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HolidayBuyer's Guide
Tech Industry

Utility, commodity: IT to follow electricity?

Sun President Jonathan Schwartz says there are telling parallels between the rise of the electricity and technology industries.

As Silicon Valley emerges from the dot-com bubble, it has become fashionable for high-tech leaders to describe ours as a maturing industry whose slower growth rate is doomed to mirror the increase in gross domestic product.

But that's taking the narrow view. If you look beyond raw silicon and software, you'll see a much bigger industry poised to deliver services based on technology that already exists. What stands between the broad industry and continued growth is not technology, but rather a cultural divide in the deployment and consumption of technology--one slowly being bridged.

This cultural divide is not unique to IT; we've seen this movie before. If you examine the history of many key technologies, you'll find three distinct stages of evolution: customization, standardization and utilization.

Some companies even employed a "chief electricity officer."

In her engaging 2003 book, "Empires of Light," historian Jill Jonnes examines the nascent electric-power industry. At first, she found, electricity was customized and costly. Thomas Edison envisioned building an electric dynamo every few blocks in a major city powering his light bulb. (His first plant served one square mile of New York, and 800 light bulbs, and cost the equivalent of $5 million today.)

Many showplace homes in the mid-1880s, including the Manhattan mansions of John Pierpont Morgan and William Henry Vanderbilt, had their own electric generators (along with a highly trained engineer on the premises to operate them). Some companies even employed a "chief electricity officer" to manage the role of electricity within the business. (Kodak, one of the first companies to build its own power plants, surprisingly still burns about 700,000 tons of costly coal a year to fire two power plants at its Rochester, N.Y., headquarters.)

If that sounds familiar, it's because that's the reality of many data centers in corporate America: They're big, costly, custom-built and run by experts.

It took many years to reach the next stage in the electricity market--standardization--where George Westinghouse's establishment of AC power and long-distance transmission helped set standards we still use today. Those standards (voltages, cycles and the like) enabled electricity to be mass- marketed. But it was still a rarity; in 1902, Niagara Falls generated a fifth of all the electricity used in the United States. In 1907, a mere 8 percent of American homes had electricity.

That's where we are today in information technology. We've created standards--chips, operating systems, network protocols and such--that have enabled computing to be mass-marketed. But IT currently requires significant expenses and expertise on the part of the user, especially in large corporate data centers.

As with electricity, though, we'll need to create mechanisms for defining a unit of computing power and pricing it.

It was the third stage--utilization, in which electricity was viewed as a commodity with a transparent price and reliable service quality--that really brought the benefits of electricity to the world. As electricity moved from customized to standardized to utilized, two things happened: Its ubiquity rose, and its cost plummeted. All manner of things driven by electricity, in addition to lights and industrial motors, were created, bringing real value to everyday people.

By 1930, even midsize American cities had nearly universal electrification; between 1910 and 1940, commodity electricity helped increase U.S. productivity by 300 percent. Industries never before dreamed of were now driving enormous wealth creation.

Ours is a young industry; we're just beginning to look at the utilization stage of technology, where network bandwidth and computing power will be available as a utility, where and when needed.

As with electricity, though, we'll need to create mechanisms for defining a unit of computing power and pricing it. We'll need to create reliable and secure delivery mechanisms. We'll have to create the things that turn this commodity into real value for consumers, the way electric irons, washing machines and water heaters did. And as consumers of computing, we'll need to take a fresh look at the role of "technology" in business and our daily lives.

What this will enable is the rapid deployment and expansion of valuable services that can be delivered over the network. Take, for instance, Google, which is delivering a wide range of search capabilities that are becoming more valuable as they become more personalized and can be used on any device.

Or look at Salesforce.com, which can use commodity bandwidth to deliver the same customer relationship management services much more cheaply than its competitors.

And this is just the beginning. For companies that provide the innovative content, network services, products and inherent intelligence to take advantage of ubiquitous and affordable bandwidth, the future is bright. As bright as for those who recognized that the light bulb was not the culmination of an idea, but rather the beginning of a revolution.