In a previous post, I discussed how cloud computing and the Grameenphone microfinance endeavor fit into a McKinsey article about the benefits of unbundling production from distribution. This weekend I decided to revisit the article again just to see if I would see anything differently this time around.
The world is indeed getting flatter. The article’s section on “Tapping into a world of talent” talks about how technology today fosters interactive online collaboration which in turn enables companies to outsource increasingly specialized aspects of their work and still maintain organizational coherence.
[...] technology permits them to decentralize innovation through networks or customers, it also allows them to parcel out more work to specialists, free agents, and talent networks.
Top talent for a range of activities-from finance to marketing and IT to operations-can be found anywhere. The best person for a task may be a free agent in India or an employee of a small company in Italy rather than someone who works for a global business service provider. Software and Internet technologies are making it easier and less costly for companies to integrate and manage the work of an expanding number of outsiders [...]
This trend should gather steam in sectors such as software, health care delivery, professional services, and real estate, where companies can easily segment work into discrete tasks for independent contractors and then reaggregate it. [...] Competitive advantage will shift to companies that can master the art of breaking down and recomposing tasks.
Globalization is inevitable, and increased competition means keeping businesses on their toes, which in turn translates to increased benefits to the consumer. In short, it’s healthy for both consumers and producers (unless you’re just lazy).
In a way, this also parallels SaaS/PaaS. Look at the SaaSCon sponsors list for a glimpse of some of players out there. There’s no shortage of on-demand providers filling gaps in the cloud-computing/SaaS value chain and gaps left open for disruption by on-premise incumbents.
Each cloud computing/SaaS vendor mostly specialize in one verticle and strive to dominate that niche-delivering a continuous stream of value (innovate or die) for less (save customers money or be undercut by your competitor). Jeff Bezos has explicitly said it before that with Amazon AWS, he wants to innovate there by reducing operating expenses, increasing efficiencies infrastructure through economies of scale, so that (here’s the important part) “.. the cost savings can be then in turn be returned to the consumer.” Ok, so I paraphrased, but he said it in a video clip somewhere online and I can’t seem to find it right now.
The point here is that he’s trying to save the consumer money (and that’s a great brand promise!) The jury is still out on that one, given that AWS is still relatively young, but if anything else – it’s a makes a good sell (who doesn’t like to hear that their vendor is actively trying to save them more money?), but ok .. I’ve digressed too much on Bezos. I just can’t help liking people (and companies) who genuinely want to help others (the customers) be successful, so that they themselves can be successful too. Pay-for-performance? Pay-per-drink? Cloud computing? 
Just to name a few vendors:
- Google Docs -> on-demand “MS Office”
- Amazon AWS -> on-demand computing power, storage.
- Salesforce -> on-demand CRM
- CODA -> on-demand finance application (built on Force.com!)
- NetSuite -> on-demand ERP
- WorkDay -> on-demand HR, payroll, procurement, business intel, ERP
Odds are that your company is already using some kind of on-demand solution for one of its functions, even if you do not realize it.
The way I see it, if you think of each of these functions as discrete tasks with each farmed out to a particular SaaS vendor, then the need for the reaggregation for each of the function’s results is obvious. I agree with the article that companies that succeed in recomposing these tasks would hold a competitive advantage.
It would allow executives to conduct business at the speed of thought (asking questions like “how can I reduce operating expenses here today, can I realistically turn the ship around fast enough in anticipation of this tectonic shift/change in competitive landscape”) – as opposed to the speed of “how fast can I line up all the columns in this Excel spreadsheet from that tabular data in the PDF spreadsheet and .. hmm, it would be really nice if I could overlay on this the results from some SQL queries.. oh wait I have to get those from John in IT first ..”
The $200-300Bil business solutions market is open for disruption by Platform-as-a-Service.
Web 2.0 – all grown up and ready to change the way we do business.
