Opinion: In this true global economy, companies are free to compete with anyone, regardless of size, and software vendors are forced into new roles.
The race to the top of the economic ladder is on, as jobs are increasingly becoming digitized and therefore virtualized, enabling knowledge workers from all over the globe to compete for coveted high-paying positions.
The Internet, broadband access and open standards have broken down geographic and political barriers, enabling companies to freely move operations not only to where the labor is cheapest but also to where the highest-skilled labor force is.
While industry pundits have been preaching about the need for every organization to become agile, economic and technological forces have converged to force agility upon us perhaps faster than we had planned. This is how it should be: After all, organizations cannot hope to avoid the basic laws of physics, such as an object in motion tends to stay in motion. If you are a company or an individual, for that matter, that is at rest, you will likely remain that way, passed by other companies and individuals that have figured out that the new law of the jungle is innovate (change) or die.
This new "flat world" reality has been happening for hundreds of years really, but the pace at which it is happening has quickened to light speed. The IT workforce will feel the brunt of this change, as they are both the architects and victims of the capability being created around the world.
But this change also impacts the traditional role of vendor and customer. Those that look to find their niche in the coming economic reality will be the end-user organizations that best leverage the flat world and those vendors that make it possible for them to do so.
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So organizations are looking to do many things at once, and this is no time to slow down because we are, all of us, racing companies and knowledge workers to the top of the economic ladder.
There is no room for mediocrity in this race, so companies will increasingly look to "in-source" specific capabilities that will enable them to better compete. Just like UPS today provides customers with expertise on how they can improve and expand their logistics capabilities so that even small companies can compete with the big boys, so to will software vendors have to change to meet the new demands of the 21st century.
So a company looking to improve its supply chain and customer relationship management capabilities may hire a company like Teradata to bring its expertise in-house to design an end-to-end analytic infrastructure for that company. Instead of selling hardware, software and services, Teradata would sell them their expertise in analytic data management, scalable and sustainable infrastructure. The organization may not buy any software from Teradata at all, or Teradata may host the infrastructure for them.
Companies might hire IBM to design a data integration layer that ties in all of the organizations information infrastructure, even those parts that have been outsourced to special service providers. Oracle might design and provide in-sourced data management capabilities. Oracle, in turn, could partner with smaller vendors like Solix Technologies that could provide the data infrastructure hygiene capability to enable the archiving, search, retrieval and subsetting of an organizations unstructured e-mail, documents and reports, as well as structured relational data.
The era of decoupling is upon us where software vendors are either specialists,
seeking to maximize competitiveness of a specific capability by competing on operational excellence, or integrators,
who optimize the competitiveness of the output of the various business systems.
In other words, we are approaching the end of the software-as-product era. End-user organizations will have neither the time nor the budgetary fat to support bloated, expensive internal infrastructure. What will be bought will be a vendors expertise not only in developing market leading software but more importantly in using that software to add value quickly and cost-effectively for its customers of all sizes. Those customers are now capable of competing globally on a level playing field with other companies regardless of size.
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The result is a flattening of the end-user organizations as well. A move away from a vertical chain of command to a more horizontal organization that can collaborate more as peers and can speed the much-needed innovation.
The software vendors will no longer be able to throw their products over the fence and hope for the best; they will be forced to eat their own dog food to an extent never seen before in this industry.
In the end, however, this evolution will spur even greater demand. The worldwide economic pie will continue to grow, and there should be more room at the top of the economic ladder for everyone, be they in Boston, Bangalore or Beijing. But we had better start running now, because the race is on.
Charles Garry is an independent industry analyst based in Simsbury, Conn. He is a former vice president with META Groups Technology Research Services. He can be reached at firstname.lastname@example.org.
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