Volume 5: Innovation Outsourcing December 2013

Innovation is changing our daily lives and reshaping the business landscape. As a result, learning how to foster innovation has become crucial to companies, industries, and even countries. Many compa-nies regard innovation as the engine that keeps their business growing, but feel that it is difficult to innovate when having to rely only on internal resources. In this case, it is common if your usual way of innovation development does not work. To innovate, businesses need to pursue innovative methods. To this end, we propose innovation outsourcing, which leverages both academic and industrial R&D resources worldwide. The Center of Technology and Business Innovation (COTBI) is an affiliation of Zhejiang University, a top university in China, and Insigma Hengtian Software Ltd. Hengtian is also closely affiliated with the University’s Colleges of Computer Science and Software Engineering. COTBI provides our partners ac-cess to the University’s vast research and development capabilities. Our mission is to develop ideas and solutions to help business and technology executives address the challenges of leading increas-ingly dynamic, global, and information-intensive organizations. This research is directed by the active participation of our client sponsors who hail from the financial services, healthcare and technology industries, along with the management executives of Hengtian and researchers from Zhejiang Univer-sity. In the past decade, we have helped leading U.S. companies such as State Street to make significant changes to their business and systems. To hear more about the unique way we approach innovation, feel free to contact us on the COTBI website: http://www.cotbi.com/. Dr. Xiaohu Yang Professor and Executive Vice Dean of the Software College Zhejiang University

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FOREWORD

If you would like to know more about Hengtian or the services we offer, please contact us: U.S. office in Boston: info@hengtianservices.com Steve Toussaint Tel: +1 857-239-9658 China HQ in Hangzhou: services@hengtiansoft.com Tel: +86 571-8827-0208

John Doerr, the uber venture capitalist of Kleiner Perkins Caufield Byers, is quoted as saying, “Every vertical will be digitally disrupted”. In business school, people tout the competitive ad-vantages of “digitally born” companies such as Google and Amazon, as MBA-types learn Had-roop. As a software service company, Hengtian has in-tuited for several years that across different in-dustries, IT is increasingly at the core of deter-mining a company’s effectiveness as a business. And innovation, many times in the form of creat-ing better IT, is what our clients strive for. Veterans of the outsourcing industry talk about the potential forging of deeper relationships be-tween outsourcing vendors and their clients, one of which is the phenomenon variously termed “co-innovation”, “gain-sharing”, or “innovation outsourcing”. With multiple high-impact tech-nologies such as cloud, mobile-Internet, and data analytics gaining acceptance in enterprises and beyond, the chatter surrounding innovation out-sourcing has intensified, and so has the action. Come to think of it, we at Hengtian had been working with clients in the manner of “innovation outsourcing” back when the jargon was not yet jargon. This pattern has repeated itself over the years: We meet a client who has been outsourcing traditional tasks such as QA testing, who in time finds out that the Chinese team at Hengtian is willing and able to think with the client. Eventually the teams on both sides find themselves brainstorming on a shared draw-ing board.

As it all makes sense in hindsight, we’ve now started to think in terms of innovation out-sourcing. The necessary condition is that the outsourcing vendor, such as Hengtian, has the resources and the talent in all aspects of archi-tecting, coding, and testing, as well as the nec-essary knowledge in technologies new and old, so that the client has access to the needed set of skills when projects evolve from the routine to the innovative. The sufficient condition, however, asks more of the outsourcing vendor. The vendor must have both the bent to appreciate innovative projects and the knack to execute for the client’s team. This requires a particular kind of company culture from the vendor’s side, ranging from the executives to the team members. To make innovation outsourcing work, a new way of managing projects is required – some-thing that we have figured out from experi-ence. Such projects run at two levels: One is the usual management of quality, schedule, scope and resources, and the other is manag-ing the scope while knowing there can be no well-defined scope. It takes heightened energy to herd through bursts of new ideas (some good and some bad), and it calls for guarding the client’s deadlines like mad. After all, what matters to the client is that their ideas be im-plemented on time, and we as the vendor must do our utmost to ensure the delivery. It is no accident that Hengtian started innova-tion sourcing early and does it often. One rea-son is that we have clients who push the enve-lope; another is that the professionals we have developed over a decade are highly capable. Further, China’s colleges graduate excellent students on a large scale – just the city of Hangzhou where we are located has 38 general universities with 459,000 college students and 43,500 postgraduate students. Hengtian’s close bond with Zhejiang University, the leading uni-versity in Hangzhou and a top three university in China, further immerses us in the culture of innovation.

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HOW TO MAKE INNOVATION OUTSOURCING WORK

HENGTIAN’S INNOVATION WITH CLOUD FOUNDRY

Hengtian has put innovation outsourcing into practice. One example is what Hengtian has been do-ing with Cloud Foundry, an innovative PaaS (Platform as a Service) originated by VMware, to im-prove the product’s reliability, scalability, compatibility with IaaS platforms, and capability in regard to automated deployment.

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Zhejiang University SEL

The SEL (Software Engineering Lab) of Zhejiang University is Hengtian’s R&D partner. It was launched in 2001 and it focuses on distributed computing, large software system design, and data mining. In 2011, the SEL designated cloud computing as one of its most important re-search areas.

Cloud Foundry

In April 2011, VMWare introduced Cloud Foun-dry, the first PaaS in the industry. PaaS offers a modern development environment, including the standard technology stack and an effective and elastic runtime environment, as well as relevant services such as the data analysis framework, tremendously simplifying the de-ployment and operation of cloud applications. Later VMWare launched the Cloud Foundry Uni-versity Program and the Core Builder Program based on a surging “software ecosystem” model, expecting universities and companies to contribute additional research efforts.

Collaboration

became the most active group in the Cloud Foundry online community. VMWare took no-tice of this energetic group and invited Zhejiang University to join the Cloud Foundry University Program. Early this year, SEL developed the first Cloud-Stack BOSH CPI (Cloud Provider Interface) in the industry. With this CPI, Cloud Foundry can be automatically deployed and scaled on CloudStack. The current work of the SEL team includes strengthening the reliability and scal-ability of the Cloud Foundry platform, improv-ing its compatibility with IaaS platforms, im-proving its automated deployment capability, and integrating more middleware such as Hadoop as a Service.

Benefits

By leveraging its research partnership with Zhejiang University, VMWare is able to access top talent to improve Cloud Foundry beyond the limitation of their internal resources. Cur-rently the SEL research team is providing con-sulting services to several Chinese enterprises, bringing great opportunities for both VMWare and SEL to explore potential cloud computing requirements in the traditional sectors in China.

After their initial research, the SEL cloud team decided to focus on PaaS and selected Cloud Foundry as the foundational platform for the research going forward. The SEL research team

INNOVATION AT HENGTIAN Hengtian’s Data Analytics Solution – HT Analytics

Innovation Keywords: Data Analytics, Data Service Bus, Ma-chine Learning

With the development and improvement of medical in-surance in China, a universal health care system is being carried out nationwide. However, a variety of medical insurance fraud schemes have gradually emerged in China. An effective application of data mining techniques could discover the hidden information to support the safe operation and risk control of the medical benefits fund, ameliorating the modern operation system.

Background

Solution Overview – HT Analytics

HT Analytics is a universal analytics solution that can tap into any kind of data sources easily and allow customized analysis algorithms plug and play. HT Analytics is built on top of the innovative concept of DSB (Data Service Bus) (see Figure 1: DSB Architecture), which is derived from the term Enterprise Service Bus (ESB), a common service-oriented architecture that integrates different applica-tions by putting a communication bus between them and then enables each application to communicate with the bus. Similarly, DSB integrates different data sources in-stead of applications and makes it smart enough to know where to grab data from massive data sources and how to pull out the best results for customers. DSB is a data analytics solution that can be used for any analytics pur-pose.

Figure 1: Data Service Bus Architecture

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CHINA BUSINESS SPOTLIGHT

The Third Plenary Session Decides Chinese Market to Open Wider to Foreign Investors

The Third Plenary Session of the 18th CPC Central Committee took place from November 9 to 12 in Beijing. The just-concluded plenary and its decision on major reforms have outlined the blue-print for China's future development. More openness to global markets and foreign businesses features as a key part of the Third Plenum resolution. Restrictions on overseas investors are to be lifted for industries including services for children and the elderly, architec-tural design, accounting and auditing, commerce, logistics and e-commerce. Industries to be opened up gradually include financial services, education, culture and medical care, while the opening-up of the manufacturing sector will be deepened.

Foreign and domestic businesses are to be treated on equal terms under the Chinese legal system. Opportunities for building more free trade zones, in addition to the pilot pro-gram in Shanghai, are indicated, with the document saying the central gov-ernment may select several qualified areas to develop free trade parks, ports or zones. Negotiations on mutual investment treaties with other countries and re-gions will be accelerated, the document states, and bureaucracy will be reduced for foreign investors. On economic reform, there is much greater scope for development created for private companies and those with mixed ownership. Most noticeably, private technology companies are granted access to the research, production and maintenance of military equipment. For an abridged version of the full text of The Decision on Major Issues Con-cerning Comprehensively Deepening Reforms: http://www.chinadaily.com.cn/m/guangxi/liuzhou/2013-11/16/content_17114835.htm (Source: China Daily)

In our experience working with a medical treatment dataset, we’ve found that proactively identifying com-plex fraud schemes is only possible when we use a multi-faceted, anti-fraud detection approach that combines sophisticated data integration with a hybrid analytical approach.

The Analysis Algorithms

Rules

Figure 2: The Relationship Between Expense and Hospitalization Days

Figure 3: The Relationship Between Expense and Hospitalization Age

Rules can be created to detect known types of fraud or abuse based on specific patterns of activity. Figure 2 and 3 illustrate the rules based on the tendency suggested by the records.

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You can identify which applications and beneficiary pat-terns are extreme outliers relative to others being proc-essed by distributional analysis as seen in Figure 4. These outliers allow additional scrutiny.

Anomaly Detection

The clustering-based method tries to capture the outlier points. The points lying near the centroid of the cluster are not probable candidates for outliers and can there-fore be disqualified from each cluster. Next we calculate a distance-based outlier score for the remaining points. The result indicates that some records are beyond the scope of normal treatment.

Figure 4: Distribution of Medicine Count for One Treatment

Figure 5: Clustering of Treatment Pattern

HENGTIAN NEWS

Hengtian and a US company Cloud Technology Partners (Cloud TP) signed a contract on an R&D project on Octo-ber 23, 2013, signifying the start of a new cooperation. The Hengtian BlueMorpho team will work with ex-perts at Cloud TP on the research and development of Cloud TP’s core prod-uct. This product will help accelerate the process of migrating applications to cloud platforms, greatly increasing efficiency. Boston based company Cloud TP was founded in 2010. It is a consulting company specialized in cloud solu-tions. Cloud TP is made up of experts that have more than 20 years’ experi-ence in the IT industry, and is consid-ered a young but promising company in cloud computing. Cloud TP’s web-site: www.cloudTP.com. (Source: http://www.hengtiansoft.com/NewsShow-en-1-201310310000.html)

Hengtian Starts Cooperation with Cloud Technology Partners on Cloud R&D

BlueMorpho

BlueMorpho is an automated solution provided by Hengtian.

The solution consists of various automatic system analy-sis and code transformation tools, built around a univer-sal core that supports multiple programming languages and system architectures.

Its main features include: ● Source code analysis: Provides insights about the

system's characteristics, structure and behavior, enabling developers to grasp the general picture as well as the details.

● Programming language translation: Automatically translates legacy source code into the targeted maintainable modern programming language by the Hengtian Universal Language Translation Frame-work.

● System architecture transformation: Automatically translates legacy source code to the targeted main-tainable modern language by the Hengtian Universal Language Translation Framework.

Its benefits include: ● Lower modernization costs ● Reduced human mistakes ● Consistent implementation ● Flexible customization

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The NICSA General Membership Meet-ing took place in Boston on September 19. Albert Ma, Hengtian’s Chief Innova-tion Officer and Stephen Toussaint, Di-rector of Business Development partici-pated in the “I Can Outsource That?” session where only five companies were selected from 20 entries to pitch their most unusual outsourcing func-tion. During the presentation, Hengtian high-lighted its cooperation with State Street Corporation and Zhejiang University, one of the top Computer Science and Engineering Universities in Research & Development in the world. Hengtian also highlighted a case in which VMware engaged Hengtian to drive in-novation with Cloud Foundry and to improve product reliability, scalability, compatibility and automated deploy-ment. Hengtian’s presentation was well-received by the audience and brought about lively and insightful discussions. For more information, visit NISCA’s web site: http://news.nicsa.org/2013/09/20/day-2-2013-nicsa-general-membership-meeting-highlights/ (Source: http://www.hengtiansoft.com/NewsShow-en-1-201310110000.html)

Hengtian Talks Innovation Outsourcing at NICSA General Membership Meeting

Innovation Keywords: Legacy System Modernization; Automation; Code Transformation

Innovation Keywords: IaaS; OpenStack; Virtual Machine Management; Automated Deployment The HT Cloud is Hengtian’s IaaS private cloud service. It is a corporate internal virtual machine management platform based on OpenStack. It integrates a monitoring service, a development interface, and automated deployment.

HT Cloud

Benefits: 1. Compared to traditional private cloud service providers, the HT Cloud is more open and flexi-ble, and supports multiple virtual platforms and infrastructure. It also provides customized ser-vices. 2. Compared to the open source OpenStack platform, the HT Cloud not only seamlessly con-nects to the client’s existing infrastructure, but also provides perfect monitoring and convenient automated processes.

HT Cloud screenshots:

Figure 7: Private Cloud Monitoring - Primary Machine Details

Figure 6: Private Cloud Monitoring Page

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Innovation Keywords: Business Intelligence; Data Processing; User Friendly

eBI is a software with an emphasis on the “e” for “effective”. It is lightweight and caters to the niche market of medium to large enter-prises and to their business intelligence needs. It consists of a multi-desk portal, a customizable “Report Factory”, and powerful data processing architecture.

The multi-desktop portal delivers a great user experience. It navigates users to a well-designed graphical interface and allows for effi-cient and convenient report browsing as well as intelligible building capabilities.

The customizable “Report Factory” enables us-ers to access: ● A highly customizable report mill ● A rich set of charting tools ● Useful functions such as exporting, printing,

and report sharing, among other creative features

The powerful data processing architecture: ● Supports huge data processing and efficient

front-end presenting ● Supports popular databases ● Is compatible with legacy data structures ● Is tailored to fit an organizational architec-

ture

eBI (effective Business Intelligence)

Figure 8: A Screenshot of eBI Interface