Shape-Shifting Software Innovations And The New Value Proposition

38 2014 Issue 02 | Dell.com/powersolutions

Perspective

Reprinted from Dell Power Solutions, 2014 Issue 2. Copyright © 2014 Dell Inc. All rights reserved. Reprinted from Dell Power Solutions, 2014 Issue 2. Copyright © 2014 Dell Inc. All rights reserved.

We’ve long claimed that software will change

the world. But for the most part, so far we’ve

just automated the human bookkeepers

and assistants. Now, however, software is

on the cusp of truly transforming the world as we know it,

particularly as the Internet of Things (IoT) emerges. A system

wherein even everyday objects are identifiable and readable

by the Internet, IoT plays a key role in influencing trends and

ideas that will dominate this transformation.

The IoT extends its presence.

In the next few years, the huge expansion of the IoT can

only significantly alter the size and scope of the software

market, as companies scramble to support all those “things”

as they did for all those smartphones. Naturally, the IoT

demands an enormous and revolutionary effort in terms of

software development. People will buy products not only

for the products themselves, but also for the advantages

provided by services embedded in those products. Running

shoes, for example, already feature the added value of

sensors that enable performance tracking, competition

with friends and even virtual worldwide marathons. The

value of a product rests not so much in the product itself

but in its capacity to be networked.

The nature of software value keeps shifting.

Even today, most software is transactionally oriented, an

outgrowth of business needs to reduce transaction costs

through scale and to drive efficiency focused on a single

unit of work. But now studies indicate that we’ve pulled

As the Internet of Things expands, the next generation

of software is poised to transform how businesses and

consumers create value.

By Jim Stikeleather

Shape-shifting software innovations and the new value proposition

Dell.com/powersolutions | 2014 Issue 02 39

Perspective


existing productivity levers as far as we can; the next step is

to focus on productivity and efficiency at the group level.

The CEB study, “The Future of Corporate IT, 2013–2017,”

covers the productivity issue extensively.1 We will see a

continuing explosion in software that enables people and

machines to collaborate, orchestrate and choreograph their

work nondirectionally. This is a whole new value proposition

beyond reducing costs and increasing efficiency: These new

ways of using software promise to change the nature of work

to directly create value for enterprise customers, suppliers

and partners, but primarily drive innovation.

The paradigm shift from ownership to rental continues.

The new generation of consumers would rather rent

a product than own it. We’re already seeing this in

transportation — for instance, Zipcar, Uber and public

bike sharing — and we’re going to see it soon in software.

Software as a service (SaaS) will increasingly become

the norm. For example, consumers will hire a company

to manage their calendars and contacts rather than buy

software for the same purpose.

Context plays an expanding role in determining value.

Case in point: The transition from basic mobile phones

to smartphones has dramatically increased the value of a

device that can make calls. One small device doesn’t just

allow you to call your family from the road; it tells you that

there’s an Indonesian-Texan barbecue fusion restaurant

four blocks from your hotel room. And soon it will be able

to tell you which colleagues are free for dinner — and then

make a reservation for five at 7 p.m. The phone’s value in

that hotel room, at that moment, is very particular. Value is

created by context and the actions taken in that context.

In the near future, no software will stand alone; how it is

choreographed to function in context will increase its value

dramatically. As a result, products and services will move

increasingly away from being products and services to

becoming platforms upon which customers and partners

can add value.

Innovation will be crucial for profit

in an equilibrium economy.

Some economists note that we’re approaching what’s called

an equilibrium or perfect economy — one in which just about

All that data, handled with the

idea that value is highest at the

moment of need, will require

increased adaptation, agility

and decision making on the part

of software itself.

1 To read the CEB report, “The Future of Corporate IT, 2013–2017,” visit qrs.ly/z43cf47.Sam

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40 2014 Issue 02 | Dell.com/powersolutions

Perspective


anyone can start producing and selling

anything in short order thanks to SaaS

computer-aided design (CAD) software,

3D printers, Kickstarter, outsourcing

production, Amazon storefronts and

UPS. This dynamic means that supply

rises to meet demand almost instantly,

bringing the economy to equilibrium.

When the economy reaches that

point, the only form of profit left is

monopoly: the profits that come from

a short period of time when you have

a value proposition that no one else

does — in other words, innovation.

More than ever, software developers

must continually innovate, and agile

development models that allow quick

manipulation of value, such as DevOps,

will become prevalent.

Advanced mathematics

becomes more important.

Basic tools of software development —

architecture, languages, environments —

follow the progressions of thought

in philosophy — logic, semantics,

taxonomy, epistemology. But

increasingly, as we move toward

the IoT, ideas drawn from advanced

mathematics will become more and

more relevant. Here’s an extreme

example: Imagine having sensors

in your undergarments that monitor

your health and that coordinate

with environmental detectors in

your outerwear, which in turn are

organized by systems in your car

or home or even synced with your

calendar, phone, and perhaps your

glasses and watch. Sensors attached

to your skin could create gigabytes

of data per second that track your

glucose levels. These sensors could

send an alert to your phone when

your glucose levels spike after eating

a sugary food or send a warning

when your electrolytes are dipping

too low. And when abnormalities in

your bloodstream are detected, the

sensors could even automatically alert

your doctor.

Today, software making the first

iterations of such connectivity possible

is rooted in code that is very close to

the silicon. But given the sheer volume

and complexity of programming

that the IoT demands, we will see

new forms of programming emerge.

These forms will leverage ideas

from the prototype-instance model

of object-oriented programming,

as well as from complex adaptive

systems rules that are derived from

advanced mathematics. I’m not sure

exactly which elements of advanced

mathematics will be used — maybe

genetic algorithms, neural nets,

predicate calculus — or how they’ll be

applied and configured. But no doubt

they’ll be key to building an IoT. All that

data, handled with the idea that value

is highest at the moment of need, will

require increased adaptation, agility

and decision making on the part of

software itself.

It’s important to note that hardware

for an IoT is ready, for the most part:

64-bit ARM or x86 system-on-chip are

adequate, and the technology will only

get better. Moreover, the IoT could

even reduce bandwidth needs if we

get the architecture right, which will

be necessary as wireless becomes the

default interface mode.

Outsourcing relationships

are characterized by trust

instead of legalities.

Economics always drives problem-

solving. In software development, just as

in any other business, we’re constantly

weighing speed to benefit against cost

When the economy

reaches equilibrium,

the only form of

profit left is

monopoly: the profits

that come from a

short period

of time when you

have a value

proposition that no

one else does —

in other words,

innovation.

Dell.com/powersolutions | 2014 Issue 02 41

Perspective


of failure. These days, the bottlenecks

that slow software development are

legal and administrative issues: the

defensive strategies used to reduce

or eliminate the cost of failure. But

as speedy experimentation becomes

the common practice— try it out, see

whether it works, quickly regroup and

try again — there just isn’t time for

traditional procurement methods.

In the coming years, we will see

outsourcing relationships become less

like traditional contractual relationships

and more like highly trusting

ecosystems in which gain and risk

are shared. You will share all needed

information with your outsourcers

and trust that they will not only build

the right thing, but perhaps even

build something better than what you

envisioned. Naturally, this idea makes

legal departments shudder, but we’re

already seeing it in play with certain

small specialty manufacturers that

produce anything you want without

requiring any contractual relationships.

Reputation and verbal commitments

are the name of the game. The maker

culture operates in a similar fashion and

still produces sophisticated products.

All this leads to

transformative change.

Flexibility happens, adaptability happens,

agility happens. The Darwinian crucible

of competition heats up and change

happens. Transformative change happens

when industries democratize — when

they’re ripped from the sole domain

of companies, governments and other

institutions and handed over to regular

people to operate collaboratively and

cooperatively. We have seen this in the

intangible world of content and the

associated disruption of media. And

we’ve seen it in the open-source software

movement and resulting software, such as

the Linux® OS, the Apache™ HTTP Server

and others that basically run the internet.

Now we are beginning to see it in the

tangible world as the IoT matures.

Basically, a value supplier or business

must maintain — appropriately and

with permission — the total context of

the customer’s environment so that

when opportunities appear to provide

value, they can be exploited as quickly

as possible if not instantaneously. And

the value of a product or service greatly

varies in the moment: One minute

it may be highly valuable, and a few

seconds, minutes, hours or days later

effectively useless. Value creation for

both business and consumer becomes a

joint activity between the customer and

the supplier or the supplier’s ecosystem.

At a particular moment, a supplier is

increasingly less likely to have all the

capabilities necessary for generating

needed value, so its ecosystem also

must be contextually aware and able to

operate instantaneously.

The role of an enterprise morphs

from providing products and services

to providing a platform upon which

customers and partners can build

value. And the strategic questions shift:

Who can add value to my platform?

Whose value can I enhance?

This transformation is driven by the

next generation of software.

Transformative

change happens

when industries

democratize — when

they’re handed

over to regular

people to operate

collaboratively

and cooperatively.

Author

Jim Stikeleather is chief innovation officer

for Dell Services, where his team enables,

facilitates and accelerates advanced

technologies, business models and processes

to address evolving business, economic and

social forces for Dell and its customers.

Dell is a trademark of Dell Inc.