One of the main problems in counterterrorism today is that there are so many people and vehicles, and so much data and material, moving through globalization's myriad networks that it seems virtually impossible to track it all effectively. Nowhere has this problem been more acute than on the high seas.

In 2006, Adm. Harry Ulrich, then U.S. commander of NATO Naval Forces Europe, decided to do something about it. Despite having virtually no resources, his dream was to transpose the global air-traffic control system onto sea traffic.

Worldwide, aircraft are transparent, because they're all required to carry an identification beacon that allows them to be tracked leaving and entering airports, and monitored between airports, by a global network of sensors. Act suspiciously and somebody's fighter aircraft will soon be on your tail.

No such pervasive system currently exists globally for maritime traffic. While bigger ships carry an ID beacon similar to aircraft, without a shared monitoring network, that's like tracking only selected commercial jets and giving everyone else a pass.
So Ulrich, upon taking command, asked a simple question: "If we can do that in the air, why can't we do it on the sea?" He made a point of pioneering his sea-traffic-control effort first inside the Mediterranean, where NATO's southern naval forces have historically been concentrated, but his real target was waters off Africa -- the most ungoverned maritime space in the world.

Ulrich knew the U. S. Navy couldn't do it alone, much less bring Africa's meager coast-guard-like navies up to snuff so they could do it on their own. So he quickly created a network of assets -- both public and private -- to manage that space, modeling his monitoring system on international air-traffic control.

Ulrich began stitching together a network of shore-based sensors ringing the Mediterranean. His naval command then began initial monitoring by tapping into the International Maritime Organization's existing Automated Identification System, transforming NATO's ability to track ship traffic in the Med.

Almost overnight, NATO went from tracking dozens of ships on the Mediterranean to thousands, and instead of getting the data sometimes up to 72 hours late, now the contacts were being tracked in one to five minutes -- to an accuracy within 50 feet on the earth's surface.

When the classic big-firm systems integrators told Ulrich it would be too costly to pull it off, the admiral turned to the Volpe Center in Cambridge, Massachusetts, a U.S. Department of Transportation research center. Instead of hundreds of millions of dollars, Ulrich's initial network cost $900,000. The shore-based receivers are small, roughly the size of a radar dish you might find on a pleasure craft.

The strength of the system is a function of its reach: the more countries join, the larger the shared operational picture. By the time Ulrich retired at the end of 2007, he had enlisted 32 countries throughout the Mediterranean, the North Atlantic, along the west coast of Africa, around the Black Sea, and in the Pacific. Today, the network continues to spread around the planet.

With Ulrich's system in place, local police, coast guards, and border patrols catch most bad guys, obviating American military responses. As Harry told me for an article I wrote about his work in a fall 2007 issue of Esquire, "I don't do defense; I do security. When you talk defense, you talk containment and mutually assured destruction. When you talk security, you talk collaboration and networking. This is the future."

The admiral's legacy program, the Maritime Safety and Security Information System, earned the Volpe Center a prestigious "Innovations in American Government" award this month from Harvard University's Ash Institute for Democratic Governance and Innovation.

When I walked up on stage and accepted the Inc 500 award, it hit me square in the face that this is a rare accomplishment, and even more difficult for a product company that started without the benefit of VC funding.

Dave with wife, Anne, at the awards ceremony
Over the 2 day period, I heard from some great speakers with entrepreneurial passion, many who never had accomplished making the list. It is so highly competitive and just plain hard to do.

I loved hearing some of the speeches during the conference and getting to know other entrepreneurs that attended the conference talk about how they created their niche and ultimately built a successful company from a good idea.

Because I enjoyed hearing some of what I like to call “golden nuggets of wisdom” so much, I thought in my conference wrap-up I would pass on a few to our blog readers:

Tom Peters – Author In Search of Excellence and The New World of WOW

“Only 7% of our great nation works for Fortune 500 companies. Small businesses and the entrepreneurs are the jet fuel that makes our country fly.”

“Brand is shorthand for a collection of experiences, memories of what it will be like the next time a customer deals with you. With the advent of blogs and consumer activism, Brand is impossible to fake; it is like the temperature in the room… it is there… it exists.”

Chester Elton – SVP Carrot Culture Group

“At the casino – they train the heck out of the Valet! Why do they spend 3 months on Valet training? Because he is the first and the last person to greet and interact with a visitor during their trip! Who is your company Valet?”

Paul Bennett – Chief Creative officer IDEO – speaking on — Creating a culture of optimism:

“You need to ditch B-B and B-C Need to become P-P Person to Person.”

“You don’t buy loyalty… you earn it… this is an interesting challenge, but small allows us to behave like human beings… Going off script and doing something human is a great place to start.”

“Stop obsessing about ROI and start obsessing about ROC! Return on Customer/Consumer is much more powerful than ROI!!!!”

“Happy people, unabashedly doing, happy things, makes for happy companies, which create happy businesses which enable happy cultures… IN WHICH THRIVE”

Marilyn Carlson Nelson – Chairman and CEO Carlson Companies – A family owned $40 Billion empire including TGI Fridays, Radisson Hotels…

“My leadership was tested terribly - after 9/11 the travel industry was particularly harmed. It was an extraordinary time for Carlson. “

“Put tactics around these strategic initiatives”

• Whomever you serve, serve with caring
• Whenever you dream – dream with your all
• Wherever you go, go as a leader
• And never, never give up
• Whatever you do – do it with integrity

“That builds trust, trust builds relationships and relationships build results.”

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Actually, I took about 40 pages of notes throughout the two days… So I can’t say that this will be my last summary post on the Inc 500/5000 conference, but I can say that the conference did leave a strong impression about how I can help shape the future of ScienceLogic in an even more positive way.

Finding Zune-Fi: Ina Fried of News.com wanders the polite streets of San Francisco in search of Zune connections over Wi-Fi. She finds a few, and has a good experience. One cafe owner sees the ease with which she can stream music and calls it cool. She can't connect at the long-running Google-sponsored free Wi-Fi at Union Square, however, which means the Wi-Fi likely has an accept button that must be pressed. Surely Microsoft could insert a little technology that would allow a browser-free acceptance of terms? Probably involves Yet Another Protocol: the Wi-Fi Terms Browser-Free Presentation Protocol (WTBFPP).

Kodak adds interesting Wi-Fi enabled all-in-one: The new Kodak ESP 9 is a multi-function printer (fax, scan, print, copy) that connects to a network via Wi-Fi or Ethernet. The $300 device spits out 30 pages per minutes in color, 32 ppm in black only. Kodak claims that the model line to which the ESP belongs uses ink in a vastly more efficient manner than the "average of comparable consumer inkjet printers."

Blogger: Dan Blum

With the crisis in financial markets still unfolding, it is important to draw what lessons we can from the experience. Since the roots of the crisis lie in a monumental failure of risk management, it’s important to understand more about what happened, and then draw some parallels to our business risk management and  IT risk management situations.

The risk management failure in the housing market and on Wall Street had multiple interdependent dimensions:

• Mortgage lenders abandoned long standing prudent loan practices. They made too many loans that buyers might not be able to repay. Exotic instruments like ARMs, option ARMs, and interest only loans proliferated. In many cases, all pretense of lending standards were abandoned, so-called “liar loans” approved.
• Capital was grossly over-leveraged. Mortgage lenders and other financial services packaged loans into securities, which they sold to raise capital to support more lending. Real capital reserve requirements to back loans were reduced. Of course, if borrowers could not repay loans, all or parts of the derivative securities would become worthless.
• Risk was aggregated at Fannie Mae, Freddie Mac, and mortgage loan insurance companies. These companies bought or insured some mortgage loans, providing something of a backstop should loans fail. Government sponsored enterprises (GSEs) Fannie and Freddie in turn became over-leveraged and securities that they sold were in turn repackaged in the murky brew of mortgage-backed securities called collateralized debt obligations (CDOs) and other exotic instruments returning generous yields.
• Non-Caveat Emptor. Institutional wealth funds and financial services firms who should have known better bought securities that had been deliberately structured to obfuscate risk. They bought securities they didn’t understand with buried tranches of toxic subprime loans..

It was a great Ponzi scheme – one that kept working as long as housing prices were going up; the recipients of subprime loans could always flip that house to the next buyer. Everyone made money. As Chuck Prince of Citigroup famously put it during a July, 2007 interview: “So long as the music is playing, you’ve got to keep dancing. We’re still dancing.” But one month later, the music stopped. Since then, Citigroup and other financial institutions have taken massive writeoffs with more to come. Wall Street titans like Bear Sterns, Lehman Brothers, Merrill Lynch, and AIG have fallen or been bought out.

What can we learn from this risk management debacle?

As business risk managers and investors, we should ask questions like these:

• Does the executive incentive structure of the company encourage managers to dance around risk? Many Wall Street firms paid senior managers 5 times their salary in bonuses tied to annual growth alone.
• Is the company over-leveraged? Is it borrowing too much money and betting it on ventures with uncertain outcomes?
• Are financial models used for risk management realistic? Earlier, I described the mortgage market of the past few years as a Ponzi scheme, where risk management models must have assumed prices would keep rising. Unlike the dotcom boom whose demise many predicted, very few in the industry foresaw the sharp declines to come in housing prices and sales volumes. Historically, the U.S. housing market has been a steadily rising one, but on the other hand the 2000s saw unprecedented rates of price increases. In reality, what goes up must come down.
• Has your company’s risk council ever performed worst case scenario analysis and built adequate reserves? In the days before economics emerged as a would-be “hard” deterministic science, business leaders may have been more cautious, more aware of and more accepting of uncertainty. Events like the Great Tulip Bubble came once in decades or centuries – not every few years. Note that legendary investor George Soros has proposed a Theory of Reflexivity that, if true, helps explain the recent extremes of boom and bust cycles. This theory holds that market participants model market behaviors based on self-interest, and for a time, their manipulations change the reality of the market – until gravitational forces bring it back to earth. Has the music of ephemeral success played to the backbeat of deterministic-sounding economic models gone to your heads and infected your risk management models?
• Are cost cutting efforts pursued blindly? Outsourcing and other forays into treacherous global waters may be giving away the crown jewels. Smart companies cut costs, but they do it in smart ways. Smart companies think like intelligence agencies as they parcel out work to different partners with varying levels of dependability, and they check on those partners.

Risk management failures can also occur at the more technical level of IT security. As IT risk managers, we might ask questions like these:

• Are the accounting and financial systems your IT department supports under adequate control? As Fred Cohen wrote in one of our documents: “Many companies use computers to manage financial systems, and despite the Sarbanes-Oxley Act (SOX) claims about accounts being properly kept, there are many attacks on financial systems that remain. For example, most of the largest financial systems in the world running on common financial databases do not use double-entry bookkeeping and are thus susceptible to all manner of frauds by insiders.” We find it troubling that a prudent control dating back to the 12th century is going out of style in the name of convenience and cost cutting. Kind of like credit checking became anachronistic during the housing bubble, eh?
• Is the “separation” in your “separation of duty” (SoD) for real? Sure the SOX auditors are looking for SoD, and maybe you have different administrators with different accounts maintaining different systems or functions. But when they say Western civilization may be but one weak password from collapse they’re not lying. Look what happened to Sarah Palin’s email account! Weak and straggly SoD is a problem across all critical IT systems where deperimiterization and server consolidation may be bringing down protective barriers, identity management is weak, and strong process controls (e.g., where two people must sign on, one perform a critical operation such as backbone router reconfiguration, and the second observe) abandoned in the name of expediency.
• Are risks being aggregated to unacceptable levels in centralized control systems? There are many ways that risks aggregate within enterprise IT infrastructures as we pursue automation and cost cutting. Network risks aggregate when centralized domain name system control is implemented. Application risks aggregate when common infrastructure is shared among applications. And enterprises aggregate platform risks when they use low-assurance endpoints, authentication, and directory systems with single sign-on to access large numbers of resources and don’t separate high consequence systems.
• Non-caveat emptor: Has IT security really done the worst case consequence analysis, attack graphs, and vulnerability analysis to know when putting more eggs in a supposedly stronger basket aggregates risks to an unacceptable level? Or are you depending only on vendor claims about some black box appliance equivalent of a risk-obfuscated CDO security? Caveat emptor (buyer beware) again! (The good news is we’ll keep talking about promoting vendor and product rating systems so you don’t have to do all the detailed product analysis yourself, but that’s another post.)

There are many parallels between the monumental risk management failure in the financial markets, and the probable weaknesses in our day to day business risk management and IT risk management. Abandonment of prudent practices for profit; excessive leverage and centralization; ill-constructed risk analysis models; risk obfuscation; and a failure of caveat emptor seem to be common problems. Please take this as a wakeup call to sharpen up the risk management thinking, process, and execution.

Traveling towards VMworld 2008

I, along with thousands of others, wended my way through a vast dimly lit cavern of a place helped along by the strangely surreal sight of ushers in black waving wispy red flags to guide us not to the empty seats in front of us, but to the ones 50 yards on. (Ah Vegas, my feet hurt already.) Perhaps the point was to live in the moment, soak in the pre-rock concert atmosphere complete with a hip and cool soundtrack ripped off from Apple commercials. (Do they all use the same ad firm?) A better way to build the anticipation for, yes, the kickoff keynote session at VMworld 2008. (photo credit: lodev)

To the sounds of Hey Ya (Shake it like a Polaroid picture), we shifted forward in our uncomfortable temporary seating placed, as at all tech conferences, too close for all but the skinny girls. The moment was here – one of those videos started playing on the dozen or so huge monitors floating above the convention crowd. You know this video; you’ve probably seen it before from HP or someone like that. One of those videos with instrumental Coldplay music in the background with time lapse/speeded-up video of people in motion and floating captions dropping into the images that leave you with a slight smile on your face as you “get” the relationship between image and text. (Do they all use the same ad firm?)

And here he is, announced like a Vegas headliner, Paul Maritz, the new CEO of VMware. Hmm. After all that hype, I rather expected someone in a black turtleneck and jeans to come out. Instead here’s this guy with pleat-front pants and an admittedly cool accent (New Zealand?) who looks a little like Al from Home Improvement. Not that there’s anything wrong with that – everyone likes Al.

And then the real fun begins.

• 30 years ago, Paul Maritz started off his business career as a developer
• 10 years ago, VMware was founded by Diane Greene and Mendel Rosenblum (BTW, 10 seconds spent showing a slide with cartoon-ized images of the founders, “thanks for what you did for the company for the past 10 years”. 10 seconds after 10 years…but maybe more would have been hypocritical…)
• a retrospective of centralized vs. decentralized computing initiatives from the 1960’s to today
• of course VMware milestones from 1998 to today
• and then an analyst-ready diagram showing the product roadmap (to be delivered in 2009) with, you guessed it, finally a connection between VMware and cloud computing (remember Maritz’s cloud-computing company was bought by EMC just a couple of years ago and that’s the section he headed up at EMC before being brought into VMware).

Forward Looking

2008 (and probably much of 2009) will be a very busy year for VMware. If you believe the roadmap, VMware seems to be taking on the management of everything – from chargeback and capacity planning to virtual storage and virtual networking (more to come on just what the planned vStorage and vNetwork will deliver) – but all of it VMware-centric. As we said in an earlier post, they’ve moved away from “defending” the hypervisor business proposition to focusing on management services on top of their own hypervisor platform. Revenue pressures must be excruciating – who wants to be a public company these days?

The best part of that new “Virtual Data Center Operating System” diagram/roadmap was the addition (and I mean addition) of something called Cloud vServices. (Did anyone else find it odd that Cloud vServices is kind of on its own in the Infrastructure vServices area? AND, I’ll have to get the other version of the diagram/roadmap I actually saw at the show because that one shows an inexplicable 4^th box in the Application vServices area titled “…”. Really. Maybe to balance out the addition of Cloud vServices?)

What was clear is that the move from VirtualCenter to vCenter –and the new vServices for rolled-up management of virtualization components/capability to span multiple VirtualCenters (or future vCenters) for reporting, monitoring and management at scale – has been in the works for a bit (but in tech time, that could mean 6 months), but the cloud stuff…not so much.

Beyond the very high-level speak appropriate to a keynote (100+ service provider partners for off-premise cloud…suspended VM’s that you don’t have to pay for until you need it), the details are uber-fuzzy. There was a session that Dave went to which was supposed to shed more light, but when questions were asked about how it really works, the answers seemed to be TBD. Does anyone know more? If VMware really has figured out practical cloud computing for enterprises, kudos to them. But I fear they’re like everyone else (except maybe AT&T) and are still working out the details.