The next line of defense—How new security leverages virtualization to counter sophisticated threats

When it comes to securing systems and data, the bad guys are constantly upping their games — finding new ways to infiltrate businesses and users. Those who protect systems from these cascading threats must be ever vigilant for new technical advances in detection and protection. In fact, they must out-innovate their assailants.

The next BriefingsDirect security insights discussion examines the relationship between security and virtualization. We will now delve into how adaptive companies are finding ways to leverage their virtualization environments to become more resilient, more intelligent, and how they can protect themselves in new ways.

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

To learn how to ensure that virtualized data centers do not pose risks — but in fact prove more defensible — we are joined by two security-focused executives, Kurt Roemer, Chief Security Strategist at Citrix, and Harish Agastya, Vice President for Enterprise Solutions at Bitdefender. The discussion is moderated by Dana Gardner, principal analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: Kurt, virtualization has become widespread and dominant within data centers over the past decade. At that same time, security has risen to the very top of IT leadership’s concerns. What is it about the simultaneous rise of virtualization and the rise of security concerns? Is there any intersection? Is there any relationship that most people may miss?

Roemer: The rise of virtualization and security has been concurrent. A lot of original deployments for virtualization technologies were for remote access, but they were also for secure remote access. The apps that people needed to get access to remotely were usually very substantial applications for the organization —  things like order processing or partner systems; they might have been employee access to email or internal timecard systems. These were things that you didn’t really want an attacker messing with — or arbitrary people getting access to.

Roemer.Kurt (1)

Roemer

Security has grown from just providing basic access to virtualization to really meeting a lot of the risks of these virtualized applications being exposed to the Internet in general, as well as now expanding out into the cloud. So, we have had to grow security capabilities to be able to not only keep up with the threat, but try to keep ahead of it as well.

Gardner: Hasn’t it historically been true that most security prevention technologies have been still focused at the operating system (OS)-level, not so much at the virtualization level? How has that changed over the past several years?

Roemer: That’s a good question. There have been a lot of technologies that are associated with virtualization, and as you go through and secure and harden your virtual environments, you really need to do it from the hardware level, through the hypervisor, through the operating system level, and up into the virtualization system and the applications themselves.

We are now seeing people take a much more rigorous approach at each of those layers, hardening the virtualization system and the OS and integrating in all the familiar security technologies that we’re used to, like antivirus, but also going through and providing for application-specific security.

So if you have a SAP system or something else where you need to protect some very sensitive company data and you don’t want that data to be accessed outside the office arbitrarily, you can provide very set interfaces into that system, being able to control the clipboard or copy and paste, what peripherals the application can interface with; i.e., turn off the camera, turn off the microphone if it’s not needed, and even get down to the level of with the browser, whether things like JavaScript is enabled or Flash is available.

So it helps to harden the overall environment and cut down on a lot of the vulnerabilities that would be inherent by just leaving things completely wide open. One of the benefits of virtualization is that you can get security to be very specific to the application.

Gardner: Harish, now that we are seeing this need for comprehensive security, what else is it that people perhaps don’t understand that they can do in the virtualization layer? Why is virtualization still uncharted territory as we seek to get even better security across the board?

Let’s get better than physical

Agastya: Customers often don’t realize when they are dealing with security in physical or virtual environments. The opportunities that virtual environments provide to them are to have the ability to take security to a higher level than physical-only. So better than physical is, I think, a key value proposition that they can benefit from — and the technology innovation of today has enabled that.

Harish Agastya

Agastya

There is a wave of innovation among security vendors in this space. How do we run resource-intensive security workloads in a way that does not compromise the service-level agreements (SLAs) that those information technology operations (IT Ops) administrators need to deliver?

There is a lot of work happening to offload security-scanning mechanisms on to dedicated security virtual appliances, for example. Bitdefender has been working withpartners like Citrix to enable that.

Now, the huge opportunity is to take that story further in terms of being able to provide higher levels of visibility, detection, and prevention from the attacks of today, which are advanced persistent threats. We seek to detect how they manifest in the data center and — in a virtual environment — what you have the opportunity to do, and how you can respond. That game is really changing now.

Gardner: Kurt, is there something about the ability to spin up virtualized environments, and then take them down that provides a risk that the bad guys can target or does that also provide an opportunity to start fresh: To eliminate vulnerabilities, or learn quickly and adapt quickly? Is there something about the rapid change that virtualization enables that is a security plus?

Persistent protection anywhere

Roemer: You really hit on the two sides of the coin. On one side, virtualization does oftentimes provide an image of the application or the applications plus OS that could be fairly easy for a hacker to steal and be able to spin up offline and be able to get access to secrets. So you want to be able to protect your images, to make sure that they are not something that can be easily stolen.

On the other side, having the ability to define persistence — what do you want to have to persist between reboots versus what’s non-persistent — allows you to have a constantly refreshed system. So when you reboot it, it’s exactly back to the golden image — and everything is as it should be. As you patch and update you are working with a known quantity as opposed to the endpoint where somebody might have administrative access and it has installed personal applications and plug-ins to their browser and other things like that that you may or may not want to have in placer.

The nice thing with virtualization is that it’s independent of the OS, the applications, the endpoints, and the varied situations that we all access our apps and data from.

Layering also comes into play and helps to make sure that you can dynamically layer in applications or components of the OS, depending on what’s needed. So if somebody is accessing a certain set of functionality in the office, maybe they have 100% functionality. But when they go home, because they are no longer in a trusted environment or maybe not working on a trusted PC from their home system, they get a degraded experience, seeing fewer applications and having less functionality layered onto the OS. Maybe they can’t save to local drives or print to local printers. All of that’s defined by policy. The nice thing with virtualization is that it’s independent of the OS, the applications, the endpoints, and the varied situations that we all access our apps and data from.

Gardner: Harish, with virtualization that there is a certain level of granularity as to how one can manage their security environment parameters. Can you expand on why having that granular capability to manage parameters is such a strong suit, and why virtualization is a great place to make that happen?

On the move, virtually

Agastya: That is one of the opportunities and challenges that security solutions need to be able to cope with.

As workloads are moving across different subgroups, sub-networks, that virtual machine (VM) needs to have a security policy that moves with it. It depends on what type of application is running, and it is not specific to the region or sub-network that that particular VM is resident on. That is something that security solutions that are designed to operate in virtual environments have the ability to do.

Security moves with the workload, as the workload is spawned off and new VMs are created. The same set of security policies associated with that workload now can protect that workload without needing to have a human step in and determine what security posture needs to belong to that VM.

See the IDC White Paper, Hypervisor Introspection: A Transformative Approach to Advanced Attack Detection.

That is the opportunity that virtualization provides. But it’s also a challenge. For example, maybe the previous generations of solutions predated all of this. We now need to try and address that.

We love the fact that virtualization is happening and that it has become a very elastic software-defined mechanism that moves around and gives the IT operations people so much more control. It allows an opportunity to be able to sit very well in that environment and provide security that works tightly integrated with the virtualization layer.

Gardner: I hear this so much these days that IT operations people are looking for more automation, and more control.

Kurt, I think it’s important to understand that when we talk about security within a virtualization layer, that doesn’t obviate the value of security that other technologies provide at the OS level or network level. So this isn’t either-or, this is an augmentation, isn’t that correct, when we talk about virtualization and security?

The virtual focus

Roemer: Yes, that’s correct. Virtualization provides some very unique assets that help extend security, but there are some other things that we want to be sure to focus on in terms of virtualization. One of them is Bitdfender Hypervisor Introspection (HVI). It’s the ability for the hypervisor to provide a set of direct inspect application programming interfaces (APIs) that allow for inspection of guest memory outside of the guest.

When you look at Windows or Linux guests that are running on a hypervisor, typically when you have tried to secure those it’s been through technology installed in the guest. So you have the guest that’s self-protecting, and they are relying on OS APIs to be able to effect security. Sometimes that works really well and sometimes the attackers get around OS privileges and are successful, even with security solutions in place.

One of the things that HVI does is it looks for the techniques that would be associated with an attack against the memory of the guest from outside the guest. It’s not relying on the OS APIs and can therefore catch attacks that otherwise would have slipped past the OS-based security functionality.

Gardner: Harish, maybe you can tell us about how Citrix and Bitdefender are working together?

Step into the breach, together

Agastya: The solution is Bitdefender HVI. It works tightly with Citrix’s XenServer hypervisor, and it has been available in a controlled release for the last several months. We have had some great customer traction on it. At Citrix Synergy this year wewill be making that solution generally available.

We have been working together for the last four years to bring this groundbreaking technology to the market.

What is the problem we are trying to solve? It is the issue of advanced attacks that hit the data center when, as Kurt mentioned, advanced attackers are able to skirt past endpoint security defense mechanisms by having root access and operating at the same level of privilege as the endpoint security that may be running within the VM.

They can then essentially create a blind spot where the attackers can do anything they want while the endpoint security solution continues to run.

See the IDC White Paper, Hypervisor Introspection: A Transformative Approach to Advanced Attack Detection.

These types of attacks stay in the environment and the customer suffers on average 200 days before a breach is discovered. The marketplace is filled with stories like this and it’s something that we have been working together with Citrix to address.

The fundamental solution leverages the power of the hypervisor to be able to monitor attacks that modify memory. It does that by looking for the common attack mechanisms that all these attackers use, whether it’s buffer overflows or it’s heap spraying, the list goes on.

They all result in memory modification that the endpoint security solution within the VM is blinded to. However, if you are leveraging the direct inspect APIs that Kurt talked about — available as part of Citrix’s XenServer solution – then we have the ability to look into that VM without having a footprint in there. It is a completely agentless solution that runs outside the security virtual appliance. It monitors all of the VMs in the data center against these types of attacks. It allows you to take action immediately, reduces the time to detection and blocks the attack.

Gardner: Kurt, what are some of the major benefits for the end-user organization in deploying something like HVI? What is the payback in business terms?

Performance gains

Roemer: Hypervisor Introspection, which we introduced in XenServer 7.1, allows an organization to deploy virtualization with security technologies behind it at the hypervisor level. What that means for the business is that every guest you bring up has protection associated with it. Even if it’s a new version of Linux that you haven’t previously tested and you really don’t know which antivirus you would have integrated with it; or something that you are working on from an appliance perspective — anything that can run on XenServer would be protected through these direct inspect APIs, and the Bitdefender HVI solution. That’s really exciting.

It also has performance benefits because you don’t have to run antivirus in every guest at the same level. By knowing what’s being protected at the hypervisor level, you can configure for a higher level of performance.

Now, of course, we always recommend having antivirus in guests, as you still have file-based access and so you need to look for malware, and sometimes files get emailed in or out or produced, and so having access to the files from an anti-malware perspective is very valuable.

So for the business, HVI gives you higher security, it gives you better performance, and the assurance that you are covered.

But you may need to cut down some of the scanning functionality and be able to meet much higher performance objectives.

Gardner: Harish, it sounds like this ability to gain introspection into that hypervisor is wonderful for security and does it in such a way that it doesn’t degrade performance. But it seems to me that there are also other ancillary benefits in addition to security, when you have that ability to introspect and act quickly. Is there more than just a security benefit, that the value could go quite a bit further?

The benefits of introspection

Agastya: That’s true. The ability to introspect into memory has huge potential in the market. First of all, with this solution right now, we address the ability to detect advanced attacks, which is a very big problem in the industry — where you have everything from nation-sponsored attacks to deep dark web, malicious components, attack components available to common citizens who can do bad things with them.

The capability to reduce that window to advanced attack detection is huge. But now with the power of introspection, we also have the ability to inject, on the fly, into the VM, additional solutions tools that can do deep forensics, measure network operations and the technology can expand to cover more. The future is bright for where we can take this between our companies.

Gardner: Kurt, anything to add on the potential for this memory introspection capability?

Specific, secure browsers

Roemer: There are a couple things to add. One is taking a look at the technologies and just rolling back through a lot of the exploits that we have seen, even throughout the last three months. There have been exploits against Microsoft Windows, exploits against Internet Explorer and Edge, hypervisors, there’s been EternalBlue and the Server Message Block (SMB) exploits. You can go back and be able to try these out against the solution and be able to see exactly how it would catch them, and what would have happened to your system had those exploits actually taken effect.

If you have a team that is doing forensics and trying to go through and determine whether systems had previously been exploited, you are giving that team additional functionality to be able to look back and see exactly how the exploits would have worked. Then they can understand better how things would have happened within their environment. Because you are doing that outside of the guest, you have a lot of visibility and a lot of information you otherwise wouldn’t have had.

One big expanded use-case here is to get the capability for HVI between Citrix and Bitdefender in the hands of your security teams, in the hands of your forensics teams, and in the hands of your auditors — so that they can see exactly what this tool brings to the table.

See the IDC White Paper, Hypervisor Introspection: A Transformative Approach to Advanced Attack Detection.

Something else you want to look at is the use-case that allows users to expand what they are doing and makes their lives easier — and that’s secured browsing.

Today, when people go out and browse the Internet or hit a popular application like Facebook or Outlook Web Access — or if you have an administrator who is hitting an administrative console for your Domain Name System (DNS) environment, your routers, your Cisco, Microsoft environments, et cetera, oftentimes they are doing that via a web browser.

One big expanded use-case here is to get the capability for HVI between Citrix and Bitdefender in the hands of your security teams.

Well, if that’s the same web browser that they use to do everything else on their PC, it’s over-configured, it presents excessive risk, and you now have the opportunity with this solution to publish browsers that are very specific to each use.

For example, you publish one browser specifically for administrative access, and you know that you have advanced malware detection. Even if somebody is trying to target your administrators, you are able to thwart their ability to get in and take over the environments that the administrators are accessing.

As more things move to the browser — and more very sensitive and critical applications move to the cloud — it’s extremely important to set up secured browsing. We strongly recommend doing this with XenServer and HVI along with Bitdefender providing security.

Agastya: The problem in the market with respect to the human who is sitting in front of the browser being the weakest link in the chain is a very important one. Many, many different technology approaches have been taken to address this problem — and most of them have struggled to make it work.

The value of XenApp coming in with its secured browser model is this: You can stream your browser and you are just presenting, rendering an interface on the client device, but the browser is actually running in the backend, in the data center, running on XenServer, protected by Bitdefender HVI. This model not only allows you to shift the threat away from the client device, but also kill it completely, because that exploit which previously would have run on the client device is not on the client device anymore. It’s not even on the server anymore because HVI has gotten to it and stopped it.

Roemer: I bring up the browser benefit as an example because when you think of the lonely browser today, it is the interface to some of your most critical applications. A browser, at the same time, is also connected to your file system, your network, your Windows registry, your certificate chain and keys — it’s basically connected to everything you do and everything you have access to in most OSes.

What we are talking about here is publishing a browser that is very specific to purpose and configured for an individual application. Just put an icon out there, users click on it and everything works for them silently in the background. By being able to redirect hyperlinks over to the new joint XenServer-Bitdefender solution, you are not only protecting against known applications and things that you would utilize — but you can also redirect arbitrary links.

Even if you tell people, “don’t click on any links”, you know every once in a while it’s going to happen. When that one person clicks on the link and takes down the entire network, it’s awful. Ransomware attacks happen like that all the time. With this solution, that arbitrary link would be redirected over to a one-time use browser. Bitdefender would come up and say, “Hey, yup, there’s definitely a problem here, we are going to shut this down,” and the attack never would have had a chance to get anywhere.

What we are talking about here is publishing a browser that is very specific to purpose and configured for an individual application.

The organization is notified and can take additional remediatative actions. It’s a great opportunity to really change how people are working and take this arbitrary link problem and the ransomware problem and neutralize it.

Gardner: It sounds revolutionary rather than evolutionary when it comes to security. It’s quite impressive. I have learned a lot in just the last week or two in looking into this. Harish, you mentioned earlier that before the general availability being announced in May for Bitdefender HVI on XenServer that you have had this in beta. Do you have any results from that? Can you offer any metrics of what’s happened in the real world when people deploy this? Are the results as revolutionary as it sounds?

Real-world rollout

Agastya: The product was first in beta and then released in controlled availability mode, so the product is actually in production deployment at several companies in both North America and Europe. We have a few financial services companies, and we have some hospitals. We have put the product to use in production deployments for virtual desktop infrastructure (VDI) deployments where the customers are running XenApp and XenDesktop on top of XenServer with Bitdefender HVI.

We have server workloads running straight on XenServer, too. These are typically application workloads that the financial services companies or the hospitals need to run. We have had some great feedback from them. Some of them have become references as well, and we will be talking more about it at Citrix Synergy 2017, so stay tuned. We are very excited about the fact that the product is able to provide value in the real world.

Roemer: We have a very detailed white paper on how to set up the secured browsing solution, the joint solution between Citrix and Bitdefender. Even if you are running other hypervisors in your environment, I would recommend that you set up this solution and try redirecting some arbitrary hyperlinks over to it, to see what value you are going to get in your organization. It’s really straightforward to set up and provides a considerable amount of additional security visibility.

See the IDC White Paper, Hypervisor Introspection: A Transformative Approach to Advanced Attack Detection.

Bitdefender also has some really amazing videos that show exactly how the solution can block some of the more popular exploits from this year. They are really impressive to watch.

Gardner: Kurt, we are about out of time, but I was curious, what’s the low-lying fruit? Harish mentioned government, VDI, healthcare. Is it the usual suspects with compliance issues hanging over their heads that are the low-lying fruit, or are there other organizations that would be ripe to enjoy the benefits?

Roemer: I would say compliance environments and anybody with regulatory requirements would very much be low-lying fruit for this, but anybody who has sensitive applications or very sensitive use-cases, too. Oftentimes, we hear things like outsourcing as being one of the more sensitive use-cases because you have external third parties who are getting in and either developing code for you, administering part of the operating environment, or something else.

We have also seen a pretty big uptick in terms of people being interested in this for administering the cloud. As you move up to cloud environments and you are defining new operating environments in the cloud while putting new applications up in the cloud, you need to make sure that your administrative model is protected.

Oftentimes, you use a browser directly to provide all of the security interfaces for the cloud, and by publishing that browser and putting this solution in front of it, you can make sure that malware is not interrupting your ability to securely administer the cloud environment.

Gardner: Last question to you, Harish. What should organizations do to get ready for this? I hope we have enticed them to learn more about it. For those organizations that actually might want to deploy, what do they need to think about in order to be in the best position to do that?

A new way of life

Agastya: Organizations need to think aboutsecure virtualization as a way of life within organizational behavior. As a result, I think we will start to see more people with titles like Security DevOps (SecDevOps).

As far as specifically using HVI, organizations should be worried about how advanced attacks could enter their data center and potentially result in a very, very dangerous breach and the loss of confidential intellectual property.

If you are worried about that, you are worried about ransomware because an end-user sitting in front of a client browser is potentially putting out your address. You will want to think about a technology like HVI. The first step for that is to talk to us and there is a lot of information on the Bitdefender website as well as on Citrix’s website.

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

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SAP Ariba and MercadoLibre to consumerize business commerce in Latin America

The next BriefingsDirect global digital business panel discussion explores how the expansion of automated tactical buying for business commerce is impacting global markets, and what’s in store next for Latin America.

We’ll specifically examine how “spot buy” approaches enable companies to make time-sensitive and often mission-critical purchases, even in complex and dynamic settings, like Latin America.

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 rising tide of such tactical business buying improvements, please join our guests, Karen Bruck, Corporate Sales Director at MercadoLibre.com in Buenos Aires, Argentina; Diego Cabrera Canay, Director of Financial Planning at MercadoLibre, and Tony Alvarez, General Manager of SAP Ariba‘s Spot Buy Business. The panel was recorded at the recent 2017 SAP Ariba LIVE conference in Las Vegas, and is moderated by Dana Gardner, principal analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: SAP Ariba Spot Buy has been in the market a few years. Tell us about where it has rolled out so far, why certain markets are being approached, and then about Latin America specifically.

Alvarez: The concept is a few years old, but we’ve been delivering SAP Ariba Spot Buy for about a year. We began in the US, and over the past 12 months the concept of Spot Buy has progressed because of our customer base. Our customer base has pushed us in a direction that is, quite frankly, even beyond Spot Buy — and it’s getting into trusted, vetted content.

Tony Alvarez

Alvarez

We are approaching the market with a two-pronged strategy of, yes, we have the breadth of content so that when somebody goes into an SAP Ariba application they can find what they are looking for, but we also now have parameters and controls that allow them to vet that content and to put a filter on it.

Over the last 12 months, we’ve come a long way. We are live in the US, and with early access in the UK and Germany. We just went live in Australia, and now we are very much looking forward to going live and moving fast into Latin America with MercadoLibre.

Gardner: Spot buying, or tactical buying, is different from strategic or more organized long-term buying. Tell us about this subset of procurement.

Alvarez: SAP Ariba is a 20 year-old company, and its roots are in that rigorous, sourced approach. We do hundreds of billions of dollars through contract catalog on the Ariba Network, but there’s a segment — and we believe it’s upward of 15% of spend — that is spot buy spend. The procurement professional often has no idea what’s being bought. And I think there are two approaches to that — either ignorance is bliss and they are glad that it’s out of their purview, or it also keeps them up at night.

SAP Ariba Spot Buy allows them to have visibility into that spend. By partnering with providers like MercadoLibre, they have content from trusted and vetted sellers to bring to the table – so it’s a really nice match for procurement.

Liberating limits

Gardner: The trick is to allow for flexibility and being dynamic, but also putting in enough rules and policies so that things don’t go off-track.

Alvarez: Exactly. For example, it’s like putting a filter on your kids’ smartphone. You want them to be able to be liberated so they can go and do as they please with phone calls — but not to go off the guardrails.

Gardner: Karen, tell us about MercadoLibre and why Latin America might be a really interesting market for this type of Spot Buy service.

Bruck: MercadoLibre is a leading e-commerce platform in Latin America, where we provide the largest marketplaces in 16 different countries. Our main markets are Brazil, Mexico, and Argentina, and that’s where we are going the start this partnership with SAP Ariba.

Karen Bruck

Bruck

We have upward of 60 million items listed on our platform, and this breadth of supplies will make purchasing very exciting. Latin America is a complicated market — and we like this complexity. We do very well.

It’s complicated because there are different rates of inflation in different countries, and so contracts can be hard to complete. What we bring to the table is an assortment of great payment and shipping solutions that make it easy for companies to purchase items. As Tony was saying, these are not under long-term contracts, but we still get to make use of this vast supply.

Gardner: Tony mentioned that maybe 15% of spend is in this category. Diego, do you think that that number might be higher in some of the markets that you serve?

Cabrera Canay: That’s probably the number — but that is a big number in terms of the spend within companies. So we have to get there and see what happens.

Progressive partnership

Gardner: Tony, tell us about the partnership. What is MercadoLibre.com bringing to the table? What is Ariba bringing to the table? How does this fit together for a whole that is greater than the sum of its parts?

Alvarez: It really is a well-matched partnership. SAP Ariba is the leading cloud procurement platform, period. When you look in Latin America, our penetration with SAP Enterprise Resource Planning (ERP) is even greater. We have a very strong installed base with SAP ERP.

Our plan is to take the SAP Ariba Spot Buy content and make it available to the SAP installed base. So this goes way beyond just SAP Ariba. And when you think about what Karen mentioned — difficulties in Latin America with high inflation — the catalog approach is not used as much in Latin America because everything is so dynamic.

For example, you might sign a contract but in just in a couple of weeks that contract may be obsolete, or unfavorable because of a change in pricing. But once we build controls and parameters in SAP Ariba Spot Buy, you can layer that on top of MercadoLibre content, which is super-broad. If you’re looking for it you’re going to find it, and that content is constantly updated. You gain real-time access to the latest information, and then the procurement person gets the benefit of control.

So I’m very optimistic. As Diego mentioned, I think 15% is really on the low-end in Latin America for this type of spend. I think this will be a really nice way to put digital catalog buying in the hands of large enterprise buyers.

Gardner: Speaking of large enterprise buyers, if I’m a purchasing official in one of your new markets, what should I be thinking about how this is going to benefit me?

Transparent, trusted transactions

It saves a lot of time, it makes the comparison very transparent, and you are able to control the different options. Overall, it’s a win-win … a partnership, a match made in heaven.

Bruck: Let me talk about this from experience. As a country manager at MercadoLibre, I had to do a lot of the procurement, together with our procurement officers. It was really frustrating at times because all of these purchases had to be one-off engagements, with a different vendor every time. That takes a lot of time. You also have to bring in price comparisons, and that’s not always a simple process.

So what this platform gives you is the ability to be very transparent about prices and among different supplies. That makes it very easy to be able to buy every time without having to call and get the vendor to be in your own buying platform.

It saves a lot of time, it makes the comparison very transparent, and you are able to control the different options. Overall, it’s a win-win. So I do believe this is a partnership, a match made in heaven.

We were also very interested in business-to-business (B2B) industries. When Tony and SAP Ariba came to our offices to offer this partnership, we thought this would be a great way to leverage their needs with our supply and make it work.

Gardner: For sellers, this enables them to do repeated business more easily, more automated and so at scale. For buyers, with transparency they have more insight into getting the best prices, the best terms of delivery. Let’s expand on that win-win. Diego, tell us about the business benefits for all parties.

Big and small, meet at the mall 

Cabrera Canay: In the past few years, we have been working to make MercadoLibre the biggest “mall” in e-commerce. We have the most important brands and the most important retailers selling through MercadoLibre.

Diego Cabrera Canay

Cabrera Canay

What differentiates us is that we are confident we have the best prices — and also other great services such as free shipping, easy payments, and financing. We are sure that we can offer the buyers better purchasing.

Obviously, from the side of sellers, this all provides higher demand, it raises the bar in terms of having qualified buyers, and then giving the best services. That’s very exciting for us.

Gardner: Tony, we mentioned large enterprises, but this cuts across a great deal more of the economy, such as small- to medium sized (SMB) businesses. Tell us about how this works across diverse economies where there are large players but lots of small ones, too?

Alvarez: On the sales side, this gives really small businesses opportunity to reach large enterprise buyers that probably weren’t there before.

Diego was being modest, but MercadoLibre’s payment structure, MercadoPago, is incredibly robust, and it’s incredibly valuable to that end-seller, and also to the buyer.

Just having that platform and then connecting — you are basically taking two populations, the large and small sellers, and the large and small buyers, and allowing them to commingle more than they ever had in the past.

Gardner: Karen, as you mentioned from your own experience, when you’re dealing with paper, and you are dealing with one-offs, it’s hard to just keep track of the process, never mind to analyze it. But when we go digital, when we have a platform, when we have business networks at work, then we can start to analyze things for companies — and more broadly into markets.

How do you see this partnership accelerating the ability to leverage analytics, leverage some of the back-end platform technologies with SAP HANA and SAP Ariba, and making more strides toward productivity for your customers?

Data discoveries

Bruck: Right. When everything is tracked, as this will be, because every single purchase will be inside their SAP Ariba platform, it is all part of your “big data.” So then you can actually drop it, control it, analyze it, and say, “Hey, maybe these particular purchases mean that we should have long-term contracts, or that our long-term contracts were not priced correctly,” and maybe that’s an opportunity to save money and lower costs.

So once you can track data, you can do a lot of things, and discover new opportunities for either being more efficient or reducing costs – and that’s ultimately what we all want in all the departments of our companies.

Gardner: And for those listeners and readers who are interested in taking advantage of these services, and ultimately that great ability to analyze, what should they be doing now to get ready? Are there some things they could do culturally, organizationally, in order to become that more digital business when these services are available to them?

Paper is terrible for companies; you have to rethink your purchase processing in a digital way.

Cabrera Canay: I can talk about in our own case, where we are rebuilding our purchase processes. Paper is terrible for companies; you have to rethink your purchase processing in a digital way. Once you do it, SAP Ariba is a great solution, and with SAP Ariba Spot Buy we will have the best conditions for the buyers.

Bruck: It’s a natural process. People are going digital and embracing these new trends and technologies. It will make them more efficient. If they get up to speed quickly, it will become less about controlling stuff that they don’t need to control. They will really understand the benefits, so it will be a natural adoption.

Gardner: Tony, coming back full circle, as you have rolled SAP Ariba Spot Buy out from North America to Europe to Asia-Pacific, and now to Latin America — what have you learned in the way people use it?

Alvarez: First, at a macro level, people have found this to be a useful tool to replace some of the contracts that were less important, and so they can rely on marketplaces.

Second, we’ve really found as we’ve deployed in the US that a lot of times multinational companies are like, “Hey, that’s great, I love this, but I really want to use this in Latin America.” So they want to go and get visibility elsewhere.

Turn-key technique

Third, they want a tool that doesn’t require any training. If I’m a procurement professional, I want my users to already be expert at using the tool. We’ve designed this in the process context, and in concert with the content partners. You can just walk up and start using it. You don’t have to be an expert, and it keeps you within the guardrails without even thinking about it.

Gardner: And being a cloud-based, software-as-a-service (SaaS) solution you’re always analyzing how it’s being used — going after that ultimate optimized user experience — and then building those improvements back in on a constant basis?

Alvarez: Exactly. Always.

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

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Posted in Business intelligence, Business networks, Cloud computing, data analysis, Enterprise transformation, ERP, machine learning, procurement, SAP, SAP Ariba, Spot buying, User experience | Tagged , , , , , , , , , , , , | Leave a comment

Awesome Procurement —Survey shows how business networks fuel innovation and business transformation

The next BriefingsDirect digital business insights interview explores the successful habits, practices, and culture that define highly effective procurement organizations.

We’ll uncover unique new research that identifies and measures how innovative companies have optimized their practices to overcome the many challenges facing business-to-business (B2B) commerce.

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 traits and best practices of the most successful procurement organizations, please join Kay Ree Lee, Director of Business Analytics and Insights at SAP Ariba. The interview was recorded at the recent 2017 SAP Ariba LIVE conference in Las Vegas, and is moderated by Dana Gardner, principal analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: Procurement is more complex than ever, supply chains stretch around the globe, regulation is on the rise, and risk is heightened across many fronts. Despite these, innovative companies have figured out how to overcome their challenges, and you have uncovered some of their secrets through your Annual Benchmarking Survey. Tell us about your research and your findings.

Lee: Every year we conduct a large benchmark program benefiting our customers that combines a traditional survey with data from the procurement applications, as well as business network.

Kay Ree Lee

Lee

This past year, more than 200 customers participated, covering more than $400 billion in spend. We analyzed the quantitative and qualitative responses of the survey and identified the intersection between those responses for top performers compared to average performers. This has allowed us to draw correlations between what top performers did well and the practices that drove those achievements.

Gardner: What’s changed from the past, what are you seeing as long-term trends?

Lee: There are three things that are quite different from when we last talked about this a year ago.

The number one trend that we see is that digital procurement is gaining momentum quickly. A lot of organizations are now offering self-service tools to their internal stakeholders. These self-service tools enable the user to evaluate and compare item specifications and purchase items in an electronic marketplace, which allows them to operate 24×7, around-the-clock. They are also utilizing digital networks to reach and collaborate with others on a larger scale.

The second trend that we see is that while risk management is generally acknowledged as important and critical, for the average company, a large proportion of their spend is not managed. Our benchmark data indicates that an average company manages 68% of their spend. This leaves 32% of spend that is unmanaged. If this spend is not managed, the average company is also probably not managing their risk. So, what happens when something unexpected occurs to that non-managed spend?

The third trend that we see is related to compliance management. We see compliance management as a way for organizations to deliver savings to the bottom line. Capturing savings through sourcing and negotiation is a good start,  but at the end of the day, eliminating loopholes through a focus on implementation and compliance management is how organizations deliver and realize negotiated savings.

Gardner: You have uncovered some essential secrets — or the secret sauce — behind procurement success in a digital economy. Please describe those.

Five elements driving procurement processes

Lee: From the data, we identified five key takeaways. First, we see that procurement organizations continue to expand their sphere of influence to greater depth and quality within their organizations. This is important because it shows that the procurement organization and the work that procurement professionals are involved in matters and is appreciated within the organization.

The second takeaway is that – while cost reduction savings is near and dear to the heart of most procurement professionals — leading organizations are focused on capturing value beyond basic cost reduction. They are focused on capturing value in other areas and tracking that value better.

The third takeaway is that digital procurement is firing on all cylinders and is front and center in people’s minds. This was reflected in the transactional data that we extracted.

The fourth takeaway is related to risk management. This is a key focus area that we see instead of just news tracking related to your suppliers.

The fifth takeaway is — compliance management and closing the purchasing loopholes is what will help procurement deliver bottom-line savings.

Gardner: What next are some of the best practices that are driving procurement organizations to have a strategic impact at their companies, culturally?

Lee: To have a strategic impact in the business, procurement needs to be proactive in engaging the business. They should have a mentality of helping the business solve business problems as opposed to asking stakeholders to follow a prescribed procurement process. Playing a strategic role is a key practice that drives impact.

Another practice that drives strategic impact is the ability to utilize and adopt technology to your advantage through the use of digital networks.

They should also focus on broadening the value proposition of procurement. We see leading organizations placing emphasis on contributing to revenue growth, or increasing their involvement in product development, or co-innovation that contributes to a more efficient and effective process.

Another practice that drives strategic impact is the ability to utilize and adopt technology to your advantage through the use of digital networks, system controls to direct compliance, automation through workflow, et cetera.

These are examples of practices and focus areas that are becoming more important to organizations.

Using technology to track technology usage

Gardner: In many cases, we see the use of technology having a virtuous adoption cycle in procurement. So the more technology used, the better they become at it, and the more technology can be exploited, and so on. Where are we seeing that? How are leading organizations becoming highly technical to gain an advantage?

Lee: Companies that adopt new technology capabilities are able to elevate their performance and differentiate themselves through their capabilities. This is also just a start. Procurement organizations are pivoting towards advanced and futuristic concepts, and leaving behind the single-minded focus on cost reduction and cost efficiency.

Digital procurement utilizing electronic marketplaces, virtual catalogs, gaining visibility into the lifecycle of purchase transactions, predictive risk management, and utilizing large volumes of data to improve decision-making – these are key capabilities that benefit the bold and the future-minded. This enables the transformation of procurement, and forms new roles and requirements for the future procurement organization.

Gardner: We are also seeing more analytics become available as we have more data-driven and digital processes. Is there any indication from your research that procurement people are adopting data-scientist-ways of thinking? How are they using analysis more now that the data and analysis are available through the technology?

If you extract all of that data, cleanse it, mine it, and make sense out of it, you can then make informed business decisions and create valuable insights.

Lee: You are right. The users of procurement data want insights. We are working with a couple of organizations on co-innovation projects. These organizations   actively research, analyze, and use their data to answer questions such as:

  • How does an organization validate that the prices they are paying are competitive in the marketplace?
  • After an organization conducts a sourcing event and implements the categories, how do they actually validate that the price paid is what was negotiated?
  • How do we categorize spend accurately, particularly if a majority of spend is services spend where the descriptions are non-standard?
  • Are we using the right contracts with the right pricing?

As you can imagine, when people enter transactions in a system, not all of it is contract-based or catalog-based. There is still a lot of free-form text. But if you extract all of that data, cleanse it, mine it, and make sense out of it, you can then make informed business decisions and create valuable insights. This goes back to the managing compliance practice we talked about earlier.

They are also looking to answer questions like, how do we scale supplier risk management to manage all of our suppliers systematically, as opposed to just managing the top-tier suppliers?

These two organizations are taking data analysis further in terms of creating advantages that begin to imbue excellence into modern procurement and across all of their operations.

Gardner: Kay Ree, now that you have been tracking this Benchmark Survey for a few years, and looking at this year’s results, what would you recommend that people do based on your findings?

Future focus: Cost-reduction savings and beyond

Lee: There are several recommendations that we have. One is that procurement should continue to expand their span of influence across the organization. There are different ways to do this but it starts with an understanding of the stakeholder requirements.

The second is about capturing value beyond cost-reduction savings. From a savings perspective, the recommendation we have is to continue to track sourcing savings — because cost-reduction savings are important. But there are other measures of value to track beyond cost savings. That includes things like contribution to revenue, involvement in product development, et cetera.

The third recommendation relates to adopting digital procurement by embracing technology. For example, SAP Ariba has recently introduced some innovations. I think the user really has an advantage in terms of going out there, evaluating what is out there, trying it out, and then seeing what works for them and their organization.

As organizations expand their footprint globally, the fourth recommendation focuses on transaction efficiency. The way procurement can support organizations operating globally is by offering self-service technology so that they can do more with less. With self-service technology, no one in procurement needs to be there to help a user buy. The user goes on the procurement system and creates transactions while their counterparts in other parts of the world may be offline.

The fifth recommendation is related to risk management. A lot of organizations when they say, “risk management,” they are really only tracking news related to their suppliers. But risk management includes things like predictive analytics, predictive risk measures beyond your strategic suppliers, looking deeper into supply chains, and across all your vendors. If you can measure risk for your suppliers, why not make it systematic? We now have the ability to manage a larger volume of suppliers, to in fact manage all of them. The ones that bubble to the top, the ones that are the most risky, those are the ones that you create contingency plans for. That helps organizations really prepare to respond to disruptions in their business.

The last recommendation is around compliance management, which includes internal and external compliance. So, internal adherence to procurement policies and procedures, and then also external following of governmental regulations. This helps the organization close all the loopholes and ensure that sourcing savings get to the bottom line.

Be a leader, not a laggard

Gardner: When we examine and benchmark companies through this data, we identify leaders, and perhaps laggards — and there is a delta between them. In trying to encourage laggards to transform — to be more digital, to take upon themselves these recommendations that you have — how can we entice them? What do you get when you are a leader? What defines the business value that you can deliver when you are taking advantage of these technologies, following these best practices?

Lee: Leading organizations see higher cost reduction savings, process efficiency savings and better collaboration internally and externally. These benefits should speak for themselves and entice both the average and the laggards to strive for improvements and transformation.

From a numbers perspective, top performers achieve 9.7% savings as a percent of sourced spend. This translates to approximately $20M higher savings per $B in spend compared to the average organization.

We talked about compliance management earlier. A 5% increase in compliance increases realized savings of $4.4M per $1B in spend. These are real hard dollar savings that top performers are able to achieve.

In addition, top performers are able to attract a talent pool that will help the procurement organization perform even better. If you look at some of the procurement research, industry analysts and leaders are predicting that there may be a talent shortage in procurement. But, as a top performer, if you go out and recruit, it is easier to entice talent to the organization. People want to do cool things and they want to use new technology in their roles.

Gardner: Wrapping up, we are seeing some new and compellingtechnologies here at Ariba LIVE 2017 — more use of artificial intelligence(AI), increased use of bringing predictive tools into a context so that they can be of value to procurement during the life-cycle of a process.

As we think about the future, and more of these technologies become available, what is it that companies should be doing now to put themselves in the best position to take advantage of all of that?

Curious org

Lee: It’s important to be curious about the technology available in the market and perhaps structure the organization in such a way that there is a team of people on the procurement team who are continuously evaluating the different procurement technologies from different vendors out there. Then they can make decisions on what best fits their organization.

Having people who can look ahead, evaluate, and then talk about the requirements, then understand the architecture, and evaluate what’s out there and what would make sense for them in the future. This is a complex role. He or she has to understand the current architecture of the business, the requirements from the stakeholders, and then evaluate what technology is available. They must then determine if it will assist the organization in the future, and if adopting these solutions provides a return on investment and ongoing payback.

So I think being curious, understanding the business really well, and then wearing a technology hat to understand what’s out there are key. You can then be helpful to the organization and envision how adopting these newer technologies will play out.

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

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Posted in Ariba, artificial intelligence, big data, Business intelligence, Business networks, Cloud computing, CRM, data analysis, Enterprise transformation, ERP, Information management, machine learning, Networked economy, procurement, SAP, SAP Ariba, Security, Spot buying | Tagged , , , , , , , , , , , | Leave a comment

Experts define new ways to manage supply chain risk in a digital economy

The next BriefingsDirect digital business thought leadership panel discussion explores new ways that companies can gain improved visibility, analytics, and predictive responses to better manage supply chain risk in the digital economy.

The panel examines how companies such as Nielsen are using cognitive computing search engines, and even machine learning and artificial intelligence (AI), to reduce risk in their overall buying and acquisitions.

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 exploding sophistication around gaining insights into advanced business commerce, we welcome James Edward Johnson, Director of Supply Chain Risk Management and Analysis at Nielsen; Dan Adamson, Founder and CEO of OutsideIQ in Toronto, and Padmini Ranganathan, Vice President of Products and Innovation at SAP Ariba.

The panel was assembled and recorded at the recent 2017 SAP Ariba LIVE conference in Las Vegas. The discussion is moderated by Dana Gardner, principal analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: Padmini, we heard at SAP Ariba LIVE that risk is opportunity. That stuck with me. Are the technologies really now sufficient that we can fully examine risks to such a degree that we can turn that into a significant business competitive advantage? That is to say, those who take on risk seriously, can they really have a big jump over their competitors?

Padmini Ranganathan (1)

Ranganathan

Ranganathan: I come from Silicon Valley, so we have to take risks for startups to grow into big businesses, and we have seen a lot of successful entrepreneurs do that. Clearly, taking risks drives bigger opportunity.

But in this world of supplier and supply chain risk management, it’s even more important and imperative that the buyer and supplier relationships are risk-aware and risk-free. The more transparent that relationship becomes, the more opportunity for driving more business between those relationships.

That context of growing business — as well as growing the trust and the transparent relationships — in a supply chain is better managed by understanding the supplier base. Understanding the risks in the supplier base, and then converting them into opportunities, allows mitigating and solving problems jointly. By collaborating together, they form partnerships.

Gardner: Dan, it seems that what was once acceptable risk can now be significantly reduced. How do people in procurement and supply chain management know what acceptable risk is — or maybe they shouldn’t accept any risk?

Adamson: My roots are also from Silicon Valley, and I think you are absolutely right that at times you should be taking risks — but not unnecessarily. What the procurement side has struggled with — and this is from me jumping into financial institutions where they treat risk very differently through to procurement – is risk versus the price-point to avoid that risk. That’s traditionally been the big problem.

Dan Adamson

Adamson

For every vendor that you on-board, you have to pay $1,000 for a due diligence report and it’s really not price-effective. But, being able to maintain and monitor that vendor on a regular basis at acceptable cost – then there’s a real risk-versus-reward benefit in there.

What we are helping to drive are a new set of technology solutions that enable a deeper level of due diligence through technology, through cognitive computing, that wasn’t previously possible at the price point that makes it cost-effective. Now it is possible to clamp down and avoid risk where necessary.

Gardner: James, as a consumer of some of these technologies, do you really feel that there has been a significant change in that value equation, that for less money output you are getting a lot less risk?

Knowing what you’re up against

Johnson: To some degree that value was always there; it was just difficult to help people see that value. Obviously tools like this will help us see that value more readily.

It used to be that in order to show the value, you actually had to do a lot of work, and it was challenging. What we are talking about here is that we can begin to boil the ocean. You can test these products, and you can do a lot of work just looking at test results.

And, it’s a lot easier to see the value because you will unearth things that you couldn’t have seen in the past.

James Edward Johnson

Johnson

Whereas it used to take a full-blown implementation to begin to grasp those risks, you can now just test your data and see what you find. Most people, once they have their eyes wide open, will be at least a little more fearful.  But, at the same time — and this goes back to the opportunity question you asked — they will see the opportunity to actually tackle these risks. It’s not like those risks didn’t exist in the past, but now they know they are there — and they can decide to do something about it, or not.

Gardner: So rather than avoid the entire process, now you can go at the process but with more granular tools to assess your risks and then manage them properly?

Johnson: That’s right. I wouldn’t say that we should have a risk-free environment; that would cost more money than we’re willing to pay. That said, we should be more conscious of what we’re not yet willing to pay for.

Rather than just leaving the risk out there and avoiding business where you can’t access information about what you don’t know — now you’ll know something. It’s your choice to decide whether or not you want to go down the route of eliminating that risk, of living with that risk, or maybe something in between. That’s where the sweet spot is. There are probably a lot of intermediate actions that people would be taking now that are very cheap, but they haven’t even thought to do so, because they haven’t assessed where the risk is.

Gardner: Padmini, because we’re looking at a complex landscape — a supply chain, a global supply chain, with many tiers — when we have a risk solution, it seems that it’s a team sport. It requires an ecosystem approach. What has SAP Ariba done, and what is the news at SAP Ariba LIVE? Why is it important to be a team player when it comes to a fuller risk reduction opportunity?

Teamwork

Ranganathan: You said it right. The risk domain world is large, and it is specialized. The language that the compliance people use in the risk world is somewhat similar to the language that the lawyers use, but very different from the language that the information technology (IT) security and information security risk teams use.

The reason you can’t see many of the risks is partly because the data, the information, and the fragmentation have been too broad, too wide. It’s also because the type of risks, and the people who deal with these risks, are also scattered across the organization.

So a platform that supports bringing all of this together is number one. Second, the platform must support the end-to-end process of managing those supply chain relationships, and managing the full supply chain and gain the transparency across it. That’s where SAP Ariba has headed with Direct Materials Sourcing and with getting more into supply chain collaboration. That’s what you heard at SAP Ariba LIVE.

We all understand that supply chain much better when we are in SAP Ariba, and then you have this ecosystem of partners and providers. You have the technology with SAP and HANA to gain the ability to mash up big data and set it in context, and to understand the patterns. We also have the open ecosystem and the open source platform to allow us to take that even wider. And last but not the least, there is the business network.

So it’s not just between one company and another company, it’s a network of companies operating together. The momentum of that collaboration allows users to say, “Okay, I am going to push for finding ethical companies to do business with,” — and then that’s really where the power of the network multiplies.

Gardner: Dan, when a company nowadays buys something in a global supply chain, they are not just buying a product — they are buying everything that’s gone on with that product, such as the legacy of that product, from cradle to PO. What is it that OutsideIQ brings to the table that helps them get a better handle on what that legacy really is?

Dig deep, reduce risk, save time

Adamson: Yes, and they are not just buying from that seller, they are buying from the seller that sold it to that seller, and so they are buying a lot of history there — and there is a lot of potential risk behind the scenes.

That’s why this previously has been a manual process, because there has been a lot of contextual work in pulling out those needles from the haystack. It required a human level of digging into context to get to those needles.

The exciting thing that we bring is a cognitive computing platform that’s trainable — and it’s been trained by FinCrime’s experts and corporate compliance experts. Increasingly, supply management experts help us know what to look for. The platform has the capability to learn about its subject, so it can go deeper. It can actually pivot on where it’s searching. If it finds a presence in Afghanistan, for example, well then that’s a potential risk in itself, but it can then go dig deeper on that.

And that level of deeper digging is something that a human really had to do before. This is the exciting revolution that’s occurring. Now we can bring back that data, it can be unstructured, it can be structured, yet we can piece it together and provide some structure that is then returned to SAP Ariba.

The great thing about the supply management risk platform or toolkit that’s being launched at SAP Ariba LIVE is that there’s another level of context on top of that. Ariba understands the relationship between the supplier and the buyer, and that’s an important context to apply as well.

How you determine risk scores on top of all of that is very critical. You need to weed out all of the noise, otherwise it would be a huge data science exercise and everyone would be spinning his or her wheels.

This is now a huge opportunity for clients like James to truly get some low-hanging fruit value, where previously it would have been literally a witch-hunt or a huge mining expedition. We are now able to achieve this higher level of value.

Gardner: James, Dan just described what others are calling investigative cognitive computing brought to bear on this supply chain risk problem. As someone who is in the business of trying to get the best tools for their organization, where do you come down on this? How important is this to you?

Johnson: It’s very important. I have done the kinds of investigations that he is talking about. For example, if I am looking at a vendor in a high-risk country, particularly a small vendor that doesn’t have an international presence  that is problematic for most supplier investigations. What do I do? I will go and do some of the investigation that Dan is talking about.

Now I’m usually sitting at my desk in Chicago. I’m not going out in the world. So there is a heightened level of due-diligence that I suspect neither of us are really talking about here. With that limitation, you want to look up not only the people, you want to look up all their connections. You might have had a due-diligence form completed, but that’s an interested party giving you information, what do you do with it?

Well, I can run the risk search on more than just the entity that I’m transacting with.  I am going to run it on everyone that Dan mentioned. Then I am going to look up all their LinkedIn profiles, see who they are connected to. Do any of those people show any red flags? I’d look at the bank that they use. Are there any red flags with their bank?

I can do all that work, and I can spend several hours doing all that work. As a lawyer I might dig a little deeper than someone else, but in the end, it’s human labor going into the effort.

Gardner: And that really doesn’t scale very well.

Johnson: That does not scale at all. I am not going to hire a team of lawyers for every supplier. The reality here is that now I can do some level of that time-consuming work with every supplier by using the kind of technology that Dan is talking about.

The promise of OutsideIQ technology is incredible. It is an early and quickly expanding, opportunity. It’s because of relationships like the one between SAP Ariba and OutsideIQ that I see a huge opportunity between Nielsen and SAP Ariba. We are both on the same roadmap.

Nielsen has a lot of work to do, SAP Ariba has a lot of work to do, and that work will never end, and that’s okay. We just need to be comfortable with it, and work together to build a better world.

Gardner: Tell us about Nielsen. Then secondarily, what part of your procurement, your supply chain, do you think this will impact best first?

Automatic, systematic risk management

Johnson: Nielsen is a market research company. We answer two questions: what do people watch? And what do people buy? It sounds very simple, but when you cover 90% of the world’s population, which we do – more than six billion people — you can imagine that it gets a little bit more complicated.

We house about 54 petabytes of database data. So the scale there is huge. We have 43,000 employees. It’s not a small company. You might know Nielsen for the set-top boxes in the US that tell what the ratings were overnight for the Super Bowl, for example, but it’s a lot more than that. And you can imagine, especially when you’re trying to answer what do people buy in  developing countries with emerging economies? You are touching some riskier things.

In terms of what this SAP Ariba collaboration can solve for us, the first quick hit is that we will no longer have to leverage multiple separate sources of information. I can now leverage all the sources of information at one time through one interface. It is already being used to deliver information to people who are involved in the procurement chain. That’s the huge quick win.

The secondary win is from the efficiency that we get in doing that first layer of risk management. Now we can start to address that middle tier that I mentioned. We can respond to certain kinds of risk that, today, we are doing ad-hoc, but not systematically. There is that systematic change that will allow us to not only target the 100 to 200 vendors that we might prioritize — but the thousands of vendors that are somewhere in our system, too.

That’s going to revolutionize things, especially once you fold in the environmental, social and governance (ESG) work that, today, is very focused for us. If I can spread that out to the whole supply chain, that’s revolutionary. There are a lot of low-cost things that you can do if you just have the information.

So it’s not always a question of, “am I going to do good in the world and how much is it going to cost me?” It’s really a question of, “What is the good in the world that’s freely available to me, that I’m not even touching?” That’s amazing! And, that’s the kind of thing that you can go to work for, and be happy about your work, and not just do what you need to do to get a paycheck.

Gardner: It’s not just avoiding the bad things; it’s the false positives that you want to remove so that you can get the full benefit of a diverse, rich supplier network to choose from.

Johnson: Right, and today we are essentially wasting a lot of time on suspected positives that turn out to be false. We waste time on them because we go deeper with a human than we need to. Let’s let the machines go as deep as they can, and then let the humans come in to take over where we make a difference.

Gardner: Padmini, it’s interesting to me that he is now talking about making this methodological approach standardized, part of due-diligence that’s not ad-hoc, it’s not exception management. As companies make this a standard part of their supply chain evaluations, how can we make this even richer and easier to use?

Ranganathan: The first step was the data. It’s the plumbing; we have to get that right. It’s about the way you look at your master data, which is suppliers; the way you look at what you are buying, which is categories of spend; and where you are buying from, which is all the regions. So you already have the metrics segmentation of that master data, and everything else that you can do with SAP Ariba.

The next step is then the process, because it’s really not a one-size-fits-all. It cannot be a one-size-fits-all, where every supplier that you on-board you are going to ask them the same set of questions, check the box and move on.

I am going to use the print service vendor example again, which is my favorite. For marketing materials printing, you have a certain level of risk, and that’s all you need to look at. But you still want, of course, to look at them for any adverse media incidents, or whether they suddenly got on a watch-list for something, you do want to know that.

But when one of your business units begins to use them for customer-confidential data and statement printing — the level of risk shoots up. So the intensity of risk assessments and the risk audits and things that you would do with that vendor for that level of risk then has to be engineered and geared to that type of risk.

So it cannot be a one-size-fits-all; it has to go past the standard. So the standardization is not in the process; the standardization is in the way you look at risk so that you can determine how much of the process do I need to apply and I can stay in tune.

Gardner: Dan, clearly SAP Ariba and Nielsen, they want the “dials,” they want to be able to tune this in. What’s coming next, what should we expect in terms of what you can bring to the table, and other partners like yourselves, in bringing the rich, customizable inference and understanding benefits that these other organizations want?

Constructing cognitive computing by layer

Adamson: We are definitely in early days on the one hand. But on the other hand, we have seen historically many AI failures, where we fail to commercialize AI technologies. This time it’s a little different, because of the big data movement, because of the well-known use cases in machine learning that have been very successful, the pattern matching and recommending and classifying. We are using that as a backbone to build layers of cognitive computing on top of that.

And I think as Padmini said, we are providing a first layer, where it’s getting stronger and stronger. We can weed out up to 95% of the false-positives to start from, and really let the humans look at the thorny or potentially thorny issues that are left over. That’s a huge return on investment (ROI) and a timesaver by itself.

But on top of that, you can add in another layer of cognitive computing, and that might be at the workflow layer that recognizes that data and says, “Jeez, just a second here, there’s a confidentiality potential issue here, let’s treat this vendor differently and let’s go as far as plugging in a special clause into the contract.” This is, I think, where SAP Ariba is going with that. It’s building a layer of cognitive computing on top of another layer of cognitive computing.

Actually, human processes work like that, too. There is a lot of fundamental pattern recognition at the basis of our cognitive thought, and on top of that we layer on top logic. So it’s a fun time to be in this field, executing one layer at a time, and it’s an exciting approach.

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How SAP Ariba became a first-mover as Blockchain comes to B2B procurement

The next BriefingsDirect digital business thought leadership panel discussion examines the major opportunity from bringing Blockchain technology to business-to-business (B2B) procurement and supply chain management.

We will now explore how Blockchain’s unique capabilities can provide comprehensive visibility across global supply chains and drive simpler verification of authenticity, security, and ultimately control.

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

To learn more about how Blockchain is poised to impact and improve supply chain risk and management, we’re joined by Joe Fox, Senior Vice President for Business Development and Strategy at SAP Ariba, and Leanne Kemp, Founder and CEO of Everledger, based in London.

The panel was assembled and recorded at the recent 2017 SAP Ariba LIVE conference in Las Vegas. The discussion is moderated by Dana Gardner, principal analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: Joe, Blockchain has emerged as a network methodology, running crypto currency Bitcoin, as most people are aware of it. It’s a digitally shared record of transactions maintained by a network of computers, not necessarily with centralized authority. What could this be used for powerfully when it comes to gaining supply chain integrity?

Fox: Blockchain did start in the Bitcoin area, as peer-to-peer consumer functionality. But a lot of the capabilities of Blockchain have been recognized as important for new areas of innovation in the enterprise software space.

Joe Fox

Fox

Those areas of innovation are around “trusted commerce.” Trusted commerce allows buyers and sellers, and third parties, to gain more visibility into asset-tracking. Not just asset tracking in the context of the buyer receiving and the seller shipping — but in the context of where is the good in transit? What do I need to do to protect that good? What is the transfer of funds associated with that important asset? There are even areas of other applications, such as an insurance aspect or some kind of ownership-proof.

Gardner: It sounds to me like we are adding lot of metadata to a business process. What’s different when you apply that through Blockchain than if you were doing it through a platform?

Inherit the trust

Fox: That’s a great question. Blockchain is like the cloud from the perspective of it’s an innovation at the platform layer. But the chain is only as valuable as the external trust that it inherits. That external trust that it inherits is the proof of what you have put on the chain digitally. And that includes that proof of who has taken it off and in what way they have control.

As we associate a chain transaction, or a posting to the ledger with its original transactions within the SAP Ariba Network, we are actually adding a lot of prominence to that single Blockchain record. That’s the real key, marrying the transactional world and the B2B world with this new trusted commerce capability that comes with Blockchain.

Gardner: Leanne, we have you here as a prime example of where Blockchain is being used outside of its original adoption. Tell us first about Everledger, and then what it was you saw in Blockchain that made you think it was applicable to a much wider businesscapability.

Kemp: Everledger is a fast-moving startup using the best of emerging technology to assist in the reduction of risk and fraud. We began in April of 2015, so it’s actually our birthday this week. We started in the world of diamonds where we apply blockchain technology to bring transparency to a once opaque market.

Leanne Kemp

Kemp

And what did I see in the technology? At the very core of cryptocurrency, they were solving the problem of double-spend. They were solving the problem of transfer of value, and we could translate those very two powerful concepts into the diamond industry.

At the heart of the diamond industry, beyond the physical object itself, is certification, and certificates in the diamond industry are the currency of trade. Diamonds are cited on web sites around the world, and they are mostly sold off the merit of the certification. We were able to see the potential of the cryptocurrency, but we could decouple the currency from the ledger and we were able to then use the synthesis of the currency as a way to transfer value, or transfer ownership or custody. And, of course, diamonds are a girl’s best friend, so we might as well start there.

Dealing with diamonds

Gardner: What was the problem in the diamond industry that you were solving? What was not possible that now is?

Kemp: The diamond industry boasts some pretty impressive numbers. First, it’s been around for 130 years. Most of the relationships among buyers and sellers have survived generation upon generation based on a gentleman’s handshake and trust.

The industry itself has been bound tightly with those relationships. As time has passed and generations have passed, what we are starting to see is a glacial melt. Some of the major players have sold off entities into other regions, and now that gentleman’s handshake needs to be transposed into an electronic form.

Some of the major players in the market, of course, still reside today. But most of the data under their control sits in a siloed environment. Even the machines that are on the pipeline that help provide identity to the physical object are also black-boxed in terms of data.

We are able to bring a business network to an existing market. It’s global. Some 81 countries around the world trade in rough diamonds. And, of course, the value of the diamonds increases as they pass through their evolutionary chain. We are able to bring an aggregated set of data. Not only that, we transpose the human element of trust — the gentleman’s handshake, the chit of paper and the promise to pay that’s largely existed and has built has built 130 years of trade.

We are now able to transpose that into a set of electronic-form technologies — Blockchain, smart contracts, cryptography, machine vision — and we are able to take forward a technology platform that will see transactional trust being embedded well beyond my lifetime — for generations to come.

Gardner: Joe, we have just heard how this is a problem-solution value in the diamond industry. But SAP Ariba has its eyes on many industries. What is it about the way things are done now in general business that isn’t good enough but that Blockchain can help improve?

Fox: As we have spent years at Ariba solving procurement problems, we identified some of the toughest. When I saw Everledger, it occurred to me that they may have cracked the nut on one of the toughest areas of B2B trade — and that is true understanding, visibility, and control of asset movement.

It dawned on me, too, that if you can track and trace diamonds, you can track and trace anything. I really felt like we could team up with this young company and leverage the unique way they figured out how to track and trace diamonds and apply that across a huge procurement problem. And that is, how do a supplier and a buyer manage the movement of any asset after they have purchased it? How do we actually associate that movement of the asset back to its original transactions that approved the commit-to-pay? How do you associate a digital purchase order (PO) with a digital movement of the asset, and then to the actual physical asset? That’s what we really are teaming up to do.

That receipt of the asset has been a dark space in the B2B world for a long time. Sure, you can get a shipping notice, but most businesses don’t do goods receipts. And as the asset flows through the supply chain — especially the more expensive the item is — that lack of visibility and control causes significant problems. Maybe the most important one is: overpaying for inventory to cover actual lost supply chain items in transit.

I talked to a really large UK-based telecom company and they told me that what we are going to do with Everledger, with just their fiber optics, they could cut their buying in half. Why? Because they overbuy their fiber optics to make sure they are never short on fiber optic inventory.

That precision of buying and delivery applies across the board to all merchants and all supply chains, even middle of the supply chain manufacturers. Whenever you have disruption to your inbound supply, that’s going to disrupt your profitability.

Gardner: It sounds as if what we are really doing here is getting a highly capable means — that’s highly extensible — to remove the margin of error from the tracking of goods, from cradle to grave.

Chain transactions

Fox: That’s exactly right. And the Internet is the enabler, because Blockchain is everywhere. Now, as the asset moves, you have the really cool stuff that Everledger has done, and other things we are going to do together – and that’s going to allow anybody from anywhere to post to the chain the asset receipt and asset movement.

For example, with a large container coming from overseas, you will have the chain record of every place that container has been. If it doesn’t show up at a dock, you now have visibility as the buyer that there is a supply chain disruption. That chain being out on the Internet, at a layer that’s accessible by everyone, is one of the keys to this technology.

We are going to be focusing on connecting the fabric of the chain together with Hyperledger. Everledger builds on the Hyperledger platform. The fabric that we are going to tie into is going to directly connect those block posts back to the original transactions, like the purchase order, the invoice, the ship notice. Then the companies can see not only where their asset is, but also view it in context of the transactions that resulted in the shipment.

Gardner: So the old adage — trust but verify — we can now put that to work and truly verify. There’s newstaking place here at SAP Ariba LIVE between Everledger and SAP Ariba. Tell us about that, and how the two companies — one quite small, one very large — are going to work together.

Fox: Ariba is all-in on transforming the procurement industry, the procurement space, the processes of procurement for our customers, buyers and sellers, and we are going to partner heavily with key players like Everledger.

Part of the announcement is this partnership with Everledger around track and trace, but it is not limited to track and trace. We will leverage what they have learned across our platform of $1 trillion a year in spend, with 2.5 million companies trading assets with each other. We are going to apply this partnership to many other capabilities within that.

Kemp: I am very excited. It’s a moment in time that I think I will remember for years to come. In March we also made an importantannouncement with IBM on some of the work that we have done beyond identifying objects. And that is to take the next step around ensuring that we have an ethical trade platform, meaning one that is grounded in cognitive compliance.

We will be able to identify the asset, but also know, for example in the diamond industry, that a diamond has passed through the right channels, paid the dutiful taxes that are due as a part of an international trade platform, and ensure all compliance is hardened within the chain.

I am hugely excited about the opportunity that sits before me. I am sincerely grateful that such a young company has been afforded the opportunity to really show how we are going to shine.

If you think about it, Blockchain is an evolution of the Internet.

Gardner: When it comes to open trade, removing friction from commerce, these have been goals for hundreds of years. But we really seem to be onto something that can make this highly scalable, very rich — almost an unlimited amount of data applied to any asset, connected to a ledger that’s a fluid, movable, yet tangible resource.

Fox: That’s right.

Gardner: So where do we go next, Joe? If the sky is the limit, describe the sky for me? How big is this, and where can you take it beyond individual industries? It sounds like there is more potential here.

Reduced friction costs

Fox: There is a lot of potential. If you think about it, Blockchain is an evolution of the Internet; we are going to be able to take advantage of that.

The new evolution is that it’s a structured capability across the Internet itself. It’s going to be open, and it’s going to be able to allow companies to ledger their interactions with each other. They are going to be able, in an immutable way, to track who owns which asset, where the assets are, and be able to then use that as an audit capability.

That’s all very important to businesses, and until now the Internet itself has not really had a structure for business. It’s been open, the Wild West. This structure for business is going to help with what I call trusted commerce because in the end businesses establish relationships because they want to do business with each other, not based on what technology they have.

Another key fact about Blockchain is that it’s going to reduce friction in global B2B. I always like to say if you just accelerated B2B payments by a few days globally, you would open up Gross Domestic Product (GDP), and economies would start growing dramatically. This friction around assets has a direct tie to how slowly money moves around the globe, and the overall cost and friction from that.

So how big could it go? Well, I think that we are going to innovate together with Everledger and other partners using the Hyperledger framework. We are going to add every buyer and seller on the Ariba Network onto the chain. They are just going to get it as part of our platform.

Then we are going to begin ledgering all the transactions that they think make sense between themselves. We are going to release a couple of key functions, such as smart contracts, so their contract business rules can be applicable in the flow of commerce — at the time commerce is happening, not locked up in some contract, or in some drawer or Portable Document Format (PDF) file. We are going to start with those things.

I don’t know what applications we are going to build beyond that, but that’s the excitement of it. I think the fact that we don’t know is the big play.

Gardner: From a business person’s perspective, they don’t probably care too much that it’s Blockchain that’s enabling this, just like a lot of people didn’t care 20 years ago that it was the Internet that was allowing them to shop online or send emails to anybody anywhere. What is it that we would tease out of this, rather than what the technology is, what’s the business benefit that people should be thinking about?

Fox: Everybody wants digital trust, right? Leanne, why don’t you share some of the things you guys have been exploring?

Making the opaque transparent

Kemp: In the diamond industry, there is fraud related to document tampering. Typically paper certificates exist across the backbone, so it’s very easy to be able to transpose those into a PDF and make appropriate changes for self-gain.

Double-financing of the pipeline is a very real problem; invoicing, of course accounts receivable, they have the ability to have banks finance those invoices two, three, four times.

We have issues with round-tripping of diamonds through countries, where transfer pricing isn’t declared correctly, along with the avoidance of tax and duties.

All of these issues are the dark side of the market. But, now we have the ability to bring transparency around any object, particularly in diamonds — the one commodity that’s yet to have true financial products wrapped around it. Now, what do I mean by that? It doesn’t have a futures market yet. It doesn’t have exchange traded funds (ETFs), but the performance of diamonds has outperformed gold, platinum and palladium.

Now, what does this mean? It means we can bring transparency to the once opaque, have the ability to know if an object has gone through an ethical chain, and then realize the true value of that asset. This process allows us to start and think about how new financial products can be formed around these assets.

We are hugely interested in rising asset classes beyond just the commodity section of the market. This platform shift is like going from the World Wide Web to the World Wide Ledger. Joe was absolutely correct when he mentioned that the Internet hasn’t been woven for transactional trust — but we have the ability to do this now.

So from a business perspective, you can begin to really innovate on top of this exponential set of technology stacks. A lot of companies quote Everledger as a Blockchain company. I have to correct them and I say that we are an emerging technology company. We use the very best of Blockchain and smart contracts, machine vision, sensorial data points, for us to be able to form the identity of objects.

Now, why is that important? Most financial services companies have really been focused on Know Your Customer (KYC), but we believe that it’s Know Your Object (KYO) that really creates an entirely new context around it.

Now, that transformation and the relationship of the object have already started to move. When you think about Internet of Things (IoT), mobile phones, and autonomous cars — these are largely devices to the fabric of the web. But are they connected to the fabric of the transactions and the identity around those objects?

Insurance companies have begun to understand this. My work in the last 10 years has been deeply involved in insurance. As you begin to build and understand the chain of trust and the chain of risk, then tectonic plate shifts in financial services begin to unfold.

Apps and assets, on and off the chain

Fox: It’s not just about the chain, it’s about the apps we build on top, and it’s really about what is the value to the buyer and the seller as we build those apps on top.

To Leanne’s point, it’s first going to be about the object. The funny thing is we have struggled to be able to, in a digital way, provide visibility and control of an object and this is going to fix that. In the end, B2B, which is where SAP Ariba is, is about somebody getting something and paying for it. And that physical asset that they are getting is being paid for with another asset. They are just two different forms. By digitizing both and keeping that in a ledger that really cannot be altered — it will be the truth, but it’s open to everyone, buyers and sellers.

Businesses will have to invent ways to control how frictionless this is going to be. I will give you a perfect example. In the past if I told you I could do an international payment of $1 million to somebody in two minutes, you would have told me I was crazy. With Blockchain, one corporation can pay another corporation $1 million in two minutes, internationally.

And on the chain companies like Everledger can build capabilities that do the currency translation on the fly, as it’s passing through, and that doesn’t dis-remediate the banks because how did the $1 million get onto the chain in the first place? Someone put it on the chain through a bank. The bank is backing that digital version. How does it get off the chain so you can actually do something with it? It goes through another bank. It’s actually going to make the banks more important. Again, Blockchain is only as good as the external trust that it inherits.

I really think we have to focus on getting the chain out there and really building these applications on top.

Listen to the podcast. Find it on iTunes. Get the mobile appRead a full transcript or download a copy. Sponsor: SAP Ariba.

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Inside story of building a global security operations center for cyber defense

The next BriefingsDirect inside story examination of security best practices focuses on the building of a global security operations center (SOC) for cyber defense.

Learn here how Zayo Group in Boulder, Colorado built a state-of-the-art SOC as it expanded its international managed security service provider practice.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript.

Hear directly from Mike Vamvakaris, Vice President of Managed Cyber Security at Zayo Group, on the build-out, best practices, and end-results from this impressive project. The moderator is Serge Bertini, Vice President of Sales and General Manager of the Canada Security Division at Hewlett Packard Enterprise (HPE).

Serge Bertini: Mike, you and I have talked many times about the importance of managed security service providers (MSSPs), global SOCs, but for our readers, I want to take them back on the journey that you and I went through to get into the SOC business, and what it took from you to build this up.

So if you could, please describe Zayo’s business and what made you decide to jump into the MSSP field.

Mike Vamvakaris: Thanks for the opportunity. Zayo Group is a global communications and infrastructure provider. We serve more than 365 markets. We have 61 international data centers on-net, off-net, and more than 3,000 employees.

Mike Vamvakaris copy

Vamvakaris

Zayo Canada required a SOC to serve a large government client that required really strict compliance, encryption, and correlational analysis.

Upon further expansion, the SOC we built in Canada became a global SOC, and now it can serve international customers as well. Inside the SOC, you will find things such as US Federal Information Processing Standard (FIPS) 140-2 security standards compliance. We do threat hunting, threat intelligence. We are also doing machine learning, all in a protected facility via five-zone SOC.

This facility was not easy to build; it was a journey, as we have talked about many times in person, Serge.

Holistic Security

Bertini: What you guys have built is a state-of-the-art facility. I am seeing how it helps you attract more customers, because not only do you have critical infrastructure in your MSSP, but also you can attract customers whose stringent security and privacy concerns can be met.

Vamvakaris: Zayo is in a unique position now. We have grown the brand aggressively through organic and inorganic activities, and we are able to offer holistic and end-to-end security services to our customers, both via connectivity and non-connectivity.

For example, within our facility, we will have multiple firewalling and distributed denial-of-service (DDoS) technologies — now all being protected and correlated by our state-of-the-art SOC, as you described. So this is a really exciting and new opportunity that began more than two years ago with what you at HPE have done for us. Now we have the opportunity to turn and pivot what we built here and take that out globally.

Bertini: What made you decide on HPE ArcSight, and what did you see in ArcSight that was able to meet your long-term vision and requirements?

Turnkey Solutions

Vamvakaris: That’s a good question. It wasn’t an easy decision. We have talked about this openly and candidly. We did a lot of benchmarking exercises, and obviously selected HPE ArcSight in the end. We looked at everyone, without going into detail. Your listeners will know who they are.

But we needed something that supported multi-tenancy, so the single pane of window view. We are serving multiple customers all over the world, and ArcSight allowed us to scale without applying tremendous amount of capital expenditure (CAPEX) investment and ongoing operational expenditure (OPEX) to support infrastructure and the resources inside the SOC. It was key for me on the business side that the business-case was well supported.

We had a very strict industry regulation in working with a large government customer, to be FIPS-compliant. So out of the box, a lot of the vendors that we were looking at didn’t even meet those requirements.

Another thing I really liked about ArcSight, when we did our benchmarking, is the event log filtration. There really wasn’t anyone else that could actually do the filtration at the throughput and the capacity we needed. So that really lent itself very well. Just making sure that you are getting the salient events and kind of filtering out the noncritical alerts that we still need to be looking at was key for us.

Something that you and I have talked about is the strategic information and operations center (SIOC) service. As a company that knew we needed to build around SOC, to protect our own backbone, and offer those services to our extended connectivity customers, we enlisted SIOC services very early to help us with everything from instant response management, building up the Wiki, even hiring and helping us retain critical skill sets in the SOC.

From an end-to-end perspective, this is why we went with ArcSight and HPE. They offered us a turnkey solution, to really get us something that was running.

The Trifecta: People, Process, Technology

Bertini: In this market, what a lot of our customers see is that their biggest challenge is people. There are a lot of people when it comes to setting up MSSPs. The investment that you made is the big differentiator, because it’s not just the technology, it’s the people and process. When I look at the market and the need in this market, there is a lack of talented people.

Serge Bertini (1)

Bertini

How did you build your process and the people? What did you have to do yourself to build the strength of your bench? Later on we can talk a little bit more about Zayo and how HPE can help put all of this together.

Vamvakaris: We were the single tenant, if you will. Ultimately we needed to go international very quickly. So we went from humble beginnings to an international capability. It’s a great story.

For us, you nailed it on the head. SOC, the technology obviously is pertinent, you have to understand your use cases, your policies that you are trying to use and protect your customers with those. We needed something very modular and ArcSight worked for that.

But within the SOC, our customers require things like customized reporting and even customized instant-response plans that are tailored to meet their unique audits or industry regulations. It’s people, process and tools or technology, as they say. I mean, that is the lifeline of your SOC.

One of the things we realized early on, you have to focus on everything from your triage, to instant response, to your kill-chain processes. This is something we have invested significantly in, and this is where we believe we actually add a lot of value to our customers.

Bertini: So it’s not just a logging capability, you guys went way beyond providing just the eyes on the glass to the red team and the tiger team and everything else in between.

Vamvakaris: Let me give you an example. Within the SOC, we have SOC Level 1, all the way to Level 3, and then we have threat hunting. So inside we do threat intelligence. We are now using machine-learning technologies. We have threat hunting, predictive analytics, and we are moving into user behavior analysis.

Remember the way I talked about SOC Level 1, Level 2, Level 3, this is a 24×7, 365-day facility. This is a five-zone SOC for enhanced access control, mantraps inside to factor biometric access control. It’s a facility that we are very proud of and that we love showcasing.

Bertini: You are a very modest person, but in the span of two years you have done a lot. You started with probably one of the largest mammoth customers, but one thing that you didn’t really talk about is, you are also drinking your own champagne.

Tell us a little bit more about, Zayo. It’s a large corporation, diverse and global. Tell us about the integration of Zayo into your own SOC, too.

Drinking your own Champagne

Vamvakaris: Customers always ask us about this. We have all kinds of fiber or Ethernet, large super highway customers I call them, massive data connectivity, and Zayo is well-known in the industry for that; obviously one of the leaders.

The interesting part is that we are able to turn and pivot, not only to our customers, but we are also now securing our own assets — not just the enterprise, but on the backbone.

So you are right, we sip our own champagne. We protect our customers from threats and unauthorized data exfiltration, and we also do that for ourselves. So we are talking about a global multinational backbone environment.

Bertini: That’s pretty neat. What sort of threats are you starting to see in the market and how are you preventing those attacks, or at least how can you be aware in advance of what is coming down the pipe?

Vamvakaris: It’s a perpetual problem. We are invested in what’s called an ethical hacking team, which is the whole white hat/black hat piece.

In practice, we’re trying to — I won’t say break into networks, but certainly testing the policies, the cyber frameworks that companies think they have, and we go out of our way to make sure that that is actually the case, and we will go back and do an analysis for them.

If you don’t know who is knocking at the door, how are you going to protect yourself, right?

So where do I see the market going? Well, we see a lot of ransomware; we see a lot of targeted spear phishing. Things are just getting worse, and I always talk about how this is no longer an IT issue, but it’s a business problem.

People now are using very crafty organizational and behavior-style tactics of acquiring identities and mapping them back to individuals in a company. They can have targeted data exfiltration by fooling or tricking users into giving up passwords or access and sign all types of waivers. You hear about this everyday somewhere that someone accidentally clicked on something, and the next thing you know they have wired money across the world to someone.

So we actually see things like that. Obviously we’re very private in terms of where we see them and how we see them, but we protect against those types of scenarios.

Gone are the days where companies are just worried about their customer provided equipment or even cloud firewalls. The analogy I say, Serge, is if you don’t know who is knocking at the door, how are you going to protect yourself, right?

You need to be able to understand who is out there, what they are trying to do, to be able to mitigate that. That’s why I talk about threat hunting and threat intelligence.

Partners in Avoiding Crime

Bertini: I couldn’t agree more with you. To me, what I see is the partnership that we built between Zayo and HPE and that’s a testament of how the business needs to evolve. What we have done is pretty unique in this market, and we truly act as a partner, it’s not a vendor-relationship type of situation.

Can you describe how our SIOC was able to help you get to the next level, because it’s about time-to-market, at the end of the day. Talk about best practices that you have learned, and what you have implemented.

Vamvakaris: We grew out to be an international SOC, and that practice began with one large request for proposal (RFP) customer. So we had a time-to-market issue compressed. We needed to be up and running, and that’s fully turnkey, everything.

When we began this journey, we knew we couldn’t do it ourselves. We selected the technology, we benchmarked that, and we went for the Gartner Magic Quadrant. We were always impressed at HPE ArcSight, over the years, if not a decade, that it’s been in that magic quadrant. That was very impressive for us.

But what really stood out is the HPE SIOC.

We enlisted the SIOC services, essentially the consulting arm of HPE, to help us build out our world-class multizone SOC. That really did help us get to market. In this case, we would have been paying penalties if we weren’t up and running. That did not happen.

The SIOC came in and assessed everything that we talked about earlier, they stress-tested our triage model and instant response plan. They helped us on the kill chain; they helped us with the Wiki. What was really nice and refreshing was that they helped us find talent where our SOC is located. That for me was critical. Frankly, that was a differentiator. No one else was offering those types of services.

Bertini: How is all of this benefitting you at the end of the day? And where do you see the growth in your business coming for the next few years?

Ahead in the Cloud

Vamvakaris: We could not have done this on our own. We are fortunate enough that we have learned so much now in-house.

But we are living in an interconnected world. Like it or not, we are about to automate that world with the Internet of things (IoT), and always-on mobile technologies, and everyone talks about pushing things to the cloud.

The opportunity for us is exciting. I believe in a complete, free, open digital world, which means we are going to need — for a long time — to protect the companies as they move their assets to the cloud, and as they continue to do mobile workforce strategies — and we are excited about that. We get to be a partner in this ecosystem of a new digital era. I think we are just getting started.

The timing then is perfect, it’s exciting, and I think that we are going to see a lot of explosive growth. We have already started to see that, and now I think it’s just going to get even more-and-more exciting as we go on.

It’s not just about having the human capabilities, but it’s also augmenting them with the right technologies and tools so they can respond faster, they can get to the issues.

Bertini: You have talked about automation, artificial intelligence (AI), and machine learning. How are those helping you to optimize your operations and then ultimately benefitting you financially?

Vamvakaris: As anyone out there who has built a SOC knows, you’re only as good as your people, processes, and tools. So we have our tools, we have our processes — but the people, that cyber security talent is not cheap. The SOC analysts have a tough job. So the more we can automate, and the more we can give them help, the better. A big push now is for AI, which really is machine learning, and automating and creating a baseline of things from which you can create a pattern, if you will, of repeatable incidents, and then understanding that all ahead of time.

We are working with that technology. Obviously HPE ArcSight is the engine to the SOC, for correlational analysis, experience-sampling methods specifically, but outside there are peripherals that tie into that.

It’s not just about having the human capabilities, but it’s also augmenting them with the right technologies and tools so they can respond faster, they can get to the issues; they can do a kill chain process quickly. From an OPEX perspective, we can free up the Level 1 and Level 2 talent and move them into the forensic space. That’s really the vision of Zayo.

We are working with technologies including HPE ArcSight to plug into that engine that actually helps us free up the incident-response and move that into forensics. The proactive threat hunting and threat intelligence — that’s where I see the future for us, and that’s where we’re going.

Bertini: Amazing. Mike, with what you have learned over the last few years, if you had to do this all over again, what would you do differently?

Practice makes perfect

Vamvakaris: I would beg for more time, but I can’t do that. It was tough, it was tough. There were days when we didn’t think we were going to make it. We are very proud and we love showcasing what we built — it’s an amazing, world-class facility.

But what would I do differently? We probably spent too much time second-guessing ourselves, trying to get everything perfect. Yet it’s never going to be perfect. A SOC is a living, breathing thing — it’s all about the people inside and the processes they use. The technologies work, and getting the right technology, and understanding your use cases and what you are trying to achieve, is key. Not trying to make it perfect and just getting it out there and then being more flexible in making corrections, [that would have been better].

In our case, because it was a large government customer, the regulations that we had to meet, we built that capability the first time, we built this from the ground up properly — as painful as that was, we can now learn from that.

In hindsight, did we have to have everything perfect? Probably not. Looking back at the compressed schedule, being audited every quarter, that capability has nonetheless put us in a better place for the future.

Bertini: Mike, kudos to you and your team. I have worked with your team for the last two to three years, and what you have done has showed us a miracle. What you built is a top-class MSSP, with some of the most stringent requirements from the government, and it shows.

Now, when you guys talk, when you present to a customer, and when we do joint-calls with the customers — we are an extension of each other. We at HPE are just feeding you the technology, but how you have implemented it and built it together with your people, process, and technology — it’s fantastic.

So with that, I really thank you. I’m looking forward to the next few years together, to being successful, and bringing all our customers under your roof.

Vamvakaris: This is the partnership that we talked about. I think that’s probably the most important thing. If you do endeavor to do this, you really do need to bring a partner to the table. HPE helped us scale globally, with cost savings and an accelerated launch. That actually can happen with a world-class partnership. So I also look forward to working with you, and serving both of our customer bases, and bringing this great capability out into the market.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: Hewlett Packard Enterprise.

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Posted in big data, Cloud computing, Cyber security, data analysis, data center, Enterprise architect, Hewlett Packard Enterprise, managed services, risk assessment, Security | Tagged , , , , , , , , , | Leave a comment

Diversity spend: When doing good leads to doing well

The next BriefingsDirect digital business thought leadership panel discussion focuses on the latest path to gaining improved diversity across inclusive supply chains.

The panel examines why companies are seeking to improve supplier diversity, the business and societal benefits, and the new tools and technologies that are making attaining inclusive suppliers easier than ever.

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 increasingly data-driven path to identifying and achieving the workforce that meets all requirements, please welcome Rod Robinson, Founder and CEO of ConnXus; Jon Stevens, Global Senior Vice President of B2B Commerce and Payments at SAP Ariba, and Quentin McCorvey, Sr., President of M and R Distribution Services.

The panel was assembled and recorded at the recent 2017 SAP Ariba LIVE conference in Las Vegas. The discussion was moderated by Dana Gardner, principal analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: Jon, why is it important to seek diversity in procurement and across supply chains? What are the reasons for doing this?

Stevens: It’s a very good question. It’s for few reasons. Number one, there is a global war for talent, and when you can get a diverse point of view, when you can include multiple different perspectives, that usually helps drive several other benefits, one of which could even be innovation.

We often see companies investing deeply inside their supply chain, working with a diverse set of suppliers, and they are gaining huge rewards from an innovation standpoint. When you look at the leading companies that leverage their suppliers to help drive new product innovation, it usually comes from these areas.

We also see companies more focused on longer-term relationships with their suppliers. Having a diverse perspective — and having a set of diverse suppliers — helps with those longer-term relationships, as both companies continue to grow in the process.

Gardner: Rod, what are you seeing in the marketplace as the major trends and drivers that have more businesses seeking more inclusivity and diversity in their suppliers?

Diversity benefits business

Robinson: As a former chief procurement officer (CPO), the one thing that I can definitely say that I have witnessed is that more diverse and inclusive supply chains are more innovative and deliver high value.

rod-robinson-400x266-300x200 (1)

Robinson

I recently wrote a blog where I highlighted some statistics that I think every procurement professional should know: One is that 99.9% of all US firms are in a small business category. Women- and minority-owned businesses represent more than 50% of the total, which is responsible for employing around 140 million people.

This represents a significant portion of the workforce. As we all know, small businesses really are the economic engine of the economy – small businesses are responsible for 65% of net new jobs.

At the end of the day, women and minorities represent more than 50% of all businesses, but they only represent about 6% of the total revenue generated.

The only thing that I would add is that diversity is vitally important as an economic driver for our economy.

Gardner: Rod points out a rich new wellspring of skills, talent and energy coming up organically from the small to medium-sized businesses. On the other hand, major national and international brands are demanding more inclusivity and diversity from their suppliers. If you are in the middle of that supply chain, is this something that should interest you?

Targeting talent worldwide

Stevens: You are spot-on. We definitely see our leading customers looking across that landscape, whether they are a large- or medium-sized company. The war for talent is only going to increase. Companies will need to seek even more diverse sources of talent. They are really going to have to stretch themselves to look outside the walls of their country to find talent, whereas other companies may not be doing so. So you’re going to see rising diversity programs.

Jon Stevens

Stevens

We have several customers in emerging parts of the world; let’s take South Africa for example. I spend a lot of time in South Africa, and one of our customers there, Nedbank, invests a lot of time and a lot of money in the growth and development of the small businesses. In South Africa, the statistics that Rod talked about are even greater as far as the portion of small companies. So we are seeing that trend grow even faster outside of the US, and it’s definitely going to continue.

Gardner: Rod, you mentioned that there are statistics, studies and research out there that indicate that this isn’t just a requirement, it’s really good business. I think McKinsey came out with a study, too, that found the top quarter of those companies seeking and gaining gender, racial and ethnic diversity were more likely to have a better financial return. So this isn’t just the right thing to do, but it’s also apparently demonstrated as being good business, too. Do you have any other insights into why the business case for this is so strong?

Diversity delivers innovation

Robinson: Speaking from first-hand experience, having been responsible for procurement and supplier diversity within a large company, there were many drivers. We had federal contracts that required us to commit to a certain level of engagement (and spending) with diverse suppliers.  We had to report on those stats and report our progress on a monthly and/or quarterly basis. It was interesting that while we were required by these contractual mandates — not only from the government but also customers like Procter and Gamble, Macy’s, and others — we started to realize that this is really creating more competition within categories that we were taking to market. It was bringing value to the organizations.

We had situations where we were subcontracting to diverse suppliers that were providing us with access to markets that we didn’t even realize that we were missing. So again, to Jon’s point, it’s more than just checking a box. We began to realize that this is really a market-imperative. This is something that is creating value for the organization.

We began to realize that this is really a market-imperative. This is something that is creating value for the organization.

The whole concept of supplier diversity started with the US government back in the late ’60s and early ’70s. That was the catalyst, but companies realized that it was delivering significant value to the organization, and it’s helped to introduce new, innovative companies across the supply chain.

At ConnXus, our big break came when McDonald’s gave us an opportunity five years ago. They took a chance on us when we were a start-up company of four.  We are now a company of 25. Obviously, revenues have grown significantly and we’ve been able to attract partners like SAP Ariba. That’s the way it should work. You always want to look for opportunities to identify new, innovative suppliers to introduce into a supply chain; otherwise we get stagnant.

Small but mighty

Stevens: I’ll add to what Rod said. This is just the sort of feedback we hear from our customers, the fact that a lot of the companies that are in this inclusive space are small — and we think that’s a big advantage.

Speed, quickness and flexibility are something you often see from diverse suppliers, or certainly smaller businesses, so a company that can have that in its portfolio has better responsiveness to their customer needs, versus a supply chain with very large processes or large organizations where it takes a while to respond to market needs. The quick in today’s world will be far more successful, and having a diverse set of suppliers allows you to respond incredibly quickly. There is obviously a financial benefit in doing so.

Gardner: A big item of conversation here at SAP Ariba LIVE is how to reduce risk across your supply chain. Just like any economic activity, if you have a diversified portfolio, with different sizes of companies, different geographic locations, and different workforce components — that can be a real advantage.

Now that we’ve established that there is a strong business case and rationale for seeking diversity, why do procurement professionals have trouble finding that diversity? Let’s go to Quentin. What’s holding back procurement professionals from finding the companies that they want?

McCorvey: Probably the biggest challenge is that the whole trend of supply chain optimization, of driving cost out of the supply chain, seems to be at odds with being inclusive, responsive, and in bringing in your own diverse suppliers. A company may have had 20 to 30 suppliers of a product, and then they look to drive that down with to just one or two suppliers. They negotiate contract prices for three-year contracts. That tends to weed out some of the smaller, more diverse organizations for several reasons.

Quentin McCorvey Sr.

McCorvey

For example, Rod talked about McDonald’s taking a chance on him. Well, they took a chance on him being a four-person organization; if he had to [grow first] he never would have had the opportunity.

For a company that requires a product in the market for every location nationally — as opposed to regionally — at a certain price, that tends to challenge a lot of the inclusion or the diversity in the supply chain.

Gardner: Right. Some companies have rules in place that don’t provide the flexibility to attract a richer supplier environment. What is being done from your perspective at SAP Ariba, Jon, to go after such a calcification of rules that leads to somewhat limited thinking in terms of where they can find choices?

Power through partnerships

Stevens: That short-term thinking that Quentin talked about is absolutely one of the big barriers, and that generally comes down to metrics. What are they trying to measure? What are they trying to accomplish?

The more thought-leading companies are able to look past something in the first year or two, and focus on not just driving cost out, as Quentin talked about, but discovering what else their suppliers can help with, whether it’s something from a regulatory standpoint or something from a product and innovation perspective.

Certainly, one challenge is that short-term thinking, the other is access to information. We see far too many procurement organizations that just aren’t thinking on a broader scale, whether it’s a diverse scale or a global scale. What SAP Ariba is now bringing to the table with our solutions is being able to include information about where to find diverse suppliers, where to search and locate suppliers, and we do that through many partnerships.

We have a solution in South Africa called Tradeworld, which addresses this very topic for that market. We have a solution called SAP Ariba Spot Buy, which allows us to bring diverse suppliers automatically into a catalog for procurement organizations to leverage. And at SAP Ariba LIVE 2017 we announced that we are partnering with Rod and his firm, ConnXus, to expand the diversity marketplace by linking the ConnXus database and the SAP Ariba Network, which opens the door to more opportunities for all of our customers.

Robinson: If I could add to Jon’s point, one thing I also look forward to as a part of our partnership with SAP Ariba is thought leadership. There are opportunities for us to share best practices. We know companies who are doing it really well, we know the companies that maybe struggling with it, but within our joint customer portfolios, we will be able to share some of those best practices.

For example, there may be situations where a company is doing a big maintenance, repair and operations (MRO) bid and you have some large players involved, such as W.W. Grainger. There may be opportunities to introduce Grainger to smaller suppliers that maybe provide fewer stock keeping units (SKUs) that they can leverage strategically across their accounts. I have been involved in a number of initiatives like that. Those are the types of insights that we will be able to bring to the table, and that really excites me about this partnership.

Gardner: Those insights, that data, and the ability to leverage a business network to automate and facilitate that all at scale is key. From what we are hearing here at SAP Ariba LIVE, leveraging that business network is essential. Rod, tell us aboutConnXus? What’s being announced here?

Seek and ye shall find in the connected cloud

Robinson: ConnXus is a next-generation procurement platform that specializes in making corporate supply chains more inclusive, transparent, and compliant. As I mentioned, we serve several global companies, many of which we share relationships with SAP Ariba.  Our cloud-based platform makes it easy for companies to track, monitor, and report against their supplier diversity objectives.

One of the major features is our supplier database, which provides real-time searchable access to nearly two million vetted women-, minority- and veteran-owned businesses across hundreds of categories. We integrate with the SAP Ariba Network. That makes it simple for companies to identify vetted, diverse suppliers. They can also search on various criteria including certifications, category, and geography. We have local, national and global capabilities.  SAP Ariba already is in a number of markets that we are looking to penetrate.

Gardner: I was really impressed when I looked at the ConnXus database, how rich and detailed it is, and not just ownership of companies but also the composition of those companies, where those people are located. So you would actually know where your inclusive supply chain is going to be, where the rubber hits the road on that, so to speak.

Jon, tell us about the news here on March 21, 2017, a marriage between SAP Ariba and ConnXus.

Stevens: The SAP Ariba Network has a community of over 2.5 million companies, and it’s companies like M and R Distribution Services that we have been able to help grow and foster over time, using some of the solutions I talked about and Ariba Discovery.

Adding to the information that Rod just talked about, we are greatly expanding that. We have the world’s largest, most global business network and now we have the world’s most diverse business network, due to the partnership with ConnXus being able to provide that information through various processes.

The partnership with ConnXus will allow us to provide a lot more education, a lot more awareness.

Fortune 2000 companies are looking all the time through requests for proposal (RFPs), through sourcing events, and analyzing supplier performance on the SAP Ariba Network. The partnership with ConnXus will allow us to provide a lot more education, a lot more awareness to them.

For the suppliers that are on our network and those who will be joining us as a part of being in ConnXus, we expect to drive a lot more business.

Gardner: If I am a purchasing agent or a procurement officer and I want to improve my supplier inclusion program, how would something like, say, SAP Ariba Spot Buy using the ConnXus database, benefit me?

Stevens: As you decide to search for a category, we will return to you several things, one of which is now the diverse supplier list that ConnXus has. One of the things we are going to be doing with SAP Ariba Spot Buy is to have a section that highlights the diversity category so that it’s front and center for a purchasing agent to use and to take advantage of.

Gardner: Clearly there is strong value and benefit here if you are a procurement officer to get involved with the ConnXus database and Ariba Network. Quentin, at M and R Distribution Services, tell us from the perspective of a small supplier like yourself, what you’re hearing about Ariba and ConnXus that interests you?

Be fruitful and multiply business opportunities 

McCorvey: You referenced a marriage between SAP Ariba and ConnXus, and part of a marriage is to be fruitful and multiply. So I want them to be fruitful so I can multiply my business opportunities. What that does for a company like ours is, we are looking for opportunities. It’s tougher for me to compete as a small business against a Grainger, or against a Fastenal, or against other larger companies like that.

So when I am going after opportunities like that, it’s going to be tough for me to win those large-scale RFPs. But if there is a target spot opportunity that I am looking for or within a region, it’s something that I can begin to do if a company is looking for someone like me.

We’ve talked a lot about corporations and the benefit of corporations, but there is also a consumer benefit, too, because we are in an age where the consumer is socially responsible and really wants to have a company that they are either investing in or they’re buying products from and they look for inclusion in their supply chains.

Folks are looking at that when they are make their investment and consumer decisions. Every company has an extremely diverse consumer base, so why should they not have a diverse supplier base? When companies look at that business ethic and corporate social responsibility as a driving tool for their organization, I want them to be able to find me among the Fortune top 20 companies. The relationship that ConnXus and SAP Ariba are driving really catalyzes these opportunities for me.

Gardner: Rod, if a company like M and R Distribution Services is not yet in your database and they want to be, how might they get going on that process and become vetted and be available to a global environment like the Ariba Network?

Robinson: It’s really simple. One of the things that we have striven to provide is a fantastic, simple user experience. It takes about six minutes to complete the initial supplier profile. Any supplier can complete a profile at no cost.

Many suppliers actually get into our database because of the services that we already provide to large enterprise customers. So if you are a McDonald’s supplier, for example, you are already going to be in our database because we scrub their vendor data on an annual basis. I think Quentin is already in because he happens to be a vendor of one of our customers, or of multiple customers.

There is a vetting process where we integrate with other third-parties to pull in data, and then you become discoverable by all of the buyers on our platform.

Gardner: Before we close out, let’s look to the future. Jon, when we think about getting this rich data, putting it in the hands of the people who can use it, we also are putting it in the hands of the machines that can use it, right?

So when we think about bots and artificial intelligence (AI) trends, what are some of your predictions for how the future will come about when it comes to procurement and inclusive supply chains?

The future is now

Stevens: You talked about trends. One is certainly around transparency and visibility; another one is around predictive analytics and intelligence. We believe that a third is around partnerships like this to drive more collaboration.

But predictive analytics, that’s not a future thing, that’s something we do today and some of the leading procurement companies are figuring out how to take advantage of it. So, for example, when a machine breaks down, you are not waiting for it. Instead, the machine is telling our systems, “Hey, wait a minute, I’ve got a problem.”

Not only that, but they are producing for the buyer the intelligence that they need to order something. We already know who the suppliers are, we already know what potentially should be done, and we are providing these decisions to procurement organizations.

The future, it’s here, you see it in our personal lives, on our phones, when you get recommendations in the morning, on the news, and everything else. It’s here today through some of our solutions.

We began to realize that this is really a market-imperative. This is something that is creating value for the organization.

And this trend around diversity, it’s also here. You mentioned SAP Ariba Spot Buy and we also have some of these other solutions like SAP Ariba Discovery where a procurement person is starting to create a sourcing event. We have the ability in our solutions to automatically recommend suppliers and based off of the goals that that procurement organization has, we can pre-populate and recommend the diverse MRO suppliers that you might want to consider for your program.

You’re seeing that today through the Ariba Network and through things like Guided Buying, where we are helping facilitate many of those steps for procurement organizations. So it’s really fun and the future in many respects is here right now.

Value-driven supply chains

Robinson: I envision a future in procurement of being able to make informed decisions on supplier selection. Procurement professionals are in a great position to change the world, and the CPO of the future; they are going to be Millennials. They want more control, and they want more transparency, and, to Quentin’s point, they want to buy from organizations that share their same values.

Our partnership with SAP Ariba will create this environment where we can move closer to fulfilling this vision of whenever you have a specification that you’ve put into the system, you’ll be pushed supplier options, and you can actually configure your criteria such that you create this optimal supplier mix – whether diversity is important to you, green/environmental issues are important you, if ethical practices are important to you. All of this can be built-in and weighted within your selection. You will create an optimal supplier portfolio that balances all of the things that are important to you and your organization.

McCorvey: Why I am excited? This conversation has come full circle for me. I started off taking about supply optimizations and some of the challenges that they pose for businesses like me. We know that people do business most often with people they know, like and appreciate. What I want to do is turn a digital connection into a digital handshake and use predictive analytics and the connections between Jon and Rod that propose an opportunity for folks to know me, for me to grow as a new organization, and for me to be in the forefront of their minds. That is a challenge that this kind of supply chain optimization helps to overcome.

I’m really happy for where this is going to go in the future. In the end, there are going to be a lot of organizations both large and small that are going to benefit from this partnership. I look forward to the great things that are going to come from it, for not only both organizations — but for people like me across the country.

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

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How AI, IoT and blockchain will shake up procurement and supply chains

The next BriefingsDirect digital business thought leadership panel discussion focuses on how artificial intelligence (AI), the Internet of things (IoT), machine learning (ML), and blockchain will shake up procurement and supply chain optimization.

Stay with us now as we develop a new vision for how today’s cutting-edge technologies will usher in tomorrow’s most powerful business tools and processes. The panel was assembled and recorded at the recent 2017 SAP Ariba LIVE conference in Las Vegas. The discussion is moderated by Dana Gardner, principal analyst at Interarbor Solutions.

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 data-driven, predictive analytics, and augmented intelligence approach to supply chain management and procurement, please welcome the executives from SAP Ariba:

Here are some excerpts:

Gardner: It seems like only yesterday we were confident to have a single view of a customer, or clean data, or maybe a single business process end–to-end value. But now, we are poised to leapfrog the status quo by using words like predictive and proactive for many business functions.

Why are AI and ML such disrupters to how we’ve been doing business processes?

Shahane: If you look back, some of the technological impact  in our private lives, is impacting our public life. Think about the amount of data and signals that we are gathering; we call it big data.

We not only do transactions in our personal life, we also have a lot of content that gets pushed at us. Our phone records, our location as we move, so we are wired and we are hyper-connected.

Dinesh Shahane

Shahane

Similar things are happening to businesses. Since we are so connected, a lot of data is created. Having all that big data – and it could be a problem from the privacy perspective — gives you an opportunity to harness that data, to optimize it and make your processes much more efficient, much more engaged.

If you think about dealing with big data, you try and find patterns in that data, instead of looking at just the raw data. Finding those patterns collectively as a discipline is called machine learning. There are various techniques, and you can find a regression pattern, or you can find a recommendation pattern — you can find all kinds of patterns that will optimize things, and make your experience a lot more engaging.

If you combine all these machine learning techniques with tools such as natural language processing (NLP), higher-level tools such as inference engines, and text-to-speech processing — you get things like Siri and Alexa. It was created for the consumer space, but the same thing could be available for your businesses, and you can train that for your business processes. Overall, these improve efficiency, give delight, and provide a very engaging user experience.

Gardner: Sanjay, from the network perspective it seems like we are able to take advantage of really advanced cloud services, put that into a user experience that could be conversational, like we do with our personal consumer devices.

What is it about the cloud services in the network, however, that are game-changers when it comes to applying AI and ML to just good old business processes?

Multiple intelligence recommended

Almeida: Building on Dinesh’s comment, we have a lot of intelligent devices in our homes. When we watch Netflix, there are a lot of recommendations that happen. We control devices through voice. When we get home the lights are on. There is a lot of intelligence built into our personal lives. And when we go to work, especially in an enterprise, the experience is far different. How do we make sure that your experience at home carries forward to when you are at work?

Sanjay Almeida

Almeida

From the enterprise and business networks perspective, we have a lot of data; a lot of business data about the purchases, the behaviors, the commodities. We can use that data to make the business processes a lot more efficient, using some of the models that Dinesh talked about.

How do we actually do a recommendation so that we move away from traditional search, and take action on rows and columns, and drive that through a voice interface? How do we bring that intelligence together, and recommend the next actions or the next business process? How do we use the data that we have and make it a more recommended-based interaction versus the traditional forms-based interaction?

Gardner: Sudhir, when we go out to the marketplace with these technologies, and people begin to use them for making better decisions, what will that bring to procurement and supply chain activities? Are we really talking about letting the machines make the decisions? Where does the best of what machines do and the best of what people do meet?

Bhojwani: Quite often I get this question, What will be the role of procurement in 2025? Are the machines going to be able to make all the decisions and we will have no role to play? You can say the same thing about all aspects of life, so why only procurement?

I think human intelligence is still here to stay. I believe, personally, it can be augmented. Let’s take a concrete example to see what it means. At SAP Ariba, we are working on a product called product sourcing. Essentially this product takes a bill of material (BOM), and

Sudhir Bhojwani

Bhojwani

it tells you the impact. So what is so cool about it?

One of our customers has a BOM, which is an eight-level deep tree with 10 million nodes in it. In this 10 million-node commodity tree, or BOM, a person is responsible for managing all the items. But how does he or she know what is the impact of a delay on the entire tree? How do you visualize that?I think humans are very poor at visualizing a 10-million node tree; machines are really good at it. Well, where the human is still going to be required is that eventually you have to make a decision. Are we comfortable that the machine alone makes a decision? Only time will tell. I continue to think that this kind of augmented intelligence is what we are looking for, not some machine making complete decisions on our behalf.

Gardner: Dinesh, in order to make this more than what we get in our personal consumer space, which in some cases is nice to have, it doesn’t really change the game. But we are looking for a higher productivity in business. The C-Suite is looking for increased margins; they are looking for big efficiencies. What is it from a business point of view that these technologies can bring? Is this going to be just a lipstick on a pig, so to speak, or do we really get to change how business productivity comes about?

Humans and machines working together

Shahane: I truly believe it will change the productivity. The whole intelligence advantage — if you look at it from a highest perspective like enhanced user experience — provides an ability to help you make your decisions.

When you make decisions having this augmented assistant helping you along the way — and at the same time dealing with large amount of data combined in a business benefit — I think it will make a huge impact.

Let me give you an example. Think about supplier risk. Today, at first you look at risk as the people on the network, and how you are directly doing business with them. You want to know everything about them, their profile, and you care about them being a good business partner to you.

But think about the second, third and fourth years, and some things become not so interesting for your business. All that information for those next years is not directly available on the network; that is distant. But if those signals can be captured and somehow surface in your decision-making, it can really reduce risk.

Reducing risk means more productivity, more benefits to your businesses. So that is one advantage I could see, but there will be a number of advantages. I think we’ll run out of time if we start talking about all of those.

Gardner: Sanjay, help us better understand. When we take these technologies and apply them to procurement, what does that mean for the procurement people themselves?

Almeida: There are two inputs that you need to make strategic decisions, and one is the data. You look at that data and you try to make sense out of it. As Sudhir mentioned, there is a limit to human beings in terms of how much data processing that they can do — and that’s where some of these technologies will help quite a bit to make better decisions.

The other part is personal biases, and eliminating personal biases by using the data. It will improve the accuracy of your strategic decisions. A combination of those two will help make better decisions, faster decisions, and procurement groups can focus on the right stuff, versus being busy with the day-to-day tasks.

Using these technologies, the data, and the power of the data from computational excellence — that’s taking the personal biases out of making decisions. That combination will really help them make better strategic decisions.

Bhojwani: Let me add something to what Sanjay said. One of the biggest things we’re seeing now in procurement, especially in enterprise software in general, is people’s expectations have clearly gone up based on their personal experience outside. I mean, 10 years back I could not have imagined that I would never go to a store to buy shoes. I thought, who buys shoes online? Now, I never go to stores. I don’t know when was the last time I bought shoes anywhere but online? It’s been few years, in fact. Now, think about that expectation on procurement software.

Currently procurement has been looked upon as a gatekeeper; they ensure that nobody does anything wrong. The problem with that approach is it is a “stick” model, there is no “carrot” behind it. What users want is, “Hey, show me the benefit and I will follow the rules.” We can’t punish the entire company because of a couple of bad apples.

By and large, most people want to follow the rules. They just don’t know what the rules are; they don’t have a platform that makes that decision-making easy, that enables them to get the job done sooner, faster, better. And that happens when the user experience is acceptable and where procurement is no longer looked down upon as a gatekeeper. That is the fundamental shift that has to happen, procurement has to start thinking about themselves as an enabler, not a gatekeeper. That’s the fundamental shift.

Gardner: Here at SAP Ariba LIVE 2017, we’re hearing about new products and services. Are there any of the new products and services that we could point to that say, aha, this is a harbinger of things to come?

In blockchain we trust

Shahane: The conversational interfaces and bots, they are a fairly easy technology for anyone to adopt nowadays, especially because some of these algorithms are available so easily. But — from my perspective — I think one of the technologies that will have a huge impact on our life will be advent of IoT devices, 3D printing, and blockchain.

To me, blockchain is themost exciting one. That will have huge impact on the way people look at the business network. Some people think about blockchain as a complementary idea to the network. Other people think that it is contradictory to the network. We believe it is complementary to the network.

Blockchain reaches out to the boundary of your network, to faraway places that we are not even connected to, and brings that into a governance model where all of your processes and all your transactions are captured in the central network.

I believe that a trusted transactional model combined with other innovations like IoT, where a machine could order by itself … My favorite example is when a washing machine starts working when the energy is cheaper … it’s a pretty exciting use-case.

This is a combination of open platforms and IoT combining with blockchain-based energy-rate brokering. These are the kind of use cases that will become possible in the future. I see a platform sitting in the center of all these innovations.

Gardner: Sanjay, let’s look at blockchain from your perspective. How do you see that ability of a distributed network authority fitting into business processes? Maybe people hadn’t quite put those two together.

Almeida: The core concept of blockchain is distributed trust and transparency. When we look at business networks, we obviously have the largest network in the world. We have more than 2.5 million buyers and suppliers transacting on the SAP Ariba Network — but there are hundreds of millions of others who are not on the network. Obviously we would like to get them.

If you use the blockchain technology to bring that trust together, it’s a federated trust model. Then our supply chain would be lot more efficient, a lot more trustworthy. It will improve the efficiency, and all the risk that’s associated with managing suppliers will be managed better by using that technology.

Gardner: So this isn’t a “maybe,” or an “if.” It’s “definitely,” blockchain will be a significant technology for advancing productivity in business processes and business platforms?

Almeida: Absolutely. And you have to have the scale of an SAP Ariba, have the scale from the number of suppliers, the amount of business that happens on the network. So you have to have a scale and technology together to make that happen. We want to be a center of a blockchain, we want to be a blockchain provider, and so that other third-party ecosystem partners can be part of this trusted network and make this process a lot more efficient.

Gardner: Sudhir, for those who are listening and reading this information and are interested in taking advantage of ML and better data, of what the IoT will bring, and AI where it makes sense — what in your estimation should they be doing now in order to prepare themselves as an organization to best take advantage of these? What would you advise them to be doing now in order to better take advantage of these technologies and the services that folks like SAP Ariba can provide so that they can stand out in their industry?

Bhojwani: That’s a very good question, and that’s one of our central themes. At the core of it, I fundamentally believe the tool cannot solve the problem completely on its own, you have to change as well. If the companies continue to want to stick to the old processes — but try to apply the new technology — it doesn’t solve the problem. We have seen that movie played before. People get our tool, they say, hey, we were sold very good visions, so we bought the SAP Ariba tool. We tried to implement it and it didn’t work for us.

When you question that, generally the answer is, we just tried to use the tool — tried to change the tool to fit our model, to fit our process. We didn’t try to change the processes. As for blockchain, enterprises are not used to being for track and trace, they are not really exposing that kind of information in any shape or form – or they are very secretive about it.

So for them to suddenly participate in this requires a change on their side. It requires seeing what is the benefit for me, what is the value that it offers me? Slowly but surely that value is starting to become very, very clear. You hear more companies — especially on the payment side — starting to participate in blockchain. A general ledger will be available on blockchain some day. This is one of the big ideas for SAP.

If you think about SAP, they run more general ledgers in the world than any other company. They are probably the biggest general ledger company that connects all of that. Those things are possible, but it’s still a technology only until the companies want to say, “Hey, this is the value … but I have to change myself as well.”

This changing yourself part, even though it sounds so simple, is what we are seeing in the consumer world. There, change happens a little bit faster than in the enterprise world. But, even that is actually changing, because of the demands that the end-user, the Millennials, when they come into the workforce; the force that they have and the expectations that they have. Enterprises, if they continue to resist, won’t be sustainable.

They will be forced to change. So I personally believe in next three to five years when there are more-and-more Millennials in the workforce, you will see people adopting blockchain and new ledgers at a much faster pace.

A change on both sides

Shahane: I think Sudhir put it very nicely. I think enterprises need to be open to change. You can achieve transformation if the value is clearly articulated. One of the big changes for procurement is you need to transition yourself from being a spend controller into a value creator. There is a lot of technology that will benefit you, and some of the technology vendors like us, we cannot just throw a major change at our users. We have to do it gradually. For example, with AI it will start as augmented first, before it starts making algorithmic decisions.

So it is a change on both sides, and once that happens — and once we trust each other on the system — nice things will happen.

Almeida: One thing I would add to that is organizations need to think about what they want to achieve in the future and adopt the tool and technology and business processes for their future business goals. It’s not about living in the past because the past is going to be gone. So how do you differentiate yourself, your business with the rest of the competition that you have?

The past business processes and people and technology many not necessarily get you over there. So how do you leverage the technology that companies like SAP and Ariba provide? Think about what should be your future business processes. The people that you will have, as Sudhir mentioned, the Millennials, they have different expectations and they won’t accept the status quo.

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

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Why effective IoT adoption is a team sport, and how to become a player

The next BriefingsDirect Voice of the Customer discussion highlights how Internet of things (IoT) adoption means more than just scaling-up networks. The complexity and novel architectural demands of IoT require a rethinking of the edge of nearly any enterprise.

We’ll explore here how implementing IoT strategies is not a one-size-fits-all endeavor — nor can it be bought off the shelf. What’s more, those new to the computational hive and analytical edge attributes of IoT are discovering that it takes a team approach.

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

To explain how many disparate threads of an effective IoT fabric come together, we’re joined by Tushar Halgali, Senior Manager in the Technology Strategy and Architecture Practice at Deloitte Consulting in San Francisco, and Jeff Carlat, Senior Director of Technology Solutions at Hewlett Packard Enterprise (HPE) Strategic Alliances. The discussion is moderated by Dana Gardner, principal analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: What the top trends making organizations recognize the importance of IoT?

Carlat: We’re at the cusp of a very large movement of digitizing entire value chains. Organizations have more and more things connected to the Internet. Look at your Nest thermostats and the sensors that are on everything. The connectivity of that back to the data center to do analytics in real-time is critical for businesses to reach the next level of efficiencies — and to maintain their competitiveness in the market.

Gardner: Tushar, this is a different type of network requirement set. We’re dealing with varied data types, speeds, and volumes in places that we haven’t seen before. What are the obstacles that organizations face as they look at their current infrastructure and the need to adapt?

Halgali: One of the really interesting things we’ve seen is that traditionally organizations have been solving technology-related problems as all information technology (IT)-related problems. There was this whole concept of machine to machine (M2M) a while back. It connected machines to the Internet, but it was a very small segment.

Now, we’re trying to get machines to connect to the Internet and have them communicate with each other. There are a lot of complexities involved. It’s not just the IT pieces, but having the operational technology (OT) connect to the IT world, too. It creates a very complex ecosystem of components.

Gardner: Let’s parse out the differences between OT in the IT. How do you describe those? Why should we understand and appreciate how different they are?

Jeff CarlatCarlat: When we think of OT, you think of long-standing companies out there, Bosch, National Instruments (NI), and many other companies that have been instrumenting sensors for operations, shop floors, oil and gas, and with every pump being sensed. The problem is that humans would have to interact a lot around those sensors, to remediate or to understand when something like a bearing on a pump has failed. [Learn more on OT and IoT.]

What’s key here is that IT, those core data-center technologies that HPE is leading the market in, has the ability of run analytics and to provide intelligence and insights from all of that sensor data. When you can connect the OT devices with the IT — whether in the data center or delivering that IT to the edge, which we call the Intelligent Edge — you can actually do your insights, create your feedback, and provide corrective actions even before things fail, rather than waiting.

Gardner: That failed ball bearing on some device isn’t just alerting the shop floor of a failure, it’s additionally automating a process where the inventory is checked. If it’s not there, the supply chain is checked, the order is put in place, it’s delivered and ready to install before any kind of breakdown — or did I oversimplify that?

End of Downtime

Carlat: That’s a fair representation. We’re working closely with a company called Flowserve. We’re building the telemetry within the pumps so that when a cavitation happens or a bearing is starting to wear out, it will predict the mean time for failure and alert them immediately. It’s all truly connected. It will tell you when it’s going to fail. It provides the access to fix it ahead of time, or as part of a scheduled maintenance plan, rather than during downtime, because downtime in an oil production facility or any business can cost millions of dollars.

Gardner: Tushar, are there any other examples you can think of to illustrate the power and importance of OT and IT together?

How to Gain Business Insights

From the Intelligent IoT Edge

Halgali: If our readers ever get a chance to check out one of the keynote speakers [at HPEDiscover London 2016] on the Intelligent Edge, there’s a good presentation by PTC ThingWorx software, which is an IoT platform and the HPE Edgeline servers in a manufacturing facility. You have conveyor belts that need certain improvements, they’re constantly producing things, and they’re part of the production facility. It’s all tied to the revenue of the organization, and the minute it shuts down, there are problems.

Tushar HalgaliMaintenance needs to be done on those machines, but you don’t want to do it too soon because you’re just spending money unnecessarily and it’s not efficient. You don’t want it too late, because then there’s downtime. So, you want to find the equilibrium between the two.

IoT determines the right window for when that maintenance needs to be done. If there’s a valve problem, and something goes down quickly, sensors track the data and we analyze the information. The minute that data goes off a certain baseline, it will tell you about this problem — and then it will say that there’s the potential in the future for a major problem.

It will actually generate a work order, which then feeds from the OT systems into the IT systems, and it’s all automatic. Then, when mechanics come in to try to solve these problems, they can use augmented reality or virtual reality to look at the machine and then fix the problem.

It’s actually a closed-loop ecosystem that would not have happened in the M2M base. It’s the next layer of maturity or advancement that IoT brings up.

Gardner: We can measure, we can analyze, and we can communicate. That gives us a lot of power. We can move toward minimum viable operations, where we’re not putting parts in place when they’re not needed, but we’re not going down either.

It reminds me of what happened on the financial side of businesses a decade or two ago, where you wanted to have spend management. You couldn’t do it until you knew where all your money was, where all the bills had to be paid, but then doing so, you could really manage things precisely. Those were back office apps, digital ledgers.

So, it’s a maturity coming to devices — analog, digital, what have you, and it’s pretty exciting. What’s the impact here financially, Jeff?

Carlat: Well, huge. Right now, IDC predicts IoT to represent about a $1.3 trillion opportunity by2020. It’s a huge opportunity, not only for incremental revenue for businesses, but increased efficiencies, reducing cost, reducing downtime, reducing risk; so, a tremendous benefit. Companies need to strongly consider a movement for digitizing the value chains to remain competitive in the future.

Bigger and Better Data at the Edge

Gardner: Okay. We understand why it’s important and we have a pretty good idea of what you need to do. Now, how do you get there? Is this big data at the edge? I heard a comment just the other day that there’s no bigger data than edge data and IoT data. We’re going to have to manage scales here that we haven’t seen before.

Carlat: It’s an excellent point. Jet engines that are being used today are generating 5 TB of data every time they land or take off. Imagine that for every plane, every engine that’s flying in the sky, every day, every year. The amount of data is huge. This brings me to the unique way that HPE is approaching this, and we truly believe we are leaders in the data center now and are leaders within IT.

We’re taking that design, that implementation, that knowledge, and we’re designing infrastructure, data center quality infrastructure, that’s put on the edge, ruggedized compute or analytics, and providing the ability to do that analysis, the machine learning, and doing it all locally, rather than sending all that data to the cloud for analytics. Imagine how expensive that would be.

That’s one approach we’re taking on within HPE. But, it’s not just about HPE tackling this. Customers are asking where to start. “This is overwhelming, this is complex. How do we do this?” We’re coming together to do advisory services, talking our customers through this, hand-holding, building a journey for them to do that digitization according to their plans and without disrupting their current environment.

Gardner: Tushar, when you have a small data center at the edge, you’re going to eke out some obvious efficiencies, but this portends unforeseen circumstances that could be very positive. What can you do when you have this level of analytics, and you take it to a macro level? You can begin to analyze things on an industry-level, and then have the opportunity to drill down and find new patterns, new associations, perhaps even new ways to design processes, factory floors, retail environments? What are we talking about in terms of the potential for the analytics when we capture and manage this larger amount of data?

Halgali: We’ve noted there are a lot of IoT use cases, and the value that generates so far has been around cost optimization, efficiencies, risk management, and those kinds of things. But by doing things on the edge, not only can you do all of those, you can start getting into the higher-value areas, such as revenue growth and innovation.

A classic example is remote monitoring. Think of yourself as a healthcare provider who would not be able to get into the business of managing people’s health if they’re all located remotely. If we have certain devices in homes through sensors and everything, you can start tracking their behaviors and their patterns. When they’re taking medicine and those kinds of things, and have all the information created through profiles of those people. You have now distributed the power of taking care of all the constituents in your base, without having to have them physically be in a hospital.

Gardner: Those feedback loops are not just one way where you can analyze, but you can start to apply the results, the benefits of the analysis, right back into the edge.

Carlat: Health and life sciences are great examples of using IoT as a way of more efficiently managing the hospital beds. It costs a lot of money to have people sit in a hospital when they don’t need to be there. To be able provide patient access remotely, to be able monitor them, to be able to intervene on an as-needed basis, drives much greater efficiencies.

We’ve talked a little bit about industrial IoT, we’ve talked a little bit about health and life sciences, but this extends into retail and smart stores, too. We’re doing a lot with Home Depot to deliver the store of the future, bridging the digital with the brick-and-mortar across 2,200 stores in North America.

It also has to do with the experience around campus and branch networks. At Levi’s Stadium in Santa Clara, California, HPE built that out with indoor Global Positioning System (GPS) and built out a mobile app that allows indoor wayfinding. It allows the patrons visiting the game to have a totally new, immersive experience.

They found uploads and downloads of photos, and they found hotspots by mapping out in the stadium. The hotspots had a great unobstructed view of the field, so there were a lot of people there taking pictures. They installed a food stand nearby and they have increased revenues because of strategic placement based on this IoT data. Levi’s Stadium recognized $1 million in additional revenue in the first season and 10 times the growth in the number of contacts that they have in their repository now.

Gardner: So, it’s safe to say that edge computing and intelligence is a gift that will keep giving, at levels organizations haven’t even conceived of yet.

Carlat: I believe it’s a necessity to stay competitive in the world of tomorrow.

How to Gain Business Insights

From the Intelligent IoT Edge

Gardner: If your competitor does this, and you don’t, that’s going to be a big question mark for your customers to mull over.

While we are still on the subject of the edge technical capabilities, by being able to analyze and not just pass along data, it seems to me it’s also a big help when it comes to compliance and security, which are big concerns.

Not only does security get mitigated by hardening or putting up a wall, probably the safest bet is to be able to analyze when something is breached or something is going wrong, and then to control or contain that. Tell me why the HPE Edgeline approach of analyzing data fast and on the edge can also be a big boost to security risk containment and other compliance issues.

Carlat: We do a lot around asset tracking. Typically, you need to send someone out there to remediate. By using Edgeline, using our sensor data, and using asset tagging, you can ensure that the right person can be identified as the service person physically at the pump to replace it, rather than just saying that they did it, writing on paper, and actually being off doing something else. You have security, you have the appropriate compliance levels with the right people fixing the right things in the right manner, and it’s all traceable and trackable.

Halgali: When you begin using edge devices, as well as geolocation services, you have this ability to do fine-grained policy management and access control for not just the people, but also devices. The surface area for IoT is so huge there are many ad-hoc points into the network. By having a security layer, you can control that and edge devices certainly help with that.

A classic example would be if you have a camera in a certain place. The camera is taking constant feeds of things that are going on that are wrong or right; it’s constantly recording the data. But the algorithms that have been fed into the edge device allow it to capture things that are normal, so it can not only alert authorities at the right time, but also store feed only for that. Why store days and day’s worth of images, when you can pick only the ones that truly matter?

As Jeff said, it allows workplace restrictions and compliance, but also in an open area, it allows you to track events that are specific.

In other cases, let’s say the mining industry or the oil and gas industry, where you have workers that are going to be in very remote locations and it’s very hard to track each one of them. When you have the ability to track the assets over time, if things go wrong, then it’s easier to intervene and help out.

Carlat: Here is a great personal example. I went to my auto dealership and I pulled into the garage. Immediately, I was greeted at my door by name, “Hello Mr. Carlat. Are you in for your service?”

I thought, “How do you know I came in? Are you tracking me? How are you doing that?” It turns out, they have radio-frequency identification (RFID) tags. When you come in for service, they apply these tags. As soon as you pull in, they provide a personalized experience.

Also, it yields a net benefit of location tracking. They know exactly where my car is at all stages. If I moved to a rental car that they have there, my profile is automatically transferred over there. It starts their cycle time metrics, too, the traceability of how they’re doing on remediating whatever my service level may be. It’s a whole new experience. I’m now a lifetime-loyal customer of this auto dealer because of that personalization; it’s all coming from implementation of IoT.

Gardner: The implications are vast; whether it’s user experience, operational efficiency, risk reduction, or insights and analysis at different levels of an industry and even a company.

It’s very impressive stuff, when you can measure everything and you can gather as much data as you want and then you can triage, and analyze that data and put the metadata out to the cloud; so much is possible.

We’ve established why this is of interest. Now, let’s think a little bit about how you get there for organizations that are thinking more about re-architecting their edge in order to avail themselves of some of these benefits. What is it about the HPE and Deloitte alliance that allows for a pathway to get on board and start doing things in a proper order to make this happen in the best fashion?

Transformation Journey, One Step at a Time

Halgali: Dana, anytime you do an IoT initiative, the key thing to realize that it should be part of a major digital transformation initiative. Like any other transformation story, there are the people, process, and the technology components of it. Jeff and I can talk about these three at a very high level when you begin talking about the process and the business model.

Deloitte has a huge practice in the strategy and the process space. What we’re looking at is digital industrial value-chain transformation. Let’s look at something like a smart factory.

What’s the value chain for an organization that’s making heavy machinery, end-to-end, all the way from R and D and planning, to procurement and development and shipment, and after-sale repairs, the entire value chain? What does that look like in the new IoT era? Then, decompose that into processes and use cases, and then identify which are the most high-value use cases, quantifying them, because that’s important.

Identifying the use cases that will deliver immediate tangible value in the near term provides the map of where to begin the IoT journey. If you can’t quantify concrete ROI, then what’s the point of investing? That addresses the reason of what IoT can do for the organization and why to leverage this capability. And then, it’s about helping our clients build out the business cases, so that they can justify the investments needed from the shareholders and the board — and can start implementing.

At a very high level, what’s the transformation story? What’s the impact on the business model for the organization? Once you have those strategy questions answered, then you get into the tactical aspects, which is how we execute on it.

From an execution standpoint, let’s look at enablement via technology. Once you have identified which use-cases to implement, you can utilize the pre-integrated, pre-configured IoT offerings that Deloitte and HPE have co-developed. These offerings address use cases such as asset monitoring and maintenance (in oil and gas, manufacturing, and smart cities), and intelligent spaces (in public venues such as malls, retail stores, and stadiums), and digital workplaces (in office buildings). One must also factor in organization, change and communication management as addressing cultural shifts as one of the most challenging aspects of an IoT-enabled digital transformation. Such a holistic approach helps our clients to think big, start small, and scale fast.

Gardner: Tushar just outlined a very nice on-ramp process. What about some places to go for information or calls for action? Where should people get started as they learn how to implement on the process that Tushar just described?

How to Gain Business Insights

From the Intelligent IoT Edge

Carlat: We’re working as one with Deloitte to deliver these transformations. Customers with interest can come to either Deloitte or HPE. We at HPE have a strong group of technology services consultants who can step in and help in partnership with Deloitte as well.

So, come to either company. Any of our partner representatives can get all of this and our websites are loaded with information. We’re here to help. We’re here to hold the hand and lead our customers to digitize and achieve these promised efficiencies that can be garnered from digital value chains.

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

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Posted in big data, Cloud computing, Data center transformation, Enterprise architect, Enterprise transformation, Hewlett Packard Enterprise, Internet of Things, Mobile apps, mobile computing, Platform 3.0 | Tagged , , , , , , , , , , | 1 Comment

TasmaNet ups its cloud game to deliver a regional digital services provider solution

The next BriefingsDirect Voice of the Customer cloud adoption patterns discussion explores how integration of the latest cloud tools and methods help smooth out the difficult task of creating and maintaining cloud-infrastructure services contracts.

The results are more flexible digital services that both save cloud consumers money and provide the proper service levels and performance characteristics for each unique enterprise and small business.

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

Stay with us now as we hear from a Tasmanian digital services provider, TasmaNet, about their solution-level approach to cloud services attainment, especially from mid-market enterprises. To share how proper cloud procurement leads to new digital business innovations, we’re joined by Joel Harris, Managing Director of TasmaNet in Hobart, Tasmania. The discussion is moderated by Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: Let’s start at a high level, looking at the trends that are driving how cloud services are affecting how procurement is going to be done in 2017. What has changed, in your opinion, in how enterprises are reacting to and leveraging the cloud services nowadays? 

Harris: We’re seeing a real shift in markets, particularly with the small- and medium-sized businesses (SMBs) in their approach and adoption of cloud services. More and more, there is an acceptance that it’s okay to buy products off the Internet. We see it  every day within personal cloud, iPhones, the Apple Store, and Google Play to buy movies. So, there is now the idea in the workplace that it’s acceptable to procure business services online through cloud providers. 

Because of the success of personal cloud with companies such as Apple, there’s a carry-over in that there is an assumed equivalent success in the commercial sense, and unfortunately, that can cause some problems. What we’re seeing is a willingness to start procuring from public, and also some private cloud as well, which is really good. What we’re finding, though, is a lack of awareness about what it means for businesses to buy from a cloud provider.

Gardner: What is it that the people might have wrong? What is it that they’ve not seen in terms of where the real basis for value comes when you create a proper cloud relationship? 

Solutions for
Hybrid and Private Cloud

IT Infrastructure

Harris: Look at the way personal cloud is procured, a simple click, a simple install, and you have the application. If you don’t like it, you can delete it. 

When you come into a commercial environment, it’s not that simple, although there can a perception that it is. When you’re looking at your application, the glossy picture, it may talk about functionality, business improvement, future savings, and things like that. But when you come to the implementation of a cloud product or a cloud service into a business, the business needs to make sure that it has met its service levels, from internal business requirements or external business requirements, and from customers and markets. 

Harris

But you also need to make sure that it has also married up the skills of your workforce. Cloud services are really just a tool for a business to achieve an outcome. So, you’re either arming someone in the workforce with the tool and skills to achieve an outcome or you’re going to use a service from a third-party to achieve an outcome. 

Because we’re still very early in the days of cloud being adopted by SMBs, the amount of work being put into the marrying up of the capabilities of a product, or the imagined capabilities of a product, for future benefits to internal business processes and systems is clearly not as mature as we would like. Certainly, if you look into the marketplace, the availability of partners and skills to help companies with this is also lacking at the moment. 

Cloud Costs

Then, comes the last part that we talked about, which is removing or changing the application. At the moment, a lot of SMBs are still using traditional procurement. Maybe they want a white car. Well, in cloud services there’s always the ability to change the color, but it does come at a cost. There’s traditionally a variation fee or similar charge.

SMBs are getting themselves in a bit of trouble when they say they would like a white car with four seats, and then, later on, find that they actually needed five seats and a utility. How do they go about changing that? 

The cost of change is something that sometimes gets forgotten in those scenarios. Our experience over the last two years is companies overlooking the cost of change when under a cloud-services contract. 

Gardner: I’ve also heard you say, Joel, that cloud isn’t for everyone, what do you mean by that? How would a company know whether cloud is the right fit for it or not?

Harris: Simply look for real, deep understanding of your business. Coming back to the ability to link up service levels, it’s the ability to have a clear view into the future of what a company needs to achieve its outcomes. If you can’t answer those questions for your customer, or the customer can’t answer the questions for you as a cloud provider, then I would advise you to take a step back and really start a new process of understanding what it is the customer wants out of the cloud product. 

Change later on can cost, and small businesses don’t have an amount of money to go in there and continue funding a third party to change the implementation of what, in most cases, becomes a core piece of software in an organization.

Gardner: For the organizations that you work with that are exploring deeper relationships to private cloud, do you find that they’re thinking of the future direction as well or thinking of the strategy that they’d like to go hybrid and ultimately perhaps more public cloud? Is that the common view for those that are ready for cloud now?

Harris: In the enterprise, yes. We’re definitely seeing a huge push by organizations that understand the breakdown of applications between suitable for private cloud and suitable for public cloud. 

As you come down into the SMB market, that line blurs a little bit. We have some companies that wish to put everything in the cloud because it’s easy and that’s the advice they were given. Or, you have people who think they have everything in the cloud, but it’s really a systems integrator that has now taken their servers, put them in a data center, and is managing them as more of a hosted, managed solution. 

Unfortunately, what we are seeing is that a lot of companies don’t know the difference between moving into the cloud and having a systems integrator manage their hardware for them in a data center where they don’t see it.

There’s definitely a large appetite for moving to the as-a-service model in companies that have a C-suite or some level of senior management with ownership of business process. So, if there is a Chief Information Officer (CIO) or a Chief Technology Officer (CTO) or some sort of very senior Information Technology (IT) person that has a business focus on the use of technology, we’re seeing a very strong review of what the company does and why and how things should be moved to either hybrid or 100 percent in either direction.

Gardner: So, clearly the choices you make around cloud affect the choices you make as a business; there really is a transformational aspect to this. Therefore, the contract, that decision document of how you proceed with your cloud relationship, is not just an IT document; it’s really a business document. Tell us why getting the contract right is so important.

Harris: It’s very, very important to involve all the areas of a business when going into a cloud services contract.

Ecosystems of Scale

Gardner: And it’s no longer really one relationship. That is to say that a contract isn’t often just between one party and another. As we’re finding out, this is an ecosystem, a team sport, if you will. How does the contract incorporate the need for an ecosystem and how does TasmaNet help solve that problem of relationship among multiple parties?

Harris: Traditionally, if we look at the procurement department of a company, the procurement department would draft a tender, negotiate a contract between the supplier and the company, and then services would begin to flow, or whatever product was purchased would be delivered. 

More and more, though, in the cloud services contract, the procurement department has little knowledge of the value of the information or the transaction that’s happening between the company and the supplier, and that can be quite dangerous. Even though cloud can be seen as a commodity item, the value of the services that come over the top is very much not a commodity item. It’s actually a high-value item that, in most cases, is something relevant to keeping the company operating.

What we found at TasmaNet was that a lot of the companies moving to cloud don’t have the tools to manage the contract. They’re familiar with traditional procurement arrangements, but in managing a services contract or a cloud services contract, if we want to focus on what TasmaNet provides, you need to know a number of different aspects. 

We created an ecosystem and we said that we were going to create this ecosystem with all of the tools required for our customers. We put in a portal, so that the finance manager can look at the financial performance of the services. Does it meet budget expectations, is it behaving correctly, are we achieving the business outcomes for the dollars that we said it was going to cost?

Then, on the other side, we have a different portal that’s more for the technology administrator about ensuring that the system is performing within the service-level agreements (SLAs) that have been documented either between the company and the service provider or the IT department and the big internal business units. 

It’s important to understand there are probably going to be multiple service levels here, not only between the service provider and the customer, but also the customer and their internal customers. So, it’s important to make sure that they’re managed all the way through. 

We provide a platform so that people can monitor end to end from the customers using, all the way through to the financial manager on the other side.

Gardner: We’ve seen the importance of the contract. We understand that this is a complex transaction that can involve multiple players. But I think there is also another shift when we move from a traditional IT environment to a cloud environment and then ultimately to a hybrid cloud environment, and that’s around skills. What are you seeing that might be some dissonance between what was the skill set before and what we can expect the new skill set for cloud computing success to be?

Sea Change

Harris: We are seeing a huge change, and sometimes this change is very difficult for the people involved. We see that with cloud services coming along, the nature of the tool is changing. A lot of people traditionally have been trained in a single skill set, such as storage or virtualization. Once you start to bring in cloud services, you’re actually bundling a bunch of individual tools and infrastructure together to become one, and all of a sudden, that worker or that individual now has a tool that is made up of an ecosystem of tools. Therefore, their understanding of those different tools and how they report on it and the related elements change.

We see a change from people doing to controlling. We might see a lot of planning to try to avoid events, rather than responding to them. It really does change the ecosystem in your workforce, and it’s probably one of the biggest areas where we see risk arise when people are moving to a cloud-services contract.

Gardner: Is there something also in the realm of digital services, rather than just technology, that larger category of digital services, business-focused outcomes? Is that another thing that we need to take into consideration as organizations are thinking about the right way to transform to be of, for, and by the cloud?

Solutions for
Hybrid and Private Cloud

IT Infrastructure

Harris: It comes back to a business understanding. It’s being able to put a circle around something that’s a process or something we could buy from someone else. We know how important it is to the company, we know what it costs the company, and we know the service levels needed around that particular function. Therefore, we can put it out to the market to evaluate. Should we be looking to buy this as a digital service, should we be looking to outsource the process, or should we be looking to have it internally on our own infrastructure and continue running it?

Those questions and the fact-finding that goes into that at the moment is one of the most important things I encourage a customer looking at cloud services to spend a lot of time on. It’s actually one of the key reasons why we have such a strong partnership at Hewlett Packard Enterprise (HPE). The hardware and infrastructure is so strong and good, the skill set and the programs that we can access to work with our customers to pull out information and put it up into things like enterprise nets to understand what the landscape looks like in a customer is just as important as the infrastructure itself.

Gardner: So, the customer needs to know themselves and see how they fit into these new patterns of business, but as you are a technologist, you also have to have a great deal of visibility into what’s going on within your systems, whether they’re on your premises, or within a public-private cloud continuum of some kind. Tell me about the TasmaNet approach and how you’re using HPE products and solutions to gain that visibility to know yourself even as you are transforming.

Harris: Sure, so a couple of the functions that we use with HPE … They have a very good [cloud workload suitability] capability set called HPE Aura with which they can sit down with us and work through the total cost of ownership for an organization. That’s not just at an IT level, but it’s for almost anything, to look at the work with the accounting team, to look at the total cost, from the electricity, through to dealing with resources, the third party contractors in construction teams. That gives us a very good baseline and understanding of how much it costs today, which is really important for people to understand. 

Then, we also have other capabilities. We work with HPE to model data about the what-if. It’s very important to have that capability when working with a third-party on understanding whether or not you should move to cloud. 

Gardner: Your comments, Joel, bring me back to a better understanding of why a static cloud services contract really might be a shackle on your ability to innovate. So how do you recognize that you need to know what you don’t know going into cloud, and therefore put in place the ability to react in some sort of a short-term basis iterate, what kind of contract allows for that dynamic ability to change? How do you begin to think about a contract that is not static?

Harris: We don’t know the answer yet. We’re doing a lot of work with our current customers and with HPE to look at that. Some of the early options we are looking at is that when we create a master services agreement with a company, even for something that may be considered a commodity, we ensure that we put in a great plan around innovation, risk management framework side, and continuous service improvement. Then there’s a conduit for information to flow between the two parties around business information, which can then feed into the use of the services that we provided.

I think we still have a long way to go, because there’s a certain maturity required. We’re essentially becoming a part of another company, and that’s difficult for people to swallow, even though they accept using a cloud services contract. We’re essentially saying, “Can we have a key to your data center, or the physical front door of your office?”

If that’s disconcerting for someone, well, it should be equally disconcerting that they’re moving to cloud, because we need access to those physical environments, the people face-to-face, the business plan, the innovation plan, and to how they manage risk in order to ensure that there is a successful adoption of cloud not just today, but also going forward.

Gardner: Clearly, the destiny of you and your clients is tied closely together. You need to make them successful, they need to let you show them the tools and the new flexible nature and you need to then rely on HPE to give you the means to create those dashboards and have that visibility. It really is a different kind of relationship, co-dependence, you might say.

Harris: The strength that TasmaNet will have going forward is the fact that we’re operating under a decentralized model. We work with HPE, so that we can have a workforce on the ground closer to the customer. The model of having all of your cloud services in one location, a thousand kilometers away from the customer, while technically capable, we don’t believe is the right mix in client-supplier relationships. We need to make sure that physically there are people on the ground to work hand-in-hand with the business management and others to ensure that we have a successful outcome. 

That’s one of the strong key parts to the relationship between HPE and TasmaNet. TasmaNet is now a certified services provider with HPE, which lets us use their workforce anywhere around Australia and work with companies that want to utilize TasmaNet services.

Gardner: Help our readers and listeners understand that your regional reach is primarily in Tasmania but you’re also in Australia and you have some designs and plans for an even  larger expansion. Tell us about your roadmap?

No Net is an Island – Tasmania and Beyond

Harris: Over the last few years, we’ve really been spending time gathering information from a couple of early contracts to understand the relationship between a cloud provider and a customer. In the last six months, we put that into a product that we actually call  TasmaNet Core, which is our new system for delivering digital services.

During the next 18 months we are working with some large contracts that we have won down here in Tasmania, having just signed one for the state government. We certainly have a number of opportunities and pathways to start deploying services and working with the state government on how cloud can deliver better business outcomes for them. We need to make sure we really understand and document clearly how we achieve success here in Tasmania.

Then, our plan is, as a company, to push this out to the national level. There are a lot of regional places throughout Australia that require cloud services, and more and more companies like TasmaNet will move into those regional areas. We think it’s important that they aren’t forgotten and we also think that for any business that can be developed in Tasmania and operate successfully, there is no reason why it can’t be replicated to regional areas around Asia-Pacific as required.

Gardner: Joel, let’s step back a moment and look at how to show, rather than tell, what we mean, in the new era of cloud, by a proper cloud adoption. Do you have any examples, either named or generic, where we can look at how this unfolded and what the business  benefits have been when it’s done well?

Solutions for
Hybrid and Private Cloud

IT Infrastructure

Harris: One of our customers, about three years ago, moved into a cloud services environment, which was very successful for the company. But what we found was that some of the contracts with their software services, while they enabled them to move into a cloud provider, added a level of complexity that make the platform very difficult to manage ongoing. 

Over a number of years, we worked with them to remove that key application from the cloud environment. It’s really important that, as a cloud provider, we understand what’s right for the customer. At the end of the day, if there’s something that’s not working for the customer, we must work with them to get results.

It worked out successfully. We have a very strong relationship with the company. There’s a local company down here called TT-Line, which operates some boat vessels for shipping between Tasmania and Mainland Australia, and because of the platform, we had to find the right mix. That’s really important and I know HPE uses it as a catch phrase. 

This is a real-world example of where it’s important to find the right mix between putting your workloads in the appropriate place. It has to work both ways. It’s easy to come in to a cloud provider. We need to make sure it’s also easy to step back out as well, if it doesn’t work.

Now, we’re working with that company to deeply understand the rest of the business to see what are the workloads that can come out of TasmaNet, and what are the workloads that need to even move internally or actually move to an application-specific hosting environment?

Gardner: Before we close out, Joel, I’d like to look a bit to the future. We spoke earlier about how private cloud and adjusting your business appropriately to the hosting models that we’ve described is a huge step, but of course, the continuum is beyond that. It goes to hybrid. There are public cloud options, data placement, and privacy concerns that people are adjusting to in terms of location of data, jurisdictions, and so forth. Tell me about where you see it going and how an organization like yours adjusts to companies as they start to further explore that hybrid-cloud continuum?

Hybrid Offspring

Harris: Going forward, the network will play probably one of the biggest roles in cloud services in the coming 10 years. More and more, we’re seeing software-defined network suppliers come into the marketplace. In Australia, we have a large data center, NEXTDC, which started up their own network to connect all of the data centers. We have Megaport, which is 100 percent software-defined, where you can buy a capacity for up to one hour or long term. As these types of networks become common, it enables more and more the fluid movement of the services on top.

When we start to cross over two of the other really big things happening, which are the Internet of Things (IoT) and 5G, you have, all of a sudden, this connectivity that means data services can be delivered anywhere and that means cloud services can be delivered anywhere.

More and more, you’re going to see the collection of data lakes, the collection of information even by small businesses that understand that they want to keep all the information, and analyze it. As they go to cloud service providers, they will demand these data services there, too, and the analysis capabilities will become very, very powerful.

In the short term, the network is going to be the key enabler for things such as IoT, which will then flow on to support a distributed model for cloud providers in the next 10 years, whereas traditionally we are seeing them centralized into key larger cities. That will change over in the coming years, because there is just too much data to centralize as people start gathering all of this information.

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