Tuesday, August 11, 2009

A Big Switch or a Gradual Shift

From March 11, 2008

I just finished reading Nicholas Carr's new book, The Big Switch. I enjoyed the read, but I found the conclusions just a bit sensational. Not surprising, as all such books seek to be titillating and a bit controversial in order to hold our attention from cover to cover. The basic premise of the book is that there will be a “big switch” from internal application development, deployment, and management to external procurement of application services. The losers will be the skilled developers and IT staff that currently toil away inside the development centers and datacenters of corporations, and the winners will be the application providers such as Google and salesforce.com that provide applications on demand. I do not believe the "big switch" will be so black and white, but I do believe a gradual shift is underway.

The historical metaphor that Carr effectively uses to demonstrate the likelihood of this pending change is the switch from locally produced electrical power to regionally produced electrical power delivered via a high performing electrical grid infrastructure. In Carr's metaphor electricity is analogous to applications and the electrical grid is analogous to the Internet. There are clearly some parallels, but I believe the metaphor is flawed because information applications are more analogous to hair dryers, drill presses, and die stamping machines (i.e. applications that consume electricity) as opposed to the electricity itself.

Here is a simple example. Both a paper mill and a steel mill have a need for high voltage electricity, but the paper mill applies that electricity to an application that involves digesting wood chips into a slurry suitable for making paper while the steel mill applies that electricity to the transformation of molten iron ore into various steel products. The paper mill has no use for an application that transforms iron ore, and the steel mill has no use for an application that digests wood chips. Their application requirements are very different, but they do use very similar electrical inputs.

It is true enough that all businesses have a need for certain applications that are somewhat universal. Salesforce.com has certainly demonstrated that a single implementation of a customer relationship management and sales force automation application can be applied across a variety of businesses and delivered effectively via the Internet. Perhaps Google will indeed accomplish the same result for basic professional productivity application such as word processing and spreadsheet analysis. But what is the fate of proprietary applications? Is salesforce.com going to deliver chip design and analysis simulations to Intel? I doubt it. Is Google going to deliver portfolio and risk analysis applications to Goldman Sachs? Unlikely. If these applications are not candidates for the “big switch,” how might their delivery still be improved according to Carr's theory?

Carr identifies two key technology developments in the “big switch” from local to regionally produced power - alternating current (AC) and reliable transformers. Alternating current makes it possible to distribute high potential voltage over large distances while transformers reliably “step down” this voltage to levels where it can be safely and reliably consumed by a variety of applications (hair dryers, drill presses, etc.). Clearly fiber optics and broadband switching are the IT equivalent of alternating current by enabling efficient delivery over long distances. I believe that hypervisors coupled with virtual appliances are analogous to the transformer technology of the power system. When applications can reliably plug into a grid to receive “power” in a standardized and repeatable manner, it will be increasingly popular to let someone else deliver the power of the grid while the individual companies focus on the “design of the application” (i.e. the drill press, the chip digester, the ore smelter).

Currently, applications used by Goldman Sachs to perform portfolio and risk analysis are not easily portable to a band of computers that Intel uses for chip design and simulation. The only way Goldman could reliably “move” these applications to another “power” provider would be to literally unbolt the racks of machines from their datacenter, truck them to another datacenter, and rebolt them to the floor and re-attach them to power and network. The definition of the applications is hard-coupled to the machines that run the applications because there was never any thought of running them on a different “grid.” It takes effort to design applications to be totally independent from the computers they run upon.

If, however, Goldman Sachs were to “transform” these applications into a coordinated group of virtual appliances, then they could literally “plug” the applications into any set of computers that exposed a standard hypervisor. As standards emerge for reliable “transformation” of applications to virtual appliances, opportunities will emerge for utility providers of variable cost datacenter capacity (aka cloud computers such as Amazon's EC2) to supply the “power” to these applications. I do not believe it will occur as a “big switch,” but I am convinced that we are witnessing the beginning of a gradual shift in the division of labor for application delivery. Companies will increasingly focus their scarce resources on the definition of the application, and the machines that provide “power” to the application will increasingly be purchased as variable cost computing cycles. But I have to agree with Carr that The Big Switch is a much better title for a book than The Gradual Shift.

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