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Sunday, June 26, 2005

Shai Sees Outsourcing As The New Unifying Enemy For Business!!

Shai Agassi sees in the transition from Client server (or internet enabled client/server) architecture to a next generation Service Oriented Architecture, a repeat of all the same phenomena’s seen in the last mega shift (from Mainframe to client/server). It starts with a period of uncertainty focused around pure-technology discussions, followed up with a de-facto standardization of an agreed blueprint. Business/application discussion replaced technology application discussion as the main focal point for a significant eco-system/after market evolving around very few players. The previous change was so sharp it was almost brutal to the incumbents. The industry as a whole found a common enemy which moved every participant in the market with an intense fervor. The common enemy of the last wave was undoubtedly the mainframe – everyone wanted to get rid of the mainframe and many companies were hoping to build their business plans on reducing and replacing the maintenance cost for the big beasts, and the people that operated them.

Shai raises the question - Who is today’s unifying enemy –Shai jokes that some of SAP’s competitors actually had in mind a few years back that it would be that big element to replace, thinking of breaking the enterprise backbone into a small collection of components and letting hundreds of fish swim in coordination to make a single shark - unfortunately that plan didn’t work, as one cannot really replace the application backbone that easily, and SAP has actually figured out the SOA is a great thing and moved from a follower mode to a leadership position in the last 3 years. Geoff Moore’s great model for process innovation provides some insights in this scenario. In the past most of the resources got sucked in maintaining the mainframe application. The way from there is either back to investment in core or being outsourced. It is interesting that an identical phenomenon exists today - but not manifestable in a physical mainframe box. The enemy is still a fight for relevancy, and the fear is still pretty much the same only with a different name,- outsourcing .
Shai thinks that the unifying enemy could be outsourcing. – as the outsource step will not end in one move, rather it will become a “WalMarting” of the industry, regardless of any enterprise’s business plan. Today the rate of business model innovation has and is significantly accelerating. Shai says by outsourcing the IT of an enterprise, the business flexibility after the contract is signed is lost (think changes to your house plan after the master contractor has signed you in blood on the blueprint…think again). The master contractor may enjoy while while you are hoping none of your competitors changes the business model and you need to catch up. Catching up is really hard to do. The next big game is who becomes the industry disruptor, and who gets dragged behind. The disruptions are going to come in shorter intervals and with more brutal force. The disruptions will start interlocking across industries, and will feel more like Tsunamis than earthquakes.
My take: (Again personal views,like all other posts here- not related to my organisation in any way) - I await Shai’s second piece – but to me on the face of it, looking at outsourcing as the unifying enemy looks like an overstatement - also the effects and the nature of impact of outsourcing looks skewed & exaggerated - shall post my views after Shai’s follow –up piece.

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
"All views expressed are my personal views are not related in any way to my employer"