Projecting technology leaders for this decade

Over my career I have seen tech industry leadership change every decade or so. Analysts like to come up with acronyms for the leaders and I have seen them evolve from BUNCH to JBOPS to FAANG. I myself coined the acronym SWITCH when the Indian outsourcers were in ascendancy in the early 2000s.

In the past, we have seen technology architecture changes deliver windows for major disruptions - the move from mainframe to client/server, then to the cloud. You could argue we are now seeing an acceleration to the cloud. Hyperscalers - Microsoft, Amazon, Google, Alibaba and dominant SaaS category vendors like Salesforce and Workday are taking over.

But I want to be careful and not fall into the trap of linear thinking and just extrapolate from the past  I think there are at least two other new trends at play this time around - growing interest in new business models and big changes in how we live, work, play and the impact that is having on various industries and their technology needs. And that is opening the door for many new players to have a shot at joining the leadership suite.

Let me give you some examples

a) Every major vendor talks about how ecommerce took off last year - thanks to the pandemic. Very few of them talk about the need to fulfill that massive incremental demand. I was reminded of that when I attended a virtual tour of Amazon Fulfillment Centers last week. It had been 2 years since I had gone to an in-person tour of their JAX2 center, and they keep scaling and navigating around the pandemic.  What's impressive is the integration of Kiva and other robots, miles of conveyor belts, "chaotic storage" with locations all stored in AWS memory, thousands of scanners, cameras and printers at each of the centers and the growing transport fleets of electric vehicles and Boeing 767s and coordination with countless 3PLs. The efficiency is mind boggling - 2,000 or so humans process a million packages a day and most are delivered within 2 days of when the order is placed. You think Amazon will stay content as a AWS infrastructure provider? The level of technology capability and integration in their fulfillment positions them to be a dominant technology integrator in many other industries. Just as impressive is the "scaling down" the co-CEOs of 6 River Systems described here and have been delivering for Spotify. The move to "micro-fulfillment" allows them to accommodate new models like flash sales, order on-line, pick-up in stores, regionalized inventories, last-mile delivery expectations and constraints while keeping warehouse workers safely distanced, quickly trained and incredibly productive. 

These new fulfillment models have called for bunch of new functionality (I didn't even touch on the hairy reverse logistics) and importantly a very different business model. They don't sell licenses or subscriptions to the merchants who use their platform - it is an outcome based model. They get paid as the merchants get paid.

b) Jamie Dimon, CEO of JP Morgan Chase wrote in his annual shareholder letter earlier this year.

“Banks already compete against a large and powerful shadow banking system. And they are facing extensive competition from Silicon Valley, both in the form of fintechs and big tech companies (Amazon, Apple, Facebook, Google and now Walmart), that is here to stay. As the importance of cloud, AI and digital platforms grows, this competition will become even more formidable. As a result, banks are playing an increasingly smaller role in the financial system.”

Notice that he did not mention any of software vendors and outsourcers we have long known.

Walmart? Yes look at all the financial services they are into. Even more impressive is Apple. While everyone talks about the success of their devices, the biggest achievement Tim Cook has delivered is the move into services - App Store fees, Apple Music, AppleCare, and revenue from Apple Pay. And much of these are digital services not the labor intensive models outsourcing firms continue with.

BTW, JPM and other big financial institutions themselves are no slouches. They spend as much on technology annually as the R&D budgets of IBM and Oracle combined. JPM's technology group has an annual $11 billion technology spend. Who's to say they cannot become tech vendors in their own right?

c) In the last year, I have had a chance to speak to execs in several asset intensive industries - aviation, railroads, energy etc. It is impressive how tech savvy many have become. They are setting up digital twins of their equipment, making their assets autonomous, using AR in field service, sensors for predictive maintenance, investing heavily in OT (as different from IT) security. Some are eyeing plans to support other's equipment, even in unrelated industries. They are moving to servitization business models at stringent SLAs that are far more demanding that what tech vendors are used to. The asset management software of many tech vendors are glorified depreciation calculators. They have not evolved their functionality, and certainly not their business models. Don't count out the GE's, the Siemens and other industrial companies as potential leaders of tech world.

d) The pandemic exposed us to a world of new digital "channel masters". What's to stop an Instacart from pivoting from delivering groceries and setting up their own supply chain of farmers and consumer goods? Or a Doordash from establishing a chain of ethnic ghost kitchens? Or a Teladoc setting up their own network of telemedicine health care professionals?

I think this decade is going to be a wild one with a blurring of traditional tech buyer/vendor lines. I advise my buy side clients - don't just look at Magic Quadrants. They reflect yesterday's tech categories and yesterday's leaders. I advise vendor clients - don't define your addressable market too narrowly. If the competitors who show up in your win/loss analysis next year are the same as those that appeared last year, maybe, just maybe you are not evolving quick enough.