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Technology, for better or worse, top of mind with NZ bosses

This year’s New Zealand Herald Mood of the Boardroom survey shows technology dominates business leaders’ thinking.

When asked “what factors will have the most impact on business over the next five years, two-thirds of bosses nominated technological advances. Nothing else came even close.

You can interpret the question as good or bad depending on whether your business is the disruptor or the disrupted.

In comparison, online security is unequivocal. New Zealand’s bosses named it as their number one concern.

Online security has been bubbling under the surface as an issue in recent years.

In this year’s New Zealand Herald Mood of the Boardroom survey, the nation’s bosses placed it first in a list of 16 possible concerns. And by a long way.

The Mood of the Boardroom team asked ore than 100 New Zealand business leaders to rate items on this list out of ten. A score of one meant there was no concern, a score of ten ranks as extreme concern. Cybersecurity scored 7.16.

Many leaders ranked online security at either nine or ten. It came in a lot higher than the next most pressing concern; the result of the US presidential election.

If the survey was held this week, it may have ranked even higher. Most CEOs filled out their survey responses before the news of the Yahoo email breach was public

Another ugly side of technology change came up in the question about multinational tax avoidance.

While there have always been worries about transfer pricing and other was of minimising taxes, technology companies like Google, Apple and Facebook take it to new extremes. They pay next to no tax in New Zealand because they claim transactions here actually take place elsewhere.

Incremental change, dealing with disruption

Infosys CEO Vishal Sikka

Infosys CEO Vishal Sikka’s says companies need to take a two-pronged approach to dealing with the disruptive challenges of 2016.

Sikka says disruption is everywhere. Like many others he points to the rise of Uber as an example of how every industry is threatened by change.

Uber came from nowhere to undermine the taxi industry in only a few years.

This happened as a consequence of Moore’s Law .

Sikka says Moore’s Law means rapid change. Human brains are not wired to understand exponential effects so we can find fast change hard to comprehend. This makes it hard to respond to Uber-like threats.

Rapid technology advances bring opportunities to disrupt faster, cheaper and more efficiently than ever. They also provide the tools to defend against disruptive threats.

Incremental change, different to disruption

According to Sikka companies wanting to defend themselves against disruptors need to be creative in two departments: incremental change and being different.

Incremental creativity is about being better at what you already do. He says you should renew your core business. Technology can help you do this by simplifying and improving processes. You can use automation, open technologies and the cloud.

The key is to free up the capacity needed for innovation.

Being different is about doing completely new things. Finding new customers, offering new products, seeking out new business models. Openness is central to this. You need to use rapid prototyping, open platforms and open workplaces

Sikka says you need to enter: “Frontiers where we don’t even have the vocabulary to describe what’s happening”.

Bill Bennett travelled to Shanghai as Huawei’s guest.

Huawei: Wolf packs lead digital era industries

Huawei Connect: Guo Ping says the days when companies can succeed by going it alone are coming to an end.

The Huawei deputy chairman says: “Society is becoming digital and intelligent. We don’t know what intelligent society will evolve into. Yet I am sure every modern industry system will become more complicated.”

As well as being more complex, industries are now interconnected and integrated. This has forced companies to be more open and flexible.

Guo says traditional companies get their advantage over competitors from their core competencies. They also own and control key resources.

Society more digital, intelligent

That competitive model is outdated. Today there’s a need to build ecosystems of companies that work together. The move towards a more digital and intelligent society means the effective use of external resources is more important.

Huawei came up with a new senior management structure to reflect this view.

Huawei Rotating CEO Guo Ping
Huawei rotating CEO Guo Ping

Guo is one of Huawei’s three senior bosses who each take turns at being the chief executive for six months at a time. This allows what is now a large, global scale company to stay nimble.

All three of Huawei’s rotating CEOs retain seniority even when it is not their turn at the top. Each gave a major keynote on a different aspect of the company’s strategy during one of the three days of the Huawei Connect 2016 event.

Industry ecosystems

Guo quotes an article in the Chinese edition of the Harvard Business Review to underline the importance of industry ecosystems. A diagram from the article shows a two-dimensional map of business advantage.

Competitive advantage and eco-advantage are the two dimensions . The map is a two-by-two grid with each quadrant characterised by a different animal.

If a business has low competitive advantage and low eco-advantage it is a panda. It doesn’t do that well in its own niche and is unable to adapt to changing environments.

Panda enterprises have weak core resources. They lack the capacity to mobilise and use commercial ecosystem partners. They are an endangered species and only survive in nature reserves.

Tiger enterprises can compete. Indeed, they are fierce and innovative. Yet while they can make breakthroughs in established areas, they are poor at connecting with external resources and partners.

Ants are individually weak but have strong collaboration and organisation. It’s easy to underestimate their power. Although they don’t do well at core competitiveness, they are sensitive to trends, have good mobility and use external resources.

Wolf pack organisations have speed, endurance and collaborate skills. They compete well in their own niche, but are adaptable and can thrive anywhere. Wolves are well suited to uncertain environmental conditions.

Guo may not be comfortable seeing Huawei compared to wolves. It is, after all, just a metaphor used by the Harvard Business Review.

A sense of smell

Yet he says that wolves have a strong sense of smell and a quick response: “These are qualities we respect at Huawei”.

Getting an industry ecosystem to work means building broad alliances of what Guo calls heroes.

He says there are three ways to make this work:
1. Making a bigger cake is more important than fighting for a larger share.
2. Managing cooperation is more important than managing competition.
3. Benefit sharing drives the evolution of the ecosystem. It is also the result of its success.

To win, companies like Huawei have to be ready to walk away from certain value and leave it on the table for partners. There is often plenty to go around.

Guo says in a decade the internet of things market will be worth as much as US$100 trillion.

“Huawei is committed to the pipe strategy. I’d like to see the internet of things evolve like the electricity industry where the development of the grid led to the invention of many new devices. Even if we only get one percent of the market, that would be a huge target”, he says.

Bill Bennett travelled to Shanghai as Huawei’s guest.

Huawei: Let a thousand clouds blossom

Photo shows Ken Hu, Huawei rotating CEO

Two years ago Huawei, a Chinese maker of telecommunications systems, said it wanted to be the world’s leading information technology company.

This year, at the three-day Huawei Connect event held in a giant arena on the banks of Shanghai’s Huangpu River, the company outlined a plan for getting there.

In a keynote speech, Ken Hu, one of Huawei’s three rotating CEOs, said the company aims to position itself as the enabler and driver of an intelligent world.

Over the next three days the meaning of these words became clear: Huawei will sell the hardware and software other companies need to build their own clouds.

Ambitious

Becoming the leading IT company was, and remains, an ambitious goal. It means taking on the likes of HP, Cisco and IBM. These US technology giants are long-established, well-known global brands. They have long-standing customers and deep relationships.

Every technology company likes to talk about disruption as if they invented the term. For some of the dinosaurs it is just an idea they pay lip-service to. At Huawei, disruption is a way of life.

Over the last decade and a half Huawei pulled off an audacious, disruptive take-over of the telecommunications equipment sector.

A decade earlier that industry was dominated by its own set of secure, long-established western giants. Now most of those names have disappeared.

Phone disruption

More recently Huawei disrupted the mobile phone market. Its first handsets were low-cost models. Huawei sold then to telecommunications carriers who in turn sold the phones to customers using their own brands. Huawei realised these devices were good enough to sell in their own right.

Today Huawei is the third biggest phone maker behind Samsung and Apple.

Now it’s the turn of the information technology incumbents to face disruptive Huawei.

These are already difficult times for traditional information technology companies. For year they sold high margin products and services to a world hungry for computers and software. Those high margins were under pressure for a generation, but that was nothing compared to the threat from cloud computing.

Infrastructure-as-a-service

Many organisations have stopped or slowed down their IT capital expenditure purchases. Instead they spend operational expenditure money buying infrastructure-as-a-service cloud services from companies like Amazon, Microsoft and Google.

Where they once installed expensive and complex applications, they now buy software-as-a-service from the likes of Salesforce, Netsuite and SAP by design.

This shift in spending, from traditional IT equipment to cloud services is the key to Huawei’s ambition.

Extend the brand

In some ways it is a classic brand extension exercise. Huawei’s most important customers have always been the telecommunications carriers. Huawei sells them wireless and fixed line network equipment. In New Zealand it does business with Spark, Vodafone, 2degrees and Chorus.

Now many of these companies are embracing cloud computing. Spark New Zealand has made huge cloud investments. It is one of the largest local cloud service providers. Many other telecommunication service providers in countries like China and Germany are starting their own cloud offerings.

Huawei already has the relationships in place with these telecommunications firms. It also has a track record of delivering. So it makes perfect sense for telecommunications companies to buy the hardware they need to operate cloud services from the same company that sells them network equipment.

And that’s the key to Huawei’s strategy. Another of the company’s three rotating CEOs, Eric Xu, says the company isn’t going after Amazon Web Services or Microsoft Azure, at least not on a global scale and not at this stage.

No public clouds…yet

He says Huawei will work with service providers for public clouds; “We don’t plan to provide public clouds outside of China.” In the rest of the world Huawei provides the infrastructure other companies need to build their clouds.

Huawei also says it doesn’t plan to operate at the higher levels of, say, software-as-a-service, it wants to build the pipes, although it stresses these are intelligent pipes.

Telecommunications carriers building cloud projects are the low-hanging fruit for Huawei, but they are just the start, the company intends to sell its cloud products to every company.

Xu says there are plans to help organisations in sectors such as finance build clouds, but there’s an even bigger opportunity with manufacturing and industrial companies. He sees room for thousands of new specialist industry-specific clouds.

Huawei cloud product firehose

There are a lot of cloud products. At Huawei Connect the company announced a slew including 31 FusionCloud Services, FusionStorage 6.0 and the FusionStage PaaS Platform. There are faster switches and faster processors.

To get this moving Huawei is looking to forming partnerships and to stick with open source software. Partners were visible at Huawei Connect, executives from Infosys, SAP, Intel and China Telecom among others gave keynote presentations. In a cavernous building next door, expo space was given over to others including Toshiba and SuSE.

Outside the Huawei Connect arena, massive industrial barges chug slowly up the river under yellow, smoggy clouds. There’s a powerful metaphor in the contrast between the old face of Chinese industry and the new one.

Huawei has a proven track record and a willingness to do the hard work needed to make ambitious plans succeed. It knows how to deliver customer value. There’s every reason to believe it can disrupt the information technology business.

Bill Bennett travelled to Shanghai for Huawei Connect as Huawei’s guest.

Main data theft threat is inside, overlooked

Despite companies spending billions to protect systems from external threats, data theft continues to climb.

Businesses often fail to address the underlying problem: most online crime involves an insider. Although in most cases that insider is an unwitting accomplice.

The latest Ponemon Institute study shows companies are struggling to protect information from theft and other attacks.

Online crime wave

Simple data theft is climbing fast. The study, sponsored by Varonis security software company found 76 percent or three out of four organisations say they have been hit by the loss or theft of data in the past two years.

Last year 67 percent or two-thirds of companies reported they had suffered a loss.

Ransomware is among the fastest growing threat. Ponemon says Seventy-eight percent of companies worry that they may be attacked.

Inside job

Ponemon confirms what we all know, insiders are the biggest computer security threat. Yet employees are not necessarily criminals. The study found insider negligence is the biggest cause of the losses and is twice as common as deliberate inside theft.

Of those companies who have already been attacked, half say they were not aware of anything until 24 hours or more after the breach. Which means attackers can do a lot of damage before they are detected.

Vested interest

As is often the case with research into online security, the company sponsoring the study has a product that can help solve the identified problem. Varonis sells insider threat protection software and tools to help companies understand what happens.

Yet that naked self-interest doesn’t negate the study’s key point, that companies often give employees more access than they need to sensitive information and that makes them vulnerable.

You don’t need to spend a cent with Varonis to fix that.

On the subject of money, a separate report from Gartner says worldwide spending on information security will grow almost eight percent in 2016.

The total amount spent is expected to hit close to US$82 billion this year. Most of the money will go to security consulting firms and outsourcing services.

Shortage of security skill

According to Gartner the shortage of talented IT security professionals means companies will need to spend more on managed detection and managed response services. In other words, addressing the problems identified by the Ponemon-Varonis study.

Over the next four years Gartner says the spending focus will switch to security testing, IT outsourcing and data loss prevention (DLP).

The analyst firm also forecasts a bright short-term future for preventive security. It says: “many security practitioners continue to have a buying preference for preventive measures. However, solutions such as security information and event management (SIEM) and secure web gateways (SWGs) are evolving to support detection-and-response approaches”.

Gartner says the SWG market will growth between now and 2020 as organisations focus on detection and response.