Anyone as old as me will remember when every office desk had a fixed-line telephone, a bulky monitor, and massive computer processor (with the fan going off all the time) — as well as all of the attendant paraphernalia like boxes of floppy disks and let’s not forget a fax!
And then there was the computer room — the windowless, air-conditioned room that hosted racks and racks of servers. The room was usually populated by a large IT team — probably making up 10% or 15% of all staff — that maintained this hardware while configuring software, running reports and building simple software programs.
Today, if your office is anything like ours, your computer equipment probably consists of a smartphone and a tablet computer. And you probably have a single IT person — if you have one at all.
How did we get here? Technology got more powerful for sure. But we didn’t turn that power into more technology, as science fiction predicted, but into making technology invisible. Everything we want — servers, software, IT resources — can be provided to us when we need it. Much like other utilities, we just switch it on and it’s there for us. We have the benefits of technology, rather than the technology itself.
Implications for the technology industry
This has various implications for the technology industry. The importance of system integration, for example, is declining as system setups become much less complex. But, for B2B software providers like us, it means two things.
First, in this new paradigm where business customers can instantly turn on new technology services, they can also instantly turn them off. Switching costs are disappearing alongside technology and, to keep customers, providers need to be offering ever-increasing levels of value-add. To paraphrase the American business magnate, Warren Buffett:
only when the on-premise tide goes out do you discover who’s been swimming naked!
We’re not yet there in banking, but it’s only a matter of time before we see which vendors have been relying on high switching costs.
The second implication is that the nature of how we create these compounding levels of value-add is also changing.