Just over 2 years ago I first wrote the post entitled “unbundling the bank” and hear I am finding myself planning a talk at CloudCamp next week entitled the same! The title, I thought, came to me earlier this week when I had chance to visit a team of Enterprise Architects at a large UK bank. I was sure the title was not “original” and came from somewhere, so you can imagine my surprise when I did the necessary search and my blog came out on top – lol!
What I really love though – is that the thoughts are just the same, the evidence however continues to mount, pointing towards the further differentiation of IT, but increasingly of the business itself, from “centralised vertical models to decentralised models made up of “single value specialists”.
Unlike my talk to bankers back in 2007, this time, the EAs are thinking about the implications of cloud and software+Services more seriously, and while most would say never, to some the light bulb is on and the opportunity for disruption is imminent!
One thing I really liked and had forgotten about the talk by Craig Heimark back in 2007 is the drive to “create increased value to the consumer at the expense of the margins; the higher the volumes the lower the margin” which to my mind reads “commoditisation”.
In the old world view of innovation, it would make sense to keep this closed or hidden, to maintain ones market lead at the expense of competition. Thereby keeping margins high.However, in an open innovation model the race to commoditise is high, Keeping margins low to avoid competition and drive to mass market appeal and therefore scale quickly. If an innovation does not scale in terms of consumer appeal then it’s not an innovation worth pursuing.
Although, it takes time for shift to happen, there are examples all over of this taking place. Below is a list of common occurrences that may take place in isolation or combination but are enablers in moving towards a more “composite enterprise”. I’ve covered some of these previously so some repetition might arise
Rise of Multi-sourcing
As discussed previously. Enterprises that have outsourced are actively re-insourcing, but in so doing they are differentiating between what comes in and what stays out. The latter are often non-differentiating or commodity, but by going through this process the results seldom remain with the encumbent outsourcer but move to new specialists.
Service Provider Convergence
The traditional models of software suppliers like system integrators, outsourcers and ISVs are converging. The SI is moving away from delivery of bespoke software to the delivery of bespoke services, software no longer lands inside the organisation’s datacentre but is automatically outsourced by the integrator. The integrator has a shared risk-reward with the customer – they are innovation partners with a desire to grow the market of the service itself, not just the value it itself fulfils.
Delivering Innovation as a business
Many enterprises are project-driven, but this is a mis-understanding, it is more that they are project-organised, they are in fact innovation or opportunity driven. The problem is they don’t realise this due to the project-based mentality that results. By taking an innovation-driven approach it is easier to see this as a business investment and to consider creating a structure that mimics more of a business than a project. this has dramatic and profound results both in terms of outcomes, but also to the people involved, the processes they create and the resultant capability that they generate.
Closely related is the rise in innovation hubs or R&D centres, that incubate or provide support to new pilot innovations. This extends outside the enterprise too, to the service provider communities where a joint risk reward reduces up front costs of innovation in favour of longer term commitment and profit, leading to the model of collaborative innovation between partners.
Rise of the new COTS Service
A great example of the re-rise of COTS (Service) is the growth, adoption and subsequent mass-customisation of the large ERP systems over the late 90s and early 00s. For those that invested heavily, there is an increased growth in EA projects looking to detangle the enterprise from these investments in favour of the new COTS Services often delivered over the web as SaaS. The simple question being why customise what doesn’t differentiate? Furthermore, by taking a simplified ‘industry standard or accepted’ approach to a business problem you start to create the opportunity to chose who delivers the service over time.