Aam Aadmi’s Tips for staying on top of the Cloud!

Preetham Nadig1 Comment

In India, ‘Aam Aadmi’ (AD) means a common man. I am a big fan of relating strategy or business operations to things we do with a bit of common sense in the course of a normal day.

India has a big demand for gold and historically households have had some portion of savings in gold, precious stones and their other amorphous forms. Since safety of these precious stuff is always a concern, people prefer to lock them away in safety lockers provided by Banks for a fee and access the items on need only basis.

Wait a minute, now what’s all of this got to do with making a decision to move IT stuff to the cloud?!

Think of the gold/precious stones as your precious data/information/infrastructure(THE STUFF) and the banks as the cloud vendors and the ‘AAM AADMI’ (AD) as you who has been entrusted with making the final decision:

Aam Aadmi Cloud

What attributes would the common man(you) check before selecting the bank(cloud vendor)??

 

1) User access

— AD would check who has authorized access to the ‘stuff’, and about the hiring and management of personnel administering the service.

2) Provision for Random Audits

— AD would check compliance to regulations and industry standards, also ensure that the vendor is willing to undergo external audits and security checks.

3) Data location

— AD would check the location of the operations center and also check for options to control the location where the stuff is stored. AD wouldn’t want the precious asset to be stored in shady or inaccessible locations.

4) Data segregation

— AD would make sure that the stuff is segregated and encrypted, and the keys  to the locker are unique and access is not available to anyone else.

5) Data Recovery

— God forbid but when a disaster occurs or stuff is stolen, AD would want to check the recovery plans put in place. This will also help in identifying the type of insurance to be serviced.

6) Vendor Business Viability

— Most importantly, AD would want to know what happens to the stuff if the vendor goes out of business? How will the stuff be returned, and in what format?

The above six steps of aam aadmi’s thought process should help the IT managers make better assessment of moving to the cloud.

How long before we ‘Samsunged’ instead of ‘Googled’??

Preetham NadigLeave a comment

As an ardent economics student I follow game theory in real life quite closely. It’s simple in essence but leaves me amazed with its innumerable applications for decision making in the real world.

Today’s world of information convergence and consumerization of IT begs the Technology Companies to sharpen their game theory(mostly non cooperative) constantly. Most companies need a strategic rational decision making process to position and compete with the fast changing dynamics – with the consumers and the providers.

Traditionally companies have used vertical and horizontal integration as  a strategy to consolidate and grow. But most often the traditional competitive strategies are best suited to maintain status quo. Innovation is the key to long term growth and sustainability for Technology companies and traditional strategies have not been a source of innovation.

Apple for a long time(pre iPhone era) was vertically integrated, was long known to be an innovative and sassy company but one couldn’t have imagined the growth rates that were to follow post iPod and iPhone release.

One of the real reasons behind the success of the iPOD was not the hardware(yes it was sleek and sexy) but the auxiliary services centered around it such as the iTunes and recently iCloud. Apple has been constantly updating the services tailored around the systems rather than the product. In addition, they created new categories for their product such as iPads and apple TVs – tap into a whole new market.

Google started as an internet search provider and now they are so much more than that as they offer services around the search and with Android as their extended arm into mobile search space the opportunities to provide google centered services are plenty.

As I see the checkered game of companies trying to create or win new markets, I see more a pattern of ‘cross – integration’.

                                              Boxers

It’s no more integration in the same vertical or horizontal, the new wave of technology integration is disrupting traditional domains and boundaries. Recently Amazon bought Washington Post and won the CIA contract for it’s cloud computing business – AWS. Few years ago Amazon was just a competitor to brick and mortar retailers such as Walmart but today it’s competing with IBM and Google. Microsoft too has entered the cross integration game with it’s tablet – Surface and eventually harbors intentions to ride the new wave of industry disruptors. 

I see see this pattern more and more. I am not surprised but rather fascinated with competitive strategies at play. Google eventually releasing Moto X – a google flagship smartphone under the guise of ‘ Motorola’ makes me wonder what will Samsung have up it’s sleeve? Will they be complacent and let their market share erode? Early this year Samsung announced an alliance with ‘Tizen’ – an open source mobile OS and in process setting up a door to distance itself from Android if ever they are forced to… and I wouldn’t be surprised with the operational and financial might of Samsung, they release a ‘Samsung’ search platform as part of cross-integration!

And hence the question – How long before we ‘Samsunged’ or even ‘Appled’ ?!

                                                   NewImage

 

Let’s revisit CAPEX vs OPEX

Preetham NadigLeave a comment

Last few weeks I have had the opportunity to meet and hear from different IAAS vendors as I look for partners to enable their solution delivery.

Recently I had the fortune to talk to an Inside Sales rep (SR) who tried to reason why their cloud based IAAS was great for the clients.

He said:

a)     Imagine having only OPEX and no CAPEX

b)    Total Cost of Ownership (TCO) is reduced by 35%

These two arguments got me fired up:

I asked: So what if ‘costs’ move from CAPEX to OPEX? What’s the IRR? What is the run rate required to break even and what is the break even period? What is the NPV of having these costs occurring year after year?

The SR just had a blank look. For him it was crystal clear – I moved into OPEX world, how could I question such a brilliant solution in today’s environment of lean budgets!

Then I asked, so how do you measure TCO, what metrics do you use? What about cost of retirement? How do you standardize training and transition costs? What about operational cost? What is the service period? What is the cost of downtime?

Again a blank look, he thought I was clueless and needed a bit more guidance. His reply:

a)     Imagine having only OPEX and no CAPEX

b)    Total Cost of Ownership (TCO) is reduced by 35%

Clearly our conversation didn’t last long after that, we exchanged the formal pleasantries and hung up the call.

So let’s revisit the Opex Vs Capex statement.

What does it mean to move from CAPEX to OPEX?

How to play this card when one wants to have a strong business case for IAAS or any XAAS setup?

Capex Opex
Definition: Capital expenditures are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing asset with a useful life that extends beyond the tax year. OpEx (Operational expenditure) refers to expenses incurred in the course of ordinary business, such as sales, general and administrative expenses (and excluding cost of goods sold – or COGS, taxes, depreciation and interest).
Accounting treatment Cannot be fully deducted in the period when they were incurred. Tangible assets are depreciated and intangible assets are amortized over time. Operating expenses are fully deducted in the accounting period during which they were incurred.

As seen in the table, CFOs and CIOs get excited about OPEX as it stretches the budget.

One doesn’t need to have an upfront ‘capital’ investment to buy an asset but pay operational charges based on usage.

Another benefit is the tax deduction based on the operational costs which can claimed in the same tax year whereas in CAPEX one cannot realize the full tax deduction in the same tax year (normally depreciated).

This is an important financial metric, useful when preparing a business case around XAAS(anything as a service). But pay attention to the company objectives, does the CFO want a leaner balance sheet with better ROI(OPEX) or does the CFO want to have a bigger balance sheet with larger assets and a greater Net Income(CAPEX).

Also do the due diligence: know what is the cost of capital to the company? In the case of a big corporation with a AAA bond rating, they can raise capital at nearly risk free rate? So the cost of capital is quite low. Can the proposed service return a similar return or greater savings? Can the proposal have a positive NPV with the company’s cost of capital?

How many years will the asset be under service?

It’s very similar to leasing a Car Vs Buying a car.

If the intended usage is not for long periods or for intermittent usage, it makes financial sense to have the car on lease (OPEX) but if one needs continuous use for next 6-10 years, it’s better to buy the car (CAPEX).

Just thinking a bit beyond the Opex Vs Capex divide will help the XAAS Vendors or the CIOs to make a better business case for the Business stakeholders.

In the next part I will revisit the Total Cost of Ownership and make a more holistic case of moving onto the next generation of cloud based services.

What Linux couldn’t do, Openstack just might in the Enterprise World!

Preetham NadigLeave a comment

What Linux couldn’t do, Openstack just might in the Enterprise World!

I have been closely following the growth and various stages of cloud computing services and strategies around Enterprise Cloud Solutions.

As I speak to different Industry experts and Information Systems Leads, two most critical factors that have been stopping Enterprises from completely embracing Cloud based solutions have been ‘Trust’ and ‘Security’.

As I dig deeper into the point of ‘Trust’, I see it is normally connected to having consistent, reliable and transparent solutions. Security on the other hand is seen at war with flexibility, both are not in sync, its just been a compromise – more security means less flexibility!!

So as more Enterprises choose various forms of clouds and cloud deployment, most of the time it is always a comprise and not an ideal solution that the CIOs would queue up for.

This is where I am convinced that Openstack will be a game changer. Openstack by design is meant to make it easier for different cloud applications (SAAS) to communicate and work with different cloud vendors (IAAS) – being the perfect interface layer – potentially making plug & play possible in the Cloud!

NewImage

Openstack provides the CIOs with that unique option to choose the comforting hybrid solution – just the right mix of Private and Public cloud solutions. Tomorrow’s enterprises who value Security and Privacy can develop in-house customized applications on the Private cloud (Security + Flexibility) knowing very well that they don’t need to redesign their Cloud Infrastructure tailored to different vendors. Openstack by design is Open Source – means transparent(and with work that needs to be done on Reliability and Consistency).

That’s why I am excited about Openstack and it’s myriad opportunities to enable the right solutions for tomorrow’s Enterprises.

@PreethamNadig