This isn't a device, it's a service

by Sean McGrath

November 28, 2007 —

Ten years ago - heck, maybe even just five years ago - if I tried to rent you
a word processor package you would have laughed at me. Why on earth would you
rent something that you can buy and own outright for a reasonably small amount
of money?

Well. Keep going backwards in time. Back through the mini-computers and the
mainframes. As you move back in time, rental of computer technology services
makes up a bigger and bigger part of the (admittedly smaller) overall IT landscape.
I remember working for a company that rented - yes rented - time on a mainframe
computer in order to run its monthly payroll. I remember working for a company
that developed and marketed financial trading systems in the City of London.
The system was not available for sale - customers could rent it but not buy
it. Monthly fee, minimum one year contract. That sort of thing.

Wind the clock forward to today and rental-based IT services are re-emerging
and taking up a bigger part of what is now, a much larger overall landscape.
In some respects, an analogy with the past works just fine. Things that are
complex and expensive and non-core can be outsourced via the magic of modern
communications technology. We have a new acronym for it : SaaS - Software as
a Service[1]. Do you need a virtual office while on the road? Would it be cost-effective
to just rent your sales force automation? How about an employee performance
management solution?

In other areas of the rental landscape, there is no direct analogy with the
past. All around us, a new class of IT service is spreading like wildfire. Services
that do not make sense to use "offline" in your own closed environment.
Services that rely on connecting to markets or connecting to vast repositories
of information. Strangely perhaps, commodity activities like word processing
are partly in that camp. Why use a completely private word processing setup
to write something that you are then going to make public? Why not write it
directly on the Web?

The big growth area for rental-based IT is the sector that involves connectivity
to big repositories of information or big networks of other users. The obvious
example is the way we rent - rather than buy - cellular telephony. The cell
phone is just the gadget, it is of little use unless we can connect to the networks.
We happily rent rather than buy that capability. As time marches forward, the
venerable PC - for so long the container of purchased services - is becoming
more "just the gadget" that connects us to our rented services that
live out there on the networks.

Also, as time goes by the PC-as-uber-gadget concept is being challenged. Cell
phones are becoming amazingly powerful devices. Of critical interest to vendors
of services is that cell phones have built-in mechanisms for handling large
volumes of small payments. Simply put, cellphones are SaaS-enabled from a business
model perspective. PCs are not.

The cellphone will not have a free ride to the top of the SaaS gadget hill
however. Take Amazon's new eBook reader for example[2]. Clearly we can read
digital books on PCs, on cellphones or on dedicated eBook readers. Where will
our wallets take us?

It is too early to say but one thing is abundantly clear I think. The emphasis
in the industry is shifting from software/hardware as something to be owned
and cherished and capitalized and depreciated to software/hardware as something
to be consumed and rented and thrown out over time.

Reading through the blogsphere's coverage of the launch of Amazon's Kindle
eBook device, one comment struck me above all others. Werner Vogel's, CTO of
Amazon:

"This isn't a device, it's a service."[3]

Indeed.

[1] http://en.wikipedia.org/wiki/Software_as_a_Service

[2] http://www.amazon.com/gp/product/B000FI73MA

[3] http://www.allthingsdistributed.com/2007/11/breaking_through_physical_boundaries.html

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