Gold taps: The boundaries of commodity

According to Simon Ratcliffe, with technology now very much a commodity, businesses need to get up close and personal with their customers. So if they want gold taps, then you need to give them gold taps.

Technology, as a commodity, is fast becoming the mantra of vendors and customers alike. Vendors trumpet the convenience and services based delivery that the approach offers, while customers look forward to lower costs and economies of scale. 

However, as with all new ideas, many are now finding flaws in the thinking and one of the biggest areas is customer expectation. The IT industry is notorious for not successfully anticipating changes and developments in customer attitudes and the same dangers are rearing their ugly heads with the commodity approach.

Why is this threat emerging? Put simply, a commodity technology is only a commodity until it reaches the customer, whereupon it must immediately become personalised, developed and sophisticated.
 
To take the analogy of a water supply, it's only a commodity until it reaches your house. From the minute it crosses the threshold, there's a world of difference between a pipe running into the centre of the room with a crude tap, a kitchen basin and a full bathroom suite with gold taps. Though the commodity remains the same, its 'presentation' and 'application' is open to huge interpretation. 

The same holds with technology – be it simple box sales, data connectivity or software services, the technology must be as the customer wants from the point it enters their premises. 

This can be as simple as wanting black PCs instead of beige, or as complex as an SLA delineating different levels of service to different individuals in an organisation on different days.
 
This presents vendors and their channel partners with many issues:

  • How can a vendor or channel partner deliver economies of scale and the consequent low prices to the customer, in the face of such personalised services and products?
  • How do you ensure the commodity component is sufficiently robust to handle so many possible permutations?
  • How do you develop a competitive pricing system around so many variables?

There are, of course, naturally occurring limiting factors to this plethora of differentiation: it's likely that companies of a similar size, or those acting in the same vertical market will need a similar set of services or products. 

However, in practice it's rare that all things are equal and it's often the small details that make the difference between a satisfactory arrangement and a successful one.

So how can the industry develop the commodity model to deliver what customers and end-users want without becoming splintered themselves?

The answer lies in recognising the 'architecture' of the commodity service:  essentially splitting it into pre- and post- threshold elements.

The pre-threshold items enable economies of scale and act as a basis for the services. The dominant issues here are low operating costs and reliability. 

Maintenance is important as without these components working to their optimum, there will be a barrier to successful business and use of the technology.

Post-threshold a different approach is required. Using a 'layered' approach services can be added on like modules: thus the amount of work required for each truly bespoke component shrinks with each layer:
 
The service delivery may be a comprehensive messaging system. The commodity component would be the provision of data connectivity and possibly hardware such as PCs.

The sub services would then build upwards – sub service three would be the provision of messaging software, two, a refinement the application, such as high level security modules and three would cover elements such as personalisation and presentation.

Such a model enables highly personalised services to be delivered with the maximum efficiency driving both end user satisfaction and sector growth.

January 2007