Nonlinear Thinking

Compendium/Miscellanea/Almanac 01.12.2011

Stuff that I find interesting.  Maybe you will too.

• Budgets, Innovation Squarely in CMOs' Sights in 2011 (Advertising Age) 
• Clouds, big data, and smart assets: Ten tech-enabled business trends to watch  (McKinsey Quarterly) 
• How Tech Will Be Critical to Corporate Sustainability in 2011 (Greenbiz) 
• Light My Fire: The Matchbook Makes a Cultural Comeback (Fast Company) 
• How Aha! Really Happens  (Strategy + Business) 
• Swimming Against the Tide: How Technology, Media, and Telecommunications Companies Can Prosper in the New Economic Reality  (Boston Consulting Group) 
• Eric Berlow: How complexity leads to simplicity  (TED)  
• The AI Revolution Is On  (Wired)  
• The Battle for Control of Smart Cities  (Fast Company) 

The Only Constant is Change: Addendum

When it rains, it pours, or so it seems.  On the heels of a recent Forrester report on the future of IT services which I wrote about here, management consultant A.T. Kearney weighs in with their own, very similar view on that future.  This recent op-ed in Businessweek by Arjun Sethi and Olivier Aries sees most of the same external drivers highlighted in the Forrester report  but offers a different and altogether more interesting futurescape for IT services.

“ In the next five years outsourcing as we know it will disappear.  The legion of Indian service providers will be sidelined or absorbed. U.S. and European companies that pioneered this corner of the high tech industry will suffer similar fates if they don't wake up.  Who will emerge as the new leaders?  Google and Amazon.com , brands that we associate with search and retail, will become better known for outsourcing."

Longtime readers of this blog will know that I have been harping on the threat that Amazon and Google, in particular, present to the old guard of IT service providers as I have written about it here, here and here. SaaS/cloud technologies, under any name, have been a game changing disruptive force for the past 10 years. When IBM acquired Corio five years ago, that should have, de facto, been some kind of canary in the coal mine.

In their commentary Sethi and Aries also conjure up a vision of what the new outsourcing model will look like.

“In the new model, outsourcers provide standard, off-the-shelf software on a "pay-per-drink" basis. For that, they will leverage so-called cloud technology, which lets users tap into computing power available via the Internet, rather than on a desktop or computer server housed locally. The appeal is scale, flexibility, and efficiency: Thousands of server computers can attack a task more quickly—and cheaply—or handle a patchwork quilt of different technologies that companies use to run their businesses. This approach will let businesses outsource entire tasks such as the tracking of inventory, paying only for the information accessed or used.”

The commentary also mentions who might be the losers in this new model (mid-tier Indian outsourcers), possible winners (SAP, Oracle, Microsoft, Salesforce), and a several major players that are not moving fast enough (Accenture, Xerox, Dell, HP).  

I am guessing that this commentary and the Forrester report will be far from the last discussions regarding the changing IT services landscape.  I would also imagine that we will see more and more discussion of the death of the internal IT department beyond the many books and reports already written.  Fasten your seatbelts.

The Only Constant is Change

"To improve is to change.  To be perfect is to change often." - Winston Churchill

Forrester has a new report out discussing the dynamic evolution that traditional IT services providers are going to experience over the next several years.  This analysis is very timely and it addresses a combination of external drivers that I have been writing and speaking about for the past several years.  The authors, John C. McCarthy and Pascal Matzke have done a masterful job in codifying the thinking around these externalities and their impact to the existing IT service provider business model. This excerpt from the executive summary delivers the high-level on the emerging metamorphosis.  

“The tech services market is about to undergo a massive transformation that will call traditional provider business models into question. Four factors will combine to dramatically change the dynamics, economics, and competitive landscape of IT services over the next three to four years: 1) the “restructuring economy”; 2) innovation moving to the edge of the enterprise; 3) the redefining of buying and governance dynamics in accounts; and 4) “as-a-service” becoming the norm.”

For those that have been engaged in surveying the technology market landscape over the past decade, the conclusions McCarthy/Matzke draw from their analysis is no surprise.  Unfortunately, few of those individuals appear to actually work for the major players in global tech services because those firms have made few, if any, alterations to the business model they have employed for the past 15 years.  As innovation in IT moved from the data center to the business units, on-demand/as-a-service and other cloud-based solutions gained traction, and social/mobile activity emerged as integral parts of the technology platform, Nero fiddled.

And the hits just keep coming.  The Forrester report offers a forecast of why and how the IT services model of today will cease to exist by 2020.  

• Forrester sees at least nine new services entering the market as cloud/SaaS redefine the services business.
• Selective sourcing and utility pricing models broaden their footprints.
• Digital natives and the advance of business (unit) buyers push traditional IT into the background.
• Standardization in cloud/SaaS solutions create pricing transparency and profound pricing pressure on traditional service models.
• Cloud/SaaS drive increasing standardization and process industrialization of services leading to delivery models based on solution partner ecosystems.

From my perspective, the most provocative item in the report is the following table that contrasts the top ten service providers in 2010 with a forecast of what the top 10 will look like in 2020.

 

Looks like a whole lotta growth, death and consolidation in the sector.  Ten years may seem like a lot of time for the current top ten to embrace and adapt to this new environment, but the truth is that this evolution has been ongoing for at least five years.  Too many of the incumbents lack the cultural and operational survival instincts to revolutionize their business models.  Some of the logos we have come to recognize in the global tech services space have already vanished.  It will be interesting to watch how this all plays out over the next decade.

Cloud Computing Trend Becomes a Movement

InformationWeek has, just this week, announced the launch of a new Website devoted to news, analysis and opinion on cloud computing.  The agenda for PlugIntoTheCloud.com is to provide a source and forum for IT pros, and the general population, to understand what the cloud computing trend/phenomena means to them and their companies.

In advance of the launch, John Foley, editor of InformationWeek, penned a column reviewing some of the important traction that cloud computing is gaining among the movers and shakers in global technology

The scramble is on among major IT vendors to establish their place -- and their brands -- in the cloud. IBM on Oct. 6 announced a handful of Web services as part of its push into cloud computing. Microsoft will reveal new details about its cloud strategy later this month. And Salesforce.com is about to redouble its push into platforms as a service.

IBM launched a beta version of Bluehouse, which it describes as a social networking and collaboration "cloud service" for people who work in different companies. It was one of several new software-as-a-service offerings from IBM, all part of a four-pronged strategy: deliver its own cloud services; help ISVs develop and offer cloud services; help business customers integrate cloud services; and provide cloud computing environments to businesses. 

Microsoft seems ready to concede that the cloud is more than hosted versions of Exchange, SharePoint, and some of its other applications. After years of Microsoft's ambivalence toward cloud computing, we're watching to see the degree to which the company deviates from its predictable course and competes more directly with Amazon and Google, as rumored.

Salesforce, having started out with SaaS services, will introduce new platform-as-a-service capabilities at its Dreamforce event, Nov. 2 to 5 in San Francisco. CEO Marc Benioff last week previewed some of what's coming. The plan includes letting customers bring their own code into its hosted software environment, making Salesforce an alternative for a wider range of business applications.

In doing so, Saleforce will tout "Our Cloud, Your Success." Call it cloud branding, and expect more of it as the competition intensifies like a high-pressure zone.

Cloud Computing: I Know it When I See it

Defining/articulating/explaining what cloud computing is seems to have become a cottage industry these days.  Perhaps obfuscation allows many enterprises whose products/services are only peripherally aligned to the concept to climb on board what they perceive as the emerging engine in the technology marketplace.

From my perspective, the definition has always been pretty clear.  Cloud computing really comes into focus only when you think about what IT always needs: a way to increase capacity or add capabilities on the fly without investing in new infrastructure, training new personnel, or licensing new software. Cloud computing encompasses any subscription-based or pay-per-use service that, in real time over the Internet, extends IT's existing capabilities.

James Staten, of Forrester Research, delivered a nice overview of cloud computing in a teleconference earlier this year.  The slides from the teleconference still provide a nice primer for the technology.

View SlideShare presentation or Upload your own. (tags: services computing)

Cloud Computing Behemoths

InformationWeek provides a brief overview of eight of the major players in the cloud computing universe in this article.  While there are any number of important participants helping structure and define what the "cloud" will look like, InformationWeek selected the following companies as representative of the differing points of view on where the "cloud" is going.

• Amazon
• Google 
• Salesforce 
• Microsoft 
• Sun Microsystems 
• IBM 
• Oracle 
• EMC 

The only surprise here is that there isn't any surprise that they selected the eight large, well-known technology providers that happen to be involved in advancing the cloud computing model.  Hard to argue with including Amazon, Google, Salesforce and IBM but I think some of the smaller, niche companies focused on the space might have been elevated to the list.  Emerging players such as Bungee Labs, Enki, Joyent and Rackspace might have created a more balanced list as they represent some of the very best, most advance thinking about the "cloud".

But check out InformationWeek's overview, particularly if you aren't aware of what the "big 8" are doing.

A "Cloud" Burst

With the launch of the Google App Engine, the concept of cloud computing takes one more step into the mainstream, creating yet another challenge to the business and operating models of IT service providers.

Cloud computing is one flavor of the grid computing approach to the use of shared computing resources. Companies offering hosted online services include Amazon, Bungee Labs, Elastra, Microsoft and Salesforce.com..

Cloud-based development platforms, or “Platform-as-a-Service” (PaaS) apps, are on-demand, web-based development environments that enable developers to build and deploy web apps that utilize the large variety of APIs and web services out on the Internet. Google App Engine resides more comfortably in this universe.

A recent article in CIO Insight by Tony Kontzer articulates the threat:

The promise of cloud computing goes far beyond simply providing software updates and dealing with growing server and storage requirements. It has the potential to transform the role of IT within the business.  

A huge cloud hangs over the future of IT.

After more than a decade of refining the Internet as a marketplace, the business world is grappling with the uneasy reality that companies can run almost every information system they rely on without owning any tech equipment. Thanks to the phenomenon known as cloud computing, businesses can rent access to applications and IT infrastructure that reside on the Internet, pay for them on a subscription or per-use basis and provide employees with access to information from anywhere at any time with nothing more than a connected device.

This is a huge, and very real, threat to all manner of constituencies in the broad IT service marketplace. From application development to infrastructure outsourcing, the sense of fear in the air should be palpable. I don’t think it is.

But, as with most threats, there comes opportunity for those that recognize it.

Kontzer again:

If the proponents of cloud computing are to be believed, that’s where the greatest promise of the technology lies: in spurring innovation. “Cloud computing will completely change the role of IT departments,” Salesforce.com’s Benioff says. “The IT department is evolving from being information technology to being innovation technology.”

I want to believe that the global outsourcers and IT service providers have baked this into their thinking about the future of their business models, but I know better. Between this and SaaS, there may be some real unplanned obsolescence taking place in the market in the near future.