The fast and furious future

Prepare for the wholesale disruption of current business models, futurist Mark Pesce tells CIOs.

Two years ago, a group of San Francisco based entrepreneurs set up a company called Uber to meet the needs of a niche group — passengers queing for limousine services in airports. Rather than establishing a centralised switchboard and dispatching centre, they developed two smartphone apps for the iPhone, with a transaction engine running in the cloud.

For its services Uber takes a cut of the fare, and is now disrupting taxi companies across North America, says futurist Mark Pesce, founder of FutureSt, a Sydney-based consultancy which helps enterprises negotiate the challenges of a “hyperconnected future”.

Pesce, who spoke at a recent CIO forum on the ‘new future of computing’, says Uber represents a new business model that has no expensive infrastructure, no overhead and very low calling costs.

Bringing Uber to another city — or country — is as simple as distributing the apps to drivers and passengers — and Pesce says such a company will be easy to launch in this part of the world.

Another example closer to home is the Australian startup AirTasker. Pesce says the firm launched a smartphone app that allows anyone to post a request for labour, together with location, time frame and proposed payment.

The request goes out to every smartphone-equipped AirTasker, and the latter can respond with a bid to complete the task. Like Uber, AirTasker does not need significant infrastructure, just investment in development for the apps and cloud services, and plenty of accounting to handle the specifics of the transactions, says Pesce.

Pesce says enough enabling technologies in software and cloud services make it possible for companies like Uber and AirTasker to be created “very quickly”. These services can be developed in three months or less by small companies, and need a very small amount of infrastructure and capital to run — making it difficult for larger organisations to react to them.

Pesce then focuses on how these trends will impact the financial sector. He starts with the famous quote of Bill Gates that the world needs banking, but it does not need banks.

Uttered in the late 90s, this sentiment is truer now than it ever was, with the advent of connected web businesses that are replacing key banking functionalities and often doing a much better job, he says. Some of these firms are startups, others are well established businesses.

For instance, PayPal is now the de facto method for international currency transfers. It removed much of the friction around transactions crossing national borders. The company is spreading towards the transaction space, aiming to offer a service whenever a transaction occurs in cyberspace.

Another major player is the Royal Canadian Mint which recently launched its MintChip. This is a memory card that acts as a secure wallet for electronic currency. Unlike an Eftpos or a credit card, the transaction takes place locally, instead of being mediated by a bank or clearing house. It is like cash in every respect — portable and difficult to counterfeit, but without the unnecessary physicality of paper money. It melds the “best features of both the physical and connected world”, says Pesce.

Read related article: The new disruptors

His presentation before CIOs zeroes in on the impact caused by the fastest deployment of consumer technology in history — the smartphone.

“It’s going to change our commercial world inside-out, as the market moves from something located at a particular place and time, to a feature of the network. Everywhere we are connected, we now bring the market with us,” says Pesce.

These parallel trends have a profound impact on labour, leading to the creation of an interconnected but intermediated workforce. Low-friction labour services like Uber, AirTasker and others let people who would otherwise be out of the workforce supplement their incomes with short-term tasks or gigs.

He predicts the century-old labour model that is most prevalent in New Zealand will gradually be broken into smaller gigs, and smaller still tasks. These tasks will be created and undertaken using smartphone apps, leaving established companies, which would usually work as intermediaries, in a vulnerable position. We are already seeing this with freelancers and contractors, but it will only become more common, he says. “Think of the smartphone as a recruiter, where you’re bidding for talent and services.”

Pesce says the development of these services is outpacing current labour laws and regulations.

Rethink and redesign the business

Pesce, however, proffers a way for businesses to thrive through this transition — by wholesale disaggregation of their services. This entails rethinking their functions and services and redesign to accommodate delivery of the disaggregated services.

As an example of this concept, he cites In 2006, Amazon CEO Jeff Bezos sent an email throughout the organisation to transform it from a monolithic online retailer into offering a range of services. Amazon opened its APIs to third-party developers creating a diverse environment of apps using Amazon services. Amazon also sold its spare server capacity, creating what would become Amazon Web Services.

This was the first modern cloud computing platform that allowed companies like Twitter, Dropbox and Instagram to build themeselves into billion dollar valuations without investing in millions of dollars of computing infrastructure, he says.

He then points to a key differentiator of the new business landscape. “The ultimate validation of your services offerings is not when they’re taken up by your local customers, but by your competitors,” says Pesce. In the case of Amazon, the number one customer for its web services is Netflix, which directly competes with Amazon’s on-demand streaming service.

For Pesce, this is the way to go for every business. Firms that can offer their partners, customers and competitors solutions for a “fast, frictionless and connected world” will survive the wholesale disruption that is already upon us, he concludes.

IBM sponsored the CIO breakfast on “The new future of computing” as part of the global launch of its PureSystems services (see sidebar on next page).

Sim Ahmed (@simantics) is a reporter for CIO New Zealand.

Divina Paredes (@divinap) is editor of CIO New Zealand.

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Sign up to receive free CIO newsletters.Sidebar: IBM's new PureSystems line assembles hardware and software in an integrated package By Joab Jackson, IDG News Service

Anticipating a growing need for larger preconfigured systems, IBM has unveiled a new product line of integrated sets of IBM hardware and software, called PureSystems.

"We see this as a major new category of systems, one different from appliances and custom solutions," said Marie Wieck, IBM general manager for application and integration middleware.

Unlike appliances, which tend to address niche uses, PureSystems packages will have a potentially wide user base, given the general duties they can undertake. And unlike custom packages, they can be deployed relatively quickly, Wieck said. These two packages "pre-integrate the hardware and the software as a single new system family," she said.

IBM's idea behind these packages is that they can cut the amount of time it would take organizations to build and deploy servers and applications. IBM has configured the packages so that they can be deployed and expanded with minimal effort.

Getting an enterprise application up and running in a closely regulated IT environment can take months. Much of the work is specific to matching the technology to the internal environment, such as configuring the system to meet organizational policies and to interact with other internal systems. But IBM managers are convinced that using IBM preconfigured systems will still cut deployment by a third of the time or more, as IBM has done most of the work in getting the internal componentry to work together.

"Things that used to take up to six months to deploy can be done as little as in two weeks," with these packages, Wieck said. They eliminate tasks such as setting up a database or a group of servers as a cluster, or linking an application with the company's personnel directory of possible users.

The first two entries of this new line of systems are designed to meet common needs for most organizations. Wieck expected these two packages could be used across as much as 80 percent of IBM's customer base. One package, PureFlex, provides basic a basic computing infrastructure, including servers, operating systems, virtualization environment and middleware. The pother package, PureApplications, deployed on top of PureFlex, provides an environment of hosting enterprise Java Web applications.

The packages could be used, for instance, to build a public or private cloud, or be used to launch a new internal application. While IBM is selling these systems for use within an organization, the systems also are designed to provide an easy way to transfer workloads to IBM's SmartCloud services. With this connectivity, organizations can transfer excess workload off-site, rather than buy more equipment or wait for computing capacity to be freed from other duties.

PureSystems packages start at about US$100,000 each. The systems use an operating system based on Linux, and can run on either x86 or IBM's own Power processors.

The release of this line of systems is a timely move on IBM's part, said Matt Eastwood, who is the IDC group vice president and general manager for the analyst firm's enterprise platforms group. In the years to come organizations will need more integrated systems like these.

"We believe the market is on the cusp of a fairly significant inflection. Businesses are under pressure to move faster and the traditional silos in many IT departments often slow things down," Eastwood said. "It is also becoming more difficult for IT to get price performance gains out of general purpose systems. Users want to focus on applications and business data, not core infrastructure."

Over time, IBM will craft more packages in the PureSystems that will meet the needs of specific use cases and industries, Wieck said. The company will use its expertise in building IT usage models, which it called Patterns of Expertise, that identify the most appropriate software, hardware and interconnectivity for a specific task.

"We expect this to be just the start of a broad family of technology deployment and innovation," Wieck said.

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