The Insider's Guide to Next-Generation BPM
By Dr. Anand Deshpande, CEO, Persistent Systems and Dr. Ashok Korwar, Consultant, Persistent Systems , 06/22/2009
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It is unlikely that the software industry will let the current economic crisis go to waste. But the question to ponder is, once this tornado blows over, what will the landscape look like? What structures will be left standing? What new structures will be thrown up by the winds of change?
Interestingly enough, the current crisis has nothing to do with technology. In the past, it has usually been technology changes that rocked the industry. This time, the changes will be driven by business imperatives; technology will just have to keep up.
In the first phase of the crisis, businesses around the world responded in the usual fashion -- once they unfroze enough to respond at all, that is -- by cutting costs, laying off people and squeezing vendors and suppliers. This round of blood-letting is more or less over and done with by now (we write this in May 2009), and the next phase of change may be expected to begin.
We may certainly expect new business models to emerge that will outlive the current recession. Uncertainty about when the economy will turn the corner will lend a premium to flexibility. Businesses will take small bets, rather than big bets, draw up monthly plans rather than annual budgets. Budgets themselves will certainly be reduced across the board, by 25 to 40 percent, not the 5 to 10 percen that are easy to manage. And this will include the CIO's budget.
The scenario
CEOs and CFOs of businesses will call upon the CIO to formulate their budget month by month, not even quarter by quarter, and will expect it to be 25 to 40 percent less than in the previous year. The CIO will respond by pushing the IT vendors to switch to a "pay for use" model, with a much lower base fee. Rather than spend $100M a year on IT with multiple vendors, the CIO will offer one prime vendor an offer he cannot refuse: take charge of everything, including people, for $5M a month. This will require extensive financial engineering, with lease options, sophisticated pricing, innovative Service Level Agreements (SLAs), advance notice requirements, penalties for under-use and over-use and the like. But the vendor will agree to all this, partly because the CIO will give him no choice, partly because he sees a bigger pie, albeit at lower "rates."
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