There was a time when IT was driven by enterprise demands and consumers had little or no influence in shaping technology. In fact consumers were relegated to a different industry group – consumer electronics, which was the home of underpowered devices with closed architectures and limited commercial applicability.
The very structure of the technology marketplace is changing and threatening to leave CIOs and Enterprises behind as it shifts toward computing oriented and driven by consumers. The consumer electronics industry is becoming the consumer technology industry where everything is connected to the web and the price power equation turns in favor of individual devices rather than corporate systems.
The consumerization of IT is something that Gartner has written about extensively as a phenomenon where the technology people have in their homes is superior to the technology people use at their workplace. While that presents challenges to CIOs and IT executives, there is a deeper and more profound change going on. The consumer market is starting to matter more to technology providers than business marketplace and demands.
The sale of more than 3 million iPads — approximately $1.8 billion dollars in revenue — in 80 days is one indication of the attractiveness and power of the consumer marketplace. Every one of those iPads sold at list price! CIOs who wanted a discount when they were looking to buy 300 devices were informed that there was no discount. Another point is the observation that within five years, mobile devices will generate traffic on the Internet than personal computers or laptop devices. Finally, the mobile device and applications marketplace driven by Droid, iPhone and other devices is clearly oriented in one direction — the consumer.
Technology follows money. This means that the directions, innovations and investments will follow growth, money and innovation and right now those indicators point to the consumer rather than the corporate marketplace. Think about it when you consider that average government and commercial IT budgets have been relatively flat for the past 10 years. Compare that to the revenue flowing into consumer devices, apps and other forms of consumer IT.
Growth opportunities are with the individual not the individual company.
Innovation is also shifting in favor of the consumer marketplace as it has two structural advantages over its commercial counterparts.
Consumers demand constant innovation, new products, functions and features every quarter for all time. Consumer technology companies have to deliver on those expectations because consumers have greater choice. Consumers make technology choices more often, and consumers have a lower ‘sunk cost’ that commercial firms.
Consumers move in and out of technologies at a torrid pace giving market innovators constant opportunities. For example, consumers will switch cell phone carriers to get the latest and greatest device, even if they have to pay a cancellation fee. It is hard to imagine people changing ERM/CRM or Supply chain technologies at such a rate for obvious reasons.
The force, pace and rewards for consumer based innovation pulls new ideas into the consumer marketplace attracting innovators at a greater rate than corporate technologies that operate at a three to five year refresh cycle. Greater demand begets greater innovation and the formulation of a permanent gap where commercial technologies have to play catch up to consumer devices and innovations.
The other force is the fact that consumers can and have innovated on their own. They see a need and rather than wait for a product management organization to act, they build the solution they need and release it into the world often as an ‘app’. This means that there are literally millions of innovators out there, some in companies and others on their own providing constant innovation to the public. They not only release new solutions, but they update and extend them at a blistering pace, often within days of discovering a bug and throughout the year to add new functionality. There is not a week that goes by where I do not have to update ‘apps’ to apply these updates.
Again compare that to a corporate upgrade cycle, where new solutions often have to be forced on the user base via an expensive and disruptive project. The consumer style of solution — continuous update — seems like a better solution. After all if a device I pay for out of my own pocket can do it better than my multi-million dollar IT organization, then what am I paying for.
Business and commercial technologies face a challenge from their consumer counterparts, as consumer technologies will generate a rapid, diverse and saleable set of innovative solutions. Business technologies will not go away. However, their position as the premier incubator of innovation is under threat as consumers now represent a viable, scalable, reachable and mass market for new solutions and technologies.
Gartner’s Steve Prentice introduced the idea of consumerization a few years ago. That idea, that consumers will have better and more capable technology has done more than shift user expectations of corporate IT. It has changed the structure of the industry with the consumer electronics industry fading away to be replaced by a consumer technologies industry that represents a significant threat to existing technology companies, their products and processes. That is the power shift, consumers getting ahead of corporate on the technology curve and upsetting views on the sources and application of innovation.