- Enterprise IT As-A-Service™
- Strategic Sourcing
- Business Transformation
- Service Optimization
- Service Provider Consulting
I recently had the privilege to sit through a two-day session with IBM’s senior executive team in services. I’m someone who tries not to drink the Kool-Aid. Even so, I came away truly impressed by the work that IBM has done to position itself to be relevant and a major player in the future of IT infrastructure.
I’ve written frequently in this blog about the impending crisis that all asset-heavy players face as first RIM and then cloud attack their revenue base. This unrelenting onslaught is already moving share from the incumbents such as IBM to challengers such as HCL and TCS and will only be exacerbated as cloud takes stronger hold.
I came away with from the two days with IBM realizing Big Blue’s profound understanding of this phenomenon and its positioning of offers that allows them to leapfrog the RIM model and play a decisive and significant role in cloud.
Taken as a whole, IBM’s public cloud software and private cloud and automation strategies gives it the capability to move clients smoothly into the future. And it assures capturing the run-off from IBM’s traditional business while at the same time expanding market share. This is truly a formidable set of capabilities that, if executed well, will ensure IBM is a major — if not dominant — player in the future of IT infrastructure.
Everything will come down to execution, and history has seldom been kind to incumbents in the face of major technology and business model disruption. But based on the two days I spent with IBM, I believe that IBM has more than a fighting chance to successfully make this transition.
Photo credit: Irish Typepad
Demand for infrastructure outsourcing in healthcare IT will rise in the coming years, as that for application outsourcing and systems integration/consulting will fall
Today’s conversations and research around technology disruption and the causes invariably focus on cloud services, and rightly so. Be it infrastructure, software, or any other facet of technology consumption or development, cloud services have had, and will continue to have, the most disruptive impact. The disruption discussion also includes the impact of mobility, next-generation analytics, and the growing importance of software to control the enterprise.
This is leaving enterprise technology providers in a state of amazement and numbness. They are investing all their energy in responding to these disruptive trends. However, there are equally important dimensions they need to understand. Some of these include:
Where is the talent? How many conventional enterprise technology providers are the first choice of employees these days? They themselves believe, very few. The mindboggling (and questionable) valuation of companies such as Pinterest, Uber, and WhatsApp, and the flood of consumer technology start-ups/niche firms (reminders of 2000?), are pushing the technology talent toward these smaller companies. Job seekers now believe that all the action and fun are in consumer technology. Even within the enterprise technology segment, new candidates and existing talent are focusing on new and innovative firms (e.g., Alteryx, Coupa, Dropbox, Palantir, Tableau, Workday) or their own start-up more than on traditional vendors. Given that technology is as good as the people who innovate it, this is a serious threat for most enterprise technology providers.
Where is the plan? Enterprise technology providers take pride in their exhaustive business case modelling and time to market planning. These cases normally create a multiyear plan and staggered investments across the timeline. However, given that technology disruption is reducing the cycle of innovation and time to market, these time and tested strategies are increasingly becoming irrelevant. Do these technology providers have sufficient internal strength, processes, and willingness to jettison the age-old model of investment planning and be in sync with the shortening technology cycle?
Why so many competitors? The huge entry barriers incumbent technology providers created for newer players are crumbling in the face of technology disruption. Enterprise buyers, driven by internal and external factors, have become more receptive of nimbler and more innovative technology companies than in the past. Moreover, new-age technology providers now better understand the requirements of an “enterprise grade product.” More so, the enterprises’ requirements are themselves undergoing significant changes that suit these new-age technology firms, such as agility over control, and first to market rather than best to the market.
The enterprise technology providers are responding by leveraging their tried and true methods of acquisition, (e.g., IBM/SoftLayer, VMware/AirWatch, Tibco/Jaspersoft,) and partnering with nimbler firms (e.g., SAP, Microsoft, and IBM partnering with Hortonworks and Cloudera for Hadoop, HP partnering with OpenStack for cloud services, and Oracle partnering with NetSuite for SaaS.)
The big challenge these enterprise technology providers now have is to strategize based on the type of competition. In earlier times, they knew their competitors and how they would react, and they were comfortable in their planning meetings. However, now the environment has changed. No one knows who and where the next competition is coming from (airline industry versus video conferencing, anyone?)
While there are likely numerous other dimensions shaping the technology market today, they are tough to foresee. This makes enterprises’ and technology providers’ task of planning for their technology roadmap almost impossible.
What is the best way to move ahead? Should enterprises and providers stop their technology planning cycles and become real time planners? Should they wait it out for the disruption smoke to clear? Should they continue with their existing strategies?
If you are an enterprise technology provider or a customer trying to make sense of this juggernaut, please do share your perspectives with me at firstname.lastname@example.org.
Transformation is a journey that, done correctly, requires a significant amount of change in an organization to achieve success.
IT transformation is the overhaul of an organization’s IT operations, where the goal is more than just cost savings. Instead, IT transformation is about increased capacity to use technology to drive new competitive advantages. IT transformation is about unlocking value through improved business agility, faster speed to market and using big data to inform smarter decisions that can lead to improved margins, sales growth and happier customers.
Transformation is always disruptive on some level. It requires changes in people, skill sets, training, headcount, career management and more.
“Big T” transformation demands that an organization attack both technology and process changes simultaneously, two variables that can add enough complexity and risk to sabotage the effort before it gets beyond the planning stage.
“Big T” transformation demands that an organization’s senior leadership be ready to make it a strategic priority, assign champions and hold people accountable for specific metrics along agreed-upon timeframes. Time must be invested to create a clear vision for what success looks like at the end of the transformation process. That includes a clear articulation of the business value desired, one that your bankers and shareholders would easily understand.
In Assessing the Cloud’s Clout to Disrupt the Outsourcing World, Peter Bendor-Samuel suggests that cloud-based IT services will be highly disruptive to the IT infrastructure space. I agree – and assert that the impact will occur faster and be more game-changing than we might imagine at this time when its $10-20 billion of projected annual revenue seems quite modest compared to estimates of “traditional” IT services of $200+ billion.
To support my point, I would encourage you to consider an analogous industry-changer – the “invention” of the low-cost airline by Freddy Laker in the late 1970s. Laker Airlines pioneered low-cost airfares, offering pricing at one-third to one-half of the cost of traditional carriers flying across the Atlantic. With only a handful or two of long-range aircraft, Laker broke the industry’s rules, securing permission to compete head-to-head with the likes of British Caledonian, TWA, and Pan Am, among others. Applying innovative operating practices, implementing sacrilegious pricing models, adopting unique sales, and marketing techniques, Laker opened new markets and changed customer buying habits forever. While the early 1980s recession across the U.S. and Europe forced Laker into bankruptcy, the airline industry was changed forever.
The parallels in today’s IT services market to Laker’s world are quite striking:
Some will challenge whether the Laker analogy is a fair comparison, but can today’s large IT services firms afford to risk not taking heed of lessons from Freddy Laker?