A tale of two cities?
It is one of the truisms of the tech business that its impossible to be good at both enterprise and consumer IT.
|Not Big Blue's finest hour.|
Companies that bridge the divide are few and far between. Microsoft has arguably done it with XBox (although if you look at the financials, its still pretty much an enterprise OS and Office company with a tiny games console business bolted onto its arse). Blackberry managed it for a few years by taking its enterprise communications devices to the masses (but look what's happened since...). But by and large the grungy white-collar world of IBM/Oracle/SAP is a very different world from the rainbow polo-necked world which Apple/Facebook/Google live in.
What I want to do is highlight three big differences between the consumer and enterprise IT, and then show how the Post-PC world is bringing them together.
1) Consumer IT = shorter product cycles
|Sixty bucks for a roster update? Money for old rope!|
In contrast enterprise IT typically moves in longer product cycles, typically 5-6 years. This reflects the slow-moving and complex nature of an enterprise IT organisation. Windows 7 a great example of this - for many enterprises the Windows 8 launch has come just as they begin their Windows 7 roll-out. Also remember companies like SAP or Oracle make much more money from annual support than upfront licence - they are masters at elongating the 5-6 years product cycle.
|What were they thinking??|
Another way this is done is making devices more closed an appliance like (cf the lack of memory/storage expandability in MacBook Air/Retina Display Macs. After all there's no point building an expansion port into a product that's going to be junked in a few months, especially if you can use that lack of memory/storage/speed to encourage them to buy a new <insert shiny new Apple product here>. Enterprise devices are more open and upgradable e.g. swappable batteries in Blackberrys - one issue about having the iPhone if you are a corporate road warrior is that if you blow through your battery life by 2pm you have a serious workflow issue.
Cutting edge features vs. trailing edge reliability: Another consequence of shorter product cycles is that there's always a rush to include cutting-edge features in an attempt to one-up the competition (even if they're not ready for prime time; Siri anyone?). This means consumer IT is more likely to be at the bleeding edge - a good example I've used before is the "Wing Commander 2 Factor" - how cutting-edge video games drove the increasing power of desktop PCs from 1990-2005.
In contrast enterprise IT tends to have fewer, but more robust features with evolutionary rather than revolutionary products the order of the day. That's not to say that revolutionary disruptions don't happen in enterprise IT world, but what normally happens is that they come from a small start-up rather than from one of the mainstream behemoths (said start-up is usually acquired two months later by Oracle).
2) Solutions versus products
Not just for Christmas... The second important difference between enterprise and consumer IT is that historically consumers have bought a product, whereas for the enterprise you are buying a wider solution which not only includes a device or software CD, but also a maintenance contract and a bunch of systems integration around it. Whereas a consumer device is like buying a puppy for Christmas, an enterprise IT solution is more like having a child (in more ways then one - I'll warrant more than a few corporates still have 18-year old Fortran databases gnashing away in the basement!).
Instant gratification versus product roadmaps: One important consequence of this is that enterprises users need a roadmap. This is one of the biggest reasons why Apple struggles to sell to corporates. An IT manager needs to be able to schedule his deployments months or years in advance. If you've built your IT around a particular product you don't want the risk that your supplier turns around without warning and completely changes its external interface. In contrast consumer IT companies are all about springing a short-term surprise to drive the fashionistas.
|This sort of roadmap gives enterprise IT strategists a warm fuzzy feeling. Especially the bit which says "Risk-Free"!|
Support matters for enterprise buyers: Similarly enterprise users need a package of lasting, reliable support. Unfortunately consumer devices don't always deliver that. Take the iPad. This device has been much hyped for enterprise adoption but the bald fact is that Apple announced it was dropping support for the original iPad in its iOS6 announcement this June. That's barely two years after the device was released and only 14 months after they stopped selling it. For an enterprise IT buyer that is completely unacceptable (after all it's like to take 14 months to get the damn thing certified for your organisation!).
"Yep we'll buy it. The users will just how to figure out how
it works later. Oh and How much did you say that optional
training contract cost would cost me?"
Enterprise IT needs to play ball with the existing stack. For an enterprise buyer you have have the whizziest, sleekest product but if it doesn't play ball with you're existing IT stack its next to useless. Interoperability (and ensuring a new product doesn't bork the existing IT stack) is a critical part of testing. In the consumer world interoperability is become more important (that's the whole point of Apple and Google's eco-system plays), but its nowhere near as much of a deal breaker. You can still sync your iTunes to a Windows PC, or your Android phone to a Mac. Apple hasn't figured out how to block that yet (although once they take Macs to an ARM-based iOS platform I'm sure they will!).
3) Different business models
Upfront sale versus ongoing maintenance: As I mentioned already, SAP and Oracle are masters about getting the customer to buy into not only a product but a whole support package. This has important financial implications as they make much more money over a product's life-cycle from high-margin recurring maintenance (typically about 20% of the initial licence fee) than they do front the initial licence. That's a complete inversion of say a consumer video game where the overwhelming majority of profits is delivered in the first month of sales (before piracy manages to kick in).
In contrast enterprise IT is much more of an a la carte affair. For example most enterprise software companies should be able to make a decent 20%+ margin, so longer as they are over the initial sales & marketing hump. It's much less a winner-takes-all world.
"We.. are.. the.. ghosts.. of.. IT past. On your left is
ADABAS, the lady on the right is ASE and that's Ms
Fortran and Little Ms Cobol in the middle...."
Right that's all for today (to be honest I'm still slightly groggy after my election night all-nighter). Hopefully I've outlined some of the contours of why these are like "two nations divided by a common language". What I want to do in my next post is build on this and show how the Post-PC world brings them together, and what companies are poised to succeed (or fail!).