by Richard Sykes

Commoditise for success

Mar 09, 20094 mins
Energy IndustryIT LeadershipIT Strategy

One theme that I explored on these pages during 2008 is the potential business impact of the automation and commoditisation of converged and integrated data processing, data storage and data networking as on-demand services.

In my most recent piece I argued that, in these recessionary times, simply battening down the hatches could prove to be a high-risk option. A determined focus on certain transformational opportunities – and exploitation of commoditised infrastructural services is one such opening – could deliver rapid benefits in the form of sharply reduced operational costs and increased operational flexibility.

A recent executive survey leads me to argue the case from a different vantage point: the continuing perception that, while the exploitation of IT is now at the core of the operations of most contemporary businesses, the integration of IT and business strategies has yet to prove to be a marriage made in heaven.

Two thirds of the non-IT executives who replied to the McKinsey survey believed that business and IT strategies should be tightly coupled, but only between a fifth and a quarter judged that they actually are today in their business.

It is difficult to challenge the imperative that a business and its enabling technology strategies should be well aligned, yet delivering this remains a real-life dilemma. My opening salvo for 2009 is to propose that commoditisation is now the key to a transformational journey that can lead to a resolution of this dilemma. My insight is a simple one. Commoditisation of infrastructural ‘stuff’ as directly sourceable services on demand allows their provision to become an exercise in straightforward commercial procurement. In a market environment where these services are widely available, their exploitation is no longer key to a business’s competitive edge as all competitors have access to them.

Google now offers a bundle of unified communications services for $50 per seat, per year, that includes 25GB of storage, email, calendaring, instant messaging, voice, video, Sites for building web pages, Docs for office applications, collaboration capabilities, and more – all available around the globe via the internet. With this in place, strategic energy can be focused on the technology enablement required to deliver the business’s core competencies out in the marketplace and in the heart of the operations of key clients – a major challenge but one more narrowly scoped by the competitive realities of the business. An alignment of IT and business strategies is now more easily deliverable.

At the heart of this insight is the issue of how the IT professional is to be put to work to create sustainable business value.

On the one hand, automation and commoditisation is about the innovation, creation and delivery of generic services that have a high technology-to-people ratio. The pioneering lead given by Google and in commoditising the operations of the server farm is about technology automation.

IBM’s growing investment in a world network of cloud computing facilities underlines that our industry’s legacy boys have now got the message, but their model is the same – technology automation by a handful of highly expert IT professionals as production engineers and supporting ops folks. Continual innovation and learning is focused on endlessly raising the productivity of the factory assets and the quality, cost competitiveness and market responsiveness of the services delivered through the factory gate.

On the other hand, where delivery of a business’s core competencies is the issue, the direct people contribution wins through in a different way. Creating and delivering technology-enabled services to underwrite the operations of a specialist retailer, or of a derivatives trader, is about the work of IT professionals who understand these things. This is about the innovation, creation and delivery of specialist services with a high people-to-technology ratio. And this is where the delivery of a genuine business/technology intimacy will determine competitive success or failure.

Automation is enabling the generic technological capabilities that almost all businesses exploit to be made available as straight and directly sourceable volume services, accessible on demand as commodities. Much of the concept called the cloud scopes this phenomenon, incorporating converged and integrated data processing, data storage and data networking services, along with generic back-office stuff such as payroll and HR, as commoditised BPO services.

This allows a business to focus its technology agenda on better exploiting its core competencies, and it’s this that delivers its competitive edge. Tight coupling and alignment of business and technology strategies is now a deliverable proposition. Will the next McKinsey survey report a sea change in non-IT executive opinion? No reason why not – all the elements for this transformational journey are now here, ready to run.