IP or commodity skill?
One of the trends that started at the end of the 20th Century and gathered pace in the 21st is the move to outsource certain parts of IT in the business to low costs providers.
This seemed a great idea at first as you could reduce, or fix your costs, for the more commodity skills. These included the provisioning of machines and desktop support of operating systems.
This also took its place in running data centres where support for standard machines and OS’s was seen as an off the shelf skill.
As the pace to outsource gathered more and more tasks were deemed to be commodity skills and candidates to outsource. Resources with many years’ experience if the various tools and there usage in the organisation were let go and replaced by these type of deals.
This is where the problems started to arise. Many of the skills that were chosen appeared to be a commodity skill but management failed to realise that once you deviated from the standard usage of the product you were in fact moving into the realms of intellectual property.
Take for instance support for ERP systems like SAP or Oracle amongst others. These are deemed to be fairly standard applications that you can churn skills out of training camps in a standard manner and then get them supporting business.
However we all know this isn’t true it isn’t what they are using that is important it’s the how they are using it that really matters. Company A and B both may have inventory and financials but the chances are they use the same package in totally different ways and on top of that the chances are they have both modified the core system in different ways.
So the concept of being able to get resources at the turn of a tap becomes increasingly more difficult because they also need to have knowledge specific to the particular company they are working for.
One of the major trends currently in business is the concept of nurturing your talent and the fact that those business that develop their talent will be the winners in the future so decision makers need to be very certain that anything they consider for outsourcing in the future is a real “commodity skill” to avoid losing all their Intellectual property.
As we move more and more toward the future and the true knowledge economy of high skill; high paid employment the distinction between the two will be more important than ever.
When IT is a service function
I’ve been very quiet for the last year as I have been working at 3 different clients who were all undertaking significant pieces of work in the heavily regulated utility sector. One was vertical and the other two were in the water sector.
One thing that these organisations all have in common is that they view the provision of delivery of IT as a service function and as a result, they all have “Strategic Partnerships” with external firms mainly based offshore. Unlike other sectors who seem to keep some functions in-house, these have gone the whole hog and handed it all over.
Service Function or intellectual Property
Whilst this has a very good effect on the bottom line, in terms of costs, and understanding what you will need to spend on your IT, it does leave you exposed in terms of intellectual property. The whole logic behind partnering is for the provider to offer the commodity skills that the organisation deems as not a core competency. This may have been a good approach in the past but now that IT is so fundamental to an organisation it is now actually intellectual property.
One of the major side effects of this “promotion” of IT to be central to the business is that if you come to try and change your “partner” it becomes a very high risk and fraught with danger which could, in fact, lead to business damage both financially and reputationally.
I have worked in organisations that have been crippled by this type of transition and it has taken months for them to get anywhere near to business as usual.
Another observation I can make is that without the level of investment in IT you can become very old fashioned and behind your competitors very quickly. This would help explain the amount of “disruption” that many traditional industries are encountering in recent years.
I am convinced that there needs to be a complete mindset change within senior IT management roles to ensure that they become thought and business leaders and not seen as a subordinate service provider.
The interesting Paradox is that a lot of the “Strategic” partnership organisations should be the ones that take the lead and help the legacy organisation change and drive IT forward, however, this potentially means cannibalising their current revenue streams they receive from supporting the old way.
I have been in the industry now for over 30 years and am still excited about what IT (Technology) can do for businesses. In the 80’s and 90’s we radicalised things with ERP systems. In the 2000’s it was the rise of the Internet. In the 20-teens it’s been the rise of the App and big data. If the old way of thinking maintains then a lot of the organisation that exist today will not be around in the next decade due to looking at technology as a service function.