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Productivity, Cloud and The Red Pill

I remember, back in 1.999, when The Matrix showed us the “Blue Pill – Red Pill Dilemma“. Since then, those Pills have become a popular metaphor for the choice between the blissful ignorance of illusion (the Blue Pill) and embracing the sometimes painful truth of reality (the Red Pill).

I don't know what you think, but I feel that, most of the times, we behave like Matrix Citizens. Things change and happen so quickly that we often don't realise what is actually going on. It's usually hard because it requires you to stop, step back, look around, think and, finally, share and review your thoughts with some others doing the same you do. And, believe me, they are not that many.

At this point in time you should know I am a big fan of Technology, IT, Automation, The Cloud and so many other topics. But, the fact that I love these questions and their opportunities doesn't mean I do ignore their downsides and the challenges they raise.

So, this time I will spend some time talking about these challenges. I do know that Complex Problems may not have unique and simple answers and I do also know that Problems, Solutions and Analysis change with their Context, mainly when we do prospective exercises.

This Red Pill won't offer you The Truth -nobody won't either. This Red Pill it's a snapshot of an ongoing and never ending effort to understand what's going on. I won't claim to be right, but this is a view based on a Context I can see today. I can be wrong or I could be tomorrow. So, don't forget to take your own journey and have your own thinking.

Let's wander around the “Not so Nice” and see what happens.

The Productivity Race

IT has been offering increasing productivity rates to The Economy for decades. These productivity gains have transformed Markets and Industries making them more competitive and, many times, changing their internal composition. It first starts changing the internal structure and behaviour of some companies and then, it changes the whole Market itself.

Different waves of evolution on IT -following the Adoption Curveimpact Labour structures driving a variety of transformations: role functional consolidations, synergies, expansions and, of course, destruction. Traditionally, the Labour-for-Capital Substitution Effect is at the root of all of these changes.

That's the way a Market Economy works and there is nothing wrong with that. The point is that we, the IT Industry, are now eating our own dog food as a Service Delivery supplier.

The Cloud Promise

Traditionally, the IT Industry has delivered Hardware and Software, “Things”, with or without “Services”. With the Internet Explosion, the IT offering has grown significantly as the whole Markets experimented a Globalization process. These two phenomenons have created an incredibly complex environment while the competitive pressures have also became even harder.

In this context, The Cloud proposition emerges promising Cost Savings, Better Quality of Service, Better Time-to-Market, Pay-as-you-Go, Dynamic and Elastic Capacity, Global reach, and, the best, a simple “as-a-Service” approach.

This collection of values sets a “New” Paradigm for further Productivity gains way beyond our traditional expectations. In fact, this paradigm shift will also change our DNA as an Industry: a transformation from a world of “Things” to a world of “Services” at high productivity rates.

What's behind the Scene

In order to build attractive and sustainable Cloud Offerings, the Big Players have invested on big and efficient Data Centers to obtain traditional Economies of Scale. They have also developed new Hardware and Software Technologies in order to multiply, by orders of magnitude, their own productivity just to be able to compete and survive in a Global “as-a-Service” Arena.

In fact, some of them have started sharing how much efficiency they have obtained through this process. Microsoft, for example, has claimed 10x efficiency growth in its Cloud Offeringsat last TechEd Conference. That means 1.000% productivity increase.

These productivity gains will also become Hardware and Software Products that will boost on premises infrastructures on the years to come. Now, you can imagine your local impact of productivity rates of 50%, 100% or more.

The world of Professional Services

Labour Regulations have favoured some outsourcing practices where the unit of trade is the “Body”. This way, you can find whole teams of people that work for a single customer for years on areas like Operations, Technical Assistance and many other types of outsourced services. In fact, it is a very simple model where “People” is marketed like regular “Things”. This way, prices can be arranged based on skills, global traded volume, and so on.

This scheme has worked fine for some time in a context where everybody seemed to win. Unfortunately, competitive pressures have started to push this model too. The question, then, is ¿how can we deal with these challenges? The answer seems to be easy: let the IT Professional Services Company take Control and Responsibility with an SLA. On this new scenario, Service Delivery could be:

  • Part-time Projects based on shared resources managed by the IT Professional Services Company.
  • Outsourcing Services where the IT Professional Services Company can play internally with Technology to increase its Operational Efficiency.
  • Adoption of Agile Methodologies.
  • Telecommuting.
  • Partnership with Third Parties for Service Layering.
  • Off-Shoring.
  • etc.

Unfortunately, this represents a huge Cultural change for many customers that are used to behave as regular employers with their external resources. Therefore, they force cost reductions while remain reluctant to loose control and change a relationship model that they know well and feel comfortable with.

It is also a shock for IT companies that lack a deep IT culture. These companies usually trade with IT as they would do with fruit. As a result, they don't want to deal with complexities of Project Management or internal IT Strategies to increase their own efficiency.

To make things even harder, real world scenarios involve multiple interests and players that go through this cultural transition asynchronously at different speeds and intensities. As you have just imagined, the IT Professional sits on the middle of these two forces in an asynchronous and ever changing environment… Yes, it's painful.

Market effects

Independent Professionals and Small and Medium Customers will love Cloud Services as it will cover their needs at price levels they can afford in order to survive in a competitive market.

Cloud Players will adapt its internal costs structures to match their brand new efficiency gains. HP, to give just a recent example, is cutting 9.000 skilled jobs due to Data Center automation strategies.

Big Corporations will also consume Cloud Services with different degrees of engagement and adoption: some may move all their desktop services to BPOS or similar offerings; others may use case-by-case approach. At the same time, they will also acquire new Hardware and Software Products that will boost their internal efficiency even further.

IT Professional Services Companies will use these technologies and methods if they want to be able to adapt their offerings with intelligence in this new context.

Outsourcing, Off-shoring, Bidding, Telecommuting, Supplier Consolidation, Mergers, and many other phenomenons will continue to happen at the same time…

In short, we are now the focus of the Creative Destruction process the same way we have been impacting other Industries for decades. This time is our moment. We need to change, adapt and evolve. New opportunities will emerge, but who knows if those will be enough … or not.


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Except where otherwise noted, ThinkInBig by Carlos Veira Lorenzo is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Published in Technology Virtual World