For many companies, the IT department is not the department of solutions. Rather, it is the department that misses deadlines, omits requirements, and frustrates the people who really make money within a company. Truth be told, most companies aren’t in the business of IT. Most companies make money either because they design products, they build products, they deliver products, or they support products. And these products are (hopefully) desired by their customers. IT exists in order to facilitate the real business of a company.
So why does IT fail so often? Or stated differently, why does IT believe it is being misrepresented in the board room?
These questions are important. In many companies, IT has adopted an air of superiority. IT leaders have sought to “rebuild” companies based upon what they believe is the “best” corporate strategy. Sometimes, the IT leaders are right. Most times, the IT leaders are deceiving themselves and possibly defrauding their stakeholders.
What Is The Purpose Of IT?
While IT can be a means of generating unique value within some companies, everyone must admit that successful IT teams take part in the routine operation of every business. IT is used for accounting and finance. IT is used for sales and marketing. IT is used for product design and product testing. IT is used for manufacturing and shipping. But in many ways, IT is now like real estate or office supplies. Every company has to have IT (and the tools and capabilities that IT delivers) if only to perform the uninspiring parts of routine operations.
This is very reminiscent of many other key technology waves throughout our history. In particular, I am reminded of the effects created by the introduction of the printing press and the introduction of double-entry bookkeeping. Both of these technologies were a means of enhancing (and accelerating) work that was already being done. In the case of movable type, the printing press replaced the people who were hand-writing scrolls and books. In the case of double-entry bookkeeping, accounts and ledgers augmented the role of simple storage vaults. Both of these technologies introduced remarkable transformations in society. And like these technologies, IT has been the source of remarkable changes.
Like the aforementioned technologies, the transformational capability of IT is highlighted in how IT has replaced burdensome, tedious, and dis-spiriting office drudgery. IT has released office workers from the burdens of the mundane so that they can focus upon the creative and inspiring work that is before them.
When IT Works
IT works when its advantages are almost seamless. In a very real sense, you know that IT is working best when it is taken for granted the most. While IT wants to be part of the “main event”, the most successful projects are often the ones where success is achieved when IT is like the invisible hand of Adam Smith.
The Commoditization of IT Services
When I began my career, IT was the place where the best and brightest minds worked insane hours in order to deliver the ‘next big thing’. This was true for the PC. It was true for operating systems (e.g., CP/M, Windows, OS/2, etc). It was also true for “custom-built” corporate services. In the nineties, corporations spent millions of dollars building customized ‘clones’ of ERP and CRM systems.
Today, all of that has changed. Hardware is a commodity. And software is now the ‘table stakes’ for hardware vendors – and service providers. Because of the “free software” movement of the eighties, the core of almost all systems now contains free/open components. At the same time, customers now believe that they should get both hardware and software for free. Most are willing to trade their birthright (i.e., privacy and independence) for a subscription fee.
Commodity Markets Are Challenging
If you accept the premise that IT products are now commodities, then there are a few economic consequences. Commodity markets usually have a low cost of entry. That means that there are (and will be) many competitors in any given market.
- This is true for computer hardware. You can get great hardware for a very low price. You can get hardware from Chinese companies, from Korean companies, or from a host of other “offshore” suppliers. Even the United States still has some “onshore” fabs (e.g., Intel). But the majority of fabs are overseas. And they produce economically compelling components. It is fascinating that while chip/system designers can be found anywhere in the world, most fabs are in Asia. Bottom line: Fabs are expensive. So they succeed only through economies-of-scale. Until new computing technologies emerge (e.g., quantum computers), it will be very difficult to defeat offshore fabs that are funded by national governments.
- It is also true for IT manpower needs. Today, you can get software services from India, China, southeast Asia, eastern Europe, and even South America. With millions of programmers worldwide, the job of writing mundane software is no longer differentiating. Bottom line: The labor winners will be the people and organizations that can take their margin from software laborers. Alternatively, it is still possible to specialize within specific industries (e.g., healthcare, aerospace, etc).
Making IT Matter – Again
Cheap hardware, cheap labor, and free software are making IT less specialized – especially at the component level. It is no longer possible to simply be a good analyst, a good programmer, or a good operator. Successful IT teams must be able to build comprehensive solutions from all of the available parts. Like residential architects, the successful IT leaders will know what is available in the market. They will know how to integrate standardized components into a working solution. They will know how to operate that solution in order to maximize the economic impact (of the solution) upon the business. In short, they will work with the owner to meet their functional desires. They will select the standardized components needed to meet the economic objectives of the owner. And they will know where to get the best labor to do the assembly, testing, and implementation of the solution.
Can someone make money being a specialist? Yes. But most specialists must be undisputed experts. Or you can make money by achieving economies-of-scale and operating with razor-thin margins. If you can do either, then you can make remarkable sums of money. If you can’t, then systems integration and solutions architecture may be your next best avenue for success.
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