Baader-Meinhof Phenomenon aka “frequency Illusion”
“where one stumbles upon some obscure piece of information—often an unfamiliar word or name—and soon afterward encounters the same subject again, often repeatedly.”
A few months ago, I started writing about the future of IT. At a high level, I mentioned that software service providers will seek to take the IT department out of IT and deliver technologies directly to individuals and groups. I believe this is common knowledge but I am pointing it out because I believe we are on a path to a new type of IT model. This new model is “IT Advisory and Consultancy.”
This translates to the end of IT as we currently know it.
Looking back over the past 5-7 years, we have seen an enormous amount of transformation. We see companies moving to cloud services and reducing their on-premise technologies. We see an increase in the transactional workforce model, where companies are buying what they need from contractors or consultants. We have seen the start of “Gig IT” and a decrease in internal employees to keep watch and maintain service continuity. For the most part, these exercises are very costly but the idea is to save in overall run costs down the road or to show savings through synergies.
The synergies accounting models have been strategically separated from the investment accounting models meaning many companies are showing great operational savings on one side of the ledger but are effectively moving money to the investment side without real overall cost reduction. I’d argue that in many cases these companies didn’t have a good handle on what they cut and what they are buying which results in a net new higher cost model overall.
I would also argue that when they figure out that they need to do something to contain or reduce these converted service costs, they wind up hiring people at 3x the rates they had their original staff costs. You know, about the “war for talent” that is all the buzz.
You understand? The basics are, they save money by reducing workforce and transitioning services. They spend more money than they save with the hope of saving more money but the hope is not an accurate plan with an understanding of all the implications. It winds up costing the company more money. The CIO transitions because her transformational aspirations resulted in net increase in operations. They get a new CIO coming from a company that just successfully transformed but that “success” hasn’t been netted out yet so, it is also an illusion of savings.
Now hang on, this is where the big change comes in. The best way for service providers like Microsoft, Google, IBM, AWS, and others to grow their business is to do a few things beyond the simple offering of new services. They need to constantly disrupt business and create change to keep consumers and IT strategists engaged and confused.
Been Dazed and Confused
Some cloud service providers are now utilities. It is literally utility level technologies which are the underpinning of business. Just like power, water, and other basics, once technologies are moved via lift and shift or process and function, companies are dependent and beholden to the service provider. I admit openly that cloud service providers are brilliant business people.
- Reduce workforce
- Reduce internal services
- Increase cloud services
- Increased demand for technologies
- Increased competition
- Increase choices for services
- Decrease service provider
- Move data and crown jewels to the service provider cloud. (out of your hands)
This is starting to add up! What could happen here to make everything even more confusing? Companies aren’t confused enough?
Coming out of the Shadow
I haven’t shocked you yet, nothing I said was or is surprising, let us consider this fact issue number 1! Shadow IT never left companies, it has been there and it stayed. The service providers have enjoyed this fact and have been quietly sneaking up on companies with the credit card IT concept. Shadow IT is increasing due to the same reasons that IT shops are decreasing.
There is a perception that IT can’t or won’t deliver services that people working in the business demand. There is a perception that IT is a blocker to progress. There is a perception that IT has too many rules and controls. There is a drive to enable every citizen to be “citizen developer” and enable every knowledge worker to be free to do what they need to do to accelerate the business.
Not only is Shadow IT coming out of the shadows, but it is also being hailed as the new way to do business. I’ll call out right now that service providers know a heck of a lot more about the opportunities in Shadow IT than most companies themselves do. Not only do they know about it, but they are also betting on expanding their growth and profitability on it.
“Heads up @Office365 and @PowerApps
Admins, you will soon no longer have the ability to control your organization’s spending on licensing. So… have fun with that. #ShadowIT”
My favorite part of what Microsoft is doing here is blatant and literal in your face raw honesty about their approach. Don’t miss the part where it says “starting with the Power Platform..”
STARTING WITH THE “THIS IS A TEST”
In order to win something, you have to do more than control the physical and logical, you have to win and control the psychology and emotion. Companies like Microsoft are now in the driver’s seat across the board. They control enough of the market and they have enough knowledge and data collected and controlled to start this campaign targeting the untapped value and opportunities in the Shadow market.
This presents such a great opportunity and new market growth in so many facets and aspects of the business, it’s no wonder why they are at the top of their game. Again, hats off to them for being so smart as to control the water supply, poison the well and create water cleaning and filtering services.
We are really at the beginning of something very interesting. I have a good imagination but I can’t see past over the hill on this one. I have previously considered that companies like Microsoft will be regulated in the same way as other utilities but our politicians don’t understand technologies enough to do anything about this yet. They are also very busy with distractions. This is the perfect opportunity for service companies to make bank.
I’ll walk down the road a little on this concept of the emerging new IT and at least some of what I think will happen in the near future. I am thinking 1-3 years for much of this and even in some cases, 2020 will see the seedlings of this concept on the ground.
Large companies are still distracted with IT transformation, synergies and the pressures associated with lowering their run and increasing investment in new technologies. Companies are letting go of their trusted workers and divesting in their workforce. They are acquiring, merging, divesting and all other sorts of “ings” which creates large projects and internal shifts. In the meantime, the world still turns and they still have to sell products and services.
The business has to deliver, they have no choice and have to answer the call to market. The internal IT teams can’t easily deliver and support the capabilities because they have been leaned out to the max. They can’t find the people to help from the outside on custom systems or process and they will need to be creative to deliver. The business doesn’t want to wait any longer for failed IT that moves at the pace of a slug and they start to say “eff it” and buy their own solutions out in the open. The service companies are well aware of these problems as they helped cause them in the first place. They see this as the great IT fracking opportunity to get more out of the well. They market directly to the business and create the technological ability to work around IT with ease.
The business uses their credit card, staff augmentation and second-order miscellaneous job descriptions added to an already stressed-out workforce to deliver the technologies they could no longer wait for.
More to Come
The most difficult part of this issue is the nature of it. It is a divide and conquers approach which amounts to the use of advanced psychological methodologies in practice on business. The best part for them is this is all legit and legal.
The most interesting part of this is that it undermines an organizational ability to understand their technology spend. Some of the money spent comes from IT and some from the business and other monies aren’t even classified. Effectively, businesses will lose visibility to their operating costs in at least certain segments of the business.
I am also seeing a complete wholesale fleecing of the SMB market. Small and medium-sized customers get the same services that large companies get and they don’t have the knowledge or expertise to understand what they are buying. I’ll call out that from a total cost and spend perspective these SMB’s are most at risk and they represent the best overall opportunity for cloud service providers in untapped market growth and percentage in sales.
If you aren’t all out flustered, angry, frightened or worried in any way, that’s good because that is EXACTLY where these companies want you. They want this all to feel as natural as phone bill with all it’s complexity that many of us choose not to pay attention to but simply pay.
I’ll say this is one of the most interesting sociological experiments of our time. These companies are using facets of cognitive bias, confusion, communication and control with the ease of a three-card monte shill.
Emerging IT in Flight
I’ll summarize my thinking here with a few basic concepts.
- Shadow IT doesn’t have to be a bad thing if an organization has clarity on all aspects of spend.
- Companies need guiding principles and cultural normalization with regard to technologies.
- Companies including small business must spend time understanding the landscape from end to end which means an investment in Enterprise Architecture.
We have a lot more to talk about here and I am curious as to what you think.