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October 17, 2006
The end of IT in small and medium businesses
Why do small and medium businesses (SMB) have internal IT departments anymore?
Several person-centuries spent in the iterative development of technology stacks have led to the emergence of well understood, reproducible best practices in enterprise IT. A number of hosting providers are now able to channel this expertise adroitly into building complete plug-n-play stacks and hosting them. In many cases, the business models of these managed IT stack providers have the wealth of mature open source software as their cornerstone. The collaboration of hundreds of open source developers on these projects has resulted in powerful network effects on quality and functionality. If you are in the SMB segment with a primary function other than IT, you probably just want to get connected and going. There is little competitive advantage to having an internal IT department put together a complete technology stack, against the proven work of hundreds, when the results of this work are ripe for the picking.
Reliable broadband connectivity is widespread in the North American enterprise context. A completely managed IT stack is not an outlandish proposition even for the most paranoid of SMB owners. The fine tuning of high-availability capabilities and the emergence of high quality administrative and reporting tools have assuaged many an SMB owner's worries that a hosting solution might lead to too little control. Moreover, a hosted solution might even prove to be better for a risk averse proprietor, given the recent emphasis on regulatory compliance in practically every major industry. The ease and uniformity with which it can be applied in a hosted situation as well as the spreading out of liability make hosting only more attractive. In cases where there is no getting around keeping records and IT operations on the premises, we are very near realizing the dream of trailer park computing. Providing a managed service atop these compute cubes would be an easy value add.
It is worth pointing out that large enterprises—especially those for whom IT lies in the critical revenue path—might still maintain enough of a competitive advantage using an internal IT department to justify the costs and upkeep of a homegrown stack. Businesses with large existing technology investments may already have critical business processes centered around them, which would make it harder for them to just switch to outsourced IT. Yet, as adoption of outsourced IT increases, the average total cost of ownership is sure to go down as economies of scale kick in. Then perhaps even non-SMB owners might reëvaluate their technology solutions.
Read the writing on the wall: if you are not in IT, then get out of IT.
Posted by Vishy at October 17, 2006 11:16 PM