We tend to think of transformation as something that network operators, particularly telcos, have to go through. In point of fact, transformation, meaning technology transformation, is going to happen to everyone, buyers and sellers, operators and enterprises. That truth leaves two questions—what kind of transformation will happen, and how will the players respond to the challenges and opportunities created. Most of us realize that tech is far from its “golden age”, that we seem to be focused more on reducing cost than enhancing capabilities. There’s a reason for that, and a resolution is also possible once we understand what’s behind the unfavorable trend.
Technology is like everything else that acts on society and economies as a force. It changes things either because it takes on a new mission, or because it gets a lot cheaper and more pervasive. If we look at information technology from its infancy in the early 1950s to today, we see signs of both forces. Certainly, IT has gotten cheaper. When I learned to program, the computer I learned on had 16 kilobytes of RAM, worked at a speed measured in milliseconds, and was the size of about ten filing cabinets. You can get wearables today with better performance. The computer I learned on also cost several hundred thousand dollars, and today a good laptop might cost one thousand, and many are half that price.
The plummeting price/performance ratio for computing allowed it to spread. We used to have data centers in which giant systems lived, tended by operations personnel who fed them records of activity that had been keypunched. These would be turned into “reports”. As computing got cheaper and more powerful, we started doing online transaction processing, then distributed computing, personal computers, tablets and smartphones, the Internet. All of these things can be linked to the exploitation of the lower cost of computing.
If cost were the only factor at play here, we could expect to see IT transforming things in a fairly linear way over time, as reducing cost expanded the things you could do with computing technology, but that’s not the case. If you examine public data on IT spending, it’s clear that we have waves of IT investment (we’ve had three so far). These represent the new mission piece of the puzzle. As IT things got cheaper, we found new ways to use them that boosted productivity for workers, and that justified faster growth in spending—30% to 40% more than the average rates of growth. When we’d fully capitalized the new paradigm, IT spending fell to perhaps 80% of average levels.
This poses the transformation question for everyone. What would happen if IT commoditization (price/performance) continued to drop, and nothing came along to generate a new mission? The value of the IT tool would be static. Every generation, replacing it would get cheaper and so spending would decline. We’d end up with low-cost, no-differentiation, products. Eventually, cost alone wouldn’t be enough to drive new applications. Just because hammers get cheaper, you don’t drive more nails. Price will transform IT into a commodity space. New missions will generate new benefits, new demand for new features, new business cases, and raise spending. That’s the reality for buyers and sellers, operators and enterprises, even consumers.
I’ve suggested in past blogs that the new mission likely to drive future IT growth would be one of two things—mobile broadband empowerment and “contextual processes” of the Internet of Things (IoT). I still think that one or both of these will have to anchor the engine of mission growth. Exploiting them is the pathway out of commoditization, but exploiting them isn’t a matter of inventing some dazzling new tech element. We already have the hardware and software tools needed to make more than just a good start at both these new missions. What is it we lack, then?
Call it “vision” or “insight”. Say that we’re mired in quarter-at-a-time tactical thinking when new missions obviously demand a strategic sense. Say we’ve lost our capacity to communicate complex things, or lost a way to monetize them in their early phase. Say any of these things and I think you’d be right. The last time we had a mission-driven cycle, the application of technology to the new mission was very clear. Personal computers did stuff that we could immediately see, and they did it in a way that didn’t demand a lot of insight to understand. The Internet gave us a universal market for consumer data services, and it was clear almost instantly, from the launching of the Web, what could be done with it.
Contrast that with our thinking about mobile broadband or IoT. How many companies see “mobile empowerment” as giving the user a mobile-readable screen from the same applications that they ran all along? Is giving someone a different view of the same data going to revolutionize their productivity? Does a worker with a powerful information appliance in their pocket as they move about doing their job, do it the same way as one chained to a desk? Why would deskbound applications anticipate the things a mobile worker might want, or do? And IoT? We focus only on getting sensors and controllers “on the Internet” and not on what incremental value they’d create once there (or how we’d pay for their deployment, secure them, protect from privacy intrusions, and so forth).
So who fixes this? Probably, eventually, we’ll blunder into a path that gets us to another wave of mission-driven IT investment. I’m frankly surprised that hasn’t happened already, given that it’s been fifteen years since we had an IT growth cycle, far longer than we’ve ever waited for one before. Given that unhappy bit of history, we probably can’t count on spontaneous resolution.
What do we then count on? Some vendor could jump-start the process. If we look back at prior tech cycles, we can see that they happened because technology filled a specific niche in business, a niche that vendors themselves saw and exploited. Talking with both service providers and enterprises has given me some insight into what buyers think would be necessary for this happy niche-filling to happen again.
First, it’s about account presence. Almost everyone in the buyer space believes that transformational technology solutions couldn’t be propagated except by direct sales contact. “It’s a matter of trust,” one said. “If I’m going to put myself on the line for some big shift, I want the vendor who’s promoting it to be there holding my hand.” The contacts need to be at a high level, too. Way over three quarters of buyers say that there has to be solid, ongoing CIO-level contact, and just slightly less said that truly transformational technology shifts would require COO and CEO engagement. All this speaks to a long-standing account presence, which only the largest vendors can hope to have.
The second requirement is a clear solution ecosystem. Nobody wants to piece together transformation by summing the parts. A few buyers who have tried, or even done, just that say that if they had to do it again, they’d demand a holistic architecture up front. It’s not that a vendor would be expected to be the supplier of every piece in the puzzle, just that they be offering it all, and taking responsibility for it. This means that integrators could be a player in transformation in theory, but buyers also indicated that they were fairly skeptical of pure integrators. They think that the vendor should have enough product skin in the game to be able to draw profit from their contribution. Otherwise, buyers think they’re paying all the product retail margins, and integration besides.
The third requirement is an open approach. Buyers are a bit embarrassed by this requirement; they know that it’s a contradiction to expect a vendor to have everything, sell everything, support everything, and at the same time preserve them from vendor lock-in, but hey, who says you have to be reasonable? The point is that the approach that transformation takes has to include a framework into which a buyer can integrate the products they already have and such future products as their business needs dictate. As a practical matter, this means a clear architecture, no proprietary interfaces or flows, and explicit provision for supplemental functionality.
I’m not surprised by what buyers say they want here. In fact, it’s not really a massive change from what they’ve always wanted. The challenge of transformation is that this is a big initiative, and the more that’s required the greater the risk and the more stringently buyers hold to their requirements to mitigate those risks. I think the barrier can be broken, but I think that it’s going to take a vendor faced with incredible profit pressure from current technologies. We may not be quite at the tipping point in that regard, in which case we can expect a year or two (or three) of doldrum spending till someone sees the elephant.