Thursday, January 18, 2007

Who is in charge of energy costs?

Teaching IT to Energy Managers is so 1999. The 2009 problem is teaching Energy Management to IT Managers. The price of energy is going through the roof (e.g. gasoline projected at $4.00/gallon by 2010) and the rate of consumption of electricity on a constant upward spiral in support of all of the computer infrastructure. In this environment, electricity costs are no longer going to be part of the facilities budget, they are going to be allocated to the departments that are consuming the power. Each of those will find their operating budgets taxed to pay for electricity and their internal or external profits slashed when they take electricity on as an expense.

Electricity is supposed to become more and more of a commodity, not turn itself into an item of competitive differentiation. Google saw the writing on the wall several years ago and moved their computers to where the cheapest power could be generated. Just as production, service, and technologies jobs have moved overseas to lower costs, energy consuming equipment is going to pack up and move to where the cheap energy is. We tend to imagine that it is not worth the cost of moving the equipment, some personnel, and installing the infrastructure to manage it remotely. But that is 1990's thinking. If the price of power keeps going up, it is going to become one of the major issues on the executive plate. Corporate guidance is going to be to find a way to lower energy consumption or lower energy prices. Who in the IT department knowns how to tackle that problem?

Related Stories:

Monday, January 15, 2007

CTO for Nuclear Power

What does the CTO of nuclear power giant Westinghouse do for a living?
#1. Design nuclear power plants.
#2. Try to sell them to countries around the world.

Until recently #2 was a lot harder than #1. Countries were just not buying nuclear power -- too dangerous, too much regulation. But now that oil is expensive, suddenly nuclear power looks cleaner and cheaper.

Here is a quick description of the challenges that faced Howard Bruschi, the former CTO of Westinghouse, when he was peddling nulcear power plants around the world.

"One great challenge in designing nuclear power plants is that making something safer and making something cheaper are often conflicting priorities: the less you spend, the less safe it is, and vice versa. This was what Westinghouse engineers began to wrestle with as they explored designs that could be built more efficiently. For any new project, the same basic technology would still be used to produce electricity: uranium pellets, encased in fuel rods, would undergo a controlled chain reaction in the core, release energy to heat pressurized water and generate steam, and the steam would turn giant, magnetized turbines to generate electricity. But they theorized that if the plant was physically smaller and it used less in the way of materials, it would help reduce costs and construction time. Also, a cheaper plant could be built off site from poured concrete modules and assembled on location, rather than through a huge works project on the scale of the Great Pyramids, as at Vogtle. Most important, perhaps, the engineers began to ponder what's known as ''passive'' safety features. Years before, the U.S. military had asked Westinghouse to design a small, underground nuclear reactor to power missile silos. The reactor was never built, according to Howard Bruschi, the company's former chief technology officer, but the lessons were not forgotten. Passive safety measures included backup systems that would kick in automatically in the event of accidents or mechanical problems. Hundreds or thousands of working pipes and valves might be replaced by, say, a tank of cooling water mounted high so it could be emptied by gravity rather than by an electric pump. Complexity reduced, money saved. And at least in theory, there was an improvement in safety, too. The company's project was given a name: the AP600. It stood for Advanced Passive reactor; the 600 represented the output in megawatts.
Westinghouse financed part of the AP600 effort through its research budget, and the company also received a generous grant in the early 1990's from the U.S. Department of Energy. But even those sources of money weren't enough to supply the hundreds of millions of dollars needed to create the large working models to test the efficacy of the safety systems. ''So we basically went to other countries that had nuclear programs and invited them to help with their test facilities and engineers,'' Bruschi says. Within Westinghouse, I heard it said that Bruschi went around the world, hat in hand, looking for help. I asked him how many countries he visited. ''Italy, France, Japan, England, Scotland, Spain, Belgium, Sweden, Switzerland, Latvia and Poland,'' he told me. Eventually he went to China and Indonesia, too. It paid off when the N.R.C. approved the design for the AP600 in 1999.

But there were no buyers. Not one. Ed Cummins, the Westinghouse engineer, says that one major utility executive set him straight on why. Any utility could build a gas plant for far cheaper, he was told, and sell the electricity at a lower rate. So why build this? The AP600 was too small. It generated too little electricity to justify its construction costs. ''He was right,'' Cummins says, and in response, he and his staff spent several years expanding the AP600 into the 1,100-megawatt AP1000. It cost more, but its larger electric output made it more competitive. When I visited Westinghouse in late May, the company was just putting the finishing touches on a simulated control room for the new plant, a sleek space near Cummins's office to demonstrate for buyers and regulators how operators will monitor the plant on just a few computer terminals and one large, central screen. Unlike the control rooms I visited at Vogtle and Grand Gulf, where operators are in charge of literally thousands of buttons, switches and meters, the technology at the AP1000 simulator, like the aesthetic, is modernized, simplified and streamlined."

Drawn from a longer article written for the New York Times Magazine: Original Draft Here

Sunday, January 07, 2007

5 CTO Patterns vs. 4 CIO Archetypes

In several journal articles and blog entries I have presented 5 major patterns of the CTO position (see paper:

The 2007 survey of CIOs by CIO Magazine created a similar set of classifications for that position. In many ways, their results line up very well with the 5 Patterns of the CTO.

4 Archetypes of the CIO

  1. Business Leader. Priorities are aligning IT and business goals.
  2. Operational Expert. Primary mission is to cut costs.
  3. Innovator. Focus on ITs ability to drive new business initiatives.
  4. Turnaround Specialist. Risk-taking agent of change.

Read the CIO archetype profiles at:

How can the CTO impact the organization?

As a CTO, what can you do to improve the organization you are a part of? How do you demonstrate that the CTO adds significant value? Here's a quick list of 10 areas where you can really impact the organization.

  1. Enable Business Innovation
  2. Reduce Business Costs
  3. Improve Customer Satisfaction
  4. Create Competitive Advantage
  5. Improve Risk Management
  6. Enable New Revenue Streams
  7. Grow Existing Revenue Streams
  8. Enable Global Expansion
  9. Enable Regulatory Compliance
  10. Automate the Supply Chain

How you accomplish these is unique for each business and CTO.

List derived from CIO Magazine:

Tuesday, January 02, 2007

National Medal of Technology

President Bush made several awards of the National Medal of Technology in February. It is interesting that two of these went to women - Padmasree Warrior, CTO of Motorola, and Chrissie England, President of Industrial Light & Magic.

White House Article

Open Business Models - Henry Chesbrough

Open Business Models: How to Thrive in the New Innovation Landscape.
Henry Chesbrough. Harvard Business School Press. 2006. List $35.00. 215 pages.

Henry Chesbrough follows up his first book, Open Innovation, with a second which provides more details on how to build an open business model to take advantage of the innovation or intellectual property from other companies and to monetize unused IP within your own company.

As the author pointed out in his first book, modern products and the technologies that support them are far too complex to be completely developed by a single company. Therefore, companies must learn to cooperate with each other to leverage the expertise that each has. Chesbrough points to the importance of licensing IP as an important part of this practice. Most companies possess IP which they are not using and which they will never use. However, it is a mistake to assume that the IP is not valuable to others with different capabilities and a different market focus. Companies like Qualcomm have recognized that their real capabilities are in developing new technologies for the cellular communications market, but not in making products for sale to the consumer. Therefore, Qualcomm focuses on making chips and licensing its technologies for others to incorporate into cell phones. IBM, on the other hand, has significant manufacturing capabilities and has begun to supplement its core business by licensing its extensive portfolio of IP. That company has increased its IP licensing revenues from a few million dollars per year to $1.2 billion.

Traditionally, companies have relied on their own internal R&D for new technologies to drive future products. These companies have also worked hard to hide or protect these technologies from competitors – a closed business model. Chesbrough’s open business model calls for companies to rely upon both internal and external R&D for new technologies. This is coupled with a modified revenue model in which the company makes money from selling products, licensing IP, creating spin-offs, and selling IP outright. The success of IBM, Qualcomm, and others in creating significant business revenues from previously unused IP suggests that a number of companies, usually large companies, possess untapped riches in their patent vaults.

As companies create partnerships and practice an open business model, they must be careful to avoid giving away the farm. Chesbrough contrasts the approach of two companies in working with partners. GO approached Microsoft to convince them to develop applications for its pen operating system. However, they forgot that Microsoft’s primary business was operating systems, not applications. Therefore, following partnering discussions that exposed the details of GO’s product, Microsoft used this information to create the PenWindows operating system and pressured GO out of business. Collabra, on the other hand successfully developed a product and released it before competitors like Microsoft could respond. Their partnering discussions limited access to their IP and they worked with people far from the strategic headquarters of Microsoft.

Chesbrough’s open business model focuses on leveraging all of the IP owned by a company by licensing it, and encourages taking advantage of the IP of others. He advises for companies to change their perception and practice regarding their IP portfolio, viewing it as valuable resources for revenue generation rather than simply as a means of protecting existing products.