Google 1, Nicholas Carr 0
from the still-matters dept
The increased use of on-demand software, or software-as-a-service as it's sometimes called, has prompted some, such as Nicholas Carr, to conclude that IT is commoditizing and will soon resemble the power plant model for distributing electricity. But while it's true that companies such as Google and Microsoft are building huge computing centers to power software and storage, it's not the case that their products are becoming commodities. The New York Times ran an interesting profile on Google this week that goes beyond the standard line, that the company's backbone is simply based on cheap commodity parts and software. While the components may be cheap, the company is doing a lot of innovation in designing massive computer systems, such as developing new assembly methods and applying formerly theoretical computer science ideas. And this isn't just some company tinkering with its boxes. By some estimates, the company is now the fourth largest maker of servers, which means that a significant number of the world's boxes are now being built in a totally new manner. Google has also considered designing its own semiconductors that suits its purposes, which is rarely done even by the incumbent box makers. The article also has quotes from Bill Gates talking about Microsoft's own efforts on this front, which he argues are better than Google's. Whether that's true or not, this doesn't sound like commoditization at all. Just because the distribution may resemble a power plant, it looks like there will be a continuation of what's always gone on in IT: constant innovation leading to fleeting technological advantages.
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How so?
I don't see how this contradicts Carr's analogy at all. Electricity is a commodity, but powerplants are custom-built. SaaS is a commodity; SaaS providers engineering their own infrastructure doesn't affect that.
I think there are reasons to take the commoditization argument with a grain of salt, but this isn't one of them.
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Also don't agree with premise of entry
Like Petréa Mitchell, I don't see how this contradicts Carr's analogy. They aren't building their own CPUs etc, just optimising one element (vs Yahoo etc that outsource design of same). Note that the commoditisation Carr talks about is operating one level of abstraction down: Dell is being squeezed because all their competitors benefit from the pushback and commoditisation Dell has been doing on its (and their suppliers). So you could say that Google is benefiting too.
Or you could say that this effort is just a modern equivalent of the "edifice complex" (where other companies build their own buildings).
Either way, Carr would still be correct.
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Re: How so?
I don't see how this contradicts Carr's analogy at all. Electricity is a commodity, but powerplants are custom-built. SaaS is a commodity; SaaS providers engineering their own infrastructure doesn't affect that.
I think Joe's argument makes sense. If hardware has really become so commoditized, then why is Google designing its own hardware and able to squeeze a lot more out of it than buying off the shelf hardware? That seems to go against Carr's thesis. It shows that Google *can* get an advantage through its own proprietary implementation of the technology.
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Commodity? Sort of.
What's being commoditized is the distribution of software (the way it is bought, sold and shipped), not the software itself. Saying Google/MS are commoditizing software is like saying that iTunes is commoditizing music. Actually there's a better argument for Apple commoditizing music since they charge the same amount per track regardless of whether it's old or new, popular or unpopular, etc.
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"and will soon look resemble the power"
Say what???
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Sure, google is a comodity supplier...
They supply the comodies of 0 & 1 bits. It's just the _order_ they supply them in that matters.
Idiots.
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Stories like this make me feel better about Google's overinflated stock prices. I hope they ride the patent wave. :)
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All products eventually become a comodity
All products eventually become a commodity. The makers of these products may innovate and advance technologically and may even use their own IP to compete and find ways to create new barriers to entry, but the product itself will continue to commoditize. Smart companies always recognize their core competency and look for ways to provide new solutions to existing and/ or new customers based on the strengths they have that can truly differentiate them. But the law of capitalism says that all products - glass, steel, textile, fiber, storage, developing code etc, will eventually commoditize and this will happen at an ever accelerating pace.
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