Technology Infrastructure

Balancing Agility and Efficiency

AN 6818
Session 2
Agenda
– Overview of technology infrastructure in
organizations
» The Concept of a Stack
» Services and Relaxing the Ownership Constraint
» Enterprise Systems – ERP / CRM
– Evolving Elements of IT Infrastructure
• Balancing Standardization and Exploration
» The Internet of Things – building across stacks
» Big Data concepts
Stages of Technology Development – matches with the
resource-based view
Each product line and architecture in ICT progresses independently
until sudden convergence – added complexity

The conversion from 2nd to 3rd generation mainframes proved

far more complex and time-consuming than planned-the trauma
of this conversion effort heavily influenced the future development
of mainframe computers.

The Evolution of IBM’s Product Line

The conceptualization of a “stack”

– Each component can be

conceptualized as part of a
stack
• Software and hardware
• Telecom
• Allows for a common vocabulary
– Modular design
• convenient metaphor
• Competition within a layer,
interfaces defined
– For firms, complementarities in
being across layers in the stack
Software “Stack”

Value-added software
including both systems
and application
software
Examples of Stacks in Different Contexts
DISTRIBUTED COMPUTING

FORM OF COMPUTING WHERE SYSTEMS IN

DIFFERENT LOCATIONS COMMUNICATE AND
COLLABORATE TO COMPLETE A TASK

• Server: Program that fulfills the requests of a client

• Hardware context - Computer that has been configured to
support requests from other computers
• Software context - Program that fulfills requests
• Client: Software program that makes requests of a server program
Example: the Common Client Server Model
What is cloud computing then?

– If you can take a piece of the software stack and

move it somewhere else
• Simply connect to that piece of functionality on the
Internet as and when needed
• Don’t need to ”own” the software, only “lease” or “use” it
when needed
• It would be cheaper, easier to expand, flexible,
potentially limitless capability
– As long as you know how to communicate with the
functionality in a specified ”language”
– Web Services and APIs
The Cloud within the Tech Infrastructure
Acquiring services from other firms requires
additional details…
• One service provisioning model
– Service provider makes computing resources and infrastructure
available to the customer as needed, charges for specific usage rather
than a flat rate.
• Functionalities of service:
– A service should be well-defined, self-contained, easily contractable
• The various pieces should fit together nicely
– Service Oriented Architecture (SOA) is essentially a collection of
services which communicate with each other
• Determine quality of service (QoS)
– Customer care evaluations
– Technological evaluations
• Service-Level Agreement (SLA)
– A service-level agreement (SLA) is a contract between a service
provider and a customer that specifies, usually in measurable terms
(QoS), what services the network service provider will provide
ENTERPRISE SYSTEMS
The Big Picture – Enterprise Software

Bus Intell.
SCM
CRM
Social Nets

ERP

Data Warehouses, Mining

What are ERP systems?

• Systems that integrate financial, human resources,

manufacturing, distribution, order management and materials
management processes
• Shared data and visibility
• Connections with upstream and downstream partners
• Unifies data from different parts of the organization, providing
managers with real-time, up-to-date information on various
business parameters
• Manages important information flows within organization

Vision of a single, one-face enterprise

Most Enterprise Data Sits in the Database System

An organization’s database management system can

be set up to work with several applications both
within and outside the firm.
Why ERP?

– Data fragmentation in silos

– High costs
– Inflexible access
– Poor visibility
– Process complexity

The logic of industry “best practice”

Management Challenges

• Expensive
– Total implementation costs at 2-3% of revenues
– TCO: 15 million, 53K per frequent user
• Long implementation cycles
– 2-5 years to be up and running
– Major rework of existing infrastructure
• High failure rates
– Estimates at greater than 50%
• Long payback
– 31 months
In-premise ERP vs Cloud-based ERP
What is CRM?
A Strategy to Integrate & Coordinate all Customer Facing Processes,
Channels, and Interactions to improve Sales, Profitability, and
Customer Satisfaction
Components of a CRM Implementation

– Most CRM systems come with three components

• CRM Infrastructure
– Data, software and hardware infrastructure
• CRM Applications
– Individual applications that deliver value in targeted ways
• Organizational Transformation
– Comprehensive CRM-related changes to decision-
making and culture within the organization

Goodhue, Wixom and Watson, 2002

Enterprise Systems
– Worth the investment?
– Best of breed or
integrated solution?
– Competitive necessity?
• Costs can be
managed by moving
to the cloud
• Flexible and scalable
• Issues of data
management and
process
rationalization
remain…
Tech Infrastructure in Firms

– Forms the baseline for processes within the firm

• But what happens when business environment changes?
• Volatility and turbulence
– Need to balance out Flexibility versus Standardization
• Newer forms of technology that can support these tradeoffs

• Artificial Intelligence and Machine Learning Models (Later)

• The Internet of Things
– Sensing, collating, real-time decision-making, nimble and adaptive
• Big Data Tech
– The storage and processing required for large amounts of
unstructured and messy data
INTERNET OF THINGS – UNIFYING THE
STACKS
The Internet of Things

– Also called the Industrial Internet

• “IoT is defined here as a network comprised of various
nodes belonging to the technological, physical, and
broad socioeconomic environments”

– All three environments are needed to function

• Technical: hardware, software, platforms
• Physical: human, non-human, physical surroundings
• Socioeconomic: consumers, legislative bodies, policy-
makers, entrepreneurs
• Cuts across traditional
forms of
infrastructural stacks
• Creates new
opportunities for
firms and individuals
• Generates
tremendously useful
data streams, based
on embedded devices
“Connected” Devices

– Three pieces to the industrial internet

• Physical components
– Mechanical and electrical parts
• Smart components
– Sensors, microprocessors, data storage, software, controls, local
OS
• Connectivity components
– Ports, antennae, protocols, network communication standards

– These elements create a new “infrastructure” stack

• More capabilities for operational efficiency
• Data streams for service creation and optimization
Largely changes how firms think about their
products and services…

• What set of smart and connected capabilities should firms pursue?

– Bose audio, Alexa, Apple watch – what do these represent?

• What functionality to invest in?

– Response time, network availability, user interface, location-based services

• Keep the service open or closed?

– Android versus iOS?

• How to use the large amounts of data that is generated?

– Sell data? Sell data+service? What about traditional business?

• Change business model entirely?

– Is GE in engines or engine data? Is Bose still an audio company?
BIG DATA – STORING AND MANAGING
LARGE DATASETS
 Big Data: what’s the fuss all about?

Approximately 2.5 quintillion bytes of data The global Big Data market is
are created each day projected to hit $103 billion by 2027
6.3 Million Google Searches Take Place 241 million emails sent per minute
Every Minute 41.6 million Whatsapp messages
90% Of The Data Worldwide Is Unstructured
Traditional methods of data storage and analysis insufficient
Starting point for data management –
relational databases

– It all started with how to

store data
• Relational Database
Management System
(RDBMS)

– Idea: First define data

schema, capture
relations and store data
accordingly
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The Limits of Relational Databases

– Advantages
• neat, clean, and fast (once indexed), high integrity across data
fields, great with corporate data
• Relational algebra – complete and reliable

– Disadvantages
• Not flexible when new data formats show up (video, text,
mixed media)
• very slow for large data sets
• gets very expensive with loading more data
• Enter new tech concept – big data
However, what happens with Big Data?

– Big Data context

• The 3 Vs – Variety, Velocity and Volume
• Beyond these three Vs
– Viscosity: resistance to flow of data
– Variability: unpredictable rate of flow and types
– Veracity: biases, noise, reliability
– Volatility: how long data are valid and relevant
What does this mean for firms?

• Traditional form of decision making on curated, “clean” data

is unnecessary
– “The unreasonable effectiveness of data”
» Move away from well-specified hypotheses testing

• Experimentation led by availability of data

– A/B testing, prediction as opposed to explanation

• Correlations and not causal relations

– Cannot answer “why?”
» In many cases, answering “why?” may come later
– Google and Flu, medicine, Fire hazards in NYC
What differentiates the core elements of big data?

• Flexibility
– Data hub, not a database
» “Write once, read many” - WORM
– Schema on read versus on write
» Efficient queries and management of the data
» Many choices for processing data – not just SQL
• Scale
– 1000s of computers, often commodity hardware
– Petabytes of data processed
• Cost
– Dramatically lower $ / terabyte
Does Big Data Replace Traditional
Corporate IT?
Does Big Data replace “traditional” data?

• No – traditional data (accounting, inventory, HR,

sales and marketing, production plans) still live in
well-designed and integrated systems
– Think “ERP” and “Accounting” databases

• However, these are not designed for the 3Vs

– Challenge: How do you retain traditional forms of curated
data (enterprise IT) while also investing in opportunities
provided by big data?
The Heart of Big Data: The Hadoop Architecture

Each node can be inexpensive

Redundancy through repetition

Master node stores real information

about data location and jobs

Scaling up is easy – simply add

more processors to the Hadoop
cluster
Elements of the Hadoop Ecosystem (Stack)

Open source, flexible and de-centralized. New applications added to the ecosystem
on an ongoing basis.
Big Data on the Cloud?
• Amazon Web Services – market leader
Big Data = Big Brother?

• Big Data techniques allow correlations between

dimensions of a user crossing into ethical grey areas
» Location based data + Health data
» Political views + Shopping data + Voting Records
» Car sensor data + Insurance data + Exercise records
» Teen social media use + Prescription data -> Teenage
pregnancies
• Unintended consequences
» Making gun records public
» Lack of domain knowledge (the McNamara effect)
» “Predictive policing”
Summary
• Tech infrastructure is not a monolithic entity
– Requires analysis about the fit between the external
environment, firm strategy and technology
– Legacy systems remain a constraint

• Improvisation and dynamic decision-making

requires appropriate investments in tech

• Most high-performing firms start small and add

incrementally in high-value sectors
– Payoff has to be assessed relative the cost and
feasibility of the technology investments