Intere ted in innovation - TMH

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					              6     I EDITOR'S                NOTE                                               20   I TOP    TEN PROJECTS IN 2006
              Intere ted in innovation? Then put the                                             What project are CIO im'e ting their                                       Publisher
                                                                                                                                                                      Zift Davis Media Inc.
              development tool in your cu tomer'                                                 money in thi year? ccordin to a
                                                                                                                                                                        Editors in Chief
              hand, it back and let them dri e your                                              Baseline urvey of more than 1.400                                   Eric Lundquist, eWEEK
              company' innovation.                                                               reader, the leading three projec are                             John McCormick, Baseline
              By eWEEK Editorial Director Eric Lundquist                                           oice over Internet Protocol, ou ourc-                          Ellen Pearlman, CIO Insight

                                                                                                 ing and data networking.                                            Contributing Editors
                                                                                                                                                                        Eileen Feretic
              SIINNOVATIONMAKES                                                                  By Baseline enior Editor Todd pangier                                  Tom Halligan
              EMERGING TECHNOLOGIES PAY OFF                                                                                                                           Jack Rosenberger
              A survey of nearly 400 senior IT                                                   30   I INTO    THE GREAT WIDE OPEN                                       CopyEditor
              executive investigate how emerging                                                 Migrating to an open source oftware                                      Lisa Delgado

              technologie and IT organization are                                                 tack operating on IBM equipment                                       hojed Diredor
                                                                                                                                                                        Michael Sanchez
              contributing to bu ine s innovation.                                                aved eTrade millions of dollar and
                                                                                                                                                                       hojed Manager
              By CIO In ight Executive Editor Allan Alter                                        enabled the company to optimize i                                     Andrea Mahoney
                                                                                                 internal development proce e. Today.                                hodudion Manager
              10      I EXPERT              VOICES:                                              eTrade enjoy ignificant performance                                    Ivis Fundichely
              GEOFFREY MOORE                                                                     increa e and greater flexibilit).                                       Art Diredor
              Innovation mean very little if all your                                            Bye WEEK enior Analy t Jason Brooks                                    Andrew Capitos
              envi ioned new product and ervice                                                                                                                       Graphic Desipers
              are never actually created, ay                                                     34   I END    NOTE: INNOVATION
                                                                                                                                                                        Maurizio Masi
                                                                                                                                                                         DaniloMatz
              Geoffrey Moore. Innovation require                                                 BEGETS INNOVATION
                                                                                                                                                                          5edion Writers
              an inve tment trategy that put your                                                To get value from IT, focu on the                       All editorial content was written and produced
              re ource where they matter mo t and a                                              down tream tran formation of th                         by the staffs of Baseline, ao Insight and eWEEK.
              people trategy that align tho e re ource                                           bu ine that's made pos ible by                              No material may be reproduced in any
                                                                                                                                                          form without the written permission of the
              with the be t kill of your employee.                                               implementing new technology.                            publisher. For information about Innovations
              By CIO In ight Editors Ellen Pearlman                                              By ZiffDavi Media Editorial Director and                     2006 magazine, call 212-503-5640.
              and Edward Baker                                                                    enior Vice Pre idem Michael Vi:ard
                                                                                                                                                                          INNOVAnONS      2006
                                                                                                                                                                          Zift Davis Media Inc.
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                                                                                                                                                                          New York, N.Y.10016
4 -? INNOVATIONS2006 -? SUMMER                                                                                 Cover illumation   by Craig 'razier
..........................................................................................   ,                                                       .
        I   Editor's Note           I   Eric Lundquist,     eWEEK




        LET CUSTOMERS DRIVE
        I OVAII N
        IS THE INNOVATION WHEEL about to spin once more?                            applicarion     deyelopment          firms are numbered.      In that
        I think so. Most companies cite listening to their customers                era, once the application          was developed,    it would remain
        as one of their main goals. Listening and spending time                     in place for year       or decades without change. Today's
        with customers is one of the ways companies hope to                         innO\"arion-laced      world of service-oriented       architectures
        deliver a product or service ahead of their competitors.                    is ju t tarring to hint at this change.
            While listening to customers       is a given, how about the                What if Zillow decided that there were more precise
        idea of taking yourself out of the equation? Instead of                     real e rate pricing mechanisms?            Rather than gnash their
        listening to your customers, why not give those customers                   teeth and hope no other company embraced                   the more
        a basic framework,       then stand back and let them design,               elegant pricin        tructure, zillow could easily and transpar-
        market and fund your products?                                              ently mO\"e to that pricing service. In the service-oriented
            If that sounds like a radical idea, you haven't been                    architecture world, a new competitive offering can be
        spending much time on the social networking                  sites          embraced and become a customer feature for your company.
        that have sprung up on the Internet. Com-                                                     Changing sales force automation             systems,
        munity sites such as MySpace.com provide a                                                billing     ystems and customer        contact systems
        framework       upon which a community            builds                                  "ill     oon become projects that can be done
        informal,     formal and informational       networks                                     in months, rather than in years at a cost of
        about people.                                                                             hundred of millions of dollars. You, as the
          Recently, companies such as Zillow                                                      c      tomer, will fit your application       needs
        (www.zillow.com) have been created around                                                 into the framework           that major vendors are
        the concept of putting real estate information                                            prO\iding. And rather than locking you into a
        into the consumer's      hands. In this case, Zillow                                      proprietary approach, those vendors will be
        has provided a robust framework          that includes                                     trhing to show how quickly they can adapt
        real estate value estimates,        but also opens                                        to your needs and requirements.
        the door for buyers, sellers, banks and event real estate                     Does all thi        ound too good to be true? It would be, if
        professionals    to inhabit the Zillow space. What Zillow has               it weren't happening        already. Are you unhappy with your
        done for real estate is also taking place in online banking,                Vonage digital phone service? Then try Skype. Or Yahoo.
        stock markets and corporate         manufacturing.                          Or AOL. Are you unhappy with your e-mail account on
           And the innovative idea of letting the customer create                   Google? Then pick anyone              of 10 different Web-based
        the final product is not just the province of the digital                   e-mail system        available.
        world. Toyota's Scion automobile         line encourages       a robust       Those same techniques             that allow you to pick and
        aftermarket     of products and services for customers               that   choose digital phone or e-mail systems will soon be avail-
        want to personalize       their Scion with specialized           paint      able in your corporate        computing      environment.     You, the
        applications,    tires and, of course, booming sound systems.               customer, will be able to pick and choose applications
        Toyota is trying to take the automobile aftermarket business                running on virtual computing networks where all the old
        from the professional      few to the amateur        many.                  hassles of incompatible           systems are invisible.
                                                                                      Innovation in this technological spin of the wheel
        ADAPTING QUICKLY TO CHANGING NEEDS                                          doesn't mean simply listening to your customers. It means
        In technology,      this approach   of providing the framework              putting the development            tools in your customers'     hands
        and letting the customer do the final detail work will have                 and letting them drive innovation.            '"i'
        a profound impact on the computing environment. The
        days of custom work being done by highly specialized                        Eric Lundquist is the editorial director of eWEEK.

6 -7 INNOVATIONS 2006 -7 SUMMER
     Innovation
     Makes Emerging
     Technologies
     PayOff
       Story by CIOInsight Executive Editor                                 Alter
       ...; illustration by Todd Davidson

                                                                             •••
               Greg I aac i following in the foot-
                tep of the mi ionarie who went
               to China year ago, only he i not
               there to do the Lord' work. In tead,
               he explained in a phone call from
                hanghai, eBay Inc. ent him there
               to "evangelize to             hine          develop-
               er ." eBay e timate that more than
               430,000 people in the nited tate,
               and thou and more worldwide,
               make a living - full- or part-time                       -
                elling on the online auction                   ite.
                   ow the company hope to add
               tens of thou and of Chine e citizen
               to that number. It want to encour-
               age third-party software develop-
               ers to create oftware u ing Web
               service that will help high-volume
               Chine e cu tomer,                the ort who ell
               thousand        of item        online, to ea ily
               manage their eBa                ale.                                 bu ine    partner,   IT ha become a       a r cent conference.     "The only way
                 eBay al 0 want               developer            to               fundamental    ingredient   in innova-    we are going to pro per i to attract
               create      oftware that will let Chi-                               tion. nd today, inno ation i n't          high-value     inve tment and perform
               ne e buyer         place and track bid                               ju tabu ine fundamental, but              high-value economic activity here
               on their mobile phone . I aac '                                      an merican ob e ion - even a              in the nited tate.     nd the way
               mi ion, a the director of eBay'                                      patriotic duty.                           to do that i through creating n w
               developer       program,          i "to attract                        "Why i innovation     important?        value, new products and ervices that
               the developer           community            to build                Well, quite frankly, it's the only way    compete and ucceed globally."
               innovative       application           ."                            we're going to have a [high]    tan-        This attention to innovation led
                  It' too early to tell if I aac 'trip                              dard of living and pro perity and         em Insight'   editors to expand the
               will payoff, but few would doubt it'                                 maintain our ecurity a well; aid          annual urvey on emerging technology
               worth the gamble. Whether                     de el-                 Deborah Wince- mith, pre ident of         into th topic of innovation.  in
               op d in-hou e or obtained                    from                    the Council on Competitivene      s, at   previou      year, our   tudy look at the


R.   4 UJNnV    4. TTON"   ?nn,; -4   c:.11M M 1='P
adoption of emerging          technologie                    Why do innovative companie                find       for quickly implementing promising
such a      oice over IP and ervice-                    benefit     from emerging technologie                     new technologies. Such companies
oriented    architecture,     and track                 that elude the les inno ative? While                      are al   0   twice as likely to measure
whether more companie are becom-                        innovative companie have an IT                            the bu iness value of a new technol-
ing early adopter of technology. But                     trategy that i de igned to up port                       ogy after they deploy it.
thi year, our urvey of 396 enior                        innovation effort, that i not a cau e                        The e findings were echoed at a
IT executives al 0 investigated                         of innovation, but an effect.                             pre entation on innovation at the
whether     emerging      technologies       and             "Innovation       tart     off with bu i-            May 2005 Gartner ympo ium in
IT organization        are contributing         to      ne     leader hip making a determina-                     San Franci co. Kathy Harri ,a
busine s innovation.                                    tion that they have to find new way                       Gartner group vice president,
   The re ult : Mo t IT organiza-                       to do thing," ays Dale Kutnick,                           noted that innovative organizations,
tion are actively involved in bu i-                     director of re earch and enior                            including IT organization,  follow
ne     proce       innovation,     and many             vice pre ident at Gartner Inc.             uch            a proce       model for innovation:
are contributing       to product and                   leader,     according to
 ervice innovation        a well. IT orga-              Kutnick, al     0   reward
nization are developing sy terns                        employee who come
that improve or replace proces e                        up with innovative way                             "Youmust keep the learning
and are finding new way to d liver                      to generate revenue             or                  going."
products    and service.         We al   0               ave money.                                        - Kathy Harris, Group Vice President, Gartner
learned that more companies               are              That i largely
early adopter        of emerging     technol-           confirmed      by our own
ogy than in pa t urvey.                                  urvey: While not all innovative                          g n rating idea, evaluating           and
     But the most important         re ult              companie        provide         uch reward     ,           electing a few idea       from among
wa thi : Emerging           technology                  innovative companie       are twice a                     them, developing and implementing
doe n't make companie    innovative;                    likely to do so. Innovative compa-                        innovation,  and learning from the
in tead, innovative companie   make                     nie al 0 have a culture that up-                          experience      so they can improve their
emerging        t chnology    valuable.         ot      port      technology     experimentation                  program       over time.
only are innovative companie    more                    and ri k-taking.                                             "That'     what make        their innova-
likely to be early adopter, but IT                         But inno ative companie don't                          tion program        sustainable:     You mu t
executive       at innovative     companie              depend solely on incentive and                            keep the learning going," Harris said.
are almo t twice a likely to report                     culture; they rely on proce ,too.                            Finally, innovative companie are
significant payoff than tho e who                       Companie where emerging tech-                             far more likely to deploy new tech-
work for companie            th y do not                nologie      payoff are far more likely                   nologie      . Of the 30 emerging
consider    innovative.                                 to have procedure             and proce se                technologie         we   urveyed,     ju t
                                                                                                                  one -     peechjvoice recognition - ha
                                                                                                                  been deployed more frequently by
                                                                        ))                                        companie that are not innovative.
                                                                                                                         sually, innovative companies           are
                     of corporate budgets are spent specifically on innovation.                                   at least twice as likely to deploy any
                                                                                                                  of the e technologie        ; in some ca e ,
                                                                                                                  such a grid computing and elf-heal-

     73%             of IT departments
                     innovation.
                                                 are involved in new product and service                          ing computing, the ratio i a much
                                                                                                                  a 9 to 1 or 10 to 1.
                                                                                                                     Given that innovative companie


     2      *        of companies        are early adopters       of information         technology.              are not only more likely to deploy
                                                                                                                  emerging
                                                                                                                  better
                                                                                                                                 technologies,
                                                                                                                            at implementing
                                                                                                                                                     but are
                                                                                                                                                     them, it

     68%             of companies have received significant
                     adopting emerging technology.
                                                                             payoffs from
                                                                                                                   eem      they are in a good po ition
                                                                                                                  to u e IT not only to remain            inno-
                     say emerging technologies play an integral                       role in                     vative, but to maintain          a u tain-
           Of        supporting corporate innovation.                                                             able competitive         advantage     in
                                                                                                                  year     to come.


                                                                                                                                      SUMMER ~ INNOVATIONS 2006 ~ 9
                                                                        Innovation isn't just
                                                                        about inventing the
                                                                        new new thing, says
                                                                        Geoffrey Moore.
                                                                        It requires a conscious
                                                                        investment strategy, and
                                                                        the will to carry it out.




r!fii]~~~~~[l!'!mL~f1Ililt!.m.rn Pearlman and Edward Baker
                             Ellen                                                  -+      mJ·      :JE'W'~'
                                                                                                  t!7j.         Jamie Tanaka••

    globalization sets in and competi-    many great ideas would never have           ays. MIttends to be highly bia ed
tion heats up, companies large and        been commercialized had not others         toward di ruptive innovation. But
 mall are turning to the diligent ap-     seen and recognized their true alue.       it al 0 tend to be emireligious.
plication of any number of innovation        Moore' new book, Dealing with           almo t like the way open- ystem
practices to tay on top. Customer         Darwin: How Great Companies                people get religious. nd you want
innovation, innovating from the edge,     Innovate at Every Phase of Their           to ay at the end of the day,' o. Be
innovation road map - all are well-       Evolution, ju t publi hed by Portfolio,    relentle Iy pragmatic. Are you get-
meaning efforts to help companies         argue that innovation by itself i not      ting a return on your innovations?' M
with the innovation proce .               enough. Innovation also require an
   But according to Geoffrey oore,        inve tment trategy that puts your
a managing director at con ultancy        re ources where they count, and                ForCIO- relate<b:esearc!\;ple-ase
TCG Advisor and a partner at              a people trategy that align those              Y.lSit--.aoiJ:i5i:glit:Co
venture capital firm MD in enlo           re ources with the be t kill of all
Park, Calif., innovation mean little if   your employee .
all tho wonderful new products and           MThere' a kind of innovation
sel"\;ce never ee the light of day.       con ulting that tend to be zealou
Con ider the notoriou fate of Xerox       about how to innovate, and about
Corp.' Palo Alto Research Center: Its     the freedom of imagination,MMoore




                                                                                                          SUMMER -7 INNOVATIONS 2006-711
        rRecently, Moore sat down with CIa Insight editors Ellen Pearlman and
            Edward Baker to chat about why innovation really matters, and about
            how best to get it done. An edited version of the conversation follows.
        &.



        CIO INSIGHT: How did you choo e                 ate through innovation, creating a new         at 1icro oft, look at Ci co y tem .
        Darwinism     as a metaphor         for the     value proposition that the cu tomer            That' becau e they're not getting
        economic    life?                               prefer and your competitor don't               a net new amount of competitive
        MOORE: The parallels between                    have. That will win you new revenue            advantage. They're just kind of recy-
        economic y tems and ecological sys-             at attractive margin . Tha~ a good             cling the exi ting competitive        advan-
        tem are pretty well known. I wanted             economic return on innovation.                 tage in their exi ting categorie          .
        to find a platform to free ourselve                 econd, you can innovate to neu-              Look at the tech       ector. In that
        from the    ense of entitlement        in the   tralize a competitor'     innovation.     ot    ector we've alway       thought     of
          .. economy: that we're entitled to            quite a attractive. You don't nece -           innovation a that di ruptive tuff
        high margins, that we're entitled to             arily gain an advantage, but you can          that magically create new catego-
        u e more of the world' re ource                 begin to overcome a deficit, to catch          rie . The    ector ha alway        been
        than any other nation ever has.                 up.    a re ult, you gain more sale,           about the technology adoption life-
          The      .. economy ha sailed with            albeit not with a really competitive           cycle. You tart with mainframe,
        the wind for all of my adult life. And          margin. But at lea t you're in the deal.       then minicomputer,           then the PC,
        now I think, for the re t of my adult               nd you can al 0 innovate in way            then the L        , then the Internet.
        life, we're going to be ailing into             that don't chang       your outward com-         ow it' mobility. Each change ha
        the wind. What we're eeing i a sea              petitivene  ,though they can change            had a tronger back-flu h, until
        change in economic         power: It's cros -   your return on innovation internally.          finally, when we got to the real
        ing the Pacific. The U. . i not going           That mean      doing thing    more ef-         correction, the bur ting of the
        to have all the economic power in               ficiently, getting the ame amount of           tech bubble, it wa really about the
        the future.                                     bang for Ie buck.                              legacy inertia of technology         refu -
           It' time for a new et of rule. What            Unfortunately, if you look at the            ing to die.
        Darwini m ay i either evolve or get             kind   of innovation    that go on in             What we're      eeing now i the
        marginalized. Darwin doe n't care. At           e tab Ii hed enterpri    e , more and          maturation     of the tech     ector. Yet
        the end of the day, you perform or you          more innovation i not generating               the idea linger     that if you're not
        don't. D alingwith Darwin was my                a net n w differentiating return.         0    doing di ruptive innovation,        nothing
        metaphor for aying tep up, or don't.            you see tock price       of e tabli hed        of intere t i happening.       And that'
                                                        enterprises   being flat for year - look       complete     and total bunk.
       SO IT'S "INNOVATE OR DIE"l
        Too many e tabli hed enterpri e ay
        to me, "We've 10 t the ability to inno-
        vate around here." That's completely
                                                           r"It's time for a new set of rules. What Darwinism
        and totally untrue. But something                       says is either evolve or get marginalized.
        ha happened         to innovation    at the e           Darwin doesn't care. At the end of the day,
        companie     that's of concern, and it
        ha to do with return on innovation.
                                                                you perform or you don't."
           In my view there are only three                 &.
        kind of innovation: You can differenti-



14 -? INNOVATIONS 2006 -? SUMMER
WHAT'S THE ALTERNATIVE                     1    are you going to get the re ource ?             make mo t of their money through
The big problem i that too many                  Iy view i that you have to extract             media buying, which i not a value-
companie      dabble in innovation.             re ource      from context to repurpo       e   added proce       . 0 er time the ad in-
They ay, "Well, we've got a little of           for core.                                       du try i going to rationalize       around
thi ,and we've got a little of that."              I'll give you an example. Right              what'    core - the creati   e tuff and
But that only guarantee         -   ince        now, 1icro oft i getting beaten up.             account relation     hip management.
they don't take anyone project very             Everyone i aying Coogle i win-                   o long a media buying remain             a
far - that they never e cape the                ning the IQ award, and 1icro oft i              fairly traightforward      proce    ,their
gravitational field of their ector.             brain-dead.    The rea on why      1icro-       client     will decide that it' cheaper to
They'll go down a path for a while,              oft i in uch trouble is th y have to           buy their media through dedicated
and then they'll think, "I like thi             put all their re ource      into their two      media-buying firm.    d agencie will
other idea, too."     nd   0   they'll try a    franchi e ,Window and ffice. But                 ay, "But that' how we make all our
little bit of that and a little bit of the      Darwin ays no. You have to continue             money." nd the client will ay, "Ye ,
other. nd their innovation don't                to meet the revenue commitment                  what'    your point?" Darwin doe n't
re onate. I call it morga bording.              of tho e context franchi e ,but you             care.
     eanwhile, 95 percent of their              have to do it with fewer re ource , 0              But the agencie      have to charge
revenue i coming from a commodity               that you can take ome re ource and              for omething. I believe th y'll be-
product or ervice they're producing              pend them on core, on whatever                 come more like con ulting firm - for
that they know damn well i never                type of innovation     will work for you.       a while.     nd then, in thi increa ing-
going to get differentiated.                    Thi    i how they did manufacturing             Iy fragmented     world, a media it elf
   Here' the critical di tinction: core         at Ci co y tem . They centralized it,           fragment      more and more, tho e
versus context. I define core as that           they tandardized it, they modular-              client will come back to the agen-
which creates a return on innovation. In-       ized it, they optimized it, and then            cie and ay,"1 do want you to buy
novation for differentiation i core. And        they out ourced it.                             the media, becau e it' gotten too
everything else i context. It may be mis-          In the 21 t century, you can no              damn hard. But now I need you to
sion-critical context, but it' still context.   longer afford to be a ertically                 help me with Coogle. How           hould I
   The problem i that you can't                 integrated    corporation   with all of         do that ad?      re my click at the right
improve your economic outlook on                your time, talent and management                level? Do I have the right earch
the context ide. You can get more               attention allocated aero s all of the           algorithms?" And then the agencie
productive, but you can't change your           variou function equally. Darwin                 will be back to buying the media, and
competitive po ition, your future,              will not reward that behavior.                  making money that way.
without changing your competitive-
advantage equation. If you don't have           WOULD THIS MODEl APPLY                          LOTS OF COMPANIES HAVE
any new competitive advantage com-              EQUALLY TO A SERVICES COM-                      MISSED SUCH TRANSITIONS.
ing along, every year the environment           PANY SUCH AS AN AD AGENCY?                      HOW CAN THEY GET BETTER AT
gets a little bit better at competing           I think it applie to any indu try.              SEEING WHAT'S COMINGl
again t you, and every year you get a             nything can be core and anything              If you allocate your re ource       ba ed
little bit more marginalized.                   can be context. The key idea about              on your revenue maker,        or margin
    o you've got to cut a little more           core and context i that what'                   maker,      you're driving in the rear-
co t. And you get a little more                 context for you could be my core.               view mirror. You're optimizing for
marginalized. You cut a little bit                nd my context could be your core.             what ha been ucce ful.         long a
more co t. nd we watch the every                That    a great economic     relation-          you're on a straight tretch it work.
powerful in titution quietly un et               hip: If it' context for you and it's my        But a soon a you hit a curve, it
them elve with about a one-degree               core, you're going to want me to do             doe n't work.
decline every year, for decade.                 it, and vice ver a.                                If you're like mo t companie , you
                                                    What' core to an ad agency? The             take la t year' budget and you ay
HOW CAN COMPANIES REIG-                         weird thing about ad agencie        right       okay, let' look at la t year' budget.
NITE THEIR GROWTH ENGINESl                      now i their economic        model i not         Thu ,you've already in titutional-
You have to self-fund. But where                aligned with their value model. They            ized the re ource allocation of the



                                                                                                                  SUMMER ~ INNOVATIONS 2006 ~ IS
                                 prior year. Which mean   that you're
                                 funding context before core. 0 core
                                 get the crap after context ha been
                                 at the trough fir t. But if you're really
                                 doing cor     vcr u context, you have to
                                 fund core before you fund context.
                                     o where       hould you tart? You
                                 ha e to tart with a trategy. And
                                 then you find the really, really dirty
                                  ecrer, which is that mo t companies
                                 don't have a trategy. Or they have
                                 a trategy but it's sort of an inertial
                                 thing. But if you really are going to
                                 do core vcr u context, and get a re-
                                 turn on innovation, the company ha
                                 to work from the arne trategy.

                                 so YOU BUDGET  FOR CORE
                                 FIRST, AND THEN FOR
                                 CONTEXT, BUT NOW THERE'S
                                 LESS MONEY FOR CONTEXT
                                 THAN THE YEAR BEFORE.
                                 THE CONTEXT PEOPLE WILL
                                 SAY, "WE HAVE TO HIT OUR
                                 REVENUE TARGET, AND IF YOU
                                 CUT THAT BUDGET, WE CAN'T
                                 DO IT." THEN WHAT?
                                   nfortunately,      the correct an wer
                                 is that the company need          to find
                                  omeone who can hit the target. "Do
                                 you want to re ign over thi ,or do
                                 you want to take a hot at it? Because
                                 that'    the choice."
                                         ow, the good new      about mi -
                                  ion-critical context is that it ha
                                 inertia on its side. If you're that big,
                                 and you've got that much money
                                 a ociated with you, you're an e -
                                 tabli hed category, and establi hed
                                 categoric  have in rtia. Think about
                                 a merry-go-round.          Once you've
                                 gOt a merry-go-round pinning, it
                                 take Ie energy to keep it pin-
                                 ning than it did to tart it.        0   you
                                 ought to be able to take         orne pro-
                                 ductivity    ri ks with your bu ine
                                 without     dimini      hing your top-line
                                 or bottom-line       goal.



18 ~ INNOVATIONS 2006 ~ SUMMER
  AROUND                                                                                                          employee' relative intere t and pa -
  Getting a return                                                                                                 ion and kill at doing invention,
  on innovation                                                                                                   deployment      and optimization.        Then
  requires discipline                                                                                             they need to detach inve tment from
  in moving ideas                                                                                                 the task and reinve t it in the kill - to
  from core to
                                                                                                                   hift deployment      re ource       to core to
  context, and then
                                                                                                                  take the next round of invention           and
  reinvesting the
  profits - and the                                                                                               deploy it.
  people - back
  into the next                                                                                                   CAN COMPANIES ORGANIZE
  innovation.                                                                                                     THE TRANSITION            FROM
                                                                                                                  INVENTION         TO DEPLOYMENT
                                                           INVENT                    OFFLOAD                      TO CONTEXT WITHOUT LAYING
   Source:   Geoffrey   A, Moore
   D~alin9 With     Darwfn,    200S                                                                               OFF PEOPLE?
                                                                                                                  It i n't ea y. But the real problem is
                                                                                                                  that if you don't succe         fully deploy
  And the game i ,you have to.                                 magazine.   Other people put them                  the next invention, you're going to lay
Becau e if you don't, you can't fund                           out in the market, and then other                  off more people again in three year ,
core.                                                          optimize them.                                     and again in three year after that,
                                                                  But at too many companie     , all              and again in three year after that.
WHAT HAPPENS TO THE WORK-                                      the re ource are getting    tuck                     Here'      the alternative:     Take
FORCE WHEN YOU START USING                                     in mi     ion-critical    context. They            your top 200 leader - and thi i
CONTEXT TO FUND CORE?                                          think they've       10 t their inventor.           what Ci co doe - and ay, "Okay,
Most people cling to the task they've                          They have not. They've           10 t their        how many inventor,          how many
been ucce ful with. Eventually, that                           deployer . Or rather, they haven't                 deployer      , how many optimizer
task become mi ion-critical context,                           10 t them - they're tuck on mi -                   do I have?"      nd if you move your
but they're the expert at it, 0 they                            ion-critical      context.   But they             leader     , you can tru t them to move
 tay with it. And then it tart                  to get         need to     hift to the next genera-               the re t of the re ource          with them
 unsetted, and they                   tay with it.    nd       tion of core.                                      to make it happen.       But if you've got
then eventually it gets out ourced.                               Meanwhile, optimizer          are key to        all your leader       tuck in the wrong
  nd then they're in a bad pot,                                getting the work out of the hand of                area, you're stuck.
becau e they really have nothing el e                          the deployer   tuck in the deploy-
they know how to do. 0 they either                             ment proce ,down to where it can                   AND THE WORKERS?
have to go with the work to the out-                           eventually be out ourced. That free                The way we do it today i to milk an
ourcer, or they just \0 e their job.                           the deployer       to come back to core            employee's experti e and then throw
  That can't be the good outcome.                              and begin deploying the next round                 away the employee. It' not fair to the
But how would you do anything dif-                             of invention.                                      employee. But if you can continually
ferently?       We came up with a differ-                         Who are the optimization        people?         invent, deploy and optimize, and thjnk
ent way of looking at thi : There'                             They are all the         ix igma monk.        ix   about your employee a part of that
a proce          model that overlay                             igma people        hift role all the time,        proce ,you can create better capital-
the evolution           of any work. Every                     going from group to group to group,                i t outcome     in a way that align \vith
proce         ha a ge tation or invention                      bringing their quality-control capabil-            your workforce rather than betray              it.
period, a prolonged                   deployment               ity with them. Deployer are program                That way, you're preparing them to
period, and an optimization  period.                           manager;        when they fini h one pro-           urvive in chi increasingly Darwinian
 II the e ta k have to happen.                                 gram they go do another program. I                 busine   world. :t·
 lanufacturing                ha all three.          d-        think human beings tend to gravitate
verti ing ha all three. Magazine                               toward one of the e three zone.                    Please send questions and comments on this
have all three. People in ent new                                   Companie      need to identify their          article to edirors@cioinsight-:iffdavis.com.



                                                                                                                                    SUMMER -7 INNOVATIONS 2006 -719
       I   Baseline                        I Top Ten IT Projects




           Big money has
       been greenlighted
           for computing
        infrastructure -
       from Voice over IP
          to applications
            performance
            management.

       rStory by Baseline Senior Editor Todd Spangler                          ...~ illustrations by Gordon Studer ••


       FOR CO RIER OF CORPORATE                    Tho e who identified IP telephony        environment while al 0 cutting co t .
       data, high on the critical-ta k list thi    as "critical" to their company aid          Dan liedhammer, senior infra-
       year i making ure the road are              they will pend an average of lLll        structure engineer at Genworth,
       well-paved - and that the delivery          million for the year on uch project.     i leading a project to extend an
       truck are zooming along at peak                Out ourcing project were econd,       exi ting vaya phone ystem over
       performance.                                with an average budget of $ .22 mil-     IP network to two call centers, each
          The Baseline Top 10 Project in           lion, followed by data networking at     with about 50 agents, in Phoenix and
       2006 survey, which a e ed the                 5.57 million. AI 0 in the Top 10 are   Encino, Calif.
       expected pending of information             de ktop upgrade ( 3.21 million) and         The project, iedhammer e ti-
       technology manager, reveal that             application performance management       mate ,will co t 70 percent Ie than
       the three large t area of funding,          (2.9 million).                           it would to in tall two eparate,
       ranked by expected pending, are                Why are infra tructure project         tandalone phone y tern with
       related to upgrading or otherwi e           a top priority? Con ider the ca e of     call routing and voice mail fea-
       modernizing information technology          Genworth Financial. Thi year, the        tures. In tead of paying 520,000
       infra tructure.                               10 billion in urance company will      for equipment at the two ite,
            o. 1 on the Ii t: Voice over           u e Voice over IP electively to aug-     Genworth can extend the exi ting
       Internet Protocol (VoIP) project.           ment it exi ting telecommunication       Avaya phone witch over IP




20 ~ INNOVATIONS 2006 ~ SUMMER
For in-depth case studies, please
visit www.ba.selinemag.com.



Baseline                    [~
connection to both call center for                    final approval proce for hi or her                       witche from headquarter in
  156,000. I iedhammer's team can                     company' information technology                           a hville, Tenn., ay Brad Wood,
al 0 centralize management for tho e                  project in 2006. The Web-ba ed                           enior director of enterpri e tech-
 ite , in tead of requiring local tech-                urvey wa conducted by Th                               nology operation. 10 t CCApri on
nician to maintain the voice y tern.                    trategy Group, a market re earch                      are in remote areas; a routine
   Genworth, however, ha no plan                      firm in Englewood, Fla.                                 admini trative ta k might require di -
to junk the 2,-00 traditional de ktop                     In the ection that follow, you'll                   patching a technician on a six-hour
phone at it headquarter in favor                      find example of how information                         round trip.
of IP-ba ed sets, becau e the exi ting                technology leader are putting each                         "That' an exp n ive trip to add an
one work perfectly well." oice                        of the Top 10 Project into action.                      exten ion," Wood ay.        a re ult,
over IP is h re, and it' a good tool,"                                                                        "Our facilitie would wait, and wait,
  iedhammer says. "But we look at it                  1 I VOICE OVER IP                                       and wait until they needed omething
as one choice, and we're u ing it only                Average spending: 11.1IM                                done - or until omething broke."
where it makes en e."                                 What it is: y tern that tran mit                           Which leads to another ju tifica-
   To be sure, Baseline's Top 10                      voice over data networks.                               tion for the project: Many of CC 's
Projects aren't all about infra truc-                 Why it's hot in 2006: Companie                          phone witche are old and prone
ture. Bu ines -oriented application                   are adopting next-generation voice                      to outage. "The current technology
are al 0 well repr ented, with the                     y tern to reduce telecommunica-                        we ha e in the field i 15 to 20 year
other half of the Ii t taken up by                    tion and management co t .                              old: Wood ay. "It's a natural
cu tomer relation hip manage-                            Correction Corp. of America                          progr     ion for us to migrate to the
ment, collaboration, upply chain                      (CC ), the large t operator of private                  new technology."
management, bu ine analytic and                       pri on in the nited tate, i in
compliance tracking.                                  the third year of a four-year project                   z I OUTSOURCING
   In December, we un'eyed 1,440                      to upgrade irs phone infrastructure                     Average spending:       .22 I
Ba eline reader , who were a cro -                    - which compri e ,000 phone at                          What it is: er ice for managing a
 ection of information technology                     40 company-owned facilitie - to                         company's information technology
executive and bu ine manager                            vaya oice over IP y tern .                            or bu ine proce function.
at companie of varying ize . ( ee                          key driver: to give CC ' central                   Why it's hot in 2006: Technology
"\ ho We urve ed" on p. 27.)Each                      information technology operation                         tandardization let bu ines e com-
re pondent wa involved in the                         group the ability to manage phone                       pare provider more ea ily.




TOP 10 PROJECTS ))
        Project                                        Average Spending"
                                                                                              MAJOR TECHNOLOGY INITIATIVES
                                                                                              RANKED


                                                                                           Median Spending"
                                                                                                            BY EXPECTED SPENDING


                                                                                                                               % of Respondents

  1     Voice over IP                                    $11,112,000                             $100,000                              16.3%
                                                                                                                                                       ---
  2     Outsourcing                                         8,216,000                              750,000                               6.0
 3 Data Networking                                           5,569,000                             150,000                             14.7
,~~-
  4     Customer Relationship
        Management                                           5,177,000                             135,000                             17.3
r 5-    Collaboration                                       4,255,000                                75,000                              9.5
  6     Supply Chain Management                             3,310,000                              500,000                               7.1
-~-
  7     Desktop Upgrades                                    3,212,000                                50,000                            27.5
  8     Application Performance
        Management                                          2,975,000                              200,000                               9.0
  ~--
  9     Business Analytics                                  2,629,000                              250,000                             11.9

I 10    Compliance Tracking                                 2,479,000                              160,000                               6.7

        'PLANNED SPENDING OF RESPONDENTS INDICATING THE TECHNOLOGY IS CRInCAl TO THEIR ORGANIZATIONS. SOURCE, BASEUNE TOP 10 PROJECTS IN 2006 SURvn.
   In 2006, there' not likely to be          Thi ummer, the Texa danced            per econd, more than twice the
a deal bigger than General Iotor'         Computing Center (T CC) expect           bandwidth in the exi ting clu ter,
announcement in February that it          to turn on 50 new high- peed net-         chulz ay. For high-performance
would plit information technology         working witche a part of a major         computing, he ay, "InfiniBand
out ourcing contract - worth an           upgrade to it Lone tar upercom-          i looking like the way to go - it'
etiOlated 15billion over the next         puting clu ter.                          a tandard, and a lot of people are
fi e years - among ix upplier:               T C. at the niversity ofTexa          moving to it:
ED, apgemini, Hewlett-Packard             at u tin, provides the infra truc-
(HP) , IBM, Compuware' Covi int           ture for re earcher acro the             41 CUSTOMER RELATIONSHIP
sub idiary and Wipro.                     country, who conduct everything          MANAGEMENT
   Bobby Cameron, a principal for IT      from climate and weather modeling        Average spending: $5.l8M
management at Forre ter Re earch,         to a trophy ics imulations. "We          What it is: oftware for tracking
 ees GM's move as a "definitive                                                    sale and cu tomer interactions.
tipping point" in the trend of com-                                                Why it's hot in 2006: Companies
panie oliciting out ourcing bids                                                   want to get more value out of their
u ing the tandardized Information                                                  data to better predict ale trends.
Technology Infra tructure Library                                                       0, how's pam selling in California?

de cription ,a et of definition                                                    Thi spring Hormel Foods, the 5.4
developed by the Briti h govern-                                                   billion producer of the famouscanned
ment for information technology                                                    ham and other meats, is rollingout soft-
 ervice . "That tart to allow more                                                 ware from iebel ystem, now part of
apple -to-apple compari on acro                                                    Oracl ,to more quicklyand accurately
 upplier : he ay.                                                                  analyze ale dara and trends.
   Meanwhile, Hud on' Bay Co.                                                         Chri Boever, Hormel' director
(HBC), Canada' large t department                                                  of category ale management for
 tore chain, has u ed outsourcing                                                  consumer product, ay that until
more electiv Iy: La t year, it                                                     recenrl • CRM package lacked the
entered a five-year deal with IB 1 to                                              ability to provide "robu t" analy i
de ign and ho tan e-commerce ite                                                   of ales data. ing iebel Bu ine
selling apparel for Canada' national                                               Analytic, Hormel will be able to link
team competing in the 2006                                                         data in its tran actional ale y tem
Olympic Winter Game.                      have to upport a ridiculou range         with external ource of data, uch
   HB igned th deal to ell the            of application: says Karl chulz,         as competitive market hare figure
Olympic merchandi e in early 2005         manager of the center' high-perfor-      from C iel en." ow we can bring
and needed the ite to go live by          mance computing group.                   it all into a ingle ource," Boever ay.
  ovember. "We didn't have the                 chulz i leading T CC's project         That hould help Hormel' 500
internal capacity or the re ources        to convert Lone tar from 512 tand-       sales profe ional get more timely
to build the application as fast as       alone erver to a 1,024-processor         in ight into trend, and improve
we needed: ay interim CIO Paul            blade- erver y tem from Dell, run-       accuracy ince the data will be
Bellack."It would have been hugely        ning Linux operating y tem . To let      aggregated." e want to become
embarras ing if it had been time to ell   all of tho e proce or communicate        more efficient pro ider to our
Olympic gear and we weren't ready:        a if they were one gigantic y tem,       employee: Boever ay.
By farming out the project to IB I, he    T CC need a very high-speed,
 ay , the company met its deadline.       low-latency network, 0 it will adopt     51 COLLABORATION
                                          InfiniBand, a networking tandard         Average spending: 4.26M
3 I DATA NETWORKING                        upported by IB 1, Hewlett-Packard,      What it is: oftware to Jet people
Average spending: 5.57M                   Dell and other, to replace a proprie-     hare file and other information.
What it is: y tem that tran mit           tary clu ter-interconnection y tem.      Why it's hot in 2006: Electronic
data among computer.                         The InfiniBand witche , up-           collaboration i fa ter and Ie
Why it's hot in 2006: pplications         plied by Top pin Communication           expen ive than the alternative.
that need greater bandwidth ar            (acquired by Ci co y tem last year),       When the Texas- ew 1exico
driving network upgrade.                  can tran fer at lea t 450 million byte   Power Co. wa in the proce of

                                                                                                  SUMMER ~ INNOVATIONS 2006 ~ 25
       being acquired by P 1 Re ource                        Getting a global view of pending i             8 1 APPLICATION              PERFORMANCE
       la t year, it u ed Web-ba ed collabo-              even more important ince Delta filed              MANAGEMENT
       ration     oftware to hare thou and                for Chapter 11bankruptcy            protection    Average spending: 2.9 1
       of document       with out ide law firm,           last    eptember.          part of the re truc-   What it is: oftware that monitor
       regulatoryagencie           and con ultant .       turing prace         ,Delta need     to pro ide   application      and can proactively               find
          Carl eider, head ofbu ine                        pending data to multiple con ulting              potential     problems.
       technology er ice at the former                    firm. "One of the fir t things they               Why it's hot in           2006:    Companie
       Texa - ew lexico Power, e timate                   want to know i , 'Who are you                     want more granular           data to analyze
       that the company           hared 6,000              pending money on?'" Currey             ay.        y tern lowdown and outage.
       document       related to the acqui irion.            The        pend-analy    i   y tern will         Re er eArnerica, which proce                      e
       Printing and delivering        tho e to the        make that ea ier to an wer. When                  3.5 million re ervation            every year
       20 partie     involved in the deal would           Delta had to pull together a com-                 for 150,000 camp ites and cabin
       have co t at lea t $300,000,         he ay.        plete     et of pending data in 2004,             in the United        tate,    i u ing HP
            ider' team u ed Hummingbird'                  it took a team of four con ultant a               Open View ystems management
       Enterpri e Collaboration oft-                      week. With the new oftware, Currey                 oftware to automate           the monitoring
       ware for the project, which co t                    ay ,the arne proce             recently took     and management of more than 200
        40,000 and didn't require IT                      a day and a half.                                  erver that run it Internet ite and
       staffer    to manage becau e it tied                                                                 internal application.
       directly into the company'          exi ting       7 1 DESKTOP UPGRADES                                   Thi     pring, the company
       Hummingbird        document       manage-          Average spending: 3.21                            expect  to roll out the Open View
       ment      y tern. That way, for example,           What it is: Computer that let                     Tran action    nalyzer, which
       the legal department          et up acce           worker        acce    corporate     data.         trace reque t all the way from
       right     it elf. "It wa ea ilya 90-day            Why it's hot in         2006:     Fa ter and      a cu tomer'       eb brow er to the
       return on inve tment,"          eider       ay .   more reliable PC are replacing older                pecific back-end application   pro-
                                                          machine.                                          ce e erving up the data. That
       6 I SUPPLY CHAIN MANAGEMENT                          When Ed            . Klein joined Royal         will help Re erveAmerica     pinpoint
       Average spending: 3.31M                            Re ort a CIO two year ago, the                    problem        when, for example,              a
       What it is: oftware to track and                   eight-hotel company ba ed in                      campground         call      and   ay    it'       not
       optimize            with upplier.
                    interaction                           Canclln, Mexico, wa having a few                  getting good re ponse time from
       Why it's hot in 2006: Companie                     problem         with it 1,000 de ktop PC .        the Web ite, say sy tern architect
       want to contain       pending by better            Mo t were running    indow 98;                    Greg Collett.
       managing       upplier relation     .              many were un table. "People were                       In tead of ju t indicating
          Delta Air Line      la t year launched          10 ing file becau e their machine                 wheth       r a server    i up or down or
       a project to analyze         9 billion in          were freezing up on them," Klein                  reporting statistics like proce s
       annual      pending with 6,000          up-        says, noting that the humid and airy              utilization, the new software will
       plier     in a con i tent way, u ing               tropical air had corroded          the com-       track individual tran actions in
       ho ted ervice       from      erticalnet.          puter circuitry in orne locations.                detail. For example, it could show
       The sy tern, brought online last                     Royal Re ort replaced all of its                why a pecific Web browser was
        urn mer, let the airline' 115 upply-              de ktop in nine month ,a project                  un ucces ful at ubmitting a par-
       chain profe ional ea ily find out                  completed in the ummer of 2005,                   ticular tructured Query Language
       exactly what Delta         pent with a             with mo t employee u ing the                      databa      e request.    "You can have
       given vendor over a certain period.                 arne configuration of Dell ptiPlex               it drill down and         ee that thi          par-
          While the company'               P              GX280 machine with Window XP.                     ticular    machine       i running      thi
       accounting     y tern include     all that           But in tead of buying them, the                  pecific      ection of Java code              lowly
       data, it was laboriou to extract, ay               company opted for three-year            lea e     and that' affecting thi  ervice,"
       Bob Currey, Delta' general manager                 for all the PC . That not only          pread     Collett ay. "It' very cool."
       for ourcing innovation and upplier                 out the payments over time, but it
       management.      "We had to do analytical          will al   0   let the company regularly           91   BUSINESS ANALYTICS
       gymnastic      to aggregate     pending,"          refre h it de ktop computer.             A        Average spending: 2.63M
       he ay. For example, contract            with       Klein explain: "Thi will en ure we                What it is: oftware that analyze
       IB 1 might be entered with different               never get into a ituation where we                bu ine information            to detect trend
       invoice codes in different countrie .              have to do thi major cleanup again:               or generate forecast.


26 ~ INNOVATIONS 2006 ~ SUMMER
                                                                                                    ))     BASELINE       TOP TEN
                                                                                                           PROJECTS IN 2006            SURVEY


The 1,440 Baseline readers who participated in our survey are mostly information technology managers                                   - accounting          for
two-thirds of all respondents - and 43.5 percent work for companies with more than 1,000 employees.


  Title                                                 Company Size                                        Number of Major IT Projects in 2006



                     Manager 19.3%

                     Exec. VP/Sr. VPIVP 1.7%
                                                        Fewer than 500 employees               49·7%
                     Analyst/consultant     8.2%
                     CIO/CTO 6.7%
                                                        500 to 999                                 6.8%
                     Director 3.1%


                                                        1.000 to 4.999
                     other IT mgmt. 27.0%


                     Exec. VP/Sr. VPIVP/GM 3.2%
                                                        5.000 to 9.999
                     CEO/COO/CFO12.1%

                     President/partner    6.9%
                                                        More than 10.000                           21.2%
                     Director 2.0%

                     Other business mgmt. 9.8%


SOUICE: BASEUNE TOP 10 PROJECTS IN 2006 SURVEY.




Why it's hot in          2006:       Tool     are       to do their job ," ay Perroni, who                  access privilege         to minimize"      egre-
providing better integration                with        add   that the new ver ions of AP'                  gation of dutie "conflicts         that create
exi ting data ource .                                   reporting    tool are "phenomenally                 opportunitie  for fraud (for example,
   Halliburton, the 21 billion energy                   better...    AP ha taken into account               if an employee omehow had the
 ervices and con truction company,                      that their product         are not that ea y        ability to cut him elf a check without
i planning to upgrade it                  AP R/3        to u e."                                            authorization).
ver ion 4.6c enterpri           e re ource                                                                    La t fall, the bank installed           oft-
planning oftware - which it oper-                       10 I COMPLIANCE TRACKING                            ware from Logical App to automate
ate in more than 100 countrie - to                      Average spending: $2.48M                            check for uch conflicts, ba ed on
my AP ERP 2005, a project to be                         What it is: oftware that record                     rule about which job function
completed in 2007.                                      change      to information       system,      to    are allowed to have certain change
   In part, Halliburton            decided         to   help show compliance            with indu try       privilege.      The     oftware al   0   records
upgrade      becau     e AP i pha ing                   or government regulation.                           change       to the account     -payable
out  upport for the older ver ion.                      Why it's hot in 2006: Companie                       y tem,      uch a if the amount of an
But the company al 0 expect to                          are looking for way to automate                     invoice were altered, and lets sup-
take advantage of    P' Busine                          compliance     activitie    .                       port   taffer     configure the sy tem
Warehou       e analytic        tools that are            BMO Financial Group, a Canadian                   but pr vent       unauthorized       changes.
bundled      into the newer version,                    financial ervices company \ ho e                      Darlene        lac Cormac, vice pre i-
 ay Mike Perroni,            Halliburton'                ub idiarie include Chicago-ba ed                   dent of procurement          and     trategic
vice pre ident of information                 tech-     banking firm Harri , la t year fin-                  ourcing at Harri , ay the oftware
nology. Currently,          Halliburton            ha   i hed a four-year project to roll out                hould cut the time to monitor con-
a 3,000-u     er licen e for Bu ines                    Oracle Financial      accounting           oft-     flict and       y tem     ecurity from two
Warehou       e.                                        ware for 20,000        orth American                month to about a week.
   After the upgrade,           all 30,000              employee.                                             "It's not glamorou ," h                 ay.
employee   will be able to acces                          To comply with the arbane-                        "But it wa n't until last year that
the sy tem to analyze data in S P.                      Oxley ct, the company must                          we decided       we ne ded to inve tin
"Thi      will make it ea ier for people                confirm that users have appropriate                 automating       thi ." : "


                                                                                                                                  SUMMER -) INNOVATIONS 2006 -) 27
        I   eWEEK                     I eTrade Financial




        ETRADE        FI        I Laved                    it experience with open ource               work a whole career in technology
            13 million annually, realized a boo t          to optimize internal development            and maybe get one of tho e, 0 it wa
        in performance      and changed the way            proces e .                                  very gratifying to have made that
        it think    about development       by mov-          Those Ie on will be critical a            bet early and to have reaped tho e
        ing from a un       olari     infra trucrure       eTrade a imilate acqui ition and            benefits very early, and it ba icaJly
        built up during the         tOck market            continue     to grm to compete with ri-     ju t fed our appetite     for continuing
        boom to an open       ource      tack run-          al    uch a    meritrade. In December,     down the open        ource path."
        ning on x 6-ba ed IB           hardware.           eTrade bought Browneo, the online             In the late 1990 , the dot-com
             Building on work it began in late             trading arm of Jp    lorgan     ha e, for   bubble wa rapidly expanding, with
        2001, the financial     ervice     company           1.6 billion. In OctOber, eTrade clo ed    eTrade right in the center of it. The
        ha moved it open            ource migra·           the purcha e of Harri direct, another       online company' trading volume and
        tion up the rack and i now taking                  online broker, for, 700 million. On         the area in which it did bu ine               were
        the Ie ons it ha learned through                   Jan. 23, eTrade reported that 2005           xpanding at a rapid pace, and           0,   tOo,
                                                           revenue wa $1.7 billion, up from            were its hardware requirement.
                                                            1.4 billion in 2004. et income was           eTradc, like many othcr financial
            For more eWEEK Labs
                                                            430 million, up from 3 0 million a          ervice     companie     at the time, man-
            analysis, please visit
            www.eweek.com                                  year earlier.                               aged the growth by adding capacity

                                         [~                   "It wa a win-win-win:
                                                             10 Greg Framke, of the com pan '
                                                           open    ource experience.
                                                                                       a eTrade


                                                                                         "You can
                                                                                                       in the form of large ener
                                                                                                         licro y tern running
                                                                                                       etary     olari
                                                                                                                                    from un
                                                                                                                                un's propri-
                                                                                                                         operating   sy tern.


30 -7 INNOVATIONS 2006 -7 SUMMER
            Lee Thomp        on, eTrade's vice              embrace of Linux by two industry                    ing ervice      and the      ervlet      that
       pre ident of architecture,          likens the       powerhou e : IB 1 and Hewlett-                      rendered     the HT        L - over to this
       row of un ervers to the aisles in                    Packard (HP). With their upport,                    new   tack," ays Thomp on. The
       a large upermarket. "You could go                     ay Framke, moving to Linux didn't                  team al 0 replaced the olaris ver-
       into an cTrade data center, and you                  mean that eTrade had to move out                     ion of BEA Tuxedo with the Linux
       could imagine your elf looking down                  on it own.                                          ver ion of the tran action manage-
       the ai Ie of helve,"            say Thomp       on     "Fortunately for us, HP and IBM                   ment      y tem,    ticking with         olari
       in    u tin, Texa . "In tead of food,                came out and aid, 'We're going to                   for the     yba e databa       e portion of
       you would       ee     un Enterpri         e         stand behind Linux:"           ay Framke            the platform.
       4500       - three full rows of them."               in     ew York. "The       econd that hap-                Te t showed that the Linux box
                                                            p ned, we made our Linux deci ion,                  could handle about 180 u er at a
       CHANGING CIRCUMSTANCES                               and we rolled it out very aggre ively,              time, compared with 300 to 400
       During the fall of 2001, a et of                      tarting in winter 2001."                           u er on one of eTrade'            un 4500
       circum tances prompted eTrade' IT                                                                         ervers. Performance          on the Linux
       organization to inve tigate a move                                                                       box dropped        harply when there
       from the       un     olari    architecture                                                              were more than about IOu                er , but,
       that had been         erving the company'                                                                before that point, the Linux box per-
       crown-jewel         application, eTrade.com,                                                             formed fa ter than the          un erver.
       to a mo t1yopen   ource               tack                                                                      her the Linux box' price wa
       anchored by Linux.                                                                                       factored in, eTrade had it elf a new
            One of the dri er,         ay Thomp-                                                                computing platform.
        on, wa a cooling             tock market                                                                  "J demon trated thi on Halloween
       and its effect on eTrade' bottom                                                                         2001, and it wa pretty imple," ay
       line. "Trading volume were above                                                                         Thomp      on. "The e un 4500                were
       300,000 average trade a day, and                                                                         co ting about a quarter of a million
       that dropped to omething in the                                                                          dollars apiece, and we could run 300
       range of 55,000 a day in 2001," he                                                                       to 400 u er on them. And here'
         ay . "Our ca h flow wa affected,                                                                       thi    little box that co t us about
       obviou ly, quite dramatically."                                                                          $4,000. It wa running           fa ter, but
          eTrade' engineer were aware of                    "Everybody was pretty floored" by the               you could only run 180 people on
       Linux a an emerging alternative to                   Linux server, says eTrade's Lee Thompson.           it. Jo h Levine, the CIO at the time,
       proprietary    nix operating y tem .                                                                      aid, 'Well, then we just need to get
       " t the time, I knew that [Amazon.                        Fir t, however, the IT organization            two, for 8,000. Do it - put a box in
       com] had already moved over to                       had to get eTrade.com          up and run-          production.'       0,   it wa a fairly short
       Linux, and Yahoo wa on a Free-                       ning on Linux.                                      meeting."
       B D tack since it inception," ay                        Thomp on a igned an architec-                      With thi mandate, eTrade'                  archi-
       Thomp       on. "And      0   I knew that, at        ture team from the IT organization                  tecture department got back to work,
        ome point, architecturally, an open                 to tudy the fea ibility of porting                  putting the new tack through aeries
        ource operating   y tem would be of                 eTrade.com'       central component            to   of te ts. In December 2001, they put
        ome intere t."                                      a Linux and open          ource     tack. A         the Linux box into production,               along-
         AI 0 prompting eTrade to move                      part of the     tudy, the team replaced              ide the row of un 4500               that     at
       off the un erver was the addition                    eTrade'     iPlanet (now       un) Web              behind eTrade's load balancer.
       of ymmetric multiprocessing and a                     erver and application            erver with           "Here' this little $4,000 box, play-
       32-bit me      age queue to the Linux                open      ource equivalent        running on        ing, literally, with the big boy of com-
       2.4.7 kernel    that hipped with Red                 Red Hat Linux 7.2.                                  puting and doing very, very well," say
       Hat Linux      7.2, the di tribution that               "We grabbed Apache, and we                       Thompson.      "Everybody was pretty
       eTrade wa       te ting. Without tho e               grabbed the Jakarta Tomcat ervlet                   floored by thi - a lot of th sy tems
       feature,     Linux could not erve a a                 y tem, and we ported a repre enta-                  ngineers who do our production
        uitable porting target for eTrade'                  tive tack of our application          - our         operation were all going over to the
       application     , ays Thomp          on.             authentication,        quote   ervice ,             box and couldn't believe how well thi
            La t but not lea twa          the public        product      ervice,     ome of our trad-           little machine wa doing."



32 ~ INNOVATIONS 2006 ~ SUMMER
NECESSARY ADJUSTMENTS                                     the other hand, if we find an open                modularly, with limited commit
  hen Thomp         on and hi team began                   ource alternative where we're not                right. eTrade i now charting a
porting the eTrade.com              application           paying for licen ing, that' the way               cour e for reorganizing     it internal
to Linux, they fir t copied the whole                     we'll go:   ay Framke. eTrade i                   development     proce    e to match the
code ba e into a eparate Linux                            about halfway through the develop-                way that open    ource projects and
branch. It wa in thi branch that th                       ment of the Tuxedo replacement,                   Linux di tribution      are organized.
team made the adju tment nece -                           which i expected to ave the com-                        our code ba e grow ,a         the
 ary for the code to run properly on                      pany 2 million a year.                            bu ine   get more complex, it'll
Linux. For example, th              move from                                                               become harder for u to achieve
 olari    to Linux al       0   involved mov-             A SUCCESSFUL MIGRATION                            the arne producti ity and rate of
ing from the       un       tudio C compiler              Coming off the open          ource migra-         change that we've enjoyed in th
to G C, or G'               ompiler Collec-               tion experience,     Thomp        on \Va in-      la t few year," ay Framke. ·We
tion, the dominant Linux and open                         tere ted in examining        the proce      e     want to break eTrade.com         up into
 ource compiler, and th team had to                       that produced      the    oftware he'd ju t        eparate package,       to allow differ-
sort through      yntax error          turned up
by the compiler chang.
  During the next couple of month                     ,
the team ported the r t of the
eTrade.com application. In the
 pring of 2002, the team brought
in 50 IB 1 x330         erver        and, in
 tages,    hifted traffic through th ir
load balancer       from the row of un
machine to the rack and a half or                     0
of x86 Linux boxe .
  The      un erver         were reallocated,
retired or old to other companie                  .
   While co t avings wa the prima-
ry moti ation for exploring an open
 ource x86 migration,              eTrade found
that the move al        0   yielded     ignificant
performance       increa e .                              eTrade's leaner, meaner server platform has boosted response times.
   The open ource migration al 0 af-
forded eTrade a higher level of flex-                     fini hed deploying 0 succe fully.                 ent packages to evolve at a different
ibility. Thi    wa e pecially important                      In a te t environment, Thomp on                rate of change. Thi      i not how we do
becau e eTrade wa making many                             in tailed Gentoo Linux, a di tribu-                oftware today at all - ba ically, the
acqui ition      at thi time, accord-                     tion that expo e it u er to the                   whole application move forward."
ing to Framke. "Linux fit our model                       breakneck   rate of change that open                 eTrade al 0 i intere ted in open
perfectly for ... caling horizontally                      ource oftware undergoe .                          ourcing some of it internally
rather than vertically: he ay. "It                          De pite the e change , however,                 developed component.         Framke
gave u the flexibility to bring a lot                     the y tern on which Thomp            on wa        and Thomp on believe they have
of product      online that were not ju t                 running Gentoo wa relativel              table.    omething to offer, temming from
brokerage      in nature."                                Knowing that managing change bet-                 eTrade' early bet on ervice-ori-
  Flu h with it initial open ource                        ter and fa ter than the competition               ented architecture.
 ucce , Trade' IT organization wa                         i a k y to ucce          ,Thomp    on and            ·We've benefited in 0 many way
enthu     ia tic about expanding          the             Framke ought to find out how open                 from what community proce e
model,     etting it        ight    in 2004 on             ource' methodology - it " ecret                  have taught u ," ays Thomp on,
the BEA Tuxedo tran action man-                            auce" - could be applied in eTrad '              "and I think it' ju t natural that
agement server.                                           own development team.                             there might b omething that we
  "We're happy to pay for oftware                           The ecret, eTrade learned, i that               do that the open ource community
where it really help            u out, but, on            open   ource project        are organized         may be intere ted in."     :t·


                                                                                                                             SUMMER -7 INNOVATIONS 2006 -7 33
       I EndNote                       I   Michael Vizard




       To get real value from IT, pay attention to the down tream
       tran formation of the bu iness that's made po ible by implementing
       new technology.

       TECH      OLOGY I           0         no     i the handmaiden       of    SHARI       G             CROSS APPLICATIONS
       bu ine     tran formation.            If there i one thing that i         But innovation        doe n't top there. Really           imple     yn-
       con i tent about information               technology,   it i that when   dication    (R     ) and other variant           of X IL are rapidly
        orne new technology         come        along, we typically u e it to    becoming        a ne\\' lingua franca for haring data acro
       do what we have previou               Iy been doing - only we do it       multiple application.
       a linle fa ter.                                                             Rather than ha\'ing to inve tin expen ive developer
          when    we upgrade an application,             we typically apply      and complex application integration tool , people are
       the arne workflow proces we u ed with the old                             increa ingly di covering the joy of imply sharing data
       application to the new application. Then, after month                     acro    variou      application.    Thi , in turn, i gi ing ri e
       of truggle and fru tration, we will actually get around                   to all ort of new Web-ba ed information                   er ice, al      0

       to re-engineering   the bu ines proce  that'                 a ociated    known a rna hup , which are the heart of the Web 2.0
       with the application, ba ed on the newfound                                         phenomenon.
       and largely unu ed capabilitie              of the new                                        In   lay, CIO In ight publi hed it annual
       application.                                                                                urvey on emerging technologie     in the
          For the la t three year, a ho t of inno ative                                           enterpri e. Not urpri ingly, the urvey found
       technologies have been cro ing the proverbial                                              that of the 4~ technologie  included, virtu-
       cha m. It will be intere ting to ee how much                                               alization,   ervice-oriented        architecture      and
       downstream innovation these technologie                                                     multicore   proce sors are top of mind in term
       will generate.                                                                             of near-term adoption, while autonomic
          Consider virtualization.           It's all the rage in                                 computing and grid computing remain far-off
       data centers the e day becau e it allows IT                                                gleam in IT manager' eye.
       organization      to ave money on erver co t by                                               To derive the full bu ine value of emerg-
       driving up utilization      rate.      But downstream,       irtualiza-   ing information       technologie    ,group        of executive     need
       tion will fundamentally             change the way we think about         to it down for a couple of hour            and ponder the truly
       u ing and managing          y tern .                                      di ruptive impact the e emerging             technologie       could
          For example,     oftware publi hers will increa ingly view             have on their bu ine . In the final analy i , technology
       virtualization    product       a platform       that shield them from    innovation that i not accompanied by bu ine innova-
       having to directly support multiple operating                sy tern .    tion i a promi e only half fulfilled.
         nd the nature of sy tern management will change a                          The ecret to getting the real value out of informa-
       the y tern that needs to be managed i a higher level                      tion technology i not to focus olely on innovations that
       of ab traction that might actually be di tributed acro                    lower co t , but rather to pay attention             to the down tream
       multiple hardware platform.                                               tran formation       of the bu ine       that'     made pos ible by
          Beyond that, virtualization i al 0 likely to alter the way             embracing        new technologie     .
       we budget for IT hardware pending.        Itimately, it may
       prove to be the mi ing link that finally enable wide-                     Michael Vi::ard i the editorial director and senior vice
        pread adoption of grid computing               model.                    pre idenr at Ziff Davis 1edia.

34 ~ INNOVATIONS 2006 ~ SUMMER

				
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