Five years ago, in early 2005, I wrote an article for the MIT Sloan Management Review called “The End of Corporate Computing.” The article, which predicted an imminent shift to “utility computing,” was the seed for my book The Big Switch. Usually, the article lies behind the Review’s paywall, but for the moment it is freely available to read. Here’s a bit from the beginning of the piece:
[Information technology] is beginning an inexorable shift from being an asset that companies own in the form of computers, software and myriad related components to being a service that they purchase from utility providers. Few in the business world have contemplated the full magnitude of this change or its far-reaching consequences. To date, popular discussions of utility computing have rarely progressed beyond a recitation of IT vendors’ marketing slogans …
The prevailing rhetoric is, moreover, too conservative. It assumes that the existing model of IT supply and use will endure, as will the corporate data center that lies at its core. But that view is perilously shortsighted. The traditional model’s economic foundation already is crumbling and is unlikely to survive in the long run. As the earlier transformation of electricity supply suggests, IT’s shift from a fragmented capital asset to a centralized utility service will be momentous. It will overturn strategic and operating assumptions, alter industrial economics, upset markets and pose daunting challenges to every user and vendor. The history of the commercial application of information technology has been characterized by astounding leaps, but nothing that has come before — not even the introduction of the personal computer or the opening of the Internet — will match the upheaval that lies just over the horizon.
A little breathless, maybe, but I was looking in the right direction. Here’s the rest of it.
Also out from behind the Review’s paywall is Andrew McAfee’s influential 2006 article “Enterprise 2.0: The Dawn of Emergent Collaboration.”
What’s the update? The two megasized corporations I’ve worked for in the past five years still use all their own computers and software and related components (although the IT service dept. was outsourced). Even worse, they still own and run vast email and data server set-ups which more than occasionally get messed up.
As I suggested in The Big Switch, we’re probably looking at a transitional period lasting a couple of decades, at least for large companies. They’re not ready for the cloud, and the cloud’s not ready for them (at least in the sense of absorbing entire enterprise-class data centers). It may go quicker, but I wouldn’t bet a whole lot on that.
I also don’t get why you call this an update. However, as a fellow believer that the switch to utility will be profound, I appreciate your providing the link to the, for now, freely available article.
BTW, as I pitch “utility computing message as game changer” to fellow IT workers, I find huge resistance. Which I find strange – guess its me that doesn’t learn tho. Things were no different in the transitions from MF->mini->PC->Web. Skeptics abounded at each transition. Well, really it was more than skepticism, it was not understanding. No worse, it was not wanting to understand.
What’s missing from the excerpt, and your comment, (I’ve not yet read the piece or the book) are the two primary aspects: competitive advantage and security.
Time was, the MBA and accounting types didn’t run corporations; you came up through the production side of the business to get the corner office. IT was sold, and honestly viewed, as the brains of how you ran your business; along with your product, IT was a part of how you made your product and was considered just as critical. Then, along came Unix (and AS/400) and relational databases, which begat small to medium business value added resellers who package full monty applications for various vertical markets.
The notion was that the businesses were too small (therefore unsophisticated) to do what large corporations did with IT, and were sufficiently dispersed both geographically and market-wise that the VAR could assure clients that their direct (assumed to be local) competitors wouldn’t be getting the same Secret Sauce.
Eventually, this all begat SAP and the bevy of BI products. Even with SAP, the application and its data, were secure in the enterprise. And the VAR’s figured out very early that there was money to be made by offering to “tweak” the plain vanilla version of their products to make it “perfect” for the XYZ Corporation.
The single most significant advancement in recent years may die aborning if “cloud” becomes the paradigm: the SSD. The advantage of SSD is too long a story for here, but simply put: SSD allows a shift to real relational data on multi-core/processor machines, yet cloud depends on warehouses of lowest common denominator crap hardware and software. Thus we see cloud datastores being promoted that are more primitive than your grandfather’s VSAM files.
Comparing IT to electric utility also ignores the “too big to fail” problem of massive integration. The meltdown in the financial system was due to just such an integration. The economies (and companies) which survived relatively unscathed were those “off the grid”, so to speak. Same was true of the Great New England Blackout in the 1960’s.
Whether to cloud or not to cloud comes down to answering a simple question: what about your business makes you competitive? The answer should be: my product and how I make it. Leaving the “how I make it” part out in the ether under the control of others is simply not wise.
Finally, the counter example: Apple and all its things i*. Fully closed. There’s a lesson there.
I also don’t get why you call this an update.
I didn’t think I did; just calling attention to the fact that the article has been “unlocked” for a time.
Nick – looking back on a 5 year old article that prognosticated future developments. What major aspects, if any, would you change or modify?
Specifically, how has the pace of change matched your view from 5 years ago?
Right, you didn’t say update, the 1st commenter did, but I read ‘revisited’ from your blog title as a synonym. No matter really, your original paper is clear, insightful, durable, and appreciated!
Perhaps a topic for more substantive discussion. quoting your article, “Large companies will pull the plug on their data centers only after the reliability, stability and benefits of IT utilities have been clearly established.”
It seems to me that you miss a critical factor and one that differentiates data services from electrical services. Electrons are totally inter-changeable, all one needs is enough of them. But data is not inter-changeable and this leads to issues such as privacy and security. Related concerns are frequently raised regarding the utility computing model.
If my critique is not off-base, what are your thoughts regarding these concerns and the impact on the move to utlility computing?
Ron, I’d refer you to The Big Switch. The first half of the book looks at what we can learn from the similarities between electricity and IT (ie, both are general purpose technologies that can be centralized); the second half looks at what we can learn from the differences (ie, info ain’t current). Chapter 9 is devoted to the topic of security. Nick
“what about your business makes you competitive? The answer should be: my product and how I make it.”
In many cases, “how I sell it” and “how I support it” are equally important as differentiators; sometimes more so.
Funny Nick that after 5 years, you still don’t get it. Electricity is not similar to computing power. And computing power is not what IT is about.
Thank you Nick for the insights. I’ve just recently become a fan of your publications and sorry I hadn’t seen the message sooner. I can understand why the IT community cries every time you write but I find your thoughts on the topics of IT and the Internet a refreshing change to the buzzword marketing of over-complicated highly expensive IT solutions that I’ve simply had enough of.
IT luddites love to pick your analogies apart because its not in their interest to simplify things; keeping things complex keeps them employed regardless of whether or not value is realized. Keep up the great work!