IT Innovations: Evaluate, Strategize, and Invest

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IT Innovations: Evaluate, Strategize, and InvestManas Sahoo

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Introduction

Adoption of a particular IT innovation is sometimes the key survival factor for many firms

“How can I best evaluate an emerging trend for its investment worthiness?”

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Introduction (cont’d)

Classic diffusion of innovations (DoI) theory By Everett M. Rogers Focuses primarily on the

“customer context” (how an innovation helps customers) without much regard to other contexts such as the “competitor or industry context” or the “technical intricacies context.”

Everett M. Rogers

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Introduction (cont’d)

The business ecosystem in the IT space in particular plays a very vital role—an innovation must therefore be “eco-friendly” to be successful.

As an alternative, Sahoo proposed a slight variation on Rogers’ original work—the diffusion of IT innovation framework—that IT professionals and academics alike can use to evaluate emerging trends.

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Outline

Evaluation Framework Analyzing Current Trends

How Can I Leverage These Trends?

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Evaluation Framework

Apart from customer-related factors, other factors such as ecosystems (networks of firms tightly linked to each other) and technology hugely influence an emerging trend’s success.

PC/client-server configurations Internet’s rise

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Evaluation Framework (cont’d)

Taking many factors into account, the diffusion of IT innovation framework evaluates whether an innovation renders the following: relieves current customer pain points provides relative advantages when compared to other

existing offerings is compatible with existing products is simple, is easy to use or implement is making inroads with larger customers has an open architecture

relieves current customer pain pointsprovides relative advantages when compared to other existing offeringsis compatible with existing products

is simple, is easy to use or implement

is making inroads with larger customers

has an open architecture

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Evaluation Framework (cont’d)

This framework’s users can develop a scoring model based on the likelihood of the trend becoming mainstream.

This score, along with considerations for the user’s economic, regulatory, and political environment, help facilitate decision-making.

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Diffusion of IT innovation framework

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Analyzing Current Trends

A survey from various IT firms and research of technical journals reveals that

are the most prominent emerging trends in IT today

SaaS SOA

Cloud Computing

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Software as a Service (SaaS) SaaS-based applications save customers from making

huge upfront investments in IT infrastructure the software vendor provides and maintains the overall

infrastructure

With its subscription-based model, offers a “quantum of solace” for customers reeling from cost pressures.

However, SaaS raises concerns related to security (because applications are hosted outside the customer’s firewalls), customization, availability, and scalability.

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SaaS (cont’d)

From an ecosystem perspective, SaaS reveals that firms tend to use it mostly to pursue an IP-based product strategy, rather than as part of ecosystem development.

However, some SaaS solution providers are trying to build a network of firms on the provider side, thus planting the seeds for a possible ecosystem.

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SaaS (cont’d)

For example, SalesForce, via its AppExchange platform, is trying to enable independent software vendors and value-added resellers to co-develop integrated solution for delivery in a SalesForce-hosted environment.

Similarly, Progress Software is providing a set of tools in its business application platform, OpenEdge, that enables firms to develop, deploy, and manage integrated applications in the SaaS model.

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SaaS (cont’d)

Because SaaS are hosted elsewhere, it isn’t easy to integrate SaaS-based solutions with on-premise applications This integration is difficult to accomplish and

expensive to execute.

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How Can I Leverage SaaS

SaaS-based solutions should be designed to trade-off between customizability ease of set

up/maintenance

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Service Oriented Architecture (SOA)

SOA’s flexibility via its standardized loose coupling between disparate applications soothes a major pain point for customers maintaining an extremely heterogeneous IT system

landscape

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Before and after SOA

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SOA (cont’d)

Existing IT applications and products can be redesigned to fit the SOA paradigm Several firms in the IT space have already started

reworking their old products For example, SAP has redesigned its Business Suite

products, providing SOA-based web services that both partners and customers can leverage as an API.

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SOA (cont’d)

SOA is an open standard that allows the integration and interoperability of different applications by different members of an ecosystem.

Typical SOA-based ecosystem offers avenues for

service providers service requestors

development tools providers

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Cloud Computing

A cloud is a type of parallel and distributed system consisting of a collection of interconnected and virtualized computers provisioned and presented as one or more unified

computing resources

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Cloud Computing(cont’d)

Compared to SaaS, Cloud computing is like “hardware as a service” it provides similar benefits and challenges

Key players

Amazon Sun

Google Grids Lab

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Convert customers’ capital expenditures to operational expenditures

Provides large one-time storage/processing requirements and the flexibility of unlimited storage/processing capacity

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However, much like SaaS It has limitations in regard to ecosystem building

The key players all have propriety clouds that aren’t interoperable.

To date, none of them have made the effort to build an ecosystem around the concept and bring in more customers

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How Can I Leverage These Trends?— SaaS

In their attempt to provide faster time to value for customers, SaaS-based applications make a trade-off with configurability

The applications most suited for this model are those that are non-core or non-mission-critical to the customer Because they raise many concerns about security,

availability, and scalability It’s important to segment the market for SaaS solutions

based on the customer’s usage rather than size

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How Can I Leverage These Trends?— SaaS (cont’d)

SaaS-based solutions should be designed to trade-off between customizability ease of set up

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In the future, SaaS-based applications should transform from being ecosystem unfriendly to ecosystem friendly

IT solution providers can help by doing

Integrating with on-premise IT solutions

Encouraging collaboration among SaaS solution providers

Encouraging system integrators and value-added resellers to collaborate on SaaS-based solutions

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Another dimension that IT solution providers should consider is the demand on organizational capabilities to deliver on the SaaS model when compared to the traditional on-premise software model.

An organizational transformation is essential to best serve this model: on the operations front, IT solution providers must acquire hosting and data maintenance capabilities.

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They also need to align service and support in a hosted application context

Sales and marketing efforts must be tuned to serve the volume business

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As a consumer for IT solutions, if your organization wants an IT solution that accelerates productivity and the time to value, yet does not want to invest in IT infrastructure acquisition and maintenance SaaS model is most suitable for you

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But before the final decision Ensure that the offering has the functionalities that you

require today and is scalable for future use Compare and contrast these functionalities with an on-

premise option and consider the following aspects:

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The following aspects

Reduce risks by considering only non-core and non-mission-critical applications for SaaS

Choose the solution that provides the best balance for the trade-off between “customizability” and “ease of set up and maintenance”

Choose the solution that integrates best in the context of your existing on-premise IT solution infrastructure

Choose the solution that provides an acceptable response time, up time, security, data protection, privacy, support service, and change-request service

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Integrating with on-premise IT solutions

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Summary—SaaS

IT solutions based on SaaS can be first tried on a small scale and then scaled up based on real benefits considering “return on investment” and “total cost of ownership” parameters

Appropriate accounting best practices can help in tracking and making the best investment decision

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How Can I Leverage These Trends?—SOA

SOA fares very well in its potential for mass adoption when analyzed using the diffusion of IT innovation framework Compared to the traditionally tightly coupled integration, SOA

provides much greater flexibility due to loose coupling The standardized manner makes it easier for execution and

maintenance SOA has acceptance from the technical fraternity and is

being rapidly adopted most new IT products are being developed with SOA as the

primary design principle

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How Can I Leverage These Trends?—SOA (cont’d)

SOA is an innovation that’s well-suited with the business ecosystems currently found in the IT space It’s an open standard it fosters strong relationships within the ecosystem

A typical SOA-based ecosystem would have the following participants

SOA Development

Tools

Service Requestors

Service Providers

SOA Management

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Service Requestors

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A key element in this ecosystem is the “business services platform” provided by major independent software vendors

This platform contains a basket of business services along with tools for other ecosystem partners to use those services

This platform could then serve as a keystone by creating high-value shareable assets The firm that first provides such an infrastructure of

services would become an important network hub

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Summary—SOA

When choosing an IT solution, consumers should give due importance to whether its architecture is based on SOA They should insist on a SOA-based system design

when engaging with a system integrator for their IT infrastructure

For their custom IT solutions, they should also consider granularity of Web services, version control, and service life-cycle management

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How Can I Leverage These Trends?—Cloud Computing

Enterprises currently use cloud services to improve service scalability and to deal with bursts in resource demands

However Service providers offer inflexible pricing, which restricts

consumers to offerings from a single provider at a time Many providers have proprietary interfaces to their services,

thus restricting the customer’s ability to swap one provider for another

For cloud computing to mature, services must follow standard interfaces

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How Can I Leverage These Trends?—Cloud Computing (cont’d)

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How Can I Leverage These Trends?—Cloud Computing (cont’d)

Business leaders from firms consuming IT solutions should seriously consider a cloud computing platform to meet their hardware requirements It provides an easy way to cater to demand surges and

helps with testing newly developed applications

Startups can leverage cloud computing as a bootstrapping strategy can reap the benefits of unlimited scalability in this

environment

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Summary—Cloud Computing

Leveraging cloud computing to centralize hardware and computing can make firms more efficient, cost-effective, and “sustainable”

However, IT management must be aware of the trade-off between greater efficiency due to centralization flexibility due to decentralization

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Summary—SaaS

SaaS it’s highly touted, but it isn’t a clear high scorer in all

aspects because it tends to remove players from the IT value

chain, it isn’t ecosystem friendly SaaS-based applications provide limited compatibility

with existing on-premise IT solutions

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Summary—SOA

SOA emerges as a strong trend when analyzed using the

framework It also fosters and enables strong relationships within

the ecosystem Organizations should take SOA very seriously and

adopt it if they haven’t already done so

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Summary—Cloud Computing

Cloud computing resembles SaaS in many ways it enables organizations to substitute large capital

expenditures on IT infrastructure with on-demand, small, operational expenditures to cloud providers

However, these providers still need to standardize their interfaces to build a market infrastructure that encourages the trading of services rendered in the cloud

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Conclusion

By using the diffusion of IT innovation framework, IT professionals can develop deep insights into upcoming trends and strategies for investing in them

The framework is similarly applicable to other trends and domains, and should become a key part of any professional’s toolbox

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IT Innovations: Evaluate, Strategize, and Invest