I like this because it’s true of “marketing,” which still tends to operate under the constraints of long cycle time and constrained “space”:
But there is so much potential! Length no longer matters — it’s as cheap to publish 100,000 words as 100. Digital text can be continually updated, so it’s no longer necessary to write a new article every time there’s a small change to a story. Digital stories can be interactive — readers can enter their information, and the story can change to reflect their circumstances. It’s really exciting stuff, and we are just beginning to figure out how to take advantage of it.
This is how we set up federation: Build a digital agenda, go to cloud, go mobile and protect yourself. These things snap together like building blocks, like Legos. (Customers) get the speed and agility of a smaller company within a bigger company. To do this is not for the faint of heart, but the philosophy is choice, not to lock you in.
Also, the piece has some figures on R&D and M&A spend, as well as revenue for recent acquisitions.
I had lunch with Israel Gat yesterday. Lobster bisque in a sourdough bread bowl, to answer your first question. We were talking about the concept of a “software defined business” (and I was complaining about how HEB needs more of that, if only to get digital Buddy Bucks).
Well, over the next 3 years, I think much of the marketing efforts in tech will converge on exactly that. This is what tech companies will try to sell and the “thought lordship” they’ll try to deploy into the market. I think it’ll actually be to the tremendous benefit of customers, not just a hustle. Soon the egg will become a chicken, and the chicken will start making demands on the egg. Which one is egg and chicken? Indeed! One can never tell the causation directionality in these things.)
Why will tech companies focus on software defined businesses as a growth driver? Well, it’s kind of the only area for growth, at least interesting growth. Keep in mind that if you’re a big, publicly traded company, you have to grow, you need to find new money sources. Last year’s revenue can’t just sit there, staying stable. Otherwise you’re toast because investors will want to allocate their money in companies that are growing, not shrinking (they’ll dump your stock, and but another). This is true for any business, but very true for technology companies.
Here’s my rough sense of revenue streams tech companies will have:
1. Consumer churn.
You know, you get a new mobile phone ever 2-3 years. Instead of subscribing to a cable package, you subscribe to HBO Go. (You sort of end up paying the same amount, but who’s paying that close of attention when there’s so new Game of Thrones episodes to watch?) You buy subscription services. Games.
Basically, the “not enterprise” market. This is what most tech press covers and talks about; it’s (sadly?) what we think of as “tech” now.
There’s growth in here, but it’s a totally different space than traditional, let alone “enterprise” tech. Microsoft finally seems to have figured this out, but meanwhile Apple, Google, and Facebook are gobbling up all the revenue and growth…not to mention all the new companies that have come along.
2. How much more ERP can there be?
Businesses still need a lot of software, but I’d argue that “systems of record” are probably well saturated at this point and low growth. This used to be the fuel of the tech sector, but if everyone has a system of record in place…how much more more spend can there be there each year? (I’m sure we could look up some IDC or Gartner numbers about single digit growth in these markets.) Not much. One area of interest is shifting over to SaaS, or:
3. Rip-n-replace cloud.
“Well, I guess I need to replace all this ‘legacy’ stuff with cloud.” You know in storage, compute, and maybe networking. There’s lots of hardware and infrastructure software churn here. In the software category, I’d put migrating your on-premises ERP/systems of record stuff to SaaS here as well: moving to Salesforce, Successfactors, etc. In a squishy analogy, things like Adobe transforming from licensed sales to subscription sales.
This is a long term play with lots of cash; for businesses though: do they end up with anything net-new? Have you actually tried to use Salesforce? It removes the hassle of having the manage your own CRM instance, but you still have to manage how your company uses the application…otherwise it’s baffling what’s going on in there. My point is: the company ends up kind of back where it was before the great rip-n-replace, just more optimized IT, with hopefully HTML5 and native mobile apps instead of Flex.
There’s lots of “drag” (secondary spending) that gets to #3 above: you know, you’re gonna need a platform for all that stuff, and the hardware and services around it…but instead of just ending up with the same IT-driven capabilities, you’ll have new capabilities in your business.
So, if you’re a tech company, and you’re looking at the 4 sources of cash and growth above, the fourth option looks pretty good. #1 means competing with Apple, Google, and Facebook and then a dog’s breakfast of lower margin goods below the UI layer. #2 and #3 are good, known quantaties, but probably with single-digit growth, if not tricky waters to traverse in the lower cloud infrastructure layers.
Then you look at the other option: a wide open field of possibilities where you “go up the elevator” and avoid the Morlocks. Large tech companies have to do all of these, of course, but I suspect you’ll see most of the razzle-dazzle spread on the fourth.
As pointed out by Andrew, frequently, this is the chart you want to use when you’re illustrating “software eating the world.” For example, as I’ve been writing in my first column for FierceDevOps:
I often joke that it’s been impossible to see a keynote in recent years without seeing the horsemen of the digital apocalypse. These are the cliche topics that seem to come up in every keynote. Two of these lay the groundwork for why the structure of the IT department needs to change:
Software is eating the world – Cloud technologies and practices have made huge improvements in productivity and costs when it comes to creating and running custom written applications. It’s easier to write and run software now, and the rise in “always on” devices (all those super-computers in our pockets that are on the Internet 24/7) creates a massive foot-print for computation: an endless buffet for software.
Change or die! – with this huge buffet of opportunity, there’s a rallying call for companies to invent new business models that rely heavily on software. This means that most every business has the opportunity to use custom written software to change the nature of their business. Think of the opportunity for Taxi companies to use software to change how they operate, or for the hotel industry to come up with a brand new business model to sell empty capacity…and you’re thinking of Uber and AirBnB. The “or die” part is a rhetorical trick to position this imperative as dire. And, indeed, in recent years studies have shown that remaining on-top has been harder. Change is needed to survive.
As the second points two, these two alone create a pull for more custom written software in businesses. It’s fast and cheaper to create software, and competition is relying on that to create new business models that challenge incumbents or, rather, those businesses that are not evolving how they run their business with software. Again: think of all those taxi services versus Uber.
A typical approach to digitalization in this scenario is to have a nurse carry an electronic tablet rather than a clipboard with papers, and use the tablet to enter data directly into the EHR system while conducting the rest of the process the same way as before. While “mobile-enabling” the process adds a few new benefits (more accurate data available more quickly), it does not present a fundamental change to the work. It still involves manual entry data and still takes a lot of time. Worse, Peter is still spending a significant time on activities that don’t involve providing direct care to his patients.
Instead, if caregivers like Peter and others work with a team of technical and management individuals with healthcare experience and skills, the hospital where he works could radically rethink the work and embrace even more digital technology. Such Internet of Things (IoT) technologies will vary according to the problem they need to solve, but in a hospital this could include smart beds, connected physiological monitors, and smart ventilators and IV pumps. By instrumenting the bed and a variety of other physical objects, vital patient information can now be transferred electronically directly into the EHR environment – no paper, no human data entry.
Otherwise, yeah, you’re just moving manual entry to tap entry. It might solve back-end problems of cleaning the data, cut that’s likely not enough.
Why are frequent deployments important? If you can deploy hundreds of times per day, you can recover from mistakes almost instantly. If you can recover from mistakes almost instantly, you can take on more risk. If you can take on more risk, you can try wild experiments—the results might turn into your next competitive advantage.
[Y]ou have to start with a position that all organizations (it doesn’t matter what industry you’re in) are going to be disrupted by highly agile, highly automated competitors who leverage technology to be the disruptive force in the sector. And, businesses clearly have a choice as to whether they are going to be the ones doing the disruption or whether they are going to be the ones having to respond to the disruption. But in either case, it depends on your ability to adapt, change and to compete. We live in a world that is increasingly digital and where technology is the lever through which much of that computation takes place. My advice to IT folks is that you’ve got to be able to have that conversation in the voice of business leaders – you’ve got to be able to articulate that reality in a language that can be understood. This is not a technology conversation, it’s a business and a competitive strategy conversation.
Organizational issues can also hinder companies’ efforts to meet goals and see real impact from digital. As in 2012, executives most often say misaligned organizational structures are the biggest challenge their companies face in meeting digital goals. This is followed by insufficiently reworked business processes (to take advantage of the digital opportunities) and difficulty finding functional talent (such as data scientists or digital marketers). In contrast, a lack of infrastructure and absence of good data are less pressing than they were last year.