In a sea of buzzwords such as RFID (radio-frequency identification tags), offshoring, and open-source initiatives, what's really driving information technology? And what's way overblown?
On Feb. 8, editors and writers of BusinessWeek sat down with George Colony, CEO of Forrester Research (FORR), a technology research and consulting firm, to talk about IT trends today and what he likes to call the "Ralph Revolution" in recognition of GM (GM) CIO Ralph Szygenda. Edited excerpts from the conversation follow.
Q: What do you see as the biggest growth area in technology right now?
A: A very big area is what we call the physical-to-digital connection. The difference between 1994 and 2004 is that in that 10-year period, a piece of wire was created from every company to every customer -- the World Wide Web. From 2004 to 2014, a piece of wire will be created from every company to every product they've ever made. I'm exaggerating here a little bit, but that's where we're going. Forrester predicts that we're going from 750 million devices connected to the Internet today to 14 billion by the end of this decade.
RFID is a small sideshow in that whole trend. But it's not as science fiction as you might think it is. Michelin is actually putting them in tires, so pressure, age, and tread wear can all be monitored.
Wal-Mart (WMT) is pushing ahead fast. And my car, actually, has two tags in it. I have a toll tag, and I also have OnStar. With OnStar, GM has tagged 10 million or 15 million vehicles. I don't think it's well-known, but when you have OnStar, GM knows every gauge in your car real-time. They know what CD you're playing, and they know what CD track you're playing. And, of course, your location and speed, how much gas is in your tank, et cetera. They aren't doing anything with it because they haven't figured out how to monetize it.
Q: What are you seeing now in corporate IT?
A: One thing is what we call "organic IT." It's the idea of cutting costs in the back end, using cheap back-end systems and servers, and then pushing the funds over onto the front end. Because a lot of companies haven't touched their Web site in three years -- it's just horrendous.
I was at J.P. Morgan Chase (JPM) this morning, and they're cutting the back end like crazy, replacing all those old proprietary systems with open source. This is a highly deflationary trend for Sun Microsystems (SUNW) and HP (HPQ). Why is HP having so much trouble in the server business? A lot of it's this organic IT.
Q: What about the trend of cutting IT costs by offshoring?
A: We spend a lot of time in India these days, and as it turns out, we think it's actually quite hard to do offshore right, to do it well. We've found it takes about 24 months from the point of decision for most companies to actually execute on offshore. So you can't just arrive in Mumbai and be up and running in two months. And we expect 50% of American companies will never do it.
Q: Fifty percent?
A: Fifty percent. That's for security reasons, for regulatory reasons. Fifty percent will never do it.
Q: Who's a pioneer in IT right now?
A: What Ralph Szygenda has done at General Motors is he has said: Forget the technology, there are only business processes at GM. We finance cars, we do R&D, we manufacture cars, we ship cars, we retail cars. Those are all the processes of GM. So he's not a typical CIO -- he's organized his IT in process and not in technology.
We actually observe this in a lot of smart companies. There are several advantages. One is that everyone in IT knows what the critical processes are of the company because they're doing that. And the CEO and the CIO speak the same language. Finally, it doesn't allow [Cisco (CSCO) CEO] John Chambers to run into your office yelling "voice over IP! RFID!" and sell you on some crazy technology you don't need. Because the question is, "How does it help me build cars, finance cars, deliver cars?"
We call that the "Process Revolution." Actually, I call it the "Ralph Revolution."