Defining the challenges facing information technologies for 2006

Ricardo Pérez. Professor. Instituto de Empresa

31 January 2006

With technologies evolving so rapidly, ITs face a wide range of challenges in 2006. But the biggest challenge of all involves transforming the role of IT , from purveyor of services and products to that of solution- provider.

With the world of technology changing so rapidly, it’s difficult to sum up the main challenges facing IT over the coming year. In the past, anything that enabled companies to spend less or offered new applications to users was considered an advance. With that in mind, three main areas for consideration emerge: New technological architectures; off-shoring models and their utility, and, within the telecommunications sector, the convergence of devices and services—a process that will create new digital ecosystems whose existence are almost unimaginable today.

Expectations: let's talk about money.

For at least two years now, the main strategies of companies providing technological solutions for other companies have focussed on flexibility and cost-savings achieved through web-based technological architectures. Now that service- oriented models are usually included in the implementation plans of most leading companies, inter-operability is finally likely to have a significant influence on inter-company relations and to affect the way in which information systems are developed and understood.

It’s easy to draw comparisons between these developments and the impact that product management systems had on a world scale in the past. In the 1950s, the use of standard-sized shipping containers transformed international trade. The only real change was the exchange standard used within the trade network, which made it possible for the different nodes or workstations to work together much more efficiently.

When the standards for the exchange of information between systems are ready (this year the bases will be laid), the management of the information exchange between companies and between the user and a company will be transformed. This year, we can expect systems executives to be less wary of change and to invest more heavily in standards that will change the role of technology in corporate strategy.

Similarly, utility computing models will have an impact on company financial results for many of the same reasons. Lower costs and the widely adopted process- standardisation and measurement systems will likely make the utility model the preferred outsourcing option this year.

This process will go hand–in hand with another trendy phenomenon: off-shoring. Off- shoring is likely to be practiced by leading companies that have invested heavily in software development. The growing use of off-shoring e is likely to have more to do with the latest market trends and the departmental mantra of “controlling what you spend”, than with any proven advantage it may provide. Despite the fact that the companies hired (usually in India or China) are improving quickly, the cultural differences--which have taken years to smooth out with Anglo-Saxon countries-- will be an obstacle, preventing this global trend from becoming widespread.

The challenge for Spain is to win a growing portion of the contracts that have seemingly gone to Indian companies over the past two years. We must compete on the basis of quality criteria, where the key factors are Capability Maturity Model Integration or CMMI-type certificates and geographic and cultural proximity. These factors will reduce the risk-element of projects and give contracting companies tighter control.
The challenge is not only to achieve this, but to show the market—and particularly the international market--that it can be done.

Promises: Convergence as manna

Finally, the development and consolidation of new technologies and the emergence of new business opportunities constitute perhaps the principal opportunity for the Spanish telecommunications sector to innovate and to internationalise. With Telefónica, the main driving force in Spain, now competing with its largest European rivals for the domestic market, innovation in services for digital convergence is a necessity and a great opportunity that must not be missed.

So far, the stars of the market have been ring-tones and polyphonic ring-tones, both of extremely low technological complexity and with little of the competitive advantage that could spur their export. What is in the pipeline now should create significant business opportunities. As a result of economics and innovation, these new technologies don’t necessarily have to be spawned by an American university or Silicon Valley. In the same way that Blogs over the last year have changed the way internet users keep abreast of current affairs, we now face a sweeping change in the way we obtain, use and pay for digital content services. Increasingly, users ask to be more independent of the device and their location. The ability to encompass the entire process, from conception to billing, is a great opportunity that requires collaboration and innovation—something the Spanish telecommunications sector is well positioned to provide.

The mystery here still lies in knowing what users really want. Market studies, focus groups and specialist questionnaires are all aimed at predicting the 'digital future'. Only a Christmas campaign laden with sales of triple-play products and 3G terminals will create the appropriate environment for determining exactly which product is a winner and which services need to be improved before they can be exported. The opportunities are emerging around giants such as Telefonica, where an entire ecosystem of companies is being created to help them develop and understand technologies from the user’s point of view.

The sad truth

But a sad truth also exists: Corporate management committees have a small number of specialists in information technologies, posing without a doubt one of the greatest challenges facing the sector this year and for years to come. If we want to encourage technological innovation, we need a commitment from company decision makers. Not only must companies participate in bold, large-scale business deals, they also must make a commitment to promoting internal innovation processes. Consequently, 'those in the computer department' need to change their role and become opinion leaders. Technology is of key importance for most businesses, at least for those looking at a brilliant future. And yet, those who are in the know are kept out of the strategic decision-making processes in most companies.

The real challenge facing ITs this year is whether they will be able to transform their role within companies, from masters¨ of the medium that offers products or services to that of solution provider. It helps that telecommunications and technology have once again made the front-page of economic papers, even though this prominence elicits criticism such as 'not this lot again?’ At least the opportunity exists, underpinned by better financial analyses and the lessons learnt from the past. I hope 2006 is the year of change---a year in which innovation, rendered through technological advances, takes precedence over the fear of failure. Only then that can we create new business opportunities, instead of getting caught up in the short-sighted maxim of 'more of the same'.

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