The IT infrastructure as Web utility
When the founder of Microsoft retires this year, it will not only mark the close of a remarkable business career. It will signal the end of an era in computing.
“The next sea change is upon us.” Those words appeared in an extraordinary memorandum that Bill Gates sent to Microsoft’s top managers and engineers on October 30 2005.
Belying its bloodless title – “Internet Software Services” – the memo was intended to sound an alarm, to warn the company that a new revolution in computing was under way, and that it threatened to upend Microsoft’s traditional business.
What had always been the linchpin of Microsoft’s success – its control over the PC desktop – was fading in importance. Thanks to the proliferation of broadband connections in homes and offices, people no longer had to buy packaged software programs and install them on their computers. Instead, they could use their web browsers to tap into software supplied over the internet from central data-processing plants.
“The broad and rich foundation of the internet will unleash a ‘services wave’ of applications and experiences available instantly,” Mr Gates wrote. This new wave, he said, “will be very disruptive”.
It is not hard to understand what spurred the memo. As Mr Gates composed it in his office at Microsoft’s headquarters in Redmond, Washington, his fears about his company’s future were taking concrete shape just 200 miles away, in a small town named The Dalles in northern Oregon. That’s where Google, the internet search giant, was building a massive data centre on the banks of the Columbia River.
Large, windowless warehouses, each the size of a football field and adorned with cooling towers, dominated the site. An article in the International Herald Tribune described the complex as “looming like an information-age nuclear plant”.
It was an apt description. What Google was building was a vast computing centre, by all accounts the largest and most sophisticated on the planet. Designed to house tens of thousands of PCs, all wired together to work as a single supercomputer, it was, indeed, the information-processing equivalent of a nuclear power station, able to pump data and software into millions of homes and businesses.
The Oregon centre, now largely complete, is just one of dozens of “server farms” that the company has built around the world, holding an estimated 500,000 computers.
But Google is not just using its computing grid to process web searches. It is also supplying services such as word processing, spreadsheets, and e-mail – programs that have long been the mainstays of Microsoft’s profitability.
By supplying business computing as a set of simple services, Google, and other utility providers such as Salesforce.com and Amazon Web Services, threaten to render large parts of the IT industry obsolete.
No corporate computing system, not even those operated by big companies, can match the efficiency, speed, and flexibility of plants such as Google’s. One analyst estimates that Google can carry out a computing task for one-tenth of what it costs a typical company.
That is why the big data centres make Bill Gates and other technology executives so nervous. They encapsulate the full disruptive potential of utility computing. If people and businesses can rely on central stations to fulfil all or most of their computing requirements, they will be able to slash the money they spend on their own hardware and software. All the dollars saved are ones that would have gone into the coffers of Microsoft and the other tech giants.
What is happening to computing today is a revolution, the biggest upheaval since the invention of the PC in the 1970s. But it is not without precedent. It bears a close resemblance to what happened to mechanical power 100 years ago.
Until the end of the 19th century, businesses had to run their own power-generating facilities, producing all the energy required to run their machinery. As industrial technology advanced, the means of generation grew more sophisticated, progressing from waterwheels to steam engines to electric dynamos, but the equipment was always located at the site of a business and maintained by its employees.
Like data-processing today, power generation was assumed to be an intrinsic part of doing business.
But with the invention of the alternating-current electric grid at the turn of the century, that assumption was overturned.
Suddenly, manufacturers did not have to be in the power-generation business. They could run machines with electric current generated in distant power plants by big utilities and fed to their factories over a network of wires. With remarkable speed, the new utilities took over the supply of industrial power. Scores of private power stations were dismantled.
What made large-scale electric utilities possible was a series of scientific and engineering breakthroughs – in electricity generation and transmission as well as in the design of electric motors – but what ensured their triumph was not technology but economics. By supplying electricity to many buyers from central stations, the utilities achieved economies of scale in power production that no individual factory could match. It became a competitive necessity for manufacturers to hook their plants up to the new electricity grid in order to tap into the cheaper source of power.
The success of the utilities fed on itself. As soon as they began to supply current to factories, they were able to expand their generating capacity and increase economies even further, achieving another great leap in efficiency. The price of electricity fell so quickly that it soon became possible for nearly every business and household to afford electric power.
The commercial and social ramifications of the democratisation of electricity would be hard to overstate. Electric light altered the rhythms of life, electric assembly lines redefined work, and electric appliances brought the Industrial Revolution into the home.
Cheap and plentiful electricity shaped the world we live in today. It is a world that did not exist a mere 100 years ago, and yet the transformation that has played out over just a few generations has been so great, so complete, that it has become almost impossible for us to imagine what life was like before electricity began to flow through the sockets in our walls.
The transformation in the supply of computing promises to have equally sweeping consequences. Software programs already control or mediate not only industry and commerce but entertainment, journalism, education, even politics and national defence. The shock waves produced by a shift in computing technology will thus be intense and far-reaching.
We can already see the early effects all around us – in the shift of control over media from institutions to individuals, in people’s growing sense of affiliation with “virtual communities” rather than physical ones, in debates over the value of privacy, even in the growing concentration of wealth in a small slice of the population.
All these trends either spring from or are propelled by the rise of internet-based computing. As information utilities grow in size and sophistication, the changes to business and society – and to ourselves – will only broaden. And their pace will only accelerate.
One place where the changes will be particularly sweeping is the corporate IT department. As the capacity and capabilities of the computing grid expand, it will continue to displace private systems as the preferred platform for computing. Businesses will gain new flexibility in assembling computing services to perform customised information-processing jobs. They will no longer be constrained by the limits of their own data centres or the dictates of a few big IT vendors.
Because of computing’s modularity, companies will have a wealth of options as they make the leap to the utility age.
They will be able to continue to fulfil some of their computing requirements inhouse, while relying on outside utilities to satisfy other needs. And they will be able to fine-tune the mix continually, as the capabilities of the utilities advance.
In contrast to the switch-over to electricity utilities, buyers do not face an all-or-nothing choice when it comes to computing.
While capital-constrained smaller companies have strong incentives to embrace the full utility model quickly, most larger companies will need to balance their investments in inhouse computing with the benefits provided by utilities.
They can be expected to pursue a hybrid approach for many years, supplying some hardware and software requirements themselves and purchasing others over the grid.
One of the key challenges for corporate IT departments lies in making the right decisions about what to hold on to and what to let go.
In the long run, the IT department is unlikely to survive, at least not in its familiar form.
It will have little to do once the bulk of business computing shifts into what Google’s CEO, Eric Schmidt, calls “the computing cloud”. Business units and even individual employees will be able to control the processing of information directly, without the need for legions of technical specialists.
Bill Gates’ 2005 memo made it clear that Microsoft had no intention of surrendering. It would turn its legendary competitiveness against the upstart utilities in the hope of sustaining its dominance in the tech business.
Putting economic muscle behind its words, the company has launched a huge program of capital investment to expand its utility computing capabilities and try to catch up with Google.
In 2006 alone, Microsoft invested $2bn more than it had previously expected to spend, much of it going to build and equip utility data centres. It is using the centres to deliver an array of services to businesses and consumers, through its Windows Live, Office Live, and MSN brands.
Other big tech companies recognise their businesses are under threat, and they, too, are taking steps to adapt to the utility age. Oracle and SAP have begun offering web-based software services in addition to their traditional applications. Hewlett-Packard and Sun have opened up utility grids to provide computing power for a metered fee.
Even large IT consulting firms such as Accenture, which grew rich on the complexity of traditional information systems, are establishing practices devoted to helping clients make the shift to utility services. Nobody wants to be left behind.
Not long after Bill Gates wrote his memo, he announced his intention to step down from his managerial role at Microsoft.
He would slowly hand over his remaining responsibilities to other executives and then he would retire from his day-to-day work at the company he had built into the superpower of the PC age.
Gates’ departure, scheduled for this summer, is richly symbolic. It marks a turning point in the brief but tumultuous history of computing.
The time of Gates and the other great software programmers who wrote the code of the PC age has come to an end. The future of computing belongs to the new utilitarians.