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The New Economy

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The New Economy

  1. 1. P R E S E N T S Composing the Digital Symphony All aspects of modern business can harness the power of digital, but the whole is more than the sum of its parts. The key to optimising your digital infrastructure is a harmonious arrangement IN ASSOCIATION WITH
  2. 2. 04 Introduction Outdated core and backend systems can hamstring even the most advanced businesses. A holistic approach is needed 06 Bringing Value to Industry AI and blockchain look set to release businesses from the burden of data analysis. Early adoption offers a competitive advantage 08 The API Economy APIs allow for collaborative solutions to develop organically across the market, benefitting consumers and companies alike 10 Accessing Dark Data AI-based analysis is set to harness the reams of video and image content currently unavailable to computerised systems 12 Hybrid Cloud Flexible cloud networks manage elasticity, allowing a quick response to demand spikes and an efficient scale-down in slow periods 14 Removing Complexity Cloud managed services place a company’s internal operations in the hands of experts, freeing up capacity to focus on core services 16 Challenges Ahead Cybercrime and regulatory changes challenge even the most agile companies. Forward planning and external support are essential Contents
  3. 3. In November 2015, Paris Orly International Airport was forced to ground all its flights due to a software failure. The program that failed wascalledDECOR,andwasusedbyair-trafficcontrollerstotransmit weather information to pilots. It was an important piece of software, and one that you might expect to be pretty sophisticated. It was running on Microsoft Windows 3.1. Originally released in 1992. Worse still, many of the people with the expertise needed to fix the system had retired, making an upgrade in the near future a necessity. Thankfully, such examples are the exception, not the rule, and most businesses realised they needed to update their digital ca- pabilities a long time ago. Instead of disparate systems split up in many different ways, companies are realising the benefits of digitally enabled systems that are centralised, homogenised and efficient in ways they have never been before. Making sure our modern, digital age – where programs from a thousand different developers, running on hardware from a hundred different man- ufacturers, have to communicate frequently and instantaneously – is allowed for at a business-wide level is imperative. Get with the program In February 2016, Deloitte released its annual Tech Trends 2016 report, and listed the eight biggest areas businesses are focusing on with their IT strategies. The list echoed insights from a range of other organisations, from the World Economic Forum and Future Today Institute through to Gartner and IBM. All of these organisations agreed technologies such as the Internet of Things, virtual reality and blockchain would have a part to play in our digital future. But Deloitte also identified a more fundamental change to the way technol- ogies are used. Many businesses, the report found, are currently in the process of ‘reimagining core systems’; while they may have a flashy app that runs on the very latest versions of iOS and Android, their backend systems – which power essential functions – are astonishingly old and beginning to cause problems. Some larger companies, particularly in the financial services sector, could still be using custom-built systems that were set up for them in the 1970s. An even greater number of firms are relying on IT systems that were put in during the digital expansion of the 1990s. These core systems are a significant drag on any new function that is imple- mented, and make it unacceptably diffi- cult for companies to keep up with new- er competitors. Google, Facebook and “Some larger companies could still be using custom-built systems that were set up for them in the 1970s” Getting in tune with the connected world Information technology is now central to virtually every industry. Despite this, many are still failing to take the holistic approach required of a modern digital business 0504 Uber certainly aren’t held back by such legacy systems. These out-of-date core systems and a compartmentalised approach to IT solutions are the barriers stopping companies mak- ing the most of their investments. Like the individual players in a symphony orchestra, digital systems may do well on their own, but only through coordination and focus can they produce a sublime masterpiece. With the variety of digital systems now in use, this is no easy task. Technologies as varied as cognitive computing, application programming interfaces (APIs) and hybrid cloud systems must work together while implementing conceptual approaches, such as data visibility and collaborative workspaces. These disparate ideas are great on their own, but better together. Diverse technologies Given the bewildering range of technologies available, a company could be forgiven for simply not knowing which way to turn. One of the many new opportunities to explore is artificial intelli- gence (AI), also known as cognitive computing or machine learning. No longer the stuff of science fiction, it’s now possible to simulate a human’s cognitive capabilities through the use of complex computer systems. Such systems are able to sort and process information far more quickly than any human could, and make recommendations that are more informed than any single person could offer. And, like humans, cognitive technologies are able to learn, adapt and improve. But whether you’re a human or a machine, learning needs to be sustained by access to high-quality and relevant information. In order for cognitive technologies to do this, they need access to so- called ‘dark data’, i.e. data stored in ways that have until now made it inaccessible to computers. That’s often formats humans would find very easy to interpret – pictures, videos, Facebook posts – but wouldn’t mean very much to a traditional computer. APIs can be a great way for businesses to maximise the value of their data. Opening information up and encouraging development beyond company walls can help businesses discover new uses for their data, and to develop new services and even business models. While each of these opportunities could be tackled one at a time, in order for them to be put to truly transformative use they need to be approached as a whole. Otherwise the end result could be disjointed, disconnected and, ultimately, ineffective. Clouded view This is one of the reasons tech companies have been so keen to offer new cloud computing services over the last few years. Google’s cloud system combines storage, computing, data an- alytics and machine learning, while Amazon Web Services brings the expertise of one of the internet’s biggest retail and logistics firms to businesses across the globe. But, as the cloud services industry evolves, it is leaders in business transformation that are coming to the fore. IBM, for example, has over 100 years of finding solutions to clients’ technology problems to bring to the table. A major benefit of working in the cloud is it means you can keep all your critical business information and processes in one place. With the right fully integrated system, employees in Lisbon, Lagos and Llanelli can work on a single set of documents simulta- neously. Even better, businesses can take advantage of powerful computer systems that would be impossibly expensive for them to buy outright. By taking advantage of cloud systems where necessary, businesses can remain competitive for a relatively low cost. If businesses don’t move soon, it might become too late; people, organisations, and (thanks to the Internet of Things) even washing machines are generating infor- mation at a rate we would previously have thought impossible. This volume of data is as extraordinary as it is intimidating, and will be one of the biggest forces driving business in the 21st century. If companies don’t develop the most efficient and effective systems to ride that tsunami, they will be washed away by it – and by the commercial advantage it will give to more capable competitors. This is not going to stop. Business is changing, and there are going to be more companies who find their antiquated back- end lets them down in the face of a younger, more innovative start-up that has moseyed into their industry. But by building systems that fire on all cylinders when needed, any business can be ready for the future. 50xmore data in the digital universe predicted by 2020 than in 2010 1.7MBof new information created by every human, every second of every day Source: IDC
  4. 4. The Olympics Games is the biggest sporting event on the planet. With billions of people watching, and billions of dollars being spent on advertising and staging, it’s also pretty big business. With each new Games, some new technological development is rolled out to stun the crowds and remind them that this is bigger than all the rest. In 1996 it was DiveCam, in 2008 it was HawkEye, but in 2016 impressive new technology was everywhere. Through a combination of the cloud, sensors, 3D cameras and AI crunching the numbers, viewers could see impressively complex statistics fed back in real time. But these new technologies are not just changing the way we en- joy the women’s 400-metre freestyle; they revolutionise the way busi- nesses operate. Because systems can learn and surmise from huge volumes of structured and unstructured data, they are not only able to improve efficiency and reduce costs, but also improve and adapt business intelligence. The exact ways in which these revolutionary capabilities will affect business are only just beginning to emerge, but we can be certain they will change the very ways we operate – at a time when customers around the world are demanding just that. At this year’s French Open, the French Tennis Federation and IBM collaborated to bring real-time information, personalisation and sharing to fans. The IBM SlamTracker captured and visual- ised real-time data to provide tennis geeks with a constant flow of facts and stats: serve speed, type of shot, duration, points and A wake-up call for business With factors from cybersecurity to data liability to consider, the business environment has never been more intractable. Industries must be awake to power of technology to reinvigorate winners. Built on IBM’s Watson technology, IBM SlamTracker can track and actually un- derstand the conversations taking place on social platforms, discerning the sources and sentiments of the exchanges. Access to such comprehensive infor- mation means individuals can make bet- ter-informed decisions with less risk – and that’s to the benefit of organisations, cus- tomers and service as a whole. Cognitive systems present a host of new possibilities; they provide the tools necessary to prepare companies for the future. Who needs banks anymore? Nowhere are these new technological tools needed more than in financial services. The industry is facing a plethora of new and in- creasingly complex challenges – painful re- minders of the 2008 crisis. Customers are demanding increasingly complex services, while remaining worried about who they can trust. At the same time, compliance with a whole new raft of regulations is costing fi- nancial institutions a lot of time and money. “People can bank without a bank now”, as Sebastian Krause, General Manager of IBM Cloud in Europe, put it. “There is competitive pressure – including from oth- er industries – so banks are becoming less conservative in their approach to new tech- nologies. The market will be disrupted even “IBM SlamTracker can track and actually understand the conversations taking place on social platforms” more in the future, so to stay in business they must open up to a changed world. To take the whole organisation on that journey is a big shift and it needs not only the right strategy, but also a lot of leadership.” Take financial transactions: they are a vital and ever-growing part of modern soci- ety, but they are still, for the most part, con- ducted through woefully out-of-date meth- ods. As ever more parties and ever-greater regulation are added, the level of com- plexity increases even further. Fortunately, there is an alternative. Decentralised ledger technology (block- chain to you and me) has the potential to completely change the financial services industry, through greater efficiency, trans- parency and cost-effectiveness. For ex- ample, JP Morgan is working with one of the biggest names in blockchain – New York-based Digital Asset Holdings – to settle transactions faster and at signifi- cantly less expense to both the company and its consumers. The partnership has also resulted in a considerable reduction in the number of associated risks, including fraud and the liability of cross-border payments. Crédit Mutuel Arkéa, meanwhile, began using cloud platform Bluemix to improve and manage customer identification in June 2016. By creating a single (but multinational) Know-Your-Client platform, the company no longer needlessly duplicates information or data requests. The result is a dramatic improvement to the user experience for both consumers and advisors. More and more institutions are embracing this exciting new financial technology, whether through their adoption of blockchain, alternative payment systems or optimal customer data management. Customer expectations are growing, but through such fast-paced fintech development, they can be met. Save a life The benefits of advancing technology are not limited to improving efficiency and security. Just as AI can absorb, comprehend and retain everything there is to know about Roger Federer’s backhand, it can do the same with corporate data. AI start-up DeepMind is taking bold steps in this area. Through its machine learning technology, medical data can be analysed far more quickly and accurately than ever before, improving the diagnosis process and treatment of a whole range of illnesses and afflictions. As well as capturing unique information about individual patients’ health histories, cognitive computing provides vital access to pre- viously concealed health data, while allowing it to be assimilated in one place. IBM Watson Health, for example, can digest up to 40 million documents in just 15 seconds; that’s a pretty impres- sive tool to have in the fight against cancer or dementia, say. Par- ticularly when one considers that, by 2020, the volume of global medical records is expected to double every 73 days – a rate far beyond anything any conventional system is capable of coping with. IBM Watson Health focuses on offering flexible, customisable services that cater to every patient’s individual needs. Through technological personalisation, organisa- tions are able target specific patient groups and reduce staff workloads, creating a more streamlined and transparent process. Since adopting IBM Watson Health, Bon Secours Virginia Medical Group – a hospital-owned multi-speciality practice – has been able to create a viable platform between the tradi- tional models of value-based care and fee- for-service across its 100 locations. The suc- cessful implementation of IBM’s technology dramatically increased both quality of patient care and revenue. As you can imagine, healthcare exec- utives quite like the idea of being able to both improve patient solutions and record management, and lower costs. The com- bination of big data analytics and scalable solutions can transform daily processes for a whole host of industry professionals, from researchers, physicians, care managers and nutritionists, to CIOs, hospital administrators and public health officials. But the implications of this powerful new technology go far beyond the core industry of making people better. By collating data from hundreds of different sources into one space, the insurance industry could dramatically improve preventive care man- agement. Ultimately, AI systems can help organisations and healthcare professionals to improve the level of care they provide to their patients, making life better for both in- dividuals and society as a whole. 40m Number of documents IBM Watson Health can digest in 15 seconds 73days Time it will take the volume of global medical records to double in 2020 Sebastian Krause General Manager, IBM Cloud Europe For the financial services industry alone, blockchain could reduce annual global banking costs by as much as $20bn. Some fintech start-ups are already developing new automated, programmable functions such as ‘smart contract’ agreements, which are executed with no human intervention once pre- defined conditions are met. By using IBM Bluemix’s blockchain service, clients and partners can create their own blockchain network with validating nodes and a designated security service. From there, they can deploy their own smart contracts. Blockchain is a potential game-changer for many other industries too, including processing medical records in healthcare, voting for governments, and creating licensing for the music industry. And, as blockchain has the potential to lower transaction costs, early adopters will gain a competitive advantage. 0706
  5. 5. What makes the smartphone a truly remarka- ble device is not that it is a very clever phone, but that it is a complete lifestyle platform. The apps that give the block of glass, metal and plastic in your pocket utility – Uber, Twitter, Netflix and the rest – aren’t usually made by the manufacturer, but by some completely separate – often even rival – corporation. The lack of direct connection between the manufacturer and developer is what allows for true innovation. Each app has a separate set of developers and funders, maximising the device’s capabilities to pro- duce a focused and often novel point of utility, as opposed to a closely linked, but ultimately tepid set of applications supplied all-in by the hardware manufacturer. In the same way, the opening up of application programming interfaces could easily lead to new, high-value services springing up in company ecosystems. It could bring increased value to custom- ers, creating loyalty and, very importantly, additional revenue. Companies often have huge amounts of data that could, in theory, hold the key to Don’t isolate yourself – collaborationis the future By opening their systems up to others through robust APIs, organisations can let their services, products and profits grow in ways they could never even have imagined improving their business processes for cus- tomers. The problem is that data is usually spread across a number of different apps, with no simple way of being brought togeth- er for meaningful exploitation. APIs – which are, simply, a set of rules, protocols and tools programmers can use to interact with a pre-existing system – make this exploitation possible. A third-party devel- oper can access these tools and use them to create their own technological offerings. This means APIs aren’t just useful for the original software manufacturers, but for the businesses that make them as well. By multiplying the number of platforms a company is on, APIs also multiply the num- ber of innovators the organisation is working with, creating new ways for customers to interact with the business and, consequent- ly, increase levels of interaction with the company’s products. While it might be easy to dismiss APIs as a way for companies to piggyback off someone else’s success, it would be an ex- pensive criticism to make; without an API, a company is closing itself off from today’s “Without an API, a company is closing itself off from today’s interconnected world” interconnected world, denying the realities of a market that delivers revenue through collaboration and innovation. APIs are the glue connecting the disparate systems that make up modern technology. Instead of forcing a customer to navigate away from a website in order to access a product or service, APIs allow services and products from different companies to be embedded in each other’s sites. FloomIt, for example, is an app that lets you share photos with strangers without divulging personal information. From the app, you can directly order prints of photos from pharmacy chain Wal- greens. Because Walgreens had made its printing API available to developers, FloomIt was able to create a way for its users to order prints in a secure and hassle-free way, benefiting both companies as well as their customers. But while the mutual benefits of having an API are obvious, hes- itant companies may soon not have a choice in the matter. Regu- latory bodies are increasingly interested in using companies’ open APIs to streamline methods that monitor business practices, and as a consequence, adopting robust APIs may soon be a legal requirement. Strategy or product? However, in order for APIs to be effective, somebody needs to be monitoring and maintaining them. Research conducted by the IBM Institute for Business Value has identified that the key to providing a suc- cessful API comes from a business treating it as its own product for the potential cus- tomer – the developer looking to improve its own creation. Organisations need to put a significant amount of effort into making sure their APIs are appealing and easy to use. And they need to be designed that way from the start, because only by using integrated cloud systems can a business make its API as user-friendly as possible. IBM also identified that the most suc- cessful APIs were developed with an insight into what it was that customers actually wanted. An API is useless unless it provides access to the right tools, services and infor- mation. If a company wants to meet those needs – and especially if it hopes to locate new ones – it has to monitor the ways APIs are used across various industries, and not just its own area of expertise. They are not static things; APIs need to be regularly redesigned and reorganised to ensure their developers are taking full advan- tage of their capabilities, while not misrepre- senting the API owner’s business. APIs need to reflect the owner’s values and priorities so they can be used in a way that represents “Regulatory bodies are increasingly interested in using companies’ open APIs” Diego Segre Vice President, IBM Hybrid Cloud Europe Companies need to be ready to bring new digital services to the market, opening up new business models and new ways to interact with Suppliers, business Partners and Customers. APIs are a hugely valuable strategic business tool for precisely this purpose. Organisations can drive efficiency and agility by making their data and functions available for general use to customers improving experience and loyalty, whilst also making the APIs available for other organizations to build new and innovative business uses previously not imagined. The API economy is here to stay, and successful organisations see APIs as a strategic foothold in today’s digital environment. the company. They also need to be consist- ent, allowing customers to easily identify and understand the product they are using. However, developing a successful API is only half the battle; as with any product, a comprehensive implementation strategy is also required. Companies need to plan, execute, analyse and iterate at every step of the way, making sure the product they end up with is multi-faceted and adapts as technology – and consumer need – chang- es. They will succeed if they understand their business goals, make sure they have the appropriate infrastructure in place, and always have one eye on how the product is being received. With the IBM Bluemix platform, a com- pany’s API can be stored in the cloud in such a way that it is easily accessible to devel- opers. Tools such as IBM’s API Connect can coordinate each of the critical stages of an API’s lifecycle, from creating the system through to running it, maintaining it and – importantly – securing it. APIs encourage speedy, dynamic and unprecedented innovation in the developer community. If a business doesn’t already have one in operation, it is closing the door on a potentially endless list of possibilities for future growth. 0908
  6. 6. It’s taken a long time, but computers are finally beginning to think like people. Technology has always been good at arranging, analysing and performing calculations on data, but that is not how humans have traditionally stored information. People use literature and images that require a degree of interpretation to understand. If your company relies on a legacy IT system to inform its deci- sion-marking process, this could be very worrying. The overwhelm- ing majority of information in IT systems has been housed in a way that computers – at least up until very recently – simply don’t under- stand. From a company’s quarterly report to a Twitter user providing feedback on poor service, information is being stored in a way that computer systems just cannot comprehend. Take the amount of information stored online in video content. People have gravitated towards video as a communication tool as increasing internet speeds have made it more practical and usable. It’s an engaging, compelling and quick way to convey a significant amount of information. Which is terrific, unless you’re a computer. According to a 2016 report from Cisco, 79 percent of global internet traffic will be in video form by 2020, meaning traditional computing won’t have the capacity to analyse nearly 80 percent of online information. For businesses, this is known as ‘dark data’: unorganised, uncategorised and untagged data, usually designed for consumption by humans, not machines. As well as videos, this could mean newspaper articles, handwritten or typewritten reports, Shining a light on dark data The majority of data collected is invisible to the businesses that create it. Thanks to AI software, business information previously hidden in plain sight has become usable and photographs. Unless a human being is able to manually sift through all this informa- tion – a task that could take a lifetime – busi- ness leaders will continue to make decisions based on the recommendations of comput- ers less informed than they could be. However, a new era of computing has begun, one in which AI is able to sort through all this dark data. By interpreting meaning from the mess, computers will al- low business leaders to make decisions with more information and confidence than they ever thought possible. IBM’s capabilities were put to the test in mid-2016 with a historic challenge: 20th Century Fox wanted to know if its cognitive technology platform, Watson, could be used to generate a trailer for its forthcoming AI horror thriller, Morgan. It turned out it could, “Video content is terrific, unless you’re a computer” and while the trailer Watson created was impressive, the method it employed was extraordinary. “Watson was able to mod- el the scenes visually to determine: was a scene scary? Was it a tender moment? Was there sadness or happiness?”, explained John Smith, IBM Fellow, Machine Vision – IBM Research. Real smarts, artificially AI offers a new way of analysing, sorting and creating data in a more intelligent and thor- ough way. It is a significant improvement over the old programmable systems that have been popular for decades. In the past, computer programs were based on mathematics and strict rules, following a rigid decision tree to come to a conclusion. This worked fine with the limited amount of organised and sorted data that was used back then, but in today’s world – with the sheer volume and complexity of data that is now on hand – these antiquated systems often fail under the pressure. If you were to take a short YouTube video, a computer would be able to tell you very simple, tangible information about it: its length, common colours, the number of people who appear in it, and so on. Howev- er, this information doesn’t usually matter to anyone watching – they are more interested in what can be learnt from the video itself. AI systems make unlocking this infor- mation possible. They are capable of writing their own rules based on feedback – a man- ner not dissimilar to how humans learn – and by creating complex decision trees, similar to those people automatically use to interpret information and make an informed choice. Through this method, a computer can learn to watch a video and interpret information from it, and in that way improve the recom- mendations it makes. These are immensely complex systems that require a tremendous amount of com- puting power to operate, which means that owning a private AI system is rarely a prac- tical choice. Fortunately, companies have taken notice of this trend’s potential, and have pushed towards making AI systems available for hire to the private sector. There is a real race on among indus- try players to make APIs for AI systems “Firewalls can only respond to an attack that is either in progress or has already happened” 79% of internet traffic will be in video form by 2020 1110 available to even the smallest companies. IBM, Microsoft and Google are all current- ly working on improving the AI systems they have produced to unlock all kinds of additional applications. One such area is the field of cognitive security. Protection against cybercrime used to mean firewalls and antivirus programs; systems initially designed to lock up data. While these systems remain in place today, they are not able to fight off modern attacks on their own. Currently, firewalls analyse data to detect abnormalities, such as a spike in server traffic. While effective, they can only respond to an attack that is either in pro- gress or has already happened. Cognitive security, however, is able to in- spect dark data to identify what prompts an increased risk of attack, and how to prepare accordingly. Instead of waiting for an attack to strike, cognitive security proactively looks for where future threats may be coming from and identifies where defences can be im- proved. As the system learns, it is able to identify and block new threats quicker than any human could. Security applications currently in wide- spread use are undoubtedly impressive. However, the next era of computing – the doors of which have only just started to open to us – holds untold promises of what may be possible. Ralph Demuth Vice President, IBM Cloud Technical Executive Europe In the near future, online videos will represent almost 90 percent of all consumer traffic. This huge amount of information is currently unsearchable, and is more commonly referred to as ‘dark data’. Using image tagging and face detection technology, we can start to make sense of this information. Dark Vision processes videos by extracting frames and tagging them independently: you can jump right to the frame you are looking for, giving access to previously unmanageable information. This particular example for video processing uses IBM Bluemix OpenWhisk and Watson services. What’s more, the potential for utilising Watson in the IBM Cloud is unlimited, from helping an energy company to predict pipeline corrosion to assisting a start-up in using social data to predict market trends.
  7. 7. Domino’s has over 800 pizza stores in the UK, and each day serves up over a million pizzas. It used to be that you’d dial up the lo- cal chain, tell the person at the other end your order, and your Buffalo Chicken pizza would be dispatched on the back of a scooter. But the internet has changed all that; today, app- based, mobile and web sales account for 50 percent of Domino’s total volume. This increase in online platform delivery has been sustained and rapid, with a 34 percent in- crease in sales in the last year alone. This massive rise in digital orders means Domino’s has had to make some pretty ma- jor upgrades to its data processing systems. They used to be entirely on-site, in the form of private servers, but at times of peak de- mand their capacity was insufficient, causing website errors, delays for customers, and a lot of stuffed crusts going cold. A plan for four seasons The solution was the hybrid cloud: a system that allows enterprise to keep data secure Ahead in the cloud The global economy increasingly exists in the digital sphere. Hybrid clouds can bring both value and efficiency savings to those businesses that are quick to embrace them in a private cloud, while using public cloud storage of computational resources to run applications that access and manipulate that data. In the case of IBM’s hybrid cloud, the streamlining of the various technologies involved reduces the occurrence of bottle- necks between what exists in the public cloud and what exists on site, allowing a more efficient workflow. The flexibility of this system allowed Domino’s to maintain its onsite data pro- cessing system while having access to off- site servers for additional data processing in times of acute demand. This meant the company could deal with most of its data processing on site in times of normal de- mand, but accommodate extra traffic during peak periods without having to upgrade its on-site IT infrastructure. As a result of the hybrid cloud, security and efficiency are no longer a trade-off. By using the hybrid cloud, businesses can add value and reduce costs, while also improving their policymaking processes. When combined with analytics services that help to evaluate, refine and synchronise data between the cloud, the company site and devices, the hybrid cloud is able to help firms make informed decisions with a far greater degree of accuracy, as non-obvious trends and correlations can begin to emerge. By splitting tasks between private and public servers, hybrid cloud technology also helps create greater architectural flex- ibility. Workloads can be deployed for use on either a third-party server or an on-site server, based on the specific demands of each individual situation. Each task can be designated for processing through the most appropriate channel, boosting efficiency. IBM even offers brokerage services to allow companies to plan, buy and manage IT services, picked and mixed from various cloud models and suppliers. That way, they can get all of the benefits of the very latest resources and platforms at a lower risk – and certainly lower cost – than if they were to try and take it on themselves. Scaling up, when needed, to a state-of-the-art infrastructure means companies can punch significantly above their weight – turning a small start-up in Wales into an international conglomerate, if only for a day. Castles in the cloud While VMWare was one of the first companies to offer hybrid cloud solutions, most of the world’s biggest tech and IT firms have now caught up. Microsoft offers its Azure Cloud service, which, while established, is still being developed and improved, while HP is also known for its open-source hybrid cloud. Amazon and Google, huge players in in the public cloud, don’t currently cater for organisations that want to keep some data in-house. When IBM was tasked with redesigning the digital platform for the Wimbledon Championships in 2015, it hosted the whole envi- ronment in its hybrid cloud. This approach allowed IBM to allocate cloud resources appropriately to each piece of digital content, en- suring a seamless experience in a year when visits to the platform ballooned to 71 million. It also allowed IBM to host the Wimbledon Social Command Centre in a separate IBM Cloud, and provide in- cremental capacity to supplement the main private cloud that has supported the tournament for years. This elasticity is one of the key attractions of the hybrid approach – and business needs don’t get much more elastic than Wimbledon, which goes from more or less nothing for 50 weeks of the year to two weeks of absolute frenzy. The platform needs to scale efficiently by a factor of more than 100 within a matter of days as the interest builds ahead of the first match on Centre Court – and scale back down again just as efficiently. Wimbledon is an extreme case, but all companies experience elasticity of one kind or another. How to deal with it without waste at the low ebb of demand and loss of business when overstretched is a fundamental issue facing business leaders the world over. As data – and the efficient management of it – becomes ever more important to firms operating in today’s tech-centric econ- omy, the most agile and forward-looking will be adopting hybrid cloud solutions in order to match their technological capabilities to their business needs. 60% Companies considering moving to a hybrid cloud 17% Average reduction in IT expenses “By using the hybrid cloud, businesses can add value and reduce costs” 1312 Multi-cloud system (82%) breakdown Companies (1,000+ employees) cloud implementation plans Source: RightScale 55% 82% Hybrid cloud Multiple public cloud Multiple private cloud Multi-cloud system Single public cloud system Single private cloud system No plans 11% 16% 9% 6% 3% Source: RackspaceSource: Avanade
  8. 8. IT has become an integral aspect of any business. No longer should it, or can it, be confined to just one employee, or even a single de- partment. IT is both essential and heavily involved in every aspect of a business; it provides a foundation for all processes, and, truly, it is the lifeblood of any organisation. Given its importance in the success of a business, the cost of managing a proficient IT system continues to grow. So complex and expensive to maintain are the numerous applications – and the level of expertise required in particular fields to keep IT systems up to scratch – that countless companies ignore the pressing need for im- proved implementation; few can afford to do it all (and well) in-house. Fortunately, however, there is an approach that can remove the complexity and enhance quality and speed to market, all while re- ducing costs: managing infrastructure through the cloud. Securing reliability Some of the biggest players in tech are now offering the solution to a company’s ever-growing list of IT requirements, through the form of managed services. Cloud managed services can encompass a vast array of business needs, from managing databases to security and even applications such as ERP. Companies such as IBM help thousands of clients set up and manage (among other things) scalable SAP software landscapes in Collaborate to remove complexity Given their increasing importance and complexity, robust and scalable IT systems can rarely be adequately maintained in-house. Cloud managed services provide an opportunity for companies to have it all and more the cloud, potentially delivering cost savings of 20 to 25 percent over five years versus traditional self-management and operation of SAP software. “The cloud managed services delivery model allows companies to lead with a more flexible OPEX model”, explained Susan Volkmann, Head of Cloud Managed Services at IBM. “But it is not just financial motivations these companies are driven by. Improved and scalable technology supporting their business requirements gives them new revenue streams or helps them unlock new clients.” Refocusing efforts on the core business of the company is one of the great advan- tages of managed services. “We have made the right decision in choosing IBM to provide higher quality services to our customers all over the world”, said Ryuzo Morita, Director of KYOCERA Document Solutions. By outsourcing such services, com- panies place vital systems in the hands of industry experts – teams with a wealth of “By outsourcing such services, companies place vital systems in the hands of industry experts” dedicated resources and talent – to an ex- tent that is simply not practical, nor afforda- ble, in-house. Moreover, doing so ensures a greater sense of business continuity, which in turn enhances the level of service offered to their clients. This ability to instil a sense of reliability is vital in competitive markets, particularly given the mounting threat and destructive nature of cyber-attacks. Today, a company’s reputation, honed over decades, can be devastated in a moment. In an event where, say, the personal records of clients are sto- len, the news can spread across global me- dia at the click of a button. Flying higher While many companies are slow to adopt managed services, either through fear of passing such control over to a third party or simply inertia, there are some that are taking the leap forward. A case to note is Deutsche Lufthansa, one of the world’s leading airline carriers. Known for its reliability and outstand- ing customer service at competitive prices, in many ways Lufthansa stands alone in the aviation industry. To further consolidate this reputation with clients across the globe, in August 2015, Lufthansa adopted IBM’s man- aged services. The group’s primary aim was to improve the customer experience on the many web- sites that fall under the Lufthansa umbrella, which include Swiss International Airlines, Germanwings, JetBlue Airways, Luxair and Brussels Airlines. In addition to launching a reengineering initiative for its online plat- forms and expanding its hosting infrastruc- ture, Lufthansa also sought to establish an innovative content management system that demonstrated greater functionality than its pre-existing systems. By outsourcing its online service delivery, Lufthansa was able to provide its customers a cutting-edge, personalised experience in 12 languages across 94 countries. The company’s profitability was bol- stered as a result of a growing number of people booking online, together with a better online service functionality that was achieved at a reduced cost. Opting for cloud man- aged services also enhanced Lufthansa’s ability to expand with flexibility, while still maintaining a reliable hosting infrastructure that can support variable traffic demands. As such, managed services have not only helped Lufthansa to deal with the problems of today, particularly those that prevail in such a highly competitive industry, it has prepared it for those of the future as well. Naturally, there will be those that prefer to conduct IT systems in-house, but there will soon come a day when this is no longer an option. As big data continues to expand at an exponential rate, particularly through the Internet of Things, and as more services and products become automated, companies must transfer these systems to an external party in order to maintain their own focus and core objectives, whatever those may be. “Today, a company’s reputation, honed over decades, can be devastated in a moment” 20-25% Potential five-year cost savings 1514 Susan Volkmann Head of Cloud Managed Services at IBM Europe As companies venture into the digital era, technology investments are no longer the exclusive domain of the traditional IT organisation. Influence from business executives is growing considerably as companies search the optimal way to increase the value they bring to the bottom line and how they can get faster to market. We see more and more IT organisations turning to cloud managed services so they can realise the promise of agility, security and availability. And although all C-levels might have their own expectations and priorities, they share a common goal of ensuring all investments are optimal for the business.
  9. 9. As businesses become increasingly reliant on data and online plat- forms, they are also becoming increasingly concerned about cyber- crime. And they are right to do so. According to IBM’s 2016 Cyber Security Intelligence Index, the average client organisation monitored experienced around 53 million security ‘events’ in the course of 2015, with 1,157 direct ‘attacks’ (defined by the report as “malicious activity that is attempting to collect, disrupt, deny, degrade or destroy information system re- sources or the information itself”). The five worst-hit industries were, in descending order: healthcare, manufacturing, financial services, government agencies and transportation. Worryingly, the most likely culprit for your organisation’s next at- tack is someone you thought you could trust, be it an employee, contractor or consultant. Insider attacks still pose the most significant single thereat to businesses around the world, accounting for 60 percent of all attacks. The majority of these breaches involve the use of viruses, spyware and malware – all methods that, given the right technol- ogy, can be prevented. As the threat of cyberattacks continues, businesses must take concrete steps to protect the integrity of their IT infrastructure. Fortunately, leading firms are now waking up to the threat. According to the UK Government’s Cyber Governance Health Check, half of FTSE 350 companies regard the risk of cyberattack Brace for the future From scaling up to Brexit, businesses can’t afford to ignore the challenges that fast-paced technological and regulatory change bring with them “Businesses everywhere will need to make sense of the vast and growing volumes of data being amassed” Unauthorised access Malicious code Sustained probe/ scan Suspicious activity Access or credentials abuse Most frequently occurring incident categories n 2014 n 2015 Who are the ‘bad guys’ Average annual security events: Average annual security attacks: Overall Malicious Inadvertent Outsiders Average annual security incidents: Event: An event on a system or network detected by a security device or application Attack: A security event that has been identified by correlation and analytics tools as malicious activity that is attempting to collect, disrupt, deny, degrade or destroy information system resources or the information itself Incident: An attack or security event that has been reviewed by IBM security analysts and deemed worthy of deeper investigation. as the key threat facing their business. This is an increase of 29 percent on reported concerns in 2014. Firms must take every possible step to safeguard against their vulnerabilities. Each business’ needs will be different, and their attackers agendas varied. As the authors of the IBM report pointed out: “While financial gain is still a powerful motivator for cyber criminals, it’s by no means the only one. Last year’s attackers branched out in a big way – inflicting physical damage, stealing intellectual property and lodging political protests.” Traditional security defences will not stand up to this onslaught, particularly as disruptive technologies bring new and unpredictable vulnerabilities. Although the figures are startling, the news is not all bad. IBM reported its client business had seen a significant reduction in events and attacks from the previous year, while the rate of discovery had increased, demonstrating that – with the right support – businesses can still turn the tide. » 2014 81,342,747 2015 52,885,311 2014 12,017 2015 1,157 2014 109 2015 178 37% 45% 20% 29% 20% 16% 11% 6% 8% 3% 55% 31.5% 23.5% 45% 60% 44.5% 15.5% 40% Insiders 2014 2015 1716 Source: IBM Cyber Security Intelligence Index 2016 For latest stats, visit ibm.com/security/xforce
  10. 10. Brexit bother In 2015, the European Commission’s arm concerning banking and finance released its newest directive covering online payment services. Known as PSD2, it will bring a num- ber of changes to the way online payment services for businesses operate within the EU. And the ramifications could be huge. Under the directive, online retailers will be able to ask consumers for permission to use their bank details, meaning retailers could re- ceive payments directly from the customer’s account. Instead of payment intermediaries, transactions will be carried out via APIs. The new regulation will also result in the intro- duction of ‘account information service pro- viders’, or AISPs, which will allow users to view all of their banking information – even if dispersed between different accounts – through one single portal. While this added convenience will be a boon to consumers, it will be a bit more worrying for banks, who will need to decide what role they can play in this new payments ecosystem. It could be an opportunity for financial institutions to reinvent themselves, but that would be very expensive at a time when their existing revenue streams will be reduced and a whole new wave of fintech competi- tors will be entering the market. The outcome of the directive will be particularly unclear for busi- nesses operating in the UK, which voted to leave the EU back in June 2016 – particularly as, at the time of writing, the exact nature of the country’s exit remains unclear. If the UK leaves the Europe- an Union but remains a part of the European Economic Area, the country will still be subject to many single market regulations, and the PSD2 regulation changes will probably be implemented along the same lines as if the UK were still a member of the EU (assuming it does not exercise its right within the EEA to unilaterally place a stop break on the policy). Indeed, implementation of the new regulations should actually be easier in the UK than in many full member states, as the country is already ahead in terms of data sharing due to the UK Open Data Initiative. Mountains of data Regardless of what these regulations actually mean or how and where they will be enforced, basic technological shifts mean businesses everywhere will need to make sense of vast and growing volumes of data. Everything from internet search engines to water bottles is gen- erating data these days, but it is estimated 80 percent of the world’s data is unstructured. Identifying the important parts of this huge dark data pool – and any patterns and insights that can be discerned from it – is an ongoing endeavour. Thankfully, a host of new technologies, such as cognitive computing and APIs, are on hand to help. With the right tools, this challenge can become an opportunity. But the simple generation of that data will also place greater costs on firms. Even companies that would not consider them- selves particularly data-focused will have to deal with increasing amounts of data, as they inevitably pivot further towards online platforms in our increasingly digital age. All this will require scaling up of data storage and processing. Essentially, the challenge will be ensuring that the most cost-efficient method of storage and the best computa- tional resources are used. Indeed, in the changing digital environ- ment businesses are set to face constant regulatory and technological challenges. To stand any chance of holding at bay these unrelenting assaults, businesses will need powerful, specialised allies to guide them, allowing them to keep their eyes on the prize of transformation. “While financial gain is still a powerful motivator for cybercriminals, it’s by no means the only one” 53mAverage number of security ‘events’ experienced by organisations in 2015 1,157Average number of direct ‘attacks’ 60% of all attacks are due to insiders 18 Group Managing Editor: Michael Mills Production Assistant: Max Tomlin Deputy Editor: Elizabeth Matsangou Editorial: Tom Bailey, Callum Glennen Designer: Sam Millard Reprographer: Robin Sloan Head of Finance: Richard Willcox Production Coordinator: Hannah Hunter-Reid Published by World News Media Ltd 40 Compton Street London EC1V 0BD United Kingdom Tel: +44 (0) 207 253 5100 The information contained in this publication has been obtained from sources the pro- prietors believe to be correct. However, no legal liability can be accepted for any errors. No part of this publication may be reproduced without the prior consent of the Publisher. © 2016 World News Media Ltd
  11. 11. Welcome to the Cognitive Era. A new era of technology. A new era of business. A new era of thinking. ibm.com/outthink IBM, the IBM logo and ibm.com are trademarks of International Business Machines Corporation, registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the Web at www.ibm.com/legal/copytrade.shtml. © Copyright IBM Corporation 2015. P31182

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