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Snapshot - A Survey of Cloud Computing Analytics and Usage

Wednesday, December 2nd, 2009

Taking the pulse of markets and their participants

By Mark P. Dangelo

www.Innovative-Relevance.com

 

As the end of this decade draws to a close, there has been great talk in the media about the sesquicentennial publishing anniversary of Darwin’s Origin of Species.  Some refer to the “animal spirits” that are contained in the dealers of Wall Street, the industry moguls, and the activists, who are trying to tame an uncooperative world.  However, just like Darwin projections and the science around evolution, a new “technical animal” called cloud computing is changing its genetic structure every day. 

One thing this is very different moving forward with the birth of cloud solutions, is that CIO’s and CTO’s will be measured by business metrics – rather than overhead metrics of cost management and infrastructure spending. 

Additionally, there are two key trends that are rapidly expanding regarding the usage of cloud computing resources and on-going viability – services and “all-in-one” offerings. 

From the survey feedback, the use of services appears to be a key component and concern for many businesses and IT professionals.  Who to trust?  Are they knowledgeable?  What cost and on-going commitment is required? 

Regarding the “all-in-one” offerings, companies are impressed with the idea of a “one-stop-shop,” but are reluctant to embrace an all-or-nothing solution that appears on the surface to be expensive with considerable lock-in periods.  However, with an increasing number of vendors all providing hardware, software and services in an end-to-end bundle, the challenge for purchasers will be evaluating each on their merits efficiently aligned with corporate needs.  Specifically, only purchase what is needed and not pay for unused or unnecessary options.

The survey was constructed to focus on seven distinct areas of interest:

·         Enterprise and Department Usage

·         Belief in Existing Analytics

·         Importance of Existing Data Sources

·         Importance of Existing Analytics

·         Cloud Computing Challenges

·         Cloud Computing Acceptance

·         Cloud Computing Preparedness

Enterprise and Department Usage

Survey results can often confirm what you have expected or in some occasions, produce insights that shed light on emerging trends or organizational beliefs.  This on-going survey was no exception.

When asked if quantitative measurements were important to the enterprise, nearly 60%[1] of the respondents said they were high to critical, yet not quite 50% said they were effective.

Conversely, only 21% of the respondents when asked the same questions about their departments or divisions, said that quantitative measurements were effective, but more than twice as many said that these same ineffective measurements were high to critically important (44%). 

The implications of these results suggest that internal process measurements were not meeting the needs of the local departments / divisions, even though the demand for measurements was moderately high.  Moreover, these same individuals surveyed believed that the enterprise had more effective analytics and that they were almost 150% more effective than their own.

Belief in Existing Analytics

While the respondents firmly indicated that the organization as a whole was better off than their departments or divisions, their belief in the value of their analytical approaches was strong (see Figure 1). 

A deficiency identified with the existing analytics was their ability to provide predictive intelligence – only 14% thought that what they were doing was of high or critical importance. 

The only other challenge potential was the use of analytics to support the delivery of strategic goals or the achievement of operational strategies – 30% identified these as low or NS (not significant). 

Importance of Existing Data Sources

The importance of existing data within the organization for the most part was what analytical specialists would expect.  First, the use of spreadsheets remained a valuable source of analytical intelligence (see Figure 2).  Moreover, point based application systems continued to be the master source for many data analysis and synthesis operations to support extraction of information into the spreadsheets.

This series of questions clearly points to potential conflicts with the use of information and the subsequent manipulation of information by desktop toolsets (and the security, logic, and integrity within them). 

The surprise factor was the 86% moderate to critical importance placed on non-internal or third party data sources for analytical decision.  Clearly, information integration, archiving, and transformation have become a primary need within business and IT departments.

Importance of Existing Analytics

Whereas, current analytics and data sources were given high marks, their importance for various decision making or operational performance were varied (see Figure 3). 

For example, 77% of respondents clearly indicated that analytics for on-going improvements or quality of delivery were of moderate to critical importance.  Yet, only 71% said that the existing data and sources were important for risk analysis and/or mitigation. 

Puzzling was that only 37% who identified analytics as important for revenue or profit improvements given that margins are always measured.  This suggests a disjointed view and potential misuse of analytics across the enterprise.  Meaning, while the departments and divisions focus on exposure and improvements, they failed to see the potential direct correlation to organizational profits.  Striking still was the lack of moderate importance (just 6%) assigned to analytics for regulatory compliance.  The results were very strong (68%) that identified analytics as important for regulatory compliance but a high percentage (25%) indicated that analytics were low or non-significant for meeting regulatory demands. 

Cloud Computing Challenges

While the source and uses of existing analytics yielded a few surprises from the expectations, the introduction of cloud computing and the data sources it generates created some clear challenges (see Figure 4). 

The biggest surprise was the indication by both business and IT professionals that the introduction of cloud computing materially changes the future role of IT – nearly 78%. 

Equally insightful was the 80% of respondents that said the usage of cloud computing increased the risks of meeting regulator needs and agency guidance.

As expected, respondents expected data integration challenges with cloud computing – 29% indicating high to critical issues. 

What was expected, but also telling, was the 42% who said they expected high to critical security issues.  However, equally telling was the 29% who said security challenges within cloud computing were low or non-significant. 

Cloud Computing Acceptance

While the respondents were concerned with the use of cloud computing and meeting regulatory compliance, 50% also felt that it was high to critical in meeting oversight and governance needs (see Figure 5). 

Moreover, 72% believe that cloud computing would be of moderate to critical significance to meet changing consumer and business functionality in the timeframes demanded by the markets.  The respondents also stated that ROI of cloud computing was a major factor in its adoption, but 56% indicated that cloud computing was non-significant or of moderate importance for consumers or customers.

Cloud Computing Preparedness

Finally, the most foreboding measurements regarding cloud computing arrived in the area of organizational preparedness (see Figure 6). 

In every category the ability to perform and deliver on the promises and requirements of cloud computing garnered very substantial non-significant or low ratings.  Many times, this single category gained 50% of the responses.

Regarding the ability to address security challenges, only 17% said that their organization rated high to critical capabilities.

The skills demanded for data integration across the layer of cloud applications received only 24% in the high to critical range.  This alone signified a clear challenge and opportunity surrounding skills, standardization, outsourcing, and correlation of growing data sources provisioned outside the traditional intranets.  

Yet, while there were concerns surrounding data integration abilities, the use and deployment of analytics using cloud computing data sources increased by 3% to 27%.  This margin is not significant but it may point to a greater belief that once the data is properly integrated, the ability to summarize, augment, and transform raw fields will be easier for analytical personnel. 

Finally, when asked a non-specific question on the general cloud computing skill sets internally available, 28% of the respondents believed that their organizations had the necessary high or critical abilities to effectively implement cloud computing – its data, analytics, and security.

Taken separately, each cloud computing skill category performed poorer than the aggregation. 

In Summary

The snapshot of this survey clearly points to a belief that internal analytics apart from cloud computing are established and reasonably trusted.   However, there were clear areas of opportunity regarding their usage and robustness.

Additionally, when cloud computing principles and challenges were introduced, there was a material reduction in the comfort level associated with this rapidly evolving set of integrated technologies.  The most important clearly pointed to data integration and security protection. 

[1] Note, for simplicity of presenting the survey findings in this forum, all numbers were rounded to the nearest integer.

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Peering Forward into the Next Decade

Tuesday, September 22nd, 2009

Seasons of Uncertainty Confronts all Aspects of Operations as We Enter 2010

By Mark P. Dangelo

www.Innovative-Relevance.com

Also published at the National Mortgage Bankers Association

What a rebound in markets and sentiments within a short 14 months – from Chicken Little (“…the sky is falling…”) to Mighty Mouse (“…here I come to save the day…”). Is the worse behind us, or yet to come in 2010?

It was just in July 2008, when the wheels started severely wobbling on the traditional finance and mortgage vehicles, and September 2008, when the axle came off causing a financial “pileup” not seen in nearly 80 years. Very recently, global and domestic central banking measures are being allowed to expire, or in some cases, wound down or withdrawn. Consumer beliefs in a rebound are bottoming out, and in some cases, moving positive once again.

The world is apparently reaching a new, constructive equilibrium, while undergoing a rebirth of social responsibility driven by worldwide wealth shifts – West to East. Sanity and risk-adjusted business practices have reached into all corners of finance and mortgage groups (FMG’s). This change has been not just domestically apparent, but globally, as evidenced by Libor inter-banking lending spreads, which have fallen back to 2007 basis point valuations. Last but not least, global commodity prices (e.g., oil, copper, steel) have stabilized, but they are at the mercy of “weed filled” economies, country agenda’s, and day-trade speculators.

Back in 2006, the Case-Shiller Housing Index reached its highest point with origination values exceeding $3 trillion, but since then, we’ve fallen nearly 40% across both indices. Moreover, the once heralded home ownership percentage has beaten a hasty retreat from over 72% nationally to just over 67% in just over two years.

Additionally, receiving widespread coverage last month was a prediction by Deutsche Bank that the worst may be yet to come – nearly 50% of homeowners will owe more than their homes are worth by 2011. Even more dire are increasing economic predictions of a very long and protracted recovery if not another recessionary dip (e.g., a “W” or double bottom).

Foreclosures are still at historic highs, and our own government very recently has predicted millions of additional foreclosures in 2010. Downward pricing pressures on homes are widespread as federal, state, and local governments supported by servicers try to “modify” the legacy of housing’s irrationality against a shell-shocked consumer. The commercial markets are foretelling an unpleasant nightmare yet to come, and per capita household debt is the highest in history – even after rebasing (not including the U.S. Federal deficit obligation of nearly $700,000 per household).

Nationally, it appears unemployment is going to break or hover near 10% for the foreseeable future, and the investment markets needed for lending might be ahead of the fiscal reality, which is still playing out. We’re happy and encouraged by the “news not being as bad as it has been.” We hope never to see this situation again in our lifetimes. Indeed, we are an optimistic lot.

Most recently, as government officials advertized a 17% return on $70 billion invested. I wonder if during the 2010 mid-term election year, if we will have a touted return on the other $2 to $4 trillion portfolioed in the Fed’s balance sheet and the multitude of Treasury programs?

Or, will it merely be a footnote on the $13 trillion in Federal debt (equaling current U.S. GDP and including $5.5 trillion in Fannie and Freddie guaranteed debt) already clogging the books, and the clouding judgment of foreign creditors? What will FHA add to the mix of woes in the coming years?

So, with trillions in capital equity still to be raised, but currently equaling the market value of all FMG’s (approximately $2 trillion USD), what can be done? Where should business and technology investment’s be made in a Western world still full of uncertainty, record deficits, and a falling dollar?

Are we peering into a West versus East recovery that will produce very, very different economies and consumers as we enter the next decade? Is the shine permanently off the housing apple — to be picked up by new entrants supported by new methods?

As we peer forward on a new decade, there are many stories yet to be written, and many roadmaps in need of navigating.

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The Six “C’s” of Generating Success

Tuesday, September 22nd, 2009

Success = Components + Collection + Consolidation + Cohesion + Capability + Conclusion

By Mark P. Dangelo

www.Innovative-Relevance.com

Also published at the National Mortgage Bankers Association

With all the media sound bites and dire messages, sometimes you just want to hide in your cubicle and do nothing new. It is understandable. However, pragmatically we must move forward ensuring that people, processes, and technologies are once again relevant for the decade facing us, and our vastly different operating ecosystems (see, “Peering Forward into the Next Decade”).

So, where should we invest? What technologies or infrastructures should we use? How could we outsource more business and knowledge processes? Should we hire FTE’s or layoff? How do we measure success, and more to the point, is it merely about profits, government conformance, risk mitigation, or social responsibility?

After two brutal years where finance and mortgage groups (FMG’s) have shed hundreds of thousands of quality jobs, will the recovery be a “V,” a “U,” a “L,” or a “W?” Additionally, what will your competitors do? Who are the “desired” consumers? What are your organizational social and community responsibilities?

Indeed, there are many questions all encased by considerable economic uncertainty. Yet, the time for action is now. The time for pervasive technological and process transformations is past due.

So, what is the formula for success as we close out 2009 and peer into 2010? Whereas, no one formula or idea can capture all aspects of viability and the technology needed to deliver quality profits, the following simple framework is able to create desired organizational action.

Success = Components + Collection + Consolidation + Cohesion + Capability + Conclusion

I know, it sounds like a lot. However, let’s briefly explore the six “C’s” of success, and what you might be able to do to capitalize on the operating environment and constraints, which are poised to completely redefine FMG players, processes, and BAU (i.e., competition and intent).

Components, the Sum of the Parts is Greater

Historically, process and technology solutions were frequently viewed as one-offs left to astute and charismatic divisional heads. Technology investments, and the business lines / products they supported, were made against segmented silos of functionality and compartmentalized budgets. As the current decade draws to an undesirable conclusion, the idiosyncratic nature of these sunken ROI projections becomes all too apparent measured against new markets and upstart competitors.

In general, future technologies and co-dependent processes appear to be taking on increased importance outside of the once hallowed walls of IT – that is, “not invented here” personnel have been translated into “no longer work here.” Technology and the capital investments needed for their realization are being created in foreign cities with little geographical familiarity for domestic personnel.

Although, as the component technology pieces are being created elsewhere, the heralded death of internal IT (i.e., the “IT Killer”) by the Cloud, by SaaS, by virtualization, or even by outsourcers, are mere pipedreams.

To be sure, the IT roles of the next decade and dogmatic desires to “control from within” a corporate center are no longer a critical success factor. The roles of CIO’s and CTO’s will increasingly disappear – to be redefined in a new technology world ripe with continuous transformations and multi-faceted governance. With a historical FMG tenure of 5 years and an average salary exceeding $300K, IT leaders will have a lot to justify this next decade.

For internal IT, the ability to rapidly integrate and adapt externally developed and defined components will be greater than traditional technology provisioning. The sum of the parts is rapidly the greatest enabler for the next decade spurred by changing consumer behavior, fast cycle product demands, and competitive reactions requiring collection and cohesion of widely dispersed data sources.

Collection, It is No Longer Just About Money

Collection activities for bankers today have taken on a huge importance. Yet, collection today and tomorrow is frequently more about data than it is mere money. Not just data within a given set of delinquency or workout processes, but data that spans the over 60 distinct functional processes throughout the comprehensive mortgage cycles.

Data collection is just the first aspect of a new decade of new requirements for corporate governance and compliance. The ability to transcend the interlinked processes, both forward and backward, can no longer rely on any manual item, faxed document, or singular “swim lanes.” To achieve proper consolidation and cohesion of increasingly specialized data sources, collection must first accept the challenges of interconnectivity, while preparing for aggregation of compartmentalized data spread throughout siloed applications.

Or more simply, if garbage (inaccessible and non-searchable data sources) is allowed into the value chain of data, it pollutes the entire downstream series of demands needed for risk, decision making, and compliance.

I have to wonder, if we had electronically stored, catalogued, and managed the entire master sources of data for the millions of loans in distress during the last five, would the modifications, legal fees, and political backlash be this pronounced?

Consolidation, the Devil is in the Data

Data. Data. Data. Consequently, if data is everywhere and widely available, why is it that decisions are made that prove inadequate or let’s face it, are out-and-out wrong?

Some would argue that collection challenges are the root of evil when it comes to success driven by sound data (e.g., KPI’s) and decisioning analytics. However, FMG CEO’s ask an important question of why nearly $2 billion annually is spent on power for data center computer equipment? With a compounded yearly increase of data storage now, by some estimates, exceeding 50% annually, what should be contained or consolidated on this equipment that isn’t already there? Where’s the value?

Consolidation of data sources for future success resides with disciplines and technologies that are still not widely in use within the mortgage industry (e.g., master data management, data deduplication, aggregation, augmentation, scrubbing, federations, structured, non-structured, et al). Some of this is cost related and others are more about skill sets and perceived need by executives for investment or action.

Consolidation, within the success formula, is also about the growing third-party portals and data providers along the segmented mortgage processes – fraud, reporting, servicing, investments, hedge funds, FOREX, systems of record, and the list grows with each passing week, and sorry to say, new government program introduced (or withdrawn). Without the first three “C’s” internalized and properly framed, the last three variables in the success formula can lead to money traps and false security.

Cohesion, Leveraging more than IT

Cohesion in this context is defined as “the ability to positively relate various sources of information to each other.” To borrow a term from the pharmaceutical industry, it is about data efficacy. Moreover, driven by new markets and required insights, integrations of the past are not the integrations of the future. In fact, the ability to efficiently and accurately integrate growing and sometimes conflicting data has recently cost many good IT professionals their career and livelihood.

The new decade dawning is already being dominated by new, virtually provisioned infrastructures (e.g., IaaS) supporting fast-cycle business functionality– e.g., Amazon, Sales Force, Microsoft, and Google. As these initial “cloud” identified offerings evolve, their robustness and business criticality takes on new importance across the enterprise. And what do these new layers of infrastructure create spanning processes and business lines? Data. Data. Data.

Therefore, the cohesion of these growing sources increases in importance. The challenge of their integration is not merely an ETL (i.e., extraction, transformation, and load), but a core shift in competencies that was once viewed only from an internal IT need. As systems are provisioned within layers of cloud infrastructures (e.g., data, voice, processes), the skill sets of cohesion and the efficacy it demands are in short supply and represents a job growth area for every IT leader and astute business person.

Capability, Fenced by Risk and Regulation

If we thought the rules of operation were cumbersome and draconian in the past, we may be severely disappointed with the future. In various speeches and interviews, the Executive and Congressional offices are all positioning for changes. Politics and lobbying being what it is, the final regulations may be some time coming – but something will change, especially if this drags into the 2010 election year.

Therefore, as more and more capabilities are delivered via cloud technologies and outsourcing relationships (just look at the numbers, acquisitions, and press releases), organization capabilities will be fenced by how quick we can react to shortened regulation cycles and risk aversion advocates (e.g., Fed, regulators, public sentiments).

Capability moving forward will be still be about systems and technology – but the time needed and patience for “failures” will be drastically shortened. Tolerance to achieve meaningful capability success will be shortened not by mere history, but by decreased CAPEX budgets, time-to-market, consumer products and their profitability, and of course, regulatory compliance.

If we are indeed confronted with a jobless recovery (the “L” or “U” scenario), how much will budgets be increased for new functional capability? What happens if a “W,” or double bottoming, is experienced in 2010? Future success requires new capabilities, but the methods and techniques of defining, provisioning, and bringing on-line will test our operations and vendor partners alike.

Conclusion, Achieving Incremental Reality from Ambiguity

With five of the six “C’s” integrated into the algorithm for success, you might be tempted to think that 83% of the equation is a passing grade. Uh, no. This last variable has proven to be the most difficult to achieve with accuracy and consistency — as it is subject to internal influences and organizational biases of beliefs. The historic methods for conclusions were often more about art than science – hubris over content

Today and more importantly tomorrow, the art of the conclusion or decision is being hurriedly replaced with analytics. Objectivity based upon vetted facts, statistics, and the other five “C’s” is ruling the discussions in the boardrooms and with investors.

In fact, spending on business intelligence tools which support robust decision making continue to increase at double-digit growth rates – an aggregated market that exceeds $60 billion. All-in-one solution sets are being deployed along the entire success equation by industry leaders IBM, Oracle, InfoSys, and SAP.

Achieving “conclusivity” is also supported by a wide range of dashboard offerings (e.g., Visual Mining), analytical and industry specific KPI firms (e.g., Intelli-Mine, Inc.), and vertical benchmarking solutions (e.g., LPS).

Linked together, the six “C’s” are a powerful formula for the changing reality of a new and ambiguous decade. Also it should be noted that the conclusions desired within FMG will no longer be reached in domestic isolation. World governing bodies, global creditors, and wealth rebalancing all will bring a stark new set of consequences for success.

Did I forget to mention the seventh “C?”

* * * * * * * *

In conclusion, successes of tomorrow cannot be redressed on the methods of the past or the behaviors of a few. Continuous vigilance will be demanded to ensure any investment in infrastructure, the cloud, or business processes are exceeding expectations and measures. “Provision and forget” cannot be a path forward for lasting success.

As we move forward, one thing is very understandable – the methods used to measure results in a virtual, highly specialized FMG ecosystem will be distinctive and non-insular. The IT approach to provisioning, integration, and maintenance will also be different. Even the standards of interoperability and exchange will be uncommon – but likely converging.

S-U-C-C-E-S-S. No matter how it is defined, spelled, or framed, success must be generated from within. Are we really prepared across people, processes, technologies, and markets to orchestrate success in an uncertain decade?

In closing, as I get ready to attend my fifth MBA Annual show in San Diego next month, I sincerely wish everyone the best of success during this industry leading event. Make sure you say “howdy!” if you see me.

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