2015 Services tipping point - part 2

Profile picture for user cebess By Charlie Bess April 9, 2015
More context and implications on why 2015 will be so important for the service space and what you should look for.

cloud service button © paisan191 - Fotolia.com
After writing the story about how I see Services in 2015, Den Howlett sent me a short note stating essentially: That's great but what does this mean? Who will come out ahead and why? Not that he was looking for any specific predictions or fallout but he felt the need for additional perspective and more context building. After all Context is King – in this age of abundant data and processing. I’m addressing those concerns in this follow-up story.

One of the differences between the mega vendors - think IBM, SAP, Oracle etc - and the startups is the fact that those new to the marketplace have nothing to lose with no or little installed base to support. As these major changes to the underlying technologies enable the shift from products to platforms, it means more than just new products or even product lines.

Those with a large embedded base are going to have to reassess their foundational beliefs and that is never easy. They will need to cannibalize licenses and large but rarely executed transactions for a more incremental and continuing flow of value and hopefully revenue. Their management teams made their bones competing in a different world and more importantly their sales organization did as well. Inertia alone will keep them from capitalizing on the service shifts underway.

The focus needs to be on the people and the value they can generate, not the technology. It is about selling to the business and meeting their needs and not just through the CIO. Some complain about the issue of shadow IT and its undermining of the CIO’s authority but let’s face it -- it is still information technology that needs to generate value no matter how it enters the value stream.

Those organizations that can see a crack in the current way value is generated and wedge their solution in to make a difference will have an impact. Remember when using a wedge, the small end usually fits into the opening better! Although Moore’s Law is driving down the costs of technology, the markets demand for consumption is increasing at an even faster rate.

I was talking with an individual the other day about the ways the big-data and IoT technologies can be applied in areas like healthcare, energy and transportation industries. We easily came up with a number of scenarios where a near infinite amount of funds would be available if a real solution was defined.

You’d think the big players have an appetite to tackle those issues, but the quarter by quarter decision making process holds them back and the small teams that are interested rarely have the financial backing of the corporation to lean into the opportunity. The startups and private companies can take a different and hopefully longer view to what research and development on these issues will mean. The services that fall out can be that gift that just keeps on giving, to all involved.

That larger quarter-by-quarter based decision making approach combined with the drag of the installed base will make it unlikely for the large organizations to excel directly. But as pointed out in the Innovator’s Dilemma, once they see a path to success, they can always snap up the startups. We’re seeing that behavior from Google, Apple and others. What is interesting about Amazon, Apple and Google is they are putting the platforms in place to permit the startups to emerge so that when they do acquire, their relationship will already exist.

The big players will only acquire the startups if they have a vision they can use to justify the expense. Few of the larger players have the aspiration and intestinal fortitude to make it through to investment. Ask them about their vision, see how it aligns to what you need to do. If they can’t articulate it well enough or don’t have the depth to address the follow-up questions be wary.

Some big player areas that remain exciting though are:

  • IBM’s efforts with Watson although I wish they’d focus on better questions and not just better answers.
  • HP’s underlying infrastructure defined by The Machine. It could enable tackling whole different domains of business problems.
  • Google and Salesforce’s approach to the service enablement side of business. They are constantly changing and focused on enablement not just selling things off the back of a wagon.

Oracle seems to be continuing to milk its cash cow, so I don’t have exposure to its disruptive influence. For SAP, I’ll find out more about it next month at SAP Sapphire.

Although many of the analysts talk about the various trends, their discussion of the implications from a services perspective are weak at best. Where I’ve actually started to look for inspiration is in the vision statements of some of the larger players in the various industries, to see if they can articulate what the implications will be on their business models. That’s where I’d look for opportunity both as a supplier and a consumer of services.

Image credit: cloud service button © paisan191 - Fotolia.com