IBM Exec Looks Ahead To Emerging Technologies Of 2006

Bruce Harreld, senior vice president of strategy at IBM, lives in what he calls a "weird world," a perspective from which he drives the company's emerging businesses work as well as its efforts to continue evolving the models for all of IBM's key business lines. Come Jan. 3, he will also be responsible for worldwide marketing. Editor Heather Clancy and Editor Lawrence M. Walsh recently met with Harreld to discuss his priorities and expectations for 2006. The basic thinking discussed at the start of the interview is guided by the writings of British economist Carlotta Perez, author of “Technological Revolutions and Financial Capital.” Excerpts follow.

Harreld: [Perez&'s] basic premise is that over and over again in the development of the modern [world], the same phenomenon has occurred at least five times. An inventor develops a technology that is going to have, without any question to almost everybody that looks at it within a nanosecond, earth-shattering implications. And a whole series of financiers in the city of London or Silicon Valley or Wall Street pour tons of capital into it, bid it up to tremendous hype and overexpectation about what it's going to do and in what time frame. And five times in history, we've had panics, depressions, crashes or dot-com collapses. Because society isn't fully prepared to deal with all the things that this new technology offers. So society was configured in a sense for multiple years ahead of the invention for a different world. They didn't anticipate the technology. ... What's the next major impact on our society?

CRN/VARBusiness: Genetics.

Harreld: Right there. Life sciences. By the way, what's interesting is that the triggering event hasn't happened yet. ... By the way, the reason I want to go there is because look at all the issues we're all bollixed up on in society. The issues around life and is it right, and where are the ethics? I don't want to get into any debate one way or another here, we all have our views, but we as a society aren't prepared to deal with this, the technology, today. Similarly, every one of these [past cycles] has had similar barriers. ...

What happens here is that you have a period of what I would call dramatic invention, tremendous invention around the technology. Then a period that [Perez] calls deployment, and I think that's really a good word. Because it's in a sense the heavy lifting in society to get the full use of the technology. Invention still goes on around the technology during this period, however the bigger issue is the full use of the technology. And in today's world, if we had more time, I would start talking about intellectual property laws and how they're not fully geared to this world we're in. We've got digital rights issues, we see all these strains and pressures.

CRN/VARBusiness: Is that what's holding us back now?

Harreld: Absolutely. It's the clustering effect. First of all, the technology isn't fully there.CRN/VARBusiness: What's not fully there?

Harreld: All the standards aren't fully there. Industry-specific standards need to get put in place. We're still dealing with the very front edges of [service-oriented architecture] as it's called in the industry, trying to make for rapid, dynamic integration of application software or middleware software. I'll keep going for a second. Think about the state of where the industry is today. If I want to add a new supplier to IBM, I go to my IT department, and they have to fill out and change the tables in an ERP package inside the company. ... Why do we have to go through the IT organization? Why don't we let the businesspeople see the status of their business on a screen, which is called business process monitoring? And if they want to add a new supplier, why don't they actually put the name in? They know how to type. Or they actually put the new terms and conditions of the relationship with the supplier in. And as they are doing that, the tables in the ERP application are starting to get filled in dynamically. But yet, that product doesn't exist today.

We've got several things that are societal around intellectual property laws. We've got, frankly, probably antitrust laws in some perspectives getting re-thought. We've got legislation issues around communication companies right now that are still very much in flux. So there are societal issues. Then there are technological standards sets of issues that are not fully enabled. We've got to take what I'll call the thinking of the industry from the infrastructure of IT into the business domain, as I've just described. There's a lot of work here.

CRN/VARBusiness: Have we fully collapsed?

Harreld: No.

CRN/VARBusiness: How much longer?

Harreld: I don't know. ... If you had asked me that 18 months ago, I would have said maybe we had fully collapsed. Partially why I say that is that the pain in society isn't there enough right now to deal with many of the issues I just put on the table. Because what happens in these periods when they go through these massive dislocations of economic turmoil, like depressions or crashes, people have to rethink almost everything they are doing. Companies have to reassess their strategy. Governments have to rethink their policies and their practices and what they're doing to support or hinder economic progress in their economy. And if you go around, I would say there is very little of that. There's some of that, but not enough. ... Part of this issue that we're going to deal with next year has to do with the globalization of the global economy.

CRN/VARBusiness: Does this mean a redistribution of wealth or a collapse of one set of economies and the build up of emerging economies?

Harreld: If you go back and look at these periods, you see a dramatic redistribution of wealth. The global economy moves to the next phase. If you think the world will stop innovation [and] progress, you've got a huge problem. Because you go into that dark corner and say this is just [going to] be a shift of economic wealth from my pocket to pockets in India and China. I don't think that way. I don't think innovation is over by any means. ... If you're a believer that there's continued innovation of society, what really happens is that wealth gets redistributed dramatically during these golden eras of deployment.

CRN/VARBusiness: We can see horizontally who our competitors are, but who's coming up from behind? Who's actually ahead of us that we don't see yet? Those are questions that aren't easily answered.

Harreld: They're not easily answered, and this period that we're in now, we're in a tense period. There's some issues. We'll all get blindsided in a certain way because it's the point of the period that new business models get enabled. IBM and our business partners in developed parts of the world--the service capabilities that are going on in India are awesome. We get blindsided by that. This technology and deployment enabled a lot of that. All of us will go through that. One of the things you'll find is that you have a lot of overcapacity because there's too much capital. Financiers are throwing a lot of money in. So you get a lot of consolidation going on, particularly in the areas of the deployment period. Look what's been happening for the past four or five years with hardware, software, services. CRN/VARBusiness: How do you factor in the need to build capacity without building overcapacity?

Harreld: The model has been you have to build yourself overcapacity in order to give yourself flexibility. That is a bad model. What about the notion of having smaller, digestible components. Why do you need to do it yourself? In fact, what's happening here is that companies are starting to say maybe I am carrying too much luggage myself? Maybe some of the things I do within my enterprise, I'm not as good at [them] as other people. So maybe I need to, in a sense, make myself smaller and more flexible. Maybe I need to go on a diet and still get the same capabilities I used to have in different ways. So there's a notion of componentization, smaller modules. Between these components and modules, whether it be hardware or middleware or services, there need to be standards between them.

CRN/VARBusiness: What do we need to get there?

Harreld: We need to get real, first of all. On the issue of standards, my personal opinion--and I think most of us at IBM agree--is that it should be owned by the clients. It shouldn't be owned by the IT industry. We need to do all that we can. Standards will go from broad technological standards to industry-specific, so we have to delay this issue. Many of the broad industry standards need to be dealt with in independent, third-party groups such as WC3 and IETF and on and on. And clients need to start holding people like IBM accountable for whether we're really implementing to those standards or playing mischief with them and voting with their pocketbooks.

CRN/VARBusiness: What questions should business partners be asking, or what issues should they be thinking about to prepare for this future?

Harreld: The first thing I'd say for business partners, to answer your question very specifically, is I think they need think very directly about their clients needs and their clients' long-term needs and make sure they're doing things on a set of platforms that gives their clients long-term flexibility [and] doesn't walk them into corners. The second thing I think they need to think about, and I'm sure many of them are, is that this game is not just about IT, it's about the business value that IT can deliver. ... We've got to be as skilled at understanding client needs, business needs, business by business as they are and helping them deliver their business performance. Clients increasingly are starting to ask another set of questions: Rather than pay the IT industry for the input, i.e. a server or a service or a custom systems integration job, maybe I'm going to need to hold you accountable and pay you for my business results that come from that. I think that those business partners and companies that focus on thinking through those very tough issues are going to be the ones that grow and thrive and deliver more value to the client. CRN/VARBusiness: Can you talk about how much risk solution providers should be willing to take on?

Harreld: There is an enormous amount of innovation that needs to happen that still needs to play out. Innovation around new business models, innovation around technology. Periods of innovation like that require a fair amount of risk taking. But I started a program a few years ago within IBM to get at emerging business opportunities. We today have built a substantial size businesses inside of IBM. When we started all that, we said big companies can't grow, big companies can't take risks, big companies have quarter-by-quarter limitations. If I take you through all that we've done, I think I could convince you that big companies can do all those things. But you have to do it in smart ways. You can't put entire companies--a business partner can't put its entire company at risk. ... My advice to business partners: Don't risk your whole company. Find out where it's important. Find out where the innovation needs to take place. And in those areas you're going to need to have a business model, or should I say a management system, that fits that opportunity accordingly. What do I mean? Again, use IBM. When we stepped back and looked at IBM, we had one management system. Remember, we had a near train wreck, we lost money, guess what we did, we put in controls all over the place. We just put controls on everything, and we could measure anything, [such as] expense-to-revenue ratio. That didn't feel like an environment that was very conducive to taking risk. Then we decided we needed to reignite the growth engine, and I was tasked, along with a number of my colleagues, to go off and think things through and [determine] how we were going to grow new businesses. With that management system of highly buttoned up controls, would every line item from an expense standpoint and asset standpoint fit an environment where you're trying to search in the market for where the opportunities are with the business model experimentation? Absolutely not. So we had to say, one management system fits all within IBM. ... How do you get from where you are today to where you need to get to without experimentation? You have to experiment, but you've got to do it with a different management system.

By the way, one of the ways you can reduce risk, we found we were taking our least-skilled people and putting them over new business areas. Does that feel right? No. You want your most skilled people, even though you have no revenue on day one, you want to scale it.