Thursday, August 22, 2013

Combining big data and cloud capabilities for ecommerce matches buyers and sellers like never before

Listen to the podcast. Find it on iTunes. Read a full transcript or download a copy. Sponsor: Ariba, an SAP company.

Social tools, big data and business networks are reshaping e-commerce in such a way that buyers and sellers are linking up in ways not possible even a few years ago.

In one example, Ohio-based LLT Barcode & Label, has found powerful new ways to develop sales and leads inexpensively using Ariba Discovery to better connect with qualified new customers.

To learn how, BriefingsDirect recently sat down with Rachel Spasser, Senior Vice President of Marketing at Ariba, an SAP Company, and Kris Hart, the Account Manager at LLT Barcode & Label in Stow, Ohio. The moderator is Dana Gardner, Principal Analyst at Interarbor Solutions. [Disclosure: Ariba is a sponsor of BriefingsDirect podcasts.]

Here are some excerpts:
Gardner: This whole concept of finding customers, developing leads using cloud, using the networked economy and how people are linked up now more-and-more has become a function of the data that people are able to access.

Tell me a little bit about how things have changed, say now, versus five years ago in terms of finding sellers for buyers, and buyers for sellers?

Spasser: We're talking about major changes that have gone on in the past few years. If you think about the mantra around marketing, it's always been to make yourself, your product, and your company relevant to potential buyers.

Ten or 15 years ago, as the Internet was really coming into its own, it provided significantly more data that helped us understand demographically, and a little bit behaviorally, who our customers were and what they were doing.

When we talk about the networked economy, business networks, and connected commerce we're really taking that to a whole other level, where as marketers, we're able to hyper-target, our potential customers not just on their demographics, but also be able to predict when they're going to be ready to buy.

They overtly raise their hand and say, "Hey, I'm interested in buying by a connected RFI or RFQ process." But we can also analyze the myriad data that's available today and put both unstructured data and structured data together in a way that helps us predict when they are going to be ready to buy. That's when we can actually present them with compelling offers. So it really does change the whole nature of the game.

What's appealing?

Gardner: Kris Hart, do you really care whether it's the cloud or the networked economy, or whether it's structured or unstructured data? What appeals to you in all this in terms of the change that's going on?

Hart: In general, you don't really care one way or another how you get it. the cloud and e-commerce makes everything a lot easier, not just for the seller, but also the buyer. It really helps with the relationship, and being on the cloud is much simpler, faster, and easier.

Gardner: Tell us a little bit about LLT Barcode & Label, so that we have a better understanding of your business, the vertical, the challenges that you face in terms of growing your business, and finding new customers.

Hart: We started about 16 years ago. It was a small company, and we're still a small company, where it's hard to get out in front of buyers. When we started, we would send out about a half-million catalogs a year. Those catalogs have inside them labels, thermal transfer ribbons, and laser labels, and items like mobile computers and printers to be able to print those items.

We started out as a small company, basically a distributor for a company that needs to ship a label via FedEx, UPS, or however. They need a label on that box to be able to ship their product. So as far as vertical markets go, if you name a company, they have to ship something, and they'd be able to use that.

So we play in every single market out there. We gross roughly about $12 million a year and we have about 15 people who work for us.

We would buy lists from Hoover’s, or somebody like that, and we would send out half a million catalogs a year.
We were hoping that everyone who got one of those catalogs would call us and want to buy something. But that's not the case, and over the past 15 years, that return on investment (ROI) has gone down significantly. So we had to find new ways to grow our business.

Internet has helped

The Internet has really helped. A lot of people at home are using sites like and eBay and they're getting used to just looking on the Internet when they need to buy something.

When they go into work, because it's so easy at home, they want to be able to do the same thing. It's a win-win for both sides. We don't have to print lots of catalogs every year, and they can just find us on our website or search engine via Google, Bing, whatever.

Gardner: Why wasn't it just creating a website and being part of the massive index that Google and other search engines use? Why was it better moving to an e-commerce cloud, a networked economy approach like Ariba Discovery?

Hart: The biggest thing with Ariba Discovery is that it's very much like We wanted to be in front of buyers when they were ready to place an order. We wanted to be that company that that person on the other end is going to come search for, see us, and give us an opportunity for their business.

If I walk in in the morning, I already have leads there. I already have an opportunity with a buyer who knows what they're looking for. They're out there on Ariba Discovery, asking me, "Can you help me?" That's a lot easier than like the catalog theory, hoping that someone runs across your website.
You know automatically what that buyer is looking for and where that buyer is.

You know automatically what that buyer is looking for and where that buyer is, and hopefully within a couple of sentences, a couple of conversations with them, you can figure out when they need to buy.

Spasser: If you listen to what Kris said, the Internet has enabled business to be done faster and for him to find new customers faster and more efficiently.

But where the business networks really differentiate themselves from the Internet as a whole is that there is a common platform, where both buyers and sellers are going to connect and find very specific commodities or services that meet their specifications. Creating a platform that enables them to get to that level of granularity enables them not just to conduct commerce faster, but conduct commerce smarter.

More and more data

As we look at the value of the business networks, over the course of time, these networks are, in essence, aggregating more and more data and insights that ultimately help companies like LLT Bar Code in that mid-market that want to do business globally. At the same time, it helps global buyers that want to buy, for various reasons, from companies that are either local suppliers, from companies that might have green initiatives, women-owned business, or diverse-owned business.

So there are a lot of different criteria that go into determining who you want to buy from or sell to. The beauty of the business network is that it gives you the ability to both get insight and get a lot of information on the buyer or the seller, and to connect based on very, very specific criteria.

Gardner: Kris, one of the things that’s interesting in comparing a web-based open-Internet approach to something more standardized is speaking the same language, data, metadata, taxonomy. It might be one thing for you to put up information on your website, but somebody who's searching, or even the search engine algorithms, might not understand the importance of certain terms and lingo.

How has a commonly understood business-oriented environment helped with your results?

Hart: Well, with Ariba Discovery it’s great. They have postings for all sorts of commodities and items that a buyer may be looking for. A buyer can check them off on his screen and then send out an RFQ.
With Ariba Discovery it’s great. They have postings for all sorts of commodities and items that a buyer may be looking for.

The nice thing about having that similar platform is that I set up a profile. I select specific commodities of the types of business and the items that we operate in. With that, a lead is automatically given to me. The buyers are looking for specific things, and it may be in his own terms or maybe a little bit different than how he may search it on the Internet and possibly miss us.

I can take my list of commodities and then it will be automatically generated. It’s going to come pretty close. He is going to be right there for me to be able to respond to whether or not we can help them, yes or no.

We started looking at Ariba Discovery in late 2011. We were trying to find some other way to gain new customers and to grow the business. We decided on Ariba Discovery in January of 2012. There were a couple of RFPs out there, and I thought, "Why not give it a shot?"
So we respond to a couple, and the first RFQ that I had responded to was for some blank labels and a couple of colored labels. A couple of weeks later I get an email from the client that had posted the RFQ, and they want us to bid on their entire distribution, labels, ribbons, and shipping items.

Too good to be true

And after going through their process of RFQs, add-in items, pricing, and everything else, we won about a $400,000 deal via Ariba Discovery. That was for a two-year contract, and that was the first one. It was almost too good to be true.

The great thing about it was that we started in the middle of January, when I responded to the RFQ and we had the contract and everything signed and they were buying from us in April. Very quick process.

Gardner: What was your cost in acquiring this customer?

Hart: With Ariba Discovery, you can use Ariba Discovery for free or you can use the Mid-Level or the Advantage. And we decided to go with the Advantage.

That had some other benefits with the profile and things of that nature and it was only $3,000. We decided to take some of our marketing budget and put it into that and at least give it a shot. We were more than happy. We got our ROI right-away, and it's a much better and simpler process than sending out a half a million catalogs a year.
You’re not wasting your time. You’re not sifting through a lot of unqualified opportunities as the seller.

Spasser: We love to hear stories like Kris’ about immediate ROI. And we hear them over-and-over again from suppliers on the network.

One benefit, as we talked about, is the ability to define very specific criteria as a seller as to what you sell, so that when you do get posts that are directed to you, you know that they're relevant to you. You’re not wasting your time. You’re not sifting through a lot of unqualified opportunities as the seller. And the benefit to the buyer is the same.

As the buyer posts, their posts are being sent to people who are all qualified, who all have the ability to meet the specifications that they have created. Therefore, it's saving a lot of time on their part as well. When you look at the two-sided model, it really is a win-win both for the buyer and the seller within the network.

One of the hidden pieces of gold within the network is the data that's created over time from all of this transactional information, as well as data that is created individually from buyers and seller. They're providing information on ratings and reviews of how quickly they got paid, if they're a seller, by a particular buyer. Or it's the reverse, how accurate and on time deliveries are if you’re a buyer looking at a seller.

So, the unstructured information, combined with a lot of structured data, is creating an opportunity to make much better matches and have buyers and sellers that are much more informed about one another as they enter into business relationship.

We all know the more that we understand and have well-defined expectations of our business partners, the more effective those relationships are over the course of time.

Some structure

Gardner: Have you been able to find that the services around process for procurement, automating the invoicing and PO process, the data, even the transactions make that a more efficient customer relationship?

Hart: Yeah, it's funny that you bring that up. Right now, that particular customer has gone to Ariba for some other items that they are going to start using for procurement and different items like that. What we're hoping is that once that process takes over, then we can be in the supplier network and possibly even set up e-catalogs for them and make their process a whole lot more efficient and easier.

That way, if they have any transition in buyers, someone is on vacation, or anything like that, there are no questions about the items that they purchased from us. There are no questions on the pricing, on who to send the purchase orders to, or anything like that. It's all handled by Ariba.
You can now start connecting with multiple buyers via the network, which enables you to create even greater efficiencies.

Hopefully, we'll be able to set up a catalog, and they'll be able to smoothly purchase from us. It already helps us being on the supplier network and then them hopefully getting ramped up and making everything a whole lot more smooth.

Spasser: It's great to hear about the benefits as it relates to efficiency from a process perspective on the network. One of the other benefits of setting up a catalog to do business with that one buyer on the network is that now you have the catalog set up on the network.

As you get additional buyers, you're using the same catalog and the same infrastructure. You can now start connecting with multiple buyers via the network, which enables you to create even greater efficiencies as a mid-market seller who may have limited resources within the company to issue and reconcile invoices.

The efficiency of setting up one relationship is the starting point. There is much more efficiency as you start to establish more-and-more relationships as a seller over the network. But there are other services that we offer over the network that also create value, and one example is our Dynamic Discounting Program.

For example, as a seller on the network if you would like to get paid faster from one of your buyers, you can offer different payment terms. Let's say your contract is a net-60 payment term, and you’d like to get paid faster because you’d like to make some capital investments in your company. You could offer to provide a discount for a net-10 payment.

Discount terms

We have many mid-market suppliers who have offered those discount terms to their buyers, so that they can self-fund growth for their own companies. That's yet another benefit of doing business on the network.

The third major benefit is the visibility and predictability that you have in relationship with the customer. At any point in time, as a seller on the network, you can go in and see the status of where your order stands, where your payment stands, or whether your invoice has been approved for payment.

It gives you a lot more visibility, and therefore predictability, as a mid-size business, into things like cash flow. You can anticipate when you're going to get paid, instead of having to pick up the phone 16 times and say, "When is the check is going to come? Have you approved the invoice?"

So there's efficiency, visibility, and predictability, and then there is the opportunity to impact cash flow by using some of the more sophisticated tools like Dynamic Discounting to speed up payment.

Gardner: Tell me a little bit about the future roadmap that Ariba is embarking on around a wider, deeper, richer basket of goods and services.
So there's efficiency, visibility, and predictability, and then there is the opportunity to impact cash flow by using some of the more sophisticated tools like Dynamic Discounting to speed up payment.

Spasser: One of the things that we are doing, really focused on the lead generation side, is expanding the services that we offer around Ariba Discovery that can help companies like LLT Barcode & Label find new customers worldwide.

Related to that is the ability to create multiple profiles that are very highly targeted. So for the various products that LLT Barcode & Label offers, they could create a profile unique to different industries. Or if there are different industry requirements around labels and barcodes, they can create very specific, targeted profiles that really make them extremely relevant to buyers within various industries.

Another service that we are offering is what we are calling "Sellers You Might Like," and that's the ability to based on what someone is searching on proactively suggest sellers that meet their criteria.

So even if a buyer does a search and doesn't necessarily click on a particular supplier, if that supplier meets those criteria from an algorithm perspective, that suppler will be proactively suggested, especially if that supplier has received high ratings and reviews from other buyers on the network.

So there are couple of new services that are being offered from the Discovery side that will really accelerate the ability for mid-market companies like LLT Barcode & Label to grow their business and expand the value that they get from using the Ariba network.

How to get started

Gardner: Any 20-20 hindsight, based on your experiences so far, that you could offer to other people who are looking to get started on this cloud-based, commerce and lead generation activity?

Hart: Definitely give it a shot. Set up a free profile and start getting some leads generated, something that comes your way. Definitely make sure you're in the right commodities. Don't start clicking boxes for commodities that you can't offer. That way, your leads are more precise and more ready to go Then see what happens for free.
Definitely give it a shot. Set up a free profile and start getting some leads generated.

If you want extra help and a little bit better outreach with the marketing profile, go up the next step or even all the way to the top like we did. We saw the benefits and doing that with the marketing help that we have from Ariba and how to use the Discovery tool. As I said, that paid off for us, but definitely give it a shot. If nothing else, just set up a free profile and see where that takes you.
Listen to the podcast. Find it on iTunes. Read a full transcript or download a copy. Sponsor: Ariba, an SAP company.

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Wednesday, August 21, 2013

Knowing what it takes to generate a minimum lovable product

(This guest post comes courtesy of Brian de Haaff, founder of Aha! Labs, Inc. Follow him at @bdehaaff.)

By Brian de Haaff

A can of cat food is a minimum viable product (MVP) when you are starving, but it’s highly unsatisfying and unlikely to generate a loyal following (of humans).

de Haaff
And there you have one of the problems of the MVP approach. It strives for “barely enough” and never good. And heaven forbid, the goal is never being great. It results in products that mostly work but never delight. No matter your source, the very definition of an MVP is generally similar to the following: The MVP is a new product with just the necessary features to be deployed, but no more.

The MVP is a curse for ambitious technology companies that want to grow. In an increasingly transactional world, growth comes from long-term customer happiness. And long-term customer happiness comes when customers adore your product or service and want you to succeed. You should be thinking about what it will take for customers to love you, not tolerate you. Really think about the type of mindset change it would take. What would it take to create a minimum lovable product (MLP)?
While the true adoption of the MVP is a strategic approach to getting product out the door, when applied it yields unsatisfactory products.

While the true adoption of the MVP is a strategic approach to getting product out the door, when applied it yields unsatisfactory products. You might argue that is is best for prototyping and feedback gathering. Yet, my experience is that when it is the dominant product development mindset in an organization, it becomes the overarching goal of every release and dictates the outcome. Even the product managers who are responsible for shepherding the product become intoxicated with mediocrity.

I have been in multiple larger organizations where the concept dominated executive, product, and engineering mind share. Rather than asking what do customers really want, or what would delight them, the conversation always returned to what’s the minimum viable product and when can we get it to market.

The problem is that the two major principles driving the MVP are flawed.

The MVP reduces waste

The MVP never reduces waste because it never delivers what the customer really wants. It presupposes that there will be iteration after iteration before the product truly meets customer requirements. Couple this with the fact that agile engineering environments prioritize “rapid output”  and it’s even more likely that what’s delivered will not be tied to the organizational strategies and product vision.

The MVP accelerates time to market

The MVP may very well get you something to market first but even in an emerging market you will not be a serious contender. Loyal customers who depend on your product are what matter. There were helpdesks before Zendesk, tablets before the iPad, electric cars before Tesla Motors, and CRM tools before The MVP is further useless in established markets where major disruption is what’s required. Customers already have tons of viable products and some are probably even pretty good. It’s your insight that matters and only a terrific product can win.

Ultimately, chasing the MVP forces you to sprint faster and faster chasing fool’s gold. And the more desperate you become to lead, the more you are likely to die from incrementalism. It’s a vicious loop that will gently guide you from market innovator to hopeful fast-follower.
We all have the opportunity to do something fantastic and be happy doing it.

Now, even if you are convinced that striving for mediocrity is an atrocity, you likely need to convince others. There is no easy way. One approach is to just yell like a crazy guy the next time you are in a strategy or product meeting and someone starts talking about the MVP. You might just be able to get the group to focus on what’s necessary to create a minimum lovable product.

Assuming you start thinking about creating love and others are willing to give you a chance, here are a few ways to determine if you have succeeded in identifying a minimum lovable product before spending one minute developing it. Remember that the goal is to find the big idea first. The more of these characteristics you can check off for your idea, the more lovable your product will be.
  • At least one person tells you it’s never been done
  • Customers visibly smile when you describe it to them
  • Someone swears when he hears the idea (in delight or disgust)
  • You dream of using it and all of the features you could add
  • Only your CTO or top architects think it’s possible
  • People start contacting you to learn about what you are building (old school word-of-mouth)
  • The top industry analysts are not writing about it
I hope that this inspires and excites you. If you are interested in learning more about building great products — you may want to use our interactive tool to discover how lovable your product is.

We all have the opportunity to do something fantastic and be happy doing it. And I personally guarantee that changing your focus and setting your sights on creating a MLP will bring you great joy and make the world a better place.

Sign up for the free 30 day trial of Aha! Follow the company @aha_io, and the author @bdehaaff. (Comments on Hacker News)

(This guest post comes courtesy of Brian de Haaff, founder of Aha! Labs, Inc.)

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Tuesday, August 20, 2013

Just in time for VMworld, Dell virtualization suite update aims to further enable data-center efficiency

Dell Software today announced the next generation of its virtualization operations management suite, just in time for next week's VMworld conference. The suite is comprised of a trio of solutions that help businesses of all sizes streamline virtualization, storage, and cloud-computing initiatives -- with broad VMware products support.

The new releases include Foglight for Virtualization, Enterprise and Standard Editions 7.0 and Foglight for Storage Management 3.0. These releases address a number of data-center transformation challenges -- from optimizing performance and efficiency in a virtual environment to solving end-to-end storage and virtualization challenges in complex and cloud-based systems.
Professionals are faced with increased expectations to deliver business value.

Dell Software, recognizing VMware's market leading penetration in virtualization, is carving out a heterogeneity support play for server, storage and VDI -- but is making VMware support a priority for now. And Dell is supporting VMware VDI even as its own thin client portfolio, nee Wyse, competes with it.

For Dell Software, the bigger long-term management and efficiency opportunity is for making a mixture of virtualization technologies tamed. They, like most, expect Microsoft Hyper-V to gain in share and therefore make for a mixed data center sprawl. And the same is expected for VDI, especially as BYOD, mobile first, and tablets make the end points even more hetero.

You might say the messier it gets (and the lack of cross-technology support from the competing market leaders themselves), the better it is for a third party like Dell to waltz in and fix the mess, and scoop up a nice piece of margin too. Dell plans to target Hyper-V eventually, but is focused on VMware for now.

"Software-defined is great, but it isn't a black box. You still need to connect the physical to the virtual," said John Maxwell, executive director, product management, Dell Software. [Disclosure: Dell Software and VMware are sponsors of BriefingsDirect podcasts.]

Infrastructure and Operations (I&O) professionals are faced with not only reducing the total cost of the data center, but also to drive agility, quickly deploy new applications, and deliver the highest level of performance, said Maxwell.
Foglight for Virtualization

Foglight for Virtualization, Enterprise Edition 7.0 provides end-to-end performance monitoring and operations management for heterogeneous virtual environments to help reduce operational costs, speed deployments, and simplify the complexity of the data center virtual and physical infrastructure. This also includes deep integration with storage, Microsoft Active Directory, and Microsoft Exchange modules to provide performance analysis and advice across data-center infrastructure.

New optimization functionality allows I&O administrators to significantly increase consolidation ratios with improved visibility and analytics geared toward right-sizing CPU, memory, and storage, and effectively manages virtual-machine (VM) sprawl by reclaiming resources through new optimization insight into such waste as powered off VMs, zombie VMs, abandoned images, and unused templates and snapshots.

Now that most enterprises are majority workload virtualized, the next wave of cost savings comes from finding and removing those zombies, managing all the various flavors of virtualization in common fashion, further optimizing the CPU/memory/disk performance, and freeing up data storage with more insight and intelligence. You could think of this all as repaving the path to software-defined data centers, recognizing that there's still a lot of waste to clear along that road well before the end destination.

Additional enhancements due this month include:
Foglight for Storage Management 3.0 helps to ensure the right storage configuration to optimize virtual infrastructure performance and availability. It provides virtualization managers with visibility into the underlying physical storage infrastructure that lies beneath the virtual datastores, enabling them to immediately identify hosts, VMs, and datastores experiencing performance problems caused by underlying physical host, fabric and storage components and tips to fix the issues.

Performance metrics

Foglight for Storage Management gathers extensive performance metrics and presents this data within a rich graphical interface incorporating architectural diagrams, graphs, alerts, and drill-down screens for fast and easy identification of virtual and physical storage problems.  New feature functionality provides:
  • Pool-level analysis to track remaining capacity and over-commitment for thin provisioning
  • Performance analyzer to provide one-click performance troubleshooting visibility from VM to array to sub-array level in a single dashboard
  • Additional device support for Dell Compellent, Dell EqualLogic, and EMC VMAX
Foglight for Virtualization, Standard Edition 7.0 is specifically designed for the small–to-medium size environment (SME), with a focus on ease of use and quick time to value. It provides administrators insight into virtual environment performance and automated resource optimization, capacity planning, chargeback and showback, and change analysis and compliance.
Dell Software’s virtualization operations management suite helps simplify the complexity of today’s modern data centers to help I&O professionals deliver on these top priorities

New capacity management and planning functionality helps to drive data-center sustainability and reduce power consumption to decrease operating costs and capital expenditures, while improving workload performance. It does this by analyzing existing VM workload requirements against the entire environment and identifying the minimum number of host servers required over time to safely support workloads. Additional new enhancements include:
  • Enhanced user interface for a more intuitive approach to capacity management and planning
  • New capacity planning features to prepare for host server refresh, upgrade, or expansion projects by finding the optimum configurations and minimum number of new or existing host servers to maximize VM performance while minimizing server cost, space, and power needs
  • New power minimization feature to reduce costs by determining the minimum number of host servers needed over time to safely run workloads, and estimating potential cost savings by powering down unneeded servers
  • New optimization to automatically adjust virtual machine disk sizes up or down, based on actual use
Foglight for Virtualization, Enterprise Edition 7.0 remains priced at $799; Foglight for Storage Management 3.0 remains priced at $499 per socket, and Foglight for Virtualization, Standard Edition 7.0 operates as a standalone tool, or can easily integrate with Dell Software’s Foglight for Virtualization, Enterprise Edition software. It's priced at $399 per physical socket in managed servers.

All can be downloaded from the Dell Software website and are expected to be generally available on August 31.

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Monday, August 19, 2013

VMware vCloud Hybrid Service powers journey to zero-cost applications for City of Melrose

Listen to the podcast. Find it on iTunes. Read a full transcript or download a copy. Sponsor: VMware.

The next BriefingsDirect IT innovator interview examines how the City of Melrose, Massachusetts, plans to reduce the cost of supporting its applications to perhaps zero -- and maybe even generate revenue -- by embracing hybrid cloud computing to become a specialized managed-services provider.

Melrose transitioned from nearly 100 percent server virtualization to a novel cloud capability built on VMware vCloud Hybrid Service (vCHS). In doing so, they gained dependable disaster recovery (DR) capabilities. They also discovered that they could not only host their own applications, but also those of nearby communities for an ongoing fee. The process sets up a win-win scenario for all the municipalities involved.

To learn how the hybrid cloud leads to new business models and lower total costs, BriefingsDirect recently sat down with Jorge Pazos, the Chief Information Officer, and Colby Cousens, IT System Administrator, both for the City of Melrose. The interview was conducted by Dana Gardner, Principal Analyst at Interarbor Solutions. [Disclosure: WMware is a sponsor of BriefingsDirect podcasts.]

Here are some excerpts:
Gardner: As you looked to extend the benefits of server virtualization, what were some of the top requirements for moving to cloud and hybrid-cloud infrastructure?

Pazos: We're an IT department for a mid-size town in Massachusetts. We offer services to all of our internal departments, and we're beginning to grow out into a managed-service provider.

What we're doing now is providing these services to other cities and towns. The way that municipalities are run, especially from an IT perspective, there isn’t a great deal of diversity. We could pretty much run IT for almost any city or town, because the apps are very similar and the business processes are all very similar.

And after the launch, actually one of the things that we are pretty excited about that we didn't see in the past was cost predictability, which we don't really see a whole lot from a lot of the other service providers.

It’s not that big of a stretch to get to that point where you say, "I can do this for another city or town." That was actually the thought process several years ago, as we started to do our own internal consolidation. The idea was that if we do it for ourselves, why can’t we do it for others. It’s not that much of a leap to get there.

Cousens: When you get some practice consolidating city and school networks and data centers you realize it's all the same thing. We could do it with other the municipalities as well.

Gardner: What was important for you to be able to do that in terms of the infrastructure solutions available?

Cousens: Compatibility was the biggest issue for me. I didn’t want to run into any roadblocks with software or hardware that wouldn't work with each other, so we would have had to drop the project just because two things wouldn't connect.

Pazos: Part of what we're looking to do internally is grow that managed-service provider part of the business, but then also take care of a lot of the day-to-day stuff, too.
Three or four years ago, there weren’t a whole lot of cloud-service providers that we felt could do what we were looking to do. So when we had this opportunity to participate in the beta for the VMware vCHS, we were really excited. There was quite a bit of promise in it for us in terms of things that we felt were important, like interoperability, security,  performance, and things like that.
If you think about building a data center, which is what we did about three or four years ago, it was a top-to-bottom upgrade of our data center. One of the things that you immediately start to think about is your disaster recovery (DR). When you're a small municipality with five square miles, where do you put a DR site that gives you diverse power providers, and geographical diversity?
It doesn't make sense to invest heavily in a DR site that’s somewhere within the same town. So we were really looking to cloud-service providers to provide that for us. That was one of the big drivers for us, and we really didn't feel comfortable growing the business too much without having at least that capability somewhere, as part of our service offering.

Gardner: Tell me about Melrose, the applications, the number of users, and your infrastructure. What are we talking about in terms of the IT organization?

Modest deployment

Pazos: It is a fairly modest deployment by service provider standards, but I think by municipal standards, we're decent size. Currently, we're at about 70 virtual machines (VMs) with 30 terabytes of storage. We connect our regional partners the way that we connect these communities, Essex is about 30 miles away, and Saugus is a direct neighbor. To connect these guys back to our data centers, we use an ENS circuit, which is basically a Layer 2 connection between the two sites that can be ramped up.

They come up in base of 10 Mbps and then they can go straight up to a 10 Gbps . We run several SQL databases, which includes our financial system. We run Microsoft Exchange, Public Safety Dispatch. There is a CAD, Computer Aided Dispatch/Records Management application, and database. We also have virtual desktops. Our entire emergency dispatch operations are all running on virtual desktops, as well as point of sale for virtual desktops.

So we run quite a few different apps, many of which are obviously pretty mission-critical, and the demand is growing. We are going to be on-boarding Saugus through the summer and into the fall. So we'll be experiencing some growth through that process as well.

Gardner: And Essex and Saugus are also municipalities in Massachusetts, and you have been experimenting and bringing them on, so that they become paying customers to you. Do you think it is possible at some point that you're going to cover your IT cost by doing this managed-service provider business?
I also think that the services we offer to the city are better because of our equipment.

Pazos: Early on, it got to a point where we couldn't do it, but it looks to me like now we're potentially going to be in a position where maybe five or six additional clients get us to the point where we are revenue-neutral to the city. That's looking a little bit more realistic for us in terms of both getting people to warm to the idea and also being able to support it.

Revenue-neutral would be absolutely fantastic. If you're taxpayer in the City of Melrose and you can have a department that offers all of its services internally and be completely revenue-neutral, I would be ecstatic about that.

Cousens: I also think that the services we offer to the city are better because of our equipment. Our refresh schedule is better. The stuff that we're using is more enterprise-grade, because we're using it in the hosting environment and providing to a number of partners.

Gardner: Let's look at the equation of how the economics of this work from the perspective of your client municipalities, for lack of a better word. When Essex and Saugus evaluate this, are they going to be able to get their IT services from you cheaper and with a higher performance than they would have been able to do it themselves?

Pazos: There are two ways to look at that. Town of Essex has reduced their IT expenditures by 33 percent year over year. So they're immediately seeing savings every year. The story in the Town of Saugus was a little bit different. They had an IT department that had inherited infrastructure that was getting old and needed to be refreshed. They were able to buy into the service and not have to incur a large upfront cost of doing a forklift upgrade of their entire IT infrastructure.

Year-to-year savings

They're saving, year one, somewhere in the vicinity of about $80,000 or just north of $75,000. Then, there's the year-over-year savings that they're seeing. So for this three-year agreement, they feel like they're saving quite a bit of money.

Gardner: Colby, given that you had a very strong set of requirements around compatibility of being able to move from your on-premises infrastructure into a hybrid cloud model, what about Essex and Saugus? Were they also highly virtualized in their servers and workloads, and how did the compatibility from them work, moving toward your vCloud Hybrid Service set up?

Cousens: That wasn’t as much of an issue for us, because they weren't really virtualized yet at all. So part of the on-boarding process for them is virtualizing all of their servers and doing some virtual-desktop offerings, too. We got to start fresh with virtualization onsite for their services.

Gardner: I suppose you could look at that as another added value. You're actually modernizing them -- or guiding them into a more optimized IT infrastructure with a higher utilization. You're also helping them decide which of their services to get from the source, in this case the one that you are managing, versus perhaps a cloud provider that would not have the expertise in the customization that they're looking for.
Not only are we saving them money, but we're able to provide them services that they weren’t providing for themselves.

Pazos: Absolutely. Not only are we saving them money, but we're able to provide them services that they weren’t providing for themselves. A lot of these guys didn’t have offsite data replication.

They didn't have DR site capability. It was a pretty traditional small data center, a server room type set up in a building. Everything was a single point of failure. We're not only saving them money, but we're providing a higher level of service than they would have ordinarily been able to achieve.

Cousens: Again, in the case of Essex, the town manager is doing the IT work too. So besides the financial piece, he was having a hard time focusing on his IT stuff as well.

Pazos: A lot of these are small governments scattered around the state. The $75,000 that Saugus is saving this year is very big money in small town government.

In the case of Essex, quite often, people are doing double duty. They're the town accountant and the IT person, or the town administrator and the IT person. So they are also gaining from freeing themselves up to focus on their primary roles. In the town of Essex, he's able to focus on being the town administrator. That’s life in small town government in Massachusetts.

Gardner: Do you have any advice for those who might be also considering adopting a hybrid cloud or maybe even pursuing the notion of being either a consumer or provider of these managed services?

Pazos: Whatever you've been waiting for, don’t wait. It's to the point where you just want to move ahead, and for some of this, you're going to have to adapt and sort of figure out as you go and as things evolve.

There were times early on, where we were frankly a little hesitant to do some things, because, to be honest with you, we spoke to a lot of folks in other cities and towns who just sort of cocked their heads a little bit and looked at us and said, "Really? Why are you doing this? Why would you want to do this? This seems sort of crazy." So there was a little bit of hesitation at times as we moved forward.

Solid idea

But the idea seemed solid, and we went ahead with it. That's the advice for folks -- don't really wait. Do your research, do your homework, understand what it is that you're getting yourself into, but certainly move ahead, because I really feel like this is the way we're going to be doing business. I know we are doing businesses right now, but I think a lot of folks are going to be doing business this way at some point in the near future.

Cousens: Experimentation is key. A lot of the technologies are complicated to just look at or read about. Get in there and do an evaluation or download trial versions of different products, like we did with the Beta, with vCHS. You just have to try it out and play with it. Then you start to realize the true value as you apply it to actual use cases.
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