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Cloud // Software as a Service
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Alternative IT

CIOs are more receptive than ever to new software models -- and not because they’re trendy.

Oracle CEO Larry Ellison mocks cloud computing as typical IT trendiness--nothing more than a new name for processors, storage, databases, operating systems, and other software delivered over the Internet. "What are you talking about?" he shouted during a recent interview at the Churchill Club, captured on YouTube. IT's as bad as the fashion business, he said: "Chanel last year had fuchsia; now it's called puce."

Yet there's a very good reason that Ellison's raising his voice. Something has changed in the attitudes of CIOs, something that starts with cloud computing but ripples beyond, and it's happened just over the past year or so. CIOs are increasingly open to new, alternative IT operating models, which also could mean new vendor relationships.

A grinding recession, paired with new choices in terms of online software, mobile computing, outsourcing, open source, and more, opens the door to this change. In particular, CIOs are rethinking significant parts of their software strategies, considering alternatives to conventional licenses, maintenance, and fee structures, as well as alternatives to lengthy internal development cycles, complex customization, and long global rollouts and upgrades. All that rethinking isn't brand new, but one suspects Ellison knows there's a much greater sense of urgency among customers.

There's no question that licensed, on-premises software, run by internal IT, will remain a mainstay of most organizations, but it will be complemented by alternative models, and in some cases replaced by them. The alternative approaches to software arrive under many names, but they all point toward making software cheaper, simpler, more flexible, and more accessible. Alternative IT models are gaining ground because, in many cases, they make too much sense to ignore. For a glimpse of this new thinking, look to the recent choices of GlaxoSmithKline CIO Bill Louv and Brent Hoag, JohnsonDiversey's senior director of global IT.

Louv bristles at any notion that he's chasing a trend. "The evolution here isn't, 'Gee, let's do something in the cloud or SaaS,'" he says. "Our Lotus Notes platform was getting to end of life. The question came up innocently that, given we'll have to spend a lot of money here, is there something we can do that's smarter?" What he decided is to move all 115,000 employees worldwide to the online, monthly subscription Exchange and SharePoint offerings that Microsoft made available in April.

Here's how smarter looks to Louv: 30% savings on total cost of ownership over five years compared with the comparable licensed software. Part of the savings, he says, comes from not doing e-mail server upgrades, since Microsoft will release those improvements as it finishes them into the Web software that it hosts and runs. What Louv gives up is that his team can't customize Exchange and SharePoint. That's OK, he says, since Exchange and SharePoint have improved to the point that the old reasons for customizing no longer exist. "And here's the rub: When you customize software, it's difficult to implement future upgrades from the vendor," Louv says.

GlaxoSmithKline also spent six months creating a "very different architecture" for online e-mail and collaboration, he says. Instead of the pharma company having replicated databases around world, all that's in Microsoft's data center. "That shifts a lot of heavy lifting toward the network and away from servers," Louv says.

The challenge of cloud apps isn't bandwidth as much as latency. GlaxoSmithKline found that internal e-mails from its Singapore operations had to go through too many switches to reach Microsoft's U.S. data center, causing delays. The company did some split tunneling, sending e-mail from Singapore across the public Internet instead of through a VPN, to get a more direct path. That approach required some "risk management administration," Louv says, and some additional security software spending.

If things don't work out, GlaxoSmithKline has an exit strategy. "It's straightforward: We'd move the same technology into our own data centers." And that's one reason he didn't consider Google Apps. "It's hard to figure out an exit strategy with Gmail," he says.

That didn't stop JohnsonDiversey's Hoag. The $3.4 billion-a-year maker of commercial cleaning products was in a holding pattern for a much-needed e-mail upgrade until last December, when the company signed a contract with Google for its Google Apps suite. For six years after SC Johnson Commercial acquired Unilever's LeverDiversey division to create JohnsonDiversey, it clunked along with two e-mail platforms, IBM Lotus Notes and Microsoft Exchange. An e-discovery system alone priced out at $500 million. The upgrade, says Hoag, "was a difficult business case that never got funded."

Hoag ticks off Gmail's advantages: It's cheaper to implement and maintain, it fits with the company's environmental goals because it didn't require new hardware, and it comes with solid disaster recovery and e-discovery through Google's Postini service. Plus his IT team would never do another e-mail upgrade. On one day, May 18, Gmail went live for every one of the company's 12,000 employees in 70 countries.

It's not perfect. Google's 99.9% uptime guarantee amounts to 43 minutes downtime a month. Though Hoag says it generally has been less, it can be unpredictable, like the 100-minute outage JohnsonDiversey and others experienced Sept. 1, when Google underestimated the impact of its server maintenance. Still, 99.9% uptime, Hoag says, is stable enough for e-mail in his industry.

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