Business executives of all industries continually chafe against the dual demands of increasing revenue and margin. Their pleas are quite simple and consistent.
They continually ask their CEOs and CFOs what they really want them to do. They can invest in my business, lowering near term margins while boosting revenues, or cut costs, hopefully sustaining modest revenue growth, while boosting margins.'
The invariable answer from their corporate masters is yes, they want both.
Past waves of IT innovation directly addressed this dilemma. The most recent wave occurred in the late 1990s as companies confronted the Y2K crisis.
Y2K stimulated the widespread adoption of enterprise resource planning (ERP) software systems. These systems replaced multiple generations of homegrown, customised applications and radically reset the bias that most IT shops had from build-don't-buy to buy-don't-build.
One of the most common benefits of ERP adoption was enterprise inventory management.
For the first time, working capital tied up in inventory could be monitored and managed on an end-to-end basis, resulting in significant efficiencies in capital utilisation.
Accurate monitoring of payables and receivables enabled corporate cash flows to be managed much more accurately and predictably.
ERP powered accounting
ERP systems also enabled the implementation of concepts such as total-cost-of-service or activity-based cost accounting at an enterprise level, providing a degree of cost transparency across a company's core business processes that in turn triggered significant cost reductions.
In many cases this transparency led to the realization that a company was dealing with a ridiculously large number of suppliers.
Armed with this knowledge, procurement organisations launched vendor consolidation programs that wrested larger discounts from a small number of key suppliers. ERP systems gave business unit managers a powerful weapon for slashing expenses and boosting margins.
Luckily, the Internet appeared on the scene in roughly the same time frame.
The Internet created an equally radical shift in most companies go-to-market strategies. The Internet provided new ways of creating stickier relationships with existing customers and global access to new ones.
The lead times required to test new product or service offerings were slashed through the use of the Internet.
The adoption of ERP and Internet technologies provided private sector companies with a lethal one-two punch for boosting margins and revenues at the same time.
ERP systems gave corporate managers the tools they needed to streamline processes and attack opex spending.
The Internet afforded companies the chance to increase revenue from existing customers and add new ones at the same time.
Fast forward to the present and it's quite possible that history is repeating itself.
Instead of consolidating legacy business applications around an ERP platform, most IT shops are consolidating their legacy data center infrastructures around cloud computing platforms.
Before the introduction of ERP systems, business applications were primarily developed at a departmental level to satisfy the needs of individual functional groups.
Similarly, the data centre assets of most corporations have been acquired on a piecemeal basis in response to specific business needs and initiatives.
Cloud computing enables the pooling of internal data center assets and the dynamic allocation of those assets to individual functional groups as needed.
Furthermore, it extends the buy-don't-build bias that now pervades most IT application teams and extends it to IT infrastructure.
Companies can now purchase infrastructure capabilities from a third party in much the same way they can purchase software capabilities through licensing or subscription models.
Mobility devices are proliferating at the same time that cloud computing principles are being adopted by many companies. The Internet radically altered a company's ability to access its customers.
Leading edge companies leveraged the Internet to reach customers at new times of day, at home or at work, in a far more informal and spontaneous fashion.
Smartphones and tablet computers are turning spontaneous customer contact into instantaneous customer contact. These devices also free consumers from having to sit in front of a screen to make a buying decision and that freedom is likely to have as revolutionary impact on consumer buying practices as the Internet had on 'brick and mortar' shopping.
The convergence of cloud computing and mobility platforms is eerily reminiscent of the convergence of ERP systems and the Internet that occurred over ten years ago. Once again, another wave of technology innovation is rising to assist business unit managers in confronting their classic conundrum of revenue vs. margin.
Cloud computing in its many forms will provide companies with flexible access to highly scalable IT resources on a variable cost basis, while mobility devices will create fundamentally new ways to engage customers and expand revenue.
What types of business opportunities might these technologies create?
Complex statistical algorithms that were once available only to the largest retail firms will now be accessible on-demand through cloud computing.
Companies of any size will have access to the computing resources needed to segment customers, monitor buying trends, detect affinities in the consumption of specific products and services, target marketing campaigns and dynamically adjust supply chain inventories and manufacturing plans in response to consumer demand.
Pricing decisions can be customized for individual consumers and predicated on past buying behaviors, local or international news, personal events (such as birthdays and anniversaries), weather forecasts or the time of day.
Mobility devices will enable presence-based discounting to draw shoppers into specific venues or social-based marketing in which consumers are instantaneously informed about the recent buying decisions of close friends or like-minded individuals.
The last generation of successful business managers harnessed the dual power of ERP systems and the Internet to achieve the profitable growth demanded by their shareholders.
Will their modern day successors be equally successful in harnessing the power of cloud computing and mobility platforms to drive up margins and revenues at the same time?
For better or worse, the challenge is inescapable.
Mark Settle is CIO at BMC Software and a former CIO for Visa International