If business services are as critical as they seem (to the cloud, 5G, IoT, AI, and more), then we need to understand as much as possible about them, and how they’re a candidate for driving technology change. As I noted in an earlier blog, there’s a trend today to jump on business services as the logical driver of practically everything. I’ve also said that what we need in 5G or IoT is not a killer app, but a killer trend.
I’ve been studying and modeling business services for decades, and so I have a lot of material to cite on the topic, and I promised to get into more detail in a later blog. This is it. What I hope to do is identify the targets that show the greatest promise in business services. It’s not a question of picking an application, but picking a strategy of the sort that has driven past spurts of IT growth and innovation.
To start with, it’s impossible to talk about business services without talking about business benefits. There are a lot of things we could say about how a service might improve revenues or reduce costs, but over time (since the 1950s, in fact) the one provable truth was that companies invest in IT to improve worker productivity overall. That means working faster, working with fewer errors, getting the correct or optimum result faster, etc.
Generally, IT spending (budgets) grow roughly in proportion to GDP, for the obvious reason that businesses overall spend to realize the overall opportunity. When a new paradigm develops to improve productivity, it’s followed by a period of growth in IT spending relative to GDP growth, meaning IT spending grows faster than the economy does. When that paradigm has been fully realized, the pace of spending growth drops below the pace of GDP growth.
The drivers of past growth/decline cycles (they actually plot as a kind of sine wave) have all deepened the integration of IT with workers’ jobs. I coined the term “jobspace” over a decade ago to describe the total information content, the sum of the IT activity, associated with a worker’s job. Big jobspaces means a lot of information coupling, and conversely a small jobspace means little information is actually required or useful. When a worker has a big jobspace, integrating the information with the job is more likely to improve productivity. That’s been true in the past, and we should expect future cycles to have this same dependency on information’s ability to empower workers.
The business benefit of a worker productivity improvement is proportional to their unit value of labor, which is the sum of wages, benefits, and spending on services associated with the worker. A big unit value of labor means a productivity improvement creates a significant benefit, which means it’s more likely to get project approval. Based on current project approval (internal rate of return versus project ROI) requirements, about a third of workers in the US are “empowerable”, meaning they have a combination of jobspace and unit value of labor that justifies productivity improvement projects. Industries with a higher percentage of empowerable workers are better targets for sale of products/services than ones with lower levels. Jobs with higher empowerability have more potential for project support than those with lower potential.
Almost a third of all workers are empowerable, meaning that their unit value of labor and jobspace combine to validate at least some productivity enhancement projects. If we were to optimally empower them all, we would initiate a new IT investment cycle that would deliver, over an eight-year period, we could boost IT spending by an average of 12% over the baseline rate of GDP growth for each year, meaning we’d essentially double IT spending for the period, versus normal growth.
The challenge, of course, is empowering everyone, and in the real world of enterprise IT budgets you’d never get approval for something as aggressive as a mass empowerment touching a third of all workers (in some companies with uniformly high unit values of labor, you’d touch every worker). The logical approach would be to ease into the empowerment transformation by focusing on workers who were not just “empowerable” but highly empowerable. Who are they?
If you recall my PRIOR BLOG on the phases of productivity empowerment, you know that I’m postulating the next step in empowerment is to push it to the hands of the worker, at the point where they’re doing the work. In past blogs I’ve called this “point-of-activity empowerment” because you’re touching the work as much as the worker. It’s point-of-activity empowerment that offers the potential to touch a third of all workers, but obviously workers who are not only empowerable but highly mobile and highly valuable constitute the brass ring in terms of ROI. Those workers make up about 8% of the total workforce in the US (and a similar percentage in other developed economies).
These workers are even more focused on specific verticals. The “best” sector, healthcare, has almost 20% of its workers as primo targets for point-of-activity empowerment projects, and the worst (agriculture, forestry, fisheries) has only 0.62% of workers as prime targets. Of the top 20 major industrial/industry classes, 8 reach the threshold of practical near-term empowerment. That means that these sectors should lead the charge. They’re Health Care and Social Assistance, Management of Companies and Enterprises, Federal-State-Local Government, Professional-Scientific-Technical Services, Educational Services, Accommodation and Food Services, and Finance and Insurance Information. In the US, the total workers in the sectors identified as high-value are about 13 million, about 8% of the labor force overall.
The most easily targeted sectors are where productivity improvements could reduce the need to add headcount. About half the total employees in the high-value target sectors are in job categories that are underfilled, the most being in health care and professional/scientific/technical services, but government employees at all levels are also an opportunity where population growth or other factors create unusual demand for workers.
There are two reasons why vertical market sectors could be important in promoting empowerment. The first is that many software providers will target specific verticals, even with software that could be used more generally. Reference-based sales is more powerful within an industry than between industries, as nearly all sales research (including mine) has shown. The second reason is that industry targeting fits a solution better to members of that industry, requiring less of prospects in the way of customization or unique development.
The risk of vertical segmentation of early productivity empowerment is that solutions would be less portable to other sectors. The overall model for all four phases of productivity empowerment software evolution (covered HERE) seems to show that many of the most time-consuming software development tasks would create a framework that would apply equally across all sectors. It also seems that the customization or personalization needed to apply most of them to industries would be modest. On the other hand, it’s very likely that looking at a single industry for inspiration could lead to excessive specialization of the base platform, requiring more work to make it useful elsewhere.
Modeling, surveys, and my own experience in software design and development all suggest that the elements of the four-phase evolution of empowerment could be built into a generalized software product with a modest level of work, perhaps six to ten developer-years total effort, and even less time could be needed if some open-source tools could be leveraged. The question is who’d be willing to expend the effort or fund (through contributions of time or money) an open-source development? Who has the credentials?
I don’t think network operators have a shot at this task; they’re not software-centric enough. Proprietary software vendors seem unlikely to build a general toolkit; they’d want a proprietary software product. That leaves IT hardware vendors, network vendors, open-source software players, and cloud providers.
Of this group, I’d expect that the public cloud providers would logically lead the charge. Point-of-activity empowerment seems to require the elasticity that the cloud can provide, and much of the empowerment process will be related to merging current IT data with other information drawn from outside, including location information. Much will involve mashups that integrate multiple information and communications channels into one easy-to-use panel or screen.
I’d like to see open-source take a greater role in the process than even the cloud providers, although some cloud providers (like Google) have a reputation for open-source support of this sort of initiative. Google’s recent alliance with AT&T for edge business service support (in 5G applications) could be a sign they’re working on the subject. The reason for my preference is that a good open-source solution, in the form of a set of middleware elements to be used in application-building, would reduce the risk of balkanization of the space, something likely if cloud providers all roll their own solutions.
The most important thing is to focus as much development as possible on the common toolkit. There are, as I’ve noted above, a lot of verticals that show greater promise than others, and a lot of employee types within those verticals. None of them, taken one at a time, are likely to be able to build a broad business case, so we need to collectivize our efforts to create that rising tide that lifts all boats.