copyright 2004-2008 by Nicholas G. Carr
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July 01, 2005
By Nicholas G. Carr
Over the last 50 years, if you wanted to get a sense of the future of business computing, you just had to look at what big companies were doing. Building or buying new systems required a lot of capital, and it was only the largest and best-funded businesses that could afford to be out on the cutting edge. Smaller organizations would wait until costs came down, then follow dutifully in the footsteps of the big guys.
But that old pattern is being turned on its head.
Today, many of computing’s pioneers are small or medium-sized organizations without a lot of cash to spend – not just businesses, but also nonprofits, government agencies, and schools. They still need to pinch pennies, but instead of waiting patiently for the prices of new systems to come down, they’re taking an altogether different route. They’re inventing a new model of computing built on cheap commodity hardware, free open-source software, and utility services supplied over the Internet.
Look at Linux, for instance. Back in the mid-1990s, the city of Garden Grove, California, shifted to the open-source operating system before most people had even heard the word “Linux.” It made the switch because of budget constraints, but it never looked back. "We just use it, and it runs and runs," the city’s IT head, Bob Shingledecker, told a reporter in 1999.
Since then, governments have continued to be among the most aggressive early adopters of Linux—to run their servers and even their PCs. Some of the motivation, particularly in Europe and Asia, is political: Governments are fearful of building their computing infrastructure on proprietary software owned by foreign corporations. But much of it is economic: Linux and other free programs provide a way to avoid the licensing fees that can quickly eat up meager public-sector budgets.
Small concerns are also leading the way in adopting “hosted software”—applications that companies rent over the Internet rather than buy and install on their own computers. Most of the early users of the web-based customer-service programs offered by upstarts Salesforce.com and RightNow Technologies were small and medium-sized businesses. They couldn’t afford to purchase big-ticket software packages and the servers required to run them, so they were happy to experiment with a cheaper alternative when it came along. Now, the hosted apps are going mainstream—Salesforce in particular is eating away at the market once controlled by giant Siebel Systems.
A similar story is unfolding on the hardware side of utility computing. Renting processing power and storage capacity from outside suppliers is particularly attractive for smaller organizations because it allows them to avoid the big capital expenditures, labor costs and maintenance headaches that go along with running a private data center. Lincoln Center, the nonprofit arts group in New York, uses computers operated by IBM to manage its web site and ticket sales. David Weekley Homes, a privately held builder based in Houston, recently moved most of its servers into a facility owned by utility supplier VeriCenter. “We didn’t want to be in the technology business,” explains CIO Heather Humphrey.
Being IT pioneers hasn’t always been easy for these organizations—there have been plenty of glitches along the way. The town fathers of Munich, Germany, for instance, made headlines when they announced plans to replace Microsoft’s Office suite with the free OpenOffice on 16,000 government PCs, but progress in carrying out the plan has been slow, hindered by technical and political challenges.
But that’s the point. Smaller organizations are willing to endure the growing pains of immature technologies because the potential cost savings and other benefits are so attractive to them. Sometimes they succeed, sometimes they don’t. But in the process, they push the new technologies ahead—until they become stable and flexible enough to be adopted by bigger users.
What’s going on in IT mirrors what happened with electricity a century ago. In the early years of the electrification of industry, small companies had to stand on the sidelines as their larger counterparts constructed expensive, private generators to power their machinery. But then, as electric utilities began to pop up, it was the smaller organizations that were the first to purchase kilowatts over the new public grid. They may not have realized it at the time, but they were defining the future of electricity in business.
As we move into the next era of business computing – the era of cheap components and utility supply – it is once again the laggards who are leading the way.
A version of this article originally appeared at BusinessWeek Online.