ROBERT BRENNAN HART AND EDWARD WILSON-SMYTHE
“Even if I know I shall never change the masses and never transform anything permanently; all I ask is that the good things also have their place, their refuge.” – Richard Wagner
THE ORIGINAL SIN OF TECHNOLOGY HYPERACCELERATION
The pace and direction of human evolution in the last 20 years has been founded on the singular force of technology hyperacceleration. Since 1995, the power of computing has increased over 50 fold while the cost has been reduced to a third, the pace of content creation has increased over 500 times, the availability of content at any given time by 10,000 fold, and the speed of content dissemination by over 3.5 billion times.
Access to modern computing capabilities has grown from under 150 million people, the vast majority in wealthy countries, to over 5 billion people. The cumulative impact of increased power, reduced cost and accelerated access has led to an 85 quintillion-fold increase in 20 years, that is, 85, followed by 18 zeros. This hyperacceleration has seen technology move from the narrow confines of the largest governments and corporations, to become an integral part of all aspects of human endeavour, across its various manifestations in individual interactions, economic organization, and social structures, and has a had a greater impact on the human condition than the accumulated progress of the 5,000 years of civilization which preceded it.
The convergence of innovation and enterprise that made this unprecedented proliferation of technology possible, however, was marred by an original sin that has, in under a generation, unraveled much of its progress and impact. The first wave of widely available technologies remained a closely guarded and proprietary preserve of innovators and entrepreneurs, who eventually morphed into the corporate colossuses of our time. Even as these technologies became foundational to the activities of individuals, governments, enterprises, and societies, the pace and direction of innovation became beholden to the commercial interests of a small group of technology companies. This concentration of control within a relatively narrow class of innovators, over what was supposed to be an abundant and widely accessible utility, creates impediments in the way of progress, and the squandering of much of the potential of technology.
The cumulative impact of proprietary, inflexible and incompatible technologies has led to an environment where enterprise technology has become wasteful, expensive, failed, and obsolete – a betrayal of the possibilities ushered in by the last generation of innovation and entrepreneurship.
THE CONTINUED SQUANDERING OF ENTERPRISE VALUE
The most prevalent manifestation of the challenges with current models is in the stubbornly high cost of enterprise technology, driven by continued and increasingly inefficient spending on non-essential technologies when by all measures these costs should be declining as rapidly as they did in the last 20 years. Moore’s Law may continue to be in effect for individual technology elements, but hits a brick wall of inflexibility and inertia when applied across the ecosystem of technologies and services which need to interoperate seamlessly to meet the needs of today’s enterprises. In most enterprise environments, the superficial benchmark of operational costs being 70% of total technology costs, and investment in new capabilities being the other 30 percent remains prevalent but misleading and naive statistic. Of the costs which are mistakenly assumed as driving new capabilities, close to 75% is spent on the ongoing update and refresh of technologies, with little impact on business capabilities.
This is a direct result of complex and convoluted technology lifecycle management, consisting of a constant stream of investment in patches, updates, upgrades and refresh, driven by users being locked into proprietary and inflexible technologies. These costs are neither differentiating nor discretionary, and merely add an additional layer of cost which must be borne by the enterprise, with no value other than to defer unacceptable risks posed by obsolete technology, often made obsolete by update and upgrade cycles controlled by large technology companies. The #1 technology “investment” priority for enterprises in 2018 remains application modernization, which makes eminent sense given that over 60% of all enterprise applications are based on proprietary, inflexible, and soon to be obsolete obsolete platforms, but provides a scathing commentary on the low value that current models add to enterprises.
In an environment where only 5 to 10 percent of technology expenditures are spent on creating new capabilities, any element of technology planning and execution can best be described as “technology theatre”, serving up the scripted impression of progress while perpetuating the ongoing squandering of enterprise value and neglect of future opportunities.
THE INSURMOUNTABLE COST OF LIVING
When enterprises do rouse themselves from the stupor of self-inflicted complexities related to technology operations and lifecycle management, they are faced with the second adverse impact of current models, and by far the most egregious. While almost all business strategy is now predicated upon technology innovation, this becomes prohibitively expensive when confronted with the complexity and inflexibility of traditional technologies that make up the bulk of enterprise investments. The cost of executing on any technology change is not limited to the acquisition of the technology itself but manifests itself in manifold increases caused by the need to update and integrate with multiple proprietary and incompatible technologies. The cost of customization, integration and transition from old platforms, even for supposedly standard technologies, can be four to five times the acquisition cost of the technology, with major enterprise application initiatives easily ranging from $200 million to over $1 billion, with every year after execution adding 10 to 15 percent of the initial cost to already unacceptable levels of inefficient technology spending.
This high initial cost poses an often-insurmountable financial hurdle for otherwise sound business initiatives, especially in the face of economic uncertainty and prolonged slow growth in most developed markets. In the last year, over 50 percent of all planned technology initiatives have never made it past the planning phase, and have been deferred or canceled. This percentage is as high as 80 percent in governments and in the recessionary resource industries. The disconnect between the significant potential for technology-driven business innovation, and the inability to execute these initiatives due to prohibitively high technology costs leads to opportunities which are never realized and value which is never generated.
A TRACK RECORD OF FAILURE
In cases where enterprises decide to proceed with technology initiatives despite, or more likely due to ignorance of, these high costs, the success rate is abysmal. The old adage among a certain breed of technology managers, thrown around without questioning the inherent defeatism and absurdity of the premise, was that technology initiatives could meet two of cost, schedule or quality objectives, but not all three. Technology thus is the only aspect of the modern enterprise that starts with the premise that it cannot meet the entire range of business priorities, and that somehow this is acceptable and “market standard”. Incompetence masquerading as wisdom.
The reality, however, is far more sobering than even that depressing thought. Driven by the complexity of proprietary, inflexible and incompatible technologies, along with an attitude that “moderate underachievement is the best possible outcome”, more than 65 percent of all technology initiatives fail to meet their cost and schedule objectives, and over half require a reduction in scope in order to address runaway budgets and timelines. The average cost overrun in these initiatives is 50 percent. As far as the supposed benefits identified in business cases to justify the investments and the ongoing spending despite cost and time overruns are concerned, more than 80% of technology initiatives do not measure the business benefits generated, and the obsolete business cases from two to three years ago remain the only record of the benefits which were supposed to accrue, but never did.
Technology initiatives based on traditional technology planning and management models achieve the dubious distinction of under promising and under delivering, costing enterprises even more than the unacceptably high costs initially budgeted, without any evidence of providing the desired business benefits planned.
THE FOUR OPERAS
If a fourth chapter in the saga of traditional technology is warranted, as it well should be in any proper epic tragedy, it revolves around the ultimate manifestation of the irrelevance of current models – “obsolete when implemented” technology solutions. Given the long planning, acquisition and execution time frame for traditional technology initiatives, the average time from initiation to execution is between 30-36 months. Not only does this delay any possible benefits beyond any reasonable business planning horizon, it puts technology initiatives at odds with the very premise of the rapidly-changing and accelerating pace of technology change, and related changes in business models, which have defined the last 20 years of technology hyperacceleration.
Initiatives based on traditional models thus force enterprises to choose between two equally unpalatable choices – modify the technologies in the midst of already expensive and high-risk efforts, adding further cost and risks to the enterprise, or invest even more in almost immediate remediation of obsolete technologies which no longer meet business needs and pose unacceptable operational risks. The only solution is to reduce the technology initiative lifecycle to a duration which is more in line with the pace of technology change and related changes in the business models, closer to three to six months, which is not possible given the proprietary and inflexible nature of current enterprise technology.
While current technology models have built into their very fabric the near certainty of inefficiency and failure, they have sustained their dominance, primarily due to the lack of credible alternatives. Enterprises have grown accustomed to wasteful, expensive, failed, and obsolete models, and accept suboptimal results within the constraints imposed by these models as somehow being evidence of success. There are however three seminal once-in-a-generation forces which are converging to displace traditional models and break the grip of the technology cartel on enterprises – market fatigue which had finally reached a tipping point, emergence of an open ecosystem of flexible and interoperable technologies, and a critical mass of technology relationships defined based on business value.
If the current model is analogous to an abusive relationship, it is fitting that the solution emerges from the subject of abuse, the long-suffering enterprise business leaders, beginning to take a stand against the failed assumptions and planning principles of the past. Business leaders are increasingly beginning to see technology, with its inability to meet business needs for accelerating change, as a barrier to innovation. Close to two-thirds of business executives are dissatisfied with current models, which may not be surprising in itself, but 60 percent of them are actively exploring alternative models which do not have the limitations imposed by the current. This has a direct manifestation in two condemning statistics, both testament to an unstoppable and irreversible momentum – 75 percent of all current technology relationships will be terminated or renegotiated before term, and 75 percent of all technology decisions impacting business strategy are being taken outside traditional IT departments. The number of enterprises who are fatigued with traditional models, and taking tangible actions to address the inefficiencies of these models, is now the vast majority of the market and is steadily growing.
Driven by a frustration and in many cases deep ideological disagreements with the current models, and spurred on by the growing demand for alternatives, a new generation of technology solutions is emerging. These solutions combine the same entrepreneurial energy and innovative thinking of the previous generation with a deliberate design that eschews command and control based on proprietary, inflexible and incompatible technologies.
The most well-known example is cloud computing models, based on the premise of flexible on-demand services which provide seamless integration across multiple technology platforms. These services are no longer cutting-edge or disruptive, but rather represent the foundation for close to 90 percent of new technology relationships being defined in 2018. The issues related to technology lock-in and data ownership associated with previous generations of cloud models have largely been addressed, and cloud solutions provide a near-seamless approach to transitioning services in and out of standard, common platforms, with a fraction of the execution cost and risks associated with traditional technology initiatives. When married with the appropriate strategic partnerships with technology service providers, the cost of these initiatives can be zero.
The emergence of standard application platforms and increasing use of open standards extend this trend beyond the cloud, and together they represent the biggest shift in the philosophy underlying enterprise technology. Application platforms based on open standards and architecture provide a direct solution to the challenges that plague current technology models. They easily integrate with other technologies, are low-cost or zero-cost to adopt, involve no additional costs related to ongoing lifecycle management, and can be completed and start contributing to business benefits in three to six months.
Given the flexibility of these solutions, the speed to implement and the significantly lower cost of adoption, enterprises can invest in multiple targeted initiatives, and afford to “fail fast”, rather than be locked into a single multi-year multi-million dollar plan, enabling an exponentially higher pace of innovation. Over 50 percent of all current technology initiatives are based on a combination of open application platforms and cloud-based services, a significant shift away from traditional licensing and hosting models.
The final piece which completes the picture is the emergence of strategic relationships between enlightened clients and a new generation of technology firms, which provide open technology platforms and related services predicated upon flexibility, ongoing modernization, and alignment to business priorities, at low or no cost. Over 85 percent of all contracts in 2018 have lifecycle management built into the ongoing services, thus eliminating the single-largest source of inefficient technology efforts and spending in enterprises. Over 25% of contracts are based on technology relationships directly delivering business outcomes, not the complex web of technical performance metrics that mean little to the business. Close to 20 percent of all contracts are based on the next generation of technology companies and service providers providing the new capabilities at zero initial cost, and linking their compensation to the business value generated through the course of the relationship.
By 2020, business-aligned contracts and zero cost models will form the majority of technology relationships, adding to the vast supermajority of relationships based on open and flexible technologies. Together, this combination of technology solutions based on open standards and commercial models aligned to business outcomes defines the “as-a-service economy” built upon the next generation of enterprise technology.
The market is uniquely positioned at an inflection point away from the discredited models of the previous generation, and towards a truly open, flexible and business-aligned model, restoring technology to its original promise and purpose of driving innovation. There remains, however, securely ensconced in the middle-management permafrost of enterprises, a large group of decision-makers and influencers who have a vested interest in perpetuating traditional technology and service models as a way to prolonging their relevance. Less than 30% of middle managers (VP and below) in enterprise see the as-a-service economy as key to the future of their enterprise, and only 25% see the need to replace current technology models and commercial relationships.
This group of stubborn holdouts can be relied upon to trot out loud and unfounded objections related to performance, security and privacy, with fear being the last lever for the naysayers. These opinions are not borne out by facts. The major cloud services providers have access to security technologies and standards far superior to what is possible in the small-scale rumps of most corporate data centers, and the performance of open-standard application platforms is comparable to proprietary technologies even at the large volumes of users and transactions typical of the most demanding environments in financial services, telecommunications, retail or government. Acknowledging this declining fringe is akin to engaging climate change deniers, creationists and Obama birthers, where no evidence-based discussion is possible. As a result, it is best to disregard this group.
The even more relevant fact is that more than 50 percent of senior executives see the as-a-service economy as key to the future, and over 60 percent see the need to move away from current models. This disconnect has contributed directly to 75 percent of decisions being made outside the orbit of this shrinking vestige of the past, and direct conversations can now be had with an enlightened and motivated majority of business and technology leaders who are aggressively seeking alternatives.
Enterprises, technology companies and service providers need to take tangible actions which challenge traditional models and the forces of incumbency and inertia, based on providing tangible, practical solutions to business leaders clamouring for change.
We can together usher in the end of an era known as much for the promise of technology hyperacceleration as for the potential which was never achieved; an era where decentralized innovation and enterprise was corrupted into the concentration of power and control.
The inevitable rise of open technologies in an as-a-service economy will finally reconcile the contradiction between innovation and inflexibility. The declining financial fortunes of traditional technology models will accelerate into an eventual demise; the twilight of the gods ending in an immolation. Let the fire that burns us, cleanse, too, the ring from its curse. And let technology finally advance us as an empowered, secure and equitable civilization.