IT Control Is An Illusion - InformationWeek

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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.

scale, almost every IT aspect of GM's global operations is a core competency, from procurement to logistics to manufacturing. (He concedes that areas such as benefits, where GM doesn't stand to gain a competitive advantage, aren't a core competency, but hiring is.)

Now, Mott has been overseeing IT operations at scale for all of his career, from Wal-Mart to Dell to Hewlett-Packard to GM. But his argument that just about everything in the IT portfolio is better done in-house doesn't hold water for two very simple reasons.

First, focus is very much like task prioritization: If everything is a priority, nothing is a priority.

Second, I don't doubt that GM will increase its IT staff to a point where many of the things it does are core competencies, but GM will never be as efficient at scale as service providers are, because it isn't in that business. GM, for instance, will never be more efficient at provisioning basic infrastructure than Amazon Web Services or Google, nor will it derive a competitive advantage there -- unless it decides to become a competitor. Becoming world class at anything requires very heavy lifting, and "undifferentiated heavy lifting" is the worst kind. More on that in a bit.

Enter the disruptor
Adrian Cockcroft, who took the InformationWeek Conference stage right after Mott, didn't refute any of the GM CIO's assertions directly, but he made his own points about span of control. My colleague Charlie Babcock, who asked the former Netflix cloud guru and current Battery Ventures technology fellow a few questions after his 20-minute presentation, laid out Cockcroft's way of thinking thusly: Rely less on direct span of control and more on trust and accountability.

The most tweeted takeaway from Cockcroft's presentation was his lessons learned from Netflix, which included the assertion: "Don't do your own undifferentiated heavy lifting." In Cockcroft's view, don't build your own gigantic and highly available compute and storage infrastructures if someone else has already done so. Cockcroft's choice at Netflix was to use AWS, what Mott would characterize as outsourcing the company's core infrastructure.

Cockcroft acknowledged that Netflix's "all-in" approach to cloud infrastructure drew a lot of skepticism over the years, and he chronicled the reactions. In 2009: "You guys are crazy." In 2010: "What Netflix is doing won't work." In 2011: "This will work only for 'unicorns' like Netflix." But by 2013 some started to react: "We're on our way to doing what Netflix is doing."

Not GM. Mott's conference slides contained dire warnings about IaaS, calling it outsourcing with no integration and ownership. He called out IaaS's security risks -- as if there are none with on-premises infrastructure -- and went as far as to say that IaaS price/performance gains are nonexistent, despite the clear price war among IaaS providers.

I run into this mentality again and again. And it's all about the risk/benefit ratio. It's a non-trivial matter to build out something like AWS in a secure manner. Many have tried; few have succeeded. Why would any enterprise IT organization, even at scale, think that it can do so and also focus on core business objectives? GM’s recent build-out of two datacenters, while an impressive consolidation of 23 datacenters worldwide, isn't exactly at AWS or Google scale.

Cockcroft made it clear what Netflix's core business objectives were in its decision to use IaaS: It takes developers minutes to provision new IT resources, not weeks. And "speed wins in the marketplace," he said. Mott has always put a premium on speed to market, so I'm not sure why he dismisses IaaS and SaaS, since speed to market is a main benefit of both.

As we advance in the digital age, where more and more -- and more -- technology is integrated into every aspect of business, do we really think that IT organizations can control it all? Do we really think that the old model of "no shadow systems" (which really means that no other business units are allowed to choose and deploy any technology on their own) is going to work? Will the business actually get more nimble and be able to create products faster and more efficiently if we demand that all technology be purchased, operated, and managed by central IT? No, no, and no.

Control is mostly an illusion anyway. Though Mott is adamant about IT having control over computing, he also acknowledged during the Q&A that his organization doesn't have span of control over in-vehicle systems. The product and IT engineers "talk," Mott said, but IT doesn't directly control that work.

This isn't your father's IT. Declaring that Netflix is a "unicorn" whose IT needs aren't as mainstream as GM's, so its underlying technologies and practices don't have to be as robust, is a bit like the banking industry telling us 20 years ago that TCP/IP is for feisty startups and that SNA is for real enterprises.

New technologies always go hand-in-hand with new business practices. And tight span of control is an old business practice that we need to move away from. As companies become more digital, IT must recognize that it needs to be the enabler and trailblazer, but not the sole source of digital tech.

When Accenture's Mark McDonald took the stage at the InformationWeek Conference to talk about where digital business is headed, he described a world where IT will move from business partner to protagonist. When IT decides unilaterally that it must hold all keys to all kingdoms, it becomes the villain. Paraphrasing Princess Leia, he remarked that the more you tighten your grip, the more that will slip through your fingers.

IT must not become the villain. IT must become the protagonist. And the chief protagonist is the CIO, who must lead a conversation with IT staffers and business peers that lands the company in a place that works for everyone.

Our InformationWeek Elite 100 issue -- our 26th ranking of technology innovators -- shines a spotlight on businesses that are succeeding because of their digital strategies. We take a close at look at the top five companies in this year's ranking and the eight winners of our Business Innovation awards, and offer 20 great ideas that you can use in your company. We also provide a ranked list of our Elite 100 innovators. Read our InformationWeek Elite 100 issue today.

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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