Perceptive Information Strategies

Walking down the street in San Francisco, I passed a newspaper box – something that in our increasingly digital age may someday be found only at the Smithsonian Museum. “Obama Pivots to Job Creation,” the San Francisco Chronicle headline announced. Wow, there it is again, I thought to myself, the word “pivot.”  All week, in vendor briefings, in my research, on TV during talking-head discussions of Obama’s strategy and now on the front page of a newspaper, I had been encountering this word. So, I took a picture of the box.

The verb form of the word came from its use as a noun, which means “a shaft or pin on which something turns” (Merriam-Webster’s). The implicit meaning of the headline, appearing the day after Obama’s State of the Union speech, was that the Obama Administration was going to turn its attention away from the now-stalled healthcare reform effort and toward the economic problem of creating jobs. This “pivot” would be quick and complete, like a machine would do it. No angst or mess: Done.

However, given that journalists and opinion-makers seemed to have picked up the word directly from Obama’s strategists, I wonder if the strategists’ use of the word comes more from basketball. Obama is as we know a major fan, and he plays the game. In basketball, once you set your pivot foot, you can spin around, but you cannot move that foot or else you’ll be called for traveling. I found a good explanation (and coaching tip, in case you need it) on YouTube. So, maybe it means that Obama has set his pivot foot – perhaps he did so on the day he took office – but he has the ability to spin around to pass or put up a (job creation) “shot” when opportunity or necessity presents itself. However, he cannot move his pivot foot or else he’ll be called for traveling. The whistle will blow, and he’ll have to turn the ball over.

In the world of business intelligence, online analytical processing (OLAP) and analysis using spreadsheets such as Microsoft Office Excel, “pivot” makes you think of pivot tables, or as Wikipedia defines them:

A pivot table is a data summarization tool found in data visualization programs such as spreadsheets. Pivot tables were created in 1979 by Paul Spinks. Among other functions, they can automatically sort, count, and total the data stored in one table or spreadsheet and create a second table displaying the summarized data. Pivot tables are also useful for creating cross tabs. The user sets up and changes the summary’s structure by dragging and dropping fields graphically. This “rotation” or pivoting of the summary table gives the concept its name. The term pivot table is a generic phrase used by multiple vendors. However, the specific form PivotTable is a trademark of the Microsoft Corporation.

Research surveys often show that spreadsheet users do not make full use of pivot tables because they don’t know how to use them effectively and are afraid of making errors. However, pivot tables are obviously incredibly powerful for seeing data from different perspectives and uncovering patterns that may not have been obvious when analyzing the data in a more limited fashion. Microsoft has introduced PowerPivot for Excel 2010 (and for SharePoint 2010); I found this blog, which does a great job of explaining PowerPivot, so I won’t go into it here. However, I will chime in to say that it is perhaps the most important development in BI this year thus far. PowerPivot begins to bring together the worlds of BI and spreadsheets: or, put differently, it enables users to have some of the major benefits of BI while remaining spreadsheet users.

“Pivot” was an important topic during my briefing last week with Visual Mining, the producer of NetCharts, a tool for developing BI dashboards and data visualization. The focus of the briefing was NetCharts Performance Dashboards V2, which the company says adds “Excel-like” table and reporting functionality. In the demo, I was impressed by the ease and flexibility with which you could work with pivot tables and the data to see different views – and not just simple views but glorious, graphical data visualizations. “We want to enable CFOs to move beyond being record keeping to being more in control,” said Tristan Ziegler, president and CEO. While the challenges faced by the office of Finance are a major focus for Visual Mining, the product is useful for other scenarios, such as contact centers, where there are many data sources and users who may be used to spreadsheets but are not expert data analysts.

Could the Obama Administration’s decision makers benefit from having more views of their data? No doubt. It might help them discover correlations between issues such as job creation and health care that weren’t apparent when they were totally focused on one topic or the other. And I don’t think you can be called for traveling.

“Crisis” would be the appropriate word to describe the troubled state of the economy in recent years. But what is the crisis, exactly?

To pull out of difficult times, public and private institutions need to be careful in how they define the crisis so that they respond appropriately and avoid repeating mistakes that may have worsened the difficulties. They also need to adjust to long-term trends driven by the global adoption of the digital infrastructure rather than simply respond to the short-term pressure of meeting quarterly numbers. These views and more were expressed by panelists at the opening plenary session on Day Two of the Supernova conference held in December in San Francisco. The panel featured a range of expert views on how organizations need to redefine themselves and develop strategies to meet the challenges of a connected world.

Supernova is an annual technology strategy event hosted and produced by Kevin Werbach, assistant professor of legal studies and business ethics at The Wharton School, which serves as partner. Werbach moderated the panel session, which addressed a variety of topic threads, including the impact and potential of social networks.

 
If the panelists were in agreement about one thing, it was that organizations run the risk of becoming so set in their ways that they see only the threats posed by major changes such as networking and social media and miss opportunities to leverage their full potential. Telecommunications companies, for example, largely missed the opportunity to extend customer relationships by creating applications that could integrate communications, scheduling and contact directories. Software providers such as Microsoft beat them to the punch.

 
By hunkering down in protective mode, many organizations do not employ new technology effectively to achieve a critical but often ignored measure of overall success: a high rate of return on assets. Panelist John Hagel III, co-chairman of the Deloitte Center for the Edge and author of several best-selling books on technology and business strategy zeroed in on this point during his remarks. “We are in the middle of a profound shift in terms of how we do business,” said Hagel. “However, the metrics we typically use to understand the economy and business performance do very little to shed light on long-term changes. Return on assets (ROA) is the best bottom-line measure of how companies are doing over the long term.”

 
Deteriorating ROA: Indicator of Crisis
During the plenary session, Hagel discussed key points from “The Shift Index,” a major research report released in 2009 by the Center for the Edge. The report was written by Hagel, John Seely Brown, Lang Davison and their research team at Deloitte. The Shift Index assesses long-term public company performance trends using three indices and 25 metrics, including ROA; however, what is garnering the most attention is the report’s analysis of ROA trends since 1965. The ROA rate offers a view of how successfully companies are earning money from assets and investments. Hagel noted that the research discovered “an overall sustained and significant deterioration of [ROA] performance of 75 percent” over the course of 40 plus years, with even the top performing companies just barely hanging on. “This is the real crisis: and there is no evidence that the deterioration is leveling off or that there will be a turnaround any time soon.”

 
Companies in the technology, telecommunications, media and automotive industries are under the most extreme corporate performance pressure, according to the report; they are experiencing both increases in competitive intensity and declines in asset profitability. “These three industries are closest to the changing digital infrastructure that is emerging around us,” Hagel explained. At the other end of the spectrum, companies in the health care, aerospace and defense industries are the most stable in terms of ROA erosion. The heavily regulated nature of these industries could be a major reason for their relative stability, Hagel noted.

 
Panelist JP Rangaswami, chief scientist of BT Group and chairman of BT’s recent acquisition, Ribbit, described how the turbulence is impacting telcos. “Infrastructure is at the same time both commoditizing and changing,” he said. “Your infrastructure is no longer something that’s going to differentiate you, even though you have to continue to invest in improving it.” Rangaswami said that BT had to look elsewhere in its traditional three-layer model of infrastructure, enabling technologies and services on top. “The economics of managing a telco have become much more complex, requiring us to work a lot harder on the enabling technologies layer of our model. The choice we made was to create the enabling environment as a multi-sided platform; we threw caution to the wind and put APIs in place that allow people to create and derive value over the top of our services. We have had to learn the ‘pull’ aspects of our environment, where power of choice has really passed to the customer.”

 
To improve performance, many organizations focus on labor productivity. But can increasing productivity improve companies’ ROA? Evidently not, in Hagel’s view. “There is absolutely no correlation between labor productivity and ROA; some of the industries that have shown the most dramatic improvements in productivity have suffered the most severe deterioration of ROA.” What about innovation? “At least as defined as product, process and service innovation,” Hagel said the report discovered that “it is not sufficient” to reverse ROA deterioration.

 
One of the report’s key insights – and one which may help companies see a way out of the downturn – focused on the competitive intensity metric. While debate continues in economics circles about how to define this metric, Hagel noted that standard concentration ratios used miss “the real action, which is that customers are becoming your competitors. They are extracting more value out of companies at lower costs to satisfy their needs.” The other constituency benefiting is creative talent – “knowledge workers” – who have significantly increased their total cash compensation since 1965.

 
These new competitive intensity pressures are forcing corporate performance to withstand “a pincer move,” Hagel said. “On one side, customers are getting more powerful and are pulling out value; on the other side is creative talent, also pulling out value. Companies do not want to pull back that value. So, the challenge is to rethink the institutional environment; companies must rethink their rationale – their reason for being.”

 
The Big Shift: Source of Instability
Such a rethinking is imperative because of what Hagel and his Deloitte colleagues have termed, “The Big Shift.” The panelists discussed many aspects of this shift, including the move from static knowledge to a flow of knowledge, and from discrete transactional interactions with customers to fuller, more extended and trusted relationships. “But how do we value relationship information?” asked Rangaswami. “This crisis shows that we don’t know how to value the right things. In the telco industry, we are just beginning to grasp the importance of things that could be of value going forward, such as relationships, conversation, information flow and tacit human knowledge.”

 
Panelist Umair Haque, director of the Havas Media Lab and strategic advisor to investors, entrepreneurs and other organizations, said the problem was that “our building blocks are not fit for a networked world; they weren’t built for it.” He offered examples how this mismatch brought about consequences such as the tremendous trade imbalance between the U.S. and China and instability caused by the largely unregulated explosion in securities day trading. “Our institutions have been built on economics suited for a non-networked world. We don’t know how to build economics for a hyper-connected world. Just as a radical example, if we had the right building blocks that could fuel perfect trust among us, there would be very little need for money. We don’t have that.”

 
Hagel noted that in other eras, revolutionary infrastructure changes in electricity, telephony or steam power brought bursts of innovation that were followed rapidly by stabilization. “This is not happening with the digital infrastructure. We need a different way of thinking about how to organize and access resources and to connect with people to draw them out as needed.”

 
Social Networks: The New Platform
Could social networks begin to provide a degree of stability amid such change? Panelist Ellen Levy, vice president of Corporate Development and Strategy at LinkedIn, described the company’s professional network of “53 million self-registered individuals” as a way for people to build long-term relationships even as the institutions they work for change. “When you look at crowdsourcing, malleable boundaries and other models of how the world is changing, they all rely on a set of assumptions that should be called out,” Levy said. “You have to be able to find out about people outside your organization. You have to believe that the information is accurate, authentic and valid. You have to be able to trust reputations. And finally, the person on the receiving end has to be interested in receiving your inquiry. When the floodgates are open and everyone can reach out to everyone, there has to be a model for why you start to do business with someone you haven’t known before.”

 
This makes context important, Levy noted. She described how the professional context of LinkedIn makes it different from a purely social network, and how that context can become the basis for filtering information so that overload is not a barrier to building relationships. “With filters, I can make inferences based on hypotheses about people around you who are part of your professional relationships or express similar goals and objectives,” Levy explained. LinkedIn could then fill out the context and even provide recommendations not only about people but also about things like books to buy because of what is known about professionals in the network who share your interests. “This is how we are trying to build the underpinnings of a connected world,” Levy said.

 
A member of the audience voiced some concern that “if you introduce any kind of monetization to a relationship, it can sully that relationship.” Levy agreed that LinkedIn and other networks have to be careful. “Motivations can’t be ignored,” she said. “However, our founders’ vision is of a system that is not transactional; you are not getting anything from it except relationship capital, which is the asset we should be measuring.”

 
Unleashing the Passion
Hagel offered that the best way for organizations to build value and break the downward trend is to locate and connect to passionate people. “Too often, organizations keep creative, passionate people behind closed doors; they shove a pizza under the door every once in a while, but don’t expose them to senior management – and senior management is usually not very passionate.” Haque agreed: “What we need today is a purpose and a passion.” He saw these as critical to creating value that can offset or counterbalance the negative effects that networking brings to institutions not built for a connected world and in the process of adjusting to it.

 
To Levy, connecting passionate people is a key value of social and professional networks, both inside and outside of organizations. “All of a sudden, the passion of people in charge of their own professional life can be harnessed, utilized and built into the story of a company,” she said. She noted that companies such as Best Buy use social networks to harness ideas and collaboration to improve how the company works. Rangaswami noted that with network platforms, “for the first time, in an environment where collaboration is real, its value can be measured and quantified.” Panelists agreed that the valuation can happen both inside and outside organizations, such as among partners.

 
With the collaborative potential of networks growing, Hagel suggested that it was time for executives and managers to ask themselves, “Do I have a long-term, trust-based relationship with the 20 smartest people not just in my organization, but in my industry?” With the connected infrastructure evolving through social and professional networks, it is possible, perhaps as never before, to develop those relationships – and spark the passion and creativity to drive economic growth.

[Note: I wrote this report for The Wharton School.]

This week I have been attending the annual IBM Cognos Industry Analyst Summit in Ottawa, Ontario Canada. Although I’m in meetings most of the time, I enjoy coming to Ottawa. The green colors, blue canals, rivers and lakes and crisp hints of fall in the air offer a nice change from the dry brown of California in September. On this trip, however, I couldn’t help but be thrown back to a year ago, when headlines from across the border screamed panic on Wall Street, in Washington and in the financial services industry. Like many, I stood mouth agape every morning as I read and watched the news. It looked like The Big One: the economic cataclysm we hoped we’d never see in our lifetimes. In sheer size, reach and complexity, it had every chance of dwarfing the Great Depression.

One year later, are we out of the woods? Did the brave if not desperate moves of Paulson, Geithner and Bernancke stave off disaster? Not according to Nassim Nicholas Taleb, author of The Black Swan: The Impact of the Highly Improbable (Random House, 2007). I caught an interview with him by Margaret Wente in this past Monday’s in The Globe and Mail. Here’s a snippet:

Margaret Wente: Happy days are here again. The central bankers say the recession is over. The markets are buoyant. Can we relax?

Nassim Taleb: Not at all. Central bankers have no clue. In the first place, the financial crisis was not a black swan. It was perfectly predictable. They ignored the phenomenal buildup in leverage since 1980. They acted like airline pilots who’d never heard of hurricanes.

After finishing The Black Swan, I realized there was a cancer. The cancer was a huge buildup of risk-taking based on the lack of understanding of reality. The second problem is the hidden risk with new financial products. And the third is the interdependence among financial institutions.

Taleb carries no water for the wizards currently trying to sort out this mess:

MW: Are you saying the U.S. shouldn’t have done all those bailouts? What was the alternative?

NT: Blood , sweat and tears. A lot of the growth of the past few years was fake growth from debt. So swallow the losses, be dignified and move on. Suck it up. I gather you’re not too impressed with the folks in Washington who are handling this crisis.

Ben Bernanke saved nothing! He shouldn’t be allowed in Washington. He’s like a doctor who misses the metastatic tumour and says the patient is doing very well. The first thing I would tell Chinese officials is, how can you buy U.S. bonds as long as Larry Summers is there? He’s a textbook case of overconfidence. Look what happened to Harvard’s finances. They took a lot of risk they didn’t understand, and it was a disaster. That’s the Larry Summers mentality.

And, he is gloomy as a gathering winter storm about the future:

MW: So if everyone is still on the wrong track, what’s the right track?

NT: My whole idea is to lower risk in society by developing a system that can resist human error, rather than one where human error rules. The first step is to make sure that no financial institution is too big to fail. Next, make sure governments don’t favour big companies. Governments should also decrease the role of economists – they’re no more reliable than astrologers, and they do more damage.

Feeling myself to be but a tiny rowboat on a roiling ocean, I am too vulnerable to give in to the pessimism of Taleb. The human in me has to believe that as we live through this debacle, we will learn how to use the tools at our disposal to climb to safety and adapt to the new reality. However, I share his concern that the problems have not gone away. They have only shifted and changed – and have become joined at the hip with the US government’s inability to control deficit spending.

Taleb would probably find the Marsh advertisement I saw on a placard at Chicago O’Hare International Airport both ironic and alarming. Written across a fine-grained, Avedon-style close-up of a human face was the proclamation, “I Risk, Therefore I am.”

I will be blogging about what I learned at the Summit at Intelligent Enterprise and Ventana Research. But, since my battery is about to go, I’ll have to get those done when I’m back on land and can charge up.

I’m writing this blog in the late afternoon in an alcove of the Hyatt Regency San Francisco’s famous atrium. A couple of hours ago, the MDM Summit finished up, and now men are rolling big carts stacked with crates of beer across the tile floor. Colored lights make the anodized aluminum bars of Charles O. Perry’s “Eclipse” sculpture look like a giant musty rose. A tense-looking chef appears; buttoned up in his professional white smock, he walks with brisk steps toward the window to check his cell phone. Reception is bad in this hotel, which doesn’t look like it’s changed much since it opened rather spectacularly in around 1970. Outside, the summer sun radiates light into the blue sky, blue bay and everything that’s moving: walkers, skateboarders, trolley cars and buses. In the distance, the first thin, grey vapor of fog stretches in a line across Angel Island. There’s more to come.

Before I succumb to the charms of this place and order an Anchor Steam, I’d like to offer some thoughts about master data management (MDM) and data governance based on what I heard at the conference. It will probably take a couple of blog installments to wrap it up. Here is the first.

Data is flying everywhere these days, particularly as more businesses turn to the Web for external sources that might give them an edge in customer intelligence. Social networks and communities could be rich sources of information about how customers relate to each other and self-define their communities. However, organizations are fooling themselves if they do not exercise MDM processes to do some of the same modeling, integration and quality efforts for external sources that they would to integrate views of data from internal sources. MDM processes are those that help organizations improve the quality and consistency of their data across multiple sources, increase their understanding of data relationships and manage how it is accessed and distributed to users.

William McKnight, a partner with US-Analytics and Louie Torres, who is now director of Business Solutions after having been director of Information Systems at Forbes, offered a useful presentation on “Incorporating Syndicated Data into Your MDM Environment.” The speakers noted that IT often exercises little control over the use of external sources; business units go out on their own to engage data syndicators, brokers and providers, which can create new data silos in the organization. However, they do this for business reasons – and as Torres pointed out, they own the P&L. “We are very interested in ‘psychographics’ that tell us what people like to do,” he said. To be closer to business units’ decisions about data sources and more helpful to their use of them, Torres, as director of Business Solutions, has moved out of IT.

With data syndicators such as InfoUSA offering to send as many as 6,000 data points on customers, the speakers noted that it is important to look at what you really need – and whether you need to pay to have it updated. “How many birthday or gender updates do we really need?” said Torres. Forbes is looking for granular data about who has a yacht, who likes to play golf and other rather moneyed customer activities. So, the company will focus most closely on data points that deliver on those matters. The speakers suggested that companies should determine what they want, and not pay for what they don’t need. As well, they should not include data points that could offer suspect information and invite into the organization information management headaches that aren’t necessary.

In part, headaches come because data brokers and syndicators are buying and selling data behind the scenes like mad. You often don’t know what they have pulled together to create a sellable data package. This can create data quality and consistency problems, making it important for organizations to use MDM processes to ascertain and ensure the quality of customer views. It also means that organizations should develop policies for external sources as part of their data governance. I will cover this aspect in a later blog.

What about the MDM industry itself? I caught the part of conference chair Aaron Zornes’ talk where he was discussing the systems integrators (SIs) and the importance of their role in MDM. He said that his organization, The MDM Institute, will have a report out on this subject shortly. One important point he made: There’s been a lot of “moving and shaking” in the SI industry, particularly regarding information management practices. Thus, Zornes offered a buyer beware; organizations should make sure that the expertise they are being promised by the SI is still what the firm is capable of delivering.

Before I step into the batter’s box to begin blogging again after some time away, I would like to offer a tribute to my father, John W. Stodder, who passed away on April 21, 2009. Although at 86 he had various ailments, his passing caught his family by surprise; he was a person of remarkable vigor and intellectual intensity and curiosity, right to the end. We fortunately saw him at Easter, during which, as usual, he asked me lots of questions about where the software industry was going, how to find information online, which kind of computer he should buy, and so on. These conversations would flow and digress into others about politics, the economy, sports, music, wine, boating and all the other topics he found interesting. It is still hard to imagine that they won’t continue. He had the good fortune of passing away while sleeping in his own bed after a couple of weeks that included family get-togethers that he loved and going with my mother – his wife of 58 eventful years – to the opera, the symphony and the book club to which they belonged. He will be missed.

A graduate of the College of the Holy Cross and Harvard Business School, my father was a maestro of finance, investment banking and the deal; he negotiated mergers and acquisitions with his own firm in Southern California for about 30 years after a successful career on Wall Street and earlier in Chicago, where I was born. To his frustration, I did not pursue a business career: but, I surely benefited from his insights into business motivations and objectives, many of which filtered into my writing over the years. He always saw opportunities and communicated restlessness about seizing them. He loved listening to and learning from people who really had it going, whether it was Bill Gates, Gates’ onetime legal nemesis David Boies, marvels from the world of opera like Luciano Pavarotti, Howard Dean, NFL coaches and players, and people he would meet, including my friends from college, seatmates on airplanes and local shopkeepers. His favorite TV show was “Charlie Rose,” which I believe he loved not just for the informative conversations but also because of Rose’s ability to draw out the thing that drives his guests to achieve their dreams and objectives. Had my father had been a talk-show journalist he probably would have done it like Charlie Rose. However, I don’t think he would have traded being “in the kitchen,” fully engaged in negotiating the complex human and financial factors that go into making mergers and acquisitions work.
He was forever giving advice, lessons and strategies, whether about my career or how to get to LAX via South Bay backroads. He preached that one should always learn; seize opportunities; be ethical; don’t be shy about asserting what you really think; and when you break an egg, make an omelet. I will not forget them as I move forward with Perceptive Information Strategies and other ventures with friends and colleagues in the years to come.

Intelligent Enterprise published my blog report about the recent SAS Global Forum near Washington, D.C. This was a very interesting conference – a great opportunity to see firsthand how analytics are becoming a change agent in healthcare, government, marketing, and numerous other endeavors. I have more to say about this event as well as some other meetings I had in the region. However…as usual, I am immersed in the present. Right now, that includes the Web 2.0 conference in San Francisco, among other things. Of course, if you can marry analytics with Web 2.0…

As it zoomed toward the international space station orbiting about 200 nautical miles above us, the shuttle Discovery had to dodge clouds of space debris. Once there, the threat to human and technology treasure did not go away; apparently, pieces of debris as small as a grain of sand could cause serious damage. Perhaps I’m reaching a bit, but this seems like an apt analogy for organizations that are beginning to journey into the realm of social media to “discover” data patterns, relationships and other insights that have eluded them thus far in their analysis of data sources closer to home. All that unstructured stuff hurtling by on Facebook, MySpace, Twitter and other social media could be important. But, getting a closer look at it could also be dangerous; companies could run afoul of privacy rules and online social etiquette in ways that might damage their reputations.

At Predictive Analytics World, I noticed that when keynoters spoke about social media, the audience of data miners, software developers, business and statistical analysts put down their Blackberries and listened intently. You could feel it in the room: the next big data gold rush, or at least the next important phase of search engine optimization and e-marketing.  I blogged at Intelligent Enterprise and Ventana Research about the conference and the growing awareness that many operational business intelligence (BI) implementations will need predictive analytics to make good on the “actionable information” promise of these applications. However, I am interested in how data mining and predictive analytics are being applied to social media and will be writing about this topic from time to time here.

Lauren McKay of CRM Magazine wrote about a Predictive Analytics World keynote by Usama Fayyad, CEO of Open Insights and former chief data officer for Yahoo!.  Fayyad talked about the success of “behavioral targeting,” or analysis of search and Web browsing, and how it might be applied to social media interactions and increase the ability of online businesses such as Yahoo! to react and respond within a relevant time period. The implementation of predictive analytics tools and techniques could allow companies to improve their response rates not only by knowing more about their customers but also gaining greater mastery of time. Right now, it seems like a lot of online businesses are shooting in the dark about how long they should keep their marketing offers alive. If they could analyze (and begin to predict) the buzz about interests and products in social media, they could gain a better understanding of the life expectancy of marketing initiatives.

“Big as this industry is, we still haven’t figured out this business,” Fayyad said humbly in his keynote. The potential benefits and dangers of social media – or really, the whole field of behavioral information that will grow to include location data as people rely on mobile devices for search and social interaction – are enormous. We don’t want to get too breathless; after all, inertia rules how most large organizations market their products and services. But, tapping behavioral information could eventually rewrite many rules of marketing. A big question, along with cost-benefit analysis of course, is how much nosiness people will tolerate. However, that’s a topic for another blog.

As I kick off this blog from my hotel room in Las Vegas, there are few clouds in the sky. The morning sun radiates through the desert dust kicked up by the activities of a million people. The pale yellow sky sits above the tall wings of the casinos and the dark, flat shadows they cast on the shorter buildings below them. Thus, without any physical clouds drifting by to offer themselves as models, I’ll have to use my imagination to think virtually…which, of course, makes perfect sense.

“In the cloud” has become a term of art tossed about perhaps a little too easily by vendors, VC-backed start-ups, IT information strategists and lately journalists in the non-IT, mainstream business media. In a sense, the idea is to connect the unknowing with the all knowing: Users and/or developers can execute whatever they need to do – on mobile, laptop or other devices – while up there on some cloud the necessary computing power, scalable software and expert professionals respond without users or developers having to know how it’s getting done.

The business arrangement may remind the grizzled veterans among us of timesharing, but keep in mind that this is 2009, not 1969. Today, few have even heard of green screens. Users expect rich interfaces and some ability to personalize and customize the services; and to succeed, the computing environment in the cloud can’t waste any of its precious resources. Providers of the cloud computing services will have less and less tolerance for sloppy software that doesn’t use resources efficiently. At the same time, we will surely see a spike in demand for tools that enable real-time performance monitoring, analysis and response to problems inside and outside the clouds.

In other words, most of today’s systems can’t just be put inside a mass of water vapor or frozen crystals (thanks, Wikipedia) and called “cloud computing.” And there’s more to cloud computing that simply “pay as you go” models, aka software as a service (SaaS). For this reason, cloud computing could spur innovation even beyond the important developments centered on virtualization. To satisfy users’ demands, database architectures, for example, may have to make more creative use of memory-based and near-line storage as well as search or other programs that are different from the query style of SQL. As well, organizations will have to devote greater attention to business rules, policies and governance issues related to information sharing, privacy and quality.

Cloud computing is changing the vendor landscape. We now have “coopetition” arrangements between the likes of Amazon and IBM, with the latter recently announcing that DB2 works in the Amazon Elastic Compute Cloud. IBM’s recent announcements from its Blue Cloud Initiative focused on Tivoli for managing data centers set up as “private” clouds; John Foley of InformationWeek offers a nice analysis here. Other vendors big and small are adjusting their strategies based on how strongly they believe the market will be for cloud computing and where they can take advantage: in other words, the marketing pieces are still in motion at Hewlett-Packard, IBM, Microsoft, Oracle, SAP and elsewhere.

Many bloggers have referenced the useful analysis recently published by researchers in the Electrical Engineering and Computer Sciences Department at the University of California, Berkeley. I recommend reading this document, even though it won’t be the final word on this still-developing phenomenon. I will be using my vantage point in this blog to explore and examine where the clouds are going, particularly as they relate to information management, business intelligence, analytics and policy directions for information governance. Yes, even on a cloudless day in Las Vegas.