Excellent multimedia presentation from Mckinsey:

http://www.mckinseyquarterly.com/Enduring_Ideas_The_business_system_2379

Business strategy involves an integrated set of actions designed to help companies gain sustainable advantage over competitors. The business system is a framework that allows a company to formulate the set of actions most likely to achieve this advantage. First introduced in a McKinsey staff paper in 1980,¹ the business system was later presented to the public by McKinsey’s Fred Gluck,² who stressed its usefulness in forming strategy. In 1985, Harvard’s Michael Porter introduced a similar framework—the value chain—and cited the business system concept in the book Competitive Advantage.³

The business system charts all the steps involved in creating and delivering a company’s product. At each link in the chain, from product development to sales and service, managers have a choice of how to conduct business. From a strategic point of view, the most important assessment is how the choices made at each step reinforce the company’s overall value proposition and, hence, its competitive advantage. The word system in business system emphasizes the importance of aligning conduct at every step with the value proposition.

To develop improvements to any one link, managers can ask a series of open-ended questions about current practices and alternate possibilities: How does the company perform at this stage? Is there a better way? How do competitors behave? Who achieves lower costs—the company or its competitors? By varying the questions, examining scenarios, and evaluating all in light of the company’s total strategy, a company can discover new strategic moves to make within an existing business—for example, whether to expand or diversify. When used to evaluate acquisitions, the framework forces managers to look for synergies between the target’s own activities and the company’s current business system.

A surprisingly simple concept, the business system continues to be a serviceable tool. Deeper examination of current conditions and potential changes at each stage can reveal the forces likely to shape a business over time—and the competitive capabilities required to meet them

ANother great article on opensource and the discussion of standards for moving data between clouds


http://www.economist.com/opinion/displaystory.cfm?story_id=13740181

Unlocking the cloud

May 28th 2009
From The Economist print edition
Open-source software has won the argument. Now a new threat to openness looms



“FIRST they ignore you, then they laugh at you, then they fight you, then you win.” Mahatma Gandhi probably never said these words, despite claims to the contrary, but they perfectly describe the progress of open-source software over the past 15 years or so. Such software, the underlying recipe for which is created by volunteers and distributed free online, was initially dismissed as the plaything of nerdy hobbyists. Big software firms derided the idea that anyone would put their trust in free software written by mysterious online collectives. Was it really secure? Whom would you call if it went wrong?

At the time, selling software to large companies was sometimes likened to drug dealing, because once a firm installed a piece of software, it had to pay a stream of licence fees for upgrades, security patches and technical support. Switching to a rival product was difficult and expensive. But with open-source software there was much less of a lock-in. There are no licence fees, and the file formats and data structures are open. Open-source software gained ground during the dotcom boom and even more so afterwards, as a way to cut costs.

Microsoft, the world’s biggest software company, went from laughing at the idea to fighting it, giving warning that there might be legal risks associated with using open-source software and even calling it a “cancer” that threatened to harm the industry. Yet the popularity of open-source programs such as the Linux operating system continued to grow. The fact that Google, the industry’s new giant, sits on a foundation of open-source code buried the idea that it was not powerful or reliable enough for heavy-duty use. One by one the industry’s giants embraced open source. Even Microsoft admits that drawing on the expertise of internet users to scrutinise and improve software has its merits, at least in some cases.

The argument has been won. It is now generally accepted that the future will involve a blend of both proprietary and open-source software. Traditional software companies have opened up some of their products, and many open-source companies have adopted a hybrid model in which they give away a basic version of their product and make money by selling proprietary add-ons (see article). The rise of software based on open, internet-based standards means worries about lock-in have become much less of a problem.
Clouding the picture

But now there is the danger of a new form of lock-in. “Cloud computing”—the delivery of computer services from vast warehouses of shared machines—enables companies and individuals to cut costs by handing over the running of their e-mail, customer databases or accounting software to someone else, and then accessing it over the internet. There are many advantages to this approach for both customers (lower cost, less complexity) and service providers (economies of scale). But customers risk losing control once again, in particular over their data, as they migrate into the cloud. Moving from one service provider to another could be even more difficult than switching between software packages in the old days. For a foretaste of this problem, try moving your MySpace profile to Facebook without manually retyping everything.

The obvious answer is to establish agreed standards for moving data between clouds. An industry effort to this effect kicked off in March. But cloud computing is still in its infancy, and setting standards too early could hamper innovation. So buyers of cloud-computing services must take account of the dangers of lock-in, and favour service providers who allow them to move data in and out of their systems without too much hassle. This will push providers to compete on openness from the outset—and ensure that the lessons from the success of open-source software are not lost in the clouds.

Good Economist article on the open source movement and the convergence with commercial software operating on "the cloud."

http://www.economist.com/business/displaystory.cfm?story_id=13743278Open-source software in the recession
Born free

May 28th 2009
From The Economist print edition
Open-source software firms are flourishing, but are also becoming less distinctive

MANY technology firms are floundering amid the recession. But many of the ones that offer services tied to open-source software—free programs written by volunteers who collaborate online—are boasting double-digit growth. Sales at Red Hat, the world’s biggest independent open-source firm with annual revenues of $653m, grew by 18% year-on-year in the first quarter. More and more firms, particularly in Europe, seem prepared to embrace open source (see chart). “Budgets are tight and we think that is good for open source,” said Jim Whitehurst, Red Hat’s boss, when announcing the results.

Indeed, open source is so widely accepted that traditional software firms are beginning to dabble in it, while some open-source firms are starting to sell proprietary add-ons to open-source programs instead of charging to provide support to firms using open-source software. If current trends hold, traditional software firms and their open-source rivals will soon be hard to tell apart. “A new pragmatism is rising,” says Matt Asay, an open-source advocate and an executive at Alfresco, which makes open-source software that helps firms manage digital content.

The “free and open-source software” movement, as it is officially called, has come a long way from its anti-establishment origins. Pioneers such as Richard Stallman did not want users to be locked into monolithic products, but to be able to change programs in whatever way they wanted, and to share their modifications.

For years, this software commons was no more than an obscure sideshow. But then the internet provided volunteer programmers with a way to co-operate cheaply. IBM and Oracle, two industry giants, threw their weight behind the Linux operating system, in part to weaken their rival Microsoft. After the dotcom bubble burst in 2001, many firms turned to Linux and other open-source software to save money.

Cost is once again the main reason why companies are turning to open source, says Jeffrey Hammond of Forrester Research, a consultancy. Its success is no longer limited to basic software, such as Linux or Apache, a program that powers web servers. Open-source firms are flourishing in databases (Ingres, for instance), business intelligence (JasperSoft), customer-relationship management and other business applications (SugarCRM, Alfresco). In addition, open-source firms have started to move into new markets without proprietary rivals. For instance, a company called Cloudera distributes a version of Hadoop, a program which helps firms process and analyse the unprecedented volumes of data generated by large websites.

But cost is not the only reason for open source’s growing popularity. Many firms now know that it offers more flexibility than proprietary programs, the licences for which often include restrictions on how they can be used, explains Matthew Aslett, of the 451 Group, a market-research firm. And companies no longer perceive free software as riskier, he adds. Getting sued for running programs that inadvertently violate somebody else’s intellectual property, for instance, has proven not to be as big an issue as once feared. Most open-source firms indemnify their customers against such lawsuits in any case.

All this has led many companies to develop a much more pragmatic approach to open-source software. In the late 1990s installing Linux was often something of a gesture of defiance against Microsoft’s domination of the software industry. Today decisions are more rational. The key question is whether the savings in licensing fees for proprietary products outweigh the additional costs in manpower to integrate and operate the free alternative. “Open-source software has become a means to an end,” says Forrester’s Mr Hammond. “Most firms don’t really care that it is libre, as in freedom, but that it is gratis, as in beer.”

Open-source firms themselves have also become increasingly pragmatic. Red Hat and Novell, its main rival, still make money by giving away Linux and charging for support: customers sign up for a subscription that gives them the right to all the updates and someone to call if something goes wrong. Yet recent years have seen a flowering of different business models. A popular approach is to sell proprietary extensions to an open-source core. “The support model does not scale well,” Mr Aslett explains. It does not generate the returns expected by venture capitalists, who invested more than $3 billion in 163 open-source firms between 1997 and 2008, according to a study by the 451 Group.

Conversely, having realised that they can economise on resources and garner good ideas, proprietary software firms are increasingly taking a liking to open-source programs, albeit mostly at the edges of their offerings. IBM has sprinkled open-source software throughout its product line and is rumoured to be interested in buying Red Hat. If Oracle’s acquisition of Sun Microsystems goes through, it will have an even bigger open-source portfolio including MySQL, a popular program for databases. Even Microsoft now carefully embraces what its managers once described as a “cancer”.

Cloud computing—the delivery of processing power over the internet from vast warehouses of shared machines—will further blur the lines between proprietary and open-source software. Most of the firms peddling this model, such as Amazon and Google, use open-source software, since having to pay licensing fees would make the business unprofitable. But their services also rely on code developed in-house, which is not given away free. Microsoft, meanwhile, is building a huge cloud using its own software. If computing becomes a service delivered over the internet, it will hardly matter how the underlying software is developed.

Does this mean that the quest for openness in software is obsolete? On the contrary. If they are not careful, companies and consumers could get locked into a cloud even more tightly than into a piece of software. This is because data residing in the cloud can be hard to move to another service. “If you have a gigabyte somewhere, it develops a certain inertia,” says Mike Olson, the boss of Cloudera, which recently found it could not switch from a poor storage service because there was no way to move the data.

This sort of problem has spawned an open-data movement. In March a group of technology firms led by IBM published an “Open Cloud Manifesto” that has since received the support of more than 150 companies and organisations. It is only a beginning, but perhaps this time around the industry will not have to go through a long proprietary period before rediscovering the virtues of openness.

Psychologist Karl Weick tells a well known story about Hungarian soldiers lost in the Apls to explain his contention that in a crises, leaders need to act in order to think. This has come to be known as enactment.
This theory is discussed with regard to the current environment in a recent article in the Harvard Business Review.

http://blogs.harvardbusiness.org/hbreditors/2009/01/leap_while_you_look_moving_for.html

Weick offered a practical example of his theory. Some Hungarian troops who got lost in the Alps wandered around aimlessly until one of the soldiers found a map in his pocket. The platoon found their way to safety, only to learn that the map they used was, in fact, a map of the Pyrenees. "I just love that story," Weick laughed, "because it illustrates that when you're confused, almost any old strategic plan can help you discover what's going on and what should be done next. In crises especially, leaders have to act in order to think - and not the other way around."

Would people agree?

http://www.lexisnexis.com/media/pdfs/LexisNexis-Technology-Gap-Survey-4-09.pdf

Bua Consulting has just launched its Business Technology Diagnostic.

The diagnostic is a simple free questionnaire on IT use in your business that can be completed in 5 - 10 minutes. Once completed it will provide a simple report outlining areas where you can make better use of IT in your business.

See how your business performs by trying it today.

http://www.bua-tools.com/technology_diagnostic/index.php

Central Desktop ran an interesting webinar in conjunction with IDC recently about the use of Software as a Service called:

"The Benefits of an Integrated Approach to Collaboration and Social Technology in Today's Tough Business Environment"

This webinar is a good first step in learning how to implement SaaS based collaboration and social technology for a better ROI accross your entire organization. Lower IT expenses and save workers time by taking a SaaS-based integrated approach to collaboration. Leverage web workspaces, meetings and social tools to manage your business better and more easily.

Visit http://www.centraldesktop.com/saas_webinar to watch. (You'll need speakers)

This article at

 http://www.economist.com/business/displaystory.cfm?story_id=13331334

IT WAS the day Sun Microsystems was supposed to rise again. On March 18th the Silicon Valley computer-maker had planned to unveil a new online service to allow start-ups to manage with much less hardware, by buying computing capacity from a “cloud”, rather like electricity from the grid. But the event was overshadowed by the news, hours earlier, that IBM was in talks to buy Sun for at least $6.5 billion in cash, which would translate into a near-100% premium over the firm’s depressed share price in recent weeks.

As The Economist went to press, a deal had yet to be confirmed. But it is no surprise that the two firms are talking. The economic crisis has pummelled Sun, which never really recovered from the dotcom bust. As its share price plumbed new lows, IBM’s remained relatively unscathed (see chart)—a reflection of its business, which has been protected by the computer giant’s global scope and the fact that it makes most of its money from software and services.

In the months to come, more big fish will seek to swallow smaller fry. That is because something deeper is going on in the computer industry. Thanks to ever more powerful chips and new software, servers and other hardware can now be “virtualised”, meaning physically separate systems can act as one. This enables computing power to become a utility: it is generated somewhere on the network (“in the cloud”) and supplied as a service. To simplify their complex data centres and cut costs, more and more companies are thinking about building in-house computing utilities, called “private clouds”, or outsourcing computing to “public clouds” of the kind Sun launched this week.

What is more, as computing becomes a utility, the borders between different systems are starting to blur. A server, for instance, can easily function as a router (a box that directs data around networks). And this convergence means that companies that used to be allies, or in totally different markets, are now starting to compete with each other, argues James Staten, an analyst at Forrester Research.

As a result the industry’s landscape is shifting. Last year Hewlett-Packard (HP), the world’s biggest computer-maker, bought Electronic Data Systems, a big provider of computer services, giving HP more manpower to help its customers build more advanced data centres. HP has also acquired software to manage data centres and put a greater emphasis on networking gear, an important component in the computer centres that have become the heart of many businesses.

Cisco, the world’s biggest maker of routers, has responded by moving into a new area: it will soon start selling servers. Together with other firms, including BMC and VMware, it has developed what it calls a “Unified Computing System”, which was unveiled on March 16th. This is essentially a private cloud in a box. Instead of having to wire up servers, storage devices and networking gear, companies can build and reconfigure virtual computer systems with a few mouse clicks.

For IBM, the third big contender in this emerging field, part of the attraction of Sun is that it has some assets, such as networking gear and data-centre software, which would beef up IBM’s ability to build private clouds. Industry observers think IBM would probably sell many of Sun’s other businesses, however, such as its line of high-end servers. A counter-bid for Sun from HP or Cisco is also possible.

HP, Cisco and IBM (and perhaps Dell, another troubled computer-maker) are gearing up to fight what has come to be called the “war for the data centre”. Much is at stake: this year alone, companies will spend about $100 billion on data centres, according to IDC, a market-research firm. As computing moves online, however, these companies will increasingly have to compete with operators of “public clouds”. Microsoft plans to enter this field, in effect offering to run companies’ computer systems for them inside its own giant data centres. Google is gradually expanding its suite of cloud-based offerings. And Amazon, the world’s biggest online retailer, is also a pioneer in the field of cloud-computing services, which it has been offering for some time.

In a way, all this is a throwback to the era of “time-sharing” on mainframe computers. In the early days of computing, companies either had to buy a mainframe, which cost millions, or share one with someone else. Now firms will once again be confronted with this choice. Contrary to what some argue, however, big companies are unlikely to go fully either way. In fact, the computing sky will probably always be cloudy, meaning that there will be many private and public clouds, and they will come in all shapes and sizes. And most of them will be interconnected. Cisco already has a name for this computing climate: the “Inter-Cloud”.

Without urgency any change effort is doomed.

 Hear Harvard Professor Michael Porter talk about forming a long term strategy to counteract the effects of the economic downturn.