Many organizations are failing to exploit falling prices in products and services that should accompany the commoditization of IT, according to Gartner. In 2007, 25 percent of IT spending was on unnecessary and redundant customization and although this will decline, it will remain at least at 10 percent overspending through 2010. The analysts expect an accelerating shift from buying and building IT to accessing IT as a service, with vendors building mass production data centers for delivery.

The need to move ever faster and at a lower cost is driving a shift from ‘integration’ activities toward greater interoperability and interchangeability with the direct result that many IT product and services markets are becoming commoditized. Gartner likened this ‘industrialization of IT’ to the two earlier industrial revolutions (of mechanization and electrification) calling it the third industrial revolution: that of digital business in the cloud.

Gartner analysts discussed the industrialization of IT at Gartner Emerging Trends Symposium/ITxpo 2008, taking place in Las Vegas through April 10.

“No IT product or service is fully commoditized today -- as there is still some cost to you in switching suppliers, but many are commoditizing and some are at a relatively advanced state such as desktop PCs,” said Brian Gammage, vice president and Gartner Fellow. “As products and services do commoditize, prices should usually fall, but conversely, for most enterprises, one of the biggest impacts of commoditization is overspending.”

Without some fundamental change in the approach to managing devices and data, IT budgets will rise, even for "static" systems. “There is no way to solve the cost of IT management by evolving costs downward,” Mr. Gammage said. “Instead, organizations need to find new and different ways of being able to scale infrastructure without scaling labor costs if they are to take advantage of this metamorphosis of IT.”

For most organizations, the shift from buying and building IT to accessing IT as a service is not new, but the trend is set to accelerate as traditional delivery models are augmented by a range of new, alternative delivery models that rely on a combination of technology and business advances to delineate and define the extent of the service. Increasingly, these are being used both internally and externally to deliver scalable IT software and hardware functions. These alternative delivery models often make irrelevant the governing principles that worked with the traditional models.

At the same time, the giants of the software and services industries are building the facilities to deliver these services. They are building the capacity for mass production: platforms for industrialization. These new mega data centers will form part of the new "mass production" capabilities companies need for IT.

“Already, more and more tools and applications, such as Office software, e-mail and CRM are being served from such centers, and we can expect the range of applications and services available to grow,” said David Mitchell Smith, vice president and Gartner Fellow. “Why pay to build it and maintain it, if you can buy it in at a fraction of the price? Achieving the requisite cost advantages will take time and scale, but it will be feasible for many of the applications we use today.”

To deliver these applications in a readily configurable and customizable manner, with the promised advantage of scale, will require Web platforms. In a Web platform ecosystem, a service provider uses the facilities of a Web platform provider to build, host or deliver the service. At a minimum, the service provider will use hosting services of the Web platform and may use additional platform services (compute, storage, security, application management, ecosystem management, information, component, application and business process) to build and deliver its services.

“The platforms to deliver the new services may be on the way but one of the main challenges for IT organizations in adapting to the next industrial revolution will be dealing with the cultural impact both internally and in the way IT interfaces with other functional areas,” Mr. Smith said. “The culture of ownership and integration will take time to overcome and will impact multiple constituencies within the organization. Finance functions, for example, will need to play a bigger part in making strategic IT decisions as financial considerations -- such as levels of capitalization and cash flow -- become critical to making IT decisions.”

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