A new era in IT

Max Hopper, writing in HBR in 1990 talked about the then IT “Hall of Fame” including

• SABRE, American Airlines’s reservation system, which eventually became a computerized reservation system (CRS), and Apollo, the other leading CRS, transformed marketing and distribution in the airline industry.

• American Hospital Supply’s ASAP order-entry and inventory-control system generated huge sales increases for the company’s medical products and turned it into an industry leader.
• others

He described what it took:

“Developing these systems consumed millions of man-hours and billions of dollars, but their marketplace advantages were huge. As a result, our experience underscored the competitive and organizational potential of information technology. At the risk of sounding immodest, we helped define an era.”

He proceeded to say,

“That era is over.”

“In this new era, information technology will be at once more pervasive and less potent—table stakes for competition, but no trump card for competitive success. As astute managers maneuver against rivals, they will focus less on being the first to build proprietary electronic tools than on being the best at using and improving generally available tools to enhance what their organizations already do well.”

He was heralding the age of packaged software and outsourcing which has resulted in several multi-billion dollar vendors over the last two decades.

The pendulum is swinging again.

Gartner, based on a new survey of 388 CEOs, reports

• Almost twice as many CEOs are intent on building up in-house technology and digital capabilities as those plan on outsourcing it (57 percent and 29 percent, respectively).
• Forty-seven percent of CEOs are directed by their board of directors to make rapid progress in digital business transformation, and 56 percent said that their digital improvements have already delivered profits.
• 33 percent of CEOs measure digital revenue.

It did not happen overnight. In my 2012 book, The New Technology Elite I saw companies is just about every industry invest in smart products and services they take to market. They were spending more money with design firms and contract manufacturers than they were with IT software vendors and outsourcers.  In the 2013 book I wrote for Karl-Heinz Streibich, The Digital Enterprise, company after company around the world described how they were rethinking every process – customer facing, on the shop floor, in logistics, in the back office.

Those were early adopters. The trends are becoming more mainstream. We are building more than buying technology. But it’s not Hopper’s era of bet-the-company on tech investments. These are much smaller and smarter investments in using tech to transform the revenue side - products, services and business models. By definition, for competitive advantage, these investments have to be proprietary.

And we are continuing to buy. But not at the pace of the last two decades. And smarter from that experience about rigidity of packaged software, about how outsourcing contrary to promise turns into a stubborn fixed cost, about the curse of lock-in behavior when we consolidate to a handful of vendors and become too dependent on them. 

Welcome to the new IT era. The rules for buyers and vendors are going to be quite different for the new decade or two.