Introducing the IT Market Clock

Introducing the IT Market Clock
By Brian Gammage, vice president and Fellow, Gartner

Published: November 26 2009 16:15 | Last updated: November 26 2009 16:15

IT is no longer an emerging set of capabilities and markets – it is a maturing business tool and must be managed as such.

Although new capabilities continue to appear in the market, their adoption and use require them to be integrated into a portfolio of existing IT assets, many of which are already mature.

Some IT assets are no longer required, or no longer deliver sufficient business value to justify the costs of maintaining them. Usually, working to budget means new IT products and services can only be adopted if existing IT assets are retired or replaced.

Every IT product and service has a finite useful life and must eventually be retired or replaced. Correct timing of this retirement/replacement is critical.

The second part of useful life, from maturity to obsolescence, must be considered when managing IT assets throughout their whole life cycles. Most organisations require more-holistic mechanisms for planning IT divestment and reinvestment activity.

Gartner’s IT Market Clock is a new framework that supports strategic investment and divestment decisions. Tools and methodologies that focus only on technology adoption are no longer sufficient to support the decisions required to manage portfolios of IT assets throughout their full lifetime of use.

Gartner’s Hype Cycle for example, which the Gartner Market Clock complements, is a buyer’s decision framework for technology adoption, but its view ends when mainstream adoption begins, which typically equates to an adoption level of between 20 and 50 per cent.

Simply, the Hype Cycle supports “technology hunting” decisions, while the IT Market Clock supports “farming” decisions for assets already in use.

The IT Market Clock uses a clock-face metaphor to represent relative market time. Each point positioned on the IT Market Clock represents an IT asset or asset class: for example, desktop PCs, packaged maintenance and support services or corporate learning systems.

Technology assets are positioned on the IT Market Clock using two parameters. The first is where they currently lie within their own useful market life, from the first time the technology product or service can be acquired and used to the last time it can be viably used.

This determines the rotational position of the asset on the Market Clock – each begins at 0 (called ”Market Start”), and moves clockwise round to 12 o’clock.

The second is relative level of commoditisation, ie the ease with which the technology product or service can be interchanged with alternatives. Relative commoditisation determines the distance from the centre of the Market Clock; assets further from the centre are more commoditised.

Commoditisation is a proxy for the balance of market power between buyers/users and suppliers. For most asset classes, relative commoditisation levels begin low, increase steadily as the market matures and then decrease again toward end of life.

The IT Market Clock is divided into quarters, each representing one of four market phases of the useful market life of an IT asset.

The Advantage quarter represents the first stage of market life, during which technologies are often proprietary or highly customised and assets provide differentiated technology, service or capability.

There will usually be limited supply options and high dependence on relevant skills. Users should focus on benefits received.

Choice is the second phase of market life, during which technology assets are subject to increasing levels of standardisation and growing supply options. Users should re-evaluate the level of required customisation, prices and supply choices periodically as assets in this phase offer the greatest scope for cost savings.

The Cost quarter is the third phase of market life, during which assets reach their highest levels of commoditisation. Differentiation between alternative sources is at its minimum level and competition centres on price. Users should focus on acquisition and switching costs and ensure minimal skill-set dependencies.

Replacement is the final phase of market life, during which assets begin to move towards end of life, usually because they comprise legacy technologies, services or capabilities.

Supply choices and access to available skill sets will be decreasing, leading to rising operational costs. Their retirement or upgrade is essential. User organisations need to monitor operating costs for IT products and services in the disfavoured phase of their market life.

Operating costs rise toward end of market life, highlighting a growing urgency for retirement or replacement. For example, the skills needed to support and maintain mainframes and business applications at end-of-life are in increasingly short supply.

Suppliers and buying organisations can move to offset these issues during the Replacement phase, as, for example, has happened in the UK, with leading financial institutions encouraging universities to place Assemble and Cobol (which is now 50 years old) back on their curriculums.

But while such moves can alleviate immediate problems, each initiative to extend useful life typically comes at higher cost.

Moreover, as more companies move off legacy technologies, the burden of responsibility for maintaining associated skill sets falls to a diminishing number of organisations. The marginal costs of continuing to use technologies as they approach the end of their useful lives will increase.

With a holistic decision framework, user organisations will be able to manage their asset portfolios proactively and determine the right time to adopt and deploy emerging or adolescent technology options, establish road map plans for replacement and upgrade of existing technology assets, and perform reviews with suppliers for best saving opportunities.

Although such a framework is focused on technology assets, the same approach could also be extended and applied to any class of business assets.

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