Monday, June 20, 2011

Consumerization: The Crowdsourced Version of COTS

RIM, the company that makes the Blackberry smartphone, announced more bad financial results last week. The company is in a downward spiral. How did the leader in smartphones lose its lead to Apple iOS and Android? There are important lessons about consumerization.

RIM marketed the Blackberry through corporate IT departments, mostly by providing security and easy integration with corporate infrastructure like email. If you wanted to use a smartphone at your company, your choice was Blackberry. The Blackberry got some consumer traction, but its high price limited consumer appeal.

Along came competition from the iPhone, Android phones, and even the iPad before RIM seriously upgraded its product line with the PlayBook tablet. RIM's slow response gave iOS and Android plenty of time to gain market share in the consumer space RIM had ignored. Consumers flocked to iOS and Android devices that put in the consumer's pocket PC functionality like surfing the web, playing music and videos, and communicating with integrated voice, email, chat, and SMS. Blackberry's security and ease of integration with corporate infrastructure held little value in consumer space.

Now consider what happened decades ago in the military. The U.S. Government asset acquisition acronym COTS stands for Commercial Off-The-Shelf. COTS became a FAR, or Federal Acquisition Regulation, in the 1980s as the Department of Defense realized that the costs of custom specified parts and products were unsustainable. The classic example was paying $640 for a toilet seat. In order to reduce acquisition costs, the government found ways to deploy COTS parts and products rather than custom.

Today, IT departments are re-learning the lessons of COTS acquisition. Take email. Corporations and governments are outsourcing email because they don't derive significant benefit or differentiation from the extra costs of providing email in-house. Email was once a service that corporations had to provide. Now consumer email systems that have been made available to corporations, like gmail, are cheaper and fuller-featured. IT departments are following COTS economics. Corporations that learn how to deploy high-volume consumer products and services save money.

This is the lesson RIM missed. RIM discounted the possibility that high-volume competitors would drive innovations like application stores that, in turn, provided inexpensive capabilities that corporations wanted, capabilities that were more valuable than RIM's security or ease of integration with corporate infrastructure.

RIM isn't alone. Other companies that sell to IT have to re-think their strategy versus consumer products and services. IT departments themselves have to re-evaluate their complex acquisition processes much the way the DoD did 25 years ago. In the IT ecosystems, Systems Integrators are playing a similar role to Defense Contractors in the military ecosystem. Like a military contractor, an SI may prefer the solution that optimizes its own profits rather than its customers' profits.

The looming phenomenon that will change all this is consumerization, the trend in which employees bring to work the devices they own and prefer to use. An employee who has purchased a device and learned to use it has made a significant financial investment that IT departments will learn to leverage. Consumerization is the crowdsourced version of COTS. It is an acquisition system that relies on employees rather than IT to identify, procure, and deploy new technology.

The end-game for IT is to provide a low-overhead corporate framework for COTS assets and manage only the non-COTS assets that provide significant differentiation. RIM has provided another lesson that COTS is a winning strategy for both manufacturers and corporate customers. Consumerization will accelerate the deployment of new COTS technology into the corporate space.

Blackberry Playbook 7-Inch Tablet (16GB)Apple iPad 2 MC769LL/A Tablet (16GB, Wifi, Black) NEWEST MODELSamsung Galaxy Tab (T-Mobile)

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