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Cloud Computing: are you ready for co-creation?

I saw a fascinating interview on Forbes.com last week that implies the death of IT as we know it. In it, Michael Chui, senior fellow at the McKinsey Global Institute, described a trend that his firm views as the way IT will be done in the future.

Chui uses the term distributed co-creation, which is companies working with external parties, both individuals and other companies, to cooperatively create new business offerings.

Chui is quoted: "Co-creation and collaboration allow you to extend your enterprise through geographical boundaries" and then goes on to say:

"We have talked about the power of orchestration vs. ownership of specific assets, employees or intellectual property. Increasingly we're seeing companies create competitive advantage with a network or ecosystem and orchestrate activity to capture value."

Chui also describes how companies are gathering much more data about these cooperative ventures and running analytics to understand how to create more value from the overall offering as well as their piece of the solution; in fact, he uses a term coming into vogue, "big data," to characterize this element of co-creation.

Turning to the role of the IT organization itself, Chui says:

"The IT organizations that are partners with the rest of the business, and which are taking these ideas and getting ahead of the game, are going to be profit drivers for those companies or organizations. Those IT organizations that confine themselves to traditional IT--servers, desktops and maybe mobile phones--will miss out on the application of these trends, and they might find themselves replaced by outside providers that are in the business of leveraging these trends."

This last point echoes an interview with Gartner VP Mark McDonald that I discussed in last week's post in which he made the same point: IT organizations that focus on efficiency are likely to be displaced by less-expensive external providers, while those that concentrate on building offerings that are part of their company's core offerings will prosper. This latter point, by the way, is not the same as the commonly-presented "partnering with business units," which is supposed to ensure that IT delivers what the business unit wants--too often, that results in better efficiency in rolling out standard apps. Instead, what this means is that IT must implement these kinds of co-creation capabilities.

The implications of the future were limned for me in a discussion I had this week with Tom Lounibos, CEO of SOASTA. SOASTA is a cloud-based testing and monitoring service used by companies to ensure their systems can respond to large and unpredictable loads. For example, Denny's used SOASTA's service to ensure their website could handle the 59 million (!) visits it received after it ran a Superbowl commercial offering a free breakfast.

Tom made two observations about the types of applications his company is working with--both of which pose a challenge to the traditional application planning of the past.

The first is the changing nature of an application's user population. Historically, as noted, most applications were focused on automating internal business processes, which meant relatively stable loads and numbers of users. With the current move to making applications accessible to external parties (via distributed co-creation), the load on an application can vary tremendously. In other words, external users are now becoming a significant part of the application user population, and the numbers and patterns of users puts paid to the old expectations of stable user population sizes.

The second was even more striking than the first. Tom said that as business groups within companies get more familiar with the capabilities and opportunities offered by integrated applications and distributed user populations, they start designing more and more innovative business offerings that assume the ability to handle unpredictable loads and manage very large amounts of traffic.

My interpretation of these observations is this: if you accept the validity of McKinsey's distributed co-creation future and that companies will absorb the ability to leverage those capabilities, the established practices and assumptions that underpin most IT organizations are no longer applicable. These practices and assumptions are designed for a world of stability, consistency, and little variation, while future business trends will undermine every one of them. The future demands vastly more scalability, elasticity, and agility.