It’s not a new story: Accelerating technological change has created new modes of production and consumption, which in turn have created new economic imperatives and ways to organise and operate a business. This is the story of the industrial revolution, of the rise of the information economy and of the growing “consumerisation” of business, information technology (IT) and the global economy.
At the core of these changes has been the “personalization” of technology and information. With the rise of social, mobile, analytics, cloud and security (SMACS) technologies, individuals are using their ready access and willingness to share information to demand even better, more personalised services. And as individual needs and tastes can rapidly change, the businesses that serve them must be able to respond just as rapidly — or opportunities, customers and even entire markets may be lost.
This post investigates the changes, their impact on IT and how best to respond. It looks at five key factors in the transformation: 1) the impact of new technology; 2) the resulting economic changes; 3) how businesses are adapting;4) the role of the integrator; 5) and the growing importance of partners and relationships.
Ultimately, it suggests that chief information officers (CIOs) must rise to the challenge of renovating their organisation’s IT core, building strong internal and external relationships and driving business growth.
Technology: Right from the start
Semiconductor pioneer and Intel founder Gordon Moore was right. In 1965, he predicted that computing power would roughly double every 18 months and this has largely held true. In recent years, this exponential growth has led to ever more rapid changes in the amount of computing power available to organisations and individuals – even as IT resources have moved off-site. Those who follow Ray Kurzweil’s law of accelerating returns will expect a 1,000-fold advance in human progress in just 10 years’ time.
The rise of cloud services is part of this advance. Your laptop can now have the same computing power that was once only the domain of large multinationals and governments (Google has printed stickers for developers stating “my other computer is a data center”).
It has forever changed the CIO’s role and promises to transform IT, from providing generic functionality like email, websites and databases to a dynamic, customer-focused and value-adding platform that’s critical to business success.
In the traditional utilities model, IT gives companies essential services like email to communicate with the outside world, websites to showcase their products and services and databases and document repositories to store their information.
But the rise of inexpensive and easy-to-deploy cloud-based services has brought radical change. Internal teams can use these services, from online storage such as Dropbox to marketing tools like Marketo, and even run business processes from Salesforce. And if IT departments are not ready to provide them, team leaders can simply order them online and pay with a credit card.
This “shadow IT” is empowering business leaders, and while it represents a loss of control for internal IT teams, it also raises significant security concerns around access to information, identity management and perimeter defence. But it reflects the reality that the old model has become too slow and too expensive. If it’s so unresponsive that internal teams are effectively ignoring their IT departments and “going rogue” then something has to give.
Adapt or perish
Like electricity before it, the nature of IT has changed. Companies used to employ Chief Electricity Officers because this was a key differentiator that needed to be created in-house. Now electricity is a utility, and competitive advantage doesn’t come from its generation but rather its application. IT is going through the same evolution – it’s no longer a product to be carefully cultivated and controlled in-house; rather it’s a service that users simply expect to be available whenever, wherever and however they need it.
IT used to be something that came out of a box; now it’s something that comes out of the end of a pipe.
Modern CIOs need to embrace and lead this change. This means building new relationships with the C-suite to understand their needs and anticipate solutions. Today, some Chief Marketing Officers have a larger IT budget than the CIO. Rather than waiting for department heads to produce new requirements, or discovering after the fact that they’ve gone ahead and deployed an unauthorised solution, CIOs must be forthright and active in their relationships.
They must learn each department or division’s requirements and suggest creative, business-enhancing solutions. They have to understand the domain and ask the critical questions: What do you need to do? How can I help you do it?
This also applies to external customers, suppliers and partners: CIOs must learn to speak their language, to understand their needs and provide elegant solutions that meet them on their own terms, rather than imposing alien (and potentially unwelcome) requirements and workflows.
Economics: Collaboration is the new way to work
The industrial age gave rise to systems of organisation and production that were ideally suited to manufacturing and process work: top-down, rigidly hierarchical, self-contained. Competitive advantage was created within the walls of the organisation.
Even as systems became more specialised and companies began to outsource, this still took place within the same industrial-era paradigm. The problem is that this economic model no longer gives the best returns. It’s too slow to adapt, especially when internal and external customers alike can easily access online services. And with customers demanding more information and wanting to engage directly with the companies they buy from, collaborative business processes and economic models are coming to the fore. These are as different to what has come before as the technologies that enable them.
The road transport industry is a good example. Thanks to the rise of self-driving cars, PwC has projected that by 2030, the number of vehicles on the road in the United States will have fallen by up to 99 percent. It’s an astonishing figure and if the prediction holds, the flow-on effects would radically transform society. They would be felt by professional drivers; car makers; fuel, finance and insurance companies; infrastructure providers; and governments. The broader impact on society in general is almost impossible to predict but would surely be transformative.
Driving the change
In broad terms, the emerging model has three tenets: excess capacity, new platforms and community marketplaces. Industries are responding to these and creating new business models. Sometimes it’s the established players adapting fast and maintaining their positions; sometimes it’s disruptive start-ups replacing the established players. How can this play out? Let’s look at an everyday technology to describe this model: the smartphone.
- Unlock the value of excess capacity: Smartphones contain powerful microprocessors, far more than they need to function simply as a telephone and messaging device, perhaps with a camera, address book and media player thrown in. Instead, this excess processing power is used to run sophisticated apps, from complex financial and CRM systems to video editing and data analysis tools.
- Create new platforms: By opening up the features of the smartphone, new development platforms have arisen. These allow individuals and small and large businesses to access the smartphone’s features and create new value that aggressively scales the use of smartphones globally.
- Community marketplaces: These platforms have given rise to new marketplaces, like the Apple App Store and Google Play, which are unified store fronts where buyers and sellers can meet. Importantly, these spaces are contestable: new marketplaces can arise, new products can be launched at low cost and consumers can decide what succeeds and what fails.
CIOs must understand these drivers and make sure their organisations are ready to embrace them. What are the underused assets in their business? Can they be accessed via a single, unified platform to support the co-creation of new value? What community or ecosystem marketplaces do they participate in where stakeholders can share ideas, co-create products and services, and buy them? And if they don’t participate, will customers begin looking elsewhere for easy access to the solutions they need?
It is also a key enabler to being able to “assemble and curate” customer experiences. By opening up to a collaborative-based business model, you are more readily able to think and act differently on what role your business will play in either owning or participating in end-to-end experiences.
For example, take the current experience of buying a car. The buyer needs to go to possibly five different industry app destinations — from the auto manufacturer, the auto dealer, to the lender, the insurer and government registrations — to stitch together his or her own experience. While each organisation may be building their best-in-industry app experience, it is still not a curated end-to-end buyer experience.
Business: Speed and adaptability are key
Nobody ever beat a competitor by running a better email server. Savvy CIOs understand this and have responded to changes in technology and their flow-on effects on the economy by using IT to stay ahead of the pack. Speed of innovation is the new key performance indicator for the digital economy.
It’s a fundamental shift in the way IT functions and the role CIOs must play. Customers, users, stakeholders and shareholders now expect more from CIOs. It’s no longer enough to build a business case for transformation around improving return on investment or reducing total cost of ownership (TCO). Every IT dollar spent needs to be generating a return – the old days, when 80 percent of the IT spend went on providing basic functionality like email, storage and static websites, are long gone.
Instead, CIOs must lead the design and configuration of the digital business and plan for the future. This includes providing digital supply chains; accessing collaborative platforms and marketplaces; and ensuring their systems and services are agile and responsive.
Cost pressures also play a role, and reducing TCO is more important than ever. With marketplaces and customer demands changing rapidly, businesses need flexible infrastructures that allow for equally rapid change. Tying up capital in fixed assets like IT hardware is a drag on a company’s bottom line. The inefficiencies, high capital costs and longer time-to-value inherent in traditional, in-house systems and managed services are increasingly hard to justify.
CIOs must take their deep understanding of their business and their customers and respond quickly to their needs, providing the services they require in days or weeks, not months or years.
The only way to do this is by moving to a hybrid IT model that includes commodity utility services, with an eye to becoming as cloud-enabled as practical. Spending time looking “under the hood” of different technologies, or having single-purpose bespoke systems built, is a luxury businesses can no longer afford.
In terms of management models, it means transitioning from the top-down, hierarchical, silo-based “plan-build-run” approach to a flat “plan-consume” design that aligns with the new economic models.
And in terms of in-house IT, the CIO’s team must see itself as a business partner that understands how to use digital platforms to create competitive advantage; provide contestable IT service marketplaces available across the entire organisation; and orchestrate, manage and optimise the IT services the business consumes. Simply put, they have to use IT services to solve business problems.
Integrators: Finding a better way
Systems integrators build solutions for their clients by integrating hardware, software and services into a single system. They select the technologies, ensure they work together, and provide managed services to keep it all running. It’s been the IT industry’s standard operating model for decades.
What’s wrong with that?
Three things stand out. It’s bespoke for the client, which means the inherent risks for the suppliers and integrator are factored into the price. There are neither economies of scale nor cost-sharing.
It’s not taking advantage of shared, scalable platforms that already include pre-built, pre-integrated solutions and services. This means it foregoes the speed-to-value benefits of immediate access to consumption-based and on-demand models.
And finally, it’s not natively designed for the collaboration or connectivity customers increasingly demand.
Moving from systems to services
Services integration works differently. The technology lives on a scalable cloud platform that has been designed with collaboration and connectivity in mind. Bespoke work is minimised to areas such as security and configuration within the existing platforms, which is faster, easier and cheaper than building a solution from scratch.
This means CIOs can focus on creating contextual digital supply chains; providing access to platforms that are easy to configure and that make it simple to orchestrate workloads; and curating ready-to-use marketplaces where they can access next-generation suppliers on demand.
As such, a services integrator must have deep relationships with a large ecosystem of next-generation partners and agreements to co-engineer value. This brings their deep knowledge of business processes to the technology and application platforms, so they can create enterprise-grade solutions, available “as a service.”
When executed well, this model allows CIOs to deliver solutions that are greater than the sum of their parts. By combining and configuring simple, easy-to-modify apps and components from their app store, they can create solutions that deliver enormous benefits at a fraction of the cost, and in a fraction of the time, of traditional models.
Partners: The secret of success
This new way of looking at IT has significant implications for partners and partner relationships. Rather than learning your needs, then designing and building you a solution, partners work with you to co-create a solution.
It also means they can develop industry-based stacks, with configurable services, applications and processes specifically designed for different verticals. For example, CSC has worked with Salesforce to launch a grants management stack for government. With the essential functionality in place, it can be quickly tailored to meet a specific government department’s needs.
New business models can provide new ways to pay (and be paid) for services. Rather than paying upfront sums for materials, models like subscriptions, management retainers and consumption-based pricing are coming into play.
CIOs can take advantage of this, whether they’re curating a marketplace for their customers or supplying apps and services to another provider. The transformation here is the move from one-off projects with one-off fees to ongoing relationships with shared revenue models. It’s good for all stakeholders, because if their projects are running all the time, they need to be providing good service all the time.
Community marketplaces: The new commons
CIOs can create or procure community marketplaces to use inside their organisation to combat the ‘shadow IT’ problem, while still empowering their people. These would typically contain competitive but compliant alternatives to otherwise unsafe services adopted in good faith by individuals trying to do their jobs. They can also create marketplaces for their customers, who can choose the apps, services and APIs they want to consume.
They’re especially good for mobile apps. With the growing popularity of bring-your-own-device (BYOD) policies, IT departments can use a trusted enterprise app store to offer a suite of applications that are secure, conform to identity management, business process and other rules, and can be ‘push’ updated automatically if vulnerabilities are found or new capabilities added. In the event that a device is lost or stolen, or a relationship with a collaborator ends, the data (which in any case is typically encrypted in transit and at rest) can be easily wiped to ensure security.
They can lower deployment and device management costs, encourage adoption (and thus, standardisation), supply accurate usage and cost data, encourage innovation and help position the IT team as active service providers.
That said, they’re not only for mobile apps; a marketplace for desktop apps, with a similarly curated selection of productivity tools, would provide similar benefits for a more static workforce. In more controlled environments, collaborators can be confined to installing only apps from the marketplace, which are digitally signed for additional security.
More broadly, it’s not hard to imagine the creation of spot markets to bid for platforms, further driving competition and ensuring that all providers focus on providing the best value and the best services.
Contestability plays an important role here and because different partners can create apps and release them into the marketplace (once the marketplace’s curators have verified them, of course), users will determine their fate. This puts power where it belongs – with the consumers – and encourages app providers to compete by constantly improving their offerings.
As start-ups and providers continue to proliferate, it should result in an ecosystem of apps and services that are trusted, secure and highly suited to customer needs.
Conclusion: CSC and services integration
As a next generation IT services provider, CSC is increasingly focusing on services integration. Like many of our peers, we have always had deep long-term partnerships with systems and technology vendors, many of whom have transitioned, or are transitioning, from products to services.
CSC is co-investing and co-engineering with our systems and technology partners. This means our clients benefit from cloud-based services that are available on demand; can access platforms for both configuration and integration to meet specific needs; and gain the ability to manage workloads securely and seamlessly across clouds and legacy systems.
It’s a different world. Clients understand the value of transitioning; they want to modernise with confidence that the new models we propose will work. We’re not only giving them access to our marketplaces and ecosystems, we’re helping them build their own.
We’re collaborating with other industry players differently, too. We don’t see competitors anymore as much as we see a shifting array of partners. Clients want solutions and they want to take advantage of hybrid IT to improve their agility and responsiveness.
Systems integration is an increasingly outdated model that will not support the next wave of business models. Systems integration is dead; long live services integration.
Co-authored with Sam Johnston, Chief Technology Officer, CSC ANZ.