At the beginning of 2010, I wrote an entry titled “Nine Key Trends in Technology Services” in which I predicted trends that would be impacting our industry. This is an important mental exercise I encourage every technology services leader to engage in on an annual basis. The trends in our industry are moving rapidly, and they have the potential to be very disruptive. You and your management team need to be discussing and debating the trends that will force you to adjust your services business. Please—do not get caught flat footed here.
One Year Ago
One year ago I asked readers to vote what trends they felt would be most disruptive to technology service businesses. Readers flagged three trends as being most disruptive:
- Cloud computing: Impact of cloud computing on product-service revenue mix of hardware companies. I discussed this trend in the previous blog entry: Death of the 99.9999 Value Prop
- Social Media: How strong is the preference of technology consumers to use social media platforms to resolve problems? ? As social media applications continue to aggregate users, users are beginning to help each other. We discussed this trend of “crowdsourcing” to solve complex problems at our 2009 conference in Silicon Valley. How will technology service organizations adjust delivery practices to leverage these emerging user communities?
- Commoditization: Hardware companies are facing continued erosion of product margins. This erosion is putting more intense pressure on service organizations to deliver both revenues and margins. This trend was discussed in Product Provider Perils.
One year later, are these trends still relevant? Are these three items impacting providers of technology services? Beyond a doubt.
Impact of Cloud Computing on Technology Services
For the past year, I have been researching, writing, and speaking on this topic. Cloud computing breaks the following aspects of technology company business models:
- Financial Model: Healthy maintenance contract margins are rolled into monthly subscription revenues. Revenues for implementing and integrating products on the customer site potentially evaporate.
- Service Offerings: Service offerings to keep equipment up and running on the customer site become irrelevant.
- Partner Ecosystem: What happens when product companies offer cloud services directly? Why do they need resellers to sell and install on premise products?
Over the past year, I have watched technology companies, both large and small, gnash their teeth over these disruptions. Yet, visibility remains low. How will the dust settle on these items? Clearly, cloud computing has the potential to totally re-architect the technology marketplace. Three years ago, could anyone have predicted that Oracle would buy Sun?
Impact of Social Media
Social Media is changing how people learn. How people gather insights. How people share insights. Crowdsourcing has become a very real alternative to traditional support models. Support organizations are struggling with how to remain the source of truth for product support when their customers have so many peer resources to leverage.
By the way, Facebook is moving into Sun’s old campus. Who would have predicted that five years ago?
Historically, Microsoft makes billions of dollars by selling site licenses for Microsoft Outlook. At the end of 2010, Microsoft found itself in a losing battle as it raced to the bottom with Google to price email services for the U.S. GSA:
Deal marks significant step for search giant in Microsoft competition
$1 a mailbox anyone? By the way, long before Facebook moved into Sun’s old campus, Google had taken over Silicon Graphic’s old campus. In the 1990’s, SGI and Sun were printing cash as they provided high margin servers to enterprises. Unix servers with proprietary chips now replaced by Linux and Intel chips.
Your Input for 2011
Moving into 2011, I believe the above three trends will continue to disrupt service business models. In addition, I feel the following trends will also be disruptive:
- New Major Markets: Like everyone, I am reading the projected economic growth statistics. Clearly, the action will be in China, India, Brazil, etc. North America and Europe are recovering, but they do not represent exciting growth for technology companies. How will service organizations successfully monetize their offerings in these new major markets?
- Engineering the Experience: Finally, the success of technology has moved well beyond the creation of features. Features are cheap. Speeds and feeds are cheap. Customers of all types (enterprise, consumer, SMB), are looking for a successful “experience” when they attempt to leverage technology. I would strongly argue that Apple is not winning the “feature” war, they are winning the “experience” war. This requirement to deliver a successful experience to technology customers could force product companies to dramatically alter their services strategy.
So once again, I would like to poll the community. What trends do you feel will be most disruptive to the world of technology services? Below I have listed the five trends previously identified. Which of these trends do you personally feel will have the greatest impact on technology service organizations over the next five years? What trends will force you to rethink your offerings or your partner strategy?
Are there other trends you feel will be more impactful? Then write them in. Take a moment and voice your opinion.