Tuesday, August 30, 2011

Prediction revisited

Some time back I wrote a bit on the economic prospects of the UK following the gov savings.  I have been thinking about where we are lately.  I did write one update (5-months-on-and-we-have-not-even.html) which seemed to validate my original.  Ok, so I have to admit that none of the predictions were that hard to imagine.  But they still stand and I wonder whether they are going to get better or worse.

I have covered most of the Gov stuff in previous posts.  One thing is clear.  They have only started to stop spending and signs are that things underlying what looks to be not too bad on the surface are far from rosey.  For a start, my business is tanking.  But thats not the point of this blog.  But it is a good indicator of things to come.

A number of indicators have struck me over the last few weeks.  The first is that there is clear evidence that gov savings have been approached in the wrong way.  Rather than looking at transforming to make their 33% in 14/15 they have split it into 3 and look to make 12% each year.  Year 1, remove all contractors (mostly done), stop all projects (mostly done).  For many of the leadership, the first 12% is delivered.  Job done and time to go get your promotion off the back of it.  But next year the next new leader has to make the next 12% without any staff.  The prediction of the loss of many permanent staff has started.  Offering voluntary redundancies has seen many of the more able staff jump ship leaving the rest to pick up the slack.  Not a good position and morale across the board is at all time low (fact).

The last 12% seems very unpleasant as there will be no where to go other than redundancies of vast numbers of civil servants.  But as there seems to be little or no progress on transformation there seems little hope.  One thing is clear, the civil service has not changed (the one thing that was needed) and lots of people's lives will be left in a mess.

The housing market is now starting to look bizarre.  One of my predictions was that the gap between rich and poor would grow.  So I think this is one of the more interesting points.  Lets look at London to start with.  The market is stagnant or dropping for the majority of the bottom end of the market.   However, there is still some strength in the million pound plus bracket.  But not for long.  The rot is spreading and those sitting comfortably will soon be suffering and only the real upper end of the market will maintain value.    One of the results of the sales problem is that demand for rental is now at stupid levels and property owners are cashing in.  Landlords rents are rising and rising.  It is now widely reported that even renting in London is going beyond the reach of the poorer people and even the normally ok professionals in work are going to struggle to pay the rents.  This means that the bottom end of the market will be forced into sharing.

This to me is very worrying.  There are multiple parts to worry about.  The first is that rents at the current levels will greatly diminish the available money to spend on food and drink, clothes etc.  We are starting to see reports of retail slow down.  The rich who own the properties will be making a good return (well beyond mortgage costs) while the renters, refused access to a mortgage will see their disposal income drop and ability to save for the huge deposits greatly reduced. Its a simple vicious circle down.

So what else?  Well, discussions with my commercial office landlord reported an interesting position.  Many of his tenants are going out of business (me included sort of) and leaving.  He is unusual as he is not an investment company (he just lets out unused floors in the building his charity owns).  But his office is not unique and nor will his position be unique.    What we also suffer is the costs of business rates.  Whether we make money or not, rates must be paid.  They were about £1K per month at my place  and rising.  A level that simply cannot be justified or afforded for many in this climate.  So we move out and save that cost and the council gets nothing.  Why nothing?  Well commercial landlords will not reduce their rents.  Simple as that.  They will prefer to leave them all empty for years and wait for times to improve.  So offices and more importantly shops will remain empty.  So the council will get next to nothing for empty properties.  High streets will look empty and the remaining survivors will not get the levels of custom.  Rates and commercial rents never go down and do not parallel the position of the economy.  Its just untenable.

I recall (an anecdote) the story of my barber who worked alone (had been there for 30 years) and his landlord has just upped his rent to £17k per year.  Imagine the number of haircuts he has to do before he even pays his rent.  Then there are utilities and rates and insurance on top.  All of which only go up regardless of the state of the economy.  He was to be forced out.

Any prices that only go up and never down to track an economic climate are fatal.  Anything that does not react to supply and demand simply breaks the model.  And when the model breaks, we find ourselves where we are today.

So, in summary, retail spend dropping, rents going up, availability of mortgages dropping, commercial property prices only going up, utilities going up, unemployment rising, government spending dropping further, private sector unable to absorb the fall out.  With certain parts of the machine stuck in only upward pricing and not able to react to the rising and falling economy will lead to misery.

I think we are not far off a tipping point.  I give it 12 months (next financial year) before the misery really starts to kick in in an unavoidably public manner.  The chancellor's view that they are helping the property market by holding interest rates down is only helpful if you have a mortgage!

Saturday, August 13, 2011

Back to the future

Every day I seem to get linked and connected to the various wise gurus talking about technology.  What's in, what's out, what's new, what's now legacy and of course the compulsory criticism of whatever is in place and whoever put it there.  There seems to now be an industry of writers who all know what is wrong and what is right.

I am firmly in the IT is a tool camp.  It is there to do something.  What I see today is that it has become bling.  It is no longer there to achieve something, the focus seems to be all about the IT and not about the outcomes.  It seems to matter little what the IT is trying to achieve and more about how it is achieving it.  This inevitably leads to the arms race of the how.

Looking back we see the client server revolution, WWW, then we started to see web services, Enterprise Architecture, SOA, Web 2.0, virtualisation and now of course Cloud.  All fully marketed, all set to change the world, all set to reduce costs, improve productivity blah blah blah.

But go back in time thousands of years and give a caveman a new cloud based email solution via a smart phone.  Will he catch more wildebeest?  Nope.  He will simply use the smart phone to beat his next meal to death with, and even then the tool would be the wrong tool.

How many more cavemen do we have to give these tools to before we realise that unless there is a use for them then they will simply be the wrong tool in the wrong hands and used for the wrong job.  Trouble is, the snake oil salesman from the IT world do somehow manage to convince caveman that it is the right tool for the job leaving poor old caveman hungry and confused as to why it now takes an hour to beat to death his rabbit dinner instead of 1 blow with his old tool the rock.  And now he has to share any lunch he does manage to catch.

One can take these analogies too far, and I often do.

So why do we do this to ourselves.  Well, poor old caveman does not know any better.  We all know that before caveman can use his smartphone he will need some cultural change.  He could use the smart phone to learn about farming, predict the weather, learn about health and treatment of sickness.  He could use it to learn how to trap animals instead of chase them.  The outcome he would be aiming for is a healthier environment to bring up his family with lower risk of death and an improved source of food.

But to even achieve that, caveman would need to understand how his world could be transformed and there would need to be a desire to do this.  Even this understanding needs to be doen through education.

And this is where I think IT is today.  Yes, its easy to pick a few examples out there where IT has transformed and visions are in place and culture has changed.  But it is only in a small set of highly over publicised cases.

The emphasis has to move away from the tool.  Yes, we need to keep modernising and innovating our tools but when the actual modernising of the tool becomes the outcome and not the transformation the modern tools should bring then what we see is a highly costly change of tool sets with little or no return on that investment.

Friday, August 12, 2011

Its a riot

I don't know what to make of the recent riots.  Its a hard one.  I think the riots represent something other than the issue of lawlessness, looting and violence.  It seems to be a worrying change in fundamental ethics.  Let's not worry too much about how it was organised (which it was) but more on the point that the general opinion I saw in interviews was that there was an understood consequence to being caught, a view of probability of being caught and a relatively clear view of the benefits that could be obtained by the crimes they were going to commit.

The idea of this calculation is worrying.  It says that right or wrong was no longer a sense of ethics and morality but one of risk management.