Tuesday, January 15, 2008

IT departments face extinction

Nicholas Carr, author of the seminal article "Does IT Matter?," did an interview with Datamation, arguing that the shift to utility-based computing will ultimately lead to the elimination of internal IT departments in all but the largest companies.

Quoting from his latest book, The Big Switch: Rewiring the World, from Edison to Google, he writes:
"The replication of tens of thousands of independent data centers, all using similar hardware, running similar software, and employing similar kinds of workers, has imposed severe economic penalties on the economy," he writes. This duplication “has led to the overbuilding of IT assets in every sector of the economy, dampening the productivity gains that can spring from computer automation."

The traditional IT department is a dinosaur awaiting news of its own extinction, in Carr’s view. And when the change comes the landscape will look far different. The in-house IT department “will have little left to do once the bulk of business computing shifts out of private data centers and into the cloud,” he writes. “Business units and even individual employees will be able to control the processing of information directly, without the need for legions of technical people."
I'm in basic agreement with Carr's view, as I've written previously about Carr's work. I do think the evolution he predicts will be slow, however. Our research at Computer Economics shows only 50% of organizations are showing any type of activity related to software-as-a-service, a key element of utility computing. Of course, that number may be understated, as there may be quite a bit of SaaS activity going on outside of the purview of the IT organization. Still, adoption is incremental.

The transition to utility computing ultimately will take place, just as electrical service migrated from private power plants to public utilities. The migration will take at least 20 years, if not longer. Still, those beginning careers in IT should favor skills that are business-related, such as business and systems analysis. Those positions will only grow, as organizations become more and more dependent on IT. Individuals with those skills will prosper, whether computing power resides within or outside the organization.

Related posts
The end of corporate computing
Computer Economics: The Business Case for Software as a Service


Unknown said...

I understand and agree with the direction we are headed for now. As far as the analogy (and as a pause for thought) how do you rationalize the fact we are now in a growing 'get off the electical grid' movement.
Just an interesting thought process to go through.

Frank Scavo said...

Bart, unless I'm mistaken, the number of customers actually getting off the electrical grid is a very small fraction, even if the percentage is growing. In contrast, the percentage of organizations that are 100% on the "utility computing grid" is very small. Perhaps, decades from now, when the majority of organizations are on the utility computing grid, that will be the time for a backlash, as so to speak.

Anonymous said...

It's too bad that Carr can't follow-up his work with something a bit different than banging the same drum louder. I guess that is too much to expect as he became quite the celebrity from his work. One thing we know about the future, is history repeats itself, but never in the same exact way. You just can't draw parallels from electricity into corporate computing without a bit more thought than he has applied.

Basic corporate computing might move to SAAS, but that is only because true innovation in corporate computing has been scarce lately. Ultimately, computers will be used in our work in ways many of us can't yet imagine, and that will be no utility-like service we buy from the cloud.

Unknown said...

I've jumped between IT and business operations 6 times at 4 jobs. BO staff w/o IT skills share doom with their IT rivals. The problem is the chasm, like partisan squabbles in US politics.

Start-ups where everyone has tech skills and business focus are like independent voters. They don't have the gap, and they will eventually eat your lunch.