The End of Corporate ComputingNicholas G. CarrIntroductionThe article The End of Corporate Computing was published in MIT Sloan Management Review, in its Spring 2005 issue; this article was a continuation in the series of an article IT Doesn’t Matter, which became a part of the Harvard Business Review. Nicholas G. Carr (Carr), as an author has his expertise in writing articles and books on technology, business and culture. These two articles focus on Supply and Demand side of Information Technology (IT) respectively. In the article The End of Corporate Computing, Carr analyzes the fundamental shift in how the technology industry is organized to supply IT to the corporate world.
Particularly, he challenges the sustainability of the contemporary business model, which he has very timely and evidently compared to the evolution of power generation companies that generate electricity on a large scale, centralized basis, taking advantage of economies of scale; This lead to a shift from power generation being a corporate function of business to simply purchase of electricity from these utility companies (Nye, 1992). In the digital future, Carr foresees that IT will make such a shift, where fragmented model will move towards centralized IT utility companies. Concise bodyIn the earlier years of businesses, production of electricity was an integral business function for mills and factories, so they had their own privately run power plants.
With the passage of time, some corporate came up with a central power generating systems, using wires for power distribution. Electricity, since then became another commodity that could be purchased and hence utility companies emerged. Electricity was required by all kinds of businesses, its nature was a very general purpose, and thus could take advantage of economies of scale.
Similar to the earlier electricity utilization model by companies, where supply of electricity was fragmented (in the sense, each company was maintaining its individual power unit), IT supply was fragmented, companies individually required to house huge infrastructure, maintain their working systems; moreover, this could not be done by themselves – they required technology specialists. This required these firms to make heavy sunk investment in infrastructures and recurring fixed costs; there was loads of overcapacity in the system and the labor as well.
This might pay off to the companies in the very long term – but this long term, that was being talked about was not a definite time period. From the supplier point of view the model of selling was not sustainable either. As the time went by, IT industry came to transformation; the phenomenon might not be totally comparable to the analogy of the electric utility industry, but great lessons to be learned. Going to vendors for the purchase of computers, storage devices, networks switches, various softwares etc.
and housing this into their huge personal data centers, this was same as running and maintenance of an own power plant. This led to lost focus of business executives from their core business functions; they were always preoccupied with the running of IT infrastructure smoothly, as they had made huge investments in it. But these independent data centers were underutilized, as the statistics in the article reveal. This short sightedness towards expansion of private data centers was because there was no large scale data utility model.