I arrived at Gartner in 1995. My colleagues there were doing Congressional Hearings, had thrown out a number of $600 billion for enterprises to fix the Y2K bug – stuff which woke up CEOs and Boards to their technology challenges. Over the next 5 years, our applications analysts handled a fire hose of client calls about TLAs we had coined – ERP, CRM etc. In my case, it approximated 10,000 30 minute calls (yes!) related to the software vendors and related Sis – we logged every call in a database Gartner had built. The patterns across those calls meant our Magic Quadrants basically wrote themselves.
At Deal Architect, we have already been tracking a stream of new applications this decade. COVID. Ukraine war, climate change and massive digital transformations have made many vertical edge applications viable – telemedicine and personalized medicine in healthcare, EV battery management and billing in utilities, intelligent returns and reverse logistics around eCommerce, Direct to Consumer and related last-mile, small-lot logistics in consumer industries, CPQ for industrials to handle complex outcome based pricing which bundles product, spare parts, all kinds of monitoring and maintenance services, financing etc. And many more for other sectors.
There is also a growing number of applications aimed at rapidly growing economies around the globe – they factor unique business practices and digital trends, local languages, currency, scripts. taxes, regulatory and other nuances.
Beyond these new vertical and geographic applications we are seeing a new generation of AI and data enabled applications. This week at Dreamforce I saw Marc Benioff interview Sam Altman of OpenAI – the man who without needing any industry analysts has single handedly started a new Y2K type stampede. And in addition to the multitude of use cases I heard about during the event, Sam threw out another potential category. In his keynote, Marc had said “They call them hallucinations; I call them lies. These LLMs are very convincing liars.” Sam basically said hallucinations are not a bug, they are a feature. “A lot of value from these systems is heavily related to the fact that they do hallucinate….If you want to look something up in a database, we already have good stuff for that…The thought before was that physical and repetitive tasks would be transformed first before moving on to creative endeavors. The model takes existing data and presents it in different, novel ways (so can be used for creative and strategic work as well)
In a different session, Peter Schwartz, Futurist at Salesforce responded to my question how his Shell (the global oil company) Scenarios Group in the 70s (and comparable ones today) could benefit from today’s AI
“Most people are uncomfortable with uncertainty. They'd rather deny the uncertainty that's inherent in most of the methodologies around things like scenarios. It's not about predicting the future. It's about making better decisions today by looking at the alternatives and managing the risks both the upside and downside far better. I think AI will be a very useful tool in that. Think about it as a current conversational strategic planning partner that presents alternatives. In fact, one of my very first applications of ChatGPT was writing an article on the future of electric vehicles. And I said, give me three scenarios on the future of electric vehicles. And it gave me three really smart ones. I didn't use them literally in what I was writing, but it was a great start. And it was really amazing and actually being able to create alternatives. So when I think about it, frankly, most companies, especially small and medium sized companies, don't have somebody like me working for them. Now imagine an AI strategic planning partner that's trained on various alternatives on the methods. the mathematics of various kinds of models, and can generate real alternatives for small and medium sized businesses”
To Peter’s point about uncertainty, Gartner had taken those scenarios a step further. We assigned probabilities to them and were actively discouraged from publishing any which had a probability of 0.4 or higher. That meant it likely was not bold, edgy enough – it likely did not have enough uncertainty factored.
Couple of weeks ago, reacting to Snowflake CEO’s comments about Nvidia’s blowout quarter, I had written the premium costs driven by GPUs and scarce AI talent would lead to “premium AI applications” being prioritized. Drug discovery, mineral insights, trading patterns, design nuances are some of the use cases which would justify them. I also said “For many vendors, their predictive AI may offer more value to customers than generative AI. If you can preclude unplanned shutdowns of expensive assets with preventive maintenance AI or you can reduce production and logistics footprint, waste and scrap through better demand forecasting AI, that may be exactly what your customers need.”
The good news about Dreamforce (and likely again at Workday Rising coming up in a couple of weeks) I heard plenty of generative AI use cases. Between the vertical, geographic and now AI enabled applications, it should allow the Gartners to come up with a new gen of TLAs. I also heard about CEOs and Boards really energized (trust me, they grudgingly go along with compliance, ESG type projects). Except, that given the shocks of the last few years – COVID, Ukraine etc. – most enterprises have seen their industries and countries radically transformed and they expect a lot more agility than they did around Y2k.
Besides the agility, I hope companies are also less wasteful than they were around Y2K. In the 90s, I saw massive project overruns, plenty of shelfware, suites which underperformed and had to be ring-fenced with best of breed solutions. I also expect enterprises will want their projects to be much more automated. AI should also allow SIs to rethink their labor-intensive delivery models.
I am looking forward to another fire hose of application functionality, architecture and implementation conversations. It’s the got the same feeling I got when I got to Gartner in 1995.
As Yogi Berra famously said: "It's déjà vu all over again."
Burning Platform 108: New Frontiers for Enterprise Applications – Part 2
For the 107th and 108th episode of Burning Platform we hosted Brian Sommer of Techventive.
In Episode 107 he presented on 3 recurring themes he is hearing from customers and vendors - War for Talent, ESG and AI. For my turn in this episode I provide a 25 year retrospective of cloud applications and describe massive untapped opportunities as we Re-globalize, as Industries morph dramatically and customer base migrations scream to be turbocharged
Re-Globalization
Starts around 1.52 in video below
I tackle lots of idle talk around de-globalization, de-dollarisation and de-industrialization of Germany. I discuss how MNCs are rapidly churning their country portfolios. How several vibrant new economies are the new “Tigers”. How static software vendor functionality and global presence increasingly shows them stuck in the “Old World”
Brian explains that global expansion is expensive in the traditional software sales model. The reality is hyperscalers continue to lead the way with massive global investments and a new class of software vendors is more adept at digital channels and will support the changing globe far more effectively
New Industry Landscapes
Starts around 16.50
I discuss how the pace of industries converging and morphing has increased given all the economic shocks of the last few years. Lots of vertical edge applications have become viable and now a new wave of AI use cases is coming which will leverage industry specific operational data.
Brian believes SIs are better positioned for verticals with their account control and large investment mindsets. He says most applications vendors love to enhance their platforms with new waves of technologies. They actually find developing new applications boring; He could well be right.
I believe a new wave of vertical application vendors will emerge. And customers will increasingly build v buy such applications. The reality is one way or another there are major market chunks waiting to be won or lost. Well-designed vertical applications have shown themselves to be very sticky with revenue streams stretching decades.
Customer Base Migrations
Starts around 30.50
I present the depressing graphic that customer bases have migrated at a very slow pace and we have ended up with a “reverse shark fin”
Brian explains that is fairly common tendency with laggards in most customer bell curves. I counter that many vendors have unusually large 50 to 80% of their customers on very old versions. Even the risks of not being in audit compliance or projecting a negative recruiting profile have not motivated them to migrate.
It’s time to leverage GenAI, RPA, accelerators, conversion factories and other automation to dramatically lower the time, cost and risk of such migrations
Every one of the three opportunities I present is massive. However, it will take a fair amount of focus and investment. Who will step up? The next few years should see a lot of churn and chaos. Or if you see the glass as half full, lots of new opportunities
December 05, 2023 in Burning Platform, Global and Vertical extensions, Globalization and Technology, Industry Commentary | Permalink | Comments (0)