IT needs to think green to save greenbacks

Experts offer advice on the cost savings of green IT, outsourcing, protecting IP and making the most out of Web 2.0

Two of the industry's notable visionaries John Hagel and Eric Openshaw from Deloitte, joined us for a recent Network World chat where they discussed green IT, outsourcing, protecting IP and making the most out of Web 2.0.

Two of the industry's notable visionaries, John Hagel (top photo) and Eric Openshaw (bottom photo), both from Deloitte, joined us for a recent Network World chat where they discussed green IT, outsourcing, protecting intellectual property and making the most out of Web 2.0.

Moderator-Julie: We want to welcome all of you joining us for today's chat. Our guests today are John Hagel and Eric Openshaw. John is co-chairman of the Deloitte Center for Edge Innovation and author of the best selling series Net Gain, Net Worth, Out of the Box and The Only Sustainable Edge. Eric is principal with Deloitte's Technology, Media & Entertainment, and Telecommunications Group and a 30-year industry veteran (and former Oracle vice president).

Eric_Openshaw: Good Morning/Afternoon; I 'm looking forward to today's discussion.

John-Hagel: Hi! It's great to be here - looking forward to some interesting conversation.

TimDC: What is your opinion on the green IT initiatives -- are they just fluff or do they serve a true business purpose? Does an international standard such as ISO 14001 help the idea of green IT or muddy the waters?

Eric_Openshaw: Green IT is very much for real. We will see a lot evolve in the next two years, and likely standards will help at some point. We are placing our bets in this area. The amount of venture capital and size of investments is staggering. Literally everywhere our clients are asking about green IT and making plans.

ITgal: So, can you offer some examples of green IT initiatives that are worthwhile (short of yanking out all the gear I've got installed now)?

Eric_Openshaw: The most basic starts with the same place we were 20 years ago, which is how much paper is being consumed for printed output. From there many are examining what needs to powered all the time, and why. Significant amounts of data etc., are stored and forgotten, yet left on. Downsizing is possible.

John-Hagel: Another example would be adopting processes and software to increase utilization of existing servers and storage facilities rather than adding more capacity.

rpw188: The chat promo said that you can give advice on ways to save money that most IT people overlook. I feel like I've turned over every stone. What are some suggestions for cost cutting that I might not know about?

Eric_Openshaw: We believe the next frontier is examining power consumption broadly across the data center(s).

rpw188: Offshoring and outsourcing - is this trend still threatening a lot of U.S. jobs or are we starting to see companies bring jobs back in house?

John-Hagel: We're still at a relatively early stage in terms of offshoring and outsourcing but seeing a major transition in the motivation from near-term wage arbitrage to accessing focused, world-class talent. A lot of the horror stories leading to bringing jobs back in house come from companies that went out to find the lowest cost providers without focusing on service quality, reliability and potential to build capability more rapidly.

rpw188: How many more jobs will IT lose to offshoring? What will an IT department look like in say, 10 years?

John-Hagel: I’m not able to quantify job loss for you, but the question will be how much leading-edge capability gets developed offshore vs. here in the U.S. Two areas to highlight - many of the world-class manufacturing and call-center operations are now located offshore, so it stands to reason there will be an opportunity for offshore software development to get better faster by serving the needs of these operations. Also, mobile software is going to tend to migrate to where the leading-edge users are, and these are largely in Asian countries, so my guess is that many of the software development jobs focused on these application areas will migrate offshore.

Eric_Openshaw: I might add that a major unknown is the rate at which current "outsourcing" countries will consume their own capacity and at what rate wages will "inflate" in those countries to reach some parity with western economies.

Richard: What challenges does outsourcing bring in terms of intellectual property and how best to manage it?

John-Hagel: IP issues are certainly a significant concern any time outsourcing occurs. Companies need to do a better job of auditing the IP practices of their prospective outsourcing partners and working with them to strengthen these practices. On the other hand, if outsourcing is used to access best in class IT talent, it may be worth incurring some modest incremental risk in IP loss. The other approach that can be helpful here is to modularize IT platforms and only outsource the modules that are not as IP sensitive.

TimDC: Are enterprises taking social media seriously enough? What should IT do regarding so-called "Web 2.0" apps or services?

John-Hagel: From my perspective there is significant additional opportunity in this area - particularly by tying these technologies to real business needs and economic impact. Specifically, these technologies could be extremely powerful in addressing exception handling activities across major functions within the enterprise - something that today is very inefficient and not effectively supported by technology.

ITgal: How will the trend of Web 2.0, social networking models, like Facebook or Twitter affect the long-time software vendors? Will my kids' generation want to use any software that sits on servers and the PC?

John-Hagel: The next generation of employees will help drive adoption of modular, loosely coupled, lightweight web services within the enterprise. These are disruptive technologies that could provide an opportunity for a new generation of software vendors. It is a great example of the consumerization of enterprise IT - increasingly the consumer market will drive early adoption of technology that eventually bleeds into the enterprise.

JoeyB: Speaking of consumerization in the enterprise, any thoughts about Apple's latest iPhone announcements yesterday?

Eric_Openshaw: For Apple it was necessary to have any credible shot at emerging as a serious player in the enterprise market.

ITgal: Should I be helping my users with Web 2.0, or keeping them from using it? On the one hand, I'm told that its a big security risk. On the other, I'm told that users need to collaborate and I need to keep track of what they do for SoX. What are your thoughts on this?

John-Hagel: Certainly you need to pay attention to security risks but on the other hand the big opportunity for business impact from IT is to shift from automation to supporting collaboration. There's a wealth of technology emerging that can support collaboration, especially across enterprises, but its adoption within the enterprise is still sporadic. Often IT execs are hugely surprised when they do an audit of how much Web 2.0 tech is already in use within their enterprise. There's a big opportunity to simply make this use visible and start to identify patterns of adoption and business impact that can help focus future deployments of Web 2.0 tech.

JoeyB: What are your thoughts on IT functions moving to the "cloud" or "software as a service"? Is this going to be as rapid as some others, like Nick Carr, say it will happen?

John-Hagel: Certainly there will be a broad trend in this direction, driven by efforts to leverage economies of scale and scope in centralized processing and storage facilities. But, like most major transitions, this will likely take longer than most people expect as we try to sort through the more challenging institutional and policy issues like how to ensure security and privacy protection.

Eric_Openshaw: We know of one major software provider that is building one of the largest data centers ever in Utah and it's driven by SaS demands.

JoeyB: It seems like we in IT are always putting out the fires instead of driving innovation at the company. Any advice on moving towards becoming innovation leaders but still not letting the company "burn down"?

John-Hagel: It's very easy to get consumed by reacting to the latest events when the pace of change accelerates. IT leaders need to have the discipline to carve out time to develop a view of what the business might look like 5 - 10 years from now given the capabilities of new generations of technology. Then they can use this to engage senior business leaders to develop a shared view and prioritize near-term resource commitments to ensure that at least some funds are focused on supporting these longer-term innovation initiatives.

rpw188: What's your view of the big picture of how the data center will change? Some companies are building massive new data centers. Others are ripping those out and doing things more distributed. What's the next big thing for the "data center"?

Eric_Openshaw: We have seen this ebb and flow over the past 30 years at least. Candidly, a lot of the current thinking gets driven by, and I hate to keep bringing it up, power consumption. For our very largest clients we see them experiencing power grid max outs and their only alternative is to either move en mass or distribute.

AS: What role do you expect emerging economies to play in the next couple of years?

Eric_Openshaw: Emerging economies come in several veins. For those that are investing in higher education, they can become major players on the world scene. I believe that these economies that invest in their infrastructure, particularly education, will help buoy the global markets and soften the recession we are experiencing.

Bob: What can we learn about innovating from emerging economies?

John-Hagel: Entrepreneurial companies in Asia in particular are taking liabilities like limited IP protection and limited access to financing and pioneering very interesting approaches to distributed innovation that go well beyond the highly publicized examples like Innocentive here in the U.S. Specifically, they are orchestrating networks of thousands of business partners connected through long-term trust-based relationships and focusing these partners on challenging performance requirements and giving them the space to innovate and experiment. There's much more on these approaches on my blog www.edgeperspectives.typepad.com

AS: What do you think will be the state of the mergers and acquisitions industry in the current economic scenario - any trends/challenges to look out for?

John-Hagel: M&A activity is likely to increase on two fronts, assuming we enter into a prolonged economic slowdown. IT vendors are likely to pursue economies of scale and scope through acquisitions to address increasing cost pressures. Also, the VC community will increasingly look to acquisitions for exits from promising start-ups if the public equity markets are not more robust. On the other hand, I would also look to an increasing amount of divestiture activity as IT companies seek to drive more focus and shed poorly performing business units.

Eric_Openshaw: Looking at the larger players we can discern no slowdown at the present time in the acquisition of smaller niche offerings/players.

status1210: How do you see open source affecting the software market in the big picture? Will it eventually kill yester-year's pricing models based on seats, CPUs, etc.? Or will it grow up and start looking for more ways to monetize the code?

Eric_Openshaw: It already is changing the big picture and pricing models. Sun has turned several markets upside down here. The monetization is tricky as the old rule still applies, "no free lunch." We see players (like Sun) giving something away for free to sell something they have others might not.

ITgal: So for an enterprise, is open source software "worth it" ... are you really saving money? Or are you just spending it in different ways -- figuring out support, writing your own code, etc.?

Eric_Openshaw: That's the 64-million-dollar question. The concept of free is interesting on the front end, but it's the "long term support stream" that counts. Most IT leaders won't accept free unless there is a definition of long-term support which comes at varying degrees of price points. Internal vs. external support is the most obvious.

JoeyB: If you had an unlimited budget and no timeframe constraints (within reason), what would be the first big IT project that you'd tackle?

John-Hagel: Obviously the answer depends on the specific context and economics of each company and where the greatest economic leverage might be. As a "horizontal" answer for a change-the-world IT project, let me suggest investing in defining "outside-in" architectures that take a greenfield approach and start with the assumption that the task of an IT architecture is to coordinate activities across thousands of independent business entities with no single control point and extremely heterogeneous tech platforms. The key focus of this architecture would be to handle long-lived, loosely coupled asynchronous transactions with rich compensation/fallback mechanisms in case transactions fail to complete as originally intended.

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