Dave used to do what?
This past Sunday afternoon, at a family gathering, my mother in-law announced that she’d “run into Dave the other day. You remember Dave…used to come ‘round to collect the mortgage and insurance money?”
“Excuse me,” I said, somewhat perplexed, “Collect the mortgage money…as in collect cash on your doorstep for your mortgage?”
“Of course,” she said matter-of-factly, “He used to collect it from most of the houses around here.” Can you imagine anything today that could be more archaic? Such things as mobile banking services and contactless payments would have seemed like witchcraft back then.
Pea-shooter alarm clocks
Over the course of time, many jobs have come and gone that today, in our warp-speed, always-connected world, seem, frankly, a bit weird! Before the alarm clock, people were employed as “knocker-uppers” to wake people up on time for their day’s work using a variety of techniques such as tapping on bedroom windows with long sticks or using pea-shooters. In the days before home refrigerators, the ice in your “G and T” would have been carved by hand from frozen ponds and lakes into giant blocks of ice and then stored, ready for the summer. And in the time before electric street lighting, gas lamps were lit by lamplighters walking the streets at dusk. While unquestionably this creates a romantic ambience on the streets of Paris, it required a seriously manual human effort every evening.
So, what on earth has all this to do with the IT industry? As the saying goes, there’s only one thing in life that is constant: change. And the saying is perhaps felt more acutely in the IT industry than any other. Right now, everyone in the IT industry has a sense that we are on the cusp of a significant disruption that will change forever “how IT gets done.” In the wake of this disruption, it’s likely we will consign to the history books some old world jobs in IT and move to an entirely new state. Ten, twenty or fifty years from today, might the next generations look back and find it perplexing that we even had IT systems physically located at each and every business? Or that those new software systems took an army of people to design and implement? Or that a specific job existed to fire up a piece of IT hardware?
The economics and dynamism of IT has been heading toward a tectonic shift for two decades now. Waves of continuous innovation and disruption are converging towards a moment of truth for the entire IT industry. As a direct consequence of this shift, businesses and industries are transforming on a scale not seen for generations. IT is both an enabler and architect of the wider industry transformation and now IT itself is set for a period of “mega disruption.” This will lead to significant challenges for IT vendors and professions.
Cloud computing is a mere hors d’oeuvre
Cloud computing has brought about materially lower price points, with compute prices decreasing almost on a daily basis. However, a confluence of trends means that the disruption is more significant than just lower price points. Customer expectations born out of personal experiences in mobile and social, changing buyer types and the growth in shadow IT, the democratization of data, the impact of software-as-a-service (SaaS), the flight to mobile devices and bring-your-own-device, together with radically different developer tools and ecosystems are all creating a very different, very fluid, very dynamic IT environment. The real disruption to enterprise IT will be born out of wholesale changes to what customers demand and expect from IT, how they will want to buy and consume IT and who those buyers of IT will be.
The IT industry re-imagined
It is clear that IT vendors will need to rethink their existing business models in light of these disruptive forces. Established vendors will need to become more radical, more creative, more entrepreneurial and more agile. A defensive long game that attempts to guard profitable yet diminishing legacy markets could be a recipe for disaster.
In each of the historical waves depicted above, a similar story has emerged. Every incumbent had a business model that served it well for years. However, each wave of change swept though, disrupted and ultimately engulfed established markets and vendors: Amazon.com disrupted brick-and-mortar booksellers and music stores; Salesforce.com and Workday came along with SaaS businesses that disrupted the software perpetual licensing model; Android (Google) and iOS (Apple) took only a few years to completely usurp Symbian (Nokia) and RIM (Blackberry) in mobile.
A key feature of each wave of change is that either the established market leaders simply missed the wave altogether, too busy building their latest and greatest products (e.g. Nokia’s “burning platform” moment), or they buried their heads in the sand, hoping the disruption would merely be a fad or that it would not materially impact their business. Market incumbents tend to get increasingly myopic over time and get stuck in revamping existing concepts and product lines, rather than taking a different approach that reimagines their entire business and industry through new eyes.
Another characteristic over the last 20 years is that each wave has initially faced detractors: In the 1990s, retail analysts were saying the rise of Amazon.com and ecommerce was merely a fad; similarly, old guards of enterprise software scoffed at the SaaS business model; and IT commentators of the day considered social media to be just a teenage phenomenon with no commercial or business value.
The reality is enterprise IT is right now at a similar tipping point. No single enterprise IT vendor wants the mega disruption wave to happen, since it requires investment, high risk and potentially a lower-margin business. Moreover, it represents a classic “Innovator’s Dilemma” for the establishment, creating an uncomfortable proposition: to kill existing businesses and revenue streams while they still at least appear to look healthy and instead begin investing in alternatives that have no guarantee of success and seem like high-risk strategies.
“As-a-service”: where enterprise IT of the future might be heading
In this brave new world, value for enterprise IT vendors may be achieved through embracing “as-a-service” concepts. Such services could be the enterprise IT game-changer over the course of the next decade, transforming how traditional enterprise IT vendors look today to how they will evolve over time. In essence these services are business-to-business and highly verticalized, with characteristics such as mobile capabilities, a cloud foundation (infrastructure-, software- or platform-as-a-service), and availability via eMarketplaces on a pay-as-you-go (PAYG) basis, all underpinned with a world-class user experience (UX).
Such a trend follows from the journey seen in various industries for some time now. The socialization of business (Wave 4) is a relatively recent phenomenon whereby entities such as Uber (taxi hire) and Airbnb (accommodation) have come to disrupt business-to-consumer markets. These are just two examples that demonstrate the essence of market disruption. Who could have predicted that the world’s largest taxi company would not own any vehicles or that the largest accommodation provider would not own any buildings? In the near future, this trend will have a wider impact in markets previously considered immune to such dramatic disruption, such as financial services, healthcare and auto.
So it’s out with the old and in with the new, right?
Not exactly. It is important to note that existing IT business models will still co-exist with new “as-a-service” models. Existing core IT products and services, such as ERP maintenance and infrastructure outsourcing will not go away anytime soon. This has always been the case in IT: the old and new co-exist. As an example, despite the significant flight to mobile devices, hundreds of millions of desktop PCs are still sold each year. There is never a single point of switchover, just a continuous evolution. In this context, “as-a-service” models are evolutionary, not revolutionary. However, what the evolution to “as-a-service” describes is the notion that companies over time will increasingly reject custom-built, on-premise IT in favor of a collection of highly vertical-specific catalogues of services.
Such services promise the Holy Grail of IT business models—to break the perennial belief that volume equals commoditization. Let us be very clear about what is being proposed: We are now about to embark on a completely new era of enterprise IT—fundamentally an “as-a-service” model—that is characterised by relatively high-volume, transactional business. The wheels are in motion for this reality, and there is no turning back.
But let us also be clear though that this does not mean that enterprise IT becomes a commoditized industry with low barriers to entry. On the contrary, to build any “as-a-service” platform will require a significant cloud compute infrastructure, business-grade mobile applications and significant analytics capabilities. Ultimately, hundreds of vertical-specific, “as-a-service” platforms could be created. Lines-of-business personnel would be key buyers and influencers of these services, due to their ease of acquisition and deployment. The vision would be that “as-a-service” platforms of the future would be as simple to procure and deploy as installing an app on a smartphone is today.
While much of this article is futuristic and speculative, what is certain is that in the years ahead, IT roles will change. Will we need armies of systems administrators and integrators knitting IT together to make it work? Probably not. In time, they may become a historical curiosity just like the “knocker-uppers” or Dave the mortgage collector. But while some roles become redundant, they are replaced by others, like data scientists, that we couldn’t have imagined years ago. Change is the only certainty in this new paradigm.