Recently, I was reflecting on our October 2002 announcement of On Demand and how it has played out in the IT industry in the intervening three years.
As I wrote in a recent blog story, when we announced the On Demand initiative back then, it felt very different from the launch of our Internet strategy in the fall of 1995. The Internet in those days seemed almost magical, full of hope and possibilities that gave rise to a fever of expectations and entrepreneurialism founded on the wonderful engine of innovation that the Internet has been ever since.
By the time of our On Demand announcement seven years later, however, the environment was decidedly different. The dot com bubble had burst, economies around the world were in a slump, and the IT industry was actually shrinking. With 9/11, the world was feeling much more vulnerable. And corporate scandals were shaking people's faith in business and the financial markets.
At the same time, technology innovation was actually flourishing. In fact, some of the most important initiatives that would determine the IT agenda for a long time to come were accelerating, including advances in all aspects of the Internet, Linux and Open Source in general, Grid Computing, Services Oriented Architectures and Autonomic Computing. But we sensed that, precisely because of all the continuing advances in technology, a profound change in computing was coming: The focus was shifting "up the stack" in how IT is used by business along with the basic assumptions about how it would be paid for and accessed. As Sam Palmisano wrote in an Information Week article in January 2003: "Having just celebrated a decade of patent leadership, we at IBM understand the vital importance of sustained technical leadership." But he then went on to say "[Customers will] spend only if the products, services, and thinking they get from our industry can help them transform their operations and build wholly new kinds of business models."
We tried to capture these marketplace changes in three basic questions: "What is an On Demand business and why should I become one?"; "What kind of computing environment does On Demand require and how do I build one"; and "Can On Demand redefine the way I buy and manage computing?" Let me briefly talk about each of these questions and how the answers to them have evolved over the last three years.
What is an On Demand business and why should I become one?
We asked a similar question when we first launched our e-business strategy around 1997. The answer back then was relatively simple: "Leverage the Internet for business value." And by the late 1990s every business and institution knew that one way or another they had to leverage the Internet. On Demand was a considerably more complex matter. We were telling our clients that as a result of the accelerated rate and pace of change all around us, including some very powerful forces like technology and globalization, businesses needed to become much more responsive, flexible and focused in order to adapt. We were telling them that "The Next Big Thing" was no longer any one technology invention, but the fact that technology was becoming integrated into, and transforming all aspects of business and society. But with businesses around the world in a funk in 2002, and with the Internet having lost its "magical" aura with the bursting of the bubble, convincing customers that they should want to become On Demand businesses was not easy.
Today perceptions have changed, and the situation feels very different. First, the picture that we were painting of an open, integrated and global On Demand world is much more widely accepted. The notion is even the centerpiece of Tom Friedman's best-selling book "The World is Flat." Much more widely accepted as well is the proposition that the IT industry should focus on business uses, rather than just the technology itself. Indeed, much work is now going on around innovating at the business model and business process levels. For example, we are embracing methodologies based on science and engineering and developing sophisticated tools and processes in the pursuit of the needed business transformations. We are also working with leading universities all over the world to help create a true academic discipline around these subjects. In my recent talks, I have been saying that we might be at the onset of a technology-enabled business process revolution that could have the impact on us in the 21st century that the Industrial Revolution had on previous generations, a proposition better accepted today than it would have been three years ago.
What kind of computing environment does on demand require and how do I build one?
At the time we launched the On Demand business initiative, we said that such a business required an open, integrated, heterogeneous IT infrastructure with self-managing, autonomic capabilities. The Internet had already convinced most people and businesses of the virtues of open standards, and much progress has been made since then. This is very important, since as the IT infrastructure continues to grow in all dimensions, managing its attendant complexity has become the focus of attention. Open standards are being used to develop end-to-end, virtualized IT infrastructures that hide the complexity and provide a base for the autonomic applications needed to make the infrastructure as self-managing as possible. Open standards are also behind the continuing progress of SOA and Web services, which are enabling us to tackle the integration of processes, information, people and just about everything needed to build open, global, integrated business solutions.
Can on demand redefine the way I buy and manage computing?
When we announced On Demand, we were convinced that one of the biggest changes coming to computing was in how customers acquired and paid for IT and IT-enabled business processes. This was the logical outgrowth of several widespread changes: an increasingly powerful and reliable IT infrastructure; the continuing acceptance of open standards all the way to the business process level; and the growing economic and competitive pressures faced by every business. In the previously referenced Information Week article Sam Palmisano said: "If businesses are going to become more flexible and variable, they're going to need more flexible and variable ways to acquire and pay for information technology. A pay-as-you-go delivery model … lets [customers] concentrate on their core business and tap into computing resources far beyond what they could reasonably own or manage."
People initially seized on this concept of "pay-as-you-go" and equated it with On Demand. In the last three years, however, we have gotten past having to defend On Demand as being more than just "utility computing." There is wide acceptance of On Demand as a state in which every company focuses on what it does best and partners for the rest, in order to remain flexible and to keep adapting to changing market conditions. This major trend has been very well captured in a recent paper from IBM's Institute for Business Value which said, "In this environment, only specialization - a laser-like focus on the few activities that confer real advantage and profit - will enable firms to deliver full value to their key stakeholder groups of customers, employees and shareholders."
Today, businesses understand much better than just a short three years ago that they need to leverage IT to transform and become On Demand businesses. This is partly because we have been working - and making excellent progress - on the substance of the initiative. But perhaps it is attributable even more to a growing acceptance of the fact that we are living in a fast-changing, integrated global world, - a "flat", On Demand world, to which every business needs to learn how to adapt. It is not possible to succeed by simply doing the same things better. In the end, the imperative is to innovate - to do new things that drive different results.