The other night in the cinema, waiting for a movie to begin, I realised I was surrounded by activity - young men and women working their cellphones/PDAs. They weren’t txting but accessing online games and information off the web – killing time before the film began. This brought home to me how ubiquitous the internet has made the power of computing. When I started writing this column the idea of being able to access the internet from a movie theatre was still science fiction. We were still largely tied to our PCs, internet access was dial-up and mobile phones were for voice communication and txting by a few. That was just four years ago. Today, I join a growing number of clients and colleagues who run their business from a wireless laptop wherever in the world they happen to be, and this is not simply to access email and information on what is happening in the office. For the lucky few who are able to live in realtim,e it means being able to make operational decisions and changes as events are unfolding -- not having to wait for a printed report, until the results are in and the outcome cast in stone. It is very hard to appreciate the period of change we are going through in the information age. Change is only really evident retrospectively and we are going through a shift in hardware and software development, the significance of which -- for most -- is hard to gauge. We cannot under-estimate the power of having information available in realtime as and when we want it, wherever we may be.
We talk about information and communication technology when what the vendors are trying to achieve is information and communication becoming one entity. Access implies the ability to link things together, enabling the centralised integration of information and xommunications: the generation at the cinema are certainly fully integrated.
The power of realtime access was recently brought home vividly to me by one of our clients. The CEO had been interviewed by Jane Smallfield of the HiGrowth Project and, of all the interesting quotes, the quote that most caught my attention was a comment about accessing his company’s system from a wireless laptop in a Beijing café, being alerted to a margin-threatening situation and being able to intervene in his business’s processes to address the situation before the order proceeded any further.
Access casts a light into any corner of the world. Someone in New York can preview whale watching in Kaikoura and book it from their living room, just as my friends at the cinema can find a restaurant while they wait for the movie to start. We now accept this as the norm when just six years ago it was unknown. For many, www.wotif.com is the only way to book hotel accommodation.
Yet from researching this area we find that if we put the enterprise software environment into a human evolutionary context, 80% of the world is still living in caves and only 2% have made it to the equivalent of a penthouse apartment. There are two statistics indicating the end is nigh for enterprise software as we currently know it.
1. According to Gartner, the cost of implementing a new system is nine times the cost of the software itself. If you buy a $50,000 software package, the likely cost to implement it will be $450,000. Don’t forget that nearly 80% of all new computer system implementations fail to some extent the first time and need considerable re-working to finally deliver – think INCIS. This first fact is responsible for the second.
2. The reason implementation costs are so high relative to the software purchase price is not so much because installation costs have risen but because software purchase prices are falling. Consequently enterprise software companies are showing increasingly weak results and are being acquired by aggregators -– think Computer Associates.
Now just a handful of companies control 80% the enterprise software market. SSA Global Technology is a good example. Having bought numerous software companies, it now controls a sizeable chunk of the trillion-dollar market base and is well placed to ensure maximum profitability is derived from the user base over which it holds sway.
There are two kinds of enterprise software -- personal productivity, the type supplied by Microsoft that costs a few hundred dollars and takes an hour or two to load on your PC, and enterprise applications such as those from SAP or Siebel that cost a couple of million and take years to fully install. You don’t need to be a rocket scientist to see a gap in the market. Personal productivity software is designed for use by one individual –- it is no good for teamwork, whereas EA software can handle the sophistication of complex business activity that cannot be achieved by personal productivity software. The downside is, however, that EA software is confined to a fixed data model and is very difficult to change.
To support our ever-changing realtime world we need a new generation of enterprise software that takes the best of both worlds -- flexible/productivity driven software that handles the complexity of enterprise system processes. I call this “enterprise productivity software”.
We are starting to see a landscape emerging of real-time enterprise where, like your nervous system, the computer is able to be realtime responsive and reactionary. The focus is away from gathering data in warehouses and then mining it, to being able to immediately access the data you need as and when it is created. You really don’t have to look hard to find the opportunity.
How many businesses today don’t use a computer system? Even the café on the corner runs business software as part of the franchise it belongs to. There are millions, from small to large, making up the $1 trillion value of installed software.
What we now need to focus on is the way software technology is going through a paradigm shift thanks to the communicative power of the enternet. I describe this change as the equivalent of the move in the hardware world from valve-based behemoths to integrated circuit-based minis; a truly huge change.
We have been schooled by hardware manufacturers to upgrade every few years to increasingly faster models; hardware vendors having built replacement into the market psyche. Software is not in same arena. The average age of the installed base of enterprise software is between 10 and 15 years. The last mainstream product releases, such as JD Edwards’ Oneworld software, came out in the mid 1990s. New product in this area is just not getting to market. From what we are told, there must be thousands of companies running software that is obsolete –- even running on obsolete hardware. They put up with it, keeping it running with patches, because they can’t find anything that is worth the pain and expense of a new system implementation -- until now.
Whereas the integrated circuit democratised computers so they became more affordable, enabling a whole new class of entrepreneur -- such as Bill Gates and Larry Ellison -- to emerge, now internet based software extends the franchise to everyone, everywhere who can access the web. We can achieve the full democratisation of computer power.
It is really too early to tell what form this change will finally take but -- whatever it is -- New Zealand should be well placed to take advantage of it. This was highlighted in the recent visit by Maggie Wilderotter senior vice-president of Microsoft's Worldwide Public Sector. She says New Zealand's reputation as an early adopter of technology has gained it worldwide kudos and cited the Microsoft Innovation Centre set up in New Zealand in association with the government as an example of a “world first” that is now being launched in 13 other countries.
We are always trying to justify the future in terms of the past, always refining our expectations of return on investment set by the paradigm of our time. Change the paradigm and you change the expectation. So, what do we have to look forward to?
Among other things, we can expect low-cost display technology to enable realtime face-to-face communication, projecting life size images – and believe me size does matter in this instance. We can’t possibly under-estimate what this will mean to the way we conduct our lives and our business. Virtual meetings will become the norm, opening up global markets and removing the need for a large percentage of business travel. Maybe Auckland’s roading problems are about to be solved, virtually. When you can see the whites of your customer’s eyes in realtime, enterprise software will have to be realtime as well or business will suffer.
It won’t be for another few years that I will really be able to write about the dawn of the new era that has arrived. Maybe it is a good thing that Kiwis are nocturnal birds -- we might just be able to get the jump on this one before the new day dawns.
John Blackham is a well known Auckland entrepreneur developing his own software solutions. Contact Blackham at email@example.com.
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