Stki 8th Cio Bootcamp 2009

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This presentation shows what is happening to IT, the economy and CIO decisions. 2009 2010

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Stki 8th Cio Bootcamp 2009

  1. 1. Does it matter how executives manage for a recession? It is a tragedy if we loose Innovation in IT Dr. Jimmy Schwarzkopf Research Fellow STKI jimmy@stki.info 1
  2. 2. • Evariste Galois (1811-1832) – accepted a duel with pistols (lack of wisdom) – spent the night before the duel in writing down his mathematical testament: theory of transformation of roots in algebraic equations (creating science) All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  3. 3. Does somebody know what is going on?? All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  4. 4. 4 All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  5. 5. Facts • The shadow banking system crashed taking the whole world economy down. – Asset comparison: • Assets of regulated banking system … $10 trillion • Assets of shadow banking system: – Hedge funds ………….$ 2.5 trillion – Investment Firms ….$ 6.0 trillion – Other ……………..……..$ 4.0 trillion Anything that does something like a “bank”; Anything that has to be rescued in crises the way banks are; Should be regulated as a bank
  6. 6. 2008: financial meltdown in 5 steps • Real estate “Bubble” all over the world – The belief that everybody should own a home – The belief that “real estate” value increases more than inflation. • Converting mortgages into securities – Wall Street bundled mortgages into securities, supposedly decreasing risk, hard to assess the value of the loans. • Cheap money via China – The Chinese have high savings rates and that money was loaned to the U.S. through the shadow banking system which used the money to make bad loans, start 10,000 hedge funds, and drive private equity.
  7. 7. 5 steps cont. • Subprime mortgages – The securitization of mortgages bundled riskier loans (subprime mortgages) with better risk loans. – This strategy worked as long as real estate prices kept rising and interest rates remained low. • Quants and options – Options were concocted by quantitative-driven financial analysts who, in their models, failed to factor in irrational human behavior. – The securitized debt was quot;insuredquot; via “unregulated” swap options. – The result: flawed options models and flawed insurance. All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  8. 8. • History is not facts, but ex-post narrative • The past is very difficult to predict • Humans cannot understand uncertainty – Do not learn from the past – Cannot understand a future mixed with chance • “Our problem is not just that we don’t know the future, we don’t know much of the past either…”
  9. 9. HISTORY REPEATS ITSELF not immediately, not identically Uniqueness Recurrence All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  10. 10. Exponential Growth in logarithmic plot www.KurzweilAI.net 10 All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  11. 11. 11 www.KurzweilAI.net
  12. 12. The S-curve Flow of Economics Financial The Real Economy Economy (moves (produces capital) value) VALUE: production Money/capital of goods and services All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  13. 13. 4 Professors and 1 School 1. Profs. Prescott & Kydland REAL ECONOMY CYCLES influenced by the technology – that converts inputs of capital and labor into output of goods Technology creates value, changes productivity and – produces cycles 2. Prof. Carlota Peres Technological Cycles change “best business practices” – These cycles create explosive growth and change – Everything changes: the way we work, live, play – Technology influences financial markets – All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  14. 14. 3. Prof. THOMAS KUHN : Real economy and technology advance in a peaceful • way interrupted by violent change revolutions PARADIGM SHIFT: A change in world view that calls • everything you know into question and each world view is replaced by another 4. Prof. Joseph Shumpeter : Innovation is the basis of technological change • through “Creative Destruction” Markets do not know how to do Price Adjustments • for Technological Innovation Produces also Financial Innovation (usually • unregulated) that tend to eventually burst All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  15. 15. Austrian-School of Economics government interventions: credit cycle theory • Governments (central banks) tend to quot;artificiallyquot; set interest rates too low for too long with wrong regulations – Low interest rates tend to stimulate borrowing – Leading to an unsustainable quot;monetary boom“ (FRENZY) – Financial institutions get caught in the frenzy – Shadow banking system starts to “ease” movement of money – quot;credit crunchquot; quot;recessionquot; or quot;bustquot; – occurs when this frenzy cannot be sustained. All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  16. 16. Financial Economic Cycles Based On Technological Innovation Cycles TECHNOLOGY FINANCIAL INNOVATION ECONOMY ECONOMY CYCLES CYCLES All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  17. 17. S curves for Economic progress DRIVEN BY SUCCESSIVE TECHNOLOGICAL REVOLUTIONS Technological progress Time 40-60 years All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  18. 18. FIVE TECHNOLOGICAL REVOLUTIONS IN 230 YEARS All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  19. 19. FRENZY: success, excess demand and GREED SUCCESSES ATTRACT of the new all available money towards entrepreneurs… the technological revolution Spectacular profits and growing capital gains GREED: makes many unprofitable Excess demand projects appear viable… in the stock market ASSET INFLATION …attracting even more funds and preparing the inevitable collapse!!! All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  20. 20. technology/economic cyclesAustrian Perez new PARADIGM School forecast Degree Turning DEPLOYMENT PERIOD INSTALLATION PERIOD Point of diffusion of the Institutional recomposition and role shift MATURITY technological “Creative destruction” revolution Defeat of the old SYNERGY financial capital Kuhn’s “boom” “golden age” to maturity FRENZY growth and social benefits production capital IRRUPTION Schumpeter’s Creative ? Next destruction big-bang big-bang Time 2O - 30 years 2O - 30 years ??? All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  21. 21. The Age of Steel The Age of Information Technology and Heavy and Global Telecommunications Engineering The Age of Oil, Automobiles Bubble, Corporate scandals & 2008 Recession… and Mass Production 1894-1920 MATURITY 1960-74 MATURITY OCIAL UNREST Depression 1930’s and WWII Social unrest mature industries CHINA Inc. 1968-70 to Third World 1943-59 SYNERGY Financial Capital Financial Capital Post war Golden Age Regulations Regulations Break down Break down Production Capital 1987-2008 1920-29 FRENZY FRENZY New 1971-87 Internet IRRUPTION regulations & Telecoms Roaring 1908-1920 Transistors; computers; mania Twenties IRRUPTION analog instruments; Oil and (USA) numerical control automobiles Mass production ICT Revolution Bretton Woods Crash Starts with the and stagflation 1971 Welfare State 1929 Internet bubble Intel Marshall Plan 1908 Micro-processor 2008 Global meltdown All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info Ford Model-T
  22. 22. Historical Records (1771 – today) All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  23. 23. Inclusive Knowledge Society with Multiple Compensatory Safety Mechanisms Service Economy Mass Production Economy DIVERSITY HOMOGENEITY HYPER SEGMENTED MARKETS: INTEGRATION OF MIND /HAND SEPARATION OF MIND AND Knowledge Worker HAND T education Blue collar White collar CAPACITY FOR UNAVOIDABLE ENVIRONMENTAL ENVIRONMENTAL PROTECTION DESTRUCTION All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  24. 24. FEATURES OF THE CURRENT PARADIGM SHIFT “SERVICES” All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  25. 25. Which road should we take ? Alice came to a fork in the road. “Which road do I take?” she asked. “Where do you want to go?” responded the Cheshire cat. “I don’t know” Alice answered. “Then” said the cat, “it doesn’t matter”. Lewis Carroll, Alice in Wonderland 25 All Rights Reserved @STKI Moshav Bnei Zion, Israel +972 9 74 444 74 www.stki.info
  26. 26. Reinvest in human capital All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  27. 27. No balance between work and leisure (home) • Prof. Ragnar Frisch – time the most precious resource an individual has – very difficult to find balance (impossible) • Prof. Israel Kizner – A market with men unable to learn: in other words COMMODITY PEOPLE… needs a group of outsiders T PEOPLE who are able to perceive opportunities – This group of entrepreneurs…notice profit opportunities that exist because of the initial ignorance of the original market participants and that have persisted because of their inability to learn. All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  28. 28. need people that can talk business terms All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  29. 29. 29 All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  30. 30. People as “commodities” All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  31. 31. All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  32. 32. Generation C is here Co-Creators Cash Control The birth of Generation C (T people) Communicate Connected Creativity Creative Class Content Conversation Community Channel Consumer 2.0 32 All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  33. 33. Shift to a solutions economy From product to service and commoditization of IT What are customers trying to solve? “Less stuff*… more service” * if “buying” then commodities All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  34. 34. Can you see the difference?? • BEFORE – We sold “products” – We “productized” services • NOW – We will sell “services” – We will “servicerize” products All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  35. 35. What will happen here? • pay for service and get free phone? • pay for phone and get free service? • pay for use of application and content and get free phone and service?
  36. 36. For the new economic paradigm: CFO or CIO create value? “Wealth in the new economy flows directly from innovation, not optimization” Kevin Kelly Wired Magazine
  37. 37. All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  38. 38. New ways: IT & Business value Business Value Cloud Computing (Late 2000s) Infrastructure Value SOA & Web Services (Early 2000s) Services Packaged Applications (Late1990s) Internet (Mid 1990s) Software Relational DBMS & BI (Mid 1980s) Std. Hardware Interfaces (Late 1980s) Hardware Consolidation / Virtualization (Late 2000s) Component PC Processors (Early 1980s) Value Character Format (ASCII) (Late 1970s) All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  39. 39. In STKI summit 2009 we will answer: IT Operations Sourcing IT Investment Perspective Enabler Cost In-house Outsource Technology Position Interoperability Standards Vendor Specific Industry Standards Follower Leader Development Preference Hardware/Software Selection Many Vendors Few Vendors Build Buy Scalability Legacy Perspective Leverage Replace Multiple-Smaller Fewer-Larger IT Development Sourcing Transactional Data In-house Outsource Distributed Centralized Processing Analytical Data Centralized Distributed Distributed Centralized All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  40. 40. Discretionary vs. Nondiscretionary What percent of your total IT budget is devoted to: • non-discretionary items • infrastructure, • support and maintenance • discretionary items • new capabilities In a recession how much of the discretionary budget is cut and how do we use the rest Source: CIO Magazine “The State of the CIO” online survey, January 2008 in order to innovate???? 36% devoted to providing new capabilities? 40 All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 40
  41. 41. IT and the meltdown: capitalization and cash flow • IT budgets will rise without some fundamental change in the approach • To take advantage of this metamorphosis of IT we need to find new and different ways of being able to scale and innovate : – without scaling labor costs – using existing “assets” All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  42. 42. How to increase discretionary budget? Services? On-demand? Multi-tenancy ? Subscriptions? Represent “disruptive” change ? YES CLOUD COMPUTING, METAweb, HATMAA, and SOA are basically new “disruptive” ways of delivering Information Technology based on scalability, re-use and new sourcing options
  43. 43. New age management books All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  44. 44. Competition in services? Business Process Improvement New Business Model All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  45. 45. CIOs will do BPI in 2009 IT of Competitor Value Business ERP captured Process 1 Market 1 by verticals Competitive No Real Sales Differentiation difference in value Prospect IT of Competitor Business Value ERP Process 2 captured 2 by verticals 45 All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  46. 46. CIOs will do BPI in 2009 IT of Competitor Value Business ERP captured Process 1 Market 1 by Best Projects verticals Business Competitive No Real Sales For Differentiation difference in value Prospect Practices IT of 2009/10 Competitor Business Value ERP Process 2 captured 2 by verticals 46 All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  47. 47. So what do we do in the “New Era” ? Business Redefined Model Business Model All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  48. 48. Business Process Innovation High Improve: SURVIVE Innovate : GROW Invent: CHANGE Contribution to Business Performance Low Redo Existing Rethink Redefine Processes Business Business All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  49. 49. 2009-11: BI and DATA MINING Data Warehouse MDM All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  50. 50. Implementing a Balanced Scorecard A balanced scorecard converts: – organization’s value drivers, • customer service • innovation • operational efficiency • financial performance –to a series of pre-defined metrics 50
  51. 51. Governance and Risk • definition became confused with obeying the law • “ENTERPRISE RISK MANAGEMENT”
  52. 52. Enterprise Risk Management Customer Demand Shortfall Cost Overruns 24 Accounting Irregularities Competitive Pressure Management Issues M&A Integration Problems Supply Chain Issues 11 Product Issues 12 Foreign Macro-Economic Customer Pricing 7 7 Commodity Prices 6 7 Loss of Key Customer 6 3 4 Interest Rates 2 2 1 1 1 1 0 0 Strategic Operational Financial Hazard 58% 31% 6% 0% All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  53. 53. Another question…. • How many systems has IT created (last 15 years) that do the same function? • How can I re-use ??? • Have to do an ASSET inventory • Then an assessment: – what we can use as services (SOA) – what we can get to work as is but BETTER (HATMAA) All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  54. 54. Service-Oriented Architecture Composite Applications 54 All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  55. 55. The SOA “dream” Enterprise Portal (BPM) Process Manager MDM Portal as assembly engine Master data manager Enterprise Integration Bus Front- & Workflow eBusiness Financial Backoffice Management System System System System Legacy CRM SCM System System System 55 All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  56. 56. HATMAA: definition • Training, assimilation, implementation, rollout,etc: are change management processes. • Change management that helps users change working processes. • HATMAA: is the measurement of the change process success. All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  57. 57. Underutilization of applications? • An assessment will show what applications have high HATMAA and which do not • LOW HATMAA need special tools and re- training • HIGH HATMAA need tool for constant reinforcement All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  58. 58. The new computing utility All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  59. 59. A huge paradigm shift is underway All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  60. 60. Delegating the Power to the Cloud All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  61. 61. The new Service-Based IT T6 T2 T1 T3 T8 T7 T5 T4 Gateway T8 T7 T2 T7 T8 T6 T3 T1 T1 T5 T4 T2 T3 T4 T5 T6 Applications Infrastructure Services Services Puzzle Builder All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 61
  62. 62. All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  63. 63. Cloud example CLOUD Services SQL MAIL Workflow Access Data Security Portal Control SaaS ERP CRM STKI drjimmys@gmail.com Raanana Yoni CUTTER Mail EDM DRP* jimmy@stki.com New York Hosted at XXX Karen All Rights Reserved @STKI Moshav Bnei Zion, Israel + +972 9 790 7000 www.stki.info
  64. 64. Path to Innovation ? Client/Server & Cloud App Server Computing Platforms Source: 3rd party analyst surveys Source Salesforce.com Customer Relationship Survey conducted in Feb. 2008, by an independent third-party CustomerSat Inc. 64 All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  65. 65. It’s Time for Every Organization to Ask: “Which Path Will We Choose?”
  66. 66. A process of mutual shaping in a constantly changing context New Business METAweb Model All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  67. 67. METAweb All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  68. 68. METAweb: Markets 2.0 • Traditional market 1.0 model: Traditional Market 1.0 Model central organization serving many individuals – Large-scale impersonal markets – Low preference expression • Market 2.0 model: flexible dynamic Market 2.0 Models capital allocation systems that provide democratic, more immediate, low-cost, affinity-directed capital Many: One Peer finance – Benefits to individuals: freedom, One: Many Affinity purchasing convenience, preferences articulation – Benefits to groups: virtual aggregation of group power to conduct transactions Many: Many Prediction markets Peer philanthropy All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info 68
  69. 69. Books you should read: crowdsourcing Stop 'Aligning IT With The Business' Connect With Customers All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  70. 70. Social Technographics™ Josh Bernoff, co-author of Groundswell All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  71. 71. I have outsourced part of my life to external cognitive servants: • No longer need a • Musical taste: memory – ITunes – Google – Yahoo • Books and others: – Wikipedia – Amazon • Personal Information • Social Capital – Smartphone tells me – LinkedIn about birthdays, phones, – Xing addresses – Facebook 71 All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  72. 72. Study by Prof. Granovetter shows that weak links are better than strong • Strong Links: More motivation to help you, since they know you better •Weak Links : Likely less overlap with leads you can easily get elsewhere Most job referrals come through those who we see rarely: old school friends, former co- workers, etc.
  73. 73. All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  74. 74. METAweb REVOLUTION 4The real, long-term change is just beginning to be felt, and anyone thinking about our economic future should consider this: • access to information is a democratizing force • makes it inexpensive and easy to collaborate and share information. Your Text here Your Text here • even the smallest companies can now have as big a presence online as a multinational corporation The revolution may have started in a garage in California but it has already crossed every border moving as freely around the globe as a cloud 74 All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info
  75. 75. All Rights Reserved 2008@STKI Moshav Bnei Zion, Israel +972 9 790 7000 www.stki.info

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