Last night saw the Prince’s Trust Technology Leadership group’s Big Debate on Supplying Global IT Services & Technology in the Next Decade, between the President of Fujitsu’s Global Business Group, Richard Christou and IT analyst and guru Richard Holway. First, a summary of the debaters’ respective positions:
Richard Holway
- The IT industry will never again see such staggering growth as it did during the 90s. We will roughly track GDP from now on (as a broad IT industry trend)
- Within this broad trend there will be significant winners and losers; the hardware industry is already being dented by the downturn whereas applications services and outsourcing will remain stronger
- At present, BRICs countries do not have strong enough economies within themselves to support strong IT growth, they are still heavily reliant on servicing the western world, either directly, or servicing local companies who themselves service the west
- Cloud will be THE driving force in IT for the next decade. Thomas Watson’s famous quote that there will only be a market for 5 computers worldwide may still come true in a sense – as people and companies increasing don’t want to own and service IT, they just want to use it. Perhaps the big 5 ‘computers’ will be cloud owners like Microsoft, Google, Amazon, the US government etc
- Challenges for the next decade: changing to a service/SaaS approach may ruin many companies’ revenue model, it will be an expensive and disruptive time (cashflow and revenue models), the downturn has accelerated change in our industry and the leader is now the most threatened.
Richard Christou
- Not sure it’s quite so bad as RH makes out. Agree that BRICs countries won’t replace revenues for now. Downturns throw up discontinuities – you can plot new entrants against downturns in the market. Plus downturns provide the opportunity to look at what you’re doing and how you’re doing it. A period to invest.
- The new technology always takes longer to come through than expected. Supplier models such as SaaS can be seen as us coming full circle (ie. back to bureau model of old). Netbook/cloud can be seen as mainframe/dumb terminal. Revenue models for SaaS are highly relevant – who’s going to pay for the next generation of IT development if such businesses are so hard to run profitably?
- Cloud’s impact on business as opposed to consumers isn’t entirely as clear. There will be clouds, many owned by large real estate companies. Google/Amazon etc exploit the IT infrastructure that makes up the cloud but that leaves an opportunity for outsourcers to manage the them.
- Christou draws a distinction between Google/Amazon and enterprise needs. There are data ownership, confidentiality and cross-border information flow issues. There will be a cloud within the enterprise and IT companies will get a lot of business here, as you will interface through many devices to your corporate cloud
- Managing a company supplying global IT services and technology will need close attention to local cultural alignment from a sales perspective. For example, outsourcing not really undertaken beyond US and fringes of Europe. Vision for the global IT company has to be locally strong operations which operate to standards/best practice but have ability to operate in local cultures highly effectively
- Managed services and outsourcing is not a bad place to be right now
Useful points made from the floor, and in response by the debaters:
- If IT becomes more of a utility, then in the future there will only be room for a few very large players. Similarly to Apple iPhone and its downloadable apps, will this happen in enterprise IT? Huge vendors becoming the channel for mini “widget” vendors?
- IT as a term is becoming a hindrance – we are an industry supplying business support and organisational outsourcing that is technology enabled
- Focus on investing in applications and outsourcing. No-one can do without IT these days – companies cannot manage without it, even in the downturn banks, travel companies, airlines, are all still spending
- Our mindset in IT should be about change, not recovery – it will never be the way it was. We will not go back to the industry we left, but the future is exciting and full of opportunity.
My top 3 summary for IT marketers is:
1) it’s going to be easy to jump on cloud/SaaS/virtualised bandwagons but much harder to carve out a decent and defendable position.
2) as IT expands from “IT” to “business support” you’ll need to understand your key accounts and segments better than ever to keep relevant. If you’re not looking to rearrange your marketing along these lines, then get started.
3) If you’re not one of the IT giants then keep an eye on them and get aligned. There was a strong feeling that the really big companies will become even more critical as a channel to market for everyone else.
The entire management team of The Marketing Practice attended the event. To see all of their conclusions on it, take a look at the comments fields of this post.
3 comments
Probably the most interesting point for me was that raised by Richard Christou about the continuing influence of national or regional culture on buying behaviours. He evidenced this by saying that service-led outsourcing was still largely not done in much of Western Europe, but it was also touched on – although not explicitly – in the debates about the cloud and data security and in the debates about the economy. There was a range of views about how concerns over data security would limit the scope of the cloud’s influence. The rationalist view seems to be that it isn’t a genuine practical concern, since it is not the cloud that is insecure but small, mobile data devices like memory sticks that can be left on trains or in pub car parks. But yet there is a significant cultural influence on the debate; a not necessarily rational fear of large, centralised data storage that perhaps owes as much to the fiction of Orwell and political history as it does to technology.
Similarly, when we talked about the downturn, there seemed to be a general consensus that whether it will be hockey-stick, u-bend or any other shape is not of significant importance. There will always be opportunity for successful companies, and perhaps those that adapt best will be those that understand the cultural impact of the recession and the continuing cultural influence on buying behaviours, rather than the purely economical.
I was also interested by the comparison between the cloud or a future IT landscape in which IT is increasingly a utility, dominated by open source models and the generics vs proprietary debate in pharmaceuticals. The key question raised being who pays for the research and development in a generic, utility-like market?
And finally, the apparent agreement amongst the audience that IT should be renamed Business Technology, as Forrester argue, which seems to stem from a sensible underlying argument that the IT industry as it is currently considered is a broad church containing in reality a vast range of industries, but then completely misses the point. As was rightly pointed out by someone afterwards, if we rename IT to BT, we’ll be left thinking, “what is it that business technology actually provides for business – ah, yes, information.” And a rose by any other name, as old Bill S rightly pointed out, would still smell the same. Especially to a group of old cynics born of the culture of hard-nosed businessmen that still to a large extent prevails in the UK and in large business particularly.
My main thought after last night was about what the market/audience would make of all this uncertainty.
Speakers and delegates raised lots of potential areas where there might be money to be made:
- Hosting the cloud
- Creating and managing a ‘mini’ cloud for a single enterprise (essentially a managed data centre offer)
- Innovating with industry-specific applications for these clouds
- Moving up the value chain (in 2 directions I guess – either to help guide an organisation about the right strategy for IT (is it cloud, enterprise cloud, SOA, BPM, or a combination of all these?) or to move into business consulting)
- Business Process Outsourcing (enabled by technology, but raising the spectre of Forrester’s view that IT needs to be separated from BT (Business Technology) (and if BT Global Services decided to go that route, would it make it “BT, a BT company”?)
- Innovating around new hardware and devices (I don’t think they spent enough time on this area – access to information in the cloud might be the big thing at the minute, but who knows what new devices will make possible?)
With all of these, my point is that IT companies need to pick a position and stick to it. Buyers need to understand how all the different services fit together, and who to turn to for what. With consolidation in the IT industry, these more defined/stratified positions will become available. It’s about time that marketing stepped in to save the buyer’s sanity.
Richard Christou had interesting points about cultural differences around the world dictating how products/services/solutions are most suitably packaged and sold for a specific country. For example, that in Japan, Africa and some other countries, showing that you have the right ‘product’ is important rather than consulting around a bespoke service (a stronger approach in the UK, for example).
But I wonder if this is changing – that with growing risk aversion here, the desire to see strong products (‘products’ in the widest sense – whether hardware, software, BPO or consulting) will start to affect UK buyers more. This ties to the previous point about consolidation and stratification in the IT industry – as the individual positions of different companies becomes clearer, it’s going to be more important that they can communicate about their specific products (indeed, this communication is going to be essential if a company wants to stake its place in the new order).
Finally, I also noted Richard Christou’s view on the signs he will use to tell when we are coming out of a downturn – increased spend in discretionary areas like consulting. Perhaps the consulting will be as much about sorting out the spaghetti mess of services outlined above as it is about finding new business opportunities.
What I took away from the evening was not to become solely focused on the speculation and headlines that are grabbing our attention right now. We need to focus now on what will be the opportunities as a result. The IT market will (as it has done before) change and face some key challenges. This will create opportunities if you can dedicate effort to focusing on what you want to offer, based on market needs, competitors strategies and the technology on the horizon. To do that there felt like some key things I thought a business would find interesting questions to ask themselves.
How flexible can you be? – Can your organisation see what the market will need and be in a position to re-organise, adjust or re-position itself? And is the organisation brave enough to do it? For a large organisation this might mean a significant level of change internally and within the offer it has built up for the market over years. If companies can’t react then it opens up the market to players who can act quickly or a number of smaller players offering niche opportunities.
Do you really understand The Cloud? – This is still very much in a discovery mode where anything is possible, the question is, do you know how you want to use it or what to offer your customers. It could make fundamental changes to your offering or how you operate, so investing time to consider how you want to model your business based on the Cloud would be worth doing. There are lots of integral questions that need to be asked, what are the boundaries of its use, how far will business truly integrate with the Cloud, how far should they? If you can develop your position on this then you may have advantages over others you can leverage as an organisation or with an offer for the marketplace.
Do you understand where consumer behaviour is driving business behaviour? – Through the demand/usage of mobile devices and access to information/sharing we’re changing the norms/expectations of when and how people access information in their daily lives. There are 2 impacts on business which interest me from this point. How businesses will have to develop their channels to engage consumers to match the way people want to access and receive information. Following that, we’re all consumers, so seeing how organisations will change internally to adapt, how an organisation will share information internally and how people will work – will it follow what people expect and how they want to work….will business keep up! In 2 years time will I have just an iphone for example and a link to the Cloud!
Finally do you understand who is in control? Who is going to be deciding what’s bought and sold – can the IT industry segment itself and decide what the ‘perfect’ IT ecosystem looks like? Will CIOs have the vision to re-structure and decide for themselves what to buy? Or will there be people under the CIO – architects in particular – who drive what gets bought because it fits a technology plan? Will the decision rest with senior business decision-makers deciding what services they want? Or will consumer behaviour drive what employees and customers want from IT? Understanding the right audience and orienting yourself around them is going to be essential to an IT supplier – alongside with understanding exactly what you have on offer to them.
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