Consumerization

Until the 1990s, large organizations got new technology first. Banks, government agencies, and corporations bought expensive computers long before such devices existed for private individuals. What stood at home was usually a stripped-down and outdated version of that. Today the direction has reversed. The smartphone in your pocket can often do more than the computer your father uses at the office. This exact reversal is what the term consumerization means: innovations first take hold in private life and from there migrate into the world of work.

Why companies lost control over their devices

An IT department used to have a comfortable position. It decided which devices and which programs were used in the building. Whoever wanted something different was out of luck. This power is largely gone. Employees know tools from their everyday lives that are faster and more pleasant than the official ones. And they simply use them, whether permitted or not.

Experts call this shadow IT: software that runs within a company without the IT department knowing about it. One team stores files in a private cloud storage service, that is, on a foreign server on the internet. Another coordinates via a chat service that nobody has approved. This is convenient, but risky. Nobody can secure or check what they don’t know about.

For software vendors, this has changed the business. In the past, you convinced the purchasing manager, and afterward a thousand employees had to use the product. Today, you first convince individual employees with a free version. If enough people within the company are working with it, the company subsequently buys the paid version. In industry jargon, this strategy is called bottom-up sales, that is, selling from the bottom up.

The path from personal device into the office

The engine of consumerization is simply unit volumes. Worldwide, more than a billion smartphones are sold every year. Office computers don’t come anywhere close to that number. Where more devices are built, prices fall and the pace of development rises. That is why a private phone today contains more modern technology than many office devices.

There is a second factor as well: the demand for usability. Consumer products have to be immediately understandable, or else people delete them again. Corporate software never had to meet that bar, because its users could be sent to training courses. Anyone who knows both perceives corporate software as cumbersome. This comparison creates the pressure that drives consumerization.

A common misconception is that consumerization is the same as digitalization. Digitalization means that processes are converted to computers in the first place. Consumerization, on the other hand, only says something about the direction in which technology spreads. A company can therefore already be thoroughly digitalized and still only just be undergoing consumerization.

From BYOD to ChatGPT in everyday work

The best-known example is BYOD, short for Bring Your Own Device. This means that employees are allowed to use their private phone or their own laptop for work. Many companies have allowed this because they couldn’t prevent it anyway. They save on devices, but they take on security issues in return. A lost private phone can contain company data.

The most current example is AI chatbots, that is, programs that answer questions in ordinary language. ChatGPT was released to private individuals at the end of 2022 and was in use by millions within weeks. Only afterward did companies begin to set up official rules for it. By that point, many employees had long since been quietly using the service for their work. In business news, such cases are described as bottom-up adoption.

For investors, this pattern is interesting because it explains how companies get valued. A provider with many private users is considered promising, even if it earns little from them so far. The expectation is that paying corporate customers will follow. Whether that pans out is usually only decided years later.