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The On-Demand Mathematics of Enterprise Computing
Change in computing will not be limited to technology--it will influence business models for every company competing in the traditional software arena.
For the rest of the September 2006 issue of CRM magazine please click here
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Identifying a paradigm shift is easily done in hindsight--separating a fad from a long-term trend is something that requires some historical perspective to get right. The only professionals who make a habit of prognosticating about changing trends are economists, and as the saying goes, they have reliably predicted 13 of the last five recessions. Some people regard on-demand as a passing fad or, at most, an alternative delivery model. Others hail it as the harbinger of a new world. Many billions of dollars have already been spent to secure on-demand agility, and future investments (and long-term consequences) hang on which of the two opinions regarding the model is right. The kinds of secular change taking place all around us in technology today might occur only once during a long period of time, but those changes can significantly alter everything that follows them. Alternative secular change, disruption, is far more common--we see disruptions in the marketplace almost constantly. The ratio is, disruption : fad :: secular change : long-term trend. In most cases, a secular change is initially seen as a common disruption and for good reason--initially secular changes are, in fact, nothing more than disruptions. In Dealing with Darwin, Geoffrey Moore identifies two basic business models, complex systems and volume operations. Complex systems represent the early adopter phase; volume operations identify a mass-market phase. We have been most accustomed to seeing volume operations models succeed as one disruption after another has toppled complex systems models in a succession of software generations, from accounting and finance to the front office. There are no more green fields left in the software today, no major systems areas that have not been automated; even new on-demand applications focus on optimizing what other systems already do. The software industry is in a secular shift from complex systems to volume operations, and that is the reason on-demand computing has an air of inevitability about it. Innovations have been brought to market as complex systems for most of the history of the high technology era. The process has required high levels of expertise to customize and operate, as well as lots of cash to keep it alive. In any sector one cares to examine, the introduction of digital automation was a complex systems deployment that over time was transformed into routine.
On-demand computing is the future, but it is not likely to cause an immediate change in every company. New application development and new solutions will follow an on-demand trajectory, which for many may also include different business models that separate software developers from marketing and distribution. As with other historical secular changes, the change in computing will not be limited to technology; it will affect business models for every company now competing in the traditional software arena. Lately, some software companies have been deriding on-demand as nothing more than an alternative delivery method that will bring customers into hybrid deployments. The danger for many of these companies is that they will regard the secular change as a mere fad that they can ride out. The on-demand paradigm may not be completely ready to take on all the challenges of traditional enterprise computing. Nevertheless, the economic advantages of on-demand computing are so significant that customers will continue to demand more and more, and on-demand suppliers will continue to invest and invent. On-demand computing has become the indispensable paradigm for the future of enterprise computing. Denis Pombriant is the founder and managing principal of Beagle Research Group, a CRM market research firm and consultancy. He can be reached at denis.pombriant@beagleresearch.com
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