Vice President of Marketing at Ariba, an SAP Company, and Kris Hart, the Account Manager at LLT Barcode & Label in Stow, Ohio. The moderator is Dana Gardner, Principal Analyst at Interarbor Solutions. [Disclosure: Ariba is a sponsor of BriefingsDirect podcasts.]

Here are some excerpts:
Gardner: This whole concept of finding customers, developing leads using cloud, using the networked economy and how people are linked up now more-and-more has become a function of the data that people are able to access.

Tell me a little bit about how things have changed, say now, versus five years ago in terms of finding sellers for buyers, and buyers for sellers?

Spasser: We're talking about major changes that have gone on in the past few years. If you think about the mantra around marketing, it's always been to make yourself, your product, and your company relevant to potential buyers.

Spasser
Ten or 15 years ago, as the Internet was really coming into its own, it provided significantly more data that helped us understand demographically, and a little bit behaviorally, who our customers were and what they were doing.

When we talk about the networked economy, business networks, and connected commerce we're really taking that to a whole other level, where as marketers, we're able to hyper-target, our potential customers not just on their demographics, but also be able to predict when they're going to be ready to buy.

They overtly raise their hand and say, "Hey, I'm interested in buying by a connected RFI or RFQ process." But we can also analyze the myriad data that's available today and put both unstructured data and structured data together in a way that helps us predict when they are going to be ready to buy. That's when we can actually present them with compelling offers. So it really does change the whole nature of the game.

What's appealing?

Gardner: Kris Hart, do you really care whether it's the cloud or the networked economy, or whether it's structured or unstructured data? What appeals to you in all this in terms of the change that's going on?

Hart: In general, you don't really care one way or another how you get it. the cloud and e-commerce makes everything a lot easier, not just for the seller, but also the buyer. It really helps with the relationship, and being on the cloud is much simpler, faster, and easier.

Gardner: Tell us a little bit about LLT Barcode & Label, so that we have a better understanding of your business, the vertical, the challenges that you face in terms of growing your business, and finding new customers.

Hart: We started about 16 years ago. It was a small company, and we're still a small company, where it's hard to get out in front of buyers. When we started, we would send out about a half-million catalogs a year. Those catalogs have inside them labels, thermal transfer ribbons, and laser labels, and items like mobile computers and printers to be able to print those items.

Hart
We started out as a small company, basically a distributor for a company that needs to ship a label via FedEx, UPS, or however. They need a label on that box to be able to ship their product. So as far as vertical markets go, if you name a company, they have to ship something, and they'd be able to use that.

So we play in every single market out there. We gross roughly about $12 million a year and we have about 15 people who work for us.

We would buy lists from Hoover’s, or somebody like that, and we would send out half a million catalogs a year.
We were hoping that everyone who got one of those catalogs would call us and want to buy something. But that's not the case, and over the past 15 years, that return on investment (ROI) has gone down significantly. So we had to find new ways to grow our business.

Internet has helped

The Internet has really helped. A lot of people at home are using sites like Amazon.com and eBay and they're getting used to just looking on the Internet when they need to buy something.

When they go into work, because it's so easy at home, they want to be able to do the same thing. It's a win-win for both sides. We don't have to print lots of catalogs every year, and they can just find us on our website or search engine via Google, Bing, whatever.

Gardner: Why wasn't it just creating a website and being part of the massive index that Google and other search engines use? Why was it better moving to an e-commerce cloud, a networked economy approach like Ariba Discovery?

Hart: The biggest thing with Ariba Discovery is that it's very much like match.com. We wanted to be in front of buyers when they were ready to place an order. We wanted to be that company that that person on the other end is going to come search for, see us, and give us an opportunity for their business.

If I walk in in the morning, I already have leads there. I already have an opportunity with a buyer who knows what they're looking for. They're out there on Ariba Discovery, asking me, "Can you help me?" That's a lot easier than like the catalog theory, hoping that someone runs across your website.
You know automatically what that buyer is looking for and where that buyer is.

You know automatically what that buyer is looking for and where that buyer is, and hopefully within a couple of sentences, a couple of conversations with them, you can figure out when they need to buy.

Spasser: If you listen to what Kris said, the Internet has enabled business to be done faster and for him to find new customers faster and more efficiently.

But where the business networks really differentiate themselves from the Internet as a whole is that there is a common platform, where both buyers and sellers are going to connect and find very specific commodities or services that meet their specifications. Creating a platform that enables them to get to that level of granularity enables them not just to conduct commerce faster, but conduct commerce smarter.

More and more data

As we look at the value of the business networks, over the course of time, these networks are, in essence, aggregating more and more data and insights that ultimately help companies like LLT Bar Code in that mid-market that want to do business globally. At the same time, it helps global buyers that want to buy, for various reasons, from companies that are either local suppliers, from companies that might have green initiatives, women-owned business, or diverse-owned business.

So there are a lot of different criteria that go into determining who you want to buy from or sell to. The beauty of the business network is that it gives you the ability to both get insight and get a lot of information on the buyer or the seller, and to connect based on very, very specific criteria.

Gardner: Kris, one of the things that’s interesting in comparing a web-based open-Internet approach to something more standardized is speaking the same language, data, metadata, taxonomy. It might be one thing for you to put up information on your website, but somebody who's searching, or even the search engine algorithms, might not understand the importance of certain terms and lingo.

How has a commonly understood business-oriented environment helped with your results?

Hart: Well, with Ariba Discovery it’s great. They have postings for all sorts of commodities and items that a buyer may be looking for. A buyer can check them off on his screen and then send out an RFQ.
With Ariba Discovery it’s great. They have postings for all sorts of commodities and items that a buyer may be looking for.

The nice thing about having that similar platform is that I set up a profile. I select specific commodities of the types of business and the items that we operate in. With that, a lead is automatically given to me. The buyers are looking for specific things, and it may be in his own terms or maybe a little bit different than how he may search it on the Internet and possibly miss us.

I can take my list of commodities and then it will be automatically generated. It’s going to come pretty close. He is going to be right there for me to be able to respond to whether or not we can help them, yes or no.

We started looking at Ariba Discovery in late 2011. We were trying to find some other way to gain new customers and to grow the business. We decided on Ariba Discovery in January of 2012. There were a couple of RFPs out there, and I thought, "Why not give it a shot?"
So we respond to a couple, and the first RFQ that I had responded to was for some blank labels and a couple of colored labels. A couple of weeks later I get an email from the client that had posted the RFQ, and they want us to bid on their entire distribution, labels, ribbons, and shipping items.

Too good to be true

And after going through their process of RFQs, add-in items, pricing, and everything else, we won about a $400,000 deal via Ariba Discovery. That was for a two-year contract, and that was the first one. It was almost too good to be true.

The great thing about it was that we started in the middle of January, when I responded to the RFQ and we had the contract and everything signed and they were buying from us in April. Very quick process.

Gardner: What was your cost in acquiring this customer?

Hart: With Ariba Discovery, you can use Ariba Discovery for free or you can use the Mid-Level or the Advantage. And we decided to go with the Advantage.

That had some other benefits with the profile and things of that nature and it was only $3,000. We decided to take some of our marketing budget and put it into that and at least give it a shot. We were more than happy. We got our ROI right-away, and it's a much better and simpler process than sending out a half a million catalogs a year.
You’re not wasting your time. You’re not sifting through a lot of unqualified opportunities as the seller.

Spasser: We love to hear stories like Kris’ about immediate ROI. And we hear them over-and-over again from suppliers on the network.

One benefit, as we talked about, is the ability to define very specific criteria as a seller as to what you sell, so that when you do get posts that are directed to you, you know that they're relevant to you. You’re not wasting your time. You’re not sifting through a lot of unqualified opportunities as the seller. And the benefit to the buyer is the same.

As the buyer posts, their posts are being sent to people who are all qualified, who all have the ability to meet the specifications that they have created. Therefore, it's saving a lot of time on their part as well. When you look at the two-sided model, it really is a win-win both for the buyer and the seller within the network.

One of the hidden pieces of gold within the network is the data that's created over time from all of this transactional information, as well as data that is created individually from buyers and seller. They're providing information on ratings and reviews of how quickly they got paid, if they're a seller, by a particular buyer. Or it's the reverse, how accurate and on time deliveries are if you’re a buyer looking at a seller.

So, the unstructured information, combined with a lot of structured data, is creating an opportunity to make much better matches and have buyers and sellers that are much more informed about one another as they enter into business relationship.

We all know the more that we understand and have well-defined expectations of our business partners, the more effective those relationships are over the course of time.

Some structure

Gardner: Have you been able to find that the services around process for procurement, automating the invoicing and PO process, the data, even the transactions make that a more efficient customer relationship?

Hart: Yeah, it's funny that you bring that up. Right now, that particular customer has gone to Ariba for some other items that they are going to start using for procurement and different items like that. What we're hoping is that once that process takes over, then we can be in the supplier network and possibly even set up e-catalogs for them and make their process a whole lot more efficient and easier.

That way, if they have any transition in buyers, someone is on vacation, or anything like that, there are no questions about the items that they purchased from us. There are no questions on the pricing, on who to send the purchase orders to, or anything like that. It's all handled by Ariba.
You can now start connecting with multiple buyers via the network, which enables you to create even greater efficiencies.

Hopefully, we'll be able to set up a catalog, and they'll be able to smoothly purchase from us. It already helps us being on the supplier network and then them hopefully getting ramped up and making everything a whole lot more smooth.

Spasser: It's great to hear about the benefits as it relates to efficiency from a process perspective on the network. One of the other benefits of setting up a catalog to do business with that one buyer on the network is that now you have the catalog set up on the network.

As you get additional buyers, you're using the same catalog and the same infrastructure. You can now start connecting with multiple buyers via the network, which enables you to create even greater efficiencies as a mid-market seller who may have limited resources within the company to issue and reconcile invoices.

The efficiency of setting up one relationship is the starting point. There is much more efficiency as you start to establish more-and-more relationships as a seller over the network. But there are other services that we offer over the network that also create value, and one example is our Dynamic Discounting Program.

For example, as a seller on the network if you would like to get paid faster from one of your buyers, you can offer different payment terms. Let's say your contract is a net-60 payment term, and you’d like to get paid faster because you’d like to make some capital investments in your company. You could offer to provide a discount for a net-10 payment.

Discount terms

We have many mid-market suppliers who have offered those discount terms to their buyers, so that they can self-fund growth for their own companies. That's yet another benefit of doing business on the network.

The third major benefit is the visibility and predictability that you have in relationship with the customer. At any point in time, as a seller on the network, you can go in and see the status of where your order stands, where your payment stands, or whether your invoice has been approved for payment.

It gives you a lot more visibility, and therefore predictability, as a mid-size business, into things like cash flow. You can anticipate when you're going to get paid, instead of having to pick up the phone 16 times and say, "When is the check is going to come? Have you approved the invoice?"

So there's efficiency, visibility, and predictability, and then there is the opportunity to impact cash flow by using some of the more sophisticated tools like Dynamic Discounting to speed up payment.

Gardner: Tell me a little bit about the future roadmap that Ariba is embarking on around a wider, deeper, richer basket of goods and services.
So there's efficiency, visibility, and predictability, and then there is the opportunity to impact cash flow by using some of the more sophisticated tools like Dynamic Discounting to speed up payment.

Spasser: One of the things that we are doing, really focused on the lead generation side, is expanding the services that we offer around Ariba Discovery that can help companies like LLT Barcode & Label find new customers worldwide.

Related to that is the ability to create multiple profiles that are very highly targeted. So for the various products that LLT Barcode & Label offers, they could create a profile unique to different industries. Or if there are different industry requirements around labels and barcodes, they can create very specific, targeted profiles that really make them extremely relevant to buyers within various industries.

Another service that we are offering is what we are calling "Sellers You Might Like," and that's the ability to based on what someone is searching on proactively suggest sellers that meet their criteria.

So even if a buyer does a search and doesn't necessarily click on a particular supplier, if that supplier meets those criteria from an algorithm perspective, that suppler will be proactively suggested, especially if that supplier has received high ratings and reviews from other buyers on the network.

So there are couple of new services that are being offered from the Discovery side that will really accelerate the ability for mid-market companies like LLT Barcode & Label to grow their business and expand the value that they get from using the Ariba network.

How to get started

Gardner: Any 20-20 hindsight, based on your experiences so far, that you could offer to other people who are looking to get started on this cloud-based, commerce and lead generation activity?

Hart: Definitely give it a shot. Set up a free profile and start getting some leads generated, something that comes your way. Definitely make sure you're in the right commodities. Don't start clicking boxes for commodities that you can't offer. That way, your leads are more precise and more ready to go Then see what happens for free.
Definitely give it a shot. Set up a free profile and start getting some leads generated.

If you want extra help and a little bit better outreach with the marketing profile, go up the next step or even all the way to the top like we did. We saw the benefits and doing that with the marketing help that we have from Ariba and how to use the Discovery tool. As I said, that paid off for us, but definitely give it a shot. If nothing else, just set up a free profile and see where that takes you.
Listen to the podcast. Find it on iTunes. Read a full transcript or download a copy. Sponsor: Ariba, an SAP company.

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at 3:38 PM 0 comments

Wednesday, August 21, 2013

Knowing what it takes to generate a minimum lovable product

(This guest post comes courtesy of Brian de Haaff, founder of Aha! Labs, Inc. Follow him at @bdehaaff.)

By Brian de Haaff

A can of cat food is a minimum viable product (MVP) when you are starving, but it’s highly unsatisfying and unlikely to generate a loyal following (of humans).

de Haaff
And there you have one of the problems of the MVP approach. It strives for “barely enough” and never good. And heaven forbid, the goal is never being great. It results in products that mostly work but never delight. No matter your source, the very definition of an MVP is generally similar to the following: The MVP is a new product with just the necessary features to be deployed, but no more.

The MVP is a curse for ambitious technology companies that want to grow. In an increasingly transactional world, growth comes from long-term customer happiness. And long-term customer happiness comes when customers adore your product or service and want you to succeed. You should be thinking about what it will take for customers to love you, not tolerate you. Really think about the type of mindset change it would take. What would it take to create a minimum lovable product (MLP)?
While the true adoption of the MVP is a strategic approach to getting product out the door, when applied it yields unsatisfactory products.

While the true adoption of the MVP is a strategic approach to getting product out the door, when applied it yields unsatisfactory products. You might argue that is is best for prototyping and feedback gathering. Yet, my experience is that when it is the dominant product development mindset in an organization, it becomes the overarching goal of every release and dictates the outcome. Even the product managers who are responsible for shepherding the product become intoxicated with mediocrity.

I have been in multiple larger organizations where the concept dominated executive, product, and engineering mind share. Rather than asking what do customers really want, or what would delight them, the conversation always returned to what’s the minimum viable product and when can we get it to market.

The problem is that the two major principles driving the MVP are flawed.

The MVP reduces waste

The MVP never reduces waste because it never delivers what the customer really wants. It presupposes that there will be iteration after iteration before the product truly meets customer requirements. Couple this with the fact that agile engineering environments prioritize “rapid output”  and it’s even more likely that what’s delivered will not be tied to the organizational strategies and product vision.

The MVP accelerates time to market

The MVP may very well get you something to market first but even in an emerging market you will not be a serious contender. Loyal customers who depend on your product are what matter. There were helpdesks before Zendesk, tablets before the iPad, electric cars before Tesla Motors, and CRM tools before Salesforce.com. The MVP is further useless in established markets where major disruption is what’s required. Customers already have tons of viable products and some are probably even pretty good. It’s your insight that matters and only a terrific product can win.

Ultimately, chasing the MVP forces you to sprint faster and faster chasing fool’s gold. And the more desperate you become to lead, the more you are likely to die from incrementalism. It’s a vicious loop that will gently guide you from market innovator to hopeful fast-follower.
We all have the opportunity to do something fantastic and be happy doing it.

Now, even if you are convinced that striving for mediocrity is an atrocity, you likely need to convince others. There is no easy way. One approach is to just yell like a crazy guy the next time you are in a strategy or product meeting and someone starts talking about the MVP. You might just be able to get the group to focus on what’s necessary to create a minimum lovable product.

Assuming you start thinking about creating love and others are willing to give you a chance, here are a few ways to determine if you have succeeded in identifying a minimum lovable product before spending one minute developing it. Remember that the goal is to find the big idea first. The more of these characteristics you can check off for your idea, the more lovable your product will be.
  • At least one person tells you it’s never been done
  • Customers visibly smile when you describe it to them
  • Someone swears when he hears the idea (in delight or disgust)
  • You dream of using it and all of the features you could add
  • Only your CTO or top architects think it’s possible
  • People start contacting you to learn about what you are building (old school word-of-mouth)
  • The top industry analysts are not writing about it
I hope that this inspires and excites you. If you are interested in learning more about building great products — you may want to use our interactive tool to discover how lovable your product is.

We all have the opportunity to do something fantastic and be happy doing it. And I personally guarantee that changing your focus and setting your sights on creating a MLP will bring you great joy and make the world a better place.

Sign up for the free 30 day trial of Aha! Follow the company @aha_io, and the author @bdehaaff. (Comments on Hacker News)

(This guest post comes courtesy of Brian de Haaff, founder of Aha! Labs, Inc.)

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at 12:03 PM 0 comments

Tuesday, August 20, 2013

Just in time for VMworld, Dell virtualization suite update aims to further enable data-center efficiency

Dell Software today announced the next generation of its virtualization operations management suite, just in time for next week's VMworld conference. The suite is comprised of a trio of solutions that help businesses of all sizes streamline virtualization, storage, and cloud-computing initiatives -- with broad VMware products support.

The new releases include Foglight for Virtualization, Enterprise and Standard Editions 7.0 and Foglight for Storage Management 3.0. These releases address a number of data-center transformation challenges -- from optimizing performance and efficiency in a virtual environment to solving end-to-end storage and virtualization challenges in complex and cloud-based systems.
Professionals are faced with increased expectations to deliver business value.

Dell Software, recognizing VMware's market leading penetration in virtualization, is carving out a heterogeneity support play for server, storage and VDI -- but is making VMware support a priority for now. And Dell is supporting VMware VDI even as its own thin client portfolio, nee Wyse, competes with it.

For Dell Software, the bigger long-term management and efficiency opportunity is for making a mixture of virtualization technologies tamed. They, like most, expect Microsoft Hyper-V to gain in share and therefore make for a mixed data center sprawl. And the same is expected for VDI, especially as BYOD, mobile first, and tablets make the end points even more hetero.

You might say the messier it gets (and the lack of cross-technology support from the competing market leaders themselves), the better it is for a third party like Dell to waltz in and fix the mess, and scoop up a nice piece of margin too. Dell plans to target Hyper-V eventually, but is focused on VMware for now.

"Software-defined is great, but it isn't a black box. You still need to connect the physical to the virtual," said John Maxwell, executive director, product management, Dell Software. [Disclosure: Dell Software and VMware are sponsors of BriefingsDirect podcasts.]

Infrastructure and Operations (I&O) professionals are faced with not only reducing the total cost of the data center, but also to drive agility, quickly deploy new applications, and deliver the highest level of performance, said Maxwell.
Foglight for Virtualization

Foglight for Virtualization, Enterprise Edition 7.0 provides end-to-end performance monitoring and operations management for heterogeneous virtual environments to help reduce operational costs, speed deployments, and simplify the complexity of the data center virtual and physical infrastructure. This also includes deep integration with storage, Microsoft Active Directory, and Microsoft Exchange modules to provide performance analysis and advice across data-center infrastructure.

New optimization functionality allows I&O administrators to significantly increase consolidation ratios with improved visibility and analytics geared toward right-sizing CPU, memory, and storage, and effectively manages virtual-machine (VM) sprawl by reclaiming resources through new optimization insight into such waste as powered off VMs, zombie VMs, abandoned images, and unused templates and snapshots.

Now that most enterprises are majority workload virtualized, the next wave of cost savings comes from finding and removing those zombies, managing all the various flavors of virtualization in common fashion, further optimizing the CPU/memory/disk performance, and freeing up data storage with more insight and intelligence. You could think of this all as repaving the path to software-defined data centers, recognizing that there's still a lot of waste to clear along that road well before the end destination.

Additional enhancements due this month include:
Foglight for Storage Management 3.0 helps to ensure the right storage configuration to optimize virtual infrastructure performance and availability. It provides virtualization managers with visibility into the underlying physical storage infrastructure that lies beneath the virtual datastores, enabling them to immediately identify hosts, VMs, and datastores experiencing performance problems caused by underlying physical host, fabric and storage components and tips to fix the issues.

Performance metrics

Foglight for Storage Management gathers extensive performance metrics and presents this data within a rich graphical interface incorporating architectural diagrams, graphs, alerts, and drill-down screens for fast and easy identification of virtual and physical storage problems.  New feature functionality provides:
  • Pool-level analysis to track remaining capacity and over-commitment for thin provisioning
  • Performance analyzer to provide one-click performance troubleshooting visibility from VM to array to sub-array level in a single dashboard
  • Additional device support for Dell Compellent, Dell EqualLogic, and EMC VMAX
Foglight for Virtualization, Standard Edition 7.0 is specifically designed for the small–to-medium size environment (SME), with a focus on ease of use and quick time to value. It provides administrators insight into virtual environment performance and automated resource optimization, capacity planning, chargeback and showback, and change analysis and compliance.
Dell Software’s virtualization operations management suite helps simplify the complexity of today’s modern data centers to help I&O professionals deliver on these top priorities

New capacity management and planning functionality helps to drive data-center sustainability and reduce power consumption to decrease operating costs and capital expenditures, while improving workload performance. It does this by analyzing existing VM workload requirements against the entire environment and identifying the minimum number of host servers required over time to safely support workloads. Additional new enhancements include:
  • Enhanced user interface for a more intuitive approach to capacity management and planning
  • New capacity planning features to prepare for host server refresh, upgrade, or expansion projects by finding the optimum configurations and minimum number of new or existing host servers to maximize VM performance while minimizing server cost, space, and power needs
  • New power minimization feature to reduce costs by determining the minimum number of host servers needed over time to safely run workloads, and estimating potential cost savings by powering down unneeded servers
  • New optimization to automatically adjust virtual machine disk sizes up or down, based on actual use
Foglight for Virtualization, Enterprise Edition 7.0 remains priced at $799; Foglight for Storage Management 3.0 remains priced at $499 per socket, and Foglight for Virtualization, Standard Edition 7.0 operates as a standalone tool, or can easily integrate with Dell Software’s Foglight for Virtualization, Enterprise Edition software. It's priced at $399 per physical socket in managed servers.

All can be downloaded from the Dell Software website and are expected to be generally available on August 31.

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at 1:13 PM 0 comments

Monday, August 19, 2013

VMware vCloud Hybrid Service powers journey to zero-cost applications for City of Melrose

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

The next BriefingsDirect IT innovator interview examines how the City of Melrose, Massachusetts, plans to reduce the cost of supporting its applications to perhaps zero -- and maybe even generate revenue -- by embracing hybrid cloud computing to become a specialized managed-services provider.

Melrose transitioned from nearly 100 percent server virtualization to a novel cloud capability built on VMware vCloud Hybrid Service (vCHS). In doing so, they gained dependable disaster recovery (DR) capabilities. They also discovered that they could not only host their own applications, but also those of nearby communities for an ongoing fee. The process sets up a win-win scenario for all the municipalities involved.

To learn how the hybrid cloud leads to new business models and lower total costs, BriefingsDirect recently sat down with Jorge Pazos, the Chief Information Officer, and Colby Cousens, IT System Administrator, both for the City of Melrose. The interview was conducted by Dana Gardner, Principal Analyst at Interarbor Solutions. [Disclosure: WMware is a sponsor of BriefingsDirect podcasts.]

Here are some excerpts:
Gardner: As you looked to extend the benefits of server virtualization, what were some of the top requirements for moving to cloud and hybrid-cloud infrastructure?

Pazos: We're an IT department for a mid-size town in Massachusetts. We offer services to all of our internal departments, and we're beginning to grow out into a managed-service provider.

Pazos
What we're doing now is providing these services to other cities and towns. The way that municipalities are run, especially from an IT perspective, there isn’t a great deal of diversity. We could pretty much run IT for almost any city or town, because the apps are very similar and the business processes are all very similar.

And after the launch, actually one of the things that we are pretty excited about that we didn't see in the past was cost predictability, which we don't really see a whole lot from a lot of the other service providers.

It’s not that big of a stretch to get to that point where you say, "I can do this for another city or town." That was actually the thought process several years ago, as we started to do our own internal consolidation. The idea was that if we do it for ourselves, why can’t we do it for others. It’s not that much of a leap to get there.

Cousens
Cousens: When you get some practice consolidating city and school networks and data centers you realize it's all the same thing. We could do it with other the municipalities as well.

Gardner: What was important for you to be able to do that in terms of the infrastructure solutions available?

Cousens: Compatibility was the biggest issue for me. I didn’t want to run into any roadblocks with software or hardware that wouldn't work with each other, so we would have had to drop the project just because two things wouldn't connect.

Pazos: Part of what we're looking to do internally is grow that managed-service provider part of the business, but then also take care of a lot of the day-to-day stuff, too.
Three or four years ago, there weren’t a whole lot of cloud-service providers that we felt could do what we were looking to do. So when we had this opportunity to participate in the beta for the VMware vCHS, we were really excited. There was quite a bit of promise in it for us in terms of things that we felt were important, like interoperability, security,  performance, and things like that.
If you think about building a data center, which is what we did about three or four years ago, it was a top-to-bottom upgrade of our data center. One of the things that you immediately start to think about is your disaster recovery (DR). When you're a small municipality with five square miles, where do you put a DR site that gives you diverse power providers, and geographical diversity?
It doesn't make sense to invest heavily in a DR site that’s somewhere within the same town. So we were really looking to cloud-service providers to provide that for us. That was one of the big drivers for us, and we really didn't feel comfortable growing the business too much without having at least that capability somewhere, as part of our service offering.

Gardner: Tell me about Melrose, the applications, the number of users, and your infrastructure. What are we talking about in terms of the IT organization?

Modest deployment

Pazos: It is a fairly modest deployment by service provider standards, but I think by municipal standards, we're decent size. Currently, we're at about 70 virtual machines (VMs) with 30 terabytes of storage. We connect our regional partners the way that we connect these communities, Essex is about 30 miles away, and Saugus is a direct neighbor. To connect these guys back to our data centers, we use an ENS circuit, which is basically a Layer 2 connection between the two sites that can be ramped up.

They come up in base of 10 Mbps and then they can go straight up to a 10 Gbps . We run several SQL databases, which includes our financial system. We run Microsoft Exchange, Public Safety Dispatch. There is a CAD, Computer Aided Dispatch/Records Management application, and database. We also have virtual desktops. Our entire emergency dispatch operations are all running on virtual desktops, as well as point of sale for virtual desktops.

So we run quite a few different apps, many of which are obviously pretty mission-critical, and the demand is growing. We are going to be on-boarding Saugus through the summer and into the fall. So we'll be experiencing some growth through that process as well.

Gardner: And Essex and Saugus are also municipalities in Massachusetts, and you have been experimenting and bringing them on, so that they become paying customers to you. Do you think it is possible at some point that you're going to cover your IT cost by doing this managed-service provider business?
I also think that the services we offer to the city are better because of our equipment.

Pazos: Early on, it got to a point where we couldn't do it, but it looks to me like now we're potentially going to be in a position where maybe five or six additional clients get us to the point where we are revenue-neutral to the city. That's looking a little bit more realistic for us in terms of both getting people to warm to the idea and also being able to support it.

Revenue-neutral would be absolutely fantastic. If you're taxpayer in the City of Melrose and you can have a department that offers all of its services internally and be completely revenue-neutral, I would be ecstatic about that.

Cousens: I also think that the services we offer to the city are better because of our equipment. Our refresh schedule is better. The stuff that we're using is more enterprise-grade, because we're using it in the hosting environment and providing to a number of partners.

Gardner: Let's look at the equation of how the economics of this work from the perspective of your client municipalities, for lack of a better word. When Essex and Saugus evaluate this, are they going to be able to get their IT services from you cheaper and with a higher performance than they would have been able to do it themselves?

Pazos: There are two ways to look at that. Town of Essex has reduced their IT expenditures by 33 percent year over year. So they're immediately seeing savings every year. The story in the Town of Saugus was a little bit different. They had an IT department that had inherited infrastructure that was getting old and needed to be refreshed. They were able to buy into the service and not have to incur a large upfront cost of doing a forklift upgrade of their entire IT infrastructure.

Year-to-year savings

They're saving, year one, somewhere in the vicinity of about $80,000 or just north of $75,000. Then, there's the year-over-year savings that they're seeing. So for this three-year agreement, they feel like they're saving quite a bit of money.

Gardner: Colby, given that you had a very strong set of requirements around compatibility of being able to move from your on-premises infrastructure into a hybrid cloud model, what about Essex and Saugus? Were they also highly virtualized in their servers and workloads, and how did the compatibility from them work, moving toward your vCloud Hybrid Service set up?

Cousens: That wasn’t as much of an issue for us, because they weren't really virtualized yet at all. So part of the on-boarding process for them is virtualizing all of their servers and doing some virtual-desktop offerings, too. We got to start fresh with virtualization onsite for their services.

Gardner: I suppose you could look at that as another added value. You're actually modernizing them -- or guiding them into a more optimized IT infrastructure with a higher utilization. You're also helping them decide which of their services to get from the source, in this case the one that you are managing, versus perhaps a cloud provider that would not have the expertise in the customization that they're looking for.
Not only are we saving them money, but we're able to provide them services that they weren’t providing for themselves.

Pazos: Absolutely. Not only are we saving them money, but we're able to provide them services that they weren’t providing for themselves. A lot of these guys didn’t have offsite data replication.

They didn't have DR site capability. It was a pretty traditional small data center, a server room type set up in a building. Everything was a single point of failure. We're not only saving them money, but we're providing a higher level of service than they would have ordinarily been able to achieve.

Cousens: Again, in the case of Essex, the town manager is doing the IT work too. So besides the financial piece, he was having a hard time focusing on his IT stuff as well.

Pazos: A lot of these are small governments scattered around the state. The $75,000 that Saugus is saving this year is very big money in small town government.

In the case of Essex, quite often, people are doing double duty. They're the town accountant and the IT person, or the town administrator and the IT person. So they are also gaining from freeing themselves up to focus on their primary roles. In the town of Essex, he's able to focus on being the town administrator. That’s life in small town government in Massachusetts.

Gardner: Do you have any advice for those who might be also considering adopting a hybrid cloud or maybe even pursuing the notion of being either a consumer or provider of these managed services?

Pazos: Whatever you've been waiting for, don’t wait. It's to the point where you just want to move ahead, and for some of this, you're going to have to adapt and sort of figure out as you go and as things evolve.

There were times early on, where we were frankly a little hesitant to do some things, because, to be honest with you, we spoke to a lot of folks in other cities and towns who just sort of cocked their heads a little bit and looked at us and said, "Really? Why are you doing this? Why would you want to do this? This seems sort of crazy." So there was a little bit of hesitation at times as we moved forward.

Solid idea

But the idea seemed solid, and we went ahead with it. That's the advice for folks -- don't really wait. Do your research, do your homework, understand what it is that you're getting yourself into, but certainly move ahead, because I really feel like this is the way we're going to be doing business. I know we are doing businesses right now, but I think a lot of folks are going to be doing business this way at some point in the near future.

Cousens: Experimentation is key. A lot of the technologies are complicated to just look at or read about. Get in there and do an evaluation or download trial versions of different products, like we did with the Beta, with vCHS. You just have to try it out and play with it. Then you start to realize the true value as you apply it to actual use cases.
Listen to the podcast. Find it on iTunes. Read a full transcript or download a copy. Sponsor: VMware.

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at 2:38 PM 0 comments

Friday, August 9, 2013

Here's how healthcare businesses can more efficiently manage their suppliers, purchases and processes

Listen to the podcast. Find it on iTunes. Read a full transcript or download a copy. Sponsor: Ariba, an SAP Company.

This latest BriefingsDirect podcast, from the recent 2013 Ariba LIVE Conference in Washington, D.C., examines how the healthcare sector has unique and daunting operational efficiency and regulatory challenges.

To help transition to new levels of productivity, we explore how the game is being changed by MedAssets, a healthcare industry procurement, spend, operations, and supply-chain services company, which currently manages some $50 billion of supply spend for its customers annually. We'll learn how MedAssets, in partnership with Ariba, an SAP company, has found impactful ways to improve health provider and supplier compliance, reduce costs, and develop better accuracy.

To hear how they do it, we sat down with Rick Grodin, Senior Vice President of Product Management at MedAssets, based in Alpharetta, Georgia. The interview is moderated by Dana Gardner, Principal Analyst at Interarbor Solutions. [Disclosure: Ariba is a sponsor of BriefingsDirect podcasts.]

Here are some excerpts:
Gardner: What's going on in the business of healthcare, and why is this such an important area for focusing on innovation, productivity, and cost reduction?

Grodin: We manage spend on behalf of 3,000-plus providers, both on the non-acute care side, as well as in the for-profit and not-for-profit acute care hospital community. The challenges that they're facing are quite remarkable, both from an incremental-cost perspective, whether that be supply cost or labor cost, as well as continued pressure on what are already razor-thin operating margins -- typically between 0 and 3 percent.

Significant consequences

With the Affordable Care Act coming down the pike, officially passed and certainly soon to be implemented, reimbursement per unit is going to come down materially for hospitals, and that’s going to have significant consequences on provider operations and financial health.

Grodin
As millions of new people come into the healthcare system, likely to be reimbursed through the state exchanges somewhere between Medicaid and Medicare rates, that’s going to have a significant impact on that operating margin, because hospitals are already losing money at Medicaid and Medicare rates.

You're going to have a significant influx of new patient volume at lower reimbursements. Therefore, the need for the healthcare community to take out substantial cost over the next couple of years is just going to continue to intensify significantly.

Anything that we can do, as a healthcare provider partner, to help them bring down those costs from a back-office operational efficiency perspective is going to be extremely important.

Gardner: When you look toward supply chains, the networked economy, and cloud providers, what's interesting for innovation?
It’s not only about how we can improve the financial health of our hospital customers, but also our supplier partners.

Grodin: For us, specifically at MedAssets, the supplier community is extremely important to us. It’s not only about how we can improve the financial health of our hospital customers, but also our supplier partners. If we can continue to work with our supplier partners to bring down their cost, they can then pass along those efficiencies and offer lower price points to our provider customers. So it’s a win-win for everybody.

Today, through MedAssets eCommerce Exchange and transaction management services, we help create a more efficient operating environment, with respect to getting purchase orders to suppliers. But because it’s through an EDI-based system, it’s basically just getting paper there more quickly, as opposed to correcting and rejecting invoices that are wrong on the front-end, so that they don’t need to be worked on the back end.

Creating a more efficient operating environment with respect to that purchase order (PO) or invoice, and basically enabling a provider and a supplier to conduct that commerce through the cloud, our exchange, or a combination thereof, will create significant operating efficiencies on both sides of the house.

Now, all of a sudden, the accounts payable (AP) clerk that’s sitting in a hospital doesn’t have to manage an exception. Today, they're constantly struggling with whether the PO price is the same as the contract price and the same as the invoice price. In many instances, it’s not.

So they need to circle back with the supplier to say, "The invoice is wrong, and you need to fix it." Or they need to circle back internally and ask why they're cutting a PO that doesn’t match the contract price, whether it’s a locally negotiated contract or a contract through a group purchasing organization.

Added value

So, it's the ability to catch those invoice exceptions upfront. All of that exception management activity can be repurposed to value-add activities internally, whether that’s reinvesting completely in patient care delivery or just repurposing those FTEs on the back end to again do more value-added activities that are not related to just managing an exception.

Gardner: Tell us a bit about the history of MedAssets, what you do, and the size.

Grodin: We touch approximately 4,200 acute-care hospitals across the country, as well as over 120,000 non-acute care providers. We have two operating segments within the organization.

The one that I primarily focus on for product management is our Spend and Clinical Resource Management group. Within this segment, we deliver value to providers through our  group purchasing organization, technology-enabled services, an analytics platform and procure-to-pay solutions that are all aimed at reducing cost on behalf of our providers.

The other element that we bring to the table is through our Advisory Solutions group, which is a number of consulting practices that can address operational improvement opportunities or other areas of cost that are not impacted just through procurement or through a group purchasing organization.
As most people are aware, labor cost is approximately 50 to 60 percent of total cost for a hospital. It’s a significant area of opportunity.

As an example, we have a phenomenal group that focuses on clinical utilization and bringing down physician preference-item costs. We have a group that focuses on permanent labor and agency labor. As most people are aware, labor cost is approximately 50 to 60 percent of total cost for a hospital. It’s a significant area of opportunity.

Finally, we bring lean transformation and process-improvement capabilities to healthcare through another practice in our Advisory Solutions group. There have been tremendous benefits brought through Lean to other industries, and we're trying to bring that to the healthcare environment as well.

We have our Spend and Clinical Resource Management segment that manages over $50 billion in spend, but we also have another large operating segment where we provide revenue cycle management services.
So we have a whole suite of technologies that can impact everything -- the front, middle and back portion of the revenue cycle -- as well as the Revenue Cycle Services group that provides both consulting services, as well as a shared-service environment for taking on revenue-cycle activities within a hospital environment.

Gardner: How about the relationship between MedAssets and Ariba? Do you utilize their services in their cloud activities, technologies, and processes, and then apply that?

Two fronts

Grodin: Our relationship with Ariba is on two fronts. We're currently in the process of implementing their Procure-to-Pay solution for our own internal use within MedAssets, and our team is extremely excited about how things are going so far.

I was mainly focused on working with the Ariba team on putting together the strategic partnership that we announced in early April and that we're extremely excited about. We wanted to partner with the leader in global e-commerce and there was no doubt that that was the Ariba team.

We’d like to bring the capabilities that are proven in other industries, where Ariba has basically gone to market and been extremely successful, and bring those similar cloud-based and network activities into healthcare.

As I alluded to before, we have our own eCommerce Exchange and Transaction Management services, as well as a partnership on the front-end for requisitioning through Prodigo.

Historically, we've done a very good job of working with the buyers in hospitals to requisition an item and get that purchase order out through our eCommerce Exchange and Transaction Management services to the vendor. Where we’ve fallen short is in helping our suppliers and providers get that invoice back most efficiently.
The other thing that’s extremely exciting about what Ariba brings to the table is the fact that they have over one million vendors on their network.

What's great about the Ariba Network is that we can link our eCommerce Exchange with the Ariba Network to enable a more efficient transaction process. We enable providers to get a PO out through our eCommerce Exchange or through the Ariba Network electronically, and then enable suppliers to send that invoice back electronically through their exchange or through invoice conversion services, which is basically taking the paper invoice and converting it into an electronic invoice.

Multiple benefits come out of that. It’s a perfect complement to what MedAssets has already been doing in the healthcare community with our provider clients, but taking it to the next level. The other thing that’s extremely exciting about what Ariba brings to the table is the fact that they have over one million vendors on their network.

Today, we do commerce through our exchange with about 350 traditional medical/surgical vendors, whereas Ariba has perfected the world that they call "indirect spend" and we call "purchased services." That's a huge unlock both for us and for the provider community.

We believe that purchased services spend is just as big as the spend that goes through the GPO, if not even bigger. Typically, that has been a very hard area for providers to get their arms around, because they haven’t had access to the data.

The main reason for that is that most of the purchased services spend is a non-PO transaction. So it’s very hard to get to that granular line-item level detail to break down that spend, whether it’s by contract category or specific vendor. You can’t manage anything if you can’t see it.

Significant value

So we're extremely excited about leveraging the Ariba Network and working with them to capture 100 percent of provider spend, not just med/surg and PO-backed spend, but all of the spend that’s coming out of the hospital. The value this can bring to the provider community is significant.

Gardner: How do MedAssets and Ariba come together to offer new capabilities into the market?
Ariba has created a smart invoicing capability, because it’s a network, as opposed to just an EDI pipe.

Grodin: This is where I get very excited about the potential of what Ariba and MedAssets can do together in the marketplace. As I mentioned before, we have our eCommerce Exchange, which is EDI-based, and we can get a certain portion of invoices back electronically through our exchange.

There are other offerings in the marketplace that are very similar, but really what they do is just get a paper invoice back into the provider’s hands more quickly. But you don’t know if that invoice is correct. If it’s not correct, there is a whole lot of inefficiency in managing that exception on the backend.

Ariba has created a smart invoicing capability, because it’s a network, as opposed to just an EDI pipe. Those invoices that are inaccurate can be rejected on the front-end, so they never even get to the provider until they are accurate.

The best part about it is that rules engine -- and that I believe that you can customize up to 70 different rules -- is dictated by the provider themselves. It’s not a built-in, one-size-fits-all type of solution. Depending on the unique needs of that provider, they can customize that rules engine to reject inaccurate invoices back to the supplier in real-time.

It’s the whole notion of garbage in, garbage out. We're preventing the garbage from coming through, which is then creating those efficiencies in accounts payable. That is absolutely something that’s going to be unique to healthcare and doesn’t exist today, and which again will create tremendous operational efficiencies on the back end.

Because of smart invoicing and the overall transaction efficiency that’s created through the exchange and the network, we're going to be able to enable providers to get invoices in a ready-to-pay status much more quickly. Industry best practice is five days. We've seen metrics, where it could take anywhere between 20 and 40 days to get that invoice approved for most healthcare providers today.

Dynamic discounting

Our relationship with Ariba will enable us to leverage Ariba’s working capital management solutions as well. They’ve got something that they refer to as Dynamic Discounting, which creates the ability to have an ad-hoc negotiation for further cost-of-goods-sold reductions between a provider and a supplier.

Because of the increased visibility into where an invoice is sitting and what the status of that invoice is between suppliers and providers -- something that doesn’t exist in healthcare today -- a supplier can go in and see that an invoice is sitting in a ready-to-pay status.

They can then offer an incremental discount to the provider, so that if the provider  has additional cash on hand and it’s better used to drive additional discounts as opposed to sitting and getting short-term interest, that can make a tremendous amount of sense.

So, there's also the ability to optimize prompt-pay discounts, where appropriate, because we're getting those invoices in a ready-to-pay status much more quickly. So if it’s a two percent discount if you pay within 10 days, and the average invoice isn’t being approved for 20 days, all of a sudden I've missed that window. Even if I have cash on hand, I can’t leverage it.

Even better, if I've missed that prompt-pay window, but am willing to pay on day 20, instead of day 30 or day 40, all of a sudden there is value coming back to the provider as opposed to no incremental value for paying early. It’s just another lever or another tool in the toolkit that we can use to drive further cost reductions in our partnership with Ariba.
As the reimbursement models are changing in healthcare, they're getting more-and-more focused on clinical quality, safety, etc.

The benefits are significant in a couple of areas, making that back-office function, specifically in AP, more efficient, more scalable, and being able to repurpose the work that was being done in that department and in other back-office administrative areas. Also, the ability to reinvest those resources in front-line patient care delivery.
As the reimbursement models are changing in healthcare, they're getting more-and-more focused on clinical quality, safety, etc. That’s where a hospital’s core focus needs to be, not in the back-office. It needs to be with the patient. Certainly there are significant FTE and operating efficiency benefits created by this partnership, but what we are particularly excited about is more from a contract-compliance perspective.

Through our eCommerce Exchange, our transaction management service, as well as what Ariba is going to bring to the table through PO and invoice automation, invoice conversion services, invoice professional which is their workflow tool, we'll have the ability to ensure that folks are buying on contract where they should be and also ensuring that they are paying the right price. We do a good job today of ensuring that that PO price matches the contract price, but where we have been challenged in the past is the ability to bring that invoice price in.

Significant benefits

It’s going to bring significant benefits, because in some of the research that we're doing with very sophisticated health systems, they're finding that they may only be buying on contract 30-40 percent of the time. So a contract is only as good as its use. If it’s just sitting in a drawer and nobody is accessing it, all the great work that’s been done by their sourcing team or our sourcing team is for naught.

The ability to do all of that in real time, to take that PO price match it up against our contract price and against the invoice price, is going to ensure not only are they buying on contract, but they are paying the right price.

Gardner: What's in store for further eking out productivity gains?

Grodin: As our relationship continues to blossom with Ariba, I'm sure we’ll be having conversations around their spend visibility and other analytic tools that they can bring to the table. Within MedAssets, we have  our own analytics tools, including service line analytics, spend analytics and pharmacy analytics.
For us, the true unlock is the ability to get access to purchasing and spend data, which is where we are very excited.

For us, the true unlock is the ability to get access to purchasing and spend data, which is where we are very excited. We capture a lot of financial and spend data today, but this purchasing and  indirect spend area is really an untapped horizon where the data and the technology that Ariba is going to bring, in combination with our analytics, people and process, will provide significant benefit.

We currently manage about $5 billion of spend through our National Procurement Center, which is the largest shared services operation of its kind in healthcare today. That combination of people, process, and technology is absolutely going to unlock new opportunities in healthcare from a spend-management and cost-reduction perspective.
Listen to the podcast. Find it on iTunes. Read a full transcript or download a copy. Sponsor: Ariba, an SAP Company.

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at 2:52 PM 0 comments

Thursday, August 8, 2013

T-Mobile swaps manual cloud provisioning for HP-powered services portal, gains lifecycle approach across multiple platforms

Listen to the podcast. Find it on iTunes. Read a transcript or download a copy. Sponsor: HP.

The next edition of the HP Discover Performance Podcast Series explores how wireless services provider T-Mobile US, Inc. improved how it delivers cloud- and data-access services to its enterprise customers.

It's a story about walking back manual cloud provisioning services and moving to a centralized service portal to manage and deploy infrastructure better. In doing so, they have improved their service offerings across multiple platforms and enabled a lifecycle approach to delivering advanced cloud services.

To learn how T-Mobile did it, we recently sat down with Daniel Spurling, Director of IT Infrastructure at T-Mobile US, Inc. The discussion is moderated by Dana Gardner, Principal Analyst at Interarbor Solutions. [Disclosure: HP is a sponsor of BriefingsDirect podcasts.]

Here are some excerpts:
Gardner: What are the major IT requirements driving your mobile carrier business right now?

Spurling: To answer that question, I'm going to frame up a little history and go into where T-Mobile has come from in the last few years and what has driven some of that business shift in our space.

As many know, in 2011 AT&T attempted to acquire T-Mobile. When that dissolved, there was a heavy recognition that we needed to drive greater innovation on our business side. We had received a generous donation, we’ll call it, of $4 billion and a lot a spectrum. We drove a lot of innovation on our network side, on the RF side, but the IT side also had to evolve.

We, as an IT group, were looking at where we needed to start evolving within the infrastructure space. We recognized that manual processes are a very rudimentary way of delivering servers or compute storage, etc. This was not going to meet the agility needs that our business was exhibiting. So we started on this path of driving a significant cultural shift, and mindset shift, as well as the actual technological shift in the infrastructure space -- with cloud as one of the core anchor points within that.

Gardner: When you decided that cloud was the right model to gain this agility, what were some of the problems that you faced?

Not a surprise

Spurling: We recognized that cloud is almost like a progression of where we've been going within IT. It is not like it is a surprise.

Spurling
We've been trying to figure out how to enable more self-service. We've been trying to figure out how to drive greater automation. We've been trying to figure out how to utilize those ubiquitous network access points, the ubiquitous services, external or internal of the company, but in a more standardized and consolidated fashion.

It wasn't so much that we were surprised and said, "Oh, we need to go cloud." It was more on the lines of we recognized that we needed to double-down our efforts in those key tenets within cloud. For T-Mobile, those key tenets really were how we drive greater standardization, consolidation and to enable greater automation -- and then to provide self-service capabilities to our customers.

Gardner: Were there particular types or sets of applications that you identified as being the first and foremost to go into this new model?

Spurling: That's a great question. A lot of people look at the applications, as either an application play or an infrastructure play, because of the ecosystem that existed when the cloud ecosystem was kind of birthing. We started more on the infrastructure side. So we looked at it and said, "How do we enable the application growth that you are talking about? How do we enable that from an infrastructure perspective?"
We recognized that we needed to double down our efforts in those key tenets within cloud.

And we saw that we needed to focus more on the infrastructure side and enable our partners within our IT teams -- our development partners, our application support partners, etc. -- to be able to transform the application stacks to be more cloud-capable and cloud-aware.

We started giving them the self-service capability on the infrastructure side, started on that infrastructure-as-a-service (IaaS) type capability, and then expanded into the platform-as-a-service (PaaS) capability across our database, application, and presentation layers.

Gardner: The good news with cloud is that you do away with manual processes and you have self-service and automation. The bad news is that you have self-service and automation, and they can get very complex and unwieldy, and like with virtual machines (VMs), sometimes there is a sprawl issue. How did you go about this in such a way that you didn’t suffer in terms of these new automation capabilities?

Spurling: I'm going to break it into two parts. Look at the complexity of an IT organization today, especially for a company of T-Mobile's size. T-mobile has 46,000 employees, around 43 million customers. It's not a small entity. The complexity that we have in the IT space mirrors that large complexity that we have in the business space.

Tough choices

We recognized on the infrastructure side, as well as in the application, test and support sides, that we cannot automate everything. We had to really drive heavy consolidation and standardization. We had to make some tough choices about the stuff that we were -- for lack of a better term -- going to pare off our infrastructure tree: different operating systems, different hardware platforms, and data centers that we were going to shut down.

We had to drive that heavy rationalization across all of the towers within our IT space, in order to enable the automation you talked about, without creating a significant amount of complexity.

On the sprawl question though, we made a conscious decision that we were going to allow or permit some level of sprawl, because of the business agility that was gained.

When you look at server sprawl, there are concerns around licensing, computer utilization, and stranding resources or assets. There are a lot of concerns around sprawl, but when you look at how much business benefit we got from enabling that agility -- or that speed to deliver, and speed to market -- the minimal amount of sprawl that was incurred was worth it from a business perspective.
You have to continue to deliver for your customers, but you need to prioritize what you are doing in that maintenance space.

We still try to manage it. We still make sure that we're utilizing our compute storage data centers, etc., as efficiently as possible, but we've almost back-burnered the sprawl issue in favor of enabling business.

Gardner: So with multiple platforms -- Windows, Linux, AIX, Unix -- and multiple data centers across large geographies, how can you do that without a larger staff? Do you find that such centralization possible, or is it pie in the sky?

Spurling: It’s a bit of both. When you look at how much work there is to enable an automation solution, you almost have to be -- and my team hates it when I use the term -- ambidextrous. On one hand, you have to continue to deliver for your customers, but you need to prioritize what you are doing in that maintenance space and shave off a bit to invest in the innovation space.

You're going to have to make some capital investments, and maybe some resource investments as well, to drive that innovation the next step forward. But you almost have to do it within the space that you are coexisting in that maintains and innovates at the same time, because you can't drop one in favor of the other.

We did have to make some tradeoffs on the maintenance side, in order to take some qualified and some bright resources that we are excited about in our burgeoning cloud future, and then invest those resources to continue driving us forward in the technological and also cultural space. We made a significant cultural change too.

Gardner: That was going to be my next question. When it comes to making these transitions in technology, platform, and approach, I often hear companies say they have a lagging cultural shift. What did that involve in terms of your internal IT department making that shift to more of a service bureau supporting your business -- like a business within a business?

Buggy whips

Spurling: A lot of times when you talk about evolution in either business context or kind of an academic context, you hear the story about the buggy whip. The buggy whip, back in the day, was something that everybody knew. About 125 years ago, everybody probably knew someone who made buggy whips or who sold buggy whips. Today, no one knows anybody who makes or sells buggy whips.

The buggy whip industry went away, but a brand-new industry emerged in the automobile space. In the same context. the old IT way of manually building servers, provisioning storage, and loading applications may be going away, but there is a brand-new environment that's been created in a higher value space.

As to the cultural shift you talked about, we had to make significant investments in our leadership to be able to help set a vision, show our employees where that vision intersected with their personal careers and how they continue to move on.

Then, you lead and help them to do that kind of emotional change. I'm not a server builder anymore. I'm now a consultant with the business on delivering a value, I'm now an automation engineer, or I'm now delivering future value and looking at new products that we can drive further automation into. That cultural change is ongoing, and it’s certainly not done.

Gardner: And given that this transition and transformation is fairly broad in terms of its impact, you don’t just buy this out of a box. How did the combination of people, process, technology and outside your knowledge come together?
With those tools, with HP professional services, and with our own internal team members, we created a tactical team that went out there and "attacked cloud."

Spurling: We knew that, from a leadership perspective, we weren’t going to get the time-to-market that we wanted by training our resources, helping them learn and make mistakes. We had to rely on professional services. So we partnered with HP very heavily to drive greater, instant-on services in our cloud solution.

On the technology side, we have everybody under the sun from a tooling perspective, but we do have a significant investment in HP software. We made a decision to move forward with the HP Cloud Suite. Pieces like HP Operations Orchestration (HPOO) or Cloud Service Automation (CSA), and building out those platforms to be the overarching cloud solution that, for lack of a better term, created that federation of loosely coupled systems that enabled cloud delivery.

With those tools, and with HP professional services, and with our own internal team members, we created a tactical team that went out there and "attacked cloud," delivered that, and continues to deliver that now.

Paybacks

Gardner: Can you look at results, either business, technological, or financial from going to a cloud model, provisioning with that automation, advancing the technology, making those cultural hurdles? What do you get for it?

Spurling: When we look at the cloud opportunity, and the agility that has been gained -- the ability to deliver things in an almost immediate fashion -- one of the byproducts that we may not exactly have intended was that our internal customers have demanded a lot of complexity, or a lot of significant specific systems.

When we said, you can get that significant system, whatever it is, in a couple of weeks -- or you can get this cloud solution that delivers 95 percent of what you asked for in a couple of hours, almost always those things that we thought were "hard" requirements melted away. The customer said, "You know what, I'm okay with this 95-percent deal because it gets me to my business objective faster."
Because of the investments we made in standardization and automation, our cloud portfolio, we were able to build out that capacity in record time.

We're realizing now that that complexity may not have been required all along, because we are able to deliver so quickly. The byproduct of that is that we're seeing massive amounts of standardization that we could never have thought would organically be possible.

From an agility perspective, there's time to market. We had a significant launch with the iPhone, a big event in T-Mobile’s history, probably one of the largest launches that we've had. That required a significant amount of investment in our back-end systems because of the load that was put in our activations and payment inside our systems.

Because of the investments we made in standardization and automation, our cloud portfolio, we were able to build out that capacity in record time, in days versus what would have taken in weeks or months two years previously. We were able to support our business with very little lead time, and the results were very impressive for us as a business. So those two areas, that standardization and consolidation and that rapid ability to deliver on business objectives, are the two key ones that we take away.

Gardner: What does the future hold?

Spurling: Cloud is just one step in continuing to evolve IT to be more of a business partner.

That's really how we are looking at it. We're making great strides in that space. In every single area, we're setting ourselves up to be closer to the business, to move that self-service capability. I'm not just talking about a webpage. I am talking about being able to consume an IT service as a business leader in a simple way. We're moving that closer-and-closer to the business and we are being less and less of a gatekeeper for technology, which is super-exciting for us.

We're recognizing that the investments we made in our PaaS plays as well as test automation as well as some of the development platforms. We're seeing those start to have payoffs in the fact that we're developing cloudware applications that are now scalable in a way that we've never seen before, without massive human invention.

So we're able to tell our business, "Go ahead and have a great marketing idea, and let’s move it forward. Let’s try that thing out. If it doesn't work, it’s not going to hurt IT. It's not going to take 18 months to deliver that." We're seeing IT able to respond about as fast as the business wants to go.

We are not there yet today. It’s a continuing journey, but that’s our trajectory in the next six to 12 months, and then who knows what’s going to happen, but we are excited to see.
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