While business leaders are able to consign problem episodes to the dustbin of history quickly, many IT management teams are still grappling with self-confidence issues that can be traced back to the last economic downturn and ‘IT recession’ in 2002/04.
Staff need to truly believe they are jointly responsible for the future of the business – your department must be a lot more than a deferential technology service provider hovering one step short of outsourcing oblivion. But how can you articulate the fundamentals of the new IT mission in a way that staff can internalise?
Looking at the macro-trend level across the IT industry landscape and comparing its offering to the needs of business leaders today, you can boil down the biggest issues to just four things IT is going to have to do really well in coming years. It must industrialise, innovate and internationalise – all in a sustainable way.
Although the automobile first appeared in 1885, it wasn’t until the 1930s that mass production really took hold of that industry. The world was reshaped by the results. Similarly, though we have been evolving business computing since the 1960s, only recently has the true scale-economy model started to emerge.
A network of gargantuan computing centres is now being strung around the globe by Google, Microsoft, IBM, HP and others. For example, Google, which we believe runs over a million servers, has been building its more recent datacentres next to rivers or lakes to aid cooling capacity. Meanwhile, it is a 1.3 mile walk around the outside of one recently constructed Microsoft Live datacentre building.
On these massive internet-connected processing platforms, Software-as-a-Service (SaaS) is mushrooming. Basic applications for small to mid-sized businesses and office software are being offered on subscription. Every major player is now involved in this, with SAP formally joining in last month.
It will take years for existing enterprise computing to change, but wholesale industrial re-engineering has already started in earnest.
Billions of dollars are being invested in this industry model. It will revolutionise technology economics by changing the way IT is constructed, offered and consumed. Your staff will have to make some big bets and take some complex decisions as this story unfolds to surf the strategic cost curves downwards in a timely way.
The numbers will be material to your business bottom line and, if you thought you had time to ponder, I should warn you that thought leader Nicholas Carrhas a new business book about the phenomenon – coming soon to a boardroom near you!
IT infrastructure will continue to become more cost-efficient over time, via new delivery models but that opportunity is equally open to all buyers. What business leaders need now, particularly in Western economies, are new sources of innovation to compete with players from emerging markets. The IT industry is generating new ideas and ways to radically improve products, services and business models, but we have barely started to take advantage.
For instance, Norwich Union’s pay-as-you-drive insurance (see box), uses basic wireless data and GPS location technologies; neither of them new. However, we have a whole collection of new technologies lining up on the near horizon. These include the social networks systems of web 2.0, the diverse array of new display technologies, the fabber, 3D virtual worlds and WiMax.
So what will your company do with this cornucopia of opportunity over the coming decade? Some companies will be too bamboozled to react, some will gorge themselves on everything and achieve nothing, and some will focus clearly enough to extract truly strategic competitive advantage. The modern IT department must be at the epicentre of that deliberation. It seems wholly improbable that companies will make the right judgement calls absent from that competency.
Like it or not, everything we do today takes place on a global stage. Whether it’s our derivatives trading markets competing against New York, or having our health service efficiency compared to that of the Nordics; we all have to be world-class to thrive. This will require us to give up the rump of some technology work to other nations that can do it more effectively. We will retain and excel in some technology specialities but as IT continues to change and advance, those specialities will sometimes arise in unexpected places.
The supply side-dominated perspective is set to change completely. Simply by the scale of demography, the rapidly evolving mass consumer markets of middle-class Asia will grow to dominate the competitive landscape of the global economy over the coming decade. To take your market share of their societal progress will require your organisation to navigate a complex set of new value chains spanning production, education, distribution, law, finance, marketing and many other activities.
What sort of enterprise architecture will allow you to quickly intercept the burgeoning trade-flow between China and Africa, scale it, but equally quickly retrench if the political volatility of that relationship takes a sudden downturn? Enterprise architects of this new era will need to be network and semantics-centric business thinkers, quite different from the structured data and application-centric minds of the 1990s.
Opening the green door
If all those factors weren’t enough for the modern-day IT leader to deal with, we now face rising concerns about IT’s environmental impact. On the one hand, we must learn to control technology’s growing and directly harmful effects; on the other, we can explore how to use it positively, to develop more sustainable methods of industry and commerce. Observing the IT industry grappling with datacentre power and cooling right now is a bit like watching a slow motion car crash.
Norwich Union’s pay-as-you-drive insurance
A location-tracking device is fitted under the dashboard, which relays information via a standard cellular telephony data circuit to the insurer. A monthly bill is then generated, itemised by journey, in pence per mile according to road type and time of day. This completely transforms the risk-pricing cycle between the insurer and driver from once a year to once a minute, revolutionising what was a staid, commoditised and frequently loss-leading sector of the insurance industry. It’s even patented to keep competitors at bay.
How can we not have seen this coming? The Moore ’s law line was clear enough, the relationship between processing speeds and watts is known, the engineering efficiency of air-conditioning was a fairly flat progress line; then we added the rack densification of blades.
It was entirely predictable that power would become a critical factor in IT management even if the geopolitics of energy had remained calm, oil had stayed at $25 a barrel and An Inconvenient Truth had never been filmed.
However, with those additional factors in play, business leaders are now rushing to commit their organisations to stretch goals on environmental improvement, because consumers, policymakers and shareholders alike are demanding swift action. So CIOs will have no choice but to find and then open the green door. The initial wave of partly cynical greenwashing will undoubtedly give way to less superficial and more sincere action but since the IT industry has mostly ignored its impact in its first forty years, there is a lot of new territory to explore and learn about.
Gartner has calculated that business IT’s carbon contribution is approximately 2% of the global total, which is comparable to that of aviation. If we included consumer electronics to that, the figure would more than double. Without redress, the carbon contribution attributable to operating microprocessor-based devices will grow quickly. It’s a combination of relatively fast growth, visibility and the 'discretionary’ nature of air travel that make that sector such an attractive target for lobbyists and regulators trying to deal with climate change. IT is in a similar position and we need to get our house in order in a responsible, self-regulated way or expect them to receive unpalatable medicine.
So remember, there are just four macro-level imperatives your IT management team should focus on: industrialising, innovating and internationalising, all sustainably. Over the winter, consider how to articulate these in a way that is specific to your industry and to your corporate strategy. Give the resulting perspective some internal publicity during 2008. Your peers around the operating committee table will question IT’s contribution less often and your team will walk taller.