George F. Colony: On the Voyage to Business Technology
George F. Colony is founder and CEO of the independent technology and market research company Forrester Research. At the end of 2006, he has published “My View: IT to BT” in which he announced the necessary change from Information Technology (IT) to Business Technology (BT). The Business Technology magazine had the opportunity to talk with George Colony about the progress of this change and the change in the self-understanding of IT and the new challenges for business and IT executives.
Mr. Colony about two years ago you argued thatInformation Technology would become Business Technology. How do you seethe situation today?
George F. Colony: I would say that as far aschanging the language it will take a long time for that to happen. SomeForrester clients – not many but several – have actually changed theterm they use from IT to BT. So we see around the edges some movementhere. And it is very interesting because it has framed very well thevoyage of IT. The voyage of technologists. Because they see themselvesas moving from the old world of IT to the new world of BT. And they arevery curious to find out together with Forrester “How do we do that?”How is that voyage navigated? What do we have to do to become BT?
So I would say that very few companies have actually arrivedat BT. But many have departed on the voyage. And that is veryencouraging. I was on a plane going to Las Vegas. I always felt thatForrester’s role in the world was to help technologists in largecompanies to rise up higher. That they get promoted, that they arerespected, that they have an impact on the future of their companies.And while on that plane I thought about what would really help them dothat? And I realized by changing the words it would actually change theway they were perceived within their companies. Information simply is alower level value than business. So it was a signal from thetechnologists “Hey, we are now in the business of business!” and we arenot in the business of simply keeping track of the numbers. And itmakes perfect sense because ten years ago it was about closing thebooks, accounting and how many products you sold yesterday. But todayyou can not develop a product or deliver a product, service a customeror find a new customer without technology.
When CEOs challenge me I say: “Fine, go back to your company and unplugwires and you will see whether you can do business or not without thosewires plugged in.” If you are Goldman Sachs you are losing a hundredmillion dollars an hour without those wires plugged in. A typicalcompany is losing tenth of millions an hour. And of course if youunplug that big wire to your website your customers can no longercontact you.
British Airways said at the Forrester IT-Forum, that they service 35million customers a month. So suddenly you wouldn’t be able to touchthem. So to me it is very clear, it is time for the change in the words- from information to business. And that’s a very important signal fromthe technologists that we are now different people. We are in adifferent business. We are not here simply to count, we are here todrive the business. So I think it is a great voyage to be on. I amencouraged by how much change happened during the last two years. I amalso encouraged that your magazine has the same title.
What is crucial for the success of BT in companies?
Colony: I believe what is most important today ishow the success imperatives of the CEO align with those of the CIO. Youwill find that in most companies they are not aligned. But as we moveto BT you will find that they come closer together and finally you willhave a synchronicity between the two. This is the right voyage, I amsure about that.
Talking about the changes necessary due to the new paradigm. Are there any changes needed at Forrester as well?
Colony: Instead of addressing the market by topicswe address the market by the roles of our clients now. And that ishelping us to help them become more relevant to the business issues intheir companies. So we got out of questions like: “Isn’t SOA cool?” or“Isn’t mobility cool?” We now ask how could the CIOs use mobility todrive the market share and the revenue of their companies. So I wouldsay yes, it has definitely changed the way we think. It has also madeus more connected to the CEOs. Because you can’t be a businesstechnologist unless you know the businesses. And of course the CEOsknow best about their business. So I personally spend a lot more of mytime with CEOs trying to help them to understand technology better –but also to help the CIO better understand the CEO.
Is there a need for change in the CEO as well?
Colony: In a company that is truly BT you cannothave the CIO be the centre of innovation or the centre of technology.In a true BT company you have TKBEs – Technology Knowledgeable BusinessExecutives. What has happened here is that the CEO and the businessleaders have increased their IQ in technology. So they are able to workas a team with the CIO to drive innovation. So you can’t say innovationis up to the CEO and you can’t say it is up to the CIO. They all mustunderstand the technology to work together to use technology forinnovation. You can see that for example at companies like FederalExpress or UPS that even the CEO is highly technology focused. Not thatthey can understand SOA in it’s great depth. They have to be able toreceive it in a friendly way and not to resist it. Many CEOs nowresist. They hear Web 2.0 and say “We’re not gonna do that”. They arenot thinking like their customers. I have an aphorism: Your customersare changed by technology and your customers will change you. By theway, this year I calculated is the first time that a CEO is appointedto a fortune 1000 company who grew up with an Apple II. You are goingto see this now. The CEOs who will arrive in the next 10 years will allknow technology from their childhood. They grew up with it andaccordingly they will deal with it differently. So I think we are goingto see tremendous generational change. And that is going to drive usfurther from IT to BT. That is another driver for BT.
In that context: Is SOA an upcoming reality or rather a dream that will never come true?
Colony: Good question. If I took all 400 Forresteranalysts and line them up against the wall and ask them what is SOA?You will get 300 answers. But I will give you my very simple answer:SOA is a new way to write software. That’s all it is. But what’s coolabout it is that we now have a standard architecture for software. Sothat I can write an element of software from my systems and than takeit and embed it into my customers’ systems. So that now I can connectmy systems to those of my customers very, very easily using SOA. And Ican than deliver services to my customer using the standardarchitecture. That is a huge breakthrough. Indeed we dreamed about thisfor 30 years. And the idea of services is the future of all businesses.
If I am General Electric I am not just selling engines to Lufthansa.Once Lufthansa buys the jet engines me as GE want to help Lufthansamaintain them, deliver spare parts, train, repair etc. And to do that Iwant it part of my systems to be embedded into those of Lufthansa. Sothat when an engine is beginning to fail I now that and can provide forthe mechanics at Frankfurt Airport when that jet arrives. This is why Ibelieve that SOA is key to future business models. Which means everyoneis in the services business. The key issue is the standards like xml.Look at the web for example. The web gave us a standard transportlayer. In the old days there was no such standard. That alsoconstitutes a great challenge to Microsoft. Software today is not juston shiny disks for 300 Dollars but available via the internet.
Do you believe that there is going to besomething like licensed software in the future considering thatconcepts like SaaS getting more and more popular?
Colony: SaaS is a very rudimentary and crude way todo software – because the web is very crude. Essentially the web todayhas 97 percent of the processing power on the server and only 3 percenton the client. But that makes no sense because the client is becomingevermore intelligent. So, I believe that the web is a dead technology –it will be replaced by a new technology running on the internet wherethe executables will be running at the server but also at the clients.And there is the ability to move the executables very freely and to runthem at the server and the client synchronized. That is what we callinteractive computing or executable internet. So SaaS I think is ashort term bridge to the executable internet world.
In fact you already see this: Google earth is this, Google maps isthis. Google is the company which is driving the executable internetand understands that. And that is big trouble for Microsoft. In a wayexecutable internet really is SOA done right. And that will be very BToriented.
What advice would you give students today, what should they focus on?
Colony: I would say “Go to a business school”. Thebest you can do today, you have to build a deep technology backgroundbut at the same time go to a business school. Because a puretechnologist in the future will not be paid very well, will beavailable in India or China. But if you can do both you still gotexcellent chances in Europe or the United States. I have talked to awoman who became Senior Innovation Officer in a bank. Now that will bean important job in the future.
She is combining her knowledge of the customers of the bank, thebusiness of the bank and IT bringing those together. So she is reallydoing BT. That balance is the advice I would give to students today.That is going to be a very potent combination which will be very highlypaid. So there is a future in IT in Europe and the United States foryoung people. But it is not for proper Java programmers and the like.Most of these jobs will go to China or elsewhere like Brazil or Russia.
How do you see the European software industry compared to the American software industry?
Colony: I think SAP has done a terrific job, a verygood job. Software AG has done a good job. I would say – this is theugly American speaking – but there is the element of slowness in thesecompanies. We used to have a couple of great companies just 20 yearsago like Nextor but they just couldn’t keep up the pace. Today there isa huge challenge for the software vendors because they rely on thelicensed software business. That whole model is under attack in thenear future. I believe it is not out of the question that you are goingto see large accounting systems paid for by advertising. That willdefinitely be a challenge for SAP or Oracle.
So for the next five years the important question will be, how fast thesoftware vendors especially in Europe can run. Can they adjust? I thinkthat during the next five years there will be greater change in thesoftware business than in the last ten years. There is absolutely nodoubt about that.
Do you believe that the American companies will run faster?
Colony: So far that has usually been the case.However as I said SAP has done a good job. They have really been veryresilient. But now they are going to get their true test. But by theway, it is not going to be easy for Oracle or Microsoft either. Thequestion is, how fast can you morph? You know Charles Darwin? Manypeople quote him wrong by claiming he had said that the strongest willsurvive. It is not the strongest but those who can adapt best.
How do you see open source in that context. Especially considering the element of cooperation?
Colony: It is also an adaptation. It is almost fastevolution. The way you collaborate in an open source environment issomething which is totally natural for the Y-Generation. There is ahuge difference if you compare it to the behaviour of Generation X orthe generations before that. Collaboration is what Facebook or MySpaceare all about – the Y-Generation simply lives and breathes that. Andthey have the tools to do that. There is probably some stupid word Ican make up like ‘coopetition’ – but it is clear that probably thedifference in competitiveness will be quite slight in the future. Itmay come down to how well you understand your customer. Look at Applewhat is Apple’s greatest strength? Apple does not do any marketresearch. They are serving a customer of one: Steve Jobs. But that isnot a lesson for anyone – because he is just a one off, that’s a freakof nature. And it will probably never happen again.
Instead it will take many people within the company to understandwhat the customers are thinking. And how well they do that will be thegreat differentiator. Customers are a bit like fruit flies: They areevolving very, very quickly. And they are always looking for newproducts. A.G. Lafley is the CEO of Procter and Gamble. When he tookover Procter and Gamble in 2002 I think. He asked the question how manyengineers do we have at Procter and Gamble? They said: “We have 3.000engineers”. He said: “How many new products do they develop?” And theygave him the number and he said: “It is not gonna work”. Because he hasa billion customers and he knows how fast they change. So what he does,is to reach out to companies all over the world to partner with. Whohas products that he can then bring into Procter and Gamble, transformthem and then bring them to the customers. He saw the fast change inthe customers.
What do you think about the opinionthat it is less and less necessary to actually travel due to all themodern devices we use today to keep informed?
Colony: That is a very important issue in theUnited States today. Because people are shocked by the development ofenergy prices. Gas was four dollars a gallon that is half of what it isin Europe. But IT is doing quite well in the U.S. because IT helps toan extend to save energy. A good example for that is Cisco’sTelePresence. This is very close to actually meeting people in person.I have such a meeting next week. The person I am talking to is usingthis technology extensively. He claims that he is travelling half asmuch and is seeing twice as many people since using TelePresence. Imean with your PDA or Smartphone you probably need a human touch tobegin a relationship but the technology can be very valuable tocontinue a relationship. So I believe that this kind of technology canhelp on the side of energy consumption.
What is also interesting about our use of technology is that it changessocial interaction. In the future everyone will know everything aboutanyone. That will be unavoidable, no matter how strict privacy ruleswill become. I recently went to a party and I met a friend I hadn’tseen in years. So I wanted to find out her address and guess what thefirst thing was that came up when I googled her? A court record. I didfind her address but the first thing was the court record. Today’s kidsunderstand that. That’s why they publish so freely on social networkssuch as Facebook. There is just no reason not to.