Utility computing is the delivery of computing power as a service, instead of a fixed asset that is maintained internally by organizations. Carr puts together a powerful argument that, because of the economics, utility computing will one day become the dominant model for corporate information systems. He ticks off a list of corporate IT assets that are tremendously underutilized: servers average 10-35 percent of their capacity, storage, 50-60 percent; and desktops, 5 percent. In addition, 60% of corporate IT personnel time is spent on routine support and maintenance--like the teams of highly skilled engineers that maintained electrical generators in factories of the early 1900s. This overcapacity, combined with technology advances that allow centralization of IT resources, are creating a powerful incentive for the utility model.
Furthermore, three advances in information systems are now coming together to make utility computing possible. He writes,
Virtualization erases the differences between proprietary computing platforms, enabling applications designed to run on one operating system to be deployed elsewhere. Grid computing allows large numbers of hardware components, such as servers or disk drives, to effectively act as a single device, pooling their capacity and allocating it automatically to different jobs. Web services standardize the interfaces between applications, turning them into modules that can be assembled and disassembled easily.The economics of utility computing are inexorable. It essentially turns information systems from a underutilized fixed asset to a variable low cost expense.
If Carr is correct, and I think he is, we are going to see changes in corporate computing in the coming ten to twenty years that will make personal computing and the Internet seem like incremental improvements. Carr thinks that the IT vendors most threatened are those that sell pieces of IT solutions directly to organizations: Microsoft, Dell, Oracle, and SAP--a list of seemingly invincible players today. He admits that the shift will take time, and the major players may be able to adjust their business models--to me Oracle comes to mind as one that is embracing utility computing. But the transition will not be easy for any of them.
Carr's article is available on the MIT Sloan Management Review web site for the incredibly low price of $6.50. Buy it and read it. It's destined to become a seminal essay on the subject of utility computing.
Software on demand: attacking the cost structure of business systems
IT: strategic investment or cost of doing business?