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Business Technology: Innovation Never Goes Out Of Style

If the big themes of this year and last were Integration and Infrastructure, then I think the coming year will be dominated by Services and Innovation.
If the big themes of this year and last were Integration and Infrastructure, then I think the coming year will be dominated by Services and Innovation. I'll try to back that up with some evidence, and I'd also like to make good on a promise I made in last week's column to offer IBM's perspectives on how its new Innovation Services group will handle issues of intellectual property (IP) ownership following client engagements. But first I'd like to offer some perspective on these interrelated subjects from one of the most successful and insightful business-technology executives in the world: Ralph Szygenda, CIO at General Motors and InformationWeek's 2002 Chief of the Year. In our Nov. 18 cover story, "Analyzing The Outsourcers" (p. 30), Szygenda described what he sees as a glaring lack of high-quality IT outsourcing-services companies. The article said, "Szygenda is working with some of the automaker's IT vendors to get them to create service businesses. He and his business-unit CIOs also force vendors to work together, since too often they don't have the means to handle the size or complexity that GM needs individually. ... 'My biggest problem is I don't have enough services suppliers,' Szygenda says. 'There aren't enough competitors.'"

Could there be a clearer call to opportunity? Which vendors will step up? Or is the shift from Integration and Infrastructure over to Services and Innovation just too big, too broad, too unknown, too scary? Has the universe of IT vendors been split into two groups: those that can make such a move (IBM, HP, Unisys--Dell?), and then everybody else?

Let's track a few things: In September 2000, HP tried to buy PricewaterhouseCooper's consulting business for about $17 billion. Less than two years later, IBM did the deal, but for $3.5 billion, or for about 20% of what HP had bid. Game-set-match IBM, right? Well, not so fast--in "Analyzing The Outsourcers," HP ranked No. 1 in our survey of 700 business-technology professionals, while IBM came in at No. 7. But those rankings couldn't take into account the move two months ago by IBM to pull 30,000 of PwC's pros into the fold as part of IBM Business Consulting. And a month after that, IBM launched Innovation Services, which allows some clients to tap into some of IBM's R&D brains. And a month after that, IBM moved to acquire Rational Software "to provide a complete software-development environment for companies that want to integrate their business processes and software infrastructure with suppliers, customers, and employees."

Does it feel like the ground under our feet is shifting a bit? And that, more and more, it's time to keep an eye on infrastructure and integration but to turn fuller focus to services that can unlock high-value innovation? Indeed, it's time to come out of the bunkers, flush the survival manuals, and resume the pursuit of innovative IP that can create new revenue streams, reduce expenses, and significantly enhance the customer experience.

In IBM's new Innovation Services group, VP Peggy Kennelly says questions about the rights to and ownership of IP that will result from engagements with clients will be negotiated "on a client-by-client basis, or project by project," which she said is the norm. "We don't want things that are created in these engagements to go to our competitors, and we know our clients don't want those things going to their competitors. The reality is, we need to be able to re-use the IP we develop, but we want to work that out fairly with clients."

Kennelly, who says she's been pleasantly surprised at the volume of interest the new venture has sparked across all industries, says these IP-ownership issues "in the end come down to what a business decides it can live with. If you can live with sharing something, that's great; or, if something you've helped create is so unique and so special that you decide you can't share it, then that's another business decision you have to evaluate. It's certainly a challenging issue, but I think it's one that IBM has a lot of experience in dealing with, and we'll be drawing on that."

So mark your '03 calendars: Services and Innovation. And watch for the next move from HP--it's a whole new game out there.

Bob Evans
Editor in Chief
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