Figure 1. Twitter Stream Graph where the subject includes "Toyota" (Image Provided by Neoformix

Most companies are still struggling to deploy VoIP, IP Contact Centers, and Multi-Channel technologies to create a more customer-centric service experience. Meanwhile, Social Media (e.g. Twitter, Facebook, Blogs, YouTube, etc.) is quickly “moving the cheese” again. Executives concerned about customer loyalty find themselves facing a torrent of unsolicited customer input from the web.

The cascading impact of one consumer’s web input feeding another, compounded by the shear volume of data that can be generated by the viral connections of social networks has put the reins of brand management in the hands of consumers on the web. Where even ten-years ago word-of-mouth gave companies at least days to mitigate customer service issues, today hours are an eternity.

The recent customer service and brand debacle at Toyota is an albeit out-of-control, but useful case to examine. Figure 1, is  a “stream graph” created by a technology from Neoformix of 1000 twitter messages that included the topic “Toyota” on Feb 5, 2010 at approximately 4:00 to 5:00PM EST. The Y-axis represents the number of messages and the X-axis represents time in 5 minute increments. Each band of color represents a different sub-topic (I suggest clicking on the picture to expand it and the link to play with it). The graph shows the volume and tenor of the discussion on Twitter that afternoon raging albeit out of control like a wildfire. Every Toyota owner who ever had their foot slip off the brake and onto the gas pedal is blogging, twittering, and video posting about how they were nearly killed by a faulty gas pedal assembly.

While the Toyota incident maybe a tsunami, smaller but nonetheless important consumer input is winging its way across the SocialSphere influencing other consumers and creating shifts in consumer loyalty for all types of product and service companies. In the call center world of just yesterday, Post-Call Surveys by voice, IVR, or web have been the traditional measurement to gauge consumer sentiment about the customer care process for at least 15 years.  Polling results were rarely published unless the story they told was nothing short of phenomenal and then only anecdotal. Poor results and trends, are reviewed behind close doors, and in complete secrecy.

Social Media has completely turned that world, upside-down. Today, consumers (and God forbid call center agents) have a self-directed and additively simple way to make their opinions a public broadcast to millions. With the average Twitter user gaining 5 to 25 new followers everyday, the viral impact of good or bad consumer sentiments ripple quickly across millions world-wide within minutes. Customer care departments live in fear today of a clandestine recordings forever chronicling bad customer service experience, on public forums instead of controlled corporate websites.

A few examples from Twitter on Friday afternoon between 3 and 4pm:

• Lauren writes: “I have been on hold with [national office supply chain's] call center for 15 minutes. Unacceptable. And their store here won’t answer their phone.”
• Manuel a call center agent writes: “If yall work or have worked in a call center yall know how thankful we are for HOLD. lmao I’m sick a u can I place u on hold?? POW!!”
• Rachel writes: “On hold with [Large Bank] for over 20 mins now. They said it would be a “short” delay b/c of storms in their call center area.”
• Jamie writes: “i’m a horrible person for yelling at the poor indian guy at the [Large Bank] call center trying to sell me credit monitoring during card activation
• Rachel another call center agent writes: “i work at a call center temporarily. its not to bad but sometime i just want to slap a bitch through the phone!!”
• Last, but not least there is Mark who took the time to record a 10 minute video (like a news story) about how  [large credit card company] would not help him solve his identity theft problem.

All of these gems were generated in about 30 minutes, and are the tip of the iceberg. These messages and thousands like them are influencing millions of current and potential customers everyday. Nielsen surveyed 25,000 online consumers worldwide, and their analysis of social networks indicated, “Peer recommendation is the most trusted channel, trusted ‘completely’ or ’somewhat’ by 9 out of 10 respondents worldwide.”

Now that we have determined that the sky is falling. What should Customer Care executives be doing? While the future may bring complete integration of social media and customer information systems, the path today has to be more practical. Unfortunately, it will create another silo of information and customer service processes.

The first step is to develop the goals and objectives of a Social Media Directorate within the Customer Care organization. Different than their Marketing brethren, this unit will be focused on the post-sale and up-sale world of customer care. While the goal is similar the tactics are different. Marketing groups are generally trying to generate an image of the brand for new customers that resonates with their goals as consumers, while the customer care unit is trying to maintain or improve customer loyalty. The goals will fall into the responsibility of four teams: SWOT, Crisis Management, Redirection, and Brand Support and Improvement.

• SWOT Team – SWOT (i.e. Strengths, Weaknesses, Opportunities, and Threats) is an Intelligence Unit within the Directorate. As it sounds the objective here is to monitor the social media world for consumer sentiment about the company or competitors and to feed that information in the form of daily and weekly reports to an executive steering committee that can quickly react.
• Crisis Management Team - More of a process than a team, a single manager may be given the role of pulling together a crisis management team when a problem erupts. This manager will have the role of organizing a series of activities in reaction to a crisis utilizing each of the other groups, as well as liaising with the rest of the Customer Care organization.
• Redirection Team - This organization will be focused on real time monitoring of social media feeds (in conjunction with the SWOT Team) looking specifically for prospective, new, or existing customers. When they find them they quickly move them off social media and into a special handling queue where there issue can be resolved. As much as possible these “rescues” need to be carefully documented to help create changes in policy or process in the rest of customer care. Generally these are problems that are slipping through the cracks. Jumping on these issues is critical to the Social Media Directorates mission.
• Brand Support and Improvement Team – Where the Redirection team is involved in reacting to problems, the BSI Team is focused on aggressively improving and maintaining the image. This type of function should be closely aligned and integrated into the Marketing strategy, but represents a grass roots approach to changing consumer sentiment by finding new or existing customers that can be community influencers and then enlisting there help (or paying them) to support the effort by moderating social networking communities, or creating an brand image based on their personal experiences.  The BSI team is focused on hammering through Marketing and Advertising’s plan by reinforcing the brand image within the ordering, fulfillment, delivery, installation, and support processes. While this has been the purview of marketing in the past, this is a critical customer care function in the post-Social Media world.

These represent the major functional  areas of a practical Social Media Directorate. In addition to this activity CRM/CIS managers need to begin to develop methods of capturing the Social Media handles of customers so that information can be cross referenced, and eventually these capabilities can be integrated within the Customer Care operation.

Ed Fullman
Partner, Adam Smith Consulting
ed.fullman@adamsmithconsulting.com
www.adamsmithconsulting.com

There maybe examples of a

Strong strategies are developed from the top of the organization down, versus from the bottom up. In the past 15 years I have watched as process improvement approaches have driven bottoms-up strategy development. I have seen many instances where executives within an organization typically are asked to build strategies only for the next level up in the organization. The goal is to create a solution which can be delivered within existing operational budgets (the next level up in the organization) and do not require consensus with other operational groups.

A Strong strategy typically involves more than just one goal, for instance sales, revenue, and net income. Not just cost improvements. When a company engages in cost improvement strategies at the operational level to meet a budgetary target they typically end-up with weak strategies that can leave a negative impact on the whole organization. For example, a company jumps into offshoring in order to decrease the labor cost per hour for their operations, but they take offshore processes that have not been transformed and optimized. As a result, it is a new mess for less, over-achieving on cost reduction and creating bonuses for operational management, but sales and revenues suffer because customer loyalty is negatively impacted.

Strong strategy finds its grace in a balance of goals not in brevity or simplicity. Balance requires investigation of multiple scenarios and a thoughtful decision-making process. In the end a Strong strategy is one that is adaptable, because the organization knows exactly why it chose it, and for what reasons it will have to change in order to meet changing objectives.

Ed Fullman
Partner, Adam Smith Consulting
ed.fullman@adamsmithconsulting.com

Outsourcing has been with us since the beginning of time, and offshoring although a new term has been with us since sailing ships began to move commerce. I don’t think either solution is going away anytime soon nor should it. Offshoring is a basic commercial transaction, and while the impact of offshoring on domestic unemployment may not be positive, you can’t blame offshoring for delivering more cost effective labor rates than domestic labor.

However, offshoring without a clear strategy can lead organizations to mixed results and potentially great harm. Labor arbitrage is always a fleeting value proposition, because it is completely based on the temporary imbalance of two labor-markets. It is the nature of labor arbitrage that the act of investing in a depressed labor-market causes those labor-related costs to rise as the oversupply of labor is exhausted. As oversupply is exhausted, attrition increases as new jobs reap higher pay than older jobs. The combination of increasing salaries, increased labor-related costs, rising currency exchange rates, and increased attrition quickly exhausts what Adam Smith called the, “Absolute Advantage” in 1776.

In my experience offshoring is a strategy often relied upon when the business strategy for the category is overly simplistic and focused only on cost reduction. A GOOD business strategy is rarely so monochromatic, and requires a more comprehensive set of goals and objectives including sales, revenue, net income as well as cost. When the strategy is broader, a more holistic sourcing strategy can be created delivering a result that is built upon consensus from more than one part of the organization. When a business process is outsourced, the profit of the outsourcer is based almost entirely on the ability to standardize the service and carefully control and optimize the use of labor to operate within a shared operation. Taking a business process offshore is even more complex where the added complexities of naturalization and accent neutralization are required for every new recruit.

Offshoring under these conditions can render business processes very fragile, and difficult to adapt and transform over time. The biggest challenge that offshore category sourcing faces over the long-term is the impact of this fragility on customer satisfaction, quality, and eventually customer-loyalty which translates into an impact on sales, revenues and net income. When a more comprehensive business strategy for the category includes a transformation program, the results are more consistent with the objectives of the overall business and most importantly can be sustained regardless of the changes in labor markets.

By reducing the labor requirements in general, the strategic importance of a lower labor rate in an offshore market can be reduced. When the labor requirements are reduced to the most important process steps, labor can be sourced more directly based on value, and where domestic labor produces a more valuable outcome it can be justified.

The bottom-line is that we need transformation to drive strategic sourcing especially in categories considering offshoring.

Ed Fullman Partner, Adam Smith Consulting
ed.fullman@adamsmithconsulting.com
www.adamsmithconsulting.com

Very generally, Genesys definitely wins the battle when integration of multiple hardware companies is the objective. Genesys will work as well whether bonding a group of Avaya 4800s or Cisco Call Managers. This makes Genesys a potentially cheaper solution in cases when the operation has a lot of diverse equipment that is only partially depreciated, and also delivers ROI faster. However, this also implies a significant level of integration risk and integration skill. In a complex Genesys environment with multiple hardware vendors the organization will need access to experienced Genesys, Avaya, and Cisco technical resources both for the launch as well as operation. This implies a more expensive and complex operation, but it may be the only solution for some companies. Again, this isn’t a hard and fast rule and requires significant analysis. This probably also means that there will be one of these or another vendors voice gateways, IVRs, etc. A global operation with multiple vendor’s PBX platforms at the premise level may create many integration complexities that limit benefits.

In contrast, Cisco is a hardware company, and while Cisco can operate as a software umbrella over Avaya and Cisco platforms, Cisco excels when an organization has a large call center operation with a majority of hardware that is end of life. Additionally the Cisco Unified Communication and Unified Contact Center solutions are built upon the same basic building blocks, and as a result there are significant economies of scale created when the focus is initially IP Telephony with Cisco Unified Communication focused on the back-office and then transitions into a front-office, call center replacement with Unified Contact Center. This approach creates an environment where the client’s intentions can be translated into routing logic and deliver a client to any IP Phone inside the network or outside the network.

Clearly these are two very high level scenarios, and client’s often find themselves in the gray zone somewhere between these two somewhat opposite situations. What’s hidden inside this technical analysis of these two scenarios, is that they are essentially devoid of business requirements. If the company with a lot of under-depreciated Avaya and Cisco PBXs was facing standing up a new customer service function with highly complex routing requirements, they maybe able to create an accretive business case for a full Cisco deployment. Likewise a company with hardware that was end-of-life, but with relatively simple inside-sales and support requirements might find that a full Cisco solution is overkill.

The best advice is to begin with a comprehensive business requirement analysis with the objective of building a requirement plan and a high-level benefit analysis. From here a complete As-Is technology inventory, and a detailed analysis of technology options will enable management to make an informed decision. Bottom-line, don’t start with a technology analysis, it could inadvertently lead in the wrong direction.

• US executives have extreme pressure to increase quarterly profits and offshoring, and specifically offshore labor arbitrage (e.g. taking advantage of lower cost offshore workers) is a fast way to decrease costs with out committing significant capital.
• Corporations get more gratification from Wall Street for cost improvement without capital investment because Wall Street’s time horizon is short, and they don’t like waiting for benefits to catch up with depreciation.
• The constraints (e.g. infrastructure, communication, transport) that limited an absolute advantage of one labor market over another in the past have been largely eliminated, making it easier to launch an offshore program.
• Sarbanes Oxley has driven the commitment and control of capital to very senior levels in corporations and cost cutting programs like offshoring that involve little or less capital are an easier path to approval.

The value of offshoring is most often represented by a labor arbitrage benefit (e.g. lowered costs associated with workers), which is reaped as soon as the offshore operation can be established, but then diminishes over time as labor costs rise. The downside of offshoring is that often business processes become harder to improve and evolve once they are delivered offshore making continued innovation difficult and expensive to deliver. This slowdown in innovation can erode Customer Loyalty making product and service upgrades harder to sell, increasing service cancellations, and creating opportunities for new market entrants to outpace market incumbents.

Offshoring may appear less attractive to businesses after considering a transformative strategy.  Innovation and transformation diminish the advantage of lower cost offshore labor by yielding substantially more productive, transformed onshore processes that deliver the same or more output with less labor. However, the key to transformative strategy is broadening the focus of the analysis beyond a labor cost analysis, to a focus on revenues and net income. Focusing strategies completely on cost improvement, especially at the operating unit level, leads quickly to ideas like offshoring where the benefit is relatively fast, and uses less capital resources. Broadening the analysis to an impact on revenues leads to conclusions that include the impact to Customer Loyalty and Quality. A slight increase in revenues without a similar increase in cost can eliminate the advantage of offshore labor. When businesses consider the potential offshore impact to sales and revenue, the quick benefits of offshoring may seem less attractive. Transformative strategy by its nature engages leaders across the business in the same analysis and strategy resulting in a more comprehensive idea that blends the needs of all units into a single plan, and builds consensus and commitment.

As an economic strategy, transformative strategy can play a role in stemming the tide of continued job loss due to offshoring. While businesses can take on some of this burden to create jobs onshore instead of offshore with transformative strategy, the US Government can also share the burden by by enacting tax changes that stimulate capital formation to provide incentives for corporations to invest in transformational programs. Similar actions were taken by President Kennedy in 1962 and President Reagan in 1982, although this time around the goal of any tax changes should specifically target the early years of a transformation program before a return on investment has been reaped from increased productivity and performance. A tax credit targeted at the initial years of a transformation program could substantially diminish the advantage of offshoring, stimulating more capital investment in transformation and making offshoring less attractive.

Ed Fullman, Managing Partner
Adam Smith Consulting
www.adamsmithconsulting.com

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Our team of experts have experience working for the largest corporations and consulting firms in a variety of functional disciplines. The link to the left provides a PDF containing our 2009-2010 Services Overview.

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Adam Smith Consulting delivers capabilities to help companies establish a stronger foundation for organic growth, by revitalizing their customer-facing processes and technologies. This presentation describes our approach to helping our customers strategize, source, and manage the journey towards an optimized front-office.

First, the improvement of the dexterity of the workmen, necessarily increases the quantity of the work he can perform; and the division of labour, by reducing every man’s business to some one simple operation, and by making this operation the sole employment of his life, necessarily increases very much the dexterity of the workman.

Secondly, the advantage which is gained by saving the time commonly lost in passing from one sort of work to another, is much greater than we should at first view be apt to imagine it. It is impossible to pass very quickly from one kind of work to another, that is carried on in a different place, and with quite different tools.

Thirdly, and lastly, everybody must be sensible how much labour is facilitated and abridged by the application of proper machinery. It is unnecessary to give any example. I shall only observe, therefore, that the invention of all those machines by which labour is so much facilitated and abridged, seems to have been originally owing to the division of labour.

There it is, a 233 year-old recipe for a business case. You don’t have to fix what isn’t broken. Smith describes the major levers in our business case:

1. Business Process Output (e.g. calls served, cases served, AHT, FCR, etc.)
2. Labor Output and Cost (e.g. calls and cases per agent per day/hour/shift, management pyramid, cost per hour, cost per minute, utilization, etc.)
3. Technology Output and Cost (e.g. capacity of various components expressed in calls, agents, etc.; as well as cost per relevant component for both as-is and to-be architecture)
4. Sales, Revenue and Net Income (e.g. as-is and to-be plan based on new capabilities)

The objective of the business case is to create a modeler that simulates the impact of the transformation program on two areas:

1. The reduction in Total Cost of Ownership (TCO) by new technology and improved customer loyalty
2. The increase in Sales, Revenue, and Net Income driven by new technology and improved customer loyalty.

Many strategists are compelled to stop the business case after step 1 above, but it is step 2 (the impact on Sales, Revenue, and Net Income) which is the key for modeling a major technology overhaul such as shifting call center infrastructure to Cisco UCC. Business leaders fall in love with Cisco UCC not because it is cheaper to operate or buy, but because of the promise it brings to transforming operations and improving customer loyalty. Characterizing and building expectations around this outcome is key to a simple and elegant business case, and will drive decision-making very quickly.

The business case itself needs to be developed using a spreadsheet in such a way that the main levers are represented as variable input fields with the spreadsheet. The challenge with these spreadsheets is that the various sub levels of each input are very interdependent. This means that one area such as depreciation schedules becomes an output, but if it could be made longer (e.g. 5-years instead of 3-years) it actually drives decision-making and becomes an input. The problem here is that you can’t have it both ways without receiving the all-to-familiar “Circular Reference” error in Microsoft Excel where the spreadsheet stops working.

Therefore before you start coding spreadsheets and find yourself lost in the possible permutations, the first step is a preliminary strategy document. The purpose here is to gain some amount of consensus as to:

1. The breadth of the analysis?
   • Usually the key here is how many front-office and back-office seats are going to be included?
     • The larger the number of seats and the sooner they will convert to the new technology the better the ROI especially with IP-based solutions like Cisco UCC which has a larger foundational base of cost than tradition premise based TDM call center solutions
   • Is growth and the impact on revenues going to be included?
     • If you have read some of my other posts you will find that this is a key point with me. Moving from an old depreciated TDM solution to a shiny new IP-based solution is going to require capital, as well as new expenses. Including growth and the impact on revenue as well as the associated net income after the investment makes the entire plan go down easier.
2. How much capital is available?
   • What is the process for approval?
     • Who really needs to be involved for approval, and what are there key objectives? This is where many plans fall apart, failing to satisfy the top executive in the decision-making chain, instead serving the needs of a lesser executive. It is better to have a sit down with the C-level that will make the final decision before even starting to write anything.
   • What is amount of capital potentially available?
     • This comes from meeting with the C-Level executives, but the key point here is don’t walk away with the executive saying, “I’ll get you whatever money you need if you can make it accretive.” That is another way to quickly fall into an abyss where you make assumptions that are incorrect at the beginning and waste precious time.  Get a clear view of how much cash is available maximum by quarter, and what the potential for change will be (e.g. probability factoring).
   • How will the new assets be depreciated? This is a challenging area for most treasurers and auditors, because the easy answer, “faster depreciation is better,” is not what you want to hear when you ask the question. IP-based call center infrastructure is very different structurally than older premise-based TDM PBX equipment. IP-based call center infrastructure like Cisco UCC is heavily centralized and very modular. Aside from the Gateways and CVPs the majority of the rest of the solution is platformed on simple Intel-based servers running Microsoft OS or Linux. The majority of the solution is software that is automatically updated and maintained under contract. Therefore, the opportunity is to get your auditor to divide up the solution into hardware and software, and depreciate the software much slower than the hardware. Essentially the software will be functional until Cisco finally retires the UCC software platform which won’t be in the next 5-years.
3. What other factors will drive the decision and the ROI?
   • Potential competitive market changes
   • Potential changes within the target customer market
   • Planned product or service marketing plan introductions
   • Current product lifecycles and demand

Using this information you can create a very high level estimate of potential impact to TCO and Revenue. From here you can gain consensus, and lock-down some of your variables possibly helping competing leaders in the business to understand the value of consolidating their efforts on the new platform.

The key is strategy, and the next leg of the effort is a detailed technical architecture and strategy. This will likely require rounds of analysis of potential architectures, and then deep analysis with the most promising solution. Then you can build a detailed business case that provides the ability to model various outcomes based on your C-Level analysis.

Adam Smith wrote about strategy saying,

Men are much more likely to discover easier and readier methods of attaining any object, when the whole attention of their minds is directed towards that single object, than when it is dissipated among a great variety of things.

It is critical that you get senior leadership attention and that the key decision-maker doesn’t become a customer of the strategy, but the owner. You should have a steering committee that includes all the key competing factions of the company, and you need the key decision-makers commitment to clear the road of obstacles along the journey to the final decision.

Ed Fullman, Partner
Adam Smith Consulting
www.adamsmithconsulting.com
ed.fullman@adamsmithconsulting.com

The majority of front-office operating cost is borne in call center agent labor cost, facilities, and administrative expense. Additionally front-office operations have a significant impact on the success of the organization and often either drives or impedes growth and profitability. As a result developing a business case for a front-office transformation involving a solution like Cisco’s UCC Enterprise product requires analysis of existing infrastructure costs, the new Cisco solution as well as the projecting the future transformation of the call center operation once the new contact center capabilities are available.

However, where strategies and their accompanying business cases often fall short in this arena is holistically considering the positive impact of a transformative technology like UCC on customer loyalty. The typical mistake is focusing only on cost and leaving out growth and the potential positive impact on sales and net income or the opposite outcome for doing nothing over an extended period. The typical challenge is that a holistic strategy requires top leadership to drive consensus across sales, marketing, customer care, and the supply-chain in order to gain long-term commitments (e.g. typically 5-years to coincide with depreciation of the investment) on improvements in customer loyalty.

When strategies for transforming customer loyalty bubble-up from the bottom of the organization rather than being driven down from the top leadership often departmental leaders attempt to use Infrastructure as a Service (IaaS) models such as British Telecom’s OneVoice Cisco UCC  solution or AT&T’s Avaya/Genesys solution to solve the problem without making a large capital investment. While this strategy often makes sense for small or mid-sized companies or departmental organizations it often has limited benefit for larger growing organizations.

Moving to IP-based technology creates opportunities for consolidating call center operations, optimizing utilization of agents, creating multi-channel contact centers operations, and deploying the latest constructs such as home-based agents. In the final analysis end customers benefit directly from these transformative strategies obtaining call center service that can be aligned closer to their intentions for calling.

Ed Fullman, Partner
Adam Smith Consulting
www.adamsmithconsulting.com

How real is “Cloud Computing” and how are large companies (>$1B revenues) adopting it? Which IT companies are most threatened by Cloud?

Cloud Computing in this case is Infrastructure as a Service (IaaS) referring to infrastructure delivered in a utility model. The utility model arises from the fee structure which is mainly based on usage billed monthly. However, it also accurately implies the standardization and the lack of customization possible in these models. IaaS can be a valuable solution for an organization when the business process and the IT required to run it has become commoditized that it no longer differentiates the organizations products or services.

The challenge with most IaaS models is that they are often designed to be loosely integrated and sometimes stand-alone versus integrated directly into the company’s enterprise. Many companies end-up in a situation where IaaS sounds good to the buying manager, but for many of the wrong reason.

In our post-SOX (Sarbanes Oxley) world committing large amounts of capital and determining how to appropriately depreciate it has become the purview of only the highest-level executives after complicated discussions with auditors and treasurers. When strategy and innovation is bubbled-up from the operation units versus being championed in a cross-unit strategy from the top of the organization, ideas like cloud-based solutions start to sound good mainly because they don’t require the typical structured decision-making and leadership approvals associated with capital intensive projects.

Project Managers are often faced with requirements to build business cases for technology replacement that can be delivered with little capital (usually small annual maintenance budgets) relying heavily on delivering the new capability within existing operational expense budgets. While this scenario has the appearance of being accretive, in reality it is a new solution procured without developing a proper strategy for expending capital making use of scenario where too much money is already being spent on an existing, out-of-date, and overly expensive solution.

Utilizing a utility model with small capital requirements relying mainly on existing expense budgets seems like an easy decision. However, the downside can be significant for the overall organization when a more strategic objective for IT is finally determined. IaaS providers typically make money by standardizing solutions and thereby constraining customization that might otherwise deliver transformational value or adaptability. IaaS pricing is designed to recover the capital-outlay that the provider incurs during the initiation of service, and as a result IaaS contractual models have substantial early termination penalties. When the cloud-based solution can’t be adequately integrated to deliver longer-term strategic objectives the organization can be often stuck with a new problem.

While the pitfalls of a cloud-based solution may be equivalent to those of a capital-intensive, internally-delivered solution that fails to deliver the planned result, the difference is that rather than having top leadership make a decision to deploy capital and make a thoughtful investment after developing a strategy, cloud-based offerings can lead a lower-level executive to make a similar decision without any strategic validation.

The bottom-line is that whether an IaaS or internally deployed solution is chosen it should occur after the development of a comprehensive strategy and business case. When an IT strategy effort takes a broad and holistic view leaders can be presented with options that are grounded not only in what is easy to approve, but also options that deliver maximum flexibility, adaptability, and optimization.

A holistic view often means building a strategy that goes beyond representing the positive impact on only operating costs from more efficient technology to understanding the impact of the new technology platform on growth, sales, revenues, and net income.

Dvorak’s other question pertains to what IT companies would be threatened by Cloud Computing model. Generally there are two types of target buyers for Cloud Computing: (1) departmental, (2) small-medium business. For IT companies that feel that this is an attractive market for their traditionally available technology solution, they will feel threatened by competitors that have a IaaS model. This could be any enterprise or specialized technology solution vendor.

Ed Fullman, Partner, Adam Smith Consulting
www.adamsmithconsulting.com
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