One of the Biggest Tech Shifts of Our Lifetimes
By Rob Fannon, editor, Phase 1 Investor
January 8, 2010
Does your company employ a vice president of electricity?
I doubt it. In fact, you probably have never heard of a vice president of electricity.
But imagine more than a century ago, anyone who wanted power had to generate his own. Businesses that needed to power their facilities hired vice presidents of electricity to run in-house electric dynamos, operate coal-burning plants, or tap into some hydroelectric source for their power needs.
This, of course, seems crazy by today's standards... investing all that capital upfront to build equipment, committing to long-term maintenance, and recruiting manpower. It's inefficient for companies with zero expertise in power generation to operate such a business within a business. But they did...
Until Thomas Edison showed them a better way.
The legendary inventor knew his new light bulb would prove meaningless without a system to distribute energy efficiently. So in 1879, he opened the world's first centralized electricity-generating plant on Pearl Street, in the heart of New York City's financial district.
As the transfer of electricity became more efficient, central power stations served larger and larger geographic areas. This kicked off one of the fastest industrial consolidation periods in U.S. history. By the end of the 1920s, 10 utility companies controlled three-fourths of the electric power in the U.S.
The benefit of widely distributed electricity grids was immediately obvious. It's much cheaper and more efficient to simply plug into the grid and buy power from a central utility company. Companies were free to innovate and expand without worrying about how to power those efforts. And as we know, the model quickly spread to things like heat and water. Today, we take power utilities for granted, a fact of modern life. Vice presidents of electricity are extinct.
Now ask yourself another question: Does your company employ a vice president of information technology? Or a chief information officer?
Doubtless your company has hired someone to maintain all the computing infrastructure your company requires to function... In 10 years, that position will be as obsolete as vice president of electricity.
Today, the corporate equivalents of the in-house power stations are IT departments full of computer servers. Most major corporations run businesses within their business dedicated to storing and sharing mountains of data.
But most corporations are no better at computer networking than power generation... They spend truckloads of money on an operation outside their area of expertise.
That's why the global economy is creating a new kind of utility, one that will transform the most important modern business commodity – computing.
I'm talking about the expansion and consolidation of networks, computer servers, and data storage... You're going to be hearing more and more about new "data utilities," which are leading a kind of technology revolution called "cloud computing."
These data utilities will allow companies (and eventually private individuals) to mothball their data storage infrastructure and shove all those mountains of files out to a third-party that can more efficiently and reliably manage it.
Once people become comfortable with the idea of entrusting their data to a third-party, the efficiencies of data utilities will become obvious. Just plug into the cloud for any IT need – hardware, software, web hosting, networking, etc. Payment is based on usage not actual hardware.
The potential is limitless, but the trend is only in its infancy... Next week, I'll go into more details about what cloud computing is, how it's already part of your life, and the best places to get started profiting on this nearly brand-new industry.
Good investing,
Rob |
