Andrew Patterson talks to IDC's Crawford Del Prete about how mobile is changing the world, and how more CEOs will come from IT

Andrew Patterson talks to IDC's Crawford Del Prete about how mobile is changing the world, and how more CEOs will come from IT

By Andrew Patterson

Well known American futurist and author John Naisbitt once wrote “We are drowning in information but starved for knowledge.”

According to global IT analysts International Data Corporation (IDC) the emergence of big data is one of four key trends it has identified will drive the next wave of tech innovation that is likely to only confirm Naisbitt’s worst fears.

The company’s extensive international network of clients and subscribers gives it a rich source of data and analysis with which to measure and forecast the big trends happening in IT globally.

The four big trends creating the third platform

Crawford Del Prete, IDC’s Executive VP & Chief Research Officer, who was recently in Auckland to address this year’s CIO Summit, says the four key trends to watch in IT are: mobile, big data and analytics, social networking and perhaps most importantly, the cloud.

“We’re exiting one era, and entering another one. The era that we’re exiting is really what we call Client Server Computing, where basically we wired the world with all these very intelligent clients, in the form of a laptop PC or a desktop PC.”

“Then there were a bunch of servers that held our data [before] we started connecting those things together and we got the power of the internet to basically communicate in new ways and to collaborate in new ways.”

“But now what’s happening above that is that the increase in networking capacity, the increase in very, very low cost, low power microprocessor technology has allowed for a new world to emerge where we’re now starting to see new innovations to allow people to communicate in new ways, to communicate on the go, to provide a much richer contextual computing experience.”

“So what we see now is all these technologies coming together into something we’re calling the Third Platform. That third platform is made up of four key components; mobile, social, cloud and big data and analytics. And those together are providing a platform for innovation that’s really unprecedented.”

Mobile is the game changer

Over laid on top all of this has been the emergence of social networks, now increasingly mobile, which has opened a whole new paradigm of opportunities for businesses to try and get their heads around

“While many of these things have been swirling around for a long time; we’ve seen social show up about five years ago in terms of Facebook and Twitter in a large scaled environment; we’ve seen mobile really take off with the launch of the iPhone in 2007 which was the dawning of the smart phone era.”

“But the cloud has also been a huge enabler in lots of different ways for really the last four or five years in terms of platform as a service, or infrastructure as a service, or even software as a service with businesses like Salesforce.com. But now we’re seeing the intersection of these providing new ways to innovate, and, frankly, transform industries from the healthcare experience to the retail experience, even energy exploration experience, and that’s what’s so exciting about the era that we’re in today.”

Getting to the third platform

Successfully navigating your way to move your business from the second platform to the third platform is usually dependent on the size, scale and age of the business. Many “new age” companies are making this transformation very quickly because of their speed, agility, and the way they’re set up.

“The expression that we use at IDC is there are some companies that were simply born on the third platform. For them, they’re in the role of the disrupter and they can really go out, and with very little barriers to entry, take advantage of many of these new technologies. Amazon would be an example of a company that was born on the third platform.”

“But for a lot of enterprises they weren’t. What’s a scary thought is that in our estimation, well over 90% of the growth for the IT market between now and the year 2017 will be associated with this third platform. So if you’re a company that’s really locked in the past and locked in the data centre computing with client server architectures, you’re not going to be participating or using IT as a way to differentiate as a competitive weapon and that potentially is going to come at a cost.”

“From an advice standpoint, the first thing you have to do is to embrace these technologies. You have to stop saying things like: oh, we don’t do that in my industry. The cloud will never be secure. Mobile devices, they’re really just a fad, and it’ll all settle down and when it does then I’ll pick the most popular platform and I’ll offer that to my customers. Instead, you really have to think: how do I use these technologies to differentiate and then grow my business.”

Changing role of IT in business

For a long time the talk was about partnering with the line of business and while that  still holds true what’s different now is the way the end user customer experience is being completely transformed by this third platform concept.

“So now the discussion has to change. Now it has to be: as an IT shop, how can I teach the marketing department which mobile app developers to work with to transform our customer’s experience associated with our product? Or how can I work with marketing and sales to develop analytics solutions that will help them understand who our most profitable customers are and who are the least profitable?”

“And that’s a big change in terms of the role of IT. It used to be: partner with IT so we can deliver IT costs lower so we can be more efficient. Now it’s: how can we innovate with technology and use that as the driver to grow our business?”

What has many IT managers excited, but perhaps also a little daunted, is that increasingly technology is not simply being seen as a support function but rather a key driver of shareholder value. IT is no longer the passenger.

“In the more progressive businesses I come across, anecdotally, I would say it’s at least 40% of the CIOs I meet with now around the globe aren’t actually technologists. They didn’t claw their way up the technological ladder of executive management. They are, maybe, from the strategy function or the finance function, and they’re spending a few years as a CIO to learn that side of the business and then go on to become a CEO somewhere else, and this is because they have to understand technology if you’re going to use technology as a competitive weapon.”

More CIOs likely to become CEOs

It’s interesting to consider the fact that Air New Zealand was ahead of its time in this regard with former CEO Sir Ralph Norris one of the first CIO’s to make it to the CEO ranks. He in turn was followed by Rob Fyfe, himself also a former CIO, who drove much of the airlines technology revolution, introducing initiatives such as self-check in, grab-a-seat and online booking systems. When you examine Air New Zealand’s brand leadership in the airline sector today, particularly its innovation around technology, much of that can be attributed to the strong IT skill set of its two former CEOs.

Del Prete predicts this is likely to be a trend we’ll see more of in the future.

“What you’ll see in the next 10 years is more CEOs who will have spent time as a CIO. They won’t have rolled their sleeves up and taken the backs off of PCs and fought with the dust bunnies to swap out network cards at any time during the role. But they will have spent time in the CIO office gaining an understanding of what the role entails, and as a CIO, they will have a much greater depth of experience and appreciation of what the technology function involves. We’ll definitely see more of that “

The education debate

The role of the education system to prepare young people for an increasingly IT driven world continues to be a source of plenty of debate. With many IT related businesses facing hiring shortages what advice does Del Prete offer NZ to address this issue in the future?

“I’m very passionate about this issue. Maths and sciences are areas where we absolutely have to make an incremental investment and we have to really create heroes out of the maths and sciences folk. So people that have learnt to code, people that have used coding to transform businesses; those people need to be held up as examples of people who are true innovators.”

“On a very large scale these are people like Christopher Isaac “Biz” Stone, one of the founders of Twitter; Mark Zuckerberg, the founder of Facebook; these are the kinds of people who were coding at a very early age, and from a math and science standpoint obviously were very gifted.”

“But having said that, I’m slowly becoming more optimistic in terms of how the educational systems will address this issue. Just this past year I had the opportunity to lecture to a university class in the United States about the future of technology and I was just stuck by how I lectured for 40 minutes and the class kept me there for another hour afterwards just asking me questions about mobile app development and analytics and big data, and these young adults are completely fearless.”

“They want to fail quickly; they want to try their hand and it’s fascinating. I compare it to my own experience in the 1980s when I graduated from university the idea was to learn how to climb up that corporate ladder and the thought of being an independent operator or consultant really was code for: oh, there’s obviously something wrong with you, and you can’t get along with people. Now these people don’t want to do that. They want to be a consultant, they want to start their own business and they want to see, as a free agent, how they can change the world with technology, and their very passionate about doing exactly that.”

Starting a business getting easier

The barriers to entry to get started in business seem to be getting lower by the day making entrepreneurship a viable choice for an increasing number of people. Starting a business has literally never been easier and it seems likely this trend is set to continue.

“I can sign up for services, I can procure those services online and I can start up a small company really quickly which is something that you’re going to see more and more people do. And again, some will succeed and some will fail, but they’re willing to take that risk early in their life, and I think that’s just wonderful. I think the ubiquity and the access of this technology through the cloud, through mobile devices, through social media; that’s what’s so amazing about this time.”

“I hear this all the time, people say: It feels different and that’s because it is different. Really this is a fundamentally different time than we’ve ever seen in the past.”

The cloud

Much of this change is being driven by the cloud which is transforming businesses in ways few would have realised even five years ago.

“The cloud will allow companies to start up services and provide new kinds of business opportunities very, very quickly. You’re talking about being able to provision a new service in a matter of minutes and make that service available to your customers just as quickly.”

“What used to involve buying services, buying software, buying middle ware, licensing all of it, making sure you’re in compliance, making sure then that the applications can be tuned to your industry; that would take months in the past. Now it’s almost instant. The application would be hosted on Google, or hosted on Amazon or hosted on VMware, or hosted in any one of these places in order to make it available to customers.”

“How it’s changing the established game is that companies, historically, have had to be very careful and also spend a lot of money on extra computing capacity. So for example, if you’re a retailer and you know that for 330 days a year you need 100% of your computing capacity, but for the other 35 days that involve Christmas or other holidays around the year, there’s another 50% of datacentre capacity that you need to support those extra people coming into your stores. Previously that would mean  you’d have to go to your executive management and say okay, that $20 million that we spent on building a datacentre, I need another $20 million to build another datacentre just for those 35 days a year.”

“Now what you can say is: I’ve got my datacentre, but for those extra 20 or 30 days I’ll simply burst into Amazon or I’ll burst into Google or I’ll burst into some local service provider here for that extra capacity and I’ll rent that capacity; I’ll use it and then it’ll come back and then maybe I’ll put that application out into the cloud for a period of time, and that’s scale. Now you’ve got a board of directors that didn’t have to approve another $20 million spend; and that’s a fundamental change to the way business is done.

Security of the cloud

Security continues to be a major barrier for those considering moving to the cloud.

Del Prete believes that the security issue will continue to ebb and flow but the cloud and its attractive functionality and significant cost savings will eventually win businesses over.

“I think there will be very visible events where something happens and unfortunately credit card numbers will get stolen or personal and viable information will get stolen and companies will get very, very concerned, and it will fade down. I think that will breed a culture of understanding what the risks are, and I’m seeing it in our data, that more and more companies are willing to put more and more of their applications out into the cloud because the cost savings are just undeniable. In the future a lot of these concerns will be a little bit quaint and become almost antique. But for now it’s an evolutionary process.

Social media

Social has been the big revolution in marketing in recent years but many businesses still struggle to identify the benefits it delivers to the bottom line. Over time, Del Prete believes social media will become the principal engagement platform through which all customer communication will eventually occur.

“The vast majority of IT leaders that we’re surveying feel they must participate in social media but they’ve no idea if they’re getting any payback, there’s no way to measure it. I think what you’re going to see in social is that social is not a fad, and this idea that we can communicate and share experiences and make better choices based on that information is extraordinary.

“We spent decades building these transaction processing based systems to improve speed then moved to decision support systems where it was really all about running the business more efficiently from a standard enterprise resource planning (ERP) standpoint. Now we’re moving to relationship based systems, and that involves taking information about my customers, a lot through social media as well as my current employees and trying to find information that matches.

“In those relationship based systems I find out who my most influential customers are, how I’m able to find that commonality in things like LinkedIn networks or Twitter networks between my sales people and their prospects so I can make better matches and close deals faster. I think you’re also going to see companies slowly transition into using this information, not for nefarious outcomes, but for ways to figure out how they can serve their customers better.”

 “A simplistic example might be the fact that if one customer has 10,000 Twitter followers, and another customer has 100, the person who has 10,000 followers is giving you some clues about their potential value and there are some nice tools available to find out if that’s really an influential customer. So that customer will get better customer service than the person who has 100 followers if they are, in fact, an influential social media user.

Sense and respond

Del Prete forecasts that not only will customers increasingly be recognised more as individuals than a homogeneous group, businesses will be able to make instant decisions about how to recognise customers and reward them accordingly.

“The idea is to move away from being a traditional make and sell approach, whether that’s a services or whether that’s a tangible product, to what I call sense and respond. How do I quickly sense and quickly respond to a particular customer based on what I know about them. For example, if they’re boarding a flight I might give them a better seat or they’re a loyal customer I might find some way to instantly reward them. That translates into a stickier customer, a more profitable customer and a more loyal customer and that’s how people will use social media in new ways going forward.

“What we’re also likely to see is that all applications in the next five years will embed some level of social into them. They will become social because it’s so powerful to learn about your customers in these new ways.”

“We’re also forecasting that you’ll see a significant drop off in the amount of email traffic. People will simply communicate with each other via a social network so they won’t communicate by email unless there’s something very formal they want to write. Our predication is prediction is that email will drop 35% per year for the next two years, in terms of the absolute amount of email volume.

“So big changes ahead, but social’s definitely not a fad. Some of the companies in that space may ebb and flow. Right now we’re seeing Facebook has got some challenges; they will likely get through those challenges, but I think this is probably the year that Twitter does an IPO. You’ll see the rankings ebb and flow, but the concept of using social to communicate with your customers in new ways; that will remain.

Think of social networking as the glue that co-creates value.

“The old network effect, where the value of the network rises exponentially with the number of people using it, couldn’t be truer for social. As more people get on the social networks they become platforms and they become treasure troves of information.”

Expect more of the unexpected to continue.

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