Some will know that this is the theme to recent Capgemini events, and it applies to many industries, but overwhelmingly to any sector where a key customer element is the technology literate 35 years old or younger person. Known as ‘Generation Y’ this is the generation that has never known business life without PCs, and in many cases, life without cell phones, or the Internet, and accordingly view technology as a life skill rather than something for the IT department. However it’s not just the users who are behaving differently, it’s also the retailers, and this month saw two retail giants, one online and one a conventional store group with a successful online extension to their business make game changing moves.
Let’s start with Tesco, the number 1 retailer in the UK with strong and growing market presence in the opening markets of Eastern Europe and the Far East. Tesco is also the number 1 retailer of grocery products online with a unique method of using its local store as the supplying point for online orders it has managed to combine the bricks and clicks capabilities. It was early into offering its customers Tesco ISP services, and recently has started to sell its own unique Skype phones that allow any Tesco customer to phone any other Tesco customer – and no other – across Skype. The real surprise happened on the first weekend in October when Tesco announced its own range of software challenging Microsoft and others with the comment; ‘when it comes to software there is little choice and prices are high – our new range of software changes this’. Arguably the choice has been going up recently with Google entering the market as well, and Amazon moving in from a different but equally game changing direction too.
Exactly what does a clever retailer such as Tesco expect to get out of this? Well there are arguments about brand loyalty and trust will sell to those who are not sure about there purchase, but that’s not the real issue under contest here. As the amount of business done online increases, and that means not just the actual purchase itself, but the information finding stage to check options, the challenge is to be the ‘first screen’. Currently the very first screen is probably Microsoft and IE Browser, but that’s a technical screen, the first business screen is usually Google, or may be Yahoo. The game for retailers is how to come out top of the searches, or to pay for advertising linked to the searches, how much more simple to offer your own software with a search engine that makes sure that your products come up first. What Tesco are doing, and other retailers seem to be equally aware of, is guaranteeing their position as the retailer of choice by establishing the online equivalent of the old rule for successful retail; location, location, location. This is not business as usual, but a strategic move to reposition for the new generation of business.
Google is not unaware of this, especially as it is now selling its search engine for internal enterprise use therefore making this tactic all the more easy to achieve. Google moved in September to offer ‘Google Applications for your Domain’, a suite of applications delivered as services over the Internet. Thought the initial launch concentrated on what might be described as Web 2.0 type tools that would complement current Microsoft software, Google has acquired Writely and has stated a word processing and spreadsheet suite will follow. The strategy is that these will all work seamlessly with other ‘process’ products such as SAP and Oracle to ensure that a user can move from finding the product through the entire process of ordering and paying. This will effectively ensure that the user stays with in the Google environment, an effective counter to the Tesco, and other retailer’s moves. The Google unique sales proposition is that they will control SPAM by their understanding of all the sites and traffic patterns.
The Amazon tactic is very different and put at its most basic seems to be to become the IT department for SMEs as they become online businesses, perhaps better stated as to provide the IT Services for the online, or front office, area. Actually this has been the Amazon strategy for some time and it already has significant presence as an IT Services business with over 6000 clients who have bought its services to build their online store fronts. In addition it also runs entire web sites with perhaps Target – a major North American retailer – as its most sizable client. It has pilots for BPO with its ‘Mechanical Turk’ offering – see CTO blog for more details – and has built up a business reselling storage by the gigabyte from its huge data centres, again its clients are those who are focused on the online market, but as this is rapidly becoming the high growth segment of the entire IT market it can be argued that this will place Amazon on a collision course with traditional IT Services businesses.
However its latest offering was a quiet affair claimed, as all the other services have been, to be a ‘beta’, or ‘pilot’ under the title of ‘Elastic Compute Cloud’. It’s a fully fledged ‘pay as you use’ software as a service offering that claims to provide a ‘true virtual computing environment’ and allows users to run up to 20 virtual servers through web service interfaced commands. Very keen pricing shows the volume influence of the Amazon data centres with a server being charged at 10 cents per hour, plus 15 cents for each gigabyte of storage, internet traffic comes in at 20 cents be Gigabyte. This is as a true ‘utility computing’ or ‘on demand’ service and really brings in house all the necessary elements to lure new start ups in the online, or Software as a Service, into Amazon to allow them to link them into their business. In addition it makes an obvious partner for the online store fronts business to offer everything as a single bundle.
There was disbelief about the term ‘Service Oriented Enterprise’ being coined to define a new type of business that would seamless blend the new SOA capabilities into a new business model, with the changes above and many others, it is becoming increasingly clear that SOEs have the power to end business as normal in many market sectors.