IT $pending: Does it affect your company’s size?

There is an age-old question which should be on the minds of tech folks and tech sales folks alike: What happens when firms spend money on Software Technology? It’s a deceptively simple question, however, when you dig deeper you find it one of the toughest questions to answer.

A little bit of history is in order here: The question was originally posed when an economist (Ronald Coase) questioned the wisdom of treating the Firm as a blackbox. Blackbox as where Input goes in one end, and output comes out the other with economists never paying attention to what happens inside the box. The answer was also part of my graduating Thesis at the University of Strathclyde, Department of Economics.

It’s a very interesting and a very important question especially if you are in the technology business. Let’s say you want to invest in a multi-million dollar Business Process Management System, and you CFO/CEO asks you, is this going to reduce my headcount and cut labor cost? This is a very similar question to what would happen if a Firm were to outsource a specific function. Does the outsourcing result in reduction of headcount, or expansion in business activities? Pretty tricky question! And you need to have the answers handy before you pitch any proposal to the savvy CxO level person. Remember there are people’s livelihoods hanging in the balance including the IT department you deal with on a daily basis.

Let’s zoom back out a bit here: It is well-known that the aim of the firm, and by extension, IT spending in it, have a shared goal in common, lowering the friction and costs which might arise from such friction within the firm. Therefore, if the IT project is successful (Big IF), then naturally, the friction costs should go down meaning the freeing up of resources and the increase of organization surplus and the freedom to carry out business expansionary activities if all the activities are carried within the firm and not utilizing an assembly line of contractors to do the job each has been designated to do.

So what does research tells us: According to a paper entitled: “An Empirical Analysis of the Relationship Between Information Technology and Firm Size” by one of my favorite Technology Economist of MIT, Erik Brynjolfsson, et al (link here), the evidence and answer is highlight dependent on the organization itself.

Let me clarify: If there are a lot of low-level jobs in the firms to be automated away by technology then those jobs are gone forever. You might say that upskilling those folks to perform higher-level jobs is a possibility, however, it is highly unlikely. This is short team. Long-term however, if there are plans in place to expand the business and there is a need for domain-knowledge, those folks who were automated away in the short-term, can be repurposed and gains can be reaped based on the strategy the company has in place.

From an employee stand-point though, skilling up should be a never-ending endeavor to keep one’s skillset up-to-update in an ever shifting market place.  Remember, outsourcing is not all that cracked up to be and there are many ways to circumvent the outsourcing hammer.

In the next segment, I will share how outsourcing has actually fallen flat on its face and what people did to get back in the employment game through the same companies their jobs were outsourced to….

Open source software, Microsoft Strategy and the dynamics of multi-sided platforms.

You cannot beat FREE!… The Free Software movement shook the foundation of the software industry and posed a serious challenge to the very essence of capitalism in this industry. It forced vendors to offer “basic” versions of their software as an open-source, free license entry point alternative.

Microsoft is one of those vendors. Two of the severely under-advertised are two Microsoft programs for Students and Start-ups to get full version software is DreamSpark and BizSpark. It works like this: If you are a student and your school has an agreement with Microsoft, you can get a lot of free Microsoft software ranging from Visual Studio Pro to Server 2012 R2 and SQL Server 2012, Operating Systems and a load of other goodies to get you on your way to develop software for the traditional desktop, cloud, App Stores (both Windows and Mobile)…

The process is very simple. Just get to the dreamspark.com site and check if your institution has a participant agreement in place and you are set to go. DreamSpark works in a similar fashion, however, it is geared towards start-ups with a preset revenue limit and a number of developers. The cost is a few hundred dollars. This is kind of Microsoft’s strategy to influence the incubation phase of a business in an attempt to try and steer them clear of the LAMP stack.

This phenomena is not new. Most people are unaware of lowering of market entry cost by any software vendor is a very well-known strategy in any multi-sided platform business model. It is very well studied and researched in the gaming industry where the entry cost of game developers is heavily subsidized by the gaming/software platform company or sometimes the reverse is true. Of course, the subsidy is supported indirectly by the customer who always ends up being the party who ends up paying for the cost of the subsidy given to the game/software developers.

Depending on what side of the platform you are on, having a strategy is very important especially if you can pool your industry peers together to garner some buying/negotiating power. Sometimes though, being the customer is most disadvantageous position in the multi-sided platform game. Gaming companies have been lowering entry costs steadily for the past few years and if you are a product manager, there are quite a few lessons to be applied from such industry as well as a the open-source/license movement to move your wares… TBC

What If Software Was Perfect? Really. Read On…

This is going to be a fun post. Imagine for a minute that software is perfect. I mean PERFECT! It does what you want in a few clicks. It’s extensible to fit your needs with just an email you send it to the software Controller (let’s call it Master Chief). It has a voice interface to change the layout of the user screens and another one to author or modify new reports.

It recognizes when a new service has come online and rolls out the red carpet to arrange authentication, authorization and migration of the incoming data. It informs you when an error occurred and has been fixed and a new update has been applied by the Controller, Master Chief, who then rolls out the changes to all the clients in the Enterprise while their machines are idling.  Master Chief notifies the hardware vendor whenever it needs more disk space in advance and more space is allocated.

When a user runs a heavy-CPU task, Master Chief chops it up and distributes it to the grid he already engineered the day he was brought online with a few voice commands.

One morning you wake up and a few guys in suit and ties from the NTSB (National Technology and Storage Board) are at your door to investigate, collect and replace your drive which crashed overnight while it was being backed up. After a formal apology is given and the CNN Reporter wraps up her report you get ready to go to work.

At work you meet with you team to review the latest Artificial Intelligence improvements which came in overnight from your running systems, you laugh at some old joke about RFPs, Blue Screen of Death, and something called Consulting and Professional Services. Profit margins are a thing of the past. All software reside in a trading investment-bank like dark pools and is free for all intents and purposes. IT staff pay is tied to the performance of the business and customer satisfaction…………. Then the Chimes of Windows startup bring you back to reality………..

Does Being an IT Specialist or a Generalist Impact Your Income?

I profess that I am not an HR expert, however, I have mentored and given career advice to many folks around the globe. The most common question I get and contemplate myself is, does career specialization impact your market value.

In Adam Smith’s pin factory, he poetically describes how specialization and division of labor give rise to economies of scale and made mass production a possibility leading to consumerism which is the ideal capitalistic manifestation of the American Dream we are currently trying to export to China and the world!.  The model in a nutshell goes as follows: you have got to buy stuff. Lots of it. Go in debt doing so. Why? So you can promote mass production, consumerism and division of labor, economies of scale thus working for the rest of your life to pay down your debt, and you get the picture.

The question remains though, how deep should our specialized skills be? And how does it affect our income? A colleague of mine beautifully stated once that our skills are similar to the letter T. The horizontal top is your general skills, and the vertical portion is your specialization. When I went for my Masters’ Degree in Economics he told me that my new skills resemble the letter n or the Greek Pi (Π) where I have two in-depth specialization.

So, which letter should your skills resemble and which one is most lucrative these days? If you are the type and specialize in a niche market, say stored procedures on mainframe DB2, then you are in a different league than say a Java developer. The problem: It’s easy to outsource your job. Why? It’s too specialized to a degree that it is easily definable. The same goes for just about the majority of such types with clear-cut division of labor and specialization and a uniform job description.

Now, if you are the Pi (Π) type, where you multi-specialize, then it will be harder but not impossible for you to be indispensable. Remember, we operate in a labor market without borders where you can hire five for the price of one or two.

So, what’s the answer? In my opinion:

  1. In the age of globalization, with
  2. A highly outsourced corporate functions,
  3. Large wage gaps in an global labor pool (for now anyway)
  4. And outsourcing companies buying local outfits to assimilate and “look and feel” more local thus expanding market share while maintain a small local presence

Your best bet is to have either models, the (Π) or the type with an extended horizontal top implying more generalized skills which include great soft skillsdeep local knowledgesocial capital through networking and most importantly working in a hard-to-define jobs with vague requirements and responsibilities where you have to wear many hats (think Startups). Finally, add a Security clearance requirement and you have the proverbial cherry on top!!

Software and the human mind: Is there an Evolutionary Gap?

I have done this experiment a while ago where I asked people what is software? It was a lot of fun and I recommend that you try it. I found out that if you are a programmer, you think its code, an architect, you are thinking abstraction layers, connectors, models. Customers however think cost, will it do what they want without disrupting their business? And then I asked my mother, her answer was: “software is what makes the computer whirr and allows me to check out her friends on Facebook, Skype and watch my favorite soaps” (which I found amazing insofar as it was the closest to reality answer!)

Software is like someone telling you, the shop you are looking for is about half-a-mile walking distance. I find these (directions) to be the funniest since you have to have walked to that shop many times and measured the distance before you can be even close to accurate as to where the shop is (or used Google Maps!) But even with maps, for the majority of us, our human minds cannot really visualize a mile or a mile-and-a=half or two. We are simply not equipped to conceptualize distance, which is the same with Software.

It’s difficult for me to believe that the human mind has totally evolved to fully understand Software Engineering, as it does understand say Civil Engineering. I believe this where most of the problems affecting our industry comes from.

In general, there is no one definition in reality that matches the one stating that a program is a “set of instruction performed on data to transform it into a desirable output”. And this is where and why we get into trouble. Say you are estimating a project, each person on the project/product team will have a different context associated with the definition of software. OK, they might be close, but there will always be subtle yet sometimes detrimental differences.

So what’s the best approach to solve this problem? I can think of a few: use a framework/methodology to as a contract to maintain perception cohesion. Also, you can keep a core team to use frequently as repetition can potentially cause convergence of perception and help in overcoming our evolutionary deficiencies. This approach will result in consistency, but not necessarily creativity. For that, you have to mix up the team and go through the pains I started this post with!!

Do you agree? It’d be great to hear about your workaround our yet-to-evolve human brain.

The Currency of Knowledge: How Realizing the Economic Value of your Knowledge Will Help You Succeed in Technology and Beyond

Remember the wheel? The first Plow? The domestication of animals? The first tribe who settled down on the Nile river delta or Mesopotamia and turned into communities farming the land and actually having the first surplus as archaeologists have discovered?

What happened afterwards? Ever since those social changes took place and the first signs of civilization begun to spring up, the only thing that has been changing since then is, yes you guessed it, Technology!

Everything we have achieved as a civilization since the day of the first surplus and amassing enough food supplies to survive droughts or bad weather gave way to a new breed of humans specializing in functions such as accounting, Trade, governing, minting money, inventing numbers then alphabets and it has not stopped since then.

Fast forward a few centuries and we get the printing press which made the diffusion of ideas an order of magnitude more when sharing a new invention which has been proven pivotal to the survival of our species and spreads a lot faster than previously.


Think about it: Everything you and I do today in any field around us is technology-related or driven by technology. 
In a past reality, economy drove knowledge, however, in today’s world it more of knowledge driving the economy.

Think about your job and ask yourself a question: Do you think that the majority of us today are information/knowledge brokers? Think about the explosion of inventions and meteoric growth of information created and is available today? Do you believe that those two trends necessitate that there are professionals like you and me who specialize in specific areas where we hold an over-average or an extraordinary amount of technical information/knowledge in the areas we specialize in regardless of the vertical industry itself.

What’s the point you may ask: The point is knowing that at the core, we are information/knowledge brokers offering our clients advice on what to do, but more importantly, what not to do, and what they need versus what they want based on the tremendous amount of knowledge we possess which is our key to reaching any goal or objective we have set for ourselves.­ It’s the knowledge we posses is what holds the key to our, and our clients’, success.

Did I lose you? Ok, let me restate this: the foundation of everyone’s career is based on his/her knowledge in the area they specialize in. Achieving awareness of this fact with some introspection on what you do day-in, day-out, is guaranteed to have an impact on how you view yourself and the way you deal with your customers and colleagues. It certainly impacted how I deal with my clients (I consider colleagues as internal clients and treat them the same way I do external clients).

In one of my favorite books, Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics by Eric D. Beinhocker, the book description states: “Accounting for the creation of wealth has long challenged humanity’s best minds” which could not be further from the truth.

The book establishes a key idea/hypothesis summarized as the ingredients to creating economic value are your usual economics foundational ideas: Land, Capital, Labor and now, Technology, as an endogenous growth factor and not an exogenous one as had been the widely held view in classical economics. Rephrasing from page 42 in the book: “The hypothesis which came to be in the mid 80’s by a Stanford economist Paul Romer…. who was became increasingly dissatisfied with the idea that that the real driver of growth, technology, was exogenous. So in 1990, Romer published a paper that kicked off the development of what has come to be known as endogenous growth theory where Romer located the source of energy for growth, not in the heroism of the entrepreneur, but in the nature of technology itself. He noted that technology has a cumulative, accelerating quality to it.” [Emphasis is mine] Simply stated: The more stuff we know, the greater the base of existing human knowledge, and the greater the payoff from the next discovery.”

This last statement is a belief which I hold very strongly and believe that the more knowledge we pass on to others, the more we are freed up to learn more.

I really like welcome your comments/opinions on this topic as I am very passionate about the subject and the very fact that technology (software) is nothing but knowledge packaged in several formats to solve business problems, empower people.

Cheers,

Bash

Public Sector Cloud Economics

I always believed that technology empowers people to do more and frees them up from the mundane and repetitive to focus on higher value activities. And as adoption of cloud computing increases, Local and State Governments looking to go to the cloud can do so not just to cut cost but also to empower and grow their local IT economy.

A case in point is an event which occurred less than 5 years ago. I was invited to deliver a seminar in Malaysia about the potential impact of cloud computing on the local economy. If you are in technical sales, or pre-sales, and trying to get in front of the Government official decision maker, this post is certainly for you as I share an approach you just cannot go wrong with.
Having worked for Microsoft for almost 10 years, I witnessed and participated in the transition from selling products to selling services, or Software as a Service (SaaS) and experienced all the difficulties every time in history we face a paradigm shift.

One of the approaches I recommended to the Malaysian Government is to encourage cloud vendors to team up with a local entity in some kind of subcontracting agreement. The entity could be the local startup community, the local University IT incubation program, or even a Government agency with in-house IT capabilities with a charge-back model in place.
If you pursue this strategy, your solution will beat the competition. Why? Because you have just reinvigorated the local IT Services economy with funds from the local government which will reinvested locally and generate tax revenue and so on. Chances are there is some form of a self-organized or Corporate-sponsored IT startup or small business community where you are trying to engage your potential customers. We have a great and thriving one here in Tampa. The agreement could be expanded to form some type of a public-private partnership making it an all win situation.

Bash Badawi has over 24 years of technology experience ranging from an internship at NASA to providing IT advisory services in over 30 countries around the globe in Europe, Africa, Asia and the Americas. Mr. Badawi can be reached on his LinkedIn profile or over email at techonomist@hotmail.com and welcomes all feedback as he is an avid reader and learner.