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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 »

What Outsourcers Often Fail to Grasp

Tuesday, October 20th, 2009

By Mark P. Dangelo

www.Innovative-Relevance.com

With unemployment at over 15 million adults coupled with a projection of $80 billion in deficits among state unemployment benefits, expectations are high among a tax paying population that the use of outsourcing would be limited moving into the next decade. After all, with so many professionals out-of-work, productivity down, and the political will strong, why are we even talking about outsourcing at all?

Why indeed. Sentiments aside, the use of onshore or offshore workforces to provide a specialized or highly productive process augmentation continues to grow at a projected 10% for all of 2009 – but down from a traditional 20%+ compounded growth rate.

Outsourcing has been around for hundreds of years in various forms. However, with the exponential increase of global communications and ease of travel started in the 1970’s, outsourcing has mushroomed into an industry with lobbying clout and a combined economic revenue streams in the hundreds of billions. It reaches all corners of the globe including some places that seem strange.

Nevertheless, while the industry has flourished, they are facing a game changing shift that few outsourcers recognize and even fewer are prepared to act upon.

Culturally Challenged

Striking at a time when Congressional bills are being sponsored (e.g., 50:50) to limit the impact on domestic economies, many outsourcers fail to comprehend the need of diversification at all level of operations within their organizations. This is particularly true for offshore firms who prefer to use visa-sponsored foreign nationals rather than domestic workforces to promote a service or integrated product offering. These homogeneous outsourcers continue to “confront” their prospects with workers who frequently do not have empathy for domestic workers, nor understand the socio-economic realities confronting their proposed outsourcing solutions.

This lack of diversity within these foreign operations are often caused by the same mistrust they accuse domestic politicians of possessing. Until these outsourcers understand of the need for radical domestic restructuring and diversification in every country of operation, they will consistently be confronted by those who disbelieve their sincerity of assistance and the economic benefits they are proposing.

Old Market Ideals

Just five years ago, outsourcing contracts were much easier to obtain. For many, they presented a reasonable business case and then took an order for a multi-year, multi-million dollar contract. With an on-going two year global recession, these traditional approaches to the markets have been permanently changed.

This can be superficially witnessed in shifting wealth, government interventions, pay-limits, increased nationalism, and, of course, a rise in consumer poverty and household debt.

But, the go-to-market approaches and discussions for many outsourcers have not fundamentally changed. Why? Because success had instilled organizational overconfidence – and an adamant disbelief that their models might potentially be “out-of-phase” to developing markets and buyer requirements. The outsourcing world is no longer simply about labor arbitrage.

An Out-of-Phase Business Model

The discussions have changed, but the internal workings of how the outsourced business requirements are satisfied have not. The methods by which outsourcing employees are compensated have been largely untouched. Moreover, they also continue to believe “one-size” of outsourcing approach fits everyone. The models used to satisfy client demands fail to recognize adequate gain-sharing, proper governance, hybrid deployments, potential co-operatives, and highly flexible business orchestration.

In general, outsourcers fail to properly frame the need for domestic, onshore collaboration and partnering with existing workforces and future operations. Labor arbitrage is still the model being tightly clung to by sales forces as the way to gain a prospects attention.

For many, the use of non-conventional approaches that benefit both domestic and foreign economies (i.e., the new reality of globalization) are frequently feared and distrusted.

* * * * * * * * *

In summary, until outsourcers accept domestic diversification, new market approaches, and changing business models, they will continue to grow at the expense of country economies. This challenge has been noted not just by bankers, but by the IMF, the UN, and other international bodies all concerned about rising protectionism and in-county sentiments.

As the new decade dawns, the inflection point is being reached where consumer demand is aligning with political will against the wholesale export of jobs. The strange thing I see as a proponent of outsourcing and globalization, it can all be easily avoided where everyone wins.

It really is up to the outsourcing firms to engage domestically with a different discussion, personnel, and delivery models. Otherwise, in the mid-election year of 2010, they may indirectly find themselves under a new class of aggressive regulators and domestic watchdogs.

And yes, there are those firms that “get it.” There are progressive outsourcing operations that are making the needed changes against a new market and organizational reality. Those are the firms that stand the best chance of survival – and of benefiting everyone within the domestically and globally interconnected economies.

Let’s frame one last question. If you are an outsourcing entity, put yourself in your clients place. What bank receiving federal assistance wants to say they have taken taxpayer money and then displaced thousands of American workers? A balance must be achieved – very soon.

Posted in Business Model, Financial Services, Innovation, Mortgage, Orchestration, Outsourcing, Protectionism, Strategy | No Comments »

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