Nicholas Carr writes:
At the start of this year, I wrote an article about utility computing that came to be published in the spring edition of the MIT Sloan Management Review under the title The End of Corporate Computing. In it, I argued that advances in networking and related technologies like virtualization and web services are going to radically transform the way information technology is supplied to businesses. Companies are going to shift from the traditional, fragmented model of client-server computing, which requires them to buy, assemble and maintain vast quantities of complex and inefficient computing machinery, to a centralized utility model, in which computing assets are rationalized, standardized and consolidated and what we’ve come to call “IT” is supplied over networks as a service from central utility plants. The economic advantages of the utility model are so great, I argued, that the transformation of IT is inevitable.
When I wrote the piece, I assumed this shift would play out slowly, as the utility model battled against a status quo propped up by the entrenched interests of both suppliers and corporate IT departments. But now I’m not so sure. I may have been thinking too conservatively. In just the last few weeks, we’ve seen, particularly on the software side, growing signs of a sea change. As consolidation, commoditization and weakening demand turn traditional packaged software into a rust-belt industry, dominated by a couple of big suppliers looking to milk the installed base, innovation and growth seem to be shifting quickly to the software-as-a-service (SaaS) arena. Pushed by diverse utility upstarts like Google (on the consumer side, so far), Salesforce.com, RightNow Technologies, 37signals and Rearden Commerce, traditional software makers are now jockeying to position themselves as players in the SaaS world.