IT Services Markets Crumble-Driving in Detroit’s Rut, is the Media Business Next?

By Tony Greenberg /Alex Veytsel

Media firms have been my clients for years. Most IT firms complain that media firms prey on IT services firms by offering to “reference them” for larger enterprise deals. WRONG. Media firms, much like adult entertainment firms, are the spaghetti slingers and early adopters of new tech. You have to love them for taking the arrows in their backs and mounting themselves on the fireplace altar as trophies.

Media firms are actually IT Heroes. While banks and automakers wax poetic about risk and return on investment, Disney, ABC, News Corp., Viacom, CBS, and Sony–all past or current clients–pave the yellow brick road. Hats off to you all for “boldly going where no man has gone before”. For now, let’s ponder what lessons we can learn from the carnage of auto and the future demise of IT. Detroit Crumbling Factory

A couple of months ago I posted a bold proposition – that the U.S. IT services industry, while nominally healthy today, could find itself following the same ditch-bound trajectory as the U.S. auto industry. Such a bold claim requires significant evidence, so to start; we’d like to focus on four ways in which the parallels are beginning to emerge:

1. Consolidation – an early enabler rather than driver of failure, it creates an atmosphere where mistakes are magnified
2. Misalignment of incentives for quality and innovation tied to scale – as companies get larger, they focus more on cost cutting than creative destruction and product innovation
3. A shielded class of workers – unions for Detroit, salespeople for IT services – create a significant financial overhead and contribute internal pressure towards conservatism
4. Calculated failure – whereas early service issues ultimately come from an inability to effectively predict and remedy problems, later ones are deliberate tradeoffs of service quality for cost.

The next several posts will focus on specific tactical drivers of stagnation and ways they can be reversed. In speaking at Humanity + at Harvard in June, I overviewed how capital markets reward poor service: http://www.boilthehuman.com/ . As this article is focused on IT, I want you to start thinking of the media business and how this relates.

Is this the beginning of the demise of an industry so critical to our gross national product and evolving state?

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