CxOs Disappointed (So Far) by Cloud Computing Value

It should come as no surprise that CxO expectations of cloud computing payback lag expectations in the areas of resilience; agility; decision making; innovation; customer experience; profits; talent recruitment and retention; costs or reputation, for example. 

All of those business processes are shaped by many other inputs than mere applied technology. And the general rule with any important new technology is that the value is not recognized until core business processes are reshaped to take advantage of the new technology. That is as likely to happen with cloud computing as with any other important new tools. 

Any major shift in technology and related business processes takes time. So much time that there often is a “productivity paradox” where investments do not seem to make much difference in outcomes for a decade or more. 

Nokia has noted that manufacturing productivity since the 1980s has been slight, in the range of one percent per year growth, despite all the information technology applied to manufacturing. 

source: PwC 

Despite the promise of big data, industrial enterprises are struggling to maximize its value.  A survey conducted by IDG showed that “extracting business value from that data is the biggest challenge the Industrial IoT presents.”

Why? Abundant data by itself solves nothing, says Jeremiah Stone, GM of Asset Performance Management at GE Digital. At least one study suggests similar findings for broadband internet access as well. 

The consensus view on broadband access for business is that it leads to higher productivity. But a study by Ireland’s Economic and Social Research Institute finds “small positive associations between broadband and firms’ productivity levels, none of these effects are statistically significant.”

“We also find no significant effect looking across all service sector firms taken together,” ESRI notes. “These results are consistent with those of other recent research that suggests the benefits of broadband for productivity depend heavily upon sectoral and firm characteristics rather than representing a generalised effect.”

“Overall, it seems that the benefits of broadband to particular local areas may vary substantially depending upon the sectoral mix of local firms and the availability of related inputs such as highly educated labour and appropriate management,” says ESRI.

 Big waves of information technology investment have in the past taken quite some time to show up in the form of measurable productivity increases.

In fact, there was a clear productivity paradox when enterprises began to spend heavily on information technology in the 1980s.

“From 1978 through 1982 U.S. manufacturing productivity was essentially flat,” said Wickham Skinner, writing in the Harvard Business Review.

In fact, researchers have created a hypothesis about the application of IT for productivity: the Solow computer paradox. 

Here’s the problem: the rule suggests that as more investment is made in information technology, worker productivity may go down instead of up.

Empirical evidence from the 1970s to the early 1990s fits the hypothesis.  

Before investment in IT became widespread, the expected return on investment in terms of productivity was three percent to four percent, in line with what was seen in mechanization and automation of the farm and factory sectors.

When IT was applied over two decades from 1970 to 1990, the normal return on investment was only one percent. 

This productivity paradox is not new. Information technology investments did not measurably help improve white collar job productivity for decades.

To be sure, some argue that the issue is our inability to measure productivity gains. It is happening, but we are unable to measure it, many would argue. That argument will not win many supporters in the CxO suites. 

Still, the disappointment is to be expected. It will take time to reap the measurable benefits of cloud, 5G, edge computing, internet of things or any other major new technology.

SASE Interest Driven by Work From Home

If work-from-home continues at a significant level after Covid-19 pandemic restrictions have abated, it is easy to suggest that investments in security at remote locations will be an important necessity. According to a study by Sapio Research, commissioned by Versa Networks, an average of 44 percent of office workers  in the United States, United Kingdom, France and Germany will continue to work at least part of the time from home. 

source: Versa Networks 

That, in turn, suggests new investments in remote-location security. The study found 34 percent of businesses invested in Secure Access Service Edge (SASE) in the past year, and an additional 30 percent plan to do so in the next six to 12 months. 

The research, conducted by Sapio Research across 500 security and IT decision makers also found that 84 percent of businesses have accelerated their digital transformation and move to the cloud during the pandemic. 

“Digital transformation” can mean almost anything these days, from investments in processes to conduct transactions or operations “in the cloud” to use of such technology to recreate business models.

PTC Academy Accredited Training for Telecom Professionals

The next edition of the PTC Academy  online training courses--providing accredited continuing education recognition--will be held 7-29 September 2021, 09:00-10:30 SGT (UTC+08:00). 

You can register here. 

The course is delivered in 10 distinct modules over a three-week period by a team of leading industry executives. 

These modules will prepare you and your team for advancement with key insights into business challenges and opportunities in the ICT industry.

Students earn continuing education credit issued by the International Accreditors for Continuing Education and Training organization that are internationally accepted and can be used to satisfy a variety of professional requirements across a range of industries.

Course content is presented in 90-minute segments, featuring:

Introduction to Telecom: Key Trends and Changes in Business Models

Provides an overview of the global telecom industry business drivers with special emphasis on key business challenges faced by C-level executives.

5G and Beyond

A closer look at mobile and wireless segments of the industry as they relate to fixed networks and overall business models.

Pipes to Platforms: Cloud and Data Centers

Examines the role and importance of cloud computing and data centers in relationship to the connectivity business.

Your Career, Your Ladder

Explains how your skills, tasks, and knowledge will change as you move up the ladder to the C-Suite.

Doing Well While Doing Good

Examines C-level challenges of balancing the interests of many stakeholders: owners, managers, employees, customers, partners, and society.

How Would You Do It?

A workshop allowing participants to grapple with C-level issues of revenue, competition, customer demand changes, cost, innovation challenges, and social responsibilities.

OTTs: Opportunities and Threats to Telcos – Taking Advantage of Both

Over-the-top apps and services sometimes compete with, but can complement, connectivity provider strategies. What are the key challenges and opportunities?

What Really Impacts Your Mobile Gameplay or Streaming Video Experience?

A closer look at the critical elements affecting network latency and a discussion of how to reduce latency to deliver a better user experience.

Convergence

Provides a broader view of how digital natives are operating, the convergence of sectors and data models, and how this may impact telecom operators over the coming years.

Digital Transformation: How Data Centers, Networks, and Clouds Are Changing IT

A closer look at how data centers, networks, and clouds are changing the IT landscape, and how these companies come together to form the backbone of today’s digital economy.

PTC Academy is designed especially for:

• Professionals with five to 10 years’ experience in one or more functional areas at communications service provider firms, data center or collocation firms, infrastructure supplier firms, application providers, device suppliers, construction or maintenance firms, regulatory bodies, industry-related consulting firms, or other firms allied to the field

• Anyone who has not yet had general responsibilities for profit and loss at their firms

• Experts in their own fields interested in learning about key business factors in related industry segments

• Anyone who wants to learn more about the industry’s history and how business strategies have changed

Course prerequisites include:

• Basic computer skills

• English language fluency suggested

• High-speed Internet-connected computer

• Desire to learn about key C-level management challenges and perspectives

Significant WFH After Pandemic Shapes Security Mechanisms Such as SASE

If work-from-home continues at a significant level after Covid-19 pandemic restrictions have abated, it is easy to suggest that investments in security at remote locations will be an important necessity. According to a study by Sapio Research, commissioned by Versa Networks, an average of 44 percent of office workers  in the United States, United Kingdom, France and Germany will continue to work at least part of the time from home. 

source: Versa Networks 

That, in turn, suggests new investments in remote-location security. The study found 34 percent of businesses invested in Secure Access Service Edge (SASE) in the past year, and an additional 30 percent plan to do so in the next six to 12 months. 

The research, conducted by Sapio Research across 500 security and IT decision makers also found that 84 percent of businesses have accelerated their digital transformation and move to the cloud during the pandemic. 

“Digital transformation” can mean almost anything these days, from investments in processes to conduct transactions or operations “in the cloud” to use of such technology to recreate business models.

3 Pandemic-Related Threats Dominate Risk, Risk Managers Say

Business risk directly related to the Covid-19 pandemic dominates concerns, a survey of 3,000 risk management experts finds. 

Surveyed for the Allianz Risk Barometer, the top three dangers were lead by business Interruption, followed by the pandemic itself, while cybercrime--caused by exposure to digital intrusions and the shift to digital commerce because of the pandemic--ranked third out of 10 issues. 

Some 94 percent of surveyed companies reported a COVID-19 related supply chain disruption in 2020.

source: Visual Capitalist 

What might be striking is the much-lower scores for threats such as “market developments” (debt, gross domestic product health) or regulatory and legal changes, which might, under other circumstances, be perceived as bigger risks.

GCI Gigabit Take Rates are 4 Times the U.S. Average

GCI customers are buying gigabit home broadband service at about four times the national U.S. rate, GCI says. Take rates for gigabit service are in the 40 percent of passings range, compared to national U.S. rates less than 10 percent. 

Alaska’s remoteness, low population and distance from the equator (for geostationary satellite access) are historical reasons for limited bandwidth within the state. New long-haul optical fiber connections, as always, make the difference. 

source: www.submarinecablemap.com  

ESG Weighing Down AT&T?

With the caveat that some may not care about costs or other implications, AT&T CEO John Stankey, speaking at AT&T’s annual meeting, uttered something telling. The third question asked at the meeting (share price first, then ownership of CNN) was about “AT&T engagement on public policy and political issues.”

The question in this instance appears not to have been asked about the routine operations of its regulatory staffs, but about environmental, social, and governance issues that have seemingly become pronounced. 

Noting the “tough” environment for ESG that is “as polarized and as caustic an environment as any of us have ever seen,” Stankey might have suggested that the burdens now are such that management time is diverted from AT&T’s other pressing issues.  

“I know I personally and the rest of the management team are spending a lot of time” on these issues,” said Stankey. He did not quantify how much “a lot” entails, but a reasonable person might infer that it is a non-trivial volume. 

That leaves less leadership bandwidth for other pressing issues, which for AT&T includes its equity valuation; its debt load; its position in mobile and fixed network markets and its growth initiatives. 

Few would question a proportionate attention to stakeholder issues more broadly defined than “shareholder value.” But shareholder value is a weighing mechanism that suggests how well AT&T is managing the effort--as must any on-going business or non-profit entity--to sustain itself for success in the future. 

And that was the first question asked at the annual meeting of shareholders, the “owners” of AT&T. We might all agree matters are “better” when shareholder value; employee interests; environmental impact and societal good all can be fostered. 

The rub is the balance of effort and impact on outcomes when an entity is under stress, as AT&T is, in a market that is changing substantially. This year AT&T broke a decades-long tradition of raising its dividend.

AT&T had raised its dividend for more than 30 straight years, as best I can recall. That ended in 2021, when the company broke tradition and declined to increase the dividend.

To be sure, AT&T has not yet taken the truly-disruptive move of cutting its dividend, a drastic move that would portend serious trouble with its core business model. But investors clearly are worried about that prospect. 

One might well suggest that time-consuming ESG matters should not be prioritized as they have been when sustainability of the enterprise is arguably the biggest issue.