Innovation and IT – Paths to Success

Getting the most value from your information technology investments today is more challenging than ever given the break-neck pace of evolution in product and service choices. Keeping ahead of developments in infrastructure, software, data systems and Internet applications absorbs increasing amounts of time and energy. Not only can missed opportunities cost businesses dearly in forgone revenues and customers, but inadequately assessed security and privacy-related risks can consume significant amounts of management resources when troubles crop up.

Knowledge@Wharton takes a look at some of the key opportunities and threats in these areas, including cloud computing, data storage, social networks and Internet marketing.

This downloadable PDF contains articles with insights from Wharton faculty on the following topics:

• No Man Is an Island: The Promise of Cloud Computing
• Time for a Data Diet? Deciding What Customer Information to Keep — And What to Toss
• Leaving ‘Friendprints’: How Online Social Networks Are Redefining Privacy and Personal Security
• Privacy on the Web: Is it a Losing Battle?
• Betting on Betas: How Internet Entrepreneurs Are Creating New Paths to Online Revenue

Download article packet from Knowledge@Wharton

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Are Marketers Adapting to the Cloud’s Impact?

As more and more businesses and applications make the move to cloud computing and Software as a Service (SaaS) solutions, it’s slowly changing the way businesses and individuals work, search, research, shop and compute in general.

According to a recent study conducted for The Economist, “Sixty‐nine percent of Americans connected to the web use some kind of ‘cloud service,’ including web‐based e‐mail or online data storage.” These changes in behavior and the accompanying changes in expectations require marketers to adapt the way they present information and run their services online.

Mobile on version 1.0

Many consumers of information are starting to lean heavily on their mobile devices as their primary research and reading tool. For marketers this means that mobile versions of services and sites need to be a consideration in the initial presentation and not a feature upgrade down the road.

RSS readers and conversion tools can do some of the lifting for basic information sites such as blogs, but marketers must be creating mobile‐friendly (read really small screen) versions of all information and mobile add‐ons and applications for all services.

No more lugging storage or power

Laptops, particularly the popular “netbooks,” rely increasingly on Internet based web applications and are intentionally stripped of power and storage capacity as the trade off for size and weight.

This means that marketing must be careful in the use of processor intense entertainment experiences and instead focus on simple presentations that can be viewed on 10‐inch monitors.

Where do the ads go?

Growing numbers of web applications are coming online as free or “fermium” offerings. Marketers of these services are finding increasing resistance to ad‐supported models.

However, web applications that deliver contextually relevant ads for products, services and information that supplement the primary offering should find greater acceptance as more editorial than interruption.

What’s the back­up plan?

The greatest friction to cloud computing and web application adoption is the notion of security and reliability. “If my data isn’t sitting on the corner of my desk in a pile of CDs, then how do I know who’s looking at it?”

Of course, the opposite is generally true, reputable storage and server facilities are often much more secure and reliable than the typical DIY platform, but it’s a perception that must be addressed.

Marketers can’t over do education in this arena and should probably consider offering back‐up, what if I can’t access my data, plans as part of their service offerings.

Gently adapting the changing demands and expectations of customers online is an ever-evolving communications and marketing challenge that’s better hit proactively than reactively.

Think Like a Startup

Many companies practice zero-based budgeting. The idea is that you do NOT start with last year’s budget. You don’t say, “We spent $xx in this category last year, so how much more or less do we spend this year?” You start with a clean sheet. This has the effect of getting rid of those costs that have always been there just because…well just because they have always been there. And that frees you to spend on what you really need, not on what you needed or thought you needed several years ago.

You can take the same approach to IT. Think like a startup, even if you have been in business for decades. Startups do almost all their IT in the cloud and using software as a service (SAAS). That is the default. A startup would think really, really hard about doing anything in-house or custom. Unless something is absolutely core (which means you should be the best in the world at doing it) it is best outsourced to a firm that does that as a core competency.

It is agility that really matters today. Huge companies are crumbling before our eyes. Watch Citigroup and General Motors and your daily newspaper as they go from invincible to suffering or dead. Huge companies have huge overhead. But medium-sized companies cannot afford that overhead.

In 1955, Fortune 500 companies accounted for one-third of the GDP in the US. In 2000, that had doubled to two-thirds. Within that cold statistic lies thousands of human stories of family farms, Mom & Pop stores and other small businesses trampled by Wal-Mart, Agribusiness and other large companies.

That is a massive shift. But it is not written in stone that large companies should control two-thirds of the economy. We may have seen the high water mark of this trend. It maybe reversing. The demise of huge companies is a massive, historical opportunity for smaller companies.

Mid-sized companies need to decide: Are you are agile like a startup or a smaller version of a large company? The latter may give you all the problems of a large company without their advantages of scale.

So, think like a startup. Only do some IT functions internally if you are really (no, really) convinced that those functions are totally core to your mission and you can be the best in the world at them.

That is easier said than done. You do have legacy IT and processes. The most important thing to recognize is that people’s jobs are at stake. If you make the process of moving to cloud/SAAS a genuine win for your people, those objections (”It’s OK for some companies, but its way too risky for us for this reason and this and oh this one as well.”) will disappear like morning mist.

Somebody who is maintaining/managing in-house systems needs to see one of two future career paths:

1. Within your company, moving from context to core, from cost center to profit center.

2. Outside your company, working for cloud/SAAS vendors, trading on the success of the migration of your systems.

Either is a good result, and it will vary by individual.

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Introduction to Server Virtualization

What Is Virtualization? What Are the Benefits?

A typical data center contains many servers. Traditionally, since hardware was cheap and applications were complex, many administrators installed one application per server. Though this provided their applications with security and isolation from other processes, it resulted in server sprawl. Workload on these servers would vary widely depending on the time of day and user activity. Many of the servers would spend a large percentage of their time idling away, doing practically nothing. Average server utilization levels are typically about 10%. Server virtualization increases each physical machine’s utilization by dividing physical servers into multiple virtual servers. Each virtual server contains its own operating environment and applications; it looks and acts exactly like a real server.

There are three ways to run virtual servers: full virtualization, para-virtualization and OS-level virtualization. In all three, the physical server is called the host and the virtual servers are called guests.

Full virtualization uses a special kind of software called a hypervisor to supervise the guests. It interacts directly with the host’s CPU, disk and network access. The hypervisor keeps each of the guests independent of one another and unaware of the other servers running on the same machine. Full virtualization requires the most overhead, and thus allows the least number of virtual servers per physical server.

With para-virtualization, the guest servers are aware of each other’s existence. Though it also uses a hypervisor, para-virtualization doesn’t require as much overhead as full virtualization because the guests are each aware of the load that they’re placing on the host. This method requires that the host be running a specially modified version of the operating system to cooperate with the hypervisor, but it offers a considerable performance improvement over full virtualization.

An OS-level virtualization doesn’t have a hypervisor at all. The host’s operating system performs the hypervisor’s duties and interacts with the guests. The biggest drawback of OS-level virtualization is that all of the virtual servers must run the same operating system as their physical server, but the performance in the guests can be similar to an actual physical machine!

Which is best? It depends on the needs of the data center. If all the servers run the same operating system, the OS-level virtualization would be the fastest and allow the most virtual servers per host. If you need to combine a number of servers running different operating systems, both full virtualization and para-virtualization can do the job, but full virtualization is the older and more mature technology for doing so.

When to use Virtualization?

Virtualization is perfect for small to mid-size applications and services that don’t fully tax the hardware resources. Since virtualization is dividing a server’s resources into fractions, applications that are too resource-intensive can overwhelm the server. When the physical server can’t meet the demands of one of the virtual servers, all of the virtual servers will bog down.

Virtualization allows for server consolidation. If there are many applications that each only use a small amount of processing power, the administrator can consolidate several servers into one virtual machine. In a data center with hundreds or thousands of computers, the power and cooling savings would be significant.

In the past, when you upgraded your server hardware because it was obsolete, you were usually required to upgrade, or at the very least, extensively test all of the software running on it as well, because the old version of the software might not run the same on the new hardware. With virtualization, though, it is possible to maintain the same operating environment regardless of any changes to the physical infrastructure of the server. This has far-reaching implications for server upgrades, because upgrades are typically incredibly expensive, not just because of the cost of the actual hardware but because of the associated costs of testing to make sure that that everything behaves as it should. …
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Recap of Recent Webinar: Managing for Growth

Did you miss our recent webinar, “Managing For Growth And Change In A Tough Economy”?

If so, you can still watch the full webinar here. Meanwhile, let me give the highlights of some of what you missed 

The goal of the webinar was to outline strategies and tips for growing your business by leveraging information technology.  I was the moderator and one of the speakers. I was joined by two extremely knowledgeable people:

• Chris Peters, End User Product Marketing Manager, Server Product Group – Intel
• Mac McConnell, Global Program Manager, Systems Group at Sun Microsystems

Business Outlook

First we covered the current business and economic environment. Our collective view is that although the economy is still in the midst of a recession, some cracks are starting to emerge in the dark facade. We noted the small signs of improvement here and there. For instance, U.S. Treasury Secretary Timothy Geithner has reported that the global recession has stabilized. A number of analysts and economists are now predicting that the recession will bottom out and end in the second half of 2009.

But perhaps the most interesting data point about recovery came from the webinar participants themselves. When asked about their budget expectations for the rest of 2009, 41% of the webinar participants reported that they expected budgets to increase. Compare that to only 18% who expected budgets to be cut. That was mildly surprising to us, given the economic environment we are living through, but also encouraging to see.

No matter what, innovative growth-oriented SMBs know that technology gives leverage and can support and even accelerate growth.  For instance, research by Six Disciplines found that SMB companies strategically using technology outperformed their competitors by 100%.

Strategies and Tips

Among the specific strategies and tips, we discussed:

Setting goals and understanding the challenges you are under. Communicate closely with all the functions in your company, including the Sales Department and Finance, especially during times like these.  You may be in a “no growth” mode but find that it is actually costing money to defer expenditures.  Intel discovered that it could save $19 million (PDF) in its own internal operations, by actually spending money to refresh servers.  Also,  you may be called upon to turn on a dime and gear up quickly to address increased sales growth as the economy opens up again.

Use open source software and existing tools to save money. You can get a software package off the shelf, and customize the software internally to suit your needs.

Using SaaS (software as a service) and cloud computing, avoids having to make large up-front investments for software licenses. It allows SMBs to manage cash flow better.  Also, as many SaaS contracts are month-to-month or short term, you gain flexibility by not being locked in.  However, Mac pointed out that by placing so much reliance on an SaaS vendor, it can have a chilling effect on your ability to switch vendors, in effect giving you less flexibility.

Also discussed were a number of strategic hardware management techniques, including trade-ins, server clustering, virtualization, and the computing performance increases you can gain in your organization.

Chris Peters pointed out the “Server refresh savings estimator.” This is an online tool that enables you to evaluate the benefits of replacing server technology with the latest generation of servers.

One key point was illustrated several times:  by doing a strategic technology refresh, the benefits multiply and spill over beyond just the cost of any hardware itself.   Example:  by consolidating servers, you not only end up with fewer servers that you have to buy, but you also increase computing capacity.  At the same time, it  reduces power consumption, reduces demand on staff time to administer and manage the servers, etc.

Customer Case Studies

Mac and Chris covered 3 customer case studies involved Sun and Intel, showing how SMBs (including one non-profit) had benefited from a strategic approach to technology and had put in place some of the strategies discussed.  The case studies are online:

• Practice-IT, an online training technology provider, utilized VMware and was able to significantly expand its capacity to support increasing workloads without increased cost as the company added new customers.

• NaviSite, a medium-sized hosting company, has 17 data centers around the globe. The company has a large VMware environment and needed to consolidate this environment to save costs while increasing the agility to respond to their customer’s needs.

• Catholic Diocese of Boise, a non-profit providing services and support for 54 parishes, 33 missions and chapels, 14 K–12 schools, a library, and 40 offices, has 38 employees who work at a central administrative office.  They were able to reduce 28 servers down to 4, by implementing Windows Server 2008 Hyper-V to minimize costs and increase server utilization.

There was some livetweeting going on behind the scenes, using the hashtag #MIDMKT. Follow the Twitter discussion  here.

This recap only scratches the surface of what we covered.  To get the full context, all the details, and much more advice, please listen to and watch the full webinar:   “Managing For Growth And Change In A Tough Economy“?

Keep Your Key Marketing Indicators Simple

I find that many business owners aren’t that hot at tracking and measuring the important indicators of marketing success. When you are just starting out, perhaps you can get away with this, but as your business grows, analyzing key marketing indicators can mean the difference between smart growth and chaos.

Measuring and tracking sounds boring and complicated, so that’s the first hurdle when you address this topic. Most of the books on the subject of marketing metrics are so full of academic speak that they don’t provide much in the way of a simple and effective approach

I firmly believe that if you mine your data for just a handful of key indicators, you can create a dashboard of information that you can actually react to, impact on, and lead from. Keep it simple and build elegant processes to extract and monitor just a handful of key marketing indicators.

There are thousands of things you can measure, but growth objectives can be attributed to measuring just these four against a set of goals.

Lead generation – Where do the best leads come from? How many do you need to generate, and what actually generates them — if you don’t know this, it’s likely you will waste lots of money on things that are not generating the wrong kinds of leads, or potentially worse, abandon a lead generation tactic that’s actually working.

Percentage of leads converted – The biggest resource killer of all for businesses is chasing leads that are not qualified, not educated (by you, not in life), and not ready to appreciate the unique value your organization has to offer. When you measure this, you have to fix it. It’s too painful otherwise.

Cost per customer acquisition – Every new customer comes with a cost. By marrying that cost with some sort of value to the organization over time metric you can determine what you can actually afford to spend to acquire a new customer and go to work on lower what you need to spend while creating more accurate budget forecasts.

Average dollar transaction per customer – It’s is generally much easier to increase your revenue through additional sales to existing customers than to go out and find new ones. You can do this through one of two ways –- increase the perceived value of your offerings and raise your prices, or consider supplementing your core offering with products and services that meet additional needs.

As you can see, no rocket surgery with this list, but tell me, are you really measuring these four significant numbers? So often business owners and managers get caught up in trying to track so many metrics that it’s nearly impossible to focus on what’s truly significant.

So, what’s there to gain by focusing on these particular indicators?

Tripling or quadrupling your lead conversion number is usually the easiest thing to do once you start paying attention to it. It’s much harder, however, to significantly increase the number of leads. But through careful lead analysis you can greatly cut the cost per lead by making better lead spending decisions.

By creating a cost-per-customer-acquisition baseline, you can begin to budget and plan growth much more accurately than ever before.

In fact, this is where you can come full circle with your marketing measurement, because now when the CEO (or you) suggests that the marketing plan calls for 25% growth over the next 18 months, you can begin to tie specific marketing and sales activities and spends to achieving that result – or at least demonstrating why or why not it’s realistic.

Benefits of Application Virtualization

Virtualization’s impact on the IT world has been undeniable over the last several years. Almost everyone who visits tech-related web sites or picks up a trade rag has probably heard about virtualization. As companies of all sizes try to figure out how to become greener and operate more efficiently with a leaner IT staff, virtualization continues to gain considerable traction. Although not currently as common as hardware-level and operating system-level virtualization, application-level virtualization is becoming more popular as several major companies expand and market their products in this space.

Application virtualization is a technology that provides the ability to package and deliver an application in a way that isolates the application from the host operating system on which it is executed. This isolation is made possible by the packaging process, which captures all of the application’s settings, files, registry entries, libraries, etc. and bundles all of them together in an easy to deploy package, such as an executable file. As you might imagine, not all application virtualization offerings are the same. Some require agents or other software installations, while others can operate in an “agent-less” environment.

Regardless of how the solution works, application virtualization provides a plethora of benefits. For instance, application virtualization creates the opportunity to run incompatible applications on the same PC. Let’s say FinanceApp 2.0 doesn’t behave well when MoneyApp 1.5 is also installed, but your finance department absolutely requires both applications on every PC. Putting two PCs on each employee’s desk would be impractical, especially when application virtualization would allow you to simply package one of the applications, let’s say MoneyApp 1.5 in this case. Thus, IT folks fluent in this technology could come to the rescue by installing FinanceApp 2.0 per the usual process while deploying a virtualized MoneyApp 1.5 to those who require it.

Another situation where application virtualization can prove extremely beneficial is when a company migrates to new versions of major software, such as an office productivity suite. Sometimes IT departments aren’t ready to deploy new software as soon as users need that software. This type of situation is usually isolated to small groups of users, and it can increase costs to start supporting multiple non-standard configurations. So, rather than installing the new application on these users’ PCs and creating non-standard configurations, you could virtualize the new version of the application and make it available in a limited deployment to those users who truly need it immediately. Because virtualized applications don’t get installed in the traditional sense, it’s easy to remove them when they are no longer needed or need replaced.

Keep in mind that some applications are not ideal candidates for virtualization. Any application that requires a device driver, for instance, would not be something you would want to try to virtualize. Additionally, software that is heavily integrated with the operating system can be extremely difficult to virtualize.

Virtualization solutions are becoming more widespread, and the offerings continue to mature and improve. Any company exploring virtualization solutions and strategies should strongly consider adding application virtualization to that research. Since many of its benefits can result in immediate cost-savings and more flexibility, application virtualization may have a natural place in your company’s attempt to create a leaner and more efficient IT.

Springtime for SMB IT Purchases?

Spring appears to be arriving after the long winter of the 2008-2009 recession.  If you’re like me, it can’t come soon enough.

Listening to the incessant drum beat of financial crises, stock market dips, lowered company earnings and slashed  budgets, you can easily fall into a mindset that bad news is here to stay.  Relentless bad news creates a climate of fear and uncertainty.  It weighs you down, if you let it.

Luckily, the cycle of bad news leading to worse news is not permanent.  One of the good things — some would say the ONLY good thing — about recessions is that eventually they end.

In the past two weeks we’ve seen a number of positive — although weak and emerging — signals that economic  recovery will start in the second half of 2009.

For instance, the Washington Post reports that the economy is showing signs of stabilizing.  Notice they didn’t say “growing” or even necessarily “improving” — just stabilizing.  But after months of everything seeming to get worse with each passing day, that’s a positive sign.  The article relies in part on the relatively optimistic remarks of Fed Chairman Ben Bernanke in the past week.

In another report, Marketwatch says that the tech outlook is showing signs that recovery may be near.  Although many large publicly-traded tech companies no longer give predictions on their upcoming quarter’s financial results, some executives are making cautiously-positive noises in speaking engagements and remarks to reporters.  Research firm IDC is now predicting that we will see a tech recovery in the second half of 2009.

But to me, perhaps the most encouraging sign of a recovery is the sentiment of business executives themselves.  Do IT decision makers feel optimistic about the near future, even if money is incredibly tight right at this moment?  What are executives planning?   In this context, the condition of the stock market or credit markets is less relevant than the actions we expect to take in our own companies.

One positive sign of executive sentiment comes from IT Retailer CDW.  CDW does a bimonthly survey of IT executives called the CDW IT Monitor. The most recent CDW IT Monitor from April 2009 finds that decision makers in small and mid-size businesses are looking more optimistic about their plans to invest in technology before the end of 2009:

“After more than a year of confidence decline, the first tentative signs of IT growth are appearing. According to the latest CDW IT Monitor, an increasing number of IT decision makers from small and medium-size business sectors anticipate investment in the next six months.

According to the latest survey, 29 percent of small business IT decision makers expect budget increases in the next six months, an increase of seven percentage points from February. Additionally, 18 percent of medium-size business IT decision makers anticipate hiring in the next six months, an increase of six percentage points since February.”

So the headline here is that small and midsize businesses are leading the way with an intention to increase or once again start making IT investments.  In fact, medium size businesses (100-999 employees) may be the most optimistic as this chart from the Monitor shows (notice the uptick in the red line since February): …
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