Not Every Industry Can Be UBER-ized
By Howard Tullman
Technology columnist Farhad Manjoo of The New York Times recently argued that the UBER model doesn’t translate very well and can’t be reliably applied to the thousands of businesses that have rapidly appeared in virtually every industry claiming to be the “UBER” of whatever. He thinks these companies are being started and run by people who are either irrational or sadly deluded and that a massive shakeout looms. There’s one UBER and that’s UBER— end of story. He’s not entirely wrong, but his view is too simplistic.
To hear it told from the “right now” industry mavens, no old line business today is safe from aggressive and disruptive innovators planning to mobilize the masses to do the biddings of others on demand and — albeit over time. They’ll be working for a relative pittance. Manjoo notes the inconvenient fact that, in some of the most visible cases, the soaring costs of delivering these small scale, bespoke services on a hyper local basis with quickly growing volume has in fact already brought about price increases, not savings, for the end users. It’s pretty clear in that he argues that if you can’t fairly rapidly achieve mass consumer pricing, your EON (Economy of Now) business on its best days will be a niche nicety for the folks with more money than time or brains and never break out of that box.
Many people still believe that these EON guys have got a better plan. And in the time honored tradition of cockeyed optimists, their plan (which they feel should be painfully obvious) is to make up the unit losses on the soon to be realized, just around the corner, and miraculously scalable volume. Sales volume will cure everything over time. Just ignore the hemorrhaging losses for now and let us keep spending that readily available VC cash while the spigot’s still wide open. And to date the venture capitalists, a depressingly “me-too” crowd of sheep and fashionable followers if ever there was one, have been more than happy to pile on and be energetic enablers of this idiocy. They’ll keep funding clones, copies, competitors and even some clowns until there’s so much noise and confusion in the marketplace that the whole construct collapses.
To Manjoo, the first cracks are already appearing in the pipe dreams that are barely holding these stories together. Too many of the also rans are already stuck in the proof point pudding (moving sideways instead of forward) and finding that they can no longer sell the same old “just wait and see” story as easily to the guys that totally fell for it the last time.
Businesses that continue to lose money on every transaction are ultimately not businesses at all. Their continued revenue growth is simply profitless prosperity. UBER benefitted by taking advantage of the unique circumstances in the cab industry and Manjoo claims that there are virtually no other major industries where those same characteristics apply—crappy customer experience; high, regulator protected prices; monopolistic markets; huge numbers of daily users; lack of viable alternatives. Ergo, no more UBERs. But this is too narrow a view.
There are a number of other industries that have completely different conditions and attributes from the cab business, but where the circumstances and the underlying motivators that drive rapid adoption and growth will also support an UBER-like solution. You just need to know where to look. It’s not a matter of a bad or non-extensible model; it’s all about finding the right services to offer to the right customers in the right markets.
Let’s just take one case and apply some alternative criteria to look ahead. I would argue that not one of these five statements describes the pre-UBER cab industry in any material way.
- -The individuals supplying the service are highly skilled, hard to find and specialized.
- -There is unmet/growing demand in every business segment.
- -There is no single supplier of any size presently able to meet the new demands.
- -When you need the service, you need it now and there are very few alternatives.
- -Price is inelastic and controlled entirely by the seller.
Now, let’s find an emerging problem of immense proportions for millions of businesses on a daily basis that is begging for a solution. One of the most obvious: IT. An UBER-ized solution for IT professionals is inevitable and just around the corner and here’s why:
(1) Unlike cab drivers, IT professionals are highly skilled technicians and not easy to find or hire. But the much more critical concern is that increasingly, of necessity, they need to specialize in areas and products just to stay up with the technologies that are of the most immediate relevance and concern to their current positions. There’s no such thing as an IT generalist any longer. At the same time, these expensive experts are often both bored and under utilized because outages are sporadic and unpredictable. Instead, they’re sitting around in full time jobs waiting for something to break; or worse, they’re being used for tasks and support services that are a waste of their training and expertise. A solution that lets them become freelance, independent providers to address the varying needs of multiple businesses is clearly the smart way to go.
(2) There are a dozen or so different technologies being used in a typical business today, meaning there is a growing risk to mission critical parts of their business operations that most owners are simply unprepared to respond to in any timely manner. And, here again, this concern doesn’t even begin to consider the danger presented by malicious or criminal cyber attacks and other forms of corporate espionage that increase in frequency and severity every day. An interesting question, one that will plague many companies in the next few years is this one: What level of unpreparedness will be deemed to have been sufficiently negligent to invalidate your business interruption insurance, even assuming that you have been conscientious about buying and maintaining such coverage? Assuring that your business has ready access to 24/7 IT support across all of the necessary technical areas is going to quickly look like a very prudent form of insurance and risk abatement.
(3) While some of the major consulting and accounting firms and a few software operations are making some noise about the need for additional levels of business protection, the fact is that as of now there’s simply no viable supplier or solution, regardless of what a business might be able to afford to pay, that can support all of the diverse IT needs that continue to grow and to grow more complex and more broadly distributed throughout organizations. Even more to the point, none of the big guys can actually afford to build teams of full time professionals while they sit on the bench waiting for the next fire alarm to ring. Realistically, only an on-demand, distributed marketplace of tech professionals can really solve the problem in an efficient manner. The big consulting firms are much more likely to help engineer the marketplace solution than they are the manpower solution. A perfect void and an amazing opportunity for a new player.
(4) Who ya gonna call? Killer IT pros are scarcer than plumbers when you really need them and, when you need them, you need them right now because increasingly if your computer systems are down, your business is down. Your in-house team can help, but, as often as not, the thing that’s busted is something they’ve built in the first place and have been bandaging rather than rebuilding for years. It’s going to become quickly apparent that they’re going to need some specialists to really get things up and running quickly and to minimize the damage not only to your business, but to the businesses of all of your customers who are also dependent on your systems. Here again, the pros are the ones who are likely to avoid the quick fixes that end up costing you ten times more in the long run because no one remembered that resetting this particular program also wiped out the year-to-date billing data for the last year or two. But the real pros are never the ones who are on your day-to-day payroll because you can’t afford them.
(5) When your business is burning down, you aren’t looking for a bargain. Just like your heat in the winter or the AC on a hot summer day, you don’t know how much you’ll miss it until it’s gone and you’ll pay pretty much anything to get it back as soon as possible. Price is simply no object in cases like this.
I can’t tell you when for sure, but I can tell you for sure that there will be UBER-like providers of outsourced IT support for companies of every size and shape because the explosion of diverse technologies in every industry and our businesses’ complete and utter dependence upon these tools means that there’s simply no choice, and realistically, no other viable solution.
And who wouldn’t like to serve a huge market connecting millions of customers having urgent technical needs, limited alternatives, and little concern about price with millions of highly skilled professionals who would love to be their own bosses, fill their days with challenging and diverse problems instead of bullshit make work jobs, and have countless opportunities served up to them on a regular basis which they can pick and choose as they wish. Sounds like IT heaven to me. And a lot like UBER as well.
Howard A. Tullman is an American serial entrepreneur, venture capitalist, educator, writer, lecturer, and art collector. He currently serves as CEO of 1871 Chicago, Managing Partner of G2T3V, LLC, and the Managing Partner of Chicago High Tech Investment Partners LLC.