IT is About to Meet the Amazon Effect

IT upheaval is inevitable -- like it or not

I use the term "amazon" as a verb now. If it's not part of everyday vernacular yet, it will be. Some examples of the usage: "Retailing was amazoned." "IT is in for a real amazoning."

I also refer to "the Amazon Effect," which describes what happens when a perfectly good (for some), happy (but complacent), established (as in, tied to the past) marketplace gets turned on its head by a new -- drum roll please! -- business model. Were you expecting me to say "technology"? It's not technology that ultimately destroys a perfectly contented market -- it's a business model. Technology shifts create evolutionary movements in markets. Business models create revolutionary upheavals in markets.

Business model revolutions destroy most of the dollar/euro/pound/yuan flow from decades to established vendors. They also tend to obliterate how buyers consume goods and services.

It will happen in IT. There's precedent.

A few, of many, examples include:

For over 100 years, until about 20 years ago, if you wanted to trade a stock, you called your broker. You were charged hundreds of dollars. You couldn't make a move without him. He worked for a big company that made oodles of dollars by soaking you and everyone else who played in the market. It was a perfectly fat, dumb and happy market. Win or lose, you paid. Win or lose, the brokerage firms won. No reason for "them" (the man, the establishment, the system, etc.) to change a blessed thing - so they didn't.

Enter the Internet. The brokerage firms laughed. No one would ever want to trade a stock online, without the astute counsel of one of their stellar brokers! Right. Now you are looked at like you have eight heads if you pay more than $7 to transact a trade. Now you manage your entire 401(k) by yourself.

Technology made this work, but it was the business model that created total upheaval.

Now consider that misty time around the turn of the century. If you wanted to own a song you heard somewhere, you bought the CD. All of it. It came with 10 or 12 songs you really didn't care about, but you paid for them anyway.

Enter iTunes. Result: A perfectly happy recording industry smashed in the face. Now you buy what you want, and only what you want. Did Sony and RCA go peacefully? Of course not. They went only when they had to. But you'll never consume the old way again. The business model caused the tectonic shift in consumption, which caused the tectonic shift in everything from production to distribution to how the artist makes a living. Record contracts are no longer where it's at. Today you make money touring. Oh well.

Five years ago, we were all going to stores when we wanted to buy something, just as our ancestors had done since at least the 1600s. Merchants needed to have storefronts and a place to house inventory, along with people to manage those stores of inventory -- all just in case you were to come by looking to buy something. How medieval!

Enter Amazon. Its business model (perhaps never stated exactly this way) was: "We're just not going to do it that way anymore. We're going to use this technology called the Internet and enable you to buy whatever it is you want while you sit on the toilet." No bricks, no mortar, no fuel, no time, no kidding.

And everything that came before is now extinct. Just like that. Out with the old, in with the new -- because a new business model that enabled a new consumption model decimated the old way. The amazoning of retail.

Along the way, entire new ecosystems evolved that couldn't have prospered in the old world. The UPS guy comes to my house every day with a box from Amazon. I kid you not. Amazon and its business model revolutionized package delivery and logistics. I don't even pay per shipment. The Amazon business model has caused downstream upheaval that allows me to pay one fee per year -- $75 -- and I get my stuff shipped second-day free. Somehow UPS makes money where no one could previously in this model. The amazoning of package delivery.

So while the IT Industry says, "It can't happen here," it's inevitable. It's ignorant to think otherwise.

The IT business is a 60-year-old, boring, staid, predictable business where the bulk of the money made on the vendor side is well known and predictable, and the way buyers consume goods and services is equally well known and predictable -- with neither party outwardly willing to give up the old ways it has come to love so deeply. Uh-oh, seems like this industry might just be ripe for a good old-fashioned amazoning.

Some people are blind to this, even though Amazon is actually in the IT space. But that is not the reason IT will be amazoned. The reason it will be turned on its head in short order is that someone (more than one, actually) will figure out that it's about the business-model and consumption-model disruptions that will be brought to market that will completely ruin a half-century or so of dominance of a few vendors. Amazon the Retail Slayer enabled millions of retailers to play where only a handful could play before. The same can happen in IT. Some will grow massive, others will shine as ancillary benefactors. Maybe a few of the big guys will ride the wave and survive -- but certainly not all of them. The revolution is on.

You will stop buying the way you always have. You will stop consuming the way you always have. You will stop using the way you always have. You will have to alter your perception in the new world order of IT.

Maybe you aren't convinced. Maybe the fact that Amazon reported $790 million in "other" revenue last quarter (IT services) doesn't impress you. Maybe the " cloud" stuff like Salesforce seems evolutionary to you, not revolutionary. But the fact that every one of your employees now keeps corporate data on an external OFS (online file sharing) service like Box or Dropbox should tell you something: You have lost control, and you didn't even know it was happening.

Accept. Adapt. Admire.

Steve Duplessie is the founder of Enterprise Strategy Group, where he is a senior analyst. You can contact him at steved@esg-global.com, and read his blog at thebiggertruth.com.

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This story, "IT is About to Meet the Amazon Effect" was originally published by Computerworld .

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