Digital Transformation Demystified: The Future Fifth Dimension of Digital Transformation

Up until Einstein, the greatest scientists and physicists only recognized 3 dimensions; the line, the plane, and the volume of an object. Each of the 3 was logically grounded in physicality, in the spatial realm, and described the entire universe pretty well for all practical and most scientific purposes up that time.

Then Einstein pointed out that time was the fourth dimension. This caused quite a stir, not only because it was part of the ushering in of the era of relativity in physics, but it caused everyone to question – if there was a dimension so obvious as time that we were missing, what is there to stop there from being a 5th dimension, or even other dimensions that we haven’t yet discovered?

Recently I outlined what the 'mystical' digital transformation really is, why it is so critical, and its effect on every company. I started by defining the four stages of the digital transformation. These four stages have remarkable similarity to the four dimensions, to the point where the fourth stage is even focused on perpetuating results across time.

Similar to time/space dimensions, here is a question I’d like to answer.

Q: is there a fifth stage of the digital transformation yet undiscovered, or should we max out our stage four journey, then look elsewhere for return on investment?

A: There is a fifth stage and it is barely in its infancy, but it could come very, very fast, and it will dwarf the productivity gains we have seen so far. The fifth stage, while too new to be wholly represented by these words, can be best summarized by calling it:

EDGE COMPUTING

Additionally, there little need to worry about whether to dump dollars in stage four or stage five. If you are doing stage four right, it will naturally lead you into stage five. You just need to make sure your teams/orgs are aware and empowered to move in that direction when they need it.

The rest of this article will explain the theory, the technologies, the accelerators, and the future of how edge computing (EC) will change the world.

The Theory

Edge computing is basically a fancy way of saying we are due for another MainFrame-to-PC 2.0 revolution. Forget the fancy terms and physical infrastructure for a minute. Its that fact that we are about to empower the front-line worker again that is the exciting part. No spoilers here, but this WAS a foundational tenet of both the quality revolution AND the agile revolution, which were the true birthplaces of the digital transformation to begin with.

Here’s the short. Companies used to have a central mainframe where jobs would be submitted across the company and then prioritized and executed in a centralized manner. This was great for top initiatives driving the most important needs, so no complaints there, but it short-changed the absolutely crucial role of the front-line worker with unique needs surrounding millions of micro-optimizations that kept the organization running. There is a great story of a decommissioned military mainframe still had an un-executed job submitted decades before from some poor short-stop who could never get their task prioritized. Let’s all hope this guy wasn’t a closet genius with the secret to save countries from war! (joking, but you get the point). When the Personal Computer, and arguably spreadsheet programs, came to the average worker’s desk, it localized the computing power needed for these millions and millions of micro-optimizations. It kicked off a new era where every part of our lives was transformed, including personal lives (why would anyone need a home pc, right?)

George Gilder explains this eloquently (and at a level a little over my head) how this is about to happen again. When we have a single compute space, VPC, or cloud environment, the intelligence of that node is based on the processing power of the node. As we network computers together, the degree of intelligence moves from the size of the nodes to the size/complexity of the network. As more devices are networked together, the intelligence is farther removed from the central processing storage unit, and more to the size of the network itself.

We are seeing this trend in its beginning now, marking a new cycle of increased productivity and performance.

The Technologies

Sorry to subject you to (yet another) buzzword bonanza. Here is how some technologies you may have heard of are building a foundation for the edge-computing revolution.

IoT: Internet of Things is driving edge computing trends in 2 key ways. First, it is separating key inputs such as sensors, processing, and networking, from the cloud. It is creating the micro-conditions and POC environments that will be a springboard for EC. Second, it is bringing these to common users; families in the consumer space, engineers, maintenance crews, and other key groups in the business space. While IoT models are currently dominated by traditional cloud-to device-design patterns instead of a more decentralized pattern (e.g. multi-master/multi-receiver, or no-master), this will diminish over time due to EC accelerators mentioned below. Cloud platforms will also (and already have begun to) fall into a classic innovator’s dilemma where decentralized management of devices will become much less expensive and much more practical, and those companies will not reduce their paywall fast enough (or will hit a lower profitability limit) which will leave greater space for innovational EC models. A second factor is that these devices, currently mostly isolated in a single cloud-to-device stream, will have greater need to talk directly to each other and exchange information directly. The network will tighten at the edge and reduce dependence on the central node. We are already seeing this critical necessity in the self-driving car space, where cars will by necessity talk directly to one another to avoid high latency. high band-with issues.

5G: 5G will provide the network backbone for early stage EC. It will do this in 2 ways. First it will literally provide network points that can service peer-to-peer, point-to-point networking needs, something that isn’t built into traditional network’s more centralized model. Second, it will provide the edge-side bandwidth necessary for large, localized transfer of data to support many devices exchanging information together.

Blockchain: Blockchain contributes 3 main things to Edge Computing. First, it creates a decentralized record of value. This eliminates centralized clearing/arbitration in compute just as it eliminates these things in finance. Second, Blockchain provides native decentralized protocols necessary to support device-to-device compute. It also provides design patterns, and ways of testing highly decentralized, highly targeted networks. Third, through the infrastructure project side, it is not only contributing patterns that can by used, but actual working systems that will be building blocks to other companies and applications. This last side is not discussed as much as the somewhat more straightforward financial application, but many predict, and I agree, that this part of blockchain technology will be much larger in value than the purely financial side.

Other decentralized protocols: Blockchain technology uniquely empowers certain applications, but it is not only the technology with decentralized protocols. There was already a growing movement to break a once distributed, democratic internet, from a few massive tech companies which have managed to dominate the in-points and out-points of the web. Tim Berners-Lee, the generally accepted ‘inventor’ of the web, is probably the best recognized person from this growing community. He and other groups are developing protocols in mesh networking, file storage, DNS, and other key backbones of the web that will be engineered in a near-decentralized or pure-decentralized manner. IPFS, inter-planetary file system, is like the most well-known, and its adoption should accelerate now that Brave Browser has announced native support for it.

The Accelorators

Societal Instability: Just in case you missed the last year of world history, there is a pandemic going on and governments have assumed the kind of control that is usually only justified by their citizens at times of war. These citizens, meanwhile, are adapting not only to their government response, but also to the response of the community, the corporations, the small businesses, and the virus itself. Even before this, there were massive protests across the world, most notably in Hong Kong, but the pandemic drastically accelerated different turmoil that builds the use-cases for EC models. Companies literally decentralized their work locations as all their workers brought their resources to their homes. To be clear on this topic, mere fact that employees take laptops to their individual dwellings and then leverage the cloud does not mean this was an edge computing take-over. Quite the contrary, this current episode was certainly a time to shine for the cloud. But, much like the cloud-IoT models today, it seeds the social environment where edge computing not only becomes practical, it becomes eminently desirable and cost-effective with time.

Economic Instability: The United States, issuer of the global reserve currency, dumped roughly 24% of all dollars ever printed in the last year on the world. That is going to have consequences. Equally disconcerting is the number of small businesses and personal households that have been destroyed in the last year. Economic instability makes old business models unviable, and new business models come out. Decentralized compute, network, and information share could be a shoe-in for leading challenges that come from a recession/depression.

Technology Infrastructure instability: Due to many of the same factors affecting society/economy, the faith and trust in major technology infrastructure is eroding. This is not refering to general uptime/availability issues (although, ironically, on the day I write this, there are major network outages across the east coast by leading providers of services). This is due to trust in the organizations themselves for making the choices that support the business/consumer needs. Recently, a social media platform was ‘deplatformed’ on a quick notice and under charges that couldn’t be uniquely attributed to that company. This has caused minor to moderate shockwaves both in the U.S. and the world as companies and governments calculate the likelihood and response of something like that happening to them.

Compounding this, other major social media platforms have changed their terms of service to aggressively collect and use their constituents’ data, bringing new momentum to an already-in-progress exodus from major tech brands.

Compounding this even further, Solarwinds/Fire eye had a massive vulnerability breach that affected the most critical commercial and financial infrastructure of the world. This has further eroded trust in bedrock technology systems.

I am not suggesting that companies will slowly unravel cloud technology back to original architectures. That isn’t going to happen. Companies instead are going to look forward to solutions that better establish their risk posture, and they are going to do it in an economic, social, and technological environment that will necessitate the innovation they are looking for.

The Inhibitors

Cloud isn’t done yet: Despite some scattered rumors that the public cloud architecture we enjoy today is going to soon lose appreciable market share, that is not going to happen. While most of the core cloud technology is decreasing in its rate of innovation, the true returns to companies for taking advantage of that cloud architecture is still far from peak. Edge Computing is still in its infancy; the infrastructures we would want to see for even the first hype cycle aren’t truly in place yet, and the advantages of cloud compared to cost are still not where they should be before an Edge Computing will make an appreciable distance. We would want to see the accelerators have greater impact, and public clouds get more greedy for revenues, before a real shift to Edge Computing happens. Even then, it won’t be a shift as much as it will be first Cloud Computing enhanced by Edge, which will transition to Edge Computing enhanced by Cloud.

Usability isn’t there yet: Edge Computing will require certain responsibilities to move from cloud services back to the business or to alternative vendors. The burden of this is much greater than most fiscal analyses factor in, and building that capability internally is still far too expensive today. Open-source communities and specialized consulting groups/start-ups are the most likely path to building better usability. As Edge Computing progresses, I would expect to see B2C models that disrupt the current IoT-to-Cloud Models in personal households. Consumers have already shown ample appetite to assume greater data sovereignty if there are viable alternatives. It just needs to be simple enough that they don’t need a degree to manage their digitally connected assets. Usability will enjoy a slight edge in the blockchain infrastructure space, as companies already have a head start with significant incentive to pursue their ideas. Communities and startups will likely branch off from this, or use lessons learned to spread usability generally through to edge computing applications.

Communities haven’t come together yet: I mentioned that there are groups that are actively building the protocols for next generation web and edge computing, but these would need to grow in influence considerably before edge computing becomes mainstream. The Venture Capital pouring in to Edge Computing start-ups isn’t to any appreciable levels either; many of these companies are chasing another goal (AI, smart cars, etc.) and require edge computing to solve that primary problem. We would want to see greater current business involvement in open-source projects, fueling communities with free capital and labor as well. One barrier is that Edge Computing is highly disruptive to many of these organizations; they lack the need to support these communities except in select instances. As the infrastructure is put in place, demand grows, and promising startups get recognition through key rounds of funding, we should see the growth in these communities that will propel edge computing to the forefront of digital transformation.

The Future

Given the wild events of the last 12 months, I hesitate to predict anything. However, up to this point, I have only provided the puzzle pieces of the fifth stage of digital transformation; It would be unfair to leave those pieces scattered without at least piecing the outline together. Some of these pieces are still forming shape, and every now and then, future events will change the metaphorical color pattern on the piece. That being said, here is a possible scenario of how edge computing will become the dominant wave of the future.

We still need to build the necessary infrastructure with correct and usability before EC goes anywhere. We could possibly do that in an early Phase 1 over the next 3-4 years, to the point where we would see sizable, serious VC rounds. 5G or similar networking would need to be both widely available AND used. That means consumers will need enough time to voluntarily switch over to 5g devices. IoT experience richness would likely need to accelerate on the AI/software side, and ideally be more widely adopted, but the device density is likely already enough to support EC paradigm shifts. Timelines for driverless cars, or significant breakthroughs in AI would need to keep pace as well; if edge was only about these related technologies, we would probably see a later timeline. We will also likely see relentless pressure from societies that will motivate minor elements to develop EC at non-optimal costs to shore up their risk postures. This won’t necessarily make the fire burn faster, but it will provide ready fuel once the fire gets going.

In Phase 2 may be 2025-2030, EC will become a core part of many businesses strategy, and will see some consumer benefits. Blockchain infrastructure will be a major competitor for buzzword/hype prime time ahead of 5G, AI, cloud computing, etc. Storage and compute will begin finding its ways back to something that may remind us of self-managed instances. R&D teams, who have already tackled challenges with building cloud test environments, will know use those lessons to build EC environments that begin to take certain loads off of the cloud infrastructure. Consumers will know name brands that help them build a home server stack, probably first in entertainment management, then in storage/productivity, then security, and appliances and, maybe late phase 2, but probably sometime in phase 3, will begin breaking from cloud provider dependency as we know it today entirely. Driverless cars should start fueling serious edge computing advances at this point, and the communities and ecosystems will be in place to replicate those learnings throughout edge applications. It will be common for normal people to be using completely decentralized or massively decentralized apps. Cloud computing will remain dominant, but its growth in last half Phase 2 will likely be due to supporting edge applications.

Phase 3, from perhaps 2030-2040, will be the decade of Edge Computing. The Cloud companies will be tested to see if any of the lessons learned about adaptation will do any good. Microsoft will likely follow the path of IBM; their dominance will be severely shaken, and they will have a series of sliding revenues marked by innovative comebacks mixed with continually missed targets. Google will likely follow a path more similar to Yahoo; their presence will not go away but after steady decline and a few pivotal setbacks, they may only be used by a smaller user set, or even be acquired/merged with another company. The main problem they have is that privacy, a key component of future edge computing, is simply not in their DNA, and internal scandal mixed with external distrust could spell disaster for the company that once represented the information age. Amazon will be the most interesting company to watch. Jeff Bezos openly admits that Amazon will not be around one day. Despite surprising agility/resiliency, Amazon is at heart a scale company, and this disfavors them because their revenues will be ultimately sabatoged by EC; pivoting their resources into compute will likely come too late to beat the very alien learning curve they will need to climb.

Blockchain will change the socio-political landscape so much at this point that I hardly dare even guess what it will look like. One thing is certain. It will be the core of finance. It will be the backbone of information functions. It will be the basis of the exchange of value in our society. We are going to look as stupid using our current financial infrastructure as Medieval Europe was when they thought the sun rotated the earth.

Likely, small groups will once again gain ground against established organizations. With decentralized exchange, compute, communications, etc. People with a will to accomplish an objective will be able to act in a way that will make even the most nimble start-up day look a little slow. I mentioned in previous articles that Flickr shocked the world with 9 deploys/day. It will be on that level of un-believability. There is a chance that this will go in exactly the opposite direction; big tech will leverage their sizable expertise in services to pivot, and government will continue their drive to exercise a chokehold on edge computing technologies. I believe that if this happens, there will be pockets of innovation that break out of the matrix, but normal consumer/business experience could possibly end in that very dismal situation.

All devices and apps will be developed with a decentralized-first paradigm. Today, you buy a phone based on the ecosystem that a certain company provides. In phase 3, the consumer will have the control over her apps and actions that normally would only be granted at root level access. This doesn’t mean that the experience would be the same as having a rooted device today; there will be a plethora of providers that make this easy while focusing on guaranteeing the users control. If the population can be better educated not on technology consumption, but on technology production, this trend will explode.

In terms of market size, once again, I don’t dare guess a dollar value for this time, although other measurements may be useful to gauge what the future looks like. In Phase 1, I expect funding for EC to be virtually non-existent. In Phase 2, it will be a minority of deals, mostly for startups. It will maybe be a generous 5% of VC deals in the beginning, and will certainly still be a minority (yet quickly growing) of deals in the end. In phase 3, larger companies will dedicate significant budget to EC even more than they do for Cloud or Digital Transformation today, and edge computing will play a part in a majority, probably the vast majority, of tech deals. Some edge computing applications will be adopted by virtually all medium to large enterprises.

Conclusion

Edge Computing is possibly not even in its infancy, but it when it comes into its prime, it will be bigger than cloud technology is today. While there are significant barriers, the demand, the necessary technology infrastructure and societal factors are falling into place, some much faster than we would have predicted even a year ago. While the final shape of the future has yet to form, if the past trends that match this are any indication, we will see the next great leap in productivity and personal empowerment, and the fulfilling of the fifth stage of the digital transformation.