One of the most common questions enterprise leaders are asking revolves around predicting the future of IT spend: how will cloud, analytics, mobile, automation, and other recent developments in the IT space determine the winners and losers of IT? Here’s an answer I gave just the other day:
“Enterprises want to capitalize on these emerging technologies, and they want them unit-priced. The advantages of a variable cost structure are too many to deny, and few obstacles remain. When the automation, robotics and cloud upheaval shakes out, the winner on the enterprise side will be the “business,” and—because it is losing control—”IT” will be the loser. (I use quotes here to indicate my disdain for looking at IT as separate from the business.) On the service provider side, the winners will be those companies that have deep relationships with their buyers, those that offer deep vertical solutions, and those that have the consultative horsepower to make it stick.”
I was rather proud of my answer … for about five seconds. Then I realized I could have delivered the exact same answer 10 years ago. A better answer would address these three elemental changes:
1. The technology. Ten or so years ago, the market was debating whether to build or to buy, and whether the value of an ERP implementation was worth its cost. Today, we have similar debates with cloud, mobility and analytics. My colleague, Steve Hall, makes a brilliant argument for a “cloud-first” strategy, which is today’s build vs. buy discourse. [Disclosure: I am employed by ISG, as is Steve].
I’ve long argued that the technology for cloud is not all that new. We’ve been co-locating data centers for how many years now? What is new is the dynamic provisioning that allows all these existing technologies to work together in a more productive, effective way. The analogy here is well-known: Uber didn’t invent the car service; it simply made it easy to leverage under-utilized assets (in this case, cars) and, thus, created a business model than can now be applied to make anything on-demand. Cloud is the Uber of IT.
2. The buyer. It would be easy to make the provocative statement that IT, as a functional organization, is dead. The argument has been made before, and while it may have been eloquently made, it is still disingenuous. IT as a function must change. Its buying power is already slipping. Functional executives are making the decision to buy “as-a-service” solutions to solve specific business problems with integrated bundles of services, software, hardware and connectivity that are consumption-priced. A server, a developer, or an application, by itself, solves nothing.The purchasing decision is finally aligning to the problem that must be solved, and this is a good thing.
But IT has a role. If these best-of-breed purchases don’t eventually work with each other, the enterprise will break down. The new business buyer doesn’t see this, but IT does. The successful IT departments of the near future will be, first and foremost, service integrators. IT is not dead—it is simply being jolted out of its comfort zone.
3. The service provider. In addition to the obvious generic cloud offerings, such as Amazon Web Services and Microsoft Azure, there are hundreds more that are vertical-specific and taking the market by storm. Enterprises are learning that, though an asset-centric approach gives them bragging rights in terms of speed-to-cloud, it delivers little value. Application-centric approaches are the key to harnessing the real value of the cloud and its technological friends (analytics, mobile, automation, etc.).
I suspect the industry will continue to embrace the “-as-a-service” model, but many traditional service providers are behind the curve on this, not having done enough to create these solutions, or—even when they have—lacking relationships with the appropriate buyers. But they have time. Traditional IT, like mainframe, will be around for a long time. The installed user base is too large for that not to be the case, and certain applications, like ERP, seem to be staying put for the foreseeable future. The portion of the market that is not moving forward will shrink every year. Successful service providers need to show growth to be relevant. The path to growth today is solving operational, not technical, problems and then finding a way to deliver that solution in the manner that enterprises want to buy it.
The script may be new, but we have all seen this movie before. For as much as we talk about the blinding pace of change in IT, a look at most large corporations will prove conclusively that it takes a long, long time to transition from legacy solutions to modern ones. For the foreseeable future, the winners will be those that manage adoption together with integration, whether they be buyers or sellers.