Web Services` Disruptive Power

If you haven?t read Nicholas Carr?s latest book, The Big Switch, it?s worth cracking the spine. The author of the infamous 2003 essay ?IT Doesn?t Matter? compares the emergence of Web services to the maturation of the electrical industry?an apt comparison.

Carr recalls how Thomas Edison?s model for power generation wasn?t to provide energy to the masses, but to local factories and?at best?their immediate neighbors. Each company or municipality would have its own DC-current power plant that provided juice to a confined area, mostly because of the transmission limits of direct current. His company, the precursor to General Electric, was built on the principle of selling equipment, not power, to its customers.

Edison was disrupted by one of his own prot?g?s, Samuel Insull, who pioneered the use of alternating current. Since AC could be transmitted over longer distances, that led to the development of the electrical grid we use today. In this model, electricity became a commodity, causing costs to drop and making cheap power available for everyone and everything.

Carr argues that the same thing will happen in IT, since the industry has been built on Edison?s paradigm: corporations build and manage their own computing power plants. Eventually, he says, Web services?software as a service, cloud computing and virtual infrastructures?will commoditize all IT and drive down costs.

The world is not lacking in companies trying to jump on the services bandwagon. In this month?s issue, Baseline recounts the most disruptive companies?ones that are challenging entrenched market leaders or conventional business models with innovative products and services. Of those that made our list, 10 deliver Web-based services. They include the usual suspects?Google, Microsoft, IBM and Sun Microsystems?but the services community is producing an impressive array of vendors providing a variety of services that were once the exclusive domain of the corporate data center.

Amazon, the world?s largest online retailer, is rapidly building out its offering of cloud computing and Internet-based storage. But consider the offering by Elastra, a services startup built on top of the Amazon infrastructure, which enables its clients to build multimode relational databases in a virtual environment in minutes and at a cost-per-use model.In a similar vein, HubSpan has coined the term ?integration as a service,? allowing companies to implement complex intra- and extra-domain application infrastructures across a virtualized service.

Saleforce.com showed how CRM could be delivered via the Web, and other specialty applications are following in its wake. SuccessFactors and InsideView are among the emerging services companies delivering specialized applications. SuccessFactors tackles the often complex task of developing employees and measuring their performance. Similarly, InsideView uses search technology to gather sales intelligence and optimize sales teams? goals.

Service providers have utopian views of the potential value they can deliver to the enterprise, but there are two major obstacles standing in their way: bandwidth and the sheer number of vendors.

Consider this: According to a new IDC report, by 2011, Internet data-transfer volume will have increased tenfold from today, and most of that increase is a result of video. That?s not surprising, since YouTube alone uses as much bandwidth today as existed in 2000, and, as Google CEO Eric Schmidt told Baseline, 10 hours of new video is uploaded to YouTube every minute. While no one says the Internet is in danger of collapsing, some experts are raising the specter of traffic jams?or lower-quality service. If that happens, it will severely impact the delivery of critical Web services.

While every technology advance is pioneered by a multitude of vendors, the sheer diversity of service delivery models and offerings will eventually frustrate the individuals who have to sign and manage multiple relationships. Even the potential savings of on-demand applications will become unmanageable if there are too many service providers. Consolidation will eventually ensue, but that will cause marketplace disruptions and slow growth in Web services.

Web services will never completely eliminate the data center, but this technology will eventually disrupt the existing corporate IT paradigm and technology marketplace. When that happens, we may have to add computing to the list of public utilities. Thank you, Mr. Insull.