IT as Utility

Nick Carr has a provocative presentation up articulating his view of how the turn of the century electrical generation business has useful lessons for the current IT industry.


  1. as web services develop, it is conceivable that all you would need for a computer was a way to access the web, and you could get everything you need through it, word processing, email, excel, etc, including file storage, etc. there will never be an “insull” of this. how could we expect that given the massive decentralization power of the web?
    the reason why we had an insull was probably that the opportunity was there, and it wasn’t that tough to do. if doing the same for IT was such a great idea, then surely carr would probably be starting this business instead of writing about it.
    however, there are other challenges here. electricity is the purest commodity known to man. the “factory” has one function and distributes a uniform product.
    IT is not the same. sure, IT is ultimately just an electrical signal, but that’s sort of like saying all music is exactly the same because it is just vibrating air. the difference is exactly what those vibrations consist of; it’s the difference between bach and the sound of traffic.
    as long as human being are alive, they will have problems and functions that can be better served through innovations in software. that software will continue to be written by small groups of people who are in touch with users and nimble enough to work out the answer. schlubs like me will continue to fork over dough to those who do this best. sure, losing businesses – ultra competitive, low margin, routinized industry standard functions – will be outsourced, but that’s long way from saying IT is like electricity.
    accenture will probably lead the way in this outsourcing, but it will be hundreds of projects, not one.

  2. Agreed, in general terms. Nick has a thesis on commoditization of IT that he continues to push, and more power (no pun intended) to him for continuing to do so. I think the essential tension here is that of commodization pulling things toward the center, versus edge intelligence and edge content pushing things to the network periphery. It is pat to imagine a homogeneous future where IT is delivered as a uniform form (in all but the simplest sense) to anyone who needs it/

  3. IT may be like artificial illumination tho…“artificial+illumination”
    “Consider the history of artificial illumination. William Nordhaus (1997) has analyzed the real price of light: how much it costs in the way of resources and labor to produce a fixed amount of artificial illumination, and has found that the real price of light has fallen by a thousandfold over the past two centuries. According to Nordhaus, accurately measuring the falling price of illumination contributes seven percent to the growth of real wages over the nineteenth and twentieth centuries. A middle-class urban American household in 1800 would have spent perhaps 4 percent of its income on illumination: candles, lamps, oil, and matches. A middle-class urban American household today spends perhaps 1/2 of 1 percent of its income on illumination, and receives vastly more artificial light than did its predecessor of two centuries ago.
    “Yet we do not speak of the ‘illumination revolution’, or of the ‘new economy’ generated by the existence of exterior streetlights and interior fluorescent office and store lights. Even though the productivity of illumination-producing technology has increased enormously, its impact on the economy and on society has been limited because demand has not kept pace with falling prices. Thus the total share of illumination in total spending, and thus in the share of the economy used to produce it, has shrunk. Its economic salience has declined.”
    only now, instead of lightbulbs, we have laptops 😀

  4. Michael Robinson says:

    This presentation is extremely (and I assume unintentionally) ironic, as Google has now demonstrated that as IT efficiencies advance, the price of IT converges on the price of electricity.
    In the presentation, Nick Carr puts PC capacity utilization at 5%. If you actually run a typical newly-purchased enterprise desktop PC at 100% computational utilization over its depreciable life, you’ll spend as much (approximately) on the electricity as on the PC itself. Thus the available economies he suggests by the 5% utilization figure are mostly illusory.
    As IT costs go down (due to open source, Moore’s Law and related effects) and electricity costs go up (due to fossil fuel depletion), the electrical utility will increasingly be the model of the IT cost structure.

  5. carr is attacked again and again for stating the obvious: IT is a commodity. look at where the attacks come from: ceos who want to ride the tech gravy train they put in neutral long ago, folks like ellison and mcnealy, who oddly enough have had to grudgingly embrace commodity technologies even as they deride them. lets not forget the vcs, most of whom are petrified of having to deal with other industries like nano, alternative energies, etc, where you actually need to understand hard science to invest fruitfully.

  6. It seems clear that the haven most likely to produce the IT utility scale (in many ways they have achieved it already) are the Wipro/Infosys, et al. of India.
    Ironically they are still stuck at the turn of the century (the last one) in terms of electricity as a utility. Gotta have your redundant diesels on site.

  7. Fartikus — You’re dead on. While Nick Carr’s argument has its holes, some of its most strident critics in the venture investing world are mostly just petrified they’ll actually have to leave software and learn some science.

  8. The part about open-source software and the IT redundancy it alleviates make some sense but the grid will never happen in any real way. How could you possibly secure your data on these grids? The comparison to electricity is not accurate because power is just one input to a business whereas your data/software is everything nowadays. btw Paul, if venture investors have been able to get away without understanding the science behind software and computer hardware that underpinned the Oracles and Suns of the past, I think they’ll be just fine in the up-and-coming scientific industries. The VC crowd will just wait for Kleiner Perkins or some new firm to hit a home run and then ape their moves when they dip their toes in.

  9. Carr does it again.
    If only IT were as simple as **pushing electrons through a copper wire** (well, in a sense it is, but it is, to put it mildly, a crass simplification).
    The “I want to buy IT the same way I buy electricity” argument is one that CIOs have been hearing for at least a decade, if not longer. Mostly from people that do not understand IT, as Carr clearly doesn’t.
    This gets more confusing for those who lack understanding of nuance when Carr uses his examples (e.g. storage providers, email providers, and other infrastructure components) – as reasons why IT, as a whole, can be commoditized. Of course those elements can – they are mature, well understood applications, at least at the core (then again, google has a tendency to redefine what email means from time to time, but lets leave that as an aside).
    The problem with most organizations is that they fail to use IT effectivley (see Most organizations overestimate the abilities of their staff to learn new software, underestimate the cultural resistance to new software (and new processes that same sometimes entails), and underinvest in training to utilize the new software. If only those obstacles could be overcome (hahaha) – perhaps the innovation part of the IT pie would become bigger – because there would be **more of a history of success there**.
    IT is only a commodity when the controllers of the IT budget spend most of that budget on networks, email servers, databases, and administrators of same (the pieces of the IT puzzle that most resemble electricity). Were organizations properly investing in IT innovation, Carr’s arguments would hold much less weight.