THE AGILE IT PLATFORMFree-Market Cloud Computing:Avoiding Stalinist Failures in your Cloud Operating ModelDave Roberts, SV...
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3
How do we ensure that…                         4
…the right people…                     5
…have access to the right      resources…                            6
…at the right time…                      7
…for the right cost?                       8
Organizational resource  allocation problem                          9
= Economic problem                     10
Top-Down                Bottom-UpCommand and Control   DecentralizedSocialist              Free Market                    ...
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Central Planning Theory:Given enough inputs and smartpeople, you can plan anything                                13
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Source: http://kcmeesha.com/2010/02/20/behind-the-iron-curtainshortages/                                                  ...
Source: http://kcmeesha.com/2010/02/20/behind-the-iron-curtainshortages/                                                  ...
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21
The Economic Calculation        Problem                           22
You never know everything.                             23
Things are changing all the time.                                24
25
26
High / Rising Prices =Shortage / Make More                          27
Low / Falling Prices =Satisfied / Make Less                         28
Better planning ability.More efficient allocation of        resources.                               29
Conclusion: Central planning loses to free  markets at the level of nation states                                        30
But what about the level of     individual firms?                              31
Thesis:  “Free Market Firms”         will beat“Centrally Planned Firms”                            32
Products sold at market price             Business Unit                                Raw materials & labor              ...
Today, most IT resources lack a  real pricing mechanism…                                  34
35
“But my shop already doeschargeback, so this doesn’t      apply to me.”                              36
Cost ≠ Market Price                      37
True Free Markets Allow:   Multiple suppliers.      Competition.    Buyer free choice.   Competitive failure.             ...
Products sold at market price              Business Unit                                 Raw materials & labor            ...
Products sold at market price              Business Unit                                 Raw materials & labor            ...
Other Manifestations:Consumerization of IT       BYOD     “Rogue IT”                        41
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Incorporating a free-marketeconomic component in your cloud operating model will:                               45
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Thank youDave RobertsVice President, StrategyEmail:                     dave.roberts@servicemesh.comWeb:                  ...
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Free-Market Cloud Computing: Avoiding Stalinist Failures in your Cloud Operating Model

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History has shown that distributed, free-market economic models inevitably beat centrally-planned, socialist economic models. Several economists have explained why this is the case. Interestingly, most enterprises use a central planning model for IT resource delivery, leading to many of the same problems seen in socialist economies. Previously, there weren't many practical alternative models for enterprises to use. But cloud computing is changing that an allowing enterprises to adopt a more free-market model for IT service delivery. As a result, we're seeing an explosion of choices and new IT efficiencies. Over time, we'd expect to see firms with a more free-market IT delivery model beat out firms with an older, centrally-planned model. This presentation details the differences and some changes you can make to ensure your enterprise is as efficient as possible.

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Free-Market Cloud Computing: Avoiding Stalinist Failures in your Cloud Operating Model

  1. 1. THE AGILE IT PLATFORMFree-Market Cloud Computing:Avoiding Stalinist Failures in your Cloud Operating ModelDave Roberts, SVP Strategy and Evangelismdave.roberts@servicemesh.com@sandhillstrat
  2. 2. 2
  3. 3. 3
  4. 4. How do we ensure that… 4
  5. 5. …the right people… 5
  6. 6. …have access to the right resources… 6
  7. 7. …at the right time… 7
  8. 8. …for the right cost? 8
  9. 9. Organizational resource allocation problem 9
  10. 10. = Economic problem 10
  11. 11. Top-Down Bottom-UpCommand and Control DecentralizedSocialist Free Market 11
  12. 12. 12
  13. 13. Central Planning Theory:Given enough inputs and smartpeople, you can plan anything 13
  14. 14. 14
  15. 15. 15
  16. 16. 16
  17. 17. 17
  18. 18. Source: http://kcmeesha.com/2010/02/20/behind-the-iron-curtainshortages/ 18
  19. 19. Source: http://kcmeesha.com/2010/02/20/behind-the-iron-curtainshortages/ 19
  20. 20. 20
  21. 21. 21
  22. 22. The Economic Calculation Problem 22
  23. 23. You never know everything. 23
  24. 24. Things are changing all the time. 24
  25. 25. 25
  26. 26. 26
  27. 27. High / Rising Prices =Shortage / Make More 27
  28. 28. Low / Falling Prices =Satisfied / Make Less 28
  29. 29. Better planning ability.More efficient allocation of resources. 29
  30. 30. Conclusion: Central planning loses to free markets at the level of nation states 30
  31. 31. But what about the level of individual firms? 31
  32. 32. Thesis: “Free Market Firms” will beat“Centrally Planned Firms” 32
  33. 33. Products sold at market price Business Unit Raw materials & labor purchased at market price“Monopoly pricing & monopoly money” Firms IT Dept. Raw materials & labor purchased at market price Free Market 33
  34. 34. Today, most IT resources lack a real pricing mechanism… 34
  35. 35. 35
  36. 36. “But my shop already doeschargeback, so this doesn’t apply to me.” 36
  37. 37. Cost ≠ Market Price 37
  38. 38. True Free Markets Allow: Multiple suppliers. Competition. Buyer free choice. Competitive failure. 38
  39. 39. Products sold at market price Business Unit Raw materials & labor purchased at market priceMarket competitive Allow BUs to purchaseofferings and pricing from multiple suppliers Firms IT Dept. Raw materials & labor purchased at market price Free Market 39
  40. 40. Products sold at market price Business Unit Raw materials & labor purchased at market priceMarket competitive Allow BUs to purchaseofferings and pricing from multiple suppliers Firms IT Dept. Raw materials & labor purchased at market price Free Market 40
  41. 41. Other Manifestations:Consumerization of IT BYOD “Rogue IT” 41
  42. 42. 42
  43. 43. 43
  44. 44. 44
  45. 45. Incorporating a free-marketeconomic component in your cloud operating model will: 45
  46. 46. 46
  47. 47. 47
  48. 48. 48
  49. 49. 49
  50. 50. Thank youDave RobertsVice President, StrategyEmail: dave.roberts@servicemesh.comWeb: http://www.servicemesh.com/Company Twitter: @servicemeshPersonal Twitter: @sandhillstrat

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