18 Feb 2015

The growing digital divide and the strategic inertia that can kill

Summary: The challenge for giant swathes of

18 Feb 2015

Summary: The challenge for giant swathes of the tech industry is that bad smell from past plumbing failures — and fear of the unknown.

The iPad is five years old this week and Apple just had the most successful business quarter of any company, ever. Asymco analyst Horace Deidu has deduced that in 2014 iOS app developers earned more than Hollywood did from box office in the US. He also makes a claim that the Apple app economy sustains more jobs than the movie biz (627,000 iOS jobs in the US vs. 374,000 in Hollywood) is easier to enter, has wider reach and is also growing more rapidly.

Meanwhile, in the face of the staggering transformation of society brought about by mobile devices and connectivity (on which you can now consume Hollywood products, instead of buying a ticket at the brick-and-mortar box office), the enterprise grade technologies and organizational models that are the underpinnings of this new world are still mostly firmly rooted in the last century.

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The challenge that layers of legacy technologies and their associated human handlers impose on companies can be the boat anchor that is holding companies back from succeeding in this new world, a scenario that has played out many times in the past. The various annual lists of successful companies change out a lot more frequently than most think — look where Apple was in 2005 — and a prime reason for corporate demise is outdated processes and therefore products bound by brittle old infrastructure and associated work paradigms.

Enterprise Resource Planning had a massive run in the ’90s fueled to some extent by fear of Y2K Chicken Little syndrome: when the clock struck midnight for the new century all the old IT contraptions would stop working. Back then ERP was replacing old 80’s tech with the credible promise of enhanced business performance and more homogenized processes across the client company as the dot com boom fueled growth ideas and new tactics.

Mobility is today’s primary disconnect because it is unequivocally new, along with the way humans now interact and find information. Not a midnight clock deadline failure issue, more a nagging worry that the business is drifting increasingly out of touch.

┬áMany firms counter this with lots of reading of blog posts like this, employing scouts to go to events and read reports (often sponsored by tech companies) that theorize and lead about disruption and ‘the future of work’. Customer propensities and data are tracked in the belief that ‘fast following’ their competitors (i.e. mirroring their possible brief competitive advantage) will keep them in the game. A bit of public posturing about possible future plans and usage of current appropriate buzz phrases is also very popular. Internally the inertia vacuum is palpable.

ERP Donut Fragmentation

Meanwhile there is significant fragmentation of the old ERP donut, which was once a credible centralizing suite. Frank Scavo of Computer Economics nicely outlined ‘The Maturing of ERP on the Salesforce Platform‘ last November, pointing out increasingly credible alternatives to the old line behemoths: Kenandy cloud erp (‘easy to use, easy to implement, easy to change‘) is an example of the agile alternatives. Financial force, Rootstock are other examples Scavo cites. He may have written this while coming down from stimulations at the fall SF Dreamforce conference, but it’s still relevant.

The big IT players increasingly have to acquire cashflow to feed the 90 day Wall Street beast, buying complementary technology companies to expand their offerings and margins, which they refer to as ‘new technology’ and part of what SAP currently refer to as ‘the networked economy’. This colossal pressure to perform at ever greater scale can be both advantage or disadvantage to customers depending on their scale and needs.

Vinnie Mirchandani, who has been talking to a lot of SAP customers for his book SAP Nation (which I haven’t read yet), blogs that customers…

…. mostly talked to me about the “old” SAP – their investments in BusinessSuite, Business Objects, Business One etc. Several told me they felt abandoned – as they mostly heard SAP talk about “new” products.

They told me they were finding it increasingly difficult to ignore benchmarks they were hearing from peers. Peers like Inteva which decommissioned SAP and went with a SaaS alternative and reduced its IT costs as percent of revenue by 60 percent.

This is the lighter, more agile world of SaaS alternatives that the world (my comment: including SAP) is moving towards.

So with mobility/smart devices and persistent broadband as genuinely new developments in society and lots of old technology to be updated, life should be good, right? The challenge for giant swathes of the tech industry is that for clients and prospects there is a bad smell from past plumbing failures from implementation partners or a fear of untested/unproven new technologies, a lack of clarity about effective, valuable ways forward and a general mistrust of the giant consulting and implementation firms. Digital security is being tested as never before by hackers and budgets are typically fragmented, making it hard for all but board level decision makers to effect large scale change.

The biggest issue of all is fear of change and the unknown

There is clearly a huge opportunity for services companies who can get to an appropriate blending of consulting and outsourcing acumen, to quote Phil Fersht at HFS Research. The challenge for the giant consulting and outsourcing firms is: Can they get to that appropriate blend while keeping their ships afloat, since they are currently mostly staffed to answer the mail and respond to RFP’s that are becoming less and less frequent as clients seek out innovative digital strategy first? Skill comes before any scaling.

With very few exceptions, the old line services industries are geared up to adapt and extend the last century’s concept of enterprise software, with precious few people at the helm who understand the importance of innovation and modern digital business strategies for clients. In a nutshell the IT services world is basically currently all cart and no horse.

The strategic ‘horse’ is therefore all important – the challenge for clients once they have a digital plan they can believe in to drive business success is in breaking out of the huge gravitational pull of their existing culture, technology and budgeting. Culture eats strategy for breakfast — unless you make tomorrow a very different day and take away the breakfast, because once you suddenly have a competitor that is executing digital tactics and stealing your lunch it is extremely hard to get back into the game.

 

Originally posted on ZDNet
http://www.zdnet.com/article/the-growing-digital-divide-and-the-strategic-inertia-that-can-kill/
January 30th 2015

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