One facet of rapid evolution within IT is that there are periodic industry consolidations. Back in the 1970s the mainframe sector known as IBM and the BUNCH shrank as market growth slowed and margins deteriorated.

In the late 1980s a similar consolidation occurred in the minicomputer market. Names such as Wang, Nixdorf, Prime, and Data General became victims of the shift to PCs. In the late 1980s I was interviewed by Digital who showed me that they were on track to overtake IBM as the biggest IT company. In software there was a similar consolidation around some areas such as spreadsheets and databases shortly after.

We now have a situation where HP has announced 50,000 redundancies. More importantly though, in the UK ecommerce growth has now slowed to single digits for the first time since 2000. It is on track to grow only marginally faster than the retail sector over the next few years unless something ‘turns up’.

Looking at the earlier waves of consolidation my estimate is that 50-70 per cent of the companies get squeezed out over a three to five year period in broad terms, in my admittedly rough calculations. In an era of proprietary hardware and software many organisations found themselves dependent on solutions that were difficult to migrate, and of course expensive. Thankfully in a more ‘open’ world this technical challenge is less of a burden. Or is it?

I think we will see a wave of consolidation, merger and failure on a par with the late 1980s over the next few years. So, what happens if say 60 per cent of cloud providers cease to be independent organisations, or if 60 per cent of social media companies cease trading? Of course, I am not talking about 60 per cent of the market vanishing, but 60 per cent of the players, many with small niches or limited investment capacity.

I can remember one organisation that described itself as a major user of one Minicomputer company’s hardware in the late 1980s. In fact they turned out to have over 20 different supplier’s hardware at the point of the industry consolidation, many just one or two devices. The costs of consolidation were a real break on new services for around five years.

If you are a user of cloud computing, how many suppliers do you think you have? I was talking to an old colleague who has just done the exercise for a European organisation. They insisted that they had two cloud providers. In a fortnight he identified 10 others. The CIO/CTO were identifying suppliers that they had direct contracts with, but the diverse organisation had others of which they were not aware.

The challenge in the next wave of consolidation, whenever it happens, is in my opinion less around proprietary systems than it is about data. If a supplier went into receivership are there any data items that might cause business problems?

On the radio yesterday there was an interesting case where a company went into receivership. The customer database was sold on as an asset to the business to recoup losses for the creditors. All fine and well, except for one point. They interviewed one customer who had not given permission for her data to be shared. However, when the supplier folded she was inundated by other companies using data she had chosen only to share with one organisation. The insolvency rules and Data Protection legislation appear to be immature in dealing with this situation, at least according to the evidence in this case.

So, if you are a CIO or CTO, try the following thought experiment:

Imagine say that your marketing department has a small contract in its own right with a cloud service provider. Do you know that the legal ownership of the data is secure for business continuity purposes if that supplier fails? Also, is the access to that data guaranteed if the supplier fails?

Are there any reputational risk issues if your data is sold on by the liquidators for the failed business?

We have seen an issue with Megaupload where backup business data was lost after FBI intervention, so this is not a hypothetical problem.

So, try this imagined vignette. An organisation has data in a hybrid cloud with four external and one internal provider. Internally, the data from multiple sources is integrated to support a wide variety of functions. What happens if one external supplier fails to the integration layer and is it business critical? Are all the contracts and business continuity arrangements in place?

Friends and colleagues in a number of organisations I knew during the minicomputer consolidation turned out to be far more exposed than they realised. Are we sure that we’re in a better position next time? Anyone want a bet on YES?

About the author

Chris Yapp is a technology and policy futurologist. Chris has been in the IT industry since 1980. His roles have spanned Honeywell, ICL, HP, Microsoft and Capgemini. He is a Fellow of the BCS and a Fellow of the RSA.