From Artisanship to Industrial: The Next Age of IT Services

Nicole France, former Gartner analyst and current Head of the Strategy and Market Intelligence team at Fujitsu Services in Europe, comments on the future of the IT Services industry……..

Fundamental change is afoot in the IT industry. And the funny thing is, there is a familiar pattern to this change. A number of long-term trends and a few more recent developments are coinciding to fundamentally reshape the way we view, invest in and operate IT. It is finally starting to grow up a little. There is an industrialisation of sorts going on here.

Of course, this isn’t the first time something like this has happened – and I’m not talking about the automotive industry. The original industrial revolution – in the textile industry – took the spinning and weaving of cloth from every hearth and home and put it into factories, which were progressively larger and larger in scale. This consolidation of the means of production was central to the whole story.

At the same time, machines were introduced that both standardised the way fabric was made and automated substantial elements of the manufacturing process. The result was a massive increase in output and a higher degree of reliability in the end product, all at a considerably lower price (try applying your hourly rate to the time it takes to weave a piece of cloth and you’ll see what I mean!).

What is a bobbin anyway? Should I care?

Fast-forward two centuries and we are now at a point where consumers have almost no knowledge of what the manufacturing process actually is. In fact, the vast majority of us don’t buy fabric directly at all – we buy the things that fabrics are made into. We care more about what the result of the manufacturing process is rather than the process itself.

That said, we’re not wholly uneducated buyers, either. Just ask anyone who’s ever noticed the difference between a cashmere scarf and an itchy wool one, even though they fulfil the same function. There is no need for specialist knowledge about where the materials come from or how they are made to understand the difference. The real question is whether a different level of performance merits the higher price.

Haven’t I seen this somewhere before?

For all that IT depends on advanced technology developments, this industry is only just beginning to undergo the same kind of changes. IT has been and largely still is an artisanal craft, part skill and part black magic. Most organisations of any size have had to create their own IT departments, not so much out of desire, as of necessity. We haven’t really had any choice. To make all of the various bits of infrastructure and applications deliver the desired result, some kind of internal competence is required to put it all together and keep it running, no matter how many outside service providers might be involved.

But consolidation, standardisation and automation of IT, combined with several years of continued pressure to reduce IT costs and increase reliability, have already begun to have an impact. So has the growing recognition on the part of business leaders that, although IT is necessary to run their businesses, much of it does not yield competitive advantage in its own right. For the most part, it simply needs to be functional, reliable, scaleable and secure. The result is that IT is now going from cottage industry to factory production.

So what’s going on in IT?

Consolidation is key to the industrialisation of IT. It has taken many forms, both within internal IT organisations and across IT services companies. This includes areas like server consolidation and application portfolio consolidation as well as the development of internal shared services operations. IT outsourcing and business process outsourcing (BPO) are another form of consolidation. In these cases, IT infrastructure and operations – computing capacity, if you like, is effectively being consolidated by the service providers.

Outsourcing has also been used as a tool by many organisations to redefine IT operations and the value they deliver to the organisation. These contracts often provide the means for reducing internal staff and transferring assets, allowing the client to redefine the role and focus of internal IT.

As in textiles, the impact of offshore and global delivery models has been equally significant in IT. The price competition introduced primarily by the Indian providers has forced both traditional services companies and internal IT departments alike to concentrate on the efficiency of their operations (especially in application services). This is largely through greater focus on quality standards and consistent service delivery and management. The current frenzy around guidelines and standards like ITIL, CMMI, six-sigma and the like is not just a passing fad – they are the foundations of truly “industrialised” processes for IT services.

Are we there yet?

Although we are moving towards a world of industrialised IT, there is still some distance to go. Truly industrialised IT, requires considerable changes on the part of both buyers and providers of IT services.

The most substantial hurdles in this industrialisation process have to do with risk. For service providers, risk has everything to do with changing business models and the growing need to make greater up-front investments in delivery capability in order to be competitive.

For clients, risk takes many forms, not least of which is the need to put more emphasis on what providers deliver – the outcomes or business value – rather than how they deliver it. This trend is already clear when it comes to business process outsourcing contracts, but is much less so in strictly IT or application-oriented services. The challenge for clients in the current environment is that however much they may want to focus solely on outcomes in these areas, they still need to care about (at least to some degree) how providers deliver them. This is still a work in progress.

So, if we are only part way to industrialised IT services, where do we go from here? As the physicist Neils Bohr famously stated; “Prediction is very difficult, especially about the future”. But this much is clear: the path to industrialisation in not going to be a steady, linear progression. Getting there will require both providers and buyers of IT to radically adapt their approaches. Providers must raise the bar on delivering reliable, predictable, robust IT services. Clients, meanwhile, must understand the benefits and tradeoffs involved in focusing on results, not input costs. Together, we need to work through our existing relationships to determine what ‘industrialised’ engagement models will look like. Who knows – these things might just turn out to look very familiar.

This article appeared in the latest issue (Issue 22) of Strategy 4 Business, Fujitsu Services’ quarterly customer magazine. For further insights from the UK and Europe, please visit www.fujitsu.co.uk/strategy4business