IBM's STG Is On Track With Smarter Computing

IBM's Systems & Technology Group (STG) represents, among other things, the hardware heritage of IBM, such as the mainframe, open systems servers and storage. But STG is deeply aligned with the company's software and services capabilities. IBM's annual STG analyst meeting is designed to bring industry (not financial) analysts up to speed on the group's strategy and direction.

David Hill

December 20, 2011

12 Min Read
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IBM's Systems & Technology Group (STG) represents, among other things, the hardware heritage of IBM, such as the mainframe, open systems servers and storage. But STG is deeply aligned with the company's software and services capabilities. IBM's annual STG analyst meeting is designed to bring industry (not financial) analysts up to speed on the group's strategy and direction.

The meeting is not a feed and speeds meeting where the latest IBM hardware products are announced. That is not to say that products were missing, as they are vital to the strategy, but rather the emphasis was on how they could aid in fulfilling the company’s overall strategy rather than emphasizing new features and functions. And knowing where IBM is and where it is going is important to all of the IT community.

Only a Rip Van Winkle IT professional would not be aware of the emphasis that IBM is placing on the concept that it calls “Smarter Computing,” which it considers the foundation for Smarter Planet. Although almost everyone in and out of the IT community would probably fail a quiz on clearly defining Smarter Planet, they have probably seen on TV, heard on radio, or seen printed advertisements that feature Smarter Planet.

In one session, one of my analyst compatriots made the statement to the effect that enterprises could care less about Smarter Computing and the Smarter Planet, essentially saying that it’s marketing hype. In essence, he was looking at Smarter Computing through the lens of an IT administrator whose life revolves around hardware and software components by whose performance he or she is measured. That misses a very big point. IBM is directing its “Smarter” message at a much higher level in the organizational hierarchy— CIOs who seek to align IT with the business to increase business value and C-level executives who desperately need the improved decision making capabilities which define the underlying premise for Smarter Computing.

The history of IT is made up of waves. An early big wave was the move to online transaction processing (OLTP) systems, which continue to be the foundation for operational business processes (using structured data). But we also added to it a wave of collaborative processing that initially emphasized e-mail and built from there with basically semi-structured information. Now we are moving to an era of “management information systems” (with the focus on managing the enterprise and not necessarily just for those with a managerial or executive title on their business card). These are systems designed to help business decision making processes and are typically based on the use of analytics.

At the STG event, IBM illustrated Smarter Computing through two focal points: Smarter Commerce and Smarter Cities. In the first instance, IBM was able to analyze large quantities of data to determine the rise in sales on Black Friday and Cyber Monday very quickly. This is information that many people wanted to know, but more than that, the power of analytics to process big data in a timely fashion was demonstrated. IBM also demonstrated the value of Smarter Commerce through a company with a very large supply chain — namely itself. IBM’s Integrated Supply Chain (ISC) applies analytics to this data rich environment to drive effectiveness, in the sense of doing more with less. This is not only beneficial to IBM, but the lessons learned can be translated to clients with large supply chains as well.

IBM’s Smarter Cities initiative leverages the fact that cities throughout the world have similar infrastructure problems, such as those related to transportation (for example, traffic congestion) and utilities (electricity, telecommunications, water, sanitation and energy). Mayors everywhere (as well as suppliers of services to cities) should be happy with IBM solutions’ instrumentation capabilities and their ability to use analytics to give insight for decision making and improved value.

IBM has targeted that 40% of its revenue will come from growth markets in 2015. That is very impressive. Note that this includes not only the pivotal “BRIC” (Brazil, Russia, India, and China) countries, but also other geographies. For example, IBM is targeting Africa. Although IBM has had a long-time presence in Africa, that tended to be limited to only several countries, including South Africa and Egypt. The complexity of the African continent poses quite a challenge, but IBM is used to dealing with complexity and thinking in terms of the many years necessary to make such investments pay off.

IBM recognizes that a local service presence and the use of local talent are essential. Since local talent is currently scarce, IBM recognizes (and is also acting by funding education programs) to develop the trained IT professionals who are needed. Surprisingly, but to its own benefit, IBM has found out that clients want the latest, fastest, and largest hardware. It is important to develop growth markets, as both the growth country and the countries outside that supply goods and services through companies like IBM stand to benefit. The world economy benefits in a win-win situation.

Although IBM’s Watson technologies have been spotlighted through play (i.e., the game show “Jeopardy”) as the demonstration of a solution to a Grand Challenge (i.e., moving computing far beyond the barriers with which it was traditionally associated), IBM is now concentrating on putting Watson to work in commercial environments. The initial focus is on information intensive businesses, such as healthcare, telecommunications and finance.

As IBM points out, Watson moves the computer from a calculator to a reasoning machine. Watson solved (in essence) the natural language problem, which includes the ability to “understand” difficult and complex questions expressed in English (a natural language) and then respond to them in the time that it would take a human to respond with an answer(s) that a human would find reasonable.

IBM describes Watson as a new class of analytical advisor and not an application per se. Watson is sophisticated software running on commercially available IBM Power 750 servers optimized for rapid, deep analytics of massively parallel problems. IBM uses hardware optimization, such as exploiting Power’s robust memory architecture (page sizes, multi-page) and cache sharing between cores.

IBM discussed healthcare efforts it is pursuing in conjunction with WellPoint where Watson takes patient information (such as medical records, medications, and tests), and reviews a large body of medical information (textbooks, articles, etc.) to provide an evidence-based analysis whose output is presented to physicians. Unlike its Jeopardy! performances, Watson does not come back with a single best answer, but may present a series of suggestions based on probabilities, not certainties. Moreover, Watson is not bound by the constraint that it has to answer a question in 3 seconds or less, an essential point, since queries may include a series of interrelated questions (such as those an oncologist or other specialist might pose). That Watson does not make decisions is a critical point. Watson merely complements the analysis of medical data and the medical decision-making process. Watson’s output can also lead to further action (such as additional medical tests whose results can help improve Watson’s ability to perform differential analyses).

This can lead to important results. Dr. Herbert Chase, physician guest of IBM who is a professor of clinical medicine, told a story. Early in his career, he was faced with a difficult case where a woman was suffering severe debilitation from what appeared to be a muscle disease, but specialists could not diagnose her condition so no treatment could be put in place. Access to literature in those days was difficult, but probably through luck and sheer determination, the physician found a non-intuitive and unlikely solution that turned out to be the answer.

He had had three clues that led to his successful diagnosis and used them to test Watson. Watson came back with a list of five or six possibilities, the second of which was the correct diagnosis. A simple standard blood test could have been used to rule out the first option. The treatment for the correct option was simple and straight forward but not one that the specialists would ever have thought of recommending. Think of the earlier improvement in the quality of life of the patient as well as the cost savings (the woman was in the hospital for weeks while various diagnostic tests were made). This is only one illustration of how valuable this approach can be.

Dr. Chase felt that doctors will accept the Watson-type technology. They simply do not have the time to review all the literature in their own specialties, let alone across other disciplines. He feels that medical education is going to have to change from memorization of information to how best to analyze information. So Watson is likely to have a major impact in many ways — saving lives, improving healthcare outcomes for better quality of life, cutting costs and enhancing medical education — among them.

But Watson is not the end of the story. Watson uses the basic Von Neumann architectural concepts that have dominated the computing industry for decades. IBM is working in its lab on cognitive computing, which among other things will lead to chips that mimic the way the brain works. Stay tuned. The IT revolution will continue to transform our lives for a long time to come.

As a storage analyst, I would be remiss if I didn’t touch upon the storage strategy discussed at the STG event. While not as headline-grabbing as Smarter Planet or Watson, hardware in the form of servers, storage, and networking continues to be a foundational technology for all of IBM’s broader efforts. And the dependence on large quantities of data, and the fact that the data explosion continues unabated, means that storage is front and center. The twin underpinnings of IBM’s storage strategy — efficiency and optimization — are mandatory if promises to derive great value from the data explosion are to be met without going broke paying for storage on the way.

Efficiency and optimization are sometimes used interchangeably. Efficiency has been defined (by the late management guru Peter Drucker) as doing things right. Optimization is a maximization play (getting the most that is possible) or a minimization play (expending the least resources). This increasing storage utilization could be seen as an efficiency play. Moving data to the proper storage tier (i.e., one that best meets the price/performance requirements for the data being managed) could be considered a maximization of available resources play. Using tape instead of disk for certain applications (such as active archiving) can be a minimization play (reducing energy costs by having idle tapes is the lowest that you can go in saving energy).

IBM illustrated its optimization and efficiency points through its Easy Tier and Active Cloud Engine solutions. Easy Tier can migrate data among up to three tiers of data (typically SSD and a variety of disk and/or tape systems). That provides cost efficiencies through better utilization on a cost basis (data requiring low performance is stored on more cost effective storage media).

The Active Cloud Engine is about providing efficiency and optimization for data in the cloud, where a single view of the data from multiple geographically distributed sites is necessary. Easy Tier might be seen as the internal vertical hierarchy approach, and Active Cloud Engine might be seen as a horizontal approach that works across geographically dispersed sites as necessary. Buying storage is not a simple commodity play at one site with one tier of storage anymore, but rather a hopefully rational process which examines complex requirements and determines the proper solution.

IBM is a for-profit company and has to report back to its stockholders periodically. Like almost any other IT vendor of at least decent size, IBM is subject to the hockey-stick effect, where vendors sweat out sales to the very hour of midnight ending a quarter, and it seems that most sales come at the end of the quarter (i.e., the third month of a quarter has much higher sales than the first month of the quarter). This has gone on for decades. Why do I mention this?

Well, while the hockey stick effect is important to IBM, the company thinks not only in the quarterly and annual results terms that drive most public companies, or even in the five year or so strategic planning cycles that drive some vendors to think beyond the short term, but also in the long-term (a decade or more). That is very unusual for companies outside of Japan.

Two examples of this long-term investment perspective are growth markets and R&D. In growth markets, IBM has been in Africa (although concentrated in a handful of countries) for a long time, and it has stayed the course. The second is R&D, as illustrated by IBM’s commitment to Watson and similar cognitive computing-focused efforts. Practical products may not come out for a long time, but that doesn’t stop IBM from moving forward. Watson took over half a decade of effort and its full impact will take a number of years to develop.

The same might be said of Smarter Computing and Smarter Planet and growth markets. They have a here and now value, but reaping the full harvest will take years of sustained effort. Other vendors who are unwilling or unable to make similar commitments may very well look upon IBM with envy and with statements like: “if we would have or if we could have …”

That said, IBM does not neglect the present. After all, it has employee mouths to feed, as well as shareholder expectations to meet, so products such as Easy Tier and Active Storage Engine represent measurable efforts to drive additional revenues. Recall also that, recently, Warren Buffett gave IBM the economic equivalent of a Good Housekeeping Seal of Approval by buying over $10B of company stock. You don’t have to follow Buffet’s lead but everyone should pay attention to what IBM is doing as a bellwether and how it will impact their lives today and in years to come.

IBM is a current client of David Hill and the Mesabi Group.

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