"The end is near(er)"

Earlier in the year I wrote, in response to Nicholas Carr's viewpoint, a post titled "The end of corporate computing? The beginning of chaos...". I did not expect to change Carr's perspective. If anything, in a recent post he says "The end is near(er)".

Carr is a smart man with a wicked sense of humor - but not sure he is privy to actual transactional economics in the IT world. As I write in "The Giant Crunching Sound", "Killing the Golden Goose?" and "Offshoring Spin",and in a number of other places in my blog, vendor economics in many IT categories  are nowhere near "utility" priced. In a number of areas, it is cheaper for CIOs to build staff and functionality, rather than buying.

The building blocks for Carr's vision for utility computing are in place - some of the vendors have overwhelming scale advantage over an individual CIO. EDS, for example, has over 100,000 employees. The average Fortune 500 CIO has 500 IT employees. Infosys has delivered over 18,000 projects using its GDM. The average CIO has done fewer than 10.  Oracle spent $ 1.5 billion in R&D last year. The average Fortune  500 CIO's total IT budget (not just on software) is less than $ 50 m. Yet vendors cannot price their products on a utility scale model? Somehow, I doubt any utility commission would allow an Oracle to get away with 90+ % gross margin on its annual maintenance contracts.

Most CIOs, unlike what Carr may think, would actually welcome utility computing. They are not afraid of outsourcing - many have already outsourced in IT more than their peers in finance, marketing and elsewhere. They just need much more compelling economics.  To them,  the "end of corporate computing" is still a ways off..till the numbers make more sense. Of course, vendors will argue they provide better service levels, quality, time to market advantage ...important metrics (which do not always improve under a vendor) but often non-starters if the financial metrics are far off.