August 5, 2015

Beyond the Fringe: Clouds, SaaS, and Mobile Internet

CIO Strategy Exchange, New York, 2010

Member Realities
As we interviewed both CIOSE members and cloud/SaaS providers, reality dictated that we consider all the various issues swirling around enterprise usage of SaaS and clouds – rather than just focus on clouds for collaboration. And we remained mindful thatInformationWeek’s dark cloud edition reported a survey in which over half of 360 “business technology professionals” expressed no interest in utilizing clouds even in a difficult economy – or ever!

Our results were more positive. Despite all the caveats about security, reliability and location, a surprising number of CIOSE members have begun the well-considered, wholly prudent, projects described below. We’ll start with SaaS, examining the CIOSE members’ expectations as well as the results they achieved. After that, we’ll sail into the clouds with a side excursion into cloud-based social networking. [REDACTED] and [REDACTED] provide especially imaginative initiatives to close the chapter.

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SaaS is carrying the mail at [REDACTED]. Outlook supported by Azure (the Microsoft cloud) will displace Notes for email, calendars and Sharepoint. The SaaS approach will provide more functionality at slightly less cost than Notes (which had been outsourced to EDS). Azure security and data ownership was carefully examined in advance, and the IT team found nothing technically to preclude a favorable decision. Change management, conversion of historical emails, and policy setting remains the responsibility of [REDACTED] internal staff. “The transition was smooth and the service rock solid. Of course, organizational learning is continuous,” notes the CIO. How does he assess the risks? “In the end, Microsoft’s brand is on the line; a security breach would damage its reputation more than ours.”

SaaS-based inventory, labor scheduling, and time reporting applications will soon be offered to many of the restaurateur’s 14,000 franchisees and company-owned sites. The advantages are compelling, beginning with a modus operandi more suited to the company’s philosophic stricture against “upselling” franchisees anything beyond basic rent for real estate and service fees for the brand. So franchisees will soon acquire IT services directly from the SaaS provider rather than having servers and software delivered by Corporate. Another important advantage is the new vendor’s inherent ability to update software for all locations simultaneously and without any intervention (or mistakes) by restaurant employees. “The best back office is no back office,” opines our CIOSE member. Bravo! And the architecture of the new offering also gives Corporate greater flexibility. So when franchises are bought or sold, the decoupling of IT systems won’t involve the (sometimes messy) unraveling that in-house systems can entail.

Security and data ownership aren’t sources of concern, partly because [REDACTED] is the small SaaS supplier’s largest customer. So the vendor is willingly adhering to [REDACTED]-imposed tenancy requirements – even if it eventually wins a contract with another restaurant chain.

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A SaaS system linking [REDACTED] 1,800 retail locations to its major suppliers has become the backbone for inventory planning, forecasting, replenishment and collaboration. Stocking plans for each [REDACTED] store are updated on the SaaS system in near real time. Then the system gives suppliers access to these plans, so they can advise [REDACTED] buyers of their upcoming promotions and/or react to the early results of an existing promotion. An additional benefit to suppliers is the dashboards loaded with critical sales and product movement data, aggregated by category. Of course the SaaS system also prevents any supplier from accessing another’s detailed figures.

For a collaborative application with both internal and many external participants, the SaaS model offers the enormous advantage of neutrality over any system developed internally at [REDACTED]. Development, interfaces and data flows are accepted because they are independently created and maintained outside the retailer’s firewall. Without that assurance, the most important suppliers (like large consumer package goods companies) would have been less unlikely to cooperate or at least have raised strenuous objections.

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Two top SaaS providers are piloting human resources and sales force automation applications at [REDACTED]. Workday will support HR in emerging countries; Salesforce.com will be used by sales reps to report their visits to hospitals, hotels and professional organizations in the United States. Among the CIO’s reasons for this approach are:

  • Lower cost: The initial investment to implement pay-per-user Workday applications in smaller locations was much lower than for SAP. The CIO estimates just $10,000 to start up Workday in Vietnam or Russia vs $250,000 to install the SAP human resource module. The first locations will be Ecuador and Thailand, and then the rollout will move further into the developing world. If successful, Workday could eventually even displace SAP’s human resource modules in Europe and North America.
  • Faster availability: Before the Salesforce pilot, the company had been planning a major extension to its CRM system. But the relevant SAP features won’t be available for several years, given the vendor’s typical pace of development and the complex interrelationships among software modules. “The wait was simply unacceptable” while the capabilities of the less weighty and newer Salesforce.com perfectly fit [REDACTED] out-year requirements.
  • Smoother Upgrades: SAP upgrades on each and every server in a business location would inevitably cause far greater disruption than a one-time upgrade centrally implemented by a SaaS vendor.

Moving on, we ask what to worry about? And examine the questions typically raised by CIOSE members about SaaS applications. Is integration with core ERP systems a horrendous task? Are there substantial security vulnerabilities? And is SaaS functionality too unaccommodating of customization to serve most major corporations? Scripts vary, of course, but the answers depend largely on the choice of tasks being transferred to a SaaS provider.

  • Integration with major ERP systems has become less burdensome and even fairly routine, after being achieved by many enterprises. (It’s a happy improvement in recent years.) But again, that conclusion depends on the specific task. At [REDACTED], Salesforce.com will simply track sales calls on customers and prospects; actual orders, shipments, and financial transactions won’t be affected. Salesforce won’t touch the systems by which this paper products supplier replenishes inventories at large retailers for a major share of its total revenues. And Salesforce won’t be implemented in international markets where field reps are already using smart phones to replenish store inventories. Nor will it displace the website where hospitals, hotels and professional organizations enter replenishment orders and track shipments today.
  • Security isn’t a source of apprehension – at least not for HR and sales call reporting. “After a thorough security review, our people felt more comfortable than I’d expected.” But creating a single sign-on between the two SaaS systems and every other application in the company could still require lots of subsurface churn.
  • Customization is more practical with recent releases of Salesforce.com than in earlier versions.

Mobilizing the Permanent Economy

Now we’ll turn from industry forecasts to enterprise experience. CIOSE companies are beginning to deploy smart phone applications for their employees and/or their customers. Because these are such intuitive and inexpensive input devices, they are often the platform of choice in emerging countries. Closer to home, iPhones will soon sport business intelligence “executive dashboards.”

As a warm up, let’s consider the threat to corporate security posed by a proliferation of smart phones attempting access to corporate data. [REDACTED] has responded by ranking employee smart phones into multiple tiers. Armoured Blackberries with special security, encryption, VPN, and GM-designed applications have access to most company files. But iPhones (and similar devices) are limited to browser access for email, calendaring and limited company files. On another front, the auto company’s marketeers are writing their own iPhone applications and games for consumers.

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Smart phones record shelf inventory in scattered mom-and-pop stores all over Latin America. At [REDACTED], after field reps upload store data, the results are displayed to decision-makers via a snappy Google-map-like interface. Red dots over a store location warn of low inventory. With this information, the company responds to stock-outs and shortages in 24 hours (previously a week) and is gaining market share. “Plus the phones are a really affordable technology platform,” adds the CIO. Little wonder this mobile application will soon be extended to other geographies.

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Mobile devices “can change the way people work, and in a very positive way,” explains the [REDACTED] CIO. But they’re ineffective when every bit of mail received by the office PC is simply forwarded to the smaller gadget as well. That won’t draw the store manager away from the back office PC to the sales floor. It’s just another distraction. So instead, smart phone email is filtered through a “human gatekeeper” who forwards only time-sensitive management directives: “Recall the following product and report back the amount removed from inventory,” for example. All the rest remains available on the office PC for later access.

Smart phones are also spurring produce buyers to alter their purchasing routines. In the past, they’d check produce quality at a farm and, upon return to their offices, execute a “blind order” for whatever quantities were usually ordered. Smart phones could soon provide current information on store inventory and provide alternate sources for the produce while the buyer is still in the field. Clearly, that availability can really improve buyer behavior.

Reformatting the business intelligence downloaded to smart phones from corporate servers is critical to user productivity. Otherwise, mobile “business intelligence” degrades into a blob of indecipherable specks. But help is on the way.
See the next page!