Ray Wang on the Forces of Change

Industry analyst R. “Ray” Wang talks with SAP.info about the future of the tech industry, cloud computing, SAP strategy, and the state of innovation.

SAP.info had the chance to talk with Ray Wang, principal analyst and CEO of Constellation Research, at the UK & Ireland SAP User Group Conference in late 2011, where he was a keynote speaker. You can watch the full keynote on YouTube.

SAP.info: In your keynote, you discussed where the enterprise software business and the technology landscape are headed. What is it that IT people need to look for and what’s coming their way?

Ray Wang: I think there are a couple of things. The first is that there are five forces on consumerization of IT: social, mobile, cloud, analytics and UC [unified communications]. Those five forces are going to be with us for the next 10 years and they’re going to permeate every aspect of enterprise software. Where SAP has been successful is in mobile, analytics, and to some extent the cloud. What’s open is really social and what’s on the UC and video front.

That being said, IT budgets today on average are down five percent year over year, and because of that we’re seeing a contraction of IT departments. However, it’s not a contraction in technology spending, because we’re seeing increases of anywhere from 18 to 22 percent in tech spending in elements typically driven by the business side. And so the shift to the business side means that IT is shrinking, but tech spending is increasing. And that has given us the new persona of the CIO, because when we look at how technology is being spent, it’s not just by the IT department. So what we see is, these four personas of a CIO, from a chief infrastructure officer to a chief integration officer to a chief intelligence officer to a chief innovation officer.

One CIO could possibly play all four roles, but it’s very hard to do in a large company. And so, in the enterprise you tend to see the chief integration officer and the chief infrastructure officer play a role that’s in traditional IT while the chief intelligence officer and the chief innovation officer play a role that could and most likely will belong to business.

The danger with the consumerization of IT is that we move too far away from each other. And if business is very successful in adopting these new technologies, but not taking into account the need to harmonize or to standardize across the enterprise, in two to three years the business will fall apart. If IT has succeeded in standardizing everything, in two to three years there’ll be no business. You need that tension between innovation, standardization, and harmonization.

SAP.info:  So you’re not saying let’s push toward the future and not look left or right? You’re saying, think about what you have and how you move forward?

Ray Wang: Correct. IT and business needs to work more closely than ever to be successful. You may have one work stream that is allowing business to take off, but IT should at least help with some architecture, planning, to set some guidelines and to say, here is what we’ll need in three to five years. Or, here is what you’ll need in 24 months. A great example is in mobility. Right now you may use a lot of point mobile solutions to get something done, but long-term there may be a bigger strategy that requires an enterprise mobility strategy. So in the short run we may have something like 100 different mobile apps that are running on different platforms, but in the long run we may standardize the ones that are more common. In analytics the same thing is happening. You may start with all these SaaS-based or cloud-based analytics, but in the long run you may want to have one analytical frame.

SAP.info: Cloud often still means SaaS, on demand solutions. What is your general definition of cloud and what’s the reality behind it?

Ray Wang: Well, there are a couple of ways to define cloud. In the U.S. there is a NIST definition for cloud, but I’d like to break it up into just a couple components. Let’s think about who owns the software. Typically in the cloud you have to figure out, do you own the software, does the vendor own the software? Traditionally, if the vendor owns the software, you’re in a software-as-a-service solution. If it’s being hosted, you own the software or you could choose to have the software hosted by the provider. The second is, how do I pay for the software? And do I pay for the software as in a subscription model? Or I could pay upfront, all on premise. And so the payment model in SaaS typically is a subscription model.

When you think about updates of that software, whether you can control the update or whether the vendor controls the update, that doesn’t define whether it’s SaaS or not. That’s just an option. But more importantly the question is whether everybody is on the same version. Because if everybody is on the same version or has access to the same version, that means they are truly in the cloud, because it’s a one-to-many delivery model.

And then I think the last definition about SaaS that people tend to forget about, or in cloud, is really about where information resides and where the code resides. If all the code and the data reside in the same place, that’s your traditional SaaS model. It’s possible to have virtualization and multi-instance, where everybody runs the same software, yet the data reside in a different location. And typically people are focusing on that as a reason not to go to multi-tenancy. There are different reasons for each one of these. One isn’t better than the other, but multi-tenancy is the most cost-effective delivery model.

SAP.info: Where are the “big players” headed in terms of innovation?  

Ray Wang: There is a lot of cool stuff coming out of Microsoft, and I think it’s going to all happen in the next 24 months. A lot of the innovation coming from Microsoft stems from the work on Windows 8. And Windows 8 has what they call a metro-style UI. And the metro UI is like all those boxes that you see with things that pop up into them. And that is driving not only the paradigm for touch user experience, it is also driving the paradigm for data visualization and it’s also driving the paradigm for how they see the intersection between business and consumer.

SAP.info: What does that mean for SAP?

Ray Wang: Well, for SAP it is in an interesting scenario. It cannot become too dependent on Java, because Oracle owns it, and it cannot become too dependent on Microsoft, because .NET is the same problem. And so you have to take an agnostic point of view. And for SAP long-term, playing the role of Switzerland is important. But it can benefit from a lot of the Microsoft technologies that are there, because at this point in time Microsoft is no longer seen as the evil empire. So what we actually now see is that Microsoft is seen as … I mean it’s just the standard. So, coming out of that, the Windows 8 technology, the ability to use Kinect for motion UI, there are some other interesting innovations that are happening with Link and Skype, the stuff they are doing with the cloud, which will in the future enable one way of getting to subscription billing. And the marketplace that everybody is building, I think that’s where the innovation showcases are happening.

SAP.info: Is there one last thought that’s important for you?

Ray Wang: I think the role of the user groups is going to continue to play a big role for SAP. SAP is making that shift and transition to the new world, and in this phase it really requires embracing a social business perspective. User groups are the community behind that social business.

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