The ‘Consumerization’ of Information Technology
The ‘consumerization’ of information technology is a powerful trend that promises many significant long-term business consequences, including radically lower costs, greatly improved functionality, and successive generations of users who are ever more technology-savvy. Consumer devices and infrastructure are also becoming an important platform for a wide variety of innovative new products, services and applications.
In this paper we take a high-level look at what we mean by consumerization, why this process matters to businesses of all sizes, and how companies should begin to approach and manage this important and still not fully appreciated phenomenon. Subsequent research will focus on consumerization’s effect upon IT infrastructure, recommended strategies for implementation and detailed case studies. We believe that this issue is important enough to merit ongoing research coverage for the next few years. Our key findings thus far are:
- Consumerized technologies, infrastructure and applications can deliver dramatically lower costs and equally significant improvements in business functionality and ease of use. While most of these technologies have been on the radar screen for several years, we believe that they are now reaching critical mass, and that organizations need a process for adjusting to these developments.
- Enterprises have usually supported IT with private infrastructures.There is growing tension between this traditional sourcing model and the consumerized alternatives that are now available. Over time, comprehensive private IT infrastructures will become a luxury that even the biggest organizations cannot afford. We believe that consumerization will be the process by which many of these traditional infrastructures are transformed and revitalized.
- In many organizations, existing infrastructures and their supporting policies and assumptions have become a barrier to innovation and a source of increasing employee frustration with corporate IT. The potential conflicts between exciting new consumerized services and ageing business infrastructures must be minimized. CIOs must be on the side of change.
- Consumerization seems likely to be a classic case of ‘disruptive’ technology, which means many organizations will find it difficult to manage. To exploit consumerized technology and public infrastructure successfully, companies must decide to support this transition and then learn to scan, evaluate and judge service maturity.
- CIOs will eventually be asked to integrate these new services with existing business systems. This will prove a daunting challenge, and will show that some consumer services are not as cheap as they first appear.
- Although the security issues are often very real and can in the short term be only partially addressed, they should not be allowed to stop emerging consumer infrastructure usage. Over time, market pressures will push many consumer systems to match or exceed the security of privately managed systems. In some areas, this has already happened.
- Companies must treat users as consumers, encouraging employee responsibility, ownership and trust by providing choice, simplicity and service. The parent/child attitude that many IT departments have traditionally taken toward end users is now obsolete.
- To take advantage of consumerization, companies must acknowledge and leverage the blurring of our personal and professional lives.This means adopting differentiated employee usage and support models.The traditional top-down, one-size-fits-all approach will increasingly alienate employees and result in lost business opportunities.
- As the current pace of technology improvement is expected to continue for many years, these issues are sure to become more important. Companies that gain an early understanding of consumerized technologies and their related issues will have significant cost and usage advantages. In short, we believe that 21st century CIOs must actively push for consumerization before it passes them by. Only forward-thinking IT management can anticipate the impact of these changes on their organization’s processes, systems and culture. It presents a real leadership opportunity.
Figure 1 – The origins of consumerization
While both top-down and bottom-up innovation models play important roles, the balance has clearly shifted towards the latter. This trend will only gain momentum over the next decade, and has now become strong enough to affect organizational IT strategies.
What do we mean by ‘consumerization’?
For much of the history of technological innovation, top-down processes have been dominant. The early users of most new technologies were customers with significant financial resources and sophisticated needs, with military projects often the primary source of major advances in IT. Over time, the benefits of this R&D trickled down, first to large organizations, and then eventually to consumers and small businesses. This was certainly the case with mainframes, minicomputers and other early IT platforms. The fax machine followed a shorter version of the same path: at first an expensive corporate device, it only later became affordable to consumers. However, beginning with the emergence of microprocessor-based systems in the early 1980s and building in momentum ever since, IT innovation has increasingly been driven by consumer markets. This trend has become more obvious over the last few years, with the emergence of ever more powerful PCs, game machines, mobile phones, PDAs, digital cameras and so on. CD-ROMs and DVDs are also excellent examples of technologies aimed primarily at consumers, with business usage sometimes lagging behind and sometimes explicitly forbidden. Many employees now have significantly more capable devices and services at home than those provided in the workplace. As these consumer devices have grown in capability, so have the infrastructures that support them, and it is these infrastructures and their supporting services that are of principal interest to business IT management. The combination of dual-use devices, public networks and related services is what we call ‘consumerization’. Over time, more and more devices, networks and valueadded services will be used and shared by both businesses and consumers.
Figure 2 – What do we mean by ‘consumerization’?
The defining aspect of consumerization is the concept of ‘dual use’. Increasingly, hardware devices, network infrastructure and value-added services will be used by both businesses and consumers. This will require IT organizations to rethink their investments and strategies.
In this paper we will see that, in many cases, consumerized services will compete or conflict with existing corporate systems. It is not that one will immediately or necessarily replace the other, but that companies need a process with which to choose between internally managed infrastructure and increasingly powerful mass-market alternatives.
Over time, however, this competition will become increasingly one-sided, since the rate of improvement for consumer infrastructures will continue to exceed what most companies can do on their own. Our experience suggests that fundamental changes in systems architecture tend to occur when an order of magnitude in customer savings or performance improvements can be achieved and when there is strong supplier leadership. All evidence indicates that consumer technologies will offer this degree of potential cost and service improvement, but because many of today’s consumer services suppliers are still relatively weak, every proposal to use such services must be judged individually.
Consumer systems will evolve more rapidly than proprietary business systems for some very simple and largely irreversible reasons. The most important of these is volume. Many electronic devices and products are now being sold in tens and even hundreds of millions of units. Already there are more than 1 billion globally connected users – via mobile phones, the Internet and so on – and this figure is expected to rise to some 3 billion within a decade. Similarly, services such as Yahoo! and Google can easily have upward of 100 million customers, providing huge economies of scale (with near-zero marginal costs), along with a base of technology, experience and understanding which private infrastructure users simply cannot match.
With volumes like these, research and development costs account for only a tiny fraction of the cost of each device or service. More importantly, the networks that eventually emerge to support such volumes must be highly robust, or at least be designed so that users can cope with any problems without needing additional human assistance.While only a few consumer services have reached this high volume, high investment stage, many will eventually do so. And thus, while business infrastructures often have advantages in security and control, their ability to keep pace in terms of price, usability and performance is becoming increasingly questionable. In addition to the impressive scale economies, consumerization has a number of other important features and benefits, including:
- Standards. Standards and consumerization are essentially inseparable, and it is global standards that make it possible for most consumer markets to evolve in a highly competitive commodity-like manner. Whether one is looking at PCs, PDAs, mobile phones, messaging or network services, there are usually many interoperable products and services on offer, in sharp contrast to most existing corporate IT networks. There is little reason to doubt that this high level of choice and interoperability will continue. In time,Web services will make it easier to integrate these systems into existing business environments, but even so, the coming integration challenges will prove daunting for many managers of private business infrastructures.
- Convergence. Many consumer devices were initially targeted at highly specific applications since this was often the best way to get a sufficiently useful product to market – consider the early generations of mobile phones. However, over time, consumer devices tend to acquire increasingly general-purpose capabilities. For example, video-game machines are now beginning to overlap with PCs, as PDAs do with mobile phones. Indeed, it now appears that PDAs will have to support voice services if they are to remain an important market force. More broadly, the convergence of work and personal technology and even of work and personal time is at the very heart of the consumerization process.
- Training and knowledge. In many ways, companies should be thankful that their employees are now being trained by these consumer systems. Instant and text messaging are just two examples of important future technologies which employees generally learn to use outside of the workplace. Indeed, in a widening number of areas, the days when companies had to train employees to use new technologies do seem to be passing. In many companies, both younger workers and IT-savvy employees are often ahead of IT professionals in using certain types of consumerized products and services. This base of knowledge and experience must be recognized and leveraged.
It is important that the use of these emerging consumerized systems is not confused with traditional forms of outsourcing. Public infrastructures can provide (for example) generic voice, data, messaging and application services directly to consumers. In contrast, outsourcing generally refers to an agent or operator providing proprietary applications or services for a specific company or client.While there can be significant overlap between these two concepts, they are usually much more different than alike. For example, a company could outsource the management and operation of its existing network and still not have access to basic consumer-oriented services. Indeed, this is exactly the case for many businesses.
How does all of this affect CIOs and other IT managers?
In recent years, corporate IT has often been accused of exaggerating the business potential of new technologies, and in many cases is seen as having lost its innovative edge. Any perceived inability to respond to emerging consumer technologies can only reinforce these damaging attitudes.What are employees supposed to think when the email systems they get for free at home seem so much simpler, more reliable and more functional than the expensive ones they are forced to use at work? How is it possible that the average consumer can set up a wireless LAN at home in a few hours, while corporate IT takes months, or deems the whole idea too difficult?
Figure 3 – Conflicts and opportunities
While many CIOs may see emerging consumer technologies as difficult to integrate and full of risk, there can be a significant upside. Companies that successfully manage the transition can rebuild their image and provide important company leadership.
While IT professionals can usually give valid answers to questions like these, the explanations are necessarily complex, and will often fall on largely deaf ears. Fortunately, there may be a happy solution. As companies begin to sense that the post-dotcom bubble downturn is finally over, there is renewed pressure for top-line growth. This is creating an increasing appetite for business innovation. Coincidentally, this demand is coming just when many consumer systems are starting to reach sufficient maturity. Consequently, the enthusiastic support for the use of public infrastructures has the potential to help revitalize both business IT usage and the reputation of corporate IT itself.
The potential range of these generic technology services and ASP-style business applications is surprisingly wide. In addition to the general-purpose devices and networks already mentioned, employees are already using many specific technology services, either with or without the knowledge of company IT management. All would appear to present real opportunities for innovation and savings. Among some of the more interesting are:
- Email. Web-based email has the potential to be the single biggest consumerized application. One of our clients has about 6,000 employees using hosted Webmail accessible from anywhere via the Internet. Like other employees, their email addresses include the company domain name, and their names are included in the company address book. The fully burdened cost for this service is about one-quarter that of the previous in-house approach. These savings should only grow over time. Some employees have taken matters into their own hands, routinely using their personal email accounts as an easy way around the limitations of internal company systems. Looking ahead, it has been widely reported that Google will soon introduce a free, advertisingbased email service that will allow each user to have up to 1 GB (one gigabyte) of online storage space; an astonishing increase over today’s mainstream capabilities. And while this type of free service is probably not suitable for most businesses, it is certainly indicative of the tremendous service and capacity improvements to come.
- Wi-Fi. Of the many dual-use projects going on in this area, perhaps the most interesting is at McDonald’s, which plans to outfit some 6,000 of its US franchises by 2005. Not only will the new systems support customer Internet access, but the company will use the same network to handle credit-card payments and distribute information to employees. Perhaps the best part of the deal is that much of the initial cost will be borne by McDonald’s Wi-Fi provider, with McDonald’s also getting a cut of the $2.95/hour rate. While many IT organizations view Wi-Fi as just another security headache, the retail industry is showing that there are real business opportunities, as well as partners willing to share the considerable financial risk.
- Storage and file transfer. Many employees already use the Web as a virtual disk drive where individual and group files can be stored for ready access from any Web connection. For example, X-drive offers a Web-based service that allows individuals to store up to 1 GB for $16/month. Similarly, most ISPs and email providers offer incremental storage at very reasonable monthly rates which employees often use to store and transfer business files. At the high end of the market, one of our clients uses a service that enables the exchange of files up to 500 MB – much greater than the attachment limitation in most enterprise email gateways.
- Automatic backup. Another client has about 500 users subscribing to an automated backup service. Incremental, encrypted backups are made each day without any action required by the user. These files can then be recovered via any Internet machine, after proper credentials are presented. In addition to the superior quality of this approach, the company has enjoyed substantial savings by eliminating the in-house file servers whose primary function was providing desktop backup services. Before they chose this service, the system’s security was reviewed by our client’s staff. Their conclusion was that the security was, if anything, over-engineered and superior to the client’s own facilities.
- Collaboration. Another client uses a hosted Web service for inter-enterprise collaboration. These systems can be set up quickly with little or no infrastructure investment, and shut down when their purpose is complete. The use of Webex and similar conferencing services is now extensive and frequently outside the control or even awareness of IT management. Even the free, members-only group discussion facilities on Yahoo! and other portals are sufficient to meet some companies’ needs.
- Social networking. Many employees are using Instant Messaging systems, despite well-publicized business concerns about security, logging and the like. This usage could skyrocket once voice capabilities are added. Contact management systems such as Plaxo are another example of a Web-based social support system, whose usage is expanding quickly. Overall, the use of technology to facilitate business and personal networking can be expected to rise rapidly, and is an excellent example of the blurring of business and personal services.
- Personal mobile phones. Another client has experimented with buying incremental time on its employees’ personal mobile phone plans for business use by the employee. The cost of the incremental minutes was much less than the best enterprise-wide plan available to the company. This is a good example of how to leverage company and employee technology investments.
- Internet fax. Another client uses the Web to manage both inbound and outbound fax services. Inbound faxes are delivered into the email inbox of the recipient as an attachment. The fully burdened cost of this service is estimated to be less than 10 percent of the company’s previous stand-alone fax machine approach. Because of the need for signatures, contracts and other (often non-digital) information, many companies still spend a considerable amount on facsimile systems. Over time, enabling legislation will eliminate the need for most paper documents, but in the interim there are real savings to be had.