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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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Posted in Analytics, Cloud Computing, Dashboards, Financial Services, Innovation, Strategy | No Comments »

Proven Technology, New Paradigm

Tuesday, October 20th, 2009

By Mark P. Dangelo

www.Innovative-Relevance.com

One of the few bright spots in lasting recessions is the birth of relevant innovation. These are the new products and services that markets and consumers want, which are pragmatic and sustainable regardless of the economic plight surrounding them. More new businesses start in times of chaos than in times of prosperity. The seeds of the next wave of business processes and supporting solution sets are growing.

Yet, not all relevant innovation is from quantum breakthroughs in technology. Often times the most momentous advancements are those that involve the layering of proven technologies in new and unique alignments. Additional gains are made from using modified processes, procedures, and formulations. Finally, the remainder is driven by new educational standards, skills learned, or via collaborative intelligence.

Let’s explore two potential paradigms that are quietly emerging to those seeking new uses for proven technologies.

A Vision to Look Beyond Today

The markets have seen an explosion of solutions targeting fraud in all its forms – misappropriation, misstatement, bribery, corruption, identity, occupancy, income, appraisal, shot-gunning, and the list goes on. The advances in data aggregation, statistical modeling, and integrity have given originators and law enforcement agencies new tools to combat illegal acts. But, whereas these increasingly robust solution sets are eliminating fraud in new, refinanced, or modification loan originations, there are additional benefits yet to be booked with the potential extension of solutions.

For example, what struck me as having huge potential during the recent MBA Annual event was an announcement by MERS and Interthinx on their National Fraud Prevention Solution. Why did this standout? What was missed by the invited press was the underlying and potential supply chain altering principles beyond identifying fraud just during the origination processes.

When examined along the entire value or supply chain of mortgage processes – origination, servicing, securitization – the existence of a common source of aggregated information potentially offers touchpoints for bonds and equities, repurposing existing asset classes, insurance, government regulators, and of course, all aspects of complex servicing. In manufacturing terms, think of it as forward and reverse supply chains where parts are sourced in many places, but assembled in one place to create a working product.

Examined differently, if fraud information is good for the origination of a loan, why shouldn’t it be used for the same loan, borrower, and institution throughout its life-cycle? Case in point, if the loan is non-portfolioed and securitized with other “quality” loans, then over its life should the borrower or trustee overseeing the tranches (e.g., covered or hybrid bonds), all sourced aspects of the loan must be permanently accessible. The same will hold true for portfolioed loans and the new Basel rules requiring greater capital reserves in 2010 against held assets.

After all, the “originate and forget” model is dead – which is why private securitization went from nearly 65% of the market to under 5% in just three years. There are parallels and lessons learned in other industries – insurance, equities, and healthcare.

If fraud is rooted in risk mitigation, then the data for risk analysis will require a comprehensive integration of the entire data or mortgage supply chain for life. Risk analysis and the underlying agencies and regulators, which will be taking more active governance roles, require a non-siloed vision. A game-changing option is made available once we look beyond the “false” industry containers of information, and into the greater comprehension demanding new operating paradigms.

While the MERS and Interthinx announcement was positive, there is a potential for a permanent shift that reverberates across the industries – like a pebble being dropped into the center of a pond.

Think Differently, Act Aggressively

With nearly 1.7 million borrowers three or more payments behind last month, the challenges of loan modifications are still mounting. Whereas, the government has claimed success for on-going workout initiatives – albeit it permanent or temporary loan restructurings – according to RealyTrac nearly 940,000 were in foreclosure filings during Q2 2009.

In general, the optimistic industry personnel are trying to stress the positives – low interest rates, government incentives, and a hope that the bottom has been put into the market free fall. Others aren’t so hopeful. But whether you believe in a recovery or more pain, one thing is very clear – how do you reach out to a customer in trouble or those seeking advice?

The complexity and breath of answers stagger the imagination. However, what is evident is that no one method will work for all classes of loans or customers. A multi-dimensional approach using all available market and technology channels needs to be cohesively integrated to ensure the best for all parties involved – borrower, lender, servicer, and investor.

One proven technology that has been used to drive consumers to secure new loans was search engine optimization or SEO. SEO is well known to marketing professionals and ad agencies. Many users commonly associate SEO with Google, Yahoo, or other search engine rankings and ad placement. It worked great to drive potential lenders to sites during the “go-go” credit of this last decade, but does it have a use now?

The short answer is yes. SEO is undergoing a rebirth among a new class of innovative firms (e.g., Enquisite), which move beyond the mere generation of prospects and into ROI, analytics, and performance. The new solution sets employ “organic” and paid placements to arrive at a composite of contacts who may want assistance and who may have been doing research on your corporate “landing pages.”

The methods of achieving this result are beyond this article, but suffice it to say that there are fundamental shifts in the way SEO is being used – for today and tomorrow. Some additional uses for performance driven SEO are in support of compliance, loan modifications, servicing, and to address political concerns that the financial institutions are not doing enough to reach out and assist struggling homeowners and consumers at risk.

For those in the retail channels trying to assess their customer approaches, novel macro uses of SEO are beginning to capture the imagination, while influencing operating initiatives. Although, many thought they knew what SEO was, the rules are being rewritten by relevant innovators eager to assist and able to deliver.

In summary, SEO is increasingly becoming part of closed-loop systems for channel deployments and operating feedback supported by adaptive process improvement techniques. It has moved well beyond simple lists, clicks and conversions.

Adapting a phrase from history, it can be said, “I never knew SEO, but it knew me.”

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Posted in Continuous Organizational Innovation, Covered Bonds, Dashboards, Data, Financial Services, Innovation, Markets, Mobile Banking, Regulations | No Comments »

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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Posted in Analytics, Architecture, Cloud Computing, Continuous Organizational Innovation, Dashboards, Data, Financial Services, Innovation, Markets, Orchestration, Outsourcing, Strategy | No Comments »

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