Thursday, October 11, 2012

Services are being digitized by business heads not IT chiefs

Wed, Oct 10 2012. 09 24 PM IST

Services are being digitized by business heads not IT chiefs

IT services providers may need to broaden their offerings on unchanged budgets, says Sondergaad

Sondergaad says software vendors will gradually offer cloud-based and collaborative models around applications being offered to businesses which will lay emphasis on 'what data do I need' rather than 'what data do I get'. Photo: Hemant Mishra/Mint.
Mumbai: Peter Sondergaard, senior vice-president at technology researcher Gartner Inc. and global head of research, has been with the firm for 23 years, having joined as a programme director for its personal computing research area and specializing in the overall desktop computing issues of European users. Prior to that, he was a research director at International Data Corp. in Europe.
In an interview, Sondergaard elaborated on the latest technology trends and their impact on business models. He also cautioned that information technology (IT) services providers need to broaden their offerings to include digitization, social computing, cloud computing and big data since information technology (IT) budgets are expected to remain unchanged in the coming years. Edited excerpts:
Emerging technologies such as cloud (use of Internet-based technologies to access information anywhere, anytime), social computing, mobility and big data (the deluge of data that is swamping organizations) are changing business models. What is the Gartner perspective?
It's become pretty clear that the four forces—cloud, social collaboration, mobility (creating the phenomenon that is called the "Internet of Things") and information (articulated around the phenomenon called big data)—that Gartner has been speaking about for the last couple of years is creating a different environment for IT companies. It's rendering obsolete the existing architectures that companies have put in place. It is challenging the established technology services providers in all markets.
For instance, three to four years back, the dominant handset player were the likes of Research in Motion Ltd (RIM), Nokia Oyj andMotorola (acquired by Google Inc.). Today, these companies do not play in the collaborative cloud-based environment, so they are no longer the dominant players.
Cloud computing, meanwhile, is moving from private (on-premise) implementations to public applications, especially for business processes. This is bound to lower the margins of IT services providers since it commoditizes certain aspects of the business. Out of the top 100 IT services providers, almost 20 may disappear over the next five years due to this paradigm shift.
We at Gartner call these changes the "nexus", or the intersection of these four forces, that is creating a different information technology architecture. This will be the pattern over the next couple of years, and will create a layer in the IT industry that focuses on enabling business process through technology and making information the revenue generation of companies, besides adding new skill sets and jobs as companies compete for information.
How should companies address this so-called 'nexus' of technologies?
IT companies should realize that IT budgets will remain almost flat in the Western markets. So they will have to optimize the infrastructure costs and application portfolios of their clients. They will also have to realize that all of the growth and spending in IT is happening outside of the IT departments. It's what we call the digitization of the organization. It's digitization of the pockets of spends that is analog today—e.g. digital marketing, more spending on analytics tools, etc. But the spends are being done by business heads and not by IT heads. You are digitizing service streams in the sectors such as retail or banking. You're also digitizing revenue because you are using information to create new ways to grow your revenue.
The challenge for the IT department is to develop a governance model for all this. Today, most CIOs (chief information officers) are not very capable of understanding these changes. They remain accountable for running the traditional back-office applications; but can they expand their role to accommodate the change in spends that are taking place outside the IT department? This is an area that a business executive or CMO (chief marketing officer) handles today.
The CIO could evolve into a coordination point for everything. Or there could be new roles like that of a chief digitization officer (already being seen in some companies) or a multitude of roles like that of a CTO (chief technology officer) or CDO (chief data officer) that even the CIO reports into. To avoid confusion, the chief executive officer, or CEO, should take responsibility for all such decisions since they affect the financials of a company. This is a very new world and we will see organizations try out new models.
Do we have any such models currently?
No. There isn't any such model, and the reason is that such an organization will end up being structured very differently. One model that we have seen is that of General Electric Co. creating a separate business unit, that reports to Jeff Immelt, chairman and chief executive officer, and is accountable for all the big data activities across all units—be it the medical equipment department or the airlines division. But such a model will not work in the government sector or in the pharmaceutical industry because these are heavily regulated. Businesses will keep on trying out new models in the next three-four years.
How well are companies managing big data?
There are a few large organizations that have started to think about information strategically. This is what will define competition in next 10 years.
What about the mobile versus personal computer or PC architecture?
PC is certainly not dead. It's a very viable form factor since many jobs require a stationary device. But there's value for such individuals to have a mobile form factor (or device) as well. And then, there are a lot of jobs for which the mobile form factor is the only advisable one. Hence, there will be multiple form factors, depending on the jobs. What is clear, though, that the mobile platform is the defined architecture for which companies will primarily develop applications for in the future. You may adapt this for a stationary environment if needed. Also, applications being written for mobile devices are influencing the way we work also on stationary devices. The cloud will help portability along all environments, and sync the data across different devices.
What about the role of social collaboration?
Speaking about the consumer side of social collaboration, the growth in the number of members on social networking sites is going to slow. You will also see increasing specialization and increasing automation on these networks. This will have some negative impact, too, since there will be more paid evaluations, more paid views with companies paying users to say something positive about their products, a lot more automation of posts (engines that will automate posts). In fact, over the next three-four years, machines will account for at least 5% of the posts that will happen on social networking sites. Some people may also be willing to sell their personal data to big services providers.
On the enterprise side, we still create serial processes and work with the information that is generated out of these processes. The information, which is internally developed, is not very valuable. The whole collaboration model is changing the process method adopted by the IT world over the last many years. You will gradually see software vendors offering cloud-based and collaborative models around applications being offered to businesses which will lay more importance on "what data do I need" rather than "what data do I get". The processes will be defined accordingly. The way systems are designed today will simply not work.

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