Mark P. McDonaldInformation Technology (IT) requires ongoing investment to deliver value to an enterprise. The introduction of web 2.0 technologies coupled with the release of development platforms such as Salesforce.com, Facebook and Google are changing the economics of IT and the distribution of IT responsibilities. A simple view sees this as changing IT economics, however the implications are deeper than just who builds your solutions.
Web 2.0 technologies challenge IT economic assumptions. Web 2.0 is different from first generation Internet which primarily broadcasted information or processed transactions. Web 2.0 is collaborative and community oriented. Compare an airline reservation portal to a site such as Digg.com and you can see the difference. Web 2.0 sites are ‘open’ enabling anyone to use their technology to build their own solutions.
Being open changes the cost of developing new applications essentially to the investment of developer’s time and attention. This has caused an explosion of people developing software to solve their problems with more than 330,000 applications built on the Facebook platform alone.
The ability of an individual to build or “mash-up” solutions essentially free challenges IT. It highlights how slow, expensive, reactionary and restrictive IT can be. IT tells me what I cannot do. Web 2.0 lets me see what my peers have already done, copy and improve upon it. This raises the simple and legitimate question: what do I need IT for when I have the ability to build for myself?
The excitement of Web 2.0 rests in individuals solving their own problems for themselves quickly and easily. So now its time for each of us to rise up! Overthrow IT! End its monopoly on company solutions. All we have to lose is stodgy ERP systems that we do not like or need. Power to the professional!
The economics goes: reduce the cost, remove the barriers, and people will serve themselves creating value and innovation everywhere in the company. At the price of practically zero no IT organization can compete. That view is true; but having more supply does not necessarily mean that it will result in value. To do that, you have to create new solutions at scale.
Scale remains the challenge facing the economics of IT and the enterprise. Every enterprise has a dimension of scale somewhere in their business model. Web 2.0 without scale has the potential to create a thousand flashes of brilliance without any light is real. How do we know? Because we have seen this before.
Web 2.0 is the latest in a series of end-user technologies that started with the PC. Each prior wave has followed a pattern of innovation, specialization, bloom and eventual mass extinction leaving a few dominant survivors such as Oracle or SAP. Executives who concentrate only on the supply side implications of Web 2.0 guarantee that it will follow this pattern.
Leaders need to match the supply of their workforce interests and talents with the need to build and sustain competitive advantage. That is the essence of the economics of management and the processes for strategy formulation, execution and leadership. Leaders at IBM, Best Buy and other companies have already taken this step and used Web 2.0 to mobilize, engage and excite associates and customers.
Without a change in leadership and management, individual Web 2.0′s solutions will be a temporary success. This may be hard to see now. People will talk about what they have use and it is easy for the media to hype the single application that changed the world, but you also have to consider the thousands of other attempts that have died along the way.
Will Web 2.0 change the economics of IT? Yes, and there are some early models for what IT may be like. Apple’s App Store is an example. It is the world’s biggest open market for software with more than 50,000 apps. Apple controls what is in the App store, not as a restriction on innovation, but as a way of guaranteeing technical compatibility and scale.
On its own, Web 2.0 will change the economics and responsibilities of IT. However, this will be small potatoes compared to its potential impact on management and leadership. Turning your employees into their own personal developers is an interesting idea. It will make you feel good, but soon you will find yourself back where you started as solutions do not gain scale and are ‘consolidated’ by a future incarnation of IT.
However, the real interesting economics are the economics of management. Here using Web 2.0 reduces the cost of focusing and mobilizing associates and trading partners.
New management economics, powered by Web 2.0, combine increased supply with scale. Both are important ingredients in creating disruptive business models that will really change the world. As a leader which would you focus on: managing thousands of personally powerful but sub-scale solutions or focusing that energy on discovering what matters and executing your strategy at scale.
Category: Innovation web 2.0 Tags: Business Leadership, economics, End User development, web 2.0
2 responses so far ↓
1 Links for August 9, 2009 | Eric D. Brown - Technology, Strategy, People, Projects August 9, 2009 at 10:13 am
[...] Web 2.0 changes IT economics but it changes leadership economics more by Mark McDonald on Gartner’s Blog Network [...]
2 ZipXap August 13, 2009 at 8:57 am
I am one of the biggest proponents of End-User Development that you will find and I have dedicated an enormous amount of my time to enabling end users. But it scares me to read “what do I need IT for when I have the ability to build for myself?”
I have also seen the dark side. I’ve seen managers hand over 2 yr old end-user solutions that have become an enormous thorn in their sides because it holds enormous amounts of data and yet has stymied competitive process evolution. I’ve seen re-implementations of off-the-shelf solutions that were a waste of time and, worse, thwart efforts to centralize vital decision-making corporate information.
End user development works when users create “Situational Applications”. Situational Applications are relatively simple with a short development cycle. End-User Development is more efficient because IT often has a hard time understanding the business requirements. But “IT Stinks” is not an excuse for employees to abandon their assignments and kill 2 months of their time developing some application that forever locks the company into today’s way of doing things.
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