deal architect

Can you be too outsourced?

Courtesy of Jason Busch I saw this pictorial on Boeing and its major suppliers for its new 787. The article calls that global supply chain risky. For as much flying as I do, I do not want Boeing to take unnecessary risks. But from what I have seen, Boeing has been evolving towards this elaborate  supplier base for years now. The 787 just takes it a further step out.

A question I frequently get is can IT be too outsourced? My answer is compared to a Boeing or a Porsche or a retailer we are babes in the wood. Both in terms of how much we outsource and how well we synchronize the IT supply chain.

And when we go in to tier 2 suppliers and below, our industry, once you leave hardware and gadgets is medieval in its thinking. See how much basic blocking and tackling software vendors do on their own, versus using third party testing and R&D firms. Or even after massive consolidation, very little product rationalization. Look how little outsourcing outsourcers do themselves as they try to preserve as much margin for themselves. Try getting multiple IT vendors to behave and agree on common delivery goals and timescales.

Boeing is a huge opportunity for tech - both as suppliers of new technologies and with tools to manage its complex schedules and supplier base. But importantly, as an example of how to evolve its own supply chain and keirutsus.

Imports and Exports. Of Talent.

As a follow up to my post this weekend about need for US to export more, and Americans traveling and doing more tours overseas, I see this CIO Magazine post about US importing CEOS and exporting CIOs

Sartorial Wilderness. Innovation Beehive.

Thomas Otter, DFOF (Dedicated Follower of Fashion - a 4 letter acronym he coined before he decided to leave SAP for Gartner, so expect it to shrink to a TLA soon) laments the dress code at TechCrunchies earlier in the month.

"The dress sense of the award winners is grim.  Nothing hip, nothing radical, nothing innovative, perhaps one here or there vaguely smart, but really just oceans of drab dullness. A payroll conference would be more fashionable and edgy."

Ouch!

But as I look at my posts on the New Florence blog just for this month I marvel at the innovation showcased at CES, MacWorld, TechCrunchies, DEMO, and from overseas, the Israel Web Tour.

Widget, gadget, mobility and other innovations from sartorially challenged startups.

If you compare their innovation delivery to the suits (and budgets) at the bigger vendors (with exceptions like Apple, Cisco, Google), I say let's sing with Neil Diamond - Forever in Blue Jeans...

Monty Python and IT

John Cleese picks on IT folks in these episodes. IT in bowties?!

Iron Mountain, the storage company sponsors it...guarantees IT will buy from EMC no matter what the price -)

More in New Renaissance

On the New Florence blog

Remaking Engineering Education
How teens - and grown-ups - communicate
Let's go fly this high-tech kite
"The Saudi Arabia of Bio-fuels"
FastCompany.TV

Verizon should emulate pharma

BusinessWeek  "A doctor who spends just one minute with a drug rep ends up prescribing 16% more of the medicine the rep is selling. A four-minute encounter prompts a 52% jump in prescriptions."

Wow, talk about sales productivity!

Compare this to a reader's experience with a Verizon rep pitching their next-gen FiOS service

"Verizon has been selling FiOS in my town for the past year - even sending sales reps door-to-door to sell it. I invited one of the reps in to tell me why I should switch to FiOS.  One answer - and one answer only - "$10/month cheaper than Comcast".   Which is exactly the same thing every flyer that arrives on my doorstep every week says.

I asked about new applications, what I could do with FiOS that I couldn't do with cable, etc... - he was completely befuddled.  He seemed to be under the impression that FiOS is cable.  He was also surprised when I told him I'm not even a Comcast customer - I have RCN (which, in turn, is a good $20-30/month lower than both Comcast and Verizon - and offers higher bandwidth than both as well as (IMHO) vastly superior service).

If I were a Verizon shareholder I'd be more than a little bit pissed that Ivan Seidenberg is spending $23 billion building the first true Fiber-to-the-Home network - and can't figure out anything else to do with it other than screw Comcast with discounted 'cable' service."

In terms of emulating pharma,  R&D also comes to mind. Last year, BusinessWeek reported Verizon's annual report did not contain a single mention of the word "research". As I wrote around my recent experience with AT&T, it would be so nice to see innovative new services developed by telcos themselves versus those by others that they re-package.

Today, if you sign up for the premium version of FiOS  of $ 60 a month Verizon throws in on-line storage. But get this - a whopping 1 GB! Why bother? Even at EMC's pricey new storage as service, Verizon's "free offer" is lame. They can do much better than that.

Why it will be very different this time

Zoli summarizes a round of speculations on what tech spend can be "safe" in a recession - it follows a NY Times report on IT "belt tightening"

I wish I was smart enough to pinpoint specific winners and losers - all I know is the market is very different from the one in 2001 and we should be careful not to look for too many clues from past recessions.

Here are some conflicting cross-currents I am seeing:

a) If tech increases 4% next year, that's NOT a recession. Other than spend on compliance and security in the last 5 years, IT spending has been declining in most companies.
b) Capital budgets will take a much bigger hit, as the trend towards buying IT as Opex accelerates. SaaS, Utility Computing, SaCS were not major factors the last time around.
c) Never before has there a confluence of so much technology innovation all showing up at the same time - virtualization, green data centers, mobility, sensory networks, social networking to name just a few. I am tracking over 40 categories on my innovation New Florence blog. Many with very compelling value propositions, but also competing with each other and incumbent vendors for attention and budget
d) Advertiser driven revenues of IT vendors are much bigger than in 2001. These dollars do not show in traditional IT budgets.
e) Customers are revolting a lot more around forced upgrades. They were not popular in 2001 because everyone was sore from Y2K. Now, if companies want it, they want it invisible and in background as with SaaS.
f) Vendor marketing dollars were concentrated on tech media and industry analysts and industry events. Many of those have already died even ahead of any slowdown as dollars move to digital channels.
g) Third party maintenance and Open Source were not on the radar for many companies seven years ago.  A recession will only push them forward this time around.
h) Offshoring (at least for US companies) is a lot more expensive than in 2001 because of  years of wage inflation and the dollar weakness. Developer communities and crowdsourcing are new phenomena we did not have in any robust fashion a few years ago.
i) The consumerization of technology in last few years has made enterprises far more eager to see similar price points in their own budgets

As a buyer of technology, sit down with your budget for the last few years. If the categories and percentages have not changed much and you have not taken advantage of various innovations and price declines and newer vendors, you are doing your organization a huge disservice if you just batten your hatches. In a recession, you should be dramatically transforming your IT budget and sourcing strategy.

As an older vendor of technology, if you expect to continue with what has worked in the last few years, you are in a very vulnerable category. The cross-currents are too strong  for you, big as you might be, to just ride it out.  Transform your revenue and marketing mix in a big way.

What will not change - and something for newer vendors to keep intensely focused on - is good old fashioned value justification. Cost savings are always handy in a recession. But other tangible payback areas also help. But as a CIO recently told me - the pay back numbers better be eye-popping. A 10 or even 20 % improvement just will not cut it.

It should be an interesting ride.

My Litmus Test for a Presidential Candidate

I do not follow politics closely. I inherently mistrust most politicians. And when I vote, it's often a last minute analysis, and I frequently cross party lines.

But things are a bit different this time. Partly because my 14 year old son (thanks to Stephen Colbert) is taking an active interest in the candidates.  Partly because the races this time are so see-saw and exciting to track. In January, months before the elections I find myself reading about the candidates and watching analysis on CNN and Fox.

And getting upset with the inward looking focus of most candidates when it comes to global trade.

This Fortune article really got me irritated. Particularly this quote from former US Trade Representative Mickey Kantor ""The public is not listening for how you expand trade... The public wants to hear just how frightened you are. Someone has to say, 'I understand it, I get it.'"

Our former trade rep who helped liberalize trade in the 90s!

No. I want a leader who tells the public to accept the changing world order, and learn to thrive on it. If jobs are headed to Shanghai or Segovia, we need to tell Americans to get our fair share with increased exports, and yes, even relocating there. Get our Generation G  moving.   

We are the country of Ernest Hemingway and Neil Armstrong and James Michener and Ben Franklin. We have always led in exploring new and exciting stuff around our earth and beyond. We have immigrants from every corner of the world who would be happy to, with the right encouragement, travel and relocate and help our exports. We have tailwinds for strong exports given the state of the dollar.

So what's this wimpy "I am frightened of the world" attitude we are pandering to?

I wish Jeff Immelt was running for President.  But in his absence,  I will vote for a candidate who comes out  and says "We can and must dramatically increase our exports".

That's my litmus test. It's the moonshot speech I want to hear.

The Global Economic Vacuum

It's been bothering me all week. The day on which the US markets were closed (for MLK day), the major bourses around the rest of the world tanked. I thought the US was the sick man here, the euro was doing fine, BRIC was the emerging global force etc. Why is the rest of the world so affected when they have been trying to de-couple from the US economy for a few years now?

I found my answer when I read this Heritage Foundation and WSJ Index of Economic Freedom courtesy of Jason Busch. It factors ten freedoms - Business Freedom, Trade Freedom, Fiscal Freedom, Government Size, Monetary Freedom, Investment Freedom, Financial Freedom, Property rights, Freedom from Corruption, Labor Freedom.

The  US is rated 5th. The ones ahead are islands or city states - by definition very open to trade and economic policy.

But what is scary is where other global economic "engines" rank.  Japan (17th), Germany (23rd), France (48th), Brazil (101st), India (115th), China (126th), Russia (134th). The first three fighting hard to stay closed and pandering to domestic businesses and unions. The other four, proud to be called the next "global forces", but still economic adolescents.

No wonder the markets are spooked. A leader in decline, and none others prepared to step forward in a meaningful way.

So call the US sick, spoiled, greedy, whatever you want.  But if you are German or Japanese or Indian, quit sniping and pick up our slack in imports, immigration and ideas.

Time to rev up your engines.

Forget the Clinton-Obama feud

If you want to see some passion, check out the comments on this Fortune column looking at the "discrepancy" between Apple reported iPhone sales and AT&T activated ones.

My POV - Steve Jobs may be a lot of things. Not sure he is that stupid to misrepresent such a major number in public. Unlocked phones used on non-ATT network, foreigners buying iPhones in US due to favorable exchange rates and not using them on AT&T network, unsold inventory etc etc...the correlation between Apple shipment and AT&T network use is not as straightforward as it seems.

May be Stephen Colbert will jump in with an opinion - far more interesting than the Presidential race -)