CTO Blog
What’s the similarity between an iPod and an enterprise system? On the face of it maybe not much but if we dig a little deeper perhaps there is something that points to an underlying trend in the corporate IT industry – consumer power. And perhaps it’s directly affecting share prices in the corporate IT industry.
Earlier this week, Apple announced results for the quarter to year-end 06 showing a 78% rise in profits with a resulting 5% share price rise. On the other hand, while SAP’s 06 sales are expected to be 11% higher than 05, it announced it is likely to miss its own sales target growth and analyst expectations of a 15-17% increase. On the back of the news SAP shares dropped 9.5% to their lowest level since 2002.
As THINKStrategies’ Jeffrey Kaplan neatly puts it ‘Consumers have seen the marketplace deliver tremendous changes recently. Companies like Amazon.com iTunes, eBay, Google, and UTube have demonstrated that it’s possible to make highly sophisticated applications responsive and simple to use. Of course these same consumers live in the corporate world and wonder why, if these kinds of advances can be made for consumer applications, are they not being delivered as corporate applications.’
And so it seems consumer power is deepening its influence over corporate IT.
While satisfaction with corporate IT remains at a low – most analysts have a figure of around 50% for corporate IT projects that either fail, cost a lot more, or deliver a lot less than expected – satisfaction with personal IT remains on the up.
The industry is reacting – for example Duet for Microsoft Office and SAP is bringing the personal and enterprise IT worlds together – and we’re seeing a rapid rise in the adoption of Software as a Service.
But to this day most business stakeholders in the corporate are told that personal IT and corporate IT are completely different worlds. Does evidence suggest that the consumer is on the march?
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As sad as the latest drop in SAP prices is it’s not the lowest level since 2002. Just a year ago it was 43.3 and two years ago it was around 37. But this drop is painful nevertheless.
Roman – thanks for the correction. The thing that intrigues me is what appears to be an apparent rise in ‘consumer power’ influencing corporate IT strategy. Btw, I do believe SAP has a strong vision and execution capability to embrace the trend.
Its not “consumers” its just customers and SAPs problem is more to do with the fact they operate in a commodity environment (backend processes) rather than an iPod generation driven change. Saying that the issue is that people want SAP procurement to work like YouTube (not UTube btw) is just wrong, the issue is that SAP procurement is just a commodity and more people are doing vanilla and treating packages as basic infrastructure rather than the differentiators they considered them to be 5+ years ago.
People love jumping on the “consumer” bandwagon in the same way as “.com” was going to drive away bricks and mortar. The real challenge is that IT doesn’t effectively deal with commodities, and in part that people suggest that the issue is for the commodity to be more trendy rather than just facing the fact its as utility an element as the phone service.
There is demand for Web 2.0 in the enterprise but backend processes are not where the benefit lies. The benefit is in external collaboration which is not what SAP are about.
Hi Brian – really interesting points.
I agree with you that a key question here is how the corporate IT world is (or is not) embracing commoditisation.
I think it’s interesting that access to personal IT commodities – such as PCs with Web and broadband – has risen massively in the last 10 years – and this seems to be a factor in driving commoditsation of IT in the corporate.
Re. benefit of external collaboration – agree again – but I would argue SAP and such are embracing this through enterprise SOA enabled products and market facing Software as a Service managed services.
Web 2.0 has created an ecosystem where a large number of small developers are able to create cool products. The costs of hardware are coming down all the time. New open source frameworks and tools have made the working in Garage a very economical option.
If there are two guys who are passionate about new technology, they hardly need any capital to start up. The cost of taking your product to market is also almost nill. Marketing and promotions hardly cost anything in this new ecosystem as you become popular by the word of mouth. Google ads are also very affordable, with almost no money you can have your site up and running and popular.
The point to notice is the ease of whole process. Now compare this with Corporate IT world. Costs are all time high … be it licensing cost, cost of learning existing technology, marketing, promotions. Also in corporate IT there is less room for innovation, there is less freedom as compared to two guys in garage.
Will this hit the corporate IT??? Think about it… There is a recent trend of merging personal IT and corporate IT where companies are looking for two guys in garage and giving them a space in their office and all the freedom. If they are a hit, company gains but if they fail, company hardly loses anything.