The Shift to Utility Computing / Cloud Doesn't Erode Competitive Advantage From IT

I sometimes see that researchers and technology analysts write that it is not possible to create competitive advantage through Information Technology. The reasoning is that as computing is becoming a utility and applications are moving to the cloud, IT becomes more of a competitive necessity that something that provides differentiation.

The analogy is often made to electricity;

1. first electricity was produced locally. In the same way as companies have their own data centers for computing today.
2. electricity then shifted to grids, and was provided as a service or "utility".

As a utility, electricity didn't provide any competitive advantage.

Computing is now becoming a utility just as electricity did.

But what about machines that were run on electricity?

Companies that used machines and integrations of machines that supported their specific processes were able to create competitve advantage even after the shift to electricity as a service or "cloud" electricity.

In the same way, companies that can use applications and integrate them in ways that support their specific processes will be able to create competitive advantage.

It's just the infrastructure that is not in-house anymore, not the way we use it.

How will the business IT game play out? Legacy vs. Agility

The amount of interesting web applications springing up each day is overwhelming. It makes me think that there are a lot of smart people out there who are allocating their scarce resource (their time) into projects that will linger a long time and then die out. I wouldn't want to be in that field, doing consumer web services. The barriers to entry are way too low, and the return on investment as well. There could be a lot of space, if we compare to tangible products for example. The problem is that the web provides zero-cost logistics. But that's a question for another post. Today I want to concentrate on Business Infromation Systems.

Business Information Systems (or applications, whatever) have been ruled by a few companies. Everyone has Microsoft (word, excel etc.). Then there's a more directly business oriented group of giants, SAP, Oracle and so forth. These giants have been attacking the balance sheets of all the companies in the world for years, making them believe that they cannot survive without paying their ridiculous licensing fees for software that is developed by such a huge amount of developers that no one really knows where the software is going.

More agile methods have been developing all the time. Ruby on rails, django and other rapid development methods have sprung up opportunitites to create customized applications faster.

Service Oriented Architectures (SOA) and SOAP promised making integration a breeze, and when that didn't quite work out as expected, REST came along and is looking quite strong in enabling new, easier ways of data integration.

What is needed now is some good ways of calculating ROI for development, fast ways to develop and easy integration. Using services such as Boomi, companies will be able to create an ecosystem that automates a lot of manual work, thus raising productivity.

In my opinion, some web applications, such as Dabbledb are already at a point where companies should start using their services and see what they can make faster using these easy alternatives to custom application development or out-of-the-box solutions.

It just isn't worth spending huge sums of money running an IT infrastructure that isn't agile, when it is possible to do simple collaboration with Google docs, just settle with Gmail and create fast business applications with Outsystems, Wavemaker or Hammerkit. Or just settle for Zoho and centralize your IT there.

One exciting company that's pushing the boundaries of productivity is Mark Logic. They allow companies to retrieve unstructured data and use it for analysis. Out of the box. No code. Just deploy. Once these technologies become mainstream, and once they are easy enough to use such as any web 2.0 service, productivity will rise fast, and the dilemma of information system success will be a faint memory. (the dilemma refers to the difficulty of research in finding a connection between IT investments and productivity).

I think the research on IT investments and productivity has been led astray. It should be built from the ground up. What can be improved by IT? How much? How much will it cost?

Instead, IT is taken as a bulk investment, money is poured into a hole, and then we try to measure something which at the same time is influenced by another 10 meaningful factors. I think it reflects well the products of the biggest vendors. You're just buying a lot of trouble, because they make you feel like you need it to stay competitive.

I just think companies should stay logical and start calculating what they really need.