Business Model Change in the IT industry itself!

Microsoft will become a provider of cloud-based computing and business services with the ‘official’ launch of Azure during mid-July. Apparently in becoming official, pricing and service levels have been fixed. I don’t want to revisit my original comments on Microsoft Azure, though I do want to mention that Microsoft has added information about Office 2010 which, together with the features in Windows 7, seems to amount to a sea change in the Windows user’s world. My personal take is that Vista continued to enhance the ‘personal or individual’ aspect of work, but with added features around communications and interactions. With Windows 7 and Office 2010, the shift has been to provide a team environment in which you can do personal work.
Adding the capabilities of Microsoft Azure to this means there is a complete environmental change, which leads me to ask the question; is this (and indeed clouds/web 2.0) a technology issue, or is it a business issue? I believe business managers have a clearer picture on clouds in some senses than the IT community. Why? Because we are (rightly) obsessed with the technology details so we can understand what we have to do to make it work in our existing environment. Business people are happy with the concept of clouds offering a flexible way to get technology support into new areas of the business, paying for what you want when you want it and offering the ability to scale based on the success of that area of business.

So here is the question; should we stop trying to ‘push’ the technology of virtualisation, clouds, web 2.0, etc and start instead by listening to the business users views of what they want, then try to figure out how to align? Answer, of course we should, we know that, but it’s very difficult to achieve this with such completely new technology in the midst of the existing systems.
BUT if we do this, our current IT industry also has to face up to the same level of business model change as our clients. This point was brought home to me very forcibly when shown an analysis of the extent to which this disruptive change is already occurring in the software industry. It seems that we are badly underestimating the amount of revenue that the XaaS vendors are taking. At least part of the explanation is that the purchases are not going through the regular channels so we are not capturing the critical information on change. By the way, this is not in anyway a message about the destruction of IT, or an argument about ‘IT doesn’t matter’, but it is warning shot that says we need to look at these new technologies with different eyes, and apply our skills and expertise in new ways.
To give an example that won’t trample on any of my colleagues in the industry, or software and services vendors, I will point to the newspaper industry and the well known fact that sales are falling and survival of some well known names is in doubt. The converse of this is that the market for ‘news’ is growing and those who work in the industry are finding new jobs with some very big hiring programmes in place. Take a read through this excellent piece to see what I mean. What has changed is the medium by which news is supplied. By definition a paper is already out of date by the time it is delivered and in the era when communication and events were happening at a slower pace this wasn’t much of an issue. Now in the volatile world of today when we are on the move continuously we want, even need, to know the latest news as it happens and delivered directly into our hand. It’s not good enough to have an out of date paper delivered in the much more mobile lifestyle of today.
So the demand for newspapers as a format is falling, but the demand for news is growing! Now consider the business model; printing and distribution is expensive as well as limiting in a whole series of other ways, i.e. geographic coverage. Yet a large amount of the cost is associated not with the value part, i.e. the news, but with the delivery mechanism of paper and printing. These costs are largely covered by advertising, yet advertising money has already moved towards using more immediate and interactive mediums, following the migration of the readers! So the required expertise directly associated with ‘news’ such as reporting, editing etc has not diminished at all, in fact, demand for those skills is rising. It’s the packaging and format for consumption by users that has changed, and the high fixed costs associated with the old formats simply have to go.
Is there a lesson there for IT? I think so and my first point is that shifting to electronic composing on a new generation of printing presses wasn’t the answer. In a sense, the introduction of the electronic newsroom created the capability for even faster change, whilst the fascination and focus on the cost and efficiency of the ‘print room’ was a red herring. My second point is that when, where and with what context or trigger, news is consumed has also changed. The situation now is that the value creator and the consumer are both now in a different business model. So back to ‘clouds’ and the point I made last year about why business models including those of the IT industry need ‘clouds’. It’s not necessarily a technology question, though its certainly requires a technology answer. No, the questions we have to focus on is ‘what is the real value proposition’, ‘how is it created’ and ‘how is it consumed’. Then we know what and how to approach using the muddle mix of products, terms, hype, etc of clouds and web 2.0. That’s true alignment for the business in 2010!

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