I was in London last week and I read that the British Newspaper the Independent was sold for 1 £. The Independent is not the only newspaper that is in trouble and it will not be the last. However the idea that one of the U.K. national news paper/publishing companies can be bought for less than the price of the paper, less than a Venti latte at Starbucks got me thinking…
Why did the Independent’s previous owners sell the company for such a price and does this offer a lesson about IT.
Technology’s impact on media in general and newspapers in particular are well documented. However, consider what technology has done to the components of a newspaper.
Did technology eliminate the value of the information in the newspaper?
No, that information is just as valuable as it was before. The volume of web traffic proves that people value news and information, so the core value of the information that used to be provided by newspapers remains high.
Did technology change the value of the reporter?
Yes in a way. Good reporting is still valued just look at the columnists who attract attention and eyeballs. However the number of people reporting has greatly expanded as everyone has the potential to be a reporter.
Did technology change the way the information is delivered?
Yes, in fact technology has turned the newspaper delivery vehicle, one of its greatest assets into the greatest liability. Newspapers rely on high volume, capital-intensive operations that drove the cost of production down to mere pennies. Now those operations and the debt required to fund them have destroyed their economic model as new internet based delivery vehicles offer a lighter weight, faster and more responsive way to get your information.
The speed technology’s impact on the newspaper industry has surprised many. In the 10 years or so since the widespread adoption of the web it has drained the industry of profits, created consolidation and led to the sale of the Independent.
Those profits are bleeding out because technology changes the DELIVERY VEHICLE for creating value, not the core value itself.
Could technology do the same thing to the IT industry?
Could it turn its core assets into insurmountable liabilities? The type of liabilities can destroy the value of the industry.
The answer is yes. Yes it could.
Look at the same three questions posed to the newspaper industry.
Does technology eliminate the value of information in IT?
No, in fact information increases in value as it becomes more prevalent and more specialized. One can argue that information is quickly becoming more valuable than process.
Does technology change the value of the IT professional?
Yes, as the value shifts from creating and operating stuff to bringing components together to achieve new solutions that extend beyond hardware and software. This is leading to creating Leaner IT organizations that have fewer people in them, but higher skill levels.
Does technology change the way IT is delivered?
Absolutely as emerging service based solutions delivered via the Internet are disrupting traditional owner-operated IT models. Currently, these lighter weight solutions are at the height of inflated expectations and are easy to dismiss. However, they are real and represent a new delivery vehicle for companies to get their information and technology services.
So will IT go the way of the newspaper? Will we read about major corporations selling their IT for $1?
In some ways we already have, in terms of what was known as transformational outsourcing. That is not the point of this post.
The point is:
- Technology is changing the way in which IT is delivered.
- Changing the delivery vehicle does not destroy the value of IT, but it does disrupt the way IT is delivered.
- This will threaten current delivery models, particularly those that require significant capital and operational investments. Those models are the captive IT organizations where most IT professionals currently work.
Such changes will happen faster than people expected, it took about 10 years in media, if that is a guide then by 2020 we will see the large scale demise of captive IT organizations and a remade industry.
That is what is black and white. Keeping IT from becoming red all over will require it to adopt new approaches.
More about that in the next post.