• Andy Jonak

The Commoditization of IT Enterprise Technology

I've opened many of my blog posts stating that the IT landscape continues to change and will continue to change—and here I have done it yet again.  This time I want to talk about how it relates to IT enterprise technology and the fact that the technology itself is (and in many cases already has) becoming commoditized.  It's not a new phenomenon; we all saw this happen with PC market and industry over the past 10 or so years.  When is the last time there was true perceived value in the PC—outside of a specialty items—within corporate IT?  Most organizations purchase and deploy PC's as if they were purchasing office supplies at the office supply superstore.  They buy them without a lot of forethought.  The same is happening within the server and storage environment.  Definitively on the lower end server and storage market, slower on the higher end server/storage market, but it is definitely there there as well.


In the IT world, commoditization generally refers to a product or solution that becomes so pervasive in the market that the only way for vendors to compete in selling it is to compete on price.  Therefore it drives pricing down for everyone, which is great for the consumers of the product but not so great for companies making and selling it.  When price wars happen, the cost of a given product remains about the same for various vendors, again, not good for the vendors unless they are hyper-efficient at making and distributing the product.  Due to this, IT organizations and companies who purchase IT technologyperceive that it doesn't matter which vendor's technology is purchased, as the perception is that it's all the same in terms of value.  It's a pretty black and white statement, and while this may or may not be true, it's perceived to be true, and we all know what they say about perception—it is reality.  And this cycle continues to perpetuate where technology that was once perceived as providing value no longer does.

The lower end server and storage market (think 1U/2U servers & workgroup storage) is already there.  Organizations don't purchase this technology with much value thought it in mind.  They purchase it to fill the need they have on the table right now.  And even if they are purchasing for a larger, strategic initiative, it's the larger strategic initiative that provides the value, not the technology itself.  They see and derive little value in the technology itself.  It's like buying a drill.  You really don't want the drill, you want the hole it creates for you, the end result.  The same is true with IT enterprise technology.  This challenge is the same (though to a lesser degree right now) on larger servers and storage and more specialized and sophisticated enterprise solutions. There is more value associated with these solutions as of now, but make no mistake, this too will change as time goes on.  It's already happening.  The advent and use of Cloud solutions (IaaS, PaaS, SaaS and every other aaS out there) within IT enterprises does and will have the effect of removing value out of the technology itself, even on the larger, more complex solutions.  Why buy the technology when I you can just spin it up as a Cloud offering or purchase a solution such as a reference or purpose built architecture where it comes as essentially an appliance?  The technology part becomes secondary, an afterthought.  Like it or not, it's the reality of our industry and where things are headed.  This doesn't mean that all technology will go away, but people will continue to see less and less perceived value in the technology itself as time goes on.  Manufacturers of technology know and understand this and are embracing (albeit, some reluctantly) the change and us it as a chance to show more, new, and different value to their customers.  And you know what? This isn't doom and gloom, this is a good thing.  It's a good thing for organizations/IT departments and the VAR community as a whole.  For IT organizations it means that IT people can focus on the best use of the technology in a much more strategic fashion, versus the bits and bytes.  They can become more enablers than doers and become more thought and knowledge driven, while looking towards how technology can help the company itself be better through its use.  Will this change the function and makeup of the IT departments?  You bet.  But all for the better. 

For the VAR community that is traditionally involved in the architecting, selling and installing of the technology itself, they too will have to change to accommodate the customer's needs, which will be focused not upon the technology, but on their services and value associated with those services.  As Thomas Friedman said in the "The World is Flat", will need to continually reevaluate our "Special Sauce" (in this case, our value as a VAR) and change it due to competitive and market demands.  This will force VAR's to step up their game or get left behind; with those that do get left behind destined to become dinosaurs that stay in the niche of only selling technology.  And no matter how good you are at selling technology, the IT world is changing around us.  VAR's really have no choice: change to stay relevant and flourish or become minimized, and potentially, go away.  You know who benefits the most from these changes?  The customer and the IT department.  They get to experience a VAR community that continually increases its value out to the market, which means more value (real and perceived) to their customers.  And at a time where customers are demanding more and more value from their VAR's and business partners (see blog post on this topic here), this benefits everyone, and especially the customer.  So don't fear the commoditization of enterprise technology in the IT world, as we know it's happening whether we like it or not.  Use it as an opportunity to change and update your own "Special Sauce" and to use technology and the skills of your IT organization to better your IT department, your company and yourself.  So embrace commoditization of the IT enterprise technology, it's a good thing no matter how you look at it for everyone.

Andy


ajonak@vicomnet.com

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