The Death of Enterprise Technologies Is Greatly Exaggerated
According to “new replaces old” assumptions, the mainframe computer would be long deceased. We all know that’s not the case. I recently met with the CIO of a large, well-known insurance company, who said that for 20 years the company has tried to reduce its reliance on mainframes. The problem is that the company runs several complex processes and algorithms, built by people who have since retired, on those systems. Everybody knows that they work, but nobody really knows how they work, which is why they’re still around two decades later.
Shocking as it may seem, enterprise software giant BMC’s mainframe software revenue is on the rise, thanks largely to scenarios such as the one my friend at the insurance company is dealing with. And remember Lotus Notes? According to The Wall Street Journal, it’s still a $1 billion business, too rooted for large companies to walk away from, and too large for IBM to ignore as it expands into cloud and social software. BMC and Lotus Notes are important lessons for investors, CEOs, strategists and anyone tempted to write off the old guard, at least in the near-term. There’s a rhythm to when and how quickly technologies are replaced — and it’s driven by three factors: product cycle, adoption time and entrenchment.
Product Cycle: The longer it takes for a company or industry to release the next version that is significantly different, the more staying power the technology will have. Product cycles in PC operating systems are a great example. Windows XP was current for more than six years, and Oracle releases a new database every four years or so. All of those technologies endure in business today.
Adoption Time: If something takes a long time to deploy or adopt, it usually takes a long time to replace. SAP is notoriously long to implement, which means it takes companies an agonizingly long time to replace the software with cloud-based alternatives, no matter how superior they may be.
Entrenchment: The large insurance company stuck with the mainframe that I mentioned earlier is the perfect example of entrenchment. Those mainframes are so complex and pervasive throughout the company, they’re difficult — and sometimes impossible — to abandon. It’s not just the old guard that is entrenched, however. Salesforce.com is relatively quick to deploy, but businesses quickly integrate it deeply in the sales process and with various applications — many built on the Force.com platform, making Salesforce.com much stickier than many people originally thought it would be.
Cloud computing, the industry I’ve worked in for the past decade, is another cautionary example. It’s common in my industry to predict the “death” of legacy on-premises technologies such as Oracle and SAP. This is overly simplistic thinking, the result of people who try to fit a complex world into a convenient narrative. The cloud is undoubtedly marching toward pervasiveness in all layers of the IT stack. It will take longer than people think, however, and the old guard won’t die. In reality, they’ll gradually become less relevant, until some day, in some blog post, people will be surprised by how much legacy software remains in the world even though the new guard has long surpassed it.
At Okta, we’ve learned this lesson from our customers, many of which are larger enterprises experimenting with the cloud but that have legacy software that won’t disappear overnight. The software is too entrenched in the system, as it typically takes months — and often years — of accumulated consulting, training and implementation hours to install.
Eventually, the cloud will be home to all of the innovation and profit, but it won’t be the whole pie. Investors looking to place bets on where technology is headed (and when) and vendors plotting strategy shouldn’t get caught up in the hype. The SAPs and Oracles of the world will linger and limp along.
They won’t go gently — no matter how hard we might try.
Todd McKinnon is CEO of Okta, an enterprise-grade identity management service that addresses the challenges of a cloud, mobile and interconnected business world. You can follow him on Twitter at @ToddMcKinnon.