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Are businesses that see it as a commodity missing the point?

  • Posted on June 15, 2016

managed services

Has IT become a commodity? And if so, is this new state of play beneficial to businesses? These were the questions we debated in the latest of our Reality Exchange Debates between Avanade and CloudTalent experts around topical IT issues.

Technologists have been writing about the commoditisation of IT since Nicholas Carr said that ‘IT doesn’t matter’ in 2003. And with the move to the cloud, one IT service can look very similar to another.

Kicking off the debate, Paul Brooks said that, to a certain degree, businesses just see IT as a product, much like buying milk, therefore all that matters is whether it’s the kind they need or not.

Geoff Alder added that IT has certainly become commoditised at the component level. He gave the example of how there aren’t many server manufacturers of any scale anymore, because they’ve all been commoditised.

In this context, I believe that IT managed services could be seen as a commodity too, but is this the right approach for companies looking to create business value from IT?

Standard offerings like Office 365 could certainly be perceived as a commodity. However, when it comes to a conversation about managed services, requirements are always different. A customer with a trading arm might want support for a business-critical application, in which case they will want high availability and SLAs. Yet a customer looking for an application that only has five users and is only utilised once a month needs a very different managed service.

Echoing this point, David Carmichael believes that modern managed services have become less of a commodity than ever before. Indeed, managed services are moving more towards outcome-based SLAs, which by their very definition are industry-orientated and thus highly individualised.

And, as Geoff Alder said, as soon as a managed service agreement begins, it has to morph to meet the needs of the business. Thus, the provider must add innovation to their managed service to successfully deliver the business outcomes required.

Businesses who are not exploiting IT commoditisation are missing out on cost savings and efficiency benefits. They should use productised building blocks to consolidate core infrastructure.  Every business faces a unique set of challenges hence customisation and integration – the layers that sit above the building blocks – require a specialised, approach. These are the layers where innovation occurs and where new ways of working can be pioneered.

This is the foundation of what we call the New Economics of IT. On one hand, it is about using the commoditised building blocks of IT to reduce the cost and complexity of core IT systems. But on another, it is also about using innovative technologies and approaches to create real business value and market differentiation.

Watch our full debate below, view the full series here or learn more about the New Economics of IT by visiting our microsite.

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