Analysis: The Simplicity Paradox

The concept is compelling: An IT architecture designed to free companies from the complexity and expense of islands of IT infrastructures. The ability to provide computing capacity to business units as they need it. Pay-as-you-go outsourcing models that free corporations from the need to buy, operate and maintain large, unwieldy, redundant IT operations. Simplified platforms and standards on which every business unit can depend. CIOs unleashed from the drudgery of micromanaging operations and maintaining old technologies, and freed up to help business units define flexible corporate IT strategies.

Making the vision of utility computing real has the power to revolutionize the business use of IT by automating the management of IT infrastructure, tightly integrating all kinds of business processes, and flexibly managing capacity. The result: savings of up to 50 percent of infrastructure costs, says John Parkinson, chief technologist for the Americas at Cap Gemini Ernst & Young. That’s a prospect few CIOs will be able to resist, especially at a time when cost-cutting pressures are high. Meanwhile, the shift to utility computing—whether companies build their own IT utilities resources or farm out their computing needs in an on-demand model—will mean a significant reorganization of how the IT industry produces and sells product to its corporate clients.

The dream of rapidly and flexibly delivering computing power, applications and storage dates back to the time-sharing of the 1960s and passes through the mid-1990s, promise of distributed computing. But all of a sudden, the vision has begun to come together. In the past year, companies as disparate as IBM Corp., Hewlett-Packard Co., Sun Microsystems Inc., EDS Corp. and Microsoft Corp. have announced products and services designed to support the effort, and a host of smaller software companies are developing the middleware to manage and automate the systems.

Says Parkinson: “In ten years, of the 10,000 largest companies in the U.S., only about 200 will be big enough to be their own utility, and only about 100 of those will choose to do it themselves. The driving economics of talent scarcity, user expectations and rate of change will force the rest into a utility provisioning strategy.”

None of this is lost on CIOs. CIO Insight recently asked more than 400 IT executives whether they thought a utility computing model would be beneficial to their companies. Despite the novelty of the technology, 44 percent said yes, and that number jumped to 54 percent among companies with more than 1,000 employees. But completing the vision—whether it takes three years or ten years—isn’t just a matter of technology. The advent of utility computing poses several very thorny non-technical paradoxes—the prospect of more business process reengineering, a new financing model, and a shift in the role of the CIO—that CIOs must resolve if they are to meet the future head on.

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