IT begins shift from asset to commodity

It's been two years since Nicholas G. Carr became the bogeyman of the information technology industry, when he published an essay in the Harvard Business Review called ''IT Doesn't Matter."

Carr's claim that the strategic value of technology had diminished drew fire from Microsoft's Bill Gates and other high priests of a business that had long flourished by marketing the strategic value of technology. The controversy propelled Carr onto the lecture circuit, where he jousted with industry heavyweights, and inspired him to expand his thesis into a 2004 book with a less provocative title, ''Does IT Matter?"

Despite that question mark, Carr, 46, hasn't backed off from his assertion that information technology is becoming a commodity. In a new article, appearing in the spring issue of MIT Sloan Management Review, he contends that corporate data centers -- founts of technology-driven strategy in the 1990s -- soon may disappear.

In their place, Carr argues in ''The End of Corporate Computing," will be large-scale utilities that will sell information technology services to businesses -- much as central electrical generating stations supplanted the water wheels and individual generators that powered manufacturing plants a century ago.

Technology ''is beginning an inexorable shift from being an asset that companies own in the form of computers, software, and myriad related components to being a service that they purchase from utility providers," Carr writes. ''Few in the business world have contemplated the full magnitude of this change or its far-reaching consequences."

Among those consequences may be disruption of the business models of technology hardware and software suppliers, who according to Carr have benefited from redundant spending and overinvestment by companies. For buyers of technology, the transition to utility computing will free executives to focus on their businesses.

Carr reprises the network computer idea, promoted by Oracle chief executive Larry Ellison in the 1990s, suggesting the personal computers dominating the desktops of today's office workers could be replaced by thin-client terminals, connected to centralized servers, that give workers only the limited functions that most of their jobs require.

PCs, Carr writes, are ''a microcosm of the overall state of computing resources at the typical corporation: fragmented, redundant, and increasingly underutilized."

Forrester Research founder and chief executive George F. Colony, one of those who debated Carr two years ago, is no more impressed with his new arguments. ''Again, as with the first article, he's half right," Colony said. ''But being half right, he's totally wrong."

Carr is correct that commodity computing functions increasingly will be done outside corporations, Colony said. But the most important functions will continue to be performed in-house, and those will become ever more critical to business success, he insisted.

Carr, in an interview, said businesses might best solve customers' problems by focusing not on technology but on the data it generates. ''CEOs and managers in general want to think hard about the information," he said. ''They don't care about the machinery."

The rise of utility computing will also create opportunities for technology companies, he said -- and not only for Indian outsourcing firms. Enterprise computing giants such as IBM, Hewlett-Packard, and Sun Microsystems could capitalize on their technology to become high-end utilities, while software firms could profit by packaging their software as services and pioneering applications, like grid computing software, that support the operations of utilities, Carr said.

''Schools like MIT may be a breeding ground for start-ups that supply the basic engineering underpinning IT utilities," he said.

Robert Weisman can be reached at weisman@globe.com.