Nicholas Carr: IT Departments Face Extinction

Monday Jan 14th 2008 by James Maguire
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The author of the provocative “Does IT Matter?” strikes again with a new book suggesting a radical reevaluation of IT’s future.

The idea that every company needs its own IT department is dying, opines Nicholas Carr. Instead of maintaining in-house data centers, companies will tap into the processing power of remote mega-computing facilities, much as they now tap into electricity from centralized utility plants.

As he theorizes in his new book, The Big Switch: Rewiring the World, from Edison to Google, this radical shift is greatly needed:

"The replication of tens of thousands of independent data centers, all using similar hardware, running similar software, and employing similar kinds of workers, has imposed severe economic penalties on the economy," he writes. This duplication “has led to the overbuilding of IT assets in every sector of the economy, dampening the productivity gains that can spring from computer automation."

nicholas carr, does IT matter?

Nicholas Carr

The traditional IT department is a dinosaur awaiting news of its own extinction, in Carr’s view. And when the change comes the landscape will look far different. The in-house IT department “will have little left to do once the bulk of business computing shifts out of private data centers and into the cloud,” he writes. “Business units and even individual employees will be able to control the processing of information directly, without the need for legions of technical people."

Naturally, to suggest this type of tectonic change upsets interested parties (including those IT staffers who must contemplate losing their positions). But upsetting the status quo is a specialty of Carr’s. His provocative 2003 Harvard Business Review article, “Does IT Matter?” theorized that the competitive advantage of IT is limited because everyone has access to the same technology. His widely discussed thesis earned him few fans in the boardrooms of tech vendors.

With his new tome fresh on bookshelves, Datamation spoke with Carr about his views on IT’s future, as well as his book’s theories about the Internet’s impact on culture.

Discuss this article in the Datamation discussion forumComment on Nicholas Carr's theories about the future of IT

Q: You draw a portrait of the future in which all computing power resides outside the corporate data center, and we tap into it like we tap into electricity today. If this comes to pass, it will radically reorganize corporate IT. What will some of the effects of this change be?

First of all, it’s important to realize that, for big companies at least, this is going to be a slow transition, playing out over a decade or two. In the interim, what this does is open up new choices for corporate IT departments in that they’ll no longer be constrained by what they can buy and install locally.

I think what it means over time is – at the least – a fairly dramatic shift in the nature of IT departments. Right now, for most corporate IT shops, the majority of workers and the majority of the budget go to building and maintaining their IT internal infrastructure. As that moves out into the supplier community, the utility community, a lot of those jobs are going to move with it, from the corporate data center into the supplier side.

At the same time, one of the big trends that corresponds to what I’m talking about, but also exists separately, is the automation of a lot of IT processes that used to require a lot of manual labor. As that continues as well, certain IT jobs are going to dwindle.

Now ultimately, what becomes of the IT department? I think if you look ahead far enough – 10, 20 years – you can probably assume that, in a lot of companies, what we think of as the IT department will probably not exist anymore.

Q: Because remote computing facilities supply all the processing power?

That’s right. That doesn’t mean that all the jobs and all the skills that today reside in IT departments, things like thinking about information management and information flows, and how software can be used to automate processes, it doesn’t mean those jobs are going to disappear – in fact they might become more important.

But my guess is that, as the IT department shifts away from being a technical resource, those kind of jobs will probably be incorporated into traditional business units and other corporate departments.

Q: Your theory suggests that IT will be a tough profession in the years ahead – employment will be slashed dramatically. There will be some “super workers,” so to speak, but the rank and file will see far fewer jobs.

I think that’s right for some categories of IT workers. Obviously when we talk about IT employment we’re talking about a broad range of jobs. And, if anything, software is going to become more important to the general economy even than it is today. So those kinds of jobs, there may be more of them, but they won’t necessarily reside in IT departments. But the more maintenance-focused jobs, which obviously count for quite a lot of IT employment today, I think we can assume those jobs are going to become fewer rather than greater.

Q: What about, for example, a huge corporation like Johnson & Johnson, a wealthy, highly competitive multinational company. Would a resource-rich company like that be willing to A) allow sensitive information to be processed by a remote computing facility, or B) allow a third party to completely handle its all-important technical infrastructure?

I think it will ultimately. But I think the largest companies are going to be the slowest to make the move to the grid. For smaller companies and mid-size companies, utility computing is a great boon for them. It allows them to catch up and tap into very sophisticated infrastructure without having to buy it themselves.

But larger companies, you’re right, big companies have such economies of scale in their IT operations that until the utility services mature, and build up their own scale, it’s unlikely that you’ll see a big shift in terms of big companies closing down their data centers or whatever.

Q: So the Fortune 500 would be the last to get on board?

Right, although what I think is going to happen is that they’re going to take advantage of the technologies that underpin the Web delivery of IT, things like virtualization and so on, and, in essence, recreate their internal IT operations as internal utilities. And I think we’re seeing that already, as we see the big consolidation wave and the virtualization wave go through big corporate data centers. In essence, they’ll become their own utility on a grid. And as that happens then they’ll have more flexibility in complementing what they provide themselves with what’s available from Web suppliers.

Q: Is it true that sensitive information would need to flow outside the firewall in this scenario, or are you suggesting that just the processing power resides outside the firewall, and no information would need to flow back and forth?

I think it’s both. On the one hand, I think you’ll have software-as-a-service companies that will lie outside of the firewall. And we’ve seen even big companies seem to be quite happy to allow some of their more sensitive data, whether it’s payroll or customer accounts, be processed by outside companies. Now there are regulatory and other issues that are very important to worry about. But I think we’ll see increasing data flow outside the firewall, and it doesn’t necessarily mean it’s less secure; we’re also going to see advances in encryption and other technologies.

But you can also draw on outside processing power and storage capacity, without necessarily having your data go outside the firewall. So I think both of those models offer attractions to companies, and we’ll see very much of an hybrid IT model, where some stuff is going on inside the firewall, and other things are going on outside of it.

Q: Your thesis suggests that this is a golden growth period for software-as-a-service, and a good thing to invest in.

That’s right. I think I think we’re going to see a continued boon in those offerings. Whether that’s going to be dominated by small start-up companies – and certainly there are hundreds of them now – or whether the big guys like SAP, Oracle, IBM and Microsoft are going to ultimately wade in and start to dominate, that’s also possible. So I think software-as-a-service is going to be a big growth area. Whether investors in it are going to make a whole lot of money, that’s another question. (Laughs.)

Q: Turning to your ideas about the cultural implications about the Internet: Your theory about the “great unbundling” suggests that the Web will facilitate myriad tiny niche markets, disconnected from one another, rather than a big global family.

In the book I talk about what’s driving this shift from a technological and economic perspective, but then you also have to look at what the social and cultural effects are going to be. And they’re not all rosy as far as I can see.

What we’re seeing is this unbundling of culture into component pieces. That’s a broad trend; newspapers being unbundled into individual articles, music being unbundled into the tune, and you can go on and on. That’s one of the essences of the Net; because it’s essentially free to distribute information, you can break it down to the lowest common denominator.

But what happens is, we’re also seeing enormous growth in personalization technologies. The danger here is that we end up with not what the Internet optimists had been hoping for, which is a more harmonious world, a more harmonious society, but more balkanization, as people begin to filter their information flows to concentrate on stuff that matches their existing ideologies or their existing biases.

Q: It’s a disconcerting trend, perhaps.

Right. And you can see evidence of it happening if you look at the political blogosphere. [In the book] I talk about a couple of recent studies that show how conservative blogs and liberal blogs are these two vast, but almost entirely separate, segments on the Net, with very few links and very little traffic that goes between them.

Academic research into psychology and society shows that if you constantly feed people information that supports their existing opinions, what happens is that it strengthens, and even radicalizes those opinions over time. So if we end up being able to filter information so that we just receive mainly the stuff that backs up our existing biases, it’s a very real scenario that we could have a greater polarization, at least on a political level.

6) Your concept of “iGod” is intriguing. Are you suggesting that there’s a spiritual aspect to the human-machine relationship?

Not really. I’m more looking at the ultimate power of the Net to begin influencing the way we think, the way our memory works, the way cognition works, and to have this almost godlike power.

This goes back to an observation about technology, which is that, as we use it, it begins to shape the way we act, the way we behave, the way we process information. And what I theorize is that, the major medium for the last 500 years has been the printed page; and that began to be pushed aside with television, but there’s really evidence – particularly if you look at young people – of it being pushed aside almost altogether now by the Internet, as the Internet becomes the universal medium.

What the Net provides us is a very different model for how we take in information. It’s not the linear model of the printed page, because of hyperlinks and those kinds of connections. It’s a much more fragmented, much more of a model that puts an emphasis on the speed with which we can take in lots of information and jump between information, rather than sitting down and concentrating and contemplating for long periods.

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