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Hewlett Packard Enterprise Discover 2015: How we deliver cloud services is going to change

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By Curt Hopkins, Managing Editor, Hewlett Packard Labs

In his Hewlett Packard Enterprise Discover 2015 digital interview on “The Outcome Economy,” HPE Senior Fellow Bernardo Huberman will outline an inevitable move in the economics of the high tech industry and enterprises in general.

Huberman, Hewlett Packard Labs’ Director of Mechanisms and Design, has addressed the outcome economy before, most recently in his blog post, “Above the clouds: what modern IT portends.”

In his Discover interview, which will air during Hewlett Packard Enterprise Discover 2015 in London on the Discover YouTube channel, he will explain in greater detail how it will change the way we do business.

Huberman is a great analogist. Here’s one of his favorites when explaining what the outcome economy is.

Bernardo-Discover-Barcelona.jpg“Let’s say you invite two friends for dinner,” he said. “You go to the supermarket, you buy your ingredients, you come home, cook, set the table, and you have your dinner.” In other words, you have bought the resources necessary to create a dinner and put the work into it yourself.

But there is an alternative, he continued. “You can take your friends out to a restaurant, where you can select from a menu. What you’re doing in the second example is paying for an outcome – your friends eating a meal they enjoy. The restaurant guarantees the outcome and shoulders the risk, while you pay, depending on what you select.”

“A visitor from Mars couldn’t come to Earth and start a restaurant,” he said. “A successful restaurant is built on centuries of knowledge, how much of what to buy, how to organize the undertaking.” Out of luck, Martians!

So, if you can do such a thing with a meal out with your friends, there is no reason that you cannot do it with the cloud. While so far, no one is offering the ability to pay for cloud outcomes, researchers at Hewlett Packard Labs are designing mechanisms that will allow for that.

“We’re going to sell outcomes rather than services,” said Huberman.

If it sounds like a bit of a risk, to turn that decades-old high tech paradigm around, it is. But risk is what you’re being paid to assume in the outcome economy.  

Such a move is not all risk for Hewlett Packard Enterprise, however, or for anyone wanting to get into the outcome economy. As Huberman notes, anyone offering outcomes on a menu is going to immediately begin to build up a tremendous, and profitable, amount of data on client decision making. If you can tell that one menu option is popular and another is very unpopular, you can lose the latter and focus on the former. That makes you leaner. You become an expert on your users and can turn around and use that expertise to make those users happier while making your own organization more efficient.

“When there is uncertainty about the state of a system, selling outcomes may not be better than selling resources,” said Huberman. But when the reverse is true, you can turn the beat around.

When it comes to cloud and data services, most providers were used to selling to CIOs. But now, they find themselves selling to CFOs and CEOs just as often. Those people cannot be wowed with technical specs. They understand outcomes. The company that can guarantee that outcome is going to have a leg up on those who sell resources or services.

It is not only cloud and data purveyors whom Huberman sees embracing this new way of selling. Other examples he uses include home environment and security providers, shipping companies, and even agricultural corporations.

“What about agriculture?” he asked. “Modern farming is already highly automated. ‘You pay this amount, and we guarantee you so many bushels.’” If you can pay more, the company will guarantee you a higher yield; if you can’t afford that, pay less and they will still guarantee you a harvest you can live with.

The key to all this is that willingness to accept your client’s risk. You either have to be almost certain you can deliver the outcome, or insurance companies will have a whole new sector on their hands. Because, unlike now, if you are selling an outcome – instead of a product – and your client experiences an unexpected result, you will be responsible for paying a penalty.

The outcome economy that Huberman sees cresting the horizon could not have arrived sooner. Such a thing would never have been possible without the relatively recent explosive availability of data and the advent of cloud computing. You need to know what you’re doing with high precision, if you’re going to risk your company’s revenue on a guaranteed outcome.

If you would like to learn more about the implications of the outcome economy and what it means for the cloud, you can watch Dr. Huberman’s interview online.

Bernardo Huberman’s Digital Executive Interview on “The Outcome Economy” will be available in early December on the HPE Discover YouTube channel.

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