Computing Cartels Shake Up IT Purchasing

Massive firms with global reach will emerge during the next 10 years, offering optimized stacks of computing capability on a pay-per-use basis.
Take a minute to envision the logical extension of today's hottest technology trends--cloud, mobile, and big data--add a healthy dose of democratization, and factor in the consumerization of IT to project what it all means for software and hardware over the next decade.

In the future, the technical details of computing solutions will get pushed further down the stack to the point where they become more abstract, manageable, and invisible--and therefore irrelevant. Computing cartels will free organizations and consumers from conflicting vendor standards. These massive firms with global reach that deliver computing solutions will emerge over the next 10 years, changing the hardware and software industries as we know them. Cartels will offer optimized stacks of computing capability on a pay-per-use basis. You won't care about the stack component details, such as the operating system and database management system--you'll buy the pre-integrated solution, not its component parts and pieces.

Cartels will include some of today's biggest names--Amazon, Cisco, Google, IBM, Microsoft, and Oracle--and I expect smaller and newer competitors to emerge. The impact of cartels on the status quo will be epic. Why buy hardware and databases from Oracle or IBM when they can house your data better and cheaper than you can? Why buy packaged applications and analytics piecemeal when you can rent an optimized solution at the service levels and scalability you require? Imagine a world in which you pay for an enterprise resource planning (ERP) capability that is always the most recent version, and that is built to accommodate any language, character set, and culture around the globe. In the 2020s, perhaps only a handful of ERP instances will span the globe--redundancy will be primarily for failover and recovery.

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Business is the reason for virtually all advances in technology, so take off your nerdy propeller hat for a minute and you'll see the real impact of computing cartels. When business is unchained from the shackles of capital investment in conflicting technology standards, it is free to focus on business. Digital upstarts with no previous legacy to hold them back will enter all sorts of markets because the barriers to entry have been shattered. Look at what streaming video did to Blockbuster, digital media did to print media, social media did for the Arab Spring revolutions in the Middle East, and you'll have an inkling of the business disruption headed to your industry when barriers to entry disappear.

The cartels will enable business leaders to rent the mundane parts of commercial enterprise as a "business in a box" or "frictionless enterprise," creating new competitors seemingly overnight, the way GEICO and Progressive entered the insurance industry. Speaking of business, hardware and software vendors will eventually figure out how to switch from selling seats, licenses, and machines, to the metered, pay-as-you-use-it software model that cloud demands. Generally accepted accounting procedure (GAAP) adjustments will provide pro forma reporting mechanisms to mollify Wall Street investors through the business-model transition.

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We're entering a golden age for software. For more and more companies, software is the business, it is the way firms will differentiate. It doesn't matter whether you're in financial services, energy, public sector, consumer products, insurance, or healthcare. You can no longer look at software as a back-office, automation, or support function. Some hardware advances are remarkable, some software advances are remarkable--when the two advance together, the effect can be revolutionary.

Look at what software developments on top of innovative hardware did to the music industry. The MP3 player was innovative new hardware technology, but its fusion with software fueled a revolution in the music industry. iTunes dethroned the big music companies' distribution channels--you could buy a song at a time on demand instead of buying the physical media through a store outlet. YouTube democratized the production and distribution of music--anyone with a laptop can cut a demo and air it to potentially millions of consumers. History will repeat itself in other industries as unique combinations of democratized access to information and capabilities usurp other traditional business models.

How you leverage software will determine whether you succeed or fail. As our world becomes more mobile, mobile software experiences that are immediate, simple, engaging, and in the context of where we physically are in the world will be prerequisites to every business process. Software will empower your customers and your employees who serve them. More importantly, the software you develop will enable you to analyze your customer and operational data in unique ways to give you distinct competitive advantage.

You won't buy this software because it will house the intellectual property that differentiates your business--you will build it hand in hand with your business leaders. As you do, build for change--think lean, loosely coupled processes. If you're weighed down by decades of excess baggage, you won't even fit on the platform, much less be able to board the train of change. Read up on the Lean Revolution, and determine how you can leverage it in your firm. Plan as if you will have to reinvent yourself and your plans every few years.

Phil Murphy is a VP and principal analyst at Forrester Research, where he serves application development & delivery professionals.

The pay-as-you go nature of the cloud makes ROI calcula­tion seem easy. It’s not. Also in the new, all-digital Cloud Calculations InformationWeek supplement: Why infrastructure-as-a-service is a bad deal. (Free registration required.)