New Tech Comes from Consumers

Businesses experience trickle-up effect Until recently, new information and communications technologies typically found a market first in the business world, then gradually trickled down to consumers. Think: personal computers, cellphones, email. But the direction of flow is changing. Now it’s just as likely, or more likely, that new technologies and applications will emerge first in the consumer market and only then find a place in the enterprise. A prime example: instant messaging (IM). There are others, such as Skype, the PC-to-PC Internet phone service that uses peer-to-peer (P2P) technology. And as we’ll see, more are coming. Gartner Inc., in a recent report, predicted that between 2007 and 2012, the majority of new information technologies that enterprises adopt will have their roots in the consumer market. Even where new technologies emerge first in the business market, enthusiastic adoption by consumers can bring prices down faster and improve the business case for enterprise users. Wi-Fi wireless LANs and mobile data applications are two recent examples. Why is all of this important? A few reasons.First-generation consumer network applications — IM and Skype are again prime examples — typically don’t have the security and management control features needed to make them work reliably and safely in the enterprise arena. The problem, as most IT managers now know, is that your employees, not understanding this or not caring, may install new technologies at the office without asking you first, thus compromising their computer and perhaps your network. If you know what’s coming from the consumer realm, you can anticipate pressure from end users to adopt it, you can more effectively block rogue use and you can prepare in an orderly fashion for adoption where appropriate. "There is so much more complexity involved in implementing a new application on a network versus implementing it at home," notes Carmi Levy, a senior research analyst at Info-Tech Research Group in London ON. "End users don’t often see that." Applications like IM and Skype also have the potential to change employee behaviour. As well as being disruptive of the market, they can be mightily interruptive in the office. Employees who are constantly being interrupted by, or interrupting others with frivolous IM messages and Skype calls — or downloading ring tones, or looking at colleagues’ holiday snaps online — will not be productive employees. If you let new consumer technologies in, you’ll have to find ways to control their use. This doesn’t just apply to technologies seeping in from the consumer realm — controlling employee misuse of e-mail remains a major concern — but consumer applications, because they have broad appeal and are easy to use, are often inherently time wasting. The positive reasons for monitoring the potential flow of new technologies and applications from the consumer side? That’s easy. Some will be hugely beneficial. Fewer and fewer IT and business managers, for example, would deny the utility of IM, though most originally viewed it as a dangerous security threat and waste of time. Skype, for all its recent vilification as a rogue presence in the enterprise, also offers obvious toll-bypass benefits. If you want to go back in time even further, very few IT professionals today would dispute the business benefits of graphical user interfaces or multimedia desktops, yet many did when employees first began agitating to bring those technologies into the enterprise. Case in pointIM is an interesting case in point: one of the most recent and perhaps clearest instances of what we’re talking about. Levy points out that first-generation IM products like AIM and ICQ had no audit functions, no access control and in general little security. "They just weren’t robust in the ways they needed to be to put them across an entire enterprise," he says. "Once you scaled to thousands or hundreds of thousands of users, they would be impossible to manage." In fairness, they were never meant for use in businesses. Even the user interfaces — cluttered, fanciful and feature-laden — made it clear they were targeted at the consumer. "There was never an intention to make them a sober corporate solution," Levy says. But all that has changed. Vendors, including market maker Microsoft Corp., introduced industrial-grade IM products designed specifically for the enterprise, and IM now has a solid foothold in the corporate market. It’s used to enhance collaboration, generally speed textual communications and circumvent the spam problem with email. Levy says, "2005 will go down as the inflection point in the move of IM into the corporate market. When Microsoft puts IM smack in the middle of its messaging strategy, it means every other vendor is going to see that, and IM will become the norm rather than the exception." IDC, the US-based market research firm, says revenues in the worldwide enterprise IM market, which includes server, security, compliance, and management products, jumped 37% year-over-year in 2004. IDC expects it to grow from US$315 million in 2005 to US$736 million in 2009. It also estimates there are 28 million business users worldwide, sending nearly a billion messages a day. Gartner predicts that by 2009, the enterprise IM market will have a compound annual growth rate of about 20%, and that by 2010, 90% of users with business email accounts will have IT-controlled IM accounts. Consumer appealSo what caused the reverse in the flow of new technologies? The biggest factors have been widespread consumer adoption of the Internet — a cultural as much as a market phenomenon — and more recently the spread of consumer broadband access, which enables many if not most of the new applications. Think: IM, Skype, blogging. Even if applications like IM don’t necessarily need a lot of bandwidth, they do need a persistent connection to be really useful. Although it was certainly businesses that first saw a need for always-on, high-speed Internet access, low-cost consumer services from cable and phone companies remade the network services market. In fact, ubiquitous low-cost broadband access is one of the first and most important examples of technology trends spreading from the consumer to the business realm. "If the CEO got a $50-a-month broadband service at home that gave him 3 megabits per second (Mbps), he started to seriously question why the 1.5-Mbps service at the office was so expensive," Levy says. "It made companies rethink how much they were spending for wide area network services. The result is that it totally commoditized the market for business-class broadband." The consumer market also has obvious appeal to vendors, the consumer sector being so much larger than the enterprise market. Success with consumers allows them to recoup investments in research and development more quickly. Security concerns and innate conservatism among corporate IT professionals coupled with the rise of a new generation of tech-savvy consumers means consumers are also often more receptive to new technologies and more able to adopt them quickly. New IP video phone vendors, for example, are targeting consumers first not just because they see more demand there, but because it’s much simpler to deploy the technology to broadband homes. Perhaps most important of all, consumers can now afford to adopt new technologies. When personal computers cost $10,000 each, not many consumers thought of buying them. Ditto when cellphones weighed a ton and cost 50 cents a minute to use. Furthermore, consumers, unlike corporate buyers, don’t have to jump through hoops to justify their expenditures. But as Levy points out, the distinction between consumer and corporate buyers is not as great as some vendors suppose. Corporate buyers, after all, are also consumers who buy technology products for themselves and for their families. "When the CEO is walking through Circuit City and sees Treo with data plans, it begins to dawn on him that this is real and perhaps his business can use this technology," Levy says. What’s coming?So. Which technologies tearing up the consumer market today might employees try to slip in the back door tomorrow? Skype Skype is an obvious candidate if it isn’t already inside. It offers free, high-quality PC-to-PC calling or very low-cost PC-to-phone calling. To use it, employees need only download and install the free software and plug a USB telephone headset into their computers. Skype says over 200 million people have downloaded the software so far. "I think there are times when Skype makes absolute sense," says analyst Joe Laszlo, a research director with New York-based Jupiter Research. "For calls from a remote worker in another country back to the home office, for example." But Levy’s company in particular has warned against the potential risks of allowing employees to use Skype at work (see Telemanagement 231). Because it’s a non-standard, closed-source program that works in stealth mode to circumvent firewalls, it could let viruses and worms into a network. If its non-standard encryption fails, it could lead to damaging information leaks. And because it’s difficult or impossible to audit and record Skype calls, it could make it harder for companies to comply with new privacy and disclosure regulations. Others have characterized these concerns as alarmist, but Levy argues, "Every time you introduce a new service like this, it’s an additional point of risk." Soft phone technology will develop much the way IM did, with vendors eventually adding the security and controllability features enterprises demand. Meanwhile, in a Skype survey, 25% of users said they already use the service for business. Probably more of that use is in Europe and Asia where long distance rates are generally higher than in North America. And among enterprise employees, it is almost certainly unsanctioned by IT. Skype itself says it only targets consumers and businesses with fewer than 25 employees and has no intention of creating an enterprise-grade version of the product. Yet it has already made some concessions to enterprise users, such as allowing them — or their network managers — to disable Skype’s file sharing and IM functions to reduce non-business-related traffic through company routers. And its website advertises partners’ Skype-integrated solutions for enterprise applications such as sales force management. IP video phones Hard on the heels of Skype come consumer-grade IP video products such as the new and surprisingly good video soft phone from iPhone2 Inc. of Boca Raton, Florida, and the US$99 hardware video phone from Irving, Texas-based Viseon. They bring all the same concerns about security and controllability as IM and Skype, while offering, perhaps, fewer quantifiable business benefits. Enterprises have been toying with IP-based desktop video conferencing for a few years, of course, but the technology has struggled to find broad acceptance. Easy-to-use, low- or no-cost Internet-based consumer video telephony may be what it takes to zap the market. Employees will discover and use the technology at home, then, just as with IM and Skype, want to bring it to work — to enhance collaboration or even make virtual customer calls. Podcasting Blogs came first — self-published, diary-like magazines on the Web. Blogging was strictly for Net nerds in the beginning, but now many businesses, especially small, tech-savvy firms, use blogs to keep customers and employees up to date on the company and its products. However, unsanctioned blogs by loose-canon employees who comment on their employer inappropriately have also created public relations and information security nightmares for some companies. A few firings have resulted. Podcasting, making audio or audio-visual content available to "subscribers" on the Web, is the new do-it-yourself content distribution craze among the digerati. The idea is that subscribers download the files to their PCs, then transfer them to multimedia-capable mobile devices for later listening or viewing. (Podcast is a contraction of iPod and broadcast.) Podcasting offers the same potential for informal, low-cost communication of internal or external business messages, but also carries some of the same risks. Best uses: pep talks and on-the-fly training for dispersed mobile workers. Technology use policies should specifically ban mention of the company in personal blogs and podcasts. And company blogs and podcasts should be carefully vetted by the public relations department. Mobile multimedia IT managers may balk at pressure from employees to adopt multimedia-capable cellphones, perhaps with some justice. The thought of mobile workers using company-issued phones to watch streamed videos or download and play MP3s — possibly during working hours — is more than a little galling. On the other hand, if you expect mobile employees to be away from home longer than office workers, as many employers do, there may be an argument that the company owes them the means to recreate while they’re mobile. After all, many firms now issue laptops equipped with DVD drives. Consider using multimedia mobile devices as employee incentives. More to the point, there are potentially useful business applications for mobile multimedia. Workers could participate in video conferences from the road. They could use down time at airports and in cabs to listen to or view downloaded company or industry podcasts. And field workers could access video-based training and instruction videos on demand. Microcommerce eBay Inc. and PayPal, the online payment system now owned by eBay, have created a whole new microcommerce economy with individuals and mostly small businesses selling very low-priced goods online in quantities of one. It’s something that either could not be done at all before or only from small, local bricks-and-mortar retailers. Levy argues that big companies need to exploit the available mechanisms of microcommerce. "Just look at how many millions of individual songs Apple has sold. Enterprises that have an online sales component can open up to entirely new markets by using these services." The consumerization of enterprise technology innovation presents significant risks and opportunities. The opportunities are obvious enough — you can take technologies refined and simplified for the consumer market, adapt them, carefully, and exploit them to gain process efficiencies, cost savings and competitive advantage. The risks? There are two. Ad hoc, unsanctioned use of consumer technologies by employees can compromise the security of your technology infrastructure. But if you fail to exploit the business benefits of new technologies flowing from the consumer world, you risk missing out on new business opportunities and losing competitive edge. In short, you need to know which technologies consumers are using, but beware of letting the consumers who work for you co-opt the organization’s technology agenda.

New Tech Comes from Consumers

News | 02/01/2006 5:00 am EST

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