ServiceMesh's Dave Roberts presented, originally at Interop Spring 2012, Las Vegas. History has shown that distributed, free-market economic models inevitably beat centrally-planned, socialist economic models. Several economists have explained why this is the case. Interestingly, most enterprises use a central planning model for IT resource delivery, leading to many of the same problems seen in socialist economies. Previously, there weren't many practical alternative models for enterprises to use. But cloud computing is changing that an allowing enterprises to adopt a more free-market model for IT service delivery. As a result, we're seeing an explosion of choices and new IT efficiencies. Over time, we'd expect to see firms with a more free-market IT delivery model beat out firms with an older, centrally-planned model. This presentation details the differences and some changes you can make to ensure your enterprise is as efficient as possible.

1. THE AGILE IT PLATFORM
Free-Market Cloud Computing:
Avoiding Stalinist Failures in your Cloud Operating Model
Dave Roberts, SVP Strategy and Evangelism
dave.roberts@servicemesh.com
@sandhillstrat

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4. How do we ensure that…
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5. …the right people…
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6. …have access to the right
resources…
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7. …at the right time…
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8. …for the right cost?
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9. Organizational resource
allocation problem
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10. = Economic problem
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11. Top-Down Bottom-Up
Command and Control Decentralized
Socialist Free Market
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13. Central Planning Theory:
Given enough inputs and smart
people, you can plan anything
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18. Source: http://kcmeesha.com/2010/02/20/behind-the-iron-curtainshortages/
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19. Source: http://kcmeesha.com/2010/02/20/behind-the-iron-curtainshortages/
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22. The Economic Calculation
Problem
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23. You never know everything.
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24. Things are changing all the time.
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27. High / Rising Prices =
Shortage / Make More
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28. Low / Falling Prices =
Satisfied / Make Less
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29. Better planning ability.
More efficient allocation of
resources.
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30. Conclusion: Central planning loses to free
markets at the level of nation states
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31. But what about the level of
individual firms?
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32. Thesis:
“Free Market Firms”
will beat
“Centrally Planned Firms”
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33. Products sold at market price
Business Unit
Raw materials & labor
purchased at market price
“Monopoly pricing &
monopoly money”
Firms
IT Dept. Raw materials & labor
purchased at market price
Free Market
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34. Today, most IT resources lack a
real pricing mechanism…
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36. “But my shop already does
chargeback, so this doesn’t
apply to me.”
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37. Cost ≠ Market Price
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38. True Free Markets Allow:
Multiple suppliers.
Competition.
Buyer free choice.
Competitive failure.
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39. Products sold at market price
Business Unit
Raw materials & labor
purchased at market price
Market competitive Allow BUs to purchase
offerings and pricing from multiple suppliers
Firms
IT Dept. Raw materials & labor
purchased at market price
Free Market
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40. Products sold at market price
Business Unit
Raw materials & labor
purchased at market price
Market competitive Allow BUs to purchase
offerings and pricing from multiple suppliers
Firms
IT Dept. Raw materials & labor
purchased at market price
Free Market
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41. Other Manifestations:
Consumerization of IT
BYOD
“Rogue IT”
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45. Incorporating a free-market
economic component in your
cloud operating model will:
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50. Thank you
Dave Roberts
Vice President, Strategy
Email: dave.roberts@servicemesh.com
Web: http://www.servicemesh.com/
Company Twitter: @servicemesh
Personal Twitter: @sandhillstrat