Dana Gardner's BriefingsDirect

Thursday, April 7, 2016

Digital payments now catching on across the business world too

The next BriefingsDirect business innovation thought leadership discussion focuses on how digital payments are catching on for many more companies in the business world following the popularity of services like Apple Pay in the consumer world.

We'll now explore how digital payment solutions are changing the game for small companies like 487 Consulting Services, which is seeing faster and simpler payments using AribaPay. And we will hear more about how B2B digital payment services like AribaPay are expanding around the globe.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy.

To learn more about the future of business payments innovation, we're joined by Drew Hofler, Senior Director of Marketing at SAP Ariba; Ken Crouse, Principal Consultant and Owner at 487 Consulting Services in Folsom, California, and Bill Dulin, Vice President of Commercial Payments at Discover in Chicago. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: Drew, for almost anything that consumers want to buy these days there's a swipe or a card chip, and we are now into wireless connectivity for payments. And yet, with business-to-business (B2B), we're still many times faxing and writing paper checks -- and it's largely still a manual process.

So why such a dichotomy between what people can do as a consumer buying gasoline, for example, and a company buying critical goods and services?

Hofler: It's fundamentally the difference between payments in B2B and the consumer world. For consumers, it's relatively simple.

Everything that you're going to buy is in a single cart at the time of payment, and it all takes place in one spot. The information and the payment itself happen together.

In the B2B world, that is just simply not the case. In the B2B world, you have an invoice that comes in for a good delivered or service rendered, and then payment may happen 30, 45, 60, 90 days later, and that payment may include more than one invoice.

Oftentimes in the B2B context, it includes hundreds of invoices on a single credit of funds into an account. So there's a huge gap between the payment and the information, and that’s what we're trying to solve. That's where the innovation needs to come, bringing that information that’s necessary for all parties to know what's being paid for, when, and why, bringing that together with the settlement of funds in a very secure environment.

Closing the gap

Gardner: But we are closing the gap. Tell us a little bit about AribaPay. How long has it been around and why is it now in a position to begin closing that gap even more rapidly than ever?

Hofler: We launched general availability of AribaPay a little over year ago, and we started here in North America. We've seen rapid growth and we just announced that we're expanding into Canada with our partner, Discover. We are also expanding, later in the year, into Europe and Latin America.

Hofler

Even though the payment systems are different, the fundamental issue with B2B payments -- the disconnect between information and the settlement of funds -- is the same no matter where you go geographically.

So that's why we're taking it global, and why we're in a position to really change the game and innovate in B2B payments. We sit at the nexus of the digital network age, which is a very different age from where payments began.

You have electronic payments like ACH in the US (or SEPA in Europe) and these types of electronic payment schemes were created back in the '70s, based on a paradigm of that time, which was COBOL-based mainframes behind brick walls, and there was no way to connect a buyer's systems with the supplier's systems.

But now, we live in the digital age, where the Ariba network connects millions of buyers and suppliers together to transact and move terabytes of data in real time between back-end systems.

Instead of doing what B2B payments and electronic payments have done in the past, which is try to take a small subset of that information out and attach it to the payment, (using the ACH or to the SEPA formats, 140 characters in Europe, which is the same as a tweet, or 80 usable characters in the US) we're taking the payment and attaching it to all of this information that’s already on the Ariba Network, the purchase order (PO), the invoice, the reason why the invoice maybe paid a little less than was expected. All of that information is fully available on the network.

We make it visible with the payment, so that both buyers and suppliers know exactly what's being paid, why it's being paid, what this million-dollar deposit is, even if it's a thousand invoices, and why it may be a little different than the supplier was expecting. All of that is fully visible and available on the Ariba Network.

Gardner: Bill, tell us a bit about the role that Discover plays in all this. And how do you feel about the gap closing between what happens in the consumer space and what can now happen in the business space?

Facilitating payments

Dulin: I think I would like to start off with what AribaPay is not, and it's not a card offering. Usually, when people see the Discover logo, they're thinking of a credit-card offering, but this is not that. We're using our infrastructure to facilitate commercial payments.

Dulin

In that case, we’re making sure that we're gathering the bank account information, we're acting as the financial institute of record, we're boarding the suppliers, so all of that information is now in our trusted network. That's how we show up as the financial institution, as the bank. We then move the money and, as Drew talked about a little bit earlier, along with that data as well. That's really where the gap is closing. We're bringing the data and the financial transaction together.

Gardner: Drew, this is not just for large companies. It should be for any company. The long tail, if you will, the larger number of people involved, will be those small-to-medium size businesses (SMBs). Is there something in it that's different or special for them other than your Global 2000 corporations?

Hofler: It’s particularly different for the receivers of payments on that long tail. The large companies have the IT resources they need to manage the complex electronic payments that are available today. That's based on EDI and things like that, and that's great.

The midsize to the smaller suppliers simply don't have the technical resources to consume the information in those formats. They just can't do it. What AribaPay really does is it makes it as simple as possible.

But then the midsize to the smaller suppliers simply don't have the technical resources to consume the information in those formats. They just can't do it. What AribaPay really does is it makes it as simple as possible.

It is as simple as an email with the information about the payment and a link into their account in the Ariba Network that they can visibly see all the information around their payment in a very nice UI. For example, if they were expecting a $1,000 payment and they got $900, the big question is why. There may be 10 invoices on that payment.

They come in, click that link, and come right into their account on the network. They see the payment ID for that $900 that they have, and we show them exactly what was invoiced, the $1,000. You expected $1,000, but you received $900, and here exactly is where the difference is from.

They have hyperlinks to go into the invoice. They can see the comments that may have been made on how maybe something was broken on the pallet, and so they only paid for 9 items instead of 10.

All of that is a very simple online experience.

Gardner: Ken, tell me a bit about 487 Consulting Services, what you do, and then we'll ask about how you like to get paid?

One-man shop

Crouse: 487 Consulting Services is my personal business. It's a one-man shop. I literally get up in the morning, walk over and turn on the coffee pot and walk over to my desk. That's probably the best part of being an independent.

Crouse

The other side of being an independent, though, is that I'm responsible for every single aspect of the business from submitting the financial filings that we did with Discover and getting on board with everybody and actually doing the work for which I'm getting paid. It's all done by me and is controlled by me.

There is no IT department. There is no human resources department. There is no large infrastructure behind me -- it's just me. I came to SAP Ariba via a customer that said they wanted to pay me that way.

Initially, I was a little apprehensive because I was expecting that I'd have to learn a new program. I could just flash back to COBOL in college back in the '80s, and that was petrifying, but the simplicity and the transparency of SAP Ariba was just refreshing.

The first webinar I attended, although scheduled for one hour, only lasted about 30 minutes because of the simplicity and then, within a couple of days, I was able to get all my paperwork together for Discover, and I was live on Ariba within less than a week.

Now, with the Ariba Network, when it comes time to do my invoice and do it about twice a month, I open my Ariba account, identify the purchase order to be billed, click the service that's to be billed and click the submit button.

Two weeks later, I received my first series of payments through Ariba and have been now receiving payments since the first of January 2015. Ariba has processed something north of 300 invoices for me amounting to probably 500 to 600 individual tasks.

Gardner: I think there are going to be more and more folks like you, smaller businesses, independents working to provide discrete services throughout our economy, around the world, many of them working off just the smart phone.

So this is an important part of our growing economy, but also it’s important for an organization like yours to have great visibility to know when the money is coming and when to expect it. Cash flow is pretty important.

So tell me a little bit about that visibility and expectation, and how this system worked better than paper, faxes, and checks?

Previous system

Crouse: It's probably best that I just take a step back from that and review where I was before Ariba, and like you mentioned, it was a paper invoicing system. My customer required that each purchase order be on a separate piece of paper for the purposes of invoicing.

So I might create 15 or 20 invoices, put them all in the same envelope with a nice little transmittal sheet, mail them off. Then, 75 days later, when I'm not getting paid for some invoice, I would then get hold of them, and they would say "Oops, your invoice isn't in our system. And I'd start all over again. That would be a time out from work. I had to stop what I was doing, resubmit the invoice, and then start the clock all over again.

Now, with the Ariba Network, when it comes time to do my invoice and do it about twice a month, I open my Ariba account, identify the purchase order to be billed, click the service that's to be billed and click the submit button. Quite literally, the invoicing is just that simple.

Within a matter of minutes, I receive recognition that the invoice is in the system, as opposed to waiting 75 days for confirmation that it's not there. I receive a positive affirmation within just a matter of minutes.

And then, within 48 to 72 hours, I have a customer who has acknowledged and has approved that invoice for payment. At that point, I know with certainty that that payment is going to come in and on a date certain. I can forecast my cash accordingly and then go on vacation. I don't have to worry about it.

When I get the notifications of the payment being in there, it's broken down line item by line item that corresponds to the exact tasks that I have done for that particular payment. I enjoy the fact that it is all in one payment and broken out that way.

Gardner: Also, Drew mentioned this opportunity for more rich information to be associated with the transaction, remittance information for example. Have you been able to avail yourself of that and is that an important part of what you're doing, being able to see all the information associated with an invoice or a payment process?

Crouse: When I get the notifications of the payment being in there, it's broken down line item by line item that corresponds to the exact tasks that I have done for that particular payment. I enjoy the fact that it is all in one payment and broken out that way.

In the past, a year and a half ago, I might receive individual payments for all of those invoices. I'd get an envelope in the mail that might have a dozen checks in it and then, I'd have to go back and reconcile one check against one invoice. It was just a very time consuming and very clumsy effort.

The other part is that I wouldn’t necessarily get paid for all of my invoices submitted on a given date at the same time. I'd get paid for 10 of the 12 invoices and then would have to start this tail-wagging-the-dog episode of chasing around payments on the other invoices and payments. Although the majority of them might be paid in 60 days, it wasn't uncommon that they would stretch out to 120 or 150 days.

Digitizing processes

Gardner: Bill, any thoughts from the Discover perspective on the ability to not just repave cow paths, but actually do things in business that could not have been done before, given that we are digitizing these processes?

Dulin: A key for us in this, and what we haven’t talked about too much, is the compliance that’s around it. So as we are moving these payments, knowing who the customer is, anti-money laundering, all the regulatory compliance that goes around it. That makes it a more robust payment.

We become more sophisticated as the technology wraps around that payment, to know where it's going, where it should be going. If something has happened that triggers it -- it makes us stop and take a look, to make sure. Sometimes, we talk about purposeful friction. Something triggered an event that made us stop the payment and take a look around and make sure that we have it.

From our perspective in this case, it's not so much of the technology; it’s pulling that sensitive information out of enterprise resource planning (ERP) programs or other places that it shouldn't be and then putting it in a financial institution, again, using that technology around it to help secure that.

Gardner: Now, we heard a lot at the recent Ariba Live 2016 Conference about risk reduction and visibility in the supply chain, that it's really about managing your supply chain. Is there something about using AribaPay, when you have all that data associated that gives people more insight into their supply chain than they may have had, auditability, the ability to further define what it is that they want in terms of best practices, Drew?

More data is better than less data, as long as you can consume it and put it in a usable format, and that's really what we are doing.

Hofler: More data is better than less data, as long as you can consume it and put it in a usable format, and that's really what we are doing.

Knowing exactly who is being paid and removing the opportunities for fraud in the payment process is huge, and AribaPay really removes those opportunities for fraud or a vast majority of them.

We have this whole platform of information and data about the interactions between a buyer and their supplier, from the moment that they source, to when they procure, to the PO, to the invoice, to the payment going through. They can see the on-time performance and they can see how often that supplier requests early payment, if they're using Dynamic Discounting on the Ariba Network, and they can feed that back into the procurement side and start to define payment terms as a result of that at the very beginning.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy. Sponsor: SAP Ariba.

Friday, April 1, 2016

How new technology trends disrupt the very nature of business

The next BriefingsDirect technology innovation thought leadership discussion focuses on how major new trends in technology are translating into disruption, and for the innovative business -- opportunity.

From invisible robots, to drones as data servers -- from virtual reality to driverless cars -- technology innovation is faster than ever, impacting us everywhere, broadening our knowledge, and newly augmenting processes and commerce. We'll now explore the ways that these technology innovations translate into business impacts, and how consumers and suppliers of services and goods can best prepare.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy.

To learn more about the future of business innovation, we’re joined by two guests, Greg Williams, Deputy Editor of WIRED UK, and Alex Atzberger, President of SAP Ariba. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: What are some of the major disrupting trends that you see in technology, and which of those do you think are going to be the most impactful for businesses?

Williams: Technology shifts tend to be almost things we don’t notice. They're not happening slowly any longer; they're happening quickly, and we're almost not seeing them.

We talk about something like robotics. Now, you can see all kinds of incredible things. You can see in Japan a robot caregiver that can lift elderly people out of their beds and can care for them in that way. You can see slightly sinister videos from Boston Dynamics of robot dogs running along that look pretty scary. But what most innovation looks like are things that we almost don’t notice are there.

For instance, and this is a boring example, an ATM is kind of a robot; a vacuum cleaner is; an elevator is. Those are things we don’t necessarily notice. They're not as dramatic as we think.

I should just caveat that and say that everything is moving very, very quickly right now. That's why it’s hard to make very clear predictions.

The other thing that’s important is this joining up of lots of different technologies. That’s the biggest trend that I see right now. We can talk about satellites and drones, which are effectively servers in the sky, or we can talk about autonomous mobility and augmented reality, but it’s all about connecting the dots.

Technology players

One thing that's interesting now is the way that car manufacturers are all technology players. Every automotive manufacturer is figuring out that what they have is a computer on wheels. They have to figure out how, when people drive into a parking lot, they make an automatic payment via the vehicle. How can the vehicle know that people’s groceries are ready to be picked up at a certain point.

Although it’s nice to list robots and autonomous vehicles and other clear technological shifts, the thing that we're really seeing is the speeding up and this coming together, this joining and connecting of the dots. Basically, all are based on three things: ubiquitous computing, mobile technology, and the cloud. Those three things underpin pretty much everything that we're going to be talking about in the next 20 minutes.

Gardner: Alex, when I hear Greg, I'm thinking business networks, although people in the consumer space might not think of them as business networks. It’s the network effect, it’s intelligence shared, it’s linking things up and allowing the pace to increase and people to share knowledge and activities. What do you see as the crossover from the consumer space in the behaviors and culture of technology and then how does that translate to the business idea of a network?

Atzberger: I was recently in Dubai, and they have a Museum of the Future that they're launching this year. In the Museum of the Future, you can see what it would be like to be going to a doctor to get a new body part to jump higher or move faster. You look at these types of ideas, and the business embraces the same sort of idea. How can I augment my business to actually run smarter and be better? What are things on which I can augment myself to use data better?

Atzberger

You can no longer be an island as a company. You need to share ideas and innovation with others. You need to be connected, and when you're connected, you can transform your business, you can do new things, you can take on new capabilities, and you can augment your business.

Companies ask us, "Now that I'm connected to a network, how can I get data out of that network to improve my business processes and do things better?" That's what they basically call the augmented enterprise, to get augmented intelligence to that business.

Gardner: We're seeing different patterns, not only in adoption, but expectations. People are seeing a mobile device tied to a cloud that has deep learning capabilities, and feedback loops that are applying the data back and forth. People are becoming ready for the next move. They want the technology to guide them. And they also don't want to take the time to learn a process; it has to be intuitive to them.

So how do these human behavioral aspects of anticipating a proactive technological helping hand impact both us in our consumer space, as well as what we would expect in our business environment?

Simplicity is key

Williams: Simplicity is absolutely key to all technology. We have to think about the end user. The end user or the customer is always the most important thing in any kind of technology process.

Going back to what Alex was talking about in terms of artificial intelligence (AI), what it’s going to allow us to do is be a lot more predictive in terms of consumer behavior and customer behavior.

Williams

If you look at something like natural language processing now, some of the startups in that space who are working with automotive manufacturers, to go back to my previous example, they will look at trends on social media and elsewhere. They can look at import and export data maybe and they can look at those predictive trends and make predictions about General Motors, their sales in the next quarter.

From the sky, we can look at parking lots at malls like Target, Costco, and Walmart and we can make predictions about how the quarterly earnings report for Walmart or whatever is going to be pretty strong this quarter.

Simplicity is absolutely key to all technology. We have to think about the end user.

What we are looking at is this constant connecting of the dots, and to Alex’s point, this incredible accumulation of data. That’s the real tough thing for businesses right now. I don’t think there’s any business out there that doesn’t understand the value of data. This phrase "big data" is one that you'll hear at every single conference, but how can we possibly parse value out of that? How can we use that data in a predictive way, rather than as a lagging indicator?

Most businesses have used data as a historical indicator. So, it's looking at sales reports or whatever other data is important within your organization. How we can use all those external factors is going to become increasingly important for businesses. Can we see how our competitors are doing by looking at the job postings that they have maybe? How can we see what their next move is in terms of manufacturing by looking at their import/export data? Can we look at the amount of money they're spending on Google AdWords and see what keywords they're spending money on?

As I said previously, it’s about connecting of the dots and bringing this information together, and also figuring it out, having someone within your organization who's not going to get overwhelmed by this data, but is curating it, and knows what’s important and what’s not important to the enterprise, because a lot of it isn’t.

Gardner: User experience plays a huge role in how we can consume and make good on this technology, on this data, on this analysis. What Greg said about simplicity can be deceiving. It might seem simple to the end user, but an awful lot has to happen in order for that effect to take place.

So Alex, one of the interesting things I've seen with SAP Ariba recently is this notion of Guided Buying. I love that word "guided," because you're anticipating the user, heading them off on complexity, but what does it take behind-the-scenes to actually make that happen?

Guided Buying

Atzberger: There’s a whole lot that it takes to get this going. The idea of Guided Buying was always that simplicity that all customers are asking us for. It’s really about how I make the user feel empowered and give the power to the user, but at the same time, embed intelligence in the software.

In our cloud applications, we thought through every step of the process, starting with monitoring how users were behaving with the system. So it’s a design thinking approach, and it starts off with deep empathy with the user. That’s the first point.

The second point is understanding what the business actually wants to accomplish, because the business actually runs a business. They have rules, methodologies, things that they want to achieve.

I was with one CPO who told me, "Alex, I look at this beautiful software, but you're making it too easy to buy. I don’t want people to just go out and buy stuff." That’s absolutely a good point, but what we're doing is embedding the logic of the buying in the enterprise into Guided Buying. That’s the difference between B2C and B2B.

The idea of Guided Buying was always that simplicity that all customers are asking us for. It’s really about how I make the user feel empowered and give the power to the user, but at the same time, embed intelligence in the software.

In B2C you can have that beautiful experience. You just want to make the experience so seamless that you drive commerce. In B2B, you want to guide the commerce, to be more relevant and fit your company goals. That requires a slightly different approach to how you solve that problem. We're obviously deeply committed to solving that problem in the context of giving users as much freedom and choice as possible while enabling the business to achieve their goals.

Williams: Alex used a really great phrase and it’s one that we actually had a discussion about in the office, which is the importance of design thinking within organizations. When you think about software or any technology, the user experience is your brand. So, it’s the people experiencing it.

Pretty much in every organization now, the "design brief" is a really important part of the organization. Maybe designers need to be brought in, whether they're software designers or in the B2C space, UX designers. They need to have a seat at the top table these days, because they're such an integral part of defining any kind of brand.

Atzberger: We hire a lot of designers into SAP Ariba, but interestingly, a lot of the engineers come and say they need to think about design as well. So, it’s not like design is still a separate department. At one point, design becomes part of what we call a scrum team that basically builds the software, and an engineer should have a point of view as well in terms of what is good design.

You could argue that there are some sites that don’t necessarily look pretty, but they're really easy to use. So, it’s not just about the visualization and the fonts, etc.; it’s about also how many clicks and the logic behind it. That’s where product people want to be product people. They don’t want to just be engineers or just designers.

Important element

Gardner: I suppose another important element to this is not only that user experience where one-size-fits-all, but a user experience where customization is brought to bear, and because of the technology, because of the intelligence, access to a cloud infrastructure, we can do that. There are examples of customization at the individual worker level, where role-based and policy-based approaches can do that.

We're also seeing with the SAP Ariba cloud, you're bringing master data, vendor data, for example, into the cloud, cleansing it, making it usable, but still keeping it germane to that particular company, so that this isn’t just a business app for everyone. Let’s delve a little bit into this idea of customization specifically to a company and then even down to the individual user. How is that so important now in business applications, Alex?

Atzberger: The premise of the cloud was always speed. What you gave up for the speed was the ability to customize, especially in enterprise systems. What we're now saying is that you can have a level of individuality and things that are important to you, either through configuration or through extending the platform that you're on.

That’s the power of the technology that comes to bear when you look at platforms today. If you look at Amazon Web Services or what SAP is doing with the HANA Cloud Platform, it’s essential, because it gives the capabilities to companies to actually customize further.

At the same time, we have a concept of the private and the public persona, because at the end of the day, there is some data that’s private to a company and then there's data that's publicly shared. We need to be very sensitive of what data is relevant and in what context.

Gardner: Greg, one of the areas where business can get out in front of the technology curve is this idea of customization and anticipatory or predictive analytics’ benefits. It seems that we're only scratching the surface here. When I go on Netflix, they still can’t pick shows that I really want to watch. When I go to Amazon and they have My Box or My Stuff, it's really just things I already bought with a little bit of augmentation.

What we're now saying is that you can have a level of individuality and things that are important to you, either through configuration or through extending the platform that you're on.

If we can take this to the full potential of customization, and I think businesses can because they have access to the data and they can be policy-based and in probably a better way than a mass consumer environment could, what’s the potential here, when the machines can really start getting us customization, predictive analytics, and apply that to how we get productive in our business sense? It strikes me as something quite significant?

Williams: Yeah, it is. I was talking to someone in a California startup who is developing a sales tool. This person worked for many years in a very large enterprise that builds CRM software. His new business is very interesting because he's trying to do what you described. He's trying to do it almost being a search engine for the entire business Internet. I know this has to be verified, but their claim is that they are much more efficient than regular salespeople.

Say you're trying to sell your software product into a telco. You'll spend a lot of time learning about the person who purchases, those services. You'll go to conferences, read blogs, develop networks, and put a lot of effort into this process.

His startup suggests that they'll be able to not only identify the companies that you're able to sell into, but they'll be able to identify the actual individuals. It will become a lot more detailed in terms of this is what they're interested in and this is what they're not interested in. This is the conference that they've been to. Increasingly, we'll have more-and-more intelligence on people, their habits, their preferences, their interests, and their connections.

Creative business

Take your Netflix example. Netflix moves simply from being a content delivery service to being a creative business by looking at this kind of Venn diagram of its users interests. They saw that there was a sweet spot that overlapped with Kevin Spacey, David Fincher, and the original House of Cards from the UK. They saw that there’s this huge amount of people who love those three things. They said, "Great. Let's commission this series."

Every time that users interact with the service, it's helping to improve it. Netflix knows what you watch, when you watch it, where you stop, where you don’t finish, where you fast-forward, and where you rewind. So, they're collecting huge amounts of data that can be used not just to understand consumer behavior, but also to get insights that can be used for decisions around content.

Gardner: So, Alex, translate this to the business environment, the business network that your company is aligned with can be the determiner of how effective this new trend towards customization, anticipation and being more of a science than an art for sales for example that Greg mentioned is. This to me says the right network with the right information is a crucial decision for you. How does that work in terms of companies differentiating themselves based on who they work with in their ecosystem?

What we see a lot is that businesses are connecting to networks to conduct global business, to find new market opportunities, and become much better at actually mining and understanding that data to become more pointed in terms of what solutions they actually want to provide to the market.

Atzberger: First of all, any company that engages in a network and then captures the data to make better business decisions is already on that journey. If you look at the social networks today, if you like three things on Facebook, Facebook knows more about you than your best friend. If you like more than 10 things, Facebook knows more about you than your spouse. That’s the logic, and the same happens in business networks as well.

What we see a lot is that businesses are connecting to networks to conduct global business, to find new market opportunities, and become much better at actually mining and understanding that data to become more pointed in terms of what solutions they actually want to provide to the market.

But we're still at the very beginning of this trend. We're working with companies on enabling Data as a Service, where they leverage the data itself to create more insight into their business, pursue better business opportunities, change their product offering actually and innovate with their supplier base. If we do that, we're impacting real change, and that's absolutely feasible today, but we're still early on.

Gardner: Any examples, Alex, of companies that really get this and that are showing some demonstrable benefits, that are really tagging on innovation to what their businesses were traditionally, but taking it in a new direction based on some of these technological benefits that we’ve talked about -- poster children for innovation perhaps.

Atzberger: When I think about poster children for innovation, I think about companies that are really looking to the network as infrastructure. What are the other things I can do through this network in order to change my business or add new capabilities?

What I love is when we have customers who talk about the fact that they can actually change their industry. Or their entire supply chain. We have a one high-tech manufacturer who thinks about how they can get demand signals much faster to their supplier base so they can actually impact the end customer. I like that thinking a lot.

Gardner: Greg, last thoughts on what's to come, how technology and business combine to transform how we get things done and perhaps even improve our quality of life?

Solving big problems

Williams: That’s obviously the fundamental end result, one hopes, of all technological change -- that people have better lives and we solve big problems. Looking forward, we're going to see, as Alex has been describing, a real joining of the dots. There aren’t necessarily going to be things that are dramatic, but we're going to see increasing amounts of AI, for instance, offering us insights in industries such as healthcare that only machines are capable of determining because of the sheer volume of data that they can analyze.

I was talking to a guy who worked in the security industry recently. They do a lot of work for the Pentagon. He was telling me that they did an analysis of tweets about ISIL during one week in August last year and they noticed that most of them were about security or the security situation in various parts of Northern Iraq and Syria, account promotion, religion, and strategic updates, but then they came across an outlier that they never noticed before.

The official ISIS accounts were re-tweeting any mention of female fighters or women in ISIL -- there was clearly a big push by ISIL to recruit women. What happens? Six weeks later, we had the first female suicide bomber in Europe in Paris. Now, those things probably are not linked, but I think we're able to see things in the data now that we have never been able to see before and I think they increasingly will be putting those things to use.

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Tuesday, March 15, 2016

How HPE’s internal DevOps paved the way for speed in global software delivery

The next BriefingsDirect DevOps innovator case study discussion explores how Hewlett Packard Enterprise’s (HPE's) internal engineering and IT organizations are exploiting the values and benefits of DevOps methods and practices.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy.

To help us better understand how DevOps significantly aids in the task of product and technology development, please welcome James Chen, Vice President of Product Development and Engineering at HPE. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: First tell us a little bit about the scale of the organization. Clearly HPE is a technology company, has a very large internal IT organization, perhaps one of the largest among the global 2000.

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Chen: We have a pretty sizeable IT organization, as you can imagine. We support all the HPE products and solutions serving our customers. We have about 8,000 to 9,000 employees, and we have a pretty large landscape of applications, something like 2,500 enterprise-scale large applications.

Chen

We also have a six data centers that host all the applications. So it's a pretty complicated infrastructure. DevOps means a lot to us because of the speed and agility that our customers are looking for, and that’s where we embarked on our journey to DevOps.

Gardner: Tell us about that journey. How long has it been? How did you get started? Maybe you can offer how you define DevOps, because it is a little bit of loose topic in how people understand it and define it.

Chen: We've been on the DevOps journey for the last couple of years. A certain part of the organization, the developer team, already practiced somehow, somewhere, in different aspects of DevOps. Someone was driving the complete automation of testing. Someone was doing a kind of Continuous Integration and Continuous Delivery (CICD), but it never came down to the scale that we believed would start impacting the overall enterprise application landscape.

Some months ago IT embarked on what we called a pilot program for DevOps. We wanted to be the ones doing DevOps in HPE, and the only way you can benefit from DevOps and understand DevOps -- the implications of DevOps on the IT organization -- is just go out and do it. So we picked some of the very complicated applications, believing that if we could do the pilot well, we would learn a lot as an organization, and it would be helpful to the future of the IT organization and deliver value to the business.

We also believed that our learning ad experiences could help HPE’s customers to be successful. We believe that every single IT shop is thinking about how they can go to DevOps and how they can increase speed and agility. But they all have to start somewhere. So our journey would be a good story to share with our peers.

Inception point

Gardner: Given that HPE has so many different products, hardware and software, what is that you did to find that right inception point. You have a very large inventory of potential places and ways that you could start your DevOps journey. What turned out to be a good place to start that then allowed you expand successfully?

Chen: We believed the easiest way was to start with some of the home-grown applications. We chose home-grown applications because it’s a little bit easier, simply because you don’t have the scale of vendor/ISP dependence to work with.

We decided to pick a handful of applications. Most of them are very complicated and some of them are very important. A good example is the OneNote application. This is the support automation application, which touches every device, every part that we ship to our customers. That application is essentially the collection point for performance data for all the devices in the customer data center, how we monitor them, and how we deal with them.

It’s what I consider a very important enterprise scale application and it’s mission critical. That was one of the criteria, pick an application that is really complicated and most likely home-grown. The other criteria was to pick an application that the application team itself already practiced, were ready to do something, and really wanted to embrace that new methodology and new idea.

The reason behind that is that we didn't want to set up a separate team to do DevOps to pair with the existing the developer team. Ideally, we wanted the existing developer team to go into that transformation. They became the transformation driver to take the old way to do DevOps into the new DevOps. So that was second criteria, the team, the people themselves had to be motivated and get ready for a change.

The third one was the application scale and impact. We understood the risk and we understood the implications. The better understanding you have, it's easy to get buy-in from your business partners and your executive team. That’s what we chose as the criteria as far as going into DevOps.

Gardner: I'm really curious. Given this super important application for HPE, how is performance measured and managed across all of these deployments, applying DevOps methodology, and getting that team buy-in? What did it earn you? What’s the payoff? What did you see that made DevOps worthwhile?

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Chen: With DevOps we captured three dimensions. One is collaboration. What I mean by collaboration is taking operations into development and taking development into operations, so the operations and development teams are working side-by-side. That’s the new relationship of the collaboration.

The traditional way you did this was by the developer finishing the product and then throwing it over the wall to the operations guy. Then, when something goes wrong, we start freaking out, asking who owned the issue.

The new way is a very close collaboration between the development team and operations. From the get-go, when we start to design a product or software application, we already have people who are running the operation. They run the support in the team by understanding the risk and the implications for the operation. So that’s one dimension, the collaboration.

The second piece is about automation. You want to figure out a way that you can automate end-to-end. That’s very important. You asked a very good question about how to get buy-in from your business partners who ask, "I'm going to do CICD. What is the implication if something goes wrong?"

Powerful weapon

Automation has become a very powerful weapon, because when you can automate development, the deployment process becomes much easier to roll back when something goes wrong. Because that’s a small incremental change that you're making every time, the impact is much easier to understand. We believe the down time is much less than the normal way of doing the process. That’s the second dimension, automation.

The third one is codification. Codification is that everything is code. The old way was to define your infrastructure and have someone manually put all the infrastructure together to run an application. Those times are over.

Full DevOps is that you are able to drive a code that’s easy to configure, have your infrastructure provisioned based on that code, and get ready to run an application.

So DevOps consists of those three things. It’s truly important, the way we talk about it and the way we understand DevOps: collaboration, the codification, and automation.

Having said that, there are other implications about the organization and contingency. Those have a very profound impact on our IT organization. That’s where we understand DevOps and we're using that kind of methodology. Our thinking is to take it to the stakeholder and the customer, and show them the benefit that we're able to deliver for them. That’s the reason we get the buy-in support from the get-go.

Of course the quality, high availability, and agility have significantly improved. But I would really focus on speed.

Gardner: Is speed the number one reason to do this, or is it quality or security? What is the biggest reward when you do this well?

Chen: Speed is probably the number one reason to go to DevOps. Of course the quality, high availability, and agility have significantly improved. But I would really focus on speed, because if you ask any business owner, business partner, or your customer today, the number one challenge for them is speed.

Early in our conversation, I mentioned about automation. Traditionally we do a release every six months, because it's so complicated, as you can imagine. We have products from storage, network, server – hardware and software. If we make platform changes, in order to cover all those customers, devices, and products, it required pretty much six months to do.

Since you have the six month cycle, products issued to your customer before the next release will not have the best support on the host automation capability.

The performance of our service quality has a significant impact on customer satisfaction. Now we're talking about a release every two weeks. That’s a significant improvement, and you can see customers are happy because now with every product release, they have the automation capability within two weeks. You immediately have the best monitor and proactive care capability that we provide to our customers.

Bottom line

Gardner: I should think that that also has an impact on the bottom line, because you're able to bring new features and functions to the market, add more value to the products, and then charge more money for it. So, it allows you to get the value of your organization in to your bottom line although faster as well.

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Chen: Yes. For example, we want to deliver any product or service that has a call-home capability, do the support automation, and proactively take care of them, within two weeks. It's a huge advantage for us, because the competition typically take a few days to a couple of weeks just to install everything.

That two weeks is probably the best timing optimized for this kind of service scheme. Can we push this to one week or a few days? It's possible, but the return on investment may not be on day one.

For every application, when you make the call about DevOps, it’s not about wanting to do it as fast as possible. You want to examine your business case and determine, “what’s the sweet spot for us with DevOps?” In this particular case, we believe that looking at the customer feedback and business partners' feedback, two weeks is the right spot for us. That's significantly better than what we use to have, every six months.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy. Sponsor: Hewlett Packard Enterprise.

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Agile on fire: IT enters the new era of 'continuous' everything

Tuesday, March 8, 2016

IoT plus big data analytics translate into better services management at Auckland Transport

The next BriefingsDirect business transformation innovator case study discussion explores the impact and experience of using Internet of Things (IoT) technologies together with big data analysis to better control and manage a burgeoning transportation agency in New Zealand.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy.

To hear more about how fast big data supports rapidly-evolving demand for different types of sensor outputs -- and massive information inputs -- we're joined by Roger Jones, CTO for Auckland Transport in Auckland, New Zealand. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: Tell us about your organization, its scope, its size and what you're doing for the people in Auckland.

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Jones: Auckland Transport was formed five years ago -- we just celebrated our fifth birthday -- from an amalgamation of six regional councils. All the transport functions were merged along with the city functions, to form a super-city concept, of which transport was pulled out and set up as a council-controlled organization.

But it's a semi-government organization as well. So we get funded by the government and the ratepayer and then we get our income as well.

We have multiple stakeholders. We're run by a board, an independent board, as a commercial company.

We look after everything to do with transport in the city: All the roads, everything on the roads, light poles, rubbish bins, the maintenance of the roads and the footpaths and the grass bins, boarding lights, and public transport. We run and operate the ferries, buses and trains, and we also promote and manage cycling across the city, walking activities, commercial vehicle planning, how they operate across the ports and carry their cargoes, and also carpooling schemes.

Gardner: Well, that's a very large, broad set of services and activities. Of course a lot of people in IT are worried about keeping the trains running on time as an analogy, but you're literally doing that.

Real-time systems

Jones: Yeah. We have got a lot of real-time systems, and trains. We've just brought in a whole new electric train fleet. So all of the technology that goes with that has to be worked through. That's the real-time systems on the platforms, right through to how we put Wi-Fi on to those trains and get data off those trains.

Jones

So all of those trains have closed-circuit television (CCTV) cameras on them for safety. It's how you get all that information off and analyze it. There's about a terabyte of data that comes off all of those trains every month. It's a lot of data to go through and work out what you need to keep and what you don’t.

Gardner: Of course, you can't manage and organize things unless you can measure and keep track of them. In addition to that terabyte you talked about from the trains, what's the size of the data -- and not just data as we understand it, unstructured data, but content -- that you're dealing with across all these other activities?

Jones: Our traditional data warehouse is about three terabytes, in round numbers, and on the CCTV we take about eight petabytes of data a week, and that's what we're analyzing. That's from about 1,800 cameras that are out on the streets. They're in a variety of places, mostly on intersections, and they're doing a number of functions.

They're counting vehicles. Under the new role, what we want to do is count pedestrians and cyclists and have the cyclists activate the traffic lights. From a cycle-safety perspective, the new carbon fiber bikes don’t activate the magnetic loops in the roads. That's a bone of contention -- they can’t get the lights to change. We'll change all that using CCTV analytics and promote that.

But we'll also be able to count vehicles that turn right and where they go in the city through number plate recognition. By storing that, when a vehicle comes into the city, we would be able to see if they traveled through the city and their average length of stay.

What we're currently working on is putting in a new parking system, where we'll collect all the data about the occupancy of parking spaces and be able to work out, in real time, the probability of getting a car parked in a certain street, at a certain time. Then, we'll be able to make that available to the customer, and especially the tradesman, who need to be able to park to do their business.

Gardner: Very interesting. We've heard a lot about smart cities and bringing intelligence to bear on some of these problems and issues. It sounds like you're really doing that. In order for you to fulfill that mission, what was lacking in your IT infrastructure? What did you need to change, either in architecture or an ability to scale or adapt to these different types of inputs?

Merged councils

Jones: The key driver was, having merged five councils. We had five different CCTV systems, for instance, watched by people manually. If you think about 1,800 cameras being monitored by maybe three staff at a time, it’s very obvious that they can’t see actually what’s happening in real time, and most of the public safety events were being missed. The cameras were being used for reactive investigation rather than active management of a problem at this point in time.

That drove us into what do we were doing around CCTV, the analytics, and how we automate that and make it easy for operators to be presented with, in real-time, here is the situation you need to manage now, and be able to be proactive, and that was the key driver.

There’s a mix of technologies out there, lots and lots of technologies. One of the considerations was which partner we should go with.

When we looked at that and at all the other scenes that are around the city we asked how we put that all together, process it in real time, and be able to make it available again, both to ourselves, to the police, to the emergency services, and to other third-party application developers who can board their own applications using that data. It’s no value if it’s historic.

Gardner: So, a proverbial Tower of Babel. How did you solve this problem in order to bring those analytics to the people who can then make good use of it and in a time frame where it can be actionable?

Jones: We did a scan, as most IT shops would do, around what could and couldn’t be done. There’s a mix of technologies out there, lots and lots of technologies. One of the considerations was which partner we should go with. Which one was going to give us longevity of product and association, because you could buy a product today, and in the changing world of IT, it’s out of business, being bought out, or it’s changed in three years time. We needed a brand that was going to be in there for the long haul.

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Part of that was the brand, and there are multiple big brands out there. Did they have the breadth of the toolsets that we were looking for, both from a hardware perspective, managing the hardware, and the application perspective? That’s where we selected Hewlett Packard Enterprise (HPE), taking all of those factors into account.

Gardner: Tell us a bit about what you're doing with data. On the front end, you're using a high-speed approach, perhaps in a warehouse, you're using something that will scale and allow for analytics to take place more quickly. Tell us about the tiering and the network and what you've been able to do with that?

Jones: What we've done is taken a tiered approach. For instance, the analytics on the CCTV comes in and gets processed by the HPE IDOL engine. That strips most of it out. We integrate that into an incident management system, which is also running on the IDOL engine.

Then, we take the statistics and the pieces that we want to keep and we're storing that in HPE Vertica. The parking system will go into HPE Vertica because it’s near real-time processing of significant volumes.

The traditional data warehouse, which was a SQL data warehouse, it’s still very valid today, and it will be valid tomorrow. That’s where we're putting in a lot of the corporate information and tying a lot of the statistical information together so that we have all the historic information around real time, which was always in an old data warehouse.

Combining information

We tie that together with our financials. A lot of smaller changing datasets are held in that data warehouse. Then, we combine that information with the stuff in Vertica and the Microsoft Analytics Platform System (APS) appliances to get us an integrated reporting at the front end in real time.

We're making a lot of that information available through an API manager, so that whatever we do internally is just a service that we can pick up and reuse or make available to whoever we want to make it available to. It’s not all public, but some of it is to our partners and our stakeholders. It’s a platform that can manage that.

Gardner: You mentioned that APS appliance, a Microsoft and HPE collaboration. That’s to help you with that real-time streaming, high velocity, high volume data, and then you have your warehouse. Where are these being run? Do you have a private cloud? Do you have managed hosting, public cloud? Where are the workloads actually being supported?

Jones: The key workloads around the CCTV, the IDOL engine, and Vertica are all are running on HPE kit on our premises, but managed by HPE-Critical Watch. That’s an HPE, almost an end-to-end service, but it just happens to be on our facilities. The rest is again on our facilities.

So we have a huge performance increase. That means that by the time the operators come in, they have yesterday’s information and they can make the right business decisions.

The problem in New Zealand is that there aren't many private clouds that can be used by government agencies. We can’t offshore it because of latency issues and the cost of shipping data to and from the cloud from the ISPs, who know how to charge on international bandwidth.

Gardner: Now that you've put your large set of services together, what are some of the paybacks that you've been able to get? How do you get a return on investment (ROI), which must be pretty sizable to get this infrastructure in place? What are you able to bring back to the public service benefits by having this intelligence, by being able to react in real time?

Jones: There are two bits to this. The traditional data warehouse was bottle-necked. If you take, from an internal business perspective, the processing out of our integrated feed system, which was a batch-driven system, the processing window each night is around 4.5 hours. To process the batch file was just over that.

We were actually running into not getting the batch file processed until about 6 a.m. At that time, the service operators, the bus operators, the ferry operators have already started work for the day. So they weren’t getting yesterday’s information in time to analyze what to do today.

Using the Microsoft APS appliance we've cut that down, and that process now takes about two hours, end-to-end. So we have a huge performance increase. That means that by the time the operators come in, they have yesterday’s information and they can make the right business decisions.

Customer experience

On the public front, I'd put it back to the customer experience. If you go into a car park and have an incident with somebody in the car park, your expectation is that somebody would be monitoring that and somebody will come to your help. Under the old system that was not the case. It would be pure coincidence if that happened.

Under the new scenario, from a public perception, that will be alerted, something will happen, and someone will come to you. So the public safety is a huge step increased. That has no financial ROI directly for us. It has across the medical spectrum and the broader community spectrum, but for us as a transport agency, it has no true ROI, except for customer expectations and perceptions.

Gardner: Well, as taxpayers having expectations met, it's probably a very strong attribute for you. When we look at your architecture, it strikes me that this is probably something more people will be looking to do, because of this IoT trend, where more sensors are picking up more data. It’s data that’s coming in, maybe in the form of a video feed across many different domains or modes. It needs to be dealt with rapidly. What do you see from your experience that might benefit others as they consider how to deal with this IoT architectural challenge?

When you start streaming data in real-time at those volumes, it impacts your data networks. Suddenly your data networks become swamped, or potentially swamped, with large volumes of data.

Jones: We had some key learning from this. That’s a very good point. IoT is all about connecting in devices. When we went from the old CCTV systems to a new one, we didn’t actually understand that some of that data was being aggregated and lost forever at the front end, and what was being received at the back end was only a snippet.

When you start streaming data in real-time at those volumes, it impacts your data networks. Suddenly your data networks become swamped, or potentially swamped, with large volumes of data.

That then drove us to thinking about how to put that through a firewall, and the reality is you can’t. The firewalls aren’t built to handle that. We're running F5’s and we looked at that and they would not have run the volume of CCTV through that.

So then you start driving to other things about how you secure your data, how you secure the endpoints, and tools like looking down your networks so that you understand what’s connected or what’s changed at the connection end, what’s changing in the traffic patterns on your network, become essential to an organization like us, because there is no way we can secure all the endpoints.

Now, a set of traffic lights has a full data connection at the end. If someone opens a cabinet and plugs in a PC, how do you know that they have done that, and that’s what we have got to protect against. The only way to do that is to know that something abnormal is there. It’s not the normal traffic coming from that area of the network, and then we're flagging it and blocking it off. That’s where we are hitting because that’s the only way we can see the IoT working from a security perspective.

Gardner: Now Roger, when you put this amount of data to work, when you've solved some of those networking issues and you have this growing database and historical record of what takes place, that can also be very valuable. Do you expect that you'll be analyzing this data over historical time periods, looking for trends and applying that to feedback loops where you can refine and find productivity benefits? How does this grow over time in value for you as a public-service organization?

Integrated system

Jones: The first real payback for us has been the integrated ticketing system. We run a tag on-tag off electronic system. For the first time, we understand where people are traveling to and from, the times of day they're traveling, and to a certain extent, the demographics of those travelers. We know if they're a child, a pensioner, a student, or just a normal adult type user.

For the first time, we're actually understanding, not only just where people get on, but where they get off and the time. We can now start to tailor our messaging, especially for transport. For instance, if we have a special event, a rugby game or a pop concert, which may only be of interest to a certain segment of the population, we know where to put our advertising or our messaging about the transport options for that. We can now tailor that to the stops where people are there at the right time of day.

We could never do that before, but from a planning perspective, we now have a view of who travels across town, who travels in and out of the city, how often, how many times a day.

We could never do that before, but from a planning perspective, we now have a view of who travels across town, who travels in and out of the city, how often, how many times a day. We've never ever had that. The planners have never had that. When we get the parking information coming in about the parking occupancy, that’s a new set of data that we have never had.

This is very much about the planners having reliable information. And if we go through the license plate reading, we'll be able to see where trucks come into the city and where they go through.

One of our big issues at the moment is that we have got a link route that goes into the port for the trucks. It's a motorway. How many of the trucks use that versus how many trucks take the shortcut straight through the middle of the city? We don’t know that, and we can do ad-hoc surveys, but we'll hit that in real time constantly, forever, and the planners can then use that when they are planning the heavy transport options.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy. Sponsor: Hewlett Packard Enterprise.