Four Forces That Will Shape IT Economics in 2012

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Howard Rubin formulated Rubin's Law, a corollary of Moore's Law, which has driven IT economics for two decades or more. Moore's law states that the number of circuits packed onto a silicon chip doubles every 18-24 months and has been driving the ability of the IT industry to deliver more capability for the same or less money. Moore's law was good for business; Rubin's law is not.

Rubin's law examines the demand for computing power, stating: The geometric growth rate of computing demand—technology intensity in the context of business and our personal lives—will drive computing costs past the point at which Moore's Law will keep the costs manageable. What this means is that discontinuous/disruptive technology and innovation are critical to the new economics we're are about to encounter. In short, business needs technology innovation now.

In a recent Wall Street and Technology piece Rubin elaborated on the four forces that he sees shaping IT economics this coming year. wiredFINANCE summarizes the piece below:

While many CFOs are focusing on issues like global market uncertainty and regulation, there should not ignore the underlying infrastructure. This infrastructure consists of the business technology engines that drive operational efficiency, enable product innovation and deployment, and enact risk/regulatory compliance. These are the applications and information systems your organization relies on every day.

Since the economic upheaval began in 2007-8, it has been clear that the usual ways of managing technology and the related economics don't fit with the emerging post-recession economy. Rubin goes on to identify four forces that will impact the economics of IT in your organization.

1. Relentless Demand for Technology—your organization probably is using more technology services and capabilities; more apps, more storage, more email, more users and user accounts, smartphones. As Rubin puts it: the demand for computing in the form of processors, storage, network bandwidth, access via alternate devices is growing faster than the global economy and faster than can be offset by Moore's Law.

2. Upward IT Spending Pressure—the business is demanding more and different IT services. This entails more hardware and software and people to administer it all. As Rubin notes: we now have entered an era in which upward technology pressure (and expense) will continue to increase in all business scenarios, regardless of whether revenue increases, decreases, or stagnates. While automation, shared cloud infrastructure, new technologies like thin provisioning, and other techniques can delay the inevitable, eventually IT spending must rise.

3. Adapting Management Models to the New Technology Economy—after five years of cutting back, delaying investment, doing more with less there are very few cost-cutting tricks left. The pent up demand for more and better technology cannot be put off much longer. Nor will organizations want to if they expect to stay competitive. Their competitors are opening new channels to customers through social media, finding new ways to deliver products and services through the cloud, and uncovering insights that lead to innovation and competitive advantage through collaboration, analytics, and big data.

4. Transitioning Business Models/Need for Urgent Change--current models by which companies manage the dynamics of their technology economics are failing, according to Rubin. Companies are spending the bulk of their IT budgets just keeping systems running with little left to address new business needs and opportunities.

His advice: focus on value production, risk management, and cost optimization simultaneously and continuously; recognize the role of data and technology in managing costs and opportunities; place extreme value on talent; foster incubation of innovation; and tune fixed versus variable costs to the performance profile of the enterprise and adjust staff distribution appropriately.

Rubin's lesson: you can't slash IT out of the recession. You'll need more IT than ever to compete in the new economy.

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