On-demand services set to take off in 2007

More companies expected to turn to on-demand alternatives, which will disrupt the IT industry fundamentally

Not long ago, every major research firm and business consultant was telling corporate executives that IT was a strategic asset that needed to be nurtured and leveraged as a competitive advantage. Today's reality is that IT is increasingly becoming a commodity, which many organizations are still unable to use fully. As a result, in 2007 more companies will turn to on-demand alternatives, which will disrupt the IT industry fundamentally.

Nicholas Carr took a beating a few years ago when he suggested that IT didn't really matter. In his follow-up story, "The End of Corporate Computing," in the spring 2005 MIT Sloan Management Review, Carr wrote, "Imagine what future generations will see when they look back at the current time . . . . won't the way corporate computing is practiced today appear fundamentally illogical -- and inherently doomed?" While some IT professionals may believe they succeeded in pushing Carr's views aside, because he is not as visible today, his Web site shows he is still busy speaking to executive groups, as well as at industry events, worldwide.

The reason: Corporate executives and users are fed up with the shortcomings of traditional IT and legacy applications, and increasingly are willing to test a widening array of online alternatives. Many are being emboldened by the rapid growth of on-demand services in the consumer world. Just as the traditional institutions of newspapers, television and the music industry are under attack from Google, YouTube and iTunes, so are traditional ways of managing technology and deploying software being seriously challenged by a new generation of managed service and software-as-a-service providers.

Both managed services and software-as-a-service leverage pervasive broadband deployment and other enabling technologies to deliver easier-to-use IT management and business applications on a subscription-service basis. These services eliminate the upfront capital investments, hardware and software deployment challenges, and ongoing administrative hassles of traditional infrastructure and application management.

Adoption of these alternatives by organizations of all sizes is well under way. A recent ThinkStrategies survey of 550 IT professionals and business executives found that about 40 percent use one or more managed services, and nearly 95 percent are either very or somewhat satisfied with the quality of these services.

Beyond saving time and money, today's managed services and software-as-a-service solutions also provide greater backup-and-recovery capabilities than many corporate IT shops. They also provide real-time, multiuser visibility that permits greater collaboration among workers.

Look for corporate adoption of on-demand services to accelerate in 2007, as more customer success stories about the lower total cost of ownership and greater return on investment become available. Corporate executives no longer will be asking why they should consider managed services or software-as-a-service, but why they should continue to put up with the hassles and costs of traditional IT and legacy applications. The real question will be whether their IT staff will be ready to respond to the on-demand movement heading their way.

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