Discussions on the Future of IT

A conversation between a student and I…

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From: Jose MartinezSent: Fri 1/6/2006 11:41 PMTo: Russell MicklerSubject: IT as a commodity

Professor Mickler, In your archived chat from Tuesday, you made reference to IT becoming a commodity similar to electrical service or other public utilities. I know this has been discussed before and know of (but haven’t found) a famous article back around 2001 called, I believe, “IT as a Commodity”. As I work for a technology services company this is a subject that has been raised and discussed many times. But I would like to present to you a concept I came up with where IT should not be compared to a commodity or service available to everyone but more like the automobile industry. Mind you this is just a rough idea! Historically, its my understanding, that originally no one thought the idea would work or whether the general population would be interested in using a “horseless carriage”. Thanks to Henry Ford and his ability to develop a production line, automobiles became standardized to produce and available price-wise to the general public. As you know the industry continued growing and with competition, foreign manufacturers and then the move to manufacture parts outside the US the industry has continued to evolve. I believe the real lesson available to IT as an industry is that the fundamental difference at the end of the day is the consumers perception in terms of value of the model/brand. Because in essence, cars and trucks are virtually made of the same parts and function/operate in the same way. The difference is that cars and trucks are marketed specifically as an entry level, touted for their fuel efficiency, or carry exorbitant price tags for no other reason than the prestige and completely unusable power in real world street driving provided the owner. Likewise, IT services will never truly become a commodity, because different users and businesses alike will want different features, some standard and some added-on along with the assurance of the company behind the product/service. To me, large companies like EDS or IBM relative to their IT services run the risk of General Motors, Ford or Chrysler. Or, maybe, they are the Mercedes and Ferrari of the industry. But, it is my belief that there are plenty of IT companies out there that want to be the new Toyota or even Kia. Like I said, its just a concept I’ve been tossing around. At the very minimum I hope you found it entertaining! I’d be very interested in your comments, thoughts and or feedback. Best regards,Jose D. MartinezAlbuquerque, NM USA

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Hello Jose – I think you’re trying to suggest is the influence of brand on IT strategy, and I do believe there is evidence of this in a variety of commercial and consumer sectors. Apple comes to mind: Apple can offer lower-end products to a comparable PC at higher prices because of their brand and market niche; the markup on their MP3 products are enormous as compared to others in the industry; Oracle’s licensing is as high as it is not solely on development costs but because they’ve such a reputation for dbms computing; IBM consultative services are at a premium; Microsoft can demand lucrative licensing arrangements for distribution of their software; and so on. However, I’m not sure if the analogy can be made to the automobile industry which has been historically protected by subsidies, tarriffs, and trade restrictions to artificially buffer the industry from foreign competition. Our automobile industry survives because of foreign trade and regulatory requirements that make doing business in America a significant barrier to entry. This is very unlike IT where competition is rampant in nearly every economic sector and foreign competition is highly encouraged by the US government (primarily to erode prices for the benefit of consumers). IBM’s sale of the microcomputer division to China’s Lenovo last year I think is a perfect example: an industry they practically created being sold to the Chinese so they can produce inexpensive, $200 PC’s. The PC is a consumer electronic and is, by definition, a commodity; I think you’ll see other computing platforms, services, applications… following the same track; just take a look at the competition in the ERP application space. Where American firms may be able to add value and tout brand is in the extra value they can provide above and beyond the hardware and software – the value-add builds that brand image you’re talking about – but, in my opinion, that will be an uphill road. Organizations like IBM and Microsoft have already seen the erosion of this market and have transitioned into new ones: gaming platforms, banking, entertainment and broadcasting, consulting services… again, value-add above the commoditization of the IT product. R

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From: Jose MartinezSent: Mon 1/9/2006 12:29 PMTo: Russell MicklerSubject: RE: IT as a commodity

Professor Mickler, Wow, I certainly appreciate the comments. I completely agree with you. I would have to guess that I am separating out the hardware (the $200 PC) from IT services. A number of companies, the one I work for included, are offshoring their helpdesks to India. And it just reminds me of complaints from unionized automotive workers that their jobs are going to Mexico. People still buy cars – even though if all things were truly equal you’d think everyone would just buy the cheapest one available. And likewise, technical services are still needed. But what type of job will an IT professional have tomorrow? It’s somewhat of a rhetorical question and I certainly respect your time too much to expect to continue the chat much further. I enjoyed my MIS300 class you taught and look forward to this one as well. Thanks again for the time and conversation. -JM Jose D. MartinezAlbuquerque, NM USA Animo et fidelitas anquiro veritas ~ Martinez family motto

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I think you raise a question that many in the industry are attempting to figure out.

What will the IT industry look like in the future?

I can tell you that, today, trends suggest that IT is more relevant in the entertainment sector. That more and more jobs (more and more capital flows) are being created through programming and designing video games, movies, and “infotainment” devices. We can also see that information technology is playing a significant role in innovation – there are tremendous opportunities right around the corner with “convergence” (interconnectivity between all things) and consumer electronics.

I can also tell you that IT’s growth in the modern organization is either static or retro. More and more functions do not require a tatical or strategic response, and therefore can be outsourced. As emerging economies are competing fiercly for this business, the American IT worker is at a significant competitive disadvantage (their standard of living) and more tactical/operational work is leaving the States. I can also tell you that IT jobs that do remain here are more innovative, creative, multi-disciplined (not just IT but other disciplines, be it business, or sciences, or artistry, entertainment again, perhaps even philanthropic) and they require a skillset that is more idea-oriented than functional. Tomorrow’s IT worker is a knowledge worker who uses IT to accomplish “something else” – as technology becomes interconnected, emersive, everywhere, always on and easy to deploy and configure, ubiquitous – IT will become more like how we manage electricity, water, and sewage: somebody comes by and hooks us up, so we can get down to _doing_ our business. And increasingly, the people doing the “hooking” are not US workers.

What could change this outlook is a radical shift in technology – a new platform, a new rush to a service or feature like the Internet, a significant security crisis, etc. – whereas the demand outstrips the supply, like we saw in the 1990′s. The era of silicon, for example, is nearly over – in ten years, we must shift gears to another form of processor (molecular, atomic, quantum, crystaline, something)… in order to continue realizing the gains from Moore’s Law. This, in ten years or so, may spur an entire new faction of the industry and demand more skilled workers, but competition will be intense (grin). Further, the babyboomers are about to retire, allowing my generation of IT professionals to begin taking up the reigns of positions that have been statically held for many years by their generation. You will see a lot of upward movement, dissolving of the middle-management layer, and outsourcing to keep payrolls consistent.

I think everyone could agree that the job future in the Americas for IT is pretty bleak. However, these things are cyclical – in another 10 years, fortunes could radically shift as we move into another era of computing. The question is, will our skillsets today be useful and are we prepared for that shift to be professionally competitive? I can’t answer that… grin.

R

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