As Sodor wakes to a new year, Thomas and his friends notice some very disturbing things...
The end of the IT world train is arriving at platform one
Cheaper hardware and software prices in 2009 means that IT becomes an increasingly throwaway business. We're there with printers, and other plug-ins: expect much the same with PCs, small servers, most storage and productivity software.
Software has gone from purchase, to rental, to free open systems and is now rapidly moving to online service. But the growing mindset is to load up on low-cost standby equipment, and scrap the original when it goes wrong. In this environment, the clever IT specialist and expensive performance monitoring tools have less and less to do.
Forget complex processor technology or clever storage solutions. Install massive redundancy of cheap commodity gear. Google pioneered this approach in building its (and the world's largest) IT infrastructure, and established that this pays big dividends and provides incredible performance. Expect this express train to arrive in 2009 and pick up more and more passengers. Don't be surprised if Google is not just the driver, but owns the railway company.
Base-line IT services hit the buffers
Talking of Google the Tank, expect a corporate flight to its Apps and productivity tools (like Gmail) in 2009.
Google has positioned itself to be in this business, just as Amazon did in running other companies' electronic shops. Many of the big corporate names have been tire kicking Google services for months. It's obvious that they are well run, highly reliable and accessible. Commodity "dial tone" services offer better quality, performance and capability that anything the traditional legacy players can supply, and make in-house provision of these services economically laughable.
Clever old Google provides ever better tools to migrate corporate services to its platform. These tools get easier to use, introduce stellar security and avoid the need for - gasp - overpaid IT people, complex software and expensive infrastructure. Expect these services to go the way of payroll. This was once a must in-house application, now it is a must outsource.
The trains leaving for Asia is loaded with bundled back office services
Expect Asian outsourcers to climb over the European and US traditional outsource players (like EDS/HP and Accenture) and in-house IT organizations, and sell directly to administrative corporate functions in 2009. They already provide the people-centric intellectual IT engines of the world. So why should they not get as much of the margin as possible?
Call centers are a thing of the past - application software maintenance is increasingly low margin, so expect pressure for bundled back office operations - that's transaction touch, rather than customer touch. I expect 2009 will be the beginning of the end of in-house IT services.
Remember, if you are not adding clear value, then you must be adding pure cost. And the tolerance for this will be thinner than atomic particles in 2009 and beyond.
I suspect few legacy IT companies or old world IT Departments are ready to cope with this uncomfortable scenario, even though they know it is on the horizon. With the global economy providing the heat, and businesses laser-focusing on cost, expect this little chemical reaction to drastically speed up 2009.
The passengers are revolting
Just about every major company funds a junkyard of application systems and technologies attached to them. Few have had the incentive to fix this, much to the consternation of corporate IT departments. Remember the IT cost justification for that ERP system - all those systems that it would replace, but somehow never did. And recognize the fact that this residue of junkyard legacy counts for a big part of the IT budget, and generates lots of operational inefficiency.
Depression-level economics will force line managers to actually take charge of this expense they unknowingly caused. Expect systems on which the company is apparently so dependent to go, and with them much of the IT junk. As a result, expect a lot of high margin break/fix work that propped up the cash flow of legacy IT companies to disappear.
The Fat Controllers lose patience
Senior managers have moved from being in awe of IT's potential, to deep disappointment at its lack of pay-off. About now, expect them to figure out that process engineering etc. needs to go - see Asian Back Office above. Once this mindset starts, expect to see a whole different senior management attitude.
Google and Microsoft, both at their core, are people productivity-centric, and will likely play a much bigger front office productivity role - look at Google's Gears and Microsoft's front office re-emphasis. Watch the gathering rush to bundle solution technology between front office (which these guys own) and back office (which Asian outsourcers will increasingly own). What's left is innovation and application - good luck with that, IT boys and girls. That's a whole different world, and one that few IT grunts have ever lived in.
Finally, the wrong kind of snow on the lines
Expect high margin networking equipment companies to fall to earth. Increasingly, when dealing with procurement departments, expect them to fail to explain that products from the likes of D-Link that cost a fraction of their price, but have the same specs, are inferior. Hey, we all know they have the same basic building block components, work to the same standards and are already at throwaway prices.
And don't expect our pals at the telephone companies to hold the line. They are up to their ass in fiber, broadband and shortly WiMax, while consumers drain the landline and traditional phone services swamp. If you don't believe it - then use Magic Jack to provide your unlimited telephone and fax services in the USA for $20 a year. YES - TWENTY BUCKS A YEAR!
And as night falls on the Island of Sodor, Thomas and his friends worry about the scrap heap....
Cormac O'Reilly is a late sixties IT industry entrant with early developer gigs in London at Abbey National, Unilever & BOC. Senior IT oil field trash in the eighties and nineties; Schlumberger (Houston TX) and Shell (The Hague). Board IT big-wig at Costain (London) before CIO/CTO at Digital and Wang Global/ Getronics (Boston. His website is here.