I spent a couple of days at the big annual event for bankers last week in Boston hosted by BAI.  They also had some high quality speakers, two of whom, Jack Welch and Al Gore,  I’ve had the brief honor of meeting previously. The third was Ram Charan, noted author and educator, and as this is the first time I heard him in person, I must say that he was excellent. All of them are plugging their books and writings including AL Gore’s latest, Our Choice: A Plan to Solve the Climate Crisis. But that is expected and I look forward to reading VP Gore’s latest.

What I thought was to a degree absent was a session on how cloud computing can assist banks, especially those that fall in the below $10B in asset range. These could be represented by banks, Savings and Loan’s (S&L) or Credit Unions (CU).

Here is what I thought was there and what was missing:

Some banks are using cloud computing for the traditional Software as a Service (SaaS) capabilities including sales such as Salesforce.com.

Some are using it to augment some of their infrastructure needs including data storage.

A few are using it to augment website capabilities.

What I didn’t hear was a bank or other financial or lending institution that started its core operations around cloud computing. And I think there are still a lot of valid concerns why this is not happening as rapidly as in some other areas of business. Let are my thoughts:

First, banking is highly regulated and likely to get more so, not less. Consumer and depositor data is closely monitored as part of the Gramm Leach Bliley Act. Cloud computing opens some doors to loss of data security.

Second, the OCC and OTS have considerable oversight in regular audits of large and small banks. Getting caught in a bad audit is not something anyone wants.Cloud computing may not lend itself well to an intense audit.

On the other hand banks, new, upcoming and traditional all can benefit from this approach. Traditional banks get to employ new services faster and quicker, while new banks don’t have to invest in a lot of Information Technology (IT) assets to get moving.

I would hope that next year we’ll hear more concrete stories of how banks are employing and deploying greater and wider services through cloud computing providers such as Amazon, IBM, Google, Oracle and Microsoft, as well as some of the outsourcers, Independent Software Vendors (ISV’s) and bank services providers including FIS, Metavante, Harland and Jack Henry.

If you would like further information on this topic, please feel free to contact me at ralphs@rgsmanagement.com 

I’ll begin by providing some evidence of how important this is to both the vendors and buyers of cloud computing technologies.  As an example, I recently attended (May 5-6) the Microsoft Developers Conference in NY City. While I don’t put myself into the core developer space, I certainly try to listen to and learn from the developers of technology. This years conference was in fact MC’ed by a couple of Microsoft executives that come from their Cloud Computing Platform Group, Doug Hauser and Mike Werner.  Both of them talked about the committment that Microsoft is making in terms of material, equipment and people resources to their internal and customer-focused use of cloud computing. 

Companies such as Microsoft, as well as Amazon and Google, each have their own strategies around cloud computing, including Microsoft’s Azure, Amazon’s S3 and Google’s AppEngine. They are also buying up massive amounts of computing power to fuel their expansion and provide a new layer of centralization for software and internet services. Some estimate that these companies are buying upwards of 20% of the world’s output of servers. Even one of my daily reads, the Financial Times of London, stepped in on March 26th and did a one-page review in their daily Analysis page titled, Cloud Control.

Cloud computing is essentially architected around a stack of services and applications that can be accessed from inside or outside the firewall (corporate or personal). What that boils down to is that the end-user can gain access to a variety of software programs and services that no longer have to reside locally (on your laptop, desktop or local server). For instance, I not only use Microsoft Outlook on my local system but I have also been expanding or complementing those capabilities with services from Google, such as Gmail and their web calendaring system. And companies such as Salesforce.com have been delivering powerful internet services applications for quite some time.

What’s new here is that businesses are redesigning some of their traditional IT centers to become more nimble to take advantage of these cloud services while architecting their internal portfolio of applications to mimic the way cloud computing is being delivered externally, but controlled within their corporate firewall.

So how are vendors marketing cloud computing?  Here’s some of the benefits that I have captured in my own words:

• Free – OK not everything is free, but for many businesses you can’t get much cheaper than this – such as Gmail, Google’s calendar and contact. Essentially this is a pay as you use service over the long term.
• Fast – you can get access to application and services quickly, without investment in software, time and people resources.
• Functional - you can try different versions of similar services (CRM, etc) and compare their capabilities and functions, side-by-side, to determine which services meet your needs and situation best.
• Failure-proof - this is a win-win for IT and Lines of Business. The IT department isn’t saddled with software that requires mounds of technical expertise and the business lines are free to experiment a little.
• Fun – with all the above, hopefully cloud computing opens up some of the latest capabilities of delivering and trialing software and internet services in a benign, safe and unobtrusive way.

I’ll conclude by focusing in on one of those last words, safe.  To market and sell services, vendors and providers of cloud computing services must guarantee the safety and security of any data that we entrust to them, whether it is our email or business content.  This key precept will be one of the important building blocks and of course marketing fundamentals for a succssful cloud computing service.

Keep my data safe and provide me with a service that I can’t get inexpensively, quickly or easily on my own, and you’ll always have my attention and wallet.

To me, this has become an important topic and one that I’ve spent some time on, consulting on virtualization and cloud computing. For those that read Thomas Friedman’s, The World is Flat, you might recall that “Virtual” was mentioned as part of his 10th Flattener. But what he was really referring to is what I wrote about in my last blog – virtualizing meetings and trade shows.

On the other hand, and in the context of this blog, virtualization is a set of techniques, processes and a good dose of software applications that allow IT departments to slice and dice their computer hardware (primarily computers and servers) and data storage into smaller, separately managed logical servers and resources. To the average non-techy, this is about as intuitive as learning Greek.

So I won’t discuss the How of doing this, but rather the Why.  The Why is simply about being able to squeeze more out of your compute and data storage purchases by optimizing their capabilities. Sounds easy enough. And of course the followup question is ‘why doesn’t what we already do work as well as this technique’ - that being the purchase of one software server license per physical server. Let’s just say that this technology and its best practices have really matured in the past few years, and until now IT has not really felt safe in fully deploying virtualization to run the core business. That is changing, and in the land of IT today virtualization provides a good deal of cost savings, while preserving and extending your previous investments in technology. This is a key result in a world economy that values economizing like never before.

Virtualization can also be an important ingredient and is frequently associated with the infrastructure behind cloud computing. There’s a lot being discussed on this subject and some actual business and products being developed and road-mapped. But I’ll address the marketing and sales behind this in another blog - since this is a much broader topic. But suffice it to say, that cloud computing and virtualization often appear together in the same context. 

There are a few major players in this arena, VMware and Citrix (through its acquisition of Xen) are the big ones. VMware is the most dominant commercial vendor maintaining an approximate 55% market share, while Citrix had its roots in the open source arena and has maintained a smaller market share. Microsoft, Sun and others have valuable components and versions of their own that work primarily with their operating systems. And of course there is a substantial partner, channel and vendor ecosystem that has developed for this market. 

Since what goes on at the top of these companies is so critical, part of the sales and business maturity process have become evident in the leadership of these businesses. VMware, which was owned and now spun off by EMC, recently went through a change at the top, putting in place Paul Maritz, a mature and seasoned veteran of building organizations by replacing one of the original founders, Diane Greene.  Why…EMC still owns a majority of stock of VMware (was about 90%) and those shares will likely become more valuable in an untethered company, one that is not “totally” beholden to EMC technology.  Xen has been managed the last few years by Peter Levine, an old colleague of mine via a UNIX International committee in the early 90’s and a veteran of Veritas (now Symantec),  and Peter put his stamp of leadership on Xen by selling it to Citrix – and remaining with Citrix as their EVP. Why…Citrix is not only a much larger company but is one that is highly complimentary to Xen, providing much of the software that allows us to create virtual conferences and connect to our remote compute resources (Go ToMyPC).

Since I’ve attended both physical (real and in-person) trade shows and events and User Group meetings from VMware, as well as virtual trade shows and on-line webinars, I’ve been impressed by their attempts to put virtualization into a decent ROI sale context. This is one of the top two keys to selling most technology and I would say that VMware has created a reasonably well-refined ROI template that you can use to judge cost-benefits.

However, I think the ability to sell virtualization’s ease of management, and safety and reliability have been less evident. Indeed, VMware has to rely too often on its partners to supply necessary “fail-safe” technologies (backup, disaster recovery, etc) to complement its offerings. True, this is changing, but it has delayed virtualization’s adoption. When I started in this business, it was all about how to get to five 9’s (99.999% uptime), which equates to 5+ minutes of downtime per year as memory serves. Virtualization will surely head further upstream in the eyes of CIO’s with more fully demonstrable and certifiable studies of uptime, MTBF (mean time between failures) and the many other quality metrics associated with running a data center. And these measures of reliability have to be associated with the level of training, processes, and other investments in order for the virtualization vendors to make a fully vetted case and to ensure a faster sale’s close cycle. One suggestion - try giving us a chart with the number of 9’s versus the level of effort (time, money and people) that I have to put in to get to that level of uptime. That is the true benchmark of ROI vs. safety that will propel and sell this technology that much faster.

Another – try adding in elements of data storage and desktop virtualization into a comprehensive ROI model and safety equation, and maybe throw in a chart on application virtualization.

There’s clearly a lot that has evolved in getting wider spread sales and adoption of virtualization, but there’s still a lot to be improved upon.  I’d love to hear your thoughts on some additional ideas.