Australian businesses need to prepare to evolve into 'digital businesses' and that will see huge disruption to the marketplace for every industry, according to Gartner research director, infrastructure software, Michael Warrilow.
Speaking at Gartner Predicts 2015, Warrilow said, "A head of a major hotel chain told me that he now sees AirBNB as his biggest competitor."
On New Year's Eve 2014, a third of all the hotel rooms in New York were booked using AirBNB and 13,000 rooms in Sydney, he said.
The company has just 1000 employees worldwide, and next to no overheads, yet is redefining how that industry does business.
Ahead of Australia's Netflix launch, Warrilow described the company as "an overnight success 10 years in the making."
The belief that Netflix came out of nowhere and blindsided the entertainment industry is inherently false; it started out as a mail-order DVD rental company that got rid of late fees, he said.
Only once the overheads and logistics became too difficult, did the company realise it had to move into the Cloud and provide video streaming. It is now available in 200 countries, and has half the market cap of Fox. It is now producing its own shows, and preparing to launch a news channel, he said.
The entertainment industry still hasn't come up with a competitive model, and it’s now estimated that Netflix accounts for a third to a half of all internet traffic.
Gartner now believes that 3D printing is setting up to do the same thing to manufacturing, and almost every other industry out there. Alongside rapid prototyping and 3D 'bio-printing' of organs, the opportunities are endless and the legal pitfalls, especially in regards to intellectual property, are immense.
"3D printing will fundamentally change the business landscape in Asia, which is so heavily based on manufacturing," Warrilow said.
"As president Obama said, the potential to bring manufacturing back to American shores is a big opportunity.
"It is also an opportunity for Australia to revitalise its manufacturing industry."
This is just another example of the need for businesses to look at becoming more agile. Gartner predicts that by 2017, 70 per cent of successful digital business models will rely on deliberately unstable processes designed to shift as customer needs shift.
"We expect that 5 per cent of organisations to have started to implement a level of 'instability', a level of greater manoeuvrability within their business process by the end of this year," he said.
The convergence of technology will continue, with social media remaining vital in the Australian market. Warrilow said there are some 12-15 million Facebook accounts in Australia, out of a total population of 23 million. Nine million of these accounts are accessed daily on a mobile device - offering huge opportunities to target individuals.
Despite this, Gartner predicts that enterprise architecture teams will invest less than 20 per cent of their time and energy on technology architecture by 2018.
Warrilow believes that technology architecture will come to define all business going forward.
Another big trend expected to take off this year is digital government. By 2018, Gartner predicts that over 30 per cent of digital government projects will treat any data as open data. Data will be seen as "open by default."
The big opportunities will come from the sharing of information across the public and private sectors. Websites such as FixMyStreet.com, where residents can submit images of problems (such as potholes and graffiti) to the local council to get fixed, will evolve further.
"Fixmystreet version 2.0, as a mobile app, could easily incorporate smartphone features such as accelerometers and gyroscopes to detect when a car goes over potholes and automatically report it," Warrilow said.
The council can share this information with private partners to perform the upgrades on a case by case contract, reducing inefficiencies.
The fourth major trend Gartner is predicting is that by 2017, 30 per cent of threat intelligence services will include vertical-market security intelligence information from the Internet of Things (IoT).
While IoT is traditionally associated with technologies such as thermostats and wrist watches, it will move more and more into 'operational tech' such as SCADA systems and security cameras - with all of the risks that implies.
Supply chain security for Australian businesses will also be paramount in the 'digital business' age. Gartner predicts that through to 2020, supply chain security failures will force 50 per cent of all digital businesses to negotiate partner contracts to share risk and liability.
The best, and most recent example of this, was US retailer Target's hack, which saw the personal information and financial details of millions of its customers exposed. The source of the hack was found to be via a third party supplier, which linked back through to Target's portal and internal systems and gave the hackers admin rights to the whole system. Target has already lost $US150 million, and Warrilow estimates the final cost to the entire business to be around $US1 billion.
Putting shared risk and liabilities into contracts, such as a requirement for a certain level of security certification will become more common, he predicts.
Tying a lot of these issues together will be the emergence of the need for new business ethics practises, especially with regards to the use of Big Data and analytics. By 2018, Gartner predicts that, by 2018, 50 per cent of business ethics violations will occur through improper use of Big Data analytics.
The temptation for marketers is immense. A major Australian retailer, Warrilow says, found itself in trouble when it used Big Data analytics to profile customers on its rewards card systems. It cross referenced product purchases, such as customers food preferences - it determined that those who prefer meat and milk to rice and pasta were better drivers, and thus offered car insurance deals, for example, which scared customers.
Target in the US ran into similar problems when it cross-referenced customer purchases to figure out which customers were pregnant, and offer them deals accordingly.
"It's a bit creepy," said Warrilow.
"It's a wet dream for marketers and a nightmare for privacy advocates."
The seventh major trend to define digital business is the user experience and interfaces of technology. By 2017, 25 per cent of software vendors will reorganise in response to market demand for consumer-grade UX.
The increased use of consumer tech interfaces, such as through iPhone interfaces, has created a demand for similar usability in internal software.
This will see the standardisation of software deployment, as less and less companies develop their own software, such as CRMs, and integrate third party solutions - such as Salesforce.com and other mobile focused apps.
Warrilow believes that digital intellectual property will also be a key issue. By 2018, Gartner predicts that at least 15 per cent of industry leading companies will advertently gift knowledge to IT vendors, who will then use it to compete against them.
A good example is the feedback systems for programs such as Salesforce.com or Google Drive. More vendors are inserting ownership clauses into their terms and conditions - meaning feeding your best practise into these companies, ostensibly to improve their products, may not be wise.
The quick march to the Cloud is also expected to pick up pace, Gartner predicting that by 2018, the most transformational digital workplace productivity technologies will be available only from the Cloud.
This means that most companies' onsite R&D and internal development divisions will taper off and disappear.
The key driver of a lot of these changes will be IoT. Gartner predicts that by 2018, the number of new connections for IoT devices will exceed all other new connections for interoperability and integration combined.
Companies need to start experimenting with these ideas now, lest they be caught off guard by rivals with slicker innovation programmes. For example, a pizza company being caught off guard by pizza delivery by drone or other left field ideas is a reality.
Gartner research director, Edmund Gabrys, said that combining all these trends has put a new focus on the role of the CIO in every company.
"The future is a bit unknown. The role of the CIO traditionally has been dealing with the known, taking what we do, and doing that a little bit better. But now there is this huge unknown, lots of risk, which is usually more toward the product development and business side of the house - we as CIOs, we're now responsible for all that. It's going to require a different type of leadership," he said.