Overstating the Consumerization of IT

Marco Arment, in Underscore Price Dynamics:

This is the real reason why Apple doesn’t care about upgrade pricing: there’s no demand from customers. The market has shown that free apps will be downloaded at least an order of magnitude more than paid-up-front apps, and smart use of in-app purchase in a free app is likely to make more money. Over time, this trend has only become stronger and more clear.

Ev Williams, from this Wired summary of a talk he gave at XOXO:

The bottom line, Williams said, is that the internet is “a giant machine designed to give people what they want.” It’s not a utopia. It’s not magical. It’s simply an engine of convenience. Those who can tune that engine well — who solve basic human problems with greater speed and simplicity than those who came before — will profit immensely. Those who lose sight of basic human needs — who want to give people the next great idea — will have problems.

“We often think of the internet enables you to do new things,” Williams said. “But people just want to do the same things they’ve always done.”

Benedict Evans, in Dead Social Networks and the Value of History:

Lots of companies have big user bases and big accumulations of user data. And they think that this gives them a lock-in. But maybe the only stickiness comes from the mere presence of users – more like a nightclub than a bank. If your friends move, you’ll move in a second, and the dynamics of smartphones mean there are no barriers at all to moving. Owning the address book, and perhaps the photos, are the only real levers of control, and it’s very hard to dislodge the underlying platform owners from that.

The most hoary of tech memes is the “Consumerization of IT.” It’s so hoary, in fact, that it has its own Wikipedia entry:

Consumerization is the growing tendency for new information technology to emerge first in the consumer market and then spread into business and government organizations. The emergence of consumer markets as the primary driver of information technology innovation is seen as a major IT industry shift, as large business and government organizations dominated the early decades of computer usage and development.

Phones are the clearest manifestation of this trend; the iPhone, Android, and even Windows Phone are first and foremost consumer devices; it’s corporate-focused BlackBerry that is all but finished.

But while this trend may be true when it comes to the technology itself, the differences in business models and go-to-market strategies seems more distinct than ever.

Specifically, a consumer’s willingness to pay seems strongly correlative to the tangibility of a good or service. In the case of apps, one they have already experienced is worth tens or even hundreds of dollars in in-app purchases, but one they have not is worth $0. New activities or products enabled by the Internet aren’t interesting, but old activities done better are. Virtual memories and connections are thrown away at the drop of a hat, even as friends and family remains more precious than ever.

Business, on the other hand, with decisions driven much more by the cold rationality of pro vs cons (or the equations and relationships concocted by the best of salespersons), is outright dismissive of hardware, say, or the user experience broadly. Tangibility and feel are extras at best, an unfortunate increase in the denominator of an ROI calculation at worse.

Taking this thinking to its logical conclusion means that the vast majority of money in the consumer space will remain in tangible goods, especially hardware. Services will likely never grow far beyond ad-supported. Meanwhile, businesses will continue to flock towards SaaS services, with traditional vendors increasingly left in the cold.

This is good for Apple, of course, and is why the most interesting area for startups is not so much consumer services but enterprise ones, like Workday and Box. It’s also the rationale for Microsoft’s focus on “devices and services”; the former is for consumers, the latter for businesses. The polarity of these businesses, though, is what makes serving both such a challenge.

The title was originally “The Consumerization of IT Myth,” which was a bit too strong. As I noted, it’s very applicable to the technology and user experience of products, but that’s where the similarities end and the business model differences begin