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Prevailing theme from 2010: The accelerating rate of technology change becomes clear

It’s nearly the end of 2010 (2010!) and I’ve just returned from a short break tramping (hiking) in the beautiful Abel Tasman National Park in New Zealand – great weather and nothing but sunshine, nature, sea and a 20kg+ backpack for company for 3 days. (OK, there were quite a few German tourists on the trail as well but other than that…) Highly recommended part of the world if you’ve never been.

Anyway, getting away out of it is a great opportunity to take the mind up out of the day-to-day and reflect on the bigger picture. I managed to spend a fair bit of time thinking about the wider trends behind what’s we’ve been seeing in our business over the last year, what our customers have been seeing, and what the implications are likely to be going forward.

Cloud uptake by in-house IT

When I set up Memia in mid-2008, I was pretty convinced that cloud technology was on the cusp of rapid mainstream commercial uptake by in-house IT departments. However, as it turns out – in our home market at least – the inertia of the embedded on-premise model and residual concerns on security, reliability and usability have slowed down the pace of adoption I expected. Whereas we’ve seen our early adopter customers gain major improvements in reliability, productivity and collaboration – all at a fraction of the cost of traditional do-it-yourself IT – they are still the minority who have dipped their toe in the water. CIOs, generally a risk-averse bunch, are still waiting for greater industry uptake – and, dare I say it, have a vested political interest in keeping an army of “IT guys” feeding and watering servers rather than culling their empire. Plus, many larger IT organisations have 3-year-plus sunk investments in IT infrastructure which they’re not going to write off immediately due to accounting rules. As a result, my experience over the last year has been that SaaS and cloud have only really been compelling for micro and small businesses where there is a compelling focus on cost. That said, the impression I’m getting now (coming out of the recession) is that cloud computing and SaaS is now a broadly accepted paradigm in many medium-sized organisations and next year will see many more CIOs taking the plunge – whether they are pushed into it by their boards or not.

Cloud impact on Systems Integrators

Meanwhile we are observing many of the “Services 2.0” predictions made by Narinder Singh of Appirio (2 years ago!) back in Dec 2008 coming true with uncanny accuracy: where previously on-premise Systems Integrators would have aimed for $10-$15 of services revenues for every $1 of software licences, the new model allows for only $2-$4 – if that. The old labour-intensive, sales-intensive one-off custom integration model just won’t be sustainable going forward. SIs have to turn into scalable SaaS businesses themselves selling “integration as a service” if they’re going to survive. Again, my impression is that today’s established SI’s are sleepwalking towards a revenue cliff and haven’t quite understood the new disruptive cost models and capabilities of the competition. I’m constantly amazed hearing about local organisations who are building their own data centres and server farms even NOW! Guys, have you *seen* Amazon’s pricing? What is it that you can do better??? The infrastructure game is a race to the bottom which will be won by the players with the biggest economies of scale and the best technology. The only question is when, not if. I give it 3 years max.

ISV Migration to the Cloud

Meanwhile in the ISV space again we’re seeing a considerable interest now in the SaaS model. Working with our ISV customers over the last year has given us a detailed understanding of the new risks, challenges, pitfalls and yet major opportunities of moving to the SaaS model. Basically, if you want to run a long-term, scalable software business then you *must* offer a multi-tenanted SaaS offering as soon as possible, period. However, the trick is to know how to do this while keeping your existing on-premise customers and without cannibalizing your existing market.

The key “table stake” of playing in this space is to get your technology strategy right: to support both on-premise and multi-tenant SaaS simultaneously using the same codebase, to support multi-channel mobile access, and to build a new 24/7 IT operations capability. And yet this is really difficult to achieve. CTOs are increasingly nonplussed as the landscape is changing so dynamically and at an ever faster rate, with technology adoption cycles and investment lifespans getting ever shorter. A year ago, who would have anticipated the rise of Android to shipping over 200,000 units per day? The trend for bring-your-own consumer devices (iPads, iPhones) into the Enterprise? Microsoft’s apparent dead-ending of Windows Mobile and Silverlight? (Where IS Microsoft going, anyway…?). Perpetual “nearly there” HTML5 support? Google’s lurking in the background of the Enterprise space and who knows what they’re doing either…

Just how does a CTO in 2011 correctly understand what’s going on out there, and then plan technology strategy accordingly?

The Accelerating Rate of Technology Change

The biggest impact on my thinking this year was reading Ray Kurzweil’s The Singularity Is Near back in May. Even though it was written back in 2005, and in many ways should now be superceded, it is an extraordinary, outspoken, visionary book which is highly relevant to today’s technologists. The key theme underlying the book is simply this: technology change – according to many objective measurements – is not linear but accelerating exponentially. Just because our cultural inheritance brings us up to assume that things will continue to change at the same rate as currently, the fact is that they are getting faster. And faster. Put another way, there will be as much technological change between 2000 and 2014 as during the whole of the 20th Century. There will be the same amount again within the next 7 years after that.

Absorbing this fundamental understanding has a profound effect on how one thinks about the future. Whether or not you can bring yourself to agree with Kurzweil’s extrapolation of the Technological Singularity (when machine intelligence capability exceeds all human intelligence capability), as happening around 2045, he still maps out the many potential changes in IT, robotics and nanotech over the next few decades which have to be taken account of when developing tech strategy now. (Amazing meme: 1 human brain = approx. 1016 computations per second (cps). In 2045 there will be approx. 10 billion (109) humans on the planet => 1025 cps in total. If Moore’s law continues at it’s current rate, this would be the equivalent of just $1000 of computer processing capacity!)

So, the major landscape changes we’ve been seeing over the last years can be understood as just the continuation of aeons of accelerating change. Fundamentally: CTOs need to underpin their thinking with this knowledge, and understand the corollary that product investment lifespans and adoption cycles will be ever shorter going forward.

At Memia, this thinking has really permeated our way of looking at strategic engagements, and we have come to feel at ease with exponential technological change. Nay, wildly optimistic at the opportunities it brings! In 2011 we will be re-focussing our consulting offerings to work with our customers to develop robust strategies which fundamenally take account of the dynamic and ever-faster-changing technology landscape.

Exciting times.

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