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DHagar
DHagar
11/9/2017 6:27:05 PM
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Platinum
Re: You all need to do the things that we want you to ....
@JohnBarnes, because it is a mass customization model.  You are tapping into "shared" infrastructure which gives the software-as-a-service the cost advantages of economies of scale, then you are able to deploy the applications that meet your customers and your markets.

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DHagar
DHagar
11/9/2017 6:23:40 PM
User Rank
Platinum
Re: A lot of "sunk costs" in older network tech...
@JohnBarnes, OK I will acknowledge the E(t) pun!  Good one!

True, but I believe we can take the knowledge from the pure formula application you have brilliantly outlined, and create a "comparative" value as to the additional capabilities that the transformation has provided to horizontally benchmark as to gains/losses, that will provide a bit more intelligence to the ROI numbers! 

In other words, I believe we will have to develop additional measures of value capabilities that capture the contribution to infrastructure as well as performance elements.  This will create a new bridge to the age-old problem of short-term vs. long-term value as well. 

Until we develop a financial value it can continue to be a stepchild and not appropriately factored in with just performance measures alone.

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DHagar
DHagar
11/9/2017 6:15:22 PM
User Rank
Platinum
Re: A lot of "sunk costs" in older network tech...
@ms.akkineni, thanks!  Yes, it is a fundamental truth that we would all do well to remember.  It would move us forward in more sustainable business models.

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elizabethv
elizabethv
11/9/2017 8:53:52 AM
User Rank
Platinum
Re: A lot of "sunk costs" in older network tech...
@mpouraryan - Half of their jobs being make redundant is astronomical! That's just crazy! My brother is currently living in Japan, and he said that in Japan, they don't allow for a job to be made redundant with technology. That they still have people who work in large rooms with literal filing cabinets and hand written papers. They put their people over their progress. In this instance, I would think letting the jobs suss themselves out with atrition would be best for the economy. But the "captailism" that has been drilled into my brain understands that won't happen. Somewhere out there, is a man with mulitple yachts, and he won't lose even one of them to save a person's job unnecessarily. Though apparently Wall Street is over-investing in the food industry at the moment, in an attempt to offset the loss in brick-and-mortar retail shopping. Perhaps everyone in the banking industry can go get jobs waiting tables. 

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mpouraryan
mpouraryan
11/8/2017 10:28:09 PM
User Rank
Platinum
Re: You all need to do the things that we want you to ....
The Cloud is the future no doubt--and Government (Despite all the challenges we're witness to) is at the forefront of engaging it--as the GovLoop Virtual Conference I was at this year underscored.    

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mpouraryan
mpouraryan
11/8/2017 10:26:57 PM
User Rank
Platinum
Re: A lot of "sunk costs" in older network tech...
As I have repeatedly noted in our on-going discourse, as long as we never forget the human element--here is the thing, though, when I read about Deutsche Bank basically noting that half of its' 97,000 workforce is going to be made redunant, we have a challenge we have to make sure we mitigate constantly and consistently...

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JohnBarnes
JohnBarnes
11/8/2017 10:01:56 PM
User Rank
Platinum
Re: You all need to do the things that we want you to ....
DHagar,

Traditionally economies of scale come from 1) wider sharing of overhead, 2) bulk purchasing, and 3) lumpy capacity. That is, the Mighty Big Widget Co. can outbid Scrappy Tiny Widget Co. because

1)Mighty Big only needs the same size of office staff (and can spred the cost over more transactions),

2) Mighty Big can get the volume discount on widget parts, which the supplier gives because they can pack bigger boxes and pay for fewer deliveries, and

3) widgetmills come in units of a million widgets per year, so Scrappy meets its 600,000 orders by using only 60% of their one-widget-mill capacity, but Mighty Big meets its 9.2 million orders using 92% of their ten-widget-mills.

The interesting thing about the cloud is that overhead is mostly automated and thus negligible (especially if it's in the cloud!), bulk purchasing is really a hardware issue (especially as NFV and SDN come into play), and one of the major advantages of being in the cloud is that capacity is no longer lumpy (you pay for infinitely divisible server access, not integer-unit servers).   So where would the economies of scale be coming from?

 

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JohnBarnes
JohnBarnes
11/8/2017 9:50:08 PM
User Rank
Platinum
Re: A lot of "sunk costs" in older network tech...
DHagar,

Well, one obvious place to start in the new metrics -- and it's already in widespread use -- is to do expected value over time where you have a probability distribution on availability. 

It's what any family that saves money by driving "thousand dollar wonders" does (I can remember when those were "hundred dollar wonders.").  I.e. you know this car has maybe a year at best left in it if you do routine maintenance and very inexpensive repairs only, and i will cost $1000.  You plan to junk it and buy another thousand-dollar-wonder whenever it dies or needs something expensive. So some portion of what you save on insurance, repairs, etc. every month has to go into the Car Replacement Fund, and if you do it right, you usually have more in the Car Replacement Fund than the replacement car costs.  (Factoring in as high-cost low-probability cases the possibilities that you might have the thing blow up on the way to the emergency room some night, or that it might decide to perish right when you don't have time to shop Auto Trader).

You can easily do that problem (assuming enough data on hand collected over the last few years, plus that possible vendors are giving you accurate numbers) for the only slightly more complicated problem of when and whether to migrate to the cloud, and end up with a distribution for estimated time to make the switch that poses  lowest cost per acceptable risk.

However -- doing it that way means that the variance of your replacement cost is much wider, and it's quite possible that your board, CFO, or CEO may just not want to accept that level of risk. They'll need to look at the whole distribution, not just a single value for E(t).  (Okay, who will be first with the E(t) phone home pun?)

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batye
batye
11/8/2017 9:05:20 PM
User Rank
Platinum
Re: A lot of "sunk costs" in older network tech...
@ms.akkineni yes as in my mind everything must be calculated and take in the account during planing of the change... 

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ms.akkineni
ms.akkineni
11/8/2017 8:39:05 PM
User Rank
Platinum
Re: A lot of "sunk costs" in older network tech...
@batye:

Absoluetly. As stated in another comment, companies should plan in such a way that atleast tiny portion of the earnings must be utilized for upcoming initiatives. That way there won't be surprises and things can be handled in better fashion whenever there is a demanding trend that compaies have to invest into and be sure that they are still able to meet market conditions.

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