Your new IT budget: $10

Wile E. CoyoteIt’s been a remarkable year, even discounting the hype, and as it comes to a close we find the entire traditional IT industry in a weirdly precarious position. In some ways, the traditional vendors seem to be going about their business in traditional ways, selling lots of gear and software licenses and maintenance contracts, pushing upgrades and service agreements – and making a pretty penny off all of it. And yet the entire enterprise seems increasingly unreal. Watching the IT business today feels kind of like watching one of those Roadrunner cartoons when Wile E. Coyote would race off a cliff and manage to tread air for a few long seconds, his legs moving in a blur, his mind not quite registering the fact that the ground had disappeared from beneath him.

Yesterday, Google put a suitable exclamation point to the end of 2006 when it announced that it was adding a domain registration option to its Apps for Your Domain service. Small businesses, schools, and other organizations will now be able to buy and set up a domain when they sign up for the Google service. And the other elements of that service will be immediately and automatically configured to run on that domain. The cost for the registration is a flat $10 a year. There’s nothing at all interesting about that price – it’s pretty much what you’d pay if you registered your domain yourself (and Microsoft will even give you a domain for free through its Office Live service). But I find that, by further simplifying the creation of what amounts to a virtual data center, the move brings into clearer view the future landscape of business IT.

It’s pretty amazing to think about what a company can now get for $10 a year:

A complete, web-based IT infrastructure for its business

A custom corporate portal/intranet for its employees

Corporate e-mail service

Corporate instant messaging

Calendar software and services

Web-site design software

Web-site hosting

And, by incorporating some other free Google services, the company also gets:

Word-processing software

Spreadsheet software

Web-site analytics

All the necessary storage, data backups, security, maintenance, and related services are included in the $10 price.

Other than some cheap PCs, a printer, and maybe a bookkeeping application, that pretty much covers all the information technology that most companies on earth require to run their businesses. (And I’ll bet the bookkeeping app will arrive soon, perhaps through a partnership with Intuit.) So, if you’re a small business or a school or a nonprofit, that’s your new annual IT budget: ten bucks. Why spend more?

And if you’re a bigger company, don’t fret. As competition among Google, Microsoft, and many others heats up, innovation in software services will only accelerate. This is just the beginning.

Beep beep.

19 Comments

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19 Responses to Your new IT budget: $10

  1. Nick, glad to see you still believe in Santa, and some older sibling did not make you a cynic.

    Next time I negotiate with IBM or Accenture I hope I can get within 6 zeroes of the number for hosted anything.

    In the meantime happy holidays…

  2. Bertil

    Does IT matter anymore?

    Sorry: I had to do this one. ;)

    More seriously, this also include ads (that you can filter away).

    You sound very enthusiast, while after reading you for a year, I felt that you are always one of the most demanding writers: that wasn’t sarcastic, was it?

    I’ll be back praying for no one at Google to be working on an ERP — imagine scores of programmers out of a job, and you’ll be kneeling with me.

  3. John Baschab

    Nick – I wonder how this pricing jibes with your post a little while back about data center costs. While I am sure second-life avatars are more expensive than corporate email, etc. it is hard to believe that the electricity, server depreciation, etc. is less than $1.00 / month to serve. Yet I can’t see what they are trying to loss lead either.

  4. Nick Carr

    John: re: Yet I can’t see what they are trying to loss lead either. I think they’re trying, as always, to place ads and collect information. Google doesn’t share the ad revenues from the ads it places on Apps for Your Domain; it keeps them all. So from that standpoint the private-label sites represent an extension of its “properties.” The big question, of course, is: will the target customers have qualms about serving ads to their employees through their corporate site/apps?

    Bertil: You might need more than prayers.

    Vinnie: I don’t even know what the word “cynic” means.

  5. Nick Carr

    Does IT matter anymore?

    It matters so much that they’ve started giving it away.

  6. Nick – I wrote this piece up at ecoIron as well, you are right on target here. With the new Google offerings and technologies such as virtualization coming into play, IT budgets are poised to drop a few quanta levels as massive consolidation hits the industry. The only thing propping it up right now are the intercorporate relationships of mid field managers who are terrified of losing their staffs and budgets. Kick that out and we will see ‘le deluge’.

  7. Mark, my day job is to help CIOs negotiate tech deals so love to see this pricing. But the reality is 80% of IT budgets are spent with vendors – IBM, SAP, Verizon etc. Yes IT staff can give, but the vendor community is addicted to lock in and incumbent pricing with 95% margins on s/w maintenance and even 45% in so called cheap fofshore contracts. It is changing gradually but very slowly.

    Nick – cynic – one who knows the price of everything and the value of nothing. My wife uses that on me often -)

  8. No question that 80 percent of the typical IT budget is maintenence and that the hole is deep. I’m just saying that that hole was created through a win-win relationship between vendors and corporate – vendors got their profits, corporate got their pork. And Google, along with other things such as virtualization and the rising price of energy, is going throw the wrench into that party.

  9. kaizer1

    No kidding. Everything has gone down in price, hosting, domain registration. You can get free firewalls, anti-virus, anti-spyware, and even management technology (such as Spiceworks and Nagios)

  10. Mark, if Google was a bigger player in the enterprise yes- but last time I checked it gets less than 1% of its revenues from corporate world. I use GMail storage and pricing as a benkcmark in some outsouricng deals, but a long way to go before its impact is felt in corporate world

  11. Vinnie,

    In some ways you’re right, but in other ways you’re not. The growth market in corporate IT is the small and midsize company market, not the big company market. I think the Google model (not just offered by Google) is going to actually begin making big inroads there in the near future, and then will creep steadily upwards. It’ll be an incremental process, but it seems to be happening more quickly than I thought it would at, say, the start of the year.

    Nick

  12. Nick at least 75% of the following vendors revenues come from the largest 2000 companies in the world…

    IBM, EDS, SAP, Accenture, CSC, Oracle, HP, TCS, Infosys – and right there we are looking at over $ 300 billion annually…

    I would estimate over 60% of all corporate IT and and telecom spend of over $ 1 trillion plus is spent by the larger companies. That may not be growing as fast as the SME market but needs chipping away as well..Google there has had little impact…

    don’t get me wrong I love what Google is doing but it is going to take a dirupter from within the ranks of the IBM or HPs to really make a big impact

  13. I couldn’t make out your last comment – 60 percent of all IT spending is by the larger companies? It would be interesting to see who is spending what. But I’m not talking about Google particularly, I’m talking about eliminating waste – wasted processor cycles, redundant hardware, million dollar software projects that fail, ridiculously short hardware upgrade cycles, etc.

    You mention HP – they just reduced their worldwide datacenters count from 85 to 6 earlier this year. They will save a billion dollars annually.

  14. Mark, you and I are violently in agreement. But getting vendors to pass along their savings is far harder than you think. As I wrote below, HP better not tell its customers – do as I say not as I do…

    http://dealarchitect.typepad.com/deal_architect/2006/05/hp_do_as_i_say_.html

    IBM, Oracle – every vendor has aavings from global labor, consolidation etc but it has been going towards margin not price reductions…

  15. I think we are in violent misunderstanding where the other guy is coming from! I not concerned whether they pass on their savings or not, only that they save. thats for the link ,I’ll add it to my blog folder.

  16. For all those who are saying but but but but … you’re missing the point. Of course no self-respecting decent-sized enterprise is going to go with something like this today.

    The point is that if this is available today for small business, what will be available tomorrow for medium-sized business? And the next day? And the next?

    IT is commoditizing.

    Where, how far, when, and what parts precisely are all things we can argue about. The basic fact is unassailable.

  17. Bertil, Google is already clearly looking at CRM (http://www.google.com/support/jobs/bin/answer.py?answer=29310&query=CRM&topic=&type=CRM) and apparently the world only needs five computers (http://news.com.com/2008-1011_3-6141598.html?part=rss&tag=2547-1_3-0-20&subj=news ). So put in a good word while your down there.

  18. Hi Nick,

    I was looking for a thread to start this conversation – this one looks appropriate with references to your famous ‘Does IT Matter’ and Commoditization of IT train of thoughts.

    Here is the interesting piece.

    SAP info carried an interview with Dr. Rainer Janßen – CIO of Munich Re on the industrialization of application development.

    1. Dr. Rainer Janßen sounds like he has not yet recovered from the IT does not matter syndrome: Follow this-

    SAP INFO: In his book “Does IT Matter?” Nicholas G. Carr asks whether IT is still of strategic significance or whether it has become a commodity. Is this question relevant to the industrialization of IT?

    Janßen: Nicholas G. Carr’s book inspired me to write an essay titled “Does Management Science Matter?” His book is yet another demonstration of how methodologically unsound theories may be “sold” as research. His arguments remind me of a joke in which a judge asks a man in the dock whether he has stopped beating his wife – yes or no? The man says, “But I’ve never …”. “Yes or no,” the judge demands to know. Everyone knows that the logically correct answer is “no”; the man can’t have stopped beating his wife because he never beat her in the first place.

    It’s the same with the question “Does IT Matter?” IT specialists have never claimed that IT matters; what matters is how it is deployed, how it is linked to business solutions, and how it is used. The only people who have maintained that IT matters are hardware and software suppliers and management gurus like Carr. So Carr’s theories don’t affect me, nor are they relevant to the industrialization of IT.

    Interesting Nick that you have started a millennium storm.

    But wait – after all that what is the meaning of Industrialization of IT?

    Here is what SAP says ( September 21, 2006 || The industrialization of IT and its consequences)

    Just as Ford manufactured a highly standardized product using highly standardized production processes in the early days of industrialization, IT service providers are now preparing for the standardization of IT products and production processes enabled by new standards and technologies.

    Alongside current discussion of “IT commodities,” SAP’s efforts to define standardized enterprise services provide evidence of this trend. Enterprise services are simply standardized, loosely linked, functional components that have a modular structure and can be reused to support complex, individual business processes – in other words, mass customizing.

    While individual business processes can be supported by linking multiple enterprise services, each enterprise service can be produced using standardized procedures and processes which, by analogy with industrial manufacturing, are typically specified in a routing. This achieves production synergies and satisfies customer requirements for business process support.

    If we systematically apply the analogy between IT and the manufacturing sector (which can be extended to include service providers), it becomes clear that applications are like machines on which different operations, described in a routing, are performed to manufacture a standardized component — whether a car fender or an enterprise service. These standardized components are assembled into a customized product: a customer-configured car or support for a customer-specific business process.

    Now – all this sounds like (?!) SAP is trying to sell the same old concepts that you made popular in your Does IT Matter article and the long tail of controversy it started.

    Industrialization of IT is just an idea. It is too early to talk about the process maturity attainment of say Automotive industry and apply that to IT. In other words – Carrs Law about IT commoditization will apply! All this is the result of a spiralling effect of confusion about fundamentals that prevails in ERP/IT industry.

    Look forward to your comments,

    Here’s wishing you a happy & prosperous New Year!

    Best Regards,

    Jagan Vaman

  19. Hi there Nick, my name is Timothy Washington.

    I like this post a lot because it talks about an important gap that I saw in online IT solutions – namely an online bookkeeping package. I’ve recently released some software that might be of some interest – ‘Bob’ and ‘Bookkeeping’. ‘Bob’ is a code generation tool and ‘bookkeeping’ is a double-entry bookkeeping system. You can get more information about them from the links below. Hopefully this will be the core of a solution that will fill a gap in the market. I’m always up for constructive criticism. Enjoy.

    Bookkeeping Release Pre-Alpha

    http://frye.blogs.com/thebox/2007/04/bookkeeping_rel.html

    Bookkeeping BKeeping and the BKell

    http://frye.blogs.com/thebox/2007/04/bookkeeping_bke.html

    Bob Release Pre-Alpha

    http://frye.blogs.com/thebox/2007/04/bob_release_pre.html

    The Life Of Bob

    http://frye.blogs.com/thebox/2007/04/the_life_of_bob.html

    Timothy Washington

    twashing@gmail.com

    ps – For some reason, I had a problem downloading and running the apps on Windows when I used Internet Explorer. But everything is fine using Firefox – go figure.