IT Smile Curve

I am interested in China’s situation and their place in the “Smile Curve”. There is a good introduction to the concept here. In a nutshell, value is created during the R&D and the marketing of products. There is very little value extracted in the middle parts of the product development lifecycle. This is illustrated in the graph below.

If this conjecture is true, it means that China should start to think about ways to derive more value from their position in the chain. China could start moving out to the ends of the value chains to capture more share.

A value-chain analysis of my industry, IT consulting, would yield some interesting results. Organizations generally have skill sets that focus on operations and change management. Most enterprises don’t have armies of C coders or configuration, which I consider to be low-level/granular low-k IT skills. With my experience to date in IT consulting, I believe that most organizations do not employ employees who are skilled at Strategy, IT Portfolio Management, or Program Management. (There are exceptions to this generalization of course, most notably, Google.)

Given this spectrum of IT skills, it leads us to conclude that the value-added activities for IT Consulting are either at the low end or the very high end.

I think that this is especially true of open source, where there is a shortage of open source coding talent. Because it is a new way of working, there is a considerable need for strategy and program management in most enterprises.