Monday, May 2, 2016

Business unusual: How the Dell-EMC merger sends shockwaves across the global storage market

The next BriefingsDirect IT market analysis discussion explores customer impacts to the global storage market now that the $67 billion Dell-EMC merger deal appears imminent. The proposed merger, which also includes EMC’s majority control of VMware, has been controversial from the start.

A massive and complex financing apparatus, largely built on private equity debt, undergirds the deal, with privately held Dell taking over the publicly traded EMC and VMware federation. This largest IT vendor deal ever is expected to close sometime between now and October 2016.

While EMC CEO and Chairman Joe Tucci has assured the storage and IT infrastructure market that the mega deal means business as usual, many observers, including analysts from Gartner, take a different view.

We're now joined by two storage industry experts to explore how consumers of storage infrastructure can best prepare for the expected storage shockwaves from the Dell takeover of EMC and VMware.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy.

To help us sort through the unknown unknowns of such an unprecedented business merger in IT, please welcome Jorge Maestre, Competitive Strategist, Global Storage at Hewlett Packard Enterprise (HPE), and Craig Rice, Business Architect at Integris Solutions Group. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: Even before this Dell acquisition of EMC was announced back in October, the storage market has been undergoing significant transformation. What have been the trends impacting the global storage business, and why did they prompt such an unprecedented merger in the first place?

Maestre: That’s a good question. Obviously, we start with flash storage. With flash as a focal point of primary storage in the data center, the technologies have evolved. Well, in the case of flash, we're not talking about an evolution; we're actually talking about a revolution. It has completely trumped what you have with spinning-disk media storage.

Maestre
You saw a lot of different opportunities for a lot of different vendors to jump in here and be the first with flash. EMC didn’t have a head start technically. That hurts, when you have vendors like Pure Storage, or ourselves at HPE obviously, or some of these other names like SolidFire and Kaminario.

And as companies are consolidating their primary storage into these flash footprints, which can be hyper-dense now, what we found is that other [infrastructure] technologies have emerged. These technologies and these trends have been here for a while, but now … they are very complementary to primary storage. You now have use cases in your data center where you can take advantage of things like hyper-converged or software-defined, or even just reinvest in file.

Now, you're looking at a data center that needs to have a completed picture. For all of EMC’s bravado, for all of their product set, for all of their ability to sell, the completed picture from them isn’t something that necessarily has always looked pretty.

We saw the result, which is the constant revenue decline. I think they're in consecutive quarters of revenue decline, and in some cases, they've taken a pretty bad hit. They've lost the midrange. The number-one product in the midrange is the HPE 3PAR. They lost that segment, and that was their staple.

They've seen VMAX revenue decline by almost 50 percent or more in the last few years, and so it has painted this picture of this huge conglomerate, monolithic company, maybe losing its way. The merger was at the right time.

Rice: I think flash is a contributing component here, but the catalyst that’s causing the greatest amount of disruption is shareholder value. Let’s take a look at what’s transpired over the past year.

Rice
We have an activist investor [Elliott Management] that’s been bullying EMC for quite some time to divest themselves from VMware. VMware is a catalyst that adds value to their storage array. We look at other organizations such as NetApp and how they had to acquire SolidFire.

We have companies such as Pure, an upstart that’s done maybe $200 million in sales and an innovating leader.

When you look at this, the whole challenge, the true disruption in storage, in the IT market then stems from shareholder value. What uniqueness do any of these mergers and acquisitions bring to the end-user customer? How does a technology change, or an innovation of flash, drive value not to IT, but to the lines of business? That’s what we've been seeing here at Integris.

Business motivations

Gardner: So clearly, there are business motivations from EMC and Dell that might not necessarily be the same motivations that their customers are facing.

EMC Chairman Joe Tucci tells everyone it’s business as usual, don’t be worried, but we saw in a recent research report from Gartner: Dell's Acquisition of EMC Will Impact Storage Customers, 10 March 2016, that this will impact customers of both vendors, no question. They suggested it could take two or four years for the storage market to settle out and for more clarity to come to that.
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So, what are some of the biggest risks, as you see it, Jorge, for storage customers, with this deal in the works?

Maestre: We have to take a look at what EMC is telling people and what other people who are doing investigations on their own are finding, and we're seeing that those contradict one another. ... EMC’s business customers, their business partners, might be in a state of confusion, but I think storage is pretty solid in general.
What we have to take a look at is what EMC is telling people and what other people who are doing investigations on their own are finding, and we're seeing that those contradict one another.

There have been CRN articles, there have been Register articles that talk about what EMC is telling everyone, "This is going to be great. This is going to go well. The two companies combine. They're going to be $80 billion. We're $80 billion with a revenue, blah, blah, blah, blah." The reality is that’s not going to be the case. Both companies are seeing revenues continue to decline.

As they merge, probably there's not going to be any overlap. Just take a look at the storage portfolio. You're not going to see a lot of overlap there. EMC is going to announce a new product [in May 2016] that everyone is expecting to jump into that entry-level space. So, they're probably going to even create a displacement for Dell Compellent.

And, of course, Dell is telling people, "No matter what happens, we'll still support Compellent for five years." That’s pretty much saying, "This product is dead." Most people agree that that’s going to happen.

From a product set perspective you're not going to see too much craziness. You're going to have the same EMC salespeople selling the same stuff. They're going to be selling servers too now, which could be a good thing or a bad thing, depending on where you come from.

But what we're not seeing, and what we're not going to see, is any type of growth. There is no way there's going to be any growth. They're talking about cutting $2 billion worth of expenses just to pay for this $67 billion deal. That’s a huge number. Cutting your expenses that much in order to show an increase in revenue, assuming you don’t lose any customers, or lose any executives, as this merger becomes complete, is just a huge risk.

Not going to happen

It’s not even a risk; it’s an uncertainty. There's no way it’s going to happen. I think there is a CRN article that talks about this. In order for them to actually show revenue growth, they have to see a seven percent improvement on top of the $74 billion that would combine the two companies together. That’s where they would be today.

That’s crazy -- seven percent on top of that and from two companies whose revenues continue to decline? How is this merger all of a sudden going to stop the revenue decline, turn it around, and bring it up seven percent? We could talk about financials all day, but you have to have a compelling product set for that. They don’t have it. I just don’t see it.

Rice: I'd like to emphasize one thing that Jorge said. I have some unique insight. We are a partner that used to be exclusively EMC. We've seen the writing on the wall. We've been working with HPE and transitioning over. We have a lot of good friends that have worked at EMC for 10, 12, 15 years, and in that highly competitive sales force environment of EMC, that’s a lifetime. These key leadership positions from district managers, area managers, and engineers are leaving the company in droves.
Why are they leaving if this is such a good deal and things are going forward? I have customers asking, "What happened to Bob Smith? He has been our rep or our district manager for 10, 12 years, why did he leave and go there?" I think that just puts credence on Jorge.

Gardner: We certainly have very big and different cultures here, where EMC has always been focused on enterprise, large companies, with an aggressive sales force, a very involved sales force. Dell, on the other hand, focused more on the mid-tier, and largely a self-service culture, where people are encouraged to buy things at a commodity level.

So what does that mean for enterprises? Are they going to see the Dell culture come to the EMC market or will the EMC market go to the Dell tier? How do you see these cultures melding, particularly in sales, that inflection point between the customer and the vendor? Jorge?

Maestre: Here’s the thing. This gets a little frustrating because we're dealing with the greatest sales spin marketing company of all time. EMC is the Michael Jordan of sales spin, marketing, and everything else. Maybe not so much in product delivery and all that other stuff, but the reality is that these guys know how to talk the game.
This gets a little frustrating because we're dealing with the greatest sales spin marketing company of all time. EMC is the Michael Jordon of sales spin, marketing, and everything else.

It’s like everyone went to the Don King school of selling. They can just promote, promote, promote all day. They do a good job of being Don King-like, every single one of them. For those who don’t remember, Don King was a huge boxing promoter in the ‘80s; Google him.

So, they are all that and they are good at that. For me, it’s very frustrating, because there is nothing there. We take a look at the revenues, the product sets, and there's just nothing here. You're looking at two completely different product sets. There's nothing compelling about it.

Now take that a step further. Why are people so interested in this? Why is everyone in love with this merger? The reality is because people love EMC. It’s the badge, it’s the sales badge, it’s the resources, and it’s the fact that they make you feel good. They come to your house. They make you hot cocoa. They tuck you in at night. That’s what they do. That’s how you sell. They're great at it. Nobody does it better than them. They literally set a bar of selling that no other vendor has even attempted to approach. You have to tip your hat.

Gardner: How will that change, Jorge?

It takes resources

Maestre: Well, that’s just it. It takes resources. You have to invest in that. You have to put a lot of money behind that. You have to create a huge support infrastructure. Take a look at how each company invests in their R and D, just to put it in perspective. Dell’s numbers, public numbers are somewhere in the area of 10 percent. EMC’s numbers are somewhere in the area of 25 percent; it might be a little bit more than that.

Think about their resources. EMC is a resource-heavy company. Dell is a very lean company. They're very much an assembly-line company. Let’s push it out here, and we'll make our revenue through volume, and don’t worry about the margins. That’s what they've shown. It’s almost contradictory cultures, contradictory selling styles, and now you have to put them together.

There's an ESG report that targets EMC customers and asks how they feel about this? Seventy five percent of the people who responded to that said, "We're fine; nothing is going to change." That’s crazy.
There's no way Dell just raised $45 billion. It’s not like they went to the bank and asked for a $45 billion mortgage. They actually raised $45 billion in private equity.

[The report] is actually telling you that 25 percent of those people are concerned. Twenty five percent is a big number for people who are EMC loyals. That’s a huge number, and we have to consider that.

At the end of the day, when this is all completed, those 25 percent are right to be nervous about this. There's no way Dell just raised $45 billion. It’s not like they went to the bank and asked for a $45 billion mortgage. They actually raised $45 billion in private equity.

That means they don’t even get to say how the money gets spent. I'm sure they had to show game plans and show how things are going to work to get the money. So, of course they had a plan. And of course the private equity investors were no problem. They bought into the plan when they gave the money, but they still have to have return on that.

And that means you're not going to be resource-heavy the way EMC is today. You're not going to invest in your business the way EMC does today. You have no choice; you have to recoup it. So if we see the data, it’s already there. Dell has told people they have to cut expenses by $2 billion a year. How can you be resource-rich, resource-heavy, the way EMC is today and cut $2 billion in expenses? You just can’t. You can’t have it both ways. It’s one or the other; there's no way around this. There are a lot of EMC customers out there who are due for a major wake-up call.

Gardner: Craig, Jorge said the halcyon days of EMC sales is coming to an end, that they won’t be spending the money to have that sales force. Is that what you're seeing, and what’s wrong with going to the Dell model of a straightforward information-based, order-it-online approach to storage?

Assembly-line model

Rice: We're seeing that. Like I mentioned earlier, Dana, there are a lot of people who have been long-term tenured, the soul of EMC, and they're leaving the organization. There's nothing wrong with going to the streamlined assembly-line model. I hope they do it and I hope they do it successfully, because what that means for a partner like myself that's focusing on HPE is that they're taking value out of the equation.

Their buyers are going to come to Dell-EMC and they're going to buy solely on price. Going to Jorge’s point, in raising $45 billion in private equity, you have to do an awful lot of volume to pay back those types of people.

When you start to add value and you understand the customers’ business like we do and other HPE partners do, because of the portfolio which HPE has, it’s going to become a very clear night-and-day difference of who is going to be able to provide a business the ability and technology in the partnership to grow from 10 percent of their market share to 20 percent to 30 percent. I don’t know many businesses that just want the low price and don’t want value and don’t want a partner to help them grow their business. The Dell-EMC model is not that.

Gardner: It seems that Dell is taking a risk by not having a more sophisticated approach to sales if that’s what they need to do.
They're not just taking a risk. They're betting the whole company. They're putting everything all-in.

Rice: Oh, 100 percent. They're not just taking a risk. They're betting the whole company. They're putting everything in on black. That would be concerning to me if I were a customer looking at that. They're going to be so debt heavy, so focused on storage without innovation on compute. Storage is just not alone; you have all these applications, all these business processes that need to rely on compute.

What type of innovation are they going to do? Let’s make that even a little bit cloudier. You're not going to do any innovation, but yet you sell a lot of servers because you're a volume-based business, but yet I have a partnership with a competitor. So I have competition with Cisco that's also self-compute.

Now, how can the two of you offer something you need, how can they bring out a product like Apollo or Moonshot? You need to do more than just innovate on storage; you need to innovate across whole IT spectrum.

I don’t see them doing that because they're going to be so debt-heavy, so laden, that they have to trim all these costs and expenses, and by the way, they have to do an awful lot of volume. If you're doing volume, you can make the best little widget, whatever that widget is, but how do you bring out that next product line, how do you impact the market, how do you change the industry, how do you bring out something like what HPE is doing with composable infrastructure? Where is that innovation in the Dell model?

Gardner: Clearly, this is not business as usual in the new sales force. So how can organizations that might be heavily EMC-orientated, or for smaller-sized organizations that are using a lot of Dell, protect themselves? They can hope for the best, they can hope that things don’t change for them, but what assurance can you put in place so that no matter what happens with Dell and EMC, you can, as an enterprise, still continue to do your business as usual?

Stay or move

Maestre: That’s a good question. For the Dell customers, the product set is easy to stay in or move to something else. If you choose to stay with the new Dell-EMC, there are a million ways to graduate from Dell into EMC’s portfolio, and of course, there are a million ways to get off of Dell’s portfolio easily altogether. So those customers are relatively safe. I think it’s relatively low risk.

The challenge … is not going to be technical, but it’s certainly going to be relationship-wise, and I don’t mean to disparage Dell. If it comes across disparaging, let me apologize up front for it, but Dell isn’t necessarily known for being a relationship company. You may have business processes in place, you may have contracts in place, things you get at a certain dollar-per-gig or at a certain price point. There is some risk to that, but that happens in business every day anyway. So, very little risk.

Let’s flip it over to the harder question, which are EMC shops. Forget that I work for HPE or anybody else. EMC products may work, but there's no question that it takes a lot longer to get those things set up and in place than other vendors’ products.

So, you’ve now not just made a financial investment but you have a significant time investment, a significant training investment. That’s a lot trickier. If you're not happy with this new combined Dell-EMC entity, if you're not happy with the direction, if you're not happy with the products that you are going to get going forward, you have a long road ahead of you. You're going to have to talk to some vendors and you're going to have to figure out how to migrate off. You have to figure out what your direction is. I would give those customers the same advice I give any customer.
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HPE Storage Leadership and Innovation
What’s your plan? What does your world look like in three years, in two years, in one year, whatever it is? Tell me what Utopia looks like, give me that, and then we'll figure out how to make the technology fit that. I don’t think those customers should be making concessions for the technology or the technology vendor or the technology vendor story. They should be making those vendors either deliver, or move on to a vendor who can. Those are the conversations they have to start having.

In a way, this is an opportunity. EMC customers who invested in a lot of infrastructure can now look around and say, "Maybe this is an opportunity for me to shrink my infrastructure, to take advantage of the fact that it’s a buyer’s market in storage, take advantage of flash, take advantage of all these different things, and see what I can do to restart my infrastructure and get me closer to what my dream vision of my data center would look like."

It could be a long and winding road. You may want partner companies. Partners are critical. The one thing that everyone has in common is Dell. HPE, IBM, no matter who you're talking to, they're all talking about partners and how important partners are. This is the best time in the world to lean on those partners and say, "Guys, help me navigate through this."

The challenge is finding an impartial or unbiased partner. Everybody works with one specific vendor, and in that way, they're just an expansion of the vendor, but there are a lot of good ones out there. This is the best time to lean on those guys if for nothing else, then just to get their consultative advice.

Gardner: What's the time frame here, Jorge? It seems to me that we're at a point where business agility means getting new systems in place to accommodate things like user experience, big data, and Internet of Things (IoT). These are driving change very rapidly. Waiting two or three years seems  to me a very long time for making strategic decisions.

Maestre: Let’s put that in perspective. The only concept in this industry is change. Things are always going to get better. Social media has created an endless stream of data that’s going to be written all the time. IoT exacerbates that. Change is always going to be here.

Every vendor is always going to be changing in some way, shape, or form, always going to be evolving. They have to. Otherwise, they're going to be left behind. Craig brought up a good point earlier about NetApp and what happened at NetApp. Now, they are buying SolidFire, and that’s like their fifth or sixth different attempt at getting into the flash market.

So, you're certainly looking at a world where you can't be just constant. Either you stay in front of it or you're going to get left behind. The issue for EMC customers for the next two or three years is not so much the roadmap, the combined product set. Everybody agrees that there is very little overlap. No one wants to disrespect Dell here, but the reality is that there is very little in the storage world that Dell has that isn’t going to be replaced by EMC, and EMC doesn’t sell servers.

Real questions

Sure, there are some questions around VCE and Vblock, but is that going to be their investment? Why would you continue to partner with Cisco Unified Computing System (UCS) when you have servers already? Those are real questions, and that’s probably one of the points that Craig made so well before.

But the reality is that that’s not where you are going to feel the pain in the next two or three years. Where you're going to feel the pain over the next two or three years is in that thing that made EMC special, the fact that they make you feel good about your purchase and the fact that they support you, and they deliver what they say.
This is an opportunity for me to shrink my infrastructure, to take advantage of a buyer’s market in storage, take advantage of flash, and see what I can do to restart my infrastructure and get closer my dream data center.

Your EMC service is based on the people who are going to leave, the point that Craig made earlier, but not just the people who are going to leave, but what process is going to survive. You have to be a blind fool to go into this thinking that nothing is going to change; that’s ridiculous. Of course, something is going to change. Even if everything worked out in the way that Joe Tucci said it would, there would still be a lot of change, there would still have to be some concessions. So there is no question about that things are going to change.

So the one thing that made EMC great, in making all of those steps to give you what they promised, feels painless and makes you feel good. All of that is where you're going to feel the pain for the next two or three years. Craig nailed it. It’s going to take about two or three years for them to sort all that out. That’s where the problem lies and that’s where this is going to impact customers. That’s why now is a good time to maybe start thinking about going elsewhere or looking at other direction.

Gardner: How do you as a storage consumer get assurance of reducing your risk, given this complex deal?

Rice: The best thing is to make competition a key component. I've read a couple of reviews from a couple well-known organizations that say get it in writing. I worked at EMC for a while, I worked at HPE for a while over the past decade. Prior to this change, a lot of salespeople would always do that get-it-in-writing thing. “Mr. Customer, I guarantee this.” When they leave, what good is that guarantee? They're a publicly traded company. You can’t commit that in writing. Will Dell and EMC do that going forward? I don’t know.
The best way to keep them honest is to find a partner, such as Integris -- there are many other good partners as well. Evaluate some competing technologies. Competition will always keep each other honest. That’s the simplest, most efficient, and least impactful way that a prospective customer can determine it. Do I want to go with Dell-EMC? Do I want to go with HPE? Do I want to go with anyone else? Bring competition in with a partner so they can equally evaluate what they had to offer.

Reducing risk

Maestre: Find partners you can work with that are good. Integris is a good one, and there are others, but find partners who are out there who can take care of you and have your best interests at heart, whose interests aren’t aligned with another vendor’s interests.

It’s great that they resell a vendor’s product, but the best partners have expertise across multiple vendors, and that’s what you want to look for. That’s important.

The other thing is to have a plan, make a plan. One thing I know about HPE in terms of the enterprise is that we absolutely make the best product. I don’t have to give you a commercial to buy my stuff. I know that we have the best product, and you'll wind up here eventually.

Consider your perfect data center, think it through, write it down, and then start talking to people, and the people who can fit your vision those are the guys you want to talk to.  Don’t worry about what somebody else is saying, what somebody else is marketing, what somebody else is highlighting. The people who ask you to make concessions to fit their product set are probably the guys you want to walk away from. That’s the best way to reduce risk -- just essentially invest in yourself.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy. Sponsor: Hewlett Packard Enterprise.

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Friday, April 29, 2016

Capgemini and HPE team up to foster needed behavioral change that bolsters cyber security across application lifecycles

The next BriefingsDirect discussion explores improving cyber security in applications across their entire lifecycles. Such trends as the Internet of Things (IoT), hybrid cloud services, mobile-first, and DevOps are increasing the demands and complexity of the overall development process.

Key factors to improving both development speed and security despite these new challenges include new levels of collaboration and communication across formerly disparate teams -- from those who design, to coders, to testers, and on to continuous monitoring throughout operations. The result is security being integrated into software design, even as the pressure builds to bring more apps to market faster.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy.

We're here now with two experts from a Capgemini and Hewlett Packard Enterprise (HPE) Alliance to learn how to create the culture, process, and technologies needed to make and keep today's applications as secure as possible.

Please join me now in welcoming our guests, Gopal Padinjaruveetil, Global Cyber Security Strategist for Capgemini, and Mark Painter, Security Evangelist at Hewlett Packard Enterprise. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: Let’s start with you Gopal. What do you see as some of the top trends that are driving the need for improved security for applications? It seems like we're in the age of "continuous everything" across the entire spectrum of applications.


Padinjaruveetil: Let me talk about a few trends with some data and focus on why application security is going to become more-and-more important as we move forward.

There's a report saying that there will be 50 billion connected devices by 2020. There was also a Cisco report that said that 92 percent of the devices today, connected devices, are vulnerable. There was an HPE study that came out last year said that 80 percent of the attacks are now happening at the application layer.
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If you put together these three diverse data points coming from three different people, we see that there will be 37 billion devices in 2020 that are deemed to be vulnerable. That’s very interesting, 37 billion devices vulnerable in 2020. We need to change the way that we develop software.

Key trend

The other key trend that we're seeing is that agility is becoming a prime driver in application development, where the business would like to have functionality as early as possible. So the whole agile development methodology driving agility is becoming key, and that's posing some unique problems.

Padinjaruveetil
The other thing that we're seeing from a trend perspective is that apps and data are moving out of the enterprise landscape. So the concept of mobile-first, free the data, free the app, and the cloud movement are major trends that affects the application security and how applications are being developed and delivered.

The other trend is regulators. In many critical industries regulations are becoming very strict with cyber crime and advanced actors. We're seeing nation states, advanced actors, coming into the game and we're seeing advanced persistent threats becoming a reality. So that’s driving another dimension to the whole application security.

Last, but not least, is that we see a big shortage of cyber security talent in the market. Those are the trends that drives the need for a different look at application security from a lifecycle approach.

Gardner: Mark, anything to offer in terms of trends that you are seeing from HPE, perhaps getting more involved with security earlier in the process?

Painter: Gopal gave a very good and very thorough answer and he was dead-on. As he said, 80 percent of attacks are aimed at the application layer. So it actually makes sense to try to prevent those vulnerabilities.

Painter
We propose that people implement application security during the development cycle, precisely because that’s where you get the most bang for your buck. You need to do things across the entire lifecycle, and that includes even production, but if you can shift to the left, stop them as early as possible, then you save so much money in the long run in case you are attacked.

We do a study in conjunction with the Ponemon Institute every year, and since 2010, every year, it shows that attacks increase in frequency, they're harder to find, and they're also increasingly costlier to remediate. So it’s the right way to do it. You have to bake security in. You just can’t simply brush it on.

Gardner: And with the heightened importance of user experience and the need for moving business agility through more rapid iterations of software, is it intuitive to conclude that more rapid development makes it more challenging for security, or is there something about doing rapid iterations and doing security that somehow can go hand in hand, a continuous approach? Gopal, any thoughts?

Rapid development

Padinjaruveetil: There's a need for rapid applications, because we're seeing lot of innovations coming, and we welcome that. But the challenge is, how do you do security in a rapid world?

There is no room for error. One of the things from a trend perspective is IoT. One of the things I tell my clients is that if you look at traditional IT, we're operating in a virtual world, purely a virtual world. But when you talk about things like operation technology (OT), we're talking about physical things, physical objects that we're using in everyday life, like a car, your temperature monitors, or your heartbeat monitors. These are physical things.

When the physical world and the virtual world come together with IoT, that could have a very big impact on the physical layer or the physical objects that we use. For example, the safety of individuals, of community, of regions, of even countries can now be put in danger, and I think that is the key thing. Yes, we need to develop applications rapidly, but we need to develop them in a very secure way.

Gardner: So the more physical things that are connected, the more opportunity there is to go through that connection and somehow do bad things, nefarious activities. So in a sense, the vulnerability increases with the connectivity.

Padinjaruveetil: Absolutely. And that’s the fear, unless we change ways of developing software. There has to be a mindset change in how we develop, deploy, and deliver software in the new world.
There has to be a mindset change in how we develop, deploy, and deliver software in the new world.

Gardner: I suppose another element to this isn't just that bad things can happen, but that the data can be accessed. If we have more data at the edge, if we move computing resources out to the edge where the data is, if we have data centers more frequently in remote locations, this all means that data privacy and data access is also key.

How much of the data security is part of the overall application security equation, Gopal?

Padinjaruveetil: One of the things I ask is to define an application, because we have different kinds of applications. You have web services and APIs. Even though those are headless, we would consider that those are applications, and applications without data have no meaning.

The application and the data are very closely tied to each other, and what's the value? There's no real advantage for a hacker just to have an application. They're coming after the data. The private data, sensitive data, or critical data about a client or a customer is what they're coming at.

You bring up a very good point that security and privacy are the key drivers when we are talking about applications. That is what people are trying to get at, whether it's intellectual property (IP) or whether it’s sensitive data, credit card data, or your health data. The application and the data are tied at the hip, and it’s important that we look at both as a single entity, rather than just looking at the application as a siloed concept.

Solving problems

Gardner: Let’s look a little bit at how we go about helping organizations approach these problems and solve them. What is it that HPE and Capgemini have done in teaming up to solve these problems? Maybe you could provide, Gopal, a brief history of how the app security alliance with these two organizations has come about?

Padinjaruveetil: Capgemini is a services company, and HPE has great security products that they bring to the market. So, very early on, we realized that there's a very good opportunity for us to partner, because we provide services and HPE provides great security products.

One of the key things, as we move into agility or into application development, is that many of the applications have millions of lines of code. These are huge applications, and it's difficult to do a manual assessment. So, automation in an agile world and in an application world becomes important. That's a key thing that HPE is enabling, automation of security through their security products and application space. We bring the services that sit on top of the products.

When I go and talk to my clients about the HPE and Capgemini partnership, I tell them that HPE is bringing a very tasty cake, and we're bringing a beautiful icing on top of the cake. Together, we have something really compelling for the user.
At a high-level, what we're trying to do is expand the application security scope, and that basically includes three big buckets. Those are secure development, security testing, and then continuous monitoring and protection.

Gardner: Let’s go to Mark in describing that cake, I would imagine there are many layers. Maybe you could describe it for some of our listeners and readers who might not be that familiar with what those layers are. What are the major components of the transformation area around security that HPE is focused on?

Painter: At a high-level, what we're trying to do is expand the application security scope, and that basically includes three big buckets. Those are secure development, security testing, and then continuous monitoring and protection.

During the development phase, you need to build security in while the developers are coding, and for that specifically, we use a tool called DevInspect. It will actually show secure coding to a developer as he is typing his own code. That gets you much, much farther ahead of the game.

As far as security testing, there are two main forms. There is static, which is code analysis, not only for your own code, but open-source components and other things. In this day and age, you really are taking security into your own hands if you trust open-source components without testing them thoroughly. So, static gives you one perspective on application security.

Then there is also dynamic scanning, where you don’t have access to the code, and you actually attack the application just as the hacker would, so you get those dynamic results.

We have a platform that combines and correlates those results. So, you get to reduce false positives and you can trust the accuracy of your results to a much greater detail.

Sustained frequency

We also provide services, but the whole thing is that you have to do this with sustained frequency. Maybe 10 years ago, there was a stage-gate approach, in which you tested at the end of the development cycle and released it. Well, that’s simply not good enough; you have to do this on a repeatable basis.

Some people would probably consider that the developmental lifecycle ends once the product is out there in the wild, but if anything, my experience in the security industry has taught me that software plus time equals vulnerability. You can’t stop your security efforts just because something has been released. You need that continuous monitoring and protection.

This is a new thing in application security, at least if you call something that’s almost a few years old "new." With something called App Defender, you can actually put an agent on the application server and it will block attacks in real time, which is a really good thing, because it’s not always convenient to patch your software.

At HPE, we offer a combination of products that you can use yourself and we also offer hybrid solutions, because there's no such thing as one-size-fits-all in any environment.
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We also offer expertise. Gopal was talking earlier about the lack of qualified candidates, and Forbes has predicted that, by 2019, a full quarter of cyber security jobs are going to be unfilled. Organizations need to be able to rely on technology, but they also need to be able to find experts and expertise when they need it. We do a lot at HPE; I will leave it at that.

Gardner: Gopal, how do these products, these layers in the cake, help with the shifting-left concept, where we move more concern about vulnerability and security deeper into the design, earlier into the coding and development process? Where do the products help with shifting left?

Padinjaruveetil: That’s a great question if you decompose or if you analyze application security as a cake. Security vulnerabilities in applications come from three specific areas. One is what I call design flaws, where the application itself is designed in a flawed manner that opens up vulnerabilities. So a bad design, in itself, causes security vulnerabilities.

The second thing is the coding flaws. Take an Apple iPhone or something like that. If you look at the design of an iPhone, the actual end product, there will be a very close match. A lot of problems we have in software industry are because there is a high level of mismatch between the design and the actual product itself as coded.

Software is coded by the developers, and if the developers aren't adding good code, there's a high possibility that that vulnerability is introduced because of poor coding.

Configuration parameters

The third thing is that the application isn't running in a vacuum. It's running on app servers and database servers and it’s going through multiple layers. There are a lot of configuration parameters, and if these configuration parameters are not set, then it leads to open vulnerability.

From a product perspective, HPE has great products that detect coding flaws. Mark talked about DevInspect. It's a great tool from a dynamics perspective, or hacking. There are great tools to look at all these three layers from a design flaw, from a configuration flaw, and a coding flaw.

As a security expert, I see that there is a great scope for tooling in the design flaw, because right now, we're talking about threat modeling and risk determination. To detect a design flaw requires a high level of human intelligence. I'm sure that in the future, there will be products that can detect design flaws, but when it comes to coding flaws, these tools can detect a coding flaw at 99 percent accuracy. So, we've seen a very good maturity in the application security areas with these products, with the different products that Mark mentioned.

Gardner: Another part of the process for development isn’t just coding, but pulling together components that have already been coded: services, SDKs, APIs, vast libraries, often in an open-source environment. Is there a way for the alliance between Capgemini and HPE to give some assurance as to what libraries or code have already been vetted, that may have already been put through the proper paces? How does the open-source environment provide a challenge, or maybe even a benefit, when done properly, to allow a reuse of code and this idea of componentized nature of development?
Another part of the process for development isn’t just coding, but pulling together components that have already been coded.

Padinjaruveetil: That’s a great point, because most of the modern applications are not valid applications. They talk with other applications. They get data from other applications, data through Web service interface, a REST API, and open source.

For example, if you want to do login, there are open-source login frameworks available. If there are things that are available, we'd like to use them, but just like custom code, open source is also vulnerable. There are vulnerabilities in open source.

Vulnerability can come from multiple things in an application. It can be caused by an API. It can be caused by an integration point, like a Web service or any other integration point. It can be caused by the device itself, when you're talking about mobile and all those things. Understanding that is a very critical aspect when we're talking about application security.

Gardner: Mark, anything to offer on this topic of open source and/or vetting code that’s available for developers to then use in their applications?

Painter: Well, it’s not an application, but it’s a good example. The Shellshock vulnerability was due to something wrong with the code of an open-source component, and that’s still impacting servers around the world. You can’t trust anybody else’s code.

There are so many different flavors of open-source components. Red Hat obviously is going to be a little better than your mom-and-pop development team, but it has to be an integrated part of your process for certain.

Cyber risk report

There is something Gopal was saying. We do a cyber risk report every year at HPE, and one of the things we do is test thousands and thousands of applications. In last year’s results, the biggest application flaw we found were basically configuration flaws. You could get to different directories than you should be able to.

Application security is not easy. If application security were easy, then we still wouldn’t be having cross-site scripting vulnerabilities that have been around almost as long as the web itself. There are a lot of different components in place. It’s a complex problem.

Gardner: So it’s important to go to partners and tried and true processes to make sure you don’t fall down into some of these holes. Let’s move on to another area, which is also quite important and difficult and challenging. That is the cultural shift, behavioral changes that are forced when a shift left happens, when you're asking people in a traditional design environment to think about security, operations, configuration management, and business-service management.

Gopal, what are some of the challenges to promulgating cultural and behavioral changes that are needed in order to make a continuous application security culture possible?

Padinjaruveetil: That’s a key aspect, because most of the application development is happening in a distributed team, and things are being assembled. So there are different teams building different things, and you're putting together the final application product and deploying it.
There are very good industry standards coming out, but the challenge is that having a policy or standard alone is not sufficient.

Many companies have now started talking about security policies and security standards, whether it’s Java development standards or .NET development. So, there are very good industry standards coming out, but the challenge is that having a policy or standard alone is not sufficient.

What I tell my clients is that any compliance without enforcement is ineffective. The example that I give is that we have traffic laws in India. If you've been to India and you look at the traffic situation there, it’s chaotic. Here, you see radar detection and automated detection of speed and things like that. So enforcement is a key area even in software development. It’s not enough to just have standards; you need to have enforcement.

The second thing I talk about is that compliance without consequence will not bring the right behavior. For example, if you get caught by a cop and he says, "Don’t do this again; I'll let you go," you're not going to change your behavior. If there's a consequence, many times that makes people change behaviors.

We need to have some kind of a discipline and compliance brought into the application development space. One of the things that I did for a major client was what I call zero tolerance. If you develop an application and if we did find a vulnerability in the application, we won't allow you to deploy it. We have zero tolerance on putting up unsecured code when we use one of these great products that HPE has.

Once we find an issue with a critical or a high issue that’s been reported, we won't let you deploy. Over a period of time, this caused a real behavioral change, because when you stop production, it has impact. It gets noticed at a very higher level. People start questioning why this deployment didn't go.

Huge change

Slowly, over a period of time, because of this compliance and because of the enforcement with consequences, we saw a huge change in behavior in the entire team, right from project managers to business analysts making sure that they are getting the security non-functional requirement correct, by the project managers making sure that the project teams are addressing it, the architect making sure the applications are designed correctly, and the testers making sure that the testing is correct. When it goes into an independent audit or something like that, the application comes out clean.

It’s not enough if you just have standards; you need to have some kind of enforcement with that.

Gardner: Mark, in order to have that sort of enforcement you need to have visibility and measurement. It seems to me that there's a lot more data gathering going on across this entire application lifecycle. And big data or analytics that we have in other areas are being brought into this fold.

Is there something about automation, orchestration, and data analytics that are part and parcel of the HPE products that could help on this behavioral shift by measuring, verifying, and then demonstrating where things are good or not so good?
Over the past 10 years in the security industry, we've changed from the idea of we're going to block every attack, to one that says the attackers are already inside your network.

Painter: One thing that HPE uses to build it in is secure coding, but also we talk about detect and response. We have an application product that integrates with our security and monitoring tool from ArcSight.

So you can actually get application information. Applications have been a typical blind spot for Security Information and Event Management (SIEM) tools, and you can actually get some of those results you are talking about from our SIEM technology, which is really cool.

Over the past 10 years in the security industry, we've changed from the idea of we're going to block every attack, to one that says the attackers are already inside your network. This is part of that detection. Maybe you didn’t find these. You can see active exploitation in other words, and then you can track it down and stop it that way.

Fifteen years ago, you had to convince people that they needed application security. You don’t have to do that know. They know they need it, but they just might not exactly know what they need to do.

It’s all about making this an opportunity for them to get security right, instead of viewing it as some sort of conflict between the need for speed and agile development and the need to release balanced against the needs of the enterprise to actually be secure and protect themselves from potential data breaches and potential data loss and all the compliance issues and now legal challenges from individual actors and all the way down the line.

Gardner: Gopal, before we close out, let’s look to the future a little bit. What comes next? Do you expect to see more use of data, measurement, and analytics, a science of development, if you will, to help with security issues, perhaps feedback loops that extend from development into production and back? How important do you think this use of more data and analytics will be to the improved automation and overall security posture of these applications?

Continuous improvement

Padinjaruveetil: You need to have data and you need to have measurements to make improvements. We want continuous improvement, but you can’t manage unless you measure. So we need to determine what are the systemic issues in application development, what are the systemic issues that we see constantly coming?

For example, if you're seeing cross-site scripting as a consistent vulnerability that’s coming across the multiple development team, we need to have some way to make sure that we're seeing patterns with the data and looking at how to reduce these major systemic errors or vulnerabilities in systems?

You will see more-and-more data collections, data measurements, and applying advanced methods to look at not just the vulnerability aspect of it, but also the behavioral aspect. That’s something that we're not doing, but I see a huge change coming where we're actually going to see the behavioral aspects being tracked with data in the application lifecycle model.
You need to have data and you need to have measurements to make improvements. We want continuous improvement, but you can’t manage unless you measure.

Gardner: Another thing to be mindful of is getting ready for IoT with many more devices, endpoints, sensors, biological sensors. All of this is going to be something coming in the next few years.

How about revisiting the skills issue before we sign off? What can organizations do about  maintaining the right skill sets, attracting the right workers and professionals, but also looking for all the options within an ecosystem, like the alliance between HPE and Capgemini. How do you see the skills problem shaking out over the next several years, Gopal?

Padinjaruveetil: If you look at many of the compliance frameworks, like NIST or ISO 27001, there's a big emphasis on control being put in place for security awareness and education. We're seeing a big drive for security education within the whole organization.

Then, we're seeing tools like DevInspect. When a developer writes bad code, if you give the feedback instantly that right now you have written a code that is bad, instead of waiting for three months or four months and doing a test, we're seeing how these tools are making changes.

So, we're seeing tools like DevInspect and helping developers to actually make themselves better code writers.

Painter: Developers are not natural security experts. They need help.

Padinjaruveetil: Yeah, absolutely.

Additional resources

Gardner: That was my last question to you, Mark. Can you suggest places that people can go for resources or how can they start to prepare themselves better for a number of the issues that we have discussed today?

Painter: It’s almost on an individual basis. There are plenty of resources on the Internet. We provide training as well. Web application security is actually one of the best places for organizations to leverage Capgemini to do their web application security testing.

The job crunch is the number one concern that enterprises have right now as part of security in the enterprise. There's a lack of qualified applicants, which says a lot when that’s a bigger concern than a data breach. We do a State of the SOC survey every year, and that was the result from the last one, which was a little surprising.
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But apart from outsourcing, you need to find those developers who have an interest in security in your organization, and you need to enable them to learn that and get better, because that’s who is going to be your security person in the future, and that’s a lot cheaper and a lot more cost-effective than going out and hiring an expert.

I know one thing, and it’s a good thing. I tell my boss repeatedly that if you have good security people, you're going to have to pay them to keep them. That’s just the state of the market as it is now. So you have to leverage that and you have to rely on automation, but  even with automation, you're still going to need that expert.

We are not yet at the point where you can just click a button and get a report. You still need somebody to look at it, and if you have interesting results, then you need that person who can go and examine those. It’s the 80/20 rule. You need that person who can go to the last 20 percent. You're going to have automation, tools, and what have you to get to that first 80 percent, but you still need that 20 percent at the end.

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Wednesday, April 27, 2016

How efficient cloud networks help the smallest companies do brisk business with the largest

The next BriefingsDirect technology innovation thought leadership discussion examines new ways for small businesses to make and manage the connections that matter to them most using cloud-based networks to bring intelligent buying and digital business benefits to any type of company.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy.

To learn more about the business of doing more commerce in the digital economy using cloud-based networks, please join me in welcoming Bob Rosenthal, Chairman and CEO of JP Promotional Products, Inc. in Ossining, New York, and Anne Kramer, CEO at Ergo Works, Inc. in Palo Alto, California. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: Bob, what is JP Promotional Products? What do you do?

Rosenthal: JP Promotional Products is a distributor of imprinted promotional products. Anything you can put an imprint or logo on. We've had this company with my daughter for about 12 years now and we sell to small companies, large companies, anyone who buys promotional products from us.

Rosenthal
Gardner: Why is being digital, being on business networks, an important part of the way you find new clients?

Rosenthal: What this has given us is the ability to find the size of client that we could not ordinarily find. We're getting into large corporations, and it is very difficult for a small company to get access to a large entity. Being on a network like SAP Ariba and leveraging services like Ariba Discovery has gotten us into some of these very large corporations.

Gardner: Anne, tell us about Egro Works.


Kramer: Ergo Works is a small, woman-owned company based in Palo Alto, California. We're a full-service ergonomics company. We offer workstation evaluations and consulting, a complete line of ergonomic furniture, accessories and computer peripherals, as well as installation services. So, I would call it solution selling.

Gardner: And do you also share Bob’s challenge of trying to be seen and heard in a busy world, by big companies that perhaps don’t know about small vendors?

Kramer: Absolutely. It’s a challenge to get an audience with this group. They generally have established vendors, and trying to knock down those doors is challenging at best.

Gardner: We know that many of the buyers of goods are looking for increased automation. They're looking for intelligence in that network and the partnerships and ecosystem that they play in. So they want to find people like you that have goods and services for them. What was it that you had to do in order to then be seen and heard, be and recognized among them?

Rosenthal: We joined Ariba Discovery, and that gave us the ability to search for leads as well as respond to matched leads. As a matter of fact, one of the first ones I got was about a half an hour after I paid for Ariba Discovery. It was a Fortune 100 Company. They were looking for a thousand pair of imprinted socks, something I knew we could do. It was a no-brainer. We established our relationship with the procurement manager. They never bought the socks, but we have a relationship now, and without Ariba Discovery, there was no way we could have done that.

Gardner: And is geography a barrier for you or you can do business with anyone, anywhere?

Rosenthal: We can do business with anyone, anywhere. The bulk of it is in the Continental US. We can ship to England or Canada and we do bring some product in from China as well.

Gardner: And for you, Anne, tell us about what you needed to in order to find clients.

Challenge of growing

Kramer: We're located in Palo Alto, which is ground zero in Silicon Valley for ergonomics. So, we are well poised in that regard. Nonetheless, the challenge of growing a small business is ever present.

Kramer
One way that we've overcome that is to participate in online marketplaces. Specifically, what we're excited about now, and why I'm here today, is the Ariba Spot Buy Program. This is going to give us a direct access to large companies that have been challenging for us to get into. It’s an exciting opportunity. Unlike other marketplaces that are geared to one-off end users, Ariba is geared toward large corporations; so we're very excited.

Gardner: Can you give us a bit more about background and understanding of Ariba Spot Buy? These are not the usual contracts that are ongoing and repeatable, but are instances where there is a need, an ad-hoc need perhaps, in a large organization. A purchasing department has been tasked with doing this or maybe people directly in the company have got the authority to find and buy things on their own.

Kramer: That’s very well put. For example, we are currently an Ariba supplier with  several clients and we offer a static catalog. We often provide or make recommendations for products that are off catalog, and Ariba Spot Buy allows companies to buy products from vendors that they don’t currently have a contractual relationship with.

The niche that we're in is a relatively small niche. So it may not warrant a company wanting to put together a catalog. This is an opportunity for them to buy these products, yet stay compliant within the Ariba ecosystem.
So that’s what Ariba Spot Buy does. It allows companies to buy products that they don’t currently have a contractual relationship with.

Gardner: Now, of course, a big approach to finding things nowadays is through search on the web and having a good website, and getting good rankings on the search engines is a big part of that. But it strikes me that you're small, you're not going to get the kind of traffic on your website that might elevate you in those search results, and you are also highly customizable. So you're not just putting a big billboard up on the Internet, so to speak, and say, here we are.

You're offering custom types of things, with promotional products in your case, Bob, and you probably want to hear a lot about each customer and tailor your services to them. How do you overcome the challenge of not being able to put a billboard up on the Internet, but also maintain the advantage of having highly customized products, Bob?

Rosenthal: Our own website has hundreds of thousands of items on it. It’s an industry-based website. If you're searching for almost any product, you'll find it on our site.

In terms of how we got people to our site, we did invest some money a few years ago. We decided to go with what’s called Local Search. We put money into being on the first page in New York State, the Tri-State area, and that’s gotten us a few large accounts.

What we're looking for in Ariba Spot Buy is to bring in more business because a lot of our products are last minute. Someone will remember at the last minute, "Oh, I'm doing a trade show next week; I need a thousand widgets to give away. I forgot to buy them. I don't want to go through a contract." That's where I think Ariba Spot Buy will help us because we can deliver products in 24 hours if we have to.

Network advantage

Gardner: So there is an advantage to being in a business network versus just the worldwide wild web?

Rosenthal: Right. What that gets us is more targeted corporations, hopefully larger entities. Where a small corporation might buy 100 pieces, the big corporation is going to buy thousands of pieces. That’s why we've joined Ariba Discovery and are looking at Ariba Spot Buy.

Gardner: And I suppose, as someone in a selling position, you're also getting a lot more information about who you're selling to, given that they're in the network and you can see and access more about what they're looking for?

Rosenthal: That’s true, and where that helps is that we tend to add a lot of creativity to it. If we know who you are and what you do, we can make recommendations for certain kind of products. If you're a tractor company exhibiting at a show, maybe we'll suggest a squeeze toy in the shape of a tractor. Knowing who you are and where you are helps us with our creativity in suggesting products.
The ability to be on Ariba Spot Buy will give us the ability to interact with our customer to then have the opportunity to sell these more custom products and get into project-based opportunities.

Gardner: And for you, Anne, in the same vein, trying to be seen, heard, and understood in the Worldwide Web is perhaps a bit more daunting than on a business network. How do you overcome that need to customize and tailor your goods and services?

Kramer: Certain products lend themselves more to selling on the web than others, and same with online marketplaces. The visibility with  Ariba Spot Buy will give us the opportunity to interact with our customers to offer them custom products and get into project-based opportunities.

Gardner: We're also seeing from SAP Ariba the desire to bring more collaboration embedded and automated into these applications and services. Also, with Guided Buying, they're allowing the sellers to be part of an intelligence network, so that buyers can be led through the process and automation can be brought to bear. How do these new technological advantages affect you as a small businesses particularly, Anne?

Kramer: Technology helps us with new ways to bring our products to market and expose our offerings to a larger audience. That’s really the biggest benefit. 

In addition, it helps us to expand our current relationships with our Ariba buyers. They can now buy off-catalog, which is a win-win. Technology also impacts the products that we sell. As technology changes, the products change in response to the latest mouse design or the material that a wrist rest is covered in, maybe it's anti-microbial for instance. So technology has a huge impact on direct and indirect part of our business. 

Running the business

Gardner: Of course, it's important for small businesses to have visibility into cash flow, when to expect payments, and how to bill accurately and appropriately. Any thoughts, Bob, on how this business network for you also adds to your own ability to run your business properly?

Rosenthal: In terms of technology, the biggest issue with us is the logo. Anyone can say they want a Bic pen. Where the technology should help us is in getting the art files from one point to the other and knowing, as far as things like cash flow, who we're dealing with, that it's a large corporation. Some use POs, some don't, for these type of buys. It gives me more comfort that we are going to get paid.

It's difficult to ask General Motors for a deposit for a $1,000 order, but we might ask the insurance broker down the street for that. So that comfort level of knowing we should be paid on a certain date is a big advantage.

Gardner: Anne, the same thing. Business visibility is important. Is there something about a business-network approach that's beneficial to you in being able to run your business well?

Kramer: Well, specifically what I am excited about with Ariba Spot Buy is that all the purchases are made using a credit card, which we love because it helps us control our cash flow. We don't have to go chasing after past-due invoices, and that time can be better spent selling more products. We love the fact that it's all credit-card based.
What I am excited about with Ariba Spot Buy is that all the purchases are made using a credit card, which we love because it helps us control our cash flow.

Gardner: Are there any specific examples of actual customers that you found through the Ariba Discovery process in this online marketplace that would illustrate some of these points? You don't have to name them necessarily, but maybe walk us through how it's worked and how that's different from the other approaches that you've had to find in customers, Bob?

Rosenthal: Well, the big account that we got, which I can't name, has turned into a huge account for us. We've established a relationship with the procurement people, and I think that relationship has built this business with them over the last 18 months, because they have a confidence level in us, and we are confident in them that, a) we're going to get paid, and paid on time, and b) it's a continuing relationship.

We do a lot of one-offs. We get a hit on our website, I need something tomorrow, can you get it? We never hear from the people again but we get an order, which is great; we do a lot of that. But we also try and establish relationships and that's what we get out of Discovery so far.

Gardner: As a small-business person myself, I know that you don't want to push that rock up the hill every month. You want to have the recurring dependable revenue; it's super important, right?

Kramer: Right. Ariba Spot Buy is an opportunity for ongoing and repeat business from companies participating in this technology.

Gardner: But this allows you to get the best of both worlds, which you can discover and find new interesting clients, but you can also maintain a steady flow from, from your installed base.

Kramer: That's right. This technology offer us an opportunity to engage new corporate customers and get paid quickly with credit card payments.

Gardner: Thank you, Bob, and if people want to learn more about your organization, how might they do that?

Rosenthal: Our website is www.jppromoproducts.com or feel free to call us at 1-800-920-3451.

Gardner: Anne, how could organizations learn more about your company?

Kramer: They could go to our website at www.askergoworks.com or our toll free number 866-ASK-ERGO.

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Thursday, April 21, 2016

Intralinks uses hybrid cloud to blaze a compliance trail across the regulatory mine field of data sovereignty

The next BriefingsDirect hybrid computing case study discussion explores how regulations around data sovereignty are forcing enterprises to consider new approaches to data location, intellectual property, and cloud collaboration services.

As organizations move beyond their on-premises data centers, regulation and data sovereignty issues have become as important as the technical requirements for their cloud infrastructure and applications.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy.

To learn how organizations have been able to get the best of data control and protection -- along with business agility -- from hybrid cloud models, we're joined Richard Anstey, CTO at Intralinks, and he's based in London. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: Tell us about the trends that make data sovereignty so important as a consideration when organizations look at how and where to manage, house, and store their data.

Anstey: This is becoming a much more important topic. It has obviously been in the news very much recently in association with the Safe Harbor regulation having been effectively annulled by the European courts.

Anstey
This is the regulators catching up with the Internet. The Internet has been somewhat unregulated for a long time, and quite rightly, the national and regional authorities are putting in place the right protections to ensure that citizens’ data are looked after and treated with the respect they deserve.

So it's becoming more important for companies to understand the regulatory environment, even those organizations that did not previously feel that they were subject to such regulation.

Gardner: So the pendulum seems to have swung from the Wild West Internet toward greater security oversight.  Do we expect more laws across more jurisdictions to make placement of data more restricted? Are we seeing this pendulum swing more toward regulation?

Anstey: Yes, it’s certainly swinging that way, and the big one for the European Region of course is the General Data Protection Regulation (GDPR), which is the European Commission initiative to unify the regulations, at least across the European Union. But the pendulum is swinging toward a greater level of regulation.

Gardner: How about in Asia-Pacific (APAC) and North America, what’s happening there?

Global issue

Anstey: Post-Snowden, this has become much more of an issue globally, and certainly across APAC there have been some very specific regulations in place for sometime, Singapore Banking Authority being the famous one, but globally this is becoming much more of an important issue for companies to be aware of.

Gardner: So while the regulatory atmosphere is becoming more important for companies to keep track of, its also more onerous for them as businesses to comply. The Internet is still a very powerful tool and people want to take advantage of cloud models and compliant data lifecycle models. Tell us about Intralinks, and about how organizations can have the best of both protected data and cloud models.

Anstey: Intralinks is in the fortunate position of having been offering cloud services in highly regulated environments for almost 20 years now. Back when we were founded, which by the way was really before most people would do their shopping online, Intralinks was operating things called Virtual Data Rooms to facilitate very high value, market-moving transactions through effectively a cloud service. We didn’t call it cloud at that time; we called it software as a service (SaaS).
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But Intralinks has come from this environment. We've always been operating in highly regulated environments, and so we're able to bring that expertise that we have built up over the last 20 years or so to bear on solving this problem for a wider range of organizations as the regulation really steps in to control a greater part of the services delivered over the Internet today.

Gardner: In a nutshell, how is it that you're able to do, in a highly regulated environment, what people think of as putting everything in a cloud?
Physical location may be one thing to think about, but there's another thing called logical location.

Anstey: Well, in a nutshell, it may be tricky, because there's lot to it. There's a lot of technology that goes into this. And there are a lot of dimensions around which you need to consider this problem. It's not just about the physical location of data. Although that may be important, there are other dimensions. Physical location may be one thing to think about, but there's another thing called logical location.

The logical location is defined as the location of the control point of the encryption as opposed to the location of highly encrypted data, which many people would argue is somewhat irrelevant. If it's sufficiently encrypted, it doesn't matter where it is. The location of the key is actually more important than who controls that key, and more important than where your encrypted data lives.

In fact, we all implicitly accept that principle. When you use your online bank, you don't know the route that that information takes between your home computer and the bank. It may well be routed across the Atlantic, based on conditions of the Internet. You just don't know, and yet we implicitly accept that because it's encrypted in transit, it doesn't really matter what route it takes.

So there is the physical location and the logical location, but there is still also the legal location, which might be to what jurisdiction this information pertains. Perhaps it pertains to a citizen of a certain country, and so there is a legal location angle to consider.

And there is also a political location to consider, which may be, for example, the jurisdiction under which the service provider is operating and where the headquarters of that service provider is.

Four dimensions

There are four dimensions already, but there is another one as well, which is the time dimension. While it may be suitable for you to share information with a third party in perhaps a different jurisdiction for a period of time, the moment that business agreement comes to an end, or perhaps the purpose or the project for which that information was being used has come to an end, you also need to be able to clear it up.

You need to tidy up and remove those things over time and make sure that just because that particular information-sharing activity was valid at one point, it doesn't mean that that’s true forever, and so you need to take the responsibility to clear it up. So there are technologies that you can bring to bear to make that happen as well.

Gardner: It sounds as if there is a full spectrum, a marketplace, of different solutions and approaches to suit whatever particular issues an organization needs in order to satisfy the regulatory, audit, and other security requirements.

Tell us about how you have been working with HPE to increase this marketplace and solve data sovereignty issues as they become more prominent in more places.

Anstey: The thing that HPE really helps us with is the fact that while we've been able for quite a long time to have data centers in multiple regions -- as the regulation and the requirements of our customers grow -- we need to be even more agile with bringing new workloads up and running in different locations.

With HPE Helion OpenStack we're able to spin up a new environment -- a new data center perhaps, or a new service -- to run in a new location far more quickly and more cost effectively than we would otherwise be able to if we were starting from the ground-up.
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Gardner: So it's important to not just be able to take advantage of cloud conceptually, but to be able to move those cloud data centers, have the fungibility, if you will, of a cloud infrastructure, a standardized approach that can be accepted in many different data-center locations, many different jurisdictions.

Is that the case, and what can we expect for the depth and reach of your services? Are you truly global?

Anstey: We are certainly truly global. We've been operating right across the world for a number of years now. The key elements that we require from this infrastructure are things like workload portability and the ability to plug into additional service providers at any time we need to be able to create a truly distributed platform.

In order to do that, you need some kind of cloud operating system, and that's what we feel we get from the HPE Helion OpenStack technology. It means that we have become much more portable to move our services around whenever we need to.

Gardner: When you're an organization and you know that there's that data portability, that there's a true global footprint for your data that you can comply with the regulations, what does that do for you as a business?

How does this, from a business perspective, benefit your bottom line? How does it translate into business terms?

Enormous uncertainty

Anstey: The key thing to realize is that there has been an enormous amount of uncertainty, and in a way, the closure of the Safe Harbor agreement has been a good thing in that there was always some doubt over its applicability and its suitability. If you'll forgive the pun, there was a cloud hanging over it. When you remove that, you still have to get a little bit more certainty, of ... "Well, that thing definitely doesn't work and so we need to have a different structure."

Nevertheless, what happens in that environment of uncertainty is that people start to play it safe and they start to think, "This cloud thing is a bit scary. Maybe we should just do it all ourselves, or maybe we should only consider private cloud deployments." When you do that, you cut off the huge options and agility that's available from using the cloud to its full extent.

What would be a bad thing is if, as the pendulum swings, as you described, toward regulation, people retreat and give up and say, "This Internet thing, we don’t want to do that. We're going to reverse the trends and the huge technological advances that we've been able to leverage over the last 10 years of growth of cloud."

We believe that by building technology in the way that we are able to construct it, with all of those options associated with ways in which you can demonstrably prove that you are responsibly looking after data over time, you don't have to sacrifice the agility of the cloud in order to adhere to the regulations as they come in.
The net is cast wider and wider for the regulation, to the point where any company that deals with personal data and needs to use that data for legitimate business purposes will now be covered by regulation.

Gardner: We've talked about data sovereignty from a geographic perspective, but how about vertical industries? Are there certain industries that require that global reach, but also need to be highly regulated?

Anstey: The vast majority of the global banks are our customers already. We also have a very large footprint in the life sciences, which often has a similar nature in terms of the level of regulation, especially if you're dealing with patient data in the field of clinical trials, for example.

But the reality is that, as this pendulum swings, the net is cast wider and wider for the regulation, to the point where any company that deals with personal data and needs to use that data for legitimate business purposes will now be covered by regulation. This isn't just guidance now.
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When we get through to the next level of EU regulation, there are some serious fines, including criminal penalties for executives and fines of up to two percent of global revenue, which really makes people wake up. It will make a far wider group of companies wake up than the previous ones who knew that they were operating in a strict regulatory framework.

Gardner: So in other words, this probably is going to pertain to many more industries than they may have thought. This is really something that’s going to hit home for just about everybody.

Anstey: Absolutely. Every industry becomes a regulated industry at that point, when to do business you need to handle the type of data that gets covered by the regulation, especially if you are operating in the EU, but as we described, with more to follow.

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