Fundamental shift in balance of power between big business and the consumer and between supplier and customer
Hannover, Germany, 8 March 2006 – Speaking at the CEO and CIO Vision Forum at CeBIT today, Steve Prentice, distinguished analyst and chief of research at Gartner Inc. outlined Gartner’s 10 Year Scenario for Information Technology, Business and Society. Mr. Prentice described how eight major trends, in four pairings, are combining to produce an unstoppable whirlwind of change throughout enterprise IT, the industry and society as a whole.
Commoditisation and Consumerisation
Tera-Architectures and Virtualisation
New Development and Acquisition and Delivery Models
Community and Collaboration
“We are half way through a 60 year journey from an analogue world to a digital one, which started in 1980 with the PC,” said Mr. Prentice. “The first 30 years have been about driving technology into the enterprise. The next 30 years will see technology reaching every individual, in every part of society and will in turn have a huge impact on the way businesses operate.”
Gartner predicts a fundamental shift in the balance of power between big business and the consumer and between supplier and customer, which will quickly lead to significant challenges for all organisations regardless of size and business sector. Business agility is becoming critical in a world where companies are compelled to meet rising consumer expectations, but many organisations are shackled by legacy systems. Similarly, ethical and environmental issues can no longer be brushed to one side as consumers demand that companies operate as good global citizens. Finally, established businesses are increasingly finding themselves squeezed by entrepreneurial �green fielders� who, unrestrained by legacy systems and unblemished by previous corporate misdemeanors, are challenging conventional business practices and pioneering new business models.
Mr. Prentice underlined the growing interdependence of technology, business and society and stressed that it is the collective impact of the eight trends that will further amplify their individual effects. “Whilst the technologies continue to evolve, it is their effective deployment and cultural assimilation that will drive growth and prosperity,” he said
Trends 1 and 2 – Commoditisation and Consumerisation
The increasing integration of technology into every day life, made possible by the proliferation of the PC and the Internet, lies at the heart of this trend. The three facets of Pipes – affordable broadband access and ubiquitous wireless connectivity, Platforms – low cost, simple to operate PCs and fixed or portable media devices with a wide range of universally available (and often free) tools and applications, and Content – search results, location-based services, downloadable multimedia, news and personalised micro-publishing, have already combined to destabilise the balance of power between technology producers, business users, consumers and the state.
“Previously expensive business tools such as PCs have become every day commodities bought on the web, via mail order or even at the local supermarket,” said Mr. Prentice. “Like the grain of sand which creates the pearl in the oyster, so the PC has become the nucleus for an IT revolution in the home.”
At the same time, new web-centric software business models are challenging traditional license-oriented software business models in the consumer space. This is increasingly influencing the wider enterprise market, not only for software but also for hardware, telecommunications and support hardware.
The impact of commoditisation and consumerisation of IT on enterprise technology and business as a whole will be far greater than anyone could have ever predicted due, in the main, to two factors:
The commoditisation of the PC is enabling new enterprise architectures
Technology-enabled consumer power is forcing businesses to become more agile and update their legacy systems
Trends 3 and 4 – Tera-Architectures and Virtualisation
Demand for infrastructure capacity will increase a hundredfold over the next ten years according to Gartner. For four decades �scale-up�, has been the dominant architectural technology. This is set to change due, in large part, to PC commoditisation. The trend is increasingly towards tera-architectures which combine with virtualisation technology to establish highly distributed systems from many low cost components. Google, for example, uses a tera-architecture approach comprising of more than 170,000 servers providing the company with a resilient, flexible, agile and scalable system that Gartner believes to be around 10 times less expensive than one built using a more traditional approach.
Virtualisation is breaking the direct link, which has existed for many years, between the physical devices and their usage. Virtualisation allows greater utilisation levels, delivering improved efficiency and greater flexibility.
Virtualisation and tera-architectures support the model of the real-time enterprise (RTE) – a business that uses a real-time IT infrastructure to sense opportunities and problems faster and responds to them more quickly. In a real-time infrastructure (RTI) standard components and architectures enable faster changes and reduce support costs. People-intensive functions are increasingly automated, extending across entire domains over time. This automation leads to improved efficiency, quality, cost structure and agility, ultimately transitioning purchase models to a utility or service model.
Mr. Prentice highlighted that the new architectures will help deal with increasingly significant challenges such as heat generation and power consumption to provide more environmentally friendly solutions.
Trends 5 and 6 – New Development and Acquisition and Delivery Models
Gartner predicts that the move in software development towards services spells the demise of the monolithic application, and with it the dominant positions held by leading software vendors in the market. The most common revenue model today is software as a product, with upfront payment for a perpetual license to use the software. However, the trend is towards offering software as a paid service with payments over time and based on a usage model. The issues that software and IT services providers must wrestle with include lower gross margins, the move to business-based rather than technology-based service level agreements, new go-to-market models that rely less on their current direct sales force, and difficulties in educating the financial community about the new business models and their impact on profit and loss statements for the first several years.
There are already early indications that hardware will follow in the same pattern, with similar financial consequences for hardware vendors. As the price for technology falls it becomes more valuable to offer support and management services to help enterprises manage their growing array of storage, as well as growing demands of regulatory and compliance authorities relating to data sets, than it does to sell a physical device. With growing bandwidth available at declining costs, many of the drivers for locally based devices also diminish. This paves the way for an era of utility-style computing where many enterprises will choose only to purchase access to a shared service on a remote device.
Trends 7 and 8 – Community and Collaboration
With commoditisation and consumerisation come not only revolutionary changes in enterprise IT but also life-altering changes to the way we interact with the wider world. Gartner predicts that by 2010, 70 percent of the population in developed nations will spend 10 times longer per day interacting with people in the electronic world than in the physical one.
Whereas we once lived in geographically defined communities, this is becoming less true every day. The home is becoming a “docking station” for an extended electronically supported existence. New communities operating on the free-sharing of information are emerging at the expense of conventional advertising and broadcast media. Such network marketing, feeding information on products and services back to prospective purchasers, has been the basis of the move from transactions towards participation and interaction – enabled by a raft of technologies including AJAX but generically referred to as “Web 2.0.”
As people increasingly drive the creation of communities, companies face at least two challenges in this vein: Are they equipped to translate those large and fluid networks of trusted friends into professional contacts and value? How effectively can they set guidelines for workers for interaction across cultures and regions and for privacy and confidentiality in these virtual communities?
Environmentalism and ethical behaviour have been slowly growing issues in business over the last decade. The increasing scope and power of activist communities and their ability to effectively publicise their discoveries means that consumer pressure and the threat of financial damage through disclosure will become a more powerful influence than formalised regulation and governmental intervention. Merely adhering to the letter of the law will no longer be sufficient and consumer pressure will likely judge historical actions by contemporary ethical standards. “Green” credentials, both for enterprises and vendors, will become a critical success factor, accelerating the move towards “Green-IT”.
Forward not legacy thinking
Whilst “Green” is an issue that companies need to get to grips with, Gartner said that this is just one of the hurdles to maintaining competitiveness in the new world order brought about by consumerisation. Legacy systems and particularly legacy thinking are the single biggest challenge to transforming business today. A majority of enterprises still operate ageing systems, which consume a majority of their IT budget to maintain.
“The dot.com threat may have been a mirage, but transformational business models enabled by Internet era IT are not,” said Mr. Prentice. “The challenge to established companies comes not from other established players, but from start-up entrepreneurs who will use technology to upset the status quo.”
Gartner’s 10 Year Scenario for IT, Business and Society will be examined in more detail at the Gartner Symposium/ITxpo taking place in Barcelona from 21 to 24 May 2006. For more information please visit www.gartner.com/eu/symposium.
Gartner, Inc. (NYSE: IT) delivers the technology-related insight necessary for its clients to make the right decisions, every day. Gartner serves 10,000 organizations, including chief information officers and other senior IT executives in corporations and government agencies, as well as technology companies and the investment community. The Company consists of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 3,700 associates, including 1,200 research analysts and consultants in 75 countries worldwide. For more information, visit http://www.gartner.com.