Discourse as History

desktop infrastructure, improve Payment Card Industry (PCI) compliance and security systems, reduce power consumption and improve user experience.

After reviewing its options, Hertz decided to use EMC’s VMware software to virtualise its servers and replace its legacy desktop devices with ‘zero-client’ terminals supplied by Dell’s Wyse Technology unit.

‘By virtualising our server and desktop estate with VMware, we were able to cut costs and free up resources to focus innovation and customer service, while dramatically simplifying our IT infrastructure and transforming how we support over 1,000 desktops in our service centre in Dublin,’ says Mr Bermingham.

By simplifying its IT infrastructure, Hertz was able to cut help-desk calls by a third (giving the IT team more time to work on new services) and cut power costs by 10 per cent.

But one of the greatest benefits is that Hertz can now scale its computing requirements up and down according to demand. For example, its main office in Scotland experiences a rapid increase in demand during the British Open and Ryder Cup tournaments, while holiday destinations such as Italy and France see peaks in demand across the summer.

Using the virtualisation software, IT can anticipate and meet demand using virtual desktops instead of having to set up new physical PCs. Feedback from employees has been highly positive, with many describing it as a

‘quantum leap’ in technology for the company.

Upgrading and rolling out software packages has also become far simpler because the IT team no longer has to

visit every PC and laptop individually. So far, Hertz has virtualised over 300 desktop applications through VMware ThinApp, which has helped the company standardise applications across devices and improve application speeds.

Compliance (with PCI) has also increased; (antivirus) patch management – a key factor in keeping corporate IT systems secure – is now done through servers rather than PCs, meaning that software is always up to date.

New uses can also be added quickly and, once plugged in, they will have instant access to the latest software and applications without needing support from an engineer. In addition, since everything is held centrally in the European Shared Services data centre in Dublin, security risks are considerably reduced.

‘While this started off as a European project, the wider international Hertz network and franchisees have become interested in rolling out VDI as well and we are currently looking into how we can extend it to countries including China, Australia and New Zealand,’ says Mr Bermingham. ‘It is great to see something we developed in our Dublin Innovation Centre recognised as having the potential to be rolled out across the globe.’

Hertz is also considering extending virtualisation to encompass voice and video services. ‘VMware has enabled us to build extremely strong foundations to realise even greater benefits, as we add more and more services and extend the research of the programme internationally,’ says Mr Bermingham. ‘This is only the start for us.’

Source: Tayor, P. (2013) Hertz reaps virtualisation rewards. Financial Times. 1 June.

© The Financial Times Limited 2013. All Rights Reserved.

QUESTION

Discuss the advantages of virtual computing.

they can quickly be overtaken by smaller companies, or even startups: witness the speed at which Microsoft moved from being a small player to toppling IBM as one of the world’s leading software companies or the speed with which Facebook and Google became two of the largest companies in the world.

Moore’s law

Gordon Moore, co-founder of Intel, predicted in 1965 that the transistor density of semiconductor chips would double roughly every 18 months. This prediction has actually happened as we have moved from different generations of processors, such as from 8086 to 80286 and through to the Pentium 4.

The problem of change refers to hardware, software and entire business information systems, but it is perhaps best evidenced by the speed in change of processors. Improvements in processing power are indicated by Moore’s law.

Alongside this increase in the capacity and speed of processors, the capacity and speed of primary RAM storage and secondary magnetic disk storage have also increased dramatically, allowing larger, more complex, software to be run. The hardware improvements have permitted more complex software to be built, and this in turn requires newer hardware, since software designers tend to design new systems for the fastest machines available. To some extent, the speed of change in other hardware and software is governed by the rate at which processing power increases.

20,000,000 is the number of times cheaper that computing grew, between 1940 and 2000, according to David Mowery, economic historian at University of California, Berkeley.

How do these technical changes affect a business? Many managers would answer that they result in unnecessary expense and disruption. While this may be true, managers do not have to adopt the latest technologies if they do not believe that they are delivering benefits.

So why are new technologies adopted? The reason may often be fear: fear that if your competitor has upgraded to the latest Intel version, or Windows or business system, then they may have a competitive advantage. If you perceive that your competitor has, or may develop, a competitive advantage, then this is a powerful incentive to invest in new systems.

Much of this investment cycle may be driven by uncertainty and the fear of falling behind.

Industry figures seem to suggest that companies overestimate the benefits that new systems can give them and underestimate the risk of project failure. The productivity paradox, which was popularised by Strassman (1997), seemed to suggest that there is little or no correlation between a company’s investment in information systems and its business performance measured in terms of profitability or stock returns (see Chapter 13 for further discussion).

Techniques for dealing with technological change

There is a continuum of approaches for how managers deal with technological change. The approaches are informed by considering the typical pattern for the diffusion of innovation summarised by Rogers (1983). Figure 3.7 illustrates a typical curve for adoption of any innovation by consumers or businesses, whether it be a new processor, a new form of storage such as DVD, or a new business concept such as e-business. One adoption approach is to be an early adopter, who always tries to be the first to make use of new technologies to gain a competitive advantage. The second is to use a more conservative ‘wait-and-see’ approach

and not use new technology until its benefits have been successfully demonstrated by other companies in your sector. Of course, there is a continuum here and most companies would seek to position themselves somewhere between the two extremes.

The problem with being an early adopter is that the leading edge of development is often also referred to as the ‘bleeding edge’ of technology due to the risk of failure. New systems may have many bugs, may integrate poorly with the existing system or may simply not live up to their promise. The counterargument to this is that, although the risks of adoption are high, so are the rewards, since you may gain an edge on your rivals. American Airlines gained a considerable advantage over its rivals when it first introduced the SABRE customer reservation system. Similarly, the banks that first introduced new techniques such as auto-teller machines and phone banking facilities also managed to increase market share. The examples in the box show people and organisations that have been too conservative – not envisaging the benefits of new hardware or technology approaches.

Figure 3.7 Typical diffusion of innovation curve

Number of new adopters Leading edge

Time 1. Innovators (2.5%)

2. Opinion leaders (13.5%) 3. Early majority (34%) 4. Late majority (34%) 5. Laggards (16%)

Conservative adopters

1 2 3 4 5

There is a tendency for hardware vendors to retain their entry-level price as technology improves. For $1000 or £1000 the specification that is available has increased dramatically over the past five years. Yet this price bracket seems to be that most commonly used

Keeping pace with PC software and hardware

Reported quotations from conservative technology adopters

‘This “telephone” has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.’

Western Union internal memo, 1876.

‘Who the hell wants to hear actors talk?’

H.M. Warner, Warner Brothers, 1927.

‘I think there is a world market for maybe five computers.’

Thomas Watson, chairman of IBM, 1943.

‘There is no reason anyone would want a computer in their home.’

Ken Olson, Founder of DEC, 1977.

in business adverts. The result of this is that a business manager may over-specify the equipment needed for end-users. Does an administration assistant really need the latest-generation PC with a very fast processor and full memory complement for simple word processing? A further problem is upgrading to new versions of operating systems and applications software. For example, a company such as Microsoft needs to produce new versions of software every few years to maintain its revenue stream. The question for the business user is, do we really need these latest versions? Companies will often find that the benefits of the new software are marginal and the costs and disruption of upgrading may be significant. Remember that costs will not only include upgrading the software, but upgrades to hardware such as RAM and processors to run the new software, and also training for staff. Some people have argued that the slow uptake of Windows 8 is due to many companies choosing to keep their existing software because they perceive that the benefits are likely to be marginal and will probably be exceeded by the costs. Effectively, the argument is that organisations are choosing to ‘skip’ one or more versions of Windows until they feel that some new and significant benefits can be realised.