I would like to take a moment off the day-to-day blogging and observe an interesting issue that was brought up in a recent industry conversation – that of the unifying force in the IT industry. As we are seeing a transition from Client server (or internet enabled client/server) architecture to a next generation Service Oriented Architecture, we are witnessing a repeat of all the same phenomena’s that we have seen in the last mega shift (from Mainframe to client/server). It starts with a period of uncertainty focused around pure-technology discussions, followed up with a de-facto standardization of an agreed blueprint. What followed last time was an exchange of the technology discussion with a business/application discussion as the main focal point for a significant eco-system/after market evolving around very few players.
What is interesting though is that the previous change was so sharp it was almost brutal to the incumbents. Players like DEC, who did not move well into the new model (separate story, I heard from Hasso on this one – I need his permission to repeat) evaporated completely…well they were subsumed in a company that was subsumed in HP (who not only adopted the model, but became part of the original blueprint for SAP). The most interesting part was that the industry as a whole found a common enemy which moved every participants in the market with a fervor only seen in sharks when they smell a wounded source of protein in proximity. The common enemy of the last wave was undoubtedly the mainframe – everyone wanted to get rid of the mainframe and many companies were hoping to build their business plans on reducing and replacing the maintenance cost for the big beasts, and the people that operated them.
So the question was left open as to who is today’s unifying enemy – that one force that all of us want to make irrelevant to the degree we can agree on everything else in the blueprint. As much as we tried to think of a physical element to replace in the IT shop we could not find it. I believe that some of SAP’s competitors actually had in mind a few years back that we would be that big element to replace, thinking of breaking the enterprise backbone into a small collection of components and letting hundreds of fish swim in coordination to make a single shark…unfortunately that plan didn’t work, as you cannot really replace the application backbone that easily, and SAP has actually figured out the SOA is a great thing for us, and moved from a follower mod e to a leadership position i n the last 3 years. And so we tried to look at the problem again only this time from our customer’s eyes, before we analyzed the vendor community. You see, customers were the first to throw the mainframe in to the water for us all to develop the taste for replacing it, and they were really afraid of the disconnect the mainframe created between them (the CIO or head of IT) and the CEO, who could not figure out why they were getting less and less impact for more and more money.
To really understand the cause for how we get there, one needs to understand Geoff Moore ‘s great model for process innovation (for more on Core and Context see Geoff’s article in last year HBR ). What happened in the past with mainframe was that companies got their IT budget stuck in mission critical context hell (what Geoff calls the Demon) just maintaining the Mainframe and the apps on it. The way from there is either back to investment in core or being outsourced. It is interesting that we are facing the same enemy today, but we cannot manifest it in a physical mainframe box. The enemy is still a fight for relevancy, and the fear is still pretty much the same only with a different name, outsourcing. There is nothing (or no one in this case) that embodies the fear better than Nick Carr . Don’t get me wrong, I have nothing personal against Nick (although some people who read his blog entry about me feel he does harbor some personal grudge against me, or is it just the people who pay him that do?), I think that he believes in what he said– that the IT industry is exhausting its differentiation. Unfortunately, I do not believe businesses have exhausted their means of differentiation, and what we do as an industry is merely enablement of the varying business models that our customers throw at us. Now, if at all, I believe the rate of business model innovation has and is significantly accelerating.
So we have a fight on our collective hands, customers and vendors, to get our system in shape, in agile, recombinant form, before the big bad wolf comes over and deems us all irrelevant (in which case he can outsource the IT department and everything that’s in it to the lowest bidder). The fight is relevant to all of us, because the outsource step will not end in one move, rather it will become a “WalMarting” of our industry, regardless of whether we have a business plan that says we will become arms supplier or we will leverage the lower cost. In a world where you have outsourced the IT of your company, you don’t really have any business flexibility after the contract is signed (think changes to your house plan after the master contractor has signed you in blood on the blueprint…think again). What you do have is a master contractor that is enjoying the benefits of Moore’s law (the original Moore , not Geoffrey), while you are hoping none of your competitors changes the business model and you need to catch up. Catching up is really hard to do. In other words, the next big game is who becomes the industry disruptor, and who gets dragged behind. The disruptions are going to come in shorter intervals and with more brutal force. The disruptions will start interlocking across industries, and will feel more like Tsunamis than earthquakes.
That is why I believe we are seeing an industry that is embracing the next big thing, and a wave of process innovation building around it. But that is all in my next blog on the Enterprise Services Ecosystem , and the great Enterprise Services Forum we ran this month in San Jose.