Category Archives: architecture

The Business of Managing IT: The Open Group IT4IT™ Forum

By The Open Group

At The Open Group London 2014 event in October, the launch of The Open Group IT4IT™ Forum was announced. The goal of the new Forum is to create a Reference Architecture and standard that will allow IT departments to take a more holistic approach to managing the business of IT with continuous insight and control, enabling Boundaryless Information Flow™ across the IT Value Chain.

We recently spoke to Forum member Charlie Betz, Founder, Digital Management Academy, LLC, about the new Forum, its origins and why it’s time for IT to be managed as if it were a business in itself.

As IT has become more central to organizations, its role has changed drastically from the days when companies had one large mainframe or just a few PCs. For many organizations today, particularly large enterprises, IT is becoming a business within the business.

The problem with most IT departments, though, is that IT has never really been run as if it was a business.

In order for IT to better cope with rapid technological change and become more efficient at transitioning to the service-based model that most businesses today require, IT departments need guidance as to how the business of IT can be run. What’s at stake are things such as how to better manage IT at scale, how to understand IT as a value chain in its own right and how organizations can get better visibility into the vast amount of economic activity that’s currently characterized in organizations through technology.

The Open Group’s latest Forum aims to do just that.

The Case for IT Management

In the age of digital transformation, IT has become an integral part of how business is done. So says Charlie Betz, one of the founding members of the IT4IT Forum. From the software in your car to the supply chain that brings you your bananas, IT has become an irreplaceable component of how things work.

Quoting industry luminary Marc Andreessen, Betz says “software is eating the world.” Similarly, Betz says, IT management is actually beginning to eat management, too. Although this might seem laughable, we have become increasingly dependent on computing systems in our everyday lives. With that dependence comes significant concerns about the complexity of those systems and the potential they carry for chaotic behaviors. Therefore, he says, as technology becomes pervasive, how IT is managed will increasingly dictate how businesses are managed.

“If IT is increasing in its proportion of all product management, and all markets are increasingly dependent on managing IT, then understanding pure IT management becomes critically important not just for IT but for all business management,” Betz says.

According to Betz, the conversation about running the business of IT has been going on in the industry for a number of years under the guise of ideas such as “enterprise resource planning for IT” and the like. Ultimately, though, Betz says managing IT comes down to determining what IT’s value chain is and how to deliver on it.

By The Open GroupBetz compares modern IT departments to atoms, cells and bits where atoms represent hardware, including servers, data centers and networks; cells represent people; and bits are represented by software. In this analogy, these three things comprise the fundamental resources that an IT department manages. When reduced to economic terms, Betz says, what is currently lacking in most IT departments is a sense of how much things are worth, what the total costs are for acquisition and maintenance for capabilities and the supply and demand dynamics for IT services.

For example, in traditional IT management, workloads are defined by projects, tickets and also a middle ground characterized by work that is smaller than a project and larger than a ticket, Betz says. Often IT departments lack an understanding of how the three relate to each other and how they affect resources—particularly in the form of people—which becomes problematic because there is no holistic view of what the department is doing. Without that aggregate view, management is not only difficult but nearly impossible.

Betz says that to get a grasp on the whole, IT needs to take a cue from the lean management movement and first understand where the work originates and what it’s nature is so activities and processes don’t continue to proliferate without being managed.

Betz believes part of the reason IT has not better managed itself to date is because the level of complexity within IT has grown so quickly. He likens it to the frog in the boiling water metaphor—if the heat is turned up incrementally, the frog doesn’t know what’s hit him until it’s too late.

“Back when you had one computer it just wasn’t a concern,” he said. “You had very few systems that you were automating. It’s not that way nowadays. You have thousands of them. The application portfolio in major enterprises—depending on how you count applications, which is not an easy question in and of itself—the range is between 5000-10,000 applications. One hundred thousand servers is not unheard of. These are massive numbers, and the complexity is unimaginable. The potential for emergent chaotic behavior is unprecedented in human technological development.”

Betz believes the reason there is a perception that IT is poorly managed is also because it’s at the cutting-edge of every management question in business today. And because no one has ever dealt with systems and issues this complex before, it’s difficult to get a handle on them. Which is why the time for creating a framework for how IT can be managed has come.

IT4IT

The IT4IT Forum grew out of a joint initiative that was originally undertaken by Royal Dutch Shell and HP. Begun as a high-level user group within HP, companies such as Accenture, Achmea, Munich RE and PwC have also been integral in pulling together the initial work that has been provided to The Open Group to create the Forum. As the group began to develop a framework, it was clear that what they were developing needed to become an open standard, Betz says, so the group turned to The Open Group.

“It was pretty clear that The Open Group was the best fit for this,” he says. “There was clearly recognition and understanding on the part of The Open Group senior staff that this was a huge opportunity. They were very positive about it from the get-go.”

Currently in development, the IT4IT standard will provide guidance and specifications for how IT departments can provide consistent end-to-end service across the IT Value Chain and lifecycle. The IT Value Chain is meant to provide a model for managing the IT services life cycle and for how those service can be brokered with enterprises. By providing the IT similar level functionality as other critical business functions (such as finance or HR), IT is enabled to achieve better levels of predictability and efficiency.

By The Open Group

Betz says developing a Reference Architecture for IT4IT will be helpful for IT departments because it will provide a tested model for departments to begin the process of better management. And having that model be created by a vendor-neutral consortium helps provide credibility for users because no one company is profiting from it.

“It’s the community telling itself a story of what it wants to be,” he said.

The Reference Architecture will not only include prescriptive methods for how to design, procure and implement the functionality necessary to better manage IT departments but will also include real-world use cases related to current industry trends such as Cloud-sourcing, Agile, Dev-Ops and service brokering. As an open standard, it will also be designed to work with existing industry standards that IT departments may already be using including ITIL®, CoBIT®, SAFe® and TOGAF®, an Open Group standard.

With almost 200 pages of material already developed toward a standard, Betz says the Forum released its initial Snapshot for the standard available in late November. From there the Forum will need to decide which sections should be included as normative parts for the standard. The hope is to have the first version of the IT4IT Reference Architecture standard available next summer, Betz says.

For more on The Open Group IT4IT Forum or to become a member, please visit http://www.opengroup.org/IT4IT.

 

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The Open Group Executive Round Table Event at Mumbai

By Bala Peddigari, Head – HiTech TEG and Innovation Management, Tata Consultancy Services Limited

The Open Group organized the Executive Round Table Event at Taj Lands End in Mumbai on November 12, 2014. The goal was to brief industry executives on how The Open Group can help in promoting Enterprise Architecture within the organization, and how it helps to stay relevant to the Indianized context in realizing and bringing in positive change. Executives from the Government of Maharastra, Reserve Bank of India, NSDL, Indian Naval Service, SVC Bank, Vodafone, SVC Bank, SP Jain Institute, Welingkar Institute of Management, VSIT,Media Lab Asia, Association of Enterprise Architects (AEA), Computer Society of India and others were present.

By Bala PeddigariJames de Raeve, Vice President, Certification of The Open Group introduced The Open Group to the executives and explained the positive impact it is creating in driving Enterprise Architecture. He noted most of the EA functions, Work Groups and Forums are driven by the participating companies and Architects associated with them. James revealed facts stating that India is in fourth position in TOGAF® certification and Bangalore is second only to London. He also discussed the newest Forum, The Open Group IT4IT™ Forum and its objective to solve some of the key business problems and build Reference Architecture for managing the business of IT.  The mission of The Open Group IT4IT Forum is to develop, evolve and drive the adoption of the vendor-neutral IT4IT Reference Architecture.

Rajesh Aggarwal, Principal Secretary IT, Government of Maharashtra, attended the Round Table and shared his view on how Enterprise Architecture can help some of the key Government initiatives drive citizen-centric change. An example he used is the change in policies for senior citizens who seek pension. They show up every November at the bank to identify themselves for Life Certificate to continue getting pension. This process can be simplified through IT. He used an excellent analogy of making phone calls to have pizza delivered from Pizza Hut and consumer goods from Flipkart. Similarly his vision is to get Smart and Digital Governance where citizens can call and get the services at their door.

MumbaiRajeesh Aggarwal

70886-uppalJason Uppal, Chief Architect (Open CA Level 3 Certified), QR Systems in Canada presented a session on “Digital Economy and Enterprise Architecture”. Jason emphasized the need for Enterprise Architecture and why now in the networked and digital economy you need intent but not money to drive change. He also shared his thoughts on tools for this new game – Industrial Engineering and Enterprise Architecture focus to improve the performance capabilities across the value chain. Jason explained how EA can help in building the capability in the organization, defined value chain leveraging EA capabilities and transforming enterprise capabilities to apply those strategies. The key performance indicators of Enterprise Architecture can be measured through Staff Engagement, Time and Cost, Project Efficiency, Capability Effectiveness, Information Quality which explains the maturity of Enterprise Architecture in the organization. During his talk, Jason brought out many analogies to share his own experiences where Enterprise Architecture simplified and brought in much transformation in Healthcare. Jason shared an example of Carlos Ghosn who manages three companies worth $140 billion USD. He explains further the key to his success is to protect his change-agents and provide them the platform and opportunity to experiment. Enterprise Architecture is all about people who make it happen and bring impact.

The heart of the overall Executive Round Table Event was a panel session on “Enterprise Architecture in India Context”. Panelists were Jason Uppal, Rakhi Gupta from TCS and myself who shared perspectives on the following questions:

  1. Enterprise Architecture and Agile – Do they complement?
  2. How are CIOs seeing Enterprise Architecture when compared to other CXOs?
  3. I have downloaded TOGAF, what should I do next?
  4. How is Enterprise Architecture envisioned in the next 5 years?
  5. How can Enterprise Architecture help the “Make in India” initiative?
  6. Should Enterprise Architecture have a course in academics for students?

I explained how Enterprise Architecture is relevant in academics and how it can enable the roots to build agile-based system to quickly respond to the changes. I also brought in my perspective how Enterprise Architecture can show strengths while covering the weaknesses. Furthermore, TOGAF applies and benefits the context of the Indian future economy. Jason explained the change in dynamics in the education system to build a query-based learning approach to find and use. Rakhi shared her thoughts based on experience associated with Department of Posts Transformation keeping a citizen-centric Enterprise Architecture approach.

Overall, it has created a positive wave of understanding the importance of Enterprise Architecture and applying the TOGAF knowledge consistently to pave the road for the future. The event was well organized by Abraham Koshy and team, with good support from CSI Mumbai and AEA Mumbai chapters.

By Bala PeddigariBala Prasad Peddigari has worked with Tata Consultancy Services Limited for over 15 years. Bala practices Enterprise Architecture and evangelizes platform solutions, performance and scalable architectures and Cloud technology initiatives within TCS.  He heads the Technology Excellence Group for HiTech Vertical. Bala drives the architecture and technology community initiatives within TCS through coaching, mentoring and grooming techniques.

Bala has a Masters in Computer Applications from University College of Engineering, Osmania. He is an Open Group Master IT Certified Architect and serves as a Board Member in The Open Group Certifying Authority. He received accolades for his cloud architectural strengths and published his papers in IEEE.  Bala is a regular speaker in Open Group and technology events and is a member of The Open Group Open Platform 3.0™.

 

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Filed under Accreditations, architecture, Certifications, Cloud, Conference, Enterprise Architecture, Open CA, Open CITS, Open Platform 3.0, Standards, TOGAF, TOGAF®

The Open Group London 2014 – Day One Highlights

By Loren K. Baynes, Director, Global Marketing Communications, The Open Group

On a crisp October Monday in London yesterday, The Open Group hosted the first day of its event at Central Methodist Hall, Westminster. Almost 200 attendees from 32 countries explored how to “Empower Your Business; Enabling Boundaryless Information Flow™”.

Just across the way from another landmark in the form of Westminster Abbey, the day began with a welcome from Allen Brown, President and CEO of The Open Group, before Magnus Lindkvist, the Swedish trendspotter and futurologist, began his keynote on “Competition and Creation in Globulent Times”.

In a very thought-provoking talk, Magnus pondered on how quickly the world now moves, declaring that we now live in a 47 hour world, where trends can spread quicker than ever before. Magnus argued that this was a result of an R&D process – rip off and duplicate, rather than organic innovation occurring in multiple places.

Magnus went on to consider the history of civilization which he described as “nothing, nothing, a little bit, then everything” as well as providing a comparison of vertical and horizontal growth. Magnus posited that while we are currently seeing a lot of horizontal growth globally (the replication of the same activity), there is very little vertical growth, or what he described as “magic”. Magnus argued that in business we are seeing companies less able to create as they are focusing so heavily on simply competing.

To counter this growth, Magnus told attendees that they should do the following in their day-to-day work:

  • Look for secrets – Whether it be for a certain skill or a piece of expertise that is as yet undiscovered but which could reap significant benefit
  • Experiment – Ensure that there is a place for experimentation within your organization, while practicing it yourself as well
  • Recycle failures – It’s not always the idea that is wrong, but the implementation, which you can try over and over again
  • Be patient and persistent – Give new ideas time and the good ones will eventually succeed

Following this session was the long anticipated launch of The Open Group IT4IT™ Forum, with Christopher Davis from the University of South Florida detailing the genesis of the group before handing over to Georg Bock from HP Software who talked about the Reference Architecture at the heart of the IT4IT Forum.

Hans Van Kesteren, VP & CIO of Global Functions at Shell, then went into detail about how his company has helped to drive the growth of the IT4IT Forum. Starting with an in-depth background to the company’s IT function, Hans described how as a provider of IT on a mass scale, the changing technology landscape has had a significant impact on Shell and the way it manages IT. He described how the introduction of the IT4IT Forum will help his organization and others like it to adapt to the convergence of technologies, allowing for a more dynamic yet structured IT department.

Subsequently Daniel Benton, Global Managing Director of IT Strategy at Accenture, and Georg Bock, Senior Director IT Management Software Portfolio Strategy at HP, provided their vision for the IT4IT Forum before a session where the speakers took questions from the floor. Those individuals heavily involved in the establishment of the IT4IT Forum received particular thanks from attendees for their efforts, as you can see in the accompanying picture.

In its entirety, the various presentations from the IT4IT Forum members provided a compelling vision for the future of the group. Watch this space for further developments now it has been launched.

IT4IT

The Open Group IT4IT™ Forum Founding Members

In the afternoon, the sessions were split into tracks illustrating the breadth of the material that The Open Group covers. On Monday this provided an opportunity for a range of speakers to present to attendees on topics from the architecture of banking to shaping business transformation. Key presenters included Thomas Obitz, Senior Manager, FSO Advisory Performance Improvement, EY, UK and Dr. Daniel Simon, Managing Partner, Scape Consulting, Germany.

The plenary and many of the track presentations are available at livestream.com.

The day concluded with an evening drinks reception within Central Hall Westminster, where attendees had the opportunity to catch up with acquaintances old and new. More to come on day two!

Join the conversation – @theopengroup #ogLON

Loren K. BaynesLoren K. Baynes, Director, Global Marketing Communications, joined The Open Group in 2013 and spearheads corporate marketing initiatives, primarily the website, blog and media relations. Loren has over 20 years experience in brand marketing and public relations and, prior to The Open Group, was with The Walt Disney Company for over 10 years. Loren holds a Bachelor of Business Administration from Texas A&M University. She is based in the US.

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The Open Group London 2014 Preview: A Conversation with RTI’s Stan Schneider about the Internet of Things and Healthcare

By The Open Group

RTI is a Silicon Valley-based messaging and communications company focused on helping to bring the Industrial Internet of Things (IoT) to fruition. Recently named “The Most Influential Industrial Internet of Things Company” by Appinions and published in Forbes, RTI’s EMEA Manager Bettina Swynnerton will be discussing the impact that the IoT and connected medical devices will have on hospital environments and the Healthcare industry at The Open Group London October 20-23. We spoke to RTI CEO Stan Schneider in advance of the event about the Industrial IoT and the areas where he sees Healthcare being impacted the most by connected devices.

Earlier this year, industry research firm Gartner declared the Internet of Things (IoT) to be the most hyped technology around, having reached the pinnacle of the firm’s famed “Hype Cycle.”

Despite the hype around consumer IoT applications—from FitBits to Nest thermostats to fashionably placed “wearables” that may begin to appear in everything from jewelry to handbags to kids’ backpacks—Stan Schneider, CEO of IoT communications platform company RTI, says that 90 percent of what we’re hearing about the IoT is not where the real value will lie. Most of media coverage and hype is about the “Consumer” IoT like Google glasses or sensors in refrigerators that tell you when the milk’s gone bad. However, most of the real value of the IoT will take place in what GE has coined as the “Industrial Internet”—applications working behind the scenes to keep industrial systems operating more efficiently, says Schneider.

“In reality, 90 percent of the real value of the IoT will be in industrial applications such as energy systems, manufacturing advances, transportation or medical systems,” Schneider says.

However, the reality today is that the IoT is quite new. As Schneider points out, most companies are still trying to figure out what their IoT strategy should be. There isn’t that much active building of real systems at this point.

Most companies, at the moment, are just trying to figure out what the Internet of Things is. I can do a webinar on ‘What is the Internet of Things?’ or ‘What is the Industrial Internet of Things?’ and get hundreds and hundreds of people showing up, most of whom don’t have any idea. That’s where most companies are. But there are several leading companies that very much have strategies, and there are a few that are even executing their strategies, ” he said. According to Schneider, these companies include GE, which he says has a 700+ person team currently dedicated to building their Industrial IoT platform, as well as companies such as Siemens and Audi, which already have some applications working.

For its part, RTI is actively involved in trying to help define how the Industrial Internet will work and how companies can take disparate devices and make them work with one another. “We’re a nuts-and-bolts, make-it-work type of company,” Schneider notes. As such, openness and standards are critical not only to RTI’s work but to the success of the Industrial IoT in general, says Schneider. RTI is currently involved in as many as 15 different industry standards initiatives.

IoT Drivers in Healthcare

Although RTI is involved in IoT initiatives in many industries, from manufacturing to the military, Healthcare is one of the company’s main areas of focus. For instance, RTI is working with GE Healthcare on the software for its CAT scanner machines. GE chose RTI’s DDS (data distribution service) product because it will let GE standardize on a single communications platform across product lines.

Schneider says there are three big drivers that are changing the medical landscape when it comes to connectivity: the evolution of standalone systems to distributed systems, the connection of devices to improve patient outcome and the replacement of dedicated wiring with networks.

The first driver is that medical devices that have been standalone devices for years are now being built on new distributed architectures. This gives practitioners and patients easier access to the technology they need.

For example, RTI customer BK Medical, a medical device manufacturer based in Denmark, is in the process of changing their ultrasound product architecture. They are moving from a single-user physical system to a wirelessly connected distributed design. Images will now be generated in and distributed by the Cloud, thus saving significant hardware costs while making the systems more accessible.

According to Schneider, ultrasound machine architecture hasn’t really changed in the last 30 or 40 years. Today’s ultrasound machines are still wheeled in on a cart. That cart contains a wired transducer, image processing hardware or software and a monitor. If someone wants to keep an image—for example images of fetuses in utero—they get carry out physical media. Years ago it was a Polaroid picture, today the images are saved to CDs and handed to the patient.

In contrast, BK’s new systems will be completely distributed, Schneider says. Doctors will be able to carry a transducer that looks more like a cellphone with them throughout the hospital. A wireless connection will upload the imaging data into the cloud for image calculation. With a distributed scenario, only one image processing system may be needed for a hospital or clinic. It can even be kept in the cloud off-site. Both patients and caregivers can access images on any display, wherever they are. This kind of architecture makes the systems much cheaper and far more efficient, Schneider says. The days of the wheeled-in cart are numbered.

The second IoT driver in Healthcare is connecting medical devices together to improve patient outcomes. Most hospital devices today are completely independent and standalone. So, if a patient is hooked up to multiple monitors, the only thing that really “connects” those devices today is a piece of paper at the end of a hospital bed that shows how each should be functioning. Nurses are supposed to check these devices on an hourly basis to make sure they’re working correctly and the patient is ok.

Schneider says this approach is error-ridden. First, the nurse may be too busy to do a good job checking the devices. Worse, any number of things can set off alarms whether there’s something wrong with the patient or not. As anyone who has ever visited a friend or relative in the hospital attest to, alarms are going off constantly, making it difficult to determine when someone is really in distress. In fact, one of the biggest problems in hospital settings today, Schneider says, is a phenomenon known as “alarm fatigue.” Single devices simply can’t reliably tell if there’s some minor glitch in data or if the patient is in real trouble. Thus, 80% of all device alarms in hospitals are turned off. Meaningless alarms fatigue personnel, so they either ignore or turn off the alarms…and people can die.

To deal with this problem, new technologies are being created that will connect devices together on a network. Multiple devices can then work in tandem to really figure out when something is wrong. If the machines are networked, alarms can be set to go off only when multiple distress indicators are indicated rather than just one. For example, if oxygen levels drop on both an oxygen monitor on someone’s finger and on a respiration monitor, the alarm is much more likely a real patient problem than if only one source shows a problem. Schneider says the algorithms to fix these problems are reasonably well understood; the barrier is the lack of networking to tie all of these machines together.

The third area of change in the industrial medical Internet is the transition to networked systems from dedicated wired designs. Surgical operating rooms offer a good example. Today’s operating room is a maze of wires connecting screens, computers, and video. Videos, for instance, come from dynamic x-ray imaging systems, from ultrasound navigation probes and from tiny cameras embedded in surgical instruments. Today, these systems are connected via HDMI or other specialized cables. These cables are hard to reconfigure. Worse, they’re difficult to sterilize, Schneider says. Thus, the surgical theater is hard to configure, clean and maintain.

In the future, the mesh of special wires can be replaced by a single, high-speed networking bus. Networks make the systems easier to configure and integrate, easier to use and accessible remotely. A single, easy-to-sterilize optical network cable can replace hundreds of wires. As wireless gets faster, even that cable can be removed.

“By changing these systems from a mesh of TV-cables to a networked data bus, you really change the way the whole system is integrated,” he said. “It’s much more flexible, maintainable and sharable outside the room. Surgical systems will be fundamentally changed by the Industrial IoT.”

IoT Challenges for Healthcare

Schneider says there are numerous challenges facing the integration of the IoT into existing Healthcare systems—from technical challenges to standards and, of course, security and privacy. But one of the biggest challenges facing the industry, he believes, is plain old fear. In particular, Schneider says, there is a lot of fear within the industry of choosing the wrong path and, in effect, “walking off a cliff” if they choose the wrong direction. Getting beyond that fear and taking risks, he says, will be necessary to move the industry forward, he says.

In a practical sense, the other thing currently holding back integration is the sheer number of connected devices currently being used in medicine, he says. Manufacturers each have their own systems and obviously have a vested interest in keeping their equipment in hospitals, so many have been reluctant to develop or become standards-compliant and push interoperability forward, Schneider says.

This is, of course, not just a Healthcare issue. “We see it in every single industry we’re in. It’s a real problem,” he said.

Legacy systems are also a problematic area. “You can’t just go into a Kaiser Permanente and rip out $2 billion worth of equipment,” he says. Integrating new systems with existing technology is a process of incremental change that takes time and vested leadership, says Schneider.

Cloud Integration a Driver

Although many of these technologies are not yet very mature, Schneider believes that the fundamental industry driver is Cloud integration. In Schneider’s view, the Industrial Internet is ultimately a systems problem. As with the ultrasound machine example from BK Medical, it’s not that an existing ultrasound machine doesn’t work just fine today, Schneider says, it’s that it could work better.

“Look what you can do if you connect it to the Cloud—you can distribute it, you can make it cheaper, you can make it better, you can make it faster, you can make it more available, you can connect it to the patient at home. It’s a huge system problem. The real overwhelming striking value of the Industrial Internet really happens when you’re not just talking about the hospital but you’re talking about the Cloud and hooking up with practitioners, patients, hospitals, home care and health records. You have to be able to integrate the whole thing together to get that ultimate value. While there are many point cases that are compelling all by themselves, realizing the vision requires getting the whole system running. A truly connected system is a ways out, but it’s exciting.”

Open Standards

Schneider also says that openness is absolutely critical for these systems to ultimately work. Just as agreeing on a standard for the HTTP running on the Internet Protocol (IP) drove the Web, a new device-appropriate protocol will be necessary for the Internet of Things to work. Consensus will be necessary, he says, so that systems can talk to each other and connectivity will work. The Industrial Internet will push that out to the Cloud and beyond, he says.

“One of my favorite quotes is from IBM, he says – IBM said, ‘it’s not a new Internet, it’s a new Web.’” By that, they mean that the industry needs new, machine-centric protocols to run over the same Internet hardware and base IP protocol, Schneider said.

Schneider believes that this new web will eventually evolve to become the new architecture for most companies. However, for now, particularly in hospitals, it’s the “things” that need to be integrated into systems and overall architectures.

One example where this level of connectivity will make a huge difference, he says, is in predictive maintenance. Once a system can “sense” or predict that a machine may fail or if a part needs to be replaced, there will be a huge economic impact and cost savings. For instance, he said Siemens uses acoustic sensors to monitor the state of its wind generators. By placing sensors next to the bearings in the machine, they can literally “listen” for squeaky wheels and thus figure out whether a turbine may soon need repair. These analytics let them know when the bearing must be replaced before the turbine shuts down. Of course, the infrastructure will need to connect all of these “things” to the each other and the cloud first. So, there will need to be a lot of system level changes in architectures.

Standards, of course, will be key to getting these architectures to work together. Schneider believes standards development for the IoT will need to be tackled from both horizontal and vertical standpoint. Both generic communication standards and industry specific standards like how to integrate an operating room must evolve.

“We are a firm believer in open standards as a way to build consensus and make things actually work. It’s absolutely critical,” he said.

stan_schneiderStan Schneider is CEO at Real-Time Innovations (RTI), the Industrial Internet of Things communications platform company. RTI is the largest embedded middleware vendor and has an extensive footprint in all areas of the Industrial Internet, including Energy, Medical, Automotive, Transportation, Defense, and Industrial Control.  Stan has published over 50 papers in both academic and industry press. He speaks at events and conferences widely on topics ranging from networked medical devices for patient safety, the future of connected cars, the role of the DDS standard in the IoT, the evolution of power systems, and understanding the various IoT protocols.  Before RTI, Stan managed a large Stanford robotics laboratory, led an embedded communications software team and built data acquisition systems for automotive impact testing.  Stan completed his PhD in Electrical Engineering and Computer Science at Stanford University, and holds a BS and MS from the University of Michigan. He is a graduate of Stanford’s Advanced Management College.

 

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Filed under architecture, Cloud, digital technologies, Enterprise Architecture, Healthcare, Internet of Things, Open Platform 3.0, Standards, Uncategorized

IT Trends Empowering Your Business is Focus of The Open Group London 2014

By The Open Group

The Open Group, the vendor-neutral IT consortium, is hosting an event in London October 20th-23rd at the Central Hall, Westminster. The theme of this year’s event is on how new IT trends are empowering improvements in business and facilitating enterprise transformation.

Objectives of this year’s event:

  • Show the need for Boundaryless Information Flow™, which would result in more interoperable, real-time business processes throughout all business ecosystems
  • Examine the use of developing technology such as Big Data and advanced data analytics in the financial services sector: to minimize risk, provide more customer-centric products and identify new market opportunities
  • Provide a high-level view of the Healthcare ecosystem that identifies entities and stakeholders which must collaborate to enable the vision of Boundaryless Information Flow
  • Detail how the growth of “The Internet of Things” with online currencies and mobile-enabled transactions has changed the face of financial services, and poses new threats and opportunities
  • Outline some of the technological imperatives for Healthcare providers, with the use of The Open Group Open Platform 3.0™ tools to enable products and services to work together and deploy emerging technologies freely and in combination
  • Describe how to develop better interoperability and communication across organizational boundaries and pursue global standards for Enterprise Architecture for all industries

Key speakers at the event include:

  • Allen Brown, President & CEO, The Open Group
  • Magnus Lindkvist, Futurologist
  • Hans van Kesteren, VP & CIO Global Functions, Shell International, The Netherlands
  • Daniel Benton, Global Managing Director, IT Strategy, Accenture

Registration for The Open Group London 2014 is open and available to members and non-members. Please register here.

Join the conversation via Twitter – @theopengroup #ogLON

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The Open Group London 2014: Open Platform 3.0™ Panel Preview with Capgemini’s Ron Tolido

By The Open Group

The third wave of platform technologies is poised to revolutionize how companies do business not only for the next few years but for years to come. At The Open Group London event in October, Open Group CTO Dave Lounsbury will be hosting a panel discussion on how The Open Group Open Platform 3.0™ will affect Enterprise Architectures. Panel speakers include IBM Vice President and CTO of U.S. Federal IMT Andras Szakal and Capgemini Senior Vice President and CTO for Application Services Ron Tolido.

We spoke with Tolido in advance of the event about the progress companies are making in implementing third platform technologies, the challenges facing the industry as Open Platform 3.0 evolves and the call to action he envisions for The Open Group as these technologies take hold in the marketplace.

Below is a transcript of that conversation.

From my perspective, we have to realize: What is the call to action that we should have for ourselves? If we look at the mission of Boundaryless Information Flow™ and the need for open standards to accommodate that, what exactly can The Open Group and any general open standards do to facilitate this next wave in IT? I think it’s nothing less than a revolution. The first platform was the mainframe, the second platform was the PC and now the third platform is anything beyond the PC, so all sorts of different devices, sensors and ways to access information, to deploy solutions and to connect. What does it mean in terms of Boundaryless Information Flow and what is the role of open standards to make that platform succeed and help companies to thrive in such a new world?

That’s the type of call to action I’m envisioning. And I believe there are very few Forums or Work Groups within The Open Group that are not affected by this notion of the third platform. Firstly, I believe an important part of the Open Platform 3.0 Forum’s mission will be to analyze, to understand, the impacts of the third platform, of all those different areas that we’re evolving currently in The Open Group, and, if you like, orchestrate them a bit or be a catalyst in all the working groups and forums.

In a blog you wrote this summer for Capgemini’s CTO Blog you cited third platform technologies as being responsible for a renewed interest in IT as an enabler of business growth. What is it about the Third Platform is driving that interest?

It’s the same type of revolution as we’ve seen with the PC, which was the second platform. A lot of people in business units—through the PC and client/server technologies and Windows and all of these different things—realized that they could create solutions of a whole new order. The second platform meant many more applications, many more uses, much more business value to be achieved and less direct dependence on the central IT department. I think we’re seeing a very similar evolution right now, but the essence of the move is not that it moves us even further away from central IT but it puts the power of technology right in the business. It’s much easier to create solutions. Nowadays, there are many more channels that are so close in business that it takes business people to understand them. This explains also why business people like the third platform so much—it’s the Cloud, it’s mobile, social, it’s big data, all of these are waves that bring technology closer to the business, and are easy to use with very apparent business value that haven’t seen before, certainly not in the PC era. So we’re seeing a next wave, almost a revolution in terms of how easy it is to create solutions and how widely spread these solutions can be. Because again, as with the PC, it’s many more applications yet again and many more potential uses that can be connected through these applications, so that’s the very nature of the revolution and that also explains why business people like the third platform so much. So what people say to me these days on the business side is ‘We love IT, it’s just these bloody IT people that are the problem.’

Due to the complexities of building the next wave of platform computing, do you think that we may hit a point of fatigue as companies begin to tackle everything that is involved in creating that platform and making it work together?

The way I see it, that’s still the work of the IT community and the Enterprise Architect and the platform designer. It’s the very nature of the platform is that it’s attractive to use it, not to build it. The very nature of the platform is to connect to it and launch from it, but building the platform is an entirely different story. I think it requires platform designers and Enterprise Architects, if you like, and people to do the plumbing and do the architecting and the design underneath. But the real nature of the platform is to use it and to build upon it rather than to create it. So the happy view is that the “business people” don’t have to construct this.

I do believe, by the way, that many of the people in The Open Group will be on the side of the builders. They’re supposed to like complexity and like reducing it, so if we do it right the users of the platform will not notice this effort. It’s the same with the Cloud—the problem with the Cloud nowadays is that many people are tempted to run their own clouds, their own technologies, and before they know it, they only have additional complexity on their agenda, rather than reduced, because of the Cloud. It’s the same with the third platform—it’s a foundation which is almost a no-brainer to do business upon, for the next generation of business models. But if we do it wrong, we only have additional complexity on our hands, and we give IT a bad name yet again. We don’t want to do that.

What are Capgemini customers struggling with the most in terms of adopting these new technologies and putting together an Open Platform 3.0?

What you currently see—and it’s not always good to look at history—but if you look at the emergence of the second platform, the PC, of course there were years in which central IT said ‘nobody needs a PC, we can do it all on the mainframe,’ and they just didn’t believe it and business people just started to do it themselves. And for years, we created a mess as a result of it, and we’re still picking up some of the pieces of that situation. The question for IT people, in particular, is to understand how to find this new rhythm, how to adopt the dynamics of this third platform while dealing with all the complexity of the legacy platform that’s already there. I think if we are able to accelerate creating such a platform—and I think The Open Group will be very critical there—what exactly should be in the third platform, what type of services should you be developing, how would these services interact, could we create some set of open standards that the industry could align to so that we don’t have to do too much work in integrating all that stuff. If we, as The Open Group, can create that industry momentum, that, at least, would narrow the gap between business and IT that we currently see. Right now IT’s very clearly not able to deliver on the promise because they have their hands full with surviving the existing IT landscape, so unless they do something about simplifying it on the one hand and bridging that old world with the new one, they might still be very unpopular in the forthcoming years. That’s not what you want as an IT person—you want to enable business and new business. But I don’t think we’ve been very effective with that for the past ten years as an industry in general, so that’s a big thing that we have to deal with, bridging the old world with the new world. But anything we can do to accelerate and simplify that job from The Open Group would be great, and I think that’s the very essence of where our actions would be.

What are some of the things that The Open Group, in particular, can do to help affect these changes?

To me it’s still in the evangelization phase. Sooner or later people have to buy it and say ‘We get it, we want it, give me access to the third platform.’ Then the question will be how to accelerate building such an actual platform. So the big question is: What does such a platform look like? What types of services would you find on such a platform? For example, mobility services, data services, integration services, management services, development services, all of that. What would that look like in a typical Platform 3.0? Maybe even define a catalog of services that you would find in the platform. Then, of course, if you could use such a catalog or shopping list, if you like, to reach out to the technology suppliers of this world and convince them to pick that up and gear around these definitions—that would facilitate such a platform. Also maybe the architectural roadmap—so what would an architecture look like and what would be the typical five ways of getting there? We have to start with your local situation, so probably also several design cases would be helpful, so there’s an architectural dimension here.

Also, in terms of competencies, what type of competencies will we need in the near future to be able to supply these types of services to the business? That’s, again, very new—in this case, IT Specialist Certification and Architect Certification. These groups also need to think about what are the new competencies inherent in the third platform and how does it affect things like certification criteria and competency profiles?

In other areas, if you look at TOGAF®, and Open Group standard, is it really still suitable in fast paced world of the third platform or do we need a third platform version of TOGAF? With Security, for example, there are so many users, so many connections, and the activities of the former Jericho Forum seem like child’s play compared to what you will see around the third platform, so there’s no Forum or Work Group that’s not affected by this Open Platform 3.0 emerging.

With Open Platform 3.0 touching pretty much every aspect of technology and The Open Group, how do you tackle that? Do you have just an umbrella group for everything or look at it through the lens of TOGAF or security or the IT Specialist? How do you attack something so large?

It’s exactly what you just said. It’s fundamentally my belief that we need to do both of these two things. First, we need a catalyst forum, which I would argue is the Open Platform 3.0 Forum, which would be the catalyst platform, the orchestration platform if you like, that would do the overall definitions, the call to action. They’ve already been doing the business scenarios—they set the scene. Then it would be up to this Forum to reach out to all the other Forums and Work Groups to discuss impact and make sure it stays aligned, so here we have an orchestration function of the Open Platform 3.0 Forum. Then, very obviously, all the other Work Groups and Forums need to pick it up and do their own stuff because you cannot aspire to do all of this with one and the same forum because it’s so wide, it’s so diverse. You need to do both.

The Open Platform 3.0 Forum has been working for a year and a half now. What are some of the things the Forum has accomplished thus far?

They’ve been particularly working on some of the key definitions and some of the business scenarios. I would say in order to create an awareness of Open Platform 3.0 in terms of the business value and the definitions, they’ve done a very good job. Next, there needs to be a call to action to get everybody mobilized and setting tangible steps toward the Platform 3.0. I think that’s currently where we are, so that’s good timing, I believe, in terms of what the forum has achieved so far.

Returning to the mission of The Open Group, given all of the awareness we have created, what does it all mean in terms of Boundaryless Information Flow and how does it affect the Forums and Work Groups in The Open Group? That’s what we need to do now.

What are some of the biggest challenges that you see facing adoption of Open Platform 3.0 and standards for that platform?

They are relatively immature technologies. For example, with the Cloud you see a lot of players, a lot of technology providers being quite reluctant to standardize. Some of them are very open about it and are like ‘Right now we are in a niche, and we’re having a lot of fun ourselves, so why open it up right now?’ The movement would be more pressure from the business side saying ‘We want to use your technology but only if you align with some of these emerging standards.’ That would do it or certainly help. This, of course, is what makes The Open Group as powerful as not only technology providers, but also businesses, the enterprises involved and end users of technology. If they work together and created something to mobilize technology providers, that would certainly be a breakthrough, but these are immature technologies and, as I said, with some of these technology providers, it seems more important to them to be a niche player for now and create their own market rather than standardizing on something that their competitors could be on as well.

So this is a sign of a relatively immature industry because every industry that starts to mature around certain topics begins to work around open standards. The more mature we grow in mastering the understanding of the Open Platform 3.0, the more you will see the need for standards arise. It’s all a matter of timing so it’s not so strange that in the past year and a half it’s been very difficult to even discuss standards in this area. But I think we’re entering that era really soon, so it seems to be good timing to discuss it. That’s one important limiting area; I think the providers are not necessarily waiting for it or committed to it.

Secondly, of course, this is a whole next generation of technologies. With all new generations of technologies there are always generation gaps and people in denial or who just don’t feel up to picking it up again or maybe they lack the energy to pick up a new wave of technology and they’re like ‘Why can’t I stay in what I’ve mastered?’ All very understandable. I would call that a very typical IT generation gap that occurs when we see the next generation of IT emerge—sooner or later you get a generation gap, as well. Which has nothing to do with physical age, by the way.

With all these technologies converging so quickly, that gap is going to have to close quickly this time around isn’t it?

Well, there are still mainframes around, so you could argue that there will be two or even three speeds of IT sooner or later. A very stable, robust and predictable legacy environment could even be the first platform that’s more mainframe-oriented, like you see today. A second wave would be that PC workstation, client/server, Internet-based IT landscape, and it has a certain base and certain dynamics. Then you have this third phase, which is the new platform, that is more dynamic and volatile and much more diverse. You could argue that there might be within an organization multiple speeds of IT, multiple speeds of architectures, multi-speed solutioning, and why not choose your own speed?

It probably takes a decade or more to really move forward for many enterprises.

It’s not going as quickly as the Gartners of this world typically thinks it is—in practice we all know it takes longer. So I don’t see any reason why certain people wouldn’t certainly choose deliberately to stay in second gear and don’t go to third gear simply because they think it’s challenging to be there, which is perfectly sound to me and it would bring a lot of work in many years to companies.

That’s an interesting concept because start-ups can easily begin on a new platform but if you’re a company that has been around for a long time and you have existing legacy systems from the mainframe or PC era, those are things that you have to maintain. How do you tackle that as well?

That’s a given in big enterprises. Not everybody can be a disruptive start up. Maybe we all think that we should be like that but it’s not the case in real life. In real life, we have to deal with enterprise systems and enterprise processes and all of them might be very vulnerable to this new wave of challenges. Certainly enterprises can be disruptive themselves if they do it right, but there are always different dynamics, and, as I said, we still have mainframes, as well, even though we declared their ending quite some time ago. The same will happen, of course, to PC-based IT landscapes. It will take a very long time and will take very skilled hands and minds to keep it going and to simplify.

Having said that, you could argue that some new players in the market obviously have the advantage of not having to deal with that and could possibly benefit from a first-mover advantage where existing enterprises have to juggle several balls at the same time. Maybe that’s more difficult, but of course enterprises are enterprises for a good reason—they are big and holistic and mighty, and they might be able to do things that start-ups simply can’t do. But it’s a very unpredictable world, as we all realize, and the third platform brings a lot of disruptiveness.

What’s your perspective on how the Internet of Things will affect all of this?

It’s part of the third platform of course, and it’s something Andras Szakal will be addressing as well. There’s much more coming, both at the input sites, everything is becoming a sensor essentially to where even your wallpaper or paint is a sensor, but on the other hand, in terms of devices that we use to communicate or get information—smart things that whisper in your ears or whatever we’ll have in the coming years—is clearly part of this Platform 3.0 wave that we’ll have as we move away from the PC and the workstation, and there’s a whole bunch of new technologies around to replace it. The Internet of Things is clearly part of it, and we’ll need open standards as well because there are so many different things and devices, and if you don’t create the right standards and platform services to deal with it, it will be a mess. It’s an integral part of the Platform 3.0 wave that we’re seeing.

What is the Open Platform 3.0 Forum going to be working on over the next few months?

Understanding what this Open Platform 3.0 actually means—I think the work we’ve seen so far in the Forum really sets the way in terms of what is it and definitions are growing. Andras will be adding his notion of the Internet of Things and looking at definitions of what is it exactly. Many people already intuitively have an image of it.

The second will be how we deliver value to the business—so the business scenarios are a crucial thing to consider to see how applicable they are, how relevant they are to enterprises. The next thing to do will pertain to work that still needs to be done in The Open Group, as well. What would a new Open Platform 3.0 architecture look like? What are the platform services? What are the ones we can start working on right now? What are the most important business scenarios and what are the platform services that they will require? So architectural impacts, skills impacts, security impacts—as I said, there are very few areas in IT that are not touched by it. Even the new IT4IT Forum that will be launched in October, which is all about methodologies and lifecycle, will need to consider Agile, DevOps-related methodologies because that’s the rhythm and the pace that we’ve got to expect in this third platform. So the rhythm of the working group—definitions, business scenarios and then you start to thinking about what does the platform consist of, what type of services do I need to create to support it and hopefully by then we’ll have some open standards to help accelerate that thinking to help enterprises set a course for themselves. That’s our mission as The Open Group to help facilitate that.

Tolido-RonRon Tolido is Senior Vice President and Chief Technology Officer of Application Services Continental Europe, Capgemini. He is also a Director on the board of The Open Group and blogger for Capgemini’s multiple award-winning CTO blog, as well as the lead author of Capgemini’s TechnoVision and the global Application Landscape Reports. As a noted Digital Transformation ambassador, Tolido speaks and writes about IT strategy, innovation, applications and architecture. Based in the Netherlands, Mr. Tolido currently takes interest in apps rationalization, Cloud, enterprise mobility, the power of open, Slow Tech, process technologies, the Internet of Things, Design Thinking and – above all – radical simplification.

 

 

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Q&A with Marshall Van Alstyne, Professor, Boston University School of Management and Research Scientist MIT Center for Digital Business

By The Open Group

The word “platform” has become a nearly ubiquitous term in the tech and business worlds these days. From “Platform as a Service” (PaaS) to IDC’s Third Platform to The Open Group Open Platform 3.0™ Forum, the concept of platforms and building technology frames and applications on top of them has become the next “big thing.”

Although the technology industry tends to conceive of “platforms” as the vehicle that is driving trends such as mobile, social networking, the Cloud and Big Data, Marshall Van Alstyne, Professor at Boston University’s School of Management and a Research Scientist at the MIT Center for Digital Business, believes that the radical shifts that platforms bring are not just technological.

We spoke with Van Alstyne prior to The Open Group Boston 2014, where he presented a keynote, about platforms, how they have shifted traditional business models and how they are impacting industries everywhere.

The title of your session at the Boston conference was “Platform Shift – How New Open Business Models are Changing the Shape of Industry.” How would you define both “platform” and “open business model”?

I think of “platform” as a combination of two things. One, a set of standards or components that folks can take up and use for production of goods and services. The second thing is the rules of play, or the governance model – who has the ability to participate, how do you resolve conflict, and how do you divide up the royalty streams, or who gets what? You can think of it as the two components of the platform—the open standard together with the governance model. The technologists usually get the technology portion of it, and the economists usually get the governance and legal portions of it, but you really need both of them to understand what a ‘platform’ is.

What is the platform allowing then and how is that different from a regular business model?

The platform allows third parties to conduct business using system resources so they can actually meet and exchange goods across the platform. Wonderful examples of that include AirBnB where you can rent rooms or you can post rooms, or eBay, where you can sell goods or exchange goods, or iTunes where you can go find music, videos, apps and games provided by others, or Amazon where third parties are even allowed to set up shop on top of Amazon. They have moved to a business model where they can take control of the books in addition to allowing third parties to sell their own books and music and products and services through the Amazon platform. So by opening it up to allow third parties to participate, you facilitate exchange and grow a market by helping that exchange.

How does this relate to the concept of the technology industry is defining the “third platform”?

I think of it slightly differently. The tech industry uses mobile and social and cloud and data to characterize it. In some sense this view offers those as the attributes that characterize platforms or the knowledge base that enable platforms. But we would add to that the economic forces that actually shape platforms. What we want to do is give you some of the strategic tools, the incentives, the rules that will actually help you control their trajectory by helping you improve who participates and then measure and improve the value they contribute to the platform. So a full ecosystem view is not just the technology and the data, it also measures the value and how you divide that value. The rules of play really become important.

I think the “third platform” offers marvelous concepts and attributes but you also need to add the economics to it: Why do you participate, who gets what portions of the value, and who ultimately owns control.

Who does control the platform then?

A platform has multiple parts. Determining who controls what part is the art and design of the governance model. You have to set up control in the right way to motivate people to participate. But before we get to that, let’s go back and complete the idea of what’s an ‘open platform.’

To define an open platform, consider both the right of access and the right to manipulate platform resources, then consider granting those rights to four different parties. One is the user—can they access one another, can they access data, can they access system resources? Another group is developers—can they manipulate system resources, can they add new features to it, can they sell through the platform? The third group is the platform providers. You often think of them as those folks that facilitate access across the platform. To give you an example, iTunes is a single monolithic store, so the provider is simply Apple, but Android, in contrast, allows multiple providers, so there’s a Samsung Android store, an LTC Android store, a Google Android store, there’s even an Amazon version that uses a different version of Android. So that platform has multiple providers each with rights to access users. The fourth group is the party that controls the underlying property rights, who owns the IP. The ability modify the underlying standard and also the rights of access for other parties is the bottom-most layer.

So to answer the question of what is ‘open,’ you have to consider the rights of access of all four groups—the users, developers, the providers and IP rights holders, or sponsors, underneath.

Popping back up a level, we’re trying to motivate different parties to participate in the ecosystem. So what do you give the users? Usually it’s some kind of value. What do you give developers? Usually it’s some set of SDKs and APIs, but also some level of royalties. It’s fascinating. If you look back historically, Amazon initially tried a publishing royalty where they took 70% and gave a minority 30% back to developers. They found that didn’t fly very well and they had to fall back to the app store or software-style royalty, where they’re taking a lower percentage. I think Apple, for example, takes 30 percent, and Amazon is now close to that. You see ranges of royalties going anywhere from a few percent—an example is credit cards—all the way up to iStock photo where they take roughly 70 percent. That’s an extremely high rate, and one that I don’t recommend. We were just contracting for designs at 99Designs and they take a 20 percent cut. That’s probably more realistic, but lower might perhaps even be better—you can create stronger network effect if that’s the case.

Again, the real question of control is how you motivate third parties to participate and add value? If you are allowing them to use resources to create value and keep a lot of that value, then they’re more motivated to participate, to invest, to bring their resources to your platform. If you take most of the value they create, they won’t participate. They won’t add value. One of the biggest challenges for open platforms—what you might call the ‘Field of Dreams’ approach—is that most folks open their platform and assume ‘if you build it, they will come,’ but you really need to reward them to do so. Why would they want to come build with you? There are numerous instances of platforms that opened but no developer chooses to add value—the ecosystem is too small. You have to solve the chicken and egg problem where if you don’t have users, developers don’t want to build for you, but if you don’t have developer apps, then why do users participate? So you’ve got a huge feedback problem. And those are where the economics become critical, you must solve the chicken and egg problem to build and roll out platforms.

It’s not just a technology question; it’s also an economics and rewards question.

Then who is controlling the platform?

The answer depends on the type of platform. Giving different groups a different set of rights creates different types of platform. Consider the four different parties: users, developers, providers, and sponsors. At one extreme, the Apple Mac platform of the 1980s reserved most rights for development, for producing hardware (the provider layer), and for modifying the IP (the sponsor layer) all to Apple. Apple controlled the platform and it remained closed. In contrast, Microsoft relaxed platform control in specific ways. It licensed to multiple providers, enabling Dell, HP, Compaq and others to sell the platform. It gave developers rights of access to SDKs and APIs, enabling them to extend the platform. These control choices gave Microsoft more than six times the number of developers and more than twenty times the market share of Apple at the high point of Microsoft’s dominance of desktop operating systems. Microsoft gave up some control in order to create a more inclusive platform and a much bigger market.

Control is not a single concept. There are many different control rights you can grant to different parties. For example, you often want to give users an ability to control their own data. You often want to give developers intellectual property rights for the apps that they create and often over the data that their users create. You may want to give them some protections against platform misappropriation. Developers resent it if you take their ideas. So if the platform sees a really clever app that’s been built on top of its platform, what’s the guarantee that the platform simply doesn’t take it or build a competing app? You need to protect your developers in that case. Same thing’s true of the platform provider—what guarantees do they provide users for the quality of content provided on their ecosystem? For example, the Android ecosystem is much more open than the iPhone ecosystem, which means you have more folks offering stores. Simultaneously, that means that there are more viruses and more malware in Android, so what rights and guarantees do you require of the platform providers to protect the users in order that they want to participate? And then at the bottom, what rights do other participants have to control the direction of the platform growth? In the Visa model, for example, there are multiple member banks that help to influence the general direction of that credit card standard. Usually the most successful platforms have a single IP rights holder, but there are several examples of that have multiple IP rights holders.

So, in the end control defines the platform as much as the platform defines control.

What is the “secret” of the Internet-driven marketplace? Is that indeed the platform?

The secret is that, in effect, the goal of the platform is to increase transaction volume and value. If you can do that—and we can give you techniques for doing it—then you can create massive scale. Increasing the transaction value and transactions volume across your platform means that the owner of the platform doesn’t have to be the sole source of content and new ideas provided on the platform. If the platform owner is the only source of value then the owner is also the bottleneck. The goal is to consummate matches between producers and consumers of value. You want to help users find the content, find the resources, find the other people that they want to meet across your platform. In Apple’s case, you’re helping them find the music, the video, the games, and the apps that they want. In AirBnB’s case, you’re helping them find the rooms that they want, or Uber, you’re helping them find a driver. On Amazon, the book recommendations help you find the content that you want. In all the truly successful platforms, the owner of the platform is not providing all of that value. They’re enabling third parties to add that value, and that’s one reasy why The Open Group’s ideas are so important—you need open systems for this to happen.

What’s wrong with current linear business models? Why is a network-driven approach superior?

The fundamental reason why the linear business model no longer works is that it does not manage network effects. Network effects allow you to build platforms where users attract other users and you get feedback that grows your system. As more users join your platform, more developers join your platform, which attracts more users, which attracts more developers. You can see it on any of the major platforms. This is also true of Google. As advertisers use Google Search, the algorithms get better, people find the content that they want, so more advertisers use it. As more drivers join Uber, more people are happier passengers, which attracts more drivers. The more merchants accept Visa, the more consumers are willing to carry it, which attracts more merchants, which attracts more consumers. You get positive feedback.

The consequence of that is that you tend to get market concentration—you get winner take all markets. That’s where platforms dominate. So you have a few large firms within a given category, whether this is rides or books or hotels or auctions. Further, once you get network effects changing your business model, the linear insights into pricing, into inventory management, into innovation, into strategy breakdown.

When you have these multi-sided markets, pricing breaks down because you often price differently to one side than another because one side attracts the other. Inventory management practices breakdown because you’re selling inventory that you don’t even own. Your R&D strategies breakdown because now you’re motivating innovation and research outside the boundaries of the firm, as opposed to inside the internal R&D group. And your strategies breakdown because you’re not just looking for cost leadership or product differentiation, now you’re looking to shape the network effects as you create barriers to entry.

One of the things that I really want to argue strenuously is that in markets where platforms will emerge, platforms beat product every time. So the platform business model will inevitably beat the linear, product-based business model. Because you’re harnessing new forces in order to develop a different kind of business model.

Think of it the following way–imagine that value is growing as users consume your product. Think of any of the major platforms, as more folks use Google, search gets better, the more recommendations improve on Amazon, and the easier it is to find a ride on Uber, so more folks want to be on there. It is easier to scale network effects outside your business than inside your business. There’s simply more people outside than inside. The moment that happens, the locus control, the locus of innovation, moves from inside the firm to outside the firm. So the rules change. Pricing changes, your innovation strategies change, your inventory policies change, your R&D changes. You’re now managing resources outside the firm, rather than inside, in order to capture scale. This is different than the traditional industrial supply economies of scale.

Old systems are giving away to new systems. It’s not that the whole system breaks down, it’s simply that you’re looking to manage network effects and manage new business models. Another way to see this is that previously you were managing capital. In the industrial era, you were managing steel, you were managing large amounts of finance in banking, you were managing auto parts—huge supply economies of scale. In telecommunications, you were managing infrastructure. Now, you’re managing communities and these are managed outside the firm. The value that’s been created at Facebook or WhatsApp or Instagram or any of the new acquisitions, it’s not the capital that’s critical, it’s the communities that are critical, and these are built outside the firm.

There is a lot of talk in the industry about the Nexus of Forces as Gartner calls it, or Third Platform (IDC). The Open Group calls it Open Platform 3.0. Your concept goes well beyond technology—how does Open Platform 3.0 enable new business models?

Those are the enablers—they’re shall we say necessary, but they’re not sufficient. You really must harness the economic forces in addition to those enablers—mobile, social, Cloud, data. You must manage communities outside the firm, that’s the mobile and the social element of it. But this also involves designing governance and setting incentives. How are you capturing users outside the organization, how are they contributing, how are they being motivated to participate, why are they spreading your products to their peers? The Cloud allows it to scale—so Instagram and What’s App and others scale. Data allows you to “consummate the match.” You use that data to help people find what they need, to add value, so all of those things are the enablers. Then you have to harness the economics of the enablers to encourage people to do the right thing. You can see the correct intuition if you simply ask what happens if all you offer is a Cloud service and nothing more. Why will anyone use it? What’s the value to that system? If you open APIs to it, again, if you don’t have a user base, why are developers going to contribute? Developers want to reach users. Users want valuable functionality.

You must manage the motives and the value-add on the platform. New business models come from orchestrating not just the technology but also the third party sources of value. One of the biggest challenges is to grow these businesses from scratch—you’ve got the cold start chicken and egg problem. You don’t have network effects if you don’t have a user base, if you don’t have users, you don’t have network effects.

Do companies need to transform themselves into a “business platform” to succeed in this new marketplace? Are there industries immune to this shift?

There is a continuum of companies that are going to be affected. It starts at one end with companies that are highly information intense—anything that’s an information intensive business will be dramatically affected, anything that’s community or fashion-based business will be dramatically affected. Those include companies involved in media and news, songs, music, video; all of those are going to be the canaries in the coalmine that see this first. Moving farther along will be those industries that require some sort of certification—those include law and medicine and education—those, too, will also be platformized, so the services industries will become platforms. Farther down that are the ones that are heavily, heavily capital intensive where control of physical capital is paramount, those include trains and oil rigs and telecommunications infrastructure—eventually those will be affected by platform business models to the extent that data helps them gain efficiencies or add value, but they will in some sense be the last to be affected by platform business models. Look for the businesses where the cost side is shrinking in proportion to the delivery of value and where the network effects are rising as a proportional increase in value. Those forces will help you predict which industries will be transformed.

How can Enterprise Architecture be a part of this and how do open standards play a role?

The second part of that question is actually much easier. How do open standards play a role? The open standards make it much easier for third parties to attach and incorporate technology and features such that they can in turn add value. Open standards are essential to that happening. You do need to ask the question as to who controls those standards—is it completely open or is it a proprietary standard, a published standard but it’s not manipulable by a third party.

There will be at least two or three different things that Enterprise Architects need to do. One of these is to design modular components that are swappable, so as better systems become available, the better systems can be swapped in. The second element will be to watch for components of value that should be absorbed into the platform itself. As an example, in operating systems, web browsing has effectively been absorbed into the platform, streaming has been absorbed into the platform so that they become aware of how that actually works. A third thing they need to do is talk to the legal team to see where it is that the third parties property rights can be protected so that they invest. One of the biggest mistakes that firms make is to simply assume that because they own the platform, because they have the rights of control, that they can do what they please. If they do that, they risk alienating their ecosystems. So they should talk to their potential developers to incorporate developer concerns. One of my favorite examples is the Intel Architecture Lab which has done a beautiful job of articulating the voices of developers in their own architectural plans. A fourth thing that can be done is an idea borrowed from SAP, that builds Enterprise Architecture—they articulate an 18-24 month roadmap where they say these are the features that are coming, so you can anticipate and build on those. Also it gives you an idea of what features will be safe to build on so you won’t lose the value you’ve created.

What can companies do to begin opening their business models and more easily architect that?

What they should do is to consider four groups articulated earlier— those are the users, the providers, the developers and the sponsors—each serve a different role. Firms need to understand what their own role will be in order that they can open and architect the other roles within their ecosystem. They’ll also need to choose what levels of exclusivity they need to give their ecosystem partners in a different slice of the business. They should also figure out which of those components they prefer to offer themselves as unique competencies and where they need to seek third party assistance, either in new ideas or new resources or even new marketplaces. Those factors will help guide businesses toward different kinds of partnerships, and they’ll have to be open to those kinds of partners. In particular, they should think about where are they most likely to be missing ideas or missing opportunities. Those technical and business areas should open in order that third parties can take advantage of those opportunities and add value.

 

vanalstynemarshallProfessor Van Alstyne is one of the leading experts in network business models. He conducts research on information economics, covering such topics as communications markets, the economics of networks, intellectual property, social effects of technology, and productivity effects of information. As co-developer of the concept of “two sided networks” he has been a major contributor to the theory of network effects, a set of ideas now taught in more than 50 business schools worldwide.

Awards include two patents, National Science Foundation IOC, SGER, SBIR, iCorp and Career Awards, and six best paper awards. Articles or commentary have appeared in Science, Nature, Management Science, Harvard Business Review, Strategic Management Journal, The New York Times, and The Wall Street Journal.

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