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Exploding the Enterprise

Moderator Phil Windley is an associate professor at Brigham Young University. Gordon Eubanks works as CEO of Oblix. John Hagel III is an author and management consultant. Darren Lee serves as CEO for NextPage. And Halsey Minor is chairman, CEO, and founder of Grand Central Communications.

Moderator Phil Windley is an associate professor at Brigham Young University. Gordon Eubanks works as CEO of Oblix. John Hagel III is an author and management consultant. Darren Lee serves as CEO for NextPage. And Halsey Minor is chairman, CEO, and founder of Grand Central Communications. What follows is a partial transcript of their panel discussion at Supernova:

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Phil Windley: Back in the Middle Ages, cities had walls around them. They had walls around them because they wanted to protect themselves. Security was the primary driver behind why they built cities. Then someone developed a weapon, a gravity-based catapult that was able to break down walls.

At the same time, markets happened once a week. They threw open the city gates, there was the market, then everyone went home. When the city walls got broken down, not only did cities change, the nature of markets changed. That’s what we’re talking about when we talk about exploding the enterprise. Corporations are no longer single entities.

There are two ways we can interpret this. One, we can view it internally. We can bring people together internally. Another way is externally. We are federating the enterprise. One of the things we determined is that the external is only leading the internal. Internal organizations are becoming decentralized in ways that make them look very much like external organizations.

Darren Lee: We founded the company five years ago to take advantage of new opportunities. The technology infrastructure as the enterprise begins to explode shakes things up. They don’t understand interaction across corporate boundaries. The second issue is around the political structure. The IT organization has a lot at stake in this new world. If users get to make the decisions, what is their role? Then there’s the business model. Who gets to own the purchase? Is it you? Or is it a Dutch date between you and your partner?

John Hagel: I’m the only non-technology vendor on the panel. I believe that what we’re seeing is a fundamental redefinition of the enterprise. The question is no longer what business are you really in but whether you should be in business at all. There is still a strong role for corporations, but it’s different than the traditional one of managing transaction costs,. It’s about accelerating learning and skill building, and deepening practices.

What’s happening in China and India is an early indicator of some of the changes we’re going to see. Offshoring is not about wage arbitrage. It’s about skill arbitrage. That’s laying claim to some of the poor processes of our organizations. In the past, we outsourced HR and other functions. Now we’re faced with outsourcing core operating processes. What’s the distinctive thing that remains?

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What’s going to be most important in the evolution of IT is that in the past, IT evolved from the inside to the outside. The next generation of architectures will come from the outside in. That requires a very different way of thinking.

Gordon Eubanks: I really agree with you about outsourcing. It’s about skills. But what I want to do is talk about an IT challenge. The Internet’s obviously had a profound effect. But we’ve moved from the dot in dot com to the “o” in “old economy.” Now business is driving the use of the Internet. We have two forces at work. One of the great innovations of the British was the limited liability corporation. People aren’t going to give that up. It’s going to continue to work.

Where does this leave IT? In a corporation, IT has two conflicts. For 40 years, what IT has done has driven competitive advantage in every business process. You can’t compete today without IT. So IT is continually under pressure to create more and more value. The other axis is control, visibility, and security. Over these 40 years, we’ve traded those off for competitive advantage. Now, with the great aid of seeing people wearing handcuffs with their suits, we need to regain some control, visibility, and security. How do we continue to create more decentralized relationships while maintaining that?

Decentralization doesn’t mean there isn’t a center, it’s about what is in the center. In the world of the Internet, we need to look at that very, very differently. What’s the big difference? The number of people using the systems has gone up in orders of magnitude. I started out with mainframes. In those days, the number of people who accessed the system was a handful. From fanfold and a few operators to 10 to the 8th people has put tremendous pressure on IT. How we solve that is a critical issue.

Halsey Minor: A lot of the benefits that were originally delivered to consumers are now being delivered to businesses. One example is Salesforce.com and Marc Benioff. But I don’t consider myself as a vendor. I’m more an evangelist of the inevitable. The Internet will allow large numbers of functions to be pulled out of IT and be provided as a service. We are trying to reduce complexity, and we are trying to reduce cost.

Ultimately, economics drive the decisions we make about IT. I don’t think that was ever more rapidly demonstrated to me than when I was talking to a large government agency. If we take away a function they were filling, we can take away $30 million a year from their operating budget. We can replicate that across the government, and we’re beginning to enter a phase where the low-cost Internet will transform business. We’ll see new value chains formed.