Cloud Computing

The tech industry is no stranger to inflated valuations and over-priced acquisitions that ultimately destroy shareholder value. One can’t help but ponder these facts when observing the bidding war being waged between industry titans Hewlett-Packard and Dell for a previously little known data-storage company, 3PAR.  Prior to Dell’s initial acquisition announcement on August 16th, 3PAR had a market capitalization of around $600M. As the bidding war has played out, 3PAR’s valuation has rocketed to over $2B.  All of this for a company with just under $200M in revenue in fiscal 2010 that has yet to register a profit.

To be clear, this is not a commentary on the wisdom of this prospective acquisition. However, it provides a good opportunity to consider why such an intense battle would be fought over a relatively obscure company. Finding growth opportunities is challenging for large companies. HP and Dell’s dogged pursuit of 3PAR supports the view that cloud computing is an area of intense interest to the firms and that it is viewed as a growth vehicle.

Cloud computing solutions (aka hosted solutions) offer an alternative to on-premise systems that have traditionally been deployed. Some of the many benefits of the cloud deployment model include lower total cost of ownership (no upfront capital expenditure), reduced reliance on internal IT staff, and the ability to easily stay current with software/hardware updates.

In the supply chain execution space, cloud computing solutions have been around for some time with transportation management systems being the most widely adopted.  As IT budgets and resources continue to tighten, companies are looking hard at this model for a wider range of solutions. For example, demand is increasing for full-function, best-of-breed warehouse management systems that go well beyond basic inventory control systems that have historically been on offer as a hosted solution.

Time will tell if this particular acquisition generates shareholder value for the ultimate winner. What is certain, is that cloud computing is an area that is expected to continue to grow quickly. Having the heft of an industry leader such as Dell or HP leading the charge can only accelerate adoption and growth of cloud computing for a wider variety of applications… including supply chain execution solutions.
 

A constant battle in any working environment is finding ways to best utilize your time so that you are doing what you do best and not spending your time on other tasks. As an example I have seen warehouses in which the warehouse manager spent nearly all of their time taking orders from paper and entering them into the computer so that they could print the pick ticket, and then after the order is picked he or she has to update the system and print the invoice. They hardly leave their office, leaving them essentially no time to see what is going on around the warehouse or look for ways to improve operations.

I think Marcus Buckingham has it right when he says "Do what you do best, Outsource the rest". We only have so much bandwidth when it comes to day to day activities and sometimes it is important to step back and re-evaluate priorities to find out what tasks can be "redistributed". In the case of the warehouses I mentioned above, a warehouse management system(WMS) would not only be able to free up those warehouse managers' time but allow them to take a look at their warehouses and see where they have opportunities to improve productivity, efficiency, etc. In the case of IT personnel who spend all of their time trying to keep their server up and running, a WMS in the cloud might be just what they need to free up the time to improve overall operations. And as for the warehouse logistics workers who spend much of their time fixing errors, running to find missed product, or trying to find where that last shipment was put away, there is substantial time saving. Even the time and hassle of shutting down your warehouse every month to do a physical inventory count can be overcome with cycle counts, also decreasing the number of errors which the people in the office have to sort through. So the next time you find yourself thinking, "There has to be a better way to do this," there probably is and it might be worth your time to look into a system that would help you do what you do best.

With cloud computing, the WMS vendor hosts the software application and hardware infrastructure. The customer accesses the WMS via a Web browser. Cloud-based solutions are becoming a more common alternative to on-premise software as businesses seek ways to reduce IT requirements and simplify maintenance and upgrades. Because all system infrastructure is based in an off-site, secure data center, cloud solutions also eliminate up-front capital expense and reduce the risk and time required by on-premise implementations. HighJump WMS in the cloud is ideal for growing businesses because the Amazon.com cloud is elastic and scalable; more power and storage is available as demand changes or the business expands. One simple monthly subscription covers maintenance, upgrades and support.

Read the press release.

I’m enjoying my second cup of coffee while learning about HighJump’s product strategy in our second day’s opening session at Innovation 2009. Sitting at my table with me are HighJump customers from the consumer goods, manufacturing and wine and spirits industries. Quite a representation!

HighJump’s Vice President of Product Strategy, Chad Collins, explains that HighJump plans to continue with the expansion of direct store delivery footprint into other geographies (HighJump is already the largest provider of DSD technology in North America), and deepen manufacturing execution and transportation capabilities.

As we get deeper into the presentation, we’re getting live demonstrations of some of HighJump’s most impressive new product offerings, including:
 

• HighJump Performance Advantage – HighJump’s new business intelligence dashboarding solution for supply chain products that provides quick visual representation of key operational data/metrics
   
• HighJump RouteCenter – HighJump’s go-forward route accounting system for the beverage industry has some pretty sophisticated drilldown, search and adaptability capabilities and many customers are already converting from older systems onto this modern platform.
   
• GPS – HighJump’s DSD customers get more than just dots moving around a screen. This new real-time tool is great for any companies operating in a dynamic sales environment and creates staff coaching opptys and helps with fuel consumption – it’s already being used in the rendering and dairy DSD industries
   
• HighJump Supply Chain Advantage 11.0 – our newest release is coming later this year and includes some pretty cool cloud computing and interoperability capabilities. Stay tuned!
   
• Unique upgrade process - HighJump's upgrades stand apart from our competitors in that our customers can choose to include only the workflows they need when they upgrade, and keep existing configurations! See how it works at www.highjump.com/easy_upgrade
   

It’s good day in Orlando! Today marks the official start of HighJump’s annual user conference, Innovation 2009. Highlights of the morning so far? An excellent breakfast (I think the orange juice is actually fresh-squeezed!) followed by a rousing opening session delivered by HighJump’s President and CEO, Timothy Campbell. A year ago at Innovation 2008 HighJump unveiled a new business vision built on both strategic acquisitions and leveraging current solutions. What a year it’s been! Over the past 12 months HighJump has:

• Added 196 new customers
• Made two strategic acquisitions in the DSD market – in aggregate, HighJump is now the largest provider of direct store delivery (DSD) technology in North America
• Introduced several new supply chain products, including a business intelligence module
• Made available on-demand route accounting system; unveiled plans for more cloud computing

Looks like it’s going to be a great week of networking and learning. Looking forward to some great customer testimonials coming up next from Wisconsin Distributing and Provide Commerce (ProFlowers.com, RedEnvelope, etc.)!

As with any new technology offering, new terminology runs rampant and leads to confusion. Before we tackle the question above, a quick refresher about cloud computing. Cloud computing is defined by the Burton Group as “The set of disciplines, technologies, and business models used to deliver IT capabilities (software, platforms, hardware) as an on-demand, scalable, elastic service.” Now that we have level-set on that definition; let’s dive into the above terms for some clarification.

Private Cloud – if you already run VMware, Xen or another virtualization technology then you are already familiar with one of the key technology enablers of cloud computing. If you have virtualized your server farm to get better utilization out of existing servers and scale applications as needed then you could be considered to running a private cloud.

Public Cloud –  I have already discussed the different types of public clouds available in a previous post. These are clouds outside of your corporate network and can be used for excess computing capacity, direct access to operating systems, development environments or on-demand business applications.

Hybrid Cloud – now that we have tackled the two easiest definitions, what is a hybrid cloud? As you might guess a hybrid cloud is a mix of the above. You might want to interlink your private network and public cloud if you needed additional computing capacity and could tap a hardware infrastructure public cloud as needed. This concept of handling spikes in computing capacity is known as ‘cloud bursting’. There are some technology considerations such as running the same hypervisor on both environments and matching-up server chip sets that can make this challenging, but improvement is expected in this area. Another reason to consider a hybrid cloud approach is to move new applications to the cloud while keeping legacy applications internal. For older systems that have several components and touch points to other systems it can be very tricky to successfully move that to a public cloud. In addition security is still a big concern with many companies, and some will opt to move certain pieces of an application to a cloud while keeping all the sensitive data behind the company’s firewall.

Hopefully that helps give you a little better understanding of which cloud is right for you. As you start to look at it in the context of your organization you will probably find that all of the above could be applicable depending on the specific business problem you are trying to solve. As a reminder our user conference is next week in sunny Orlando, and I would welcome the chance to sit down and discuss your company’s approach to cloud computing.

As an environmental engineer at Duke University, I studied different types of clouds and the mechanics of their movement in the sky. At that time I could just look at a cloud and tell the type of atmosphere and weather conditions that were present. While the science that went into that analysis is now far beyond me, it appears clouds are again a hot topic! If you read anything in business technology you are likely to see several mentions of cloud computing. Currently there is not a more over-hyped and thus confusing term. Several companies are offer cloud based solutions; well what are they really providing?

I recently attended a wonderful seminar by the Burton Group (http://www.burtongroup.com/) on the topic of cloud computing. I found their classification to be very crisp and straightforward. They classify cloud offerings into one of four categories:

• Application Clouds (Software as a Service) – these are SaaS based solutions and the most common cloud offerings today. In supply chain TMS are the most common SaaS solutions available.
• Platform Clouds (Platform as a Service) – these solutions provide a development environment and tools to build custom applications.
• Software Infrastructure Clouds (Software Infrastructure as a Service) – this type of cloud offers baseline software capabilities such as RDBMS, EAI, and ETL.
• Hardware Infrastructure Clouds (Hardware Infrastructure as a Service) – these are elastic on-demand hardware and OS capabilities. Amazon’s EC2 has created the most buzz in this area. These solutions are ideal if you are experienced with virtualization and rather than virtualize on your internal hardware you would prefer to buy hardware by the drink from someone else.

I think the above classification is extremely useful before your company goes rushing into the cloud. Take the time to understand what your real goals are for pursuing a cloud based solution and then find the right sub-set of vendors that can meet your requirements; otherwise you will spend a lot of time, like I did in college, just looking at the clouds.

I have been without a home personal computer for nearly a year now. After the hard drive failed in the family desktop for a second time in 6 months, I packed it up and moved it to the garage (a trip to the electronics recycling facility is coming soon). I have been delaying the purchase of a new computer because I don’t want the hassle of administering virus software and installing new applications.

Now, through my recent exposure to SaaS and cloud computing at work, I am starting to rethink my needs at home. Very soon HighJump will be announcing that of our newest route accounting platform, HighJump RouteCenter, will be delivered in a SaaS model. This model allows our customers to focus on what they do best – selling more beer, wine, spirits, and soft drinks – while we worry about maintaining hardware and network infrastructure. No longer will customers need to worry about data centers, electrical, cooling, system administration, patching, cabling, and other low-value but expensive IT infrastructure costs. Additionally, our customers get a “network effect” as they can leverage pre-defined integrations to major supplier organizations like Coca-Cola, Pepsi, Anheuser-Busch, and MillerCoors. We have projects underway to expand this approach across the product suite and even run on commercial cloud solutions. These are exciting developments! I am convinced this will change the way customers think about their IT going forward.

Now back to my home computing situation….I don’t really need a personal computer (or Mac). I need a window into the cloud that allows me to access photo collections on Flickr, my friends on Facebook, office applications from Google or Microsoft and email from Google. So it looks like a NetBook is the newest item on my shopping list!

Just a few years ago, the definition of a technology company was fairly straight-forward. Technology companies had product-focused R&D, launched products and sold those products directly or through channels. It is not as straightforward any more. Is Facebook a technology company? How about Amazon? How about a third party logistics provider?

The answer is becoming more nuanced as firms are finding ways to use technology to drive process differentiation in the market. Amazon has simplified the process of buying over the web to the point that this technology service is becoming as important a “product” as the consumable products sold through their site. Amazon’s expansion into technology services has even led them to provide Infrastructure as a Service (IaaS) through their cloud computing solutions. 

Sure, technology still has a role of making businesses more productive and helping them gain economies of scale. However, this is only the most basic level of thinking when it comes to applying technology to business problems. A more sophisticated approach is to determine what customer needs are currently unmet in your market and can be satisfied through the unique use of technology.

I often hear that supply chain execution technology is considered “commodity” IT. This reference is common when people evaluate best of breed technology solutions against ERP based solutions. Any company looking to derive an advantage from their supply chain should not view their execution technology as commodity. Companies who look to differentiate based on their technology service and supply chain should look to solutions that provide them full functionality and the ability to create unique, differentiated processes within the system.  Amazon certainly did not get to where they are today with a “commodity” view of technology.

"Is it live, or is it Memorex?" - I remember a set of commercials from a long time ago were you couldn’t really tell if the sound that broke the glass was real or a virtual sound from a Memorex tape.

 It is the same with Virtualization in IT today. You really can’t tell the difference between an app running on a physical or virtual machine.  We have seen this trend growing more and more over the last few years. Virtualization provides many benefits to a company including “greener IT,” lower costs, server consolidation, higher server utilization, faster provisioning etc.

There are also many layers that are benefiting from virtualization in IT other than just at the server level such as storage, networking and others. Virtualization also is a key enabler for cloud computing which is a topic for a later discussion.

HighJump Software fully supports our software in a virtualized VMWare ESX environment, and we utilize virtualization heavily in our own development processes including testing and automated builds. The leading vendor in this space is VMWare but there are many other providers that see the trend increasing and are now in the space in a big way including Microsoft, Citrix/XenSource, IBM, Novell and many others.

 I would encourage anyone just learning about virtualization to research the different options and vendors and start developing a strategy for deployment and management in a virtualized world.

So the next time you are using your favorite software from your corporate IT systems, you may wonder “Is it live or is it Memorex?”