EVOLUTION OF BPR

Musing on changing economics of IT

Posted on the October 27th, 2008 under Business Risk, Change Management, Enterprise Software, SaaS by Gregory Yankelovich

This week’s special report on Corporate IT in the Economist examines economical implications of changes coming with advent of “Cloud” computing. While people are still debating definitions of the term, and the concept is not as new as journalists and marketers (wait, it there a difference?  Hmmm..that a subject for another post) making it to be, this report is attempting to cover much wider implications, as I have read before. Quite interesting read in general, but there are two areas that resonated with me the most:

1. As and if the concept of “cloud” becomes more acceptable from corporate, legal, social, etc. points of view, more corporations will start to outsource their business processes, that are not their “core” competence, to BPU’s (Business Process Utilities). How many corporations still run payroll in house? Today most companies collect their payables in house, but as as they age beyond certain point, they do outsource collection to the specialists. There is nothing new to this except the reach, flexibility and the scale which could escalate substantially;

2. As the investment barriers for entry into the software business coming down, the “cloud” offers enormous leverage for fast scaling to meet requirements of any large customer. As SaaS successfully demonstrated, the current software licensing model is no longer license to print money. But even SaaS vendors finding they subscription fees under pressure.

software vendors will have to find new ways to charge for their wares: in the cloud, tying licensing fees to the number of users, for instance, will be difficult, since services will mostly be consumed by other machines. More importantly, the corporate world has become less and less willing to buy software for large sums of money, so software firms listed on America’s stockmarkets now make most of their profits from maintenance and other services

The scary part is that software business model transition may find itself on slippery slope similar to the music recording industry have discovered.

Power of many little voices

Posted on the April 18th, 2008 under Change Management, Enterprise 2.0, Organizational Transformation by Gregory Yankelovich

Whatever I have said before about “social enterprise” zealots, I need to take back now. They obviously saw something these, which many practitioners, like myself, have difficulties to apply to corporate IT initiatives. The Economist published a very interesting article this week “Disgruntled small investors in Canada flex their muscles” that is well worth reading, which describes how asymmetric relationship between large number of small customers and large institutions can unexpectedly be challenged by use of social networking and other tools of Web 2.0.

Following the example of their children and grandchildren, some small investors formed a group on Facebook, a social-networking site, to trade information, provide mutual support and plot strategy. Brian Hunter, the group administrator, says the site turned out to be an “amazing tool”. People who would never have met in real life, from pig farmers and retired loggers to MBA students and pastors, created a formidable interest group.

Campaigners were able to ensure that investors armed with information attended cross-country meetings held in late March and early April by the backers of the restructuring deal. “We had 300 raging grannies show up in Vancouver,” says Mr Hunter. “[The backers] got their heads handed to them at that meeting.”

The efforts of the campaigners paid off on April 9th, when Canaccord Capital, the investment broker that sold the paper to just over 1,400 of the 1,800 small investors, reversed its previous decision and said it would fully reimburse clients holding C$1m or less as long as the broader deal wins acceptance. Other companies have made similar promises and more are expected to do so before the vote.

If institutions are not capable to learn how to play on a more leveled playing field, the financial consequences can be devastating. That will probably apply to politics as well.

You go Grannies!