The Bifurcation of Technology and the Revolution in the IT Industry

Sometimes people start to use a phrase or word that captures a moment of change. You hear friends and colleagues using it, and it starts to crop up in the media. One such example I’ve heard several times in the last few weeks is bifurcation, as a dry shorthand for the current momentous transformation in IT and IT services. The trends I noted in an article (here) in the summer are accelerating, and fast.

A recent, excellent article in the Economist covers this well. The bifurcation is the dual-track nature of growth in IT. Services and products related to mobile and cloud are expanding, and sometimes with extraordinary growth rates. Conversely, traditional IT sectors are growing slowly or even shrinking”. The sectors under pressure include most types of hardware, traditional enterprise software, and classical IT services.

The combination of the differential growth characteristics means the IT industry overall is showing modest growth. The Economist quotes a number of 3% overall. Other commentators will give numbers even closer to zero. It is a challenging environment.

One result of this is the beginning of significant change in the corporate structures of IT suppliers. Larger companies are acquiring faster-growing companies. That is the usual cycle. More profoundly, some large companies will radically reshape themselves. As the Economist describes “HP’s recent decision to break itself up was merely the opening shot … Others will shed businesses that have become commoditised …IBM announced that it will pay Globalfoundries, a contract chipmaker, to take its semiconductor business off its hands.”

The changes in technology driving these changes in business are very real. Over the last 20 years, the relentless increase in available compute power, network bandwidth and storage capacity has moved us to a world where a wide variety of very powerful devices – not always operated by people, but increasing by other machines – can connect reliably to remote services of increasing breadth and sophistication.

And what this means is that such services can potentially take advantage of real economies of scale, and can be built and provided to the entirety of the universe of consumers and business with an ease that a generation ago would have seemed startling.

A new underlying industry architecture for software is forming. It includes a complex infrastructure layer that provides cloud services, which itself faces real change as the concepts of commoditized data centre and commoditized server becomes blurred. It includes a complex range of platform options that link humans and their devices to apps and cloud services. The architecture is crowned by applications and functional services – and it is the richness of these that will accelerate the change in IT. Importantly for established businesses, there is an explicit need to add an integration layer to the architecture – since we are on a decade-long transformation, and the interfaces with legacy systems will be key concerns. Overall, the concepts of Infrastructure-as-as-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS) introduced by Gartner have served us well, but need refreshing as this form of architecture becomes dominant.

These changes in architecture also change the expectations for the delivery of software and services. New companies especially want their back-end support systems to be easily, immediately and cheaply available, and provided as elastic services that will grow with them. They do not seek uniqueness or differentiation here. Instead, they want innovation and rapid development of those services that face their customers. More generally, monolithic applications are being replaced by systems of services. This brings more architectural complexity, but it allows development to be parallelized and – if well managed – delivered in much more agile ways.

There are obvious dangers here for the providers of IT services (and you can include IT departments under this heading) who are sometimes surprisingly disinterested in the way they deliver their technology services, although this is often what clients are buying.

For example: a typical feature of large companies is operator dominance where a focus on cost becomes primary – growth in a changing world is much harder and requires fortitude. Taken to excess, the focus becomes optimization of legacy services, and too much focus on tools such as global delivery – wonderful as part of a toolkit, but most effective in combination with client-facing services that bring new technology opportunity into the heart of businesses. Indeed, the best India-based IT providers realize exactly that, and understand that conventional outsourcing now has a limited shelf life.

Another sign of dysfunctional effects are mash-ups of old and new which resemble failed experiments in genetic engineering. We all know of large projects where agile approaches have been introduced at too large a scale to deal with mad schedules, and client and suppliers try to handle this with conventional procurement approaches. Fixed-price contracts and flexible iteration can be unlikely bedfellows.

But real, sun-bright opportunity at scale also exists. An eco-system of service providers has appeared around the dynamic and fast-growing company Salesforce. Salesforce transaction volumes are in 9 figures daily, and much of these are via their platform technologies, showing people are building their own apps around its Software-as-a-Service core.

Another positive example:  I have come across one agile based company that hires the very best developers – aspiring for the top 1% – and undertakes only small projects with direct and strong business support. It seems to genuinely deliver the benefits of agile approaches, with great reliability. This emphasizes to me a coming focus on skills and expertise that can marry client need and the power of new tech. Like all times of change, smart tech-savvy people who understand clients and can integrate complexity will be at a premium.

And the growth rates of many larger consultancies are respectable, or simply plain good – reflecting client needs for advice and support in their transformations.

So, as always I end very optimistically. There are new opportunities for those technology service providers who can develop architectures and architects for the new world, and who can create app and tech services that can be reused across their clients. Good companies of the future will get to grips with better, more nimble ways of integrating, assembling and crafting solutions for clients as systems of services. They will invest in building the new skills and high-end expertise for 21st century delivery – both close to clients and in their global centres. They will create new types of career, and new types of personal opportunity.

I will be writing about these positive trends in future articles. Stay tuned.

Keith Haviland is a business and technology leader, with a special focus on how to combine big vision and practical execution at the very largest scale, and how new technologies will reshape tech services.
He is a Former Partner and Global Senior Managing Director at Accenture, and founder of Accenture’s Global Delivery Network.
Published author and active film producer, including Last Man on the Moon. Advisor/investor for web and cloud-based start-ups.

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