By QUENTIN HARDY
What kind of cartels will deliver business computing, and how should businesses respond?
Forrester, the technology research company, just released its business and technology outlook for 2020. The short version is that cloud computing will come on quicker than you think, it will be controlled by a very few companies that will fight for the right to own your data, and businesses need to think about what software they can write that will differentiate them from all the other customers of these giants.
Like a lot of these reports, Forrester has a couple of clichés (we have entered the era of individual empowerment; change is the only constant) and interesting facts that you don’t really know what to do with (there will be 22 billion connected devices in 2020; Moore’s Law dictates that the computing power of I.B.M.’s Watson will fit into a human hand by then).
The substance of the report, however, is plain: cloud and mobile computing combined will rapidly improve, dislodging many incumbents in enterprise computing, and vastly empowering a few others, becoming what Forrester calls “computing cartels” that control millions of servers in data centers around the globe. These cartels, the report says, will include Amazon, Cisco Systems, Google, I.B.M., Microsoft, Oracle and a few competitors. Like most of these reports, it does not name losers, though Hewlett-Packard and Dell were among those noticeably absent.
It is notable that the members of the cartel are all United States companies. Kyle McNabb, a vice president at Forrester who was an author of the study, said in an interview, however, that in reality “they’re all multinationals,” though the innovation happens in the United States first.
“It could happen in China and Europe too,” he added, “but we don’t see the same innovation there.”
These cartels, the report says, will offer cheap computing, ease of use and low maintenance costs. They will compete with each other by focusing on different sectors. “Consumer and other data will become the mainstay of firms such as Amazon, Google, Microsoft,” the report says, adding that “big technology vendors will provide processing, analytical capabilities and global reach, while credit-card processing, logistics and social firms will provide transaction data, logistical supply and consumer demand and consumption.” They will also tailor their offerings to different industries, like health care and finance.
As shocking as the rise of these few multinational cartels may sound, since this is supposed to be the age of the empowered individual, it fits a historical pattern. For example, the ability to locate processing near a river dominated milling, trapping and other industries for a long time. Access to and control of electrification had a lot to do with earlier booms in technology and industrialization. Change has been a constant for some time. This time through, the winner is the one able to best manage and deploy millions of servers full of data.
“They will house the primary computing power, and the core analytics,” Mr. McNabb said of these cartels. With so much of the core computing taken care of, he said, corporate buyers of this information technology will differentiate their customer offerings with software that refines the analytics to single out individuals precisely.
The winners will be the ones that most ably respond to changing customer tastes. That might be another eternal truth, that winners are people who win customers, except now it will happen at a rapidly accelerated rate. The analytic software may actually act to hasten the process of taste-changing, since it will offer more variety, and respond faster to choices, than ever before.
Among the giants, Mr. McNabb said, the differentiation will consist of “the tool kits and methods” they have to build software, and the data sets they have to make different kinds of software. “It is a little bit like the way SAP and I.B.M. now offer core application interfaces and developer kits, and individuals customize them.” The difference will be the scale, once corporations can shift savings from not owning their own hardware and start building more software.
For any of that to happen, though, companies have to accept what is coming. Most corporations are not ready for the change that will be wrought by cloud computing, Mr. McNabb said.
“We just got off the phone yesterday with a very large company that is still deciding about open-source computing, not even cloud,” he said. Open-source systems, like the Linux operating system, were controversial for many businesses a decade ago.
“About 10 percent of the companies we deal with can cope with what is going on; the rest just worry about the 80 percent of their budget that goes to maintaining legacy computing systems,” Mr. McNabb said.
He added, “It’s funny. They’re all sitting at these meetings with their iPads and Samsung Galaxies, connected to the Internet. Meantime, they struggle with old computing systems and outdated rules.”