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Thought Leaders In Cloud Computing: Dennis Hodges, CIO Of Inteva (Part 2)

Posted on Tuesday, Aug 31st 2010

By guest author Shaloo Shalini and Bhavana Sharma

Functionality is the key when it comes to selecting a vendor for a cloud-based solution as with noncloud offerings. Integration with on-premise software and applications is a big requirement, and some vendors, such as Inteva, are taking a lead in helping customers with providing integrated solutions by working directly with other software solution vendors. This may not be a scalable proposition, and in the long run we expect to see newer methodologies addressing the issue of integration in the cloud and with on-premise applications in a more streamlined and scalable manner. This part of the interview also covers the topic of payback from the investment in cloud computing. Dennis mentions that Inteva’s investment in cloud paid for itself in less than a year. Read on for more details.

SM: When you are evaluating cloud vendors, your primary criteria is the functionality of what you trying to accomplish; is that a fair assessment?

DH: Yes, functionality is most important thing whether it is in a cloud or not. If there are two vendors that tie and there isn’t huge difference between their solutions, then I may go in for the cloud, but if one person came in and head and shoulders above the other, then I would go with him regardless of whether he was in the cloud.

SM: I see. When you are talking to vendors, what is their reaction? For example, you mentioned Plex and Birst and said that you asked them to talk to each other and sort out whether they can work with each other and integrate. What kind of response do you get from them?

DH: From a business intelligence (BI) cloud vendor’s perspective, this is what they expect. They understand that you do not to want to be an expert on transformation and logic behind data conversion or be an extract, transform, load (ETL) expert. Rather than just having them for reporting, we want them to be ETL experts as well. Our ERP provider has already started working providing us ODBC interfaces over which we can put the data right out. So, they are getting there as well; they understand the model.

SM: Let me switch over to business models in the cloud. When you think about moving to cloud how much is the notion of a different business model going from a capital expense (capex) to an operational expenses (opex) model or perhaps to a significantly lower cost structure. How big a role was that playing in your decision making?

DH: The capex to opex switch was a big decision maker in our ERP selection. We have made public announcements about things such as we have been able to cut our IT costs by about a third through some of the strategic decisions we made – moving away from some of the traditional IT support models and moving to SaaS-based ERP. In our business we have cost models. IT is not a profit center of course, but my goal here is to be the lowest cost provider – at world-class costs and with world-class service, which is a difficult thing to provide. [Inteva reduced its IT costs from 2% to 1% of revenues by using Plex’s solution; see more here.]

SM: But part of that cost saving sounds like it has come from being able to cut the IT organization significantly as well.

DH: Yes, as compared to before. Well, we were spun off from our parent company Delphi about two and half years ago. We are coming in at a much lower level on costs and headcount than what was estimated by our former parent in the automotive world, which used a more traditional IT model.

SM: Let’s talk about return on investment (ROI). What kinds of returns do you think your investment in cloud computing will fetch you and in what time?

DH: It has already paid for itself; as far as our cloud-based ERP is concerned, it was less than a year payback.

SM: Very good. As you go through selecting more cloud vendors, what are your expectations for integration and the integration costs involved? Do you have any feelings about whether the integration costs and risks may surpass your cost savings or the kind of cost savings that you have had so far?

DH: Well, we have been fortunate in that aspect because we worked with a lot of these vendors. They see the benefit of what we want to do. We have really been able to negotiate very good implementation costs because we basically pushed a lot onto them. We said, look there is a lot of value in your doing it in this way. In the case of Plex‘s ERP system, we are one of their largest clients, which is an advantage for us. SAP wouldn’t even know who you were if we used SAP in terms of customer size, but with Plex we are big enough to have a voice with them. But we have also been global in pushing them in the areas that they knew they needed pushing in, so they have been very flexible about implementation costs. I think as we talked to Plex we also talked to Birst and we told them look, here is the way for you to get into a new business altogether with such a service. You can talk to Plex, and I think you have the opportunity to basically provide this integration as a service to people out there who are Plex customers. This integration is not a one-off case just for us; this is almost a new service Birst can provide to people who aren’t yet Birst customers. If somebody can do that well, they will have other customers.

SM: Yes, there are definitely benefits across the board.

DH: I am a big believer in that. You pick a vendor and build a good relationship with that vendor. I am in calls about Plex, I have been to the conferences presented on the benefits of going to Plex for its reference clients because in the long run, strong relationship building, good strong service is just as important to me as it is to the vendor. I am not one of those who believe in trying to breach a vendor and change and then wonder why I don’t get good support from my vendors.

SM: How is Plex handling this integration? Is it handling this integration in-house or does it have any system integrators in between helping in this integration?

DH: No, I don’t think there is a third party involved in the integration. Plex has very deep experience in this area and it is pretty restrictive in terms of who gets on the table in between. So, my assumption would be that it is directly involved and the two vendors will be talking directly to get the integration done with each other.

SM: But isn’t that going to be difficult to scale up? From the point of view of the SaaS providers, if they have to do all of their integration work for every client, won’t they run into issues?

DH: Oh, you are right! I was thinking about the upfront work more than the longer term work. I think what they will probably do is the BI provider doesn’t have good hooks into the tables within Plex, but it does for the ODBC interfaces. I think it would be basically the BI provider that – I think it will involve integration teams as well.

SM: Today we are in the early stages of integration in the industry in terms of significant cloud computing adoption. My broader question is, As this industry matures and as vendors and their ecosystem mature, there will be integrators in the middle? Because it’s really not in the interest of cloud vendors to do all this integration themselves. I can see that early customers would push the integration work to the vendors. From the vendor’s point of view, it would require very well trained, experienced integrators who know their systems inside out to be able to do the integration well. Eventually, cloud vendors will need third-party professional services or third-party organizations that do this kind of integration for them to scale.

DH: Yes, I would agree with that. The other thing is when you move forward, it grows and there integrator’s needs will change. But the nice thing is that all of these tools have really moved ahead and toward simplicity. It is not like other integration projects that I have experience with. I was a project manager several times for SAP BMW implementations. This integration is nowhere near as complex as that was.

SM: Yes, those are massive.

DH: Those were massive with entire teams of people with experts on the SAP side, experts on the BMW side. What I have seen from these newer ones is that now the tables are exposed in quick drag and drop. You want an integrator to enter at some point and do it more quickly and rapidly rather than learn it all yourselves or push it all on the vendor.

This segment is part 2 in the series : Thought Leaders In Cloud Computing: Dennis Hodges, CIO Of Inteva
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