IT is About to Meet the Amazon Effect

IT upheaval is inevitable -- like it or not

By Steve Duplessie
Wed, June 05, 2013

Computerworld — 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.

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Originally published on www.computerworld.com. Click here to read the original story.
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