Part I: The Manager s View

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2 Part I: The Manager s View This story defines component and architectural improvements in cloud computing, along with their relevance to the market and competitive performance advantage. t s no secret that product development managers advance their most compelling features and functionality to get a leg up on the competition. But even with the utmost of due diligence, these same managers often overlook other important considerations in prioritizing features and functionality that translate into a competitive performance advantage. These considerations focus on making a distinction between component and architectural feature improvements (1,2). While component and architectural improvements are relative, not absolute terms, component improvements address incumbent markets and customers, whereas architectural improvements enable new markets and customers. 2 Volume 2, 2011: Issue 3

3 Consider the weather modification variety of seeding the cloud, which started more than half a century ago; scientists addressed the main market of rain-making for irrigation purposes by introducing chemicals in the atmosphere by air- and groundbased means. More recently, lasers have been used. New applications include the ancillary and pseudo markets of fog, hail, and air pollution suppression. The timeless notion of component and architectural improvements is alive and well. Today s cloud computing environment parallels many other industries that have intentionally developed technologies to retain incumbent markets and innovate new ones. This analysis makes three points: Component and architectural improvements in cloud computing must be strategically evaluated by product development managers to satisfy incumbent and nascent markets. Although component and architectural improvements may be more or less aligned with the constituent elements of cloud computing (facilities, networks, servers, security, virtualization, application management, etc.), both types of improvements are mission critical to profitability. Architectural improvements present a fork in the road, requiring a new mindset to incubate these disruptive technologies. Evaluation of Component and Architectural Feature Improvements Most products and services come into world in the usual way. They all start with an idea. A business plan details the value proposition, market segments and target markets, product roadmaps, forecasting, pricing, and go-to-market plans. In the very early stages of product lifecycle development, features are prioritized 1 through n. Invariably, a cutline is drawn in this prioritized feature list. Finally, at the end of navigating through the rugged terrain of resource and cost contention, schedule constraints, and feature creep, a product or service is built and delivered. In developing a prioritized feature list, product managers need to ask the following questions. Is there a distinction made between features that enable component versus architectural improvements? Have incumbent markets and new markets been identified? If architectural improvements have been identified, is the organization able to take an offensive and/or defensive position to promote competitive advantage? Finally, is the organization willing to revisit these issues throughout the product development lifecycle? Table 1 below presents the criteria, which distinguishes component versus architectural improvements. Seeding the Cloud Table 1: Decision Criteria for Component and Architectural Improvements Volume 2, 2011: Issue 3 3

4 In addition to market impact previously discussed, the pioneering work by Clayton Christensen at Harvard Business School has addressed four other decision criteria of component and architectural improvements. First, component improvements rarely lead to a first-mover advantage, whereas architectural improvements often do. Second, S-Curves (initial slow performance growth as a function of time, followed by rapid performance growth, culminating in a performance plateau) tend to plateau in component improvements as a consequence of firm-specific limitations. Architectural improvements tend to reach performance plateaus due to industry-specific trends. Third, incumbent firms are much more inclined to foster component improvements. After all, their existing customer base and internal corporate functions are tactically aligned with component and incremental improvements. Fourth, architectural improvements are disruptive; they create new markets that are characteristic of true innovation. Features and attributes in cloud computing have component and architectural dependencies as shown in Figure 2 for the data center. Once again, there isn t a digital separation between component and architectural improvements owing to all the criteria described in Table 1. However, the key distinction is that features representing architectural improvements must 1) enable the possibility of new markets; 2) have a track record in actually creating new markets; and 3) be sufficiently disruptive to promote market feasibility at the low-end. In examining Figure 2, data center attributes including security, compliance, virtualization, open standards, and enterprise IT control lean heavily on the architectural side. While these attributes have become a greater part of the data center s componentry, they play vital roles in creating new markets and new data center solutions, which are emblematic of architectural change. As an example, virtualization plays an architectural role in the management of pooled resources, allowing better responsiveness to changing organizational needs. Today s virtualization technology yields a variety of specializations including full virtualization, partial virtualization, para-virtualization and hardware-assisted virtualization. These specializations change the dynamic between host and guest machines, leading to new markets and data center implementations. Today, the hallmark of architectural change in cloud computing is in the field of virtualization. Yet, as of the beginning of 2010, only 18 percent of all data centers that could be virtualized have been virtualized, according to Gartner. There are concerns, some real and some perceived, that data centers lack sufficient security and compliance control. Enhancements in virtualization can go a long way to quell those concerns. Data center attributes including facilities, networking, and X86-based servers/hardware are more component-driven, but also have architectural dependencies. Advances in networking and protocols promote architectural improvements in capacity and connectivity. Advances in microprocessor technology and hardware enable architectural improvements in virtualization and speed. In summary, features and attributes in cloud computing have stronger architectural dependencies than those, for example, in the disk-drive industry for one crucial reason features and attributes in cloud computing tend to reach their performance plateaus owing to industry-specific trends and standards, not firm-specific capabilities. Once a performance plateau is reached, the whole industry moves forward and only those firms adopting the latest in architecture will have a first-mover advantage. The complexities of first-mover advantage in cloud computing are worthy of a completely separate discussion. Other features and attributes of cloud computing that have architectural dependencies are uncovered when comparing data center solutions. (3) This is shown in Figure 3. Information Technology (IT) control can reside in the enterprise for private data center markets or in third parties for cloud computing and various forms of hosting. Simply put, the need for IT control plays a vital architectural role in creating new data center solutions and markets. Figure 2: Component and Architectural Dependencies in Data Centers 4 Volume 2, 2011: Issue 3

5 Seeding the Cloud Figure 3: Enterprise and 3rd-Party IT Management for Data Center Solutions Profiting with Component and Architectural Improvements Both component and architectural improvements in cloud computing have their place in making profit for the firm. Performance features and attributes in cloud computing are especially interdependent regardless of whether they are component or architecturally driven. Hardware is connected to virtualization. Networks are connected to everything. It would be a big mistake to become monolithic in the selection of options to profit the firm. However, architectural improvements have a special place transforming industries and eclipsing component improvements, as will be shown. To put some color on this, consider the disk-drive industry from 1970 to Ferrite heads and oxide disks were a component of disk-drive architecture. Some firms including Control Data Corporation, Fujitsu, and Hewlett-Packard were reluctant to even change the component composition from ferrite heads and oxide disks to a complete thin-film solution. Instead, they chose to wring out incremental improvements on existing component technologies with great success in improving areal density. Other companies, such as IBM, were quick to make component switches. None of the companies gained first-mover advantage as performance plateaus were firm-specific, not industry-specific. However, architectural changes in the disk-drive form factor were a different story. Those firms that failed to make the industry shift from one form factor to the next were out of business within three years. In cloud computing, firms can make excellent returns on incremental improvements for existing markets and customers. For those managers confident in wringing out performance improvements with existing technologies without moving to new component or architectural changes, discretion is probably the better part of valor. However, features and attributes in cloud computing have strong architectural dependencies where performance moves with industry-wide specificity. Even with networking technology, which has both component and architectural dependencies, it is important for firms to make the right transitions to retain competitive advantage. This is shown by the S-Curve analysis in Figure 4 for Ethernet technologies. Volume 2, 2011: Issue 3 5

6 Component and Architectural Improvements A Fork in the Road Even with the best product planning in the cloud computing/xaas arena, the distinction between component and architectural improvements is often not made and perhaps not even recognized. Furthermore, these types of improvements are assessed at a discrete point in time as shown in Figure 2, which can change radically in even the shortest of product development lifecycles. Product development managers shouldn t split hairs on the definition of component and architectural improvements. In most industries and especially in cloud computing, these are relative, not absolute terms. There are strong interdependencies among component and architectural improvements. Rather, these same managers should assess when features and their attendant performance improvements promote new, disruptive markets. If so, there s a fork in the road. Product managers can continue to execute component improvements at attractive returns for an incumbent customer base. However, they should incubate new architectural improvements separately, even if the payoffs are not immediate. This includes not only getting on the offensive to develop new architectural improvements, but also taking a legitimate defensive posture to introduce barriers to entry among competitors. A fork in the road can be adequately negotiated, provided there is a well-trained army of technical and business foot soldiers. But failing to venture down the road of architectural improvement can prove fatal to the incumbents. References (1) Clayton M. Christensen, Exploring the Limits of the Technology S-Curve. Part I: Component Technologies, Production and Operations Management. Vol. 1, No. 4, Fall 1992 (2) Clayton M. Christensen, Exploring the Limits of the Technology S-Curve. Part I: Architectural Technologies, Production and Operations Management. Vol. 1, No. 4, Fall 1992 (3) Lynda Stadtmueller, Buildout, Co-Lo, Hosting, or Cloud: Competing for Enterprise Data Center Dollars, Stratecast, a Division of Frost & Sullivan, Vol. 3, No. 1, Februrary, Figure 4: Ethernet S-Curves 6 Volume 2, 2011: Issue 3