Profiting in a Datacommodity Industry: I
While I am working on a whitepaper on the larger subject, a comment on my post of IBM's announcement [also see their whitepaper: Living in an On Demand World] prompts me to elaborate:
Recently prominent IT companies (IBM, Sun, HP, Microsoft) have announced developments in utility computing, grid computing, virtualized data centers and web services. The importance of these new models cannot be overstated – they are enabling a new phase of networked computing for efficient management of Datacommodities.
Storage, Processing and Bandwidth will trend towards commoditization while Software and Services will trend away from it. The technical standardization of Mbs, MIPS, Mbps, & MHz demanded by customers to reduce their technology risk and for vendors to realize production economies create the characteristics of physical commodities. Storage, Processing and Bandwidth can be considered Datacommodities. The turbulence of the business environment and consumer tastes, on the other hand, requires constant change. Software trends towards commoditization as well, specifically towards standard protocols and components. But the custom assembly of these components, adapting systems to this environmental change is the domain of software and services, a trend away from commoditization.
The Tech Industry has always resisted commoditization, by creating new overlays, bundles and marketing tactics. But a fundamental change has occurred that compels a new strategy of embracing commoditization. A critical mass of Datacommodities have been standardized as fungible physical commodities and made accessible through communications infrastructure and standard protocols. Since this mass exists, there is no going back. This also comes at a time where customers have greater power over vendors to unbundled solutions than before. And new network, data center and web services management systems that virtualize underlying commodity components allow them to aggregate bundles according to their requirements at any given time. With component commodities accessible and bundling shifted to customers, this customer-driven commoditization is a reality the industry must face.
Although it seems counter-intuitive, there is the potential for even greater profit in the Tech Industry than before, but it requires change. Providers of technologies that are trending towards commoditization need to adapt their business models to that of lean infrastructure providers while providing new value added services such as risk management. Providers of software and services need to adapt to leverage underlying commodities while changing how they serve their customers.
12:45:24 PM 
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