Cloud Computing, ownership matters

CheckIn the past fifteen years, many internal IT departments of enterprises evolved from artisan organizations that only assembled and provided customized, tailor-made products, to hybrid craft and mass production organizations that provides custom as well as standard products. But nowadays these IT departments are confronted with external organizations that deliver standard services and products that can be easily adapted to the needs of the customer based on the concept of “mass customization”.

Instead of buying, owning, and managing all kinds of IT components by your self, nowadays the IT infrastructure is offered as a service by means of cloud computing.

There is a shift from “goods dominant logic” to a “service dominant logic”, were the focus is shifting away from tangibles and toward intangibles. This trend is supported by the use of virtualization technology for server, storage and network devices and also for applications.

The cloud computing offering of lower costs, shorter time to market, and on demand provisioning makes it very tempting for organizations to outsource their IT infrastructure and services.

But don’t we forget something? One of the most important things of information processing is that an organization has the right controls over the use of applications, data and infrastructure. Incomplete control can lead to all kinds of issues about business obligations and liabilities.

The control of these items is arranged by contracts, which is in fact an exchange of property rights. These property rights are a bit complicated because they have several dimensions:

  • The right of possession
  • The right of control
  • The right of exclusion (access rights)
  • The right of enjoyment (earn income from it)
  • The right of disposition (buying or selling)

The consequence of these different dimensions is that different parties are able to hold partitions of rights to particular elements of a resource. On top of this there is the issue of legislation. When we talk about ownership we have to be careful because in legal systems ownership is based on tangible/physical objects. And yes of course, we have legislation about intellectual property, trademarks, etc. but when it comes to virtualized objects it becomes murky. Also cloud computing is about delivering services (intangibles) not about goods (tangibles).

The transition from “goods dominant logic” to a “service dominant logic” is a mind shift where the “bundle of rights” or property ownership still matters.

Signing cloud computing deals is not only about money and provisioning it is also about control. When a cloud computing sourcing deal is taking place the partitions of property rights should be grouped into appropriate bundles to stay in control.

Data Center 2.0 – The Sustainable Data Center now available

The book ‘Data Center 2.0 – The Sustainable Data Center’ (ISBN 978-1499224689) is now available on Amazon.

Given the complexity of the ‘data center supply chain’, the number of stakeholders that are involved and the issues that are at stake, data centers are a fine example of a topic that looks like an IT architect topic but instead is an Enterprise architect topic.

Data centers are also an example of a “new” quality attribute that deserve much more attention of enterprise architects: sustainability.

A sustainable data center should be environmentally viable, economically equitable, and socially bearable. Creating sustainable data centers is not a technical problem but an economic problem to be solved.

Data Center 2.0: The Sustainable Data Center is an in-depth look into the steps needed to transform modern-day data centers into sustainable entities.

The book takes a conceptual approach on the subject of data centers and sustainability. It offers at least multiple views and aspects on sustainable data centers to allow readers to gain a better understanding and provoke thoughts on how to create sustainable data centers.

The book has endorsements of Paul-Francois Cattier Global Senior, Vice-President Data Center – Schneider Electric, Mark Thiele, President and Founder – Data Center Pulse, and John Post, Managing Director – Foundation  Green IT Amsterdam region.

To get an impression see the following slide deck.

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The Connection between Enterprise Architecture and Data Centers

What is the connection between enterprise architecture and something technical as data centers?

In one of his blogs Tom Graves, a well known enterprise architect, is discussing the needs of enterprise architect clients.

According to Tom: “What paying-folks in business and elsewhere want from enterprise-architecture and suchlike is very rarely about theory or anything of that kind – on frameworks, reference-models, schemas and so on. Nope. What they want from us is practical answers to practical business-questions – almost nothing more than that” (emphasis by Tom Graves).

I would add to this that enterprise architecture is all about decision support and gaining insight in certain organisational issues. Depending on the issues (and the main objective one wants to achieve) we can define different work domains with different goals and timelines as shown in the figure below.

EAWorkdomains

The enterprise architect is the one who should help an organization to operate as one, by working towards a common shared vision supported by a well orchestrated set of actions, is to have the capability to create, implement and maintain a coherent enterprise design also known as an enterprise architecture.

The promise of enterprise architecture is that designing an enterprise by applying systematic rational methods will produce an enterprise that is capable to pursues its purposes more effectively and efficiently.

Enabling organisations to make better-informed decisions.

One of the main activities (and one of the main differentiators with other architects) of the enterprise architect should be to help to create insight in the relation between developments in technology and society, and the organization and the impact it has on the strategic, tactical and operational work level of the organization.

Inform, communicate and facilitate are the verbs of the enterprise architect.

Walk the talk

Based on these ideas I wrote a book about data centers. Why?

The last few years the focus of data centers was mainly on IT efficiency. But currently there is much is more at stake than ordinary operational technicalities. Something that not everyone is aware of.

In large parts of the world, computers, Internet services, mobile communication, and cloud computing have become a part of our daily lives, professional and private. Information and communication technology has invaded our life and is recognized as a crucial enabler of economic and social activities across all sectors of our society. The opportunity of anytime, anywhere being connected to communicate and interact and to exchange data is changing the world.

So, during the last two decades, a digital information infrastructure has been created whose functioning is critical to our society, governmental, and business processes and services, which depend on computers. Data centers, buildings to house computer servers along with network and storage systems, are a crucial part of this critical digital infrastructure. They are the physical manifestation of the digital economy and the virtual and digital information infrastructure, were data is processed, stored, and transmitted.

Given the fact that we are living in a world with limited resources and the demand for digital infrastructure is growing exponentially, there will be limits that will be encountered. The limiting factor to future economic development is the availability and the functioning of natural capital. Therefore, we need a new and better industrial model.

Creating sustainable data centers is not a technical problem but an economic problem to be solved.

Therefore organisations have to rethink the “data center equation” of “people, planet, profit”.

With a Cradle-to-Cradle approach we can transform current production systems with linear material flows (make take waste) to production systems with circular materials flows (reuse, recycle and recover). In order to prevent resource depletion, disposal of valuable materials and harmless emissions.

A sustainable data center should be environmentally viable, economically equitable and socially bearable. The combination of service-dominant logic and cradle-to-cradle makes it possible to create a sustainability data center industry.

Data Center 2.0: The Sustainable Data Center is an in-depth look into the steps needed to transform modern-day data centers into sustainable entities (ISBN 978-1499224689).

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The as-a-Service model and Enterprise Architecture

Cloud Computing is an example for the X-as-a-Service delivery model. It is said that cloud computing is improving business agility because of the ability to rapidly and inexpensively provision technological infrastructure resources on a pay-per-use basis. So customers are urged not to buy and own hardware and software for themselves but instead they should make use of cloud computing services that are offered by the cloud computing providers.

In essence, this delivery model defies the need of physical ownership of hardware and software. What is the point of owning hardware and software? The only thing you want to do with it is using it at the time you need it. So it looks like that physical ownership is based on the need to have control on the availability of the functions offered by the software and hardware. The cloud computing proposition of on-demand delivery on a pay-per-use basis more or less removes the necessity to possess hardware and software.

Service approach

The first thing that comes to mind is the question: “is this XaaS wisdom, X-as-a-Service as preached by the cloud computing providers also used by them selves?”.

A datacenter is an assembly of software, computer servers, storage, networks and power and cooling/air handling components. With these means the cloud computing provider assembles its cloud computing services. But is there a need for these providers to own these components?

Can a datacenter and thus a cloud computing proposition be assembled by a set of software, computer servers, storage, networks and power and cooling/air handling services provided by third parties?

Go circular

The emphasis on services rather than goods is a central idea of the new industrial model, circular economy, that is now gradually taking shape.

Circular economy draws a sharp distinction between the consumption and the use of CircularEconomy materials. It is based on a ‘functional service’ model in which manufacturers retain the ownership of their products and, where possible, act as service providers—selling the use of products, not their one-way consumption as in the current industrial model of linear economy. In this new industrial model the goal of manufacturers is shifting; selling results rather than equipment, performance and satisfaction rather than products.

Examples

Cloud computing (information technology) is not the only example of X-as-a-Service.

An example of this new approach is Philips, the global leader in LED lighting systems who has recently closed a deal with the Washington Metropolitan Area Transit Authority (WMATA) to provide 25 car parks with a LED lighting service. Philips will monitor and maintain the lighting solution based on a lighting-as-a-service model (Pay-per-Lux model).

As expressed by Philips the implications from a business process perspective are profound. Out the window goes the traditional, linear approach to resource use: namely, extract it, use it and then dump it. Instead, management focus turns to principles such as re-manufacturing, refurbishment and reuse.

Another example is InterfaceFLOR. As part of their drive to increase the inherent level of sustainability of their business, they do not sell the carpet as a product, they lease it as a service. That is supply, install, maintain and replace the carpet.

Changing Supply Chains

In this circular economy model, all materials used in a production process falls into one of two categories: technical or biological nutrients.

Technical nutrients are strictly limited to non-toxic, non-harmful synthetic materials that have no negative effects on the natural environment. They can be used in closed continuous cycles without losing their integrity or quality. In this manner these materials can be used over and over again instead of being  waste as in the traditional linear economy process of Take-Make-Waste.

Biological Nutrients are organic materials that, once used, can be disposed of in any natural environment and decompose into the soil, without affecting the natural environment.

The two types of materials each follow their own recycling process.

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Enterprise Architecture

It is clear that we are moving away from the linear model. The European Commission published a document entitled Manifesto for a Resource Efficient Europe which explicitly stated that “In a world with growing pressures on resources and the environment, the EU has no choice but to go for the transition to a resource-efficient and ultimately regenerative circular economy.”

As expressed by Philips the implications from a business process perspective are profound. Why bothering on the life cycle management of all the components you need? Why the burden of managing the buying, installing, maintaining, replacing, decommissioning processes of these components?

This shift will change the current supply chains and will enforce the idea of an Service Oriented Business model. This also brings the question to the Enterprise Architect how the business proposition of his organisation can be assembled by a set of services provided by third parties, how to manage and control a business service oriented organisation, and also how his organisation can provide services instead of products to their customers. The classical question ”What makes a firm?” is back on the table again. Also the circular economy approach shed some new light on the topic of sourcing and new sourcing models will be needed.

We have to rethink the supply chain and business model of our organisation again.

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If you want to know more on circular economy download a free copy of the book SenSe & SuStainability from the Ellen Macarthur foundation or read the book of Braungart and McDonough ‘Cradle to Cradle: Remaking the way we make things.

Right Sourcing book is out now!

Our new book, Right Sourcing: Enabling Collaboration, is now available for ordering at the publishers websites: US: http://lnkd.in/AWVXt6 UK: http://lnkd.in/vFCWZB

Read more about the book and the project at http://sourcing-it.org

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Rien Dijkstra, John Gøtze and Pieter van der Ploug are the editors. The foreword is written by Chris Potts, and contributing authors are Mette Axél, Thierry de Baillon, Joor Baruah, Oscar Berg, Joost van Boeschoten, Freddy Brugmans, Dick van Dijk, Edwin van Dis, Erik Doernenburg, Tom Graves, Johan den Haan, Jack van Hoof, Wouter Meijers, Steef Peters, Micha Schimmel, Menno Weij, and Rob Zuijderhoudt.

Right Sourcing – Enabling Collaboration puts forward the proposal that the modern enterprise must fundamentally rethink its ‘sourcing equation’ to become or remain viable. By presenting perspectives on sourcing from 21 different contributors, the editors hope to enable and inspire readers to make better-informed decisions.

We received some nice endorsements:

“Sourcing is a business theme which gets more and more attention. But making the right decisions is not easy. Sourcing is a wicked problem. This book provides valuable insights and concepts that will help to improve decisions with regard to sourcing. I would recommend this book to anyone who wants to achieve right sourcing.”
Martin van den Berg
Enterprise Architect, Co-Founder of DYA and author of several books, including “Dynamic Enterprise Architecture: How to Make It Work”.

“Sourcing is becoming an increasingly complex task – one that requires fundamental changes in management thinking, radical new ways in which to communicate and deal with knowledge, and a totally new and different view of all the stakeholders. In this book leading thinkers in this space, do a great job in opening up the reader’s mind to possibilities for alternative solutions that integrate the human aspects in everything we do.”
François Gossieaux
Co-President Human 1.0 and author of “The Hyper-Social Organization”

“What most impressed me about this book is the scope of it’s coverage, and the level of academic rigor behind the analysis. The broad scope makes this relevant to senior executives concerned with strategy, operational executives accountable for results, and technologist on the ground. The academic rigor gives me confidence that the findings and recommendations are sound. This book will be the reference guide for anyone seriously involved in strategic sourcing.”
R. Lemuel Lasher
Global Chief Innovation Officer, CSC

“Thought provoking, occasionally frustrating and timely! As the theory of the firm is “tested” with evolving technology and globalization driving down transaction costs and enabling greater connectivity we’re presented with many different possibilities for business operating models. By exploring the perspectives of organization, economics, technology and people this book provides the reader with a compendium of theory, ideas and practical tips on “Right Sourcing” the business of IT and enabling different business models. The slightly idiosyncratic nature of a book with contributions from different authors only serves to engage the reader in the discussion. I hope the editors find a way to continue this discussion beyond the book!”
Adrian Apthorp
Head of Enterprise Architecture, DHL Express Europe

“The pursuit of sustainable development is one of the greatest challenges of our time. For this to succeed we must transform our current linear economy to a circular one. This calls for better coordination and collaboration between all players in product chains. Right-sourcing people, products and services is becoming an increasingly important topic therefore. This book provides the reader valuable insights and food for thought on right sourcing and collaboration.”
Prof. Dr. H.H.F. Wijffels
Utrecht Sustainability Institute (USI), University of Utrecht, The Netherlands

Right Sourcing

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Some time ago, together with John Gøtze and Pieter van der Ploeg, I started a new book project: The Sourcing Initiative.

Given the complexity of modern organizations and the dependencies between the organization and its customers, employees, partners and suppliers, sourcing activities can be quite an endeavour. Without fully understanding the strategic, tactical and operational consequences, sourcing can also be a risky business and decisions can have serious repercussions.

Our proposition is that the modern enterprise must fundamentally rethink its ‘sourcing equation’ in order to become or remain viable. When the enterprise solves its sourcing equation, it has achieved what we call Right Sourcing. Right sourcing has great potential to help organizations to optimize the use of resources and to eliminate or reduce wastes of capital, human labour and energy. It also has the potential to create adaptive organizations that stimulate, enable and improve collaboration for the mutual benefit of all of the parties involved.

To further explore the idea of right sourcing, we invited a variety of experts to write contributions for this book. We were interested in finding ways to improve the sourcing strategy and decision making. We also wanted to explore the parameters and circumstances that influence the success of right sourcing and make the dependencies with respect to people, organization, technology and economics visible and explicit and to make better informed decisions possible.

Editors Rien Dijkstra, John Gøtze and Pieter van der Ploeg are proud to present the forthcoming book, Right Sourcing: Enabling Collaboration, a collective effort from a number of experienced contributors from 7 countries.

Read more on the book’s website.

Reference:
Dijkstra, R., Gøtze, J., Ploeg, P.v.d. (eds.) (2013) Right Sourcing: Enabling Collaboration. AuthorHouse.