I am picking up the thread from the earliest post, The Data Center Leading Edge. eBay, Google and Amazon are leading the charge in creating a highly scaleable “lean” data center out of commodity building-blocks. They have added custom-software to tune the infrastructure to get the best performance (and I call it adaptable infrastructure). This is a paradigm change. Just ten years back the focus used to be on tuning the applications, rather than the infrastructure, to get the best performance.
Even under normal circumstances, this new data center paradigm would have percolated to the rest of the marketplace. But in current circumstances, the pace is likely to be real quick. The main reason is that Google and Amazon are on the path of turning themselves into data center utilities. Amazon has already opened up its data center with S3 and EC2; and Google is expected to launch GDrive soon. By making their “lean” data centers available to everybody, they are speeding the pace of change in the marketplace.
Captive data centers are in trouble. They have to shape up significantly and have to do it fast.
Consequently a mad scramble to fix the current data centers is about to be unleashed. While this is a great opportunity for the likes of Tivoli/IBM and OpenView/HP, not surprisingly, most of the Indian IT services companies are also jumping in. All the big ones have now started remote infrastructure management divisions that are growing at 80-100% YOY (this WSJ story describes the service in layman terms). Wipro is the clear leader right now. They have a broad portfolio and a head-start over the others. This is prompting their competitors to innovate. For instance, HCL offers a service called business-ready infrastructure. Essentially they take charge of the current on-premises infrastructure and bundle that with remote infrastructure management and application management. They will also work with SAP to offer a “pay per use” multi-year service model. Vinnie Mirchandani, with his customary flair, has called this Software as Customized Service (SaCS).
Remote infrastructure management and SaCS has a big future. Gartner has come out with some interesting predictions…
- Through 2008, > 50% of new outsourcing deals will include utility service components
- By 2008, more than 70% of new application utility offerings will be targeted at business units or line managers rather than IT organizations
- By 2010, 30% of new software purchases will be delivered via an application utility or software as a service model
- By 2010, Infrastructure utilities will reduce datacenter operating costs by 40%
- By 2012, more than 50% of G1000 companies will use an external IT infrastructure utility in addition to private utilities or internal customer IT infrastructure
New Job Definition for CIOs
What will be the impact of all these big changes - utility infrastructure model, SaaS, etc. – on the jobs of CIO? Will they become less central to the business? Or will they become more important? One thing is sure that their job is about to change big time.
The case that CIOs will become less important is pretty strong. Look at what happened with manufacturing. As firms became more modular by outsourcing manufacturing, they no longer needed senior manufacturing officers. It’s a given that most of the data center infrastructure management is going to move to the utility model. This means that a big chunk of CIO responsibilities today will go away. This can’t be good for CIOs, right?
Well, I tend to believe that this will be good for CIOs.
I have written earlier that I see this whole transition as being similar to what happened in the semiconductor industry in late-80s. At the time the semiconductor value chain modularized into specialist fabless chip-design companies and merchant foundries. Merchant foundries become more efficient and chip-design companies became more innovative.
The same dynamic is about to repeat itself in the IT space. The infrastructure portion will become efficient and the rest of it will be become more innovative. So CIOs can have a shot at becoming Chief Innovation Officers.
Dave Girouard, GM of Enterprise Business at Google also makes a similar point. He believes that by handing over “core IT functions, including security” to specialists, CIOs will be able to focus on innovations that grow the business. Sadagopan agrees with this view and adds that “enterprise software market players will have to… embark on an important restructuring and transformation”.
What’s your take on this?
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