The information technology industry is not mature enough, and a return to rapid industry growth is possible – but only after a long hard look at issues such as standardisation and collective customer needs, Paul Reynolds, managing director of London-based Wentworth Management Consultants believes. Market immaturity, he believes, is symptomatic of a poor level of co-operation among users, vendors, and collectively between both sides of the industry. He argues that the major vendors and their followers have fallen into an analytical trap, by succumbing to conventional wisdoms that can be easily and successfully challenged. Certainly, from a macro-economic perspective the market is nowhere near saturated – according to a study of computer usage amongst US workers, penetration is no more than 15% – a figure that is certainly even lower in the UK. Fantasy land Moreover, Reynolds believes the market is not saturated from a micro-economic perspective either, and that in fact there are many signs of shortages in supply. Large users wait months for new terminals or disk subsystems; data processing departments find that services they want to buy in are unavailable. Users are faced with a large array of insufficiently differentiated products using different technologies. And budgets are depressed by pessimistic views of industry responsiveness and by concern over disputes such as the interface law suit between Apple and Hewlett-Packard and the Unix International-Open Software Foundation struggle. The argument goes that to be competitive and avoid the lock-in, users must buy from many vendors – any company that thinks it can provide a total solution is living in fantasy land according to Reynolds – and as a result there is not oversupply, but undersupply in the industry. In addition, there are high costs for system integration and specialist services which are not always easily and openly available. These absorb resources, reduce benefits and depress budgets. The popular view is that growth follows technological change – certainly the Open System market is witnessing a period of change, growth and redefinition that is rooted in Thomas Kuhn’s theory of scientific revolution. According to Reynolds however, more important for a climate of growth is investment across the whole user organisation and investments in performance that are easily absorbed by users – both of which can be delivered through standardisation. It encourages a shift in user resources away from integration and duplication of technical expertise towards higher value technology and is certainly borne out by the example of the adoption and development of Sun’s Sparc architecture, which has been primed by the Unix standard. Standards also make it easier to develop complex applications. IBM and DEC excepted, industry profit does not any longer come primarily from locking customers into proprietary technology because users now know they are being locked in, and spend less accordingly – Reynolds cites NATO, the EC Commission, Lockheed Corp and General Motors as examples of this trend: some of his examples spend up to 30% less than they would otherwise. Governments and larger corporations will even buy kit from several different vendors, investing time and money integrating them to maintain multi-vendor strategies. Arguments against standardisation hinge on two basic issues. Firstly that standards turn products into commodities, therefore reducing profits, and secondly that they retard technological change. The first is true in some instances, however, the low cost of identical personal computers and software is not reflected in the expense of building a complete network of systems for a large corporation or government. In addition, much of the user community already buys standardised products directly from the manufacturers, not from the main vendors, and as Reynolds argues, low spark plug prices do not eliminate the profits of BMW. In a study of large users, he has concluded that even with only a third of information technology requirements standardised, savings of up to
40% on software, 30% on technical services, and 60% in data processing departments on staff training, procurement and planning can be made. Rather than reducing budgets, these savings are more likely to be reinvested, and reinvested in areas of mutual benefit to vendors and users – on new equipment and services. Another characteristic particular to information technology – and one that would shock other industries – is user expectations of vendor responsiveness. In this game it is possible for oversupply and undersupply to co-exist, whilst users have very low expectations of what vendors can do for them. Users must collaborate So what’s to be done? Reynold’s believes that users ought to start flexing their muscles and begin to collaborate internationally on issues like application portability profiles, and user-driven demands for new services and technology. These developments would need to be managed by the supply side of the industry, it is to be hoped, encouraging vendors to regain the initiative. Indeed some large US users are forming groups with this express intention, and in New Hampshire and Massachusetts, academic users and procurement bodies meet once a year to thrash out a list of requirements for what they want achieved over the year, which is then presented to industry for fulfillment like a shopping list. Reynold’s calls for a new independent internationally composed body to oversee the industry – like those that exist in many others – to address user needs, standards, technology convergence in areas like the integration of high definition television and workstations, communications and portability, as well the issue of intellectual property rights, which conventional legislative bodies have been woefully incapable of defining. Looking at the present climate, the battleground of Open Systems has given rise to bodies from the industry which resemble the Geneva conventions on rules of war. Groups like X/Open are heavily subscribed at present, but in Reynolds’ view they may not make much difference in the long run because too much is at stake for member companies, leading to so called independent strategies and products being carved up between members. Witness the skirmishes between Unix International and the Open Software Foundation which are, from the users point of view, totally irrelevant for open systems – users would rather have one than have the industry in dispute.
