Shifting from Products to Services; Technology Vendors and IT may have a different path to the next generation use of Technology in the Enterprise
Vice President and Principal Analyst, Constellation Research
Constellation Research
Andy Mulholland is Vice President and Principal Analyst focusing on cloud business models. Formerly the Global Chief Technology Officer for the Capgemini Group from 2001 to 2011, Mulholland successfully led the organization through a period of mass disruption. Mulholland brings this experience to Constellation’s clients seeking to understand how Digital Business models will be built and deployed in conjunction with existing IT systems.
Coverage Areas
Consumerization of IT & The New C-Suite: BYOD,
Internet of Things, IoT, technology and business use
Previous experience:
Mulholland co authored four major books that chronicled the change and its impact on Enterprises starting in 2006 with the well-recognised book ‘Mashup Corporations’ with Chris Thomas of Intel. This was followed in…...
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Astute CEOs, with their Boards, are increasingly recognizing, re organizing and transforming their Enterprises in response to new competitors and markets emerging from ongoing Digital Disruption. Competitive survival is becoming the issue; as Internet based technology disrupts traditional customer, and market, relationships. At the heart of this is the ‘Services’ based Business model, but it is unlikely to mean Services provided on the basis IT recognises.
The new Enterprise business model may be built on Internet provided ‘Services’, but in a wholly different manner, in the type and use of ‘Services’ than the deploy and operate model of IT. The sheer numbers involved, the granularity of consumption introduce new management requirements both by Business and Technology management. Operating a true ‘Services’ based Enterprise is a new game to be mastered by both sides!
Currently Internet connected Services, or Cloud based Applications, are now an established method to deploy/deliver current IT Applications and Infrastructure, offering cost challenged CIOs some excellent opportunities to ‘do more for less’. The major Enterprise Technology Vendors have at various speeds moved to answer this demand by converting their previous generation of enterprise application products into Software as a Service, Infrastructure as a Service, etc. However, moving to support the enterprise through these ‘Services’ does not fundamentally change the use and management of traditional IT capabilities by the Enterprise.
Running traditional Applications, SaaS, or Infrastructure, IaaS, ‘as a Service’ certainly helps the costs of the IT department, but it’s not the Business game changer in the manner that Clouds, Apps, Mobility and Social Tools, have combined to become Digital Disruptors of Business models.
For the Enterprise IT vendor shifting their existing Applications from a License agreement to Services agreements maintains the revenues from their current products and installed base. Whilst for the IT department the knowledge and expertise in the Business use, the stability of operations, even the management tools and reporting metrics remain broadly similar as well. In reality the adoption of Services to support the existing IT model has been more of a budgetary and risk management issue than a true innovation in the business capabilities provided by Technology.
The Digital Disruption to Business markets that is driving Enterprise reorganization is based on using new technologies as Services/Apps in areas not covered by existing IT operations. The new Business requirements need a very different ‘Services’ model, one that is alien to most IT operational practices. In fact its key deploy and operate model is directly contra to traditional IT best practices, and is directly aligned to new transformed Business organization model.
It pays to remind ourselves that the existing IT model was developed to support the internal transformation of Business models introduced by Business Process Re-Engineering, BPR. All of this came together to make for the last great transformation of Business in the early nineties as Business organization models required the creation of the CIO role, and the IT department itself, with an aligned mission to support the transformed Enterprise. (It may surprise some readers to know that IT, as we define it today, only dates from around 1993, prior to this Enterprise Computing Services provided the then Business organizational structures with a very different set of Computing Services).
The advent of a further change in Business organizational models to take competitive advantage of the new generation of technology moves operations into new external areas. Introducing, as before, an entirely new Business organizational structures with a new aligned, and different, Technology deploy and operate model. Yes, it’s based on Internet connected and provided Services, but not in a similar manner to those Services that support the existing IT model.
De centralization, with end user empowerment, are key factors at the heart of the new competitive Business organization designed for the fast moving online, well informed, marketplace. Add the massive use/scale of small Services, or Apps, applied in an infinite number of combinations, on multiple devices used by both employees and customers, or suppliers. In contrast to carefully created best practices IT organizations around controlled, optimized, processes with strictly managed data, and it’s a picture of their worse nightmare.
Relax, this isn’t about replacing the enterprise applications and existing IT operations, the fulfillment operations of an Enterprise with the tight control for compliance etc. remain vital. Instead it’s about extending, the use of technology into new areas supporting new Business organizational structures targeting interacting with the external market. The requirement is to support techno Savvy workers in ‘choosing and using’ a wide range of capabilities to turn their current market or customer opportunity into a successful business ‘outcome’. The Business organizational model reflects, therefore the technology deployment and management requirement has to change as well to align.
To understand what is required to deploy and operate Technology in support of ‘Digital Disruption’ its necessary to grasp why business models are themselves becoming de centralized and dynamically driven into frequent change.
This month The McKinsey Review republished the article ‘Unbundling the Corporation’ written by the well-respected Business Management expert John Hagel with Marc Singer as co-author. Though written in June 2000 in response to the foreseeable impact of the Internet and its technologies on business, it’s an absolutely valid definition of the organizational drivers and changes taking place today. Around the same date Roger Camrass published his book ‘The Atomic Corporation’, since revised and updated, but again a remarkably clear definition of the new Internet enable Enterprise organizational model using of Services. Both should be on the recommended reading list of CIOs and IT people to grasp the new business drivers, and for a practical example of a large Enterprise Business re-organization of this type see the example of Philips Industries in the previous blog.
Today the factors quoted in ‘Unbundling the Corporation’, or the ‘Atomic Corporation’ have become powerful forces that are driving, more than merely than enabling, change as we individually, and collectively, adopt Internet based technology and tools. Both cite the challenge of constraining internal Enterprise optimization processes that the current business models based on BPR and ERP inevitably create, versus the external market opportunity factors that innovative use of Internet based Business is creating.
The themes of both ‘Unbundling the Enterprise’ and ‘Atomic Corporation’ is the identification of how Internet based technology allows an Enterprise to selectively choose where, and how, to organize its response to operational opportunities. The granularity of the organizational elements being large enough to for business management to access the bigger, less constrained set of opportunities found by a new generation of real time data analysis; versus the granularity of the resulting actions being supported by Technology providing small enough ‘elements’ to allow optimized assembly of the right response to the right opportunity.
The granularity of actions that these new Business models require needs the assembly of Services, with the use of Apps, at a previously unimagined scale. Simultaneously with user driven selection of the appropriate tools for their manipulation of the insight into a successful business outcome.
In the Smart Business organizational model Technology deployment and Business management shifts from controlled access via the supply side of a finite number of enterprise applications delivered in a ring fenced environment to the management of a massive number of ‘Services’ and Apps used by the Enterprise employees in an infinite number of ways that are defined by their business role.
This represents an inversion of what, and how, Technology is deployed and managed to the new Business objectives of an Enterprise from current IT, hence the title of this blog. The management of these new organizational business models, incorporating many more end points of connectivity, (IoT, etc.), and functionality, (Services and Apps), is a complex challenge complete unlike the first generation of ‘Services’ in use by IT today.
It lies at the heart of CIO versus CMO debate about the difference between the two roles, and solving it by understanding how the two sides must work coherently in support of the Enterprise is key to successful navigating through Digital Disruption. This blog series will explore this topic in more detail over the coming months to endeavor to assist all parties in understanding the full picture and nature of the changes.
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