On-demand computing: My take

IBM's Irving Wladawsky-Berger says the winners in the on-demand era won't necessarily be companies with the hottest technologies.

3 min read
Since the dot-com implosion, many people have questioned the value of information technologies, worrying that IT is too mature, too commoditized, and that it no longer has strategic value. I disagree.

Technology advances continue at their torrid pace. Moore's Law is alive and well, the Internet is evolving in reach, capability and reliability, and new technologies like grid computing, Web services and intelligent software are enabling the integration of resources and applications, people and processes on a scale undreamed of only a decade ago.

IBM defines this confluence of business need with advanced technological capabilities as the on-demand era.

Every business--high-tech, low-tech or no-tech--is faced with the merciless marketplace demand for ever-greater levels of productivity. That means constantly driving down costs and increasing efficiency. But by itself, shaving increments of cost is not sufficient for real success and leadership in one's industry. After all, the best cost-cutter in the world is still only doing the same thing as every other business.

Truly successful leadership firms stand out by differentiating the ways they do business. That means developing, producing, and delivering goods and services better than anyone else. All that is a matter of process--and it is the application of technology at the business process level that makes it possible.

Of course, technology has been applied to business processes in one way or another, since the first mainframe automated the payroll process. In the on-demand era, however, things will be different.

In the past, the application of technology was often piecemeal, and incompatibility bedeviled most firms. I expect that in the on-demand era, all firm business processes will be integrated from the customer on through the enterprise--and right back to suppliers. In effect, these processes will appear and act to the customer as a single process.

That is a profound departure from the past and not one to be undertaken in fragmented fashion. We cannot just throw random technologies at business processes that are so critical to the lifeblood of an enterprise.

We cannot just throw random technologies at business processes that are so critical to the lifeblood of an enterprise.
A solid foundation of enterprise and industry expertise must be developed in order for business processes to become competitive differentiators. Only after technology and process come together will their value become evident.

Developing that foundation of expertise requires a fair amount of introspection on the part of the enterprise. There's no doubt that as more and more businesses undertake the effort, they will find themselves distinguishing between those processes in which their real expertise lies and those that are peripheral.

Another point: Companies that have the "hottest technology" won't necessarily figure among the real winners in the emerging on-demand era. Rather, the winners will be firms that have done the hard work of determining where their real expertise lies and then build it into their business processes. Only then will they match the available technology to that process.

Companies that can embed their particular know-how into everyday routines--all the while partnering with other experts for ancillary services such as HR or finance--will thrive. Accelerating this shift to an expert economy is the growth of a global Internet infrastructure, which enables very tight integration between expert companies.

Companies with the "hottest technology" won't necessarily figure among the real winners in the emerging on-demand era.
Economists describe this kind of specialization as "comparative advantage," with everyone doing what they do best rather than trying to compete across the board. That's what brought companies such as United Parcel Service and Federal Express into existence.

The horizon of the on-demand era is coming into clear view. We are evolving toward an economy in which expertise embodied in an enterprise and its people will be its real advantage and differentiator. Whatever strategic value technology may have had is shifting to the people and businesses that put it to work in support of their frame of excellence--this is the expertise that will define them to their customers, collaborators and competitors.