Cloud // Infrastructure as a Service
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4/23/2014
09:06 AM
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IT Control Is An Illusion

With all due respect to GM's Randy Mott, doing most IT work in-house and outside the cloud isn't a winning strategy.

The InformationWeek Conference a few weeks ago featured two speakers with polar opposite views on IT management. General Motors CIO Randy Mott argued for more IT span of control. Former Netflix cloud architect Adrian Cockcroft argued for less. They both made compelling cases, but I think Cockcroft's view eventually will prevail.

Mott's span-of-control argument jibes with his three-year initiative to flip GM's reliance on outsourcing, from 90% outsourced IT to 90% in-house. He makes a strong case for moving IT in-house, citing how expensive, slow, and undifferentiated traditional outsourcing work can be. (Mott notes that GM's IT budget has gone down during the insourcing effort, though that wasn't a main goal.)

Mott made a number of important points during his 45-minute on-stage discussion with InformationWeek editor-in-chief Rob Preston: Real innovation happens when IT pros are tightly aligned with company strategy and the CIO has a seat at the CEO's table; IT must produce clear strategies, governance, and metrics; IT is a strategic asset, with speed of innovation a major success factor; and sustained competitive advantage comes from a focus on continuous improvement, creative process, and technological change. No arguments from me there.

[Are applications safer in the cloud? Read Fight Software Piracy With SaaS.]

But Mott started to lose me when he said things like "real business applications on an enterprise scale do not come from venture capitalists." Really? Try telling that to Virgin America, Coca-Cola Enterprises, Delta Airlines, Proctor & Gamble, or (ahem) Toyota, all big customers of Salesforce.com. (Let's all remember that Salesforce was funded by VC firm Sunbridge Partners back in 2000 -- strong, scalable ideas come from everywhere.)

Preston has spent time with Mott and has written that Mott isn't arguing that VC-backed startups produce no meaningful enterprise IT innovations. But Mott is skeptical that their systems and applications can scale, affordably, to meet Fortune 100 needs. I'm skeptical that continuing to rely on the same old providers (GM has signed enterprise license agreements with 11 tech giants) will lead to innovation and competitive advantage. They're as fossilized as any large organization.

As startup legend Steve Blank noted in a recent commencement speech: "In spite of all their resources, large companies are responsible for very, very few disruptive innovations." If you truly want to provide differentiated services, relying on the same cast of characters is a terrible idea.

Image: Dennis Hill (Flickr)
Image: Dennis Hill (Flickr)

Mott went too far. He classified software-as-a-service as a form of outsourcing and declared that SaaS is a path of "no integration," which is a blanket statement. During an interview Preston conducted with Mott a few weeks before the InformationWeek Conference, Mott dismissed SaaS as a way for customers to "get even, not get ahead." That's not always true. The right SaaS platforms with the right APIs offer you plenty of integration opportunities and the ability to add value on top of those platforms without having to write your own foundational systems.

Modern IT is more about reuse and repurposing than starting from scratch. To take the idea of doing everything yourself to an extreme, does GM mine ore for steel or attempt to build every component for every one of its autos? Clearly not.

One audience member challenged Mott on his anti-outsourcing stance, arguing that outsourcing is useful for areas that aren't IT core competencies, a belief that I share. What are GM's IT core competencies? Mott said that, at

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Jonathan Feldman is Chief Information Officer for the City of Asheville, North Carolina, where his business background and work as an InformationWeek columnist have helped him to innovate in government through better practices in business technology, process, and human ... View Full Bio

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dlampe328
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dlampe328,
User Rank: Apprentice
5/27/2014 | 4:10:37 PM
Re: Integration is the key
TerryB beat me to it. Automotive manufacturing is only done by a few companies so there is very limited economy of scale. I'm pretty sure there isn't a SaaS product out there that will let you track WIP and your supply chain to make sure you have JIT inventory and don't either gap a line or overload your distribution. Keeping all those gears turning (pun intended) takes a lot of integration. Another issue I have is that Jonathan is assuming some bad judgment on behalf of Mott that I don't think is warranted. I don't think Mott would completely ignore SaaS offerings any more than he would ignore COTS products which are surely already in place. The decision between "insourcing" and "outsourcing" traditionally has not always been a make/buy decision. It was often a make/make decision. I don't think that has changed, but when you buy the "make" you lose the investment in human capital that can never be recovered unless you bring the contractors on full time. The job of the CIO isn't to make every single make/buy insource/outsource decision. It's their job to set the strategic tone for the business. Mott wanted to move the pendulum in a different direction which I think most people agree is a good thing.
jhutchens941
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jhutchens941,
User Rank: Apprentice
4/28/2014 | 7:42:28 PM
Middle Way
This is a false diacotomy thinking IT should be 90% enterprise or 90% public cloud.

Netflix is the poster child for public cloud, and considering their business which peaks at 4x volume 8 hours a day, of course, renting infrastructure makes the most sense.  But even Pinterest bursts at a fraction of Nexflix, and the mundane workloads of business don't match this spike model.

The General Motors CIO approach to insourcing fits the post financial crisis large company IT approach, but he is missing the dynamic nature of cloud infrastrucutre which we'll call New IT.  I'm going to borrow this term from Jamie Lerner, President of Seagate Cloud and formally a key executive in the Cisco private cloud conversion who coined this phrase and said New IT is about "radical standardization" in scale-out infrastructure.

The false diactomy is thinking you can only get New IT by going to public cloud.  Fortunately, the Openstack(R) project, and companies like my company Continuware  (www.continuware.co) enable New IT outside the public cloud.  We deliver managed building blocks of New IT, for less than the public cloud, leaving your corporate data completely in your control, and your IT team more time to focus on business requirements & applications and less on infrastructure.
TerryB
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TerryB,
User Rank: Ninja
4/24/2014 | 2:10:47 PM
Integration is the key
I don't disagree with Jonathon very often but this is a case I side with Mott. SaaS API's are not the same thing as having the full code base to work with when trying to integrate with company wide systems. Does anyone even want to argue that point?

Narrow scope stuff like SalesForce, which is just a wimpy CRM system compared to something like an ERP system, is easy to provide API's for. It only does so much, where do you need to integrate it outside of the sales order processing? We looked at that once. It did so little I just wrote the parts our company needed and it didn't take very long.

But try using a collection of SaaS applications for Sales Order Processing, Trucking/Logistics, Lab testing for meeting product specifications and shop floor control for producing in a make-to-order environment and connecting all those by API so you can block inside sales from shipping orders which have not been lab approved. And if approved, automatically create and send all the shipping paperwork and product certification to the customer, along with whatever the trucker himself needs.

We can do that here because all the code belongs to us. We can do anything we decide we want to do. That will never be true in the Saas world. You will be able to do whatever the vendor thinks MOST of their customers might want to do. And of that subset, what will let them charge you the most in never ending rent.

Integration is the single biggest key to efficiency and quality for any company. SaaS and outsourcing rarely get you there.

I get sick of hearing about NetFlix. I mean, come on, they let you download a file from a catalog and collect your monthly subscription. That's the entire scope of their systems. How many developers couldn't create that? It's only the scale they operate at that is impressive and that's mostly a function of hardware. As a developer, I'd be bored out of my mind working there compared to the manufacturing environment I've always worked in.
SaneIT
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SaneIT,
User Rank: Ninja
4/24/2014 | 7:32:30 AM
Re: In our out
I would hope that a company the size of GM could find the talent.  I lived in the Detroit area for a decade so I know the talent is there and I know that a lot of the talent works for companies that directly support the automakers. If they feel like there is a local talent shortage they are the ones who caused it by spinning off and outsourcing to smaller companies like Visteon and Delphi for example.
SaneIT
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SaneIT,
User Rank: Ninja
4/24/2014 | 7:27:41 AM
Re: In our out
Goals are good but I think when you put hard numbers out there like we see in this instance I believe that the people listening to you are going to hold you to that.  I don't have any problem with a company that wants to pull some more functions back in house as long as it is moving their company forward.  I know several people who work or have worked inside the big 3 and one was a very long term contractor doing programming for them.  I was surprised to hear how much of their labor is outsourced when you consider that they are in a very competitive market and one would expect that they would want to keep some of the projects he was working on in house.  I'm sure at one time outsourcing the jobs looked very good on paper so I wonder what changed.
moarsauce123
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moarsauce123,
User Rank: Ninja
4/23/2014 | 6:50:19 PM
As usual, it all depends
What worked for Netflix might not work for GM. Netflix does not build cars and GM is not streaming movies. That means outright dimissing GMs move as wrong is rather bold. Cloud services are fine when the business can operate without them because cloud services are only as good as the Internet connection to them.

The discussion also does not specify which IT tasks specifically are used by GM and Netflix. If Netflix only needs lots of storage and big pipes, those can be found in plenty of places. If GM needs specialized applications that interact with production systems it may not be as easy to find an off the shelf outsourcer that can do that for less. Outsourcing is really only interesting if the same task with the same quality and responsiveness can be done for less.
Charlie Babcock
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Charlie Babcock,
User Rank: Author
4/23/2014 | 1:36:05 PM
Mott's centralized control shut down too many possibilities
I reacted the same way, Jonathan, when I heard Mott describe software as a service as having the same drawbacks as outsourcing. If you want, you can customize your Salesforce.com software as a service. If you want you can make use of the Force.com platform to build auxiliary applications to software as a service. IT maintains a lot of control over SaaS, how it's used and how it can be modified or extended. The cloud can be used as an extension of IT. He tended to view it as a debilitator of IT. I didn't understand how he came by that point of view.
danielcawrey
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danielcawrey,
User Rank: Ninja
4/23/2014 | 12:55:38 PM
Re: In our out
I think that SaaS is important, no matter what GM's CIO may think. It's not going anywhere. 

In terms of insourcing versus outsourcing, a lot of it depends on the ability for an organization to attract the right talent. That's not always possible; this is what necessitates outsourcing. I do believe that an insourcing initiative can build a tighter team.

The question is: Can you successfully put the right talent in place? Not always possible. 
RobPreston
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RobPreston,
User Rank: Author
4/23/2014 | 12:15:58 PM
Re: In our out
I've always viewed the goal of 90% in-house IT as more of an aspiration than a hard-and-fast rule. It wants to rely a lot less on outsourcing, so it sets a very high bar. I don't know if GM is precisely measuring the percentages. But it's very serious about going in this new direction. 
Drew Conry-Murray
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Drew Conry-Murray,
User Rank: Ninja
4/23/2014 | 10:01:35 AM
Innovation Sources
I have to agree with you about calling out Mott's assertion that real business applications don't come from VCs. There are numerous examples, including Salesforce, of enterprise businesses that have been built from startups, though most of the time small, innovative companies end up getting acquired. As for innovation, I think it's possible for incumbents to do a bit of innovation, but it usually takes a significant threat to their business to spur new thinking.
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