May 062011
 

Since October of last year I have been spoiled rotten by an engagement in San Francisco. The client is great to work with, JetBlue flies non-stop from AUS to SFO, I have a view of the Golden Gate bridge from my hotel room and I really enjoy Michael Tilson Thomas conducting the San Francisco Symphony. The only complaint I have is that I added a few pounds due to the eclectic cooking of San Francisco restaurants. Not a bad way to make a living…

As car rental and parking rates in San Francisco are murderously high, I subscribed to zipcar. I am now able to pick a car for a few hours and meet with colleagues and friends in the bay area without spending too much on transportation. I am so fond of zipcar that I recently “threatened” the CEO of the client company that I will race her in her brand new Lexus RX 450h with my zipcar…

Subscribing to zipcar and using it on-demand during my trips to San Francisco is plain common sense. The experience, however, led me to ponder whether I need a car at all. Obviously, I do not need my car when I am doing consulting for Cutter in another city. Nor do I need a car in order to go from home to my place of employment when I am in town – the distance of 40 feet from my bedroom to my study can be easily covered by foot. Living in Austin, TX, I can bike most of the year to the zipcar lot by the University of Texas and pick a car when I really need it. For all I know, it is only a matter of time until I give my car to my son and revert to zipcar transportation.

The reason I bother you with my personal patterns is simple: I concluded that zipcar is actually a competitive threat to GM, Ford and Chrysler. There must be millions and millions of folks in the US whose needs are pretty similar to mine and their thinking on the subject is not much different. If every one of us “shares” 10% of a car through zipcar, the number of cars bought  in the US (and probably elsewhere) is going to shrink significantly. zipcar, no doubt, will continue to buy cars from the Big Three, but they will only buy 5%, or 10% or 20% of the number of cars bought when everyone of us owned his/her car.

If you accept this premise, the implications in general, and for IT in particular, are mind boggling. An in-house IT is like owning a car. Conversely, on-demand computing is like renting a zipcar by the hour. Most general managers that I work with will gladly rent computing. They will, of course, insist on certain standards of privacy, security and ownership of data, but once those are met they will go the “zipcar route” in a heart beat.

I don’t really know how soon we will be seeing business units renting computing big time. I am, however, fairly certain it is question of “when?”, not of “will they?” From the point of view of a business unit, in-house IT is merely another option, and not necessarily the best one, for running applications.

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Israel Gat

Israel Gat served as Cutter Fellow and the Director of the Agile Product Management & Software Engineering Excellence practice from 2008 until 2015.

Discussion

  2 Responses to “Toward a Subscription Economy”

  1. There are a VERY small number of cities that is a viable strategy.

    • avatar

      The number of cities in which you can bike all year around is indeed small. However, the number of cities in which the zipcar kind of transportation makes sense could be quite significant. For example, if I lived in NYC I would use the subway to get to the zipcar lot.

      We are really talking about the evolution of end-to-end ecosystems. The ecosystems that supports living in suburbia, which pretty much required owning a car or two, evolved over many years. Likewise, the transportation for a zipcar based ecosystem will take time to form. I certainly do not know today the details of the ecosystems to come, but not knowing the specific details is in the nature of discussing emergent trends.

      The bigger question I am posing is that of a subscription economy. I believe it will be applicable not just to transportation but to many verticals.

      In the context of research, analysis and blog posts by the Cutter Consortium, the public Cloud – which is a form of subscription – is here. Best I can tell from my engagements and those of other Cutter consultants, more and more general managers get their computing needs satisfied by one form of public cloud service or another. Colleagues of mine who specialize in this area – Claude Baudoin, Lou Mazzucchelli and Annie Shum – can no doubt elaborate in length and depth on the momentum they are experiencing these days in this space.

      Best,

      Israel

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