Utility computing may revolutionise IT services: IDC

Internet delivery of processing power, storage, software, network bandwidth and other services could eventually transform the IT services market and cause upheaval among today's leading outsourcing firms, a US market research firm said this week.

Outsourcers such as IBM, EDS and CSC are investing heavily in building a business around on-demand or utility computing and appear solidly positioned to lead the market.

But other companies, namely leading online firms Amazon.com, eBay, Yahoo!  and Google, already deliver on-demand services on a global scale and have the potential to disrupt the traditional power players in the IT technology and services markets, IDC said in a report released this week.

"We believe the disruption will be from the bottom up," David Tapper, an IDC analyst and author of the report said. "If you look at it in terms of markets, then there's consumer electronics, communications and IT."

For example, Toyota 30 years ago was considered a low-end automobile that couldn't compete with cars built by the larger US automakers. Today, however, Toyota's building high-end products and has become the number three automaker in the US.

Amazon and eBay provide mostly consumer services but there's nothing stopping them from reselling or developing IT services for the enterprise, Tapper said.

"If you ask who the threat is [to traditional outsourcers], then you'd have to look at the landscape and say it's all of them [Yahoo!, eBay and similar firms]," Tapper said.

An increasing amount of IT capacity, meaning storage, software, processing power and network bandwidth, is becoming commoditised and standardised, a trend that fosters delivery as a service rather than through discrete product sales, IDC said.

Telecommunications is moving to the internet via VOIP. That means organisations with a broadband connection may eventually order services without buying a lot of proprietary equipment.

A person starting a small business 10 years from now may be able to go to Google.com on a laptop and order a mixture of services such as voice, sales-force automation and payroll and get credit approval in 30 days, IDC said.

Besides online service providers mentioned above, other companies also are well-positioned to enter the IT services market, IDC said.

Dell and Microsoft, for example, could use their tremendous brand awareness and presence in the SMB market to become the point of sale for IT services.

Companies offering utility-like services like payroll service provider Automatic Data Processing, and consumer-driven yet industry-savvy conglomerates like General Electric are well-placed make a play in the IT services market.

"From a consumer point of view, this will be a good thing," Tapper said, noting that businesses and consumers will have access to more items and services at cheaper prices.

"But from an industry point of view, it's going to be disruptive."