IT's the services, stupid!

The results of our recent quick poll offer further proof that the information technology (IT) industry is rapidly shifting from a product orientation to a services-led business. Over half (56.6%) of the seventy-six poll respondents viewed utility computing as a service solution rather than a technology solution. Another 28.9% saw utility computing as a mixed bag or "tangled web" of technology and services. Only 14.5% thought of utility computing as a technology solution alone.

While this poll was far from scientific, our site visitors can hardly
be accused of being biased. This site, like most in our industry, focuses more on the latest in technology than it does on services. Yet, those of you who responded to our poll clearly see the utility computing market as a services business rather than just a technology trend.

Your response to our poll reinforces my view that it will be the services-led IT vendors who will be the long-term leaders in the utility computing market. Given our poll results, it is not surprising that companies like IBM, Hewlett-Packard and EDS have won the greatest mindshare and most significant customer contracts in the utility computing market to date on the strength of their outsourcing and integration capabilities more than the technical features of their utility computing products.

And it is equally easy to understand why technology-centric companies like EMC, Sun Microsystems and Microsoft are struggling to win market recognition and share as utility computing suppliers.

Utility computing has become an icon for more than just the transformation of traditional IT architectures. It has given many enterprises a new reason and model for outsourcing IT. Rather than acquire a vast array of new hardware and software to build their own in-house utility computing environments, most enterprises are enlisting their primary IT vendors to build and manage new, on-demand IT operations for them.

EMC has been moving steadily toward a software and services model in response to these trends. Sun is making louder noises about shifting in this direction as well. Microsoft, like many other technology companies, is still committed to developing new utility computing products rather than offering new service solutions.

EMC, Sun and other IT vendors who are attempting to restructure their organizations so they can deliver more of their technical capabilities via services rather than products are learning how hard it is to invert their business models. This restructuring entails turning upside down the entire supply chain. The IT industry inversion affects everything from the way technology is developed to the way it is packaged, priced, sold, delivered and supported.

It is widely-held knowledge that it has taken IBM over ten years to invert its operations to become the leading service-solution provider in the industry. HP would like to compress the process into half the time. Others will be lucky to succeed at all. But it will be increasingly important that they move in this direction, or risk being left behind and out of synch with enterprises' changing demands.

Thanks for casting your vote on this topic. I welcome your feedback regarding my interpretation of your views and encourage you to participate in our latest poll on which IT services will command your greatest attention in 2004.

THINKstrategies

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