Joe's Jottings
Jottings Number 50, by Joe Podolsky:
From: uunet!HP-PaloAlto-om4.om.hp.com!JOE_PODOLSKY
Date: Tue, 27 Feb 96 12:22:00 -0800
Subject: Middlepeople R Us
One of the better thinkers and advisors on information systems and technology subjects is University of Texas professor and former Ernst & Young consultant Tom Davenport. And I'm not saying this just because Tom is a frequent visitor at HP and is also kind enough to remain on the distribution list of these jottings. The real reason I like Tom's work is that he has interesting viewpoints. He often jogs my loose thoughts into new patterns. The current case in point is his column titled "Think Tank" in the February 1, 1996 issue of _CIO_ magazine. In it, he introduces us to "Penzias' Law" named after Arno Penzias, one of the "more visible smart guys" at Bell Labs. Penzias' Law says "that anyone who stands between a customer and a computer that can fully meet the customer's need, will eventually not have a job." People and organizations like that are called "intermediaries" and Davenport says that Penzias Law predicts "disintermediation" by IT. Davenport explains that we are surrounded by intermediaries: travel agents, brokers of all kinds, wholesalers, and distributors. In the computer industry, we have a whole alphabet of intermediaries, VABs and VARs and ISVs, all of whom in some way take hardware and add combinations of software and services to give customers exactly what they want. Disintermediation by IT is not a new phenomenon. Wal-Mart changed the rules of the retail game by using IT to work directly with manufacturers. E-mail allows us to by-pass the post office. Layers of hierarchy have melted away as strategic planners and operational managers learned to use IT to communicate without the interpretation services of middle managers. Davenport predicts, however, that the rate of disintermediation is about to skyrocket thanks to the killer app of the '90s, the Worldwide Web. The Web is the closest thing we have now to a completely open system. We can be male or female or (as the New Yorker cartoon says) even canine on the Web. More amazing than shape-shifting, we can be Wintel or Apple or even UNIX with satisfying indifference. And, as the explosion of home pages demonstrates, Web technology is relatively cheap and easy to use, both as providers and users. I certainly agree with Davenport's observations, but I think that he's just describing the tip of a management of change iceberg. In IT, I think "middlepeople R us." Let's look at a typical personal computer distribution value chain where there is a producer of computer hardware, an VAR that adds custom installation and support services, and an end-user. Penzias' Law correctly predicts that, as a hardware family evolves, the intermediaries' services become less and less needed. The hardware and systems software become easier to use, and the users become better educated and/or more tolerant, squeezing the user support intermediary from both sides. Computer-Based-Training and context-sensitive help features enable software producers to squeeze the traditional class-based training intermediary. A major driver of Penzias' Law, of course, is Moore's Law. As we get lots more MIPS for relatively constant costs, we can use those instruction cycles to do work that once required people. Thus, all of us working in IT, no matter what our jobs, are affected by Penzias' Law. I suggest, also, that Penzias' Law is rooted as much in economics as in technology. When a technology is young, the producer is happy to have various intermediaries to help provide what Geoff Moore calls "the whole product." And the value of the new technology is sufficiently high to the users that they are willing to pay prices that give adequate profits to all players. As a given branch on a technology tree matures, however, competition quickly cuts the profit margins available in the value chain, and the first limbs (but not the last) to be pruned are the intermediaries. What I infer from this Penzias' Law lifecycle, however, is not that intermediaries are going to disappear; rather, in order to survive, intermediaries need to adapt and evolve themselves even faster than are the producers and users. The evolution can be linear; e.g., user support people need to let go of DOS-based Windows and become experts in NT. C programmers learn how to (re)use objects. This is the easiest case, because skill sets are relatively constant even as specific content varies. Experienced classroom trainers, however, are not likely to have the software skills needed to write computer-based-training packages. Even the best coders may not be good at cobbling together business solutions from purchased applications. To survive these kinds of shifts requires a whole new set of aptitudes. Some trainers will evolve to course planners, some programmers to systems designers, but, even then, to drive down costs, fewer of these jobs will be needed for a given business set. We in IT have foisted the effects Penzias' Law on others for years, but we've been able to keep our own intermediary jobs by linear evolution. No more. Dr. Frankenstein's fate might be ours. We have built the Web and other user friendly systems, and our users don't need us as much any more. Do you resemble this? If so, what are you doing to survive? Or, do you think you're in a job that's immune from Penzias' Law? In either case, please share what you've learned. Penzias' Law alive and well and living in our IT career paths. Thanks, Tom, for giving us a label and a wake-up whack. The first step in dealing with a problem is to recognize it. Joe