A Tool Cloud

Today, most sizable IT organizations have hundreds, if not thousands, of licenses for software tools that are critical for building and running the databases and applications that power their business. Managing these tools and their associated licenses, including deploying, provisioning, and updating them, is time-consuming and incurs many hidden costs. There are also real productivity costs when IT professionals can’t readily access the tools they need at the right time. On the other hand, putting a bunch of tools on a server with no management, provisioning or usage tracking capabilities around them can come at an even higher cost. So then, where should IT professionals or anyone else responsible for setting up and managing a tools infrastructure look for answers? The latest phenomenon sweeping the IT landscape – cloud computing – may hold the most promise to overcome this issue.

The reduced complexity, lower costs and improved scalability afforded by enterprise clouds are growing in appeal to many IT organizations. What many people fail to realize is that cloud-derived advantages such as on-demand access, shared pools and rapid provisioning are not limited to running their databases and applications. These same benefits can also be extended to help them reduce the costs and complexities of managing the myriad software tools they use to design, build and manage their systems. By employing cloud principles to set up a private cloud infrastructure for tools – a tool cloud, if you will – complete with application virtualization capabilities, organizations can centrally provision and manage licenses across their enterprise.

The emerging tool cloud approach can give IT groups within an enterprise instant access to many of the tools they need to solve critical tasks, both improving their productivity and reducing tooling costs by allowing software to be shared.

IT Ecosystem

The IT industry today consists of a rapidly evolving and massively interconnected network of organizations, technologies, products and consumers. In contrast with the vertically integrated environment of the 1990s and millennium 2000, today’s industry is divided into a large number of domains producing customized components, systems, and services. The degree of interaction between firms in the industry is truly astounding, with substantial number of organizations frequently involved in the design, development, out sourcing, or implementation of even a single module of enterprise software suites.

The IT ecosystem began the 21st century by entering a deep recession, made worse by over investments and business failures in the IT, Software and Telecommunications industries. At around the same time, Microsoft Corporation and the US Department of Justice entered into a Consent Decree (“Consent Decree”) that resolved their multi-year antitrust dispute. Since, this period of retrenchment, the IT ecosystem has regained its health, rebounding from its recession and delivering significant levels of innovation.

This network of organizations can be compared to a biological ecosystem. Like its biological counterparts, the IT ecosystem is characterized by a large number of variables who depend on each other for their mutual effectiveness and survival. Because the performance of individual firms and the utility of individual products depend so much on the performance of other firms and products in the ecosystem, understanding the IT ecosystem requires the development of ways to characterize the collective health of the setting. Drawing from a variety of public and proprietary data, including market value indicators, productivity measurements, and return on invested capital metrics with respect to the three critical indicators of IT ecosystem health, robustness, productivity, and innovation, the IT ecosystem is strong in all three of the most important sectors of Hardware, Software, and Services.

Robustness - can be assessed in a variety of ways. One way is to analyze the sustainability of value in the ecosystem. The persistence or recovery in the value of the constituent firms after a major disruption can be used as an indicator of the ecosystem’s robustness. Another approach to robustness, developed elsewhere, is a measure of financial betas and firm survival rates. A healthy ecosystem will promote the survival of a diverse set of firms, including those that populate a variety of niches, through inevitable disruptions. This diversity provides greater choice and reliability to the customers that depend on a business ecosystem.

Productivity - In conservation literature on biological ecosystems, the term productivity how effectively the ecosystem converts raw materials into living organisms - is a widely used measure of ecosystem health and how it benefits those who use it. Improvements in productivity show that an ecosystem is able to produce more with the same or less input. In the long run, real earnings in a business ecosystem are tied to productivity gains. Improvements in productivity within the IT ecosystem are equally important measures of the health and competitiveness of the IT industry. Output per hour of all persons – or labor productivity – is the most commonly used productivity measure.

Innovation - Robustness and productivity do not completely capture the health of a business ecosystem. Both in ecological and business literature, it is important that systems also exhibit variety or diversity — that they support many different species or types of organizations. Innovation, or Niche Creation, is the critical mechanism by which business ecosystems increase diversity over time. This diversity results in new alternatives and choices for the customers that depend on a business ecosystem. In the analyses of Innovation that follows, we will first look at broad indicators of innovation across the IT ecosystem, and we will then review specific cases of very rapid innovation in products and business models that have resulted in significant growth and changes in the competitive landscape. The return on venture capital is a good measure of the effectiveness of investment in innovation and niche creation. Venture capital is the primary source of funding for start-up activity in new ecosystem domains. Venture capital investment on its own (or the number of new firms created) is not necessarily a good indicator in this context, because we are interested in meaningful, sustainable innovative niches. Return on venture capital investment is a much better indicator of sustainable innovation and niche creation than overall investment levels.

Finally, there is a strong level of innovativeness and growth, with new competitors repeatedly challenging the more established companies. Software and hardware platforms are witnessing significant innovation and evolution, which is in turn fueling innovation in a broad variety of applications and business models.