Agreeing to disagree, part deux (with some small agreement this time)
Dear Vorticians,
In my last entry, I rebutted a column written by Tom Foremski of SiliconValleyWatcher.com, in which he called the enterprise IT market deadly dull. Tom's kept the debate alive with this post , and I gotta say: Tom, we're still at odds here.
First off, I'm not arguing that information technology itself is exciting or fascinating. Yes, some of this stuff is innovative and quite interesting. But far be it from me to extol the sexiness of, say, storage virtualization versus an iPod, the iCon of successful consumer technology and the most oft-cited product I can remember. (And, Tom, I'd argue that Apple's marketing prowess was equally, if not more, responsible for the iPod's success as marrying the MP3 player with a great online music store. I don't have an iPod - imagine that! - and I still love the ads.)
Rather, what's fascinating to me - and what I argued - are the changes the enterprise IT industry is going through - changes that rival the scope of the most significant market shifts we've seen in the past. These changes are being driven by the death of client/server and the emergence of Web services-based applications. How successfully customers and suppliers navigate this transformation will make all the difference in their success or failure in the years to come.
Tom's right about a couple points in his column. (See, we agree on some things.)
Information technology itself is not strategic. Amen. Business process innovation is strategic and how you support that through the innovative use of IT is vital. But, while admitting the point, I'll add that it's like saying money and time are not strategic. It's what you do with them.
I'll also agree that open source will play a huge role in the future. But I won't agree that everyone will have a plain vanilla open source (yawn) IT architecture that offers no competitive advantage. God forbid that's what the future holds for US businesses, particularly in light of the emergence of powerful global competitors. Saying that Google has built a new business on this low-cost, open source platform misses the point that Google has married that with search technology and a slew of other features and functions - embodied in its own secret sauce IT - that set the company apart. The beauty of open source and commoditization in the hardware arena is that they enable companies to devote more of their IT resources to developing applications that provide a competitive advantage. Just because you are not using off-the-shelf packages doesn't mean you aren't applying IT strategically. In fact, it will be fascinating to see how well New and Old Rules Enterprises take advantage of the power of Web services.
Tom says: "I don't think IT has ever been strategic." Wow. Tell that to Wal-Mart, Citibank and American Airlines. In fact, tell it Google and see how Eric Schmidt responds. The simple fact is that innovation in business process married to innovation in the use of IT can make a huge difference. Not forever, maybe not even for five years, but it can tilt the playing field to your advantage for some period of time. And while it does, you work to develop the next advantage.
Tom, thanks for the plug about Vortex 05. Maybe we can agree on something else. Yankees or Red Sox? Chocolate or vanilla? Coke or Pepsi? (Actually, Diet Coke.)
Bye for now. As always, I welcome comments here or via email to jgallant@vortex.net.
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Comments
Dear John:
Tom is right that IT is deadly boring, because it's now a mature technology in which there is incremental but no exciting innovation and substantial but slowing growth (internet years are equal to seven calendar years, no?). Most importantly though, no talented person would now enter the field for any reason but to make a lot of money, fast. So Tom is all wet in his rules - anyone who plays by them will have to give away ownership to contributors, if not venture folks.
Employees are a bargain because you buy their labor wholesale and sell it retail.
Tom's rules are not new: literally millions of small time shop owners since the 19th century played by those rules and overwhelmingly vanished.
Posted by: Rich Janow on August 21, 2005 10:51 PM
John,
The thing that struck me about your blog and Tom's is the missed nuance about business process being SEPARATE from IT. I think there is a tendency to treat IT as "infrastructure". IT stands for Information Technology, not Infrastructure Technology, and increasingly the most important part of IT is not infrastructure which is becoming dial tone; it is applications. Even Cisco's big new initiative is guess what: AON, or Application Oriented Networking.
Business Processes are fundamentally tied to the applications in an enterprise and as long as business process innovation leads to competitive advantage, applications and their data will continue to be extremely important to the enterprise. The single largest cap-ex spend category in the US in IT is not hardare, not networking gear, but software.
In your Churchill Club panel, one of the panelists said very clearly that IT groups in Cisco report into the LOB's. Well those IT groups are not the network guys, they are the apps groups. Cisco's corporate networks do not embody business process or competitive advantage. Cisco's LOB's and business processes and applications do.
Here is how I see the enterprise software industry playing out:
1. Business Processes will continue to drive competitive advantage: Business Managers will demand more agile, more efficient and more revenue generating processes. This is Core.
2. IT groups will clearly be demarcated into the technology infrastructure service provider (insourced our outsourced), which is Context and the LOB IT groups, which will be both Core and Context.
3. Context LOB IT applications will tend to be outsourced to ASP models: did you know that today the largest ASP is not Salesforce (possibly Core for some companies) but SuccessFactors which hosts an HR employee performance management application (Context for al companies).
4. Core IT groups will remain insourced, or be outsourced to very strategic partners who have industry specific domain expertise. These groups will buy/build/integrate enterprise software. This enterprise software will increasingly be delivered as an enterprise software appliance in order to deal with the issues of complexity and TCO. This is also where the LAMP stack will play.
While other scenarios are possible, this is the likely scenario. And in the process our industry will change to adapt to this scenario. The good news is that there will be room for ASP's, smart software companies, and professional services firms with vertical domain expertise: all in the applications space.
And btw, corporate enterprises will continue to grow and the new dot.coms will continue to challenge them; and there will be the occasional Google or Yahoo that changes the game. But like Microsoft did not eliminate IBM, Google and Yahoo will not eliminate advertising agencies.
Posted by: Peter Relan on August 23, 2005 05:08 AM
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