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5 minutes reading time (997 words)

We are tech companies and tech means cloud which means new business models

We believe that we are all tech companies. Obviously companies like Dell with hardware or Microsoft with software or Cisco with networking products or IBM with services or Salesforce with cloud software or even Apple with consumer electronics are recognized as tech companies that are relevant to the businesses that operate around the world. But this is not the extent of the tech industry.

We may or may not recognize financial institutions as being technology companies but the financial institutions themselves recognize that technology shapes their competitive environment. A recent memo from a senior executive at one of those financial institutions identified not their traditional competitors but Apple Pay as a significant source of future competition.

Automotive industry companies like GM, Ford, and Mercedes are also technology companies. We all recognize Tesla as a technology company because in essence its product is technology with electronics and electric engines. In the 1970s, metal was the single highest value component of a vehicle. In the 80s and 90s, computer hardware became the most valuable component of a vehicle, and today software is the highest value component in a new vehicle. A new vehicle purchased today contains often as much as 100 million lines of software code. For comparison's sake, the Android operating system contains about 15 million lines and Facebook has about 62 million lines of code. So a late model car is equivalent from a coding perspective to Facebook plus Android plus Android again plus a little bit more Android.

The taxi industry, represented by cabs in New York City and Toronto and Mexico City and a tuk tuk from Thailand, has been greatly disrupted by Uber which owns no cars but provides ride services around the world.

This huge opportunity for the creation of new wealth by disrupting existing industries with technology is driving quite a lot of tech innovation throughout the economy. As analyst David Moschella observed in a post entitled 'Dual Disruptions', a firm can be seen by the technology industry either as a valued customer or potential lunch for this Uberfication style of disruption.

Speaking of which, the hotel industry has been disrupted as well in similar fashion by Airbnb which by the way currently has more rooms available than any of the three leading hotel firms, IHG, Hilton Worldwide or the Marriott group, and it's expected that soon Airbnb will actually book more rooms than any of these three hotel chains.

And traditional industrial companies, such as GE, Siemens and Hitachi, are also moving heavily into the world of technology. In fact, Jeff Immelt, the chairman and CEO of GE, was famously quoted as saying, "If you went to bed last night as an industrial company, you're going to wake up today as a software and analytics company."

We can find similar examples of disruption or technology innovation in retail, healthcare, education, resources and manufacturing. We are all tech companies.

Tech means Cloud

And increasingly ‘tech’ means ‘cloud’. And what does the shift to cloud mean in terms of how we evaluate cloud and how we position it for executive management? Our contention is that if you were to look at cloud as a single day with the first minute being the first time the phrase 'cloud' was used and the last minute being the last time that 'cloud' was ever mentioned, and consider that as a single 24 hour period, then only about the first 90 minutes would represent the technology associated with cloud. The remaining time will be focused on the business management challenges and opportunities that arise from cloud. Today, we focus quite a lot on technology issues in cloud. We talk about IaaS and SaaS and private and public and hybrid because we're still in and approaching the end of the 90 minute segment of the 24 hour time period. But we'll be looking at the business management challenges and opportunities associated with cloud for many years to come.

“Tech” in the cloud era means “leadership, strategy and management expertise”

As 'tech' means 'cloud', it also in the cloud era means 'leadership, strategy and management expertise'. Techaisle’s SMB & Midmarket survey research data on total IT budget management shows that in small companies, businesses with 1 to 99 employees, business management is already responsible for more than 50% of IT budget decisions. In mid-sized businesses with 100-999 employees, business management is responsible for just over a third of total official budget management and allocations, and IT is responsible for about half. But adding the IT and business budget responsibility does not add to 100%. What's the gap? It's shadow IT, which Techaisle estimates is 16% of total spend within small businesses and 15% of total spend in medium businesses. This spend isn't, properly speaking, managed by anybody but it's often controlled by the business management or business users within an organization.

How the spending is allocated differs from category to category. If we look just at IT infrastructure, Techaisle stats show that in small businesses, business managers control nearly 60% of IT infrastructure budget decisions and IT controls about a quarter of these decisions. In medium businesses, the 100-999 employee businesses, the IT department is much more significant, controlling 58% of total expenditures on things like servers and networking equipment and related services.

When we look at applications though, we see that already in the official part of the budget, business management is responsible for 50% of application spend even within medium businesses, and if we add shadow IT to that, we find that business users are controlling nearly two thirds of application budgets today.

What does it mean? It means that we need better management from both an IT and a business user perspective of cloud initiatives as they proceed. There should less emphasis on business as usual execution and more on benefits, outcomes, strategy, and soft skills. This is essential for aligning the skills of technology and increasingly of business professionals with the outcomes that cloud enables.

12 points for Cloud Channel Transformation
New Belgium Brewing – a midmarket firm managing gr...
 

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Sunday, 15 September 2019

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