If we call the “Combustion Engine based Automobile & Oil” as the “Old Economy” and we all are now looking at Digital as the “Next Gen” it becomes so natural that “Electric Cars represent the future which is the Digital Age”
From a technology services industry perspective, the emergence of cloud services/ products, Artificial Intelligence (AI)/Deep Learning and IoT, over the last few years are having a disruptive impact, they now represent the Digital Age and Digital Transformation in Technology Services.
So, if we go by the pace of technology acceleration and cloud adoption over the last five years and factor in that every five years the rate of change is only going to accelerate, the predictions, for various industries are pretty radical.
As we have seen the rise of cloud services/products over the last few years, we are witnessing a radical shift in the mindsets of our consumers. We are witnessing more customers getting used to the “App Mindset/Revolution” and better User Experience and User Interface. This started with the emergence of the 99c instant app download mindset in the consumer space and has now overflowed into a similar mindset of consumers in the business world. The business users do not want to wait for a year for their tech folks or vendors to build a custom app. Idea to application prototype and prototype to final product time has remarkably reduced.
The basic question one asks today is “Is there an App for that?” This has become a common phrase, it has virtually become part of our life. Let’s analyze the power of this statement and how it has transformed every aspect of our work environment. .
Users in every category and industry are first looking to explore if there is an app to solve every need or a problem they encounter.
Let’s take a leaf out of this and apply the impact to the Industries serviced by Technology Providers. Most CIO’s (Chief Information Officers), CTO’s (Chief Technology Officers, CMO’s (Chief Marketing Officer) now consider their first priority to explore options which are off the shelf – Cloud/SaaS based and easy to start, work straight out of the box or like an app. Main theme is why build if you can buy of the shelf – Cloud or SaaS based products.
There are numerous examples of Vendors/Organizations providing such ecosystems, to name a few such as Salesforce, Workday, and Quick Base. The common theme – Low Code/No Code “Less Code & Less Maintenance”.
Instant gratification! Gone are the days where CIO’s would have 3 to 5 year build plans. The life span of a CIO is now 24 months to 36 months, so he or she has must show early value and quick results. The best way to get early value for them is to look at cloud based products or off the shelf solutions which can be installed quickly and allow users to have instant benefits. This does not need much of capex investments. The CIO’s can look at customizations and integrations to other systems in phase II.
These are also emerging trends as we are witnessing more CMO’s take the lead on innovation and are driving a larger share of the IT budgets.
If you analyze Michael Porters value chain of an organization, each aspect of it
(inventory, procurement, manufacturing, sales, marketing, finance, human resources can be covered using cloud/SaaS (Software as a Solution) based apps/solutions without really having to build custom applications. Ecosystems around cloud based platforms (like Salesforce, Workday to name a few) can provide end to end solutions for major functionalities within an organization.
One can then look at many integration solutions (like, Mulesoft, Dell Boomi) and other frameworks available to integrate and enable different systems to talk to each other. This reduces time to market, reduces cost of implementation and maintenance.
For example, today creative organizations (say in non-manufacturing sector) can look at a combination of products like, Salesforce or Workday based ecosystems to deploy them as a mini ERP utilizing their CRM, finance, logistics and distribution modules, it would be a straight out of the box implementation for majority of their system requirements. This ecosystem has matured over a period of time they have enough real cases to fit most organization & processes. It is also becoming more flexible and cost effective from a licensing and maintenance perspective.
What does this model do for Traditional Technology Service Providers who depend on building custom solutions for their customers? This disruption has mostly large and midsized global technology solution providers extremely worried and rethinking their support model.
The trend clearly is moving towards those companies who can deliver value through a “platform”, “product” or “accelerators built on an existing platform” or those service/product providers who have an advantage on integration services
(middleware and integration partners). Traditional Technology Service providers will find it difficult to survive on a “Custom Build Mindset”.
The technology trends are moving more towards building products and services around ecosystems. The largest ecosystems are converging around Amazon, Microsoft, Google, Apple, Oracle, and SAP, and Salesforce.
But what does that do to traditional technology solutions/service providers?
Right now they work on a model, which looks at building and testing custom software solutions (be it on a waterfall or Agile Methodology) for their clients. They deploy thousands of developers and testers, BA’s (onsite/offshore) to do custom build, maintenance of existing systems and enhancements however, the Cloud based product model puts a big risk to these jobs.
In the Digital Transformation Age “technology service providers will need to relook at their value proposition and ensure they have alignment and value creation around some of the above-mentioned ecosystems.
However, the bigger question to ask is “If most services and solutions are available using a cloud platform or an AI based service/product” what does that do to the role of a traditional technology service provider. How do these organizations create sustainable competitive advantage? It is important to understand the main driving force behind this.
If you as an organization are supporting an industry and that industry is being disrupted or being re-invented, how is it possible for that change or disruption not to affect your existing model?
Now translate the above into the jobs of the future and the job losses emanating out of the cloud and AI movement.
If we see the future on a parallel track, the auto manufacturing and related services industry is getting disrupted due to the electric and autonomous vehicles, that will lead to job losses and economic re-orientation on a historic proportion as explained in my earlier article.
We are witnessing Artificial Intelligence based engines helping organizations with QA automation, helpdesk and service desk automation. AI and Deep Learning based platforms are helping in predictive analytics. Many Organizations are improving internal efficiency using automation tools for DevOps (CI/CD), Infrastructure & Deployment Automation using cloud services from AWS and Azure
Over the next 2 Technology Decades (10 years) the performance and reach of AI and Cloud based services and products will only accelerate, this will tremendously help organizations to innovate quickly as their speed to market will accelerate at a rapid pace and they may be able to achieve innovation on demand or close to on demand. The trends indicate that 47% of US jobs are at risk due to automation driven by AI and associated technologies. This is no longer restricted to blue collar job, most of this impact will be on white collar/service jobs.
The pace of change is profound and organizations need to relook at this digital disruption and digital transformation as an opportunity to change and align with “The New Digital Economy”
Let’s take the example of Banking & Financial Industry:
FinTech is radically transforming and disrupting the traditional functions of the banking and financial services industry. The Digital Bank with Digital Security is replacing the Traditional Brick & Mortar Banks. Emergence of Block Chain Technology, Crypto Currency and Digital Wallets are having a tremendous impact of how banking services are provided and financial transactions are audited. These are also changing how compliance and settlement services are being conducted. We can already see the benefits of digital transformations using digital wallets & Mobile payments in some of the developing world in fact, Block Chain Technology is no longer restricted to Banking and Finance, it is being adopted across industries like Retail, Insurance, and Real Estate.
These technologies will have an impact on the nature of jobs and will disrupt the traditional industry job market. We are witnessing the massive change in Digital Payments in Countries like India who are embracing digital technologies in all aspects and industries.
Emergence of Apps like Wealth Front, Venmo are challenging the domain of traditional investment advisors and banking/payment industry. The emergence of high speed trading and artificial intelligence based algorithms have had tremendous impact on the Role of The Traditional “Trader in the Stock Market” and the Business Analyst in the Financial World.
Nimble Cloud Based Fintech Service and Product Providers are disrupting large Banking and Financial Services Organizations. These New Fintech firms have cloud based products do not have large legacy applications to support like the traditional banks. Technology services firms that are supporting the Banking & Financial Industry will have to rethink their models of support
How should technology consulting firms restructure their services to thrive in the “New Digital Economy”
- Develop a Customer Experience/Journey Map
The start of the digital transformation journey is to create the map of how the customer consumes or experiences your services. How digital transformation has changed that experience. The service provider needs to create this map for every industry segment it services. For their survival they will need to stay nimble by look at creating value at every stage of the customer’s new digital journey/experience.
- Create a group of small startups within your large organization.
Large technology service providers will need to create a startup culture within their organization. They will need to break their organization into small startups catering to each industry segment. Each small group within the organization will need to focus on creating value within a particular segment and learn to be nimble and work on small projects and small teams. For example, get teams across a few innovative segments like IoT, UX/UI, Digital Enablement, Cloud Services, Digital Security, Digital Product Engineering. This will put tremendous pressure on large technology service providers as this model contradicts their norm of getting large single engagements from clients. Now they will need to adapt to small engagements.
- Create New Competitive Advantage based on a Digital World.
Every Industry be it retail, automobile, media, publishing is undergoing a digital disruption/digital transformation and this has given rise to numerous opportunities for technology services firms. It is a level playing field between the Big Consulting firms and mid-size organizations. Every tech services organization should look first internally to understand its core value and its key differentiators that has helped it so far.It requires a very detailed analysis of the type of work and value it currently delivers to its customers across industries. Then map the industry movement and the digital disruption that is affecting that industry. There should be a map showing the value chain, the organization must analyze where in that new digital value chain, will it create a competitive advantage. After analysis, they should narrow down maybe 3 to 4 key value drivers and each should answer the following question, “Which Industry and What Value Will it Create” How do we service it: Through,
a) A New Service Platform :
b) A New Product offering :
c) A New Integration Offering.
All of the above will need to be driven from creating an IP (Intellectual Property) mindset. Each Organization will have to carefully evaluate what Value they deliver to their end customer and industry. Once the matrix evolves around a few customer segments and industries then they should look building either a platform, product or service which gives them a competitive advantage and helps their customer deliver value to the Industry they serve.
“The Road head can be summed up as “Be Prepared to Disrupt Yourself or Get Disrupted”