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Pull business models will force IT to adapt

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Can information technology companies adapt to a world of so-called "pull" business models where the individual is the center of the universe from "push" systems that are more centralized?

Can information technology companies adapt to a world of so-called "pull" business models where the individual is the center of the universe from "push" systems that are more centralized?

That question is key issue in The Power of Pull, a book that summarizes three years of research from Deloitte's Center for the Edge. John Hagel III, one of the authors of the book along with John Seely Brown and Lang Davison, recently stopped by the office to chat about the intersection of pull business models and how they will change information technology.

The key theme here is that individuals are embracing pull business models from the likes of Google and Facebook. In a nutshell, these companies can pull together expertise in a hurry to get things done. The models scale and can be very powerful.

Most of the world is under the push business model where you see a need, forecast demand and deliver the goods. There are some early pioneers in the pull model. For instance, Toyota's just in time manufacturing techniques are an example of what Hagel calls pull 1.0.

So what does this mean for information technology companies? Hagel argues that IT infrastructure and platforms will have to adapt to pull models. Cloud computing will be a big enabler here since it's one of the easier ways to pull people and resources together. Social networking will be another pillar of the equation and can be a more efficient way of handling customer service queries---especially exceptions. Pull business models are about solving pain points with surgical precision.

Can your IT vendor enable that?

Hagel portrays a tech industry---vendors and customers alike---that aren't ready for pull models. "CIOs are risk averse and are becoming the analog of corporate legal counsel---it's about preventing blowups," says Hagel. "Executives are short-term focused and look at business cases and modest investments."

Meanwhile, IT companies---notably big enterprise software companies like SAP and Oracle---have to adapt to this pull model. How will SAP and Oracle layer pull capabilities on top of applications designed for push business models. Hagel cites SAP's software developer network (SDN) as a handy community model that enables pull practices. Unfortunately, Hagel hasn't spent a lot of time researching Oracle so there wasn't a direct comparison.

One big bogeyman in this pull business world is that pay-as-you-go may be the leading mantra. Companies like SAP and Oracle rely on big software deals and implementations. "Vendors are focused on the mega sale and pull requires a different economic model," said Hagel.

Simply put, enterprise systems have to focus on large networks and webs of partners, not the four walls of a corporation, said Hagel.

Ultimately, the CFO will be the change agent in the company. The CFO will push cloud computing, software as a service and pull models. "The CFO will force the issue," predicted Hagel.

Where's the hotbed of pull business models? Hagel said it pays to look at the young companies in China. Notably, Hagel highlighted Li & Fung, a company that increasingly comes up in conversations about IT, business and global sourcing. In a nutshell, Li & Fung organizes thousands of business partners into a supply chain. The business is modular and can be constructed and deconstructed quickly.

"Li & Fung shows the power of integrating suppliers, management techniques and architecture," explained Hagel.

In his book, Hagel describes Li and Fung.

Li & Fung operates in a variety of industries, but it got its start in the apparel industry. It was there that the company initially developed an operating model that it is now extending into other industries. In the apparel industry Li & Fung's customers are apparel designers in the United States and Europe. It works with these customers to define their needs in terms of apparel production and then configures supply networks that are not just customized for the individual customer, but customized down to the individual line of apparel.

Li & Fung does not perform any of the supply-network operations itself. Instead, it works with more than 10,000 business partners in more than forty countries around the world to ensure that exactly the right capability is deployed to support each item of apparel...In effect, Li & Fung has organized a global pull platform for apparel designers.

The punch line: Li & Fung plays supply chain choreographer without fancy technology. Sure, Li & Fung has systems for the internal processes, but the company herds cats via fax and phone. The business model is new, but the technology is old.

In a blog post, Vinnie Mirchandani notes that his analysis, used in his book The New Polymath, shows that 50 percent of budgets are spent on the top 25 information technology and telecom vendors. In the U.S. we're all about the lock-in not the willy-nilly nature of Li and Fung.

However, there's a lot to be said for willy nilly. After the Sept. 11, 2001 terrorist attacks Li & Fung moved its production from Pakistan to other companies and countries in three weeks. Can your company---and the IT systems behind it---do that?

Perhaps Li & Fung is an isolated case, but Hagel has another example of the pull model---PortalPlayer, which played a big role in the development of Apple's iPad. The story is similar in that it all boils down to the pull model.

The challenge for IT vendors is clear: Learn from the likes of Li & Fung and then supply it technology.

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Larry Dignan

Editor-in-Chief

Editor-in-Chief Larry Dignan is editor-in-chief of SmartPlanet and ZDNet. He is also editorial director of TechRepublic. Previously, he was an editor at eWeek, Baseline and CNET News. He has written for WallStreetWeek.com, Inter@ctive Week, New York Times and Financial Planning. He holds degrees from the Columbia University Graduate School of Journalism and the University of Delaware. He is based in New York but resides in Pennsylvania. Follow him on Twitter. Disclosure