Cheap Revolution


A cheap revolution is on the horizon in the world of Information Technology, and it promises to radically change the IT business landscape.

The term Cheap Revolution was coined by Rich Karlgaard in Forbes Magazine in 2003. The cheap revolution heralds the era in which the customer will no more depend on the IT giants for his computing needs but will shift to open source software, cheap chips and on demand customized software.

Infact the concept of the cheap revolution is also frequently used to explain the outsourcing business.

When we look at the giants of the IT industry, we find that they are strikingly similar in the business model they follow. Companies like Microsoft, oracle, Cisco, SAP have made their fortunes by selling proprietary hardware/Software /operating systems along with licensing at large margins.

But increasingly they are being challenged by startups offering open source and web based alternatives with on demand customization facilities at a fraction of the cost.

We have examples of operating systems like Ubuntu and OpenBSD, and Salesforce.com whose CRM software is fast catching up with Siebel.

What is even more interesting to note is that these startups are being operated by employees who have worked with these very giants of the IT industry.

Does this spell doom for Microsoft. Maybe.

So how do the IT giants survive this cheap revolution?







1. Improve your product offering faster than anybody else can. This tactic works, generally, only for market leaders with a good brand name, a greased distribution channel and financial might. (Think Intel.) And it works only as long as the market wants the added functionality and is willing to pay for it.

2. Sell fast custom solutions that answer a customer's needs. This is what IBM is doing. IBM has increasingly started tying up with third party providers which give it the flexibility to react quickly to customer demands.

3. Find an unserved market and serve it cheaply.