Google is beginning to up the rhetorical stakes in its nascent battle with traditional IT firms for the business market. In a speech in Boston yesterday, Dave Girouard, Google’s top enterprise guy, blasted the “insane complexity” of current IT, according to Network World. “The information technology business as it pertains to large businesses has become a lot of maintenance,” he said. In a pitch for the utility computing model, he told the audience of business executives:
A lot of things that people think of as core IT functions need to disappear into the ether so that the IT organization can properly focus on the value-added [activities] … Information security, as critical as it is, needs to be taken care of by organizations who live and die by it, who invest the money, time, resources and staff. Why should every company in the world have to build up their own expertise and have to maintain servers and provide security?
He even borrowed a page from my book, saying that “just as the management of electricity became routine, so will many IT functions.”
As I discuss in my new commentary on the FT’s podcast, Google’s software-as-a-service package is already a compelling alternative to traditional IT for small organizations – and at $10 a year, its price is hard to beat. But Google has a long way to go before it can begin to muscle in on the mainstream enterprise IT market. I wonder if Girouard’s words indicate that the company is about to make a bigger move into the software-as-a-service business. Will it follow up its purchase of the wiki company JotSpot with some bigger SaaS acquisitions? I’m betting it will.
This is a very interesting observation. But the “insane complexity” of enterprise IT does not come just from vendors’ high-ticket bloatware, it is also a product of the IT culture of many large firms, whose bureaucratic hegemony drives up costs and drives down usefulness. The commodification through abundance of things like CMS, IM, Wiki, Blogs, RSS threaten this position, which makes the Google hypothesis realistic.
Google could deliver some of the underlying services, but there is a missing layer between Google tools and the population of an individual business, which is the layer of context needed to turn these tools into a socal fabric – I think this is what Shirky referred to as “situated software”. Google is a bit like Ford – not great at skins, mods and re-mixing – but I bet they could mobilise a lot of developers to create customised re-combinations of Google systems, or themes. That would be something to see.
This is a very interesting observation. But the “insane complexity” of enterprise IT does not come just from vendors’ high-ticket bloatware, it is also a product of the IT culture of many large firms, whose bureaucratic hegemony drives up costs and drives down usefulness. The commodification through abundance of things like CMS, IM, Wiki, Blogs, RSS threaten this position, which makes the Google hypothesis realistic.
Google could deliver some of the underlying services, but there is a missing layer between Google tools and the population of an individual business, which is the layer of context needed to turn these tools into a socal fabric – I think this is what Shirky referred to as “situated software”. Google is a bit like Ford – not great at skins, mods and re-mixing – but I bet they could mobilise a lot of developers to create customised re-combinations of Google systems, or themes. That would be something to see.
Lee, Great points. Thanks. Nick
In the future, everything that is simple will be complicated. And of course the corollary to that statement is that today is yesterday’s future.
Holding out hopes of simplification of the IT industry flies in the face of decades of increased complexity.
This move is a “no brainer” for Google. They will start their encroachment into the enterprise market from the bottom up (same as Microsoft did). After they are proven in the small business space their enterprise story will just get better and better. You eat this elephant one “byte” at a time and it sounds like the public nibbling has just started! Take for example storage, most small businesses cannot remotely provide the kind of disaster recovery services that Amazon can with their S3 offering in house, hence Katrina wipes out 1/3 of the attorneys in the state of Louisiana. Google will follow suit with “gDrive” and begin to capture part of this market. Other offerings will follow as Google (and others) begin to deliver on the IT as utility vision. The speeds and feeds aspect of IT is dead (the obit has not been written yet but it is inevitable)–the new “high value” IT is just being born–and is being driven by end users (as Doc Searls like to say the “because of” factor).
Gregotheweb: Information systems are becoming more complex, but their use has steadily become easier. Google search is a great example of this.
Carlos: You are probably right when it comes to small businesses. But solutions for consumers and small businesses are not attractive to midsized to large companies. These companies are willing to pay to get a guaranteed service, and there is no ad-scheme that could replace the guarantees they demand.
The main problem are the service providers themselves. By their own admission, Sun’s Grid has lost large deals with banks because Sun refused to sign the privacy and availability guarantees. Businesses are right to assume that if the provider is not willing to make solid *written* commitments in legal agreements, their systems must not be ready for business use.
Also, replacing a system with another system must have a clearly positive impact on the business. Many midsized to large companies are already outsourcing, or considering the oursourcing of, their entire IT to a large IT consultant companies. For these midsized to large companies, it doesn’t matter if their solution is a utility or an installed software package. Both are managed by their third party IT provider. They demand a single point of contact, and so will never talk to the utility company. To win, utility providers must find unique approaches that add business value, provide more business value per dollar than installed software for existing software like CRM/ERP/…, or must work with the IT consultant companies to help them fullfill the business contract with less people. Keep in mind, however, that often these consultants have server-maintenance as a core capability. When handing server maintencance over to a third party (utility provider), they require even harsher written guarantees, because they have financial liabilities, plus their reputation is at stake.
That said, I still believe the utility model will be the only one left standing in the long run. But it will take a lot more than bringing consumer solutions to business customers.
Ah, I cannot edit the typos I just noticed in my previous post.
No service is ever 100%, hence the abundant use of the n+x model from stand alone (n+0), to the simple cluster (n+1) and further.
This extends not just to hardware but to providers. Hence the greater the number of providers in a cloud and the more distributed the application, the greater the resilience. A case of n+1 would have one utility provider as the primary source, and another as the secondary.
By creating a utility IT environment where applications & data can simply switch from one provider to another, you enable two things to happen.
Firstly, you create a competitive utility IT environment – where price & quality of service (QoS) can be compared.
Secondly, you should be able to create a greater level of resilience at the same price.
For example, I understand that is estimated that 15% of company data centre capacity is utilised, if you accept this and assume a 100% markup then for the same price each company can access three equivalent utility data centres (n+2) – assuming perfect balancing of supply and demand, and discounting any economies of scale. So an n+1 model will give more resilience at less cost.
This assumes simple transfer between providers and open competition. However if we spend over $2 trillion p.a. on IT and the majority of that IT is CODB and of little or no strategic value – then such cost savings become critical.
It is likely that there will be a shift towards a cloud of utility providers, competing on price & QoS with simple transfer of applications and data between providers. In the same way that it is likely that most CODB apps will become generic and exist somewhere on the cloud.
Price & competitiveness will force the issue. As the ubiquity of IT increases, so more of it will shift towards CODB.
Scarcity is the key to differentiation and a source of advantage, not ubiquity. Everyone has ERP/CRM etc. The systems are not a source of differentiation and the focus should be “as cheap as chips”.
So I agree that the utility model will on the main be the only one standing, but the driving force will be a greater understanding that majority of IT is CODB and price / QoS will become critical – not added value.
I agree with much of what Filip has said. See my own post on the subject.
I agree darkobserver that competent teams can bring advantage, however that’s not an argument against utility, it’s an argument for employing competent people.
If it was an argument against utility for CODB operations, then we’d all have our own company power, communication and postal services.
IT systems complexity arises from a number of sources, including IT’s will to power. However, there is another factor – business needs. I’m a business leader and I need a way to do X, right now (or as soon as possible). Is there an IT system that does it? No, or I can’t find it, or it’s not quite close enough, or….
So I create it/have someone in the business create it. It may start off as a spreadsheet or Access DB, but it addresses a business need. Over time it gains value as we increasingly depend on it. Maybe it’s not all that secure or robust by IT’s standards, though it meets business needs.
Except….
Except that my customer data doesn’t match the corporate customer master. Except that it’s built atop SQL Server when the coporate standard is Oracle. Except, except, except….
In achieving a business need, I’ve complicated the data infrastructure of the overall enterprise. Should I not meet my need? Should I wait for IT and lose the opportunity cost, when I’m measured by my results and not IT’s?
There are no easy answers, but business units will do what they need to do to meet their corporate goals, especially revenue/profit goals.
Google may exacerbate this conflict, just as Lotus 123 did, just as Windows and Access did. Ultimately the agile business is an advantaged business, no matter what IT thinks. But it’s one more reason why IT gets complicated, and it’s a good one.