The most powerful player in the 21st-century global IT supply chain is the business end-user. All the other players in the chain — in-house IT organisations, IT vendors, resellers and consultants — need to position themselves to best respond to end-users’ needs. That’s because end-users now have so many options when it comes to consuming IT, ranging from using software-as-a-service packages to developing systems entirely in-house.
Meanwhile, thanks to the global economy and high-bandwidth internet connectivity, IT activities whose value is produced mainly from low-cost and highly efficient operations are being done where the costs are lowest. Only those whose value is derived through the innovation of highly responsive operations are being done close to the end-user.
Given these broad outlines of the global IT supply chain, the players who need to respond to end-users’ needs must position themselves depending on the way they answer this question: How am I going to deal with agility? By agility, I mean continuous close coordination between business and IT people to respond effectively to constantly changing situations. Some products and services do not require high amounts of agility, but others do. And not everyone is cut out to be agile.
Agility is needed if customers value a product or service primarily because it quickly responds to their evolving needs. If it is valued mostly for its low cost or because of the part it plays in keeping operations running reliably, agility isn’t a big factor. What’s important in those cases is efficiently maintaining the status quo. The more commoditised a product or service is, the less agility is needed to support it.
Perhaps the ultimate IT commodity service is datacentre operations. We do it so well that business people take it for granted and care only about getting it at the lowest price. This service and its related products are inevitably going to wind up being located in places where the cost of labour is low.
The ultimate in IT agility, on the other hand, is epitomised by businesses and services like Google, iTunes and Facebook, which combine an array of technologies to quickly create and deliver new services to a fast-growing and fickle customer base. Their agility keeps them fresh so that their service offerings keep evolving as the needs and tastes of their customers change. If they couldn’t keep up with those needs and tastes, their customers would go elsewhere. Somewhere between these two extremes of commodity and agility is where you find most of us in the IT business.
For reasons of simple economics, businesses will continue to outsource datacentre and related operations. The efficiencies and economies of scale offered by IT utility companies are already compelling and will only become more so. These IT utilities are evolving from the combination of telecomms providers, hardware and software vendors, and datacentre operators.
As companies outsource the activities that are being handled by IT utilities, they are increasingly turning their attention to the need to be responsive to their customers. That requires agile IT, since everything a company does these days has IT running right down the middle of it. Every new business venture, product or marketing campaign needs agile IT support to prevent the business end-users from being overwhelmed by the flood of details and demands that go along with doing new things.
If they’re going to survive, in-house IT groups and the vendors and consultants they work with are going to have to focus primarily on agility and delivering the responsiveness that their business users value. Those IT professionals and vendors that decide that agility isn’t their strength will be dealing not with end-user businesses, but with IT utilities.
- Michael H Hugos is a principal at the Center for Systems Innovation in the US. He can be contacted at www.MichaelHugos.com