As the economy continues in its slump, there are economic forces at work that will change the way we use technology. By the way, we are far luckier than physical anthropologists, who can only pick over old bones to figure out how humans evolved. In high tech, we get to watch evolution in real time.
Although many may argue that lower earnings are putting the squeeze on IT to do more with less, I believe that over time, the real impact will be lower expectations of what the operational side can do for the business. At the enterprise level, IT will seek to execute less costly solutions to meet these limited prospects. Companies can no longer afford to pay US$5 in consulting costs for every $1 they spend on the software license.
Let’s look at this evolutionary process as it plays out in two distinct stages.
It starts in the midmarket, which enterprise-application vendors have suddenly discovered. They are creating less complex, largely point solutions that are not only easier to install and manage but are also far less costly.
For example, by the end of the third quarter, Big Blue will introduce PLM Express, a product life-cycle management application targeted at the midmarket. PLM Express is indicative of stage one in the evolutionary process. With a lower price tag and smaller footprint, it’s not the same animal as the monolithic PLM application that IBM sells with its partner Dassault Systemes to GM and Boeing.
The current climate is also fostering boutique software vendors such as Fort Collins, Colo.-based CoCreate, which launched its PLM package OneSpace.net earlier this month. CoCreate may be far smaller than IBM, but it shares the same philosophy for the midmarket: “We solve a specific problem,” says Irv Christy, director of marketing at CoCreate.
But this is only the tip of the iceberg. It won’t be long before these midmarket solutions gain the attention of the greater enterprise. CIOs and CTOs will see the relevance of applications that can be used to solve a short list of pressing problems. And with the advent of XML and other true integration technologies, point solutions will no longer be an anathema to the Fortune 1000.
As with any evolutionary force, once the process starts, it rarely, if ever, reverses itself. A new day is dawning in software that will be far more competitive, far less costly, and far easier to evaluate against a return on investment.
As with any good theory, there has to be a caveat, and John Parkinson, chief technologist at Cap Gemini Ernst & Young, in Rosemont, Ill., came to my aid with a few “yes, buts … .”
Parkinson sees a spectrum of attitudes in the enterprise. He believes there are the habitual early adopters, such as Wal-Mart, FedEx, and Fidelity, who culturally believe that technology is a competitive weapon. “What’s happening with them is it’s a continuing series of big bets because they can,” Parkinson tells me.
But early adopters represent about 5 percent of the Fortune 1000, about 50 companies; far too small a target market for most vendors.
At the other end of the spectrum are the “pain avoiders,” companies that have had it with technology and may be looking to outsource. That’s 25 percent.
If Parkinson is right, that leaves a large segment of the enterprise that will make point-solution software vendors the dominant species.