In the world of technology, we’ve had the IBM mainframe era, the Microsoft PC era, and now we have…the Google web era?
I’m not being facetious; well, CIO magazine is not being facetious, anyway, when it features this as its cover story. Add in McKinsey’s just-released "Two new tools that CIOs want," and we have a potential "technology architecture transformation beginning to take shape."
If past is prologue, astute and adaptable firms will foresee this wave coming and will gain, if not a permanent, a sure-fire cyclical, competitive advantage.
McKinsey first, on what "two new tools" you want:
- "server virtualization (which helps companies improve the match between their computing capacity and their application workloads, so that they can do more with fewer machines) and
- "software as a service (which allows IT departments to offload the delivery and maintenance of software applications)."
For the non-techies in the audience, server virtualization solves a seemingly odd problem, which is that in almost any computer network, the servers don’t actually work very hard at all. A common estimate, in fact, is that in a mixed environment of servers running Windows, UNIX, and Linux (a ubiquitous scenario), each machine is typically uses only 5-15% of its capacity.
"Virtualization," a software application,enables any given hardware server box to run (say) all through operating systems at once, and all the applications that run on top of each, boosting utilization to 40% or more, while retaining the ability to meet peak demand. A corollary benefit is that applications themselves can be distributed across multiple machines, so a temporarily overtaxed box can "hand off" a processing job to a comrade.
The benefits are financial, and real:
"One CIO with a budget of $600 million told us that his company has virtualized 30 percent of its servers and plans to have 60 percent of them virtualized within two or three years. He expects to reduce capital expenditures during the next server-refresh cycle by 30 percent and to reallocate the savings to different projects."
The other initiative, software as a service delivered over the Internet, means that "rather than purchasing and deploying applications inside the enterprise, many companies are buying access to externally hosted applications." You only pay for the software as you use it, and it’s essentially a form of outsourcing. With the model of outsourcing to a dedicated vendor who does one and only one thing come the classic benefits:
- economies of scale as the vendor can amortize upgrades across a multitude of subscribers;
- highly specific expertise focused on the single application and nothing else;
- with the result that deploying an application as "software as a service" rather than the conventional install-locally, license-and- upgrade, can save 30% or more and cut deployment times from 6 to 24 months to, essentially, however long it takes to finalize the contract.
Those two developments may sound altogether IT-land and techie, but a salient component of my philosophy of law firm management is that the CIO deserves "a seat at the table" at any firm that thinks it operates in the 21st Century, so these are Executive Committee and Managing Partner, not just IT, issues
But the Google story, courtesy of CIO, is sexy enough for any dinner party conversation.
Here’s how CIO sets the stage:
"In the Google-future, IT will be more scalable, agile and cost-effective. But it will also be less controllable by CIOs. This will require CIOs to adopt a new mind-set for how they manage the use of IT in their company. Those who succeed will be free to focus on driving innovation; those who fail will be fighting a battle they’re destined to lose.
“CIOs need to understand that it is a whole new world.”
Google’s power, and the threat it poses to incumbents, has little to do with search or with advertising, although those are readily grasped innovations we all can appreciate—just as we say to ourselves, "Why didn’t I think of that?"
Google’s power is something unseen and largely unknown: Its hardare infrastructure. Would it surprise you to learn that Google is the third largest server manufacturer in the world? And, although "Google treats its infrastructure as a closely guarded secret. It doesn’t allow outsiders into its data centers," an educated guess by an independent consultant who focuses on Google estimates the firm now has 150,000 servers spread across 24 data centers.
To some observers, Google’s business trajectory so far has seemed like
somewhat random, opportunistic growth. That could be a ruinous
under-estimation of them if you’re going up against them competitively:
“IBM
executives in the early 1980s didn’t understand what Microsoft was,” says
[an analyst]. "Now Microsoft is in the same spot, and they are
trying to understand what Google is. And they’re having a hard time.”
In the traditional corporate/firm IT infrastructure model, the CIO
and his advisors choose which applications users will and will not
have, and people have no choice but to dine from the set menu. By contrast,
at home people are free to choose what applications they’ll have on
their PC’s. As Google moves more and more applications
to the Web, people who like them at home will exercise enormous pressure
to have them available at work as well.
But what CIO in their right mind would give up control? Aren’t
CIO’s all about (among other things) security, audit trails, and locking
down options? It sounds as though no one at Google would disagree:
"At its core, however, Google’s enterprise strategy will
remain viral. It won’t try to convince CIOs to replace the applications
they already have with Google versions. Instead, Google will continue
to produce products that people like using and will use—at home and
at work.“It will happen without people noticing,” says [Dave] Girouard [head
of Google’s enterprise applications], prophetically. “People
look for a eureka moment but things just seep in. That’s what’s happening
here.”In other words, one of these days you could wake up and find that most
of the applications your company uses are provided by Google.
That’s a vision bound to keep most CIOs on edge."
Never happen? Remember that few saw Microsoft coming either.
And if you believe today’s New York Times’ lead
business story,
now Microsoft and Google are "grappling for supremacy." And
in this war, the key determinants of who wins are (a) ability to adapt
to change rather than remaining prisoners of their past success; and
(b) recruiting and retaining the best and
brightest people.
“One area where Microsoft and Google are really competing head-to-head
now is in the war for talent,” said Richard S. Tedlow, a historian
and professor at the Harvard Business School. “Historically, the company
that won the war for talent, won the war.”
Whoever wins this latest commercial war, it seems clear that our fundamental
technology platform is shifting beneath us, from the desktop to the
Web.
Law firms that get there first—while still, to be sure, maintaining
rigorous standards in non-negotiable areas like document retention—will
be able to respond with more alacrity, will be able to invest less
in home-grown infrastructure, and will benefit from "best of breed"
applications developed at a cost spread over millions of users.
And another thing: People might actually enjoy having a little
choice.
